[Federal Register Volume 61, Number 136 (Monday, July 15, 1996)]
[Rules and Regulations]
[Pages 36974-36987]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-17886]



[[Page 36973]]


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Part III





Department of Energy





_______________________________________________________________________



Office of Energy Efficiency and Renewable Energy



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10 CFR Part 430



Procedures for Consideration of New or Revised Energy Conservation 
Standards for Consumer Products; Final Rule

  Federal Register / Vol. 61, No. 136 / Monday, July 15, 1996 / Rules 
and Regulations  

[[Page 36974]]



DEPARTMENT OF ENERGY

Office of Energy Efficiency and Renewable Energy

10 CFR Part 430

RIN [1904-AA83]


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

AGENCY: Office of Energy Efficiency and Renewable Energy, Department of 
Energy (DOE).

ACTION: Notice of final rulemaking.

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

SUMMARY: The Department of Energy (DOE or Department) today promulgates 
a rule to elaborate on the procedures, interpretations and policies 
that will guide the Department in establishing new or revised energy 
efficiency standards for consumer products. The process described in 
this rule provides for greatly enhanced opportunities for public input, 
improved analytical approaches, and encouragement of consensus-based 
standards. This enhanced approach was developed by the Department on 
the basis of extensive consultations with many stakeholders.

EFFECTIVE DATE: The procedures, interpretations and policies 
established in this rule take effect on August 14, 1996.

ADDRESSES: A copy of the report entitled ``Results of the Appliance 
Rulemaking Process Improvement Effort,'' from which much of the 
enhanced process described in this rule is derived, may be obtained 
from: U.S. Department of Energy, Office of Energy Efficiency and 
Renewable Energy, Forrestal Building, EE-43, 1000 Independence Avenue, 
SW, Washington, DC 20585, (202) 586-7574. This report may be read at 
the DOE Freedom of Information Reading Room, U.S. DOE, Forrestal 
Building, Room 1E-190, 1000 Independence Avenue, SW, Washington, DC 
20585, (202) 586-6020, between the hours of 9 a.m. and 4 p.m., Monday 
through Friday, except Federal holidays.

FOR FURTHER INFORMATION CONTACT:
Michael J. McCabe, Office of Energy Efficiency and Renewable Energy, 
U.S. Department of Energy, Mail Station EE-43, 1000 Independence 
Avenue, SW, Washington, DC 20585-0121, (202) 586-0371
Douglas W. Smith, Office of General Counsel, U.S. Department of Energy, 
Mail Station GC-70, 1000 Independence Avenue, SW, Washington, DC 20585-
0103, (202) 586-3410
Deborah E. Miller, Office of Energy Efficiency and Renewable Energy, 
U.S. Department of Energy, Mail Station EE-1, 1000 Independence Avenue, 
SW, Washington, DC 20585-0121, (202) 586-8888.

SUPPLEMENTARY INFORMATION:

I. Background on Appliance Standards Program
II. Process Leading to Development of this Rule
III. Description of Rule
    1. Objectives
    2. Scope
    3. Setting Priorities for Rulemaking Activity
    4. Process for Developing Efficiency Standards and Factors to be 
Considered
    5. Policies on Selection of Standards
    6. Effective Date of a Standard
    7. Test Procedures
    8. Joint Stakeholder Recommendations
    9. Principles for the Conduct of Engineering Analysis
    10. Principles for the Analysis of Impacts on Manufacturers
    11. Principles for the Analysis of Impacts on Consumers
    12. Consideration of Non-Regulatory Approaches
    13. Crosscutting Analytical Assumptions
    14. Deviations, Revisions, and Judicial Review
IV. Related DOE Actions to Implement Process Improvements
    1. Finalized process improvement report
    2. Process to develop rulemaking priorities
    3. Review of manufacturer impact analysis
    4. Review of non-regulatory approaches
    5. Creation of an advisory committee
V. Status of Ongoing Rulemakings
VI. Administrative Procedure
VII. Administrative Reviews

I. Background on Appliance Standards Program

    The Department of Energy's appliance standards program is conducted 
pursuant to Title III, Part B of the Energy Policy and Conservation Act 
(EPCA). 42 U.S.C. 6291-6309. In 1987, EPCA was amended to establish by 
law national efficiency standards for certain appliances and a schedule 
for DOE to conduct rulemakings to periodically review and update these 
standards. National Appliance Energy Conservation Act, Pub. L. 100-12 
(1987). The products covered by these standards included refrigerators 
and freezers, room air conditioners, central air conditioners and heat 
pumps, water heaters, furnaces, dishwashers, clothes washers and 
dryers, direct heating equipment, ranges and ovens, pool heaters, and 
fluorescent lamp ballasts. In conducting the rulemakings to update the 
standards, the Secretary of Energy is to set standards at levels that 
achieve the maximum improvement in energy efficiency that is 
technologically feasible and economically justified.
    The Energy Policy Act of 1992 (EPACT) further amended EPCA to 
expand the coverage of the standards program to include certain 
commercial and industrial equipment, including commercial heating and 
air-conditioning equipment, water heaters, certain incandescent and 
fluorescent lamps, distribution transformers, and electric motors. 
Energy Policy Act of 1992, Pub. L. 102-486 (1992). EPACT also 
established maximum water flow-rate requirements for certain plumbing 
products and provided for voluntary testing and consumer information 
programs for office equipment, luminaires, and windows.
    EPCA also provides for DOE to establish test procedures to be used 
in evaluating compliance with efficiency standards. These test 
procedures are revised periodically to reflect new product designs or 
technologies.
    As prescribed by EPCA, energy efficiency standards are established 
by a three-phase public process: Advance Notice of Proposed Rulemaking 
(ANOPR); Notice of Proposed Rulemaking (NOPR); and Final Rule. The 
process to develop test procedures is similar, except that an Advance 
Notice is not required.
    In updating standards as required by EPCA, DOE revised standards 
for refrigerators and freezers in November 1989, with those standards 
becoming effective in January 1993. 54 FR 47916 (Nov. 17, 1989). These 
standards resulted in an approximately 25 percent reduction in 
refrigerator energy use. In May 1991, DOE issued revised energy 
conservation standards for clothes washers, clothes dryers, and 
dishwashers which became effective on May 14, 1994. 56 FR 22250 (May 
14, 1991).
    DOE has published notices of proposed rulemaking on revised 
standards for a number of covered products. A NOPR for energy 
conservation standards for eight products (water heaters, room air-
conditioners, mobile-home furnaces, direct-heating equipment, pool 
heaters, kitchen ranges and ovens, fluorescent lamp ballasts, and 
televisions) was published in March 1994. 59 FR 10464 (March 4, 1994). 
DOE has since withdrawn the proposal to establish standards for 
television sets. 60 FR 32627 (June 23, 1995). With regard to ballasts 
and electric water heaters, DOE is gathering further inputs and 
conducting further analysis. 60 FR 5880 (Jan. 31, 1995). In July 1995, 
the Department issued a NOPR for energy conservation standards for 
refrigerator

[[Page 36975]]

products which was based largely on a proposal made by a coalition of 
refrigerator manufacturers, electric utilities, states and energy 
conservation advocates. 60 FR 37388 (July 20, 1995).
    The Department of the Interior and Related Agencies Appropriations 
Act for Fiscal Year 1996 included a moratorium on proposing or issuing 
energy conservation appliance standards for the remainder of Fiscal 
Year 1996. See Pub. L. 104-134. The Department is continuing to work on 
the analyses underlying proposed standards and on test procedure 
revisions during this fiscal year.
    The appliance standards program supports key objectives of the 
Administration's Sustainable Energy Strategy, which include: Increasing 
the efficiency of energy use in order to strengthen our economy and 
improve living standards; reducing the adverse environmental impacts 
associated with energy production, delivery and use; and keeping 
America secure by reducing our vulnerability to global energy market 
shocks. Although the Department recognizes that policies that rely on 
market forces or market-based incentives are preferable in many 
circumstances, appropriate regulatory intervention can achieve 
efficiency gains that will benefit consumers, businesses, and the 
Nation. Existing appliance standards are projected to save 23 
quadrillion BTUs of energy from 1993 to 2015, resulting in estimated 
consumer savings of $1.7 billion per year in 2000 and estimated annual 
emission reductions of 107 million tons of carbon dioxide and 280 
thousand tons on nitrogen oxides by 2000. An aggressive program for 
promoting the efficient use of energy resources, including appliance 
efficiency standards that are technically feasible and economically 
justified, is a critical element of the Sustainable Energy Strategy.

II. Process Leading to Development of This Rule

    Since the National Performance Review's recommendations on 
Regulatory Reform were issued over two years ago, the U.S. DOE has 
forged new ways of carrying out its appliance standards rulemaking 
responsibilities. To supplement the traditional rulemaking process 
established by law, the Department has encouraged consensus-based 
alternatives and invited interest group participation in the early 
stages of standards development with mechanisms such as technical 
sessions and workshops.
    In September 1995, the Department announced a formal effort to 
consider further improvements to the process used to develop appliance 
efficiency standards, calling on energy efficiency groups, 
manufacturers, trade associations, state agencies, utilities, and other 
interested parties to provide input to guide the Department's work. To 
date, the Department's process improvement effort has consisted of 
several elements:

--A series of preliminary meetings were held with interested parties to 
identify opportunities for improvement in the rulemaking process, 
standards priority setting, analysis methods and Department decision-
making;
--Interviews were conducted with thirty organizations that have 
participated in past appliance rulemakings to solicit information 
regarding the perceived strengths and weaknesses of the process;
--A preliminary draft ``Process Improvement Plan'' was developed from 
these initial meetings and interviews;
--A public workshop was held to obtain broad-based input on the 
Department's draft ``Process Improvement Plan'' and other elements of 
the Department's proposed new approach;
--A draft report entitled ``Results of the Appliance Rulemaking Process 
Improvement Effort'' was prepared and distributed for comment to the 
workshop participants;
--Follow-up meetings were held with interested parties on the issues 
raised in the draft report; and
--Several drafts of today's rule were shared with stakeholders, and the 
Department addressed numerous comments made by interested parties in 
written submissions and during two well-attended stakeholder workshops.

    The publication of this rule is an important step in 
institutionalizing the procedural improvements identified in this 
process. It is not, however, the only step. Other actions in the 
Department's process improvement effort include: A review of the 
manufacturing impact analysis model and methodologies; a review of non-
regulatory approaches; the prioritization of future rules; and the 
creation of an advisory committee consisting of a representative group 
of interested parties, to oversee the implementation of these 
commitments. (See section IV of the Supplementary Information.) The 
objective is to act quickly to implement this enhanced standards 
development process, and to continue to invite extensive stakeholder 
consultation in the implementation phase.
    The Department's many stakeholders have contributed tremendously to 
this effort to review the Department's procedures. The Department 
appreciates that sustained contribution, and is committed to implement 
a process that is more responsive to stakeholder concerns.

