# Energy Conservation Program: Energy Conservation Standards for Refrigerated Bottled or Canned Beverage Vending Machines > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/fr%3AE8-13345 ## Record - **Collection:** Federal Register - **Document type:** Proposed Rule - **Published:** June 16, 2008 - **Citation:** 73 FR 34094 ## Text DEPARTMENT OF ENERGY Office of Energy Efficiency and Renewable Energy 10 CFR Part 431 [Docket No. EERE-2006-STD-0125] RIN 1904-AB58 Energy Conservation Program: Energy Conservation Standards for Refrigerated Bottled or Canned Beverage Vending Machines AGENCY: Office of Energy Efficiency and Renewable Energy, Department of Energy. ACTION: Advance notice of proposed rulemaking and notice of public meeting. SUMMARY: The Energy Policy and Conservation Act (EPCA) directs the Department of Energy (DOE) to establish energy conservation standards for various consumer products and commercial and industrial equipment, including refrigerated bottled or canned beverage vending machines (beverage vending machines), for which DOE determines that energy conservation standards would be technologically feasible and economically justified, and would result in significant energy savings. DOE is publishing this Advance Notice of Proposed Rulemaking (ANOPR) to: (1) Announce that it is considering establishment of energy conservation standards for beverage vending machines; and (2) announce a public meeting to receive comments on a variety of related issues. DATES: DOE will hold a public meeting on Thursday, June 26, 2008, from 9 a.m. to 5 p.m. in Washington, DC. DOE must receive requests to speak at the public meeting no later than 4 p.m., Thursday, June 19, 2008. DOE must receive a signed original and an electronic copy of statements to be given at the public meeting no later than 4 p.m., Thursday, June 19, 2008. DOE will accept comments, data, and information regarding this ANOPR before or after the public meeting, but no later than July 16, 2008. See Section IV, “Public Participation,” of this ANOPR for details. ADDRESSES: The public meeting will be held at the U.S. Department of Energy, Forrestal Building, Room 1E-245, 1000 Independence Avenue, SW., Washington, DC 20585. (Please note that foreign nationals visiting DOE Headquarters are subject to advance security screening procedures. If you are a foreign national and wish to participate in the public meeting, please inform DOE as soon as possible by contacting Ms. Brenda Edwards at (202) 586-2945 so that the necessary procedures can be completed.) Any comments submitted must identify the ANOPR for Beverage Vending Machines, and provide the docket number EERE-2006-STD-0125 and/or Regulatory Information Number (RIN) 1904-AB58. Comments may be submitted using any of the following methods: • Federal eRulemaking Portal: http://www.regulations.gov. Follow the instructions for submitting comments. • E-mail: beveragevending.rulemaking@ee.doe.gov . Include docket number EERE-2006-STD-0125 and/or RIN number 1904-AB58 in the subject line of the message. • Postal Mail : Ms. Brenda Edwards, U.S. Department of Energy, Building Technologies Program, Mailstop EE-2J, 1000 Independence Avenue, SW., Washington, DC 20585-0121. Please submit one signed paper original. • Hand Delivery/Courier: Ms. Brenda Edwards, U.S. Department of Energy, Building Technologies Program, 950 L'Enfant Plaza, SW., Suite 600, Washington, DC 20024. Telephone: (202) 586-2945. Please submit one signed paper original. For detailed instructions on submitting comments and additional information on the rulemaking process, see Section IV, “Public Participation,” of this document. Docket: For access to the docket to read background documents or comments received, go to the U.S. Department of Energy, Resource Room of the Building Technologies Program, 950 L'Enfant Plaza, SW., Suite 600, Washington, DC, 20024, (202) 586-2945, between 9 a.m. and 4 p.m., Monday through Friday, except Federal holidays. Please call Ms. Brenda Edwards at the above telephone number for additional information regarding visiting the Resource Room. FOR FURTHER INFORMATION CONTACT: Mr. Charles Llenza, U.S. Department of Energy, Office of Energy Efficiency and Renewable Energy, Building Technologies Program, EE-2J, 1000 Independence Avenue, SW., Washington, DC 20585-0121. Telephone: (202) 586-2192. E-mail: Charles.Llenza@ee.doe.gov. Mr. Eric Stas or Ms. Francine Pinto, U.S. Department of Energy, Office of the General Counsel, GC-72, 1000 Independence Avenue, SW., Washington, DC 20585-0121. Telephone: (202) 586-9507. E-mail: Eric.Stas@hq.doe.gov or Francine.Pinto@hq.doe.gov . For information on how to submit or review public comments and on how to participate in the public meeting, contact Ms. Brenda Edwards, U.S. Department of Energy, Office of Energy Efficiency and Renewable Energy, Building Technologies Program, EE-2J, 1000 Independence Avenue, SW., Washington, DC 20585-0121. Telephone: (202) 586-2945. E-mail: Brenda.Edwards@ee.doe.gov. SUPPLEMENTARY INFORMATION: Table of Contents I. Introduction A. Purpose of the Advance Notice of Proposed Rulemaking B. Overview of the Analyses Performed 1. Engineering Analysis 2. Markups To Determine Equipment Price 3. Energy Use Characterization 4. Life-Cycle Cost and Payback Period Analyses 5. National Impact Analysis C. Authority D. Background 1. History of Standards Rulemaking for Beverage Vending Machines 2. Rulemaking Process 3. Miscellaneous Rulemaking Issues a. Consensus Agreement b. Type of Standard c. Split Incentive Issue 4. Test Procedure 5. Rating Conditions II. Energy Conservation Standards Analyses for Beverage Vending Machines A. Market and Technology Assessment 1. Definition of “Beverage Vending Machine” 2. Equipment Classes 3. Selection of Baseline Equipment—Use of the ENERGY STAR Criteria 4. Normalization Metric 5. Scope and Coverage of Equipment a. Combination Machines b. Refurbished Equipment 6. Market Assessment 7. Technology Assessment B. Screening Analysis 1. Technology Options Screened Out 2. Technology Options Considered Further in Analysis C. Engineering Analysis 1. Approach 2. Equipment Classes Analyzed 3. Analytical Models a. Cost Model b. Energy Consumption Model 4. Baseline Models 5. Alternative Refrigerants 6. Cost-Efficiency Results D. Markups To Determine Equipment Price E. Energy Use Characterization 1. Selection of Efficiency Levels for Further Analysis 2. Annual Energy Consumption Results F. Rebuttable Presumption Payback Periods G. Life-Cycle Cost and Payback Period Analyses 1. Approach 2. Life-Cycle Cost Analysis Inputs a. Baseline Manufacturer Selling Price b. Increase in Selling Price c. Markups d. Installation Costs e. Energy Consumption f. Electricity Prices g. Electricity Price Trends h. Repair Costs i. Maintenance Costs j. Lifetime k. Discount Rate l. Rebound Effect m. Effective Date 3. Split Incentive Issue 4. Payback Period 5. Life-Cycle Cost and Payback Period Results H. Shipments Analysis I. National Impact Analysis 1. Approach 2. Base-Case and Standards-Case Forecasted Efficiencies 3. National Impact Analysis Inputs 4. National Impact Analysis Results J. Life-Cycle Cost Sub-Group Analysis K. Manufacturer Impact Analysis 1. Sources of Information for the Manufacturer Impact Analysis 2. Industry Cash Flow Analysis 3. Manufacturer Sub-Group Analysis 4. Competitive Impacts Assessment 5. Cumulative Regulatory Burden 6. Preliminary Results for the Manufacturer Impact Analysis L. Utility Impact Analysis M. Employment Impact Analysis N. Environmental Assessment O. Regulatory Impact Analysis III. Candidate Energy Conservation Standards Levels IV. Public Participation A. Attendance at Public Meeting B. Procedure for Submitting Requests to Speak C. Conduct of Public Meeting D. Submission of Comments E. Issues on Which DOE Seeks Comment 1. Equipment Classes 2. Compressor and Lighting Operating Hours 3. Refurbishment Cycles 4. Life-Cycle Cost Baseline Level 5. Base-Case and Standards-Case Forecasts 6. Differential Impact of New Standards on Future Shipments by Equipment Classes 7. Selection of Candidate Standard Levels for Notice of Proposed Rulemaking Analysis 8. Approach to Characterizing Energy Conservation Standards V. Regulatory Review and Procedural Requirements VI. Approval of the Office of the Secretary I. Introduction A. Purpose of the Advance Notice of Proposed Rulemaking Through this Advance Notice of Proposed Rulemaking, the U.S. Department of Energy is initiating rulemaking to consider establishing energy conservation standards for beverage vending machines. The purpose of this ANOPR is to provide interested persons with an opportunity to comment on: 1. The equipment classes that DOE plans to analyze in this rulemaking; 2. The analytical framework, methodology, inputs, models, and tools ( e.g. , life-cycle cost (LCC) and national energy savings (NES) spreadsheets) that DOE has been using to perform analyses of the impacts of energy conservation standards for refrigerated bottled or canned beverage vending machines (collectively referred to in this ANOPR as “beverage vending machines”); 3. The analyses conducted for the ANOPR, including the preliminary results of the engineering analysis, the markups analysis to determine equipment price, the energy use characterization, the LCC and payback period (PBP) analyses, the NES and national impact analyses, and preliminary manufacturer impact analysis. These analyses are summarized in the ANOPR Technical Support Document (TSD), Energy Efficiency Standards for Commercial and Industrial Equipment: Refrigerated Beverage Vending Machines 1 , published in tandem with this ANOPR; and 1 To view the technical support document for this rulemaking, visit DOE's Web site at: http://www.eere.energy.gov/buildings/appliance_standards/commercial/beverage_machines.html . 4. The candidate standard levels (CSLs) that DOE has developed for the ANOPR from these analyses. Interested persons are welcome to comment on any relevant issue related to this ANOPR. However, throughout this Federal Register notice, DOE identifies areas and issues on which it specifically invites public comment. These critical issues are summarized in Section IV.E of this notice. B. Overview of the Analyses Performed As noted above, EPCA, as amended, authorizes DOE to consider establishing or amending energy conservation standards for various consumer products and commercial and industrial equipment, including the beverage vending machines that are the subject of this ANOPR. (42 U.S.C. 6291 et seq. ) DOE conducted in-depth technical analyses for this ANOPR in the following areas: (1) Engineering; (2) markups to determine equipment price; (3) energy use characterization; (4) LCC and PBP; and (5) NES and net present value (NPV). The ANOPR discusses the methodologies, assumptions, and preliminary results for each analysis. For each type of analysis, Table I.1 identifies the sections in this document that contain the results of the analyses, and summarizes their methodologies, key inputs, and assumptions. In addition, DOE conducted several other analyses that either support the five analyses discussed above or are preliminary analyses that will be expanded during the notice of proposed rulemaking (NOPR) stage of this rulemaking. These analyses include the market and technology assessment, a screening analysis which contributes to the engineering analysis, and the shipments analysis which contributes to the national impacts analysis. In addition to these analyses, DOE has begun preliminary work on the life-cycle cost subgroup analysis, manufacturer impact analysis, utility impact analysis, employment impact analysis, environmental impact analysis, and the regulatory impact analysis for the ANOPR. These analyses will be expanded upon during the NOPR stage of this rulemaking. DOE consulted with stakeholders as part of its process in developing all of these analyses for the ANOPR and invites further public input on these topics which it will incorporate, as appropriate, into any revised analyses. While obtaining such input is the primary purpose at this ANOPR stage of the rulemaking, this notice also contains a synopsis of the preliminary analytical results. (The TSD contains a complete set of results.) The purpose of publishing these preliminary results in this notice is to: (1) Facilitate public comment on DOE's analytical methodology; (2) illustrate the level of detail interested persons (stakeholders 2 ) will find in the TSD; and (3) invite stakeholders to comment on the structure and the presentation of those results. The preliminary analytical results presented in the ANOPR are subject to revision following review and input from stakeholders. 2 The terms “stakeholders” and “interested persons” are used interchangeably throughout this ANOPR to refer to any member of the public seeking to provide input on this rulemaking. Table I.1.