Energy Conservation Program for Consumer Products: Energy Conservation Standards for Three Cleaning Products

DEPARTMENT OF ENERGY

Office of Energy Efficiency and Renewable Energy

10 CFR Part 430

[Docket No. EE-RM-94-403]

RIN 1904-AA67

Energy Conservation Program for Consumer Products: Energy

Conservation Standards for Three Cleaning Products

AGENCY: Office of Energy Efficiency and Renewable Energy, Department of

Energy.

ACTION: Advance notice of proposed rulemaking.

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SUMMARY: The Energy Policy and Conservation Act, as amended by the

National Energy Conservation Policy Act, the National Appliance Energy

Conservation Act, the National Appliance Energy Conservation Amendments

of 1988 and the Energy Policy Act of 1992, prescribes energy

conservation standards for certain major household appliances and

requires the Department of Energy (Department) to administer an energy

conservation program for these products. Among other things, the Energy

Policy and Conservation Act, as amended, requires the Department to

consider amending the energy conservation standards for dishwashers,

clothes washers and clothes dryers.

The purpose of this Advance Notice of Proposed Rulemaking is to:

Present for comment the product classes that the Department is planning

to analyze; present a detailed discussion of the analytical methodology

and analytical models that the Department expects to use in performing

analyses in connection with the proposed rule; and facilitate the

gathering of information and comments prior to publishing a subsequent

notice of proposed rulemaking.

DATES: Written comments must be received by January 30, 1995.

ADDRESSES: Written comments are to be submitted to: U.S. Department of

Energy, Office of Energy Efficiency and Renewable Energy, ``Energy

Efficiency Standards for Consumer Products,'' (Docket No. EE-RM-94-

403), Room 5E-066, Forrestal Building, 1000 Independence Avenue, SW,

Washington, DC 20585, (202) 586-7140.

Copies of the public comments received may be read at the

Department's Freedom of Information Reading Room, U.S. Department of

Energy, Forrestal Building, Room 1E-190, 1000 Independence Avenue, SW,

Washington, DC 20585, (202) 586-6020 between the hours of 9:00 a.m. and

4:00 p.m., Monday through Friday, except Federal holidays.

For more information concerning public participation in this

rulemaking proceeding, see section IV, ``Public Comment Procedures,''

of this notice.

FOR FURTHER INFORMATION CONTACT:

P. Marc LaFrance, U.S. Department of Energy, Office of Energy

Efficiency and Renewable Energy, Forrestal Building, Mail Station EE-

431, 1000 Independence Avenue, SW., Washington, DC 20585, (202) 586-

7140

Eugene Margolis, Esq., U.S. Department of Energy, Office of General

Counsel, Forrestal Building, Mail Station GC-72, 1000 Independence

Avenue, SW., Washington, DC 20585, (202) 586-9507

SUPPLEMENTARY INFORMATION:

I. Introduction

a. Authority

b. Background

II. Methodology

III. Models, Data, and Assumptions

a. Engineering Performance Models and Costing Analysis

1. Appliance classes

2. Baseline units

3. Design options

4. Maximum technologically feasible designs

5. Performance models

6. Costing analysis

7. Price-efficiency relationships

8. Data sources

9. Outputs from the Engineering Analysis

b. Residential Energy Models

1. Lawrence Berkeley Laboratory Residential Energy Model

2. Residential End-Use Energy Planning System (REEPS 2.12)

c. Manufacturer Impact Models

1. Conceptual approach

2. Measures of impact

3. Lawrence Berkeley Laboratory Manufacturer Impact Model

4. Government Regulatory Impact Model

5. Cash-flow analysis of costs due to standards

6. Data sources

d. Utility Impact Model

e. Sensitivity Analyses

IV. Public Comment Procedures

a. Participation in Rulemaking

b. Written Comment Procedures

c. Issues for Public Comment

V. Review under Executive Order 12866

I. Introduction

a. Authority

Part B of Title III of the Energy Policy and Conservation Act,

Public Law 94-163, as amended by the National Energy Conservation

Policy Act, Public Law 95-619, the National Appliance Energy

Conservation Act, Public Law 100-12, the National Appliance Energy

Conservation Amendments of 1988, Public Law 100-357, and the Energy

Policy Act of 1992, Public Law 102-486,\1\ created the Energy

Conservation Program for various Consumer Products other than

Automobiles (Program).

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\1\Part B of Title III of the Energy Policy and Conservation

Act, as amended by the National Energy Conservation Policy Act, the

National Appliance Energy Conservation Act, the National Appliance

Energy Conservation Amendments of 1988, and the Energy Policy Act of

1992, is referred to in this Advance Notice of Proposed Rulemaking

as the ``Act.'' Part B of Title III is codified at 42 U.S.C. 6291 et

seq. Part B of Title III of the Energy Policy and Conservation Act,

as amended by the National Energy Conservation Policy Act only, is

referred to as the National Energy Conservation Policy Act.

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Three cleaning products (dishwashers, clothes washers, and clothes

dryers) are the subject of this Advance Notice of Proposed Rulemaking.

The National Appliance Energy Conservation Act of 1987 amended the Act

(section 325(g)) to impose prescriptive standards (design feature

requirements) for the three cleaning products as part of the energy

conservation program for consumer products. These design feature

requirements were effective for appliances manufactured on or after

January 1, 1988, and were as follows: dishwashers shall be equipped

with an option to dry without heat, clothes washers shall have an

unheated rinse option, and gas clothes dryers shall not be equipped

with a constant burning pilot. The Act required the Department to

conduct a rulemaking by January 1, 1990, to determine if the above

mentioned standards should be amended. The Act provided that any

amendment to the standards would apply to products manufactured three

years after the rulemaking. The final rule (56 FR 22279) was issued May

14, 1991, and is effective for products manufactured on or after May

14, 1994 (hereafter referred to as the May 1991 final rule). The Act

also requires the Department to conduct a subsequent rulemaking no

later than five years after the date of publication of the previous

final rule. This second round of rulemaking is the purpose of today's

notice.

Any new or amended standard is required to be designed so as to

achieve the maximum improvement in energy efficiency that is

technologically feasible and economically justified (section

325(l)(2)(A)).

Section 325(l)(2)(B)(i) of the Act provides that before the

Department determines whether an energy conservation standard is

economically justified, it must first solicit comments on the proposed

standard. After reviewing comments on the proposal, the Department must

then determine that the benefits of the standard exceed its burdens,

based to the greatest extent practicable, on a weighing of the

following seven factors:

(1) The economic impact of the standard on the manufacturers and on

the consumers of the products subject to such standard;

(2) The savings in operating costs throughout the estimated average

life of the covered product in the type (or class) compared to any

increase in the price, initial charges, or maintenance expenses for the

covered products that are likely to result directly from the imposition

of the standard;

(3) The total projected amount of energy savings likely to result

directly from the imposition of the standard;

(4) Any lessening of the utility or the performance of the covered

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 conservation; and

(7) Other factors the Secretary considers relevant.

b. Background

The Department conducted the first rulemaking to determine if the

standards (design feature requirements) imposed by the Act should be

amended. The Department published an Advance Notice of Proposed

Rulemaking (53 FR 17712, May 18, 1988), a Notice of Proposed Rulemaking

(54 FR 32744, August 9, 1989), and the May 1991 final rule. The May

1991 final rule imposed energy conservation standards for the cleaning

products which are based on performance. The standards specify a

minimum energy factor for both classes of dishwashers (Standard and

Compact). Two of the five classes of clothes washers (Top-loading

Standard and Top-loading Compact) and four of the five classes of

clothes dryers (Electric Standard, Electric Compact (120v), Electric

Compact (240v), and Gas Standard) are subject to a minimum energy

factor while the remaining classes are subject to design feature

requirements. The May 1991 final rule energy conservation standards are

effective for products manufactured on or after May 14, 1994.