III. Description of Rule

1. Objectives

    Section 1 of the rule articulates the Department's major objectives 
for the enhanced process to be employed for considering new or revised 
appliance efficiency standards. The Department's objectives are to:
    (a) Provide for early input from stakeholders
    (b) Increase predictability of the rulemaking timetable
    (c) Increase use of outside technical expertise
    (d) Eliminate problematic design options early in the process
    (e) Fully consider non-regulatory approaches
    (f) Conduct thorough analysis of impacts
    (g) Use transparent and robust analytical methods
    (h) Articulate policies to guide selection of standards
    (i) Support efforts to build consensus on standards
    (j) Reduce time and cost of developing standards

2. Scope

    Section 2 describes the applicability of the enhanced process 
contained in the rule. The Department has adopted a common sense 
approach to the transition to this enhanced process.
    DOE will use the new approach for all new rulemakings. With regard 
to rulemakings that are already underway, DOE and interested parties 
have invested substantial effort and resources. In balancing whether 
the benefits of using this enhanced process justify the delay of 
starting these rulemakings anew, DOE has concluded that the new process 
will be used, from the start, with respect to rulemakings in which a 
NOPR has not yet been published. To the extent analytical work has 
already been done or public comment on an ANOPR has already been 
provided, such analysis and comment will be considered, as appropriate, 
in proceeding under the new process. A case-by-case review is needed to 
determine how to proceed (i.e., whether some or all of the analytical 
or procedural steps should be repeated) with respect to products for 
which a NOPR has been issued and the

[[Page 36976]]

analysis is nearly complete. DOE's intentions concerning how to proceed 
with those rulemakings that are beyond the NOPR stage are discussed in 
some detail in section V below. Note that the rulemakings beyond the 
NOPR stage include one rule based on a consensus stakeholder 
recommendation and others for which there has been shared analysis and 
public workshops consistent with the direction of this rule.

3. Setting Priorities for Rulemaking Activity

    Section 3 describes the process that will be used in developing 
rulemaking priorities, including factors to be considered. The annual 
process invites public input on the program's rulemaking agenda for the 
coming year, establishes factors to be considered in establishing 
priorities, and provides, in conjunction with the Department's 
Regulatory Agenda, a clear set of expectations about the scheduled 
rulemaking activities.

4. Process for Developing Efficiency Standards and Factors To Be 
Considered

    Section 4 establishes the process for developing efficiency 
standards. This process is designed to provide for greater, and more 
productive, interaction between the Department and interested parties 
throughout the process. It is also designed so that key analyses are 
performed earlier in the process, with early opportunities for public 
input to and comment on the analyses. The process is consistent with 
the procedural requirements of law, but adds some important steps to 
enhance the process.
    Building upon the National Performance Review's regulatory reform 
initiative, an effort has been underway at the Department to increase 
consultation with interested parties at every stage of the rulemaking 
process. In addition to holding the formal public hearings and 
soliciting written comments, the Department has increased its use of 
public workshops and other less formal tools to develop more effective 
standards. The Department has received broad support for its recent 
efforts to open the standards development process and its commitment to 
obtain input from interested parties early--well in advance of the 
ANOPR--and often in the rulemaking process.
    Section 4 also articulates factors that DOE will take into account 
in screening design options, selecting candidate standard levels, and 
selecting proposed and final standard levels.
(a) Pre-ANOPR Screening and Analysis of Design Options
    As described in section 4(a), the first step in a rulemaking will 
be a screening analysis that will identify the product categories and 
technologically feasible design options and then narrow the range of 
design options being considered for the development of candidate 
standard levels. This screening analysis, along with the engineering 
analysis and the selection of candidate standard levels, will occur 
before DOE publishes an ANOPR.
    Some manufacturers have expressed concern that the Department may 
devote too much attention to consideration of design options that: Are 
not practical to mass manufacture, install or service; have substantial 
impacts on consumer utility; or raise significant safety concerns. The 
screening step is designed to address these concerns. The Department 
will develop, with input from interested parties, a list of design 
options for further consideration. The Department will eliminate from 
further consideration a design option that: Is not technologically 
feasible; is not practicable to manufacture, install and service; has 
significant adverse impact on the utility of the product to consumers; 
or adversely affects health or safety. Consistent with Natural 
Resources Defense Council v. Herrington, 768 F.2d 1355 (D.C. Cir. 
1985), the Department will evaluate design options for technological 
feasibility on the basis of whether the options are in use by industry 
or research has progressed to the development of a prototype. However, 
consideration of practicability to manufacture, impacts on consumer 
utility and health and safety effects at this stage is designed to 
ensure that commercially impractical designs, even if technologically 
feasible, are screened out on the basis of other statutory criteria 
early in the process. This early screening approach should reduce 
uncertainty as to the direction of standards development.
    The Department will seek expert input to conduct the necessary 
analyses. The Department, with input from interested parties, will 
identify issues that will be examined in the engineering analysis and 
the types of specialized expertise that may be required. With these 
specifications, DOE will select appropriate contractors, 
subcontractors, and as necessary, expert consultants to perform the 
engineering analysis and the impact analysis. DOE, in consultation with 
interested parties, also will identify technology/industry experts who 
can provide independent, expert review of the results of the 
engineering analysis and the subsequent impact analysis. The Department 
will consider in the analyses, wherever feasible, data, information and 
analyses received from stakeholders.
    After the screening of design options, the DOE contractor will 
perform engineering and initial economic analysis of the design 
options. The results of this analysis will be distributed for review by 
experts and interested parties. If appropriate, a public workshop will 
be conducted to review these results.
    The process does not contemplate that the early screening process 
will be the final opportunity to gather and consider input on whether a 
design option is technologically feasible; is practicable to 
manufacture, install and service; has significant adverse impact on 
utility of the product to consumers; or adversely affects health or 
safety. Any new information on these issues that is provided in later 
stages of the rulemaking will be considered, as provided in sections 
4(b)(4) and 4(d)(7)(ix), and a preliminary determination to include or 
exclude consideration of a design option based on the screening 
analysis may be revised if supported by a reexamination of these 
factors based on new information.
    This emphasis on the early stages of the process is designed to 
enable interested parties and DOE to engage in a more productive, 
informative interaction on standards issues prior to the publication of 
the ANOPR, so that the standards development process starts with the 
best possible foundation of common understanding.
(b) Factors in Selection of Proposed Standard
    Section 4(c) provides that following review of comments on the 
ANOPR, DOE's contractor will conduct specified impact analyses to be 
used by DOE in selecting proposed standards. The factors to be 
considered by DOE in selection of proposed standard levels include:
    (i) Consensus stakeholder recommendations
    (ii) Impacts on manufacturers
    (iii) Impacts on consumers
    (iv) Impacts on competition
    (v) Impacts on utilities
    (vi) National energy, economic and employment impacts
    (vii) Impacts on the environment and energy security
    (viii) Impacts of non-regulatory approaches
    (ix) New information relating to factors use for screening design 
options.

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    The Department's approach to analysis and consideration of several 
of these key factors is discussed in sections 10, 11, and 12 of the 
rule.
(c) Enhanced Opportunities for the Public to Receive Information and 
Provide Input
    Throughout the process, the Department will provide interested 
parties with opportunities to provide data, recommendations and other 
comments. DOE will share with the public both analyses and preliminary 
decisions to inform interested parties as to the progress of standards 
development. This information from the Department will enable the 
public to provide informed input to DOE at each step of the process.
    With the goal of better informing stakeholders about DOE rulemaking 
activities, the Department will use various methods, in addition to 
Federal Register notices, to notify interested parties of upcoming 
meeting and rulemaking notices, such as industry publications, Inside 
Energy, Air Conditioning News, Appliance Magazine, Product Safety 
Letter, and the Energy Efficiency and Renewable Energy Network (EREN) 
located on the Internet at http://www.eren.doe.gov.
(d) Timely Completion of Rulemakings
    The Department's intent is to use a process that will produce 
standards that have sound analytical grounding and have been subject to 
thorough review and comment without making the process unduly time-
consuming. The entire process provided for in section 4, from the date 
of issuance of the listing of priorities indicating that work is about 
to begin on the development of a new standard, to issuance of the final 
rule, should take no more than three years. The time required from 
issuance of an ANOPR to issuance of a final rule should be no more than 
18 months.
    Timely completion of rulemakings is essential. If experience 
demonstrates rulemakings are not being completed within a 3-year 
timeframe using this new process, DOE will reconsider this process to 
explore how changes can be made to expedite the process.

5. Policies on Selection of Standards

    Section 5 describes Department policies concerning the selection of 
new or revised standards, and decisions preliminary thereto. These 
policies are intended to provide guidance for making the determinations 
required by section 325 of the EPCA, 42 U.S.C. 6295.
    Section 5(b) states policy guidance for screening design options. 
In particular, it states that a design option will not be considered 
further if it is determined that the technology: is not incorporated in 
a commercial product or a working prototype; will not be capable of 
being mass produced and installed and serviced by persons serving the 
relevant market at the time a standard would take effect; will have 
significant adverse impact on the utility of the product to consumers, 
or result in the unavailability of any product type generally available 
in the U.S. market; or will have significant adverse impacts on health 
or safety.

    Section 5(c) and (d) describe the policies pertaining to the 
selection of candidate standard levels.

    Sections 5(e) and (f) describe Department policies guiding 
selection of proposed and final standard levels. Section 325(o)(2)(A) 
of EPCA provides that any new or revised standard must be designed to 
achieve the maximum improvement in energy efficiency that is determined 
to be technologically feasible and economically justified. A candidate 
standard level will not be proposed or promulgated if the Department 
determines that it is not technologically feasible and economically 
justified. See EPCA section 325(o)(3)(B). A standard level is 
economically justified if the benefits exceed the burdens. See EPCA 
section 325(o)(2)(B)(i).

    The Department encourages efforts to develop consensus among 
interested parties on proposals for new or revised standards as an 
effective mechanism for balancing the economic, energy, and 
environmental interests affected by standards. Thus, notwithstanding 
any other policy on selection of proposed standards, a consensus 
recommendation on an updated efficiency level submitted by a group that 
represents all interested parties will be proposed by the Department if 
it is determined to meet the statutory criteria.

    Section 5(e) articulates a number of policies to guide the 
application of EPCA's economic justification criterion in selecting a 
proposed standard. Although many factors are pertinent to the ultimate 
judgment about whether the benefits of a standard level exceed the 
burdens, these policies reflect special concern about particular types 
of significant adverse impacts on consumers and manufacturers in 
reaching that judgment.

    The policies articulated in section 5(e)(3)(i) are stated as 
rebuttable presumptions. Although these presumptions reflect the great 
significance DOE attaches to these factors, DOE will consider evidence 
that rebuts an applicable presumption that a standard level is not 
economically justified. Any applicable presumption will be rebutted if 
the Department determines that specifically identified expected 
benefits of the standard would outweigh the expected adverse effects.

