Energy Conservation Program for Consumer Products: Procedures for Consideration of New or Revised Energy Conservation Standards for Consumer Products

SUMMARY: The Department of Energy (DOE or Department) today promulgates

a rule to elaborate on the procedures, interpretations and policies

that will guide the Department in establishing new or revised energy

efficiency standards for consumer products. The process described in

this rule provides for greatly enhanced opportunities for public input,

improved analytical approaches, and encouragement of consensus-based

standards. This enhanced approach was developed by the Department on

the basis of extensive consultations with many stakeholders.

EFFECTIVE DATE: The procedures, interpretations and policies

established in this rule take effect on August 14, 1996.

ADDRESSES: A copy of the report entitled ``Results of the Appliance

Rulemaking Process Improvement Effort,'' from which much of the

enhanced process described in this rule is derived, may be obtained

from: U.S. Department of Energy, Office of Energy Efficiency and

Renewable Energy, Forrestal Building, EE-43, 1000 Independence Avenue,

SW, Washington, DC 20585, (202) 586-7574. This report may be read at

the DOE Freedom of Information Reading Room, U.S. DOE, Forrestal

Building, Room 1E-190, 1000 Independence Avenue, SW, Washington, DC

20585, (202) 586-6020, between the hours of 9 a.m. and 4 p.m., Monday

through Friday, except Federal holidays.

FOR FURTHER INFORMATION CONTACT:

Michael J. McCabe, Office of Energy Efficiency and Renewable Energy,

U.S. Department of Energy, Mail Station EE-43, 1000 Independence

Avenue, SW, Washington, DC 20585-0121, (202) 586-0371

Douglas W. Smith, Office of General Counsel, U.S. Department of Energy,

Mail Station GC-70, 1000 Independence Avenue, SW, Washington, DC 20585-

0103, (202) 586-3410

Deborah E. Miller, Office of Energy Efficiency and Renewable Energy,

U.S. Department of Energy, Mail Station EE-1, 1000 Independence Avenue,

SW, Washington, DC 20585-0121, (202) 586-8888.

SUPPLEMENTARY INFORMATION:

I. Background on Appliance Standards Program

II. Process Leading to Development of this Rule

III. Description of Rule

1. Objectives

2. Scope

3. Setting Priorities for Rulemaking Activity

4. Process for Developing Efficiency Standards and Factors to be

Considered

5. Policies on Selection of Standards

6. Effective Date of a Standard

7. Test Procedures

8. Joint Stakeholder Recommendations

9. Principles for the Conduct of Engineering Analysis

10. Principles for the Analysis of Impacts on Manufacturers

11. Principles for the Analysis of Impacts on Consumers

12. Consideration of Non-Regulatory Approaches

13. Crosscutting Analytical Assumptions

14. Deviations, Revisions, and Judicial Review

IV. Related DOE Actions to Implement Process Improvements

1. Finalized process improvement report

2. Process to develop rulemaking priorities

3. Review of manufacturer impact analysis

4. Review of non-regulatory approaches

5. Creation of an advisory committee

V. Status of Ongoing Rulemakings

VI. Administrative Procedure

VII. Administrative Reviews

I. Background on Appliance Standards Program

The Department of Energy's appliance standards program is conducted

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

(EPCA). 42 U.S.C. 6291-6309. In 1987, EPCA was amended to establish by

law national efficiency standards for certain appliances and a schedule

for DOE to conduct rulemakings to periodically review and update these

standards. National Appliance Energy Conservation Act, Pub. L. 100-12

(1987). The products covered by these standards included refrigerators

and freezers, room air conditioners, central air conditioners and heat

pumps, water heaters, furnaces, dishwashers, clothes washers and

dryers, direct heating equipment, ranges and ovens, pool heaters, and

fluorescent lamp ballasts. In conducting the rulemakings to update the

standards, the Secretary of Energy is to set standards at levels that

achieve the maximum improvement in energy efficiency that is

technologically feasible and economically justified.

The Energy Policy Act of 1992 (EPACT) further amended EPCA to

expand the coverage of the standards program to include certain

commercial and industrial equipment, including commercial heating and

air-conditioning equipment, water heaters, certain incandescent and

fluorescent lamps, distribution transformers, and electric motors.

Energy Policy Act of 1992, Pub. L. 102-486 (1992). EPACT also

established maximum water flow-rate requirements for certain plumbing

products and provided for voluntary testing and consumer information

programs for office equipment, luminaires, and windows.

EPCA also provides for DOE to establish test procedures to be used

in evaluating compliance with efficiency standards. These test

procedures are revised periodically to reflect new product designs or

technologies.

As prescribed by EPCA, energy efficiency standards are established

by a three-phase public process: Advance Notice of Proposed Rulemaking

(ANOPR); Notice of Proposed Rulemaking (NOPR); and Final Rule. The

process to develop test procedures is similar, except that an Advance

Notice is not required.

In updating standards as required by EPCA, DOE revised standards

for refrigerators and freezers in November 1989, with those standards

becoming effective in January 1993. 54 FR 47916 (Nov. 17, 1989). These

standards resulted in an approximately 25 percent reduction in

refrigerator energy use. In May 1991, DOE issued revised energy

conservation standards for clothes washers, clothes dryers, and

dishwashers which became effective on May 14, 1994. 56 FR 22250 (May

14, 1991).

DOE has published notices of proposed rulemaking on revised

standards for a number of covered products. A NOPR for energy

conservation standards for eight products (water heaters, room air-

conditioners, mobile-home furnaces, direct-heating equipment, pool

heaters, kitchen ranges and ovens, fluorescent lamp ballasts, and

televisions) was published in March 1994. 59 FR 10464 (March 4, 1994).

DOE has since withdrawn the proposal to establish standards for

television sets. 60 FR 32627 (June 23, 1995). With regard to ballasts

and electric water heaters, DOE is gathering further inputs and

conducting further analysis. 60 FR 5880 (Jan. 31, 1995). In July 1995,

the Department issued a NOPR for energy conservation standards for

refrigerator

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products which was based largely on a proposal made by a coalition of

refrigerator manufacturers, electric utilities, states and energy

conservation advocates. 60 FR 37388 (July 20, 1995).

The Department of the Interior and Related Agencies Appropriations

Act for Fiscal Year 1996 included a moratorium on proposing or issuing

energy conservation appliance standards for the remainder of Fiscal

Year 1996. See Pub. L. 104-134. The Department is continuing to work on

the analyses underlying proposed standards and on test procedure

revisions during this fiscal year.

The appliance standards program supports key objectives of the

Administration's Sustainable Energy Strategy, which include: Increasing

the efficiency of energy use in order to strengthen our economy and

improve living standards; reducing the adverse environmental impacts

associated with energy production, delivery and use; and keeping

America secure by reducing our vulnerability to global energy market

shocks. Although the Department recognizes that policies that rely on

market forces or market-based incentives are preferable in many

circumstances, appropriate regulatory intervention can achieve

efficiency gains that will benefit consumers, businesses, and the

Nation. Existing appliance standards are projected to save 23

quadrillion BTUs of energy from 1993 to 2015, resulting in estimated

consumer savings of $1.7 billion per year in 2000 and estimated annual

emission reductions of 107 million tons of carbon dioxide and 280

thousand tons on nitrogen oxides by 2000. An aggressive program for

promoting the efficient use of energy resources, including appliance

efficiency standards that are technically feasible and economically

justified, is a critical element of the Sustainable Energy Strategy.

II. Process Leading to Development of This Rule

Since the National Performance Review's recommendations on

Regulatory Reform were issued over two years ago, the U.S. DOE has

forged new ways of carrying out its appliance standards rulemaking

responsibilities. To supplement the traditional rulemaking process

established by law, the Department has encouraged consensus-based

alternatives and invited interest group participation in the early

stages of standards development with mechanisms such as technical

sessions and workshops.

In September 1995, the Department announced a formal effort to

consider further improvements to the process used to develop appliance

efficiency standards, calling on energy efficiency groups,

manufacturers, trade associations, state agencies, utilities, and other

interested parties to provide input to guide the Department's work. To

date, the Department's process improvement effort has consisted of

several elements:

--A series of preliminary meetings were held with interested parties to

identify opportunities for improvement in the rulemaking process,

standards priority setting, analysis methods and Department decision-

making;

--Interviews were conducted with thirty organizations that have

participated in past appliance rulemakings to solicit information

regarding the perceived strengths and weaknesses of the process;

--A preliminary draft ``Process Improvement Plan'' was developed from

these initial meetings and interviews;

--A public workshop was held to obtain broad-based input on the

Department's draft ``Process Improvement Plan'' and other elements of

the Department's proposed new approach;

--A draft report entitled ``Results of the Appliance Rulemaking Process

Improvement Effort'' was prepared and distributed for comment to the

workshop participants;

--Follow-up meetings were held with interested parties on the issues

raised in the draft report; and

--Several drafts of today's rule were shared with stakeholders, and the

Department addressed numerous comments made by interested parties in

written submissions and during two well-attended stakeholder workshops.

The publication of this rule is an important step in

institutionalizing the procedural improvements identified in this

process. It is not, however, the only step. Other actions in the

Department's process improvement effort include: A review of the

manufacturing impact analysis model and methodologies; a review of non-

regulatory approaches; the prioritization of future rules; and the

creation of an advisory committee consisting of a representative group

of interested parties, to oversee the implementation of these

commitments. (See section IV of the Supplementary Information.) The

objective is to act quickly to implement this enhanced standards

development process, and to continue to invite extensive stakeholder

consultation in the implementation phase.

The Department's many stakeholders have contributed tremendously to

this effort to review the Department's procedures. The Department

appreciates that sustained contribution, and is committed to implement

a process that is more responsive to stakeholder concerns.

III. Description of Rule

1. Objectives

Section 1 of the rule articulates the Department's major objectives

for the enhanced process to be employed for considering new or revised

appliance efficiency standards. The Department's objectives are to:

(a) Provide for early input from stakeholders

(b) Increase predictability of the rulemaking timetable

(c) Increase use of outside technical expertise

(d) Eliminate problematic design options early in the process

(e) Fully consider non-regulatory approaches

(f) Conduct thorough analysis of impacts

(g) Use transparent and robust analytical methods

(h) Articulate policies to guide selection of standards

(i) Support efforts to build consensus on standards

(j) Reduce time and cost of developing standards

2. Scope

Section 2 describes the applicability of the enhanced process

contained in the rule. The Department has adopted a common sense

approach to the transition to this enhanced process.

