Energy Conservation Program for Appliance Standards: Procedures, Interpretations, and Policies for Consideration in New or Revised Energy Conservation Standards and Test Procedures for Consumer Products and Commercial/Industrial Equipment

DEPARTMENT OF ENERGY

10 CFR Part 430

[EERE-2021-BT-STD-0003]

RIN 1904-AF13

Energy Conservation Program for Appliance Standards: Procedures, Interpretations, and Policies for Consideration in New or Revised Energy Conservation Standards and Test Procedures for Consumer Products and Commercial/Industrial Equipment

AGENCY:

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

ACTION:

Final rule.

SUMMARY:

The U.S. Department of Energy (“DOE” or the “Department”) is revising the Department's “Procedures, Interpretations, and Policies for Consideration of New or Revised Energy Conservation Standards and Test Procedures for Consumer Products and Certain Commercial/Industrial Equipment.” The revisions are consistent with longstanding DOE practice and would remove unnecessary obstacles to DOE's ability to meet its statutory obligations under the Energy Policy and Conservation Act (“EPCA”).

DATES:

This rule is effective January 12, 2022.

ADDRESSES:

The docket for this rulemaking, which includes

Federal Register

notices, 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:

www.regulations.gov/docket/EERE-2021-BT-STD-0003.

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

FOR FURTHER INFORMATION CONTACT:

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

ApplianceStandardsQuestions@ee.doe.gov.

Mr. Pete Cochran, U.S. Department of Energy, Office of the General Counsel, GC-33, 1000 Independence Avenue SW, Washington, DC 20585. Telephone: (202) 586-9496. Email:

Peter.Cochran@hq.doe.gov.

SUPPLEMENTARY INFORMATION:

Table of Contents

I. Summary of the Final Rule

II. Authority and Background

A. Authority

B. Background

III. Discussion of Specific Revisions to Appendix A

A. Restoring the Department's Discretion To Depart From the General Guidance in Appendix A

B. Significant Energy Savings Threshold

C. Determinations of Economic Justification

D. Adoption of Industry Test Standards

E. Finalization of Test Procedures Prior to Issuance of a Standards Proposal

F. Direct Final Rules

G. Negotiated Rulemaking

H. Other Topics

IV. Procedural Issues and Regulatory Review

A. Review Under Executive Orders 12866

B. Review Under the Regulatory Flexibility Act

C. Review Under the Paperwork Reduction Act of 1995

D. Review Under the National Environmental Policy Act of 1969

E. Review Under Executive Order 13132

F. Review Under Executive Order 12988

G. Review Under the Unfunded Mandates Reform Act of 1995

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

I. Review Under Executive Order 12630

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

K. Review Under Executive Order 13211

L. Review Consistent With OMB's Information Quality Bulletin for Peer Review

M. Congressional Notification

V. Approval of the Office of the Secretary

I. Summary of the Final Rule

In July of 1996, the United States Department of Energy (“DOE” or “the Department”) issued a final rule that codified DOE's “Procedures, Interpretations and Policies for Consideration of New or Revised Energy Conservation Standards for Consumer Products” at 10 CFR part 430, subpart C, appendix A (“appendix A”). 61 FR 36974 (July 15, 1996) (“July 1996 Final Rule”). The July 1996 Final Rule acknowledged that the guidance contained in appendix A would not be applicable to every rulemaking and that the circumstances of a particular rulemaking should dictate application of these generally applicable practices. 61 FR 36979.

On February 14, 2020, DOE published a final rule (“February 2020 Final Rule”) in the

Federal Register

that made significant revisions to appendix A. 85 FR 8626. DOE also published a companion final rule on August 19, 2020 (“August 2020 Final Rule”), that clarified how DOE would conduct a comparative analysis across all trial standard levels when determining whether a particular trial standard level was economically justified.

See

85 FR 50937. Contrary to the July 1996 Final Rule, the revisions made in the February 2020 Final Rule sought to create a standardized rulemaking process that was binding on the Department. 85 FR 8626, 8634. In creating this one-size-fits-all approach, the February 2020 Final Rule and the August 2020 Final Rule also added additional steps to the rulemaking process that are not required by any applicable statute.

Subsequent events have caused DOE to reconsider the merits of a one-size-fits-all rulemaking approach to establishing and amending energy conservations standards and test procedures. Two of these events are particularly salient. First, on October 30, 2020, a coalition of non-governmental organizations filed suit under EPCA alleging that DOE has failed to meet rulemaking deadlines for 25 different consumer products and commercial equipment.

1

On November 9, 2020, a coalition of States filed a virtually identical lawsuit.

2

In response to these lawsuits, DOE has reconsidered whether the benefits of a one-size-fits-all rulemaking approach outweigh the increased difficulty such an approach poses in meeting DOE's statutory deadlines and obligations under EPCA. As mentioned previously, the July 1996 Final Rule allowed for “case-specific deviations and modifications of the generally applicable rule.”

3

This allowed DOE to tailor rulemaking procedures to fit the specific circumstances of a particular rulemaking. For example, under the July 1996 Final Rule, minor modifications to a test procedure would not automatically result in a 180-day delay before DOE could issue a notice of proposed energy conservation standards. Eliminating these unnecessary delays would better enable DOE to clear this backlog of missed rulemaking deadlines in a timely manner and meet future obligations and deadlines under EPCA while not affecting the ability of any interested person, including small entities, to participate in DOE's rulemaking process. Further, the sooner new or amended energy conservation standards eliminate less-efficient covered products and equipment from the market, the

greater the resulting energy savings and environmental benefits.

1

Natural Resources Defense Council

v.

DOE,

Case No. 20-cv-9127 (S.D.N.Y. 2020).

2

State of New York

v.

DOE,

Case No. 20-cv-9362 (S.D.N.Y. 2020).

3

61 FR 36974, 36979.

Second, on January 20, 2021, the White House issued Executive Order 13990, “Protecting Public Health and the Environment and Restoring Science to Tackle the Climate Crisis.” 86 FR 7037 (Jan. 25, 2021). Section 1 of that Order lists a number of policies related to the protection of public health and the environment, including reducing greenhouse gas emissions and bolstering the Nation's resilience to climate change.

Id.

at 86 FR 7037, 7041. Section 2 of the Order instructs all agencies to review “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, [these policies].”

Id.

Agencies are then directed, as appropriate and consistent with applicable law, to consider suspending, revising, or rescinding these agency actions and to immediately commence work to confront the climate crisis.

Id.

Under that same section, for certain explicitly enumerated agency actions, including the February 2020 and the August 2020 Final Rules, the Order directs agencies to consider publishing for notice and comment a proposed rule suspending, revising, or rescinding the agency action within a specific time frame. Under this mandate, DOE is directed to propose any major revisions to these two rules by March 2021, with any remaining revisions to be proposed by June 2021.

Id.

at 86 FR 7038.

In light of these events, DOE has identified several aspects of the February 2020 and the August 2020 Final Rules that present obstacles to DOE's ability to expeditiously clear the backlog of missed rulemaking deadlines while meeting future obligations under EPCA. In accordance with E.O. 13990, DOE proposed major revisions to appendix A in a notice of proposed rulemaking (NOPR) that was published on April 12, 2021 (“April 2021 NOPR”). 86 FR 18901. DOE proposed additional revisions to appendix A in a second NOPR that was published on July 7, 2021 (“July 2021 NOPR”). 86 FR 35668. DOE is addressing the proposed revisions from the April 2021 NOPR in this document. DOE will address the additional revisions proposed in the July 2021 NOPR in a separate final rule.

In this document, DOE is: (1) Restoring DOE's discretion to depart from the general guidance in appendix A; (2) removing the recently-added threshold for determining when the significant energy savings criterion is met; (3) removing the recently-added requirement to conduct a comparative analysis as part of DOE's analysis of economic justification under the factors listed in 42 U.S.C. 6295(o)(2)(B)(i); (4) reverting to DOE's 1996 guidance regarding completion of test procedure rulemakings prior to issuance of a NOPR for an energy conservation standards rulemaking; (5) clarifying that DOE may make modifications to industry test procedure standards to comply with the requirements of EPCA, as well as for certification, compliance, and enforcement purposes; (6) reverting to DOE's prior practice on direct final rules; and (7) clarifying that DOE will conduct negotiated rulemakings in accordance with the Negotiated Rulemaking Act (“NRA”), Public Law 104-320 (5 U.S.C. 561,

et seq.

). These revisions are summarized in the following table.

List of Revisions in This Document

Section

Proposed revisions in April 2021 NOPR

Final revisions

1. Objectives

Revise language to be consistent with the newly proposed Section 3

Revise language to be consistent with new Section 3; revise paragraph (g) to specifically reference consensus recommendations developed through negotiated rulemakings.

2. Scope

No revisions proposed in this document

No revisions in this document.

3. Mandatory Application of the Process Rule

Replace with new Section 3, “Application”

Replace with new Section 3, “Application.”

4. Setting Priorities for Rulemaking Activity

No revisions proposed in this document

No revisions in this document.

5. Coverage Determination Rulemakings

Eliminate the 180-day period in paragraph (c) between finalization of DOE test procedures and issuance of a NOPR proposing new or amended energy conservation standards

Eliminate the 180-day period in paragraph (c) between finalization of DOE test procedures and issuance of a NOPR proposing new or amended energy conservation standards.

6. Process for Developing Energy Conservation Standards

Eliminate paragraph (b), “Significant Savings of Energy”

Eliminate paragraph (b), “Significant Savings of Energy.”

7. Policies on Selection of Standards

Eliminate text in paragraph (e)(2)(i) requiring DOE to conduct a comparative analysis when determining whether a proposed standard level is economically justified

Eliminate text in paragraph (e)(2)(i) requiring DOE to conduct a comparative analysis when determining whether a proposed standard level is economically justified.

8. Test Procedures

Clarify in paragraph (c) that DOE may revise consensus industry test procedure standards for compliance, certification, and enforcement purposes; eliminate the 180-day period in paragraph (d) between finalization of DOE test procedures and issuance of a NOPR proposing new or amended energy conservation standards

Clarify in paragraph (c) that DOE may revise consensus industry test procedure standards for compliance, certification, and enforcement purposes; revise application of the 180-day period in paragraph (d).

9. ASHRAE Equipment

No revisions proposed in this document

No revisions in this document.

10. Direct Final Rules

Revise section to clarify that DOE will implement its direct final rule authority on a case-by-case basis

Revise section to clarify that DOE will implement its direct final rule authority on a case-by-case basis.

11. Negotiated Rulemaking Process

Eliminate section

Eliminate section.

12. Principles for Distinguishing Between Effective and Compliance Dates

No revisions proposed in this document

No revisions in this document.

13. Principles for the Conduct of the Engineering Analysis

No revisions proposed in this document

No revisions in this document.

14. Principles for the Analysis of Impacts on Manufacturers

Eliminate incorrect cross reference

Eliminate incorrect cross reference.

15. Principles for the Analysis of Impacts on Consumers

No revisions proposed in this document

No revisions in this document.

16. Consideration of Non-Regulatory Approaches

No revisions proposed in this document

No revisions in this document.

17. Cross-Cutting Analytical Assumptions

No revisions proposed in this document

No revisions in this document.

* As part of the revisions, sections and subsections have been renumbered as required.

II. Authority and Background

A. Authority

Title III, Parts B

4

and C

5

of the Energy Policy and Conservation Act, as amended, (“EPCA” or “the Act”), Public Law 94-163 (42 U.S.C. 6291-6317, as codified), established the Energy Conservation Program for Consumer Products and Certain Industrial Equipment.

6

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

4

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

5

Part C was added by Public Law 95-619, Title IV, section 441(a). For editorial reasons, upon codification in the U.S. Code, Part C was redesignated Part A-1.

6

All references to EPCA in this document refer to the statute as amended through Energy Act of 2020, Public Law 116-260 (Dec. 27, 2020).

In addition, pursuant to EPCA, any new or amended energy conservation standard for covered products (and at least certain types of equipment) must be designed to achieve the maximum improvement in energy efficiency that is technologically feasible and economically justified. (42 U.S.C. 6295(o)(2)(A); 42 U.S.C. 6316(a)) In determining whether a standard is economically justified, EPCA requires DOE, to the greatest extent practicable, to consider the following seven factors: (1) The economic impact of the standard on the manufacturers and consumers; (2) the savings in operating costs, throughout the estimated average life of the products (

i.e.,

life-cycle costs), compared with any increase in the price of, or in the initial charges for, or operating and maintaining expenses of, the products which are likely to result from the imposition of the standard; (3) the total projected amount of energy, or as applicable, water, savings likely to result directly from the imposition of the standard; (4) any lessening of the utility or the performance of the products likely to result from the imposition of 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 imposition of the standard; (6) the need for national energy and water conservation; and (7) other factors DOE finds relevant. (42 U.S.C. 6295(o)(2)(B)(i)) Furthermore, the new or amended standard must result in a significant conservation of energy (42 U.S.C. 6295(o)(3)(B); 42 U.S.C. 6313(a)(6); and 42 U.S.C. 6316(a)) and comply with any other applicable statutory provisions.

B. Background

DOE conducted an effort between 1995 and 1996 to improve the process it follows to develop energy conservation standards for covered appliance products. As part of this effort, DOE reached out to many different stakeholders, including manufacturers, energy-efficiency advocates, trade associations, State agencies, utilities, and other interested parties for input on the procedures, interpretations, and policies used by DOE in considering whether to issue new or amended energy conservation standards. This process resulted in publication of the July 1996 Final Rule which codified these procedures, interpretations, and policies in appendix A. The goal of the July 1996 Final Rule was to elaborate on the procedures, interpretations, and policies that would guide the Department in establishing new or revised energy conservation standards for consumer products. The rule was issued without notice and comment under the Administrative Procedure Act's (“APA”) exception for “interpretative rules, general statements of policy, or rules of agency organization, procedure, or practice.” (5 U.S.C. 553(b)(A))

On December 18, 2017, DOE issued a request for information (“RFI”) on potential revisions to appendix A. 82 FR 59992. DOE subsequently published a NOPR regarding appendix A in the

Federal Register

on February 13, 2019. 84 FR 3910. On July 26, 2019, DOE subsequently issued a notice of data availability (“NODA”) in the

Federal Register

. 84 FR 36037 (“July 2019 NODA”). After considering the comments it received DOE then published a final rule in the

Federal Register

on February 14, 2020, which significantly revised appendix A. 85 FR 8626.

While DOE issued the July 1996 Final Rule without notice and comment as an interpretative rule, general statement of policy, or rule of agency organization, procedure, or practice, the February 2020 Final Rule was issued with notice and comment. For several reasons, as stated throughout the April 2021 NOPR and this document, DOE believes appendix A is best described and utilized not as a legislative rule but instead as generally applicable guidance that may guide, but not bind, the Department's rulemaking process. The revisions finalized in this document are intended to clarify this point. In accordance with Executive Order 13990, DOE used a notice and comment process to revise appendix A. 86 FR 7037. DOE held a public webinar for the April 2021 NOPR on April 23, 2021.

In response to the April 2021 NOPR and public webinar, DOE received comments from the following parties:

Table of Commenters

Commenter(s)

Affiliation

Acronym, identifier

A.O. Smith

Manufacturer

A.O. Smith.

Air-Conditioning, Heating, and Refrigeration Institute

Manufacturer Trade Group

AHRI.

Air-Conditioning, Heating, and Refrigeration Institute (AHRI), AMCA International (AMCA), American Lighting Association (ALA), Association of Home Appliance Manufacturers (AHAM), Consumer Technology Association (CTA), Hearth, Patio & Barbecue Association (HPBA), Heating, Air-conditioning & Refrigeration Distributors International (HARDI), Information Technology Industry Council (ITI), International Sign Association (ISA), Manufactured Housing Institute (MHI), National Association of Manufacturers (NAM), National Electrical Manufacturers Association (NEMA), North American Association of Food Equipment Manufacturers (NAFEM), Power Tool institute, Inc. (PTI), and Plumbing Manufacturers International (PMI)

Manufacturer Trade Groups

Joint Industry Commenters.

American Gas Association, American Public Gas Association, Spire, Inc., and Spire Missouri, Inc

Utility Trade Group

AGA.

American Lighting Association

Manufacturer Trade Group

ALA.

