# Energy Conservation Program: Energy Conservation Standards for Commercial Prerinse Spray Valves > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/fr%3A2021-16995 ## Record - **Collection:** Federal Register - **Document type:** Proposed Rule - **Published:** August 18, 2021 - **Citation:** 86 FR 46330 ## Text DEPARTMENT OF ENERGY 10 CFR Part 431 [EERE-2019-BT-STD-0034] RIN 1905-AE56 Energy Conservation Program: Energy Conservation Standards for Commercial Prerinse Spray Valves AGENCY: Office of Energy Efficiency and Renewable Energy, Department of Energy. ACTION: Notification of proposed determination and request for comment. SUMMARY: The Energy Policy and Conservation Act, as amended (“EPCA”), prescribes energy conservation standards for various consumer products and certain commercial and industrial equipment, including commercial prerinse spray valves (“CPSVs”). EPCA also requires the U.S. Department of Energy (“DOE” or “the Department”) to periodically determine whether more-stringent, amended standards would be technologically feasible and economically justified, and would result in significant energy savings. In this notification of proposed determination (“NOPD”), DOE has initially determined that amended energy conservation standards for commercial prerinse spray valves are not needed. DOE requests comment on this proposed determination and the associated analyses and results. DATES: Meeting: DOE will hold a webinar on Wednesday, September 1, 2021, from 10:00 a.m. to 3:00 p.m. See section VII, “Public Participation,” for webinar registration information, participant instructions, and information about the capabilities available to webinar participants. Comments: Written comments and information are requested and will be accepted on or before October 18, 2021. See section VII, “Public Participation,” for details. ADDRESSES: Interested persons are encouraged to submit comments using the Federal eRulemaking Portal at www.regulations.gov. Follow the instructions for submitting comments. Alternatively, interested persons may submit comments by email to the following address: CPSV2019STD0034@ee.doe.gov. Include a docket number EERE-2019-BT-STD-0034 and/or RIN number 1904-AE56 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. Although DOE has routinely accepted public comment submissions through a variety of mechanisms, including postal mail and hand delivery/courier, DOE has found it necessary to make temporary modifications to the comment submission process in light of the ongoing Covid-19 pandemic. DOE is currently accepting only electronic submissions at this time. If a commenter finds that this change poses an undue hardship, please contact Appliance and Equipment Standards Program staff at (202) 586-1445 to discuss the need for alternative arrangements. Once the Covid-19 pandemic health emergency is resolved, DOE anticipates resuming all of its regular options for public comment submission, including postal mail and hand delivery/courier. No telefacsimiles (faxes) will be accepted. For detailed instructions on submitting comments and additional information on this process, see section VII of this document. Docket: The docket, which includes Federal Register notices, public meeting attendee lists and transcripts (if one is held), comments, and other supporting documents/materials, is available for review at www.regulations.gov. All documents in the docket are listed in the www.regulations.gov index. However, not all documents listed in the index may be publicly available, such as information that is exempt from public disclosure. The docket web page can be found at https://www.regulations.gov/docket/EERE-2019-BT-STD-0034. The docket web page contains instructions on how to access all documents, including public comments, in the docket. See section VII, “Public Participation,” for further information on how to submit comments through www.regulations.gov. FOR FURTHER INFORMATION CONTACT: Mr. Bryan Berringer, U.S. Department of Energy, Office of Energy Efficiency and Renewable Energy, Building Technologies Office, EE-5B, 1000 Independence Avenue SW, Washington, DC 20585-0121. Email: ApplianceStandardsQuestions@ee.doe.gov. Ms. Kathryn McIntosh, U.S. Department of Energy, Office of the General Counsel, GC-33, 1000 Independence Avenue SW, Washington, DC, 20585-0121. Telephone: (202) 586-2002. Email: Kathryn.McIntosh@hq.doe.gov. For further information on how to submit a comment or review other public comments and the docket contact the Appliance and Equipment Standards Program staff at (202) 287-1445 or by email: ApplianceStandardsQuestions@ee.doe.gov. SUPPLEMENTARY INFORMATION: Table of Contents I. Synopsis of the Proposed Determination II. Introduction A. Authority B. Background 1. Current Standards 2. History of Standards Rulemakings for Commercial Prerinse Spray Valves III. General Discussion A. Product Classes and Scope of Coverage B. Test Procedure C. Technological Feasibility 1. General 2. Maximum Technologically Feasible Levels D. Energy Savings 1. Determination of Savings 2. Significance of Savings E. Cost Effectiveness F. Further Considerations IV. Methodology and Discussion of Related Comments A. Market and Technology Assessment 1. Scope of Coverage 2. Technology Options 3. Screening Analysis a. Screened-Out Technologies b. Remaining Technologies 4. Product Classes 5. Market Assessment B. Engineering Analysis 1. Efficiency Analysis a. Baseline Efficiency Levels b. Higher Efficiency Levels 2. Cost Analysis a. Cost-Efficiency Results C. Markups Analysis D. Energy and Water Use Analysis 1. Product Cost 2. Installation Cost 3. Annual Energy Consumption 4. Energy Prices 5. Water and Wastewater Prices 6. Maintenance and Repair Costs 7. Product Lifetime 8. Discount Rates 9. Energy Efficiency Distribution in the No-New-Standards Case 10. Payback Period Analysis E. Shipments Analysis 1. Nearest Neighbor Switch Scenario 2. Product Switch Scenario F. National Impact Analysis 1. Product Efficiency Trends 2. National Energy Savings 3. Net Present Value Analysis G. Manufacturer Impact Analysis 1. Overview 2. GRIM Analysis and Key Inputs a. Manufacturer Product Costs b. Shipment Projections c. Product and Capital Conversion Costs d. Manufacturer Markup V. Analytical Results and Conclusions A. Economic Impacts on Individual Consumers B. Economic Impacts on Manufacturers 1. Industry Cash Flow Analysis Results 2. Direct Impacts on Employment 3. Impacts on Manufacturing Capacity 4. Impacts on Subgroups of Manufacturers 5. Cumulative Regulatory Burden C. National Impact Analysis 1. Significance of Energy Savings 2. Net Present Value of Consumer Costs and Benefits D. Proposed Determination 1. Technological Feasibility 2. Cost Effectiveness 3. Significant Conservation of Energy 4. Additional Consideration 5. Summary VI. Procedural Issues and Regulatory Review A. Review Under Executive Order 12866 B. Review Under the Regulatory Flexibility Act C. Review Under the Paperwork Reduction Act D. Review Under the National Environmental Policy Act of 1969 E. Review Under Executive Order 13132 F. Review Under Executive Order 12988 G. Review Under the Unfunded Mandates Reform Act of 1995 H. Review Under the Treasury and General Government Appropriations Act, 1999 I. Review Under Executive Order 12630 J. Review Under the Treasury and General Government Appropriations Act, 2001 K. Review Under Executive Order 13211 L. Review Under the Information Quality Bulletin for Peer Review VII. Public Participation A. Participation in the Webinar B. Procedure for Submitting Prepared General Statements for Distribution C. Conduct of the Webinar D. Submission of Comments E. Issues on Which DOE Seeks Comment VIII. Approval of the Office of the Secretary I. Synopsis of the Proposed Determination Title III, Part B 1 of EPCA, 2 established the Energy Conservation Program for Consumer Products Other Than Automobiles. (42 U.S.C. 6291-6309) These products include commercial prerinse spray valves, the subject of this NOPD. 3 1 For editorial reasons, upon codification in the U.S. Code, Part B was redesignated Part A. 2 All references to EPCA in this document refer to the statute as amended through the Energy Act of 2020, Public Law 116-260 (Dec. 27, 2020). 3 Because Congress included commercial prerinse spray valves in Part B of Title III of EPCA, the consumer product provisions of Part B (not the industrial equipment provisions of Part C) apply to commercial prerinse spray valves. However, because commercial prerinse spray valves are commonly considered to be commercial equipment, as a matter of administrative convenience and to minimize confusion among interested parties, DOE placed the requirements for commercial prerinse spray valves into subpart O of 10 CFR part 431. Part 431 contains DOE regulations for commercial and industrial equipment. DOE refers to commercial prerinse spray valves as either “products” or “equipment.” DOE is issuing this NOPD pursuant to the EPCA requirement that not later than 6 years after issuance of any final rule establishing or amending a standard, DOE must publish either a notification of determination that standards for the product do not need to be amended, or a notice of proposed rulemaking (“NOPR”) including new proposed energy conservation standards (proceeding to a final rule, as appropriate). (42 U.S.C. 6295(m)) For this proposed determination, DOE analyzed commercial prerinse spray valves subject to standards specified in title 10 of the Code of Federal Regulations (“CFR”) § 431.266. DOE first analyzed the technological feasibility of more energy (water) efficient commercial prerinse spray valves and commercial prerinse spray valves with lower energy use. For those commercial prerinse spray valves for which DOE determined higher standards to be technologically feasible, DOE estimated energy savings that would result from potential energy conservation standards by conducting a national impacts analysis (“NIA”). DOE evaluated whether higher standards would be cost effective by conducting life-cycle cost (“LCC”) and payback period (“PBP”) analyses and estimated the net present value (“NPV”) of the total costs and benefits experienced by consumers. Based on the results of the analyses, summarized in section V of this document, and comments received in response to the early assessment request for information (“RFI”) published in June 2020 (“June 2020 RFI”; see 85 FR 35383 (Jun. 10, 2020)), DOE has tentatively determined that current standards for commercial prerinse spray valves do not need to be amended because any potential benefits are outweighed by the risk of increased energy and water usage due to the increased risk of product switching, costs, and additional burden to manufacturers. II. Introduction The following section briefly discusses the statutory authority underlying this proposed determination, as well as some of the historical background relevant to the establishment of standards for commercial prerinse spray valves. A. Authority EPCA authorizes DOE to regulate the energy efficiency of a number of consumer products and certain industrial equipment. Title III, Part B of EPCA established the Energy Conservation Program for Consumer Products Other Than Automobiles. These products include commercial prerinse spray valves, the subject of this document. (42 U.S.C. 6291(33)) EPCA prescribed energy conservation standards (in terms of flow rate) for these products (42 U.S.C. 6295(dd)) and directs DOE to conduct future rulemakings to determine whether to amend these standards. (42 U.S.C. 6295(m)) The energy conservation program under EPCA consists essentially of four parts: (1) Testing, (2) labeling, (3) the establishment of Federal energy conservation standards, and (4) certification and enforcement procedures. Relevant provisions of EPCA specifically include definitions (42 U.S.C. 6291), test procedures (42 U.S.C. 6293), labeling provisions (42 U.S.C. 6294), energy conservation standards (42 U.S.C. 6295), and the authority to require information and reports from manufacturers (42 U.S.C. 6296). 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. (42 U.S.C. 6295(o)(3)(A) and 42 U.S.C. 6295(r)) Manufacturers of covered products must use the prescribed DOE test procedure as the basis for certifying to DOE that their products comply with the applicable energy conservation standards adopted under EPCA and when making representations to the public regarding the energy use or efficiency of those products. (42 U.S.C. 6293(c) and 42 U.S.C. 6295(s)) Similarly, DOE must use these test procedures to determine whether the products comply with standards adopted pursuant to EPCA. (42 U.S.C. 6295(s)) The DOE test procedures for commercial prerinse spray valves appear at 10 CFR 431.264. Federal energy conservation requirements generally supersede State laws or regulations concerning energy conservation testing, labeling, and standards. (42 U.S.C. 6297(a)-(c)) California, however, has a statutory exemption to preemption for commercial prerinse spray valve standards adopted by the California Energy Commission before January 1, 2005. (42 U.S.C. 6297(c)(7)) As a result, while Federal commercial prerinse spray valve standards apply in California, California's commercial prerinse spray valve standards also apply for standards adopted before January 1, 2005, as they were exempt from preemption. In 2018, California revised its regulations so that the maximum flow rate requirements align with those implemented by DOE for commercial prerinse spray valves. DOE may, however, grant waivers of Federal preemption for particular State laws or regulations, in accordance with the procedures and other provisions set forth under EPCA. (See 42 U.S.C. 6297(d)) Pursuant to the amendments contained in the Energy Independence and Security Act of 2007 (“EISA 2007”), Public Law 110-140, any final rule for new or amended energy conservation standards promulgated after July 1, 2010, is required to address standby mode and off mode energy use. (42 U.S.C. 6295(gg)(3)) Specifically, when DOE adopts a standard for a covered product after that date, it must, if justified by the criteria for adoption of standards under EPCA (42 U.S.C. 6295(o)), incorporate standby mode and off mode energy use into a single standard, or, if that is not feasible, adopt a separate standard for such energy use for that product. (42 U.S.C. 6295(gg)(3)(A)-(B)) Because commercial prerinse spray valves only consume energy and water in active mode, DOE's test procedures for commercial prerinse spray valves do not address standby mode and off mode energy use as they are not applicable for this product. DOE must periodically review its already established energy conservation standards for a covered product no later than 6 years from the issuance of a final rule establishing or