—In-Depth Technical Analyses Conducted for the ANOPR Analysis area Methodology Key inputs Key assumptions ANOPR section for results TSD section for results Engineering Design option analysis Component cost data and performance values Component performance improvements are estimated using ANSI/ASHRAE Standard 32.1-2004 Section II.C.6 Chapter 5, section 5.10, and Appendix B. Markups to Determine Equipment Price Assessment of company financial reports to develop markups that transform manufacturer prices into customer prices Distribution channels, market shares across the different channels, State sales taxes, and shipments to different States Markups for baseline and more-efficient equipment are different Section II.D Chapter 6, section 6.7. Energy Use Characterization Energy use estimates from the energy performance model based on the engineering analysis spreadsheet Annual energy consumption based on hourly weather data for 237 U.S. locations Vending machines certified for indoor/outdoor use are assumed to be split 25% outdoors and 75% indoors Section II.E Chapter 7, section 7.4.4, and Appendix D. LCC and Payback Period Analysis of a representative sample of commercial customers by business type and location Manufacturer selling prices, markups (including sales taxes), installation price, energy consumption, electricity prices and future trends, maintenance costs, repair costs, equipment lifetime, and discount rate Baseline efficiency is Level 1. Average electricity prices are listed by customer type and State. The Annual Energy Outlook 2007 (AEO2007) 3 is used as the reference case for future trends. Equipment lifetime is 14 years. Discount rate is estimated using the weighted average cost of capital by customer type Section II.G.5 Chapter 8, section 8.4, and Appendix G. Shipments Projection of total sales by business type, State and by equipment class Wholesaler markups from company balance-sheet data, current shipments data by equipment class, and average equipment lifetime Market shares by equipment class are constant. Market saturation by business type is constant. Shipments do not change in response to standards Section II.H Chapter 9, section 9.4. National Impact Forecasts of equipment costs, annual energy consumption, and operating costs to 2042 Shipments; effective date of standard; base-case efficiencies; shipment-weighted market shares; annual energy consumption, total installed cost, and repair and maintenance costs (all on a per-unit basis); escalation of electricity prices; electricity site-to-source conversion; discount rate; and present year Annual shipments are from the shipments model. The annual weighted-average energy efficiency, installed cost, and annual-weighted average repair costs are a function of the energy efficiency level. Annual weighted-average maintenance costs are constant with the energy consumption level. AEO2007 is used for electricity price escalation, and the National Energy Modeling System (NEMS) is used for site-to-source conversion. Discount rates are 3% and 7% real. Future costs are discounted to 2007 Section II.I.4 Chapter 10, section 10.4, and Appendix I. 3 DOE will conduct the NOPR analysis using the latest available version of the AEO. Updated analytical spreadsheets using AEO2008 will be made available on DOE's Web site by late Spring/early Summer 2008: http://www.eere.energy. gov/buildings/appliance_standards/commercial/beverage_machines.html. 1. Engineering Analysis DOE uses the engineering analysis, along with the equipment price determination, to establish the relationship between the costs (i.e., end-user/customer prices) and efficiencies of equipment which DOE evaluates for standards, including beverage vending machines. This relationship serves as the basis for cost and benefit calculations for individual commercial customers, manufacturers, and the Nation. The engineering analysis identifies representative baseline equipment, which is the starting point for analyzing technologies expected to provide energy efficiency improvements. “Baseline equipment” here refers to model(s) having features and technologies typically found in equipment currently offered for sale. The baseline model in each equipment class represents the characteristics of equipment in that class; for equipment which is already subject to an energy efficiency standard, the baseline unit is typically one which just meets the current regulatory requirement. After identifying baseline models, DOE estimates manufacturer selling prices (MSPs) through an analysis of manufacturer costs and manufacturer markups. Manufacturer markups are the multipliers used to determine MSPs based on manufacturing cost. The engineering analysis uses cost-efficiency curves based on a design-options approach 4 derived from DOE analysis. In the engineering analysis, DOE also discusses the equipment classes analyzed, sensitivity to material prices, and the use of alternative refrigerants. For additional detail on the engineering analysis, see Section II.C.1. 4 A design-options approach uses individual or combinations of design options to identify increases in efficiency. Under this approach, estimates are based on manufacturer or component supplier data, or through the use of engineering computer simulation models. Individual design options, or combinations of design options, are added to the baseline model in ascending order of cost-effectiveness. 2. Markups to Determine Equipment Price DOE determines customer prices for beverage vending machines from MSP 5 and equipment price markups using industry balance sheet and U.S. Census Bureau data. To determine price markups, DOE identifies distribution channels for equipment sales and determines the existence and amount of markups within each distribution channel. For each distribution channel, DOE distinguishes between “baseline markups” applied to the MSP for baseline equipment and “incremental markups” applied to the incremental increase in MSP for more-efficient equipment. Overall baseline and overall incremental markups are calculated separately based on the product of all baseline and incremental markups at each step in a distribution channel. Together, the overall baseline markup applied to the baseline equipment MSP and the incremental markups applied to the incremental increase in MSP for more-efficient equipment, including sales tax, determine the final customer price. For additional detail on the markups used to determine equipment price, see Section II.D. 5 Manufacturer selling prices are derived from the manufacturer production costs by applying the manufacturer markup. The MSP is the selling price of the equipment directly from the manufacturing facility. If this equipment is then routed through a wholesaler and/or a distributor, additional markups are applied before reaching the customer. 3. Energy Use Characterization The energy use characterization provides estimates of annual energy consumption for beverage vending machines. DOE uses these estimates in the subsequent LCC and PBP analyses and the national impact analysis (NIA). DOE developed daily energy consumption estimates for the different equipment classes analyzed in the engineering analysis. 6 DOE then validated these estimates with simulation modeling of energy consumption on an annual basis for all the equipment classes and efficiency levels. The simulation modeling took into account the percentage of vending machines that would be placed indoors and outdoors and therefore, exposed to varying ambient temperatures. For additional detail on the energy use characterization, see Section II.E. 6 The daily energy consumption estimates were calculated in the engineering analysis based on procedures and conditions specified in ANSI/ASHRAE Standard 32.1-2004, Methods of Testing for Bottled, Canned, and Other Sealed Beverages . 4. Life-Cycle Cost and Payback Period Analyses The LCC and PBP analyses determine the economic impact of potential standards on individual commercial customers. The LCC is the total customer expense for a piece of equipment over the life of the equipment (i.e., purchase price plus maintenance and operating costs). The LCC analysis compares the life-cycle costs of equipment designed to meet new or amended energy conservation standards with the life-cycle cost of the equipment likely to be installed in the absence of such standards. DOE determines these costs by considering: (1) Total installed cost to the purchaser (including MSP, sales taxes, distribution channel markups, and installation cost); (2) the operating expenses of the equipment (energy cost and maintenance and repair cost); (3) equipment lifetime; and (4) a discount rate that reflects the real cost of capital and puts the LCC in present value terms. For additional detail on the LCC analysis, see Section II.G.1. The PBP represents the number of years needed to recover the increase in purchase price (including installation cost) of more-efficient equipment through savings in the operating cost. The PBP is the increase in total installed cost due to increased efficiency divided by the (undiscounted) decrease in annual operating cost from increased efficiency. For additional detail on the PBP analysis, see Section II.G.1. 5. National Impact Analysis The NIA estimates the NES, as well as the NPV, of total national customer costs and savings expected to result from new standards at specific efficiency levels. Stated another way, DOE calculated the NES and NPV for each standard level for beverage vending machines as the difference between a base-case forecast (i.e., without new standards) and the standards-case forecast (i.e., with new standards). For each year of the analysis, the beverage vending machine stock is composed of units of different types shipped in previous years (or vintages) which remain available for sale at present. Each vintage has a characteristic distribution of efficiency levels. DOE first determined the average energy consumption of each vintage in the stock accounting for all efficiency levels in that vintage. The national annual energy consumption is then the product of the annual average energy consumption per beverage vending machine at a given vintage and the number of beverage vending machines of that vintage in the stock for the particular year. This approach accounts for differences in unit energy consumption from year to year. Annual energy savings are calculated for each standard level by subtracting national energy consumption for that standard level from that calculated for the baseline. Cumulative energy savings are the sum of the annual NES determined from 2012 to 2042. In a similar fashion, DOE tracks the first costs for all equipment installed at each efficiency level for each vintage. It also tracks the annual operating cost (sum of the energy, maintenance, and repair costs) by vintage for all equipment remaining in the stock for each year of the analysis. DOE then calculates the net economic savings each year as the difference between total operating cost savings and increases in the total installed costs. The NPV is the annual net cost savings calculated for each year, discounted to the year 2012, and expressed in 2007$. Cumulative NPV savings reported are the sum of the annual NPV savings over the analysis period (2012-2042). 7 Critical inputs to the NIA include shipment projections, rates at which users retire equipment (based on estimated equipment lifetimes), and estimates of changes in shipments and retirement rates in response to changes in equipment costs due to new standards. For additional detail on the NIA, see Section II.I.1. 7 DOE uses 31 years as the time period of analysis for its NES calculations in many of its rulemakings, in order to enable interested persons to understand the relative magnitude of energy savings potentials of the various equipment at the standard levels being considered. C. Authority Title III of EPCA sets forth a variety of provisions concerning energy efficiency. Part A 8 of Title III provides for the “Energy Conservation Program for Consumer Products Other Than Automobiles.” (42 U.S.C. 6291-6309) 8 This part was originally titled Part B; however, it was redesignated Part A, after Part B of Title III was repealed by Pub. L. 109-58. Similarly, Part C, Certain Industrial Equipment , was redesignated Part A-1. The amendments to EPCA contained in the Energy Policy Act of 2005 (EPACT 2005), Pub. L. 109-58, include new or amended energy conservation standards and test procedures for some of these products, and direct DOE to undertake rulemakings to promulgate such requirements. In particular, section 135(c)(4) of EPACT 2005 amends EPCA to direct DOE to prescribe energy conservation standards for beverage vending machines. (42 U.S.C. 6295(v)) Because of its placement in Part A of Title III of EPCA, the rulemaking for beverage vending machine energy conservation standards is bound by the requirements of 42 U.S.C. 6295. However, since beverage vending machines are commercial equipment and consistent with DOE's previous action to incorporate the EPACT 2005 requirements for commercial equipment into Title 10 of the Code of Federal Regulations (CFR), Part 431 (“Energy Efficiency Program for Certain Commercial and Industrial Equipment”), DOE intends to place the new requirements for beverage vending machines in 10 CFR part 431. The location of the provisions within the CFR does not affect either their substance or applicable procedure, so DOE is placing them in the appropriate CFR part based on their nature or type. 9 9 Because of their placement into 10 CFR 431, beverage vending machines will be referred to as “equipment” throughout this notice. Before DOE prescribes any such standards, however, it must first solicit comments on proposed standards. Moreover, DOE must design each new standard for beverage vending machines to achieve the maximum improvement in energy efficiency that is technologically feasible and economically justified, and will result in significant conservation of energy. (42 U.S.C. 6295(o)(2)(A), (o)(3), (v)) To determine whether a standard is economically justified, DOE must, after receiving comments on the proposed standard, determine whether the benefits of the standard exceed its burdens to the greatest extent practicable, considering the following seven factors: (1) The economic impact of the standard on manufacturers and consumers of products subject to the standard; (2) The savings in operating costs throughout the estimated average life of the covered product in the type (or class) compared with any increase in the price, initial charges, or maintenance expenses for the covered product likely to result from imposition of the standard; (3) The total projected amount of energy savings likely to result directly from imposition of the standard; (4) Any lessening of the utility or performance of the covered products likely to result from imposition of the standard; (5) The impact of any lessening of competition, as determined in writing by the Attorney General, that is likely to result from imposition of the standard; (6) The need for national energy conservation; and (7) Other factors the Secretary of Energy (the Secretary) considers relevant. (42 U.S.C. 6295(o)(2)(B)(i)) D. Background 1. History of Standards Rulemaking for Beverage Vending Machines As noted above, section 135(c)(4) of EPACT 2005 amended section 325 of EPCA in part by adding new subsections 325(v)(2), (3), and (4). (42 U.S.C. 6295(v)(1), (2) and (3)). 10 These provisions direct the Secretary to prescribe, by rule, energy conservation standards for beverage vending machines no later than August 8, 2009, and state that any such standards shall apply to beverage vending machines manufactured three years after the date of publication of the final rule that establishes those standards. The energy use of this equipment has never before been regulated at the Federal level. 10 It is noted that the relevant statutory provisions were renumbered pursuant to section 316 of the Energy Independence and Security Act of 2007, Pub. L. 110-140. Section 135(a)(3) of EPACT 2005 amended section 321 of EPCA in part by adding new subsection 321(40) (42 U.S.C. 6291(40)), which establishes the definitions for “refrigerated bottled or canned beverage vending machine” as “a commercial refrigerator that cools bottled or canned beverages and dispenses the bottled or canned beverages on payment.” In addition, section 136(a)(3) of EPACT 2005 amended section 340 of EPCA in part by adding a definition for “commercial refrigerator, freezer, and refrigerator-freezer.” 