Americans for Prosperity

Advocacy Group

AFP.

Anonymous

Individual

Anonymous

Individual

Appliance Standards Awareness Project

(Joint Comments filed with the American Council for an Energy-Efficient Economy, Consumer Federation of America, and National Consumer Law Center)

Advocacy Group

Joint Advocacy Commenters.

Attorneys General of California, Colorado, Connecticut, Illinois, Maine, Maryland, Michigan, Minnesota, Nevada, New Jersey, New York, Oregon, Pennsylvania, Vermont, Washington, the Commonwealth of Massachusetts, the District of Columbia, and the City of New York

State, Local Governments

State Commenters.

Bradford White Corporation

Manufacturer

BWC.

California Energy Commission

State

CEC.

California Investor-Owned Utilities

Utilities

Cal-IOUs.

John Cannon

Individual

Carrier Corporation

Manufacturer

Carrier.

Crown Boiler Company

Manufacturer

Crown Boiler.

Edison Electric Institute

Utility Trade Group

EEI.

GE Appliances

Manufacturer

GEA.

Goodman Manufacturing Company, L.P

Manufacturer

Goodman.

Grundfos Americas Corporation

Manufacturer

Grundfos.

Ahmed Ahmed Hamdi

Individual

Hoshizaki America, Inc

Manufacturer

Hoshizaki.

Hussmann Corporation

Manufacturer

Hussmann.

Hydraulic Institute

Manufacturer Trade Group

HI.

Hydronic Industry Alliance—Commercial

Manufacturer Trade Group

HIA.

Institute for Policy Integrity—New York University School of Law

Academic Institution

IPR.

Lennox International

Manufacturer

Lennox.

Lutron

Manufacturer

Lutron.

Manufactured Housing Institute

Manufacturer Trade Group

MHI.

New Yorker Boiler Company, Inc

Manufacturer

New Yorker Boiler.

North American Association of Food Equipment Manufacturers

Manufacturer Trade Group

NAFEM.

National Propane Gas Association

Utility Trade Group

NPGA.

Natural Resources Defense Council, Earthjustice & Sierra Club

Advocacy Groups

Joint Environmentalist Commenters.

Nortek Global HVAC, LLC

Manufacturer

Nortek.

Northwest Power and Conservation Council

Advocacy Group

NPCC.

Northwest Energy Efficiency Alliance

Advocacy Group

NEEA.

Signify

Manufacturer

Signify.

Small Business Administration (SBA) Office of Advocacy

Federal Government Agency

SBA Office of Advocacy.

Southern Company

Utility

Southern.

Sullivan-Palatek, Inc

Manufacturer

Sullivan-Palatek.

Sara Taylor

Individual

Trane Technologies

Manufacturer

Trane.

Unico, Inc

Manufacturer

Unico.

U.S. Boiler Company

Manufacturer

U.S. Boiler.

Weil-McLain Company

Manufacturer

Weil-McLain.

Westinghouse Lighting Corporation

Manufacturer

Westinghouse.

Whirlpool Corporation

Manufacturer

Whirlpool.

Zero Zone, Inc

Manufacturer

Zero Zone.

III. Discussion of Specific Revisions to Appendix A

A. Restoring the Department's Discretion To Depart From the General Guidance in Appendix A

One of the most significant changes made to appendix A in the February 2020 Final Rule was to turn what had been guidance on usual practices for issuing new or amended energy conservation standards and test procedures into binding requirements. In contrast, the July 1996 Final Rule contained procedures, interpretations, and policies that DOE believed would be appropriate for general use in conducting energy conservation standard and test procedure rulemakings. However, in the July 1996 Final Rule, DOE also acknowledged the possibility that the usual practices would not be appropriate for every rulemaking and that the circumstances of a particular rulemaking should dictate application of these generally applicable practices, subject to public notice explaining any such deviations. 61 FR 36974, 36979.

In making appendix A binding, DOE made a policy determination at the time it issued the February 2020 Final Rule that “promot[ing] a rulemaking environment that is both predictable and consistent” outweighed the need for “flexibility to fit the appropriate process to the appliance standard or test procedure at issue.” February 2020 Final Rule, 85 FR 8626, 8633-8634. Additionally, in response to comments that mandatory application of appendix A could conflict with DOE's statutory obligations under EPCA (

e.g.,

rulemaking deadlines), DOE stated its policy view that the February 2020 Final Rule had been drafted to closely follow and implement EPCA.

Id.

at 85 FR 8634.

As noted in its April 2021 proposal, DOE is reconsidering its policy judgment in weighing the predictability of a one-size-fits-all approach against the negative effects that a mandatory application of appendix A would have on DOE's ability to meet the statutory deadlines established under EPCA and other applicable requirements. Under EPCA, DOE is required to review energy conservation standards for covered products and equipment at least once every six years to determine whether a more-stringent standard would result in significant conservation of energy and is technologically feasible and economically justified. (42 U.S.C. 6295(m)(1); 42 U.S.C. 6313(a)(6)(C); 42 U.S.C. 6316(a)) Similarly, DOE is also required to review test procedures for covered products and equipment at least once every seven years to determine whether improvements can be made. (42 U.S.C. 6293(b)(1); 42 U.S.C. 6314(a)(1)(A)) DOE currently has energy conservation standards and test procedures in place for more than 60 categories of covered products and equipment and is typically working on anywhere from 50 to 100 rulemakings (for both energy conservation standards and test procedures) at any one time. Consequently, DOE has often been unable to meet its rulemaking deadlines, and with the February 2020 Final Rule mandating procedural steps that make the rulemaking process lengthier than EPCA requires, implementation of this binding process would make it even more difficult to clear the existing backlog of missed rulemaking deadlines in a timely manner and meet future rulemaking deadlines.

Among the steps that EPCA does not require—but the February 2020 Final Rule does—is for DOE to issue rulemaking documents in advance of a NOPR. The February 2020 Final Rule mandates use of an early assessment RFI and either an advanced notice of proposed rulemaking (“ANOPR”) or a framework document with a preliminary analysis. While DOE recognizes the importance of gathering early stakeholder input and has proposed to maintain opportunities for pre-NOPR input in the July 2021 NOPR,

7

such input may not be necessary or useful in all cases. For instance, EPCA requires DOE to revisit a determination that standards do not need to be amended within three years. (42 U.S.C. 6295(m)(3)(B)) In such cases, particularly with respect to covered products and equipment that have gone through multiple rounds of rulemakings and for which there has been negligible change to the market and relevant technology, a pre-NOPR publication may provide limited value. Thus, DOE may be able to directly issue a notice of proposed determination that standards do not need to be amended. Stakeholders would still have the opportunity to comment on the proposed determination. And, in the event that DOE receives new information in response to the notice of proposed determination, DOE can issue supplemental rulemaking documents before proceeding to a final rule or determination.

7

86 FR 35668, 35669.

The February 2020 Final Rule also required that DOE finalize test procedure rulemakings 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. DOE stated that this requirement would allow stakeholders to provide more effective comments on the proposed energy conservation standards. 85 FR 8626, 8676. DOE acknowledges the importance of established methodologies for measuring energy use and energy efficiency when evaluating potential amendments to the energy conservation standards. Whether a potential energy conservation standard is technologically feasible and economically justified will be dependent, in part, on how the energy use of a product is measured. As discussed in section III.E of this document, DOE is requiring that new test procedures and amended test procedures that impact measured energy use or efficiency be finalized at least 180 days prior to the close of the comment period for: (i) A NOPR proposing new or amended energy conservation standards; or (ii) a notice of proposed determination that standards do not need to be amended. However, this 180-day period may not always be necessary. For example, DOE will typically use an industry test procedure as the basis for a new DOE test procedure. If DOE adopts the industry test procedure without modification, stakeholders should already be familiar with the test procedure. In such cases, requiring the new test procedure to be finalized 180 days prior to the close of the comment period for a NOPR proposing new energy conservation standards would offer little benefit to stakeholders while delaying DOE's promulgation of new energy conservation standards.

These examples illustrate what was clearly understood in the July 1996 Final Rule—that the procedures, interpretations, and policies laid out in appendix A that are generally applicable to DOE's rulemaking program should be determined on a case-by-case basis based on the individual circumstances of a given rulemaking. 61 FR 36974, 36979. Accordingly, in the April 2021 NOPR, the Department proposed reverting back to the original, non-binding status of appendix A. DOE requested comments, information, and data on whether appendix A should be non-binding or, alternatively, whether the rule should remain binding but with revised provisions.

In addition, consistent with its proposal to revert appendix A back to non-binding guidance, DOE's April 2021 NOPR also proposed clarifying that appendix A does not create legally enforceable rights. DOE does not intend for departures from the generally

applicable guidance contained in appendix A to serve as the basis for potential procedural legal challenges. DOE's proposed clarification, like the general approach contained in the July 1996 Final Rule, would not impact the ability of a party to raise a challenge regarding the substantive merits of a given rulemaking or the procedural steps delineated under EPCA or the APA. (

See

42 U.S.C. 6306 (applying judicial review to EPCA's consumer product provisions) and 42 U.S.C. 6316(a)-(b) (extending the application of 42 U.S.C. 6306 to commercial and industrial equipment)) DOE sought comment on this proposed clarification as well. 86 FR 18901, 18905.

Comments in Favor of DOE's Proposal To Restore the Non-Binding Nature of Appendix A

A number of commenters favored DOE's proposed approach. For example, the Joint Environmentalist Commenters reasoned that it is impossible for DOE to create a binding, one-size-fits-all procedure that would adequately address all the unique situations and requirements of DOE's myriad rulemakings. In their view, neither the Administrative Procedure Act (APA) nor EPCA compel such a rigid approach. They argued that the rulemaking process created by the February 2020 Final Rule is more onerous and more time consuming than the one enacted by Congress or adopted in the July 1996 Final Rule. These commenters argued that DOE cannot afford to waste time in addressing its statutory mandate and rulemaking backlog, and they supported DOE's attempt to restore flexibility to appendix A by returning it to non-binding guidance, thereby allowing DOE to respond appropriately to the unique circumstances of a particular rulemaking. (Joint Environmentalist Commenters, No. 31 at p. 2)

8

8

The parenthetical reference provides a reference for information located in the docket of this rulemaking. (Docket No. EERE-2021-BT-STD-0003, which is maintained at

www.regulations.gov

). The references are arranged as follows: (Commenter name, comment docket ID number, page of that document).

Similarly, the CA IOUs urged DOE to return appendix A to its previous status as non-binding guidance, which they argued would restore predictability and certainty to the rulemaking process. These commenters argued that each DOE rulemaking is unique, making the inflexible blanket approach followed in the February 2020 Final Rule one that could result in missed opportunities for increased energy and water efficiency and delay DOE's timely completion of its statutory obligations (including elimination of the current backlog of rulemakings). Furthermore, the CA IOUs argued that a binding appendix A opened DOE up to additional avenues of legal challenge, first on the basis of appendix A itself and then on the potentially conflicting requirements of appendix A and EPCA. They suggested that a binding appendix A increases uncertainty and reduces the ability for all parties to plan for the future, so they encouraged DOE to expand its reasoning for this rulemaking action to clarify DOE's position for future Administrations. However, in the interest of transparency, the CA IOUs also recommended that DOE should alert stakeholders and document when the agency finds it necessary to deviate from the guidance embodied in appendix A; however, the commenters stated that even this provision should be non-binding. (CA IOUs, No. 34 at pp. 1, 2, 6)

The CEC also agreed with DOE's proposal to return appendix A to a non-binding status as a means to enable DOE to retain the flexibility to adapt to the unique circumstances of each rulemaking. It argued generally that unless DOE adopted its proposed approach, following the February 2020 Final Rule would lead to worse air pollution, higher greenhouse gas emissions, unnecessary consumption of water, less-efficient products, and higher energy bills. It further argued that DOE's proposal would ensure necessary flexibility while providing the regulated community with sufficient certainty, encouraging innovation, saving consumers money, improving efficiency, making progress on the backlog of missed deadline rulemakings, and limiting unnecessary greenhouse gas emissions. (CEC, No. 35 at pp. 1-2, 11)

Furthermore, the CEC asserted that the self-imposed administrative barriers in the February 2020 Final Rule would lead to continued delays, market uncertainty, lost energy savings, and harm to consumers. Although the CEC encouraged DOE to be as transparent, consistent, and predictable as possible in its rulemakings, it cautioned that strict adherence to all of the February 2020 Final Rule's required elements will lead to further delay regarding already overdue energy conservation standards and test procedure rulemakings. It reasoned that a mandatory appendix A would provide additional opportunities for procedural challenges, which would create additional costs and unnecessary market uncertainties that would limit innovation and undermine achievable energy savings. In its view, EPCA's mandatory procedures regarding the setting of standards and test procedures control, and to the extent that any appendix A provisions conflict with EPCA, those regulatory requirements would be unlawful. For all these reasons, the CEC stated that appendix A should be returned to guidance status. (CEC, No. 35 at p. 3)

The Joint Advocacy Commenters also favored returning appendix A to general guidance and restoring DOE's discretion to depart from that guidance in appropriate cases. These commenters recognized the importance of having a predictable process for industry stakeholders and encouraged DOE to strive to adhere to the procedures set forth in appendix A, while stressing the need for DOE to have the flexibility to adjust the process to cover the range of issues which may arise in individual rulemakings. According to the Joint Advocacy Commenters, departing from appendix A's general practice may sometimes be necessary to avoid uncertainty for manufacturers and/or to avoid unnecessary delays. As an example, they noted how appendix A details the analytical practices DOE uses in rulemaking and argued that DOE should not need to go through rulemaking to change appendix A each time it wishes to modify its analytical processes to reflect best practices. They also expressed concern that the February 2020 Final Rule's binding provisions could conflict with statutory requirements and increase litigation solely on the issue of whether DOE has followed the prescribed procedures. For these reasons, the commenters argued that applying these guidelines to a specific rulemaking should be determined on a case-by-case basis and that appendix A should be returned to its original, non-binding status. (Joint Advocacy Commenters, No. 38 at pp. 1-2; Joint Advocacy Commenters (Appendix I), No. 38 at pp. 1, 2)

The State Commenters argued that application of appendix A should be determined on a case-by-case basis so that DOE is accorded the latitude and discretion to pursue the most appropriate approach to gathering, analyzing, and synthesizing stakeholder input for different standards. In their view, this procedural flexibility will help ensure that DOE is able to fulfill its statutory mandates as efficiently as possible and with minimal delay and litigation risk. (State Commenters, No. 29 at p. 8) The commenters also noted that making appendix A binding on all rulemakings—including where doing so conflicts with EPCA—exposes DOE to increased litigation that would further delay promulgation of final standards

on statutorily mandated timelines. (State Commenters, No. 29 at p. 8)

NPCC and NEEA supported DOE's April 2021 proposal, noting that the current version of appendix A contains unnecessary obstacles to DOE's ability to meet its obligations under EPCA. (NPCC, No. 12 at pp. 1-2; NEEA, No. 43 at p. 2) NEEA also asserted that many of the changes in the 2020 Final Rule were unclear and confusing and that they handicapped DOE's ability to effectively and efficiently adopt standards and test procedures so as to achieve maximum economic and environmental benefits for the Nation—thereby making it more difficult for DOE to meet rulemaking deadlines, and resulting in less national energy savings. (NEEA, No. 43 at pp. 1-2) NPCC supported DOE's effort to revert back to non-binding guidance and to restore the flexibility that DOE once had under the 1996 version of appendix A. (NPCC, No. 12 at p. 3) Similarly, NEEA supported DOE's ability to address each rulemaking individually, but in furtherance of transparency, it urged DOE to clearly state in a particular rulemaking when it intended to depart from the procedures outlined in appendix A, along with the reasons for that departure. (NEEA, No. 43 at p. 2)

Comments Opposing DOE's Proposal

DOE also received a number of comments opposing its proposed removal of the mandatory application of appendix A. In AHRI's and BWC's views, appendix A should remain mandatory so as to provide certainty, transparency, and consistency in the rulemaking process DOE uses to implement its energy conservation standards program. (AHRI, No. 25 at p. 1-2; BWC, No. 24 at p. 1) AHRI also asserted that the Department's proposal fails to address or acknowledge DOE's stated reason for making the February 2020 Final Rule binding—namely that of promoting a predictable and consistent rulemaking environment where all stakeholders know what to expect during the rulemaking process—and DOE's proposal does not provide any explanation as to why the record before the agency no longer warrants ensuring that it provide a predictable and consistent rulemaking process. (AHRI, No. 25 at p. 7)