amending a standard for a covered product. (42 U.S.C. 6295(m)) This 6-year look-back provision requires that DOE publish either a determination that standards do not need to be amended or a NOPR, including new proposed standards (proceeding to a final rule, as appropriate). (42 U.S.C. 6295(m)(1)(A)-(B)) EPCA further provides that, not later than 3 years after the issuance of a final determination not to amend standards, DOE must publish either a notification of determination that standards for the product do not need to be amended, or a NOPR including new proposed energy conservation standards (proceeding to a final rule, as appropriate). (42 U.S.C. 6295(m)(3)(B)) DOE must make the analysis on which a determination is based publicly available and provide an opportunity for written comment. (42 U.S.C. 6295(m)(2)) A determination that amended standards are not needed must be based on consideration of whether amended standards will result in significant conservation of energy, are technologically feasible, and are cost effective. (42 U.S.C. 6295(m)(1)(A) and 42 U.S.C. 6295(n)(2)) Additionally, any new or amended energy conservation standard prescribed by the Secretary of Energy (“Secretary”) for any type (or class) of covered product shall be designed to achieve the maximum improvement in energy efficiency which the Secretary determines is technologically feasible and economically justified. (42 U.S.C. 6295(o)(2)(A)) Among the factors DOE considers in evaluating whether a proposed standard level is economically justified includes whether the proposed standard at that level is cost-effective, as defined under 42 U.S.C. 6295(o)(2)(B)(i)(II). Under 42 U.S.C. 6295(o)(2)(B)(i)(II), an evaluation of cost-effectiveness requires DOE to consider savings in operating costs throughout the estimated average life of the covered products in the type (or class) compared to any increase in the price, initial charges, or maintenance expenses for the covered products that are likely to result from the standard. (42 U.S.C. 6295(n)(2) and 42 U.S.C. 6295(o)(2)(B)(i)(II)) DOE is publishing this NOPD in satisfaction of the 6-year review requirement in EPCA. B. Background 1. Current Standards In a final rule published on January 27, 2016, (“January 2016 Final Rule”), DOE prescribed the current energy conservation standards for commercial prerinse spray valves manufactured on and after January 28, 2019. 81 FR 4748. These standards prescribe a maximum flow rate in gallons per minute (“gpm”) for each product class and are set forth in DOE's regulations at 10 CFR 431.266 and repeated in Table II.1. Table II.1—Federal Energy Conservation Standards for Commercial Prerinse Spray Valves Product class (spray force in ounce-force, ozf) Flow rate (gpm) Product Class 1 (≤5.0 ozf) 1.00 Product Class 2 (>5.0 ozf and ≤8.0 ozf) 1.20 Product Class 3 (>8.0 ozf) 1.28 2. History of Standards Rulemakings for Commercial Prerinse Spray Valves In support of the present review of the CPSV energy conservation standards, on June 10, 2020, DOE published the June 2020 RFI, which identified various issues on which DOE sought comment to inform its determination of whether the standards need to be amended. 85 FR 35383. DOE was specifically interested in collecting data and information that could enable the agency to determine whether it should propose a “no new standard” determination because a more stringent standard: (1) Would not result in a significant savings of energy, (2) is not technologically feasible, (3) is not economically justified, or (4) any combination of foregoing. Id. at 85 FR 35385. In response to a comment received, DOE published on July 20, 2020, a reopening of public comment period extending the comment period for an additional 30 days. 85 FR 43748. DOE received comments in response to the June 2020 RFI from the interested parties listed in Table II.2. Table II.2—June 2020 RFI Written Comments Organization(s) Reference in this NOPD Organization type Appliance Standards Awareness Project ASAP Efficiency Organization. Northwest Energy Efficiency Alliance NEEA Efficiency Organization. Pacific Gas and Electric Company, San Diego Gas and Electric, and Southern California Edison CA IOUs Utilities. Plumbing Manufacturers Inc PMI Trade Association. A parenthetical reference at the end of a comment quotation or paraphrase provides the location of the item in the public record. 4 4 The parenthetical reference provides a reference for information located in the docket. (Docket No. EERE-2019-BT-STD-0034, which is maintained at https://www.regulations.gov/docket/EERE-2019-BT-STD-0034 ). The references are arranged as follows: (commenter name, comment docket ID number, page of that document). III. General Discussion DOE developed this proposed determination after considering comments, data, and information from interested parties that represent a variety of interests. This document addresses issues raised by these commenters. A. Product Classes and Scope of Coverage When evaluating and establishing energy conservation standards, DOE divides covered products into product classes by the type of energy used or by capacity or other performance-related features that justify differing standards. In making a determination whether a performance-related feature justifies a different standard, DOE must consider such factors as the utility of the feature to the consumer and other factors DOE determines are appropriate. (42 U.S.C. 6295(q)) The CPSV classes for this proposed determination are discussed in further detail in section IV.A.4 of this document. This proposed determination covers commercial prerinse spray valves defined as a handheld device that has a release-to-close valve and is suitable for removing food residue from food service items before cleaning them in commercial dishwashing or ware washing equipment. 10 CFR 431.262 The scope of coverage is discussed in further detail in section IV.A.1 of this document. B. Test Procedure EPCA sets forth generally applicable criteria and procedures for DOE's adoption and amendment of test procedures. (42 U.S.C. 6293) Manufacturers of covered products must use these test procedures to certify to DOE that their product complies with energy conservation standards and to quantify the efficiency of their product. (42 U.S.C. 6295(s) and 42 U.S.C. 6293(c)) DOE will finalize a test procedure establishing methodologies used to evaluate proposed energy conservation standards at least 180 days prior to publication of a NOPR proposing new or amended energy conservation standards. Section 8(d) of appendix A to 10 CFR part 430, subpart C (“Process Rule”). DOE's current energy conservation standards for commercial prerinse spray valves are expressed in terms of gpm. 10 CFR 431.266 DOE published a test procedure final rule on December 30, 2015, which incorporated by reference the 2013 version of ASTM International (“ASTM”) Standard F2324 (“ASTM F2324-13”). 80 FR 81441 (“December 2015 Final Rule”). In the December 2015 Final Rule, DOE also revised the definition of “commercial prerinse spray valve,” made minor changes to the DOE flow rate test method, and added a definition and test method for “spray force.” The test procedures for commercial prerinse spray valves are codified in 10 CFR 431.264. On June 5, 2020, DOE published an RFI soliciting public comment and data on all aspects of the existing DOE test procedure for commercial prerinse spray valves, including (1) the scope and definition of the test procedure, (2) incorporation of the reaffirmed industry standard, and (3) the representativeness of the test water pressure. 85 FR 34541 On May 20, 2021 DOE published a test procedure NOPR, which proposed updates to incorporate the 2019 reaffirmed version of ASTM Standard F2324, ASTM F2324-13 (2019). 86 FR 27298, 27302. DOE has initially determined that this change to the version referenced would not impact the measured flow rate. Id. DOE also proposed revising the definition of “commercial prerinse spray valve” to clarify which valves are covered products but did not propose to change the scope of valves that are covered. Id. C. Technological Feasibility 1. General In evaluating potential amendments to energy conservation standards, DOE conducts a screening analysis based on information gathered on all current technology options and prototype designs that could improve the efficiency of the products or equipment that are the subject of the determination. As the first step in such an analysis, DOE develops a list of technology options for consideration in consultation with manufacturers, design engineers, and other interested parties. DOE then determines which of those means for improving efficiency are technologically feasible. DOE considers technologies incorporated in commercially available products or in working prototypes to be technologically feasible. Sections 6(c)(3)(i) and 7(b)(1) of appendix A to 10 CFR part 430, subpart C. After DOE has determined that particular technology options are technologically feasible, it further evaluates each technology option in light of the following additional screening criteria: (1) Practicability to manufacture, install, and service; (2) adverse impacts on product utility or availability; (3) adverse impacts on health or safety; and (4) unique-pathway proprietary technologies. Sections 6(c)(3)(ii)-(v) and 7(b)(2)-(5) of appendix A to 10 CFR part 430, subpart C. Section IV.A.3 of this document discusses the results of the screening analysis for commercial prerinse spray valves, particularly the designs DOE considered, those it screened out, and those that are the basis for the standards considered in this proposed determination. For further details on the screening analysis for this proposed determination, see chapter 4 of the NOPD technical support document (“TSD”). 2. Maximum Technologically Feasible Levels When DOE proposes to adopt an amended standard for a type or class of covered product, it must determine the maximum improvement in energy efficiency or maximum reduction in energy use that is technologically feasible for such a product. (42 U.S.C. 6295(p)(1)) Accordingly, in the engineering analysis, DOE determined the maximum technologically feasible (“max-tech”) improvements in energy efficiency for commercial prerinse spray valves, using the design parameters for the most efficient products available on the market or in working prototypes. The max-tech levels that DOE determined for this analysis are described in section IV.B of this document and in chapter 5 of the NOPD TSD. D. Energy Savings 1. Determination of Savings For each efficiency level (“EL”) evaluated, DOE projected energy savings from application of the efficiency level to the commercial prerinse spray valves purchased in the 30-year period that begins in the assumed year of compliance with the potential standards (2027-2056). The savings are measured over the entire lifetime of the commercial prerinse spray valves purchased in the previous 30-year period. DOE quantified the energy savings attributable to each efficiency level as the difference in energy consumption between each standards case and the no-new-standards case. The no-new-standards case represents a projection of energy consumption that reflects how the market for a product would likely evolve in the absence of amended energy conservation standards. DOE used its NIA spreadsheet model to estimate national energy savings (“NES”) from potential amended or new standards for commercial prerinse spray valves. The NIA spreadsheet model (described in section IV.G of this document) calculates energy savings in terms of site energy, which is the energy directly consumed by products at the locations where they are used. For electricity, DOE reports NES in terms of both site and primary energy savings, which is the savings in the energy that is used to generate and transmit the site electricity. DOE also calculates NES in terms of full-fuel-cycle (“FFC”) energy savings. The FFC metric includes the energy consumed in extracting, processing, and transporting primary fuels ( i.e., coal, natural gas, petroleum fuels), and thus presents a more complete picture of the impacts of energy conservation standards. 5 DOE's approach is based on the calculation of an FFC multiplier for each of the energy types used by covered products or equipment. For more information on FFC energy savings, see section IV.G of this document. 5 The FFC metric is discussed in DOE's statement of policy and notice of policy amendment. 76 FR 51282 (Aug. 18, 2011), as amended at 77 FR 49701 (Aug. 17, 2012). 2. Significance of Savings In determining whether amended standards are needed, DOE must consider whether such standards will result in significant conservation of energy. (42 U.S.C. 6295(m)(1)(A)) On February 14, 2020, DOE published an update to its procedures, interpretations, and policies for consideration in new or revised energy conservation standards and test procedure, i.e., “Procedures, Interpretations, and Policies for Consideration of New or Revised Energy Conservation Standards and Test Procedures for Consumer Products and Certain Commercial/Industrial Equipment” (see 10 CFR part 430, subpart C, appendix A). 