11 11 This definition reads as follows: “(9)(A) The term ‘commercial refrigerator, freezer, and refrigerator-freezer’ means refrigeration equipment that— (i) is not a consumer product (as defined in section 321 [of EPCA; 42 U.S.C. 6291(1)]); (ii) is not designed and marketed exclusively for medical, scientific, or research purposes; (iii) operates at a chilled, frozen, combination chilled and frozen, or variable temperature; (iv) displays or stores merchandise and other perishable materials horizontally, semivertically, or vertically; (v) has transparent or solid doors, sliding or hinged doors, a combination of hinged, sliding, transparent, or solid doors, or no doors; (vi) is designed for pull-down temperature applications or holding temperature applications; and (vii) is connected to a self-contained condensing unit or to a remote condensing unit.” (42 U.S.C. 6311(9)(A)) On June 28, 2006, DOE published in the Federal Register a notice announcing a public meeting and the availability of a Framework Document titled, Rulemaking Framework for Refrigerated Bottled or Canned Beverage Vending Machines , 12 that describes the procedural and analytical approaches that DOE anticipates using to evaluate energy conservation standards for beverage vending machines. 71 FR 36715. DOE invited written comments on this analytical framework. 12 The Framework Document is available at: http://www.eere.energy.gov/buildings/appliance_standards/commercial/beverage_machines.html. DOE held a Framework public meeting on July 11, 2006, whose purpose was to discuss the procedural and analytical approaches for use in the rulemaking, and to inform and facilitate stakeholder involvement in the rulemaking process. The analytical framework presented at the public meeting described different analyses, such as LCC and PBP, the planned methods for conducting them, and the relationships among the various analyses. 13 Manufacturers, trade associations, environmental advocates, and other interested parties attended the public meeting. 13 PDF copies of the slides and other materials associated with the public meeting are available at: http://www.eere.energy.gov/buildings/appliance_standards/commercial/beverage_machines.html . Comments received after publication of the Framework Document and at the July 11 public meeting helped identify and elaborated upon issues involved in this rulemaking and provided information that has contributed to DOE's efforts to resolve these issues. Many of the statements provided by stakeholders are quoted or summarized in this ANOPR. A parenthetical reference at the end of a quotation or passage provides the location of such item in the public record ( i.e. , the docket for this rulemaking). The ANOPR TSD describes the analytical framework in detail. During the course of this rulemaking, Congress passed the Energy Independence Security Act of 2007 (EISA 2007), which the President signed on December 19, 2007 (Pub. L. 110-140). Of relevance to the beverage vending machine rulemaking, section 310(3) of EISA 2007 amended section 325 of EPCA in part by adding subsection 325(gg) (42 U.S.C. 6295(gg)). This subsection requires any new or amended energy conservation standard adopted after July 1, 2010 to incorporate “standby mode and off mode energy use.” (42 U.S.C. 6295(gg)(3)(A)) Since any standard associated with this rulemaking is required by August 2009, the energy use calculations will not include “standby mode and off mode energy use.” To include standby mode and off mode energy use requirements for this rulemaking would take a considerable degree of analytical effort and would likely require changes to the test procedure. Given the statutory deadline, DOE has decided to address this requirement when the standards for beverage vending machines are reviewed in August 2015 to consider the need for possible amendment in accordance with 42 U.S.C. 6295(m). 2. Rulemaking Process Table I.2 sets forth a list of the analyses DOE has conducted and intends to conduct in its evaluation of potential energy conservation standards for beverage vending machines. Historically, DOE performed the manufacturer impact analysis (MIA) in its entirety between the ANOPR and NOPR stages of energy conservation standards rulemakings. However, more recently, DOE has refined its process and has begun to publish a preliminary MIA in the ANOPR for public comment. DOE believes this change will improve the rulemaking process. Accordingly, as noted in the table below, DOE has performed a preliminary MIA for this ANOPR. Table I.2.—Beverage Vending Machine Analysis ANOPR NOPR Final Rule* • Market and technology assessment • Revised ANOPR analyses • Revised NOPR analyses • Screening analysis • Life-cycle cost sub-group analysis • Engineering analysis • Manufacturer impact analysis • Energy use characterization • Utility impact analysis • Markups to determine equipment price • Employment impact analysis • Life-cycle cost and payback period analyses • Environmental assessment • Shipments analysis • Regulatory impact analysis • National impact analysis • Preliminary manufacturer impact analysis * During the final rule phase, DOE considers the comments submitted by the U.S. Department of Justice in the NOPR phase concerning the impact of any lessening of competition likely to result from the imposition of the standard. (42 U.S.C. 6295(o)(2)(B)(v)) The analyses listed in Table I.2 also include the development of related economic models and analytical tools, as necessary. If timely new data, models, or tools that enhance the development of standards become available, DOE will incorporate them into this rulemaking. 3. Miscellaneous Rulemaking Issues a. Consensus Agreement In response to the Framework Document, USA Technologies stated that there appears to be considerable consensus regarding potential energy conservation standards for beverage vending machines and that DOE could provide a valuable and meaningful service by coordinating the efforts of industry, manufacturers, beverage vending machine owners, and utilities by fostering an agreement on standards. USA Technologies stated that this approach could help the industry achieve significant energy savings in a very short time, instead of waiting until 2012. (USA Tech, No. 9 at p. 1) 14 Edison Electric Institute (EEI) suggested that, given DOE's workload on Federal standards over the next several years, DOE should try to arrange a negotiated rulemaking of interested parties to help streamline the process. EEI noted that such a process was very successful with the fluorescent lamp ballast rulemaking. 15 (EEI, No. 12 at p. 1) DOE supports efforts by interested parties to work together to develop and present to DOE recommendations on equipment categories and standard levels. Such recommendations are welcome throughout the standards development process, especially following issuance of the ANOPR. Any consensus recommendation must satisfy the statutory criteria provided by EPCA in determining whether an energy conservation standard is technologically feasible and economically justified, and will result in significant conservation of energy. (42 U.S.C. 6295(o)(2)(A), (o)(3), (v)) Any consensus recommendation should also include information that DOE can use to assess the seven statutory factors that determine whether the benefits of the standard exceed its burdens to the greatest extent practicable. (42 U.S.C. 6925(o)(2)(B)(i)) 14 A notation in the form “USA Tech, No. 9 at p. 1” identifies a written comment that DOE received and included in the docket for this rulemaking (Docket No. EERE-2006-STD-0125), maintained in the Resource Room of the Building Technologies Program. Specifically, this footnote refers to a comment made USA Technologies, and recorded on page 1 of document number 9. Likewise, a notation in the form “Public Meeting Transcript, No. 8 at p. 150” identifies an oral comment that DOE received during the July 11, 2006, Framework public meeting and which was recorded in the public meeting transcript in the docket for this rulemaking. Likewise, a notation in the form “Joint Comment,” No. 13 at p. 3” identifies a written comment that DOE has received and has included in the docket of this rulemaking. 15 DOE notes that in the florescent lamp ballasts rulemaking, a consensus process was used. 65 FR 56740, 56744 (Sept. 19, 2000). b. Type of Standard Crane Merchandising Systems asked whether the technology options listed would become mandatory as part of the rulemaking. (Public Meeting Transcript, No. 8 at p. 150) USA Technologies stated that, in terms of technology options for compliance with energy conservation standards, the more opportunity manufacturers have to be creative, the better, particularly since this is a very creative industry. It stated that restricting manufacturers to particular design options would not be in the manufacturers'—or the buyers'—best interest. (Public Meeting Transcript, No. 8 at p. 173) Dixie-Narco likewise stated that the choice of technologies used to achieve standards should be left to the discretion of the manufacturer. (Public Meeting Transcript, No. 14 at p. 3) Dixie-Narco further suggested that the DOE standard should not recommend any particular design packages or endorse any specific third-party technologies developed for use in vending machines that original equipment manufacturers have not endorsed as being compatible with their equipment. It stated that these technologies may work against other energy-saving components such as variable-capacity compressors. (Public Meeting Transcript, No. 14 at p. 3) In contrast, the Naval Facilities Engineering Service Center (NFESC) recommended that DOE should pursue cost-effective standards for beverage vending machines, which would include both overall efficiency standards, as well as prescriptive standards that address more focused topics such as a low-power-mode requirement for low-use periods and lighting efficiency within the unit. (NFESC, No. 15 at p. 2) In response, DOE notes that EPCA provides that an “energy conservation standard” must be either (A) “a * * * level of energy efficiency” or “a * * * quantity of energy use,” or (B), for certain specified equipment, “a design requirement.” (42 U.S.C. 6291(6)) Thus, an “energy conservation standard” cannot consist of both a design requirement and a level of efficiency or energy use. 16 Moreover, item (A) above indicates that, under EPCA, a single energy conservation standard cannot have measures of both energy efficiency and energy use. Furthermore, EPCA specifically requires DOE to base its test procedure for this equipment on American National Standards Institute (ANSI)/American Society of Heating, Refrigerating and Air-Conditioning Engineers (ASHRAE) Standard 32.1-2004, Methods of Testing for Rating Vending Machines for Bottled, Canned or Other Sealed Beverages. (42 U.S.C. 6293(b)(15)) The test methods in ANSI/ASHRAE Standard 32.1-2004 consist of means to measure energy consumption, not energy efficiency. 16 Beverage vending machines are not one of the specified equipment for which EPCA allows a standard to consist of a design requirement. (42 U.S.C. 6291(6)(B), 6292(a)). For these reasons, DOE does not intend to develop efficiency standards or design requirements for this equipment. Instead, DOE intends to develop standards such that each beverage vending machine would be subject to a maximum level of energy use, and manufacturers could meet these standards with their own choice of design methods. c. Split Incentive Issue DOE mentioned the “split incentive issue” (explained below) at the Framework public meeting when discussing distribution channels for beverage vending machines sold to the bottler or a vending machine operator. The bottler or the vending machine operator installs these machines at different sites through location contracts, maintains and stocks the machines, and retains a certain percentage of the coin-box revenue. The site owner, in this case, allows the machine to be placed on-site, receives a percentage of the coin-box revenue and/or other remuneration, and most relevant to this rulemaking, pays the electricity bill and enjoys any electricity cost savings associated with more-efficient machines. The equipment purchaser (bottler or vending machine operator) does not pay the electricity bill and, therefore, does not receive any cost savings. In principle, the business site owner would be willing to accept a lower percentage of revenue for a machine that uses less electricity. However, where it is costly to renegotiate contracts, the incentive to purchase more-efficient machines may be lessened or eliminated. Nonetheless, there may be a growing market for energy-efficient beverage vending machines because environmentally-conscious beverage companies and bottlers are pushing to install energy-efficient machines on-site, and certain site owners are demanding that energy-efficient machines be installed to reduce their electricity costs. At the Framework public meeting, Coca-Cola indicated that the vending machine operator may or may not pay some or all of the energy costs, depending on its contract with the site owner. (Public Meeting Transcript, No. 8 at p. 190) Meanwhile, EEI asserted that information about distribution channels and beverage vending machine contracts would be important for the LCC analysis. EEI claimed that unless there is a provision in the contract for energy costs, there will be a split incentive for machine owners and site owners. (EEI, No. 12 at p. 5) DOE agrees with EEI that there may be a split incentive in the beverage vending machine market; however, it disagrees with EEI's contention that the split incentive is relevant to the LCC analysis. DOE recognizes that when a standard results in overall operating cost savings that are greater than increases in the installed cost for the equipment, there will be a life-cycle cost benefit from the standard, a key piece of regulatory information independent of who receives such benefit. How the benefits and burdens are shared between the equipment purchaser and the site owner is a function of the nature of the contract, and this allocation may in fact change as the expenses of either party change as a result of subsequent events, such as changes in electricity prices or standards requiring more-efficient machines. DOE has limited data on existing beverage vending machine contracts, but knows that these can vary widely. DOE has no data on how these contracts may change as the relative expenses of either party shift. In summary, for the purposes of the LCC analysis and as is required by EPCA, DOE is evaluating the benefits and burdens of the standards from the standpoint of a “customer” who is assumed to bear the burden of purchasing the equipment and the benefits of any energy savings, which in this case, is the equipment purchaser. (42 U.S.C. 6295(o)(2)(B)(i)) DOE requests further comment and information on this issue. 