[Federal Register Volume 62, Number 81 (Monday, April 28, 1997)]
[Rules and Regulations]
[Pages 23102-23116]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-10888]



[[Page 23101]]

_______________________________________________________________________

Part IX





Department of Energy





_______________________________________________________________________



Office of Energy Efficiency and Renewable Energy



_______________________________________________________________________



10 CFR Part 430



Energy Conservation Program for Consumer Products: Energy Conservation 
Standards for Refrigerators, Refrigerator-Freezers and Freezers; Final 
Rule



Energy Conservation Program for Consumer Products; Finding of No 
Significant Impact; Notice

  Federal Register / Vol. 62, No. 81 / Monday, April 28, 1997 / Rules 
and Regulations  

[[Page 23102]]


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DEPARTMENT OF ENERGY

Office of Energy Efficiency and Renewable Energy

10 CFR Part 430

[Docket No. EE-RM-93-801]


Energy Conservation Program for Consumer Products: Energy 
Conservation Standards for Refrigerators, Refrigerator-Freezers and 
Freezers

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

ACTION: Final rule.

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

SUMMARY: The Department of Energy (DOE or Department) today promulgates 
revised energy conservation standards for refrigerators, refrigerator-
freezers, and freezers. This action is expected to result in 
substantial energy savings, with consequent benefits to consumers and 
reductions in emissions of air pollutants.

EFFECTIVE DATE: The effective date of the revised standards is July 1, 
2001.

FOR FURTHER INFORMATION CONTACT: Michael J. McCabe, U.S. Department of 
Energy, Office of Energy Efficiency and Renewable Energy, Forrestal 
Building, Mail Station EE-43, 1000 Independence Avenue, SW, Washington, 
D.C. 20585-0121, (202) 586-9127.
    Douglas W. Smith, Esq., U.S. Department of Energy, Office of 
General Counsel, Forrestal Building, Mail Station GC-70, 1000 
Independence Avenue, SW, Washington, D.C. 20585-0103, (202) 586-3410.

Supplementary Information

I. Introduction
    A. General
    B. Background
II. Discussion of Criteria and Comments
    A. Technological Feasibility
    1. General
    2. Maximum Technologically Feasible Levels
    B. Economic Justification
    1. Economic Impact on Manufacturers
    a. Approach to Modeling
    b. Phaseout of HCFC-141b
    i. Thermal Performance of HCFC-141b Replacement
    ii. HFC-245fa Availability
    iii. Cumulative Burden From Multiple Government Regulations
    2. Economic Impact on Consumers Including Life-cycle Costs and 
Payback Periods
    3. Energy Savings
    a. Forecast of Savings
    b. Significance of Savings
    4. Lessening of Utility or Performance of Products
    5. Impact of Lessening of Competition
    6. Need of the Nation to Conserve Energy
    7. Other Factors
    C. Rebuttable Presumption of Economic Justification
III. Analysis
    A. Product Classes
    B. Standard Levels
    1. Standard Level 4
    2. Standard Level 3
    3. Standard Level 2
    4. Standard Level 1
    C. Effective Date
IV. Procedural Requirements
    A. Environmental Review
    B. Regulatory Planning and Review
    C. Unfunded Mandates Review
    D. Regulatory Flexibility Act Review
    E. Federalism Review
    F. ``Takings'' Assessment Review
    G. Paperwork Reduction Act Review
    H. Review under Executive Order 12988
    I. Review under Small Business Regulatory Enforcement Fairness 
Act of 1996
V. Department of Justice Views on Proposed Rule

I. Introduction

A. General

    This final rule concludes a regulatory action, mandated by Part B 
of Title III of the Energy Policy and Conservation Act, as amended (the 
Act or EPCA), 42 U.S.C. Sec. 6291-6309, to review and revise the 
Department's energy conservation standards applicable to refrigerators, 
refrigerator-freezers, and freezers (refrigerator products). The 
revised standards will result in reduced energy consumption, reduced 
consumer costs, and reduced emissions of air pollutants associated with 
electricity production. The Department estimates that over 30 years the 
revised standards will save approximately 6.67 quads (7.03 exajoules 
(EJ)) of primary energy and result in a 465 million metric ton (Mt) 
(513 million short tons) reduction in emissions of CO2 and a 1,362 
thousand metric ton (kt) (1,501,000 short tons) reduction in emissions 
of NOX.
    The regulations published today amend existing standards that were 
promulgated on November 17, 1989 (hereinafter referred to as the 1989 
Final Rule). 54 FR 47916. The Act directs the Department to review the 
1989 Final Rule for possible amendment and to issue a final rule based 
on that review within five years. EPCA, Sec. 325(b)(3)(B), 42 U.S.C. 
Sec. 6295(b)(3)(B).
    In developing today's final regulations, the Department has relied 
substantially on a joint recommendation negotiated by refrigerator 
manufacturers and their trade association, energy efficiency advocates, 
electric utilities, and state energy offices, which was submitted to 
the Department on November 15, 1994. The Department appreciates their 
efforts to work out differences and, to the maximum extent practicable, 
intends to support and encourage similar efforts with respect to energy 
conservation standards for other appliances.

B. Background

    DOE published an Advance Notice of Proposed Rulemaking (hereinafter 
referred to as the 1993 Advance Notice) on standards for refrigerator 
products as well as other products on September 8, 1993. 58 FR 47326. 
The 1993 Advance Notice presented the product classes that DOE planned 
to analyze and provided a detailed discussion of the analytical 
methodology and models that the Department expected to use in doing the 
analysis to support this rulemaking. The Department invited comments 
and data on the accuracy and feasibility of the planned methodology and 
encouraged interested persons to recommend improvements or alternatives 
to the approach taken by DOE.
    On November 15, 1994, the Department received joint comments from 
the Association of Home Appliance Manufacturers (AHAM), the Natural 
Resources Defense Council (NRDC), the American Council for an Energy 
Efficient Economy (ACEEE), the New York State Energy Office, the 
California Energy Commission (CEC), Pacific Gas and Electric (PG&E) and 
Southern California Edison (SCE) (hereinafter referred to as the 
``Joint Comments''). The AHAM member companies that were active in the 
negotiations and that supported the agreement were: Amana 
Refrigeration, Inc. (Amana), Frigidaire Company (Frigidaire), General 
Electric Appliances (GEA), Marvel Industries (Marvel), Maytag Company 
(Maytag), Sanyo Company (Sanyo), Sub-Zero Corporation (Sub-Zero), U-
Line Corporation (U-Line), W.C. Wood Company and Whirlpool Corporation 
(Whirlpool).
    This group of refrigerator manufacturers, energy efficiency 
advocates, electric utilities, and state energy offices worked 
intensively for approximately two and one-half years to develop a 
common recommendation for revised energy conservation standards for 
refrigerator products that met the statutory requirements. Although DOE 
neither organized nor was a member of the group, DOE responded to the 
group's request to send DOE staff observers to meetings and to make 
contractors available to provide analytical support. The Department 
viewed the group effort to reach agreement among representatives of 
industry, energy efficiency advocates and others as a very constructive 
development, and the thoughtful Joint

[[Page 23103]]

Comments were of great value to the Department in crafting its 
proposal.
    On July 20, 1995, DOE published a Notice of Proposed Rulemaking in 
which the Department proposed amended energy conservation standards for 
the refrigerator products (hereinafter referred to as the 1995 Proposed 
Rule). 60 FR 37388. The standard levels proposed in the 1995 Proposed 
Rule corresponded closely to the standard levels recommended in the 
Joint Comments on the 1993 Advance Notice. Standards proposed in the 
1995 Proposed Rule are shown in Table 1-1 and Table 1-2.

 Table 1-1.--Proposed Energy Standards for Refrigerators, Refrigerator- 
               Freezers, and Freezers Which Contain HCFCs               
------------------------------------------------------------------------
                                    Energy standards equations  (kWh/yr)
                                   -------------------------------------
           Product class                               Effective 3 years
                                        Effective      after publication
                                     January 1, 1993     of  final rule 
------------------------------------------------------------------------
1. Refrigerators and Refrigerator-                                      
 freezers with manual defrost.....         13.5AV+299                   
                                           0.48av+299       8.82AV+248.4
                                                            0.31av+248.4
2. Refrigerator-Freezers--partial                                       
 automatic defrost................         10.4AV+398                   
                                           0.37av+398       8.82AV+248.4
                                                            0.31av+248.4
3. Refrigerator-Freezers--                                              
 automatic defrost with top-                                            
 mounted freezer without through-                                       
 the-door ice service and all-                                          
 refrigerators--automatic defrost.         16.0AV+355                   
                                           0.57av+355       9.80AV+276.0
                                                            0.35av+276.0
4. Refrigerator-Freezers--                                              
 automatic defrost with side-                                           
 mounted freezer without through-                                       
 the-door ice service.............         11.8AV+501                   
                                           0.42av+501       4.91AV+507.5
                                                            0.17av+507.5
5. Refrigerator-Freezers--                                              
 automatic defrost with bottom-                                         
 mounted freezer without through-                                       
 the-door ice service.............         16.5AV+367                   
                                           0.58av+367       4.60AV+459.0
                                                            0.16av+459.0
6. Refrigerator-Freezers--                                              
 automatic defrost with top-                                            
 mounted freezer with through-the-                                      
 door ice service.................         17.6AV+391                   
                                           0.62av+391      10.20AV+356.0
                                                            0.36av+356.0
7. Refrigerator-Freezers--                                              
 automatic defrost with side-                                           
 mounted freezer with through-the-                                      
 door ice service.................         16.3AV+527                   
                                           0.58av+527      10.10AV+406.0
                                                            0.36av+406.0
8. Upright Freezers with Manual                                         
 Defrost..........................         10.3AV+264                   
                                           0.36av+264       7.55AV+258.3
                                                            0.27av+258.3
9. Upright Freezers with Automatic                                      
 Defrost..........................         14.9AV+391                   
                                           0.53av+391      12.43AV+326.1
                                                            0.44av+326.1
10. Chest Freezers and all other                                        
 Freezers except Compact Freezers.         11.0AV+160                   
                                           0.39av+160       9.88AV+143.7
                                                            0.35av+143.7
11. Compact Refrigerators and                                           
 Refrigerator-Freezers with Manual                                      
 Defrost..........................         13.5AV+299                   
                                           0.48av+299      10.70AV+299.0
                                                            0.38av+299.0
12. Compact Refrigerator-Freezers--                                     
 partial automatic defrost........         10.4AV+398                   
                                           0.37av+398       7.00AV+398.0
                                                            0.25av+398.0
13. Compact Refrigerator-Freezers--                                     
 automatic defrost with top-                                            
 mounted freezer and compact all-                                       
 refrigerators--automatic defrost.         16.0AV+355                   
                                           0.57av+355      12.70AV+355.0
                                                            0.45av+355.0
14. Compact Refrigerator-Freezers--                                     
 automatic defrost with side-                                           
 mounted freezer..................         11.8AV+501                   
                                           0.42av+501       7.60AV+501.0
                                                            0.27av+501.0
15. Compact Refrigerator-Freezers--                                     
 automatic defrost with bottom-                                         
 mounted freezer..................         16.5AV+367                   
                                           0.58av+367      13.10AV+367.0
                                                            0.46av+367.0
16. Compact Upright Freezers with                                       
 Manual Defrost...................         10.3AV+264                   
                                           0.36av+264       9.78AV+250.8
                                                            0.35av+250.8
17. Compact Upright Freezers with                                       
 Automatic Defrost................         14.9AV+391                   
                                           0.53av+391      11.40AV+391.0
                                                            0.40av+391.0
18. Compact Chest Freezers........         11.0AV+160                   
                                           0.39av+160      10.45AV+152.0
                                                            0.37av+152.0
------------------------------------------------------------------------
AV=Total adjusted volume, expressed in ft.\3\, as determined in         
  Appendices A1 and B1 of Subpart B of this Part.                       
av=Total adjusted volume, expressed in Liters.                          