DOE will use the new approach for all new rulemakings. With regard

to rulemakings that are already underway, DOE and interested parties

have invested substantial effort and resources. In balancing whether

the benefits of using this enhanced process justify the delay of

starting these rulemakings anew, DOE has concluded that the new process

will be used, from the start, with respect to rulemakings in which a

NOPR has not yet been published. To the extent analytical work has

already been done or public comment on an ANOPR has already been

provided, such analysis and comment will be considered, as appropriate,

in proceeding under the new process. A case-by-case review is needed to

determine how to proceed (i.e., whether some or all of the analytical

or procedural steps should be repeated) with respect to products for

which a NOPR has been issued and the

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analysis is nearly complete. DOE's intentions concerning how to proceed

with those rulemakings that are beyond the NOPR stage are discussed in

some detail in section V below. Note that the rulemakings beyond the

NOPR stage include one rule based on a consensus stakeholder

recommendation and others for which there has been shared analysis and

public workshops consistent with the direction of this rule.

3. Setting Priorities for Rulemaking Activity

Section 3 describes the process that will be used in developing

rulemaking priorities, including factors to be considered. The annual

process invites public input on the program's rulemaking agenda for the

coming year, establishes factors to be considered in establishing

priorities, and provides, in conjunction with the Department's

Regulatory Agenda, a clear set of expectations about the scheduled

rulemaking activities.

4. Process for Developing Efficiency Standards and Factors To Be

Considered

Section 4 establishes the process for developing efficiency

standards. This process is designed to provide for greater, and more

productive, interaction between the Department and interested parties

throughout the process. It is also designed so that key analyses are

performed earlier in the process, with early opportunities for public

input to and comment on the analyses. The process is consistent with

the procedural requirements of law, but adds some important steps to

enhance the process.

Building upon the National Performance Review's regulatory reform

initiative, an effort has been underway at the Department to increase

consultation with interested parties at every stage of the rulemaking

process. In addition to holding the formal public hearings and

soliciting written comments, the Department has increased its use of

public workshops and other less formal tools to develop more effective

standards. The Department has received broad support for its recent

efforts to open the standards development process and its commitment to

obtain input from interested parties early--well in advance of the

ANOPR--and often in the rulemaking process.

Section 4 also articulates factors that DOE will take into account

in screening design options, selecting candidate standard levels, and

selecting proposed and final standard levels.

(a) Pre-ANOPR Screening and Analysis of Design Options

As described in section 4(a), the first step in a rulemaking will

be a screening analysis that will identify the product categories and

technologically feasible design options and then narrow the range of

design options being considered for the development of candidate

standard levels. This screening analysis, along with the engineering

analysis and the selection of candidate standard levels, will occur

before DOE publishes an ANOPR.

Some manufacturers have expressed concern that the Department may

devote too much attention to consideration of design options that: Are

not practical to mass manufacture, install or service; have substantial

impacts on consumer utility; or raise significant safety concerns. The

screening step is designed to address these concerns. The Department

will develop, with input from interested parties, a list of design

options for further consideration. The Department will eliminate from

further consideration a design option that: Is not technologically

feasible; is not practicable to manufacture, install and service; has

significant adverse impact on the utility of the product to consumers;

or adversely affects health or safety. Consistent with Natural

Resources Defense Council v. Herrington, 768 F.2d 1355 (D.C. Cir.

1985), the Department will evaluate design options for technological

feasibility on the basis of whether the options are in use by industry

or research has progressed to the development of a prototype. However,

consideration of practicability to manufacture, impacts on consumer

utility and health and safety effects at this stage is designed to

ensure that commercially impractical designs, even if technologically

feasible, are screened out on the basis of other statutory criteria

early in the process. This early screening approach should reduce

uncertainty as to the direction of standards development.

The Department will seek expert input to conduct the necessary

analyses. The Department, with input from interested parties, will

identify issues that will be examined in the engineering analysis and

the types of specialized expertise that may be required. With these

specifications, DOE will select appropriate contractors,

subcontractors, and as necessary, expert consultants to perform the

engineering analysis and the impact analysis. DOE, in consultation with

interested parties, also will identify technology/industry experts who

can provide independent, expert review of the results of the

engineering analysis and the subsequent impact analysis. The Department

will consider in the analyses, wherever feasible, data, information and

analyses received from stakeholders.

After the screening of design options, the DOE contractor will

perform engineering and initial economic analysis of the design

options. The results of this analysis will be distributed for review by

experts and interested parties. If appropriate, a public workshop will

be conducted to review these results.

The process does not contemplate that the early screening process

will be the final opportunity to gather and consider input on whether a

design option is technologically feasible; is practicable to

manufacture, install and service; has significant adverse impact on

utility of the product to consumers; or adversely affects health or

safety. Any new information on these issues that is provided in later

stages of the rulemaking will be considered, as provided in sections

4(b)(4) and 4(d)(7)(ix), and a preliminary determination to include or

exclude consideration of a design option based on the screening

analysis may be revised if supported by a reexamination of these

factors based on new information.

This emphasis on the early stages of the process is designed to

enable interested parties and DOE to engage in a more productive,

informative interaction on standards issues prior to the publication of

the ANOPR, so that the standards development process starts with the

best possible foundation of common understanding.

(b) Factors in Selection of Proposed Standard

Section 4(c) provides that following review of comments on the

ANOPR, DOE's contractor will conduct specified impact analyses to be

used by DOE in selecting proposed standards. The factors to be

considered by DOE in selection of proposed standard levels include:

(i) Consensus stakeholder recommendations

(ii) Impacts on manufacturers

(iii) Impacts on consumers

(iv) Impacts on competition

(v) Impacts on utilities

(vi) National energy, economic and employment impacts

(vii) Impacts on the environment and energy security

(viii) Impacts of non-regulatory approaches

(ix) New information relating to factors use for screening design

options.

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The Department's approach to analysis and consideration of several

of these key factors is discussed in sections 10, 11, and 12 of the

rule.

(c) Enhanced Opportunities for the Public to Receive Information and

Provide Input

Throughout the process, the Department will provide interested

parties with opportunities to provide data, recommendations and other

comments. DOE will share with the public both analyses and preliminary

decisions to inform interested parties as to the progress of standards

development. This information from the Department will enable the

public to provide informed input to DOE at each step of the process.

With the goal of better informing stakeholders about DOE rulemaking

activities, the Department will use various methods, in addition to

Federal Register notices, to notify interested parties of upcoming

meeting and rulemaking notices, such as industry publications, Inside

Energy, Air Conditioning News, Appliance Magazine, Product Safety

Letter, and the Energy Efficiency and Renewable Energy Network (EREN)

located on the Internet at http://www.eren.doe.gov.

(d) Timely Completion of Rulemakings

The Department's intent is to use a process that will produce

standards that have sound analytical grounding and have been subject to

thorough review and comment without making the process unduly time-

consuming. The entire process provided for in section 4, from the date

of issuance of the listing of priorities indicating that work is about

to begin on the development of a new standard, to issuance of the final

rule, should take no more than three years. The time required from

issuance of an ANOPR to issuance of a final rule should be no more than

18 months.

Timely completion of rulemakings is essential. If experience

demonstrates rulemakings are not being completed within a 3-year

timeframe using this new process, DOE will reconsider this process to

explore how changes can be made to expedite the process.

5. Policies on Selection of Standards

Section 5 describes Department policies concerning the selection of

new or revised standards, and decisions preliminary thereto. These

policies are intended to provide guidance for making the determinations

required by section 325 of the EPCA, 42 U.S.C. 6295.

Section 5(b) states policy guidance for screening design options.

In particular, it states that a design option will not be considered

further if it is determined that the technology: is not incorporated in

a commercial product or a working prototype; will not be capable of

being mass produced and installed and serviced by persons serving the

relevant market at the time a standard would take effect; will have

significant adverse impact on the utility of the product to consumers,

or result in the unavailability of any product type generally available

in the U.S. market; or will have significant adverse impacts on health

or safety.

Section 5(c) and (d) describe the policies pertaining to the

selection of candidate standard levels.

Sections 5(e) and (f) describe Department policies guiding

selection of proposed and final standard levels. Section 325(o)(2)(A)

of EPCA provides that any new or revised standard must be designed to

achieve the maximum improvement in energy efficiency that is determined

to be technologically feasible and economically justified. A candidate

standard level will not be proposed or promulgated if the Department

determines that it is not technologically feasible and economically

justified. See EPCA section 325(o)(3)(B). A standard level is

economically justified if the benefits exceed the burdens. See EPCA

section 325(o)(2)(B)(i).

The Department encourages efforts to develop consensus among

interested parties on proposals for new or revised standards as an

effective mechanism for balancing the economic, energy, and

environmental interests affected by standards. Thus, notwithstanding

any other policy on selection of proposed standards, a consensus

recommendation on an updated efficiency level submitted by a group that

represents all interested parties will be proposed by the Department if

it is determined to meet the statutory criteria.

Section 5(e) articulates a number of policies to guide the

application of EPCA's economic justification criterion in selecting a

proposed standard. Although many factors are pertinent to the ultimate

judgment about whether the benefits of a standard level exceed the

burdens, these policies reflect special concern about particular types

of significant adverse impacts on consumers and manufacturers in

reaching that judgment.

The policies articulated in section 5(e)(3)(i) are stated as

rebuttable presumptions. Although these presumptions reflect the great

significance DOE attaches to these factors, DOE will consider evidence

that rebuts an applicable presumption that a standard level is not

economically justified. Any applicable presumption will be rebutted if

the Department determines that specifically identified expected

benefits of the standard would outweigh the expected adverse effects.

6. Effective Date of a Standard

Section 6 provides that the lead time between the publication of a

final rule in the Federal Register and the effective date of the new or

revised standard will be at least the period contemplated by the

rulemaking schedules contained in EPCA. The Department will consider,

on a case-by-case basis, further extending this lead time if the

circumstances warrant. For instance, the lead time might be extended to

mitigate the cumulative burden of implementing multiple product

regulations or to permit time for market acceptance of new products.