4. Test Procedure A test procedure outlines the method by which manufacturers will determine the energy consumption of their beverage vending machines, and thereby assess the results used to certify compliance with an energy conservation standard. Section 135(b) of EPACT 2005 amended section 323 of EPCA in part by adding new subsections 323(b)(15) (42 U.S.C. 6293(b)(15)) and 323(f) (42 U.S.C. 6293(f)). Respectively, these subsections provide that the test procedure for refrigerated bottled or canned beverage vending machines shall be based on ANSI/ASHRAE Standard 32.1-2004, and that the Secretary had until August 8, 2007 to prescribe that new test procedure. On December 8, 2006, DOE published a final rule in the Federal Register that incorporated by reference ANSI/ASHRAE Standard 32.1-2004, with two modifications, as the DOE test procedure for this equipment. 71 FR 71340, 71375; 10 CFR 431.294. The first modification DOE made was to specify that in Section 6.2, “Voltage and Frequency,” equipment with dual nameplate voltages must be tested at the lower of the two voltages only. 71 FR 71340, 71355 (Dec. 8, 2006). The second modification was to specify that (1) any measurement of “vendible capacity” of refrigerated bottled or canned beverage vending machines must be in accordance with the second paragraph of Section 5, “Vending Machine Capacity,” of ANSI/ASHRAE Standard 32.1-2004, and (2) any measurement of “refrigerated volume” of refrigerated bottled or canned beverage vending machines must be in accordance with the methodology specified in Section 5.2, “Total Refrigerated Volume,” (excluding subsections 5.2.2.2 through 5.2.2.4) of the ANSI/Association of Home Appliance Manufacturers (AHAM) HRF-1-2004, Energy, Performance and Capacity of Household Refrigerators, Refrigerator-Freezers and Freezers. Id. 5. Rating Conditions In the Framework Document, DOE requested feedback on what rating conditions it should use for setting standards and determining compliance with them. DOE's test procedure included two rating conditions (i.e., 75 degrees Fahrenheit (°F)/45 percent relative humidity (RH) and 90°F/65 percent RH). EEI stated that the 75°F/45 percent RH ambient conditions specified in the ANSI/ASHRAE Standard 32.1-2004 should provide adequate daily energy-usage information for most machines located solely indoors. EEI added that for certain indoor conditions (i.e., machines located in rooms with limited ventilation), the 90°F/65 percent RH test conditions may be better. (EEI, No. 12 at p. 2) Dixie-Narco stated that for the majority of indoor equipment, the rating 75°F/45 percent RH temperature is accurate and reflects actual conditions. (Public Meeting Transcript, No. 8 at p. 95) Dixie-Narco stated that the 90°F/65 percent RH rating condition is highly overstated, arguing that no location in the United States is at 90°F/65 percent RH condition 24 hours a day, 365 days a year. Royal Vendors and UVA Technologies agreed with Dixie-Narco, stating that the actual energy use of outdoor machines is likely to be overstated, in most cases, when determined under those conditions. (Public Meeting Transcript, No. 8 at pp. 96-97) Pacific Gas and Electric (PG&E) indicated, however, that DOE need not distinguish between indoor and outdoor temperature conditions in setting rating conditions because machines located indoors sometimes operate in warmer conditions, similar to the ambient conditions that the machine might operate in if it was located outdoors. (Public Meeting Transcript, No. 8 at p. 94) Coca-Cola stated energy consumption depends not only on ambient temperature, but also on ambient humidity and the heat load (heat output by components) within the machine. (Coca-Cola, No. 8 at p. 220) EEI noted that one EEI member company suggested that if DOE could determine a way to require outdoor-rated machines to be used exclusively outdoors and indoor-rated machines to be used exclusively indoors, there could be considerable energy savings. (EEI, No. 12 at p. 2) During the Framework public meeting, EEI stated that if glass-front machines are placed outside, DOE might need to consider a different test procedure to account for the difference in radiation heat loads between glass-front and closed-front machines. EEI also suggested separate tests for winter and summer conditions for machines used outdoors. (Public Meeting Transcript, No. 8 at p. 66) In addition, EEI argued that energy usage of beverage vending machines varies dramatically based on ambient conditions. It suggested that DOE should adopt a test procedure for outdoor machines that would account for high ambient temperatures and/or solar loads, which would improve the efficiency of the equipment throughout the year, but especially on peak summer days. (EEI, No. 12 at p. 3) EEI added that if DOE decides to establish standards in terms of total daily energy consumption, then extreme outdoor temperature conditions must be accounted for. (EEI, No. 12 at p. 5) In response to these comments, DOE understands the concerns about the variability in energy consumption resulting from different ambient conditions. However, outdoor-only beverage machines are currently nonexistent. Currently, all machines placed outdoors are designed for both indoor and outdoor use and are not designed exclusively for outdoor use only. If, as suggested by several manufacturers, a 90 °F/65 percent RH rating condition for a machine used outdoors would result in overstatement of its energy use due to changing daily and seasonal ambient conditions, that rating condition applied to the same machine used indoors would then be expected to result in an even greater overstatement of energy use. For example, the average annual temperature in Miami, FL (one of the southernmost and warmest cities in the United States) is approximately 75 °F. 17 Therefore, throughout the United States, almost all average annual outdoor temperatures are close to or below 75 °F. DOE chooses to evaluate an average temperature because it believes that the increase in the energy consumption of a machine operating in temperatures above the average is offset by the decrease in energy consumption of a machine operating in temperatures below the average. In addition, beverage vending machines have closed refrigeration systems. The relative humidity that a beverage vending machine operates in has a much less significant impact than ambient temperature on the energy consumption of a beverage vending machine. After careful consideration of public comments on this issue, DOE plans to use a 75 °F/45 percent RH rating condition for all refrigerated beverage vending machines covered by this rulemaking. DOE will include this rating condition requirement as part of any energy conservation standards developed in this rulemaking. 17 Typical Meterorological Year 2 (TMY2) Data (from the 1961-1990 National Solar Radiation Data Base). Available at: http://rredc.nrel.gov/solar/old_data/nsrdb/tmy2/. II. Energy Conservation Standards Analyses for Beverage Vending Machines This section addresses the analyses DOE has performed and intends to perform for this rulemaking. A separate subsection addresses each analysis and the underlying assumptions applied to that analysis. Specifically, DOE will perform a set of analyses, including: (1) A market and technology assessment; (2) a screening analysis; (3) an engineering analysis; (4) an analysis to determine equipment price; (5) an energy use characterization; (6) an LCC and PBP analysis; (7) a shipments analysis; (8) a national impact analysis; and (9) a manufacturer impact analysis. Additional analyses consider the impact of a potential rule on utilities, LCC sub-groups, employment, and the environment. A full description of how these analyses are performed is contained in the TSD. 18 However, this section of the ANOPR provides an overview of these analyses, while focusing on how these analyses are being tailored to this rulemaking and on their underlying assumptions. It also discusses comments received from interested parties since DOE published the beverage vending machines Framework Document. 18 Available on DOE's Web site at http://www.eere.energy.gov/buildings/appliance_standards/commercial/beverage_machines.html. A. Market and Technology Assessment When DOE begins a standards rulemaking, it develops market assessment information that provides an overall picture of the market for the equipment concerned, including the nature of the equipment, the industry structure, and market characteristics for the equipment. The technology assessment identifies available, energy-saving technologies, which will be considered in the screening analysis. These activities consist of both quantitative and qualitative efforts based primarily on publicly available information. The subjects addressed in the market and technology assessment for this rulemaking include manufacturer characteristics and market shares, existing regulatory and non-regulatory efficiency improvement initiatives, equipment classes, and trends in equipment markets and characteristics. This information serves as resource material for use throughout the rulemaking. 1. Definition of “Beverage Vending Machine” As mentioned above, EPCA defines the term “refrigerated bottled or canned beverage vending machine” as “a commercial refrigerator that cools bottled or canned beverages and dispenses the bottled or canned beverages on payment.” (42 U.S.C. 6291(40)) Thus, whether equipment is a beverage vending machine covered under EPCA depends on whether it cools and dispenses “bottled beverages” and/or “canned beverages,” and, in the Framework Document, DOE requested feedback on the meaning of these terms. The following summarizes public comments on this issue. PepsiCo stated that there are many types of packaging for beverages that cannot be categorized as a can or bottle. (Public Meeting Transcript, No. 8 at p. 36) Dixie-Narco questioned how DOE's packaging definition will take into account evolving package types over time. (Public Meeting Transcript, No. 8 at p. 37) PepsiCo elaborated, asking how DOE will treat other types of packaging (e.g., pouch-type packaging and packaging that is a combination of plastic and paperboard). (Public Meeting Transcript, No. 8 at pp. 40-41) The National Automated Merchandising Association (NAMA) then asked whether DOE will include aseptic packaging as a bottle or can. 19 (Public Meeting Transcript, No. 8 at p. 41) 19 An aseptic package is a package that is intended to prevent spoilage and is used for long-term storage of its contents. Dixie-Narco suggested that DOE should use the term “beverage containers” to describe the items refrigerated beverage vending machines dispense. (Public Meeting Transcript, No. 8 at p. 46) EEI stated that DOE should expand the list of vended items to more than just bottles and cans. (Public Meeting Transcript, No. 8 at p. 42) It suggested that DOE should add “other beverage container” to the list of vended items that delineate what constitutes a beverage vending machine, and that DOE should define that term, so as to include other combinations (e.g., plastic and paperboard, metal and plastic, metal and glass) or other materials that may contain a beverage that will be housed in a refrigerated beverage vending machine. EEI noted that another option would be to add the phrase “packaged beverage-refrigerated” to the list of vended products that define what equipment is a beverage vending machine. (EEI, No. 12 at p. 3) The Alliance to Save Energy, the American Council for an Energy Efficient Economy (ACEEE), the Appliance Standards Awareness Project (ASAP), the Natural Resources Defense Council (NRDC), the Northeast Energy Efficiency Partnerships (NEEP), and the Northwest Power and Conservation Council, in comments they jointly filed (hereafter “Joint Comment”), stated that the definitions suggested by DOE for the terms “bottle” and “can” seem workable, except that the term “can” should be broadened to include plastic. The Joint Comment also noted the distinction between what is a “can” and what is a “bottle” is not important, as long as all types of containers are included. (Joint Comment, No. 13 at p. 3) Dixie-Narco agreed with this comment. The Joint Comment suggested using the ASHRAE standard package (i.e., a 12-ounce, 355-milliliter can) as a thermal load in the test procedure. (Dixie-Narco, No. 14 at p. 1) After carefully reviewing these comments, DOE has tentatively decided to consider broader definitions for the terms “bottled” and “canned” as they apply to beverage vending machines. DOE believes a bottle or can in this context refers to “a sealed container for beverages,” so a bottled or canned beverage is “a beverage in a sealed container.” Such definition would avoid unnecessary complications regarding the material composition of the container. Furthermore, a single, encompassing definition will eliminate the need to determine whether a particular container is a bottle or a can. DOE seeks comment on this broader definition, both as to the definition itself and whether it is consistent with the intent of the Act. Combination vending machines are vending machines that dispense cooled beverages as well as other beverages and food items. These types of vending machines are discussed in Section 5.a below. 