6. Effective Date of a Standard

    Section 6 provides that the lead time between the publication of a 
final rule in the Federal Register and the effective date of the new or 
revised standard will be at least the period contemplated by the 
rulemaking schedules contained in EPCA. The Department will consider, 
on a case-by-case basis, further extending this lead time if the 
circumstances warrant. For instance, the lead time might be extended to 
mitigate the cumulative burden of implementing multiple product 
regulations or to permit time for market acceptance of new products. 
This section also provides that the period between the effective date 
of one standard and the effective date of any revision to that standard 
will be at least the period contemplated by the rulemaking schedules 
contained in EPCA. These policies will ensure that the time available 
for manufacturers to prepare for implementation of a new or revised 
standard and the time available for the amortization of any fixed costs 
associated with compliance will be no less than anticipated in the 
statute.

7. Test Procedures

    Section 7 states the Department's commitment to ensure that 
revisions to test procedure rules necessary to evaluate revisions to 
standards are developed and finalized in a timely fashion.
    Any necessary modifications in test procedures will be proposed 
before issuance of an ANOPR on revised standards and will be finalized 
prior to the issuance of a NOPR on revised standards. Where significant 
test procedure changes are needed, DOE will attempt to finalize test 
procedure revisions before the issuance of an ANOPR on revised 
standards.

8. Joint Stakeholder Recommendations

    Section 8 states that the Department supports efforts by groups of 
interested parties to develop and present consensus recommendations on 
standards to DOE. Throughout the standards development process, and 
especially following the issuance of the ANOPR, interested parties are 
welcome to develop common recommendations to the Department on product 
categories and standard levels as well as on more specific analytical 
issues. The

[[Page 36978]]

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

9. Principles for the Conduct of Engineering Analysis

    Section 9 states the Department's commitment to solicit input from 
interested parties and experts in conducting the engineering analysis. 
The Department will use this input to develop the design options to be 
considered in the subsequent analyses, identify any engineering models 
necessary, and estimate the likely cost and performance improvement 
potential of design options. The Department will use analytical methods 
that explicitly account for uncertainty.

10. Principles for the Analysis of Impacts on Manufacturers

    Section 10 describes the approach DOE will use in the analysis and 
consideration of impacts on manufacturers. The process addresses a 
number of concerns raised in the process improvement effort. First, the 
process provides opportunities for comments in the pre-ANOPR screening 
process and at the beginning of the impact assessment process. This 
will focus attention on items of specific concern to each individual 
regulatory proceeding. Discussions on what data are critical as well as 
the specific approaches for generating those data will be conducted in 
open proceedings. Second, the Department will utilize an annual cash 
flow approach to determine quantitative impacts on manufacturers 
including a short term assessment based on the cost and capital 
requirements during the period between the announcement of a regulation 
and the time when the regulation comes into effect. Third, with input 
from manufacturers and other interested parties, the Department will 
develop estimates of the critical variables affecting manufacturers 
(such as expected changes in product prices, sales, and possible fuel 
switching) drawing on multiple sources of data both quantitative and 
qualitative. Fourth, the Department will analyze the impacts of a 
standard on different types of manufacturers, with particular attention 
to impacts on small manufacturers. This will be done with scenario 
analysis or other appropriate methods. Fifth, the Department will use 
models that: are clear and understandable; feature accessible 
calculations; and recognize and report the range of uncertainty. 
Finally, the Department will assess and describe the effects on 
manufacturers of other significant product-specific regulations that 
will take effect within three years of the effective date of the 
standard under consideration and will affect significantly the same 
manufacturers. This assessment is intended to capture the impacts of 
different DOE standards affecting multiple products made by the same 
manufacturing division.
    With respect to overlapping efficiency standards on a product and 
components of the product, the Department will pay special attention to 
the cumulative regulatory burden being borne by the manufacturer of 
finished products containing that component. In such cases, the 
Department will specifically address the cost of potential component 
standards plus the overlapping costs of existing parallel standards on 
both the component and the system in which the component is installed.

11. Principles for the Analysis of Impacts on Consumers

    Section 11 describes the Department's approach to consideration of 
consumer impacts. First, in the very early stages of standard 
development, DOE will consider adverse impacts of design options on 
consumer utility and will identify other possible impacts on consumers 
of updated efficiency standards which may warrant closer examination 
during the standards development process. Second, DOE will determine, 
on the basis of any information submitted during the standard 
development process, whether a proposed standard is likely to result in 
the unavailability of any covered product type with performance 
characteristics, features, sizes, capacities, and volumes that are 
substantially the same as products generally available in the U.S. at 
the time. Consistent with EPCA, DOE will not promulgate a standard at a 
level where it concludes that it would result in such unavailability. 
Third, the Department will consider the views of the Department of 
Justice on any impacts of a proposed standard on competition, and will 
not issue a standard determined to have significant anticompetitive 
impacts. Fourth, the Department will use regional analysis and 
sensitivity analysis tools, as appropriate, to evaluate the potential 
distribution of impacts of candidate standards levels on consumers. The 
Department will consider impacts on significant segments of society in 
determining standards levels. Where significant subgroups would be 
expected to bear significant adverse impacts, DOE will place increased 
emphasis on voluntary programs to bring about additional potential 
energy savings.
    The Department will be sensitive to first cost increases and make 
greater use of sensitivity analysis and scenario analysis in reporting 
consumer Life-Cycle Cost, Payback Period and Cost of Conserved Energy. 
The Department expects that the use of these methods will result in 
more economically efficient standards than reliance on pay-back period 
alone, while achieving the similar result of avoiding negative impacts 
to identifiable population groups.
    Substantial increases in product prices may adversely affect low-
income households or cause shifts in product purchasing patterns. Thus, 
if a candidate standard level would cause a substantial increase in the 
product first costs to consumers or would not pay back such additional 
first costs through energy cost savings in less than three years, 
Department will specifically assess the likely impacts of such a 
standard on low-income households, product sales and fuel switching. 
The results of this assessment will be considered in the evaluation of 
consumer and manufacturer impacts.
    As noted during the process improvement effort, consumers have 
rarely participated directly in standards development. In order to 
address concerns about the lack of such direct participation, DOE will 
seek to strengthen its efforts to inform and involve consumers and 
consumer representatives in the process of developing standards. This 
will include expanded notification of consumer representatives during 
the process of developing updated efficiency standards and, where 
appropriate, DOE may seek the direct input of consumers.
    The Department is committed to improving the analysis of 
engineering issues and consumer and manufacturer impacts. The 
Department also is cognizant that using ever more elaborate 
quantitative approaches carries the risk of unacceptable delays and 
incomprehensible analysis and results. For these reasons, the 
Department will seek to balance appropriately the use of quantitative 
and qualitative approaches, with the goal of providing the most useful 
information upon which to make the required judgments.

12. Consideration of Non-Regulatory Approaches

    Section 12 states the Department's commitment to consider fully the 
likely effects of market forces and any non-regulatory initiatives in 
assessing the incremental benefits of efficiency standards. DOE 
considers voluntary ``market pull'' programs to be an

[[Page 36979]]

important complement to its standards program.

13. Crosscutting Analytical Assumptions

    Section 13 describes the principles the Department intends to 
follow in selecting the key assumptions which are critical to the 
quantitative analysis of the impacts of candidate standard levels, 
including rates of economic growth, energy price and demand trends, 
product specific energy efficiency trends, real discount rates and 
emission rates. These cross-cutting analytical assumptions will 
continue to be specifically identified in all notices of proposed 
rulemaking and will continue to be subject to public comment and review 
as part of each such rulemaking.
    Certain crosscutting analytical assumptions will change regularly 
as forecasts of economic growth, energy price, demand, efficiency and 
other trends are modified. In other cases, such as the real discount 
rates used to assess the present value of future costs or savings for 
consumers, commercial businesses, manufacturers or the Nation, the 
Department hopes that the crosscutting analytical assumptions will 
remain relatively stable. For residential consumers, the Department 
currently uses real discount rates of 2, 6 and 15% in the analysis of 
likely impacts of appliance standards. For commercial users, the 
Department currently uses 4, 8 and 12%. For manufacturers, the 
Department currently uses 12%, but is likely to develop a range of 
values for future use. For National benefits, the Department currently 
uses 7%.
    With respect to the consideration of the impacts of candidate 
standards on the environment and energy security, the Department can 
find no sound analytical method for accurately estimating the monetary 
value of such environmental or energy security benefits (or costs). 
Therefore, the Department will not attempt to incorporate the estimated 
monetary value of such externalities into its estimates of the national 
net present values of candidate standard levels. However, as required 
by the National Environmental Policy Act, the Department will continue 
to consider the likely effects of candidate standard levels on the 
environment and energy security in reaching a decision as to whether 
the benefits of the such standard levels exceed their burdens.
    EPCA provides that energy conservation standards prescribed under 
EPCA are to be based on energy consumption at the point of use (i.e., 
site energy). See EPCA sections 321 (4), (5) and (6). For purposes of 
estimating energy savings in evaluating the benefits of a proposed 
standard, DOE considers the energy savings associated with the 
production of the fuel used by the appliance covered by the standard 
(i.e., source energy).

14. Deviations, Revisions and Judicial Review

    The Department has crafted this rule to include procedures, 
interpretations and policies that it believes will be appropriate for 
general use in the future conduct of the appliance standards program. 
However, given the possibility of unanticipated circumstances affecting 
either particular rulemakings or the program generally, the rule 
includes provision for case-specific deviations and modifications of 
the generally applicable rule. If the Department concludes that 
elements of this rule are not appropriate in a particular standards 
rulemaking, DOE will provide interested parties with notice of the 
deviation and an explanation of why such a deviation was deemed 
appropriate. If the Department concludes, based on experience with this 
approach, that changes in this Appendix are appropriate, DOE will 
provide notice of such modifications to the rule with an accompanying 
explanation. DOE will consult with interested parties, probably through 
the advisory committee (described in section IV.5 of this Supplementary 
Information), prior to any such modification to the rule. The 
procedures, interpretations, and policies stated in this Appendix are 
not intended to establish any new cause of action or right to judicial 
review. Judicial review of final rules is provided for in section 336 
of EPCA.

IV. Related DOE Actions To Implement Process Improvements

    In addition to promulgation of this rule, DOE employed other 
activities to address some of the concerns raised by stakeholders 
during the process improvement. These activities are described below.

1. Finalized Process Improvement Report

    The Department will issue the final report on ``Results of the 
Appliance Rulemaking Process Improvement Effort'' in August 1996.

2. Process To Develop Rulemaking Priorities

    On June 14, 1996, the Department held a public workshop on 
priority-setting and DOE will make available a draft priority listing 
based on the results of our priority-setting analysis in late July. The 
draft rulemaking priority listing and the accompanying analysis will: 
Indicate for which covered products DOE is proposing to initiate or 
continue, during the next two years, the development of updated 
standards; document the priority-setting analysis which DOE used to 
develop the draft priority listing; indicate the next steps for all 
currently active rulemakings; describe any variations from the enhanced 
process that will be followed for specific products; and provide a 
schedule for completion of each rulemaking identified.
    The final list of rulemaking priorities will be available at the 
time that the Regulatory Agenda is published in the Federal Register in 
the fall of 1996. During the summer, the Department will obtain public 
comments on the draft listing of rulemaking priorities.