     Table 1-2.--Proposed Energy Standards for HCFC-Free Refrigerators, Refrigerator-Freezers, and Freezers     
----------------------------------------------------------------------------------------------------------------
                                                           Energy standards equations (kWh/yr) effective dates  
                                                        --------------------------------------------------------
                     Product class                                            3 years after      9 years after  
                                                             Effective        publication of     publication of 
                                                          January 1, 1993       final rule         final rule   
----------------------------------------------------------------------------------------------------------------
19. HCFC-Free Refrigerators and Refrigerator-Freezers                                                           
 with Manual Defrost...................................         13.5AV+299                                      
                                                                0.48av+299       9.70AV+273.2                   
                                                                                 0.34av+273.2       8.82AV+248.4
                                                                                                    0.31av+248.4
20. HCFC-Free Refrigerator-Freezer--partial automatic                                                           
 defrost...............................................         10.4AV+398                                      
                                                                0.37av+398       9.70AV+273.2                   
                                                                                 0.34av+273.2       8.82AV+248.4
                                                                                                    0.31av+248.4

[[Page 23104]]

                                                                                                                
21. HCFC-Free Refrigerator-Freezers--automatic defrost                                                          
 with top-mounted freezer without through-the-door ice                                                          
 service and HCFC-Free all-refrigerators--automatic                                                             
 defrost...............................................         16.0AV+355                                      
                                                                0.57av+355      10.78AV+303.6                   
                                                                                 0.38av+303.6       9.80AV+276.0
                                                                                                    0.35av+276.0
22. HCFC-Free Refrigerator-Freezers--automatic defrost                                                          
 with side-mounted freezer without through-the-door ice                                                         
 service...............................................         11.8AV+501                                      
                                                                0.42av+501       5.40AV+558.3                   
                                                                                 0.19av+558.3       4.91AV+507.5
                                                                                                    0.17av+507.5
23. HCFC-Free Refrigerator-Freezers--automatic defrost                                                          
 with bottom-mounted freezer without through-the-door                                                           
 ice service...........................................         16.5AV+367                                      
                                                                0.58av+367       5.06AV+504.9                   
                                                                                 0.18av+504.9       4.60AV+459.0
                                                                                                    0.16av+459.0
24. HCFC-Free Refrigerator-Freezers--automatic defrost                                                          
 with top-mounted freezer with through-the-door ice                                                             
 service...............................................         17.6AV+391                                      
                                                                0.62av+391      11.22AV+391.6                   
                                                                                 0.40av+391.6      10.20AV+356.0
                                                                                                    0.36av+356.0
25. HCFC-Free Refrigerator-Freezers--automatic defrost                                                          
 with side-mounted freezer with through-the-door ice                                                            
 service...............................................         16.3AV+527                                      
                                                                0.58av+527      11.11AV+446.6                   
                                                                                 0.39av+446.6      10.10AV+406.0
                                                                                                    0.36av+406.0
26. HCFC-Free Upright Freezers with Manual Defrost.....         10.3AV+264                                      
                                                                0.36av+264       8.31AV+284.1                   
                                                                                 0.29av+284.1       7.55AV+258.3
                                                                                                    0.27av+258.3
27. HCFC-Free Upright Freezers with Automatic Defrost..         14.9AV+391                                      
                                                                0.53av+391      13.67AV+358.7                   
                                                                                 0.48av+358.7      12.43AV+326.1
                                                                                                    0.44av+326.1
28. HCFC-Free Chest Freezers and All Other Freezers                                                             
 Except Compact Freezers...............................         11.0AV+160                                      
                                                                0.39av+160      10.87AV+158.1                   
                                                                                 0.38av+158.1       9.88AV+143.7
                                                                                                    0.35av+143.7
29. HCFC-Free Compact Refrigerators and Refrigerator-                                                           
 Freezers with Manual Defrost..........................         13.5AV+299                                      
                                                                0.48av+299       13.5AV+299.0                   
                                                                                   0.48av+299      10.70AV+299.0
                                                                                                    0.38av+299.0
30. HCFC-Free Compact Refrigerator-Freezer--partial                                                             
 automatic defrost.....................................         10.4AV+398                                      
                                                                0.37av+398       10.4AV+398.0                   
                                                                                 0.37av+398.0       7.00AV+398.0
                                                                                                    0.25av+398.0
31. HCFC-Free Compact Refrigerator-Freezers--automatic                                                          
 defrost with top-mounted freezer and HCFC-free compact                                                         
 all-refrigerators--automatic defrost..................         16.0AV+355                                      
                                                                0.57av+355       16.0AV+355.0                   
                                                                                 0.57av+355.0      12.70AV+355.0
                                                                                                    0.45av+355.0
32. HCFC-Free Compact Refrigerator-Freezers--automatic                                                          
 defrost with side-mounted freezer.....................         11.8AV+501                                      
                                                                0.42av+501       11.8AV+501.0                   
                                                                                 0.42av+501.0       7.60AV+501.0
                                                                                                    0.27av+501.0
33. HCFC-Free Compact Refrigerator-Freezers--automatic                                                          
 defrost with bottom-mounted freezer...................         16.5AV+367                                      
                                                                0.58av+367       16.5AV+367.0                   
                                                                                 0.58av+367.0      13.10AV+367.0
                                                                                                    0.46av+367.0
34. HCFC-Free Compact Upright Freezers with Manual                                                              
 defrost...............................................         10.3AV+264                                      
                                                                0.36av+264       10.3AV+264.0                   
                                                                                   0.36av+264       9.78AV+250.8
                                                                                                    0.35av+250.8
35. HCFC-Free Compact Upright Freezers with Automatic                                                           
 defrost...............................................         14.9AV+391                                      
                                                                0.53av+391       14.9AV+391.0                   
                                                                                 0.53av+391.0      11.40AV+391.0
                                                                                                    0.40av+391.0
36. HCFC-Free Compact Chest Freezers...................         11.0AV+160                                      
                                                                0.39av+160       11.0AV+160.0                   
                                                                                 0.39av+160.0      10.45AV+152.0
                                                                                                    0.37av+152.0
----------------------------------------------------------------------------------------------------------------
AV = Total adjusted volume, expressed in ft.\3\, as determined in Appendices A1 and B1 of Subpart B of this     
  Part.                                                                                                         
av = Total adjusted volume, expressed in Liters.                                                                

    The proposed standards were designed to reduce product energy use 
by up to 30 percent relative to current standards (Tier 1).1 For 
products manufactured without HCFC blowing agents, there was a second-
tier standard applicable for six years designed to reduce energy use by 
up to 23 percent (Tier 2). The percentage reduction in energy use 
varied from class to class. The proposed standards would take effect 
three years from the date of publication of the final rule. The second 
tier transition standard for HCFC-free products was designed to address 
concerns about uncertainty relating to the energy penalty associated 
with substitutes for HCFC-141b, the blowing agent used for refrigerator 
insulation. The manufacture and import of HCFC-141b, a stratospheric 
ozone-depleting chemical, will be banned effective January 1, 2003, 
pursuant to regulations of the Environmental Protection Agency (EPA). 
40 CFR 82.4 (l), (m).
---------------------------------------------------------------------------

    \1\ The largest two classes, top mount auto defrost 
refrigerator-freezer without through-the-door features and side-by-
side refrigerator freezers with through-the-door features, have 
efficiency improvements of 29.6 and 29.3 percent, respectively. 
These two classes account for 78 percent of the energy used by 
refrigerators and refrigerator/freezers and 57 percent of all 
refrigerator products including freezers.
---------------------------------------------------------------------------

    The 1989 Final Rule divided refrigerator products into 10 classes 
based on various product characteristics (e.g., freezer location). As 
was proposed in the 1995 Proposed Rule, today's rule establishes new 
classes for eight different compact refrigerator configurations.
    The comment period on the 1995 Proposed Rule, extended by 30 days 
from its original date, ended on November 2, 1995. 60 FR 47497 
(September 13, 1995). A public hearing was held in Washington, D.C. on 
October 26, 1995. In September and October of 1995, some manufacturers 
indicated that they no longer supported the imposition of updated 
standards prior to 2003 because of uncertainty surrounding the thermal 
efficiency characteristics and cost of insulation

[[Page 23105]]

using a blowing agent other than HCFC-141b and safety concerns relating 
to use of hydrocarbon blowing agents.
    In September 1995, the Department announced a formal effort to 
improve the process it uses to develop appliance efficiency standards. 
Energy efficiency advocates, product manufacturers, trade associations, 
state agencies, utilities and other interested parties were asked to 
provide substantial input into the Department's work, which resulted in 
the publication of a rule institutionalizing procedural enhancements. 
61 FR 36973 (July 15, 1996) (hereinafter referred to as the Process 
Rule). The enhanced process for considering new or revised appliance 
efficiency standards includes earlier input from stakeholders, 
increased predictability of the rulemaking timetable, an improved 
analysis of impacts, and the encouragement of consensus agreements when 
possible. For further details, see the Process Rule. 61 FR 36973 (July 
15, 1996).
    The Department of the Interior and Related Agencies Appropriations 
Act for Fiscal Year 1996 included a moratorium on proposing or issuing 
new or amended appliance energy conservation standards during Fiscal 
Year 1996. Pub. L. 104-134.
    In keeping with elements of the Process Rule and to inform the 
development of a final rule on revised refrigerator standards, DOE 
reopened the comment period on the Proposal Rule until September 11, 
1996 (hereinafter referred to as the 1996 Reopening Notice). 61 FR 
41748 (August 12, 1996). DOE sought further comment on issues relating 
to the relationship between revised DOE efficiency standards and the 
EPA regulation of HCFC-141b. In the 1996 Reopening Notice, DOE 
described a number of options under consideration, including the 
approach in the Proposed Rule, and requested comment and supporting 
data. In the Reopening Notice, the Department identified a ``preferred 
option,'' which would have established that standard levels would be 
set in the range bounded by the proposed Tier 1 and Tier 2 standard 
levels effective January 1, 2003, with the final standard level to be 
set in 1999, based on a narrow determination of the energy penalty of 
the substitute blowing agent. The options identified for comment 
focused on standard levels in the range bounded by the proposed Tier 1 
and Tier 2 standard levels, and on effective dates from 2000 through 
2003.

II. Discussion of Criteria and Comments

    The Act requires that any new or amended conservation standard 
prescribed by the Secretary shall achieve the maximum improvement in 
energy efficiency that is technologically feasible and economically 
justified. EPCA Sec. 325(o)(2)(A), 42 U.S.C. Sec. 6295(o)(2)(A).
    The Department conducted engineering and economic analyses of those 
classes of refrigerator products for which performance and cost data 
could be obtained. The classes analyzed were: top-mounted refrigerator-
freezer with auto defrost; top-mounted refrigerator-freezer with auto 
defrost and through-the-door features; side-by-side refrigerator-
freezer with auto defrost; side-by-side refrigerator-freezer with auto 
defrost and through-the-door features; bottom-mounted refrigerator-
freezer with auto defrost; upright freezer with auto defrost; upright 
freezer with manual defrost; chest freezer with manual defrost; and 
compact refrigerator-freezer with manual defrost. Data was collected by 
surveys of the industry, extensive literature review and discussions 
with experts. This information was used as the basis for determining 
the improvement in performance and the manufacturer cost for each 
design option added to the baseline unit. The engineering analysis 
determined the annual energy use, life cycle costs, and pay back 
periods for each combination of design options. Proposed standards for 
classes which could not be analyzed due to the lack of data have been 
based on the percentage performance improvement over current standards 
determined for a similar class that was analyzed. No new data on 
engineering or economic analysis was provided in the comments to the 
1995 Proposed Rule.
    Revised national impact analyses were performed for today's final 
rule using the 1997 Annual Energy Outlook (AEO) energy price forecast. 
These results are presented in the updated Chapter 5, ``National Energy 
and Economic Impacts'' of the Technical Support Document (TSD), DOE/EE-
0064. Chapter 4, ``Life-Cycle Costs and Payback Period,'' was also 
revised using the 1997 AEO energy price forecast. The TSD is the same 
as the one that accompanied the 1995 Proposed Rule for these products, 
with the exception of Chapter 4, Chapter 5 and Table R.5, ``Expected 
Impacts of Program Alternatives,'' which have been updated. Copies of 
the TSD and the updated chapters and table are available at the DOE 
Freedom of Information Reading Room, U.S. Department of Energy, 
Forrestal Building, Room 1E-190, 1000 Independence Avenue, SW., 
Washington, DC 20585, (202) 586-6020, between the hours of 9 a.m. and 4 
p.m. Monday through Friday except Federal holidays.
    The Department has received over 200 comments from Members of 
Congress, manufacturers, states, environmental and energy efficiency 
organizations, trade associations, utilities and the public over the 
course of nearly two years beginning with the publication of the 1995 
Proposed Rule. The significant issues raised by the public comments are 
addressed below. The Department has recently received comments from a 
diverse group of stakeholders indicating support for the approach taken 
in this final rule. (Frigidaire, No. 316; GEA, No. 317; Maytag, No. 
318; Whirlpool, No. 319; Amana, No. 320; NRDC, Alliance to Save Energy 
(ASE), ACEEE, CEC, Florida Energy Office, SCE, and Oregon Office of 
Energy, PG&E, No. 321).

