[Federal Register Volume 59, Number 218 (Monday, November 14, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-28044]


[[Page Unknown]]

[Federal Register: November 14, 1994]


-----------------------------------------------------------------------

DEPARTMENT OF ENERGY
Office of Energy Efficiency and Renewable Energy

10 CFR Part 430

[Docket No. EE-RM-94-403]
RIN 1904-AA67

 

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

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

ACTION: Advance notice of proposed rulemaking.

-----------------------------------------------------------------------

SUMMARY: The Energy Policy and Conservation Act, as amended by the 
National Energy Conservation Policy Act, the National Appliance Energy 
Conservation Act, the National Appliance Energy Conservation Amendments 
of 1988 and the Energy Policy Act of 1992, prescribes energy 
conservation standards for certain major household appliances and 
requires the Department of Energy (Department) to administer an energy 
conservation program for these products. Among other things, the Energy 
Policy and Conservation Act, as amended, requires the Department to 
consider amending the energy conservation standards for dishwashers, 
clothes washers and clothes dryers.
    The purpose of this Advance Notice of Proposed Rulemaking is to: 
Present for comment the product classes that the Department is planning 
to analyze; present a detailed discussion of the analytical methodology 
and analytical models that the Department expects to use in performing 
analyses in connection with the proposed rule; and facilitate the 
gathering of information and comments prior to publishing a subsequent 
notice of proposed rulemaking.

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

ADDRESSES: Written comments are to be submitted to: U.S. Department of 
Energy, Office of Energy Efficiency and Renewable Energy, ``Energy 
Efficiency Standards for Consumer Products,'' (Docket No. EE-RM-94-
403), Room 5E-066, Forrestal Building, 1000 Independence Avenue, SW, 
Washington, DC 20585, (202) 586-7140.
    Copies of the public comments received may be read at the 
Department's Freedom of Information Reading Room, U.S. Department of 
Energy, Forrestal Building, Room 1E-190, 1000 Independence Avenue, SW, 
Washington, DC 20585, (202) 586-6020 between the hours of 9:00 a.m. and 
4:00 p.m., Monday through Friday, except Federal holidays.
    For more information concerning public participation in this 
rulemaking proceeding, see section IV, ``Public Comment Procedures,'' 
of this notice.

FOR FURTHER INFORMATION CONTACT:

P. Marc LaFrance, U.S. Department of Energy, Office of Energy 
Efficiency and Renewable Energy, Forrestal Building, Mail Station EE-
431, 1000 Independence Avenue, SW., Washington, DC 20585, (202) 586-
7140
Eugene Margolis, Esq., U.S. Department of Energy, Office of General 
Counsel, Forrestal Building, Mail Station GC-72, 1000 Independence 
Avenue, SW., Washington, DC 20585, (202) 586-9507

SUPPLEMENTARY INFORMATION:

I. Introduction
    a. Authority
    b. Background
II. Methodology
III. Models, Data, and Assumptions
    a. Engineering Performance Models and Costing Analysis
    1. Appliance classes
    2. Baseline units
    3. Design options
    4. Maximum technologically feasible designs
    5. Performance models
    6. Costing analysis
    7. Price-efficiency relationships
    8. Data sources
    9. Outputs from the Engineering Analysis
    b. Residential Energy Models
    1. Lawrence Berkeley Laboratory Residential Energy Model
    2. Residential End-Use Energy Planning System (REEPS 2.12)
    c. Manufacturer Impact Models
    1. Conceptual approach
    2. Measures of impact
    3. Lawrence Berkeley Laboratory Manufacturer Impact Model
    4. Government Regulatory Impact Model
    5. Cash-flow analysis of costs due to standards
    6. Data sources
    d. Utility Impact Model
    e. Sensitivity Analyses
IV. Public Comment Procedures
    a. Participation in Rulemaking
    b. Written Comment Procedures
    c. Issues for Public Comment
V. Review under Executive Order 12866

I. Introduction

a. Authority

    Part B of Title III of the Energy Policy and Conservation Act, 
Public Law 94-163, as amended by the National Energy Conservation 
Policy Act, Public Law 95-619, the National Appliance Energy 
Conservation Act, Public Law 100-12, the National Appliance Energy 
Conservation Amendments of 1988, Public Law 100-357, and the Energy 
Policy Act of 1992, Public Law 102-486,\1\ created the Energy 
Conservation Program for various Consumer Products other than 
Automobiles (Program).
---------------------------------------------------------------------------

    \1\Part B of Title III of the Energy Policy and Conservation 
Act, as amended by the National Energy Conservation Policy Act, the 
National Appliance Energy Conservation Act, the National Appliance 
Energy Conservation Amendments of 1988, and the Energy Policy Act of 
1992, is referred to in this Advance Notice of Proposed Rulemaking 
as the ``Act.'' Part B of Title III is codified at 42 U.S.C. 6291 et 
seq. Part B of Title III of the Energy Policy and Conservation Act, 
as amended by the National Energy Conservation Policy Act only, is 
referred to as the National Energy Conservation Policy Act.
---------------------------------------------------------------------------

    Three cleaning products (dishwashers, clothes washers, and clothes 
dryers) are the subject of this Advance Notice of Proposed Rulemaking. 
The National Appliance Energy Conservation Act of 1987 amended the Act 
(section 325(g)) to impose prescriptive standards (design feature 
requirements) for the three cleaning products as part of the energy 
conservation program for consumer products. These design feature 
requirements were effective for appliances manufactured on or after 
January 1, 1988, and were as follows: dishwashers shall be equipped 
with an option to dry without heat, clothes washers shall have an 
unheated rinse option, and gas clothes dryers shall not be equipped 
with a constant burning pilot. The Act required the Department to 
conduct a rulemaking by January 1, 1990, to determine if the above 
mentioned standards should be amended. The Act provided that any 
amendment to the standards would apply to products manufactured three 
years after the rulemaking. The final rule (56 FR 22279) was issued May 
14, 1991, and is effective for products manufactured on or after May 
14, 1994 (hereafter referred to as the May 1991 final rule). The Act 
also requires the Department to conduct a subsequent rulemaking no 
later than five years after the date of publication of the previous 
final rule. This second round of rulemaking is the purpose of today's 
notice.
    Any new or amended standard is required to be designed so as to 
achieve the maximum improvement in energy efficiency that is 
technologically feasible and economically justified (section 
325(l)(2)(A)).
    Section 325(l)(2)(B)(i) of the Act provides that before the 
Department determines whether an energy conservation standard is 
economically justified, it must first solicit comments on the proposed 
standard. After reviewing comments on the proposal, the Department must 
then determine that the benefits of the standard exceed its burdens, 
based to the greatest extent practicable, on a weighing of the 
following seven factors:
    (1) The economic impact of the standard on the manufacturers and on 
the consumers of the products subject to such standard;
    (2) The savings in operating costs throughout the estimated average 
life of the covered product in the type (or class) compared to any 
increase in the price, initial charges, or maintenance expenses for the 
covered products that are likely to result directly from the imposition 
of the standard;
    (3) The total projected amount of energy savings likely to result 
directly from the imposition of the standard;
    (4) Any lessening of the utility or the performance of the covered 
products likely to result from the imposition of the standard;
    (5) The impact of any lessening of competition, as determined in 
writing by the Attorney General, that is likely to result from the 
imposition of the standard;
    (6) The need for national energy conservation; and
    (7) Other factors the Secretary considers relevant.

