Energy Conservation Program for Consumer Products: Energy Conservation Standards for Refrigerators, Refrigerator-Freezers and Freezers
Federal RegisterApr 28, 1997
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DEPARTMENT OF ENERGY
Office of Energy Efficiency and Renewable Energy
10 CFR Part 430
[Docket No. EE-RM-93-801]
Energy Conservation Program for Consumer Products: Energy
Conservation Standards for Refrigerators, Refrigerator-Freezers and
Freezers
AGENCY: Office of Energy Efficiency and Renewable Energy, DOE.
ACTION: Final rule.
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SUMMARY: The Department of Energy (DOE or Department) today promulgates
revised energy conservation standards for refrigerators, refrigerator-
freezers, and freezers. This action is expected to result in
substantial energy savings, with consequent benefits to consumers and
reductions in emissions of air pollutants.
EFFECTIVE DATE: The effective date of the revised standards is July 1,
2001.
FOR FURTHER INFORMATION CONTACT: Michael J. McCabe, U.S. Department of
Energy, Office of Energy Efficiency and Renewable Energy, Forrestal
Building, Mail Station EE-43, 1000 Independence Avenue, SW, Washington,
D.C. 20585-0121, (202) 586-9127.
Douglas W. Smith, Esq., U.S. Department of Energy, Office of
General Counsel, Forrestal Building, Mail Station GC-70, 1000
Independence Avenue, SW, Washington, D.C. 20585-0103, (202) 586-3410.
Supplementary Information
I. Introduction
A. General
B. Background
II. Discussion of Criteria and Comments
A. Technological Feasibility
1. General
2. Maximum Technologically Feasible Levels
B. Economic Justification
1. Economic Impact on Manufacturers
a. Approach to Modeling
b. Phaseout of HCFC-141b
i. Thermal Performance of HCFC-141b Replacement
ii. HFC-245fa Availability
iii. Cumulative Burden From Multiple Government Regulations
2. Economic Impact on Consumers Including Life-cycle Costs and
Payback Periods
3. Energy Savings
a. Forecast of Savings
b. Significance of Savings
4. Lessening of Utility or Performance of Products
5. Impact of Lessening of Competition
6. Need of the Nation to Conserve Energy
7. Other Factors
C. Rebuttable Presumption of Economic Justification
III. Analysis
A. Product Classes
B. Standard Levels
1. Standard Level 4
2. Standard Level 3
3. Standard Level 2
4. Standard Level 1
C. Effective Date
IV. Procedural Requirements
A. Environmental Review
B. Regulatory Planning and Review
C. Unfunded Mandates Review
D. Regulatory Flexibility Act Review
E. Federalism Review
F. ``Takings'' Assessment Review
G. Paperwork Reduction Act Review
H. Review under Executive Order 12988
I. Review under Small Business Regulatory Enforcement Fairness
Act of 1996
V. Department of Justice Views on Proposed Rule
I. Introduction
A. General
This final rule concludes a regulatory action, mandated by Part B
of Title III of the Energy Policy and Conservation Act, as amended (the
Act or EPCA), 42 U.S.C. Sec. 6291-6309, to review and revise the
Department's energy conservation standards applicable to refrigerators,
refrigerator-freezers, and freezers (refrigerator products). The
revised standards will result in reduced energy consumption, reduced
consumer costs, and reduced emissions of air pollutants associated with
electricity production. The Department estimates that over 30 years the
revised standards will save approximately 6.67 quads (7.03 exajoules
(EJ)) of primary energy and result in a 465 million metric ton (Mt)
(513 million short tons) reduction in emissions of CO2 and a 1,362
thousand metric ton (kt) (1,501,000 short tons) reduction in emissions
of NOX.
The regulations published today amend existing standards that were
promulgated on November 17, 1989 (hereinafter referred to as the 1989
Final Rule). 54 FR 47916. The Act directs the Department to review the
1989 Final Rule for possible amendment and to issue a final rule based
on that review within five years. EPCA, Sec. 325(b)(3)(B), 42 U.S.C.
Sec. 6295(b)(3)(B).
In developing today's final regulations, the Department has relied
substantially on a joint recommendation negotiated by refrigerator
manufacturers and their trade association, energy efficiency advocates,
electric utilities, and state energy offices, which was submitted to
the Department on November 15, 1994. The Department appreciates their
efforts to work out differences and, to the maximum extent practicable,
intends to support and encourage similar efforts with respect to energy
conservation standards for other appliances.
B. Background
DOE published an Advance Notice of Proposed Rulemaking (hereinafter
referred to as the 1993 Advance Notice) on standards for refrigerator
products as well as other products on September 8, 1993. 58 FR 47326.
The 1993 Advance Notice presented the product classes that DOE planned
to analyze and provided a detailed discussion of the analytical
methodology and models that the Department expected to use in doing the
analysis to support this rulemaking. The Department invited comments
and data on the accuracy and feasibility of the planned methodology and
encouraged interested persons to recommend improvements or alternatives
to the approach taken by DOE.
On November 15, 1994, the Department received joint comments from
the Association of Home Appliance Manufacturers (AHAM), the Natural
Resources Defense Council (NRDC), the American Council for an Energy
Efficient Economy (ACEEE), the New York State Energy Office, the
California Energy Commission (CEC), Pacific Gas and Electric (PG&E) and
Southern California Edison (SCE) (hereinafter referred to as the
``Joint Comments''). The AHAM member companies that were active in the
negotiations and that supported the agreement were: Amana
Refrigeration, Inc. (Amana), Frigidaire Company (Frigidaire), General
Electric Appliances (GEA), Marvel Industries (Marvel), Maytag Company
(Maytag), Sanyo Company (Sanyo), Sub-Zero Corporation (Sub-Zero), U-
Line Corporation (U-Line), W.C. Wood Company and Whirlpool Corporation
(Whirlpool).
This group of refrigerator manufacturers, energy efficiency
advocates, electric utilities, and state energy offices worked
intensively for approximately two and one-half years to develop a
common recommendation for revised energy conservation standards for
refrigerator products that met the statutory requirements. Although DOE
neither organized nor was a member of the group, DOE responded to the
group's request to send DOE staff observers to meetings and to make
contractors available to provide analytical support. The Department
viewed the group effort to reach agreement among representatives of
industry, energy efficiency advocates and others as a very constructive
development, and the thoughtful Joint
[[Page 23103]]
Comments were of great value to the Department in crafting its
proposal.
On July 20, 1995, DOE published a Notice of Proposed Rulemaking in
which the Department proposed amended energy conservation standards for
the refrigerator products (hereinafter referred to as the 1995 Proposed
Rule). 60 FR 37388. The standard levels proposed in the 1995 Proposed
Rule corresponded closely to the standard levels recommended in the
Joint Comments on the 1993 Advance Notice. Standards proposed in the
1995 Proposed Rule are shown in Table 1-1 and Table 1-2.
Table 1-1.--Proposed Energy Standards for Refrigerators, Refrigerator-
Freezers, and Freezers Which Contain HCFCs
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Energy standards equations (kWh/yr)
-------------------------------------
Product class Effective 3 years
Effective after publication
January 1, 1993 of final rule
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1. Refrigerators and Refrigerator-
freezers with manual defrost..... 13.5AV+299
0.48av+299 8.82AV+248.4
0.31av+248.4
2. Refrigerator-Freezers--partial
automatic defrost................ 10.4AV+398
0.37av+398 8.82AV+248.4
0.31av+248.4
3. Refrigerator-Freezers--
automatic defrost with top-
mounted freezer without through-
the-door ice service and all-
refrigerators--automatic defrost. 16.0AV+355
0.57av+355 9.80AV+276.0
0.35av+276.0
4. Refrigerator-Freezers--
automatic defrost with side-
mounted freezer without through-
the-door ice service............. 11.8AV+501
0.42av+501 4.91AV+507.5
0.17av+507.5
5. Refrigerator-Freezers--
automatic defrost with bottom-
mounted freezer without through-
the-door ice service............. 16.5AV+367
0.58av+367 4.60AV+459.0
0.16av+459.0
6. Refrigerator-Freezers--
automatic defrost with top-
mounted freezer with through-the-
door ice service................. 17.6AV+391
0.62av+391 10.20AV+356.0
0.36av+356.0
7. Refrigerator-Freezers--
automatic defrost with side-
mounted freezer with through-the-
door ice service................. 16.3AV+527
0.58av+527 10.10AV+406.0
0.36av+406.0
8. Upright Freezers with Manual
Defrost.......................... 10.3AV+264
0.36av+264 7.55AV+258.3
0.27av+258.3
9. Upright Freezers with Automatic
Defrost.......................... 14.9AV+391
0.53av+391 12.43AV+326.1
0.44av+326.1
10. Chest Freezers and all other
Freezers except Compact Freezers. 11.0AV+160
0.39av+160 9.88AV+143.7
0.35av+143.7
11. Compact Refrigerators and
Refrigerator-Freezers with Manual
Defrost.......................... 13.5AV+299
0.48av+299 10.70AV+299.0
0.38av+299.0
12. Compact Refrigerator-Freezers--
partial automatic defrost........ 10.4AV+398
0.37av+398 7.00AV+398.0
0.25av+398.0
13. Compact Refrigerator-Freezers--
automatic defrost with top-
mounted freezer and compact all-
refrigerators--automatic defrost. 16.0AV+355
0.57av+355 12.70AV+355.0
0.45av+355.0
14. Compact Refrigerator-Freezers--
automatic defrost with side-
mounted freezer.................. 11.8AV+501
0.42av+501 7.60AV+501.0
0.27av+501.0
15. Compact Refrigerator-Freezers--
automatic defrost with bottom-
mounted freezer.................. 16.5AV+367
0.58av+367 13.10AV+367.0
0.46av+367.0
16. Compact Upright Freezers with
Manual Defrost................... 10.3AV+264
0.36av+264 9.78AV+250.8
0.35av+250.8
17. Compact Upright Freezers with
Automatic Defrost................ 14.9AV+391
0.53av+391 11.40AV+391.0
0.40av+391.0
18. Compact Chest Freezers........ 11.0AV+160
0.39av+160 10.45AV+152.0
0.37av+152.0
------------------------------------------------------------------------
AV=Total adjusted volume, expressed in ft.\3\, as determined in
Appendices A1 and B1 of Subpart B of this Part.
av=Total adjusted volume, expressed in Liters.