A. Technological Feasibility

1. General
    For those products and classes of products discussed in today's 
final rule, DOE believes that all of the efficiency levels analyzed in 
the 1995 Proposed Rule, while not necessarily realized in current 
production, are technologically feasible. The technological feasibility 
of the design options is addressed in Chapter 3 of the TSD. The 
Department considers a design option technologically feasible if that 
design option is incorporated in commercial products or in working 
prototypes.
    The Department received no public comments regarding the efficiency 
levels achievable by the design options presented in the 1995 Proposed 
Rule and accompanying TSD.
2. Maximum Technologically Feasible Levels
    To meet the requirement set forth in the Act that any new or 
amended standard be technologically feasible, the Department conducted 
engineering analyses of those classes of refrigerator products for 
which performance and cost data could be obtained. Accordingly, for 
each class of product under consideration in this rulemaking, a maximum 
technologically feasible design option (max tech) was identified. The 
max tech levels were derived by adding energy-conserving engineering 
design options to the baseline units for each of the respective classes 
in order of increasing consumer payback periods. A brief discussion of 
the max tech level for each class analyzed is found in the ``Analysis'' 
section of the 1995 Proposed Rule. 60 FR at 37407-8 (July 20, 1995). A 
complete discussion of each max tech level and the design options 
included in

[[Page 23106]]

each is found in the Engineering Analysis in Chapter 3 of the TSD.

B. Economic Justification

    Section 325 of the Act provides seven factors to be evaluated in 
determining whether a conservation standard is economically justified: 
economic impact on manufacturers and consumers, net consumer savings, 
energy savings, impacts on product utility, impact on competition, need 
for energy conservation, and other relevant factors. EPCA 
Sec. 325(o)(2)(B)(i), 42 U.S.C. Sec. 6295(o)(2)(B)(i). Each of these is 
discussed below.
1. Economic Impact on Manufacturers
    a. Approach to Modeling. The Engineering Analysis identified design 
options for improvements in efficiency along with the associated costs 
to manufacturers for each class of product. For each design option, 
these costs constitute the increased per-unit cost to manufacturers to 
achieve the indicated energy efficiency levels. Manufacturer, 
wholesaler, and retailer markups will result in a consumer purchase 
price higher than the manufacturer cost.
    In the analysis which supported the 1995 Proposed Rule, the 
Department used a computer model that simulated a hypothetical company 
to assess the likely impacts of standards on manufacturers and to 
determine the effects of standards on the industry at large. This 
model, the Manufacturer Analysis Model (MAM), is described in the TSD. 
(See TSD, Appendix C.) It provides a broad array of outputs, including 
shipments, price, revenue, net income and short- and long-run returns 
on equity. An ``Output Table'' lists values for all these outputs for 
the base case and for each of the standards cases under consideration. 
(See Tables 6-4 through 6-7 of Chapter 6 in the TSD.) The base case 
represents the forecasts of outputs with the range of energy 
efficiencies expected if there are no new or amended standards. A 
``Sensitivity Chart'' shows how returns on equity would be affected by 
a change in any one of the nine control variables of the model. (TSD, 
Appendix C). The Manufacturer Analysis Model consists of 13 modules. 
The module which estimates the impact of standards on total industry 
net present value is version 1.2 of the Government Regulatory Impact 
Model (GRIM), dated March 1, 1993, which was developed by the Arthur D. 
Little Consulting Company (ADL) under contract to AHAM, the Gas 
Appliance Manufacturers Association (GAMA), and the Air-Conditioning 
and Refrigeration Institute (ARI). (See TSD, Appendix C for more 
details.)
    Commenting on the 1995 Proposed Rule, AHAM, Sub-Zero and GEA 
criticized the methodology and analytical models used to assess 
standards. These comments raised concerns about the determination of 
the impact of standards on manufacturers, particularly the way the 
Department used the GRIM developed by industry, and the failure to 
consider the impact of multiple DOE and other agency regulations. Sub-
Zero requested that DOE reassess the method used to determine the 
burdens that future standards will place on small companies. (AHAM, No. 
207 at 2-4; Sub-Zero, No. 209 at 3, 4; and GEA, No. 212 at 1, 2).
    In implementing the Process Rule, the Department is now undertaking 
a review of the manufacturing impact analysis model and methodologies. 
In developing its new methodology, the Department will take into 
account the comments received concerning its methodology. However, 
while DOE is committed to improving these analytical tools, DOE 
believes the results of the Department's manufacturer impact analysis 
on the 1995 Proposed Rule reasonably reflect the likely impact of new 
refrigerator standards. The analysis shows, for example, significant 
drops in short-run return on equity for the higher standard levels, 
which is consistent with manufacturers' claims. Moreover, 
notwithstanding their comments concerning the manufacturer impact 
analytical method, manufacturers, in the Joint Comments, concluded that 
the proposed standard levels were economically justified and, in more 
recent comments, expressed support for the approach taken in this final 
rule. (Joint Comments, No. 49 at 22; Frigidaire, No. 316; GEA, No. 317; 
Maytag, No. 318; Whirlpool, No. 319; Amana, No. 320).
    Other than on issues relating to the status of alternative blowing 
agents, there have been neither significant technological changes nor 
significant changes in the market since the Joint Comments were 
received and the 1995 Proposed Rule was published. Therefore, the 
Department believes the analysis found in the 1995 Proposed Rule, the 
TSD for the Proposed Rule (with updated chapters) and the Joint 
Comments are a sound basis for promulgating this final rule. 
Developments relating to substitute blowing agents, and the impact of 
these developments on manufacturer costs are discussed below.
    b. Phaseout of HCFC-141b. Many of the manufacturers' written or 
oral comments on the 1995 Proposed Rule asked that the Department take 
into account the cumulative burden of DOE's new energy efficiency 
standards and EPA's regulations banning, as of January 1, 2003, the 
manufacture and import of HCFC-141b, the blowing agent currently used 
in the production of the insulation in refrigerators. In the preamble 
to the Process Rule, with respect to refrigerators, DOE stated that it 
``expects to consult further with interested parties to determine 
whether it is appropriate to make alterations to the proposed standards 
to take into account the interaction between the revised efficiency 
standards and Clean Air Act and Montreal Protocol on Substances that 
Deplete the Ozone Layer regulations relating to the manufacture of 
HCFCs.'' 61 FR at 36980. The 1996 Reopening Notice expressly sought 
comment on the interrelationship between these two regulatory actions, 
the resulting impact on manufacturers, and the possible means for 
mitigating any adverse impacts. There are three major areas of concern 
regarding the phaseout of HCFC-141b: the thermal performance of the 
replacements; the date by which sufficient quantities of the 
replacement would be available; and the impact of both regulations on 
the development and manufacture of new refrigerators.
    i. Thermal Performance of HCFC-141b Replacements. Based on a 
recommendation in the Joint Comments, the Department's 1995 Proposed 
Rule proposed new product classes for refrigerator products made 
without HCFCs. To allow for the presumed energy penalty of replacements 
for HCFC-141b, DOE proposed a 10 percent relaxation of the otherwise 
applicable standards for HCFC-free products for a period of six years 
after the effective date of the new standards. The Joint Comments, 
which were developed in 1994 and reflect information on blowing agents 
available at the time, stated that: ``all non-chlorinated substitutes 
available to replace HCFC-141b are expected to be a minimum 10% less 
energy efficient.'' (Joint Comments, No. 49 at 12).
    In the 1996 Reopening Notice, the Department sought additional 
information on replacement blowing agents because of the relevance of 
such information to the rulemaking effective date and standard levels. 
AHAM submitted a report summarizing the research of the Appliance 
Research Consortium (ARC) on foam blowing agents which indicates that a 
foam blowing agent, hydrofluorocarbon (HFC)-245fa (1,1,1,3,3-
pentafluoropropane), is able to produce

[[Page 23107]]