This section also provides that the period between the effective date

of one standard and the effective date of any revision to that standard

will be at least the period contemplated by the rulemaking schedules

contained in EPCA. These policies will ensure that the time available

for manufacturers to prepare for implementation of a new or revised

standard and the time available for the amortization of any fixed costs

associated with compliance will be no less than anticipated in the

statute.

7. Test Procedures

Section 7 states the Department's commitment to ensure that

revisions to test procedure rules necessary to evaluate revisions to

standards are developed and finalized in a timely fashion.

Any necessary modifications in test procedures will be proposed

before issuance of an ANOPR on revised standards and will be finalized

prior to the issuance of a NOPR on revised standards. Where significant

test procedure changes are needed, DOE will attempt to finalize test

procedure revisions before the issuance of an ANOPR on revised

standards.

8. Joint Stakeholder Recommendations

Section 8 states that the Department supports efforts by groups of

interested parties to develop and present consensus recommendations on

standards to DOE. Throughout the standards development process, and

especially following the issuance of the ANOPR, interested parties are

welcome to develop common recommendations to the Department on product

categories and standard levels as well as on more specific analytical

issues. The

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Department will seek to support these efforts in whatever way possible.

9. Principles for the Conduct of Engineering Analysis

Section 9 states the Department's commitment to solicit input from

interested parties and experts in conducting the engineering analysis.

The Department will use this input to develop the design options to be

considered in the subsequent analyses, identify any engineering models

necessary, and estimate the likely cost and performance improvement

potential of design options. The Department will use analytical methods

that explicitly account for uncertainty.

10. Principles for the Analysis of Impacts on Manufacturers

Section 10 describes the approach DOE will use in the analysis and

consideration of impacts on manufacturers. The process addresses a

number of concerns raised in the process improvement effort. First, the

process provides opportunities for comments in the pre-ANOPR screening

process and at the beginning of the impact assessment process. This

will focus attention on items of specific concern to each individual

regulatory proceeding. Discussions on what data are critical as well as

the specific approaches for generating those data will be conducted in

open proceedings. Second, the Department will utilize an annual cash

flow approach to determine quantitative impacts on manufacturers

including a short term assessment based on the cost and capital

requirements during the period between the announcement of a regulation

and the time when the regulation comes into effect. Third, with input

from manufacturers and other interested parties, the Department will

develop estimates of the critical variables affecting manufacturers

(such as expected changes in product prices, sales, and possible fuel

switching) drawing on multiple sources of data both quantitative and

qualitative. Fourth, the Department will analyze the impacts of a

standard on different types of manufacturers, with particular attention

to impacts on small manufacturers. This will be done with scenario

analysis or other appropriate methods. Fifth, the Department will use

models that: are clear and understandable; feature accessible

calculations; and recognize and report the range of uncertainty.

Finally, the Department will assess and describe the effects on

manufacturers of other significant product-specific regulations that

will take effect within three years of the effective date of the

standard under consideration and will affect significantly the same

manufacturers. This assessment is intended to capture the impacts of

different DOE standards affecting multiple products made by the same

manufacturing division.

With respect to overlapping efficiency standards on a product and

components of the product, the Department will pay special attention to

the cumulative regulatory burden being borne by the manufacturer of

finished products containing that component. In such cases, the

Department will specifically address the cost of potential component

standards plus the overlapping costs of existing parallel standards on

both the component and the system in which the component is installed.

11. Principles for the Analysis of Impacts on Consumers

Section 11 describes the Department's approach to consideration of

consumer impacts. First, in the very early stages of standard

development, DOE will consider adverse impacts of design options on

consumer utility and will identify other possible impacts on consumers

of updated efficiency standards which may warrant closer examination

during the standards development process. Second, DOE will determine,

on the basis of any information submitted during the standard

development process, whether a proposed standard is likely to result in

the unavailability of any covered product type with performance

characteristics, features, sizes, capacities, and volumes that are

substantially the same as products generally available in the U.S. at

the time. Consistent with EPCA, DOE will not promulgate a standard at a

level where it concludes that it would result in such unavailability.

Third, the Department will consider the views of the Department of

Justice on any impacts of a proposed standard on competition, and will

not issue a standard determined to have significant anticompetitive

impacts. Fourth, the Department will use regional analysis and

sensitivity analysis tools, as appropriate, to evaluate the potential

distribution of impacts of candidate standards levels on consumers. The

Department will consider impacts on significant segments of society in

determining standards levels. Where significant subgroups would be

expected to bear significant adverse impacts, DOE will place increased

emphasis on voluntary programs to bring about additional potential

energy savings.

The Department will be sensitive to first cost increases and make

greater use of sensitivity analysis and scenario analysis in reporting

consumer Life-Cycle Cost, Payback Period and Cost of Conserved Energy.

The Department expects that the use of these methods will result in

more economically efficient standards than reliance on pay-back period

alone, while achieving the similar result of avoiding negative impacts

to identifiable population groups.

Substantial increases in product prices may adversely affect low-

income households or cause shifts in product purchasing patterns. Thus,

if a candidate standard level would cause a substantial increase in the

product first costs to consumers or would not pay back such additional

first costs through energy cost savings in less than three years,

Department will specifically assess the likely impacts of such a

standard on low-income households, product sales and fuel switching.

The results of this assessment will be considered in the evaluation of

consumer and manufacturer impacts.

As noted during the process improvement effort, consumers have

rarely participated directly in standards development. In order to

address concerns about the lack of such direct participation, DOE will

seek to strengthen its efforts to inform and involve consumers and

consumer representatives in the process of developing standards. This

will include expanded notification of consumer representatives during

the process of developing updated efficiency standards and, where

appropriate, DOE may seek the direct input of consumers.

The Department is committed to improving the analysis of

engineering issues and consumer and manufacturer impacts. The

Department also is cognizant that using ever more elaborate

quantitative approaches carries the risk of unacceptable delays and

incomprehensible analysis and results. For these reasons, the

Department will seek to balance appropriately the use of quantitative

and qualitative approaches, with the goal of providing the most useful

information upon which to make the required judgments.

12. Consideration of Non-Regulatory Approaches

Section 12 states the Department's commitment to consider fully the

likely effects of market forces and any non-regulatory initiatives in

assessing the incremental benefits of efficiency standards. DOE

considers voluntary ``market pull'' programs to be an

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important complement to its standards program.

13. Crosscutting Analytical Assumptions

Section 13 describes the principles the Department intends to

follow in selecting the key assumptions which are critical to the

quantitative analysis of the impacts of candidate standard levels,

including rates of economic growth, energy price and demand trends,

product specific energy efficiency trends, real discount rates and

emission rates. These cross-cutting analytical assumptions will

continue to be specifically identified in all notices of proposed

rulemaking and will continue to be subject to public comment and review

as part of each such rulemaking.

Certain crosscutting analytical assumptions will change regularly

as forecasts of economic growth, energy price, demand, efficiency and

other trends are modified. In other cases, such as the real discount

rates used to assess the present value of future costs or savings for

consumers, commercial businesses, manufacturers or the Nation, the

Department hopes that the crosscutting analytical assumptions will

remain relatively stable. For residential consumers, the Department

currently uses real discount rates of 2, 6 and 15% in the analysis of

likely impacts of appliance standards. For commercial users, the

Department currently uses 4, 8 and 12%. For manufacturers, the

Department currently uses 12%, but is likely to develop a range of

values for future use. For National benefits, the Department currently

uses 7%.

With respect to the consideration of the impacts of candidate

standards on the environment and energy security, the Department can

find no sound analytical method for accurately estimating the monetary

value of such environmental or energy security benefits (or costs).

Therefore, the Department will not attempt to incorporate the estimated

monetary value of such externalities into its estimates of the national

net present values of candidate standard levels. However, as required

by the National Environmental Policy Act, the Department will continue

to consider the likely effects of candidate standard levels on the

environment and energy security in reaching a decision as to whether

the benefits of the such standard levels exceed their burdens.

EPCA provides that energy conservation standards prescribed under

EPCA are to be based on energy consumption at the point of use (i.e.,

site energy). See EPCA sections 321 (4), (5) and (6). For purposes of

estimating energy savings in evaluating the benefits of a proposed

standard, DOE considers the energy savings associated with the

production of the fuel used by the appliance covered by the standard

(i.e., source energy).

14. Deviations, Revisions and Judicial Review

The Department has crafted this rule to include procedures,

interpretations and policies that it believes will be appropriate for

general use in the future conduct of the appliance standards program.

However, given the possibility of unanticipated circumstances affecting

either particular rulemakings or the program generally, the rule

includes provision for case-specific deviations and modifications of

the generally applicable rule. If the Department concludes that

elements of this rule are not appropriate in a particular standards

rulemaking, DOE will provide interested parties with notice of the

deviation and an explanation of why such a deviation was deemed

appropriate. If the Department concludes, based on experience with this

approach, that changes in this Appendix are appropriate, DOE will

provide notice of such modifications to the rule with an accompanying

explanation. DOE will consult with interested parties, probably through

the advisory committee (described in section IV.5 of this Supplementary

Information), prior to any such modification to the rule. The

procedures, interpretations, and policies stated in this Appendix are

not intended to establish any new cause of action or right to judicial

review. Judicial review of final rules is provided for in section 336

of EPCA.

IV. Related DOE Actions To Implement Process Improvements

In addition to promulgation of this rule, DOE employed other

activities to address some of the concerns raised by stakeholders

during the process improvement. These activities are described below.

1. Finalized Process Improvement Report

The Department will issue the final report on ``Results of the

Appliance Rulemaking Process Improvement Effort'' in August 1996.

2. Process To Develop Rulemaking Priorities

On June 14, 1996, the Department held a public workshop on

priority-setting and DOE will make available a draft priority listing

based on the results of our priority-setting analysis in late July. The

draft rulemaking priority listing and the accompanying analysis will:

Indicate for which covered products DOE is proposing to initiate or

continue, during the next two years, the development of updated

standards; document the priority-setting analysis which DOE used to

develop the draft priority listing; indicate the next steps for all

currently active rulemakings; describe any variations from the enhanced

process that will be followed for specific products; and provide a

schedule for completion of each rulemaking identified.

The final list of rulemaking priorities will be available at the

time that the Regulatory Agenda is published in the Federal Register in

the fall of 1996. During the summer, the Department will obtain public

comments on the draft listing of rulemaking priorities.