Table 1-2.--Proposed Energy Standards for HCFC-Free Refrigerators, Refrigerator-Freezers, and Freezers
----------------------------------------------------------------------------------------------------------------
Energy standards equations (kWh/yr) effective dates
--------------------------------------------------------
Product class 3 years after 9 years after
Effective publication of publication of
January 1, 1993 final rule final rule
----------------------------------------------------------------------------------------------------------------
19. HCFC-Free Refrigerators and Refrigerator-Freezers
with Manual Defrost................................... 13.5AV+299
0.48av+299 9.70AV+273.2
0.34av+273.2 8.82AV+248.4
0.31av+248.4
20. HCFC-Free Refrigerator-Freezer--partial automatic
defrost............................................... 10.4AV+398
0.37av+398 9.70AV+273.2
0.34av+273.2 8.82AV+248.4
0.31av+248.4
[[Page 23104]]
21. HCFC-Free Refrigerator-Freezers--automatic defrost
with top-mounted freezer without through-the-door ice
service and HCFC-Free all-refrigerators--automatic
defrost............................................... 16.0AV+355
0.57av+355 10.78AV+303.6
0.38av+303.6 9.80AV+276.0
0.35av+276.0
22. HCFC-Free Refrigerator-Freezers--automatic defrost
with side-mounted freezer without through-the-door ice
service............................................... 11.8AV+501
0.42av+501 5.40AV+558.3
0.19av+558.3 4.91AV+507.5
0.17av+507.5
23. HCFC-Free Refrigerator-Freezers--automatic defrost
with bottom-mounted freezer without through-the-door
ice service........................................... 16.5AV+367
0.58av+367 5.06AV+504.9
0.18av+504.9 4.60AV+459.0
0.16av+459.0
24. HCFC-Free Refrigerator-Freezers--automatic defrost
with top-mounted freezer with through-the-door ice
service............................................... 17.6AV+391
0.62av+391 11.22AV+391.6
0.40av+391.6 10.20AV+356.0
0.36av+356.0
25. HCFC-Free Refrigerator-Freezers--automatic defrost
with side-mounted freezer with through-the-door ice
service............................................... 16.3AV+527
0.58av+527 11.11AV+446.6
0.39av+446.6 10.10AV+406.0
0.36av+406.0
26. HCFC-Free Upright Freezers with Manual Defrost..... 10.3AV+264
0.36av+264 8.31AV+284.1
0.29av+284.1 7.55AV+258.3
0.27av+258.3
27. HCFC-Free Upright Freezers with Automatic Defrost.. 14.9AV+391
0.53av+391 13.67AV+358.7
0.48av+358.7 12.43AV+326.1
0.44av+326.1
28. HCFC-Free Chest Freezers and All Other Freezers
Except Compact Freezers............................... 11.0AV+160
0.39av+160 10.87AV+158.1
0.38av+158.1 9.88AV+143.7
0.35av+143.7
29. HCFC-Free Compact Refrigerators and Refrigerator-
Freezers with Manual Defrost.......................... 13.5AV+299
0.48av+299 13.5AV+299.0
0.48av+299 10.70AV+299.0
0.38av+299.0
30. HCFC-Free Compact Refrigerator-Freezer--partial
automatic defrost..................................... 10.4AV+398
0.37av+398 10.4AV+398.0
0.37av+398.0 7.00AV+398.0
0.25av+398.0
31. HCFC-Free Compact Refrigerator-Freezers--automatic
defrost with top-mounted freezer and HCFC-free compact
all-refrigerators--automatic defrost.................. 16.0AV+355
0.57av+355 16.0AV+355.0
0.57av+355.0 12.70AV+355.0
0.45av+355.0
32. HCFC-Free Compact Refrigerator-Freezers--automatic
defrost with side-mounted freezer..................... 11.8AV+501
0.42av+501 11.8AV+501.0
0.42av+501.0 7.60AV+501.0
0.27av+501.0
33. HCFC-Free Compact Refrigerator-Freezers--automatic
defrost with bottom-mounted freezer................... 16.5AV+367
0.58av+367 16.5AV+367.0
0.58av+367.0 13.10AV+367.0
0.46av+367.0
34. HCFC-Free Compact Upright Freezers with Manual
defrost............................................... 10.3AV+264
0.36av+264 10.3AV+264.0
0.36av+264 9.78AV+250.8
0.35av+250.8
35. HCFC-Free Compact Upright Freezers with Automatic
defrost............................................... 14.9AV+391
0.53av+391 14.9AV+391.0
0.53av+391.0 11.40AV+391.0
0.40av+391.0
36. HCFC-Free Compact Chest Freezers................... 11.0AV+160
0.39av+160 11.0AV+160.0
0.39av+160.0 10.45AV+152.0
0.37av+152.0
----------------------------------------------------------------------------------------------------------------
AV = Total adjusted volume, expressed in ft.\3\, as determined in Appendices A1 and B1 of Subpart B of this
Part.
av = Total adjusted volume, expressed in Liters.
The proposed standards were designed to reduce product energy use
by up to 30 percent relative to current standards (Tier 1).1 For
products manufactured without HCFC blowing agents, there was a second-
tier standard applicable for six years designed to reduce energy use by
up to 23 percent (Tier 2). The percentage reduction in energy use
varied from class to class. The proposed standards would take effect
three years from the date of publication of the final rule. The second
tier transition standard for HCFC-free products was designed to address
concerns about uncertainty relating to the energy penalty associated
with substitutes for HCFC-141b, the blowing agent used for refrigerator
insulation. The manufacture and import of HCFC-141b, a stratospheric
ozone-depleting chemical, will be banned effective January 1, 2003,
pursuant to regulations of the Environmental Protection Agency (EPA).
40 CFR 82.4 (l), (m).
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\1\ The largest two classes, top mount auto defrost
refrigerator-freezer without through-the-door features and side-by-
side refrigerator freezers with through-the-door features, have
efficiency improvements of 29.6 and 29.3 percent, respectively.
These two classes account for 78 percent of the energy used by
refrigerators and refrigerator/freezers and 57 percent of all
refrigerator products including freezers.
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The 1989 Final Rule divided refrigerator products into 10 classes
based on various product characteristics (e.g., freezer location). As
was proposed in the 1995 Proposed Rule, today's rule establishes new
classes for eight different compact refrigerator configurations.
The comment period on the 1995 Proposed Rule, extended by 30 days
from its original date, ended on November 2, 1995. 60 FR 47497
(September 13, 1995). A public hearing was held in Washington, D.C. on
October 26, 1995. In September and October of 1995, some manufacturers
indicated that they no longer supported the imposition of updated
standards prior to 2003 because of uncertainty surrounding the thermal
efficiency characteristics and cost of insulation
[[Page 23105]]
using a blowing agent other than HCFC-141b and safety concerns relating
to use of hydrocarbon blowing agents.
In September 1995, the Department announced a formal effort to
improve the process it uses to develop appliance efficiency standards.
Energy efficiency advocates, product manufacturers, trade associations,
state agencies, utilities and other interested parties were asked to
provide substantial input into the Department's work, which resulted in
the publication of a rule institutionalizing procedural enhancements.
61 FR 36973 (July 15, 1996) (hereinafter referred to as the Process
Rule). The enhanced process for considering new or revised appliance
efficiency standards includes earlier input from stakeholders,
increased predictability of the rulemaking timetable, an improved
analysis of impacts, and the encouragement of consensus agreements when
possible. For further details, see the Process Rule. 61 FR 36973 (July
15, 1996).
The Department of the Interior and Related Agencies Appropriations
Act for Fiscal Year 1996 included a moratorium on proposing or issuing
new or amended appliance energy conservation standards during Fiscal
Year 1996. Pub. L. 104-134.
In keeping with elements of the Process Rule and to inform the
development of a final rule on revised refrigerator standards, DOE
reopened the comment period on the Proposal Rule until September 11,
1996 (hereinafter referred to as the 1996 Reopening Notice). 61 FR
41748 (August 12, 1996). DOE sought further comment on issues relating
to the relationship between revised DOE efficiency standards and the
EPA regulation of HCFC-141b. In the 1996 Reopening Notice, DOE
described a number of options under consideration, including the
approach in the Proposed Rule, and requested comment and supporting
data. In the Reopening Notice, the Department identified a ``preferred
option,'' which would have established that standard levels would be
set in the range bounded by the proposed Tier 1 and Tier 2 standard
levels effective January 1, 2003, with the final standard level to be
set in 1999, based on a narrow determination of the energy penalty of
the substitute blowing agent. The options identified for comment
focused on standard levels in the range bounded by the proposed Tier 1
and Tier 2 standard levels, and on effective dates from 2000 through
2003.
II. Discussion of Criteria and Comments
The Act requires that any new or amended conservation standard
prescribed by the Secretary shall achieve the maximum improvement in
energy efficiency that is technologically feasible and economically
justified. EPCA Sec. 325(o)(2)(A), 42 U.S.C. Sec. 6295(o)(2)(A).
The Department conducted engineering and economic analyses of those
classes of refrigerator products for which performance and cost data
could be obtained. The classes analyzed were: top-mounted refrigerator-
freezer with auto defrost; top-mounted refrigerator-freezer with auto
defrost and through-the-door features; side-by-side refrigerator-
freezer with auto defrost; side-by-side refrigerator-freezer with auto
defrost and through-the-door features; bottom-mounted refrigerator-
freezer with auto defrost; upright freezer with auto defrost; upright
freezer with manual defrost; chest freezer with manual defrost; and
compact refrigerator-freezer with manual defrost. Data was collected by
surveys of the industry, extensive literature review and discussions
with experts. This information was used as the basis for determining
the improvement in performance and the manufacturer cost for each
design option added to the baseline unit. The engineering analysis
determined the annual energy use, life cycle costs, and pay back
periods for each combination of design options. Proposed standards for
classes which could not be analyzed due to the lack of data have been
based on the percentage performance improvement over current standards
determined for a similar class that was analyzed. No new data on
engineering or economic analysis was provided in the comments to the
1995 Proposed Rule.
Revised national impact analyses were performed for today's final
rule using the 1997 Annual Energy Outlook (AEO) energy price forecast.
These results are presented in the updated Chapter 5, ``National Energy
and Economic Impacts'' of the Technical Support Document (TSD), DOE/EE-
0064. Chapter 4, ``Life-Cycle Costs and Payback Period,'' was also
revised using the 1997 AEO energy price forecast. The TSD is the same
as the one that accompanied the 1995 Proposed Rule for these products,
with the exception of Chapter 4, Chapter 5 and Table R.5, ``Expected
Impacts of Program Alternatives,'' which have been updated. Copies of
the TSD and the updated chapters and table are available at the DOE
Freedom of Information Reading Room, U.S. Department of Energy,
Forrestal Building, Room 1E-190, 1000 Independence Avenue, SW.,
Washington, DC 20585, (202) 586-6020, between the hours of 9 a.m. and 4
p.m. Monday through Friday except Federal holidays.
The Department has received over 200 comments from Members of
Congress, manufacturers, states, environmental and energy efficiency
organizations, trade associations, utilities and the public over the
course of nearly two years beginning with the publication of the 1995
Proposed Rule. The significant issues raised by the public comments are
addressed below. The Department has recently received comments from a
diverse group of stakeholders indicating support for the approach taken
in this final rule. (Frigidaire, No. 316; GEA, No. 317; Maytag, No.
318; Whirlpool, No. 319; Amana, No. 320; NRDC, Alliance to Save Energy
(ASE), ACEEE, CEC, Florida Energy Office, SCE, and Oregon Office of
Energy, PG&E, No. 321).