AFP also argued that appendix A should remain binding. It dismissed DOE's stated reasons for making appendix A non-binding—namely to aid in meeting deadlines and to allow it to meet unspecified “statutory obligations”—noting that with over two decades of rulemakings, DOE has rarely met its statutory deadlines even when appendix A was non-binding. In AFP's view, DOE offered no justification in its proposal as to why this situation would change now. (AFP, No. 36 at p. 2) AFP asserted that the three examples offered by DOE in favor of making appendix A non-binding were flawed. It argued that with respect to DOE's ability to meet its statutory deadlines and “other applicable requirements,” DOE offered no explanation as to what comprised the latter. (AFP, No. 36 at pp. 2-3) It also argued that although DOE stated that changes or additions to EPCA's procedural requirements may affect DOE's ability to meet the relevant rulemaking deadlines, DOE failed to show how a non-binding appendix A will either help in meeting these statutory requirements or what will be different from DOE's historic practices. AFP offered similar criticisms with respect to DOE's statements regarding how the mandatory application of appendix A's requirements for early assessment RFIs and ANOPRs may affect DOE's ability to meet statutory deadlines and how having a binding appendix A would also make it more difficult to meet those statutory obligations. (AFP, No. 36 at pp. 2-3)

AFP also referenced DOE's statements to Congress regarding the Department's ability to satisfy the requisite statutory deadlines, in which DOE explained that the Appliance Standards Program has historically had difficulties in meeting its statutorily-required rulemaking obligations, including when appendix A was non-binding. (AFP, No. 36 at p. 3) The commenter asserted that the proposal did not explain how making appendix A non-binding will yield results different from the past, and that DOE should hold itself accountable for complying with its own procedures to ensure that the public will have confidence in the transparency and fairness of DOE's rulemaking process. (AFP, No. 36 at pp. 3, 5)

Commenters Favoring a Mandatory Appendix A Coupled With Well-Defined Exceptions

Additionally, there were also commenters who favored the use of limited, well-defined exceptions to appendix A while maintaining its overall mandatory approach. A number of manufacturers favored an approach that would retain the mandatory nature of appendix A (along with the certainty and predictability it offered), while building in additional flexibility for DOE, and objected to returning appendix A to its prior status as guidance. (Carrier, No. 26 at pp. 1-2; Nortek, No. 19 at p. 2; GEA, No. 20 at pp. 2-3; Lennox, No. 18 at p. 2; A.O. Smith, No. 27 at p. 2; Goodman, No. 22 at p. 2; Trane, No. 23 at p. 2) Nortek and GEA added that if Appendix A becomes non-binding, DOE should add both a mandatory public notice and comment provision that must be followed whenever the agency intends to deviate from appendix A and a rule-specific explanation for the deviation, followed by an opportunity for public comment before the agency proceeds with such deviation. (Nortek, No. 19 at p. 2; GEA, No. 20 at pp. 2-3;

see also

Goodman, No. 22 at p. 2 (asserting that DOE should explain its deviation)) Carrier, Lennox, A.O. Smith, and Trane offered that if DOE required more flexibility (such as making more expeditious, non-material, technical adjustments to test procedures), DOE should tailor those provisions of appendix A where that added flexibility is needed, rather than making Appendix A non-binding. (Carrier, No. 26 at p. 4; Lennox, No. 18 at p. 2; A.O. Smith, No. 27 at p. 3; Trane, No. 23 at p. 20). A.O. Smith suggested that DOE should propose to add a clear “exception clause” that would permit DOE to deviate from appendix A when certain criteria are met, namely: (1) Consensus agreements; (2) negotiated rulemakings; and (3) test procedure rulemakings that are addressing clarifications necessary to provide clarity to the market, reduce uncertainty, and provide a level playing field. (A.O. Smith, No. 27 at p. 2) In A.O. Smith's view, this limited exception would recognize those circumstances where deviations from appendix A are necessary and the expediting of the rulemaking process is reasonable. (A.O. Smith, No. 27 at pp. 2-3) Carrier suggested that DOE should retain its current early assessment requirement (

i.e.,

that an early assessment be conducted prior to the issuance of a standards NOPR) but that the current rule be modified to permit DOE the ability to use the most efficient early assessment method available. (Carrier, No. 26 at p. 1) The commenter offered a similar approach with respect to the current 180-day buffer period between the finalizing of a test procedure rule and the proposal for new or amended energy conservation standards. (Carrier, No. 26 at p. 2)

AGA objected to DOE's proposal to make appendix A non-binding and noted that because the 1996 version of appendix A had not been binding on DOE, it held little value. The commenter stated that in 2016, DOE frequently ignored appendix A, and its non-binding nature effectively conflicted with the need for an orderly and predictable regulatory process. (AGA,

No. 33 at pp. 3-4) Reversing the February 2020 Final Rule's mandatory nature would, in its view, be a serious mistake in light of AGA's past experience with having a non-binding version of appendix A in place. (AGA, No. 33 at p. 4) AGA argued that concerns over the rigidity of the February 2020 Final Rule—which AGA acknowledged to be the case with respect to some requirements—can be addressed through the revision of those requirements or by providing exceptions in appropriate circumstances, all without resorting to making appendix A non-binding. (AGA, No. 33 at pp. 4-5)

NPGA stated that while DOE's April 2021 NOPR has identified a number of rulemaking scenarios where different procedures may be beneficial, the agency's ability to make unilateral decisions about when and how to implement different rulemaking procedures lacks transparency. (NPGA, No. 15 at p. 2) It stressed the importance of getting stakeholder input regarding the potential feasibility and energy savings of rulemaking actions as soon in the process as possible. For that reason, NPGA supported the continued use of the “early look” provisions to solicit public comments on new regulatory actions. However, it agreed with DOE that different rulemaking approaches may be better suited in some cases for soliciting stakeholder input, so in the alternative, NPGA suggested that DOE should propose a new structure or minimum requirements that must be satisfied to justify an agency decision to deviate from appendix A and seek stakeholder information in response. (NPGA, No. 15 at pp. 2, 3) NPGA also argued that businesses need regulatory predictability and that DOE's proposal to largely operate on a case-by-case basis would make it difficult for manufacturers to have confidence in such rulemakings. It urged DOE to prepare and finalize regulations in an orderly fashion with a fair opportunity for all stakeholders to share information with the agency. (NPGA, No. 15 at p. 3)

Crown Boiler (along with fellow boiler manufacturers U.S. Boiler and New Yorker Boiler who both filed nearly identical responses) opposed DOE's proposed change to make appendix A non-binding. Although Crown Boiler acknowledged that in some cases it may make sense for DOE to have flexibility in adapting the rulemaking process to different situations, the commenter asserted that when DOE did have such discretion in the past, the Department abused it. Crown Boiler argued that where deviation from appendix A is necessary, DOE should be required to justify such deviation in writing after soliciting stakeholder input. If DOE is deviating frequently from appendix A, Crown Boiler stated that further amendments to appendix A may be required, but the solution should not be to scrap the binding nature of the process. (Crown Boiler, No. 10 at pp. 2-3; U.S. Boiler, No. 11 at p. 3; and New Yorker Boiler, No. 13 at pp. 2-3)

ALA urged DOE to retain the binding aspects of appendix A but recognized that a one-size-fits-all approach may not always be practical. It argued that retaining the binding aspects of the February 2020 Final Rule will allow DOE to meet its statutory obligations and eliminate time-wasting negotiations on process and procedures. (ALA, No. 28 at p. 2) ALA suggested that if appendix A becomes non-binding, DOE should ensure consistency such as through applying at least a 180-day period between finalizing a test procedure and proposing standards when major changes affecting energy consumption measurements are at issue, although the commenter concluded that a shorter time frame may be warranted for changes that do not impact measured energy performance. In its view, this change will ensure the best outcome in setting appropriate standards and reduce undue burden—particularly on small business entities who have limited resources with which to fully participate in DOE's rulemakings. (ALA, No. 28 at 2)

Lutron stated that it understands DOE's desire to increase flexibility and improve efficiency by restoring DOE's discretion to depart from appendix A's general guidance. It did not oppose such changes as a general matter, but the company argued that certain aspects should remain mandatory, specifically: (1) Test procedures must be finalized before energy conservation standards are proposed; (2) New test procedures or test procedure amendments that impact measured energy must have an adequate lead time between finalization of that test procedure and a new or amended standards proposal; and (3) There should be some form of stakeholder engagement before issuance of a notice of proposed rulemaking for energy conservation standards. (Lutron, No. 16 at p. 2) Lutron suggested that DOE should revert to the language in section 14(a) of the July 1996 Final Rule, which required DOE to make a finding that it is necessary and appropriate to deviate from the procedure specified in appendix A, to explain why, and to provide interested parties an opportunity to comment. The commenter also argued that DOE should clarify that any such deviations will be rule-specific and done on a case-by-case basis, rather than being broadly applicable. (Lutron, No. 16 at p. 2)

Both Grundfos and HI disagreed with DOE's proposal to return appendix A to guidance and noted that manufacturers are held to the strict requirements of the regulations, so DOE should likewise be expected to define a clear and consistent method for how it intends to manage its process to create/update those regulations, thereby providing stakeholders with needed predictability and consistency—as well as a means of enforcing those provisions through legally enforceable rights. They did not favor a case-by-case approach and stressed that such an approach would be at odds with the need for consistency, predictability, and transparency in DOE's regulatory process. However, these commenters also offered a middle ground, suggesting that appendix A should be binding, but with clear, thoughtful, and well-constructed flexibility to ensure DOE can meet the applicable requirements of EPCA. (Grundfos, No. 37 at pp. 1, 2; HI, No. 42 at pp. 1, 2)

The SBA Office of Advocacy stated that appendix A should remain binding while allowing for exceptions in certain instances. (SBA Office of Advocacy, No. 14 at p. 4) It stated that, among other things, without clear-cut processes for how the agency will promulgate standards, small businesses are not able to participate meaningfully in commenting and are not able to provide the types of substantive technical comments necessary to determine whether a particular test procedure is feasible. (SBA Office of Advocacy, No. 14 at p. 4)

NAFEM opposed restoring DOE's discretion to depart from appendix A's general provisions and asserted that if DOE is concerned about unnecessary delays, the Department could amend the rule by including the option of using a NODA for early assessment instead of relegating the whole appendix A to being optional guidance. (NAFEM, No. 30 at p. 4) NAFEM added that the April 2021 NOPR makes clear that DOE is seeking additional insulation from having to follow any rule or having any provisions that would impinge on its unbridled discretion by removing any legal impediment to its actions. (NAFEM, No. 30 at p. 4) In NAFEM's view, removing accountability and allowing for unlimited discretion will not provide economic stability or efficiency in the EPCA rulemaking process. (NAFEM, No. 30 at p. 4)

The Joint Industry Commenters also strongly opposed DOE's proposal to eliminate the mandatory nature of the

February 2020 Final Rule. (Joint Industry Commenters, No. 40 at p. 4) They suggested instead that DOE should ensure the rule is tailored to its needs and provides the needed flexibility such that the agency can follow it regularly. (Joint Industry Commenters, No. 40 at p. 5). If DOE reverts back to a non-binding version of appendix A, the Joint Industry Commenters suggested DOE consider adding the following: (1) Provide parties with notice and explanation of why a deviation from appendix A is necessary and appropriate; (2) clarify that deviations can only be established on a case-by-case basis; (3) provide stakeholders with the opportunity to comment on the need for the deviation; and (4) maintain the mandatory nature of the rule for certain provisions, including: (a) A requirement to finalize test procedures before issuing proposed energy conservation standards with a 180-day lead-in period for new test procedures or amended test procedures that impact measured energy use or efficiency, and (b) an opportunity for early stakeholder input prior to issuance of proposed energy conservation standards. (Joint Industry Commenters, No. 40 at pp. 6-7)

DOE's Response to Comments

DOE first notes that the majority of commenters, both in support of and against restoring the Department's discretion to depart from the general guidance in Appendix A, have noted the merits of providing DOE with some measure of flexibility in its rulemaking processes. (

See, e.g.,

Carrier, No. 26 at pp. 1-2 (favoring a more flexible application of the procedures in appendix A); Nortek, No. 19 at p. 2 (suggesting DOE provide rule-specific explanations when deviations are needed); A.O. Smith, No. 27 at p. 3 (preferring a binding process with reasonable exceptions over the current rigid approach); AGA, No. 33 at pp. 4-5 (noting that the rigidity imposed by the current requirements can be mitigated by providing for exceptions in certain circumstances); State Commenters, No. 29 at p. 8 (noting that procedural flexibility will help ensure that DOE is able to fulfill its statutory mandates as efficiently as possible with minimal delay and litigation risk); Joint Environmentalist Commenters, No. 31 at p. 2 (discussing the importance of allowing DOE to respond appropriately to the unique circumstances of a particular rulemaking)) Where commenters differ is on how to implement this flexibility. Some commenters, such as the Joint Environmentalist Commenters, support making appendix A non-binding to allow DOE the necessary flexibility to respond to the unique circumstances of a particular rulemaking, while other commenters, such as the Joint Industry Commenters, support retaining the current, binding nature of appendix A with modifications to ensure procedures are tailored to DOE's needs and provide the needed flexibility such that DOE can follow it regularly. (Joint Environmentalist Commenters, No. 31 at p. 2; Joint Industry Commenters, No. 40 at p. 5)

After carefully considering these comments, DOE is finalizing the proposal from the April 2021 to revert appendix A back to its original status as non-binding guidance. That being said, DOE recognizes the merits in both approaches and believes the revisions to appendix A finalized in this document represent the best combination of these two approaches. Accordingly, DOE is also modifying appendix A to reduce the need for departures from the generally-applicable guidance by accounting for specific circumstances surrounding a rulemaking. For example, in section III.E of this document, DOE is implementing guidance on when a 180-day period between finalization of a test procedure and the end of the comment period for an associated standards proposal is warranted. These changes will result in fewer departures from the procedures laid out in appendix A. However, as noted previously, DOE currently has energy conservation standards and test procedures in place for more than 60 categories of covered products and equipment and is typically working on anywhere from 50 to 100 rulemakings. Further these covered products and equipment encompass a wide variety of industries. For certain covered products and equipment, such as commercial package air conditioning and heat pumps, there are established trade organizations that represent a majority of manufacturers and that are able to compile comprehensive datasets. External power supplies, on the other hand, are used in a wide range of products and do not fall neatly into a single trade organization. As a result, DOE may need to tailor its rulemaking approach to account for the lack of consolidated information for a given covered product. This is just one example of how DOE has had to adapt its rulemaking process due to varying circumstances across covered products/equipment. Consequently, it is simply not feasible to anticipate every instance of when flexibility or an exception to the generally applicable procedures of appendix A would be warranted for the more than 60 categories of covered products and equipment that DOE regulates. As such, in addition to the specific instances where DOE is incorporating flexibility into appendix A, DOE believes it is imperative that the Department have the discretion to depart from the generally-applicable guidance in appendix A.

Several commenters expressed concern that reverting to the prior, longstanding use of appendix A as non-binding guidance would reduce certainty, transparency, and consistency in the rulemaking process DOE uses to implement its Appliance Standards Program. (

See, e.g.,

AHRI, No. 25 at p. 1-2; BWC, No. 24 at p. 1) NAFEM went so far as to state that a non-binding appendix A would allow for unbridled discretion in the rulemaking process by removing any legal impediment to DOE's actions. (NAFEM, No. 30 at p. 4) In response, DOE notes that reverting appendix A to non-binding guidance has no effect on the procedures that are already required under EPCA. DOE will continue to follow those statutory requirements and strive to continue to meet the related deadlines that EPCA prescribes. For example, EPCA requires that a test procedure or standards proposal be published for public comment, that comment periods be of specified minimum durations, and that notice of determinations be subject to notice and comment before DOE publishes a final determination not to amend a given set of standards for covered products and equipment. (

See

42 U.S.C. 6293(b)(2) (prescribing minimum comment period for test procedure proposed rulemakings); 42 U.S.C. 6295(m)(2) (prescribing minimum comment period for proposed determinations);

and

42 U.S.C. 6295(p)(2) (prescribing minimum comment period for standards proposed rulemakings)) Further, DOE will continue to ensure new or amended energy conservation standards and test procedures meet applicable statutory criteria in EPCA (

e.g.,

standards result in the maximum improvement in energy efficiency that is technologically feasible and economically justified). Taken together, all of these requirements establish a consistent, predictable rulemaking process. NAFEM's concerns about unbridled discretion and a lack of any legal impediment to DOE's actions are unfounded. As discussed above, EPCA restrains DOE's discretion in several areas and specifies a more detailed rulemaking process than that laid out in the Administrative Procedure Act.