3. Review of Manufacturer Impact Analysis

    In order to initiate the process of developing new and 
substantially improved methods for assessing the impacts of standards 
on manufacturers, DOE will review in detail the existing analyses 
methodologies, develop a draft work plan for the development of new 
methods for assessing manufacturer impact, and invite comments and 
suggestions from interested parties.

4. Review of Non-Regulatory Approaches

    DOE has initiated a process for developing methods for comparing 
the likely benefits and costs of updated efficiency standards to 
various non-regulatory alternatives. For instance, DOE held a public 
workshop on June 20, 1996 which examined, among other issues, 
alternatives and complements to standards for fluorescent lamp 
ballasts. DOE expects to hold one or more similar workshops to examine 
these issues with regard to other products.

5. Creation of an Advisory Committee

    DOE is establishing an Advisory Committee on Appliance Energy 
Efficiency Standards. The Committee will provide an official, organized 
forum for interested parties to provide the Department with advice, 
information, and recommendations on the Appliance Efficiency Standards 
rulemaking process. Committee members will be chosen to ensure an 
appropriately balanced representation of various points of view and 
functions of interested parties and experts, such as manufacturer trade 
associations, manufacturers, energy efficiency groups, consumers, 
utilities, retailers, and state energy offices. The Assistant Secretary

[[Page 36980]]

for Energy Efficiency and Renewable Energy will chair the Committee.
    It is anticipated that this advisory committee will be a useful 
forum for obtaining advice on the desirability of making changes to the 
procedures, interpretations and policies set out in this rule, and on 
cross cutting analytical issues affecting all product standards. The 
Advisory Committee may recommend that DOE undertake generic proceedings 
relating to crosscutting analytical issues.

V. Status of Ongoing Rulemakings

    As stated in section 2 of the rule, the Department will apply the 
new process described in section 4 of the rule to all rulemakings for 
which a NOPR has not yet been published. To the extent analytical work 
has already been done, and public comment on an ANOPR already has been 
provided, such analysis and comment will be considered, as appropriate, 
in proceeding with the new process.
    The Department is precluded through September 1996 from using funds 
appropriated under the Fiscal Year 1996 Interior Appropriations Act to 
propose or promulgate new or revised efficiency standards. With respect 
to rulemakings for which a NOPR has already been published, DOE 
currently intends to proceed as follows:
    Refrigerators. The analysis of comments on the NOPR is complete. At 
this time, DOE believes that no major changes to the underlying 
analysis of the proposed refrigerator standards is necessary. However, 
the Department expects to consult further with interested parties to 
determine whether it is appropriate to make alterations to the proposed 
standards to take into account the interaction between the revised 
efficiency standards and Clean Air Act and Montreal Protocol on 
Substances that Deplete the Ozone Layer regulations relating to 
manufacture of HCFCs, which take effect in 2003, as suggested by some 
stakeholders. The Department expects that any further consideration of 
this issue would be consistent with the approach taken in today's rule 
on pertinent topics such as cumulative regulatory burden.
    Ballasts. The analysis underlying the previously proposed standards 
has been substantially revised and has been circulated for technical 
review by manufacturers and other interested parties. A public workshop 
to review this revised analysis was held on June 20, 1996.
    Cooking Products and Room Air Conditioners. The analyses underlying 
the proposed standards for these two product categories have been 
substantially revised and are now being circulated for technical review 
by manufacturers and other interested parties. On the basis of these 
analyses and any comments received on these analyses, the Department 
expects to proceed to issue a final rule after the current fiscal year 
1996 moratorium expires.
    Water Heaters. The analyses for gas, oil and electric water heaters 
are being revised and will be completed and made available for review 
depending on the priority given this product. A revised NOPR would be 
issued following the new procedure.
    Mobile Home Furnaces, Direct Heating Equipment and Pool Heaters. 
The analyses for these products have been revised and will be made 
available for review depending on the priority given them. Revised 
NOPRs would be issued following the new procedure.
    In the near term, DOE will consider these rulemakings among others 
in the upcoming priority setting effort, and will solicit and consider 
public comment on how to proceed with these rules in that process.

VI. Administrative Procedure

    The rule published today describes procedures, interpretations, and 
policies DOE will follow in conducting rulemakings on appliance 
standards. DOE is not required to provide for prior notice and 
opportunity for comment on today's final regulations because they fall 
within the Administrative Procedure Act's exception for 
``interpretative rules, general statements of policy, or rules of 
agency organization, procedure, or practice.'' 5 U.S.C. 553(b)(A). 
Moreover, these procedures, interpretations and policies were developed 
with extensive consultation with representatives of all of the 
interests that typically participate in standards rulemakings. The 
consultations to date are described in detail in section II of this 
Supplementary Information.

VII. Administrative Reviews

A. Review Under Executive Order 12866

    This regulatory action is not a significant regulatory action under 
Executive Order 12866, ``Regulatory Planning and Review,'' October 4, 
1993. Accordingly, this action was not subject to review under the 
Executive Order by the Office of Information and Regulatory Affairs.

B. Review Under Executive Order 12612

    Executive Order 12612 requires that regulations, rules, 
legislation, and any other policy actions be reviewed for any 
substantial direct effect on states, on the relationship between the 
National Government and states, or in the distribution of power and 
responsibilities among various levels of government. If there are 
substantial effects, then the Executive Order requires preparation of a 
federalism assessment to be used in all decisions involved in 
promulgating and implementing a policy action.
    The final rules published today do not regulate the states. They 
primarily will affect the manner in which DOE develops proposed rules 
to revise consumer product energy efficiency standards. Section 327 of 
the EPCA provides for preemption of state regulation in this area. The 
final rules published today do not alter the distribution of authority 
and responsibility to regulate in this area. Accordingly, DOE has 
determined that preparation of a federalism assessment is unnecessary.

C. Review Under Executive Order 12988

    With respect to the review of existing regulations and the 
promulgation of new regulations, section 3(a) of Executive Order 12988, 
``Civil Justice Reform,'' 61 FR 4729 (February 7, 1996), imposes on 
Executive agencies the general duty to adhere to the following 
requirements: (1) Eliminate drafting errors and ambiguity; (2) write 
regulations to minimize litigation; and (3) provide a clear legal 
standard for affected conduct rather than a general standard and 
promote simplification and burden reduction. With regard to the review 
required by section 3(a), section 3(b) of the Executive Order 
specifically requires that Executive agencies make every reasonable 
effort to ensure that the regulation: (1) Clearly specifies the 
preemptive effect, if any; (2) clearly specifies any effect on existing 
Federal law or regulation; (3) provides a clear legal standard for 
affected conduct while promoting simplification and burden reduction; 
(4) specifies the retroactive effect, if any; (5) adequately defines 
key terms; and (6) addresses other important issues affecting clarity 
and general draftsmanship under any guidelines issued by the Attorney 
General. Section 3(c) of the Executive Order requires Executive 
agencies to review regulations in light of applicable standards in 
section 3(a) and section 3(b) to determine whether they are met or it 
is unreasonable to meet one or more of them. DOE reviewed today's final 
regulations under the standards of section 3 of the Executive Order and 
determined that, to the extent permitted

[[Page 36981]]

by law, they meet the requirements of those standards.

D. Regulatory Flexibility Act

    If an agency is required by law to issue a general NOPR, and if a 
rule has, or is likely to have, a significant negative economic impact 
on a substantial number of small entities, then the Regulatory 
Flexibility Act, 5 U.S.C. 601 et seq., requires preparation of an 
initial and final regulatory flexibility analysis to accompany proposed 
and final rulemakings, respectively. Because the rule published today 
is exempt from notice and comment rulemaking under the Administrative 
Procedure Act, there is no requirement to prepare a regulatory 
flexibility analysis.

E. Review Under the National Environmental Policy Act

    The Department has concluded that this rule falls into a class of 
actions that are categorically excluded from review under the National 
Environmental Policy Act of 1969 (NEPA), 42 U.S.C. 4321, 4331-35, 4341-
47, because they would not individually or cumulatively have a 
significant impact on the human environment as determined by DOE's 
regulations. 10 CFR part 1021, subpart D. Therefore this rule does not 
require preparation of an environmental impact statement or 
environmental assessment pursuant to NEPA.

F. Review Under Unfunded Mandates Reform Act of 1995

    Title II of the Unfunded Mandates Reform Act of 1995, Pub.L. 104-4, 
requires each Federal agency to assess the possible effects of Federal 
regulatory action on state, local, and tribal governments, and the 
private sector of Federal mandates. If a Federal mandate is expected to 
have an impact of $100 million or more in any year, then the mandate is 
significant and the issuing agency is obliged to undertake a detailed 
assessment of costs and benefits. If the Federal mandate is a 
significant intergovernmental mandate, then the issuing agency is 
obliged to provide a meaningful and timely opportunity for affected 
governments to participate in the development of the rule. The final 
regulations in this notice apply only to the conduct of DOE officials 
and do not place regulatory obligations on anyone outside of DOE. 
Accordingly, there are no legal requirements under the Unfunded 
Mandates Reform Act of 1995 that apply to this rulemaking.

G. Review Under Small Business Regulatory Enforcement Fairness Act of 
1996

    Consistent with the Small Business Regulatory Enforcement Fairness 
Act of 1996, DOE will submit to Congress a report regarding the 
issuance of today's final rule prior to the effective date set forth at 
the outset of this notice. The report will note the Office of 
Management and Budget's determination that this rule does not 
constitute a ``major rule'' under that Act. 5 U.S.C. 801, 804.

List of Subjects in 10 CFR Part 430

    Administrative practice and procedure, Energy conservation, 
Household appliances.

    Issued in Washington, DC, on July 9, 1996.
Christine A. Ervin,
Assistant Secretary, Energy Efficiency and Renewable Energy.