6 85 FR 8626. In the updated Process Rule, DOE established a significance threshold for energy savings under which DOE employs a two-step approach that considers both an absolute site energy savings threshold and a threshold that is a percent reduction in the energy use of the covered product. Section 6(a) of the appendix A to 10 CFR part 430, subpart C. 6 On January 20, 2021, the President issued Executive Order 13990, Protecting Public Health and the Environment and Restoring Science to Tackle the Climate Crisis. Exec. Order No. 13,990, 86 FR 7037 (Jan. 25, 2021) (“E.O. 13990”). E.O. 13990 affirms the Nation's commitment to empower our workers and communities; promote and protect our public health and the environment; and conserve our national treasures and monuments. To that end, the stated policies of E.O. 13990 include: Improving public health and protecting our environment; ensuring access to clean air and water; and reducing greenhouse gas emissions. E.O. 13990 section 1. Section 2 of E.O. 13990 directs agencies, in part, to immediately review all existing regulations, orders, guidance documents, policies, and any other similar agency actions (“agency actions”) promulgated, issued, or adopted between January 20, 2017, and January 20, 2021, that are or may be inconsistent with, or present obstacles to, the policy set forth in the Executive Order. E.O. 13990 section 2. In addition, section 2(iii) of E.O. 13990 specifically directs DOE to, as appropriate and consistent with applicable law, publishing for notice and comment a proposed rule suspending, revising, or rescinding the updated Process Rule. In response to this directive, DOE has undertaken a review of the updated Process Rule. See, 86 FR 18901 (Apr. 12, 2021) and 86 FR 35668 (July 7, 2021). DOE first evaluates the projected energy savings from a potential max-tech standard over a 30-year period against a 0.3 quadrillion British thermal units (“quads”) of site energy savings threshold. Section 6(b)(2) of appendix A to 10 CFR part 430, subpart C. If the 0.3-quad threshold is not met, DOE then compares the max-tech savings to the total energy usage of the covered product to calculate a percentage reduction in energy usage. Section 6(b)(3) of appendix A to 10 CFR part 430, subpart C. If this comparison does not yield a reduction in site energy use of at least 10 percent over a 30-year period, the analysis will end and DOE will propose to determine that no significant energy savings would likely result from setting new or amended standards. Section 6(b)(4) of appendix A to 10 CFR part 430, subpart C. If either one of the thresholds is reached, DOE will 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. Section 6(b)(5) of appendix A to 10 CFR part 430, subpart C. This two-step approach allows DOE to ascertain whether a potential standard satisfies EPCA's significant energy savings requirements in 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.” EPCA defines “energy efficiency” as the ratio of the useful output of services from a consumer product to the energy use of such product, measured according to the Federal test procedures. (42 U.S.C. 6291(5), emphasis added ) EPCA defines “energy use” as the quantity of energy directly consumed by a consumer product at point of use, as measured by the Federal test procedures. (42 U.S.C. 6291(4)) Further, EPCA uses a household energy consumption metric as a threshold for setting standards for new covered products. (42 U.S.C. 6295(l)(1)) Given this context, DOE relies on site energy as the appropriate metric for evaluating the significance of energy savings. DOE noted in the June 2020 RFI that the significant water savings requirement does not apply to prerinse spray valves. 85 FR 35383, 35385. DOE cites 42 U.S.C. 6295(o)(3)(B), which specifies significant conservation of water for only “showerheads, faucets, water closets, or urinals”. DOE also stated that the prohibition on amending a standard to allow greater water use does not apply to prerinse spray valves. Id. DOE cites 42 U.S.C. 6295(o)(1), which similarly prohibits the prescription of any amended standard that increases the maximum allowable water use of only showerheads, faucets, water closets, or urinals. The CA IOUs commented that because commercial prerinse spray valves use heated water, any standard that increased the flow rate would be in conflict with EPCA's prohibition on increasing maximum allowable energy use as specified in 42 U.S.C. 6295(o)(1). (CA IOUs, No. 6 at p. 4) As discussed, DOE is not proposing to amend the energy conservation standards for commercial prerinse spray valves ( i.e., DOE is not proposing to amend the maximum flow rates). For this proposed determination, DOE analyzed the maximum possible savings relative to the potential for consumers to switch to equipment or products with a higher flow rate, such as faucets, in response to more stringent standards. E. Cost Effectiveness In making a determination of whether amended energy conservation standards are needed, EPCA requires DOE to consider the cost effectiveness of amended standards in the context of the savings in operating costs throughout the estimated average life of the covered product compared to any increase in the price of, or in the initial charges for, or maintenance expenses of, the covered product that are likely to result from a standard. (42 U.S.C. 6295(m)(1)(A), 42 U.S.C. 6295(n)(2), and 42 U.S.C. 6295(o)(2)(B)(i)(II)) In determining cost effectiveness of amending standards for commercial prerinse spray valves, DOE conducted LCC and PBP analyses that estimate the costs and benefits to users from standards. To further inform DOE's consideration of the cost effectiveness of amended standards, DOE considered the NPV of total costs and benefits estimated as part of the NIA. The inputs for determining the NPV of the total costs and benefits experienced by consumers are (1) total annual installed cost, (2) total annual operating costs (energy costs and repair and maintenance costs), and (3) a discount factor to calculate the present value of costs and savings. F. Further Considerations As stated previously, pursuant to EPCA, absent DOE publishing a notification of determination that energy conservation standards for commercial prerinse spray valves do not need to be amended, DOE must issue a NOPR that includes new proposed standards. (42 U.S.C. 6295(m)(1)(B)) The new proposed standards in any such NOPR must be based on the criteria established under 42 U.S.C. 6295(o) and follow the procedures established under 42 U.S.C. 6295(p). (42 U.S.C. 6295(m)(1)(B)) The criteria in 42 U.S.C. 6295(o) require that standards be designed to achieve the maximum improvement in energy efficiency, which the Secretary determines is technologically feasible and economically justified. (42 U.S.C. 6295(o)(2)(A)) In deciding whether a proposed standard is economically justified, DOE must determine whether the benefits of the standard exceed its burdens. (42 U.S.C. 6295(o)(2)(B)(i)) DOE must make this determination after receiving comments on the proposed standard, and by considering, to the greatest extent practicable, the following seven statutory factors: (1) The economic impact of the standard on manufacturers and consumers of the products subject to the standard; (2) The savings in operating costs throughout the estimated average life of the covered products in the type (or class) compared to any increase in the price, initial charges for, or maintenance expenses of the covered products that are likely to result from the standard; (3) The total projected amount of energy (or as applicable, water) savings likely to result directly from the standard; (4) Any lessening of the utility or the performance of the covered products likely to result from the standard; (5) The impact of any lessening of competition, as determined in writing by the Attorney General, that is likely to result from the standard; (6) The need for national energy and water conservation; and (7) Other factors the Secretary considers relevant. (42 U.S.C. 6295(o)(2)(B)(i)(I)-(VII)) As discussed in the January 2016 Final Rule, DOE found that amended standards at a level more stringent than those adopted would not be economically justified under the considerations of the seven factors prescribed in EPCA. 81 FR 4748, 4794. Specifically, the Secretary concluded that at the more stringent standards levels the benefits of energy savings, positive NPV of consumer benefits, emission reductions, and the estimated monetary value of the emissions reductions would be outweighed by the reduction in manufacturer industry value. Id. Consequently, the Secretary concluded that standards more stringent than those adopted were not economically justified. Id. For the determination proposed in this document, DOE has considered potential manufacturer impacts associated with amended energy conservation standards (See section IV.H of this document). IV. Methodology and Discussion of Related Comments This section addresses the analyses DOE has performed for this proposed determination with regard to commercial prerinse spray valves. Separate subsections address each component of DOE's analyses. DOE used several analytical tools to estimate the impact of potential energy conservation standards. The first tool is a spreadsheet that calculates the LCC savings and PBP of potential energy conservation standards. The NIA uses a second spreadsheet set that provides shipments projections and calculates NES and NPV of total consumer costs and savings expected to result from potential energy conservation standards. These spreadsheet tools are available on the website: https://www.regulations.gov/docket/EERE-2019-BT-STD-0034. A. Market and Technology Assessment DOE develops information in the market and technology assessment that provides an overall picture of the market for the products concerned, including the purpose of the products, the industry structure, manufacturers, market characteristics, and technologies used in the products. This activity includes both quantitative and qualitative assessments, based primarily on publicly available information. The subjects addressed in the market and technology assessment for this proposed determination include (1) a determination of the scope and product classes, (2) manufacturers and industry structure, (3) existing efficiency programs, (4) shipments information, (5) market and industry trends, and (6) technologies or design options that could improve the energy efficiency of commercial prerinse spray valves. The key findings of DOE's market assessment are summarized in the following sections. See chapter 3 of the NOPD TSD for further discussion of the market and technology assessment. 1. Scope of Coverage In this analysis, DOE relied on the definition of commercial prerinse spray valves in 10 CFR 431.262, which defines commercial prerinse spray valve as “a handheld device that has a release-to-close valve and is suitable for removing food residue from food service items before cleaning them in commercial dishwashing or ware washing equipment.” Any product meeting the definition of commercial prerinse spray valve is included in DOE's scope of coverage. In response to the June 2020 RFI, NEEA and Appliance Standards Awareness Project (ASAP) commented that many valves marketed on online retailers' and manufacturers' websites appear to meet DOE's definition of a commercial prerinse spray valve but have flow rates above DOE's limits. (ASAP, No. 5 at p. 1; NEEA, No. 7 at p. 2) ASAP provided website links to products it asserted meet DOE's definition but have flow rates above DOE's energy conservation standard limits and models that are advertised as complying with DOE standards are not included in DOE's compliance database. (ASAP, No. 5 at p. 2-4) ASAP commented that the current definition means that a product does not have to be explicitly marketed as a commercial prerinse spray valve in order to be covered, so long as it is suitable for use in washing dishes. ( Id. at p. 2) In the May 20, 2021 CPSV test procedure NOPR, DOE addressed similar comments and proposed to update the definition to codify in the CFR existing guidance on the application of the current definition in 10 CFR 431.262. 86 FR 27298. DOE reiterated that adopting this guidance is not intended to change the scope of valves covered in the CPSV definition, only to codify existing guidance. Id. 2. Technology Options In the June 2020 RFI, DOE identified several technology options that would be expected to improve the efficiency of commercial prerinse spray valves, as measured by the DOE test procedure. The complete list of technology options identified are as follows: (1) Addition of flow control insert, (2) Smaller spray hole area, (3) Aerators, (4) Additional valves, (5) Changing spray hole shape, and (6) Venturi meter to orifice plate nozzle geometries. 7 7 A venturi meter is a nozzle where the fluid accelerates through a converging cone of 15-20 degrees. An orifice plate is a flat plate with a circular hole drilled in it. DOE requested comment on the applicability of these technologies to the efficiency and performance characteristics of commercial prerinse spray valves. DOE also requested comment and data on any new technologies that should be considered in its analysis. 85 FR 35383, 35386-35387. In response to the June 2020 RFI, PMI commented that it is not aware of any significant technological advances that would vastly alter the water and energy savings from the products currently being produced. (PMI, No. 4 at p. 1) CA IOUs commented that pressure compensating aerator (“PCA”) technology represents an opportunity for further efficiency gains from commercial prerinse spray valves and recommended DOE investigate the energy saving potential of these technologies. (CA IOUs, No. 6 at p. 1) PCAs typically use an O-ring that compresses and relaxes in response to system pressure. When there is no pressure, the O-ring is relaxed and allows the aerator to be fully opened. As the pressure increases, the O-ring is compressed into the aerator opening to partially block water passage. This establishes an inverse relationship between the area of the aerator opening and the water pressure, and can be designed such that the water flow rate is approximately constant with pressure. CA IOUs commented that because the flow rate of commercial prerinse spray valves varies with pressure, low water pressure can reduce user satisfaction and result in consumers trying to alter their spray valve or replace it with a higher flow-rate spray valve. ( Id. at p. 1-2) They stated that using a PCA decouples the flow rate of commercial prerinse spray valves from water supply pressure, increasing consumer satisfaction. ( Id. at p. 3) CA IOUs commented that PCAs became widely adopted around 2010 and were not previously considered by DOE in the context of a CPSV rulemaking. They urged DOE to consider PCAs as a technology option in this rulemaking. ( Id. at p. 3) An initial review of the technology indicates that PCAs represent an opportunity to increase consumer satisfaction at low water pressure, as PCAs would ensure that consumers get their desired spray force across the entire range of in-field water pressures. However, DOE does not initially find PCAs to represent a technology option that would improve the water efficiency of commercial prerinse spray valves as measured by DOE's test procedure. DOE's test procedure measures flow rate and spray force at a singular, representative water pressure. Adding a PCA would not change the flow rate or spray force at DOE's test pressure. 8 8 In the CA IOUs comment, Figure 2 also shows that at the DOE test procedure test pressure (60 pounds per square inch, or psi), the flow rate continues to be at 1.28 gpm for fixed orifice, PCA high performance, and PCA basic. (CA IOUs, No. 6 at p. 3) In summary, for this analysis, DOE considers the technology options shown in Table IV.1. Detailed descriptions of these technology options can be found in chapter 3 of the NOPD TSD. Table IV.1—Commercial Prerinse Spray Valves Technology Options Technology Option Addition of Flow Control Insert Smaller Spray Hole Area Aerators Additional Valves Changing Spray Hole Shape Venturi Meter to Orifice Plate Nozzle Geometries DOE seeks comment on its determination that PCAs would not change the flow rate or spray force at DOE's test pressure. 