3. Review of Manufacturer Impact Analysis

In order to initiate the process of developing new and

substantially improved methods for assessing the impacts of standards

on manufacturers, DOE will review in detail the existing analyses

methodologies, develop a draft work plan for the development of new

methods for assessing manufacturer impact, and invite comments and

suggestions from interested parties.

4. Review of Non-Regulatory Approaches

DOE has initiated a process for developing methods for comparing

the likely benefits and costs of updated efficiency standards to

various non-regulatory alternatives. For instance, DOE held a public

workshop on June 20, 1996 which examined, among other issues,

alternatives and complements to standards for fluorescent lamp

ballasts. DOE expects to hold one or more similar workshops to examine

these issues with regard to other products.

5. Creation of an Advisory Committee

DOE is establishing an Advisory Committee on Appliance Energy

Efficiency Standards. The Committee will provide an official, organized

forum for interested parties to provide the Department with advice,

information, and recommendations on the Appliance Efficiency Standards

rulemaking process. Committee members will be chosen to ensure an

appropriately balanced representation of various points of view and

functions of interested parties and experts, such as manufacturer trade

associations, manufacturers, energy efficiency groups, consumers,

utilities, retailers, and state energy offices. The Assistant Secretary

[[Page 36980]]

for Energy Efficiency and Renewable Energy will chair the Committee.

It is anticipated that this advisory committee will be a useful

forum for obtaining advice on the desirability of making changes to the

procedures, interpretations and policies set out in this rule, and on

cross cutting analytical issues affecting all product standards. The

Advisory Committee may recommend that DOE undertake generic proceedings

relating to crosscutting analytical issues.

V. Status of Ongoing Rulemakings

As stated in section 2 of the rule, the Department will apply the

new process described in section 4 of the rule to all rulemakings for

which a NOPR has not yet been published. To the extent analytical work

has already been done, and public comment on an ANOPR already has been

provided, such analysis and comment will be considered, as appropriate,

in proceeding with the new process.

The Department is precluded through September 1996 from using funds

appropriated under the Fiscal Year 1996 Interior Appropriations Act to

propose or promulgate new or revised efficiency standards. With respect

to rulemakings for which a NOPR has already been published, DOE

currently intends to proceed as follows:

Refrigerators. The analysis of comments on the NOPR is complete. At

this time, DOE believes that no major changes to the underlying

analysis of the proposed refrigerator standards is necessary. However,

the Department expects to consult further with interested parties to

determine whether it is appropriate to make alterations to the proposed

standards to take into account the interaction between the revised

efficiency standards and Clean Air Act and Montreal Protocol on

Substances that Deplete the Ozone Layer regulations relating to

manufacture of HCFCs, which take effect in 2003, as suggested by some

stakeholders. The Department expects that any further consideration of

this issue would be consistent with the approach taken in today's rule

on pertinent topics such as cumulative regulatory burden.

Ballasts. The analysis underlying the previously proposed standards

has been substantially revised and has been circulated for technical

review by manufacturers and other interested parties. A public workshop

to review this revised analysis was held on June 20, 1996.

Cooking Products and Room Air Conditioners. The analyses underlying

the proposed standards for these two product categories have been

substantially revised and are now being circulated for technical review

by manufacturers and other interested parties. On the basis of these

analyses and any comments received on these analyses, the Department

expects to proceed to issue a final rule after the current fiscal year

1996 moratorium expires.

Water Heaters. The analyses for gas, oil and electric water heaters

are being revised and will be completed and made available for review

depending on the priority given this product. A revised NOPR would be

issued following the new procedure.

Mobile Home Furnaces, Direct Heating Equipment and Pool Heaters.

The analyses for these products have been revised and will be made

available for review depending on the priority given them. Revised

NOPRs would be issued following the new procedure.

In the near term, DOE will consider these rulemakings among others

in the upcoming priority setting effort, and will solicit and consider

public comment on how to proceed with these rules in that process.

VI. Administrative Procedure

The rule published today describes procedures, interpretations, and

policies DOE will follow in conducting rulemakings on appliance

standards. DOE is not required to provide for prior notice and

opportunity for comment on today's final regulations because they fall

within the Administrative Procedure Act's exception for

``interpretative rules, general statements of policy, or rules of

agency organization, procedure, or practice.'' 5 U.S.C. 553(b)(A).

Moreover, these procedures, interpretations and policies were developed

with extensive consultation with representatives of all of the

interests that typically participate in standards rulemakings. The

consultations to date are described in detail in section II of this

Supplementary Information.

VII. Administrative Reviews

A. Review Under Executive Order 12866

This regulatory action is not a significant regulatory action under

Executive Order 12866, ``Regulatory Planning and Review,'' October 4,

1993. Accordingly, this action was not subject to review under the

Executive Order by the Office of Information and Regulatory Affairs.

B. Review Under Executive Order 12612

Executive Order 12612 requires that regulations, rules,

legislation, and any other policy actions be reviewed for any

substantial direct effect on states, on the relationship between the

National Government and states, or in the distribution of power and

responsibilities among various levels of government. If there are

substantial effects, then the Executive Order requires preparation of a

federalism assessment to be used in all decisions involved in

promulgating and implementing a policy action.

The final rules published today do not regulate the states. They

primarily will affect the manner in which DOE develops proposed rules

to revise consumer product energy efficiency standards. Section 327 of

the EPCA provides for preemption of state regulation in this area. The

final rules published today do not alter the distribution of authority

and responsibility to regulate in this area. Accordingly, DOE has

determined that preparation of a federalism assessment is unnecessary.

C. Review Under Executive Order 12988

With respect to the review of existing regulations and the

promulgation of new regulations, section 3(a) of Executive Order 12988,

``Civil Justice Reform,'' 61 FR 4729 (February 7, 1996), imposes on

Executive agencies the general duty to adhere to the following

requirements: (1) Eliminate drafting errors and ambiguity; (2) write

regulations to minimize litigation; and (3) provide a clear legal

standard for affected conduct rather than a general standard and

promote simplification and burden reduction. With regard to the review

required by section 3(a), section 3(b) of the Executive Order

specifically requires that Executive agencies make every reasonable

effort to ensure that the regulation: (1) Clearly specifies the

preemptive effect, if any; (2) clearly specifies any effect on existing

Federal law or regulation; (3) provides a clear legal standard for

affected conduct while promoting simplification and burden reduction;

(4) specifies the retroactive effect, if any; (5) adequately defines

key terms; and (6) addresses other important issues affecting clarity

and general draftsmanship under any guidelines issued by the Attorney

General. Section 3(c) of the Executive Order requires Executive

agencies to review regulations in light of applicable standards in

section 3(a) and section 3(b) to determine whether they are met or it

is unreasonable to meet one or more of them. DOE reviewed today's final

regulations under the standards of section 3 of the Executive Order and

determined that, to the extent permitted

[[Page 36981]]

by law, they meet the requirements of those standards.

D. Regulatory Flexibility Act

If an agency is required by law to issue a general NOPR, and if a

rule has, or is likely to have, a significant negative economic impact

on a substantial number of small entities, then the Regulatory

Flexibility Act, 5 U.S.C. 601 et seq., requires preparation of an

initial and final regulatory flexibility analysis to accompany proposed

and final rulemakings, respectively. Because the rule published today

is exempt from notice and comment rulemaking under the Administrative

Procedure Act, there is no requirement to prepare a regulatory

flexibility analysis.

E. Review Under the National Environmental Policy Act

The Department has concluded that this rule falls into a class of

actions that are categorically excluded from review under the National

Environmental Policy Act of 1969 (NEPA), 42 U.S.C. 4321, 4331-35, 4341-

47, because they would not individually or cumulatively have a

significant impact on the human environment as determined by DOE's

regulations. 10 CFR part 1021, subpart D. Therefore this rule does not

require preparation of an environmental impact statement or

environmental assessment pursuant to NEPA.

F. Review Under Unfunded Mandates Reform Act of 1995

Title II of the Unfunded Mandates Reform Act of 1995, Pub.L. 104-4,

requires each Federal agency to assess the possible effects of Federal

regulatory action on state, local, and tribal governments, and the

private sector of Federal mandates. If a Federal mandate is expected to

have an impact of $100 million or more in any year, then the mandate is

significant and the issuing agency is obliged to undertake a detailed

assessment of costs and benefits. If the Federal mandate is a

significant intergovernmental mandate, then the issuing agency is

obliged to provide a meaningful and timely opportunity for affected

governments to participate in the development of the rule. The final

regulations in this notice apply only to the conduct of DOE officials

and do not place regulatory obligations on anyone outside of DOE.

Accordingly, there are no legal requirements under the Unfunded

Mandates Reform Act of 1995 that apply to this rulemaking.

G. Review Under Small Business Regulatory Enforcement Fairness Act of

1996

Consistent with the Small Business Regulatory Enforcement Fairness

Act of 1996, DOE will submit to Congress a report regarding the

issuance of today's final rule prior to the effective date set forth at

the outset of this notice. The report will note the Office of

Management and Budget's determination that this rule does not

constitute a ``major rule'' under that Act. 5 U.S.C. 801, 804.

List of Subjects in 10 CFR Part 430

Administrative practice and procedure, Energy conservation,

Household appliances.

Issued in Washington, DC, on July 9, 1996.

Christine A. Ervin,

Assistant Secretary, Energy Efficiency and Renewable Energy.

For the reasons set forth in the preamble, Part 430 of Chapter II

of Title 10, Code of Federal Regulations, is amended as set forth

below:

PART 430--ENERGY CONSERVATION PROGRAM FOR CONSUMER PRODUCTS

1. The authority cite continues to read as follows:

Authority: 42 U.S.C. 6291-6309.