In the May 1991 final rule, the Department announced that it was

accelerating the second review of energy efficiency standards for

clothes washers because it became aware of a design option (horizontal-

axis wash tub in a top-loading washer) in use in Europe that was not

included in the proposed rule and upon which no comment was received.

The Department did not consider establishing a standard based on the

top-loading horizontal-axis design option because this information came

to the attention of the Department after the close of the comment

period on the proposed rule and thus was not subject to public debate.

The Department published an Advance Notice of Proposed Rulemaking (55

FR 39624, September 28, 1990, ``nine product rulemaking'') which

announced the acceleration of the second review of energy efficiency

standards for clothes washers. In response to that notice, a number of

energy efficiency advocates and appliance manufacturers requested that

the Department delay the second review until 1995-1996. The additional

time was requested in order to allow manufacturers time to implement

the standards imposed by the May 1991 final rule and to fully evaluate

new, more energy efficient technologies such as top-loading horizontal-

axis clothes washers. This additional time, manufacturers contended,

would enable them to provide more meaningful and relevant comments on

the next, legislatively required rulemaking. The Department considered

the request, and by letter, dated February 26, 1992, notified the

parties requesting the delay that the Department had determined that it

would conduct the rulemaking on the later schedule, as requested.

Today's Advance Notice of Proposed Rulemaking includes clothes

washers. Comments previously received for the September 28, 1990,

Advance Notice of Proposed Rulemaking relative to clothes washers will

be considered and addressed in the Department's Notice of Proposed

Rulemaking. Those who submitted previous comments have the option of

maintaining their previously submitted comments, amending previous

comments, or withdrawing their previous comments and submitting new

comments. The Department will address all applicable comments in the

Notice of Proposed Rulemaking.

Presently, the Department also is conducting a rulemaking on three

types of consumer products (central air conditioners and central air

conditioning heat pumps; furnaces; and refrigerators, refrigerator-

freezers, and freezers) which was initiated by the publication of a

Advance Notice of Proposed Rulemaking. (58 FR 47326, Sept. 8, 1993)

(hereafter referred to as the Three Product Advance Notice). The Three

Product Advance Notice has a detailed discussion on numerous cross-

cutting policy and methodological issues. These issues include discount

rates, environmental externalities, manufacturer impact analysis,

incremental analysis and information on any identifiable groups or

consumers who may be disproportionally affected by any proposed

national energy efficiency standard levels. The Department proposes to

use the same analytical methods in all efficiency standard rulemakings

and, therefore, the decisions on many of these cross-cutting issues

that emerge from other rulemaking processes, such as the Three Product

Advance Notice, are likely to be reflected in the proposed standards

that will follow this Advance Notice.

The Department is developing a general test procedure revision

which will address previously granted waivers, add future testing

criteria and provide test procedure clarity. This planned revision will

not change the energy consumption reporting of any product models and

will be promulgated prior to the effective date of any new standards

from this rulemaking.

II. Methodology

This section provides a brief description of the analyses to be

used to determine the impacts of the standards. It offers an overview

of the analytic methodology and discusses the major components of the

analyses: the Engineering Analysis, the Manufacturer Analysis, the

Consumer Analysis, and the Utility Analysis.

This section also discusses the interrelationships among the

components that ensure consistency throughout the analyses.

The next section, Models, Data and Assumptions, describes the

computer models used in the analyses. The models predict the

anticipated response of consumers, manufacturers, and utilities to

future changes in the economy, including the imposition of energy

conservation standards. Quantitative estimates of the impacts of

standards will be calculated from the outputs from the models. The

models that will be utilized in the analyses are:

Engineering Performance Models,

Consumer Impact Models,

Manufacturer Impact Models, and

Utility Impact Model.

The function, data sources, assumptions and validity of the results

for each model are discussed below.

The overall impact of appliance conservation standards on energy

use, consumers, manufacturers, and other factors will be determined by

comparing projections under the base case\2\ with the projections under

the proposed standards and, perhaps, by comparing the projections of

various proposed standards. The possible comparison of different

standard cases was one of the issues raised in the Three Product

Advance Notice. The analysis method chosen, based on the review of

public comments on this earlier notice, as well as, comments received

in response to today's notice, will be used in the development of the

proposed standards for the products addressed by this Advance Notice.

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\2\The base case assumes implementation of the conservation

standards that were set by the Department of Energy in the May 1991

final rule.

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The analysis that will be performed is made up of the following

items:

An Engineering Analysis that establishes the technical

feasibility and product attributes, including costs of design options,

to improve appliance efficiency.

A Manufacturer Analysis that provides an estimate of

manufacturers' responses to the proposed standards. Their responses are

quantified by changes in several financial performance measures, such

as pricing, output and profitability etc.

A Consumer Analysis that forecasts appliance sales,

efficiencies, energy use, consumer expenditures, and the national net

benefits and costs and a separate Life Cycle Cost Analysis to evaluate

the purchaser's savings in operating expenses relative to increases in

purchase price.

A Utility Analysis that measures the projected impacts of

the altered energy-consumption patterns on electric and gas utilities.

Each analysis area will be performed for each of the three products

under consideration. The results of the Engineering Analysis will be

reviewed by the Department to determine whether standards for each

product could yield measurable energy savings. If standards would not

yield energy savings, then the analysis will be terminated. If energy

savings are possible, then a detailed analysis is performed.

There is interaction among the Engineering, Consumer, Utility, and

Manufacturer Analyses. The Engineering Analysis examines appliance

designs and related attributes such as efficiency and costs. Based on

the relationships between the prices and efficiencies of design

options, the Consumer Analysis forecasts sales and efficiencies of new

and replacement appliances. These data are used as inputs to the

Manufacturer Analysis to determine the financial impacts on

prototypical firms within the industry. The Consumer Analysis forecasts

national aggregate energy savings and consumer expenditures associated

with the purchase and operation of the appliances. Consumer

expenditures (both purchase and operation) are employed in the Life-

Cycle Cost Analysis to determine consumer impacts. Changes in sales,

revenues, investments, and marginal costs of utilities are calculated

from the energy savings in the Utility Analysis.

Three periods of time are used in the analyses. First, the

Engineering Analysis examines the technical feasibility of improving

the efficiency of the covered products by analyzing design options

available today to improve product efficiency, whether they are

commercially available or prototypes. Second, the Manufacturer Analysis

is performed for a typical year after the standards are assumed to have

been imposed. Typically, the fifth year is selected, so all major

impacts of a standard would have occurred. Third, the Consumer Analysis

examines impacts over a time period at least as long as the average

lifetimes of the products.