3. Screening Analysis DOE uses the following five screening criteria to determine which technology options are suitable for further consideration in an energy conservation standards rulemaking: (1) Technological feasibility. Technologies that are not incorporated in commercial products or in working prototypes will not be considered further. (2) Practicability to manufacture, install, and service. If it is determined that mass production and reliable installation and servicing of a technology in commercial products could not be achieved on the scale necessary to serve the relevant market at the time of the projected compliance date of the standard, then that technology will not be considered further. (3) Impacts on product utility or product availability. If it is determined that a technology would have significant adverse impact on the utility of the product to significant subgroups of consumers or would result in the unavailability of any covered product type with performance characteristics (including reliability), features, sizes, capacities, and volumes that are substantially the same as products generally available in the United States at the time, it will not be considered further. (4) Adverse impacts on health or safety. If it is determined that a technology would have significant adverse impacts on health or safety, it will not be considered further. (5) Unique-Pathway Proprietary Technologies. If a design option utilizes proprietary technology that represents a unique pathway to achieving a given efficiency level, that technology will not be considered further due to the potential for monopolistic concerns. Sections 6(c)(3) and 7(b) of appendix A to 10 CFR part 430, subpart C. In summary, if DOE determines that a technology, or a combination of technologies, fails to meet one or more of the listed five criteria, it will be excluded from further consideration in the engineering analysis. a. Screened-Out Technologies In the June 2020 RFI, DOE presented the screened-out technology options from the January 2016 Final Rule and sought comment regarding whether these technology options would continue to be screened out. 85 FR 35383, 35387. In response to the June 2020 RFI, DOE did not receive any comments suggesting these technologies should no longer be screened out. DOE's review of the market also suggests that these technologies are not suitable for further consideration, as discussed in chapter 4 of the TSD. Therefore, for this analysis, DOE has maintained the January 2016 Final Rule conclusions and has screened out the same technology options as presented in Table IV.2. Table IV.2—Screened-Out Technology Options Screened technology option Screening criteria (X = basis for screening out) Technological feasibility Practicability to manufacture, install, and service Adverse impact on product utility Adverse impacts on health and safety Unique-pathway proprietary technologies Addition of Flow Control Insert X Aerators X Additional Valves X b. Remaining Technologies After reviewing each technology, DOE did not screen out the following technology options and considers them as design options in the engineering analysis: (1) Smaller spray hole area. (2) Changing spray hole shape, and (3) Venturi meter to orifice plate nozzle geometries. DOE determined that these technology options are technologically feasible because they are being used or have previously been used in commercially available products or working prototypes. Also these remaining technology options meet the other screening criteria ( i.e., practicable to manufacture, install, and service and do not result in adverse impacts on consumer utility, product availability, health, or safety). For additional details, see chapter 4 of the NOPD TSD. 4. Product Classes In general, when evaluating and establishing energy conservation standards, DOE divides the covered product into classes by (1) the type of energy used, (2) the capacity of the product, or (3) any other performance-related feature that affects energy efficiency and justifies different standard levels, considering factors such as consumer utility. (42 U.S.C. 6295(q)) For commercial prerinse spray valves, the current energy conservation standards specified in 10 CFR 431.266 are based on three product classes determined according to spray force, which is a performance-related feature that provides utility to the consumer. “Spray force” is defined as the amount of force exerted onto the spray disc, measured in ounce-force (“ozf”). 10 CFR 431.262 Table IV.3 lists the current three product classes for commercial prerinse spray valves. Table IV.3—Current Commercial Prerinse Spray Valve Product Classes Product class Spray force in ounce-force, ozf Product Class 1 ≤5.0 ozf. Product Class 2 >5.0 ozf and ≤8.0 ozf. Product Class 3 >8.0 ozf. These product classes were based on previous market research that identified three distinct end-user applications requiring differing amounts of spray force: (1) Cleaning delicate glassware and removing loose food particles from dishware (which require the least amount of spray force), (2) cleaning wet food, and (3) cleaning baked-on foods (which requires the greatest amount of spray force). 81 FR 4748, 4758-4759. In the June 2020 RFI, DOE sought feedback regarding whether there had been any changes to the end-user applications of each product classes and if any of the existing product classes should be merged or separated. Further, DOE requested any data on additional performance-related features, in addition to spray force, that provide unique consumer utility that would justify additional product classes. 85 FR 35386. In response, PMI commented that it was not aware of any data or market feedback that would warrant changes to the end-user applications of each product class or changes to the current product class structure. (PMI, No. 4 at p. 4) Further, it was not aware of any data or market feedback that would warrant additional product classes. ( Id. ) DOE did not receive any comments or data suggesting that changes to the existing product class structure were needed and therefore maintained the existing product class structure in this analysis. 5. Market Assessment In the June 2020 RFI, DOE stated that preliminary research indicated some of the “shower-type” basic models since the January 2016 Final Rule had been redesigned to have flow rates and spray force in product class 2 (>5.0 ozf and ≤8.0 ozf), with few commercial prerinse spray valves remaining in product class 3 (>8.0 ozf). 85 FR 35383, 35386. In response to the RFI, PMI commented that the total number of commercial prerinse spray valves that meet the Environmental Protection Agency's (“EPA's”) WaterSense standards continues to grow. (PMI, No. 4 at p. 3) It further commented that industry needs more time to evaluate the impact the current DOE standards have had on the market. ( Id. at p. 1) Specifically, PMI stated that the relatively recent compliance date has not allowed manufacturers time to recoup their investments associated with the most recent redesigns, and some manufacturers and distributors need time to sell-through the existing products they have in stock. ( Id. at p. 4) PMI commented in support of a no-new-standards determination due to any improvement in efficiency being negligible when compared to the current standard's improvement from the previous 1.6 gpm flow rate limitation. ( Id. at p. 5) DOE notes that EPA's WaterSense program was sunset in 2019, with the implementation of the energy conservation standard prescribed in the January 2016 Final Rule, after participants expressed an “overwhelming preference for canceling the WaterSense specification, indicating limited potential for further efficiency.” 9 9 EPA's notification of sunset of the WaterSense Specification for commercial prerinse spray valves can be found at the following link: https://www.epa.gov/watersense/commercial-pre-rinse-spray-valves-specification-and-certification. NEEA reiterated DOE's observation that significantly fewer spray valves are currently manufactured in product class 3 and expressed concern that the absence of high flow-rate valves could drive certain manufacturers to select out of scope products with flow rates above energy conservation standards. (NEEA, No. 7 at p. 3) NEEA recommended DOE investigate any potential product class switching and any switching to equipment that may be out of scope. ( Id. at p. 4) DOE modeled potential product class switching and any switching to out-of-scope equipment as discussed in section IV.F of this document. For this proposed determination, DOE initially relied on government databases, retail listings, and industry publications ( e.g., manufacturer catalogs) to assess the overall state of the industry. DOE used this market analysis to generate the shipments analysis, discussed in section IV.F of this document. DOE maintained the nearest neighbor switching assumptions from the previous rulemaking, as discussed in section IV.F of this document. B. Engineering Analysis The purpose of the engineering analysis is to establish the relationship between the efficiency and cost of commercial prerinse spray valves. There are two elements to consider in the engineering analysis: The selection of efficiency levels to analyze ( i.e., the “efficiency analysis”) and the determination of product cost at each efficiency level ( i.e., the “cost analysis”). In determining the performance of higher-efficiency products, DOE considers technologies and design option combinations not eliminated by the screening analysis. For each product class, DOE estimates the baseline cost, as well as the incremental cost for the product at efficiency levels above the baseline. The output of the engineering analysis is a set of cost-efficiency “curves” that are used in downstream analyses ( i.e., the LCC and PBP analyses and the NIA). NEEA recommended DOE set the efficiency standards to the maximum available flow rate currently on the market in each product class. (NEEA, No. 7 at p. 4) As described in the following analyses, DOE evaluated the savings potential of higher efficiency standards. 1. Efficiency Analysis DOE typically uses one of two approaches to develop energy efficiency levels for the engineering analysis: (1) Relying on observed efficiency levels in the market ( i.e., the efficiency-level approach), or (2) determining the incremental efficiency improvements associated with incorporating specific design options to a baseline model ( i.e., the design-option approach). Using the efficiency-level approach, the efficiency levels established for the analysis are determined based on the market distribution of existing products (in other words, based on the range of efficiencies and efficiency-level “clusters” that already exist on the market). Using the design option approach, the efficiency levels established for the analysis are determined through detailed engineering calculations and/or computer simulations of the efficiency improvements from implementing specific design options that have been identified in the technology assessment. DOE may also rely on a combination of these two approaches. For example, the efficiency-level approach (based on actual products on the market) may be extended using the design option approach to interpolate to define “gap fill” levels (to bridge large gaps between other identified efficiency levels) and/or to extrapolate to the “max-tech” level (particularly in cases where the “max tech” level exceeds the maximum efficiency level currently available on the market). In this proposed determination, similar to the January 2016 Final Rule, DOE is adopting a design-option approach. The analysis is performed in terms of incremental increases in efficiency (decreases in flow rate) due to implementation of selected design options. a. Baseline Efficiency Levels For each product class, DOE generally selects a baseline model as a reference point for each class, and measures changes resulting from potential energy conservation standards against the baseline. The baseline model in each product class represents the characteristics of a product typical of that class ( e.g., capacity, physical size). Generally, a baseline model is one that just meets current energy conservation standards, or, if no standards are in place, the baseline is typically the most common or least efficient unit on the market. The current minimum energy conservation standards represent the baseline efficiency levels for each product class. The current standards for each product class are based on flow rate in gpm. DOE requested comment in the June 2020 RFI regarding whether using the current energy conservation standards for commercial prerinse spray valves are an appropriate baseline efficiency level. 85 FR 35383, 35388. DOE did not receive any comments on this issue. Therefore, DOE is using the current energy conservations standards as the baseline efficiency level in this analysis. b. Higher Efficiency Levels As part of DOE's analysis, the maximum available efficiency level is the highest efficiency ( i.e., lowest water use in a given product class) unit currently available on the market. DOE also defines a “max-tech” efficiency level to represent the maximum possible efficiency for a given product. In the June 2020 RFI, DOE presented the max-tech efficiency level from the January 2016 Final Rule and requested comment as to whether these max-tech options were appropriate. 85 FR 35383, 35388. DOE did not receive any comment suggesting they were not. Based on a review of recent manufacturer catalogs, DOE identified a new max-tech commercial prerinse spray valve for product class 1, which has a flow rate of 0.45 gpm as compared to the flow rate of 0.62 gpm presented in the June 2020 RFI. 10 As such, DOE has used the max-tech efficiency level flow rates presented in Table IV.4 in this analysis. 10 The new max-tech model utilizes smaller spray hole area to further reduce flow rate. This is not a new technology option; rather, it is further utilizing a technology option considered during the January 2016 Final Rule. Table IV.4—Maximum Efficiency Levels Currently Available Product class Flow rate (gpm) Product Class 1 0.45 Product Class 2 0.73 Product Class 3 1.13 DOE seeks comment on its new max-tech efficiency level for product class 1. In the January 2016 Final Rule, DOE presented a theoretical linear relationship between CPSV flow rate and spray force, derived from both Bernoulli's principle of incompressible flow and the concept of conservation of mass in a fluid system. Further, DOE had verified this linear relationship through market testing of available products and close matching between the theoretical relationship and the flow rates and spray forces of available products. 