b. Background

    The Department conducted the first rulemaking to determine if the 
standards (design feature requirements) imposed by the Act should be 
amended. The Department published an Advance Notice of Proposed 
Rulemaking (53 FR 17712, May 18, 1988), a Notice of Proposed Rulemaking 
(54 FR 32744, August 9, 1989), and the May 1991 final rule. The May 
1991 final rule imposed energy conservation standards for the cleaning 
products which are based on performance. The standards specify a 
minimum energy factor for both classes of dishwashers (Standard and 
Compact). Two of the five classes of clothes washers (Top-loading 
Standard and Top-loading Compact) and four of the five classes of 
clothes dryers (Electric Standard, Electric Compact (120v), Electric 
Compact (240v), and Gas Standard) are subject to a minimum energy 
factor while the remaining classes are subject to design feature 
requirements. The May 1991 final rule energy conservation standards are 
effective for products manufactured on or after May 14, 1994.
    In the May 1991 final rule, the Department announced that it was 
accelerating the second review of energy efficiency standards for 
clothes washers because it became aware of a design option (horizontal-
axis wash tub in a top-loading washer) in use in Europe that was not 
included in the proposed rule and upon which no comment was received. 
The Department did not consider establishing a standard based on the 
top-loading horizontal-axis design option because this information came 
to the attention of the Department after the close of the comment 
period on the proposed rule and thus was not subject to public debate. 
The Department published an Advance Notice of Proposed Rulemaking (55 
FR 39624, September 28, 1990, ``nine product rulemaking'') which 
announced the acceleration of the second review of energy efficiency 
standards for clothes washers. In response to that notice, a number of 
energy efficiency advocates and appliance manufacturers requested that 
the Department delay the second review until 1995-1996. The additional 
time was requested in order to allow manufacturers time to implement 
the standards imposed by the May 1991 final rule and to fully evaluate 
new, more energy efficient technologies such as top-loading horizontal-
axis clothes washers. This additional time, manufacturers contended, 
would enable them to provide more meaningful and relevant comments on 
the next, legislatively required rulemaking. The Department considered 
the request, and by letter, dated February 26, 1992, notified the 
parties requesting the delay that the Department had determined that it 
would conduct the rulemaking on the later schedule, as requested.
    Today's Advance Notice of Proposed Rulemaking includes clothes 
washers. Comments previously received for the September 28, 1990, 
Advance Notice of Proposed Rulemaking relative to clothes washers will 
be considered and addressed in the Department's Notice of Proposed 
Rulemaking. Those who submitted previous comments have the option of 
maintaining their previously submitted comments, amending previous 
comments, or withdrawing their previous comments and submitting new 
comments. The Department will address all applicable comments in the 
Notice of Proposed Rulemaking.
    Presently, the Department also is conducting a rulemaking on three 
types of consumer products (central air conditioners and central air 
conditioning heat pumps; furnaces; and refrigerators, refrigerator-
freezers, and freezers) which was initiated by the publication of a 
Advance Notice of Proposed Rulemaking. (58 FR 47326, Sept. 8, 1993) 
(hereafter referred to as the Three Product Advance Notice). The Three 
Product Advance Notice has a detailed discussion on numerous cross-
cutting policy and methodological issues. These issues include discount 
rates, environmental externalities, manufacturer impact analysis, 
incremental analysis and information on any identifiable groups or 
consumers who may be disproportionally affected by any proposed 
national energy efficiency standard levels. The Department proposes to 
use the same analytical methods in all efficiency standard rulemakings 
and, therefore, the decisions on many of these cross-cutting issues 
that emerge from other rulemaking processes, such as the Three Product 
Advance Notice, are likely to be reflected in the proposed standards 
that will follow this Advance Notice.
    The Department is developing a general test procedure revision 
which will address previously granted waivers, add future testing 
criteria and provide test procedure clarity. This planned revision will 
not change the energy consumption reporting of any product models and 
will be promulgated prior to the effective date of any new standards 
from this rulemaking.

II. Methodology

    This section provides a brief description of the analyses to be 
used to determine the impacts of the standards. It offers an overview 
of the analytic methodology and discusses the major components of the 
analyses: the Engineering Analysis, the Manufacturer Analysis, the 
Consumer Analysis, and the Utility Analysis.
    This section also discusses the interrelationships among the 
components that ensure consistency throughout the analyses.
    The next section, Models, Data and Assumptions, describes the 
computer models used in the analyses. The models predict the 
anticipated response of consumers, manufacturers, and utilities to 
future changes in the economy, including the imposition of energy 
conservation standards. Quantitative estimates of the impacts of 
standards will be calculated from the outputs from the models. The 
models that will be utilized in the analyses are:
     Engineering Performance Models,
     Consumer Impact Models,
     Manufacturer Impact Models, and
     Utility Impact Model.
    The function, data sources, assumptions and validity of the results 
for each model are discussed below.
    The overall impact of appliance conservation standards on energy 
use, consumers, manufacturers, and other factors will be determined by 
comparing projections under the base case\2\ with the projections under 
the proposed standards and, perhaps, by comparing the projections of 
various proposed standards. The possible comparison of different 
standard cases was one of the issues raised in the Three Product 
Advance Notice. The analysis method chosen, based on the review of 
public comments on this earlier notice, as well as, comments received 
in response to today's notice, will be used in the development of the 
proposed standards for the products addressed by this Advance Notice.
---------------------------------------------------------------------------

    \2\The base case assumes implementation of the conservation 
standards that were set by the Department of Energy in the May 1991 
final rule.
---------------------------------------------------------------------------

    The analysis that will be performed is made up of the following 
items:
     An Engineering Analysis that establishes the technical 
feasibility and product attributes, including costs of design options, 
to improve appliance efficiency.
     A Manufacturer Analysis that provides an estimate of 
manufacturers' responses to the proposed standards. Their responses are 
quantified by changes in several financial performance measures, such 
as pricing, output and profitability etc.
     A Consumer Analysis that forecasts appliance sales, 
efficiencies, energy use, consumer expenditures, and the national net 
benefits and costs and a separate Life Cycle Cost Analysis to evaluate 
the purchaser's savings in operating expenses relative to increases in 
purchase price.
     A Utility Analysis that measures the projected impacts of 
the altered energy-consumption patterns on electric and gas utilities.
    Each analysis area will be performed for each of the three products 
under consideration. The results of the Engineering Analysis will be 
reviewed by the Department to determine whether standards for each 
product could yield measurable energy savings. If standards would not 
yield energy savings, then the analysis will be terminated. If energy 
savings are possible, then a detailed analysis is performed.
    There is interaction among the Engineering, Consumer, Utility, and 
Manufacturer Analyses. The Engineering Analysis examines appliance 
designs and related attributes such as efficiency and costs. Based on 
the relationships between the prices and efficiencies of design 
options, the Consumer Analysis forecasts sales and efficiencies of new 
and replacement appliances. These data are used as inputs to the 
Manufacturer Analysis to determine the financial impacts on 
prototypical firms within the industry. The Consumer Analysis forecasts 
national aggregate energy savings and consumer expenditures associated 
with the purchase and operation of the appliances. Consumer 
expenditures (both purchase and operation) are employed in the Life-
Cycle Cost Analysis to determine consumer impacts. Changes in sales, 
revenues, investments, and marginal costs of utilities are calculated 
from the energy savings in the Utility Analysis.
    Three periods of time are used in the analyses. First, the 
Engineering Analysis examines the technical feasibility of improving 
the efficiency of the covered products by analyzing design options 
available today to improve product efficiency, whether they are 
commercially available or prototypes. Second, the Manufacturer Analysis 
is performed for a typical year after the standards are assumed to have 
been imposed. Typically, the fifth year is selected, so all major 
impacts of a standard would have occurred. Third, the Consumer Analysis 
examines impacts over a time period at least as long as the average 
lifetimes of the products.