III. Models, Data, and Assumptions

a. Engineering Performance Models and Costing Analysis

The Engineering Analysis addresses two statutory requirements. The

first requirement is that the Department consider only improvements in

energy efficiency that are technologically feasible. The second is that

the Department consider any lessening of utility to the consumer due to

the imposition of standards. In addition, the Engineering Analysis

provides information on efficiencies, energy consumption, manufacturing

costs, and maintenance and installation costs for use in the other

analyses.

The Engineering Analysis develops cost and efficiency data for a

set of design options within each appliance class. These data are the

output of the engineering performance models and costing analysis

discussed in subsections 5-9, below.

1. Appliance Classes

The first step in the Engineering Analysis is to segregate product

types into separate classes to which different energy conservation

standards apply. Classes are differentiated by the type of energy use

(oil, natural gas, or electricity) or capacity or performance-related

features that provide utility to the consumer and affect efficiency.

Classes are differentiated in order to ensure that consumer products

having different capacities or other performance-related features

affecting efficiency and utility remain available to consumers.

For each of the three appliances, the following are the classes

that the Department proposes to consider. The Department welcomes

comments on the proposed classes.

(i) Dishwashers

Compact Dishwasher (less than 22 inches in exterior width)

Standard Dishwasher (equal to or greater than 22 inches in exterior

width)

(ii) Clothes Washers

Compact (less than 1.6 ft\3\ capacity)

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\3\The energy factor is a measurement of energy efficiency

derived from the Department of Energy test procedure for that

product.

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Standard (1.6 ft\3\ or greater capacity)

(iii) Clothes Dryers

Electric, Standard (4.4 ft\3\ or greater capacity)

Electric, Compact, 120v (less than 4.4 ft\3\ capacity)

Electric, Compact, 240v (less than 4.4 ft\3\ capacity)

Gas, Standard (4.4 ft\3\ or greater capacity)

Gas, Compact (less than 4.4 ft\3\ capacity)

In the case of clothes washers, the Department is proposing to

eliminate certain previously defined classifications (Semi-Automatic

Top-Loading, Front-Loading and Suds Saving) because they do not offer

any added utility which is inherently less energy efficient and

therefore would require protection from the energy conservation

standards. In the May 1991 final rule, these classes were not subject

to a minimum energy conservation standard imposed because they

represented a small portion of the market, and due to a lack of

adequate information the Department did not analyze them. However, the

1988 standard requiring an unheated rinse option is still applicable to

these classes. The Department has further reviewed this topic and

believes that these products should be subject to the minimum energy

conservation standards applicable to either compact or standard clothes

washers. The Department welcomes comments on this issue.

2. Baseline Units

For the purpose of generating a cost/efficiency relationship, the

Engineering Analysis needs to define a starting point or baseline. The

assumed baseline unit is to represent a typical model within an

appliance class sold during the initial year of the analysis, e.g., a

unit that minimally exceeds the existing standard. Once identified,

each baseline unit is characterized by its efficiency-related design

options. The Engineering Analysis uses information gathered from trade

organizations, manufacturers, and consultants with expertise in

specific product types to determine the engineering characteristics of

the baseline unit. The Department requests data on specific units and

combinations of design options to be considered as a baseline unit. In

addition, the Department requests comments on any other factors to be

considered in selecting baseline units.

3. Design Options

The Engineering Analysis will identify an individual design option

or combinations of design options with a potential for improving energy

efficiency. Design options that are currently on the market, that are

being developed, or that may be on the market by the time standards are

effective will be considered. Furthermore, the Department requests

comments on whether the existing test procedures are appropriate for

measuring product energy use and efficiency and whether the test

procedure can evaluate a particular design option's contribution to the

product's energy consumption.

In addition to proposing a credit for more efficient water

extraction in the clothes washer test procedure, the Department may

consider a two tier energy conservation standard for clothes washers.

One standard would be the same as the existing performance standard for

clothes washers and the second standard would require a minimum water

extraction. The Department believes that mechanical water extraction is

much more cost effective than thermal extraction. If the Department

were to propose this two tier standard, then the analysis for the

clothes dryer standard would consider the impact of drier clothes

entering the clothes dryer. The Department welcomes comments on this

issue.

The Department requests comments on both the design options listed

below and the applicability of the extant or proposed test procedure.

The following is a list of design options that will be examined:

(i) Dishwashers

Energy Savings Options for Water Reduction:

(A) Improved food filter

(B) Improved spray arm geometry

(C) Improved fill control

(D) Modified sump geometry with & without dual pumps

(E) Microprocessor controls and fuzzy logic (algorithm logic based on

sensor input)

Other Energy Saving Options:

(F) Reduced inlet water temperature

(G) Improved motor efficiency

(H) Increased insulation

(I) Flow-thru heating

(J) Ultrasonic washing

(ii) Clothes Washers

(A) Improved fill control

(B) Configuration/tolerance of inner and outer tubs to reduce water use

(C) Reduce thermal mass

(D) Added Insulation

(E) Increase motor efficiency

(F) Thermostatically controlled mixing valves

(G) Electrolytic dissociation of water

(H) Ultrasonic washing

(I) Higher spin speed

(J) Horizontal axis design

(K) Bubble action

(L) Microprocessor controls and fuzzy logic (algorithm logic based on

sensor input)

(M) Ozonated laundering

(N) Suds saving

(O) Direct drive motor

(iii) Clothes Dryers

(A) Automatic termination

(B) Increased insulation

(C) Recycle exhaust heat

(D) Inlet air preheat

(E) Inlet air preheat, condensing mode

(F) Modified operating conditions

(G) Heat pump

(H) Microwave

(I) Reverse tumble feature

(J) Improved rib design to reduce drying time

4. Maximum Technologically Feasible Designs

The Act requires that, in considering any new or amended standards,

the Department must consider those that ``shall be designed to achieve

the maximum improvement in energy efficiency that the Secretary

determines is technologically feasible and economically justified''

(section 325(l)(2)(A)). As a first step, the maximum technologically

feasible level will be identified. The maximum technologically feasible

level is one that can be carried out by the addition of energy

efficient design improvements to the baseline units without affecting

the product's utility. The Department believes that the design options

comprising the maximum technologically feasible level must have been

physically demonstrated in at least a prototype form to be considered

technologically feasible.

5. Performance Models

In the Engineering Analysis, the Department's estimate of the

efficiency of various design options and combination of design options

will be based on either calculation (e.g., computer simulation models)

or experimental data based on the Department's test procedures. The

Department requests test data on the efficiency of the various design

options and information on possible simulation models for use in this

rulemaking.

6. Costing Analysis

Manufacturer cost data for baseline units and incremental costs for

design improvements are requested. The cost data requested include, for

each design option, incremental cost data disaggregated into labor,

purchased parts, materials, shipping/packaging, and tooling. Also

requested are any additional consumer installation or maintenance costs

resulting from the design improvements.

7. Price-Efficiency Relationships

The results of the Engineering Analysis are summarized in the cost-

efficiency relationships that show the efficiency, unit energy

consumption, and manufacturer cost of each design option and

combination of design options for each appliance class. Manufacturer

and dealer markups obtained from the Manufacturer Impact Analysis are

applied to the manufacturing costs to determine the purchase price of

the appliance. The price-efficiency relationships are a fundamental

input to the Consumer Analysis.

8. Data Sources

Shipments data, costs of purchased materials and parts, and

engineering and labor cost data will be based on available information,

including information received in comments on this Advance Notice of

Proposed Rulemaking and collected from industry sources.