2. Appendix A to Subpart C of Part 430--Procedures, Interpretations

and Policies for Consideration of New or Revised Energy Conservation

Standards for Consumer Products--is added as set forth below:

Appendix A to Subpart C of Part 430--Procedures, Interpretations and

Policies for Consideration of New or Revised Energy Conservation

Standards for Consumer Products

1. Objectives

2. Scope

3. Setting Priorities for Rulemaking Activity

4. Process for Developing Efficiency Standards and Factors to be

Considered

5. Policies on Selection of Standards

6. Effective Date of a Standard

7. Test Procedures

8. Joint Stakeholder Recommendations

9. Principles for the Conduct of Engineering Analysis

10. Principles for the Analysis of Impacts on Manufacturers

11. Principles for the Analysis of Impacts on Consumers

12. Consideration of Non-Regulatory Approaches

13. Crosscutting Analytical Assumptions

14. Deviations, Revisions, and Judicial Review

1. Objectives

This Appendix establishes procedures, interpretations and

policies to guide the DOE in the consideration and promulgation of

new or revised appliance efficiency standards under the Energy

Policy and Conservation Act (EPCA). The Department's objectives in

establishing these guidelines include:

(a) Provide for early input from stakeholders. The Department

seeks to provide opportunities for public input early in the

rulemaking process so that the initiation and direction of

rulemakings is informed by comment from interested parties. Under

the guidelines established by this Appendix, DOE will seek early

input from interested parties in setting rulemaking priorities and

structuring the analyses for particular products. Interested parties

will be invited to provide input for the selection of design options

and will help DOE identify analysis, data, and modeling needs. DOE

will gather input from interested parties through a variety of

mechanisms, including public workshops.

(b) Increase predictability of the rulemaking timetable. The

Department seeks to make informed, strategic decisions about how to

deploy its resources on the range of possible standards development

activities, and to announce these prioritization decisions so that

all interested parties have a common expectation about the timing of

different rulemaking activities. The guidelines in this Appendix

provide for setting priorities and timetables for standards

development and test procedure modification and reflect these

priorities in the Regulatory Agenda.

(c) Increase use of outside technical expertise. The Department

seeks to expand its use of outside technical experts in evaluating

product-specific engineering issues to ensure that decisions on

technical issues are fully informed. The guidelines in this Appendix

provide for increased use of outside technical experts in

developing, performing and reviewing the analyses. Draft analytical

results will be distributed for peer and stakeholder review.

(d) Eliminate problematic design options early in the process.

The Department seeks to eliminate from consideration, early in the

process, any design options that present unacceptable problems with

respect to manufacturability, consumer utility, or safety, so that

the detailed analysis can focus only on viable design options. Under

the guidelines in this Appendix, DOE will eliminate from

consideration design options if it concludes that manufacture,

installation or service of the design will be impractical, or that

the design option will adversely affect the utility of the product,

or if the design has adverse safety or health impacts. This

screening will be done at the outset of a rulemaking.

(e) Fully consider non-regulatory approaches. The Department

seeks to understand the effects of market forces and voluntary

programs on encouraging the purchase of energy efficient products so

that the incremental impacts of a new or revised standard can be

accurately assessed and the Department can make informed decisions

about where standards and voluntary ``market pull'' programs can be

used most effectively. Under the guidelines in this

[[Page 36982]]

Appendix, DOE will solicit information on the effectiveness of

market forces and non-regulatory approaches for encouraging the

purchase of energy efficient products, and will carefully consider

this information in assessing the benefits of standards. In

addition, DOE will continue to support voluntary efforts by

manufacturers, retailers, utilities and others to increase product

efficiency.

(f) Conduct thorough analysis of impacts. In addition to

understanding the aggregate costs and benefits of standards, the

Department seeks to understand the distribution of those costs and

benefits among consumers, manufacturers and others, and the

uncertainty associated with these analyses of costs and benefits, so

that any adverse impacts on significant subgroups and uncertainty

concerning any adverse impacts can be fully considered in selecting

a standard. Under the guidelines in this Appendix, the analyses will

consider the variability of impacts on significant groups of

manufacturers and consumers in addition to aggregate costs and

benefits, report the range of uncertainty associated with these

impacts, and take into account cumulative impacts of regulation on

manufacturers.

(g) Use transparent and robust analytical methods. The

Department seeks to use qualitative and quantitative analytical

methods that are fully documented for the public and that produce

results that can be explained and reproduced, so that the analytical

underpinnings for policy decisions on standards are as sound and

well-accepted as possible. Under the guidelines in this Appendix,

DOE will solicit input from interested parties in identifying

analysis, data, and modeling needs with respect to measurement of

impacts on manufacturers and consumers.

(h) Articulate policies to guide selection of standards. The

Department seeks to adopt policies elaborating on the statutory

criteria for selecting standards, so that interested parties are

aware of the policies that will guide these decisions. Under the

guidelines in this Appendix, policies for screening design options,

selecting candidate standard levels, selecting a proposed standard

level, and establishing the final standard are established.

(i) Support efforts to build consensus on standards. The

Department seeks to encourage development of consensus proposals for

new or revised standards because standards with such broad-based

support are likely to balance effectively the economic, energy, and

environmental interests affected by standards. Under the guidelines

in this Appendix, DOE will support the development and submission of

consensus recommendations for standards by representative groups of

interested parties to the fullest extent possible.

(j) Reduce time and cost of developing standards. The Department

seeks to establish a clear protocol for initiating and conducting

standards rulemakings in order to eliminate time-consuming and

costly missteps. Under the guidelines in this Appendix, increased

and earlier involvement by interested parties and increased use of

technical experts should minimize the need for re-analysis. This

process should reduce the period between the publication of an

Advance Notice of Proposed Rulemaking (ANOPR) and the publication of

a final rule to not more than 18 months, and should decrease the

government and private sector resources required to complete the

standard development process.

2. Scope

(a) The procedures, interpretations and policies described in

this Appendix will be fully applicable to:

(1) Rulemakings concerning new or revised Federal energy

conservation standards for consumer products initiated after August

14, 1996, and

(2) Rulemakings concerning new or revised Federal energy

conservation standards for consumer products that have been

initiated but for which a Notice of Proposed Rulemaking (NOPR) has

not been published as of August 14, 1996.

(b) For rulemakings described in paragraph (a)(2) of this

section, to the extent analytical work has already been done or

public comment on an ANOPR has already been provided, such analyses

and comment will be considered, as appropriate, in proceeding under

the new process.

(c) With respect to incomplete rulemakings concerning new or

revised Federal energy conservation standards for consumer products

for which a NOPR was published prior to August 14, 1996, the

Department will conduct a case-by-case review to decide whether any

of the analytical or procedural steps already completed should be

repeated. In any case, the approach described in this Appendix will

be used to the extent possible to conduct any analytical or

procedural steps that have not been completed.

3. Setting Priorities for Rulemaking Activity

(a) Priority-setting analysis and development of list of

priorities. At least once a year, the Department will prepare an

analysis of each of the factors identified in paragraph (d) of this

section based on existing literature, direct communications with

interested parties and other experts, and other available

information. The results of this analysis will be used to develop

rulemaking priorities and proposed schedules for the development and

issuance of all rulemakings. The DOE analysis, priorities and

proposed rulemaking schedules will be documented and distributed for

review and comment.

(b) Public review and comment. Each year, DOE will invite public

input to review and comment on the priority analysis.

(c) Issuance of final listing of rulemaking priorities. Each

fall, the Department will issue, simultaneously with the issuance of

the Administration's Regulatory Agenda, a final set of rulemaking

priorities, the accompanying analysis, and the schedules for all

priority rulemakings that it anticipates within the next two years.

(d) Factors for priority-setting. The factors to be considered

by DOE in developing priorities and establishing schedules for

conducting rulemakings will include:

(1) Potential energy savings.

(2) Potential economic benefits.

(3) Potential environmental or energy security benefits.

(4) Applicable deadlines for rulemakings.

(5) Incremental DOE resources required to complete rulemaking

process.

(6) Other relevant regulatory actions affecting products.

(7) Stakeholder recommendations.

(8) Evidence of energy efficiency gains in the market absent new

or revised standards.

(9) Status of required changes to test procedures.

(10) Other relevant factors.

4. Process for Developing Efficiency Standards and Factors to be

Considered

This section describes the process to be used in developing

efficiency standards and the factors to be considered in the

process. The policies of the Department to guide the selection of

standards and the decisions preliminary thereto are described in

section 5.

(a) Identifying and screening design options. Once the

Department has initiated a rulemaking for a specific product but

before publishing an ANOPR, DOE will identify the product categories

and design options to be analyzed in detail, and identify those

design options eliminated from further consideration. Interested

parties will be consulted to identify key issues, develop a list of

design options, and to help the Department identify the expertise

necessary to conduct the analysis.

(1) Identification of issues for analysis. The Department, in

consultation with interested parties, will identify issues that will

be examined in the standards development process.

(2) Identification of experts and other interested parties for

peer review. DOE, in consultation with interested parties, will

identify a group of independent experts and other interested parties

who can provide expert review of the results of the engineering

analysis and the subsequent impact analysis.

(3) Identification and screening of design options. In

consultation with interested parties, the Department will develop a

list of design options for consideration. Initially, the candidate

design options will encompass all those technologies considered to

be technologically feasible. Following the development of this

initial list of design options, DOE will review each design option

based on the factors described in paragraph (a)(4) of this section

and the policies stated in section 5(b). The reasons for eliminating

any design option at this stage of the process will be fully

documented and published as part of the ANOPR. The technologically

feasible design options that are not eliminated in this screening

will be considered further in the Engineering Analysis described in

paragraph (b) of this section.

(4) Factors for screening of design options. The factors for

screening design options include:

(i) Technological feasibility. Technologies incorporated in

commercial products or in working prototypes will be considered

technologically feasible.

(ii) Practicability to manufacture, install and service. If mass

production of a

[[Page 36983]]

technology in commercial products and reliable installation and

servicing of the technology could be achieved on the scale necessary

to serve the relevant market at the time of the effective date of

the standard, then that technology will be considered practicable to

manufacture, install and service.

(iii) Adverse Impacts on Product Utility or Product

Availability.

(iv) Adverse Impacts on Health or Safety.

(5) Selection of contractors. Using the specifications of

necessary contractor expertise developed in consultation with

interested parties, DOE will select appropriate contractors,

subcontractors, and as necessary, expert consultants to perform the

engineering analysis and the impact analysis.

(b) Engineering analysis of design options and selection of

candidate standard levels. After design options are identified and

screened, DOE will perform the engineering analysis and the benefit/

cost analysis and select the candidate standard levels based on

these analyses. The results of the analyses will be published in a

Technical Support Document (TSD) to accompany the ANOPR.

(1) Identification of engineering analytical methods and tools.

DOE, in consultation with outside experts, will select the specific

engineering analysis tools (or multiple tools, if necessary to

address uncertainty) to be used in the analysis of the design

options identified as a result of the screening analysis.

(2) Engineering and life-cycle cost analysis of design options.

The DOE and its contractor will perform engineering and life-cycle

cost analyses of the design options.