III. Models, Data, and Assumptions

a. Engineering Performance Models and Costing Analysis

    The Engineering Analysis addresses two statutory requirements. The 
first requirement is that the Department consider only improvements in 
energy efficiency that are technologically feasible. The second is that 
the Department consider any lessening of utility to the consumer due to 
the imposition of standards. In addition, the Engineering Analysis 
provides information on efficiencies, energy consumption, manufacturing 
costs, and maintenance and installation costs for use in the other 
analyses.
    The Engineering Analysis develops cost and efficiency data for a 
set of design options within each appliance class. These data are the 
output of the engineering performance models and costing analysis 
discussed in subsections 5-9, below.
1. Appliance Classes
    The first step in the Engineering Analysis is to segregate product 
types into separate classes to which different energy conservation 
standards apply. Classes are differentiated by the type of energy use 
(oil, natural gas, or electricity) or capacity or performance-related 
features that provide utility to the consumer and affect efficiency. 
Classes are differentiated in order to ensure that consumer products 
having different capacities or other performance-related features 
affecting efficiency and utility remain available to consumers.
    For each of the three appliances, the following are the classes 
that the Department proposes to consider. The Department welcomes 
comments on the proposed classes.
(i) Dishwashers
Compact Dishwasher (less than 22 inches in exterior width)
Standard Dishwasher (equal to or greater than 22 inches in exterior 
width)
(ii) Clothes Washers
Compact (less than 1.6 ft\3\ capacity)
---------------------------------------------------------------------------

    \3\The energy factor is a measurement of energy efficiency 
derived from the Department of Energy test procedure for that 
product.
---------------------------------------------------------------------------

Standard (1.6 ft\3\ or greater capacity)
(iii) Clothes Dryers
Electric, Standard (4.4 ft\3\ or greater capacity)
Electric, Compact, 120v (less than 4.4 ft\3\ capacity)
Electric, Compact, 240v (less than 4.4 ft\3\ capacity)
Gas, Standard (4.4 ft\3\ or greater capacity)
Gas, Compact (less than 4.4 ft\3\ capacity)

    In the case of clothes washers, the Department is proposing to 
eliminate certain previously defined classifications (Semi-Automatic 
Top-Loading, Front-Loading and Suds Saving) because they do not offer 
any added utility which is inherently less energy efficient and 
therefore would require protection from the energy conservation 
standards. In the May 1991 final rule, these classes were not subject 
to a minimum energy conservation standard imposed because they 
represented a small portion of the market, and due to a lack of 
adequate information the Department did not analyze them. However, the 
1988 standard requiring an unheated rinse option is still applicable to 
these classes. The Department has further reviewed this topic and 
believes that these products should be subject to the minimum energy 
conservation standards applicable to either compact or standard clothes 
washers. The Department welcomes comments on this issue.
2. Baseline Units
    For the purpose of generating a cost/efficiency relationship, the 
Engineering Analysis needs to define a starting point or baseline. The 
assumed baseline unit is to represent a typical model within an 
appliance class sold during the initial year of the analysis, e.g., a 
unit that minimally exceeds the existing standard. Once identified, 
each baseline unit is characterized by its efficiency-related design 
options. The Engineering Analysis uses information gathered from trade 
organizations, manufacturers, and consultants with expertise in 
specific product types to determine the engineering characteristics of 
the baseline unit. The Department requests data on specific units and 
combinations of design options to be considered as a baseline unit. In 
addition, the Department requests comments on any other factors to be 
considered in selecting baseline units.
3. Design Options
    The Engineering Analysis will identify an individual design option 
or combinations of design options with a potential for improving energy 
efficiency. Design options that are currently on the market, that are 
being developed, or that may be on the market by the time standards are 
effective will be considered. Furthermore, the Department requests 
comments on whether the existing test procedures are appropriate for 
measuring product energy use and efficiency and whether the test 
procedure can evaluate a particular design option's contribution to the 
product's energy consumption.
    In addition to proposing a credit for more efficient water 
extraction in the clothes washer test procedure, the Department may 
consider a two tier energy conservation standard for clothes washers. 
One standard would be the same as the existing performance standard for 
clothes washers and the second standard would require a minimum water 
extraction. The Department believes that mechanical water extraction is 
much more cost effective than thermal extraction. If the Department 
were to propose this two tier standard, then the analysis for the 
clothes dryer standard would consider the impact of drier clothes 
entering the clothes dryer. The Department welcomes comments on this 
issue.
    The Department requests comments on both the design options listed 
below and the applicability of the extant or proposed test procedure. 
The following is a list of design options that will be examined:
(i) Dishwashers
    Energy Savings Options for Water Reduction:

(A) Improved food filter
(B) Improved spray arm geometry
(C) Improved fill control
(D) Modified sump geometry with & without dual pumps
(E) Microprocessor controls and fuzzy logic (algorithm logic based on 
sensor input)

Other Energy Saving Options:

(F) Reduced inlet water temperature
(G) Improved motor efficiency
(H) Increased insulation
(I) Flow-thru heating
(J) Ultrasonic washing
(ii) Clothes Washers
(A) Improved fill control
(B) Configuration/tolerance of inner and outer tubs to reduce water use
(C) Reduce thermal mass
(D) Added Insulation
(E) Increase motor efficiency
(F) Thermostatically controlled mixing valves
(G) Electrolytic dissociation of water
(H) Ultrasonic washing
(I) Higher spin speed
(J) Horizontal axis design
(K) Bubble action
(L) Microprocessor controls and fuzzy logic (algorithm logic based on 
sensor input)
(M) Ozonated laundering
(N) Suds saving
(O) Direct drive motor
(iii) Clothes Dryers
(A) Automatic termination
(B) Increased insulation
(C) Recycle exhaust heat
(D) Inlet air preheat
(E) Inlet air preheat, condensing mode
(F) Modified operating conditions
(G) Heat pump
(H) Microwave
(I) Reverse tumble feature
(J) Improved rib design to reduce drying time
4. Maximum Technologically Feasible Designs
    The Act requires that, in considering any new or amended standards, 
the Department must consider those that ``shall be designed to achieve 
the maximum improvement in energy efficiency that the Secretary 
determines is technologically feasible and economically justified'' 
(section 325(l)(2)(A)). As a first step, the maximum technologically 
feasible level will be identified. The maximum technologically feasible 
level is one that can be carried out by the addition of energy 
efficient design improvements to the baseline units without affecting 
the product's utility. The Department believes that the design options 
comprising the maximum technologically feasible level must have been 
physically demonstrated in at least a prototype form to be considered 
technologically feasible.
5. Performance Models
    In the Engineering Analysis, the Department's estimate of the 
efficiency of various design options and combination of design options 
will be based on either calculation (e.g., computer simulation models) 
or experimental data based on the Department's test procedures. The 
Department requests test data on the efficiency of the various design 
options and information on possible simulation models for use in this 
rulemaking.
6. Costing Analysis
    Manufacturer cost data for baseline units and incremental costs for 
design improvements are requested. The cost data requested include, for 
each design option, incremental cost data disaggregated into labor, 
purchased parts, materials, shipping/packaging, and tooling. Also 
requested are any additional consumer installation or maintenance costs 
resulting from the design improvements.
7. Price-Efficiency Relationships
    The results of the Engineering Analysis are summarized in the cost- 
efficiency relationships that show the efficiency, unit energy 
consumption, and manufacturer cost of each design option and 
combination of design options for each appliance class. Manufacturer 
and dealer markups obtained from the Manufacturer Impact Analysis are 
applied to the manufacturing costs to determine the purchase price of 
the appliance. The price-efficiency relationships are a fundamental 
input to the Consumer Analysis.
8. Data Sources
    Shipments data, costs of purchased materials and parts, and 
engineering and labor cost data will be based on available information, 
including information received in comments on this Advance Notice of 
Proposed Rulemaking and collected from industry sources.
9. Outputs From the Engineering Analysis
    For each combination of design options considered, the models and 
data provide:
     Energy efficiency (expressed as the Department's energy 
factor),\3\
     Annual energy consumption per unit (based on the 
Department's test procedures),
     Increased material, purchased parts, labor, and investment 
costs for medium\4\ and large manufacturers by product class,
---------------------------------------------------------------------------