9. Outputs From the Engineering Analysis

For each combination of design options considered, the models and

data provide:

Energy efficiency (expressed as the Department's energy

factor),\3\

Annual energy consumption per unit (based on the

Department's test procedures),

Increased material, purchased parts, labor, and investment

costs for medium\4\ and large manufacturers by product class,

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\4\As was the case with previous analyses, small manufacturers

will not be analyzed separately. No general manufacturing approach

could be identified for these firms because of the wide variability

in their approach to manufacturing. Therefore, small manufacturers'

costs have been assumed to equal those of medium manufacturers. The

Department encourages small manufacturers to submit data.

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The relationship between cost and efficiency level by

product class, and

Other information on product characteristics, such as

lifetimes, maintenance costs and installation costs.

b. Residential Energy Models

The Department has used the Lawrence Berkeley Laboratory

Residential Energy Model (LBL-REM) in the analysis and reanalysis for

numerous Department rulemakings. The Department has considered

replacing the LBL-REM with the Electric Power Research Institute's

REEPS model and is presently analyzing it for the Three Product Advance

Notice rulemaking. The Department expects to use the analytical method

chosen for that rulemaking in the analysis for this rulemaking. The

Department welcomes comments on this approach. Below is a description

of both models.

1. Lawrence Berkeley Laboratory Residential Energy Model

The LBL-REM forecasts the appliance purchase choices that

households make as well as their subsequent appliance usage behavior

and energy consumption. The model uses engineering estimates of the

characteristics of particular designs of appliances and calculates the

national impacts of a technology-specific policy on the populations of

appliances used in the households. Alternative designs are

characterized by price and efficiency. The output from the LBL-REM

provides estimates of national energy savings and consumer economic

impacts (including equipment and operating expenses).

Engineering, economic, and demographic data are used in the LBL-

REM. The engineering data for appliances include the price-efficiency

relationships described above. Additional data include information

regarding alternative building shell construction measures and costs,

unit energy consumption and efficiency of existing appliances, age

distribution of existing appliance stock, and retirement functions.

Economic data include projected energy prices\5\ and household income,

models of energy investment, appliance purchase and usage behavior,

including fuel and technology choice for each end use. Demographic data

include number of households by type, projected housing starts and

demolitions, and initial appliance holdings.

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\5\ The projections of energy prices will be taken from the most

recent Annual Energy Outlook, a publication of the Department's

Energy Information Administration.

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Structure of the model. The LBL-REM segments annual energy

consumption into house types, end uses, and fuel types. The house types

are single-family, multifamily, and mobile homes. Calculations are

performed separately for existing and new housing construction each

year over the period 1980-2030. The end uses are space heating

(including room and central), air conditioning (room, central

conventional, and central heat pump), water heating, refrigeration,

cooking, clothes drying, lighting, clothes washing, dishwashing, pool

heating, televisions and miscellaneous. Up to four fuels are

considered, as appropriate to each end use: electricity, natural gas,

heating oil, and liquid petroleum gas. The model exists in two

versions: national (one region) and regional (10 Federal regions).

Since usage of cleaning products is not likely to differ by geographic

location, the national version will be utilized in this analysis.

The model projects five types of activities: technology/fuel

choice; building shell thermal integrity choice; appliance efficiency

choice; usage behavior; and turnover of buildings and appliances.

Housing stock submodel. This submodel generates data about housing

stock projections for the LBL-REM. The number of occupied households,

by type, is taken from the 1990 Census of Population and Housing. An

exogenous projection for housing starts is obtained, and estimates of

projected demolition rates by house type are calculated, assuming an

exponential function. The housing submodel determines the projected

housing stock each year, 1981-2030, by subtracting demolitions from

existing stock, then adding starts. The annual demolition rates by

house type will be calculated for single-family, multifamily, and

mobile homes, respectively.

Efficiency choice algorithm. Historical efficiency data are

available primarily from trade associations for selected years for each

class of appliance through at least 1992. The Federal energy

conservation standards for new units of these appliances are expected

to be met by the effective date of the standard. After that date,

future efficiency improvements are assumed to be a function of designs

available (according to the engineering analysis) and of relevant

energy prices. The forecasting algorithm is designed to allow annual

average efficiency or shipment-weighted efficiency factors to increase

if either more efficient designs become available at lower prices or

energy prices increase. Conversely, if energy prices decrease, the

shipment-weighted efficiency factors may decline, but would have a

lower bound at the existing standard level, i.e., the 1991 standard

prescribed by the Department, effective 1994, for dishwashers, clothes

washers and clothes dryers.

Thermal integrity. The LBL-REM addresses thermal integrity as an

input into the model for conducting analysis on appliances which affect

a dwelling's cooling or heating load. The Department believes that

thermal integrity will not be a factor in the analysis for the three

cleaning products. The Department welcomes comments on this assumption.

Modeling efficiency standards. The LBL-REM projects the average

efficiency of new products; for example, clothes dryers purchased each

year in the absence of additional Federal regulations. A distribution

of efficiencies is constructed around the average based on efficiency

distributions observed in the marketplace. This information includes

information from industry sources and published data from the industry

trade associations. A new Federal standard level eliminates part of the

distribution; therefore, a new distribution is constructed. The new

shipment-weighted average efficiency then characterizes the efficiency

of new units in that year. The same process is applied to all years

after implementation of the standard. The model is then run again for

the standards case\6\with the adjusted average efficiencies to

calculate any changes in market shares or usage behavior that may occur

as a result of standards and to calculate the net energy savings.

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\6\The standards case refers to a time period when a potential

new standard has been implemented.

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Turnover of appliance stocks. The initial age distribution of

appliances in stock is based on industry data about historical annual

shipments. The fraction of each product that retires each year is based

on the number of years since purchase of the product. For each year's

purchase, the model associates an average efficiency, so that when

older appliances are retired, they are also recognized as less

efficient. All appliance replacements are included in the retirement

function, including those resulting for reasons other than product

failure. However, the analysis does not explicitly consider the effect

of increased purchase price on the turnover rate. The Department

requests data and comments on how to consider this factor.

The number of potential purchasers of an appliance in new homes is

equal to the number of new homes constructed each year. The number of

potential purchasers of appliances in existing houses is equal to the

number of retiring appliances plus (if applicable) a fraction of those

households that did not previously own the product.

Calculation of market shares. Potential purchasers may purchase any

competing technology within an end use or none. For each end use, long-

term market share elasticities are estimated with respect to equipment

price, operating expense, and income, respectively. The effect of

standards is expected to be lower operating expense and increased

equipment price. The percentage changes in these quantities are used,

together with market share elasticities, to determine changes in market

share resulting from standards. The model assumes that higher equipment

prices will decrease sales volumes while lower operating expenses will

increase them. The net result (predicted market share) depends on the

standard level selected with its associated equipment prices and

operating expenses.

Usage behavior. For some products changing the operating expense

results in changes in usage behavior. These changes are modeled based

on usage elasticities in operating expense and income. For dishwashers,

clothes washers and clothes dryers we expect these elasticities to be

at or near zero; usage behavior is not influenced by the cost of

operating the appliance. On the other hand, the popularity of certain

``energy saving'' features, such as air (in lieu of heated) drying on

dishwashers suggests that some consumers alter their behavior in

response to operating costs. The Department requests comments on this

assumption.