    For the reasons set forth in the preamble, Part 430 of Chapter II 
of Title 10, Code of Federal Regulations, is amended as set forth 
below:

PART 430--ENERGY CONSERVATION PROGRAM FOR CONSUMER PRODUCTS

    1. The authority cite continues to read as follows:

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

    2. Appendix A to Subpart C of Part 430--Procedures, Interpretations 
and Policies for Consideration of New or Revised Energy Conservation 
Standards for Consumer Products--is added as set forth below:

Appendix A to Subpart C of Part 430--Procedures, Interpretations and 
Policies for Consideration of New or Revised Energy Conservation 
Standards for Consumer Products

1. Objectives
2. Scope
3. Setting Priorities for Rulemaking Activity
4. Process for Developing Efficiency Standards and Factors to be 
Considered
5. Policies on Selection of Standards
6. Effective Date of a Standard
7. Test Procedures
8. Joint Stakeholder Recommendations
9. Principles for the Conduct of Engineering Analysis
10. Principles for the Analysis of Impacts on Manufacturers
11. Principles for the Analysis of Impacts on Consumers
12. Consideration of Non-Regulatory Approaches
13. Crosscutting Analytical Assumptions
14. Deviations, Revisions, and Judicial Review

1. Objectives

    This Appendix establishes procedures, interpretations and 
policies to guide the DOE in the consideration and promulgation of 
new or revised appliance efficiency standards under the Energy 
Policy and Conservation Act (EPCA). The Department's objectives in 
establishing these guidelines include:
    (a) Provide for early input from stakeholders. The Department 
seeks to provide opportunities for public input early in the 
rulemaking process so that the initiation and direction of 
rulemakings is informed by comment from interested parties. Under 
the guidelines established by this Appendix, DOE will seek early 
input from interested parties in setting rulemaking priorities and 
structuring the analyses for particular products. Interested parties 
will be invited to provide input for the selection of design options 
and will help DOE identify analysis, data, and modeling needs. DOE 
will gather input from interested parties through a variety of 
mechanisms, including public workshops.
    (b) Increase predictability of the rulemaking timetable. The 
Department seeks to make informed, strategic decisions about how to 
deploy its resources on the range of possible standards development 
activities, and to announce these prioritization decisions so that 
all interested parties have a common expectation about the timing of 
different rulemaking activities. The guidelines in this Appendix 
provide for setting priorities and timetables for standards 
development and test procedure modification and reflect these 
priorities in the Regulatory Agenda.
    (c) Increase use of outside technical expertise. The Department 
seeks to expand its use of outside technical experts in evaluating 
product-specific engineering issues to ensure that decisions on 
technical issues are fully informed. The guidelines in this Appendix 
provide for increased use of outside technical experts in 
developing, performing and reviewing the analyses. Draft analytical 
results will be distributed for peer and stakeholder review.
    (d) Eliminate problematic design options early in the process. 
The Department seeks to eliminate from consideration, early in the 
process, any design options that present unacceptable problems with 
respect to manufacturability, consumer utility, or safety, so that 
the detailed analysis can focus only on viable design options. Under 
the guidelines in this Appendix, DOE will eliminate from 
consideration design options if it concludes that manufacture, 
installation or service of the design will be impractical, or that 
the design option will adversely affect the utility of the product, 
or if the design has adverse safety or health impacts. This 
screening will be done at the outset of a rulemaking.
    (e) Fully consider non-regulatory approaches. The Department 
seeks to understand the effects of market forces and voluntary 
programs on encouraging the purchase of energy efficient products so 
that the incremental impacts of a new or revised standard can be 
accurately assessed and the Department can make informed decisions 
about where standards and voluntary ``market pull'' programs can be 
used most effectively. Under the guidelines in this

[[Page 36982]]

Appendix, DOE will solicit information on the effectiveness of 
market forces and non-regulatory approaches for encouraging the 
purchase of energy efficient products, and will carefully consider 
this information in assessing the benefits of standards. In 
addition, DOE will continue to support voluntary efforts by 
manufacturers, retailers, utilities and others to increase product 
efficiency.
    (f) Conduct thorough analysis of impacts. In addition to 
understanding the aggregate costs and benefits of standards, the 
Department seeks to understand the distribution of those costs and 
benefits among consumers, manufacturers and others, and the 
uncertainty associated with these analyses of costs and benefits, so 
that any adverse impacts on significant subgroups and uncertainty 
concerning any adverse impacts can be fully considered in selecting 
a standard. Under the guidelines in this Appendix, the analyses will 
consider the variability of impacts on significant groups of 
manufacturers and consumers in addition to aggregate costs and 
benefits, report the range of uncertainty associated with these 
impacts, and take into account cumulative impacts of regulation on 
manufacturers.
    (g) Use transparent and robust analytical methods.  The 
Department seeks to use qualitative and quantitative analytical 
methods that are fully documented for the public and that produce 
results that can be explained and reproduced, so that the analytical 
underpinnings for policy decisions on standards are as sound and 
well-accepted as possible. Under the guidelines in this Appendix, 
DOE will solicit input from interested parties in identifying 
analysis, data, and modeling needs with respect to measurement of 
impacts on manufacturers and consumers.
    (h) Articulate policies to guide selection of standards. The 
Department seeks to adopt policies elaborating on the statutory 
criteria for selecting standards, so that interested parties are 
aware of the policies that will guide these decisions. Under the 
guidelines in this Appendix, policies for screening design options, 
selecting candidate standard levels, selecting a proposed standard 
level, and establishing the final standard are established.
    (i) Support efforts to build consensus on standards. The 
Department seeks to encourage development of consensus proposals for 
new or revised standards because standards with such broad-based 
support are likely to balance effectively the economic, energy, and 
environmental interests affected by standards. Under the guidelines 
in this Appendix, DOE will support the development and submission of 
consensus recommendations for standards by representative groups of 
interested parties to the fullest extent possible.
    (j) Reduce time and cost of developing standards. The Department 
seeks to establish a clear protocol for initiating and conducting 
standards rulemakings in order to eliminate time-consuming and 
costly missteps. Under the guidelines in this Appendix, increased 
and earlier involvement by interested parties and increased use of 
technical experts should minimize the need for re-analysis. This 
process should reduce the period between the publication of an 
Advance Notice of Proposed Rulemaking (ANOPR) and the publication of 
a final rule to not more than 18 months, and should decrease the 
government and private sector resources required to complete the 
standard development process.

2. Scope

    (a) The procedures, interpretations and policies described in 
this Appendix will be fully applicable to:
    (1) Rulemakings concerning new or revised Federal energy 
conservation standards for consumer products initiated after August 
14, 1996, and
    (2) Rulemakings concerning new or revised Federal energy 
conservation standards for consumer products that have been 
initiated but for which a Notice of Proposed Rulemaking (NOPR) has 
not been published as of August 14, 1996.
    (b) For rulemakings described in paragraph (a)(2) of this 
section, to the extent analytical work has already been done or 
public comment on an ANOPR has already been provided, such analyses 
and comment will be considered, as appropriate, in proceeding under 
the new process.
    (c) With respect to incomplete rulemakings concerning new or 
revised Federal energy conservation standards for consumer products 
for which a NOPR was published prior to August 14, 1996, the 
Department will conduct a case-by-case review to decide whether any 
of the analytical or procedural steps already completed should be 
repeated. In any case, the approach described in this Appendix will 
be used to the extent possible to conduct any analytical or 
procedural steps that have not been completed.

3. Setting Priorities for Rulemaking Activity

    (a) Priority-setting analysis and development of list of 
priorities. At least once a year, the Department will prepare an 
analysis of each of the factors identified in paragraph (d) of this 
section based on existing literature, direct communications with 
interested parties and other experts, and other available 
information. The results of this analysis will be used to develop 
rulemaking priorities and proposed schedules for the development and 
issuance of all rulemakings. The DOE analysis, priorities and 
proposed rulemaking schedules will be documented and distributed for 
review and comment.
    (b) Public review and comment. Each year, DOE will invite public 
input to review and comment on the priority analysis.
    (c) Issuance of final listing of rulemaking priorities. Each 
fall, the Department will issue, simultaneously with the issuance of 
the Administration's Regulatory Agenda, a final set of rulemaking 
priorities, the accompanying analysis, and the schedules for all 
priority rulemakings that it anticipates within the next two years.
    (d) Factors for priority-setting. The factors to be considered 
by DOE in developing priorities and establishing schedules for 
conducting rulemakings will include:
    (1) Potential energy savings.
    (2) Potential economic benefits.
    (3) Potential environmental or energy security benefits.
    (4) Applicable deadlines for rulemakings.
    (5) Incremental DOE resources required to complete rulemaking 
process.
    (6) Other relevant regulatory actions affecting products.
    (7) Stakeholder recommendations.
    (8) Evidence of energy efficiency gains in the market absent new 
or revised standards.
    (9) Status of required changes to test procedures.
    (10) Other relevant factors.

4. Process for Developing Efficiency Standards and Factors to be 
Considered

    This section describes the process to be used in developing 
efficiency standards and the factors to be considered in the 
process. The policies of the Department to guide the selection of 
standards and the decisions preliminary thereto are described in 
section 5.
    (a) Identifying and screening design options. Once the 
Department has initiated a rulemaking for a specific product but 
before publishing an ANOPR, DOE will identify the product categories 
and design options to be analyzed in detail, and identify those 
design options eliminated from further consideration. Interested 
parties will be consulted to identify key issues, develop a list of 
design options, and to help the Department identify the expertise 
necessary to conduct the analysis.
    (1) Identification of issues for analysis. The Department, in 
consultation with interested parties, will identify issues that will 
be examined in the standards development process.
    (2) Identification of experts and other interested parties for 
peer review. DOE, in consultation with interested parties, will 
identify a group of independent experts and other interested parties 
who can provide expert review of the results of the engineering 
analysis and the subsequent impact analysis.
    (3) Identification and screening of design options. In 
consultation with interested parties, the Department will develop a 
list of design options for consideration. Initially, the candidate 
design options will encompass all those technologies considered to 
be technologically feasible. Following the development of this 
initial list of design options, DOE will review each design option 
based on the factors described in paragraph (a)(4) of this section 
and the policies stated in section 5(b). The reasons for eliminating 
any design option at this stage of the process will be fully 
documented and published as part of the ANOPR. The technologically 
feasible design options that are not eliminated in this screening 
will be considered further in the Engineering Analysis described in 
paragraph (b) of this section.
    (4) Factors for screening of design options. The factors for 
screening design options include:
    (i) Technological feasibility. Technologies incorporated in 
commercial products or in working prototypes will be considered 
technologically feasible.
    (ii) Practicability to manufacture, install and service. If mass 
production of a