    \4\As was the case with previous analyses, small manufacturers 
will not be analyzed separately. No general manufacturing approach 
could be identified for these firms because of the wide variability 
in their approach to manufacturing. Therefore, small manufacturers' 
costs have been assumed to equal those of medium manufacturers. The 
Department encourages small manufacturers to submit data.
---------------------------------------------------------------------------

     The relationship between cost and efficiency level by 
product class, and
     Other information on product characteristics, such as 
lifetimes, maintenance costs and installation costs.

b. Residential Energy Models

    The Department has used the Lawrence Berkeley Laboratory 
Residential Energy Model (LBL-REM) in the analysis and reanalysis for 
numerous Department rulemakings. The Department has considered 
replacing the LBL-REM with the Electric Power Research Institute's 
REEPS model and is presently analyzing it for the Three Product Advance 
Notice rulemaking. The Department expects to use the analytical method 
chosen for that rulemaking in the analysis for this rulemaking. The 
Department welcomes comments on this approach. Below is a description 
of both models.
1. Lawrence Berkeley Laboratory Residential Energy Model
    The LBL-REM forecasts the appliance purchase choices that 
households make as well as their subsequent appliance usage behavior 
and energy consumption. The model uses engineering estimates of the 
characteristics of particular designs of appliances and calculates the 
national impacts of a technology-specific policy on the populations of 
appliances used in the households. Alternative designs are 
characterized by price and efficiency. The output from the LBL-REM 
provides estimates of national energy savings and consumer economic 
impacts (including equipment and operating expenses).
    Engineering, economic, and demographic data are used in the LBL-
REM. The engineering data for appliances include the price-efficiency 
relationships described above. Additional data include information 
regarding alternative building shell construction measures and costs, 
unit energy consumption and efficiency of existing appliances, age 
distribution of existing appliance stock, and retirement functions. 
Economic data include projected energy prices\5\ and household income, 
models of energy investment, appliance purchase and usage behavior, 
including fuel and technology choice for each end use. Demographic data 
include number of households by type, projected housing starts and 
demolitions, and initial appliance holdings.
---------------------------------------------------------------------------

    \5\ The projections of energy prices will be taken from the most 
recent Annual Energy Outlook, a publication of the Department's 
Energy Information Administration.
---------------------------------------------------------------------------

    Structure of the model. The LBL-REM segments annual energy 
consumption into house types, end uses, and fuel types. The house types 
are single-family, multifamily, and mobile homes. Calculations are 
performed separately for existing and new housing construction each 
year over the period 1980-2030. The end uses are space heating 
(including room and central), air conditioning (room, central 
conventional, and central heat pump), water heating, refrigeration, 
cooking, clothes drying, lighting, clothes washing, dishwashing, pool 
heating, televisions and miscellaneous. Up to four fuels are 
considered, as appropriate to each end use: electricity, natural gas, 
heating oil, and liquid petroleum gas. The model exists in two 
versions: national (one region) and regional (10 Federal regions). 
Since usage of cleaning products is not likely to differ by geographic 
location, the national version will be utilized in this analysis.
    The model projects five types of activities: technology/fuel 
choice; building shell thermal integrity choice; appliance efficiency 
choice; usage behavior; and turnover of buildings and appliances.
    Housing stock submodel. This submodel generates data about housing 
stock projections for the LBL-REM. The number of occupied households, 
by type, is taken from the 1990 Census of Population and Housing. An 
exogenous projection for housing starts is obtained, and estimates of 
projected demolition rates by house type are calculated, assuming an 
exponential function. The housing submodel determines the projected 
housing stock each year, 1981-2030, by subtracting demolitions from 
existing stock, then adding starts. The annual demolition rates by 
house type will be calculated for single-family, multifamily, and 
mobile homes, respectively.
    Efficiency choice algorithm. Historical efficiency data are 
available primarily from trade associations for selected years for each 
class of appliance through at least 1992. The Federal energy 
conservation standards for new units of these appliances are expected 
to be met by the effective date of the standard. After that date, 
future efficiency improvements are assumed to be a function of designs 
available (according to the engineering analysis) and of relevant 
energy prices. The forecasting algorithm is designed to allow annual 
average efficiency or shipment-weighted efficiency factors to increase 
if either more efficient designs become available at lower prices or 
energy prices increase. Conversely, if energy prices decrease, the 
shipment-weighted efficiency factors may decline, but would have a 
lower bound at the existing standard level, i.e., the 1991 standard 
prescribed by the Department, effective 1994, for dishwashers, clothes 
washers and clothes dryers.
    Thermal integrity. The LBL-REM addresses thermal integrity as an 
input into the model for conducting analysis on appliances which affect 
a dwelling's cooling or heating load. The Department believes that 
thermal integrity will not be a factor in the analysis for the three 
cleaning products. The Department welcomes comments on this assumption.
    Modeling efficiency standards. The LBL-REM projects the average 
efficiency of new products; for example, clothes dryers purchased each 
year in the absence of additional Federal regulations. A distribution 
of efficiencies is constructed around the average based on efficiency 
distributions observed in the marketplace. This information includes 
information from industry sources and published data from the industry 
trade associations. A new Federal standard level eliminates part of the 
distribution; therefore, a new distribution is constructed. The new 
shipment-weighted average efficiency then characterizes the efficiency 
of new units in that year. The same process is applied to all years 
after implementation of the standard. The model is then run again for 
the standards case\6\with the adjusted average efficiencies to 
calculate any changes in market shares or usage behavior that may occur 
as a result of standards and to calculate the net energy savings.
---------------------------------------------------------------------------

    \6\The standards case refers to a time period when a potential 
new standard has been implemented.
---------------------------------------------------------------------------