Energy consumption calculations. The total energy consumption per

house for each end use and fuel by house type and vintage (existing or

new) is the product of the unit energy consumption (accounting for

efficiency and capacity changes) and usage factor, e.g., relative hours

of full-load use for dishwashers. The corresponding annual energy

consumption for all households is the annual consumption per household,

times the number of households of that type and vintage, times the

fraction of those households owning that appliance.

Aggregate energy consumption is obtained by summing intermediate

results. For example, national electricity consumption for residential

dishwashing in a particular year is the sum across house types and

house vintages of electricity used by compact and standard dishwashers.

National residential electricity consumption in that year is the sum of

all end uses of electricity consumption in the residential sector.

Model outputs. The principal outputs from the LBL-REM for each year

are:

Energy consumption by end use and fuel,

Total residential energy consumption by fuel,

Per-unit equipment price and operating expense by product,

Projected annual shipments of residential appliances, and

Differences in these quantities between a base and a

standards case.

These outputs are provided annually (or for selected years) and

cumulatively over a period of time, e.g., 1999-2030. Energy savings are

provided annually from implementation of standards to the end of the

period. Net present value of standards is evaluated for each regulated

product and for the end use(s) comprising the regulated and competing

products.

Energy savings are calculated as the difference in energy

consumption between the base case and standards case. Energy

consumption in both the base case and standards case includes changes

in fuel choice or changes in usage behavior. Therefore, the energy

savings capture the net energy savings due to regulation, including the

effects induced by shifts in market share or changes in usage behavior.

Net present value, on the other hand, excludes these types of

effects.\7\ Net present value is calculated from per-unit changes in

equipment and operating expenses, multiplied by standards case

shipments. If the net present value were calculated without normalizing

with regard to shipments, erroneous results would be obtained. If

standards caused decreased purchases of a product, this would appear as

an economic benefit; namely, less money spent on purchasing and using

appliances.\8\ If standards resulted in increased purchases, this would

be incorrectly counted as a cost when it reflects consumers' preference

for the post-standards product.

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\7\Present value is the discounted total value of energy

consumption during the appliances' lifetimes, plus the discounted

equipment costs for those appliances that are purchased during those

periods at alternative standards levels. The difference between a

standards case and a base case is the net present value attributable

to amended standards. A positive net present value for an appliance

at a given standard level indicates that, if that standard were

adopted, consumers of that appliance as a whole would save that much

more money in fuel costs, discounted to the present, than they would

pay in increased initial price for a more efficient appliance,

discounted to the present, compared to the base case.

\8\Without normalization, the greatest economic benefit would be

obtained by a standard level that resulted in no future purchases of

the product. Then no money would be spent on purchasing the product

or on operating expenses, and the value of the savings would equal

the amount of money that would have been spent without the standard.

This would clearly be a misrepresentation of the net present value

of standards.

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Base case usage is assumed in calculating the net present value

since any ``rebound effect''\9\ reflects the consumer's judgment that

increased usage is worth more than the direct energy savings associated

with keeping usage constant. Therefore, deduction of any foregone

energy savings resulting from a possible ``rebound effect,'' prior to

calculating the net present value, would result in an underestimate of

the true net present value associated with a given efficiency

improvement.

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\9\The ``rebound effect'' is the projected energy savings from

an efficiency improvement that does not occur. This results when

purchasers of more energy efficient appliance use them more

intensively, thereby saving less energy than the engineering

estimates would have indicated. In some instances, the rebound is

zero.

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Other Impacts. In determining economic justification, the Act

directs the Department to consider a number of different factors. Among

these factors are requirements that the Department consider the

economic impact of the standard on consumers. In this regard, the Act

establishes a rebuttable presumption that a standard is economically

justified if the additional product costs attributable to the standard

are less than three times the value of the first year energy cost

savings. Also, the Department is required to consider changes in the

life-cycle costs resulting from the standard.

Taking into consideration these various requirements, the

Department calculates:

The estimated simple payback of additional product costs

(based on estimated changes in product purchase prices) by the energy

cost savings projected to result from the proposed standard.

The estimated changes in life-cycle costs to the consumer

likely to result from the proposed standard, and

The net present value of estimated savings to the Nation

of the proposed standard.

The calculation of both consumer life-cycle costs and national net

present costs/benefits require the use of appropriate discount rates.

The discount rate used in such calculations is intended to approximate

the time-value of money of those who would bear the additional product

prices resulting from a proposed standard and who would also,

presumably, benefit from the resulting savings in energy expenses.

Consequently, the most appropriate discount rate depends on the

characteristics of the individual consumers, businesses, or other

persons affected by a proposed standard. The Department expects to use

the same discount rates for this notice as are selected as a result of

the Three Product Advance Notice. The Department welcomes comments on

this issue.

The Department recognizes that there are external societal benefits

(and possibly costs) that are generated from appliance standards. These

are principally the value of reductions in oil imports and the

reduction in projected emissions of SO2, NO2 and CO2. It

has been suggested that the appliance standards resulting from this

rulemaking will not create any SO2 or NO2 savings beyond

those that will be required by the Clean Air Act of 1990 (P.L. 101-549,

November 15, 1990). If that proves to be true, then the emissions

reductions from standards that do occur will accrue to those deriving

the reductions (which are principally electric utilities) by displacing

the measures that those firms would otherwise utilize to achieve their

required reductions of SO2 and NO2. In that case, the

SO2 and NO2 reductions from standards would represent a cost-

free way for those firms to achieve their savings, and, as such, would

have some value to those firms realizing the reductions. The actual

value that will be realized from appliance standards-induced reductions

of SO2 will be the market-determined dollar value placed on the

pollution credits that are earned. Such credits can be used by the firm

realizing the credits, ``banked'' for future use, or sold for use or

``banking'' by others.

In previous rulemakings, the Department identified benefits

resulting from national energy savings and emissions reductions, but

did not attach any monetary value to these benefits because of the

considerable uncertainty of such estimates. However, in order more

explicitly to consider such externalized benefits (or costs), the

Department will attempt in this rulemaking to establish values for

these benefits, if a sound analytical basis can be found. The

Department has recently published a Supplemental Advance Notice (59 FR

51140, October 7, 1994) to the Three Product Advance Notice; this

Supplemental Advance Notice presents considerations that would need to

be made in developing a sound analytic basis for monetizing

externalities.

The Department is concerned about the impact to any identifiable

groups or consumers who may be disproportionally affected by any

proposed national energy efficiency standard levels. The Department

requested comments on a methodology for addressing this issue in the

Three Product Advance Notice. The Department expects to follow the

policy regarding the consideration of such disproportionate impacts

that emerges from the consideration of comments on the Three Product

Advance Notice in this rulemaking. The Department welcomes comments on

this issue.

2. Electric Power Research Institutes Residential End-Use Energy

Planning System (REEPS 2.12)

REEPS has been used since the early 1980s both as a tool for

national residential policy analysis and subsequently as an analytical

tool for electric utilities to forecast long-term residential energy

demand. The current version of the model, REEPS 2.12, simulates the

energy consumption behavior of specific household segments.