A. Technological Feasibility
1. General
For those products and classes of products discussed in today's
final rule, DOE believes that all of the efficiency levels analyzed in
the 1995 Proposed Rule, while not necessarily realized in current
production, are technologically feasible. The technological feasibility
of the design options is addressed in Chapter 3 of the TSD. The
Department considers a design option technologically feasible if that
design option is incorporated in commercial products or in working
prototypes.
The Department received no public comments regarding the efficiency
levels achievable by the design options presented in the 1995 Proposed
Rule and accompanying TSD.
2. Maximum Technologically Feasible Levels
To meet the requirement set forth in the Act that any new or
amended standard be technologically feasible, the Department conducted
engineering analyses of those classes of refrigerator products for
which performance and cost data could be obtained. Accordingly, for
each class of product under consideration in this rulemaking, a maximum
technologically feasible design option (max tech) was identified. The
max tech levels were derived by adding energy-conserving engineering
design options to the baseline units for each of the respective classes
in order of increasing consumer payback periods. A brief discussion of
the max tech level for each class analyzed is found in the ``Analysis''
section of the 1995 Proposed Rule. 60 FR at 37407-8 (July 20, 1995). A
complete discussion of each max tech level and the design options
included in
[[Page 23106]]
each is found in the Engineering Analysis in Chapter 3 of the TSD.
B. Economic Justification
Section 325 of the Act provides seven factors to be evaluated in
determining whether a conservation standard is economically justified:
economic impact on manufacturers and consumers, net consumer savings,
energy savings, impacts on product utility, impact on competition, need
for energy conservation, and other relevant factors. EPCA
Sec. 325(o)(2)(B)(i), 42 U.S.C. Sec. 6295(o)(2)(B)(i). Each of these is
discussed below.
1. Economic Impact on Manufacturers
a. Approach to Modeling. The Engineering Analysis identified design
options for improvements in efficiency along with the associated costs
to manufacturers for each class of product. For each design option,
these costs constitute the increased per-unit cost to manufacturers to
achieve the indicated energy efficiency levels. Manufacturer,
wholesaler, and retailer markups will result in a consumer purchase
price higher than the manufacturer cost.
In the analysis which supported the 1995 Proposed Rule, the
Department used a computer model that simulated a hypothetical company
to assess the likely impacts of standards on manufacturers and to
determine the effects of standards on the industry at large. This
model, the Manufacturer Analysis Model (MAM), is described in the TSD.
(See TSD, Appendix C.) It provides a broad array of outputs, including
shipments, price, revenue, net income and short- and long-run returns
on equity. An ``Output Table'' lists values for all these outputs for
the base case and for each of the standards cases under consideration.
(See Tables 6-4 through 6-7 of Chapter 6 in the TSD.) The base case
represents the forecasts of outputs with the range of energy
efficiencies expected if there are no new or amended standards. A
``Sensitivity Chart'' shows how returns on equity would be affected by
a change in any one of the nine control variables of the model. (TSD,
Appendix C). The Manufacturer Analysis Model consists of 13 modules.
The module which estimates the impact of standards on total industry
net present value is version 1.2 of the Government Regulatory Impact
Model (GRIM), dated March 1, 1993, which was developed by the Arthur D.
Little Consulting Company (ADL) under contract to AHAM, the Gas
Appliance Manufacturers Association (GAMA), and the Air-Conditioning
and Refrigeration Institute (ARI). (See TSD, Appendix C for more
details.)
Commenting on the 1995 Proposed Rule, AHAM, Sub-Zero and GEA
criticized the methodology and analytical models used to assess
standards. These comments raised concerns about the determination of
the impact of standards on manufacturers, particularly the way the
Department used the GRIM developed by industry, and the failure to
consider the impact of multiple DOE and other agency regulations. Sub-
Zero requested that DOE reassess the method used to determine the
burdens that future standards will place on small companies. (AHAM, No.
207 at 2-4; Sub-Zero, No. 209 at 3, 4; and GEA, No. 212 at 1, 2).
In implementing the Process Rule, the Department is now undertaking
a review of the manufacturing impact analysis model and methodologies.
In developing its new methodology, the Department will take into
account the comments received concerning its methodology. However,
while DOE is committed to improving these analytical tools, DOE
believes the results of the Department's manufacturer impact analysis
on the 1995 Proposed Rule reasonably reflect the likely impact of new
refrigerator standards. The analysis shows, for example, significant
drops in short-run return on equity for the higher standard levels,
which is consistent with manufacturers' claims. Moreover,
notwithstanding their comments concerning the manufacturer impact
analytical method, manufacturers, in the Joint Comments, concluded that
the proposed standard levels were economically justified and, in more
recent comments, expressed support for the approach taken in this final
rule. (Joint Comments, No. 49 at 22; Frigidaire, No. 316; GEA, No. 317;
Maytag, No. 318; Whirlpool, No. 319; Amana, No. 320).
Other than on issues relating to the status of alternative blowing
agents, there have been neither significant technological changes nor
significant changes in the market since the Joint Comments were
received and the 1995 Proposed Rule was published. Therefore, the
Department believes the analysis found in the 1995 Proposed Rule, the
TSD for the Proposed Rule (with updated chapters) and the Joint
Comments are a sound basis for promulgating this final rule.
Developments relating to substitute blowing agents, and the impact of
these developments on manufacturer costs are discussed below.
b. Phaseout of HCFC-141b. Many of the manufacturers' written or
oral comments on the 1995 Proposed Rule asked that the Department take
into account the cumulative burden of DOE's new energy efficiency
standards and EPA's regulations banning, as of January 1, 2003, the
manufacture and import of HCFC-141b, the blowing agent currently used
in the production of the insulation in refrigerators. In the preamble
to the Process Rule, with respect to refrigerators, DOE stated that it
``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 the manufacture of
HCFCs.'' 61 FR at 36980. The 1996 Reopening Notice expressly sought
comment on the interrelationship between these two regulatory actions,
the resulting impact on manufacturers, and the possible means for
mitigating any adverse impacts. There are three major areas of concern
regarding the phaseout of HCFC-141b: the thermal performance of the
replacements; the date by which sufficient quantities of the
replacement would be available; and the impact of both regulations on
the development and manufacture of new refrigerators.
i. Thermal Performance of HCFC-141b Replacements. Based on a
recommendation in the Joint Comments, the Department's 1995 Proposed
Rule proposed new product classes for refrigerator products made
without HCFCs. To allow for the presumed energy penalty of replacements
for HCFC-141b, DOE proposed a 10 percent relaxation of the otherwise
applicable standards for HCFC-free products for a period of six years
after the effective date of the new standards. The Joint Comments,
which were developed in 1994 and reflect information on blowing agents
available at the time, stated that: ``all non-chlorinated substitutes
available to replace HCFC-141b are expected to be a minimum 10% less
energy efficient.'' (Joint Comments, No. 49 at 12).
In the 1996 Reopening Notice, the Department sought additional
information on replacement blowing agents because of the relevance of
such information to the rulemaking effective date and standard levels.
AHAM submitted a report summarizing the research of the Appliance
Research Consortium (ARC) on foam blowing agents which indicates that a
foam blowing agent, hydrofluorocarbon (HFC)-245fa (1,1,1,3,3-
pentafluoropropane), is able to produce
[[Page 23107]]
insulating foams with a thermal efficiency comparable to HCFC-141b. The
ARC report included the results of refrigerator cabinet tests which
found that units using HFC-245fa insulation averaged only 0.9 percent
more energy usage than comparable units using HCFC-141b. (AHAM, No.
237, Attachment 3).
ii. HFC-245fa Availability. HFC-245fa cannot be used in
refrigerators until the blowing agent is added to EPA's Significant New
Alternatives Policy (SNAP) list. This inclusion is dependent on the
results of several toxicity tests and could occur during 1997. A 90-day
toxicity test ended in August 1996 and the results raised no
significant concerns. Based on these results and results of other
tests, the likely producer of the chemical, AlliedSignal, will decide
whether to petition EPA to have HFC-245fa added to the SNAP list. EPA
has indicated that it is prepared to initiate the necessary regulatory
process to determine whether to allow commercialization of HFC-245fa as
soon as a manufacturer petitions the Agency. Based on early information
about the physical and toxicological performance of HFC-245fa, EPA
believes regulatory approval will be granted. (EPA, No. 301 at 1, 2).
In addition to the toxicity tests, AlliedSignal also has performed
a gas migration test using foam board insulation made with HFC-245fa.
Comparatively little migration has occurred (less than the migration of
HCFC-141b under similar conditions). An AHAM-sponsored food transfer
test performed by an independent laboratory (Hazelton) should begin in
the summer of 1997, with refrigerator results available in the fall of
1997, and freezer results due toward the end of 1997.
Although the chemical will not require Food and Drug Administration
(FDA) approval, these studies are likely to be reviewed by an
independent panel of experts to decide whether the chemical would
likely meet the FDA's Generally Regarded As Safe (GRAS) requirements.
This process should be completed by the end of 1997. (AlliedSignal, No.
266 at 1).
While there are still some uncertainties associated with HFC-245fa,
AlliedSignal has indicated, based on favorable test results, that it
expects to begin commercial production of HFC-245fa in 1999 and to
expand its availability in early 2000 by starting production at a new
facility. As of February 1997, AlliedSignal expected appliance
manufacturers to begin converting to HFC-245fa as early as 1999 and to
complete their conversion before the end of 2000. (AlliedSignal, No.
314, at 4).
iii. Cumulative Burden from Multiple Government Regulations. During
1995 and 1996, prior to the availability of the positive test results
on HFC-245fa, many manufacturers expressed concern about the cumulative
regulatory burden of revised efficiency regulations and EPA's ban on
the production of HCFC-141b as of 2003. They argued that imposing new
efficiency standards in 2000 would force manufacturers to redesign
their products and processes twice, once in 1999, in order to meet the
new efficiency standard, and a second time in 2002, to accommodate a
new insulation blowing agent. Manufacturers believed then that the
replacement for HCFC-141b was likely to have significant impacts on
thermal efficiency and product design, and could also involve
significant manufacturing process changes.
Maytag, GEA and Frigidaire expressed concerns about the
availability of HCFC-free foams. GEA stated that it appeared unlikely
that HFC-245fa would be proven safe and made available in sufficient
quantities before 2002. (GEA, No. 212 at 2). AHAM stated that even if
the commercial sale of HFC-245fa began in 1999 or 2000, there might not
be sufficient production for the entire refrigerator (and building
insulation) industry. (AHAM, No. 268 at 3).
As a result of these concerns, the Department carefully considered
the interrelationship between these two regulatory actions. To try to
mitigate the effects of new energy efficiency standards for
refrigerator products and the phaseout of HCFC-141b, the Department
evaluated a number of different combinations of effective dates and
standard levels for HCFC-141b products and for HCFC-free products. In
the 1995 Proposed Rule, the Department proposed separate classes for
HCFC and HCFC-free products with 10 percent less stringent standards
for the HCFC-free products. In the 1996 Reopening Notice, the
Department presented for comment seven possible adjustments to the
standards levels and effective date, including the two-tier option
proposed in the 1995 Proposed Rule. In the Reopening Notice, the
Department specifically requested input on the question of whether
significant cost savings would result from having standards take effect
at the same time as the EPA ban on the manufacture of HCFC-141b. The
Department also requested more information on the candidate substitutes
for HCFC-141b.