(3) Review by expert group and stakeholders. The results of the

engineering and life-cycle cost analyses will be distributed for

review by experts and interested parties. If appropriate, a public

workshop will be conducted to review these results. The analyses

will be revised as appropriate on the basis of this input.

(4) New information relating to the factors used for screening

design options. If further information or analysis leads to a

determination that a design option, or a combination of design

options, has unacceptable impacts based on the policies stated in

section 5(b), that design option or combination of design options

will not be included in a candidate standard level.

(5) Selection of candidate standard levels. Based on the results

of the engineering and life-cycle cost analysis of design options

and the policies stated in section 5(c), DOE will select the

candidate standard levels for further analysis.

(c) Advance Notice of Proposed Rulemaking.

(1) Documentation of decisions on candidate standard selection.

(i) If the screening analysis indicates that continued development

of a standard is appropriate, the Department will publish an ANOPR

in the Federal Register and will distribute a draft TSD containing

the analyses performed to this point. The ANOPR will specify

candidate standard levels but will not propose a particular

standard. The ANOPR will also include the preliminary analysis of

consumer life-cycle costs, national net present value, and energy

impacts for the candidate standard levels based on the engineering

analysis.

(ii) If the preliminary analysis indicates that no candidate

standard level is likely to meet the criteria specified in law, that

conclusion will be announced. In such cases, the Department may

decide to proceed with a rulemaking that proposes not to adopt new

or amended standards, or it may suspend the rulemaking and conclude

that further action on such standards should be assigned a low

priority under section 3.

(2) Public comment and hearing. There will be 75 days for public

comment on the ANOPR with at least one public hearing or workshop.

(3) Revisions based on comments. Based on consideration of the

comments received, any necessary changes to the engineering analysis

or the candidate standard levels will be made.

If major changes are required at this stage, interested parties

and experts will be given an opportunity to review the revised

analysis.

(d) Analysis of impacts and selection of proposed standard

level. After the ANOPR, economic analyses of the impacts of the

candidate standard levels will be conducted. The Department will

propose updated standards based on the results of the impact

analysis.

(1) Identification of issues for analysis. The Department, in

consultation with interested parties, will identify issues that will

be examined in the impacts analysis.

(2) Identification of analytical methods and tools. DOE, in

consultation with outside experts, will select the specific economic

analysis tools (or multiple tools if necessary to address

uncertainty) to be used in the analysis of the candidate standard

levels.

(3) Analysis of impacts. DOE will conduct the analysis of the

impacts of candidate standard levels including analysis of the

factors described in paragraphs (d)(7)(ii)-(viii) of this section.

(4) Review by expert group and stakeholders. The results of the

analysis of impacts will be distributed for review by experts and

interested parties. If appropriate, a public workshop will be

conducted to review these results. The analysis will be revised as

appropriate on the basis of this input.

(5) Efforts to develop consensus among stakeholders. If a

representative group of interested parties undertakes to develop

joint recommendations to the Department on standards, DOE will

consider deferring its impact analysis until these discussions are

completed or until participants in the efforts indicate that they

are unable to reach a timely agreement.

(6) Selection of proposed standard level based on analysis of

impacts. On the basis of the analysis of the factors described in

paragraph (d)(7) of this section and the policies stated in section

5(e), DOE will select a proposed standard level.

(7) Factors to be considered in selecting a proposed standard.

The factors to be considered in selection of a proposed standard

include:

(i) Consensus stakeholder recommendations.

(ii) Impacts on manufacturers. The analysis of manufacturer

impacts will include: Estimated impacts on cash flow; assessment of

impacts on manufacturers of specific categories of products and

small manufacturers; assessment of impacts on manufacturers of

multiple product-specific Federal regulatory requirements, including

efficiency standards for other products and regulations of other

agencies; and impact on manufacturing capacity, plant closures, and

loss of capital investment.

(iii) Impacts on consumers. The analysis of consumer impacts

will include: Estimated impacts on consumers based on national

average energy prices and energy usage; assessments of impacts on

subgroups of consumers based on major regional differences in usage

or energy prices and significant variations in installation costs or

performance; sensitivity analyses using high and low discount rates

and high and low energy price forecasts; consideration of changes to

product utility and other impacts of likely concern to all or some

consumers, based to the extent practicable on direct input from

consumers; estimated life-cycle cost with sensitivity analysis; and

consideration of the increased first cost to consumers and the time

required for energy cost savings to pay back these first costs.

(iv) Impacts on competition.

(v) Impacts on utilities. The analysis of utility impacts will

include estimated marginal impacts on electric and gas utility costs

and revenues.

(vi) National energy, economic and employment impacts. The

analysis of national energy, economic and employment impacts will

include: Estimated energy savings by fuel type; estimated net

present value of benefits to all consumers; and estimates of the

direct and indirect impacts on employment by appliance

manufacturers, relevant service industries, energy suppliers and the

economy in general.

(vii) Impacts on the environment and energy security. The

analysis of environmental and energy security impacts will include

estimated impacts on emissions of carbon and relevant criteria

pollutants, impacts on pollution control costs, and impacts on oil

use.

(viii) Impacts of non-regulatory approaches. The analysis of

energy savings and consumer impacts will incorporate an assessment

of the impacts of market forces and existing voluntary programs in

promoting product efficiency, usage and related characteristics in

the absence of updated efficiency standards.

(ix) New information relating to the factors used for screening

design options.

(e) Notice of Proposed Rulemaking.

(1) Documentation of decisions on proposed standard selection.

The Department will publish a NOPR in the Federal Register that

proposes standard levels and explains the basis for the selection of

those proposed levels, and will distribute a draft TSD documenting

the analysis of impacts. As required by Sec. 325(p)(2) of EPCA, the

NOPR also will describe the maximum improvement in energy efficiency

or

[[Page 36984]]

maximum reduction in energy use that is technologically feasible

and, if the proposed standards would not achieve these levels, the

reasons for proposing different standards.

(2) Public comment and hearing. There will be 75 days for public

comment on the NOPR, with at least one public hearing or workshop.

(3) Revisions to impact analyses and selection of final

standard. Based on the public comments received and the policies

stated in section 5(f), DOE will review the proposed standard and

impact analyses, and make modifications as necessary. If major

changes to the analyses are required at this stage, interested

parties and experts will be given an opportunity to review the

revised analyses.

(f) Notice of Final Rulemaking. The Department will publish a

Notice of Final Rulemaking in the Federal Register that promulgates

standard levels and explains the basis for the selection of those

standards, accompanied by a final TSD.

5. Policies on Selection of Standards.

(a) Purpose. (1) Section 4 describes the process that will be

used to consider new or revised energy efficiency standards and

lists a number of factors and analyses that will be considered at

specified points in the process. Department policies concerning the

selection of new or revised standards, and decisions preliminary

thereto, are described in this section.

These policies are intended to elaborate on the statutory

criteria provided in section 325 of the EPCA, 42 U.S.C. 6295.

(2) The policies described below are intended to provide

guidance for making the determinations required by EPCA. This

statement of policy is not intended to preclude consideration of any

information pertinent to the statutory criteria. The Department will

consider all pertinent information in determining whether a new or

revised standard is consistent with the statutory criteria.

Moreover, the Department will not be guided by a policy in this

section if, in the particular circumstances presented, such a policy

would lead to a result inconsistent with the criteria in section 325

of EPCA.

(b) Screening design options. Section 4(a)(4) lists factors to

be considered in screening design options. These factors will be

considered as follows in determining whether a design option will

receive any further consideration:

(1) Technological feasibility. Technologies that are not

incorporated in commercial products or in working prototypes will

not be considered further.

(2) Practicability to manufacture, install and service. If it is

determined that mass production of a technology in commercial

products and reliable installation and servicing of the technology

could not be achieved on the scale necessary to serve the relevant

market at the time of the effective date of the standard, then that

technology will not be considered further.

(3) Impacts on product utility to consumers. If a technology is

determined to have significant adverse impact on the utility of the

product to significant subgroups of consumers, or result in the

unavailability of any covered product type with performance

characteristics (including reliability), features, sizes,

capacities, and volumes that are substantially the same as products

generally available in the U.S. at the time, it will not be

considered further.

(4) Safety of technologies. If it is determined that a

technology will have significant adverse impacts on health or

safety, it will not be considered further.

(c) Identification of candidate standard levels. Based on the

results of the engineering and cost and benefit analyses of design

options, DOE will identify the candidate standard levels for further

analysis. Candidate standard levels will be selected as follows:

(1) Costs and savings of design options. Design options which

have payback periods that exceed the average life of the product or

which cause life-cycle cost increases relative to the base case,

using typical fuel costs, usage and discount rates, will not be used

as the basis for candidate standard levels.

(2) Further information on factors used for screening design

options. If further information or analysis leads to a determination

that a design option, or a combination of design options, has

unacceptable impacts under the policies stated in paragraph (b) of

this section, that design option or combination of design options

will not be included in a candidate standard level.

(3) Selection of candidate standard levels. Candidate standard

levels, which will be identified in the ANOPR and on which impact

analyses will be conducted, will be based on the remaining design

options.

(i) The range of candidate standard levels will typically

include:

(A) The most energy efficient combination of design options;

(B) The combination of design options with the lowest life-cycle

cost; and

(C) A combination of design options with a payback period of not

more than three years.

(ii) Candidate standard levels that incorporate noteworthy

technologies or fill in large gaps between efficiency levels of

other candidate standard levels also may be selected.

(d) Advance notice of proposed rulemaking. New information

provided in public comments on the ANOPR will be considered to

determine whether any changes to the candidate standard levels are

needed before proceeding to the analysis of impacts. This review,

and any appropriate adjustments, will be based on the policies in

paragraph (c) of this section.

(e) Selection of proposed standard. Based on the results of the

analysis of impacts, DOE will select a standard level to be proposed

for public comment in the NOPR. Section 4(d)(7) lists the factors to

be considered in selecting a proposed standard level. Section

325(o)(2)(A) of EPCA provides that any new or revised standard must

be designed to achieve the maximum improvement in energy efficiency

that is determined to be technologically feasible and economically

justified.