81 FR 4748, 4762. The relationship between flow rate and spray force is given below: EP18AU21.000 In the June 2020 RFI, DOE requested comment regarding whether this equation was still applicable. PMI commented that this relationship was still accurate and that it supports using the equation for determining flow rate or spray force. (PMI, No. 4 at p. 5) DOE did not receive any other comments on the equation, and therefore continues to apply this equation in the engineering analysis. 11 See chapter 5 of the NOPD TSD. 2. Cost Analysis The cost analysis portion of the engineering analysis is conducted using one or a combination of cost approaches. The selection of cost approach depends on a suite of factors, including the availability and reliability of public information, characteristics of the regulated product, and the availability and timeliness of purchasing the product on the market. The cost approaches are summarized as follows: • Physical teardowns: Under this approach, DOE physically dismantles a commercially available product, component-by-component, to develop a detailed bill of materials (“BOM”) for the product. • Catalog teardowns: In lieu of physically deconstructing a product, DOE identifies each component using parts diagrams (available from manufacturer websites or appliance repair websites, for example) to develop the BOM for the product. • Price surveys: If neither a physical nor catalog teardown is feasible (for example, for tightly integrated products such as fluorescent lamps, which are infeasible to disassemble and for which parts diagrams are unavailable) or cost-prohibitive and otherwise impractical ( e.g., large commercial boilers), DOE conducts price surveys using publicly available pricing data published on major online retailer websites and/or by soliciting prices from distributors and other commercial channels. In the January 2016 Final Rule, DOE developed cost-efficiency curves by creating a BOM using physical and catalog teardowns of commercial prerinse spray valves and concluded that manufacturing production cost was unaffected by efficiency level, both within product classes and across product classes. 81 FR 4748, 4765. In the June 2020 RFI, DOE requested comment as to whether this conclusion had changed since DOE's previous analysis. 85 FR 35383, 35389. DOE did not receive any comment suggesting this conclusion has changed. As discussed in section IV.A.2 of this document, DOE did not observe any new technology options from the January 2016 Final Rule. Therefore, for this proposed determination, DOE updated the cost analysis from the January 2016 Final Rule to be representative of the market in 2020. This included updating the material prices of each component of the previously torn down commercial prerinse spray valves and updating the labor, depreciation, utilities, maintenance, tax, and insurance costs. DOE did not include any commercial prerinse spray valves that have exited the market or had their design modified since they were torn down. The resulting BOM provides the basis for the manufacturer production cost (“MPC”) estimates. These updated costs reaffirm that there are differences in manufacturing costs between units from different manufacturers. However, none of the differences were directly related to the efficiency of a commercial prerinse spray valve. Rather, the differences were primarily due to differences in the type and amount of material used ( e.g., plastic versus brass or stainless steel spray nozzles). As such, the resulting cost analysis provided the basis for the MPC estimates. However, DOE has initially concluded that MPC is unaffected by efficiency level, similar to the conclusion from the January 2016 Final Rule; i.e., MPC remains constant across all product classes. 81 FR 4748, 4765. DOE seeks comment and data regarding any changes in MPC that would not be accounted for by updating the cost analysis of the previously conducted product teardowns. Specifically, DOE seeks any data that would contradict its determination of no incremental cost associated with improvements in efficiency of commercial prerinse spray valves. a. Cost-Efficiency Results The results of the engineering analysis are reported as cost-efficiency data and indicate that manufacturing production costs are unaffected by efficiency level within a product class and across product classes. Therefore, DOE assumed the final MPC as the average MPC of all commercial prerinse spray valves. The summary of the cost efficiency relationships for product class 1, 2, and 3 are presented in Table IV.5, Table IV.6, and Table IV.7, respectively. See TSD chapter 5 for additional detail on the engineering analysis and complete cost-efficiency results. Table IV.5—Cost Efficiency Relationship for Product Class 1 [Spray force ≤5.0 ozf] Efficiency level Efficiency level description Flow rate (gpm) Manufacturer production cost ( 2020$ ) Incremental cost over baseline ($) Baseline Current Federal standard 1.00 $26.91 $0.00 Level 1 15% improvement over Federal standard 0.85 26.91 0.00 Level 2 25% improvement over Federal standard 0.75 26.91 0.00 Level 3 Maximum technologically-feasible (max-tech) 0.45 26.91 0.00 Table IV.6—Cost Efficiency Relationship for Product Class 2 [Spray force >5.0 ozf and ≤8.0 ozf] Efficiency level Efficiency level description Flow rate (gpm) Manufacturer production cost ( 2020$ ) Incremental cost over Baseline ($) Baseline Current Federal standard 1.20 $26.91 $0.00 Level 1 15% improvement over Federal standard 1.02 26.91 0.00 Level 2 25% improvement over Federal standard 0.90 26.91 0.00 Level 3 Maximum technologically-feasible (max-tech) 0.73 26.91 0.00 Table IV.7—Cost Efficiency Relationship for Product Class 3 [Spray force >8.0 ozf] Efficiency level Efficiency level description Flow rate (gpm) Manufacturer production cost ( 2020$ ) Incremental cost over baseline ($) Baseline Current Federal standard 1.28 26.91 0.00 Level 1 Maximum technologically-feasible (max-tech) 1.13 26.91 0.00 See chapter 5 of the NOPD TSD for additional detail on the engineering analysis and complete cost-efficiency results. C. Markups Analysis To account for manufacturers' non-production costs and profit margin, DOE applies a non-production cost multiplier (the manufacturer markup) to the MPC. The resulting manufacturer selling price (“MSP”) is the price at which the manufacturer distributes a unit into commerce. DOE developed an average manufacturer markup by examining the annual Securities and Exchange Commission (“SEC”) 10-K reports filed by publicly-traded manufacturers primarily engaged in appliance manufacturing and whose combined product range includes commercial prerinse spray valves. The manufacturer mark-up is discussed in more detail in section IV.H.2.d of this document. The markups analysis also develops appropriate markups ( e.g., retailer markups, distributor markups, contractor markups) in the distribution chain and sales taxes to convert the MSP estimates derived in the engineering analysis to consumer prices, which are then used in the LCC and PBP analysis and in the manufacturer impact analysis (“MIA”). At each step in the distribution channel, companies mark up the price of the product to cover business costs and profit margin. DOE requested comment in the June 2020 RFI regarding markups per distribution channel as well as the portion of equipment sold via each distribution channel. 85 FR 35383, 35390. DOE did not receive any comments related to markups per distribution channel. For commercial prerinse spray valves, the main parties in the distribution chain are manufacturers, distributors, retailers, and service company. Each party in the distribution chain sells to the final consumer. Table IV.8 provides the portion of equipment passing through different distribution channels. Table IV.8—Commercial Prerinse Spray Valve Distribution Channels Channel Pathway Percentage through channel A Manufacturer → Final Consumer (Direct Sales) 17 B Manufacturer → Authorized Distributor → Final Consumer 33 C Manufacturer → Retailer → Final Consumer 17 D Manufacturer → Service Company → Final Consumer 33 DOE developed baseline markups for each entity in the distribution chain. Baseline markups are multipliers that convert the MSP of equipment at the baseline efficiency level to consumer purchase price. Incremental markups are multipliers that convert the incremental increase in MSP for a product at each higher efficiency level (compared to the MSP at the baseline efficiency level) to the corresponding purchase price. In the analysis for this proposed determination, DOE used only baseline markups, as the engineering analysis indicated that there is no price increase with improvements in efficiency for commercial prerinse spray valves. DOE relied on annual reports and SEC 10-K reports from public companies in the different distribution channels to estimate average baseline markups. Table IV.9 provides the markups for each distribution channel. Table IV.9—Commercial Prerinse Spray Valve Baseline Channels Channel Pathway Baseline markup A Manufacturer → Final Consumer (Direct Sales) 1.72 B Manufacturer → Authorized Distributor → Final Consumer 1.72 C Manufacturer → Retailer → Final Consumer 1.52 D Manufacturer → Service Company → Final Consumer 1.87 DOE seeks comment on the markup channels, the percentage through each channel, and the baseline markup of commercial prerinse spray valves. Chapter 6 of the NOPD TSD provides details on DOE's development of markups for commercial prerinse spray valves. D. Energy and Water Use Analysis The purpose of the energy use analysis is to determine the annual energy consumption of commercial prerinse spray valves at different efficiencies in representative U.S. commercial buildings, and to assess the energy savings potential of increased CPSV efficiency. The energy use analysis estimates the range of energy use of commercial prerinse spray valves in the field ( i.e., as they are actually used by consumers). The energy use analysis provides the basis for other analyses DOE performed, particularly assessments of the energy savings and the savings in consumer operating costs that could result from adoption of amended or new standards. The energy use analysis for this NOPD is the same process as DOE used in the January 2016 Final Rule. 81 FR 4748, 4765-4766. As discussed in section IV.B.1, DOE developed flow rates for each efficiency level analyzed in the engineering analysis. DOE calculated the energy and water use by determining the representative daily operating time of the product by major building types that contain commercial kitchens found in the 2012 Commercial Building Energy Consumption Survey (“CBECS”). 12 The daily CPSV operating time was annualized based on operating schedules for each building type. In the June 2020 RFI, DOE presented CPSV annual operating hours and requested comment on those hours. 85 FR 35383, 35390. DOE did not receive any comments related to operating hours. 12 U.S. Department of Energy-Energy Information Administration. Commercial Building Energy Consumption Survey. 2020. Washington, DC. Available at https://www.eia.gov/consumption/commercial/data/2012/. Water use for each equipment class was determined by multiplying the annual operating time by the flow rate and operating pressure of 60 pounds per square inch (“psi”) for each efficiency level. DOE requested comment in the June 2020 RFI requesting feedback related to the typical operating pressure of the water typically supplied to commercial prerinse spray valves and DOE's assumption of 60 psi. 85 FR 35383, 35390. PMI concurred with this operating pressure and stated that 60 ± 2 psi is representative of the average U.S. water pressure in commercial kitchens. (PMI, No. 4 at pp. 4-5) DOE did not receive any further comments and therefore maintained the 60 psi operating pressure for each efficiency level. Energy use was calculated by multiplying the annual water use in gallons by the energy required to heat each gallon of water to an end-use temperature of 108 °F. DOE requested comment in the June 2020 RFI related to the end-use water temperature of the water leaving the prerinse spray valves and any related supporting data. 85 FR 35383, 35390. PMI stated that it was not aware of any data or market information that suggested a different temperature than the 108 °F end-use temperature. (PMI, No. 4 at p. 5) Cold water supply temperatures used in this calculation were derived for the nine U.S. census regions based on ambient air temperatures, and hot water supply temperature was assumed to be 140 °F based on ASHRAE Standard 12-2020. 13 13 ASHRAE Standard 12-2020: Minimizing the Risk of Legionellosis Associated with Building Water Systems (March 2020). DOE seeks comment on the methods to improve DOE's energy-use analysis, as well as any supporting alternate operating hour estimates for operation of commercial prerinse spray valves. DOE seeks comment on water pressure and the end-use temperature. Chapter 7 of the NOPD TSD provides details on DOE's energy use analysis for commercial prerinse spray valves. Life-Cycle Cost and Payback Period Analysis4764-4765. For purposes of its analysis, DOE used 2027 as the first year of compliance with any amended standards for commercial prerinse spray valves. Table IV.10 summarizes the approach and data DOE used to derive inputs to the LCC and PBP calculations. The subsections that follow provide further discussion. Details of the spreadsheet model, and of all the inputs to the LCC and PBP analyses, are contained in chapter 8 of the NOPD TSD and its appendices. Table IV.10—Summary of Inputs and Methods for the LCC and PBP Analysis * Inputs Source/method Product Cost Derived by multiplying MPCs by manufacturer and retailer markups and sales tax, as appropriate. Installation Costs Baseline installation cost determined with data from U.S. Department of Labor and U.S. Bureau of Labor Statistics. Assumed no change with efficiency level. Annual Energy Use The energy use multiplied by the average hours per year. Average number of hours based on field data. Variability: Based on the 2012 CBECS. Energy Prices Electricity: Based on the U.S. Energy Information Administration (“EIA”) Form 861 data for 2020. Variability: Regional energy prices determined for 27 regions. Energy Price Trends Based on the Annual Energy Outlook 2021 (“ AEO2021”) price projections. Repair and Maintenance Costs Assumed no change with efficiency level. Product Lifetime Average: 5 years Discount Rates Approach involves identifying all possible debt or asset classes that might be used to purchase the considered appliances or might be affected indirectly. Primary data source was the Federal Reserve Board's Survey of Consumer Finances. Compliance Date 2027. * References for the data sources mentioned in this table are provided in the sections following the table or in chapter 8 of the NOPD TSD. 1. Product Cost To calculate consumer product costs, DOE multiplied the MSPs developed in the engineering analysis by the distribution channel markups described in section IV.C (along with sales taxes). As stated earlier in this notice, DOE used baseline markups, but did not apply incremental markups, because the engineering analysis indicated that there is no price increase with improvements in efficiency for commercial prerinse spray valves. In prior energy conservation standards rulemakings, DOE estimated the total installed costs per unit for product and then assumed that costs remain constant throughout the analysis period. This assumption is conservative because product costs tend to decrease over time. In 2011, DOE published a notice of data availability (“NODA”) titled Equipment Process Forecasting in Energy Conservation Standards Analysis. 