REEPS 2.12 incorporates the basic features of residential end-use

forecasting into a generalized modeling framework in which the user has

considerable control over the algorithms and model structure. This

framework provides greater flexibility over more traditional models

which are ``hardwired'' for particular formulations of residential

sector energy use. This facilitates implementation of a wide range of

scenarios and policies at varying levels of disaggregation without ever

changing the computer program itself.

Space conditioning and appliance modeling. REEPS 2.12 provides a

separate modeling framework for space conditioning end-uses and another

for household appliances, like refrigerators, clothes washers, etc.

These frameworks are referred to as the HVAC module and appliance

modules. Exogenous variables include macroeconomic projections such as

income and household size and other external parameters specified by

the user. Fuel price projections are implemented as exogenous time

series for each fuel and rate class used in the model. Household data

allows the user to forecast changes to the housing stock based on

separate decay rates for each housing type and vintage block.

HVAC module/thermal shell. REEPS 2.12 has an HVAC module which

deals with space conditioning equipment and the thermal shell. The

module has various parameters such as fuel choice, system capacity,

efficiency levels, etc.. The Department believes that these issues will

not be a factor in the analysis for the three cleaning products because

these products do not impact the thermal characteristics of the

dwelling. The Department welcomes comments on this assumption.

Appliance module. The REEPS 2.12 Appliance Model provides a

generalized structure for characterizing purchases and energy

consumption of appliances. This model will be used to analyze the three

cleaning products if the Department decides to adopt REEPS. Working

within the REEPS framework, users of the model configure economic and

energy data on appliances and define functional relationships to model

changes in energy consumption in future years. Demographic segmentation

allows the user to define different segments of the appliance market

based on household characteristics such as income or household size and

differentiate purchase decisions across these segments. These other

input sets precede the specification of the appliance models themselves

because they define important elements of appliance model structure,

such as the housing types specified in the Households module. Data from

these input sets are used as drivers in forecasting the size,

characteristics, and usage of the appliance stock.

The REEPS 2.12 Appliance Model is a vintaged capital stock or stock

flow-adjustment model that maintains accounts of appliances by vintage

year. REEPS 2.12 uses a state-based approach to forecasting in which

purchase decisions are explicitly modeled at the household level. The

state-based approach differs from a saturation approach to appliance

modeling, in which the saturations or market shares are modeled and the

difference from the current ownership patterns are attributed to

appliance purchases. The ``state'' of a given appliance model in a

given year determines the energy consumption for that appliance by

tracking five key variables throughout the course of the forecast:

size, efficiency, usage, market share and the number of households.

Appliance size, efficiency and usage are defined by the user in the

units and values appropriate for a given end-use and/or appliance.

Three general modeling steps are executed for each appliance end-

use: (1) Base-year calibration, (2) decision-model calibration, and (3)

forecast execution. In the base-year calibration, the Appliance Model

is compared with the input housing stock and demographic

characteristics to check for values that are disaggregated by housing

type and demographic segment. Usage is adjusted to be consistent with

stock Unit Energy Consumption values and vintage block information on

vintage block shares, efficiencies and sizes. In the second step,

decision-model calibration, the decision models are adjusted to fit the

control values specified in the first forecast year. These control

values are referred to as ``control-year'' data, and include the

marginal appliance efficiencies and new purchase shares. Finally, in

the forecast execution step, decision models are used to predict new

appliance ownership shares and efficiency choices. The algorithmic

procedures in each of these three steps are detailed in the technical

documentation for the Appliance Model.

Policy modeling. The flexibility of REEPS 2.1 allows the user to

model a number of policies through the judicious modification of the

appropriate parameters, equations, structure, and addition of new

technologies. Government and utility policies have the potential to

restrict appliance efficiency levels, energy prices, financial criteria

for new equipment purchases, early retirement of appliances, and rates

of technical innovation. The policy choices in REEPS 2.12 include:

Energy prices, functional forms and coefficients for choice equations,

pre-failure replacement conversion decision algorithm, restrictions on

legal or market availability of specific technologies, and modification

of specific technologies, purchase prices or efficiencies.

c. Manufacturer Impact Models

1. Conceptual Approach

The manufacturer impact analysis estimates the overall impact of

new or amended standards on an industry's profitability and scale of

operation.

2. Measures of Impact

The analysis examines two types of long-run impact: profitability

and growth. Consequently, five measures of impact are reported. They

are: shipments, prices, revenues, net incomes and returns on equity.

Return on equity is the primary measure of profitability, assets and

income provide the primary measures of growth. At the request of

appliance manufacturers, a new measure, net present value of the

industry, will also be reported.

Two short-run impacts are also analyzed. First, the ability of the

industry to provide the one-time investments required to meet the new

standard is examined. Second, if standards result in decreased sales

for the particular industry being analyzed, the analysis examines the

possibility of price-cutting while the industry is adjusting to a lower

sales volume.

3. Lawrence Berkeley Laboratory Manufacturer Impact Model

In order to estimate the impacts of energy efficiency standards, a

computer spreadsheet model, the Lawrence Berkeley Laboratory

Manufacturer Impact Model (LBL-MIM), was developed.

The LBL-MIM was developed at Lawrence Berkeley Laboratory in 1988.

Since its inception, it has evolved and has been used in the analysis

and reanalysis for numerous Department rulemakings.

The LBL-MIM models the cumulative effects of standards on the

future of the industry, and by means of present value formulas presents

the effects on an annualized basis.

Ideally, a manufacturer analysis should look at the impact of a

proposed regulation on every firm that does business in the industry

under question. However, because the industries being analyzed have

many manufacturers making a particular product, a firm-by-firm analysis

is not feasible. In addition, the engineering and financial data for

most manufacturing firms are proprietary and are not routinely

available for public analysis. Because of these limitations on data and

resources, the LBL-MIM models a prototypical firm. In many cases this

firm represents a division of a larger firm. Therefore, a prototype

firm is a hypothetical firm representative of a portion of the

industry. Prototypical firms are defined by parameters that are

important for determining the impacts of standards and are consistent

with data for the portion of the industry they represent. Important

parameters used in the model include the cost structure of the firms,

profitability ratios, relative costs of complying with the new

standard, and marketing strategies.

Revenue is affected by both price and shipments. Price is

determined by computing the markup over long-run marginal costs and

then using the markup to determine an optimal price. Demand is

determined by price and operating expense elasticities, coupled with

the changes in price and operating expenses resulting from the

standards.

The LBL-MIM produces several outputs used in analyzing the impact

of standards on manufacturers. A simplified pro forma income statement

is prepared for each prototypical firm. In addition to the income

statement, five main variables--shipments, prices, revenues, net

incomes, and returns on equity--are reported. The results are presented

for the without-standards (or without amended standards) case and the

with-standards (or with amended standards) case, and the relative

differences between the two are also given.

4. Integration of the Lawrence Berkeley Laboratory Manufacturer Impact

Model and the Government Regulatory Impact Model

As part of its comments submitted to the Department for the

rulemaking on nine consumer products (comments No. 61D and 61E dated

July 1991 and September 9, 1991, respectively), the Association of Home

Appliance Manufacturers (AHAM) proposed an alternate approach to the

LBL-MIM for the analysis of manufacturer impacts. The AHAM's approach

was formalized as a computer spreadsheet by the Arthur D. Little

consulting firm. It was named the Government Regulatory Impact Model

(GRIM) and was formally proposed to DOE by representatives of the AHAM,

the Air-Conditioning and Refrigeration Institute, the Gas Appliance

Manufacturers Association, and Arthur D. Little on April 15, 1993.