insulating foams with a thermal efficiency comparable to HCFC-141b. The 
ARC report included the results of refrigerator cabinet tests which 
found that units using HFC-245fa insulation averaged only 0.9 percent 
more energy usage than comparable units using HCFC-141b. (AHAM, No. 
237, Attachment 3).
    ii. HFC-245fa Availability. HFC-245fa cannot be used in 
refrigerators until the blowing agent is added to EPA's Significant New 
Alternatives Policy (SNAP) list. This inclusion is dependent on the 
results of several toxicity tests and could occur during 1997. A 90-day 
toxicity test ended in August 1996 and the results raised no 
significant concerns. Based on these results and results of other 
tests, the likely producer of the chemical, AlliedSignal, will decide 
whether to petition EPA to have HFC-245fa added to the SNAP list. EPA 
has indicated that it is prepared to initiate the necessary regulatory 
process to determine whether to allow commercialization of HFC-245fa as 
soon as a manufacturer petitions the Agency. Based on early information 
about the physical and toxicological performance of HFC-245fa, EPA 
believes regulatory approval will be granted. (EPA, No. 301 at 1, 2).
    In addition to the toxicity tests, AlliedSignal also has performed 
a gas migration test using foam board insulation made with HFC-245fa. 
Comparatively little migration has occurred (less than the migration of 
HCFC-141b under similar conditions). An AHAM-sponsored food transfer 
test performed by an independent laboratory (Hazelton) should begin in 
the summer of 1997, with refrigerator results available in the fall of 
1997, and freezer results due toward the end of 1997.
    Although the chemical will not require Food and Drug Administration 
(FDA) approval, these studies are likely to be reviewed by an 
independent panel of experts to decide whether the chemical would 
likely meet the FDA's Generally Regarded As Safe (GRAS) requirements. 
This process should be completed by the end of 1997. (AlliedSignal, No. 
266 at 1).
    While there are still some uncertainties associated with HFC-245fa, 
AlliedSignal has indicated, based on favorable test results, that it 
expects to begin commercial production of HFC-245fa in 1999 and to 
expand its availability in early 2000 by starting production at a new 
facility. As of February 1997, AlliedSignal expected appliance 
manufacturers to begin converting to HFC-245fa as early as 1999 and to 
complete their conversion before the end of 2000. (AlliedSignal, No. 
314, at 4).
    iii. Cumulative Burden from Multiple Government Regulations. During 
1995 and 1996, prior to the availability of the positive test results 
on HFC-245fa, many manufacturers expressed concern about the cumulative 
regulatory burden of revised efficiency regulations and EPA's ban on 
the production of HCFC-141b as of 2003. They argued that imposing new 
efficiency standards in 2000 would force manufacturers to redesign 
their products and processes twice, once in 1999, in order to meet the 
new efficiency standard, and a second time in 2002, to accommodate a 
new insulation blowing agent. Manufacturers believed then that the 
replacement for HCFC-141b was likely to have significant impacts on 
thermal efficiency and product design, and could also involve 
significant manufacturing process changes.
    Maytag, GEA and Frigidaire expressed concerns about the 
availability of HCFC-free foams. GEA stated that it appeared unlikely 
that HFC-245fa would be proven safe and made available in sufficient 
quantities before 2002. (GEA, No. 212 at 2). AHAM stated that even if 
the commercial sale of HFC-245fa began in 1999 or 2000, there might not 
be sufficient production for the entire refrigerator (and building 
insulation) industry. (AHAM, No. 268 at 3).
    As a result of these concerns, the Department carefully considered 
the interrelationship between these two regulatory actions. To try to 
mitigate the effects of new energy efficiency standards for 
refrigerator products and the phaseout of HCFC-141b, the Department 
evaluated a number of different combinations of effective dates and 
standard levels for HCFC-141b products and for HCFC-free products. In 
the 1995 Proposed Rule, the Department proposed separate classes for 
HCFC and HCFC-free products with 10 percent less stringent standards 
for the HCFC-free products. In the 1996 Reopening Notice, the 
Department presented for comment seven possible adjustments to the 
standards levels and effective date, including the two-tier option 
proposed in the 1995 Proposed Rule. In the Reopening Notice, the 
Department specifically requested input on the question of whether 
significant cost savings would result from having standards take effect 
at the same time as the EPA ban on the manufacture of HCFC-141b. The 
Department also requested more information on the candidate substitutes 
for HCFC-141b.
    Public comment on these various proposals was split, with 
Whirlpool, Marvel Industries, the Northwest Power Planning Council 
(NPPC), U-Line, CEC, NASEO, ACEEE, NRDC and other commenters expressing 
continued strong support for the standards as proposed in the 1995 
Proposed Rule. (Whirlpool, No. 208 at 3; Marvel Industries, No. 261 at 
1; NPPC, No. 210 at 1; U-Line, No. 211 at 2; ACEEE and NRDC, No. 214 at 
2; CEC, No. 215 at 1; and NASEO, No. 216 at 1). Amana, Frigidaire, GEA 
and Maytag supported a new standard in 2003, in order to allow them to 
make the product and process changes necessary for meeting a new 
standard simultaneously with introducing a substitute for HCFC-141b. 
(Amana, Frigidaire, GEA, and Maytag, No. 290, at 1).
    In response to the 1996 Reopening Notice, manufacturers, energy 
efficiency advocates, the EPA and others provided additional 
information. The Department received comments which more specifically 
addressed the growing likelihood that HFC-245fa would be the chosen 
substitute for HCFC-141b. ACEEE and NRDC claimed that there was now 
evidence that by the 2003 phaseout date for the manufacture of HCFC-
141b, alternative blowing agents would be available with no energy 
penalty. If the Department were significantly delayed in publishing a 
final rule, ACEEE and NRDC recommended reconsidering the issue of less 
stringent standards for HCFC-free products. (ACEEE and NRDC, No. 206 at 
7-9). Several commenters stated that current information indicated that 
the next generation HFC's being tested will be viable alternatives with 
minimal impact on energy consumption and cost. (EPA, No. 250 at 4; GEA, 
No. 317; Whirlpool, No. 319).
    Amana, Frigidaire, Maytag and GEA stated that switching to HCFC 
substitutes as early as 2000 was not technically feasible, given what 
is known about the time line for testing and production of HFC-245fa. 
They asserted that toxicity testing might not be completed until 2001, 
that the transition of manufacturing facilities to produce the 
substitute would take additional time, and that chemical manufacturers 
might not be able to provide adequate supplies of the substitute 
product to all appliance companies on a timely basis. (Amana, 
Frigidaire, Maytag and GEA, No. 265 at 1).
    These manufacturers commented that the HCFC substitute could affect 
the fundamental design and manufacture of refrigerators. In particular, 
if the substitute is not a ``drop-in,'' an additional redesign of 
refrigerator products may be required. They further commented that 
while the largest

[[Page 23108]]

manufacturers may be able to accommodate the investment in multiple 
redesigns, other manufacturers cannot afford the added costs associated 
with over-designing, under-designing or mis-designing for double digit 
efficiency improvements without first knowing what the HCFC replacement 
will be. (Amana, Frigidaire, Maytag and GEA, No. 265 at 1).
    Information submitted by manufacturers reflected varying views on 
the likely incremental costs if products needed to be redesigned twice 
in a three year period (once in 2000 and again in 2003). Maytag stated 
that when the HCFC-141b ban and the imposition of new energy efficiency 
standards are separated in time, engineering changes will occur at each 
stage, requiring considerable resources each time, and the possibility 
of major capital investments. (Maytag, No. 233, at 2). Frigidaire 
stated that the incremental cost of two redesigns versus a single 
redesign between the present time and 2003 is substantial for smaller 
manufacturers. (Frigidaire, No. 232 at 5). Whirlpool stated that if 
HFC-245fa or a comparable blowing agent with no significant energy 
penalty is available, then the degree of redesign needed will be 
minimal. No product changes would be required, although some companies 
might choose to make minor design changes and/or change liner material 
to obtain competitive cost advantages. Whirlpool commented that the 
factory investments for conversion to HFC-245fa will be zero to a few 
hundred thousand dollars. (Whirlpool, No. 244, at 3).
    Based on the positive results of recent toxicology tests, and the 
statements of Allied Signal, the EPA and others, DOE has concluded that 
it is likely that the chosen substitute for HCFC-141b will be HFC-
245fa, or another blowing agent with comparable characteristics, and 
that such a substitute will be available for use in the manufacture of 
refrigerators prior to the 2003 phase out date for the production of 
HCFC-141b. (Allied Signal, No. 314; EPA, No. 250). Furthermore, the 
results of recent tests conducted by ARC show that there is likely to 
be little or no energy penalty associated with the use of HFC-245fa. 
(AHAM, No. 237, Attachment 3 at 9). Allied Signal reported that foams 
produced with HFC-245fa age at a slower rate than foams produced with 
HCFC-141b at all temperatures tested. Therefore, the thermal 
conductivity of HFC-245fa blown foams is superior to that of HCFC-141b 
foams after several weeks of aging. (Allied Signal, No. 267 at 8-9). As 
noted by Whirlpool, HFC-245fa is less corrosive than HCFC-141b which 
may result in some cost savings to the industry because manufacturers 
will not need to use an inner liner or may be able to use a lower cost 
liner material. (Whirlpool, No. 244 at 3). Because of the comparability 
of HFC-245fa to HCFC-141b, the Department believes that only minor 
changes in refrigerator design, not a complete redesign, will be 
required to convert to the new blowing agent.
    DOE has carefully considered all comments on the impact of amended 
energy efficiency standard levels on manufacturers. Based on the 
information in the record about the characteristics of HFC-245fa and 
its likely schedule of availability, DOE believes it is no longer 
necessary to retain the second tier standard for HCFC-free product 
classes, as proposed in the 1995 Proposed Rule. Consequently, this rule 
establishes a single tier of efficiency standards at the levels 
corresponding to the Tier 1 standards in the 1995 Proposed Rule. This 
approach is supported by recent comments from Frigidaire, GEA, Maytag, 
Whirlpool, Amana, energy conservation advocates, states and utilities. 
(Frigidaire, No. 316; GEA, No. 317, Maytag, No. 318, Whirlpool, No. 
319; Amana, No. 320; NRDC, ASE, ACEEE, CEC, Florida Energy Office, SCE, 
and Oregon Office of Energy, PG&E, No. 321).
    The Department recognizes that there will be considerable costs 
associated with the product redesign necessary to meet the new 
efficiency standards, as well as some additional costs associated with 
the conversion to a new insulation blowing agent, even assuming that 
agent is HFC-245fa or another chemical with comparable characteristics. 
In addition, the redesign for meeting revised efficiency standards can 
be done with greater confidence if the substitute blowing agent is 
known at the time of the redesign. For these reasons, the Department 
has decided to give manufacturers 14 months more than the minimum of 
three years from the date of publication until the standard becomes 
effective. This will allow more time for the development of HCFC-141b 
substitutes, and for manufacturers to make design changes and obtain 
the capital necessary to complete the required changes. Furthermore, 
because of the comparability of HCFC-141b and HFC-245fa, DOE believes 
that manufacturers could choose to delay their conversion to HFC-245fa 
until sometime after July 1, 2001, without incurring substantial 
additional costs.
    In April 1997, a number of parties filed comments with the 
Department supporting this approach of setting an effective date of 
July 1, 2001, and eliminating the second tier transition standard for 
HCFC-free products. (Frigidaire, No. 316; GEA, No. 317, Maytag, No. 
318, Whirlpool, No. 319; Amana, No. 320; NRDC, ASE, ACEEE, CEC, Florida 
Energy Office, SCE, and Oregon Office of Energy, PG&E, No. 321). This 
approach is founded on the best current information about substitutes 
for HCFC-141b, i.e., that HFC-245fa will receive the necessary 
regulatory approvals, and that Allied Signal will make it available in 
sufficient quantities for all manufacturers to use prior to 2003. 
However, given that all testing on HFC-245fa has not been completed, 
some commenters urged the Department to provide for appropriate 
exception relief for manufacturers in the event that HFC-245fa or 
comparable products do not become available to all manufacturers on a 
timely basis.
    DOE recognizes that some uncertainty still exists about the 
ultimate acceptability of HFC-245fa or other comparable blowing agents, 
as well as some uncertainty regarding the timing of commercial 
production of such a product. The results, to date, of HFC-245fa 
toxicology tests have generally been positive, but the testing process 
is not likely to be completed until late 1997. Consequently, it is 
still possible that subsequent tests will identify unacceptable risks 
associated with the use of this product or that its commercial 
availability will be delayed beyond 2003. Under such conditions, DOE 
may grant manufacturers exception relief. Section 504 of the Department 
of Energy Organization Act authorizes DOE to make adjustments of any 
rule or order issued under the Energy Policy and Conservation Act, 
consistent with the other purposes of the Act, if necessary to prevent 
special hardship, inequity, or unfair distribution of burdens. 42 
U.S.C. Sec. 7194(a).
    The process established by DOE for receiving and acting on 
applications for exception is set forth in 10 CFR part 1003, subpart B. 
Applicants for an exception are required to serve their application on 
persons who might be adversely affected by the granting of an 
exception, and DOE may require or provide additional notice of the 
application. 10 CFR 1003.23. The notices to potentially affected 
parties would include an invitation to submit comments regarding the 
application to DOE and any comments would be served on the other 
identified parties in the proceeding. The applicant would be provided 
an opportunity to respond to any submissions by third parties relevant 
to the application. 10 CFR

[[Page 23109]]