76 FR 9696 (Feb. 22, 2011). In the NODA, DOE proposed a methodology for determining whether equipment process have trended downward in real terms. The methodology examines so-called price or experimental learning, wherein, with ever-increasing experience with the production of a product, manufacturers are able to reduce their production costs through innovations in technology and process. Commercial prerinse spray valves are formed metal devices. Neither changes in technology nor process are expected to occur to change the price of the product in this analysis. For this analysis DOE assumed that product costs remain constant over the analysis period. This is consistent with the January 2016 Final Rule. 81 FR 4748, 4767. 2. Installation Cost Installation cost includes labor, overhead, and any miscellaneous materials and parts needed to install the product. DOE used data from U.S. Department of Labor to estimate the baseline installation cost for commercial prerinse spray valves. Consistent with the January 2016 Final Rule, DOE found no evidence that installation costs would be affected by increased efficiency levels. 81 FR 4748, 4767. 3. Annual Energy Consumption For each sampled CPSV user, DOE determined the energy consumption for a commercial prerinse spray valve at different efficiency levels using the approach described previously in section IV.D of this document. 4. Energy Prices DOE derived average annual commercial electricity prices for 27 geographic regions using data from the U.S. Energy Information Administration (“EIA”) Form EIA-861 database (based on “Annual Electric Power Industry Report”). 14 The NOPD analysis used the data for 2020 DOE derived average natural gas prices using data from EIA's natural gas prices. 15 14 Available at www.eia.doe.gov/cneaf/electricity/page/eia861.html. 15 Available at https://www.eia.gov/dnav/ng/ng_pri_sum_a_EPG0_PCS_DMcf_m.htm. To estimate energy prices in future years, DOE multiplied the average regional energy prices by a projection of annual change in national-average commercial energy price in AEO 2021. 16 AEO2021 has an end year of 2050. To estimate price trends after 2050, DOE used the average annual rate of change in prices from 2040 through 2050. 16 U.S. Department of Energy—Energy Information Administration. Annual Energy Outlook 2021 with Projections to 2050. 2021. Washington, DC. (AEO2021). Available at www.eia.gov/outlooks/aeo/. 5. Water and Wastewater Prices DOE obtained data on water and wastewater prices from the 2019 American Water Works Association (“AWWA”) surveys for this analysis. 17 For each state and the District of Columbia, DOE combined all individual utility observations within the state to develop one value for water and wastewater service. Because water and wastewater charges are frequently tied to the same metered commodity values, DOE combined the prices for water and wastewater into one total dollar per thousand gallons figure. This figure is referred to as the combined water price. DOE used the consumer price index (“CPI”) data for water related consumption (1974-2019) in developing a real growth rate for combined water price forecasts. DOE requested comment in the June 2020 RFI whether a different water price dataset should be considered. 85 FR 35383, 35391. DOE received no comments related to water price datasets. Chapter 8 of the NOPD TSD provides more detail about DOE's approach to developing water and wastewater prices. 17 Available at https://www.awwa.org/Store/2019-Water-and-Wastewater-Rate-Survey—Digital-Set/ProductDetail/79004009. 6. Maintenance and Repair Costs Repair costs are associated with repairing or replacing product components that have failed in an appliance; maintenance costs are associated with maintaining the operation of the product. Typically, small incremental increases in product efficiency produce no, or only minor, changes in repair and maintenance costs compared to baseline efficiency products. DOE requested comment in the June 2020 RFI on the assumption of zero maintenance and repair costs upon failure. DOE assumed that consumers would replace the commercial prerinse spray valve upon failure rather than repairing the product. 85 FR 35383, 35391. DOE also requested comment if these changes would differ per efficiency level. Id. DOE received no comments related to maintenance nor repair costs. For this NOPD, DOE modeled commercial prerinse spray valves as not being repaired, and no maintenance costs. Additionally, DOE modeled no changes in maintenance or repair costs between different efficiency levels. 7. Product Lifetime For commercial prerinse spray valves, DOE used lifetime estimates from manufacturer datasheets and other published data sources. DOE requested comment in the June 2020 RFI regarding lifetime and lifetime distributions. In the June 2020 RFI, DOE restated the values from the January 2016 Final Rule, an average lifetime of 5 years and maximum of 10 years. 85 FR 35383, 35391. DOE did not receive any comments related to lifetime of commercial prerinse spray valves. DOE developed a Weibull distribution with an average lifetime of 5 years and a maximum lifetime of 10 years. The use of a lifetime distribution for this analysis helps account for the variability in product lifetimes. 8. Discount Rates In the calculation of LCC, DOE applies discount rates appropriate to CPSV users to estimate the present value of future operating costs. DOE estimated a distribution of commercial discount rates for commercial prerinse spray valves based on consumer financing costs and the opportunity cost of consumer funds. DOE applies weighted average discount rates calculated from consumer debt and asset data, rather than marginal or implicit discount rates. 18 DOE notes that the LCC does not analyze the appliance purchase decision, so the implicit discount rate is not relevant in this model. The LCC estimates NPV over the lifetime of the product, so the appropriate discount rate will reflect the general opportunity cost of commercial consumer funds, taking this time scale into account. Given the long-time horizon modeled in the LCC, the application of a marginal interest rate associated with an initial source of funds is inaccurate. Regardless of the method of purchase, consumers are expected to continue to rebalance their debt and asset holdings over the LCC analysis period, based on the restrictions consumers face in their debt payment requirements and the relative size of the interest rates available on debts and assets. DOE estimates the aggregate impact of this rebalancing using the historical distribution of debts and assets. 18 The implicit discount rate is inferred from a consumer purchase decision between two otherwise identical goods with different first cost and operating cost. It is the interest rate that equates the increment of first cost to the difference in NPV of lifetime operating cost, incorporating the influence of several factors: transaction costs, risk premiums and response to uncertainty, time preferences, and interest rates at which a consumer is able to borrow or lend. To establish commercial discount rates for the LCC analysis, DOE identified all relevant commercial consumer debt or asset classes in order to approximate a commercial consumer's opportunity cost of funds related to appliance energy cost savings. It estimated the average percentage shares of the various types of debt and equity by commercial consumer building type using data from Damodaran Online 19 for 1998-2019. Using Damodaran Online and the Federal Reserve, DOE developed a distribution of rates for each type of debt and asset by building type to represent the rates that may apply in the year in which amended standards would take effect. DOE assigned each sample building a specific discount rate drawn from one of the distributions. The average rate across all types of commercial consumer debt and equity, weighted by the shares of each type, given business size, is 7.0 percent. See chapter 8 of the NOPD TSD for further details on the development of consumer discount rates. 19 Damodaran Online. Available at http://pages.stern.nyu.edu/~adamodar/ (accessed April 2020). 9. Energy Efficiency Distribution in the No-New-Standards Case To accurately estimate the share of consumers that would be affected by a potential energy conservation standard at a particular efficiency level, DOE's LCC analysis considered the projected distribution (market shares) of product efficiencies under the no-new-standards case ( i.e., the case without amended or new energy conservation standards). To estimate the energy efficiency distribution of commercial prerinse spray valves for 2027 (the first year of the analysis period), DOE conducted general internet searches and examined manufacturer literature to understand the characteristics of the spray values currently offered on the market. DOE assumed that the no-new-standards case percentages in 2027 would stay the same through the analysis period. The estimated market shares by product class for the no-new-standards case for commercial prerinse spray valves are shown in Table IV.11. The estimated market shares within each product class for the no-new-standards case for commercial prerinse spray valves are shown in Table IV.12. See chapter 8 of the NOPD TSD for further information on the derivation of the efficiency distributions. Table IV.11—Product Class Distribution in No-New-Standards Case Product class Portion of shipments (% of shipments) 1 10 2 70 3 20 Table IV.12—Efficiency Level Distribution Within Each Product Class in No-New-Standards Case Efficiency level Product class 1 (% of shipments) Product class 2 (% of shipments) Product class 3 (% of shipments) 0 3.1 74.2 86.0 1 — 24.2 14.0 2 87.5 3 9.4 1.5 10. Payback Period Analysis The PBP is the amount of time it takes the consumer to recover the additional installed cost of more-efficient products, compared to baseline products, through energy cost savings. The PBP is expressed in years. The PBP that exceeds the life of the product means that the increased total installed cost is not recovered in reduced operating expenses. The inputs to the PBP calculation for each efficiency level are the change in total installed cost of the product and the change in the first-year annual operating expenditures relative to the baseline. The PBP calculation uses the same inputs as the LCC analysis, except that discount rates are not needed. E. Shipments Analysis DOE uses projections of annual product shipments to calculate the national impacts of potential amended or new energy conservation standards on energy use, NPV, and future manufacturer cash flows. 20 The shipments model takes an accounting approach in tracking market shares of each product class and the vintage of units in the stock. Stock accounting uses product shipments as inputs to estimate the age distribution of in-service product stocks for all years. The age distribution of in-service product stocks is a key input to calculations of both the NES and NPV, because operating costs for any year depend on the number of commercial prerinse spray valves in operation during that year. 20 DOE uses data on manufacturer shipments as a proxy for national sales, as aggregate data on sales are lacking. In general, one would expect a close correspondence between shipments and sales. Historical CPSV shipment data come from industry reports as well as DOE's Compliance Certification Management System. 21 DOE used the commercial floorspace growth rate to make projections through year 2056. PMI commented that at least 20,000 restaurants closed in 2020 as a result of the COVID-19 pandemic. (PMI, No. 4 at pp. 3-4) DOE modeled flat growth in 2020 through 2022 for commercial prerinse spray valves. DOE assumes that growth will increase by the time the analysis period starts in 2027. 21 Available at https://www.regulations.doe.gov/ccms. Previous research by the Environmental Protection Agency (“EPA”) identified low spray force as one of the primary drivers of user dissatisfaction for some application of commercial prerinse spray valves. 22 The relationship between consumer satisfaction and spray force for commercial prerinse spray valves makes it possible that consumers may opt to switch product classes if they are unsatisfied with the spray force available to them in their current product class. In some cases, consumers may opt to switch to a commercial prerinse spray valve that consumes more water and energy than their current product. 22 EPA WaterSense, Prerinse Spray Valves Field Study Report, as 24-25 (Mar. 31, 2011) (Available at https://www.epa.gov/sites/production/files/2017-02/documents/ws-background-prsv-field-study-report.pdf ). If the current choices of product under the current regulations correspond to the consumers' optimal product, it is probable that some consumers would switch from product class 1 to product class 2 or from product class 2 to product class 3 in response to amended standards in order to maintain their satisfaction with the product. In more extreme cases, consumers may also opt to exit the CPSV market and purchase a different type of product ( e.g., a faucet) with a higher flow rate. The economics resulting from product-class and product-type switching may result in lower optimal efficiency levels and reduced estimates of water and energy savings, as compared to the case without class switching. In the January 2016 Final Rule, DOE acknowledged both the possibility that consumers would switch between product classes and the possibility that a subset of consumers would exit the CPSV market and purchase higher flow-rate products ( e.g., faucets). 