[[Page 36983]]

technology in commercial products and reliable installation and 
servicing of the technology could be achieved on the scale necessary 
to serve the relevant market at the time of the effective date of 
the standard, then that technology will be considered practicable to 
manufacture, install and service.
    (iii) Adverse Impacts on Product Utility or Product 
Availability.
    (iv) Adverse Impacts on Health or Safety.
    (5) Selection of contractors. Using the specifications of 
necessary contractor expertise developed in consultation with 
interested parties, DOE will select appropriate contractors, 
subcontractors, and as necessary, expert consultants to perform the 
engineering analysis and the impact analysis.
    (b) Engineering analysis of design options and selection of 
candidate standard levels. After design options are identified and 
screened, DOE will perform the engineering analysis and the benefit/
cost analysis and select the candidate standard levels based on 
these analyses. The results of the analyses will be published in a 
Technical Support Document (TSD) to accompany the ANOPR.
    (1) Identification of engineering analytical methods and tools. 
DOE, in consultation with outside experts, will select the specific 
engineering analysis tools (or multiple tools, if necessary to 
address uncertainty) to be used in the analysis of the design 
options identified as a result of the screening analysis.
    (2) Engineering and life-cycle cost analysis of design options. 
The DOE and its contractor will perform engineering and life-cycle 
cost analyses of the design options.
    (3) Review by expert group and stakeholders. The results of the 
engineering and life-cycle cost analyses will be distributed for 
review by experts and interested parties. If appropriate, a public 
workshop will be conducted to review these results. The analyses 
will be revised as appropriate on the basis of this input.
    (4) New information relating to the factors used for screening 
design options. If further information or analysis leads to a 
determination that a design option, or a combination of design 
options, has unacceptable impacts based on the policies stated in 
section 5(b), that design option or combination of design options 
will not be included in a candidate standard level.
    (5) Selection of candidate standard levels. Based on the results 
of the engineering and life-cycle cost analysis of design options 
and the policies stated in section 5(c), DOE will select the 
candidate standard levels for further analysis.
    (c) Advance Notice of Proposed Rulemaking.
    (1) Documentation of decisions on candidate standard selection. 
(i) If the screening analysis indicates that continued development 
of a standard is appropriate, the Department will publish an ANOPR 
in the Federal Register and will distribute a draft TSD containing 
the analyses performed to this point. The ANOPR will specify 
candidate standard levels but will not propose a particular 
standard. The ANOPR will also include the preliminary analysis of 
consumer life-cycle costs, national net present value, and energy 
impacts for the candidate standard levels based on the engineering 
analysis.
    (ii) If the preliminary analysis indicates that no candidate 
standard level is likely to meet the criteria specified in law, that 
conclusion will be announced. In such cases, the Department may 
decide to proceed with a rulemaking that proposes not to adopt new 
or amended standards, or it may suspend the rulemaking and conclude 
that further action on such standards should be assigned a low 
priority under section 3.
    (2) Public comment and hearing. There will be 75 days for public 
comment on the ANOPR with at least one public hearing or workshop.
    (3) Revisions based on comments. Based on consideration of the 
comments received, any necessary changes to the engineering analysis 
or the candidate standard levels will be made.
    If major changes are required at this stage, interested parties 
and experts will be given an opportunity to review the revised 
analysis.
    (d) Analysis of impacts and selection of proposed standard 
level. After the ANOPR, economic analyses of the impacts of the 
candidate standard levels will be conducted. The Department will 
propose updated standards based on the results of the impact 
analysis.
    (1) Identification of issues for analysis. The Department, in 
consultation with interested parties, will identify issues that will 
be examined in the impacts analysis.
    (2) Identification of analytical methods and tools. DOE, in 
consultation with outside experts, will select the specific economic 
analysis tools (or multiple tools if necessary to address 
uncertainty) to be used in the analysis of the candidate standard 
levels.
    (3) Analysis of impacts. DOE will conduct the analysis of the 
impacts of candidate standard levels including analysis of the 
factors described in paragraphs (d)(7)(ii)-(viii) of this section.
    (4) Review by expert group and stakeholders. The results of the 
analysis of impacts will be distributed for review by experts and 
interested parties. If appropriate, a public workshop will be 
conducted to review these results. The analysis will be revised as 
appropriate on the basis of this input.
    (5) Efforts to develop consensus among stakeholders. If a 
representative group of interested parties undertakes to develop 
joint recommendations to the Department on standards, DOE will 
consider deferring its impact analysis until these discussions are 
completed or until participants in the efforts indicate that they 
are unable to reach a timely agreement.
    (6) Selection of proposed standard level based on analysis of 
impacts. On the basis of the analysis of the factors described in 
paragraph (d)(7) of this section and the policies stated in section 
5(e), DOE will select a proposed standard level.
    (7) Factors to be considered in selecting a proposed standard. 
The factors to be considered in selection of a proposed standard 
include:
    (i) Consensus stakeholder recommendations.
    (ii) Impacts on manufacturers. The analysis of manufacturer 
impacts will include: Estimated impacts on cash flow; assessment of 
impacts on manufacturers of specific categories of products and 
small manufacturers; assessment of impacts on manufacturers of 
multiple product-specific Federal regulatory requirements, including 
efficiency standards for other products and regulations of other 
agencies; and impact on manufacturing capacity, plant closures, and 
loss of capital investment.
    (iii) Impacts on consumers. The analysis of consumer impacts 
will include: Estimated impacts on consumers based on national 
average energy prices and energy usage; assessments of impacts on 
subgroups of consumers based on major regional differences in usage 
or energy prices and significant variations in installation costs or 
performance; sensitivity analyses using high and low discount rates 
and high and low energy price forecasts; consideration of changes to 
product utility and other impacts of likely concern to all or some 
consumers, based to the extent practicable on direct input from 
consumers; estimated life-cycle cost with sensitivity analysis; and 
consideration of the increased first cost to consumers and the time 
required for energy cost savings to pay back these first costs.
    (iv) Impacts on competition.
    (v) Impacts on utilities. The analysis of utility impacts will 
include estimated marginal impacts on electric and gas utility costs 
and revenues.
    (vi) National energy, economic and employment impacts. The 
analysis of national energy, economic and employment impacts will 
include: Estimated energy savings by fuel type; estimated net 
present value of benefits to all consumers; and estimates of the 
direct and indirect impacts on employment by appliance 
manufacturers, relevant service industries, energy suppliers and the 
economy in general.
    (vii) Impacts on the environment and energy security. The 
analysis of environmental and energy security impacts will include 
estimated impacts on emissions of carbon and relevant criteria 
pollutants, impacts on pollution control costs, and impacts on oil 
use.
    (viii) Impacts of non-regulatory approaches. The analysis of 
energy savings and consumer impacts will incorporate an assessment 
of the impacts of market forces and existing voluntary programs in 
promoting product efficiency, usage and related characteristics in 
the absence of updated efficiency standards.
    (ix) New information relating to the factors used for screening 
design options.
    (e) Notice of Proposed Rulemaking.
    (1) Documentation of decisions on proposed standard selection. 
The Department will publish a NOPR in the Federal Register that 
proposes standard levels and explains the basis for the selection of 
those proposed levels, and will distribute a draft TSD documenting 
the analysis of impacts. As required by Sec. 325(p)(2) of EPCA, the 
NOPR also will describe the maximum improvement in energy efficiency 
or

[[Page 36984]]

maximum reduction in energy use that is technologically feasible 
and, if the proposed standards would not achieve these levels, the 
reasons for proposing different standards.
    (2) Public comment and hearing. There will be 75 days for public 
comment on the NOPR, with at least one public hearing or workshop.
    (3) Revisions to impact analyses and selection of final 
standard. Based on the public comments received and the policies 
stated in section 5(f), DOE will review the proposed standard and 
impact analyses, and make modifications as necessary. If major 
changes to the analyses are required at this stage, interested 
parties and experts will be given an opportunity to review the 
revised analyses.
    (f) Notice of Final Rulemaking. The Department will publish a 
Notice of Final Rulemaking in the Federal Register that promulgates 
standard levels and explains the basis for the selection of those 
standards, accompanied by a final TSD.

5. Policies on Selection of Standards.

    (a) Purpose. (1) Section 4 describes the process that will be 
used to consider new or revised energy efficiency standards and 
lists a number of factors and analyses that will be considered at 
specified points in the process. Department policies concerning the 
selection of new or revised standards, and decisions preliminary 
thereto, are described in this section.
    These policies are intended to elaborate on the statutory 
criteria provided in section 325 of the EPCA, 42 U.S.C. 6295.
    (2) The policies described below are intended to provide 
guidance for making the determinations required by EPCA. This 
statement of policy is not intended to preclude consideration of any 
information pertinent to the statutory criteria. The Department will 
consider all pertinent information in determining whether a new or 
revised standard is consistent with the statutory criteria. 
Moreover, the Department will not be guided by a policy in this 
section if, in the particular circumstances presented, such a policy 
would lead to a result inconsistent with the criteria in section 325 
of EPCA.
    (b) Screening design options. Section 4(a)(4) lists factors to 
be considered in screening design options. These factors will be 
considered as follows in determining whether a design option will 
receive any further consideration:
    (1) Technological feasibility. Technologies that are not 
incorporated in commercial products or in working prototypes will 
not be considered further.
    (2) Practicability to manufacture, install and service. If it is 
determined that mass production of a technology in commercial 
products and reliable installation and servicing of the technology 
could not be achieved on the scale necessary to serve the relevant 
market at the time of the effective date of the standard, then that 
technology will not be considered further.
    (3) Impacts on product utility to consumers. If a technology is 
determined to have significant adverse impact on the utility of the 
product to significant subgroups of consumers, or result in the 
unavailability of any covered product type with performance 
characteristics (including reliability), features, sizes, 
capacities, and volumes that are substantially the same as products 
generally available in the U.S. at the time, it will not be 
considered further.
    (4) Safety of technologies. If it is determined that a 
technology will have significant adverse impacts on health or 
safety, it will not be considered further.
    (c) Identification of candidate standard levels. Based on the 
results of the engineering and cost and benefit analyses of design 
options, DOE will identify the candidate standard levels for further 
analysis. Candidate standard levels will be selected as follows:
    (1) Costs and savings of design options. Design options which 
have payback periods that exceed the average life of the product or 
which cause life-cycle cost increases relative to the base case, 
using typical fuel costs, usage and discount rates, will not be used 
as the basis for candidate standard levels.
    (2) Further information on factors used for screening design 
options. If further information or analysis leads to a determination 
that a design option, or a combination of design options, has 
unacceptable impacts under the policies stated in paragraph (b) of 
this section, that design option or combination of design options 
will not be included in a candidate standard level.
    (3) Selection of candidate standard levels. Candidate standard 
levels, which will be identified in the ANOPR and on which impact 
analyses will be conducted, will be based on the remaining design 
options.
    (i) The range of candidate standard levels will typically 
include:
    (A) The most energy efficient combination of design options;
    (B) The combination of design options with the lowest life-cycle 
cost; and
    (C) A combination of design options with a payback period of not 
more than three years.
    (ii) Candidate standard levels that incorporate noteworthy 
technologies or fill in large gaps between efficiency levels of 
other candidate standard levels also may be selected.
    (d) Advance notice of proposed rulemaking. New information 
provided in public comments on the ANOPR will be considered to 
determine whether any changes to the candidate standard levels are 
needed before proceeding to the analysis of impacts. This review, 
and any appropriate adjustments, will be based on the policies in 
paragraph (c) of this section.
    (e) Selection of proposed standard. Based on the results of the 
analysis of impacts, DOE will select a standard level to be proposed 
for public comment in the NOPR. Section 4(d)(7) lists the factors to 
be considered in selecting a proposed standard level. Section 
325(o)(2)(A) of EPCA provides that any new or revised standard must 
be designed to achieve the maximum improvement in energy efficiency 
that is determined to be technologically feasible and economically 
justified.
    (1) Statutory policies. The fundamental policies concerning 
selection of standards are established in the EPCA, including the 
following:
    (i) A candidate standard level will not be proposed or 
promulgated if the Department determines that it is not 
technologically feasible and economically justified. See EPCA 
section 325(o)(3)(B). A standard level is economically justified if 
the benefits exceed the burdens. See EPCA section 325(o)(2)(B)(i). A 
standard level is rebuttably presumed to be economically justified 
if the payback period is three years or less. See EPCA section 
325(o)(2)(B)(iii).
    (ii) If the Department determines that a standard level is 
likely to result in the unavailability of any covered product type 
with performance characteristics (including reliability), features, 
sizes, capacities, and volumes that are substantially the same as 
products generally available in the U.S. at the time, that standard 
level will not be proposed. See EPCA section 325(o)(4).
    (iii) If the Department determines that a standard level would 
not result in significant conservation of energy, that standard 
level will not be proposed. See EPCA section 325(o)(3)(B).
    (2) Selection of proposed standard on the basis of consensus 
stakeholder recommendations. Development of consensus proposals for 
new or revised standards is an effective mechanism for balancing the 
economic, energy, and environmental interests affected by standards. 
Thus, notwithstanding any other policy on selection of proposed 
standards, a consensus recommendation on an updated efficiency level 
submitted by a group that represents all interested parties will be 
proposed by the Department if it is determined to meet the statutory 
criteria.
    (3) Considerations in assessing economic justification.
    (i) The following policies will guide the application of the 
economic justification criterion in selecting a proposed standard:
    (A) If the Department determines that a candidate standard level 
would result in a negative return on investment for the industry, 
would significantly reduce the value of the industry, or would cause 
significant adverse impacts to a significant subgroup of 
manufacturers (including small manufacturing businesses), that 
standard level will be presumed not to be economically justified 
unless the Department determines that specifically identified 
expected benefits of the standard would outweigh this and any other 
expected adverse effects.
    (B) If the Department determines that a candidate standard level 
would be the direct cause of plant closures, significant losses in 
domestic manufacturer employment, or significant losses of capital 
investment by domestic manufacturers, that standard level will be 
presumed not to be economically justified unless the Department 
determines that specifically identified expected benefits of the 
standard would outweigh this and any other expected adverse effects.
    (C) If the Department determines that a candidate standard level 
would have a significant adverse impact on the environment or energy 
security, that standard level will be presumed not to be