1003.25(a)(1). After considering the entire record, DOE would render a 
final decision and order. In exercising its authority under section 
504, DOE may grant an exception from an efficiency standard for a 
limited time, and may place other conditions on the grant of an 
exception.
    DOE will require any application for an exception to provide 
specific facts and information relevant to the claim that compliance 
would cause special hardship, inequity or the unfair distribution of 
burdens. Joint applications would be permitted. Compliance with the 
terms of this rule could constitute special hardship for the 
refrigerator manufacturing industry in the unexpected event that it was 
shown that HFC-245fa or a comparable product would not be available as 
a timely replacement for HCFC-141b and the unavailability of HFC-245fa 
or comparable products prior to the imposition of the ban on the 
further production of HCFC-141b would substantially increase the 
expected manufacturer costs associated with complying with this revised 
standard. In such circumstances, appropriate transition relief, as may 
be needed to address the special hardship, would be considered. Any 
relief would be crafted with due consideration for the effects of such 
relief on competition in the affected markets.
2. Economic Impact on Consumers Including Life-Cycle Costs and Payback 
Periods
    In determining whether a standard is economically justified, EPCA 
directs the Secretary to consider the economic impact on consumers. In 
response to the 1996 Reopening Notice, over 100 consumers urged the 
adoption of the standards as proposed in the Proposed Rule. These 
comments supported the reduction in pollution which would result from 
the standards as well as the benefits to American households. (Public 
Comments, No. 305).
    To evaluate the expected economic impact on consumers, the 
Department calculates the total life-cycle costs of alternate standard 
levels as well as the expected time required to pay back any increase 
in the product's initial costs. The expected payback period of a 
standard is calculated and often referenced because it is a commonly 
used measure and also is the basis for the rebuttable presumption 
created by section 325(o)(2)(B)(iii) of EPCA, 42 U.S.C. 
6295(o)(2)(B)(iii).
    The life-cycle cost to consumers is the sum of the purchase price 
and the operating expense discounted over the lifetime of the 
appliance. Installation and maintenance costs are elements of life-
cycle cost but are not significant for refrigerator products. The 
change in life-cycle costs resulting from any new standards is 
considered by the Department to be the best measure of the effect of 
proposed standards on consumers. This is quantified by the difference 
in the life-cycle costs for the average consumer with and without 
revised standards for the analyzed refrigerator classes.
    The life-cycle cost was calculated for each class for the range of 
efficiencies considered in the Engineering Analysis, using a real 
consumer discount rate of 6 percent. The purchase price is based on the 
factory costs in the Engineering Analysis and includes a factory markup 
plus distributor and retailer markups. The Department believes that its 
analysis represents the worst case scenario for consumers in that it 
assumes an incremental increase in the purchase price based on the 
costs associated with improving efficiency. In the marketplace, 
manufacturers may offset some or all of this cost increase by, for 
example, making material substitutions or increasing productivity. 
(Whirlpool, No. 208 at 2,3). DOE does not attempt to predict the 
consumer benefits of such non-energy changes which are part of an on-
going product improvement process.
    Energy Market & Policy Analysis, Inc. (EM&PA) commented that the 
economic analysis issued by DOE in its TSD is based on outdated and 
invalid assumptions about potential energy costs. EM&PA commented that 
all calculations of life-cycle costs, payback periods, and consumer 
energy cost savings in the TSD are based on unrealistically high 
estimates of future energy (particularly electricity) prices. (EM&PA, 
No. 229 at 3).
    The purchase price and operating energy expense of each standard 
level based on the 1994 AEO are presented in Chapter 4 (Consumer 
Impacts) of the original TSD. The Department is committed to using the 
most recent available AEO forecasts. The annual operating cost for 
standard level 1 has been updated based on the lower 1997 AEO energy 
prices.2 (See updated Chapter 4 of the TSD.) The 1997 AEO forecast 
of electricity prices in 2000 is 12.7 percent lower than the 1994 
forecast.
---------------------------------------------------------------------------

    \2\ Annual energy cost is the product of annual energy use times 
$0.0858/kWh. This electricity price comes from the 1997 AEO price 
projection. (Sec. 5.1.4, ``Residential Energy Prices,'' of updated 
TSD Chapter 5).
---------------------------------------------------------------------------

    Moreover, DOE has analyzed life-cycle costs, payback periods, cost 
of conserved energy, energy savings, and other metrics using a range of 
energy prices. Life-cycle costs for the standard level of today's final 
rule were calculated for the following sensitivity cases: low state 
electricity prices, high state electricity prices, high equipment 
prices, low equipment prices, the combination of low state electricity 
prices and high equipment prices, and the combination of high state 
electricity prices and low equipment prices. Results are shown in 
updated TSD Chapter 4. The Department is committed to using such 
analyses in future rulemakings. (Section 11(e) of the Process Rule).
    As a complement to energy price sensitivities, the Department 
calculates the cost of conserved energy (CCE) for standards under 
consideration. The CCE is the increase in purchase price amortized over 
the lifetime energy savings of the appliance. The advantage of the CCE 
approach is that it does not require assumptions about future energy 
prices because it uses only the purchase expense of the efficiency 
measure and the expected energy savings. The consumer will benefit 
whenever the cost of conserved energy is less than the energy price 
paid by the consumer for that end use. (TSD, Sec. 4.4, p. 4-23)
    AHAM commented, ``The DOE/LBNL energy analysis indicates that 
standard levels approximating those proposed have paybacks in the 3-4 
year category. In fact, analysis undertaken by AHAM, with the same data 
LBNL used, indicates that for the proposed standards levels the payback 
is in the 7-8 year period for refrigerator/freezers and 11-12 years for 
freezers.'' (AHAM, No. 207 at 2).
    The payback period reported in the TSD, using 1997 AEO energy price 
forecasts, is 4.1 years for the top mount auto defrost refrigerator-
freezer class without through-the-door features, the most popular class 
of refrigerators, and ranged from 0.6 to 11.9 years for other classes 
of refrigerator products. (See TSD, Chapter 4). AHAM provided no 
explanation for the discrepancy in payback forecasts, claimed no 
specific errors in the Department's analysis and provided insufficient 
data to enable the Department to determine why the payback periods do 
not agree. The Department calculated payback periods using both AEO 
1994 and 1997 energy prices and both sets of payback periods are 
shorter than AHAM claims.
    ACEEE and NRDC noted that the 1995 Proposed Rule rejected standard 
level 2 in part because the payback period at this level may be as long 
as 19 years, the expected life of the product. (ACEEE and NRDC, No. 206 
at 6). Standard level 2 was not rejected solely on the basis of

[[Page 23110]]

the payback period. The Department also considered the adverse impact 
on manufacturers short-run return on equity.
3. Energy Savings
    The Act requires DOE to consider the total projected energy savings 
that result from revised standards. The Department used the Lawrence 
Berkeley National Laboratory Residential Energy Model (LBNL-REM) 
results in its consideration of total projected savings.
    a. Forecast of Savings. The Department forecasts energy consumption 
by using the LBNL-REM, which forecasts energy consumption over the 
period of the analysis for candidate standards and the base case. (See 
TSD, Appendix B for a detailed discussion of the LBNL-REM.). The LBNL-
REM projections depend on estimated values, the most significant of 
which are the responsiveness of household appliance purchasers to 
changes in residential energy prices and consumer income, future energy 
prices, future levels of housing construction, and options that exist 
for improving the energy efficiency of appliances.
    The Department's estimate of the energy savings attributable to a 
standard is the difference between the projected energy consumption, 
assuming compliance with the candidate standard, and projected energy 
consumption under the base case. The calculation of the forecast energy 
savings for today's rule differs in two significant ways from the 
original TSD presentation which was the basis for the numbers in the 
1995 Proposed Rule. First, the effective date of the standards has been 
changed from January 1, 1998, to July 1, 2001. Second, the Department 
is now using the AEO 1997 energy price forecasts instead of the AEO 
1994 energy price forecasts which were used in the 1995 TSD. The 
cumulative energy savings of this final rule, as shown in updated 
chapter 5, is 6.67 quads over the period 2000 through 2030. The 
Department did not receive any comments on the calculation of energy 
savings.
    b. Significance of Savings. Under section 325(o)(3)(B) of the Act, 
42 U.S.C. Sec. 6295(o)(3)(B), the Department is prohibited from 
adopting a standard for a product if that standard would not result in 
``significant conservation of energy.'' While the term ``significant'' 
is not defined in the Act, the U.S. Court of Appeals for the D.C. 
Circuit concluded that Congress intended the word ``significant'' to 
mean ``non-trivial.'' Natural Resources Defense Council v. Herrington, 
768 F.2d 1355, 1373 (D.C. Cir. 1985). DOE has determined that the 
energy savings from this final rule are significant.
4. Lessening of Utility or Performance of Products
    In establishing classes of products and design options, the 
Department tried to eliminate any degradation of utility or performance 
in the products under consideration in this rulemaking. That is, to the 
extent that comments or research showed that a product included a 
utility or performance-related feature that inherently lowers energy 
efficiency, a separate class with a different efficiency standard was 
created for that product. This is consistent with the Joint Comments 
which stated that ``these standards were chosen at a level that 
provides for no significant lessening of utility or performance.'' 
(Joint Comments, No. 49 at 23). No other comment was received on this 
subject.
5. Impact of Lessening of Competition
    The Act directs the Department to consider the impact of any 
lessening of competition that is likely to result from the imposition 
of the standards. It further directs the Attorney General to make a 
determination of the impact, if any, of any lessening of competition 
and to provide that determination to DOE within 60 days of the 
publication of a proposed rule.
    In its letter of April 19, 1996, the Department of Justice (DOJ) 
provided its analysis of the standards proposed in the 1995 Proposed 
Rule. (A copy of the letter containing the DOJ findings is published in 
its entirety in Section V.) DOJ stated, ``we cannot conclude that 
promulgation of the proposed rules is likely to have a substantial 
adverse effect on competition in the market for those products. While 
the rules may result in some changes in the product mix offered by some 
manufacturers, and may result in the discontinuation of certain models 
of each of the products, the available evidence does not demonstrate 
that competition in these markets likely would be substantially 
affected by the proposed rules.''
    DOJ expressed some concern regarding the cumulative effect of the 
proposed energy conservation standards and EPA's ban on the manufacture 
and import of HCFC-141b. DOE reopened the comment period on August 12, 
1996, in order to obtain additional information and views on these 
issues. As a result of the reopening, DOE obtained information about 
the availability of substitutes for HCFC blowing agents which shows 
there is likely to be less economic impact on manufacturers from the 
conversion to HCFC-141b substitutes than anticipated at the time of the 
DOJ analysis. As discussed in Section II.B.1.b. of this Supplementary 
Information section, research conducted by a consortium of refrigerator 
manufacturers shows that HFC-245fa (or a similar substance) is a likely 
substitute for HCFC-141b, and that use of HFC-245fa is not expected to 
require major product redesign. Moreover, the change in effective date 
further addresses the DOJ concerns about the proposed rule.
    Representatives of several manufacturers argued that DOE is 
required to seek a new determination from DOJ of the impact on 
competition of options raised in the Reopening Notice before 
promulgating any final rule. The Assistant Attorney General's letter of 
April 19, 1996, fully satisfied DOJ's obligations under EPCA. The Act 
only requires the Attorney General to make a determination of the 
impact on competition of a proposed rule. 42 U.S.C. 6295(o)(2)(B)(ii). 
No provision of EPCA requires DOJ to convey its views on DOE notices of 
reopening of the comment period or on final rules, nor does EPCA 
require DOE to solicit views from DOJ on those actions. DOE 
acknowledges that there may be circumstances in which it would be 
advisable, as a matter of policy, for DOE to solicit supplemental views 
from DOJ, but DOE sees no need to do that in this proceeding. Moreover, 
DOJ was aware of the reopening of the comment period but submitted no 
additional views on the impact on competition of the various options 
presented for comment. The DOJ views in this proceeding are contained 
in its original April 19, 1996, analysis.
6. Need of the Nation to Conserve Energy
    Enhanced energy efficiency improves the Nation's energy security, 
strengthens the economy and reduces the environmental impacts of energy 
production. The Department estimates that over 30 years, the revised 
standards will save approximately 6.67 quads (7.03 exajoules (EJ)) of 
primary energy.
7. Other Factors
    EPCA allows the Secretary of Energy, in determining whether a 
standard is economically justified, to consider any other factors that 
the Secretary deems relevant. The estimated environmental benefits from 
today's final rule (based on the 1997 AEO fuel prices) are, over the 
period from 2000 to 2030, a reduction in emissions of NOX by 1,362 
thousand tons (1,501 thousand short tons), a reduction in emissions of 
CO2 by 465 Mt (513 million short tons) and

[[Page 23111]]

a reduction in the cost of the emission controls roughly equivalent to 
the cost of reducing SO2 emissions by 1,545 kt (1,703 thousand 
short tons). (TSD, updated Chapter 5).