81 FR 4748, 4769. DOE previously implemented a nearest neighbor switching mechanism and a product switch scenario in the shipments model to estimate such consumer choices. In the June 2020 RFI, DOE requested comment and information on whether product class switching occurred as a result of the previous amended rule as well as any potential switching as the result of a new amended rule. 85 FR 35883, 35392. NEEA recommended DOE examine potential product-class switching in the product class 3 CPSV market. (NEEA, No. 7 at pp. 1-2) In the shipment model in this analysis, DOE developed a method for modeling product class switching where consumers opted for the nearest neighbor and the possibility of some consumers exiting the CPSV market for higher flow-rate products, similar to the previous rulemaking. 1. Nearest Neighbor Switch Scenario The first scenario can be characterized as a “nearest neighbor” approach, in that consumers would choose the product with the flow rate that is closest to their current product flow rate, even if it has a higher spray force (thus product class switching). Under the nearest neighbor scenario, DOE assumed 100 percent of consumers would choose the closest flow rate. Table IV.13 lists the flow rate for the potential efficiency levels evaluated in this NOPD, which are the consumer's potential options for product switching. Table IV.13—Commercial Prerinse Spray Valve Flow Rates Efficiency level Product class 1 Flow rate (gpm) Product class 2 Flow rate (gpm) Product class 3 Flow rate (gpm) Baseline 1.00 1.20 1.28 Level 1 * 0.85 1.02 1.13 Level 2 0.75 * 0.90 Level 3 0.45 0.73 * Market data do not indicate currently available product that meet this efficiency level. This scenario was included within the Reference case when DOE analyzed any potential amended standards, similar to the January 2016 Final Rule. 81 FR 4748, 4769. A detailed discussion of DOE's method to model product class switching is contained in chapter 9 of the TSD. DOE seeks comment on the product-class switching methodology used in this analysis, including any logic consumers may employ when switching as well as the portion of consumers that may switch. 2. Product Switch Scenario In the January 2016 Final Rule, DOE include an alternate analysis (Trial Standard Level 4a) where consumers of product class 3 might opt for other products such as a faucet. 81 FR 4748, 4779. The Federal standard for that product has a flow rate of 2.2 gpm. 10 CFR 430.32(o) In response to the June 2020 RFI, NEEA requested DOE examine potential switching to products above DOE standards. (NEEA, No. 7 at pp. 1-3) In this NOPD, DOE also included a sensitivity analysis (known as a product switch scenario) in which some consumers exit the CPSV market and instead use other products like faucets, with greater flow rates than applicable to commercial prerinse spray valves. In this sensitivity analysis, a subset of consumers currently using the highest efficiency level of product class 3 ( e.g., consumers currently purchasing valves at EL0 of product class 3) would exit the CPSV market and instead use faucets with a flow rate of 2.2 gpm. As noted in section IV.A.5, since the January 2016 Final Rule, some of the high flow rates (and correspondingly high spray force) units identified during the last rulemaking have been redesigned as product class 2 commercial prerinse spray valves, with lower spray forces. As a result, few units are currently available in product class 3. The lack of units available in product class 3 makes it more likely that customers seeking the product utility associated with a high spray force unit would not be satisfied with their commercial prerinse spray valve if more efficient standards are considered in product class 3. Therefore, the likelihood of customers opting for alternative products in response to amended standards is more likely during this rulemaking than it was during the January 2016 Final Rule. A detailed discussion of DOE's method to model this sensitivity analysis is contained in chapter 9 of the TSD. DOE seeks comment on the approach used to analyze the possibility of some consumers exiting the CPSV market for higher flow-rate products, including any logic consumers may employ when switching as well as the portion of consumers that may switch. F. National Impact Analysis The NIA assesses the NES and the NPV from a national perspective of total consumer costs and savings that would be expected to result from new or amended standards at specific efficiency levels. 23 (“Consumer” in this context refers to consumers of the equipment being regulated.) DOE calculates the NES and NPV for the potential standard levels considered based on projections of annual product shipments, along with the annual energy consumption and total installed cost data from the energy use and LCC analyses. For the present analysis, DOE projected the energy savings, operating cost savings, product costs, and NPV of consumer benefits over the lifetime of commercial prerinse spray valves sold from 2027 through 2056. 23 The NIA accounts for impacts in the 50 states and Washington, DC. DOE evaluates the effects of new or amended standards by comparing a case without such standards with standards-case projections. The no-new-standards case characterizes energy use and consumer costs for each CPSV product class in the absence of new or amended energy conservation standards. For this projection, DOE considers historical trends in efficiency and various forces that are likely to affect the mix of efficiencies over time. DOE compares the no-new-standards case with projections characterizing the market for each CPSV product class if DOE adopted new or amended standards at specific energy efficiency levels ( i.e., the ELs or standards cases) for that class. For the standards cases, DOE considers how a given standard would likely affect the market shares of commercial prerinse spray valves with lower flow rates than the standard. DOE uses a spreadsheet model to calculate the energy savings and the national consumer costs and savings from each EL. Interested parties can review DOE's analyses by changing various input quantities within the spreadsheet. The NIA spreadsheet model uses typical values (as opposed to probability distributions) as inputs. Table IV.14 summarizes the inputs and methods DOE used for the NIA analysis for the NOPD. Discussion of these inputs and methods follows the table. See chapter 10 of the NOPD TSD for details. Table IV.14—Summary of Inputs and Methods for the National Impact Analysis Inputs Method Shipments Annual shipments from shipments model. Modeled Compliance Date of Standard 2027. Efficiency Trends No-new-standards case. Standards cases. Annual Energy Consumption per Unit Annual weighted-average values are a function of energy use at each EL. Total Installed Cost per Unit Annual weighted-average values are a function of cost at each EL. Annual Energy Cost per Unit Annual weighted-average values as a function of the annual energy consumption per unit and energy prices. Repair and Maintenance Cost per Unit Annual values do not change with efficiency level. Energy Prices AEO2021 projections (to 2050) and extrapolation through 2056. Energy Site-to-Primary and FFC Conversion A time-series conversion factor based on AEO2021 . Discount Rate 3 percent and 7 percent. Present Year 2021. 1. Product Efficiency Trends A key component of the NIA is the trend in energy efficiency projected for the no-new-standards case and each of the standards cases. Section IV.E.9 of this document describes how DOE developed an energy efficiency distribution for the no-new-standards case (which yields a shipment-weighted average efficiency) for each of the considered product classes for the year of anticipated compliance with an amended or new standard. For the standards cases, DOE used a “roll-up” switching scenario to establish the shipment-weighted efficiency for the year that standards are assumed to become effective (2027). In this scenario, the market shares of product in the no-new-standards case that do not meet the standard under consideration would “roll up” to meet the new standard level or switch to the “nearest neighbor” based on the flow rate of the valves that were originally used. The market share of product above the standard would remain unchanged. 2. National Energy Savings The NES analysis involves a comparison of national energy consumption of the considered product between each potential standards case (EL) and the case with no new or amended energy conservation standards. DOE calculated the national energy consumption by multiplying the number of units (stock) of each product (by vintage or age) by the unit energy consumption (also by vintage). DOE calculated annual NES based on the difference in national energy consumption for the no-new-standards case and for each higher efficiency standard case. DOE estimated energy consumption and savings based on site energy and converted the electricity consumption and savings to primary energy ( i.e., the energy consumed by power plants to generate site electricity) using annual conversion factors derived from AEO2021. Cumulative energy savings are the sum of the NES for each year over the timeframe of the analysis. The use of a higher-efficiency product is occasionally associated with a direct rebound effect, which refers to an increase in utilization of the product due to the increase in efficiency. For commercial prerinse spray valves, DOE did not use a rebound effect estimate. DOE does not include the rebound effect in the NPV analysis because it reasons that the increased service from greater use of the product has an economic value that is reflected in the value of the foregone energy savings. In 2011, in response to the recommendations of a committee on “Point-of-Use and Full-Fuel-Cycle Measurement Approaches to Energy Efficiency Standards” appointed by the National Academy of Sciences, DOE announced its intention to use FFC measures of energy use and greenhouse gas and other emissions in the NIA and emissions analyses included in future energy conservation standards rulemakings. 76 FR 51281 (Aug. 18, 2011). After evaluating the approaches discussed in the August 18, 2011 notice, DOE published a statement of amended policy in which DOE explained its determination that EIA's National Energy Modeling System (“NEMS”) is the most appropriate tool for its FFC analysis and its intention to use NEMS for that purpose. 77 FR 49701 (Aug. 17, 2012). NEMS is a public domain, multi-sector, partial equilibrium model of the U.S. energy sector 24 that EIA uses to prepare its AEO. The FFC factors incorporate losses in production, and delivery in the case of natural gas, (including fugitive emissions) and additional energy used to produce and deliver the various fuels used by power plants. The approach used for deriving FFC measures of energy use and emissions is described in appendix 10B of the NOPD TSD. 24 For more information on NEMS, refer to The National Energy Modeling System: An Overview 2009, DOE/EIA-0581(2009), October 2009. Available at https://www.eia.gov/analysis/pdfpages/0581(2009)index.php. 3. Net Present Value Analysis The inputs for determining the NPV of the total costs and benefits experienced by consumers are (1) total annual installed cost, (2) total annual operating costs (energy costs and repair and maintenance costs), and (3) a discount factor to calculate the present value of costs and savings. DOE calculates net savings each year as the difference between the no-new-standards case and each standards case in terms of total savings in operating costs versus total increases in installed costs. DOE calculates operating cost savings over the lifetime of each product shipped during the projection period. The operating cost savings are energy cost savings, which are calculated using the estimated energy savings in each year and the projected price of the appropriate form of energy. To estimate energy prices in future years, DOE multiplied the average regional energy prices by the projection of annual national-average commercial energy price changes in the Reference case from AEO2021, which has an end year of 2050. To estimate price trends after 2050, DOE used the average annual rate of change in prices from 2020 through 2050. As part of the NIA, DOE also analyzed scenarios that used inputs from variants of the AEO2021 Reference case that have lower and higher economic growth. Those cases have lower and higher energy price trends compared to the Reference case. NIA results based on these cases are presented in appendix 10C of the NOPD TSD. In calculating the NPV, DOE multiplies the net savings in future years by a discount factor to determine their present value. For this NOPD, DOE estimated the NPV of consumer benefits using both a 3-percent and a 7-percent real discount rate. DOE uses these discount rates in accordance with guidance provided by the Office of Management and Budget (“OMB”) to Federal agencies on the development of regulatory analysis. 25 The discount rates for the determination of NPV are in contrast to the discount rates used in the LCC analysis, which are designed to reflect a consumer's perspective. The 7-percent real value is an estimate of the average before-tax rate of return to private capital in the U.S. economy. The 3-percent real value represents the “social rate of time preference,” which is the rate at which society discounts future consumption flows to their present value. 25 United States Office of Management and Budget. Circular A-4: Regulatory Analysis. September 17, 2003. Section E. Available at www.whitehouse.gov/omb/memoranda/m03-21.html. G. Manufacturer Impact Analysis 1. Overview DOE conducted a MIA for commercial prerinse spray valves to estimate the financial impacts of analyzed amended energy conservation standards on manufacturers of commercial prerinse spray valves. The MIA has both quantitative and qualitative aspects. The quantitative part of the MIA relies on the Government Regulatory Impact Model (“GRIM”), an industry cash-flow model customized for the commercial prerinse spray valves covered in this proposed determination. The key GRIM inputs are data on the industry cost structure, MPCs, and shipments, as well as assumptions about manufacturer markups and manufacturer conversion costs. The key MIA output is industry net present value (“INPV”), which is the sum of industry annual cash flows over the analysis period, discounted using the industry-weighted average cost of capital, and the impact to domestic manufacturing employment. The GRIM calculates annual cash flows using standard accounting principles. DOE used the GRIM to compare changes in INPV between the no-new-standards case and various ELs, the standards cases. The difference in INPV between the no-new-standards case and the standards cases represents the financial impact of potential amended energy conservation standards on CPSV manufacturers. Different sets of assumptions (conversion cost scenarios) produce different INPV results. The qualitative part of the MIA addresses factors such as manufacturing capacity; characteristics of, and impacts on, any particular subgroup of manufacturers, including small manufacturers; the cumulative regulatory burden placed on CPSV manufacturers; and any impacts on competition. 