[[Page 36985]]

economically justified unless the Department determines that 
specifically identified expected benefits of the standard would 
outweigh this and any other expected adverse effects.
    (D) If the Department determines that a candidate standard level 
would not result in significant energy conservation relative to non-
regulatory approaches, that standard level will be presumed not to 
be economically justified unless the Department determines that 
other specifically identified expected benefits of the standard 
would outweigh the expected adverse effects.
    (E) If the Department determines that a candidate standard level 
is not consistent with the policies relating to practicability to 
manufacture, consumer utility, or safety in paragraphs (b) (2), (3) 
and (4) of this section, that standard level will be presumed not to 
be economically justified unless the Department determines that 
specifically identified expected benefits of the standard would 
outweigh this and any other expected adverse effects.
    (F) If the Department determines that a candidate standard level 
is not consistent with the policies relating to consumer costs in 
paragraph (c)(1) of this section, that standard level will be 
presumed not to be economically justified unless the Department 
determines that specifically identified expected benefits of the 
standard would outweigh this and any other expected adverse effects.
    (G) If the Department determines that a candidate standard level 
will have significant adverse impacts on a significant subgroup of 
consumers (including low-income consumers), that standard level will 
be presumed not to be economically justified unless the Department 
determines that specifically identified expected benefits of the 
standard would outweigh this and any other expected adverse effects.
    (H) If the Department or the Department of Justice determines 
that a candidate standard level would have significant 
anticompetitive effects, that standard level will be presumed not to 
be economically justified unless the Department determines that 
specifically identified expected benefits of the standard would 
outweigh this and any other expected adverse effects.
    (ii) The basis for a determination that triggers any presumption 
in paragraph (e)(3)(i) of this section and the basis for a 
determination that an applicable presumption has been rebutted will 
be supported by substantial evidence in the record and the evidence 
and rationale for making these determinations will be explained in 
the NOPR.
    (iii) If none of the policies in paragraph (e)(3)(i) of this 
section is found to be dispositive, the Department will determine 
whether the benefits of a candidate standard level exceed the 
burdens considering all the pertinent information in the record.
    (f) Selection of a final standard. New information provided in 
the public comments on the NOPR and any analysis by the Department 
of Justice concerning impacts on competition of the proposed 
standard will be considered to determine whether any change to the 
proposed standard level is needed before proceeding to the final 
rule. The same policies used to select the proposed standard level, 
as described in section 5(e) above, will be used to guide the 
selection of the final standard level.

6. Effective Date of a Standard

    The effective date for new or revised standards will be 
established so that the period between the publication of the final 
rule and the effective date is not less than any period between the 
dates for publication and effective date provided for in EPCA. The 
effective date of any revised standard will be established so that 
the period between the effective date of the prior standard and the 
effective date of such revised standard is not less than period 
between the two effective dates provided for in EPCA.

7. Test Procedures

    (a) Identifying the need to modify test procedures. DOE, in 
consultation with interested parties, experts, and the National 
Institute of Standards and Technology, will attempt to identify any 
necessary modifications to established test procedures when 
initiating the standards development process.
    (b) Developing and proposing revised test procedures. Needed 
modifications to test procedures will be identified in consultation 
with experts and interested parties early in the screening stage of 
the standards development process. Any necessary modifications will 
be proposed before issuance of an ANOPR in the standards development 
process.
    (c) Issuing final test procedure modification. Final, modified 
test procedures will be issued prior to the NOPR on proposed 
standards.
    (d) Effective date of modified test procedures. If required only 
for the evaluation and issuance of updated efficiency standards, 
modified test procedures typically will not go into effect until the 
effective date of updated standards.

8. Joint Stakeholder Recommendations

    (a) Joint recommendations. Consensus recommendations, and 
supporting analyses, submitted by a representative group of 
interested parties will be given substantial weight by DOE in the 
development of a proposed rule. See section 5(e)(2). If the 
supporting analyses provided by the group addresses all of the 
statutory criteria and uses valid economic assumptions and 
analytical methods, DOE expects to use this supporting analyses as 
the basis of a proposed rule. The proposed rule will explain any 
deviations from the consensus recommendations from interested 
parties.
    (b) Breadth of participation. Joint recommendations will be of 
most value to the Department if the participants are reasonably 
representative of those interested in the outcome of the standards 
development process, including manufacturers, consumers, utilities, 
states and representatives of environmental or energy efficiency 
interest groups.
    (c) DOE support of consensus development, including impact 
analyses. In order to facilitate such consensus development, DOE 
will make available, upon request, appropriate technical and legal 
support to the group and will provide copies of all relevant public 
documents and analyses. The Department also will consider any 
requests for its active participation in such discussions, 
recognizing that the procedural requirements of the Federal Advisory 
Committee Act may apply to such participation.

9. Principles for the Conduct of Engineering Analysis

    (a) The purpose of the engineering analysis is to develop the 
relationship between efficiency and cost of the subject product. The 
Department will use the most appropriate means available to 
determine the efficiency/cost relationship, including an overall 
system approach or engineering modeling to predict the improvement 
in efficiency that can be expected from individual design options as 
discussed in the paragraphs below. From this efficiency/cost 
relationship, measures such as payback, life cycle cost, and energy 
savings can be developed. The Department, in consultation with 
interested parties, will identify issues that will be examined in 
the engineering analysis and the types of specialized expertise that 
may be required. With these specifications, DOE will select 
appropriate contractors, subcontractors, and expert consultants, as 
necessary, to perform the engineering analysis and the impact 
analysis. Also, the Department will consider data, information and 
analyses received from interested parties for use in the analysis 
wherever feasible.
    (b) The engineering analysis begins with the list of design 
options developed in consultation with the interested parties as a 
result of the screening process. In consultation with the 
technology/industry expert peer review group, the Department will 
establish the likely cost and performance improvement of each design 
option. Ranges and uncertainties of cost and performance will be 
established, although efforts will be made to minimize uncertainties 
by using measures such as test data or component or material 
supplier information where available. Estimated uncertainties will 
be carried forward in subsequent analyses. The use of quantitative 
models will be supplemented by qualitative assessments as 
appropriate.
    (c) The next step includes identifying, modifying or developing 
any engineering models necessary to predict the efficiency impact of 
any one or combination of design options on the product. A base case 
configuration or starting point will be established as well as the 
order and combination/blending of the design options to be 
evaluated. The DOE, utilizing expert consultants, will then perform 
the engineering analysis and develop the cost efficiency curve for 
the product. The cost efficiency curve and any necessary models will 
be subject to peer review before being issued with the ANOPR.

10. Principles for the Analysis of Impacts on Manufacturers

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

[[Page 36986]]