C. Rebuttable Presumption of Economic Justification

    Section 325(o)(2)(B)(iii) of EPCA, 42 U.S.C. Sec. 6925 
(o)(2)(B)(iii), states:
    ``If the Secretary finds that the additional cost to the consumer 
of purchasing a product complying with an energy conservation standard 
level will be less than three times the value of the energy savings 
during the first year, there shall be a rebuttable presumption that 
such standard level is economically justified.''
    If the increase in the initial price of an appliance due to a 
conservation standard would repay itself to the consumer in energy 
savings in less than 3 years, then it is presumed that such standard is 
economically justified. This presumption of economic justification can 
be rebutted upon a proper showing.
    The pay back period for today's final rule for manual defrost 
upright freezers is less than 3 years. The estimated pay back period 
for the top mounted automatic defrost refrigerator-freezer class, which 
accounts for more than 50 percent of the sales of all refrigerator-
freezer products, is 4.1 years. The longest payback period for any of 
the product classes is 11.9 years (this is for refrigerators with a 
top-mount freezer and through-the-door features, the least popular of 
the full-size refrigerator classes), which is substantially shorter 
than the product life. (Updated TSD Chapter 4, Sec. 4.2.2).

III. Analysis

A. Product Classes

    The Department is adding new product classes for compact 
refrigerators, refrigerator-freezers and freezers. Formerly, the 
Department made no class distinctions by size of refrigerator, so 
compact refrigerators were governed by the same standards (which 
include adjustments for volume) as full-size refrigerators. The 
Department is now adding new product classes for compact refrigerators, 
refrigerators-freezers and freezers, which includes products with a 
total volume of less than 7.75 cubic feet (Federal Trade Commission/
AHAM rated volume) and 36 inches or less in height. The total energy 
consumption of all compact refrigerator products in the U.S. is about 
2.5 percent of the total energy consumed by all refrigerator products. 
There are only three or four energy savings options expected to be 
available for these products by the year 2001. Because of small 
production volumes, the impact of new standards on these manufacturers 
is relatively severe. The Department calculates a 5-year payback period 
is required to recoup the consumer cost of improvements in efficiency 
at levels only 2 to 3 percent more stringent than the 1993 levels. 
Given that the compact products have a distinct utility (i.e., they 
serve a variety of applications not served by full sized units) and the 
limited efficiency improvement potential because of the limited number 
of design options available, the Department has concluded that compact 
refrigerator products should be treated differently from full sized 
models.
    The proposal to create new product classes for HCFC-free products 
has been dropped, based on information about the likely availability of 
HFC-245fa as a substitute blowing agent.

B. Standard Levels

    Section 325(o)(2)(A) of the Act specifies that any new or amended 
standard the Department prescribes must be designed to ``achieve the 
maximum improvement in energy efficiency * * * which the Secretary 
determines is technologically feasible and economically justified.''
    The figures cited in this section are found in the TSD prepared for 
the 1995 Proposed Rule and the updated TSD chapters 4 and 5, which are 
supplements to the TSD. The updated TSD chapters reflect two major 
changes from the original TSD: effective date and updated electricity 
price forecasts. The original TSD was prepared using energy price 
forecasts from the 1994 AEO. The 1997 AEO, which forecasts lower energy 
prices, recently became available. The impact of lower energy prices is 
to reduce somewhat the economic benefits of standards, which is 
reflected in increased consumer payback periods and reduced life-cycle-
cost savings and national benefits. Standard Levels 4, 3, and 2 were 
rejected in the 1995 Proposed Rule using the 1994 AEO price forecasts 
and the lower 1997 AEO price forecasts would show somewhat smaller 
energy cost savings for the rejected standard levels. The Department 
did not rerun the TSD analysis for the rejected standard levels based 
on the 1997 AEO energy price forecasts. The calculations for Standard 
Levels 4, 3, and 2 below are derived from the TSD, and reflect AEO 94 
predictions and an effective date in 1998. For Standard Level 1, the 
Department did prepare revised TSD chapters using the 1997 AEO energy 
price forecasts and the July 1, 2001, effective date of the standards. 
3
---------------------------------------------------------------------------

    \3\ Note that the analysis of Standard Level 1 in the Proposed 
Rule assumed that all products met the proposed Tier 1 standards, 
thus no adjustment to reflect the elimination of the HCFC-free 
classes and their Tier 2 standards is needed.
---------------------------------------------------------------------------

1. Standard Level 4
    The Department first considered the max tech level of efficiency. 
Standard Level 4, max tech, would save the most energy: 10.0 quads 
(10.55 EJ) for refrigerators (including refrigerator-freezers) and 2.0 
quads (2.11 EJ) for freezers between 1998 and 2030. In order to meet 
this standard, the Department assumes that all refrigerator products 
would incorporate vacuum panel insulation. The use of vacuum panel 
insulation accounts for 30 percent of total energy savings, with 
increased wall thickness as the only alternative. Vacuum panel 
technology has progressed, but there remain concerns about 
manufacturability, availability, reliability, and performance. Vacuum 
panels are 6 to 10 times heavier than foam. The increase in door weight 
may cause the appliance to tip over when the door is opened. Also, 
current production capability for vacuum panels is far too small for 
the projected demand. A 1-inch increase in wall and door thickness (a 
2-inch increase in the side-to-side dimension) is not a viable option. 
Some larger products already are constrained by the need to fit into 
existing spaces and through doors and passageways. Decreasing interior 
volume would sacrifice product utility. In addition, there are likely 
to be some groups of consumers who would experience net life-cycle cost 
increases compared to the units they would have otherwise purchased. 
Based upon a consideration of these factors, the Department therefore 
concludes that the burdens of Standard Level 4 for refrigerators, 
refrigerator-freezers and freezers outweigh the benefits, and rejects 
the standard level as not economically justified.
2. Standard Level 3
    This standard level is projected to save 8.6 quads (9.1 EJ) of 
energy for refrigerators and refrigerator-freezers and 1.7 quads (1.8 
EJ) for freezers. While this level does not use vacuum panels, about 40 
percent of the energy savings for most of the classes is obtained by 
increasing the insulation values. There is general agreement that an 
increase in the wall thickness is not acceptable for many of the larger 
models in each class. This level has payback periods as high as 25.5 
years (longer than the typical 19-year product life) and reduces 
estimated

[[Page 23112]]

refrigerator manufacturer short-run return on equity from 7.3 percent 
to 5.8 percent, a reduction of 20 percent. For freezer manufacturers, 
the estimated short-run return on equity (ROE) drops from 7.3 percent 
to 4.7 percent, a reduction of more than 35 percent. Based on these 
considerations, the Department concludes that the burdens of Standard 
Level 3 for refrigerators, refrigerator-freezers and freezers outweigh 
the benefits, and rejects the standard level as not economically 
justified.
3. Standard Level 2
    This standard level is projected to save 7.8 quads (8.2 EJ) of 
energy for refrigerators and refrigerator-freezers, and 1.3 quads (1.4 
EJ) for freezers. However, this level also requires an increase in 
insulation with a corresponding increase in the wall thickness. 
Furthermore, the payback period may be as long as 19.0 years, the 
expected life of these products. The initial burden on the 
manufacturers is also high: short-run return on equity for 
manufacturers of both refrigerators and freezers is estimated to 
decrease from 7.3 percent to 6.2 percent, a reduction of 16 percent. 
The Department concludes that the burdens of Standard Level 2 for 
refrigerators, refrigerator-freezers and freezers outweigh the 
benefits, and rejects the standard level as not economically justified.
4. Standard Level 1
    The Department concludes that Standard Level 1 for refrigerator 
products, effective in July 2001, and without the special transition 
standards for HCFC-free products contained in the 1995 Proposed Rule, 
is technologically feasible and economically justified. Over the period 
from July 1, 2001-2030, Standard Level 1 is projected to save 6.18 
quads (6.52 EJ) for refrigerators and refrigerator freezers and 0.49 
quads (0.51EJ) for freezers. Technologies necessary to meet this 
standard level are presently available. The consumer payback of this 
standard level is 4.1 years for the largest-selling class (top mount 
auto-defrost refrigerator, without through-the-door features) and no 
more than 11.9 years for any class. The cost of conserved energy is 3.7 
cent/kWh for the largest selling class, meaning that this standard 
level will benefit purchasers of this refrigerator class who pay more 
than 3.7 cent/kWh for electricity. Standard Level 1 is at or near the 
lowest life-cycle cost for all classes and is expected to result in a 
reduction in life-cycle cost of approximately $117 or 9.3 percent for 
the largest class. For the largest selling refrigerator class, if the 
lowest state energy price is analyzed, the minimum life-cycle cost 
point is still at Standard Level 1, and consumers would still benefit. 
Consumers who pay the high state electricity price would benefit from 
an even higher standard. (See updated TSD Chapter 4).
    According to the TSD analysis, manufacturers' short-run return on 
equity is estimated to drop from 7.31 percent in the base case to 6.92 
percent for Standard Level 1. The long-run ROE at Standard Level 1 is 
7.36 percent, a slight improvement from the base ROE of 7.31 percent. 
In the Joint Comments, the manufacturers and others recommended this 
standard level to DOE. In the Joint Comments, the parties commented 
that the negotiation process allowed for a cumulative assessment of 
impact which, in turn, led to adjustments among various product 
standard levels in order to better balance the economic impact among 
manufacturers. (Joint Comments, No. 49 at 14). The major manufacturers 
have supported this standard level with a July 2001 effective date in 
their recent comments. (Frigidaire, No. 316; GEA, No. 317, Maytag, No. 
318, Whirlpool, No. 319; Amana, No. 320).
    This final rule will save approximately the same amount of energy 
as would promulgation of the rule proposed in the 1995 Proposed Rule. 
The energy savings lost by setting a July 1, 2001, effective date are 
offset by the elimination of the less stringent proposed standards for 
HCFC-free products. Energy savings from the 1995 Proposed Rule and this 
final rule are presented in Table 2. The proposed rule would have 
established a two-tiered standard effective three years from the date 
of publication (May 2000); the final rule is a single tier standard 
effective in July 2001. Two proposed rule scenarios are shown: the 
first scenario assumes there are no HCFC-free products until 2003; the 
second scenario assumes all products qualify for the Tier 2 HCFC-free 
standard level from 2000-2005.

                                   Table 2.--Cumulative Energy Savings (Quads)                                  
----------------------------------------------------------------------------------------------------------------
                                                               Two-tiered        Two-tiered        Single tier  
                                                              Proposed Rule     Proposed Rule      Final Rule   
                           Years                              (Tier 2 from      (Tier 2 from     (Effective July
                                                               2003-2005)        2000-2005)         1, 2001)    
----------------------------------------------------------------------------------------------------------------
2000-2010.................................................              0.87              0.73              0.81
2000-2020.................................................              3.31              3.06              3.26
2000-2030.................................................              6.67              6.41              6.67
----------------------------------------------------------------------------------------------------------------

    For all these reasons, DOE concludes that Standard Level 1 is 
economically justified. The public comments support this conclusion. 
Standard Level 1 corresponds to the efficiency levels in the Joint 
Comments submitted on the 1993 Advance Notice. Furthermore, it has been 
supported by a diverse group of parties in recent comments. 
(Frigidaire, No. 316; GEA, No. 317; Maytag, No. 318; Whirlpool, No. 
319; Amana, No. 320; NRDC, ASE, ACEEE, CEC, Florida Energy Office, SCE, 
and Oregon Office of Energy, PG&E, No. 321).

C. Effective Date

    As discussed above, the Department concludes that the rule based on 
Standard Level 1 should take effect for all classes of refrigerators on 
July 1, 2001. This date, combined with the elimination of the HCFC-free 
classes, mitigates concerns about adverse manufacturer impacts while 
preserving energy and consumer savings comparable to those of the 1995 
Proposed Rule.