2. Equipment Classes In general, when evaluating and establishing energy conservation standards, DOE divides covered equipment into equipment classes by the type of energy used, capacity, or other performance-related features that affect efficiency and factors such as the utility of such feature(s) to users. (42 U.S.C. 6295(q)) DOE routinely establishes different energy conservation standards for different equipment classes based on these criteria. A number of characteristics of beverage vending machines have the potential to affect their energy use and efficiency, and accordingly, to be the basis for separate equipment classes for these machines. In the Framework Document, DOE suggested and sought feedback on two issues that could affect equipment class designations: (1) Indoor-only and indoor/outdoor machines; and (2) glass-front and solid-front machines. With regard to glass-front and solid-front machines, ACEEE stated it may be better to distinguish equipment classes as “zone-cooled” and “fully-cooled” rather than “solid-front” and “glass-front”, respectively. It asserted that the latter two demarcations overlap to some extent, and some important distinctions make zone-cooled and fully-cooled better classifications. (Public Meeting Transcript, No. 8 at p. 85) NAMA stated that during vending machine efficiency meetings with the Canadian Standards Association (CSA), the CSA's standards committee recommended “zone-cooled” and “fully-cooled” as the two classes of refrigerated beverage vending machines. (Public Meeting Transcript, No. 8 at p. 58) Dixie-Narco and Coca-Cola agreed that using these designations to define equipment classes has merit. (Public Meeting Transcript, No. 8 at pp. 63-64) As stated earlier, DOE categorizes equipment classes based on different performance-related or utility-related factors that affect efficiency. PG&E stated that the efficiency of a machine depends on whether it is zone-cooled or fully-cooled. (Public Meeting Transcript, No. 8 at p. 62) Dixie-Narco stated that, all other things being equal, zone-cooled machines use less energy than fully-cooled machines because their refrigeration system is smaller. (Public Meeting Transcript, No. 8 at p. 103) PepsiCo expressed a similar opinion, adding that it would like to see standards based on energy use, rather than trying to define what the design of the machine should be. (Public Meeting Transcript, No. 8 at p. 103) Based on public comments, DOE agrees that “zone-cooled” and “fully-cooled” are more appropriate descriptors for beverage vending machines that are solid-front and glass-front, respectively, and intends to use this terminology in this rulemaking. In addition to whether a beverage vending machine is zone-cooled or fully-cooled, the ambient conditions that a machine operates in can also affect its energy efficiency. EEI and NFESC stated that there should be separate equipment classes for indoor-only and indoor/outdoor machines. (Public Meeting Transcript, No. 8 at p. 50 and NFESC, No. 15 at p. 4) Dixie-Narco commented that a classification is needed for the outdoor machines simply because of the large number of machines that Coca-Cola and PepsiCo own; some smaller operators may primarily have indoor locations, but no one should be excluded. (Public Meeting Transcript, No. 8 at p. 94) Coca-Cola stated that a distinction between indoor-only and indoor/outdoor machines has to do with weatherization and how they tolerate environmental effects. Specifically, Coca-Cola stated that indoor/outdoor machines are more weatherproof and designed to be less influenced by environmental effects, such as high humidity and direct contact with moisture. (Public Meeting Transcript, No. 8 at p. 55) Dixie-Narco commented that the primary differences between indoor-only and indoor/outdoor machines are vandalism-prevention features. (Public Meeting Transcript, No. 8 at p. 53) Southern California Edison's Refrigeration and Thermal Test Center (RTTC) asked whether it would be appropriate to have a category for outdoor-only machines since there probably will be glass-front outdoor machines in the future. RTTC stated that the larger refrigeration system needed for an outdoor machine would not be the proper size for indoor conditions. (Public Meeting Transcript, No. 8 at p. 89) In contrast, Dixie-Narco stated that outdoor machines today can be used indoors and outdoors, but that classification is acceptable because the machine can be tested to the worst-case environment. According to Dixie-Narco, indoor-only machines are tested to the 75 °F/45 percent RH condition, so when an outdoor machine is tested indoors, lower energy use is measured because of the lower rating conditions. Dixie-Narco did not see any need to have additional specifications. (Public Meeting Transcript, No. 8 at p. 89) ACEEE summarized the discussion at the Framework public meeting, stating it heard there should be an outdoor category with subcategories for zone-cooled and fully-cooled machines, and an indoor category without any subcategories. (Public Meeting Transcript, No. 8 at p. 94) ACEEE suggested three equipment classes based on the discussion at the Framework public meeting: (1) A zone-cooled machine tested at 90 °F; (2) a fully-cooled machine tested at 75 °F; and (3) a fully-cooled machine tested at 90 °F. (Public Meeting Transcript, No. 8 at p. 68). Dixie-Narco stated that variable-speed compressors are increasingly being used in vending machines, and they adapt to the load indoors and outdoors. Moreover, Dixie-Narco argued that these compressors are no less efficient indoors, even if they are sized to operate outdoors. Dixie-Narco stated that in order to be able to meet ENERGY STAR Tier 2 levels and above, manufacturers will have to use variable speed compressor technology. (Public Meeting Transcript, No. 8 at p. 91) Dixie-Narco recommended consolidating into one rating condition so that both indoor and outdoor vending machines are tested at a standard of 75 °F/45 percent RH. (Dixie-Narco, No. 14 at p. 2). Based on the public comments above and anecdotal information that few glass-front or fully-cooled machines (certified for indoor use only) are actually installed outdoors (because of safety and vandalism reasons) and very few other machines are certified for indoor use only, DOE now intends to designate the following two equipment classes of beverage vending machines for this rulemaking: (a) Class A Machine (fully-cooled machines). (b) Class B Machine (any beverage vending machine not considered to be Class A) DOE recognizes that fully-cooled beverage vending machines virtually always have glass fronts, and DOE has designated these machines as “Class A.” DOE has designated as “Class B” any other beverage vending machine that cannot be considered Class A. DOE intends to use these two equipment classes rather than four as suggested in the Framework Document. DOE does not find it necessary to establish separate equipment classes for indoor machines and outdoor machines, because of the similarities between average indoor and outdoor operating conditions. Thus, DOE intends to use two equipment classes (Class A and Class B), as described in further detail below. The “Class A” beverage vending machine equipment class is comprised of machines that cool the entire internal volume. Class A machines generally use “shelf-style” vending mechanisms and tend to utilize a transparent (glass or transparent polymer) front,. Because the next-to-be-vended product is visible to the consumer and any product can be selected by the consumer off of the shelf, all bottled or canned beverage containers are necessarily enclosed within the refrigerated volume. The “Class B” beverage vending machine equipment class is generally composed of machines that have an opaque front (which provides better insulation from ambient conditions) and utilize a “stack-style” vending mechanism. These machines are usually installed either indoors or outdoors. The energy consumption of the outdoor machines varies with the varying ambient conditions. However, as stated earlier, the average energy consumption of these machines is very similar to that of machines installed indoors. Typically, though, unlike the Class A machines, only a fraction (or a zone) of the volumes of the Class B machines (usually the bottom third of the machine) is cooled. Hence, they are also sometimes referred to as “zone-cooled” machines. 3. Selection of Baseline Equipment—Use of the ENERGY STAR Criteria Once DOE establishes equipment classes, it selects a baseline model as a reference point for each class, and measures changes resulting from energy conservation standards against the baseline. The baseline model in each equipment class represents the characteristics of equipment typical of that class (e.g., vendible capacity, physical size). Generally, a baseline model is one that just meets current energy conservation standards, or, if no standards are in place, the baseline is typically the most common or least efficient unit on the market. At present, there are no existing energy conservation standards for beverage vending machines covered under this rulemaking. However, the U.S. Environmental Protection Agency (EPA) has developed voluntary energy performance criteria for beverage vending machines as part of the ENERGY STAR labeling program. ENERGY STAR has a two-tiered specification for refrigerated beverage machines. Tier 1 has been in effect for new machines since April 1, 2004, and for refurbished machines since April 31, 2006. The Tier 2 criteria went into effect on July 1, 2007 for all new machines. Originally, the top 25 percent of beverage vending machines qualified for ENERGY STAR Tier 1. Now, however, some manufacturers are producing even more-efficient machines that qualify for Tier 2, and a majority of the machines being manufactured meet or exceed Tier 1 levels. However, there are some models currently in the market that are less efficient than the Tier 1 levels. In the Framework Document, DOE suggested setting the ENERGY STAR Tier 1 specification as the baseline efficiency level for all classes of beverage vending machines covered under this rulemaking. (More details regarding the specifications can be found in Chapter 3 of the TSD.) ACEEE asserted that the ENERGY STAR Tier 1 specification can probably be considered the baseline for solid-front machines, but that for glass-front machines, the baseline may have to be slightly lower. (Public Meeting Transcript, No. 8 at p. 114) In contrast, Dixie-Narco stated that Tier 1 level would be a good baseline for glass-front machines. Dixie-Narco further commented that all of the glass-front machines that both of its competitors sell are ENERGY STAR qualified, and that it would be comfortable meeting those levels for its glass-front machines as well. (Public Meeting Transcript, No. 8 at p. 116) EEI and Royal Vendors agreed that Tier 1 would be an appropriate baseline level. (Public Meeting Transcript, No. 8 at p. 118; Royal, No. 11 at p. 3) The Joint Comment agreed that models meeting the ENERGY STAR Tier 1 specification should be used as the baseline because more than 90 percent of indoor/outdoor beverage vending machines meet this specification, and a large and growing volume of indoor-only machines meet this specification as well. The Joint Comment added that in the next two years, it is expected that nearly all indoor-only machines will meet this specification, because of the trend for beverage companies to only want to purchase ENERGY STAR-qualified equipment. (Joint Comment, No. 13 at p. 3) Moreover, PepsiCo stated that it requires the manufacturers with which it contracts to build new machines to meet the California Energy Commission standard, which is the same as the ENERGY STAR Tier 1 requirement. (Public Meeting Transcript, No. 8 at p. 265) Coca-Cola stated that it has mandated that all Coca-Cola vending machines are to use half as much energy by 2010 as in 2000, adding that this reduction would certainly meet ENERGY STAR Tier 1 qualifications. USA Technologies noted that there are three primary manufacturers in the industry and that each makes three primary models. According to USA Technologies, these nine models probably represent more than 90 percent of the beverage vending machines purchased each year. Thus, USA Technologies commented that by considering the energy consumption of these models and the number of units purchased over the last five years, the baseline model would be clear. (Public Meeting Transcript, No. 8 at p. 115) Based on stakeholder feedback and current market trends, DOE expects that in the absence of new standards, most, if not all, new machines will meet the ENERGY STAR Tier 1 level by 2012. Therefore, DOE is using ENERGY STAR Tier 1 as the baseline efficiency level since it roughly represents the least-efficient equipment likely to be sold in 2012. 4. Normalization Metric For both residential and commercial refrigerators, EPCA and DOE implementing regulations set standards for each of several classes. These classes, for the most part, are not defined by size, but are instead based upon their design configurations and whether rated for indoor or outdoor use; therefore, these classes include equipment of varying sizes. Because a refrigerator's energy use is a function of its size, the standard for each class incorporated a formula which, in effect, prescribes a maximum amount of energy use that varies by size of equipment within that class. (10 CFR 430.32(a) and 10 CFR 431.66) A key factor in each such formula is a “normalization metric,” which represents equipment size (e.g., refrigerated volume) and allows the maximum allowed energy use to vary by the size of the equipment. DOE is using the same approach in developing standards in this beverage vending machine rulemaking. In the Framework Document, however, DOE set forth the currently used industry metric of vendible capacity (i.e., number of cans) of a beverage vending machine as well as the refrigerated volume metric as is being used in commercial refrigerators. During the Framework public meeting, DOE asked for comment on which of these normalization metrics would be most appropriate for the beverage vending machines in this rulemaking. In response, Coca-Cola stated that for the current test metric (i.e., vendible capacity), the DOE test procedure does not reflect the current state of the beverage vending machine industry. (Public Meeting Transcript, No. 8 at p. 69) Dixie-Narco, Crane Merchandising Systems, Coca-Cola, and PepsiCo all agreed that refrigerated volume would provide the best normalization metric for beverage vending machines. (Public Meeting Transcript, No. 8 at pp. 86-125) Dixie-Narco then asked whether industry consensus standards (e.g., AHAM standards) exist for measuring refrigerated volume in refrigerators that could be adapted for use in assessing beverage vending machines. (Public Meeting Transcript, No. 8 at p. 87) At the meeting, DOE responded that the test procedures in ANSI/AHAM HRF-1-2004, may be relevant and is currently in use for residential refrigerators. Dixie-Narco stated that a method to measure refrigerated volume must be determined. Dixie-Narco stated that the industry must examine residential and commercial refrigeration equipment and try to develop an agreed-upon method of measuring the refrigerated volume of vending machines. Dixie-Narco stated that once this is done, it will have energy-consumption data it can provide to DOE for analysis. (Public Meeting Transcript, No. 8 at p. 134) Royal Vendors stated that California just published new energy standards, 20 and that California will require manufacturers to measure and report the refrigerated volume of all vending machines according to the AHAM 1974 volume calculation (i.e., ANSI/AHAM HRF-1-1979). Therefore, Royal Vendors stated that manufacturers will be measuring refrigerated volumes for their machines, and it will be public information. (Public Meeting Transcript, No. 8 at p. 135) 20 California Energy Commission, Title 20, 2007 Appliance Efficiency Regulations. Based on the public comments and the recently published California standards which use refrigerated volume for all vending machines, DOE decided to use refrigerated volume as the normalization metric for measuring daily energy consumption for all equipment classes of beverage vending machines. DOE will collect industry data to develop a translation from vendible capacity to refrigerated volume. 