As for comments regarding the transparency of DOE's rulemaking

process, DOE notes that appendix A is an agency construction—a provision that was developed not only to address how DOE will conduct energy conservation standards and test procedure rulemakings but also to provide transparency to DOE's rulemaking process. As stated throughout this rulemaking, DOE is making appendix A non-binding in recognition of the fact that DOE should be able to tailor its rulemaking process to best fit the unique circumstances of a particular rulemaking, not to reduce transparency in its rulemaking process. That being said, DOE recognizes that deviations from appendix A without notice or explanation are not conducive to a transparent rulemaking process. Accordingly, DOE is modifying its proposed approach from the April 2021 NOPR to more closely match the original appendix A by providing the public with notice and an explanation of any deviations to the generally applicable guidance of appendix A. These deviations will be narrowly tailored to the individual rulemaking at issue and will not be applied on an across-the-board basis.

In response to those commenters who criticized DOE's proposal and noted the Department's past inability to meet statutory deadlines even under a non-binding appendix A, DOE acknowledges the difficulties it has had in meeting these requirements in the past. DOE will continue to strive to meet these deadlines, and the removal of the mandatory provisions imposed by the 2020 February Final Rule (which tended to lengthen the rulemaking process) will provide DOE with a greater chance of success in doing so. Reserving this discretionary flexibility will aid in DOE's ability to focus its various resources in meeting the deadlines imposed under EPCA (or any other potential deadlines, such as those imposed pursuant to court order). Furthermore, DOE's past difficulty in meeting these deadlines when appendix A's provisions were not mandatory only further highlights the need for the agency to have more flexibility in carrying out a given rulemaking, not less, as the February 2020 Final Rule dictates.

Finally, DOE agrees with those commenters who suggested that the removal of the binding nature of appendix A would reduce the overall scope of DOE's litigation risk and avoid scenarios where appendix A requirements may conflict with statutory requirements in EPCA. Reducing litigation risk, among other things, provides added certainty to DOE's rulemaking process. DOE also notes that removing the potential for procedural challenges stemming from a set of self-imposed requirements does not affect the ability of interested parties to bring substantive legal challenges under the relevant statutory provisions, such as the APA and EPCA. This change should contribute to DOE's ability to satisfy its statutory obligations in a timely manner.

For the aforementioned reasons, DOE is finalizing the proposal from the April 2021 NOPR to restore DOE's discretion to depart from the generally-applicable guidance of appendix A, subject to the modification discussed above requiring notice and explanation for each deviation.

B. Significant Energy Savings Threshold

As DOE noted in the preamble to the April 2021 NOPR, the Secretary of Energy may not prescribe an amended or new energy conservation standard if the Secretary determines that such standard will not result in significant conservation of energy. (42 U.S.C. 6295(o)(3)(B); 42 U.S.C. 6313(a)(6)(A)(ii)(II); and 42 U.S.C. 6316(a)) Congress did not define the statutory term “significant conservation of energy,” and, for several decades prior to the February 2020 Final Rule, DOE also did not provide specific guidance or a numerical threshold for determining what constitutes significant conservation of energy. Instead, DOE determined on a case-by-case basis whether a particular rulemaking would result in a significant conservation of energy.

In a departure from this practice, the February 2020 Final Rule added a numerical threshold for significant conservation of energy that currently applies to all energy conservation standards rulemakings for both covered products and equipment. That threshold requires an energy conservation standard to result in either: (1) A 0.30 quad reduction in site energy use over a 30-year analysis period or (2) a 10-percent reduction in site energy use over that same period. DOE explained in the February 2020 Final Rule its expectation that the threshold would ensure that economically-justified standards would be developed, while also making the rulemaking process more predictable. 85 FR 8626, 8670.

As DOE explained in its April 2021 proposal, the Department is reconsidering its policy views on whether this numerical threshold allows DOE to fully consider whether an energy conservation standard would result in significant conservation of energy. 86 FR 18901, 18905. In particular, DOE is reevaluating whether the significance of energy savings offered by a new or amended energy conservation standard can be determined without knowledge of the specific circumstances surrounding a given rulemaking.

As noted in the April 2021 NOPR, a uniform numerical threshold for site energy savings does not account for differences in primary energy and full-fuel-cycle (“FFC”) effects for different covered products and equipment when determining whether energy savings are significant.

Id.

Primary energy and FFC effects include the energy consumed in electricity production (depending on load shape), in distribution and transmission, and in extracting, processing, and transporting primary fuels (

i.e.,

coal, natural gas, petroleum fuels). For example, 1 quad of site electricity energy consumption in 2022 corresponds to approximately 3.05 quads of FFC energy consumption (for a generic end-use load shape). By contrast, 1 quad of site natural gas or oil energy consumption in 2022 corresponds to 1.11 and 1.17 quads of FFC energy consumption, respectively.

9

Thus, FFC effects present a more complete picture of the impacts of potential energy conservation standards, including greenhouse gas emissions, and would allow DOE to more fully consider the impacts of potential energy conservation standards during its rulemaking processes. This is especially important in light of the fact that the United States has now rejoined the Paris Agreement and will exert leadership in confronting the climate crisis.

10

9

See

Coughlin, K. Projections of Full-Fuel-Cycle Energy and Emissions Metrics. (2013). LBNL-6025E; Energy information Administration

Annual Energy Outlook 2021

(available at:

https://www.eia.gov/outlooks/aeo

).

10

See

Executive Order 14008, “Tackling the Climate Crisis at Home and Abroad,” 86 FR 7619 (Feb. 1, 2021).

Additionally, DOE pointed out in the April 2021 NOPR that some covered products and equipment have most of their energy consumption occur during periods of peak energy demand—a condition that a uniform numerical threshold does not capture. 86 FR 18901, 18905. The impacts of these products on the energy infrastructure can be more significant than those from products with relatively constant site energy use demand. For example, whereas consumer refrigerators operate 24 hours per day, 365 days per year, central air conditioners typically operate during only part of the year, including periods of peak demand (

i.e.,

during the hottest summer days), a factor that is likely to impact grid reliability. Thus, reducing energy use

during periods of peak demand has a more significant impact as it helps reduce stress on energy infrastructure. But the current threshold for determining whether energy savings are significant does not allow DOE to assign greater significance to energy savings that have a greater impact on reducing the stress on U.S. energy infrastructure. FFC and grid impacts are but two examples of any number of factors that cannot be fully accounted for when using DOE's current uniform threshold for significant conservation of energy.

Accordingly, DOE sought comment on whether to eliminate the current threshold for determining significant conservation of energy and to revert to its prior practice of making such determinations on a case-by-case basis or on any suggested alternatives. Commenter responses on this issue are summarized in the ensuing paragraphs, followed by the Department's response.

Comments Supporting Removal of the Significant Energy Savings Threshold

A number of commenters supported DOE's proposal to remove the February 2020 Final Rule's significant energy savings threshold. For example, in expressing support for DOE's proposal, NPCC noted its initial objection to the threshold when it was first proposed by DOE. (NPCC, No. 12 at p. 3) NEEA held a similar view, asserting that the threshold was overly prescriptive and would prevent DOE from adopting standards that save energy and are economically justified. The commenter provided hypothetical examples of what it viewed as anomalous results that might occur if the significant energy saving threshold were to be used in its current form. (NEEA, No. 43 at p. 2 (noting that DOE would be able to implement a standards rulemaking resulting in 0.1 quads of energy savings if it represented 11% of site energy use but would be unable to implement two separate rulemakings resulting in 0.2 quads and 8% of site energy use reduction each))

Some commenters also argued that the particular facts and circumstances need to be fully considered by DOE before it can make a determination regarding the significance of the energy savings involved. (State Commenters, No. 29 at p. 8; CEC, No. 35 at p. 5) Several Commenters also argued that the current significant energy savings threshold is both an unreasonable interpretation of EPCA and in conflict with existing case law. (State Commenters, No. 29 at p. 9 (asserting that the threshold violated EPCA, case law, and congressional intent, and would result in lost public benefits); Joint Environmentalist Commenters, No. 31 at pp. 3-4) (asserting that the threshold violated EPCA and judicial precedent); CEC, No. 35 at pp. 4-5 (citing

NRDC

v.

Herrington,

768 F.2d 1355, 1373 (D.C. Cir. 1985) and asserting that energy savings are significant if they are not “genuinely trivial”)) The CEC further argued that using a mandatory significant energy savings threshold as an initial consideration would allow DOE to side-step its obligations to evaluate the costs and benefits of any energy conservation opportunity that is not genuinely trivial, which is particularly important for technologies that may currently have a small market share but which could consume significant amounts of energy in the future (

e.g.,

electric vehicle supply equipment). It also warned that a static significant energy savings threshold could be abused in situations where products could be split into numerous categories in order to ensure that no product meets the threshold, such that no standards may be established or amended. (CEC, No. 35 at pp. 4-5)

The Joint Environmentalist Commenters characterized the adoption of the significant energy savings threshold as a “harmful change” that is inflexible. They argued that many of DOE's previously adopted energy conservation standards would not have met the 2020 February Final Rule's threshold, despite providing billions of dollars in utility bill savings, avoided health harms, and reduced greenhouse gas emissions. These commenters also argued that Congress intended for DOE to apply a gradualist approach by requiring the reexamination of standards at least every six years, and they reasoned that DOE cannot use a significant energy savings threshold to short-circuit this statutory requirement to reconsider standards at regular intervals. (Joint Environmentalist Commenters, No. 31 at pp. 3-5)

The Joint Advocacy Commenters argued generally that adoption of the proposals contained in the April 2021 NOPR would have the potential to achieve very large consumer and climate benefits, while still providing ample opportunity for stakeholder input throughout DOE's rulemaking process. (Joint Advocacy Commenters, No. 38 at p. 1) Regarding the threshold specifically, these commenters favored its removal because, in their view, such an arbitrary threshold is inconsistent with the relevant case law and congressional intent and has the potential to sacrifice large savings for both consumers and businesses since site energy savings of 0.30 quads (as provided in the threshold) are equivalent to electricity bill savings of about $11 billion. The Joint Advocacy Commenters further argued that the numerical threshold would prevent DOE from pursuing a standard, even if such standard would impose no costs, because the agency would never get to consider that level of savings as part of the required analysis of economic justification. These commenters also faulted the numerical threshold for not allowing DOE to account for factors such as the increased significance of energy savings that can reduce greenhouse gas emissions or the specific circumstances associated with a given product. They agreed with the April 2021 NOPR's arguments that the significant energy savings threshold does not allow DOE to account for other relevant considerations such as a potential standard's impact on peak demand and reduction of stress on the electric grid, and they added that the threshold could also prevent the successful conclusion of consensus agreements. For these reasons, the Joint Advocacy Commenters recommended that DOE should return to considering whether significant energy savings are present on a case-by-case basis, as it has historically done. (Joint Advocacy Commenters, No. 38 at pp. 2-3; Joint Advocacy Commenters (Appendix I), No. 38 at pp. 1, 2, 9-11)

IPI also supported DOE's proposed removal of the significant energy savings threshold and suggested that DOE should also consider other factors besides climate effects when determining whether energy savings are significant. (IPI, No. 17 at p. 1) In addition to supporting DOE's stated reasons for removing the threshold, IPI argued that had the threshold been in place when DOE set standards for commercial warm air furnaces in 2016, the Nation would have had to forego 12.4 million metric tons of CO

2

emissions savings, as well as significant reductions in criteria pollutants and consumer savings of $1 billion. (IPI, No. 17 at p. 2) The commenter asserted that foregoing such savings in the future by continuing to use the threshold would significantly undermine commitments to U.S. leadership on climate change and would bypass the “cost-free chance[s] to save energy” that courts have said that Congress did not intend for DOE to pass up. (IPI, No. 17 at pp. 2-3) In IPI's view, relying solely on numerical thresholds is arbitrary (IPI, No. 17 at p. 3), and it agreed with the April 2021 NOPR's observation that peak demand has a greater impact on U.S. energy infrastructure compared to

non-peak demand. IPI stated that the timing of energy demand matters not only in this context but also with respect to climate, health, and consumer impacts, explaining that electricity generators that satisfy peak demand can also be among the most-polluting generators and that some consumers may experience increased electricity pricing during peak demand periods. (IPI, No. 17 at pp. 3-4) As a result, in IPI's view, energy savings for appliances that operate during peak demand periods can have greater benefits for the climate, human health, and consumers than the raw numbers show. For this reason, IPI argued that these impacts should be considered when determining whether a given savings level is significant. (IPI, No. 17 at p. 4)

IPI added that climate and health impacts should be incorporated into DOE's reasoning for the removal of the current energy savings threshold. (IPI, No. 17 at p. 4) In addition to DOE's reasoning that the current threshold's link to site energy use does not permit DOE to account for differences in primary energy and FFC effects for different covered products, IPI contended that a given amount of site energy usage will also be associated with different amounts of FFC emissions depending on the fuel type used and that those different emissions will likewise be associated with different climate and health impacts. The commenter argued that these reasons favor DOE's consideration of climate and health impacts when assessing the significance of energy savings for a given standard and in repealing the February 2020 Final Rule's numerical thresholds.

11

(IPI, No. 17 at p. 4)

11

IPI also offered as additional support its comments to DOE's prior proposals regarding appendix A in which it opposed the use of a threshold for significant energy savings. (IPI, No. 17 (Attachment 4) (Comments dated March 16, 2020) at pp. 3-4)); IPI, No. 17 (Attachment 5) (Comments dated May 6, 2019) at pp. 2-3)

The CA IOUs also supported removal of the significant energy savings threshold, arguing that it directly conflicts with DOE's ability to set energy conservation standards that achieve the maximum energy savings that are technologically feasible and economically justified. They characterized it as an “arbitrary minimum savings threshold” and also faulted it for its potential to prevent DOE from setting efficiency standards for emerging technologies that may have relatively low market penetration currently but that present large savings opportunities for the future. The CA IOUs argued that appropriate Federal energy conservation standards could help reduce the social cost of such technologies and accelerate their acceptance, and accordingly, these commenters recommended that DOE should again interpret significant energy savings to mean not “genuinely trivial” (referencing the

Herrington

case). (CA IOUs, No. 34 at pp. 2-3)

Finally, the proposed elimination of the significant energy savings threshold was also supported by some manufacturers. A.O. Smith stated that it did not believe that appendix A needed to include a significant energy savings threshold, as the factors that EPCA requires DOE to evaluate include both savings and cost. (A.O. Smith, No. 27 at p. 4) Trane noted that, even with the current approach's “10% improvement backstop,” this level of improvement could represent a significant leap for many covered products that is simply impossible to achieve, let alone be technically feasible. (Trane, No. 23 at p. 3). Instead, Trane favored permitting DOE to use its own discretion, after carefully weighing stakeholder input, as to whether potential cumulative energy savings are significant enough to proceed with a standards rulemaking. (Trane, No. 23 at p. 3)

Comments Opposing Removal of the Significant Energy Savings Threshold

A number of commenters opposed DOE's proposal to remove the current threshold for significant energy savings. For example, in AHRI's view, DOE's establishment of the current significant energy savings threshold, rather than relying on a case-by-case determination, fell within DOE's authority under EPCA. (AHRI, No. 25 at p. 7) Many commenters asserted that the use of such a threshold would provide consistency, predictability, certainty, stability, or some combination of these elements, to regulated entities and stakeholders, and they argued that it would ensure that DOE pursues economically-justified standards. (AHRI, No. 25 at p. 7; Joint Industry Commenters, No. 40 at p. 12; Goodman, No. 22 at p. 3; Lutron, No. 16 at p. 2; Zero Zone, No. 21 at p. 2; Grundfos, No. 37 at p. 2; HI, No. 42 at p. 2; AGA, No. 33 at p. 5; MHI, No. 32 at p. 2). The SBA Office of Advocacy made special note that the threshold provides certainty to small businesses. (SBA Office of Advocacy, No. 14 at p. 5) A number of commenters also asserted that focusing on potential standards capable of satisfying the threshold would help DOE prioritize its resources and meet its statutory deadlines. (AHRI, No. 25 at pp. 7-8; Carrier, No. 26 at p. 2; Crown Boiler, No. 10 at p. 2; Nortek, No. 19 at p. 3; BWC, No. 24 at pp. 2-3; GEA, No. 20 at p. 3; Joint Industry Commenters, No. 40 at p. 12; ALA, No. 28 at 2; MHI, No. 32 at p. 2; AFP, No. 36 at pp. 1-2, 4; SBA Office of Advocacy, No. 14 at p. 5) (

See also

U.S. Boiler, No. 11 at pp. 2-5

and

New Yorker Boiler, No. 13 at pp. 2-4)

12

GEA added that if a rule is not going to make a meaningful difference in energy consumption, DOE should make no new standard and return to the rule in three years, pursuant to EPCA. (GEA, No. 20 at p. 3) NAFEM cautioned that removing the threshold and leaving an undefined process will make standards rulemakings more contentious and less efficient. (NAFEM, No. 30 at p. 5)

12

The comments from Crown Boiler will serve as the basis for discussion of the positions taken by these commenters, as the comments provided were essentially identical.