    Turnover of appliance stocks. The initial age distribution of 
appliances in stock is based on industry data about historical annual 
shipments. The fraction of each product that retires each year is based 
on the number of years since purchase of the product. For each year's 
purchase, the model associates an average efficiency, so that when 
older appliances are retired, they are also recognized as less 
efficient. All appliance replacements are included in the retirement 
function, including those resulting for reasons other than product 
failure. However, the analysis does not explicitly consider the effect 
of increased purchase price on the turnover rate. The Department 
requests data and comments on how to consider this factor.
    The number of potential purchasers of an appliance in new homes is 
equal to the number of new homes constructed each year. The number of 
potential purchasers of appliances in existing houses is equal to the 
number of retiring appliances plus (if applicable) a fraction of those 
households that did not previously own the product.
    Calculation of market shares. Potential purchasers may purchase any 
competing technology within an end use or none. For each end use, long-
term market share elasticities are estimated with respect to equipment 
price, operating expense, and income, respectively. The effect of 
standards is expected to be lower operating expense and increased 
equipment price. The percentage changes in these quantities are used, 
together with market share elasticities, to determine changes in market 
share resulting from standards. The model assumes that higher equipment 
prices will decrease sales volumes while lower operating expenses will 
increase them. The net result (predicted market share) depends on the 
standard level selected with its associated equipment prices and 
operating expenses.
    Usage behavior. For some products changing the operating expense 
results in changes in usage behavior. These changes are modeled based 
on usage elasticities in operating expense and income. For dishwashers, 
clothes washers and clothes dryers we expect these elasticities to be 
at or near zero; usage behavior is not influenced by the cost of 
operating the appliance. On the other hand, the popularity of certain 
``energy saving'' features, such as air (in lieu of heated) drying on 
dishwashers suggests that some consumers alter their behavior in 
response to operating costs. The Department requests comments on this 
assumption.
    Energy consumption calculations. The total energy consumption per 
house for each end use and fuel by house type and vintage (existing or 
new) is the product of the unit energy consumption (accounting for 
efficiency and capacity changes) and usage factor, e.g., relative hours 
of full-load use for dishwashers. The corresponding annual energy 
consumption for all households is the annual consumption per household, 
times the number of households of that type and vintage, times the 
fraction of those households owning that appliance.
    Aggregate energy consumption is obtained by summing intermediate 
results. For example, national electricity consumption for residential 
dishwashing in a particular year is the sum across house types and 
house vintages of electricity used by compact and standard dishwashers. 
National residential electricity consumption in that year is the sum of 
all end uses of electricity consumption in the residential sector.
    Model outputs. The principal outputs from the LBL-REM for each year 
are:
     Energy consumption by end use and fuel,
     Total residential energy consumption by fuel,
     Per-unit equipment price and operating expense by product,
     Projected annual shipments of residential appliances, and
     Differences in these quantities between a base and a 
standards case.
    These outputs are provided annually (or for selected years) and 
cumulatively over a period of time, e.g., 1999-2030. Energy savings are 
provided annually from implementation of standards to the end of the 
period. Net present value of standards is evaluated for each regulated 
product and for the end use(s) comprising the regulated and competing 
products.
    Energy savings are calculated as the difference in energy 
consumption between the base case and standards case. Energy 
consumption in both the base case and standards case includes changes 
in fuel choice or changes in usage behavior. Therefore, the energy 
savings capture the net energy savings due to regulation, including the 
effects induced by shifts in market share or changes in usage behavior.
    Net present value, on the other hand, excludes these types of 
effects.\7\ Net present value is calculated from per-unit changes in 
equipment and operating expenses, multiplied by standards case 
shipments. If the net present value were calculated without normalizing 
with regard to shipments, erroneous results would be obtained. If 
standards caused decreased purchases of a product, this would appear as 
an economic benefit; namely, less money spent on purchasing and using 
appliances.\8\ If standards resulted in increased purchases, this would 
be incorrectly counted as a cost when it reflects consumers' preference 
for the post-standards product.
---------------------------------------------------------------------------

    \7\Present value is the discounted total value of energy 
consumption during the appliances' lifetimes, plus the discounted 
equipment costs for those appliances that are purchased during those 
periods at alternative standards levels. The difference between a 
standards case and a base case is the net present value attributable 
to amended standards. A positive net present value for an appliance 
at a given standard level indicates that, if that standard were 
adopted, consumers of that appliance as a whole would save that much 
more money in fuel costs, discounted to the present, than they would 
pay in increased initial price for a more efficient appliance, 
discounted to the present, compared to the base case.
    \8\Without normalization, the greatest economic benefit would be 
obtained by a standard level that resulted in no future purchases of 
the product. Then no money would be spent on purchasing the product 
or on operating expenses, and the value of the savings would equal 
the amount of money that would have been spent without the standard. 
This would clearly be a misrepresentation of the net present value 
of standards.
---------------------------------------------------------------------------

    Base case usage is assumed in calculating the net present value 
since any ``rebound effect''\9\ reflects the consumer's judgment that 
increased usage is worth more than the direct energy savings associated 
with keeping usage constant. Therefore, deduction of any foregone 
energy savings resulting from a possible ``rebound effect,'' prior to 
calculating the net present value, would result in an underestimate of 
the true net present value associated with a given efficiency 
improvement.
---------------------------------------------------------------------------

    \9\The ``rebound effect'' is the projected energy savings from 
an efficiency improvement that does not occur. This results when 
purchasers of more energy efficient appliance use them more 
intensively, thereby saving less energy than the engineering 
estimates would have indicated. In some instances, the rebound is 
zero.
---------------------------------------------------------------------------