Public comment on these various proposals was split, with
Whirlpool, Marvel Industries, the Northwest Power Planning Council
(NPPC), U-Line, CEC, NASEO, ACEEE, NRDC and other commenters expressing
continued strong support for the standards as proposed in the 1995
Proposed Rule. (Whirlpool, No. 208 at 3; Marvel Industries, No. 261 at
1; NPPC, No. 210 at 1; U-Line, No. 211 at 2; ACEEE and NRDC, No. 214 at
2; CEC, No. 215 at 1; and NASEO, No. 216 at 1). Amana, Frigidaire, GEA
and Maytag supported a new standard in 2003, in order to allow them to
make the product and process changes necessary for meeting a new
standard simultaneously with introducing a substitute for HCFC-141b.
(Amana, Frigidaire, GEA, and Maytag, No. 290, at 1).
In response to the 1996 Reopening Notice, manufacturers, energy
efficiency advocates, the EPA and others provided additional
information. The Department received comments which more specifically
addressed the growing likelihood that HFC-245fa would be the chosen
substitute for HCFC-141b. ACEEE and NRDC claimed that there was now
evidence that by the 2003 phaseout date for the manufacture of HCFC-
141b, alternative blowing agents would be available with no energy
penalty. If the Department were significantly delayed in publishing a
final rule, ACEEE and NRDC recommended reconsidering the issue of less
stringent standards for HCFC-free products. (ACEEE and NRDC, No. 206 at
7-9). Several commenters stated that current information indicated that
the next generation HFC's being tested will be viable alternatives with
minimal impact on energy consumption and cost. (EPA, No. 250 at 4; GEA,
No. 317; Whirlpool, No. 319).
Amana, Frigidaire, Maytag and GEA stated that switching to HCFC
substitutes as early as 2000 was not technically feasible, given what
is known about the time line for testing and production of HFC-245fa.
They asserted that toxicity testing might not be completed until 2001,
that the transition of manufacturing facilities to produce the
substitute would take additional time, and that chemical manufacturers
might not be able to provide adequate supplies of the substitute
product to all appliance companies on a timely basis. (Amana,
Frigidaire, Maytag and GEA, No. 265 at 1).
These manufacturers commented that the HCFC substitute could affect
the fundamental design and manufacture of refrigerators. In particular,
if the substitute is not a ``drop-in,'' an additional redesign of
refrigerator products may be required. They further commented that
while the largest
[[Page 23108]]
manufacturers may be able to accommodate the investment in multiple
redesigns, other manufacturers cannot afford the added costs associated
with over-designing, under-designing or mis-designing for double digit
efficiency improvements without first knowing what the HCFC replacement
will be. (Amana, Frigidaire, Maytag and GEA, No. 265 at 1).
Information submitted by manufacturers reflected varying views on
the likely incremental costs if products needed to be redesigned twice
in a three year period (once in 2000 and again in 2003). Maytag stated
that when the HCFC-141b ban and the imposition of new energy efficiency
standards are separated in time, engineering changes will occur at each
stage, requiring considerable resources each time, and the possibility
of major capital investments. (Maytag, No. 233, at 2). Frigidaire
stated that the incremental cost of two redesigns versus a single
redesign between the present time and 2003 is substantial for smaller
manufacturers. (Frigidaire, No. 232 at 5). Whirlpool stated that if
HFC-245fa or a comparable blowing agent with no significant energy
penalty is available, then the degree of redesign needed will be
minimal. No product changes would be required, although some companies
might choose to make minor design changes and/or change liner material
to obtain competitive cost advantages. Whirlpool commented that the
factory investments for conversion to HFC-245fa will be zero to a few
hundred thousand dollars. (Whirlpool, No. 244, at 3).
Based on the positive results of recent toxicology tests, and the
statements of Allied Signal, the EPA and others, DOE has concluded that
it is likely that the chosen substitute for HCFC-141b will be HFC-
245fa, or another blowing agent with comparable characteristics, and
that such a substitute will be available for use in the manufacture of
refrigerators prior to the 2003 phase out date for the production of
HCFC-141b. (Allied Signal, No. 314; EPA, No. 250). Furthermore, the
results of recent tests conducted by ARC show that there is likely to
be little or no energy penalty associated with the use of HFC-245fa.
(AHAM, No. 237, Attachment 3 at 9). Allied Signal reported that foams
produced with HFC-245fa age at a slower rate than foams produced with
HCFC-141b at all temperatures tested. Therefore, the thermal
conductivity of HFC-245fa blown foams is superior to that of HCFC-141b
foams after several weeks of aging. (Allied Signal, No. 267 at 8-9). As
noted by Whirlpool, HFC-245fa is less corrosive than HCFC-141b which
may result in some cost savings to the industry because manufacturers
will not need to use an inner liner or may be able to use a lower cost
liner material. (Whirlpool, No. 244 at 3). Because of the comparability
of HFC-245fa to HCFC-141b, the Department believes that only minor
changes in refrigerator design, not a complete redesign, will be
required to convert to the new blowing agent.
DOE has carefully considered all comments on the impact of amended
energy efficiency standard levels on manufacturers. Based on the
information in the record about the characteristics of HFC-245fa and
its likely schedule of availability, DOE believes it is no longer
necessary to retain the second tier standard for HCFC-free product
classes, as proposed in the 1995 Proposed Rule. Consequently, this rule
establishes a single tier of efficiency standards at the levels
corresponding to the Tier 1 standards in the 1995 Proposed Rule. This
approach is supported by recent comments from Frigidaire, GEA, Maytag,
Whirlpool, Amana, energy conservation advocates, states and utilities.
(Frigidaire, No. 316; GEA, No. 317, Maytag, No. 318, Whirlpool, No.
319; Amana, No. 320; NRDC, ASE, ACEEE, CEC, Florida Energy Office, SCE,
and Oregon Office of Energy, PG&E, No. 321).
The Department recognizes that there will be considerable costs
associated with the product redesign necessary to meet the new
efficiency standards, as well as some additional costs associated with
the conversion to a new insulation blowing agent, even assuming that
agent is HFC-245fa or another chemical with comparable characteristics.
In addition, the redesign for meeting revised efficiency standards can
be done with greater confidence if the substitute blowing agent is
known at the time of the redesign. For these reasons, the Department
has decided to give manufacturers 14 months more than the minimum of
three years from the date of publication until the standard becomes
effective. This will allow more time for the development of HCFC-141b
substitutes, and for manufacturers to make design changes and obtain
the capital necessary to complete the required changes. Furthermore,
because of the comparability of HCFC-141b and HFC-245fa, DOE believes
that manufacturers could choose to delay their conversion to HFC-245fa
until sometime after July 1, 2001, without incurring substantial
additional costs.
In April 1997, a number of parties filed comments with the
Department supporting this approach of setting an effective date of
July 1, 2001, and eliminating the second tier transition standard for
HCFC-free products. (Frigidaire, No. 316; GEA, No. 317, Maytag, No.
318, Whirlpool, No. 319; Amana, No. 320; NRDC, ASE, ACEEE, CEC, Florida
Energy Office, SCE, and Oregon Office of Energy, PG&E, No. 321). This
approach is founded on the best current information about substitutes
for HCFC-141b, i.e., that HFC-245fa will receive the necessary
regulatory approvals, and that Allied Signal will make it available in
sufficient quantities for all manufacturers to use prior to 2003.
However, given that all testing on HFC-245fa has not been completed,
some commenters urged the Department to provide for appropriate
exception relief for manufacturers in the event that HFC-245fa or
comparable products do not become available to all manufacturers on a
timely basis.
DOE recognizes that some uncertainty still exists about the
ultimate acceptability of HFC-245fa or other comparable blowing agents,
as well as some uncertainty regarding the timing of commercial
production of such a product. The results, to date, of HFC-245fa
toxicology tests have generally been positive, but the testing process
is not likely to be completed until late 1997. Consequently, it is
still possible that subsequent tests will identify unacceptable risks
associated with the use of this product or that its commercial
availability will be delayed beyond 2003. Under such conditions, DOE
may grant manufacturers exception relief. Section 504 of the Department
of Energy Organization Act authorizes DOE to make adjustments of any
rule or order issued under the Energy Policy and Conservation Act,
consistent with the other purposes of the Act, if necessary to prevent
special hardship, inequity, or unfair distribution of burdens. 42
U.S.C. Sec. 7194(a).
The process established by DOE for receiving and acting on
applications for exception is set forth in 10 CFR part 1003, subpart B.
Applicants for an exception are required to serve their application on
persons who might be adversely affected by the granting of an
exception, and DOE may require or provide additional notice of the
application. 10 CFR 1003.23. The notices to potentially affected
parties would include an invitation to submit comments regarding the
application to DOE and any comments would be served on the other
identified parties in the proceeding. The applicant would be provided
an opportunity to respond to any submissions by third parties relevant
to the application. 10 CFR
[[Page 23109]]
1003.25(a)(1). After considering the entire record, DOE would render a
final decision and order. In exercising its authority under section
504, DOE may grant an exception from an efficiency standard for a
limited time, and may place other conditions on the grant of an
exception.
DOE will require any application for an exception to provide
specific facts and information relevant to the claim that compliance
would cause special hardship, inequity or the unfair distribution of
burdens. Joint applications would be permitted. Compliance with the
terms of this rule could constitute special hardship for the
refrigerator manufacturing industry in the unexpected event that it was
shown that HFC-245fa or a comparable product would not be available as
a timely replacement for HCFC-141b and the unavailability of HFC-245fa
or comparable products prior to the imposition of the ban on the
further production of HCFC-141b would substantially increase the
expected manufacturer costs associated with complying with this revised
standard. In such circumstances, appropriate transition relief, as may
be needed to address the special hardship, would be considered. Any
relief would be crafted with due consideration for the effects of such
relief on competition in the affected markets.
2. Economic Impact on Consumers Including Life-Cycle Costs and Payback
Periods
In determining whether a standard is economically justified, EPCA
directs the Secretary to consider the economic impact on consumers. In
response to the 1996 Reopening Notice, over 100 consumers urged the
adoption of the standards as proposed in the Proposed Rule. These
comments supported the reduction in pollution which would result from
the standards as well as the benefits to American households. (Public
Comments, No. 305).
To evaluate the expected economic impact on consumers, the
Department calculates the total life-cycle costs of alternate standard
levels as well as the expected time required to pay back any increase
in the product's initial costs. The expected payback period of a
standard is calculated and often referenced because it is a commonly
used measure and also is the basis for the rebuttable presumption
created by section 325(o)(2)(B)(iii) of EPCA, 42 U.S.C.
6295(o)(2)(B)(iii).