Some commenters also contended that by removing the threshold, DOE would improperly be relying on factors outside of its statutory authority when considering whether to adopt a given standard (

e.g.,

rejoining of the U.S. to the Paris Agreement, reducing stress on energy infrastructure, and considering greenhouse gas emissions). (AHRI, No. 25 at p. 8; AFP, No. 36 at pp. 4-5) These commenters argued that DOE's consideration of “significant conservation of energy” is limited to whether there is a significant conservation of electricity or fossil fuels and does not extend to whether that conservation of energy would have a significant impact on other DOE priorities such as reducing peak demand, limiting stress on electricity infrastructure, or taking action on climate change. (AHRI, No. 25 at p. 8; AFP, No. 36 at pp. 4-5). AGA faulted DOE for proposing to remove the significant energy savings threshold before having even had a chance to use it. (AGA, No. 33 at p. 5 (noting the same and requesting DOE first analyze previous appliance efficiency rulemakings to provide context and a transparent rationale for the threshold value (or lack thereof) that DOE would apply to future rulemakings.)) ALA disfavored case-by-case determinations, and the organization asserted that the economic cost of the regulatory process and related testing should be weighed against the potential energy savings over a determined period of time. (ALA, No. 28 at p. 2) ALA noted its prior support for DOE's efforts to prioritize test procedures and standards development to identify categories offering consumers the most energy savings, and it argued that following this approach would allow DOE to target its limited resources on those products consuming the most

energy, thereby creating a baseline approach. (ALA, No. 28 at pp. 2-3) AFP noted that the agency has devoted substantial time and effort to rules producing little energy savings, while missing its deadlines 90 percent of the time. (AFP, No. 36 at pp. 1-2, 4 (citing DOE's own finding that 40 percent of the 60 rules it had examined produced 6 percent of the overall energy efficiency savings))

While many commenters supported the continued use of the significant energy savings threshold, some also recognized the need for DOE to have some flexibility in how the threshold would be applied. For example, while Carrier thought the threshold would apply in most instances, it acknowledged that there may be some instances where additional or alternative benefits may exist and suggested that DOE revise appendix A to provide the agency with the ability to address those unique cases (where appropriate) with notice and explanation. (Carrier, No. 26 at p. 2) The Joint Industry Commenters and Nortek reasoned that, even if appendix A became non-binding, DOE should retain the significant energy savings threshold, because DOE could undertake a deviation after giving the public notice and an opportunity for comment should other factors lead DOE to conclude that doing so would satisfy EPCA. (Joint Industry Commenters, No. 40 at p. 12; Nortek, No. 19 at p. 3) Goodman also offered alternatives to the complete removal of the threshold, suggesting that DOE either: (1) Retain the current threshold as a rebuttable presumption that, if met, would be deemed “significant” while savings levels falling under the threshold would be presumed “insignificant” unless DOE demonstrates otherwise or (2) define “significant energy savings” to be a value connected to the average annual per-household energy use requirement specified in 42 U.S.C. 6292(b)(1)(B). (Goodman, No. 22 at p. 4) Lutron suggested that if the current threshold causes problems in achieving the Administration's energy conservation and climate goals, lowering the threshold would be preferable to its removal. (Lutron, No. 16 at pp. 2-3) NAFEM stated that if DOE removes the threshold, appendix A should be revised to provide a list of all of the factors DOE may consider when making a determination that energy savings are significant. (NAFEM, No. 30 at p. 5) ALA asserted that there should be some baseline approach to setting standards to avoid wasting time and money, but it added that using exact thresholds are unlikely to apply to all product types. (ALA, No. 28 at p. 2)

Lennox suggested that DOE should issue a supplemental proposal with an analytical basis for its approach to determining significant energy savings, if the agency wants to consider eliminating its use of “quantitative significance thresholds,” including why a smaller threshold may not be appropriate. (Lennox, No. 18 at p. 9). Lennox went on to state that if DOE eliminates the use of thresholds, it should restore and strengthen the prior version of appendix A, where presumptions had existed against regulations such as those that would: (1) Result in a negative return on investment for the industry; (2) would significantly reduce the value of the industry; or (3) be the direct cause of plant closures, significant losses in domestic manufacturer employment, or significant losses of capital investment by domestic manufacturers. (Lennox, No. 18 at pp. 9-10) (

See also

10 CFR part 430, subpart C, appendix A, section 5(e)(3) (2018))

Crown Boiler—in conjunction with both U.S. Boiler and New York Boiler, who both filed essentially identical comments (

see

U.S. Boiler, No. 11 at pp. 2-5 and New Yorker Boiler, No. 13 at pp. 2-4)

13

—made a number of arguments, in addition to those noted earlier, in support of the significant energy savings threshold. It argued that the threshold is an acknowledgement by DOE that there is a point at which projected energy (and carbon) savings become too small to be statistically significant and its proposed removal would, in its view, make appendix A less science-based, an action which would be in conflict with Executive Order 13990. (Crown Boiler, No. 10 at p. 2) Crown Boiler also stressed that energy efficiency standards have real world impacts, including added cost for equipment and potential job losses, and the commenter argued that DOE should be required to show a degree of energy savings above a

de minimis

level before setting an energy conservation standard. (Crown Boiler, No. 10 at p. 3) It further added that there is a direct relationship between fuel consumption and carbon emissions, and consequently, insignificant energy savings would be expected to also translate into insignificant carbon reductions. Crown Boiler reasoned that given these limitations, standards with a low-yield potential for energy savings would not justify the imposition of heavy regulatory burdens and DOE should avoid setting standards simply for purposes of “international virtue signaling” and to demonstrate leadership in confronting the climate crisis. (Crown Boiler, No. 10 at p. 3)

13

The comments from Crown Boiler will serve as the basis for discussion of the positions taken by these commenters.

Crown Boiler also noted that an insignificant reduction in energy savings is highly unlikely to be realized entirely during a peak demand period, and the commenter added that DOE itself considered the impact that the significant energy savings threshold would have on potential reductions in peak demand, but that it determined that it retained the ability to consider the impacts of new standards on grid reliability if these concerns impacted specific rulemakings. (Crown Boiler, No. 10 at p. 3;

see also

85 FR 8626, 8672 (Feb. 14, 2020)) Crown Boiler also challenged DOE's view that eliminating the threshold would allow DOE to consider potential source energy savings by pointing out that DOE had noted that it believed it was statutorily obligated to utilize site energy use when analyzing energy savings, and it asserted that the April 2021 NOPR did not address DOE's ability to consider source energy savings in this manner while still complying with EPCA. (Crown Boiler, No. 10 at pp. 3-4)

Additionally, Crown Boiler asserted that DOE's only possible error in setting its significant energy savings threshold was reducing it from the originally proposed value of 0.5 quad to the 0.3 quad threshold ultimately adopted. (Crown Boiler, No. 10 at p. 4) It pointed to two energy conservation standard rules—the 2016 rule for residential boilers and the 2020 rule for commercial boilers—as highlighting the potential for negative impacts in the absence of a threshold. The commenter asserted that each of these rules was expected to result in only a 0.6 percent improvement in efficiency, for a total of 0.16 quads and 0.27 quads over 30 years, respectively. Crown Boiler argued that in exchange for these small gains, both gas and oil boilers would face a significant reduction in their ability to work properly when installed with sub-optimal vent systems. Moreover, Crown Boiler argued that such boilers face an increased risk of reliability problems that could reduce efficiency in the field over time, and that manufacturers experienced a drain on engineering resources that would have otherwise been allocated to more productive uses (such as research into new technologies capable of operating on a higher concentration of renewable fuels). Crown Boiler viewed these outcomes as real losses that were traded for theoretical energy savings so low that it

raises questions as to whether DOE can credibly claim these predicted saving as accurate. (Crown Boiler, No. 10 at p. 4)

DOE's Response to Comments

In response to these comments, DOE first notes that several commenters discussed DOE's authority to establish a threshold for determining whether energy savings are significant. As discussed in the April 2021 NOPR, DOE proposed to remove the current numerical threshold for determining whether energy savings are significant because it did not allow DOE to consider the specific circumstances surrounding a given rulemaking, not because DOE lacked the statutory authority to establish a threshold. 86 FR 18901, 18905. As evidenced by the court's decision in

Herrington,

it is clear that DOE may choose to establish a numerical threshold as long as the threshold is consistent with the policies behind the program.

See Herrington,

768 F.2d at 1376 (“we do not hold that the Act forbids DOE to set levels of significance for each product type as a percentage of the energy consumed by that product type, provided that the levels selected reasonably accommodate the policies of the Act.”). However, while establishing a threshold is permissible under EPCA, DOE does not believe it is the best course of action. As discussed previously, a set numerical threshold does not allow DOE to consider the specific circumstances (

e.g.,

electric infrastructure impacts, FFC effects, and greenhouse gas emissions) surrounding a given rulemaking when determining whether energy savings are significant.

As for the argument that DOE's determinations of significance for energy savings should be limited to whether there is a significant conservation of electricity or fossil fuels and that it should not extend to the impacts of those energy savings, commenters seem to suggest that the significance of energy savings can be determined without consideration of the broader impacts of those savings. DOE does not agree with this position, nor does EPCA compel such an approach. As noted in

Herrington,

determining whether energy savings are significant should be informed by the underlying policies of the Appliance Standards Program.

Id.

DOE's Appliance Standards Program was created in the 1970's in response to an energy supply crisis.

See

EPCA (noting in the Act's description the law's intention “[t]o increase domestic energy supplies and availability; to restrain energy demand; to prepare for energy emergencies; and for other purposes.”)

Congress expanded further on the intended policies underlying the Appliance Standards Program in subsequent amendments to EPCA. For example, the Energy Policy Act of 2005, Public Law 109-58 (Aug. 8, 2005), which, among other things, amended EPCA to establish energy conservations standards for additional consumer products, was enacted to “ensure jobs for our future with secure, affordable, and reliable energy.” The Energy Independence and Security Act of 2007, Public Law 110-140 (Dec. 19, 2007), which similarly amended EPCA to establish new energy conservation standards for consumer products and commercial equipment, was enacted to “move the United States toward greater energy independence and security, to increase the production of clean renewable fuels, to protect consumers, to increase the efficiency of products, buildings, and vehicles, to promote research on and deploy greenhouse gas capture and storage options, and to improve the energy performance of the Federal Government, and for other purposes.” Energy conservation achieved through the Appliance Standards Program helps achieve many of these policy objectives. For example, energy conservation standards can increase grid reliability by decreasing peak demand. Energy conservation standards also protect consumers by reducing greenhouse gas and other pollutant emissions. As a result, and in accordance with the court in

Herrington,

DOE believes any determination of whether energy savings are significant should involve some consideration of the potential impact of those energy savings on the policy objectives underlying the Appliance Standards Program. Thus, rather than being constrained in the manner suggested by these commenters—

i.e.,

that DOE is limited to determining significance solely in terms of the amount of projected electricity or fossil fuel energy savings—DOE is guided by the underlying policy objectives of EPCA, as amended, governing the Appliance Standards Program when determining whether potential energy savings are significant.

DOE also received several other comments disagreeing with DOE's decision to consider the potential impacts of energy savings when determining whether those energy savings are significant. Crown Boiler commented that DOE itself had noted it was statutorily obligated to utilize site energy use when analyzing energy savings. (Crown Boiler, No. 10 at pp. 3-4) Crown Boiler also commented that DOE had determined in the February 2020 Final Rule that it could address the impacts of new standards on grid reliability in individual rulemakings.

In response, DOE first notes that Crown Boiler's claim that DOE stated it was obligated to use site energy savings mischaracterizes DOE's position in the February 2020 Final Rule. In that rule, DOE stated that use of site energy savings was consistent with EPCA's definition for “energy use” and the process followed by DOE when determining whether to apply energy conservation standards to other covered products. 85 FR 8626, 8668. But, even if Crown Boiler's claim had been accurate, DOE did not propose to remove the threshold because the use of site energy savings itself is problematic. Instead, DOE proposed to remove the uniform numerical threshold because relying solely on the threshold itself does not account for the specific circumstances surrounding a given rulemaking. Nowhere is this deficiency more evident than in the consideration of FFC effects for electricity and natural gas where 1 quad of site electricity energy consumption corresponds to approximately 3.05 quads of FFC energy consumption, while 1 quad of site natural gas energy consumption corresponds to 1.11 quads of FFC energy consumption. DOE will continue to calculate potential site energy savings for energy conservation standards. But DOE will determine the significance of those site energy savings based on their impact, which may include impacts on FFC savings, grid reliability, and greenhouse gas emissions. Crown Boiler's second argument similarly misses the mark. DOE agrees that the impact of new standards on grid reliability can be addressed during individual rulemakings. But, that can only occur if the February 2020 Final Rule threshold has been met.

In response to comments that eliminating a uniform numerical threshold will reduce certainty and predictability in DOE's rulemaking process (

see, e.g.,

AHRI, No. 25 at p. 7; Joint Industry Commenters, No. 40 at p. 12; Goodman, No. 22 at p. 3) or lead to an undefined process that will make standards rulemakings more contentious and less efficient (NAFEM, No. 30 at p. 5), DOE notes that elimination of the numerical threshold will not change its rulemaking process. DOE will continue to collect information and conduct analyses to determine if new or amended standards would result in significant conservation of energy and are technologically feasible and economically justified. If these statutory criteria are met, DOE will propose new

or amended standards. Stakeholders will then have the opportunity to comment on the proposed new or amended standards, including whether the potential energy savings are significant. If new or amended standards are subsequently issued in a final rule, manufacturers will typically have between 3 and 5 years to come into compliance with the new or amended standards. (

See

42 U.S.C. 6295(m)(4)) This is a consistent process based on well-established methodologies that have been extensively used over the long lifetime of DOE's Appliance Standards Program. As for claims that elimination of the uniform numerical threshold will lead to less predictable rulemakings, DOE does not issue new or amended energy conservation standards based solely on whether the potential energy savings are significant. Any new or amended standard must also be technologically feasible and economically justified. Further, DOE only makes these determinations after conducting a full analysis of all available information, including information obtained during the rulemaking process. And, while DOE acknowledges that a uniform numerical threshold makes for less complicated significance determinations, it does so by ignoring the very real differences,

e.g.,

FFC effects and electrical grid impacts, between energy savings across different rulemakings. DOE believes that any benefits of this approach are more than outweighed by its failure to account for the specific facts and circumstances surrounding an individual rulemaking.