    Other Impacts. In determining economic justification, the Act 
directs the Department to consider a number of different factors. Among 
these factors are requirements that the Department consider the 
economic impact of the standard on consumers. In this regard, the Act 
establishes a rebuttable presumption that a standard is economically 
justified if the additional product costs attributable to the standard 
are less than three times the value of the first year energy cost 
savings. Also, the Department is required to consider changes in the 
life-cycle costs resulting from the standard.
    Taking into consideration these various requirements, the 
Department calculates:
     The estimated simple payback of additional product costs 
(based on estimated changes in product purchase prices) by the energy 
cost savings projected to result from the proposed standard.
     The estimated changes in life-cycle costs to the consumer 
likely to result from the proposed standard, and
     The net present value of estimated savings to the Nation 
of the proposed standard.
    The calculation of both consumer life-cycle costs and national net 
present costs/benefits require the use of appropriate discount rates. 
The discount rate used in such calculations is intended to approximate 
the time-value of money of those who would bear the additional product 
prices resulting from a proposed standard and who would also, 
presumably, benefit from the resulting savings in energy expenses. 
Consequently, the most appropriate discount rate depends on the 
characteristics of the individual consumers, businesses, or other 
persons affected by a proposed standard. The Department expects to use 
the same discount rates for this notice as are selected as a result of 
the Three Product Advance Notice. The Department welcomes comments on 
this issue.
    The Department recognizes that there are external societal benefits 
(and possibly costs) that are generated from appliance standards. These 
are principally the value of reductions in oil imports and the 
reduction in projected emissions of SO2, NO2 and CO2. It 
has been suggested that the appliance standards resulting from this 
rulemaking will not create any SO2 or NO2 savings beyond 
those that will be required by the Clean Air Act of 1990 (P.L. 101-549, 
November 15, 1990). If that proves to be true, then the emissions 
reductions from standards that do occur will accrue to those deriving 
the reductions (which are principally electric utilities) by displacing 
the measures that those firms would otherwise utilize to achieve their 
required reductions of SO2 and NO2. In that case, the 
SO2 and NO2 reductions from standards would represent a cost-
free way for those firms to achieve their savings, and, as such, would 
have some value to those firms realizing the reductions. The actual 
value that will be realized from appliance standards-induced reductions 
of SO2 will be the market-determined dollar value placed on the 
pollution credits that are earned. Such credits can be used by the firm 
realizing the credits, ``banked'' for future use, or sold for use or 
``banking'' by others.
    In previous rulemakings, the Department identified benefits 
resulting from national energy savings and emissions reductions, but 
did not attach any monetary value to these benefits because of the 
considerable uncertainty of such estimates. However, in order more 
explicitly to consider such externalized benefits (or costs), the 
Department will attempt in this rulemaking to establish values for 
these benefits, if a sound analytical basis can be found. The 
Department has recently published a Supplemental Advance Notice (59 FR 
51140, October 7, 1994) to the Three Product Advance Notice; this 
Supplemental Advance Notice presents considerations that would need to 
be made in developing a sound analytic basis for monetizing 
externalities.
    The Department is concerned about the impact to any identifiable 
groups or consumers who may be disproportionally affected by any 
proposed national energy efficiency standard levels. The Department 
requested comments on a methodology for addressing this issue in the 
Three Product Advance Notice. The Department expects to follow the 
policy regarding the consideration of such disproportionate impacts 
that emerges from the consideration of comments on the Three Product 
Advance Notice in this rulemaking. The Department welcomes comments on 
this issue.
2. Electric Power Research Institutes Residential End-Use Energy 
Planning System (REEPS 2.12)
    REEPS has been used since the early 1980s both as a tool for 
national residential policy analysis and subsequently as an analytical 
tool for electric utilities to forecast long-term residential energy 
demand. The current version of the model, REEPS 2.12, simulates the 
energy consumption behavior of specific household segments.
    REEPS 2.12 incorporates the basic features of residential end-use 
forecasting into a generalized modeling framework in which the user has 
considerable control over the algorithms and model structure. This 
framework provides greater flexibility over more traditional models 
which are ``hardwired'' for particular formulations of residential 
sector energy use. This facilitates implementation of a wide range of 
scenarios and policies at varying levels of disaggregation without ever 
changing the computer program itself.
    Space conditioning and appliance modeling. REEPS 2.12 provides a 
separate modeling framework for space conditioning end-uses and another 
for household appliances, like refrigerators, clothes washers, etc. 
These frameworks are referred to as the HVAC module and appliance 
modules. Exogenous variables include macroeconomic projections such as 
income and household size and other external parameters specified by 
the user. Fuel price projections are implemented as exogenous time 
series for each fuel and rate class used in the model. Household data 
allows the user to forecast changes to the housing stock based on 
separate decay rates for each housing type and vintage block.
    HVAC module/thermal shell. REEPS 2.12 has an HVAC module which 
deals with space conditioning equipment and the thermal shell. The 
module has various parameters such as fuel choice, system capacity, 
efficiency levels, etc.. The Department believes that these issues will 
not be a factor in the analysis for the three cleaning products because 
these products do not impact the thermal characteristics of the 
dwelling. The Department welcomes comments on this assumption.
    Appliance module. The REEPS 2.12 Appliance Model provides a 
generalized structure for characterizing purchases and energy 
consumption of appliances. This model will be used to analyze the three 
cleaning products if the Department decides to adopt REEPS. Working 
within the REEPS framework, users of the model configure economic and 
energy data on appliances and define functional relationships to model 
changes in energy consumption in future years. Demographic segmentation 
allows the user to define different segments of the appliance market 
based on household characteristics such as income or household size and 
differentiate purchase decisions across these segments. These other 
input sets precede the specification of the appliance models themselves 
because they define important elements of appliance model structure, 
such as the housing types specified in the Households module. Data from 
these input sets are used as drivers in forecasting the size, 
characteristics, and usage of the appliance stock.
    The REEPS 2.12 Appliance Model is a vintaged capital stock or stock 
flow-adjustment model that maintains accounts of appliances by vintage 
year. REEPS 2.12 uses a state-based approach to forecasting in which 
purchase decisions are explicitly modeled at the household level. The 
state-based approach differs from a saturation approach to appliance 
modeling, in which the saturations or market shares are modeled and the 
difference from the current ownership patterns are attributed to 
appliance purchases. The ``state'' of a given appliance model in a 
given year determines the energy consumption for that appliance by 
tracking five key variables throughout the course of the forecast: 
size, efficiency, usage, market share and the number of households. 
Appliance size, efficiency and usage are defined by the user in the 
units and values appropriate for a given end-use and/or appliance.
    Three general modeling steps are executed for each appliance end-
use: (1) Base-year calibration, (2) decision-model calibration, and (3) 
forecast execution. In the base-year calibration, the Appliance Model 
is compared with the input housing stock and demographic 
characteristics to check for values that are disaggregated by housing 
type and demographic segment. Usage is adjusted to be consistent with 
stock Unit Energy Consumption values and vintage block information on 
vintage block shares, efficiencies and sizes. In the second step, 
decision-model calibration, the decision models are adjusted to fit the 
control values specified in the first forecast year. These control 
values are referred to as ``control-year'' data, and include the 
marginal appliance efficiencies and new purchase shares. Finally, in 
the forecast execution step, decision models are used to predict new 
appliance ownership shares and efficiency choices. The algorithmic 
procedures in each of these three steps are detailed in the technical 
documentation for the Appliance Model.
    Policy modeling. The flexibility of REEPS 2.1 allows the user to 
model a number of policies through the judicious modification of the 
appropriate parameters, equations, structure, and addition of new 
technologies. Government and utility policies have the potential to 
restrict appliance efficiency levels, energy prices, financial criteria 
for new equipment purchases, early retirement of appliances, and rates 
of technical innovation. The policy choices in REEPS 2.12 include: 
Energy prices, functional forms and coefficients for choice equations, 
pre-failure replacement conversion decision algorithm, restrictions on 
legal or market availability of specific technologies, and modification 
of specific technologies, purchase prices or efficiencies.

c. Manufacturer Impact Models

1. Conceptual Approach
    The manufacturer impact analysis estimates the overall impact of 
new or amended standards on an industry's profitability and scale of 
operation.
2. Measures of Impact
    The analysis examines two types of long-run impact: profitability 
and growth. Consequently, five measures of impact are reported. They 
are: shipments, prices, revenues, net incomes and returns on equity. 
Return on equity is the primary measure of profitability, assets and 
income provide the primary measures of growth. At the request of 
appliance manufacturers, a new measure, net present value of the 
industry, will also be reported.
    Two short-run impacts are also analyzed. First, the ability of the 
industry to provide the one-time investments required to meet the new 
standard is examined. Second, if standards result in decreased sales 
for the particular industry being analyzed, the analysis examines the 
possibility of price-cutting while the industry is adjusting to a lower 
sales volume.
3. Lawrence Berkeley Laboratory Manufacturer Impact Model
    In order to estimate the impacts of energy efficiency standards, a 
computer spreadsheet model, the Lawrence Berkeley Laboratory 
Manufacturer Impact Model (LBL-MIM), was developed.
    The LBL-MIM was developed at Lawrence Berkeley Laboratory in 1988. 
Since its inception, it has evolved and has been used in the analysis 
and reanalysis for numerous Department rulemakings.
    The LBL-MIM models the cumulative effects of standards on the 
future of the industry, and by means of present value formulas presents 
the effects on an annualized basis.
    Ideally, a manufacturer analysis should look at the impact of a 
proposed regulation on every firm that does business in the industry 
under question. However, because the industries being analyzed have 
many manufacturers making a particular product, a firm-by-firm analysis 
is not feasible. In addition, the engineering and financial data for 
most manufacturing firms are proprietary and are not routinely 
available for public analysis. Because of these limitations on data and 
resources, the LBL-MIM models a prototypical firm. In many cases this 
firm represents a division of a larger firm. Therefore, a prototype 
firm is a hypothetical firm representative of a portion of the 
industry. Prototypical firms are defined by parameters that are 
important for determining the impacts of standards and are consistent 
with data for the portion of the industry they represent. Important 
parameters used in the model include the cost structure of the firms, 
profitability ratios, relative costs of complying with the new 
standard, and marketing strategies.
    Revenue is affected by both price and shipments. Price is 
determined by computing the markup over long-run marginal costs and 
then using the markup to determine an optimal price. Demand is 
determined by price and operating expense elasticities, coupled with 
the changes in price and operating expenses resulting from the 
standards.
    The LBL-MIM produces several outputs used in analyzing the impact 
of standards on manufacturers. A simplified pro forma income statement 
is prepared for each prototypical firm. In addition to the income 
statement, five main variables--shipments, prices, revenues, net 
incomes, and returns on equity--are reported. The results are presented 
for the without-standards (or without amended standards) case and the 
with-standards (or with amended standards) case, and the relative 
differences between the two are also given.
4. Integration of the Lawrence Berkeley Laboratory Manufacturer Impact 
Model and the Government Regulatory Impact Model
    As part of its comments submitted to the Department for the 
rulemaking on nine consumer products (comments No. 61D and 61E dated 
July 1991 and September 9, 1991, respectively), the Association of Home 
Appliance Manufacturers (AHAM) proposed an alternate approach to the 
LBL-MIM for the analysis of manufacturer impacts. The AHAM's approach 
was formalized as a computer spreadsheet by the Arthur D. Little 
consulting firm. It was named the Government Regulatory Impact Model 
(GRIM) and was formally proposed to DOE by representatives of the AHAM, 
the Air-Conditioning and Refrigeration Institute, the Gas Appliance 
Manufacturers Association, and Arthur D. Little on April 15, 1993.
    The primary functional differences between GRIM and LBL-MIM are 
GRIM's use of an annual cash-flow analysis for manufacturer costs and 
restriction to cost predictions. DOE has analyzed the GRIM's cost 
approach and found that, given identical inputs, its results were 
similar enough to those of the cost section of the LBL-MIM that the 
LBL-MIM outputs are not significantly affected by the use of the GRIM. 
Because the cash-flow approach to manufacturer costs is simpler and 
more transparent to the industry, DOE intends to analyze the GRIM cost-
analysis methodology and may integrate the model into the LBL-MIM as a 
replacement for the cost analysis section of the LBL-MIM. The analysis 
of the GRIM and possible adoption will be determined in the Three 
Product Advance Notice rulemaking and the Department expects to use the 
same methodology in this rulemaking. The Department welcomes comments 
on this issue.
    If the GRIM is adopted, then the capabilities of the LBL-MIM 
necessary to the analysis but not found in the GRIM, such as price and 
shipments forecasting, will be retained. The GRIM's measure of impact 
and industry net present value would be included as part of the LBL-
MIM's primary measures of impact.
5. Cash-Flow Analysis of Costs Due to Standards
    A change in standards affects the analysis in three distinct ways. 
Increased levels of standards will require additional investment, will 
raise production costs, and will affect revenue through higher prices 
and, possibly, lower quantities sold.
    The integrated model using the GRIM cost analysis uses a number of 
factors--annual expected revenues; manufacturer costs such as costs of 
sales, selling and general administration costs; taxes; and capital 
expenditures related to depreciation, new standards, and maintenance--
to arrive at a series of annual cash flows beginning from before 
implementation of standards and continuing explicitly for five years 
after implementation.
    The measure of industry net present values are calculated by 
discounting the annual cash flows from the period before implementation 
of standards to some future point in time.
    The revenues are supplied by the price and shipments forecasting 
algorithms from the LBL-MIM.
6. Data Sources
    The models need data that characterize both a particular industry 
and prototypical firms within that industry. Estimates of data are 
based on information from five general sources: Lawrence Berkeley 
Laboratory business consultation groups; the Engineering Analysis; the 
Consumer Analysis; public financial data; and industry profiles.