(1) Statutory policies. The fundamental policies concerning

selection of standards are established in the EPCA, including the

following:

(i) A candidate standard level will not be proposed or

promulgated if the Department determines that it is not

technologically feasible and economically justified. See EPCA

section 325(o)(3)(B). A standard level is economically justified if

the benefits exceed the burdens. See EPCA section 325(o)(2)(B)(i). A

standard level is rebuttably presumed to be economically justified

if the payback period is three years or less. See EPCA section

325(o)(2)(B)(iii).

(ii) If the Department determines that a standard level is

likely to result in the unavailability of any covered product type

with performance characteristics (including reliability), features,

sizes, capacities, and volumes that are substantially the same as

products generally available in the U.S. at the time, that standard

level will not be proposed. See EPCA section 325(o)(4).

(iii) If the Department determines that a standard level would

not result in significant conservation of energy, that standard

level will not be proposed. See EPCA section 325(o)(3)(B).

(2) Selection of proposed standard on the basis of consensus

stakeholder recommendations. Development of consensus proposals for

new or revised standards is an effective mechanism for balancing the

economic, energy, and environmental interests affected by standards.

Thus, notwithstanding any other policy on selection of proposed

standards, a consensus recommendation on an updated efficiency level

submitted by a group that represents all interested parties will be

proposed by the Department if it is determined to meet the statutory

criteria.

(3) Considerations in assessing economic justification.

(i) The following policies will guide the application of the

economic justification criterion in selecting a proposed standard:

(A) If the Department determines that a candidate standard level

would result in a negative return on investment for the industry,

would significantly reduce the value of the industry, or would cause

significant adverse impacts to a significant subgroup of

manufacturers (including small manufacturing businesses), that

standard level will be presumed not to be economically justified

unless the Department determines that specifically identified

expected benefits of the standard would outweigh this and any other

expected adverse effects.

(B) If the Department determines that a candidate standard level

would be the direct cause of plant closures, significant losses in

domestic manufacturer employment, or significant losses of capital

investment by domestic manufacturers, that standard level will be

presumed not to be economically justified unless the Department

determines that specifically identified expected benefits of the

standard would outweigh this and any other expected adverse effects.

(C) If the Department determines that a candidate standard level

would have a significant adverse impact on the environment or energy

security, that standard level will be presumed not to be

[[Page 36985]]

economically justified unless the Department determines that

specifically identified expected benefits of the standard would

outweigh this and any other expected adverse effects.

(D) If the Department determines that a candidate standard level

would not result in significant energy conservation relative to non-

regulatory approaches, that standard level will be presumed not to

be economically justified unless the Department determines that

other specifically identified expected benefits of the standard

would outweigh the expected adverse effects.

(E) If the Department determines that a candidate standard level

is not consistent with the policies relating to practicability to

manufacture, consumer utility, or safety in paragraphs (b) (2), (3)

and (4) of this section, that standard level will be presumed not to

be economically justified unless the Department determines that

specifically identified expected benefits of the standard would

outweigh this and any other expected adverse effects.

(F) If the Department determines that a candidate standard level

is not consistent with the policies relating to consumer costs in

paragraph (c)(1) of this section, that standard level will be

presumed not to be economically justified unless the Department

determines that specifically identified expected benefits of the

standard would outweigh this and any other expected adverse effects.

(G) If the Department determines that a candidate standard level

will have significant adverse impacts on a significant subgroup of

consumers (including low-income consumers), that standard level will

be presumed not to be economically justified unless the Department

determines that specifically identified expected benefits of the

standard would outweigh this and any other expected adverse effects.

(H) If the Department or the Department of Justice determines

that a candidate standard level would have significant

anticompetitive effects, that standard level will be presumed not to

be economically justified unless the Department determines that

specifically identified expected benefits of the standard would

outweigh this and any other expected adverse effects.

(ii) The basis for a determination that triggers any presumption

in paragraph (e)(3)(i) of this section and the basis for a

determination that an applicable presumption has been rebutted will

be supported by substantial evidence in the record and the evidence

and rationale for making these determinations will be explained in

the NOPR.

(iii) If none of the policies in paragraph (e)(3)(i) of this

section is found to be dispositive, the Department will determine

whether the benefits of a candidate standard level exceed the

burdens considering all the pertinent information in the record.

(f) Selection of a final standard. New information provided in

the public comments on the NOPR and any analysis by the Department

of Justice concerning impacts on competition of the proposed

standard will be considered to determine whether any change to the

proposed standard level is needed before proceeding to the final

rule. The same policies used to select the proposed standard level,

as described in section 5(e) above, will be used to guide the

selection of the final standard level.

6. Effective Date of a Standard

The effective date for new or revised standards will be

established so that the period between the publication of the final

rule and the effective date is not less than any period between the

dates for publication and effective date provided for in EPCA. The

effective date of any revised standard will be established so that

the period between the effective date of the prior standard and the

effective date of such revised standard is not less than period

between the two effective dates provided for in EPCA.

7. Test Procedures

(a) Identifying the need to modify test procedures. DOE, in

consultation with interested parties, experts, and the National

Institute of Standards and Technology, will attempt to identify any

necessary modifications to established test procedures when

initiating the standards development process.

(b) Developing and proposing revised test procedures. Needed

modifications to test procedures will be identified in consultation

with experts and interested parties early in the screening stage of

the standards development process. Any necessary modifications will

be proposed before issuance of an ANOPR in the standards development

process.

(c) Issuing final test procedure modification. Final, modified

test procedures will be issued prior to the NOPR on proposed

standards.

(d) Effective date of modified test procedures. If required only

for the evaluation and issuance of updated efficiency standards,

modified test procedures typically will not go into effect until the

effective date of updated standards.

8. Joint Stakeholder Recommendations

(a) Joint recommendations. Consensus recommendations, and

supporting analyses, submitted by a representative group of

interested parties will be given substantial weight by DOE in the

development of a proposed rule. See section 5(e)(2). If the

supporting analyses provided by the group addresses all of the

statutory criteria and uses valid economic assumptions and

analytical methods, DOE expects to use this supporting analyses as

the basis of a proposed rule. The proposed rule will explain any

deviations from the consensus recommendations from interested

parties.

(b) Breadth of participation. Joint recommendations will be of

most value to the Department if the participants are reasonably

representative of those interested in the outcome of the standards

development process, including manufacturers, consumers, utilities,

states and representatives of environmental or energy efficiency

interest groups.

(c) DOE support of consensus development, including impact

analyses. In order to facilitate such consensus development, DOE

will make available, upon request, appropriate technical and legal

support to the group and will provide copies of all relevant public

documents and analyses. The Department also will consider any

requests for its active participation in such discussions,

recognizing that the procedural requirements of the Federal Advisory

Committee Act may apply to such participation.

9. Principles for the Conduct of Engineering Analysis

(a) The purpose of the engineering analysis is to develop the

relationship between efficiency and cost of the subject product. The

Department will use the most appropriate means available to

determine the efficiency/cost relationship, including an overall

system approach or engineering modeling to predict the improvement

in efficiency that can be expected from individual design options as

discussed in the paragraphs below. From this efficiency/cost

relationship, measures such as payback, life cycle cost, and energy

savings can be developed. The Department, in consultation with

interested parties, will identify issues that will be examined in

the engineering analysis and the types of specialized expertise that

may be required. With these specifications, DOE will select

appropriate contractors, subcontractors, and expert consultants, as

necessary, to perform the engineering analysis and the impact

analysis. Also, the Department will consider data, information and

analyses received from interested parties for use in the analysis

wherever feasible.

(b) The engineering analysis begins with the list of design

options developed in consultation with the interested parties as a

result of the screening process. In consultation with the

technology/industry expert peer review group, the Department will

establish the likely cost and performance improvement of each design

option. Ranges and uncertainties of cost and performance will be

established, although efforts will be made to minimize uncertainties

by using measures such as test data or component or material

supplier information where available. Estimated uncertainties will

be carried forward in subsequent analyses. The use of quantitative

models will be supplemented by qualitative assessments as

appropriate.

(c) The next step includes identifying, modifying or developing

any engineering models necessary to predict the efficiency impact of

any one or combination of design options on the product. A base case

configuration or starting point will be established as well as the

order and combination/blending of the design options to be

evaluated. The DOE, utilizing expert consultants, will then perform

the engineering analysis and develop the cost efficiency curve for

the product. The cost efficiency curve and any necessary models will

be subject to peer review before being issued with the ANOPR.

10. Principles for the Analysis of Impacts on Manufacturers

(a) Purpose. The purpose of the manufacturer analysis is to

identify the likely

[[Page 36986]]

impacts of efficiency standards on manufacturers. The Department

will analyze the impact of standards on manufacturers with

substantial input from manufacturers and other interested parties.

The use of quantitative models will be supplemented by qualitative

assessments by industry experts. This section describes the

principles that will be used in conducting future manufacturing

impact analysis.

(b) Issue identification. In the impact analysis stage (section

4(d)), the Department, in consultation with interested parties, will

identify issues that will require greater consideration in the

detailed manufacturer impact analysis. Possible issues may include

identification of specific types or groups of manufacturers and

concerns over access to technology. Specialized contractor

expertise, empirical data requirements, and analytical tools

required to perform the manufacturer impact analysis also would be

identified at this stage.

(c) Industry characterization. Prior to initiating detailed

impact studies, the Department will seek input on the present and

past industry structure and market characteristics. Input on the

following issues will be sought:

(1) Manufacturers and their relative market shares;

(2) Manufacturer characteristics, such as whether manufacturers

make a full line of models or serve a niche market;

(3) Trends in the number of manufacturers;

(4) Financial situation of manufacturers;

(5) Trends in product characteristics and retail markets; and

(6) Identification of other relevant regulatory actions and a

description of the nature and timing of any likely impacts.

(d) Cost impacts on manufacturers. The costs of labor, material,

engineering, tooling, and capital are difficult to estimate,

manufacturer-specific, and usually proprietary. The Department will

seek input from interested parties on the treatment of cost issues.

Manufacturers will be encouraged to offer suggestions as to possible

sources of data and appropriate data collection methodologies.

Costing issues to be addressed include:

(1) Estimates of total cost impacts, including product-specific

costs (based on cost impacts estimated for the engineering analysis)

and front-end investment/conversion costs for the full range of

product models.

(2) Range of uncertainties in estimates of average cost,

considering alternative designs and technologies which may vary cost

impacts and changes in costs of material, labor and other inputs

which may vary costs.