IV. Procedural Requirements

A. Environmental Review

    A Draft Environmental Assessment for Proposed Energy Conservation 
Standards for Refrigerators, Refrigerator-Freezers, and Freezers was 
prepared pursuant to the National Environmental Policy Act of 1969 
(NEPA), 42 U.S.C. Secs. 4321 et seq., the regulations of the Council on 
Environmental Quality, 40 CFR parts 1500-1508, the Department's 
regulations for compliance with NEPA, 10 CFR part 1021, and the 
Secretarial Policy on the National Environmental

[[Page 23113]]

Policy Act (June 1994). Section V.B.2. of the Secretarial Policy 
encourages the Department to provide an opportunity for interested 
parties to review environmental assessments prior to the Department's 
formal approval of such assessments.
    No comments were received on the Draft Environmental Assessment 
that was published within the TSD that accompanied the 1995 Proposed 
Rule. The Department finalized the Environmental Assessment in January, 
1996. (DOE/EA-1138). The standards in today's final rule differ 
slightly from the Proposed Rule's Standard Level 1, resulting in 
slightly less energy savings in the early years of the standards. The 
AEO 1997 emission factors are different, and, therefore, emission 
reductions are correspondingly changed from the 1995 Proposed Rule. 
Updated tables of emission reductions were prepared for today's final 
rule and will be available in the Freedom of Information Reading Room. 
The environmental effects of this final rule were deemed to be not 
significant for NEPA purposes, so the Department today is issuing a 
Finding of No Significant Impact (FONSI), published elsewhere in this 
issue.

B. Regulatory Planning and Review

    Today's regulatory action has been determined to be an 
``economically significant regulatory action'' under Executive Order 
12866, ``Regulatory Planning and Review.'' 58 FR 51735 (October 4, 
1993). Accordingly, today's action was subject to review under the 
Executive Order by the Office of Information and Regulatory Affairs 
(OIRA) of the Office of Management and Budget.
    Pursuant to E.O. 12866, DOE prepared a draft Regulatory Analysis. 
Six major alternatives were identified by DOE as representing feasible 
policy alternatives for achieving consumer product energy efficiency. 
Each alternative has been evaluated in terms of its ability to achieve 
significant energy savings at reasonable costs and has been compared to 
the effectiveness of the rule. 60 FR 37388, 37411 (July 20, 1995). No 
new data has been received concerning this review. The draft Regulatory 
Analysis, which was published as a part of the TSD, is incorporated 
herein as final. Table R-5 ``Expected Impacts of Program 
Alternatives,'' was updated for this rule and included with the updated 
portions of the TSD.
    AHAM stated that the Department needs to improve the evaluation of 
non-regulatory means of achieving energy savings. (AHAM, No. 207 at 7). 
Whirlpool commented that with the reduction in rebate programs, 
Whirlpool feels that there will be no improvement, and probably some 
backsliding in efficiency without mandatory standards improvement: 
``Standards are a key driver for innovation for improved energy 
efficiency. Innovating for improved efficiency does require resources. 
However, as manufacturers develop and retool for energy-efficient 
products (especially `clean sheet' designs) they will routinely include 
other benefits beyond energy efficiency (such as innovative features, 
cost reductions, and quality improvements) in order to maximize the 
return from their investment.'' (Whirlpool, No. 208 at 2, 3).
    NPPC stated, ``The level of standards proposed meets the 
department's criteria for setting standards. In addition, we analyzed 
the level of proposed standards from the perspective of whether the 
energy savings represented a cost-effective resource for the Northwest 
region, instead of buying power from the electricity market or building 
a combustion turbine. We found that the resource represented by making 
these appliances more efficient was indeed cost-effective and 
represents over 100 average megawatts of electricity savings over the 
next 20 years. By far, the best way to secure these savings is to adopt 
Federal standards. Federal standards give a uniform signal to 
manufacturers across their entire national market, and eliminate 
administrative costs that would be incurred if utilities tried to 
secure the savings through local programs.'' (NPPC, No. 210 at 1).
    ACEEE and NRDC provided data to support the position that for 
refrigerator products, ``alternative means such as labeling and rebate 
programs are a useful complement to standards, but are not a 
replacement for standards.'' One study found that refrigerator labeling 
produces an average of 1.5 percent savings in energy use. Similarly, 
utilities have found that rebate programs can influence only 40 to 60 
percent of purchases. Market trends ``support the conclusion that 
standards will have a much greater impact on new product efficiency and 
energy savings than non-regulatory approaches.'' (ACEEE and NRDC, No. 
214 at 10-11).
    Under the Process Rule policies, the Department is committed to 
exploring non-regulatory alternatives to standards. A full discussion 
of the Department's consideration of non-regulatory alternatives is 
presented in the ``Regulatory Impact Analysis'' section of the TSD. The 
Department concluded that for this rulemaking, the energy savings from 
a regulatory approach greatly exceeded the savings from any non-
regulatory alternative. (See updated Table R.5 ``Expected Impacts of 
Program Alternatives'' of the Regulatory Impact Analysis.) The updated 
analysis shows energy savings from voluntary efficiency targets (the 
most effective of the non-regulatory alternatives) to be 3.49 quads 
from 2000-2030, which is significantly less than the 6.67 quads of 
energy savings predicted for today's rule.

C. Unfunded Mandates Review

    With respect to a proposed regulatory action that may result in the 
expenditure by the private sector of $100 million or more (adjusted 
annually for inflation), section 202 of the Unfunded Mandates Reform 
Act of 1995 (UMRA) requires a Federal agency to publish estimates of 
the resulting costs, benefits and other effects on the national 
economy. 2 U.S.C. 1532 (a), (b). Section 202 of UMRA authorizes an 
agency to respond to the content requirements of UMRA in any other 
statement or analysis that accompanies the proposed rule. 2 U.S.C. 
1532(c).
    The content requirements of section 202(b) of UMRA relevant to a 
private sector mandate substantially overlap the economic analysis 
requirements that apply under section 325(o) of EPCA and Executive 
Order 12866. The Supplementary Information section of the notice of 
proposed rulemaking and ``Regulatory Impact Analysis'' section of the 
TSD responded to those requirements.
    DOE is obligated by section 205 of UMRA, 2 U.S.C. 1535, to identify 
and consider a reasonable number of regulatory alternatives before 
promulgating a rule for which a written statement is required under 
section 202. From those alternatives, DOE must select the least costly, 
most cost-effective, or least burdensome alternative that achieves the 
objectives of the rule unless DOE publishes an explanation of why a 
different alternative is selected. As required by section 325(o) of the 
Energy Policy and Conservation Act, this final rule establishes energy 
conservation standards for refrigerator products that are designed to 
achieve the maximum improvement in energy efficiency which DOE has 
determined to be technologically feasible and economically justified. 
42 U.S.C. 6295(o). A full discussion of the alternatives considered by 
DOE is presented in the ``Regulatory Impact Analysis'' section of the 
final TSD and updated Table R.5 ``Expected Impacts of Program 
Alternatives.''

[[Page 23114]]

D. Regulatory Flexibility Act Review

    The Regulatory Flexibility Act (5 U.S.C. 601-612) requires that an 
agency prepare an initial regulatory flexibility analysis and publish 
the analysis (or a summary thereof) in the Federal Register when it 
publishes a general notice of proposed rulemaking required by law. 5 
U.S.C. 603. The Act also requires an agency to prepare a final 
regulatory flexibility analysis and publish the analysis (or a summary 
thereof) in the Federal Register when it publishes a final rule. 5 
U.S.C. 604. These requirements do not apply if the agency certifies, 
when it publishes a proposed or final rule, that the rule if 
promulgated would not have a significant economic impact on a 
substantial number of small entities. 5 U.S.C. 605(b). In the 1995 
Proposed Rule, the Department certified that the proposed standard 
levels would not, if promulgated, have a significant economic impact on 
a substantial number of small entities. No written comments 
specifically addressed that certification.
    Although DOE did not prepare an initial regulatory flexibility 
analysis, it considered the potential economic impact of the rule on 
small businesses and included provisions in the 1995 Proposed Rule and 
this final rule designed to minimize the burden on manufacturers of 
refrigerator products who are small businesses.
    The Regulatory Flexibility Act defines ``small business'' by 
incorporating the definition of ``small business concern'' in the Small 
Business Act. 5 U.S.C. 601(3). The Department used the small business 
size standards published by the Small Business Administration to 
estimate the number of small businesses that would be required to 
comply with this rule. Small Business Administration, Final Rule on 
``Small Business Size Standards,'' 61 FR 3280 (January 31, 1996). The 
size standards are listed by Standard Industrial Classification (SIC) 
code and industry description. To be considered a small business, a 
manufacturer of home refrigerators or freezers, together with its 
affiliates, may employ no more than 1,000 employees. SIC Category 3632 
(61 FR at 3291).
    DOE examined the structure of the industries that would be affected 
by this rulemaking to determine the likely impact of the rule on that 
structure. Both the home refrigerator and freezer industries are highly 
concentrated. Five firms, none of which is a small business, account 
for approximately 95 percent of all non-compact refrigerator sales in 
the U.S. Two firms account for at least 90 percent of freezer sales in 
the U.S., and neither firm is a small business. Three firms, none of 
which is a small business, account for approximately 84 percent of the 
sales of compact refrigerators.4 U-Line and Marvel, which are 
small businesses, account for 6 percent and 3 percent, respectively, of 
compact refrigerator sales. Other small businesses, such as Sun Frost 
and Sub-Zero, produce refrigerators for niche markets.
---------------------------------------------------------------------------

    \4\ Appliance Magazine, September 1996. 1995 sales figures.
---------------------------------------------------------------------------

    In the July 1995 Proposed Rule, DOE proposed new classes of 
standards for compact refrigerators, refrigerator-freezers and freezers 
after considering the relatively small size of the compact refrigerator 
manufacturers and the technological limitations on improving the energy 
efficiency of compacts. As discussed in the 1995 Proposed Rule (60 FR 
at 37405-06), this approach was recommended by the Joint Comments based 
on several factors, including technological constraints and the limited 
research and development funding and capital resources available to 
small companies. The standards for compact refrigerator products 
proposed in the 1995 Proposed Rule would have required five percent 
less energy use than the 1993 standards. The compact refrigerator 
products standards in this final rule retain the 1995 Proposed Rule 
requirement for five percent less energy use.
    DOE continues to believe that promulgation of this rule will not 
have a significant economic impact on a substantial number of small 
entities. However, if after the rule becomes effective DOE learns that 
such an impact would occur, the Department may exercise its authority 
under section 325(t) of EPCA, 42 U.S.C. 6295(t), or section 504(a) of 
the DOE Organization Act, 42 U.S.C. 7194(a), to grant appropriate 
relief to small manufacturers.

E. Federalism Review

    Executive Order 12612 requires that regulations or rules be 
reviewed for any substantial direct effects on states, on the 
relationship between the Federal Government and the states, or on the 
distribution of power among various levels of government. 52 FR 41685 
(October 30, 1987). If there are sufficient substantial direct effects, 
the Executive Order requires the preparation of a Federalism assessment 
to be used in decisions by senior policy makers in promulgating or 
implementing the regulation.
    The Act provides that Federal energy efficiency standards 
established by the Act or regulations promulgated pursuant to the Act 
preempt state standards for such products. 42 U.S.C. Sec. 6297. This 
final rule does not expand the scope of preemption beyond that 
resulting from the existing regulations. Thus, DOE has concluded that 
there is no net effect sufficient to warrant preparation of a 
Federalism assessment. Moreover, if any such state regulations are 
adopted, the Act provides for subsequent state petitions for waiver of 
Federal preemption.

F. ``Takings'' Assessment Review

    DOE has determined pursuant to Executive Order 12630, 53 FR 8859 
(March 18, 1988), that this regulation would not result in any takings 
which might require compensation under the Fifth Amendment to the U.S. 
Constitution.