The primary functional differences between GRIM and LBL-MIM are

GRIM's use of an annual cash-flow analysis for manufacturer costs and

restriction to cost predictions. DOE has analyzed the GRIM's cost

approach and found that, given identical inputs, its results were

similar enough to those of the cost section of the LBL-MIM that the

LBL-MIM outputs are not significantly affected by the use of the GRIM.

Because the cash-flow approach to manufacturer costs is simpler and

more transparent to the industry, DOE intends to analyze the GRIM cost-

analysis methodology and may integrate the model into the LBL-MIM as a

replacement for the cost analysis section of the LBL-MIM. The analysis

of the GRIM and possible adoption will be determined in the Three

Product Advance Notice rulemaking and the Department expects to use the

same methodology in this rulemaking. The Department welcomes comments

on this issue.

If the GRIM is adopted, then the capabilities of the LBL-MIM

necessary to the analysis but not found in the GRIM, such as price and

shipments forecasting, will be retained. The GRIM's measure of impact

and industry net present value would be included as part of the LBL-

MIM's primary measures of impact.

5. Cash-Flow Analysis of Costs Due to Standards

A change in standards affects the analysis in three distinct ways.

Increased levels of standards will require additional investment, will

raise production costs, and will affect revenue through higher prices

and, possibly, lower quantities sold.

The integrated model using the GRIM cost analysis uses a number of

factors--annual expected revenues; manufacturer costs such as costs of

sales, selling and general administration costs; taxes; and capital

expenditures related to depreciation, new standards, and maintenance--

to arrive at a series of annual cash flows beginning from before

implementation of standards and continuing explicitly for five years

after implementation.

The measure of industry net present values are calculated by

discounting the annual cash flows from the period before implementation

of standards to some future point in time.

The revenues are supplied by the price and shipments forecasting

algorithms from the LBL-MIM.

6. Data Sources

The models need data that characterize both a particular industry

and prototypical firms within that industry. Estimates of data are

based on information from five general sources: Lawrence Berkeley

Laboratory business consultation groups; the Engineering Analysis; the

Consumer Analysis; public financial data; and industry profiles.

d. Utility Impact Model

Electric utility impact model. The electric utility analysis serves

three purposes within the overall assessment of the impact of the

proposed standards. First, it contributes to quantifying the energy

savings by determining the reduction in fossil fuels used for

electricity generation. Second, the estimated reduction in fossil fuel

consumption is an input to the Environmental Assessment, as required by

the National Environmental Policy Act. And third, by calculating

utility avoided costs, it provides marginal electricity costs. Avoided

cost is calculated by assessing the impacts on the electric utility

industry in terms of changes in investment, revenue requirements, and

residential load factors.

The electric utility analysis adopts the standard approach that the

value of electricity savings, based on marginal costs, can be broken

down into energy savings and capacity savings. The energy component

reflects the avoided cost of fuel not burned at the powerplant by the

reduced need to generate electricity. The capacity component measures

the avoided cost of financing and building extra generating capacity.

The analysis characterizes these avoided costs per KWh of heating,

cooling, and baseload energy saved. The heating and cooling energy

includes baseload and peak energy. These values are used to calculate

societal benefits from reduced electricity consumption.

The Electric Utility Impact Model calculates avoided energy costs

based on a disaggregation of the generation fuel mix to the National

Electric Reliability Council regions and a simplified load duration

curve for each region. First, the model allocates national electricity

savings that are forecasted by the LBL-REM to National Electric

Reliability Council regions in proportion to their current consumption

of heating, cooling, and baseload energy. The regional proportions are

derived from data on regional appliance saturations, efficiencies, and

hours of use. The fraction of the electricity that would have to be

generated at the margin from oil and gas is calculated from the total

regional oil and gas fraction and the simplified load duration curve.

Projected utility natural gas and coal prices, weighted by the oil and

gas fraction and the non-oil and gas fraction, respectively, are used

to calculate utility marginal costs over the forecast period. The

marginal costs are adjusted to account for seasonal differences.

The avoided capacity cost calculation in the model is based on

conservation load factors for the energy savings attributable to the

standards as well as the capacity costs of a combustion turbine. A

conservation load factor is defined as the average hourly energy

savings of a conservation measure divided by its peak load savings. The

conservation load factors are a way of characterizing the peak demand

savings of a conservation measure. They are used to convert the

capacity value of the standards into the per-kWh values described

above. The National Electric Reliability Council forecasts of capacity

requirements for each region are used to account for regional

variations in reserve margin. If the National Electric Reliability

Council forecasts an adequate reserve margin in a region for a given

year, no value is given to the capacity savings in the region.

The inputs needed for the Utility Impact Model are conservation

load factors, state-level utility fuel prices, appliance saturations,

efficiencies, and hours of use as well as electricity generation by

fuel type and capacity need by National Electric Reliability Council

region. The outputs of the analysis are fuel savings, reduction in the

need for new generating capacity, and avoided energy and capacity costs

for heating, cooling, and baseload appliances per million Btu's of

resource energy.

Gas utility modeling. Because the natural gas supply system does

not consist of vertically integrated suppliers, the gas utility

modeling necessarily takes a different approach from the electric

utility modeling. Nonetheless, the fundamental goal, to estimate the

effect of proposed standards on utilities and their customers, is the

same. The analysis on the gas side is greatly simplified by the fact

that no energy conversion is involved, so that the amount of natural

gas saved at the burner tip is not very different from the amount that

can remain in the ground. The environmental impacts are similarly

simple, relative to electricity supply, because most of the

environmental consequences of residential natural gas use occur at the

burner tip. The focus of the gas analysis, therefore, sits squarely on

the cost impact of proposed standards.

The gas utility cost modeling is in two parts. In the first, the

effect of the standard on the general market for natural gas is

estimated. For the purposes of this analysis, the result of interest is

the city gate price of natural gas. That is, the price that local gas

distribution companies pay for the gas they later distribute to

customers. In general, the sales reductions predicted from residential

appliance efficiency standards are not expected to be great enough, or

near enough in the future to have a major impact on the North American

gas market as a whole. However, to quantify any possible effect, the

Department will use a national equilibrium gas supply and transmission

model. This model will be run under a base case that reflects current

EIA forecasts of gas supply and demand, and policy cases that reflect

Department forecasts of the effect of the proposed standard.

The second part of the analysis concerns the gas market downstream

of the city gate. The U.S. has numerous and diverse local natural gas

distribution companies, and no individual modeling of companies is

feasible. The Department will, therefore, rely on a general econometric

model of industry cost structure. Company operating costs are

represented in an historic data base covering about 50 major U.S.

distribution companies. A translog econometric cost function will be

fitted to these data and then applied as a forecasting tool. The inputs

to this model are twofold: (1) the same base case and policy case

demand forecasts, reduced to local company levels; and (2) the base and

policy case city gate price forecasts derived from the market-wide

analysis. The results of the econometric modeling will show the effects

of the proposed standard on a typical local distribution company and

its customers.

e. Sensitivity Analyses

Sensitivity studies are performed to determine how changes in

technical and operational parameters affect key engineering and

economic indicators used in evaluation of appliance standards. This

makes it possible to place limits on the overall results of the

analysis and to gain an understanding of which variables are most

important in producing these results. Sensitivity analyses are

developed in a series of distinct steps. For each component analysis in

the overall analysis, critical input parameters are identified and

reasonable ranges of variation determined. The sensitivity of the model

to changes in the value of each important parameter is then estimated

by running the model for both the base case and the standards cases.