The life-cycle cost to consumers is the sum of the purchase price
and the operating expense discounted over the lifetime of the
appliance. Installation and maintenance costs are elements of life-
cycle cost but are not significant for refrigerator products. The
change in life-cycle costs resulting from any new standards is
considered by the Department to be the best measure of the effect of
proposed standards on consumers. This is quantified by the difference
in the life-cycle costs for the average consumer with and without
revised standards for the analyzed refrigerator classes.
The life-cycle cost was calculated for each class for the range of
efficiencies considered in the Engineering Analysis, using a real
consumer discount rate of 6 percent. The purchase price is based on the
factory costs in the Engineering Analysis and includes a factory markup
plus distributor and retailer markups. The Department believes that its
analysis represents the worst case scenario for consumers in that it
assumes an incremental increase in the purchase price based on the
costs associated with improving efficiency. In the marketplace,
manufacturers may offset some or all of this cost increase by, for
example, making material substitutions or increasing productivity.
(Whirlpool, No. 208 at 2,3). DOE does not attempt to predict the
consumer benefits of such non-energy changes which are part of an on-
going product improvement process.
Energy Market & Policy Analysis, Inc. (EM&PA) commented that the
economic analysis issued by DOE in its TSD is based on outdated and
invalid assumptions about potential energy costs. EM&PA commented that
all calculations of life-cycle costs, payback periods, and consumer
energy cost savings in the TSD are based on unrealistically high
estimates of future energy (particularly electricity) prices. (EM&PA,
No. 229 at 3).
The purchase price and operating energy expense of each standard
level based on the 1994 AEO are presented in Chapter 4 (Consumer
Impacts) of the original TSD. The Department is committed to using the
most recent available AEO forecasts. The annual operating cost for
standard level 1 has been updated based on the lower 1997 AEO energy
prices.2 (See updated Chapter 4 of the TSD.) The 1997 AEO forecast
of electricity prices in 2000 is 12.7 percent lower than the 1994
forecast.
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\2\ Annual energy cost is the product of annual energy use times
$0.0858/kWh. This electricity price comes from the 1997 AEO price
projection. (Sec. 5.1.4, ``Residential Energy Prices,'' of updated
TSD Chapter 5).
---------------------------------------------------------------------------
Moreover, DOE has analyzed life-cycle costs, payback periods, cost
of conserved energy, energy savings, and other metrics using a range of
energy prices. Life-cycle costs for the standard level of today's final
rule were calculated for the following sensitivity cases: low state
electricity prices, high state electricity prices, high equipment
prices, low equipment prices, the combination of low state electricity
prices and high equipment prices, and the combination of high state
electricity prices and low equipment prices. Results are shown in
updated TSD Chapter 4. The Department is committed to using such
analyses in future rulemakings. (Section 11(e) of the Process Rule).
As a complement to energy price sensitivities, the Department
calculates the cost of conserved energy (CCE) for standards under
consideration. The CCE is the increase in purchase price amortized over
the lifetime energy savings of the appliance. The advantage of the CCE
approach is that it does not require assumptions about future energy
prices because it uses only the purchase expense of the efficiency
measure and the expected energy savings. The consumer will benefit
whenever the cost of conserved energy is less than the energy price
paid by the consumer for that end use. (TSD, Sec. 4.4, p. 4-23)
AHAM commented, ``The DOE/LBNL energy analysis indicates that
standard levels approximating those proposed have paybacks in the 3-4
year category. In fact, analysis undertaken by AHAM, with the same data
LBNL used, indicates that for the proposed standards levels the payback
is in the 7-8 year period for refrigerator/freezers and 11-12 years for
freezers.'' (AHAM, No. 207 at 2).
The payback period reported in the TSD, using 1997 AEO energy price
forecasts, is 4.1 years for the top mount auto defrost refrigerator-
freezer class without through-the-door features, the most popular class
of refrigerators, and ranged from 0.6 to 11.9 years for other classes
of refrigerator products. (See TSD, Chapter 4). AHAM provided no
explanation for the discrepancy in payback forecasts, claimed no
specific errors in the Department's analysis and provided insufficient
data to enable the Department to determine why the payback periods do
not agree. The Department calculated payback periods using both AEO
1994 and 1997 energy prices and both sets of payback periods are
shorter than AHAM claims.
ACEEE and NRDC noted that the 1995 Proposed Rule rejected standard
level 2 in part because the payback period at this level may be as long
as 19 years, the expected life of the product. (ACEEE and NRDC, No. 206
at 6). Standard level 2 was not rejected solely on the basis of
[[Page 23110]]
the payback period. The Department also considered the adverse impact
on manufacturers short-run return on equity.
3. Energy Savings
The Act requires DOE to consider the total projected energy savings
that result from revised standards. The Department used the Lawrence
Berkeley National Laboratory Residential Energy Model (LBNL-REM)
results in its consideration of total projected savings.
a. Forecast of Savings. The Department forecasts energy consumption
by using the LBNL-REM, which forecasts energy consumption over the
period of the analysis for candidate standards and the base case. (See
TSD, Appendix B for a detailed discussion of the LBNL-REM.). The LBNL-
REM projections depend on estimated values, the most significant of
which are the responsiveness of household appliance purchasers to
changes in residential energy prices and consumer income, future energy
prices, future levels of housing construction, and options that exist
for improving the energy efficiency of appliances.
The Department's estimate of the energy savings attributable to a
standard is the difference between the projected energy consumption,
assuming compliance with the candidate standard, and projected energy
consumption under the base case. The calculation of the forecast energy
savings for today's rule differs in two significant ways from the
original TSD presentation which was the basis for the numbers in the
1995 Proposed Rule. First, the effective date of the standards has been
changed from January 1, 1998, to July 1, 2001. Second, the Department
is now using the AEO 1997 energy price forecasts instead of the AEO
1994 energy price forecasts which were used in the 1995 TSD. The
cumulative energy savings of this final rule, as shown in updated
chapter 5, is 6.67 quads over the period 2000 through 2030. The
Department did not receive any comments on the calculation of energy
savings.
b. Significance of Savings. Under section 325(o)(3)(B) of the Act,
42 U.S.C. Sec. 6295(o)(3)(B), the Department is prohibited from
adopting a standard for a product if that standard would not result in
``significant conservation of energy.'' While the term ``significant''
is not defined in the Act, the U.S. Court of Appeals for the D.C.
Circuit concluded that Congress intended the word ``significant'' to
mean ``non-trivial.'' Natural Resources Defense Council v. Herrington,
768 F.2d 1355, 1373 (D.C. Cir. 1985). DOE has determined that the
energy savings from this final rule are significant.
4. Lessening of Utility or Performance of Products
In establishing classes of products and design options, the
Department tried to eliminate any degradation of utility or performance
in the products under consideration in this rulemaking. That is, to the
extent that comments or research showed that a product included a
utility or performance-related feature that inherently lowers energy
efficiency, a separate class with a different efficiency standard was
created for that product. This is consistent with the Joint Comments
which stated that ``these standards were chosen at a level that
provides for no significant lessening of utility or performance.''
(Joint Comments, No. 49 at 23). No other comment was received on this
subject.
5. Impact of Lessening of Competition
The Act directs the Department to consider the impact of any
lessening of competition that is likely to result from the imposition
of the standards. It further directs the Attorney General to make a
determination of the impact, if any, of any lessening of competition
and to provide that determination to DOE within 60 days of the
publication of a proposed rule.
In its letter of April 19, 1996, the Department of Justice (DOJ)
provided its analysis of the standards proposed in the 1995 Proposed
Rule. (A copy of the letter containing the DOJ findings is published in
its entirety in Section V.) DOJ stated, ``we cannot conclude that
promulgation of the proposed rules is likely to have a substantial
adverse effect on competition in the market for those products. While
the rules may result in some changes in the product mix offered by some
manufacturers, and may result in the discontinuation of certain models
of each of the products, the available evidence does not demonstrate
that competition in these markets likely would be substantially
affected by the proposed rules.''
DOJ expressed some concern regarding the cumulative effect of the
proposed energy conservation standards and EPA's ban on the manufacture
and import of HCFC-141b. DOE reopened the comment period on August 12,
1996, in order to obtain additional information and views on these
issues. As a result of the reopening, DOE obtained information about
the availability of substitutes for HCFC blowing agents which shows
there is likely to be less economic impact on manufacturers from the
conversion to HCFC-141b substitutes than anticipated at the time of the
DOJ analysis. As discussed in Section II.B.1.b. of this Supplementary
Information section, research conducted by a consortium of refrigerator
manufacturers shows that HFC-245fa (or a similar substance) is a likely
substitute for HCFC-141b, and that use of HFC-245fa is not expected to
require major product redesign. Moreover, the change in effective date
further addresses the DOJ concerns about the proposed rule.
Representatives of several manufacturers argued that DOE is
required to seek a new determination from DOJ of the impact on
competition of options raised in the Reopening Notice before
promulgating any final rule. The Assistant Attorney General's letter of
April 19, 1996, fully satisfied DOJ's obligations under EPCA. The Act
only requires the Attorney General to make a determination of the
impact on competition of a proposed rule. 42 U.S.C. 6295(o)(2)(B)(ii).
No provision of EPCA requires DOJ to convey its views on DOE notices of
reopening of the comment period or on final rules, nor does EPCA
require DOE to solicit views from DOJ on those actions. DOE
acknowledges that there may be circumstances in which it would be
advisable, as a matter of policy, for DOE to solicit supplemental views
from DOJ, but DOE sees no need to do that in this proceeding. Moreover,
DOJ was aware of the reopening of the comment period but submitted no
additional views on the impact on competition of the various options
presented for comment. The DOJ views in this proceeding are contained
in its original April 19, 1996, analysis.
6. Need of the Nation to Conserve Energy
Enhanced energy efficiency improves the Nation's energy security,
strengthens the economy and reduces the environmental impacts of energy
production. The Department estimates that over 30 years, the revised
standards will save approximately 6.67 quads (7.03 exajoules (EJ)) of
primary energy.
7. Other Factors
EPCA allows the Secretary of Energy, in determining whether a
standard is economically justified, to consider any other factors that
the Secretary deems relevant. The estimated environmental benefits from
today's final rule (based on the 1997 AEO fuel prices) are, over the
period from 2000 to 2030, a reduction in emissions of NOX by 1,362
thousand tons (1,501 thousand short tons), a reduction in emissions of
CO2 by 465 Mt (513 million short tons) and
[[Page 23111]]
a reduction in the cost of the emission controls roughly equivalent to
the cost of reducing SO2 emissions by 1,545 kt (1,703 thousand
short tons). (TSD, updated Chapter 5).
C. Rebuttable Presumption of Economic Justification
Section 325(o)(2)(B)(iii) of EPCA, 42 U.S.C. Sec. 6925
(o)(2)(B)(iii), states:
``If the Secretary finds that the additional cost to the consumer
of purchasing a product complying with an energy conservation standard
level will be less than three times the value of the energy savings
during the first year, there shall be a rebuttable presumption that
such standard level is economically justified.''