5. Scope and Coverage of Equipment a. Combination Machines At the Framework public meeting, stakeholders raised a number of questions regarding what types of beverage vending machines would be covered in the present rulemaking. Whirlpool asked whether this rulemaking will cover beverage vending machines that have separate sections for refrigerated and non-refrigerated beverages. (Public Meeting Transcript, No. 8 at p. 45) Dixie-Narco and Crane Merchandising Systems also expressed concern about zone-cooled machines that contain different products in different sections held at different temperatures. These stakeholders suggested that this may cause confusion and may raise questions about the definition of “zone cooled.” (Public Meeting Transcript, No. 8 at p. 104) EEI stated that the types and quantities of products sold in refrigerated vending machines are changing and will have an impact on energy use, which may result in confusion about what this rulemaking covers. EEI suggested that, based on stakeholder feedback, this rulemaking should cover all machines that have at least 50-75 percent of their capacity dedicated to refrigerated, packaged beverages. (EEI, No. 12 at p. 2) EEI also suggested that DOE consider a definition for a “refrigerated product machine” to cover machines that sell food along with beverages. EEI noted that if more machines sell both food and beverages, and DOE does not cover this equipment in this rulemaking, there could be a loophole for manufacturers to produce machines that do not meet the standard if there is at least one food (or other non-beverage) item for sale in the equipment. (EEI, No. 12 at p. 3) PG&E asked if DOE could benefit from the California designations of multi-package equipment and non-multi-package equipment 21 when considering what beverage vending machines will be included in this rulemaking. (Public Meeting Transcript, No. 8 at p. 62) 21 The California Energy Commission defines a “refrigerated multi-package beverage vending machine” as a refrigerated beverage vending machine that is able to display and dispense at least 20 discrete types of beverages. (California Energy Commission, Title 20, 2007 Appliance Efficiency Regulations). EPCA does not explicitly address “combination machines” (i.e., vending machines that dispense cooled beverages as well as other beverages and food items). As discussed above, EPCA directs DOE to set standards for vending machines that cool bottled or canned beverages and dispense them upon payment. (42 U.S.C. 6291(40) and 6295(v)) DOE believes that the language used to define beverage vending machines is broad enough to include any vending machine, as long as some portion of that machine cools bottled or canned beverages and dispenses them upon payment. For this rulemaking, DOE interprets these provisions to cover any vending machine that can dispense at least one type of refrigerated bottled or canned beverage, regardless of the other types of vended products (some of which may not be refrigerated). b. Refurbished Equipment At the Framework public meeting, PepsiCo also asked whether the new standards would apply to refurbished and remanufactured equipment. (Public Meeting Transcript, No. 8 at p. 230) USA Technologies indicated that, to establish meaningful regulations, DOE must consider the existing machines that are remanufactured or refurbished, as well as new machines. (Public Meeting Transcript, No. 8 at p. 22) In response to the possibility that DOE could use ENERGY STAR criteria when defining energy standards for beverage vending machines, stakeholders commented on how this would affect their equipment that is currently on the market. Dixie-Narco stated they make some vending machines that do not meet ENERGY STAR criteria, but these machines could be modified to achieve them. (Public Meeting Transcript, No. 8 at p. 131) Royal Vendors volunteered that it also has a model series that does not meet ENERGY STAR criteria because of the loading configuration of the machines, but the series has very low sales. (Public Meeting Transcript, No. 8 at p. 131) PepsiCo stated that a very small percentage of its machines built before 2004 meet ENERGY STAR Tier 1 criteria, but that it would be very expensive to upgrade these machines. (Public Meeting Transcript, No. 8 at p. 245) DOE has carefully considered its authority to establish energy conservation standards for rebuilt and refurbished beverage vending machines in light of these comments, and as discussed below, has tentatively concluded that its authority does not extend to rebuilt and refurbished equipment. The relevant statutory provisions are discussed below, as well as the agency's rationale in reaching this conclusion. Section 332 of EPCA provides that it shall be unlawful for any manufacturer or private labeler to distribute in commerce any new covered equipment which is not in conformity with an applicable energy conservation standard. (42 U.S.C. 6302(a)(5) and 6316(a)-(b) (emphasis added)) 22 Congress made section 332 applicable to beverage vending machines because an applicable energy conservations standard is prescribed for that equipment under section 325(v) of EPCA. (42 U.S.C. 6295(v)) Section 332(b) defines “new covered product” to mean “a covered product the title of which has not passed to a purchaser who buys such a product for purposes other than (1) reselling such product, or (2) leasing such product for a period in excess of one year.” (42 U.S.C. 6302(b)) That is, a new covered product is one for which the title has not passed to a customer. 23 22 DOE only regulates equipment that is either specifically enumerated as “covered products” or is equipment for which DOE has been granted authority to regulate in another statutory provision. Section 325 of EPCA (42 U.S.C. 6295) grants DOE authority to regulate beverage vending machines, without including the specific language designating them as “covered products.” The failure to include the words “covered product” in Section 325 of EPCA or to include beverage vending machines in Section 322 of EPCA, which lists the covered products in Part A, does not mean that beverage vending machines will not be treated as “covered products” for purposes of DOE exercising its regulatory authority. 23 In the context of this discussion, the term “customer” is used to identify equipment's end user; e.g., “customer” does not include a party that takes title of equipment solely for the purpose of resale or for leasing equipment for less than a year. DOE believes that the definition of “new covered product” in section 332 is ambiguous on the question of whether a rebuilt or refurbished beverage vending machine is subject to DOE's authority to set energy conservation standards. On this point, DOE notes that section 332 does not expressly provide that “new covered product” means new equipment the title of which is transferred by the original manufacturer to an original owner. Conversely, the definition of “new covered product” does not expressly exclude substantially remanufactured equipment that is subsequently resold (i.e., equipment sold or disposed of by the original owner that is rebuilt or refurbished by an entity which resells it to another person). In order to resolve this ambiguity regarding DOE's authority to regulate rebuilt and refurbished beverage vending machines, DOE considered both congressional intent and the nature of the existing beverage vending machine market. There is no legislative history that reflects Congress's intent. However, DOE views the way Congress chose to define “new covered product” in EPCA as the strongest indicator that the term was not intended to apply to rebuilt or refurbished equipment. Specifically, it is unlikely that Congress would have made transfer of “title” the test of whether equipment was “new” if it intended to cover rebuilt or refurbished equipment. The most reasonable interpretation of the statutory definition is that Congress intended that this provision apply to newly manufactured equipment the title of which has not passed for the first time to a purchaser of the equipment. Such interpretation provides certainty and clarity for the regulated entities subject to these statutory provisions. In addition, if DOE were to interpret “new covered product” as applying to other than newly manufactured equipment, EPCA's testing and labeling provisions would be much harder to implement and enforce. Identifying “manufacturers” under such an interpretation likely would be difficult, 24 and it also likely would be difficult for DOE to distinguish between rebuilt equipment that is not covered and equipment that has been so extensively rebuilt as to be considered “new,” and therefore, subject to these provisions. 24 For example, a business that rebuilds or remanufactures equipment, instead of reselling it and transferring title, could operate as a repair facility for consumers who already own the used equipment. The business would simply rebuild the equipment for a fee and return it to the owner; there would be no transfer of title. DOE understands the concern of some stakeholders that there is a possibility that the energy conservation standards for beverage vending machines could be circumvented if remanufactured machines are not deemed to be “new covered products.” DOE understands that the rebuilt and refurbished beverage vending machine market is comprised of either: (1) Equipment sold by the original manufacturer or private labeler, which after purchase by a commercial customer, is then modified and resold by another party; or (2) equipment that, following purchase by a commercial customer, is modified and retained by that customer. However, for the above-stated reasons, DOE has concluded that rebuilt and refurbished beverage vending machines are not “new covered products” under EPCA, and therefore, are not subject to DOE's energy conservation standards or test procedures. 25 With respect to the first scenario, upon transfer of the title of the beverage vending machine to the commercial customer, the beverage vending machine is no longer new covered equipment, and therefore, it is not subject to DOE regulations even if it is subsequently resold. Similarly, with respect to beverage vending machines that are refurbished or rebuilt for or by the commercial customer (i.e., they are not resold), DOE lacks authority over those beverage vending machines because they are neither “new” covered equipment nor distributed in commerce. Furthermore, if refurbished or rebuilt beverage vending machines that are sold to another party were covered but not those that are refurbished or rebuilt for the commercial customer, DOE believes this would likely create an inequity that Congress would not have intended since a purpose of EPCA was to establish a single national standard, not multiple standards for the same equipment. 25 DOE notes that de minimis use of used or recycled parts would not make a “new product” into a used product. Throughout the history of the energy conservation standards program, DOE has not regulated used consumer products or commercial equipment that has been refurbished, rebuilt, or undergone major repairs, since EPCA only covers new covered equipment distributed in commerce. For all of these reasons, DOE concludes that rebuilt or refurbished beverage vending machines are not new covered equipment under EPCA and, therefore, are not subject to DOE's energy conservation standards or test procedures. 6. Market Assessment In the market assessment, DOE develops a qualitative and quantitative characterization of the beverage vending machine industry and market structure based on publicly-available information and information submitted by manufacturers and other stakeholders. Three major beverage vending machines manufacturers hold the vast majority (about 75 percent) of the domestic market share: • Crane Merchandising/Dixie-Narco, Inc. 26 26 Crane Merchandising purchased Dixie-Narco, Inc. on October 23, 2006, after the Framework public meeting was held. • Royal Vendors, Inc. • Sanden-Vendo America Several other manufacturers also produce beverage vending machines for the domestic market, including: • Automatic Merchandising Systems (AMS) • Distributed Vending Company • Jofemar USA • Seaga Manufacturing, Inc. • The Wittern Group PepsiCo and Coca-Cola are, by far, the largest customers of beverage vending machines. They do not manufacture beverage vending machines. Instead, they contract with manufacturers that produce equipment with specific design characteristics. DOE is considering the possibility that small businesses would be particularly affected by the promulgation of energy conservation standards for beverage vending machines. The Small Business Administration (SBA) lists small business size standards for this industry as they are described in the North American Industry Classification System (NAICS) code 333311, Automated Vending Machine Manufacturing. The size standard for an industry sets the largest average annual receipts or average number of employees that a for-profit concern can have and still qualify as a small business for Federal Government programs. SBA defines small business manufacturing enterprises for beverage vending machines as having 500 employees or fewer. DOE identified six small business manufacturers in the beverage vending machine industry. DOE will study the potential impacts on these small businesses in detail during the manufacturer impact analysis, which will be conducted as part of the NOPR analysis. See Chapter 3 of the TSD for more information regarding small business manufacturers of beverage vending machines. DOE recognizes that smaller manufacturers, niche manufacturers, and manufacturers exhibiting a cost structure that differs substantially from the industry average may be differentially affected by the imposition of standards. NAMA stated that it could provide a list of manufacturers along with associated contact information that could be useful for DOE's research. (Public Meeting Transcript, No. 8 at p. 76) DOE is using NAMA's information on manufacturers and contacts to define subgroups of smaller manufacturers. DOE will use this information to analyze how standards enacted by this rulemaking affect smaller manufacturers. In the Framework Document, DOE requested suggestions for obtaining historical energy usage and equipment shipping information. NAMA stated that shipment data are now privately held and are not reported to NAMA or the Census Bureau. NAMA noted that DOE will have to request historical shipment information directly from manufacturers. (Public Meeting Transcript, No. 8 at p. 75) Dixie-Narco stated that it would provide historical shipment information if asked, but requested the data remain confidential. Dixie-Narco added that obtaining energy-usage information back to 1990 would be difficult, if not impossible, because such information was not recorded by manufacturers at that time. (Public Meeting Transcript, No. 8 at p. 76) PepsiCo and Coca-Cola recommended that DOE request historical shipment and energy-usage data from EPA and State organizations. (Public Meeting Transcript, No. 8 at pp. 78-82) PepsiCo urged all manufacturers to provide NAMA with all available historical shipment and energy-usage data for aggregation. (Public Meeting Transcript, No. 8 at p. 79) NAMA stated that it collected some aggregated