d. Utility Impact Model

    Electric utility impact model. The electric utility analysis serves 
three purposes within the overall assessment of the impact of the 
proposed standards. First, it contributes to quantifying the energy 
savings by determining the reduction in fossil fuels used for 
electricity generation. Second, the estimated reduction in fossil fuel 
consumption is an input to the Environmental Assessment, as required by 
the National Environmental Policy Act. And third, by calculating 
utility avoided costs, it provides marginal electricity costs. Avoided 
cost is calculated by assessing the impacts on the electric utility 
industry in terms of changes in investment, revenue requirements, and 
residential load factors.
    The electric utility analysis adopts the standard approach that the 
value of electricity savings, based on marginal costs, can be broken 
down into energy savings and capacity savings. The energy component 
reflects the avoided cost of fuel not burned at the powerplant by the 
reduced need to generate electricity. The capacity component measures 
the avoided cost of financing and building extra generating capacity. 
The analysis characterizes these avoided costs per KWh of heating, 
cooling, and baseload energy saved. The heating and cooling energy 
includes baseload and peak energy. These values are used to calculate 
societal benefits from reduced electricity consumption.
    The Electric Utility Impact Model calculates avoided energy costs 
based on a disaggregation of the generation fuel mix to the National 
Electric Reliability Council regions and a simplified load duration 
curve for each region. First, the model allocates national electricity 
savings that are forecasted by the LBL-REM to National Electric 
Reliability Council regions in proportion to their current consumption 
of heating, cooling, and baseload energy. The regional proportions are 
derived from data on regional appliance saturations, efficiencies, and 
hours of use. The fraction of the electricity that would have to be 
generated at the margin from oil and gas is calculated from the total 
regional oil and gas fraction and the simplified load duration curve. 
Projected utility natural gas and coal prices, weighted by the oil and 
gas fraction and the non-oil and gas fraction, respectively, are used 
to calculate utility marginal costs over the forecast period. The 
marginal costs are adjusted to account for seasonal differences.
    The avoided capacity cost calculation in the model is based on 
conservation load factors for the energy savings attributable to the 
standards as well as the capacity costs of a combustion turbine. A 
conservation load factor is defined as the average hourly energy 
savings of a conservation measure divided by its peak load savings. The 
conservation load factors are a way of characterizing the peak demand 
savings of a conservation measure. They are used to convert the 
capacity value of the standards into the per-kWh values described 
above. The National Electric Reliability Council forecasts of capacity 
requirements for each region are used to account for regional 
variations in reserve margin. If the National Electric Reliability 
Council forecasts an adequate reserve margin in a region for a given 
year, no value is given to the capacity savings in the region.
    The inputs needed for the Utility Impact Model are conservation 
load factors, state-level utility fuel prices, appliance saturations, 
efficiencies, and hours of use as well as electricity generation by 
fuel type and capacity need by National Electric Reliability Council 
region. The outputs of the analysis are fuel savings, reduction in the 
need for new generating capacity, and avoided energy and capacity costs 
for heating, cooling, and baseload appliances per million Btu's of 
resource energy.
    Gas utility modeling. Because the natural gas supply system does 
not consist of vertically integrated suppliers, the gas utility 
modeling necessarily takes a different approach from the electric 
utility modeling. Nonetheless, the fundamental goal, to estimate the 
effect of proposed standards on utilities and their customers, is the 
same. The analysis on the gas side is greatly simplified by the fact 
that no energy conversion is involved, so that the amount of natural 
gas saved at the burner tip is not very different from the amount that 
can remain in the ground. The environmental impacts are similarly 
simple, relative to electricity supply, because most of the 
environmental consequences of residential natural gas use occur at the 
burner tip. The focus of the gas analysis, therefore, sits squarely on 
the cost impact of proposed standards.
    The gas utility cost modeling is in two parts. In the first, the 
effect of the standard on the general market for natural gas is 
estimated. For the purposes of this analysis, the result of interest is 
the city gate price of natural gas. That is, the price that local gas 
distribution companies pay for the gas they later distribute to 
customers. In general, the sales reductions predicted from residential 
appliance efficiency standards are not expected to be great enough, or 
near enough in the future to have a major impact on the North American 
gas market as a whole. However, to quantify any possible effect, the 
Department will use a national equilibrium gas supply and transmission 
model. This model will be run under a base case that reflects current 
EIA forecasts of gas supply and demand, and policy cases that reflect 
Department forecasts of the effect of the proposed standard.
    The second part of the analysis concerns the gas market downstream 
of the city gate. The U.S. has numerous and diverse local natural gas 
distribution companies, and no individual modeling of companies is 
feasible. The Department will, therefore, rely on a general econometric 
model of industry cost structure. Company operating costs are 
represented in an historic data base covering about 50 major U.S. 
distribution companies. A translog econometric cost function will be 
fitted to these data and then applied as a forecasting tool. The inputs 
to this model are twofold: (1) the same base case and policy case 
demand forecasts, reduced to local company levels; and (2) the base and 
policy case city gate price forecasts derived from the market-wide 
analysis. The results of the econometric modeling will show the effects 
of the proposed standard on a typical local distribution company and 
its customers.