If the increase in the initial price of an appliance due to a
conservation standard would repay itself to the consumer in energy
savings in less than 3 years, then it is presumed that such standard is
economically justified. This presumption of economic justification can
be rebutted upon a proper showing.
The pay back period for today's final rule for manual defrost
upright freezers is less than 3 years. The estimated pay back period
for the top mounted automatic defrost refrigerator-freezer class, which
accounts for more than 50 percent of the sales of all refrigerator-
freezer products, is 4.1 years. The longest payback period for any of
the product classes is 11.9 years (this is for refrigerators with a
top-mount freezer and through-the-door features, the least popular of
the full-size refrigerator classes), which is substantially shorter
than the product life. (Updated TSD Chapter 4, Sec. 4.2.2).
III. Analysis
A. Product Classes
The Department is adding new product classes for compact
refrigerators, refrigerator-freezers and freezers. Formerly, the
Department made no class distinctions by size of refrigerator, so
compact refrigerators were governed by the same standards (which
include adjustments for volume) as full-size refrigerators. The
Department is now adding new product classes for compact refrigerators,
refrigerators-freezers and freezers, which includes products with a
total volume of less than 7.75 cubic feet (Federal Trade Commission/
AHAM rated volume) and 36 inches or less in height. The total energy
consumption of all compact refrigerator products in the U.S. is about
2.5 percent of the total energy consumed by all refrigerator products.
There are only three or four energy savings options expected to be
available for these products by the year 2001. Because of small
production volumes, the impact of new standards on these manufacturers
is relatively severe. The Department calculates a 5-year payback period
is required to recoup the consumer cost of improvements in efficiency
at levels only 2 to 3 percent more stringent than the 1993 levels.
Given that the compact products have a distinct utility (i.e., they
serve a variety of applications not served by full sized units) and the
limited efficiency improvement potential because of the limited number
of design options available, the Department has concluded that compact
refrigerator products should be treated differently from full sized
models.
The proposal to create new product classes for HCFC-free products
has been dropped, based on information about the likely availability of
HFC-245fa as a substitute blowing agent.
B. Standard Levels
Section 325(o)(2)(A) of the Act specifies that any new or amended
standard the Department prescribes must be designed to ``achieve the
maximum improvement in energy efficiency * * * which the Secretary
determines is technologically feasible and economically justified.''
The figures cited in this section are found in the TSD prepared for
the 1995 Proposed Rule and the updated TSD chapters 4 and 5, which are
supplements to the TSD. The updated TSD chapters reflect two major
changes from the original TSD: effective date and updated electricity
price forecasts. The original TSD was prepared using energy price
forecasts from the 1994 AEO. The 1997 AEO, which forecasts lower energy
prices, recently became available. The impact of lower energy prices is
to reduce somewhat the economic benefits of standards, which is
reflected in increased consumer payback periods and reduced life-cycle-
cost savings and national benefits. Standard Levels 4, 3, and 2 were
rejected in the 1995 Proposed Rule using the 1994 AEO price forecasts
and the lower 1997 AEO price forecasts would show somewhat smaller
energy cost savings for the rejected standard levels. The Department
did not rerun the TSD analysis for the rejected standard levels based
on the 1997 AEO energy price forecasts. The calculations for Standard
Levels 4, 3, and 2 below are derived from the TSD, and reflect AEO 94
predictions and an effective date in 1998. For Standard Level 1, the
Department did prepare revised TSD chapters using the 1997 AEO energy
price forecasts and the July 1, 2001, effective date of the standards.
3
---------------------------------------------------------------------------
\3\ Note that the analysis of Standard Level 1 in the Proposed
Rule assumed that all products met the proposed Tier 1 standards,
thus no adjustment to reflect the elimination of the HCFC-free
classes and their Tier 2 standards is needed.
---------------------------------------------------------------------------
1. Standard Level 4
The Department first considered the max tech level of efficiency.
Standard Level 4, max tech, would save the most energy: 10.0 quads
(10.55 EJ) for refrigerators (including refrigerator-freezers) and 2.0
quads (2.11 EJ) for freezers between 1998 and 2030. In order to meet
this standard, the Department assumes that all refrigerator products
would incorporate vacuum panel insulation. The use of vacuum panel
insulation accounts for 30 percent of total energy savings, with
increased wall thickness as the only alternative. Vacuum panel
technology has progressed, but there remain concerns about
manufacturability, availability, reliability, and performance. Vacuum
panels are 6 to 10 times heavier than foam. The increase in door weight
may cause the appliance to tip over when the door is opened. Also,
current production capability for vacuum panels is far too small for
the projected demand. A 1-inch increase in wall and door thickness (a
2-inch increase in the side-to-side dimension) is not a viable option.
Some larger products already are constrained by the need to fit into
existing spaces and through doors and passageways. Decreasing interior
volume would sacrifice product utility. In addition, there are likely
to be some groups of consumers who would experience net life-cycle cost
increases compared to the units they would have otherwise purchased.
Based upon a consideration of these factors, the Department therefore
concludes that the burdens of Standard Level 4 for refrigerators,
refrigerator-freezers and freezers outweigh the benefits, and rejects
the standard level as not economically justified.
2. Standard Level 3
This standard level is projected to save 8.6 quads (9.1 EJ) of
energy for refrigerators and refrigerator-freezers and 1.7 quads (1.8
EJ) for freezers. While this level does not use vacuum panels, about 40
percent of the energy savings for most of the classes is obtained by
increasing the insulation values. There is general agreement that an
increase in the wall thickness is not acceptable for many of the larger
models in each class. This level has payback periods as high as 25.5
years (longer than the typical 19-year product life) and reduces
estimated
[[Page 23112]]
refrigerator manufacturer short-run return on equity from 7.3 percent
to 5.8 percent, a reduction of 20 percent. For freezer manufacturers,
the estimated short-run return on equity (ROE) drops from 7.3 percent
to 4.7 percent, a reduction of more than 35 percent. Based on these
considerations, the Department concludes that the burdens of Standard
Level 3 for refrigerators, refrigerator-freezers and freezers outweigh
the benefits, and rejects the standard level as not economically
justified.
3. Standard Level 2
This standard level is projected to save 7.8 quads (8.2 EJ) of
energy for refrigerators and refrigerator-freezers, and 1.3 quads (1.4
EJ) for freezers. However, this level also requires an increase in
insulation with a corresponding increase in the wall thickness.
Furthermore, the payback period may be as long as 19.0 years, the
expected life of these products. The initial burden on the
manufacturers is also high: short-run return on equity for
manufacturers of both refrigerators and freezers is estimated to
decrease from 7.3 percent to 6.2 percent, a reduction of 16 percent.
The Department concludes that the burdens of Standard Level 2 for
refrigerators, refrigerator-freezers and freezers outweigh the
benefits, and rejects the standard level as not economically justified.
4. Standard Level 1
The Department concludes that Standard Level 1 for refrigerator
products, effective in July 2001, and without the special transition
standards for HCFC-free products contained in the 1995 Proposed Rule,
is technologically feasible and economically justified. Over the period
from July 1, 2001-2030, Standard Level 1 is projected to save 6.18
quads (6.52 EJ) for refrigerators and refrigerator freezers and 0.49
quads (0.51EJ) for freezers. Technologies necessary to meet this
standard level are presently available. The consumer payback of this
standard level is 4.1 years for the largest-selling class (top mount
auto-defrost refrigerator, without through-the-door features) and no
more than 11.9 years for any class. The cost of conserved energy is 3.7
cent/kWh for the largest selling class, meaning that this standard
level will benefit purchasers of this refrigerator class who pay more
than 3.7 cent/kWh for electricity. Standard Level 1 is at or near the
lowest life-cycle cost for all classes and is expected to result in a
reduction in life-cycle cost of approximately $117 or 9.3 percent for
the largest class. For the largest selling refrigerator class, if the
lowest state energy price is analyzed, the minimum life-cycle cost
point is still at Standard Level 1, and consumers would still benefit.
Consumers who pay the high state electricity price would benefit from
an even higher standard. (See updated TSD Chapter 4).
According to the TSD analysis, manufacturers' short-run return on
equity is estimated to drop from 7.31 percent in the base case to 6.92
percent for Standard Level 1. The long-run ROE at Standard Level 1 is
7.36 percent, a slight improvement from the base ROE of 7.31 percent.
In the Joint Comments, the manufacturers and others recommended this
standard level to DOE. In the Joint Comments, the parties commented
that the negotiation process allowed for a cumulative assessment of
impact which, in turn, led to adjustments among various product
standard levels in order to better balance the economic impact among
manufacturers. (Joint Comments, No. 49 at 14). The major manufacturers
have supported this standard level with a July 2001 effective date in
their recent comments. (Frigidaire, No. 316; GEA, No. 317, Maytag, No.
318, Whirlpool, No. 319; Amana, No. 320).
This final rule will save approximately the same amount of energy
as would promulgation of the rule proposed in the 1995 Proposed Rule.
The energy savings lost by setting a July 1, 2001, effective date are
offset by the elimination of the less stringent proposed standards for
HCFC-free products. Energy savings from the 1995 Proposed Rule and this
final rule are presented in Table 2. The proposed rule would have
established a two-tiered standard effective three years from the date
of publication (May 2000); the final rule is a single tier standard
effective in July 2001. Two proposed rule scenarios are shown: the
first scenario assumes there are no HCFC-free products until 2003; the
second scenario assumes all products qualify for the Tier 2 HCFC-free
standard level from 2000-2005.
Table 2.--Cumulative Energy Savings (Quads)
----------------------------------------------------------------------------------------------------------------
Two-tiered Two-tiered Single tier
Proposed Rule Proposed Rule Final Rule
Years (Tier 2 from (Tier 2 from (Effective July
2003-2005) 2000-2005) 1, 2001)
----------------------------------------------------------------------------------------------------------------
2000-2010................................................. 0.87 0.73 0.81
2000-2020................................................. 3.31 3.06 3.26
2000-2030................................................. 6.67 6.41 6.67
----------------------------------------------------------------------------------------------------------------
For all these reasons, DOE concludes that Standard Level 1 is
economically justified. The public comments support this conclusion.
Standard Level 1 corresponds to the efficiency levels in the Joint
Comments submitted on the 1993 Advance Notice. Furthermore, it has been
supported by a diverse group of parties in recent comments.
(Frigidaire, No. 316; GEA, No. 317; Maytag, No. 318; Whirlpool, No.
319; Amana, No. 320; NRDC, ASE, ACEEE, CEC, Florida Energy Office, SCE,
and Oregon Office of Energy, PG&E, No. 321).
C. Effective Date
As discussed above, the Department concludes that the rule based on
Standard Level 1 should take effect for all classes of refrigerators on
July 1, 2001. This date, combined with the elimination of the HCFC-free
classes, mitigates concerns about adverse manufacturer impacts while
preserving energy and consumer savings comparable to those of the 1995
Proposed Rule.