(3) Variable cost impacts on particular types of manufacturers,

considering factors such as atypical sunk costs or characteristics

of specific models which may increase or decrease costs.

(e) Impacts on product sales, features, prices and cost

recovery. In order to make manufacturer cash flow calculations, it

is necessary to predict the number of products sold and their sale

price. This requires an assessment of the likely impacts of price

changes on the number of products sold and on typical features of

models sold. Past analyses have relied on price and shipment data

generated by economic models. The Department will develop additional

estimates of prices and shipments by drawing on multiple sources of

data and experience including: actual shipment and pricing

experience, data from manufacturers, retailers and other market

experts, financial models, and sensitivity analyses. The possible

impacts of candidate standard levels on consumer choices among

competing fuels will be explicitly considered where relevant.

(f) Measures of impact. The manufacturer impact analysis will

estimate the impacts of candidate standard levels on the net cash

flow of manufacturers. Computations will be performed for the

industry as a whole and for typical and atypical manufacturers. The

exact nature and the process by which the analysis will be conducted

will be determined by DOE, in conjunction with interested parties.

Impacts to be analyzed include:

(1) Industry net present value, with sensitivity analyses based

on uncertainty of costs, sales prices and sales volumes;

(2) Cash flows, by year;

(3) Other measures of impact, such as revenue, net income and

return on equity, as appropriate;

The characteristics of atypical manufacturers worthy of special

consideration will be determined in consultation with manufacturers

and other interested parties and may include: manufacturers

incurring higher or lower than average costs; and manufacturers

experiencing greater or fewer adverse impacts on sales. Alternative

scenarios based on other methods of estimating cost or sales impacts

also will be performed, as needed.

(g) Cumulative impacts of other Federal regulatory actions. (1)

The Department will recognize and seek to mitigate the overlapping

effects on manufacturers of new or revised DOE standards and other

regulatory actions affecting the same products. DOE will analyze and

consider the impact on manufacturers of multiple product-specific

regulatory actions. These factors will be considered in setting

rulemaking priorities, assessing manufacturer impacts of a

particular standard, and establishing the effective date for a new

or revised standard. In particular, DOE will seek to propose

effective dates for new or revised standards that are appropriately

coordinated with other regulatory actions to mitigate any cumulative

burden.

(2) If the Department determines that a proposed standard would

impose a significant impact on product manufacturers within three

years of the effective date of another DOE standard that imposes

significant impacts on the same manufacturers (or divisions thereof,

as appropriate), the Department will, in addition to evaluating the

impact on manufacturers of the proposed standard, assess the joint

impacts of both standards on manufacturers.

(3) If the Department is directed to establish or revise

standards for products that are components of other products subject

to standards, the Department will consider the interaction between

such standards in setting rulemaking priorities and assessing

manufacturer impacts of a particular standard. The Department will

assess, as part of the engineering and impact analyses, the cost of

components subject to efficiency standards.

(h) Summary of quantitative and qualitative assessments. The

summary of quantitative and qualitative assessments will contain a

description and discussion of uncertainties. Alternative estimates

of impacts, resulting from the different potential scenarios

developed throughout the analysis, will be explicitly presented in

the final analysis results.

(i) Key modeling and analytical tools. In its assessment of the

likely impacts of standards on manufacturers, the Department will

use models which are clear and understandable, feature accessible

calculations, and have assumptions that are clearly explained. As a

starting point, the Department will use the Government Regulatory

Impact Model (GRIM). The Department will consider any enhancements

to the GRIM that are suggested by interested parties. If changes are

made to the GRIM methodology, DOE will provide notice and seek

public input. The Department will also support the development of

economic models for price and volume forecasting. Research required

to update key economic data will be considered.

11. Principles for the Analysis of Impacts on Consumers

(a) Early consideration of impacts on consumer utility. The

Department will consider at the earliest stages of the development

of a standard whether particular design options will lessen the

utility of the covered products to the consumer. See section 4(a).

(b) Impacts on product availability. The Department will

determine, based on consideration of information submitted during

the standard development process, whether a proposed standard is

likely to result in the unavailability of any covered product type

with performance characteristics (including reliability), features,

sizes, capacities, and volumes that are substantially the same as

products generally available in the U.S. at the time. DOE will not

promulgate a standard if it concludes that it would result in such

unavailability.

(c) Department of justice review. As required by law, the

Department will solicit the views of the Justice Department on any

lessening of competition that is likely to result from the

imposition of a proposed standard and will give the views provided

full consideration in assessing economic justification of a proposed

standard. In addition, DOE may consult with the Department of

Justice at earlier stages in the standards development process to

seek to obtain preliminary views on competitive impacts.

(d) Variation in consumer impacts. The Department will use

regional analysis and sensitivity analysis tools, as appropriate, to

evaluate the potential distribution of impacts of candidate

standards levels among different subgroups of consumers. The

Department will consider impacts on significant segments

[[Page 36987]]

of consumers in determining standards levels. Where there are

significant negative impacts on identifiable subgroups, DOE will

consider the efficacy of voluntary approaches as a means to achieve

potential energy savings.

(e) Payback period and first cost. (1) In the assessment of

consumer impacts of standards, the Department will consider Life-

Cycle Cost, Payback Period and Cost of Conserved Energy to evaluate

the savings in operating expenses relative to increases in purchase

price. The Department intends to increase the level of sensitivity

analysis and scenario analysis for future rulemakings. The results

of these analyses will be carried throughout the analysis and the

ensuing uncertainty described.

(2) If, in the analysis of consumer impacts, the Department

determines that a candidate standard level would result in a

substantial increase in the product first costs to consumers or

would not pay back such additional first costs through energy cost

savings in less than three years, Department will specifically

assess the likely impacts of such a standard on low-income

households, product sales and fuel switching.

12. Consideration of Non-Regulatory Approaches

(a) The Department recognizes that voluntary or other non-

regulatory efforts by manufacturers, utilities and other interested

parties can result in substantial efficiency improvements. The

Department intends to consider fully the likely effects of non-

regulatory initiatives on product energy use, consumer utility and

life cycle costs, manufacturers, competition, utilities and the

environment, as well as the distribution of these impacts among

different regions, consumers, manufacturers and utilities. DOE will

attempt to base its assessment on the actual impacts of such

initiatives to date, but also will consider information presented

regarding the impacts that any existing initiative might have in the

future. Such information is likely to include a demonstration of the

strong commitment of manufacturers, distribution channels, utilities

or others to such voluntary efficiency improvements. This

information will be used in assessing the likely incremental impacts

of establishing or revising standards, in assessing appropriate

effective dates for new or revised standards and in considering DOE

support of non-regulatory initiatives.

(b) DOE believes that non-regulatory approaches are valuable

complements to the standards program. In particular, DOE will

consider pursuing voluntary programs where it appears that highly

efficient products can obtain a significant market share but less

efficient products cannot be eliminated altogether because, for

instance, of unacceptable adverse impacts on a significant subgroup

of consumers. In making this assessment, the Department will

consider the success more efficient designs have had in the market,

their acceptance to date, and their potential market penetration.

13. Crosscutting Analytical Assumptions

In selecting values for certain crosscutting analytical

assumptions, DOE expects to continue relying upon the following

sources and general principles:

(a) Underlying economic assumptions. The appliance standards

analyses will generally use the same economic growth and development

assumptions that underlie the most current Annual Energy Outlook

(AEO) published by the Energy Information Administration (EIA).

(b) Energy price and demand trends. Analyses of the likely

impact of appliance standards on typical users will generally adopt

the mid-range energy price and demand scenario of the EIA's most

current AEO. The sensitivity of such estimated impacts to possible

variations in future energy prices are likely to be examined using

the EIA's high and low energy price scenarios.

(c) Product-specific energy-efficiency trends, without updated

standards. Product specific energy-efficiency trends will be based

on a combination of the efficiency trends forecast by the EIA's

residential and commercial demand model of the National Energy

Modeling System (NEMS) and product-specific assessments by DOE and

its contractors with input from interested parties.

(d) Discount rates. For residential and commercial consumers,

ranges of three different real discount rates will be used. For

residential consumers, the mid-range discount rate will represent

DOE's approximation of the average financing cost (or opportunity

costs of reduced savings) experienced by typical consumers.

Sensitivity analyses will be performed using discount rates

reflecting the costs more likely to be experienced by residential

consumers with little or no savings and credit card financing and

consumers with substantial savings. For commercial users, a mid-

range discount rate reflecting the DOE's approximation of the

average real rate of return on commercial investment will be used,

with sensitivity analyses being performed using values indicative of

the range of real rates of return likely to be experienced by

typical commercial businesses. For national net present value

calculations, DOE would use the Administration's approximation of

the average real rate of return on private investment in the U.S.

economy. For manufacturer impacts, DOE plans to use a range of real

discount rates which are representative of the real rates of return

experienced by typical U.S. manufacturers affected by the program.

(e) Environmental impacts. The emission rates of carbon, sulfur

oxides and nitrogen oxides used by DOE to calculate the physical

quantities of emissions likely to be avoided by candidate standard

levels will be based on the current average carbon emissions of the

U.S. electric utilities and on the projected rates of emissions of

sulfur and nitrogen oxides. Projected rates of emissions, if

available, will be used for the estimation of any other

environmental impacts. The Department will consider the effects of

the proposed standards on these emissions in reaching a decision

about whether the benefits of the proposed standards exceed their

burdens but will not determine the monetary value of these

environmental externalities.

14. Deviations, Revisions, and Judicial Review

(a) Deviations. This Appendix specifies procedures,

interpretations and policies for the development of new or revised

energy efficiency standards in considerable detail. As the approach

described in this Appendix is applied to the development of

particular standards, the Department may find it necessary or

appropriate to deviate from these procedures, interpretations or

policies. If the Department concludes that such deviations are

necessary or appropriate in a particular situation, DOE will provide

interested parties with notice of the deviation and an explanation.

(b) Revisions. If the Department concludes that changes to the

procedures, interpretations or policies in this Appendix are

necessary or appropriate, DOE will provide notice in the Federal

Register of modifications to this Appendix with an accompanying

explanation. DOE expects to consult with interested parties prior to

any such modification.

(c) Judicial review. The procedures, interpretations, and

policies stated in this Appendix are not intended to establish any

new cause of action or right to judicial review.

[FR Doc. 96-17886 Filed 7-12-96; 8:45 am]

BILLING CODE 6450-01-P