G. Paperwork Reduction Act Review

    No new information or recordkeeping requirements are imposed by 
this rulemaking. Accordingly, no Office of Management and Budget 
clearance is required under the Paperwork Reduction Act (44 U.S.C. 3501 
et seq.).

H. Review Under Executive Order 12988

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

[[Page 23115]]

determine whether they are met or it is unreasonable to meet one or 
more of them. DOE has completed the required review and determined 
that, to the extent permitted by law, this final rule meets the 
relevant standards of Executive Order 12988.

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

    Consistent with Subtitle E of the Small Business Regulatory 
Enforcement Fairness Act of 1996, 5 U.S.C. 801-808, DOE will submit to 
Congress a report regarding the issuance of today's final rule prior to 
the effective date set forth at the outset of this notice. The report 
will identify the final rule as a ``major rule'' for purposes of 
Congressional review. The Department also will submit to the 
Comptroller General, and make available to each House of Congress, the 
TSD and other relevant information as required by 5 U.S.C. 801.

V. Department of Justice Views on Proposed Rule

    Reproduced below is the letter provided by the Department of 
Justice to DOE pursuant to EPCA Sec. 325 (o)(2)(B)(ii), 42 U.S.C. 
Sec. 6295 (o)(2)(B)(ii):

April 19, 1996.

The Honorable Christine A. Ervin, Assistant Secretary for Energy 
Efficiency and Renewable Energy, United States Department of Energy, 
Forrestal Building, 1000 Independence Ave., SW, Washington, DC 
20585.

Dear Ms. Ervin:
    The Department of Energy (``DOE'') has issued a Notice of 
Proposed Rulemaking amending the energy conservation standards for 
refrigerators, refrigerator-freezers and freezers (60 FR 37368 (the 
``proposed rules''). Section 325 of the Energy Policy and 
Conservation Act, as amended in 1992 (42 U.S.C. 6295) (``the Act''), 
requires the Attorney General ``* * * to determine the impact, if 
any, of any lessening of competition likely to result from the 
proposed standards.'' This letter constitutes the competitive impact 
determination of the Department of Justice (the ``Department'').
    The proposed rules would establish more stringent energy 
efficiency standards for three types of household appliances--
refrigerator-freezers (``refrigerators''), compact refrigerators and 
household freezers. The proposed rules would require greater 
percentage increases in energy efficiency for refrigerators than for 
the other products. If promulgated, the new energy standards will 
take effect less than five years before regulations promulgated by 
the Environmental Protection Agency prohibiting the use of HCFCs 
take effect on January 1, 2003. Because it may be harder to meet the 
new energy efficiency standards without HCFCs, the rules contain a 
separate set of standards for non-HCFC products that would permit 
somewhat greater energy use.
    In order to assess the likely impact of the proposed rules on 
competition in the sale of refrigerators, compact refrigerators, and 
freezers, the Department examined the structure of the affected 
industries and interviewed manufacturers and others to determine the 
likely impact of the rules on that structure. All three industries 
are highly concentrated. Only five firms account for 95 percent of 
all refrigerator sales in the U.S.; two firms account for at least 
90 percent of freezer sales in the U.S.; and four firms account for 
most sales of compact refrigerators. With the possible exception of 
compact refrigerators, substantial new entry into these markets in 
the near future is unlikely.
    In assessing the likely impact of the rules on competition the 
Department attempted to determine whether the rules would likely 
lead to an increase in concentration in any of the markets. They 
could do so in two ways: first, by raising the cost of appliances 
and reducing design and feature choices, standards may lower demand. 
Second, if standards impose costs on manufacturers that cannot be 
passed on to consumers, they can lower manufacturers' rates of 
return. Either or both of these effects could cause manufacturers to 
exit the market, or to stop making certain types of products, 
thereby lessening competition and raising prices.
    The proposed rules are largely identical to the proposals (``the 
Joint Comments'') which were formally submitted to DOE on November 
15, 1994. The Joint Comments were the product of two years of 
negotiations involving most of the major manufacturers of these 
appliances, the Association of Home Appliance Manufacturers and a 
group of public utilities and environmental organizations. The 
parties stated in the Joint Comments that it was their belief that 
the standards would not ``lead to a likelihood of reduced 
competition.''
    Some manufacturers, however, now tell the Department their prior 
conclusion that the rules would not reduce competition was based on 
an assumption that the proposed standards would be enacted soon 
after the Joint Comments were submitted. They contend that the 
unanticipated delay has changed the way that the rules will affect 
them. Because the rules relating to products that utilize HCFCs will 
be relevant only until HCFCs are phased out in 2003, the costs of 
redesign and retooling needed to bring these products into 
compliance cannot be amortized over as long a product life as 
anticipated. Thus, some manufacturers have stated that compliance 
with the standard will add substantially to their costs and could 
lead one or more of them to consider discontinuing the manufacture 
of certain sizes or types of refrigerators.
    Based upon information available to the Department in this 
proceeding, however, we cannot conclude that promulgation of the 
proposed rules is likely to have a substantial adverse effect on 
competition in the markets for these products. While the rules may 
result in some changes in the product mix offered by some 
manufacturers, and may result in the discontinuation of certain 
models of each of the products, the available evidence does not 
demonstrate that competition in these markets likely would be 
substantially affected by the proposed rules.
    The Department notes, however, that it does have some concerns 
about the cumulative effects of these and other energy efficiency 
regulations on the markets for refrigerators and freezers. 
Manufacturers will be required to comply both with the proposed 
rules and the requirement for a phaseout of the use of HCFCs by 
January 1, 2003. There is some evidence suggesting the previous 
round of energy efficiency rules for freezers were a significant 
factor in the decisions of two firms to cease manufacture of those 
products, leaving an extremely concentrated market dominated by the 
two remaining firms. The cumulative effect of the costs of 
compliance with both DOE and EPA regulations, together with the 
diversion of corporate attention and resources from marketing 
efforts, could ultimately have an adverse impact on the ability of 
some firms to compete.

      Sincerely,
Anne K. Bingaman,
Assistant Attorney General.

List of Subjects in 10 CFR Part 430

    Administrative practice and procedure, Energy conservation, 
Household appliances.

    Issued in Washington, D.C., on April 23, 1997.
Christine A. Ervin,
Assistant Secretary, Energy Efficiency and Renewable Energy.

For the reasons set forth in the preamble, part 430 of chapter II of 
title 10, Code of Federal Regulations, is amended as set forth below.

PART 430--ENERGY CONSERVATION PROGRAM FOR CONSUMER PRODUCTS

    1. The authority citation for part 430 continues to read as 
follows:

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

    2. Section 430.2 is amended by adding a definition for compact 
refrigerator/refrigerator-freezer/freezer to read as follows:


Sec. 430.2  Definitions.

* * * * *
    Compact refrigerator/refrigerator-freezer/freezer means any 
refrigerator, refrigerator-freezer or freezer with total volume less 
than 7.75 cubic feet (220 liters)(rated volume as determined in 
Appendix A1 and B1 of subpart B of this part) and 36 inches (0.91 
meters) or less in height.
* * * * *
    3. Section 430.32 is amended by revising paragraph (a) to read as 
follows:

[[Page 23116]]

Sec. 430.32  Energy conservation standards and effective dates.

* * * * *
    (a) Refrigerators/refrigerator-freezers/freezers. These standards 
do not apply to refrigerators and refrigerator-freezers with total 
refrigerated volume exceeding 39 cubic feet (1104 liters) or freezers 
with total refrigerated volume exceeding 30 cubic feet (850 liters).

------------------------------------------------------------------------
                                       Energy standards equations for   
                                        maximum energy use  (kWh/yr)    
           Product class           -------------------------------------
                                        Effective       Effective  July 
                                     January 1, 1993        1, 2001     
------------------------------------------------------------------------
1. Refrigerators and Refrigerator-                                      
 freezers with manual defrost.....         13.5AV+299                   
                                           0.48av+299       8.82AV+248.4
                                                            0.31av+248.4
2. Refrigerator-Freezer--partial                                        
 automatic defrost................         10.4AV+398                   
                                           0.37av+398       8.82AV+248.4
                                                            0.31av+248.4
3. Refrigerator-Freezers--                                              
 automatic defrost with top-                                            
 mounted freezer without through-                                       
 the-door ice service and all-                                          
 refrigerators--automatic defrost.         16.0AV+355                   
                                           0.57av+355       9.80AV+276.0
                                                            0.35av+276.0
4. Refrigerator-Freezers--                                              
 automatic defrost with side-                                           
 mounted freezer without through-                                       
 the-door ice service.............         11.8AV+501                   
                                           0.42AV+501       4.91AV+507.5
                                                            0.17av+507.5
5. Refrigerator-Freezers--                                              
 automatic defrost with bottom-                                         
 mounted freezer without through-                                       
 the-door ice service.............         16.5AV+367                   
                                           0.58av+367       4.60AV+459.0
                                                            0.16av+459.0
6. Refrigerator-Freezers--                                              
 automatic defrost with top-                                            
 mounted freezer with through-the-                                      
 door ice service.................         17.6AV+391                   
                                           0.62av+391      10.20AV+356.0
                                                            0.36av+356.0
7. Refrigerator-Freezers--                                              
 automatic defrost with side-                                           
 mounted freezer with through-the-                                      
 door ice service.................         16.3AV+527                   
                                           0.58av+527      10.10AV+406.0
                                                            0.36av+406.0
8. Upright Freezers with Manual                                         
 Defrost..........................         10.3AV+264                   
                                           0.36av+264       7.55AV+258.3
                                                            0.27av+258.3
9. Upright Freezers with Automatic                                      
 Defrost..........................         14.9AV+391                   
                                           0.53av+391      12.43AV+326.1
                                                            0.44av+326.1
10. Chest Freezers and all other                                        
 Freezers except Compact Freezers.         11.0AV+160                   
                                           0.39av+160       9.88AV+143.7
                                                            0.35av+143.7
11. Compact Refrigerators and                                           
 Refrigerator-Freezers with Manual                                      
 Defrost..........................        13.5AV+299a                   
                                          0.48av+299a      10.70AV+299.0
                                                            0.38av+299.0
12. Compact Refrigerator-Freezer--                                      
 partial automatic defrost........        10.4AV+398a                   
                                          0.37av+398a       7.00AV+398.0
                                                            0.25av+398.0
13. Compact Refrigerator-Freezers--                                     
 automatic defrost with top-                                            
 mounted freezer and compact all-                                       
 refrigerators--automatic defrost.        16.0AV+355a                   
                                          0.57av+355a      12.70AV+355.0
                                                            0.45av+355.0
14. Compact Refrigerator-Freezers--                                     
 automatic defrost with side-                                           
 mounted freezer..................        11.8AV+501a                   
                                          0.42av+501a       7.60AV+501.0
                                                            0.27av+501.0
15. Compact Refrigerator-Freezers--                                     
 automatic defrost with bottom-                                         
 mounted freezer..................        16.5AV+367a                   
                                          0.58av+367a      13.10AV+367.0
                                                            0.46av+367.0
16. Compact Upright Freezers with                                       
 Manual Defrost...................        10.3AV+264a                   
                                          0.36av+264a       9.78AV+250.8
                                                            0.35av+250.8
17. Compact Upright Freezers with                                       
 Automatic Defrost................        14.9AV+391a                   
                                          0.53av+391a      11.40AV+391.0
                                                            0.40av+391.0
18. Compact Chest Freezers........        11.0AV+160a                   
                                          0.39av+160a      10.45AV+152.0
                                                            0.37av+152.0
------------------------------------------------------------------------
AV=Total adjusted volume, expressed in ft.3, as determined in Appendices
  A1 and B1 of subpart B of this part.                                  
av=Total adjusted volume, expressed in Liters.                          
a Applicable standards for compact refrigerator products manufactured   
  before July 1, 2001. Compact refrigerator products are not separate   
  product categories under the standards effective January 1, 1993.     

* * * * *
[FR Doc. 97-10888 Filed 4-25-97; 8:45 am]
BILLING CODE 6450-01-P