IV. Procedural Requirements
A. Environmental Review
A Draft Environmental Assessment for Proposed Energy Conservation
Standards for Refrigerators, Refrigerator-Freezers, and Freezers was
prepared pursuant to the National Environmental Policy Act of 1969
(NEPA), 42 U.S.C. Secs. 4321 et seq., the regulations of the Council on
Environmental Quality, 40 CFR parts 1500-1508, the Department's
regulations for compliance with NEPA, 10 CFR part 1021, and the
Secretarial Policy on the National Environmental
[[Page 23113]]
Policy Act (June 1994). Section V.B.2. of the Secretarial Policy
encourages the Department to provide an opportunity for interested
parties to review environmental assessments prior to the Department's
formal approval of such assessments.
No comments were received on the Draft Environmental Assessment
that was published within the TSD that accompanied the 1995 Proposed
Rule. The Department finalized the Environmental Assessment in January,
1996. (DOE/EA-1138). The standards in today's final rule differ
slightly from the Proposed Rule's Standard Level 1, resulting in
slightly less energy savings in the early years of the standards. The
AEO 1997 emission factors are different, and, therefore, emission
reductions are correspondingly changed from the 1995 Proposed Rule.
Updated tables of emission reductions were prepared for today's final
rule and will be available in the Freedom of Information Reading Room.
The environmental effects of this final rule were deemed to be not
significant for NEPA purposes, so the Department today is issuing a
Finding of No Significant Impact (FONSI), published elsewhere in this
issue.
B. Regulatory Planning and Review
Today's regulatory action has been determined to be an
``economically significant regulatory action'' under Executive Order
12866, ``Regulatory Planning and Review.'' 58 FR 51735 (October 4,
1993). Accordingly, today's action was subject to review under the
Executive Order by the Office of Information and Regulatory Affairs
(OIRA) of the Office of Management and Budget.
Pursuant to E.O. 12866, DOE prepared a draft Regulatory Analysis.
Six major alternatives were identified by DOE as representing feasible
policy alternatives for achieving consumer product energy efficiency.
Each alternative has been evaluated in terms of its ability to achieve
significant energy savings at reasonable costs and has been compared to
the effectiveness of the rule. 60 FR 37388, 37411 (July 20, 1995). No
new data has been received concerning this review. The draft Regulatory
Analysis, which was published as a part of the TSD, is incorporated
herein as final. Table R-5 ``Expected Impacts of Program
Alternatives,'' was updated for this rule and included with the updated
portions of the TSD.
AHAM stated that the Department needs to improve the evaluation of
non-regulatory means of achieving energy savings. (AHAM, No. 207 at 7).
Whirlpool commented that with the reduction in rebate programs,
Whirlpool feels that there will be no improvement, and probably some
backsliding in efficiency without mandatory standards improvement:
``Standards are a key driver for innovation for improved energy
efficiency. Innovating for improved efficiency does require resources.
However, as manufacturers develop and retool for energy-efficient
products (especially `clean sheet' designs) they will routinely include
other benefits beyond energy efficiency (such as innovative features,
cost reductions, and quality improvements) in order to maximize the
return from their investment.'' (Whirlpool, No. 208 at 2, 3).
NPPC stated, ``The level of standards proposed meets the
department's criteria for setting standards. In addition, we analyzed
the level of proposed standards from the perspective of whether the
energy savings represented a cost-effective resource for the Northwest
region, instead of buying power from the electricity market or building
a combustion turbine. We found that the resource represented by making
these appliances more efficient was indeed cost-effective and
represents over 100 average megawatts of electricity savings over the
next 20 years. By far, the best way to secure these savings is to adopt
Federal standards. Federal standards give a uniform signal to
manufacturers across their entire national market, and eliminate
administrative costs that would be incurred if utilities tried to
secure the savings through local programs.'' (NPPC, No. 210 at 1).
ACEEE and NRDC provided data to support the position that for
refrigerator products, ``alternative means such as labeling and rebate
programs are a useful complement to standards, but are not a
replacement for standards.'' One study found that refrigerator labeling
produces an average of 1.5 percent savings in energy use. Similarly,
utilities have found that rebate programs can influence only 40 to 60
percent of purchases. Market trends ``support the conclusion that
standards will have a much greater impact on new product efficiency and
energy savings than non-regulatory approaches.'' (ACEEE and NRDC, No.
214 at 10-11).
Under the Process Rule policies, the Department is committed to
exploring non-regulatory alternatives to standards. A full discussion
of the Department's consideration of non-regulatory alternatives is
presented in the ``Regulatory Impact Analysis'' section of the TSD. The
Department concluded that for this rulemaking, the energy savings from
a regulatory approach greatly exceeded the savings from any non-
regulatory alternative. (See updated Table R.5 ``Expected Impacts of
Program Alternatives'' of the Regulatory Impact Analysis.) The updated
analysis shows energy savings from voluntary efficiency targets (the
most effective of the non-regulatory alternatives) to be 3.49 quads
from 2000-2030, which is significantly less than the 6.67 quads of
energy savings predicted for today's rule.
C. Unfunded Mandates Review
With respect to a proposed regulatory action that may result in the
expenditure by the private sector of $100 million or more (adjusted
annually for inflation), section 202 of the Unfunded Mandates Reform
Act of 1995 (UMRA) requires a Federal agency to publish estimates of
the resulting costs, benefits and other effects on the national
economy. 2 U.S.C. 1532 (a), (b). Section 202 of UMRA authorizes an
agency to respond to the content requirements of UMRA in any other
statement or analysis that accompanies the proposed rule. 2 U.S.C.
1532(c).
The content requirements of section 202(b) of UMRA relevant to a
private sector mandate substantially overlap the economic analysis
requirements that apply under section 325(o) of EPCA and Executive
Order 12866. The Supplementary Information section of the notice of
proposed rulemaking and ``Regulatory Impact Analysis'' section of the
TSD responded to those requirements.
DOE is obligated by section 205 of UMRA, 2 U.S.C. 1535, to identify
and consider a reasonable number of regulatory alternatives before
promulgating a rule for which a written statement is required under
section 202. From those alternatives, DOE must select the least costly,
most cost-effective, or least burdensome alternative that achieves the
objectives of the rule unless DOE publishes an explanation of why a
different alternative is selected. As required by section 325(o) of the
Energy Policy and Conservation Act, this final rule establishes energy
conservation standards for refrigerator products that are designed to
achieve the maximum improvement in energy efficiency which DOE has
determined to be technologically feasible and economically justified.
42 U.S.C. 6295(o). A full discussion of the alternatives considered by
DOE is presented in the ``Regulatory Impact Analysis'' section of the
final TSD and updated Table R.5 ``Expected Impacts of Program
Alternatives.''
[[Page 23114]]
D. Regulatory Flexibility Act Review
The Regulatory Flexibility Act (5 U.S.C. 601-612) requires that an
agency prepare an initial regulatory flexibility analysis and publish
the analysis (or a summary thereof) in the Federal Register when it
publishes a general notice of proposed rulemaking required by law. 5
U.S.C. 603. The Act also requires an agency to prepare a final
regulatory flexibility analysis and publish the analysis (or a summary
thereof) in the Federal Register when it publishes a final rule. 5
U.S.C. 604. These requirements do not apply if the agency certifies,
when it publishes a proposed or final rule, that the rule if
promulgated would not have a significant economic impact on a
substantial number of small entities. 5 U.S.C. 605(b). In the 1995
Proposed Rule, the Department certified that the proposed standard
levels would not, if promulgated, have a significant economic impact on
a substantial number of small entities. No written comments
specifically addressed that certification.
Although DOE did not prepare an initial regulatory flexibility
analysis, it considered the potential economic impact of the rule on
small businesses and included provisions in the 1995 Proposed Rule and
this final rule designed to minimize the burden on manufacturers of
refrigerator products who are small businesses.
The Regulatory Flexibility Act defines ``small business'' by
incorporating the definition of ``small business concern'' in the Small
Business Act. 5 U.S.C. 601(3). The Department used the small business
size standards published by the Small Business Administration to
estimate the number of small businesses that would be required to
comply with this rule. Small Business Administration, Final Rule on
``Small Business Size Standards,'' 61 FR 3280 (January 31, 1996). The
size standards are listed by Standard Industrial Classification (SIC)
code and industry description. To be considered a small business, a
manufacturer of home refrigerators or freezers, together with its
affiliates, may employ no more than 1,000 employees. SIC Category 3632
(61 FR at 3291).
DOE examined the structure of the industries that would be affected
by this rulemaking to determine the likely impact of the rule on that
structure. Both the home refrigerator and freezer industries are highly
concentrated. Five firms, none of which is a small business, account
for approximately 95 percent of all non-compact refrigerator sales in
the U.S. Two firms account for at least 90 percent of freezer sales in
the U.S., and neither firm is a small business. Three firms, none of
which is a small business, account for approximately 84 percent of the
sales of compact refrigerators.4 U-Line and Marvel, which are
small businesses, account for 6 percent and 3 percent, respectively, of
compact refrigerator sales. Other small businesses, such as Sun Frost
and Sub-Zero, produce refrigerators for niche markets.
---------------------------------------------------------------------------
\4\ Appliance Magazine, September 1996. 1995 sales figures.
---------------------------------------------------------------------------
In the July 1995 Proposed Rule, DOE proposed new classes of
standards for compact refrigerators, refrigerator-freezers and freezers
after considering the relatively small size of the compact refrigerator
manufacturers and the technological limitations on improving the energy
efficiency of compacts. As discussed in the 1995 Proposed Rule (60 FR
at 37405-06), this approach was recommended by the Joint Comments based
on several factors, including technological constraints and the limited
research and development funding and capital resources available to
small companies. The standards for compact refrigerator products
proposed in the 1995 Proposed Rule would have required five percent
less energy use than the 1993 standards. The compact refrigerator
products standards in this final rule retain the 1995 Proposed Rule
requirement for five percent less energy use.
DOE continues to believe that promulgation of this rule will not
have a significant economic impact on a substantial number of small
entities. However, if after the rule becomes effective DOE learns that
such an impact would occur, the Department may exercise its authority
under section 325(t) of EPCA, 42 U.S.C. 6295(t), or section 504(a) of
the DOE Organization Act, 42 U.S.C. 7194(a), to grant appropriate
relief to small manufacturers.
E. Federalism Review
Executive Order 12612 requires that regulations or rules be
reviewed for any substantial direct effects on states, on the
relationship between the Federal Government and the states, or on the
distribution of power among various levels of government. 52 FR 41685
(October 30, 1987). If there are sufficient substantial direct effects,
the Executive Order requires the preparation of a Federalism assessment
to be used in decisions by senior policy makers in promulgating or
implementing the regulation.
The Act provides that Federal energy efficiency standards
established by the Act or regulations promulgated pursuant to the Act
preempt state standards for such products. 42 U.S.C. Sec. 6297. This
final rule does not expand the scope of preemption beyond that
resulting from the existing regulations. Thus, DOE has concluded that
there is no net effect sufficient to warrant preparation of a
Federalism assessment. Moreover, if any such state regulations are
adopted, the Act provides for subsequent state petitions for waiver of
Federal preemption.