The results of the sensitivity analyses are examined to determine the

sensitivity of the forecasts to exogenous variables and assumptions and

the sensitivity of the differences between the base and standards cases

(impacts of alternative standards).

The sensitivity analyses have been developed at the national level

and no effort has been made to link them with any specific population

groups. The standards analysis assumes that nationwide average

appliance usage rates, energy prices, and efficiency apply to all

consumers in all areas of the nation, although the Department

recognizes that there exist large variations in each of these factors.

The Department requested in the Three Product Advance Notice

information concerning the extent to which any proposed national

efficiency standard is likely to affect identifiable groups of

consumers disproportionally and how best to consider such impacts in

the selection of efficiency standard levels. The Department also

requested additional data to help it better assess the disproportionate

impacts on such groups. The Department expects to use the same approach

that emerges in the Three Product Advance Notice rulemaking in this

rulemaking. The Department welcomes comments on this issue.

IV. Public Comment Procedures

a. Participation in Rulemaking

The Department encourages the maximum level of public participation

possible in this rulemaking. Individual consumers, representatives of

consumer groups, manufacturers, associations, States or other

governmental entities, utilities, retailers, distributors,

manufacturers, and others are urged to submit written statements on the

proposal.

The Department has established a period of 75 days following

publication of this notice for persons to comment on this proposal. All

public comments received will be available for review in the

Department's Freedom of Information Reading Room.

b. Written Comment Procedures

Interested persons are invited to participate in this proceeding by

submitting written data, views, or arguments with respect to the

subjects set forth in this notice. Instructions for submitting written

comments are set forth at the beginning of this notice and below.

Comments should be labeled both on the envelope and on the

documents, ``Three Cleaning Products Rulemaking (Docket No. EE-RM-94-

403),'' and must be received by the date specified at the beginning of

this notice. Ten copies are requested to be submitted. Additionally,

the Department would appreciate an electronic copy of the comments to

the extent possible. The Department is currently using

WordPerfectTM 5.1. All comments and other relevant information

received by the date specified at the beginning of this notice will be

considered by the Department in the proposed rule.

All written comments received on the Advance Notice of Proposed

Rulemaking will be available for public inspection at the Freedom of

Information Reading Room, as provided at the beginning of this notice.

Pursuant to the provisions of 10 CFR 1004.11, any person submitting

information or data that is believed to be confidential and exempt by

law from public disclosure should submit one complete copy of the

document and ten (10) copies, if possible, from which the information

believed to be confidential has been deleted. The Department will make

its own determination with regard to the confidential status of the

information or data and treat it according to its determination.

Factors of interest to the Department, when evaluating requests to

treat information as confidential, include: (1) A description of the

item; (2) an indication as to whether and why such items of information

have been treated by the submitting party as confidential, and whether

and why such items are customarily treated as confidential, and whether

and why such items are customarily treated as confidential within the

industry; (3) whether the information is generally known or available

from other sources; (4) whether the information has previously been

available to others without obligation concerning its confidentiality;

(5) an explanation of the competitive injury to the submitting person

that would result from public disclosure; (6) an indication as to when

such information might lose its confidential character due to the

passage of time; and (7) whether disclosure of the information would be

in the public interest.

c. Issues for Public Comment

The Department is interested in receiving comments and data

concerning the accuracy and workability of this methodology. Also, the

Department welcomes discussion on improvements or alternatives to this

approach. In particular, the Department is interested in gathering data

on the following:

Descriptive and performance characteristics for baseline

models of each product class that are the subject of this rulemaking;

these baseline models should be those satisfying the appropriate

standards;

Proposed product classes for products in this rulemaking;

Costs of baseline models and incremental costs of designs

improving the energy efficiency of the products that are the subject of

this rulemaking;

Appropriateness of existing and proposed test procedures

to the proposed design options; specifically, the Department would like

comments on whether a clothes washer that consumes more energy for a

higher percentage of water extraction (thus, lower clothes dryer energy

consumption) should be given a credit and if so, how much; and

Data on lifetimes of the appliances.

The Department requested information on the issues listed below in

the Three Product Advance Notice issued in September 1993. However, the

Department encourages commenters to provide any additional information

on these issues which may not have been presented in response to the

Department's Three Product Advance Notice. These issues are as follows:

The relevance of the data inputs and outputs of the LBL-

REM and LBL-MIM models, whether these models could or should capture

the cumulative effects of Federal energy conservation standards on

multi-product appliance manufacturers and whether or not there are

acceptable alternative models that could be used, such as REEPS or

GRIM;

Analytic bases and methods of calculating the dollar value

of reduced atmospheric emissions of SO2, NO2, and CO2

from reduced energy consumption;

Data on consumer financing of appliances useful for

obtaining a weighted-average discount rate; and

Data on the possible adverse affects of standards on

identifiable groups of consumers that experience below-average utility

or usage rates.

The Department has been unable to identify the financial

characteristics of small manufacturers. For purposes of this analysis,

small manufacturers' costs are assumed to equal those of medium

manufacturers. The Department is especially interested in learning of

the existence of small manufacturers and in obtaining costing data from

such manufacturers of the products under consideration.

For the Residential Energy Model analysis, the Department requests

interested parties to provide historical data on shipments and average

efficiencies by class for the products subject to the proposed

rulemaking. Data on consumer prices and on the installation and

maintenance expenses of these appliances are also requested.

The manufacturer analysis needs financial data from the product

division level. All of these data are available at the firm level; but

since firms are typically much larger than the relevant division, the

firm data may give a misleading indication of the division's finances.

An income statement and balance sheet at the division level would

be most helpful. If this is not available, then data on the following

variables are considered most essential: Net income, revenue, selling

and general and administrative costs, engineering costs, costs of goods

sold, interest, taxes, debt-to-equity ratio, net depreciable assets,

net assets, capital investment, and long-term debt.

The Department also welcomes current data on unit sales and

revenues for the industries as a whole.

V. Review Under Executive Order 12866

Today's regulatory action has been determined to be an

``economically significant regulatory action'' under Executive Order

12866, ``Regulatory Planning and Review,'' (58 FR 51735, October 4,

1993). Accordingly, today's action was subject to review under the

Executive Order by the Office of Information and Regulatory Affairs

(OIRA).

There were no substantive changes between the draft submitted to

OIRA and today's action.

The draft of today's action and any other documents submitted to

OIRA for review have been made a part of the rulemaking record and are

available for public review in the Department's Freedom of Information

Reading Room, 1000 Independence Avenue SW. Washington, DC 20585 between

the hours of 9:00 and 4:00, Monday through Friday, telephone (202) 586-

6020.

Issued in Washington, DC, on November 2, 1994.

Christine A. Ervin,

Assistant Secretary, Energy Efficiency and Renewable Energy.

[FR Doc. 94-28044 Filed 11-10-94; 8:45 am]

BILLING CODE 6450-01-P