e. Sensitivity Analyses

    Sensitivity studies are performed to determine how changes in 
technical and operational parameters affect key engineering and 
economic indicators used in evaluation of appliance standards. This 
makes it possible to place limits on the overall results of the 
analysis and to gain an understanding of which variables are most 
important in producing these results. Sensitivity analyses are 
developed in a series of distinct steps. For each component analysis in 
the overall analysis, critical input parameters are identified and 
reasonable ranges of variation determined. The sensitivity of the model 
to changes in the value of each important parameter is then estimated 
by running the model for both the base case and the standards cases. 
The results of the sensitivity analyses are examined to determine the 
sensitivity of the forecasts to exogenous variables and assumptions and 
the sensitivity of the differences between the base and standards cases 
(impacts of alternative standards).
    The sensitivity analyses have been developed at the national level 
and no effort has been made to link them with any specific population 
groups. The standards analysis assumes that nationwide average 
appliance usage rates, energy prices, and efficiency apply to all 
consumers in all areas of the nation, although the Department 
recognizes that there exist large variations in each of these factors. 
The Department requested in the Three Product Advance Notice 
information concerning the extent to which any proposed national 
efficiency standard is likely to affect identifiable groups of 
consumers disproportionally and how best to consider such impacts in 
the selection of efficiency standard levels. The Department also 
requested additional data to help it better assess the disproportionate 
impacts on such groups. The Department expects to use the same approach 
that emerges in the Three Product Advance Notice rulemaking in this 
rulemaking. The Department welcomes comments on this issue.

IV. Public Comment Procedures

a. Participation in Rulemaking

    The Department encourages the maximum level of public participation 
possible in this rulemaking. Individual consumers, representatives of 
consumer groups, manufacturers, associations, States or other 
governmental entities, utilities, retailers, distributors, 
manufacturers, and others are urged to submit written statements on the 
proposal.
    The Department has established a period of 75 days following 
publication of this notice for persons to comment on this proposal. All 
public comments received will be available for review in the 
Department's Freedom of Information Reading Room.

b. Written Comment Procedures

    Interested persons are invited to participate in this proceeding by 
submitting written data, views, or arguments with respect to the 
subjects set forth in this notice. Instructions for submitting written 
comments are set forth at the beginning of this notice and below.
    Comments should be labeled both on the envelope and on the 
documents, ``Three Cleaning Products Rulemaking (Docket No. EE-RM-94-
403),'' and must be received by the date specified at the beginning of 
this notice. Ten copies are requested to be submitted. Additionally, 
the Department would appreciate an electronic copy of the comments to 
the extent possible. The Department is currently using 
WordPerfectTM 5.1. All comments and other relevant information 
received by the date specified at the beginning of this notice will be 
considered by the Department in the proposed rule.
    All written comments received on the Advance Notice of Proposed 
Rulemaking will be available for public inspection at the Freedom of 
Information Reading Room, as provided at the beginning of this notice.
    Pursuant to the provisions of 10 CFR 1004.11, any person submitting 
information or data that is believed to be confidential and exempt by 
law from public disclosure should submit one complete copy of the 
document and ten (10) copies, if possible, from which the information 
believed to be confidential has been deleted. The Department will make 
its own determination with regard to the confidential status of the 
information or data and treat it according to its determination.
    Factors of interest to the Department, when evaluating requests to 
treat information as confidential, include: (1) A description of the 
item; (2) an indication as to whether and why such items of information 
have been treated by the submitting party as confidential, and whether 
and why such items are customarily treated as confidential, and whether 
and why such items are customarily treated as confidential within the 
industry; (3) whether the information is generally known or available 
from other sources; (4) whether the information has previously been 
available to others without obligation concerning its confidentiality; 
(5) an explanation of the competitive injury to the submitting person 
that would result from public disclosure; (6) an indication as to when 
such information might lose its confidential character due to the 
passage of time; and (7) whether disclosure of the information would be 
in the public interest.

c. Issues for Public Comment

    The Department is interested in receiving comments and data 
concerning the accuracy and workability of this methodology. Also, the 
Department welcomes discussion on improvements or alternatives to this 
approach. In particular, the Department is interested in gathering data 
on the following:
     Descriptive and performance characteristics for baseline 
models of each product class that are the subject of this rulemaking; 
these baseline models should be those satisfying the appropriate 
standards;
     Proposed product classes for products in this rulemaking;
     Costs of baseline models and incremental costs of designs 
improving the energy efficiency of the products that are the subject of 
this rulemaking;
     Appropriateness of existing and proposed test procedures 
to the proposed design options; specifically, the Department would like 
comments on whether a clothes washer that consumes more energy for a 
higher percentage of water extraction (thus, lower clothes dryer energy 
consumption) should be given a credit and if so, how much; and
     Data on lifetimes of the appliances.
    The Department requested information on the issues listed below in 
the Three Product Advance Notice issued in September 1993. However, the 
Department encourages commenters to provide any additional information 
on these issues which may not have been presented in response to the 
Department's Three Product Advance Notice. These issues are as follows:
     The relevance of the data inputs and outputs of the LBL-
REM and LBL-MIM models, whether these models could or should capture 
the cumulative effects of Federal energy conservation standards on 
multi-product appliance manufacturers and whether or not there are 
acceptable alternative models that could be used, such as REEPS or 
GRIM;
     Analytic bases and methods of calculating the dollar value 
of reduced atmospheric emissions of SO2, NO2, and CO2 
from reduced energy consumption;
     Data on consumer financing of appliances useful for 
obtaining a weighted-average discount rate; and
     Data on the possible adverse affects of standards on 
identifiable groups of consumers that experience below-average utility 
or usage rates.
    The Department has been unable to identify the financial 
characteristics of small manufacturers. For purposes of this analysis, 
small manufacturers' costs are assumed to equal those of medium 
manufacturers. The Department is especially interested in learning of 
the existence of small manufacturers and in obtaining costing data from 
such manufacturers of the products under consideration.
    For the Residential Energy Model analysis, the Department requests 
interested parties to provide historical data on shipments and average 
efficiencies by class for the products subject to the proposed 
rulemaking. Data on consumer prices and on the installation and 
maintenance expenses of these appliances are also requested.
    The manufacturer analysis needs financial data from the product 
division level. All of these data are available at the firm level; but 
since firms are typically much larger than the relevant division, the 
firm data may give a misleading indication of the division's finances.
    An income statement and balance sheet at the division level would 
be most helpful. If this is not available, then data on the following 
variables are considered most essential: Net income, revenue, selling 
and general and administrative costs, engineering costs, costs of goods 
sold, interest, taxes, debt-to-equity ratio, net depreciable assets, 
net assets, capital investment, and long-term debt.
    The Department also welcomes current data on unit sales and 
revenues for the industries as a whole.

V. Review Under Executive Order 12866

    Today's regulatory action has been determined to be an 
``economically significant regulatory action'' under Executive Order 
12866, ``Regulatory Planning and Review,'' (58 FR 51735, October 4, 
1993). Accordingly, today's action was subject to review under the 
Executive Order by the Office of Information and Regulatory Affairs 
(OIRA).
    There were no substantive changes between the draft submitted to 
OIRA and today's action.
    The draft of today's action and any other documents submitted to 
OIRA for review have been made a part of the rulemaking record and are 
available for public review in the Department's Freedom of Information 
Reading Room, 1000 Independence Avenue SW. Washington, DC 20585 between 
the hours of 9:00 and 4:00, Monday through Friday, telephone (202) 586-
6020.

    Issued in Washington, DC, on November 2, 1994.
Christine A. Ervin,
Assistant Secretary, Energy Efficiency and Renewable Energy.
[FR Doc. 94-28044 Filed 11-10-94; 8:45 am]
BILLING CODE 6450-01-P