F. ``Takings'' Assessment Review
DOE has determined pursuant to Executive Order 12630, 53 FR 8859
(March 18, 1988), that this regulation would not result in any takings
which might require compensation under the Fifth Amendment to the U.S.
Constitution.
G. Paperwork Reduction Act Review
No new information or recordkeeping requirements are imposed by
this rulemaking. Accordingly, no Office of Management and Budget
clearance is required under the Paperwork Reduction Act (44 U.S.C. 3501
et seq.).
H. 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 Executive Order 12988
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 Executive Order 12988 requires Executive
agencies to review regulations in light of applicable standards in
section 3(a) and section 3(b) to
[[Page 23115]]
determine whether they are met or it is unreasonable to meet one or
more of them. DOE has completed the required review and determined
that, to the extent permitted by law, this final rule meets the
relevant standards of Executive Order 12988.
I. Review Under Small Business Regulatory Enforcement Fairness Act of
1996
Consistent with Subtitle E of the Small Business Regulatory
Enforcement Fairness Act of 1996, 5 U.S.C. 801-808, 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 identify the final rule as a ``major rule'' for purposes of
Congressional review. The Department also will submit to the
Comptroller General, and make available to each House of Congress, the
TSD and other relevant information as required by 5 U.S.C. 801.
V. Department of Justice Views on Proposed Rule
Reproduced below is the letter provided by the Department of
Justice to DOE pursuant to EPCA Sec. 325 (o)(2)(B)(ii), 42 U.S.C.
Sec. 6295 (o)(2)(B)(ii):
April 19, 1996.
The Honorable Christine A. Ervin, Assistant Secretary for Energy
Efficiency and Renewable Energy, United States Department of Energy,
Forrestal Building, 1000 Independence Ave., SW, Washington, DC
20585.
Dear Ms. Ervin:
The Department of Energy (``DOE'') has issued a Notice of
Proposed Rulemaking amending the energy conservation standards for
refrigerators, refrigerator-freezers and freezers (60 FR 37368 (the
``proposed rules''). Section 325 of the Energy Policy and
Conservation Act, as amended in 1992 (42 U.S.C. 6295) (``the Act''),
requires the Attorney General ``* * * to determine the impact, if
any, of any lessening of competition likely to result from the
proposed standards.'' This letter constitutes the competitive impact
determination of the Department of Justice (the ``Department'').
The proposed rules would establish more stringent energy
efficiency standards for three types of household appliances--
refrigerator-freezers (``refrigerators''), compact refrigerators and
household freezers. The proposed rules would require greater
percentage increases in energy efficiency for refrigerators than for
the other products. If promulgated, the new energy standards will
take effect less than five years before regulations promulgated by
the Environmental Protection Agency prohibiting the use of HCFCs
take effect on January 1, 2003. Because it may be harder to meet the
new energy efficiency standards without HCFCs, the rules contain a
separate set of standards for non-HCFC products that would permit
somewhat greater energy use.
In order to assess the likely impact of the proposed rules on
competition in the sale of refrigerators, compact refrigerators, and
freezers, the Department examined the structure of the affected
industries and interviewed manufacturers and others to determine the
likely impact of the rules on that structure. All three industries
are highly concentrated. Only five firms account for 95 percent of
all refrigerator sales in the U.S.; two firms account for at least
90 percent of freezer sales in the U.S.; and four firms account for
most sales of compact refrigerators. With the possible exception of
compact refrigerators, substantial new entry into these markets in
the near future is unlikely.
In assessing the likely impact of the rules on competition the
Department attempted to determine whether the rules would likely
lead to an increase in concentration in any of the markets. They
could do so in two ways: first, by raising the cost of appliances
and reducing design and feature choices, standards may lower demand.
Second, if standards impose costs on manufacturers that cannot be
passed on to consumers, they can lower manufacturers' rates of
return. Either or both of these effects could cause manufacturers to
exit the market, or to stop making certain types of products,
thereby lessening competition and raising prices.
The proposed rules are largely identical to the proposals (``the
Joint Comments'') which were formally submitted to DOE on November
15, 1994. The Joint Comments were the product of two years of
negotiations involving most of the major manufacturers of these
appliances, the Association of Home Appliance Manufacturers and a
group of public utilities and environmental organizations. The
parties stated in the Joint Comments that it was their belief that
the standards would not ``lead to a likelihood of reduced
competition.''
Some manufacturers, however, now tell the Department their prior
conclusion that the rules would not reduce competition was based on
an assumption that the proposed standards would be enacted soon
after the Joint Comments were submitted. They contend that the
unanticipated delay has changed the way that the rules will affect
them. Because the rules relating to products that utilize HCFCs will
be relevant only until HCFCs are phased out in 2003, the costs of
redesign and retooling needed to bring these products into
compliance cannot be amortized over as long a product life as
anticipated. Thus, some manufacturers have stated that compliance
with the standard will add substantially to their costs and could
lead one or more of them to consider discontinuing the manufacture
of certain sizes or types of refrigerators.
Based upon information available to the Department in this
proceeding, however, we cannot conclude that promulgation of the
proposed rules is likely to have a substantial adverse effect on
competition in the markets for these products. While the rules may
result in some changes in the product mix offered by some
manufacturers, and may result in the discontinuation of certain
models of each of the products, the available evidence does not
demonstrate that competition in these markets likely would be
substantially affected by the proposed rules.
The Department notes, however, that it does have some concerns
about the cumulative effects of these and other energy efficiency
regulations on the markets for refrigerators and freezers.
Manufacturers will be required to comply both with the proposed
rules and the requirement for a phaseout of the use of HCFCs by
January 1, 2003. There is some evidence suggesting the previous
round of energy efficiency rules for freezers were a significant
factor in the decisions of two firms to cease manufacture of those
products, leaving an extremely concentrated market dominated by the
two remaining firms. The cumulative effect of the costs of
compliance with both DOE and EPA regulations, together with the
diversion of corporate attention and resources from marketing
efforts, could ultimately have an adverse impact on the ability of
some firms to compete.
Sincerely,
Anne K. Bingaman,
Assistant Attorney General.
List of Subjects in 10 CFR Part 430
Administrative practice and procedure, Energy conservation,
Household appliances.
Issued in Washington, D.C., on April 23, 1997.
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 citation for part 430 continues to read as
follows:
Authority: 42 U.S.C. 6291-6309.
2. Section 430.2 is amended by adding a definition for compact
refrigerator/refrigerator-freezer/freezer to read as follows:
Sec. 430.2 Definitions.
* * * * *
Compact refrigerator/refrigerator-freezer/freezer means any
refrigerator, refrigerator-freezer or freezer with total volume less
than 7.75 cubic feet (220 liters)(rated volume as determined in
Appendix A1 and B1 of subpart B of this part) and 36 inches (0.91
meters) or less in height.
* * * * *
3. Section 430.32 is amended by revising paragraph (a) to read as
follows:
[[Page 23116]]
Sec. 430.32 Energy conservation standards and effective dates.
* * * * *
(a) Refrigerators/refrigerator-freezers/freezers. These standards
do not apply to refrigerators and refrigerator-freezers with total
refrigerated volume exceeding 39 cubic feet (1104 liters) or freezers
with total refrigerated volume exceeding 30 cubic feet (850 liters).
------------------------------------------------------------------------
Energy standards equations for
maximum energy use (kWh/yr)
Product class -------------------------------------
Effective Effective July
January 1, 1993 1, 2001
------------------------------------------------------------------------
1. Refrigerators and Refrigerator-
freezers with manual defrost..... 13.5AV+299
0.48av+299 8.82AV+248.4
0.31av+248.4
2. Refrigerator-Freezer--partial
automatic defrost................ 10.4AV+398
0.37av+398 8.82AV+248.4
0.31av+248.4
3. Refrigerator-Freezers--
automatic defrost with top-
mounted freezer without through-
the-door ice service and all-
refrigerators--automatic defrost. 16.0AV+355
0.57av+355 9.80AV+276.0
0.35av+276.0
4. Refrigerator-Freezers--
automatic defrost with side-
mounted freezer without through-
the-door ice service............. 11.8AV+501
0.42AV+501 4.91AV+507.5
0.17av+507.5
5. Refrigerator-Freezers--
automatic defrost with bottom-
mounted freezer without through-
the-door ice service............. 16.5AV+367
0.58av+367 4.60AV+459.0
0.16av+459.0
6. Refrigerator-Freezers--
automatic defrost with top-
mounted freezer with through-the-
door ice service................. 17.6AV+391
0.62av+391 10.20AV+356.0
0.36av+356.0
7. Refrigerator-Freezers--
automatic defrost with side-
mounted freezer with through-the-
door ice service................. 16.3AV+527
0.58av+527 10.10AV+406.0
0.36av+406.0
8. Upright Freezers with Manual
Defrost.......................... 10.3AV+264
0.36av+264 7.55AV+258.3
0.27av+258.3
9. Upright Freezers with Automatic
Defrost.......................... 14.9AV+391
0.53av+391 12.43AV+326.1
0.44av+326.1
10. Chest Freezers and all other
Freezers except Compact Freezers. 11.0AV+160
0.39av+160 9.88AV+143.7
0.35av+143.7
11. Compact Refrigerators and
Refrigerator-Freezers with Manual
Defrost.......................... 13.5AV+299a
0.48av+299a 10.70AV+299.0
0.38av+299.0
12. Compact Refrigerator-Freezer--
partial automatic defrost........ 10.4AV+398a
0.37av+398a 7.00AV+398.0
0.25av+398.0
13. Compact Refrigerator-Freezers--
automatic defrost with top-
mounted freezer and compact all-
refrigerators--automatic defrost. 16.0AV+355a
0.57av+355a 12.70AV+355.0
0.45av+355.0
14. Compact Refrigerator-Freezers--
automatic defrost with side-
mounted freezer.................. 11.8AV+501a
0.42av+501a 7.60AV+501.0
0.27av+501.0
15. Compact Refrigerator-Freezers--
automatic defrost with bottom-
mounted freezer.................. 16.5AV+367a
0.58av+367a 13.10AV+367.0
0.46av+367.0
16. Compact Upright Freezers with
Manual Defrost................... 10.3AV+264a
0.36av+264a 9.78AV+250.8
0.35av+250.8
17. Compact Upright Freezers with
Automatic Defrost................ 14.9AV+391a
0.53av+391a 11.40AV+391.0
0.40av+391.0
18. Compact Chest Freezers........ 11.0AV+160a
0.39av+160a 10.45AV+152.0
0.37av+152.0
------------------------------------------------------------------------
AV=Total adjusted volume, expressed in ft.3, as determined in Appendices
A1 and B1 of subpart B of this part.
av=Total adjusted volume, expressed in Liters.
a Applicable standards for compact refrigerator products manufactured
before July 1, 2001. Compact refrigerator products are not separate
product categories under the standards effective January 1, 1993.
* * * * *
[FR Doc. 97-10888 Filed 4-25-97; 8:45 am]
BILLING CODE 6450-01-P
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