historical shipment and energy-usage data for the ENERGY STAR program. (Public Meeting Transcript, No. 8 at p. 83) EPA stated that it is creating a summary report for the 2005 shipment information from NAMA and will at least include the shipments of ENERGY STAR-qualified models and an estimate of market penetration. EPA also suggested that, depending on how high market penetration is, shipment of ENERGY STAR-qualified models could serve as a proxy for determining the makeup of the overall market, although the data would not be manufacturer-specific. (Public Meeting Transcript, No. 8 at p. 83) Dixie-Narco stated that EPA has the company's shipment data for 2005, but it did not collect data before 2005. (Dixie-Narco, No. 14 at p. 2) ACEEE summarized that there seem to be two paths for collection and aggregation of historical shipment and energy-usage data: (1) By NAMA, or (2) by a DOE contractor. (Public Meeting Transcript, No. 8 at p. 82) Dixie-Narco stated at the Framework public meeting that it will try to provide data on its forthcoming models, keeping in mind that ENERGY STAR Tier 2 will take effect in July 2007. Dixie-Narco added that it estimates 80 percent of installed machines will exceed ENERGY STAR Tier 1 levels by 2012. (Public Meeting Transcript, No. 8 at p. 246) Royal Vendors stated that it will cooperate with NAMA to develop equipment shipment data on an industry basis. Royal Vendors noted, however, that trends may be difficult to decipher. (Royal, No. 11 at p. 2) EEI stated that according to public meeting participants, “stack-style” machines were 90 percent of the market and glass-front machines were 10 percent of the market in 2001. However, stack-style and glass-front machines were each 50 percent of the market in 2006. EEI noted that if market shares continue changing in this direction, baseline energy-usage and energy-efficiency upgrade possibilities could be affected. (EEI, No. 12 at p. 3) In summary, it is evident that NAMA does not have the historical shipment and energy-usage data necessary to determine efficiency trends in the industry. Therefore, DOE will contact ENERGY STAR program staff and State organizations and use their websites and various industry reports to obtain historical shipment and energy-usage data. 7. Technology Assessment In the technology assessment, DOE identifies technologies and design options that could improve the efficiency of beverage vending machines. This assessment provides the technical background and structure on which DOE bases its screening and engineering analyses. For beverage vending machines, DOE based its list of technologically-feasible design options on input from manufacturers, industry experts, component suppliers, trade publications, and technical papers. See Chapter 3 of the TSD for additional detail on the technology assessment and technologies analyzed. However, the following discussion provides an overview of the salient aspects of the technology assessment, including issues on which DOE seeks public comment. In the Framework Document, DOE identified and sought feedback on the applicable technologies and designs which have the potential to improve the energy efficiency of the identified equipment classes. A detailed discussion of these technologies and design options is given in Chapter 3 of the TSD. In response, Dixie-Narco asserted that certain technology options on DOE's list are not compatible with each other. (Public Meeting Transcript, No. 8 at p. 155) Furthermore, EEI commented that several of the technologies may already be incorporated into the baseline units being manufactured and installed in the United States. (EEI, No. 12 at p. 4) Several stakeholders addressed other means for reducing the energy use of beverage vending machines, offering both general and specific suggestions. Specifically, Royal Vendors stated that the important systems and components which may impact the energy efficiency of a beverage vending machine are the sealed cooling unit, evaporator/circulating fan, lighting, insulation, and door-sealing systems. It noted that ENERGY STAR Tier 1 qualified machines include an effective combination of these systems with a focus on lighting, compressor efficiency, and efficient evaporator/circulating fan motor impellers. To improve the energy efficiency of beverage vending machines, Royal Vendors suggested adding T8 lamps with electronic ballasts, low-ballast-factor ballasts, electronically-commutated fan motors with engineered impeller and venturi rings, and capillary tube systems with liquid-suction heat exchangers. Royal Vendors also stated that anti-sweat heaters are no longer in use and can be removed from the list of technologies considered. (Royal, No. 11 at p. 3) On this issue, Coca-Cola stated that the manufacturers which supply the company with beverage vending machines have already discontinued use of capillary tube expansion devices (which consume more energy) and are starting to instead use more-efficient thermostatic and electronic expansion valves. Coca-Cola stated that some manufacturers are researching other technologies such as Stirling refrigeration, which uses temperature differential to provide electrical power. (Public Meeting Transcript, No. 8 at p. 92) EEI and ACEEE agreed that ballasts using dimming technology should be considered a technology option as a means of decreasing the energy consumption associated with beverage vending machine lighting. (Public Meeting Transcript, No. 8 at p. 92; Joint Comment, No. 13 at p. 3) EEI added that DOE may want to investigate other lighting technologies such as T5 fluorescent lamps and dimmable light emitting diode (LED) systems. (EEI, No. 12 at p. 4) PG&E expressed a similar opinion that there are many opportunities to save energy in lighting beverage vending machines. PG&E also suggested considering additional fan motor technologies. (Public Meeting Transcript, No. 8 at p. 172) USA Technologies stated that the technology options list should also include energy-management systems, which restrict the energy use of equipment in a room when it is not occupied. (Public Meeting Transcript, No. 8 at p. 149). DOE is addressing all the technology options suggested and welcomes further public comment on this issue. See the screening analysis portion of this ANOPR and Chapter 3 of the TSD for more details on these technology options. B. Screening Analysis The purpose of the screening analysis is to evaluate the technology options identified as having the potential to improve the efficiency of equipment, in order to determine which technologies to consider further and which to screen out. DOE consulted with industry, technical experts, and other interested parties to develop a list of technologies for consideration. DOE then applied the following four screening criteria to determine which technologies are unsuitable for further consideration in the rulemaking: (1) Technological Feasibility. Technologies incorporated in commercial equipment or in working prototypes will be considered technologically feasible. (2) Practicability to Manufacture, Install, and Service. If mass production and reliable installation and servicing of a technology in commercial equipment could be achieved on the scale necessary to serve the relevant market at the time of the effective date of the standard, then that technology will be considered practicable to manufacture, install, and service. (3) Adverse Impacts on Equipment Utility or Equipment Availability. If a technology is determined to have significant adverse impact on the utility of the equipment to significant subgroups of consumers, or result in the unavailability of any covered equipment type with performance characteristics (including reliability), features, sizes, capacities, and volumes that are substantially the same as equipment generally available in the United States at the time, it will not be considered further. (4) Adverse Impacts on Health or Safety. If it is determined that a technology will have significant adverse impacts on health or safety, it will not be considered further. 10 CFR Part 430, Subpart C, Appendix A at 4(a)(4) and 5(b). 1. Technology Options Screened Out In the market and technology assessment (Chapter 3 of the TSD), DOE developed an initial list of technologies expected to have the potential to reduce the energy consumption of beverage vending machines. In the screening analysis, DOE screened out technologies based on four criteria discussed above (i.e., technological feasibility, practicability to manufacture, changes to equipment utility, and safety). The list of remaining technologies becomes one of the key inputs to the engineering analysis (discussed subsequently). For reasons explained below, DOE screened out a number of technologies (which were not input into the energy consumption model), including higher-efficiency evaporator and condenser fan blades, low-pressure differential evaporators, and defrost mechanisms. Higher-efficiency evaporator and condenser fan blades reduce motor shaft power requirements by moving air more efficiently. Current beverage vending machine designs use stamped sheet metal or plastic axial fan blades. These fan blades are lightweight and inexpensive. DOE was not able to identify any axial fan blade technology that is significantly more efficient than that which is currently in use, but it did identify and consider one alternative fan blade technology that could potentially improve efficiency—tangential fan blades. Tangential fan blades can produce a wide, even airflow, and have the potential to allow for increased saturated evaporator temperature (SET) through improved air distribution across the evaporator coil, which would reduce compressor power. However, tangential fan blades are less efficient at moving air, and, thus, require greater motor shaft power. Because of these competing effects, the use of tangential fan blades would not be expected to improve energy efficiency, so DOE did not consider tangential fan blades as a design option. Low-pressure differential evaporators reduce energy consumption by reducing the power level required of evaporator fan motors. However, in space-constrained equipment such as beverage vending machines, this reduction usually comes from a decrease in evaporator coil surface area, which generally requires a lower SET to achieve the same discharge air temperature and cooling potential. This, in turn, results in a reduction in compressor efficiency. Because of these competing effects, the use of low-pressure differential evaporators would not be expected to improve energy efficiency, so DOE did not consider low-pressure differential evaporators as a design option. Defrosting for beverage vending machines is typically accomplished with off-cycle defrost (which uses no energy and decreases compressor on-time), although DOE understands that this function also may be accomplished with electric resistance heating. Because the vast majority of machines already use off-cycle defrost (a typical feature in baseline equipment), DOE has determined that there is currently no defrost design option capable of more effectively reducing defrost energy consumption for equipment that uses off-cycle defrost. For these reasons, DOE did not consider off-cycle defrost as a design option for achieving further improvements in energy efficiency. DOE eliminated four other technologies considered in the market and technology assessment—thermoacoustic refrigeration, magnetic refrigeration, electro-hydrodynamic heat exchangers, and copper rotor motors—because all four are currently in the research stage, and DOE believes that they would not be practicable to manufacture, install, and service on the scale necessary to serve the relevant market at the time of the effective date of the standard (i.e., 2012). Because these technologies are in the research stage, DOE also cannot assess whether they would have any adverse impacts on utility to significant subgroups of consumers, would result in the unavailability of any types of equipment, or would present any significant adverse impacts on health or safety. Therefore, DOE will not consider these technologies as design options for improving the energy efficiency of beverage vending machines. 2. Technology Options Considered Further in Analysis After screening out technologies in accordance with the provisions set forth in 10 CFR Part 430, Subpart C, Appendix A, (4)(a)(4) and (5)(b), DOE is considering the following nine technologies, or “design options,” as viable means of improving energy efficiency of the beverage vending machines covered under this ANOPR. The market and technology assessment (TSD Chapter 3) provides a detailed description of these design options. These design options will be considered by DOE in the engineering analysis: • More-efficient lighting and ballasts. • More-efficient evaporator fan motors. • Evaporator fan motor controllers. • Improved evaporator design. • Insulation increases or improvements. • Improved glass pack (for Class A machines). • Higher efficiency condenser fan motors. • Improved condenser design. • More-efficient compressors. In the Framework Document, DOE stated that to the greatest extent possible, it would base its engineering analysis on commercially-available equipment which incorporates one or more of the design options listed above. In this way, DOE is better able to apply these features in a manner consistent with real world applications. DOE stated that it would consider a proprietary design in the subsequent analyses only if it is not a unique path to a given efficiency level. Several stakeholders provided comments on the issue of proprietary technologies in the context of the beverage vending machine rulemaking. NFESC responded that DOE should consider whether efficiency levels attainable only through proprietary technologies can be made part of the efficiency standard if that technology were to be made available through licensing agreements at a reasonable cost. (NFESC, No. 15 at p. 6) USA Technologies stated that its products are patented, but available to anyone in the industry anywhere in the world. (Public Meeting Transcript, No. 8 at p. 182) USA Technologies also noted that it has a proprietary patented design that will take many of the ENERGY STAR Tier 1 machines to Tier 2 levels and make some Tier 2 machines even more efficient. USA Technologies added that there is technology in the market today capable of driving energy costs down at a very reasonable cost to the manufacturer. USA Technologies urged DOE not to exclude these proprietary technologies from the analysis, although it also acknowledged that the market should remain competitive. (Public Meeting Transcript, No. 8 at p. 176). PepsiCo agreed with DOE's approach, claiming that certain proprietary technologies should be excluded. PepsiCo cited the example of how Coca-Cola has patented several energy management