impacts of efficiency standards on manufacturers. The Department 
will analyze the impact of standards on manufacturers with 
substantial input from manufacturers and other interested parties. 
The use of quantitative models will be supplemented by qualitative 
assessments by industry experts. This section describes the 
principles that will be used in conducting future manufacturing 
impact analysis.
    (b) Issue identification. In the impact analysis stage (section 
4(d)), the Department, in consultation with interested parties, will 
identify issues that will require greater consideration in the 
detailed manufacturer impact analysis. Possible issues may include 
identification of specific types or groups of manufacturers and 
concerns over access to technology. Specialized contractor 
expertise, empirical data requirements, and analytical tools 
required to perform the manufacturer impact analysis also would be 
identified at this stage.
    (c) Industry characterization. Prior to initiating detailed 
impact studies, the Department will seek input on the present and 
past industry structure and market characteristics. Input on the 
following issues will be sought:
    (1) Manufacturers and their relative market shares;
    (2) Manufacturer characteristics, such as whether manufacturers 
make a full line of models or serve a niche market;
    (3) Trends in the number of manufacturers;
    (4) Financial situation of manufacturers;
    (5) Trends in product characteristics and retail markets; and
    (6) Identification of other relevant regulatory actions and a 
description of the nature and timing of any likely impacts.
    (d) Cost impacts on manufacturers. The costs of labor, material, 
engineering, tooling, and capital are difficult to estimate, 
manufacturer-specific, and usually proprietary. The Department will 
seek input from interested parties on the treatment of cost issues. 
Manufacturers will be encouraged to offer suggestions as to possible 
sources of data and appropriate data collection methodologies. 
Costing issues to be addressed include:
    (1) Estimates of total cost impacts, including product-specific 
costs (based on cost impacts estimated for the engineering analysis) 
and front-end investment/conversion costs for the full range of 
product models.
    (2) Range of uncertainties in estimates of average cost, 
considering alternative designs and technologies which may vary cost 
impacts and changes in costs of material, labor and other inputs 
which may vary costs.
    (3) Variable cost impacts on particular types of manufacturers, 
considering factors such as atypical sunk costs or characteristics 
of specific models which may increase or decrease costs.
    (e) Impacts on product sales, features, prices and cost 
recovery. In order to make manufacturer cash flow calculations, it 
is necessary to predict the number of products sold and their sale 
price. This requires an assessment of the likely impacts of price 
changes on the number of products sold and on typical features of 
models sold. Past analyses have relied on price and shipment data 
generated by economic models. The Department will develop additional 
estimates of prices and shipments by drawing on multiple sources of 
data and experience including: actual shipment and pricing 
experience, data from manufacturers, retailers and other market 
experts, financial models, and sensitivity analyses. The possible 
impacts of candidate standard levels on consumer choices among 
competing fuels will be explicitly considered where relevant.
    (f) Measures of impact. The manufacturer impact analysis will 
estimate the impacts of candidate standard levels on the net cash 
flow of manufacturers. Computations will be performed for the 
industry as a whole and for typical and atypical manufacturers. The 
exact nature and the process by which the analysis will be conducted 
will be determined by DOE, in conjunction with interested parties. 
Impacts to be analyzed include:
    (1) Industry net present value, with sensitivity analyses based 
on uncertainty of costs, sales prices and sales volumes;
    (2) Cash flows, by year;
    (3) Other measures of impact, such as revenue, net income and 
return on equity, as appropriate;
    The characteristics of atypical manufacturers worthy of special 
consideration will be determined in consultation with manufacturers 
and other interested parties and may include: manufacturers 
incurring higher or lower than average costs; and manufacturers 
experiencing greater or fewer adverse impacts on sales. Alternative 
scenarios based on other methods of estimating cost or sales impacts 
also will be performed, as needed.
    (g) Cumulative impacts of other Federal regulatory actions. (1) 
The Department will recognize and seek to mitigate the overlapping 
effects on manufacturers of new or revised DOE standards and other 
regulatory actions affecting the same products. DOE will analyze and 
consider the impact on manufacturers of multiple product-specific 
regulatory actions. These factors will be considered in setting 
rulemaking priorities, assessing manufacturer impacts of a 
particular standard, and establishing the effective date for a new 
or revised standard. In particular, DOE will seek to propose 
effective dates for new or revised standards that are appropriately 
coordinated with other regulatory actions to mitigate any cumulative 
burden.
    (2) If the Department determines that a proposed standard would 
impose a significant impact on product manufacturers within three 
years of the effective date of another DOE standard that imposes 
significant impacts on the same manufacturers (or divisions thereof, 
as appropriate), the Department will, in addition to evaluating the 
impact on manufacturers of the proposed standard, assess the joint 
impacts of both standards on manufacturers.
    (3) If the Department is directed to establish or revise 
standards for products that are components of other products subject 
to standards, the Department will consider the interaction between 
such standards in setting rulemaking priorities and assessing 
manufacturer impacts of a particular standard. The Department will 
assess, as part of the engineering and impact analyses, the cost of 
components subject to efficiency standards.
    (h) Summary of quantitative and qualitative assessments. The 
summary of quantitative and qualitative assessments will contain a 
description and discussion of uncertainties. Alternative estimates 
of impacts, resulting from the different potential scenarios 
developed throughout the analysis, will be explicitly presented in 
the final analysis results.
    (i) Key modeling and analytical tools. In its assessment of the 
likely impacts of standards on manufacturers, the Department will 
use models which are clear and understandable, feature accessible 
calculations, and have assumptions that are clearly explained. As a 
starting point, the Department will use the Government Regulatory 
Impact Model (GRIM). The Department will consider any enhancements 
to the GRIM that are suggested by interested parties. If changes are 
made to the GRIM methodology, DOE will provide notice and seek 
public input. The Department will also support the development of 
economic models for price and volume forecasting. Research required 
to update key economic data will be considered.

11. Principles for the Analysis of Impacts on Consumers

    (a) Early consideration of impacts on consumer utility. The 
Department will consider at the earliest stages of the development 
of a standard whether particular design options will lessen the 
utility of the covered products to the consumer. See section 4(a).
    (b) Impacts on product availability. The Department will 
determine, based on consideration of information submitted during 
the standard development process, whether a proposed standard is 
likely to result in the unavailability of any covered product type 
with performance characteristics (including reliability), features, 
sizes, capacities, and volumes that are substantially the same as 
products generally available in the U.S. at the time. DOE will not 
promulgate a standard if it concludes that it would result in such 
unavailability.
    (c) Department of justice review. As required by law, the 
Department will solicit the views of the Justice Department on any 
lessening of competition that is likely to result from the 
imposition of a proposed standard and will give the views provided 
full consideration in assessing economic justification of a proposed 
standard. In addition, DOE may consult with the Department of 
Justice at earlier stages in the standards development process to 
seek to obtain preliminary views on competitive impacts.
    (d) Variation in consumer impacts. The Department will use 
regional analysis and sensitivity analysis tools, as appropriate, to 
evaluate the potential distribution of impacts of candidate 
standards levels among different subgroups of consumers. The 
Department will consider impacts on significant segments

[[Page 36987]]

of consumers in determining standards levels. Where there are 
significant negative impacts on identifiable subgroups, DOE will 
consider the efficacy of voluntary approaches as a means to achieve 
potential energy savings.
    (e) Payback period and first cost. (1) In the assessment of 
consumer impacts of standards, the Department will consider Life-
Cycle Cost, Payback Period and Cost of Conserved Energy to evaluate 
the savings in operating expenses relative to increases in purchase 
price. The Department intends to increase the level of sensitivity 
analysis and scenario analysis for future rulemakings. The results 
of these analyses will be carried throughout the analysis and the 
ensuing uncertainty described.
    (2) If, in the analysis of consumer impacts, the Department 
determines that a candidate standard level would result in a 
substantial increase in the product first costs to consumers or 
would not pay back such additional first costs through energy cost 
savings in less than three years, Department will specifically 
assess the likely impacts of such a standard on low-income 
households, product sales and fuel switching.

12. Consideration of Non-Regulatory Approaches

    (a) The Department recognizes that voluntary or other non-
regulatory efforts by manufacturers, utilities and other interested 
parties can result in substantial efficiency improvements. The 
Department intends to consider fully the likely effects of non-
regulatory initiatives on product energy use, consumer utility and 
life cycle costs, manufacturers, competition, utilities and the 
environment, as well as the distribution of these impacts among 
different regions, consumers, manufacturers and utilities. DOE will 
attempt to base its assessment on the actual impacts of such 
initiatives to date, but also will consider information presented 
regarding the impacts that any existing initiative might have in the 
future. Such information is likely to include a demonstration of the 
strong commitment of manufacturers, distribution channels, utilities 
or others to such voluntary efficiency improvements. This 
information will be used in assessing the likely incremental impacts 
of establishing or revising standards, in assessing appropriate 
effective dates for new or revised standards and in considering DOE 
support of non-regulatory initiatives.
    (b) DOE believes that non-regulatory approaches are valuable 
complements to the standards program. In particular, DOE will 
consider pursuing voluntary programs where it appears that highly 
efficient products can obtain a significant market share but less 
efficient products cannot be eliminated altogether because, for 
instance, of unacceptable adverse impacts on a significant subgroup 
of consumers. In making this assessment, the Department will 
consider the success more efficient designs have had in the market, 
their acceptance to date, and their potential market penetration.

13. Crosscutting Analytical Assumptions

    In selecting values for certain crosscutting analytical 
assumptions, DOE expects to continue relying upon the following 
sources and general principles:
    (a) Underlying economic assumptions. The appliance standards 
analyses will generally use the same economic growth and development 
assumptions that underlie the most current Annual Energy Outlook 
(AEO) published by the Energy Information Administration (EIA).
    (b) Energy price and demand trends. Analyses of the likely 
impact of appliance standards on typical users will generally adopt 
the mid-range energy price and demand scenario of the EIA's most 
current AEO. The sensitivity of such estimated impacts to possible 
variations in future energy prices are likely to be examined using 
the EIA's high and low energy price scenarios.
    (c) Product-specific energy-efficiency trends, without updated 
standards. Product specific energy-efficiency trends will be based 
on a combination of the efficiency trends forecast by the EIA's 
residential and commercial demand model of the National Energy 
Modeling System (NEMS) and product-specific assessments by DOE and 
its contractors with input from interested parties.
    (d) Discount rates. For residential and commercial consumers, 
ranges of three different real discount rates will be used. For 
residential consumers, the mid-range discount rate will represent 
DOE's approximation of the average financing cost (or opportunity 
costs of reduced savings) experienced by typical consumers. 
Sensitivity analyses will be performed using discount rates 
reflecting the costs more likely to be experienced by residential 
consumers with little or no savings and credit card financing and 
consumers with substantial savings. For commercial users, a mid-
range discount rate reflecting the DOE's approximation of the 
average real rate of return on commercial investment will be used, 
with sensitivity analyses being performed using values indicative of 
the range of real rates of return likely to be experienced by 
typical commercial businesses. For national net present value 
calculations, DOE would use the Administration's approximation of 
the average real rate of return on private investment in the U.S. 
economy. For manufacturer impacts, DOE plans to use a range of real 
discount rates which are representative of the real rates of return 
experienced by typical U.S. manufacturers affected by the program.
    (e) Environmental impacts. The emission rates of carbon, sulfur 
oxides and nitrogen oxides used by DOE to calculate the physical 
quantities of emissions likely to be avoided by candidate standard 
levels will be based on the current average carbon emissions of the 
U.S. electric utilities and on the projected rates of emissions of 
sulfur and nitrogen oxides. Projected rates of emissions, if 
available, will be used for the estimation of any other 
environmental impacts. The Department will consider the effects of 
the proposed standards on these emissions in reaching a decision 
about whether the benefits of the proposed standards exceed their 
burdens but will not determine the monetary value of these 
environmental externalities.

14. Deviations, Revisions, and Judicial Review

    (a) Deviations. This Appendix specifies procedures, 
interpretations and policies for the development of new or revised 
energy efficiency standards in considerable detail. As the approach 
described in this Appendix is applied to the development of 
particular standards, the Department may find it necessary or 
appropriate to deviate from these procedures, interpretations or 
policies. If the Department concludes that such deviations are 
necessary or appropriate in a particular situation, DOE will provide 
interested parties with notice of the deviation and an explanation.
    (b) Revisions. If the Department concludes that changes to the 
procedures, interpretations or policies in this Appendix are 
necessary or appropriate, DOE will provide notice in the Federal 
Register of modifications to this Appendix with an accompanying 
explanation. DOE expects to consult with interested parties prior to 
any such modification.
    (c) Judicial review. The procedures, interpretations, and 
policies stated in this Appendix are not intended to establish any 
new cause of action or right to judicial review.

[FR Doc. 96-17886 Filed 7-12-96; 8:45 am]
BILLING CODE 6450-01-P