As for commenters such as ALA and AFP that asserted the uniform numerical threshold would help DOE prioritize its resources and meet its statutory deadlines, DOE notes that having a threshold can only constrain DOE's ability to prioritize its resources. As discussed previously, a uniform numerical threshold does not account for the differences across covered products and equipment rulemakings,

e.g.,

FFC effects. For example, under the threshold established in the February 2020 Final Rule, DOE would not be able to prioritize a rule that saves 0.25 quad of site energy and 0.6 quad of FFC energy over a rule that saves 0.30 quad of site energy and 0.4 quad of FFC energy. DOE assumes commenters also meant that the threshold would result in more rulemakings resulting in determinations that standards do not need to be amended, which would free up DOE resources. But, in many cases the process for issuing a new or amended standard, in terms of the number of

Federal Register

publications and opportunities for public comment, is very similar to the process for issuing a final determination not to amend a standard. Both typically involve the issuance of pre-NOPR documents where DOE collects information and data in order to determine whether a new or amended standard would satisfy the relevant criteria in EPCA. DOE then uses these data and information to prepare a proposal on whether a new or amended standard is warranted. After reviewing public comments on the proposal, DOE issues a final document that either establishes a new or amended standard or determines that a new or amended standard is not warranted. Finally, a determination not to amend standards must be revisited within 3 years, while a decision to issue new or amended standards must be revisited within 6 years. (42 U.S.C. 6295(m)) DOE believes the other revisions to appendix A finalized in this document and the additional revisions that were proposed in the July 2021 NOPR will have a much greater impact on DOE's ability to meet its statutory deadlines.

As for the commenters who proposed a modified threshold,

e.g.,

a rebuttable presumption of significance or a lower threshold value, DOE notes these approaches pose the same problem as the threshold set in the February 2020 Final Rule. Namely, they assume on some level that the significance of energy savings can be determined without considering the specific circumstances surrounding a given rulemaking. Additionally, DOE notes that it has never stated the threshold for determining the significance of energy savings established in the February 2020 Final Rule is too high. Rather, the issue is that any set threshold ignores the very real differences in energy savings across different rulemakings.

Several commenters discussed the potential economic impacts on industry and consumers of DOE's proposal to remove the threshold for determining whether energy savings are significant. DOE notes that a determination that energy savings are significant is but one step in the process of issuing new or amended standards. EPCA still requires, among other things, that a new or amended standard be economically justified, which includes the consideration of economic impacts on manufacturers and consumers. (See 42 U.S.C. 6295(o)(2)(B)(i)(I)) DOE will continue to follow these provisions and to perform the required analyses to demonstrate and ensure that the relevant statutory criteria are satisfied before setting (or amending) energy conservation standards or deciding not to amend them.

With regards to Lennox's comment that, assuming the threshold is eliminated, DOE should restore and strengthen prior provisions from the July 1996 Final Rule, DOE will address these comments and the additional revisions proposed in the July 2021 NOPR in a separate final rule.

Finally, DOE does not agree with AGA's statement faulting the Department for proposing to remove the significant energy savings threshold before having even had a chance to use it. The effects of the threshold established in the February 2020 Final Rule on the Department's rulemaking processes were readily apparent on issuance of the rule. As discussed throughout this document, the February 2020 Final Rule, including the significant energy savings threshold, does not allow DOE to account for the particular circumstance of individual rulemakings,

e.g.,

FFC and electrical grid impacts.

Accordingly, for the aforementioned reasons, DOE has concluded that determinations of significance for energy savings should be made on a case-by-case basis. As a result, DOE is removing the significant energy savings threshold.

C. Determinations of Economic Justification

Under EPCA, any new or amended standard must be designed to achieve the maximum improvement in energy efficiency that is technologically feasible and economically justified. (42 U.S.C. 6295(o)(2)(A); 42 U.S.C. 6316(a)). To ensure that DOE meets this statutory mandate, DOE employs a walk-down process to select energy conservation standard levels. As a first step in the process, DOE screens out technologies for improving energy efficiency that are not feasible. DOE then uses the remaining technologies to create a range of trial standard levels (“TSLs”). These TSLs typically include: (1) The most-stringent TSL that is technologically feasible (

i.e.,

the “max-tech” standard); (2) the TSL with the lowest life-cycle cost; (3) a TSL with a payback period of not more than three years; and (4) any TSLs that incorporate noteworthy technologies or fill in large gaps between efficiency levels of other TSLs. Beginning with the max-tech TSL, DOE then determines whether a specific TSL is economically justified. In making that determination, DOE determines, after reviewing public comments and data, whether the benefits of the standard exceed its burdens by, to the greatest extent practicable, considering the

seven factors described in 42 U.S.C. 6295(o)(2)(B)(i). (

See also

42 U.S.C. 6313(a)(6)(B)(ii) (applying the seven factors to ASHRAE equipment); 42 U.S.C. 6316(a) (applying the seven factors to non-ASHRAE equipment)). If DOE determines that the max-tech TSL is economically justified, the analysis ends, and DOE adopts the max-tech TSL as the new or amended standard. However, if DOE determines that the max-tech TSL is not economically justified, DOE walks down to consider the next-most-stringent TSL. This walk-down process continues until DOE determines that a TSL is economically justified or that none of the TSLs are economically justified.

In the August 2020 Final Rule, DOE modified this process to require that determinations of economic justification include a comparison of the benefits and burdens of the selected TSL against the benefits and burdens of the baseline case and all other TSLs. 85 FR 50937, 50944. DOE stated its belief that such an approach would allow for more reliable determinations that a specific TSL is economically justified.

Id.

at 85 FR 50939. While the requirement to conduct a comparative analysis affected DOE's process for determining whether a TSL is economically justified, it did not dictate any particular outcome or require DOE to modify its general approach of walking down from the max-tech TSL.

DOE's decision to add a comparative analysis to the process for determining whether a TSL is economically justified generated concern among several stakeholders that DOE would use the comparative analysis to select a TSL that maximizes net benefits, as opposed to the TSL that maximizes energy savings and is technologically feasible and economically justified.

Id.

DOE's statement in the August 2020 Final Rule that “the purpose of EPCA's seven factors is not to select the standard that achieves the maximum improvement in energy efficiency,

no matter how minute an estimated cost savings”

added further confusion to how DOE would use the comparative analysis in determining whether a TSL is economically justified. 85 FR 50937, 50939 (emphasis added).

In light of the confusion and uncertainty around whether a comparative analysis would result in DOE choosing the TSL that maximizes net benefits as opposed to the TSL that represents the maximum improvement in energy efficiency that is technologically feasible and economically justified, DOE proposed to eliminate the requirement to conduct a comparative analysis when determining whether a specific TSL is economically justified in the April 2021 NOPR. 86 FR 18901, 18906. DOE received numerous comments on this proposal with some commenters in favor of eliminating the comparative analysis and others arguing that it should be retained.

Comments Supporting DOE's Proposal To Eliminate the Requirement To Conduct a Comparative Analysis in Determining Economic Justification

In support of DOE's proposal to remove the requirement to conduct a comparative analysis, several commenters expressed concern that the comparative analysis could lead to DOE selecting a TSL that does not represent the maximum improvement in energy efficiency that is technologically feasible and economically justified. (See

e.g.,

Joint Advocacy Commenters, No. 38 at p. 3; Grundfos, No. 37 at p. 3; CEC, No. 35 at p. 6; State Commenters, No. 29 at p. 9) Some commenters were particularly concerned that the comparative analysis would result in DOE choosing a TSL that maximizes net benefits instead of energy savings. (Joint Environmentalist Commenters, No. 31 at p. 5; CA IOUs, No. 34 at pp. 2-3) IPI commented that the approach would not be transparent and allow DOE to define what is “economically justified” on any subset of adverse impacts to which DOE may happen to arbitrarily assign controlling weight—a result that it asserted would be inconsistent with statutory requirements and rational decision making. (IPI, No. 17 (Attachment 4 (Comments dated March 16, 2020) at pp. 2-3; IPI, No. 17 (Attachment 5 (Comments dated May 6, 2019) at pp. 3-4)

Comments Opposing DOE's Proposal To Eliminate the Requirement To Conduct a Comparative Analysis in Determining Economic Justification

Other commenters opposed DOE's proposal to remove the requirement to conduct a comparative analysis. For example, several commenters stated the comparative analysis will ensure DOE, when faced with TSLs with comparable savings, chooses the trial standard level with a less severe negative impact. (

See, e.g.,

MHI, No. 32 at p. 2; Lutron, No. 16 at p. 3; Joint Industry Commenters, No. 40 at pp. 12-13) NAFEM commented that removal of the comparative analysis requirement could result in energy conservation standards that save more energy at the expense of product differentiation, refinement, and end-use flexibility. (NAFEM, No. 30 at p. 5) SBA Office of Advocacy commented that EPCA does not expressly prohibit an analysis of net benefits and DOE does not provide justification as to why a net benefits approach is inaccurate or otherwise prohibited, and instead merely states that the elimination of the comparative analysis is to reduce uncertainty. (SBA Office of Advocacy, No. 14 at p. 6) SBA Office of Advocacy also stated that engaging in a comparative analysis would ensure that DOE is considering the full scope of impacts of a particular standard and would help DOE in moving towards better compliance with the Regulatory Flexibility Act. (SBA Office of Advocacy, No. 14 at p. 7) Zero Zone stated that DOE should retain the comparative analysis for standard level selection, because the Department has not provided any evidence of an actual problem using that approach. (Zero Zone, No. 21 at p. 2) Finally, BWC stated that the comparative analysis would help DOE and stakeholders better assess the TSLs against the applicable statutory criteria. (BWC, No. 24 at p. 3)

DOE's Response to Comments

DOE first notes that both commenters in favor of the proposal to eliminate the comparative analysis and those against its removal stated that the comparative analysis could lead to the Department forgoing energy savings in favor of increased economic benefits. (

See, e.g.,

Joint Advocacy Commenters, No. 38 at p. 3; MHI, No. 32 at p. 2) Based on these comments, it is clear that the comparative analysis generated significant confusion and uncertainty about whether the process would result in DOE selecting the TSL that results in the maximum improvement in energy efficiency that is technologically feasible and economically justified or a TSL that saves less energy but imposes lower costs on manufacturers and consumers.

Pursuant to EPCA, any new or amended energy conservation standard must be designed to achieve the maximum improvement in energy efficiency that DOE 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 seven statutory factors, which allow DOE to consider the full breadth of impacts including benefits and costs, along with other factors the Secretary considers relevant. In practice, DOE determines an appropriate energy conservation

standard level for adoption by conducting a “walk-down” analysis of the trial standard levels (TSLs) considered in the proposal, after reviewing any public comments. DOE starts by analyzing the maximum technologically feasible (max-tech) level to see whether the statutory criteria for significant energy savings, technological feasibility, and economic justification have been met. If the max-tech TSL fails to meet any of these statutory criteria, DOE determines that it cannot adopt that level, and it then moves to the next highest TSL and conducts the same analysis. The agency continues in this manner until it reaches a TSL that meets all of the statutory criteria. Once DOE arrives at such level (if any), DOE is required under EPCA to choose that TSL because it represents the maximum improvement in energy efficiency that is technologically feasible and economically justified. (

See

42 U.S.C. 6295(o)(2)(A); 42 U.S.C. 6316(a))

With respect to the SBA Office of Advocacy's comments, DOE would like to clarify two issues. First, DOE did not state in the April 2021 NOPR that conducting an analysis of net benefits is inaccurate or otherwise prohibited by EPCA. The concern with the comparative analysis, as discussed previously, is that the process would result in the maximization of net benefits instead of energy savings that are technologically feasible and economically justified, which is contrary to the statute. As for ensuring DOE considers the full scope of impacts of a particular TSL, the comparative analysis did not change the scope of impacts considered by DOE for a particular TSL. The analysis required DOE to compare the benefits and burdens of a TSL against the benefits and burdens of the baseline case and all other TSLs. 85 FR 50937. But, as stated in the August 2020 Final Rule, the vast majority of DOE's analytical work involves evaluating the seven factors for each TSL (

e.g.,

life-cycle costs, manufacturer impacts, total energy savings). 85 FR 50937, 50941. For example, DOE performs a manufacturing impact analysis to identify and quantify the impacts of any new or amended energy conservation standards on manufacturers. As part of this analysis, DOE uses the Government Regulatory Impact Model (“GRIM”) to calculate cash flows using standard accounting principles and changes in industry net present value (INPV) between the no-new-standards case and each proposed TSL. The difference in INPV between the no-new-standards case and each TSL represents the financial impact of the new or amended energy conservation standard on manufacturers. The addition of a comparative analysis has no effect on DOE's analysis of manufacturing impacts.

The comments received in response to the April 2021 NOPR have solidified DOE's concerns regarding the use of the comparative analysis. DOE has no desire to create a situation where stakeholders will question, and potentially challenge, whether the Department is choosing a TSL that maximizes net benefits instead of the TSL that represents the maximum improvement in energy efficiency that is technologically feasible and economically justified as required under EPCA. Further, the process and criteria laid out in 42 U.S.C. 6295(o)(2)(B)(i) and 42 U.S.C. 6313(a)(6)(B)(ii) for determining economic justification are already sufficiently robust, and any potential, incremental improvement that may result from the use of a comparative analysis is outweighed by the uncertainty it casts over DOE's fulfillment of its statutory obligations under EPCA. As a result, DOE is eliminating the requirement in appendix A to conduct a comparative analysis when determining whether a TSL is economically justified. Consistent with EPCA and past practice, DOE will determine whether a TSL is economically justified after determining, based on the factors listed in 42 U.S.C. 6295(o)(2)(B)(i) and 42 U.S.C. 6313(a)(6)(B)(ii), whether the benefits of the standard exceed its burdens.

D. Adoption of Industry Test Standards

The February 2020 Final Rule amended appendix A to require adoption, without modification, of consensus industry test standards as test procedures for covered products and equipment, unless such standards do not meet the EPCA statutory criteria for test procedures. 85 FR 8626, 8678-8682, 8708. In essence, DOE sought to explain and codify its established practice, which is to analyze the appropriate industry consensus test standard, with the input of stakeholders and the interested public, to: (1) Determine that the EPCA criteria are met and use the consensus test standard as the Federal test procedure; (2) modify the standard so that it complies with the statutory criteria, or (3) reject the standard and develop an entirely new test procedure.

On further review, DOE has come to see that its attempt at clarification may have had the opposite effect, creating the false impression that DOE had put in place a new presumption for an “as-is” adoption of consensus industry test standards without meaningful review. That was not DOE's intention, and accordingly, the Department proposed to clarify in the April 2021 NOPR that while DOE will first consider applicable consensus industry test standards, such test standards must first undergo a thorough agency review to ensure that they meet the requirements of the statute and are compatible with DOE's compliance, certification, and enforcement (“CC&E”) regulations. 86 FR 18901, 18907.