technologies that are not available to PepsiCo. (Public Meeting Transcript, No. 8 at p. 181) Dixie-Narco stated that proprietary designs that include add-on or non-permanent energy management devices not installed by the manufacturer must be excluded from consideration in this rulemaking, since the manufacturer is ultimately responsible for all technologies incorporated in beverage vending machines. (Dixie-Narco, No. 14 at p. 4) As noted previously, DOE will consider all proprietary designs unless they are the only way to reach a given efficiency level, in which case they will be rejected from further analysis. With regard to proprietary add-on energy management devices, DOE has not considered these devices as design options because they are external to the vending machine and/or are not installed by the manufacturer. DOE is sensitive to stakeholder concerns regarding proprietary designs and will make provisions to maintain the confidentiality of any proprietary data stakeholders submit. This information will provide input to the competitive impact assessment and other economic analyses. For more details on how DOE developed the technology options and the process for screening these options and the design options that DOE is considering, see the market and technology assessment (Chapter 3 of the TSD) and the screening analysis (Chapter 4 of the TSD). C. Engineering Analysis The purpose of the engineering analysis is to establish the relationship between the cost and efficiency of beverage vending machines. For each equipment class, this relationship estimates the baseline manufacturer cost, as well as the incremental cost for equipment at efficiency levels above the baseline. In determining the performance of higher-efficiency equipment, DOE considers technologies and design option combinations not eliminated by the screening analysis. The output of the engineering analysis is a set of cost-efficiency “curves” that are used in downstream analyses (i.e., the LCC and PBP analyses and the NIA). DOE typically structures its engineering analysis around one of three methodologies: (1) The design-option approach, which calculates the incremental costs of adding specific design options to a baseline model; (2) the efficiency-level approach, which calculates the relative costs of achieving increases in energy efficiency levels; and (3) the reverse-engineering or cost-assessment approach, which involves a “bottoms-up” manufacturing cost assessment based on a detailed bill of materials derived from beverage vending machine tear-downs. 1. Approach In this rulemaking, DOE is adopting a design-option approach, which calculates the incremental costs of adding specific design options to a baseline model. For each equipment class, DOE analyzed three machines of different sizes to assess how energy use varies with size. A small, a medium, and a large machine were chosen for Class A and Class B beverage vending machines, based on current market offerings. See Chapter 3 of the TSD for a detailed description of the Class A and Class B equipment classes and Chapter 5 of the TSD for additional detail on the different machines analyzed. In the Framework Document, DOE requested feedback on possible use of an efficiency-level approach supported, as needed, by a design-option approach to determine the cost-efficiency relationship for beverage vending machines. DOE stated that it plans to create an industry-wide analysis based primarily on data from stakeholders. The data are intended to represent the average incremental production cost to improve a baseline model to a specified efficiency level. This methodology constitutes an efficiency-level approach to the engineering analysis because it establishes the relationship between manufacturer cost and increased efficiency at predetermined efficiency levels above the baseline. Under this approach, manufacturers typically provide incremental manufacturer cost data for incremental increases in efficiency. Although DOE specifically requested this information from the industry, no such information was provided. Since an efficiency-level approach was not possible for beverage vending machines, DOE instead decided to use cost estimates of specific design options. This methodology constitutes a design-options approach because it uses individual or combinations of design options to identify increases in efficiency. Under this approach, estimates are based on manufacturer or component supplier data or derived from engineering computer simulation models. Individual design options or combinations of design options are added to the baseline model in ascending order of cost. This approach also involves consultation with outside experts and/or further review of publicly available cost and performance information. The Joint Comment stated that using manufacturer-supplied efficiency levels that have been checked against design options derived by DOE was acceptable if DOE verified a sufficient number of efficiency improvements with design option data to provide confidence in DOE's overall estimates. The Joint Comment added that for a robust approach, DOE must compare multiple points per equipment class and do additional analysis if the design option and efficiency level data are not in alignment. (Joint Comment, No. 13 at p. 1) The Joint Comment stated that DOE should explore methods of making the detailed manufacturer cost data publicly available, although it recognized that this task would be difficult given DOE's need to strike a balance between manufacturers' requirements for confidentiality and the public's need for transparency in government decision making. In making this request, the Joint Comment explained that manufacturer cost estimates are a “black box” for other stakeholders, and making the data submitted by manufacturers publicly available could greatly improve the transparency of the process. (Joint Comment, No. 13 at p. 2) As explained above, an efficiency-level approach was not possible, so DOE relied solely on a design-option approach in the engineering analysis. Given that there were no manufacturer-provided cost-efficiency curves, DOE was not able to compare the two approaches as suggested by the Joint Comment. However, the design-option approach allows advocates, manufacturers, and other stakeholders the opportunity to review DOE's methodology and assumptions, including cost estimates, as this information is made publicly available through the ANOPR TSD and engineering spreadsheet. Through consultation with outside experts, review of publicly-available cost and performance information, and modeling of equipment cost and energy consumption, DOE believes it has conducted a robust engineering analysis. Chapter 5 of the TSD describes the methodology used to perform the design-option analysis in detail. 2. Equipment Classes Analyzed Beverage vending machines can be divided into different equipment classes categorized by physical characteristics that affect equipment efficiency. Most of these characteristics affect the merchandise that the equipment cools and vends, and how the customer accesses that merchandise. Key physical characteristics are the door type (e.g., glass-front or solid-front) and the machine's vendible capacity (or refrigerated volume). As described in Section II.A.2, DOE analyzed two equipment classes: Class A (fully-cooled machines) and Class B (all other machines). Furthermore, as discussed above, beverage vending machine energy use varies with volume, so DOE analyzed three different machine sizes for each equipment class to assess how energy use varies with size. 3. Analytical Models In the design-option approach, DOE used models to develop cost and energy consumption estimates for each equipment class at each efficiency level. DOE used a cost model to estimate the manufacturer production cost (MPC) in dollars, and an energy consumption model to estimate the daily energy consumption in kilowatt hours (kWh) of covered beverage vending machines. Each of these models is discussed in further detail below. a. Cost Model DOE used a cost model to estimate the core case cost (i.e., the MPC of the structure, walls, doors, shelving and fascia of the case, but does not include the cost of any energy-using components) of beverage vending machines. This model was adapted from a cost model developed for DOE's rulemaking on commercial refrigeration equipment. 27 The approach for commercial refrigeration equipment involved disassembling a self-contained refrigerator, analyzing the materials and manufacturing processes for each component, and developing a parametric spreadsheet to model the cost to fabricate (or purchase) each component and the cost of assembly. Because of the similarities in manufacturing processes between self-contained commercial refrigeration equipment and vending machines, DOE was able to adapt the commercial refrigeration equipment cost model for beverage vending machines by maintaining many of the assumptions about materials and manufacturing processes but modifying the dimensions and types of components to be specific to beverage vending machines. To confirm the accuracy of the cost model, DOE obtained input from stakeholders on beverage vending machine production cost estimates and on other assumptions used in the model. DOE believes this approach is acceptable, given the similarities in materials and manufacturing processes between commercial refrigeration equipment and beverage vending machines. Chapter 5 of the TSD provides details of the cost model. 27 See http://www.eere.energy.gov/buildings/appliance_standards/commercial/refrigeration_equipment.html for further detail on and validation of the commercial refrigeration equipment cost model. In the Framework Document, DOE sought feedback from manufacturers on incremental manufacturing costs and components in terms of design options to improve energy efficiency. The Joint Comment stated that the cost estimates should assume mass production, since efficiency standards could make today's expensive niche products tomorrow's lower-cost commodity products. (Joint Comment, No. 13 at p. 2) The Joint Comment stated that DOE should account for market forces in computing typical costs using manufacturer cost estimates. Based on past experience, the Joint Comment explained that the various cost estimates that DOE will collect from manufacturers can vary significantly from manufacturer to manufacturer. Also, manufacturers with below-average costs will determine market prices, because higher-priced manufacturers will need to reduce costs to remain competitive. Therefore, the Joint Comment recommended that DOE should use the simple average of the market-share-weighted average cost estimate and the lowest cost estimate. (Joint Comment, No. 13 at p. 2) EEI mentioned that the increasing cost of commodities such as steel, copper, aluminum, and plastic may affect this rulemaking. EEI stated that commodity prices for plastics, for example, have risen dramatically in the past few years because of the increase in oil prices. However, EEI also noted that high prices may dictate redesigns to avoid using those materials. (Public Meeting Transcript, No. 8 at p. 181 and EEI, No. 12 at p. 5) PG&E stated that just as the prices of raw materials have gone up, so have the prices of primary energy. (Public Meeting Transcript, No. 8 at p. 183) In response to these comments, DOE conducted a sensitivity analysis on material prices similar to the analysis presented in the commercial refrigeration equipment rulemaking. DOE determined the cost of raw materials by using prices for copper, steel, and aluminum from the American Metals Market. 28 Prices for rifled and unrifled copper tubing were obtained directly from a tubing manufacturer. Because metal prices have fluctuated drastically over the last few years, DOE used metal prices that reflect a five-year average of the Bureau of Labor Statistics Producer Price Indices (PPIs) 29 from 2002 to 2006 with an adjustment to 2006$. DOE used the PPIs for copper rolling, drawing, and extruding, and steel mill products, and DOE made the adjustments to 2006$ using the gross domestic product implicit price deflator. Because it is not clear if these material price trends will continue, DOE conducted a sensitivity analysis to illustrate the effect of raw material price variability on the cost of beverage vending machines. See Chapter 5 of the TSD for more details on this sensitivity analysis. 28 American Metals Market, http://www.amm.com/. 29 U.S. Department of Labor, Bureau of Labor Statistics, Producer Price Indices, http://www.bls.gov/ppi/. DOE applied a manufacturer markup to the MPC estimates to arrive at the MSP. MSP is the price of equipment sold at which the manufacturer can recover both production and non-production costs and earn a profit. DOE developed a market-share-weighted average industry markup by examining gross margin information from the annual reports of several major beverage vending machine manufacturers and Securities and Exchange Commission (SEC) 10-K reports. 30 The manufacturers whose gross margin information DOE examined represent approximately 70 percent of the beverage vending machine market, and each of these companies is a subsidiary of a more diversified parent company that manufactures equipment other than beverage vending machines. Because the SEC 10-K reports do not provide gross margin information at the subsidiary level, the estimated markups represent the average markups that the parent company applies over its entire range of offerings. 30 Available at: http://www.sec.gov/edgar.shtml. Markups were evaluated for 2001 to 2006. The manufacturer markup is calculated as 100/(100 − average gross margin), where average gross margin is calculated as revenue − cost of goods sold (COGS). To validate the information, DOE reviewed its assumptions with beverage vending machine manufacturers. During interviews (see Chapter 12 of the TSD), beverage vending machine manufacturers stated that many manufacturers generate revenue and profit by providing other goods and services, and their margins for beverage vending machines are lower than their company-wide margin. Taking this information into consideration, DOE is using an industry-wide manufacturer markup of 1.03 in the engineering analysis. b. Energy Consumption Model The energy consumption model estimates the daily energy consumption of beverage vending machines at various performance levels using a design-option approach. The model is specific to the equipment covered under this rulemaking, but is sufficiently generalized to model the energy consumption of all covered equipment classes. For a given equipment class, the model estimates the daily energy consumption for th [Text truncated at 120,000 characters. The full text is on the page linked above.] --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/fr%3AE8-13345. Public record. Not legal advice.