2. GRIM Analysis and Key Inputs DOE uses the GRIM to quantify the changes in cash flows over time due to potential amended energy conservation standards. These changes in cash flows result in either a higher or lower INPV for the standards cases compared to the no-new-standards case. The GRIM uses a standard annual cash-flow analysis that incorporates MPCs, manufacturer markups, shipments, and industry financial information as inputs. It then models changes in manufacturer investments that may result from the analyzed amended energy conservation standards. The GRIM uses these inputs to calculate a series of annual cash flows beginning with the reference year of the analysis, 2021, and continuing to the terminal year of the analysis, 2056. DOE computes INPV by summing the stream of annual discounted cash flows during the analysis period. DOE used a real discount rate of 6.89 percent, the same discount rate used in the January 2016 Final Rule, for CPSV manufacturers in this NOPD. 81 FR 4748, 4749. Many of the GRIM inputs come from the engineering analysis, the shipments analysis, and other research conducted during the MIA. The major GRIM inputs are described in detail in the following sections. DOE seeks comment on the use of 6.89 as a real discount rate for CPSV manufacturers. a. Manufacturer Product Costs Manufacturing more efficient products is typically more expensive than manufacturing baseline products. However, as discussed in section IV.B.2 of this document, the MPCs for all commercial prerinse spray valves is constant at every efficiency level and for every product class. In the MIA, DOE used the MPCs calculated in the engineering analysis, as described in section IV.B.2 of this document and further detailed in chapter 5 of the TSD for this NOPD. b. Shipment Projections INPV, the key GRIM output, depends on industry revenue, which depends on the quantity and prices of commercial prerinse spray valves shipped in each year of the analysis period. Industry revenue calculations require forecasts of (1) total annual shipment volume of commercial prerinse spray valves, (2) the distribution of shipments across the product classes, and (3) the distribution of shipments across ELs. In the MIA, DOE used the shipments calculated as part of the shipments analysis discussion in section IV.F of this document and chapter 9 of the TSD for this NOPD. c. Product and Capital Conversion Costs DOE expects the analyzed amended CPSV energy conservation standards would cause manufacturers to incur conversion costs to bring their production facilities and product designs into compliance with potential amended standards. For the MIA, DOE classified these conversion costs into two groups: (1) Capital conversion costs and (2) product conversion costs. Capital conversion costs are investments in property, plant, and equipment necessary to adapt or change existing production facilities so new product designs can be fabricated and assembled. Product conversion costs are investments in research, development, testing, marketing, certification, and other non-capitalized costs necessary to make product designs comply with potential amended standards. In general, DOE assumes all conversion-related investments occur between the year of publication of a potential final rule and the year by which manufacturers must comply with potential amended standards. DOE created estimates of industry capital and product conversion costs using the engineering cost model and information gained during product teardowns. Product conversion costs depend on the number of CPSV models that need to be redesigned and re-tested as well as the number of manufacturers that need to update brochures and marketing materials. Capital conversion costs are based on the number of plastic spray patterns that would need to be fabricated by CPSV manufacturers. The conversion cost estimates are presented in section V.B of this document. d. Manufacturer Markup As discussed in section IV.H.2.a of this document, the MPCs for commercial prerinse spray valves are the manufacturers' costs for those products. The MPCs include materials, direct labor, depreciation, and overhead, which are collectively referred to as the cost of goods sold. The MSP is the price received by CPSV manufacturers from the first sale of those products, typically to a distributor, regardless of the downstream distribution channel through which the commercial prerinse spray valves are ultimately sold. The MSP is not the price the end-user pays for commercial prerinse spray valves because there are typically multiple sales along the distribution chain and various markups applied to each sale. The MSP equals the MPC multiplied by the manufacturer markup. The manufacturer markup covers all the CPSV manufacturer's non-production costs ( i.e., selling, general, and administrative expenses; research and development; and interest) as well as profit. Total industry revenue for CPSV manufacturers equals the MSPs at each efficiency level multiplied by the number of shipments at that efficiency level for all product classes. As previously discussed in section IV.B.2 of this document, the MPC for all commercial prerinse spray valves is the same at each ELs for all product classes. Therefore, total industry revenue equals the MSP multiplied by the number of shipments. In the June 2020 RFI, DOE requested comment on whether the manufacturer markup of 1.30 from the January 2016 Final Rule is still appropriate to represent the market share weighted average value. 85 FR 35383, 35389. DOE did not receive any comments on this topic. Therefore, in this NOPD MIA, DOE used the same manufacturer markup of 1.30 that was used in the January 2016 Final Rule. V. Analytical Results and Conclusions The following section addresses the results from DOE's analyses with respect to the considered energy conservation standards for commercial prerinse spray valves. It addresses the ELs examined by DOE and the projected impacts of each of these levels. Additional details regarding DOE's analyses are contained in the NOPD TSD supporting this document. A. Economic Impacts on Individual Consumers DOE analyzed the cost effectiveness ( i.e., the savings in operating costs throughout the estimated average life of commercial prerinse spray valves compared to any increase in the price of, or in the initial charges for, or maintenance expenses of, the commercial prerinse spray valves) that is likely to result from the imposition of a standard at an efficiency level by considering the LCC and PBP at each EL. DOE also examined the impacts of potential standards on selected consumer subgroups. These analyses are discussed in the following sections. Typically, a higher-efficiency product can affect consumers in two ways: (1) Purchase price increases and (2) annual operating costs decrease. In the case of commercial prerinse spray valves, there is no incremental cost associated with the higher-efficiency product. Inputs used for calculating the LCC and PBP include total installed costs ( i.e., product price plus installation costs) and operating costs ( i.e., annual energy use, energy prices, energy price trends, repair costs, and maintenance costs). The LCC calculation also uses product lifetime and a discount rate. Chapter 8 of the NOPD TSD provides detailed information on the LCC and PBP analyses. Table V.1 shows the average LCC and PBP results for the ELs considered for commercial prerinse spray valves in this analysis. Table V.1—Average LCC and PBP Results by Efficiency Level Efficiency level LCC savings 2020$ Simple payback period years EL 1 $379.05 0 EL 2 739.23 0 EL 3 751.50 0 The average LCC results in Table V.1 reflect the assumption of a consumer opting to stay within the same product class and not incorporating the switching between product classes that is modeled when assessing national impacts. The results in Table V.1 also assume a consumer purchases a product from an efficiency level that exists in the market as shown in Table IV.13. As a result, product class 1 consumers at baseline efficiency level purchase efficiency level 2 products in the LCC analysis, and product class 2 consumers at efficiency level 1 purchase efficiency level 3 in the LCC analysis. B. Economic Impacts on Manufacturers DOE performed a MIA to estimate the impact of potential amended energy conservation standards on manufacturers of commercial prerinse spray valves. The following sections describe the expected impacts on CPSV manufacturers at each EL. Chapter 11 of the NOPD TSD explains the MIA in further detail. 1. Industry Cash Flow Analysis Results In this section, DOE provides MIA results from the analysis, which examines changes in the industry that could result from new and amended standards. Table V.2 and Table V.3 depict the estimated financial impacts (represented by changes in INPV) of potential amended energy conservation standards on CPSV manufacturers, as well as the conversion costs that DOE estimates manufacturers would incur at each EL. To evaluate the range of cash flow impacts on the CPSV industry, DOE modeled two conversion cost scenarios that correspond to the range of potential manufacturer investments that may occur in responses to potential amended standards. Each conversion cost scenario results in a unique set of cash flows and corresponding industry values at each EL. In the following discussion, the INPV results refer to the difference in industry value between the no-new-standards case and the standards cases that result from the sum of discounted cash flows from the reference year (2021) through the end of the analysis period (2056). The results also discuss the difference in cash flows between the no-new-standards case and the standards cases in the year before the analyzed compliance date for potential amended energy conservation standards. This differential represents the size of the required conversion costs relative to the cash flow generated by the CPSV industry in the absence of amended energy conservation standards. To assess the upper (less severe) end of the range of potential impacts on CPSV manufacturers, DOE modeled a sourced conversion cost scenario. This scenario assumes that the majority of CPSV manufacturers, but not all CPSV manufacturers, source components (including the nozzle) from component suppliers and simply assemble the commercial prerinse spray valves. In this scenario, the CPSV manufacturers that DOE assumed source components would not incur capital conversion cost related to the fabrication of plastic nozzles if CPSV manufacturers must redesign nozzle molds due to the analyzed energy conservation standards. To assess the lower (more severe) end of the range of potential impacts on CPSV manufacturers, DOE modeled a fabricated conversion cost scenario. This scenario assumes that all of the CPSV manufacturers currently selling products with plastic spray nozzles fabricate these nozzles in-house. In this scenario, all CPSV manufacturers incur capital conversion costs related to the fabrication of plastic nozzles if CPSV manufacturers must redesign nozzle molds due to analyzed energy conservation standards. DOE seeks comment on the methodology for estimating manufacturer conversion costs used in the two conversion cost scenarios (the sourced conversion cost scenario and the fabricated conversion cost scenario). Additionally, DOE seeks comment of how many manufacturers fabricate plastic nozzles in-house verses how many manufacturers out-source the production of the plastic nozzles for their commercial prerinse spray valves. Table V.2 and Table V.3 present the projected results for commercial prerinse spray valves under the sourced and fabricated conversion cost scenarios. DOE examined results for all product classes together since most manufacturers sell products across a variety of the analyzed product classes. Table V.2—Manufacturer Impact Analysis for Commercial Prerinse Spray Valves—Sourced Conversion Cost Scenario Units No-new- standards case Efficiency level * 1 2 3 INPV ( 2020$ millions ) 11.5 10.6 10.6 10.6 Change in INPV ( 2020$ millions ) (0.9) (0.9) (0.9) ( % ) (7.5) (7.5) (7.6) Product Conversion Costs ( 2020$ millions ) 1.3 1.3 1.3 Capital Conversion Costs ( 2020$ millions ) 0.1 0.1 0.1 Total Conversion Costs ( 2020$ millions ) 1.4 1.4 1.4 * Numbers in parentheses indicate negative numbers. Table V.3—Manufacturer Impact Analysis for Commercial Prerinse Spray Valves—Fabricated Conversion Cost Scenario Units No-new- standards case Efficiency level * 1 2 3 INPV ( 2020$ millions ) 11.5 10.5 10.5 10.4 Change in INPV ( 2020$ millions ) (1.0) (1.0) (1.1) ( % ) (8.5) (8.5) (9.5) Product Conversion Costs ( 2020$ millions ) 1.3 1.3 1.3 Capital Conversion Costs ( 2020$ millions ) 0.3 0.3 0.4 Total Conversion Costs ( 2020$ millions ) 1.6 1.6 1.7 * Numbers in parentheses indicate negative numbers. At EL 1, DOE estimates the impacts on INPV to range from −$1.0 million to −$0.9 million, or a change in INPV of −8.5 percent to −7.5 percent. At EL 1, industry free cash flow (operating cash flow minus capital expenditures) is estimated to decrease to $0.1 million, or a drop of up to 88.2 percent, compared to the no-new-standards case value of $0.7 million in 2026, the year leading up to the analyzed compliance date of potential amended energy conservation standards. Percentage impacts on INPV are moderately negative at EL 1. DOE projects that in the analyzed year of compliance (2027), 97 percent of CPSV shipments in product class 1, 26 percent of CPSV shipments in product class 2, and 14 percent of CPSV shipments in product class 3 will meet EL 1. DOE expects CPSV manufacturers to incur approximately $1.3 million in product conversion costs to update brochures and marketing material and re-test and redesigned CPSV models that would need to be redesigned if standards were set at EL 1. Additionally, CPSV manufacturers would incur between $0.3 million and $0.1 million in capital conversion costs to fabricate new plastic nozzle molds to accommodate spray patterns that could meet potential standards set at EL 1. At EL 2, DOE estimates the impacts on INPV to range from −$1.0 million to −$0.9 million, or a change in INPV of −8.5 percent to −7.5 percent. At EL 2, industry free cash flow (operating cash flow minus capital expenditures) is estimated to decrease to $0.1 million, or a drop of up to 88.2 percent, compared to the no-new-standards case value of $0.7 million in 2026, t [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%3A2021-16995. Public record. Not legal advice.