Comments Supporting DOE's Clarification of Its Process for Adopting Consensus Industry Standards

The majority of commenters generally supported or had no objections to DOE's proposal to clarify that the Department will amend consensus industry test standards as necessary to ensure compliance with both the statutory requirements in EPCA and DOE's CC&E regulations. (

See, e.g.,

State Commenters, No. 29 at p. 10; Lutron, No. 16 at p. 3; NEEA, No. 43 at p. 3; Joint Environmentalist Commenters, No. 31 at p. 6; Joint Industry Commenters, No. 40 at p. 10) In citing their support for DOE's proposal, several commenters stated that consensus industry test standards are not generally designed for regulatory purposes and, as such, modifications to ensure compliance with EPCA and DOE's CC&E regulations are often necessary. (

See, e.g.,

CA IOUs, No. 34 at p. 5; Joint Advocacy Commenters, No. 38 at pp. 3-4) The CA IOUs and Joint Environmentalist Commenters also favored DOE's proposal because it would relieve stakeholders of the burden of having to participate in both industry and DOE test procedure development processes. (CA IOUs, No. 34 at p. 5; Joint Environmentalist Commenters, No. 31 at p. 6)

Aside from expressing their support for DOE's proposal, Lutron and the Joint Industry Commenters also asked DOE to clarify in the regulatory text of appendix A that industry test standards are consensus test procedures, which usually involve more than just industry stakeholders. (Lutron, No. 16 at p. 3; Joint Industry Commenters, No. 40 at p. 10)

Comments Opposing DOE's Clarification of Its Process for Adopting Consensus Industry Standards

Other commenters supported DOE's adoption of consensus industry test standards with little or no modification. (

See, e.g.,

Signify, No. 41 at p. 1; Lennox, No. 18 at p. 5; New Yorker Boiler, No. 13 at p. 5) These commenters expressed a variety of reasons for

advocating for the adoption of consensus industry test standards. For example, Crown Boiler and BWC stated that most consensus industry test standards are developed by all interested stakeholders, including manufacturers, industry advocates, regulators (including DOE), and certification agency laboratories. (Crown Boiler, No. 10 at p. 5; BWC, No. 24 at p. 3) Crown Boiler also noted that the committee members tend to have decades of experience and that DOE should rely on these committees to develop the test procedures. (Crown Boiler, No. 10 at p. 5) Some commenters stated that adopting consensus industry test standards would reduce burden on both DOE and stakeholders. (

See

BWC, No. 24 at p. 3 (stating that deviating from consensus industry test procedures will add unnecessary workload for DOE staff); Signify, No. 41 at p. 1 (stating that changes to consensus industry test procedures create unnecessary burden for industry and test laboratories)) Several commenters also stated that adoption of consensus industry test procedures would expedite DOE's test procedure rulemaking process and allow stakeholders to address standards rulemakings sooner. (

See, e.g.,

U.S. Boiler, No. 11 at pp. 5-6; GEA, No. 20 at p. 3) Finally, GEA stated that adopting consensus industry test procedures would reduce the likelihood of litigation over test procedures. (GEA, No. 20 at p. 3)

In order to avoid the need to make modifications to consensus industry test procedures, several commenters encouraged DOE to participate in the industry test standards development process as a way to ensure that consensus industry test standards are compatible with EPCA and DOE's CC&E regulations. (

See, e.g.,

Signify, No. 41 at p. 1; ALA, No. 28 at p. 3) Additionally, with regards to compatibility with DOE's CC&E regulations, Lennox stated that DOE should consider “the potential need to modify the applicable CC&E requirements, not the industry test procedure.” (Lennox, No. 18 at p. 5).

DOE's Response to Comments

As an initial matter regarding the request that DOE clarify that industry test standards are “consensus” test standards, DOE uses the term “consensus” broadly to indicate a process in which multiple stakeholders develop and finalize the industry test standard. The use of the term “consensus” is not intended as an assessment of the representativeness of those stakeholders involved in the process. In certain cases, industry test standards were not developed by a group that is fully representative of DOE's rulemaking stakeholders, including energy-efficiency advocacy organizations, utilities, States, consumer groups, etc. DOE notes that under section 301 of the Department of Energy Organization Act (Pub. L. 95-91; 42 U.S.C. 7101), DOE must comply with section 32 of the Federal Energy Administration Act of 1974, as amended by the Federal Energy Administration Authorization Act of 1977. (15 U.S.C. 788; “FEAA”) Section 32 essentially provides in relevant part that, where a proposed rule authorizes or requires use of commercial standards, DOE must inform the public of the use and background of such standards. DOE must also evaluate these standards as to whether they fully comply with the requirements of section 32(b) of the FEAA (

i.e.,

whether they were developed in a manner that fully provides for public participation, comment, and review). In addition, section 32(c) requires DOE to consult with the Attorney General and the Chairman of the Federal Trade Commission concerning the impact of the commercial or industry standards on competition.

In response to the remaining comments, DOE first notes that commenters have raised several valid points about the benefits of adopting consensus industry test standards with little to no modification (

e.g.,

reducing test procedure development cost). That said, these benefits cannot be realized at the expense of DOE's statutory obligations. In accordance with EPCA, DOE must ensure that a consensus industry test standard is reasonably designed to produce test results that measure energy efficiency or use during a representative average use cycle or period of use without being unduly burdensome to conduct. (42 U.S.C. 6293(b)(3)) As a result, DOE has often found it necessary to make modifications to an applicable consensus industry test standard to ensure compliance with these statutory requirements. For example, the DOE test procedure for dehumidifiers requires reduced indoor ambient temperature conditions as compared to those specified in the referenced industry test standard as DOE determined that the reduced conditions are more representative of the product's average use cycle as required by EPCA. 80 FR 45801, 45807 (July 31, 2015). As another example, the DOE test procedure for portable air conditioners includes several modifications to the industry test method that DOE determined would provide results that are representative of typical use. Specifically, in comparison to the industry test procedure, the DOE test procedure requires a different set of indoor and outdoor test conditions; an additional test condition for units with a dual-duct configuration; and additional provisions to account for heat transferred to the indoor conditioned space from the ducts and any infiltration air from unconditioned spaces, which are not accounted for in the industry test method. 81 FR 35241, 35250, 35248, 35253 (June 1, 2016).

Additionally, DOE notes that consensus industry test standards are often designed to support industry certification programs with the goal of verifying ratings within a tolerance specified by industry. DOE's CC&E regulations, on the other hand, are designed to ensure, in accordance with EPCA, that all products and equipment distributed in commerce in the United States comply with applicable Federal energy and water conservation standards. Furthermore, DOE's CC&E regulations seek to establish a level playing field amongst industry participants and to also help ensure that the utility bill savings that consumers expect from energy and water conservation standards are being realized. For example, in the past, DOE has had to specify airflow tolerances for certain industry standard test conditions that are referenced for the testing of certain categories of small, large, and very large air-cooled commercial package air conditioners and heating equipment after having determined that such tolerances are necessary to address potential variation in the measured efficiency and cooling capacity of the equipment. 80 FR 79655, 79659-79660 (Dec. 23, 2015). DOE also notes that industry representatives and other stakeholders are welcome to participate in the development and modification of the Department's CC&E regulations.

14

In fact, some of DOE's existing CC&E regulations were developed by a negotiated rulemaking that resulted in a consensus agreement amongst the Department, industry, and many diverse stakeholders over, among other things, the allowance of simulations to develop ratings under specific circumstances for commercial heating, ventilation, and air-conditioning equipment; commercial water heaters; and commercial refrigeration equipment. 80 FR 144 (Jan. 5, 2015).

14

For example, DOE recently asked for comment on a proposal to amend the certification and reporting provisions for several covered products and equipment. 86 FR 43120 (August 6, 2021).

DOE may also modify consensus industry test standards for other

reasons. For example, DOE is not required to adopt or align its test procedures with sections of the consensus industry test standard that are not necessary for the method of test for metric(s) included in the DOE test procedure. For instance, sections of the industry test procedure regarding selection of models for testing under an industry certification program, verification of represented values and the associated tolerances, and operational requirements need not be referenced or aligned with under the DOE test procedure. This is consistent with the Department's longstanding practice to only include sections that are relevant to the method of test for metric(s) included in the DOE test procedure, or that provide clarifications that help promote understanding amongst regulated entities. Another instance where DOE may need to deviate from a consensus industry test standard is to address issues identified through DOE's test procedure waiver process. For example, a manufacturer may seek a test procedure waiver for a covered product that incorporates a new, innovative technology that was not contemplated by the consensus industry test standard or where some other deficiency in the test procedure forestalls successful testing. In such cases, DOE is required to update the Federal test procedure to eliminate the need for such a waiver. 10 CFR 430.27(l); 10 CFR 431.401(l).

Finally, although DOE has explained why the Department is often required to modify consensus industry test standards, DOE agrees with commenters that consensus industry test standards should serve as the basis for Federal test procedures whenever possible.

15

As a result, DOE wishes to underscore the importance of the consensus industry test procedure development process, including the need to ensure that a broad cross-section of stakeholder interests are represented in the development of such consensus industry standards. DOE believes that consensus test standards that represent a consensus across all stakeholders, not just industry, will be more likely to meet the statutory requirements in EPCA and DOE's CC&E regulations. To that end, DOE is committed to supporting the consensus industry standards development process by participating on relevant industry standards committees. However, DOE reiterates that the industry test standard development process cannot supplant the Department's test procedure rulemaking process, because DOE must still ensure that potential Federal test procedures meet applicable statutory requirements in EPCA and are compatible with DOE's CC&E regulations.

15

The National Technology Transfer and Advancement Act of 1995 (“NTTA”), Public Law 104-113, and the Office of Management and Budget (“OMB”) Circular A-119, Federal Participation in the Development and Use of Voluntary Consensus Standards and in Conformity Assessment Activities, both direct Federal agencies to adopt voluntary consensus standards unless they are inconsistent with applicable law or otherwise impracticable.

Accordingly, for the aforementioned reasons, DOE is clarifying in appendix A that consensus industry test standards must undergo a thorough review to ensure that they meet the requirements of EPCA and are compatible with DOE's CC&E regulations before being adopted as a Federal test procedure.

E. Finalization of Test Procedures Prior to Issuance of a Standards Proposal

In the February 2020 Final Rule, DOE adopted at section 8(d) of appendix A, a requirement that Federal test procedures establishing methodologies used to evaluate new or amended energy conservation standards be finalized at least 180 days prior to publication of a NOPR proposing new or amended energy conservation standards. 85 FR 8626, 8678, 8708. DOE explained that this approach would allow stakeholders time to gain familiarity with the new or amended test procedure prior to commenting on any proposed standards.

Upon further review, DOE has determined that, similar to other provisions in the February 2020 Final Rule, a one-size-fits-all requirement to finalize new or amended test procedures 180 days before proposing standards does not allow DOE to account for the particular circumstances of a rulemaking and may result in unnecessary delays. For instance, as noted in the April 2021 NOPR, some test procedure amendments may involve only minor modifications that do not change the measured energy efficiency of a covered product or equipment. 86 FR 18901, 18907-18908. As a result, DOE proposed to remove this 180-day spacing requirement and revert to the approach previously followed in the July 1996 Final Rule that test procedure rulemakings be finalized prior to publication of an energy conservation standards proposal, which permitted DOE to appropriately adjust the length of time between the test procedure final rule and an energy conservation standards proposal.

Id.

DOE also sought comment on any alternatives to its proposal, including whether DOE should retain a set period between finalization of a test procedure and issuance of a standards NOPR.

Id.

Comments Supporting DOE's Proposal To Eliminate the Requirement That Test Procedures Be Finalized at Least 180 Days Prior to Issuance of a Standards NOPR

Several commenters expressed their support for DOE's proposal in the April 2021 NOPR. These commenters stated that the 180-day requirement may not be necessary for all rulemakings and that DOE should have the flexibility to determine the appropriate period between finalization of new or amended test procedures and issuance of proposed standards. (

See, e.g.,

Joint Advocacy Commenters, No. 38 at pp. 4-5; NEEA, No. 43 at pp. 3-4; CA IOUs, No. 34 at pp. 1, 3-4) Some of the commenters cited negotiated rulemakings, where test procedures and energy conservation standards are often considered and issued in parallel, as an area where the 180-day requirement delays implementation of consensus standards without providing a corresponding benefit. (

See, e.g.,

Joint Advocacy Commenters, No. 38 at pp. 4-5; NEEA, No. 43 at pp. 3-4) Commenters also argued that minor modifications to a test procedure may not warrant a lengthy delay before issuance of a standards proposal. (

See, e.g.,

NEEA, No. 43 at pp. 3-4; Joint Environmentalist Commenters, No. 31 at p. 2) Finally, Joint Advocacy Commenters expressed concern that the 180-day requirement could lead to DOE foregoing certain test procedure corrections in order to avoid delaying rulemakings. (Joint Advocacy Commenters, No. 38 at pp. 4-5)

Comments Supporting the Requirement That Test Procedures Be Finalized at Least 180 Days Prior to Issuance of a Standards NOPR

Several commenters asserted that the 180-day period is necessary to allow stakeholders the opportunity to conduct testing and gain familiarity with the new or amended test procedure so as to better inform their understanding of the impacts of a proposed energy conservation standard. (

See, e.g.,

AHRI, No. 25 at p. 9; ALA, No. 28 at p. 3; AGA, No. 33 at p. 5; BWC, No. 24 at p. 2) These commenters also expressed a variety of other reasons for opposing removal of the 180-day period between finalization of a test procedure and issuance of a standards proposal. For instance, Zero Zone opposed eliminating the 180-day spacing between test procedure and energy conservation standards rules, stating that DOE has not documented any

delays that would be caused if the 180-day waiting period were to be applied. The SBA Office of Advocacy noted that small businesses have limited resources and staff, and in many instances, they do not have the ability to test their products on-site. According to the SBA Office of Advocacy, small businesses must instead either hire an outside laboratory to test the products and report back or pull employees from other tasks to conduct such testing in-house. (SBA Office of Advocacy, No. 14 at p. 5) BWC argued that the benefits of having a finalized test procedure far outweigh any delay in complying with statutory deadlines, particularly in light of EPCA's anti-backsliding provisions. (BWC, No. 24 at p. 2)

Comments Supporting Alternatives to DOE's Proposal

Numerous commenters recognized that a 180-day period between finalization of a test procedure and issuance of a standards NOPR is not always necessary. However, these commenters did not agree with DOE's proposal to eliminate the 180-day period and determine the appropriate period on a case-by-case basis. Instead, these commenters suggested a variety of approaches for determining an appropriate length of time between finalization of a test procedure and issuance of a standards proposal. For instance, several commenters suggested revising the relevant section of appendix A to allow DOE to shorten the 180-day period through some formal mechanism, which would include an opportunity for stakeholder input. (

See, e.g.,

Carrier, No. 26 at p. 3; Crown Boiler, No. 10 at pp. 4-5) Other commenters suggested that DOE should list the limited circumstances under which it would deviate from the 180-day period. (A.O. Smith, No. 27 at p. 4; Lennox, No. 18 at p. 4) Similarly, if DOE eliminates the requirement for a standardized 180-day period, ALA requested that DOE provide clear and specific guidance on when the 180-day period would be warranted. (ALA, No. 28 at p. 4) Several other commenters urged DOE to retain the 180-day period when the test procedure is new or makes significant changes that will impact measured energy use or efficiency. (

See, e.g.,

Lutron, No. 16 at pp. 2, 3-4, Joint Industry Commenters, No. 40 at p. 9; EEI, No. 9 at pp. 64-65) Nortek acknowledged that there are situations where 180 days is not necessary (

e.g.,

minor technical corrections to a longstanding test procedure), and in those cases, the company stated that it would be supportive of a 90-day minimum. (Nortek, No. 19 at p. 3) Grundfos recommended that DOE: (1) Include a proposed timeline in each test procedure NOPR/final rule for input from stakeholders, and (2) conduct a mandatory webinar for related input to be heard. The company reasoned that such approach would provide DOE with the flexibility it desires, while preventing DOE from defining arbitrary timelines without negotiation. (Grundfos, No. 37 at pp. 1-2) While Goodman expressed support for retaining the 180-day requirement, Goodman also stated that, if DOE chooses to modify the 180-day period, the Department should define the 180-day period as preferred but not mandatory in appendix A and articulate with specificity and on the record its reasons for choosing a lesser time period. (Goodman, No. 22 at p. 3)

DOE also received an alternative joint proposal from AHAM, ALA, Hearth Patio and Barbecue Association (HPBA), NEMA, Plumbing Manufacturers International (PMI), ASAP, and ACEEE. These stakeholders suggested that DOE provide a 180-day time period between the finalization of a new or amended test procedure and the end of the comment period on the proposed standard. They also specified that DOE could deviate from the 180-day requirement for negotiated rulemakings and test procedure changes that are limited to calculation changes (

e.g.,

use factor or adder) (AHAM

et al.

Submission, No. 74 at pp. 2-3)

DOE Response to Comments

Commenters uniformly expressed support for finalizing test procedures prior to proposing new or amended standards. (

See, e.g.,

Carrier, No. 26, at p. 3; Lutron, No. 16 at pp. 2, 3-4; CA IOUs, No. 34 at pp. 1, 3-4; NEEA, No. 43 at pp. 3-4; Joint Industry Commenters, No. 40 at p. 8; Whirlpool, No. 9 at p. 36) For example, the CA IOUs encouraged DOE to complete test procedure final rules before publication of a NOPR for new or amended energy conservation standards whenever possible (due to generally better outcomes in both proceedings). (CA IOUs, No. 34 at pp. 1, 3-4) Where commenters differed was on the minimum length of time between finalization of a test procedure and issuance of a standards proposal—and under what circumstances, if any, that period of time should be shortened (or lengthened).

With respect to the comments in favor of DOE retaining the 180-day requirement for all test procedure rulemakings, DOE agrees with the majority of commenters who recognized that a 180-day period is not necessary for all test procedure rulemakings (

e.g.,

minor technical corrections and negotiated rulemakings). As stated throughout this rulemaking, DOE is amending appendix A to avoid situations where an inflexible process lengthens a rulemaking without providing a corresponding benefit. Thus, DOE is not establishing a minimum period of time between finalization of a test procedure and issuance of a standards proposal that would be applied across all of the Department's rulemakings.

Nevertheless, while the majority of commenters recognized that the 180-day period was not necessary for every rulemaking, a large number of commenters wanted more guidance on circumstances under which DOE would provide stakeholders with sufficient time to become familiar with a new or amended test procedure prior to having to comment on a standards proposal. These commenters typically cited new test procedures or test procedure amendments that impact measured energy use as instances necessitating that DOE provide some period of time for stakeholders to gain familiarity with the test procedure prior to commenting on any proposed standards. (

See, e.g.,

Joint Industry Commenters, No. 40 at p. 9; Trane, No. 23 at p. 2)

In response to these comments, DOE first notes that it already acknowledged in the April 2021 NOPR that there may be circumstances where a longer rulemaking timeline is necessary to allow stakeholders time to become familiar with a new or amended test procedure.

See

86 FR 18901, 18908. Further, DOE's proposal to revert to the guidance provided in the 1996 version of Appendix A that test procedures be finalized prior to issuance of a standards proposal does not prevent DOE from finalizing test procedures well in advance (

i.e.,

180 days or more) of proposing new or amended energy conservation standards.

However, recognizing the importance of this issue to stakeholders, DOE believes a modified version of its proposal from the April 2021 NOPR can meet the Department's goal of avoiding the inefficiencies and unnecessary delays of a one-size-fits-all rulemaking approach while assuring stakeholders they will have sufficient time to gain familiarity with a new or amended test procedure prior to commenting on a standards proposal. As such, DOE is adopting the proposal from the April 2021 NOPR that test procedures be finalized prior to issuing a standards proposal. However, in response to comments, DOE is also adopting a

requirement that new test procedures or significant test procedure amendments that impact measured energy use or efficiency be finalized at least 180 days before the end of the comment period of a proposal for new or amended standards. DOE will state in the test procedure final rule whether this 180-day provision applies and why—

i.e.,

because the test procedure is either new or the amendments impact measured energy use or efficiency. While DOE is adopting the 180-day period as requested by several commenters, DOE is tying the 180 days to the end of the comment period instead of the issuance of the standards proposal. DOE believes this is a better approach for two reasons. First, it recognizes that the comment period, which is at least 60 days, also provides stakeholders with an opportunity to gain familiarity with the new or amended test procedure. And second, it provides DOE with more flexibility in issuing standards proposals, which can benefit both DOE and stakeholders. For instance, if DOE needs to meet a statutory deadline for issuing a standards NOPR, the Department could choose to issue a standards NOPR with a longer comment period in order to more quickly issue that NOPR after finalizing a new or amended test procedure. In addition to helping DOE meet a statutory deadline, the longer comment period would also give stakeholders more time to comment on aspects of the standards proposal that are not directly related to the test procedure. Finally, as suggested in the AHAM

et al.

proposal, DOE is adopting exceptions to the 180-day requirement for negotiated rulemakings and test procedure amendments that only result in a calculational change. In the first instance, stakeholders can determine the appropriate period between finalization of the test procedure and issuance of a standards NOPR as part of their negotiations. With regards to the second instance, calculational changes do not require stakeholders to conduct new tests to determine the effect of the test procedure change on measured energy use or efficiency.

For the aforementioned reasons, DOE is finalizing the proposal from the April 2021 NOPR that test procedures be finalized prior to issuance of a standards proposal, subject to the modifications discussed above establishing a minimum period of 180 days between the finalization of a test procedure and the end of the standards NOPR comment period for, with certain exceptions: (1) New test procedures; and (2) amended test procedures that impact measured energy use or efficiency.

F. Direct Final Rules

As discussed in the April 2021 NOPR (

see

86 FR 18901, 18908-18909), the Energy Independence Security Act of 2007, Public Law 110-140 (Dec. 19, 2007), amended EPCA, in relevant part, to grant DOE authority to issue a “direct final rule” (“DFR”) to establish energy conservation standards in appropriate cases. Under this authority, DOE may issue a DFR adopting energy conservation standards for a covered product or equipment upon receipt of a joint proposal from a group of “interested persons that are fairly representative of relevant points of view (including representatives of manufacturers of covered products, States, and efficiency advocates),” provided DOE determines the energy conservation standards recommended in the joint proposal conform with the requirements of 42 U.S.C. 6295(o) or 42 U.S.C. 6313(a)(6)(B), as applicable. (42 U.S.C. 6295(p)(4)(A)) While these two provisions contain many of the requirements DOE typically must satisfy in issuing an energy conservation standard, such as the prohibition against setting less-stringent standards (

i.e.,

the “anti-backsliding” requirement), they do not adopt all the requirements of a typical energy conservation standard rulemaking. For example, 42 U.S.C. 6295(o) does not specify a mandatory time period between promulgation of an energy conservation standard and the compliance date for that standard (

i.e.,

compliance period). DOE has looked to the joint proposals to fill in these necessary details. This process had been well-received by manufacturers, trade organizations, and energy efficiency advocates, as it allowed more room for negotiation, which in turn made it easier for stakeholders to reach a consensus agreement. February 2020 Final Rule, 85 FR 8626, 8682-8683.

In a departure from this practice, DOE clarified in the February 2020 Final Rule that 42 U.S.C. 6295(p)(4) is a procedure for issuing a DFR and not an independent grant of rulemaking authority. As such, under the February 2020 Final Rule, any joint proposal submitted to DOE under the DFR provision must identify a separate rulemaking authority such as 42 U.S.C. 6295(m) (amendment of standards) or 42 U.S.C. 6295(n) (petition for amended standard) and comply with the requirements (

e.g.,

compliance periods) listed in that provision.

Id.

DOE also provided additional guidance on the Department's interpretation of “fairly representative” and obligations upon receipt of an adverse comment.

Id.

at 85 FR 8683-8685.

In the April 2021 NOPR, DOE explained that it is reconsidering whether these clarifications regarding the DFR process are appropriate or necessary, for the reasons set forth subsequently. This reconsideration begins with the language of the statute. The language in 42 U.S.C. 6295(p)(4) is clear that DOE may issue standards recommended by interested persons that are fairly representative of relative points of view as a DFR when the recommended standards are in accordance with 42 U.S.C. 6295(o) or 42 U.S.C. 6313(a)(6)(B), as applicable. There are no other requirements listed, which is consistent with the unique circumstances of rules issued under the DFR provision. DOE's overarching statutory mandate in issuing energy conservation standards is to choose a standard that results in the maximum improvement in energy efficiency that is technologically feasible and economically justified—a requirement found in 42 U.S.C. 6295(o).

Many of the other requirements found in EPCA constrain DOE's discretion in setting standards for the benefit of stakeholders. For example, mandatory compliance periods are intended to give manufacturers sufficient lead time to design new products and shift manufacturing capacity as necessary. Similarly, EPCA provides that manufacturers shall not be required to apply new standards to a product with respect to which other new standards have been required during the prior 6-year period. (42 U.S.C. 6295(m)(4)(B)) But, if manufacturers agree to a shorter compliance period or two tiers of standards as part of a consensus agreement submitted under the DFR provision, it would be odd if DOE were then forced to deny such a proposal based upon requirements designed to protect the interests of those same manufacturers. That being said, DOE will still deny such a proposal if it is not fairly representative of manufacturers' points of view. (42 U.S.C. 6295(p)(4)(A)) Similarly, DOE will also deny such a proposal if it does not meet applicable criteria in 42 U.S.C. 6295(o), which, among other things, require DOE to consider the economic impact on manufacturers (including small manufacturers) and any possible lessening of competition that may result from imposition of the proposed standard. As to this latter point, pursuant to EPCA, DOE receives a written determination from the Attorney General as to the potential anti-competitive effects from any proposed energy conservation standard. (

See

42 U.S.C. 6295(o)(2)(B)(i)(V) and (ii))

Issuing standards through a consensus agreement among stakeholders is different than DOE's normal rulemaking process. There is a corresponding difference in the statutory criteria that DOE must apply to each process, one that is made clear by the language in 42 U.S.C. 6295(p)(4). Accordingly, DOE has proposed to eliminate the rigid requirement that DFR submittals identify a separate rulemaking authority and instead revert to the Department's prior practice of evaluating DFR submittals based on the criteria laid out in 42 U.S.C. 6295(p)(4).

As discussed previously, DOE also provided additional guidance on the Department's interpretation of “fairly representative” and obligations upon receipt of an adverse comment. Upon reconsideration, DOE believes that the additional guidance may be overly prescriptive in some circumstances. For instance, the February 2020 Final Rule required a group submitting a DFR proposal to include larger concerns and small businesses in the regulated industry/manufacturer community, energy advocates, energy utilities (as appropriate for the given covered product or equipment), consumers, and States. 85 FR 8626, 8683. While this list may be appropriate for some DFR proposals, it is not universally applicable. For instance, some of DOE's regulated industries do not have small business manufacturers (

e.g.,

external power supplies).

16

DOE also stated it would publish in the

Federal Register

any DFR proposal to obtain feedback as to whether the proposal was submitted by a group that is fairly representative of relevant points of view.

Id.

Once again, this may be good practice for some DFR proposals (

e.g.,

those concerning newly covered products or equipment), but it may be unnecessary for most DFR proposals. The bulk of DOE's covered products and equipment have gone through multiple rounds of rulemakings, and DOE has become very familiar with the relevant points of view for these covered products and equipment.

16

See

85 FR 30636, 30648 (May 20, 2020).

With respect to DOE's discussion of adverse comments in the February 2020 Final Rule, DOE largely repeated the requirements listed in 42 U.S.C. 6295(p)(4)(C). Namely, DOE will withdraw a DFR if one or more adverse comments may provide a reasonable basis for withdrawing the rule under 42 U.S.C. 6295(o), 42 U.S.C. 6313(a)(6)(B), or any other applicable law. The one clarification DOE offered was that the Department may consider comments as adverse, even if the issue was brought up previously during the rulemaking process.

Id.

at 85 FR 8685. However, this clarification does not offer any insight into how DOE will determine whether an adverse comment provides a reasonable basis for withdrawing the rule.

For these reasons, DOE considered whether the guidance contained in the February 2020 Final Rule concerning DFRs is unnecessary or redundant to the statutory language in 42 U.S.C. 6295(p)(4) and proposed to add “where appropriate” to clarify that DOE retains the discretion to determine what “fairly representative” means for a given DFR submission on a case-by-case basis. Regardless of whether the DFR section in appendix A is retained, deleted, or revised, DOE stated that it will continue to evaluate DFR proposals in accordance with 42 U.S.C. 6295(p)(4).

DOE requested comments on the merits of its proposed revisions to the DFR section, as well as any alternative approaches, such as deletion of or amendments to the section or retention of aspects of this section. Additionally, DOE sought comment regarding small business perspectives and related impacts as to the proposed application of the DFR provision of EPCA.

In response to the April 2021 NOPR, DOE received a considerable number of comments on its proposal related to DFRs, which were overwhelmingly supportive of DOE's proposed return to the Department's historic approach to DFRs that was in place before adoption of the February 2020 Final Rule. (Hamdi, No. 7 at p. 1; NPCC, No. 12 at p. 5; Carrier, No. 26 at p. 3; A.O. Smith, No. 27 at p. 5; MHI, No. 32 at pp. 3-4; Nortek, No. 19 at p. 4; Joint Environmentalist Commenters, No. 31 at pp. 6-7; CA IOUs, No. 34 at p. 4; CEC, No. 35 at p. 7; Grundfos, No. 37 at p. 3; Joint Advocacy Commenters, No. 38 at pp. 5-6; Joint Advocacy Commenters (appendix I), No. 38 at pp. 1, 2, 13-14; NEEA, No. 43 at p. 4; Lennox, No. 18 at p. 7; Goodman, No. 22 at p. 4; Trane, No. 23 at p. 3; Joint Industry Commenters, No. 40 at p. 16) However, there were a few commenters who opposed DOE's proposal and instead supported retention of the approach to DFRs contained in the February 2020 Final Rule. (AGA, No. 33 at p. 6; AFP, No. 36 at p. 2; Anonymous, No. 39 at p. 1) These comments and their rationale are discussed in further detail in the paragraphs that follow.

Comments in Support of DOE's Proposal To Return to Its Prior Practice Regarding the Use of the DFR Provision in EPCA

A number of commenters argued that a return to DOE's prior interpretation of EPCA's DFR provisions are authorized by and consistent with the statute's requirements. (Joint Environmentalist Commenters, No. 31 at pp. 6-7; CEC, No. 35 at p. 7; Joint Advocacy Commenters, No. 38 at p. 6; A.O. Smith, No. 27 at p. 5) On this point, the Joint Environmentalist Commenters made the case that EPCA's DFR provision at 42 U.S.C. 6295(p)(4) expressly authorizes DOE to accept a proposed standard negotiated by a representative group of stakeholders, provided that the proposal complies with 42 U.S.C. 6295(o) (residential products) or 42 U.S.C. 6313(a)(6)(B) (commercial and industrial products). The Joint Environmentalist Commenters disagreed with DOE's interpretation in the February 2020 Final Rule that 42 U.S.C. 6295(p)(4) confers no independent grant of rulemaking authority upon DOE, and, as a result DFRs must satisfy the statutory requirements associated with another rulemaking authority,

e.g.,

42 U.S.C. 6295(m) or 42 U.S.C. 6295(n). Instead, these commenters favored a return to DOE's prior flexibility in this area (

e.g.,

consideration of different compliance timelines). (Joint Environmentalist Commenters, No. 31 at pp. 6-7) Similarly, the CEC supported DOE's proposed interpretation in the April 2021 NOPR that the direct final rule provision at 42 U.S.C. 6295(p)(4) grants the agency rulemaking authority separate and distinct from its general authority to adopt energy conservation standards. The commenter argued that the interpretation of that statutory provision contained in the February 2020 Final Rule is inconsistent with the language of the statute and congressional intent to facilitate DFRs. Consequently, the CEC encouraged DOE to move forward with its proposal. (CEC, No. 35 at p. 7)

The NPCC reasoned that the direct final rule provision enacted by Congress was designed with the intent to streamline mutually agreed upon standards. The NPCC stated that the current rule's requirement that DOE first identify a separate and independent basis for a given standards rulemaking adds unnecessary steps and requirements to the direct final rule process. Consequently, the NPCC supported the removal of this provision. (NPCC, No. 12 at p. 5) Likewise, Nortek stated that it disagrees with DOE's decision in the February 2020 Final Rule to define DFRs as a procedural tool and to eliminate the use of DFRs in negotiated rulemaking. (Nortek, No. 19 at p. 4) Trane and Lennox also agreed with DOE's proposal to eliminate the requirement for a separate rulemaking

authority and to implement its DFR authority on a case-by-case basis, evaluating consensus proposal submissions based on the criteria laid out in 42 U.S.C. 6295(p)(4). (Trane, No. 23 at p. 3; Lennox, No. 18 at p. 6)

Most of the commenters favored a return to DOE's prior approach to DFRs because of the increased flexibility that approach provided. (Joint Environmentalist Commenters, No. 31 at pp. 6-7; CA IOUs, No. 34 at p. 4; Joint Advocacy Commenters, No. 38 at p. 6; Joint Advocacy Commenters (Appendix I), No. 38 at pp. 1, 2, 13-14) For example, Carrier characterized DOE's earlier direct final rule process as an efficient, cost-effective regulatory process for both the government and stakeholders, a point echoed by MHI and NEEA. (Carrier, No. 26 at p. 3; MHI, No. 32 at pp. 3-4; NEEA, No. 43 at p. 4) A.O. Smith stated that applying the DFR authority in a flexible manner, so as to permit consideration of measures such as alternative compliance dates, dual metrics

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