[Federal Register Volume 63, Number 223 (Thursday, November 19, 1998)]
[Proposed Rules]
[Pages 64344-64370]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-30555]



[[Page 64343]]

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Part III





Department of Energy





_______________________________________________________________________



Office of Energy Efficiency and Renewable Energy



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10 CFR Part 430



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Energy Conservation Program for Consumer Products: Energy Conservation 
Standards for Clothes Washers; Proposed Rule

  Federal Register / Vol. 63, No. 223 / Thursday, November 19, 1998 / 
Proposed Rules  

[[Page 64344]]



DEPARTMENT OF ENERGY

Office of Energy Efficiency and Renewable Energy

10 CFR Part 430

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


Energy Conservation Program for Consumer Products: Energy 
Conservation Standards for Clothes Washers

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

ACTION: Supplemental Advance Notice of Proposed Rulemaking.

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

SUMMARY: The Energy Policy and Conservation Act, as amended (EPCA or 
Act), requires the Department of Energy (DOE or Department) to consider 
amending the energy conservation standards for certain major household 
appliances. This supplemental advance notice of proposed rulemaking 
(ANOPR) addresses the requirement of EPCA to consider amending the 
energy conservation standards for clothes washers no later than five 
years after the date of publication of the previous final rule (May 14, 
1991).
    The purpose of this supplemental ANOPR is to provide interested 
persons with an opportunity to comment on:
    First, the product classes that the Department is planning to 
analyze;
    Second, the analytical framework, models (e.g., the Government 
Regulatory Impact Model (GRIM)), and tools (e.g., a Monte Carlo 
sampling methodology, and life-cycle-cost (LCC) and national energy 
savings (NES) spreadsheets) that the Department expects to use in 
performing analyses of the impacts of standards; and
    Third, the results of preliminary analyses for life-cycle-cost, 
payback and national energy savings contained in the Preliminary 
Technical Support Document: Energy Efficiency Standards for Consumer 
Products: Clothes Washers (TSD) and summarized in this supplemental 
ANOPR.

DATES: Written comments must be received by February 2, 1999. The 
Department requests 10 copies of the written comments and, if possible, 
a computer disk. The Office of Codes and Standards is currently using 
WordPerfect 6.1.
    A public hearing will be held on December 14 (1:00-4:00 p.m.) and 
15 (9:00 a.m.-4:00 p.m.), 1998. See Supplementary Information for 
further details.

ADDRESSES: Written comments should be submitted to: U.S. Department of 
Energy, Attn: Brenda Edwards-Jones, Office of Energy Efficiency and 
Renewable Energy, ``Energy Efficiency Standards for Consumer 
Products,'' (Docket No. EE-RM-94-403), EE-431, Forrestal Building, 1000 
Independence Avenue, SW, Room 1J-018, Washington, D.C. 20585, (202) 
586-9127.
    The public hearing will be held at the U.S. Department of Energy, 
Forrestal Building, 1000 Independence Avenue SW, Room 1E-245, 
Washington, D.C. 20585.
    Copies of the Preliminary Technical Support Document: Energy 
Efficiency Standards for Consumer Products: Clothes Washers (TSD) may 
also be obtained from: U.S. Department of Energy, Office of Codes and 
Standards, 1000 Independence Avenue, SW, Rm 1J-018, Washington, D.C. 
20585-0121, (202) 586-9127.
    Public Information: The public may access the Freedom of 
Information Reading Room, located at the U.S. Department of Energy, 
Forrestal Building, 1000 Independence Avenue, SW, Room 1E-190, 
Washington, D.C. 20585 between the hours of 9:00 a.m. and 4:00 p.m., 
Monday through Friday, (except Federal holidays). Call (202) 586-6020 
for information.
    For more information concerning public participation in this 
rulemaking proceeding, see section IV, ``Public Comment Procedures,'' 
of this document.

FOR FURTHER INFORMATION CONTACT: Bryan Berringer, U.S. Department of 
Energy, Office of Energy Efficiency and Renewable Energy, Forrestal 
Building, Mail Station EE-431, 1000 Independence Avenue, SW, 
Washington, D.C. 20585-0121, (202) 586-0371, E-mail: 
[email protected]
Eugene Margolis, Esq., U.S. Department of Energy, Office of General 
Counsel, Forrestal Building, Mail Station GC-72, 1000 Independence 
Avenue, SW, Washington, D.C. 20585, (202) 586-9507, E-mail: 
[email protected]

SUPPLEMENTARY INFORMATION:

I. Introduction
    A. Authority
    B. Background
    1. History
    2. Test Procedure
    3. Process Improvement
II. Clothes Washers Analyses
    A. Preliminary Market and Technology Assessment
    1. Market Assessment
    a. General
    b. Product Specific
    2. Technology Assessment
    a. General
    b. Product Specific
    3. Preliminary Base Case Shipments Forecast
    a. General
    b. Product Specific
    B. Screening Analysis
    1. Product Classes
    a. General
    b. Product Specific
    2. Baseline Unit
    a. General
    b. Product Specific
    3. Design Options/Efficiency Level
    a. General
    b. Product Specific
    4. Proprietary Designs
    a. General
    b. Product Specific
    C. Engineering Analysis
    1. Energy Savings Potential and Manufacturing Costs
    a. General
    b. Product Specific
    I. Manufacturing Cost--Reverse Engineering
    D. Life-Cycle-Cost (LCC) and Payback Analysis
    1. Life-Cycle-Cost Spreadsheet
    a. General
    b. Product Specific
    i. LCC Analysis
    ii. Payback Analysis (Distribution of Paybacks)
    iii. Rebuttable/Test Procedure Payback
    2. Preliminary Results
    a. General
    b. Product Specific
    E. Preliminary National Impact Analyses
    1. National Energy Savings (NES) Spreadsheet Model
    a. General
    b. Product Specific
    2. Preliminary Results
    a. General
    b. Product Specific
    3. Indirect Employment Impacts
    a. General
    b. Product Specific
    F. Consumer Analyses
    1. Purchase Price
    a. General
    b. Product Specific
    2. Consumer Participation
    a. General
    b. Product Specific
    G. Manufacturer Analysis
    1. Industry Cash Flow
    a. General
    b. Product Specific
    2. Manufacturer Sub-Group Analysis
    a. General
    b. Product Specific
    3. Interview Process
    a. General
    b. Product Specific
    H. Competitive Impact Assessment
    a. General
    b. Product Specific
    I. Utility Analysis
    1. Proposed Methodology
    a. General
    b. Product Specific
    i. Assumptions
    ii. Results
    J. Environmental Analysis

[[Page 64345]]

    1. Proposed Methodology
    a. General
    b. Product Specific
    K. Regulatory Impact Analysis
III. Proposed Standards Scenarios
IV. Public Comment Procedures
    A. Participation in Rulemaking
    B. Written Comment Procedures
    C. Issues for Public Comment
V. Review Under Executive Order 12866

I. Introduction

A. Authority

    Part B of Title III of the Energy Policy and Conservation Act, 
Public Law 94-163, as amended by the National Energy Conservation 
Policy Act, Public Law 95-619, the National Appliance Energy 
Conservation Act of 1987, Public Law 100-12, the National Appliance 
Energy Conservation Amendments of 1988, Public Law 100-357, and the 
Energy Policy Act of 1992, Public Law 102-486 (the Act or EPCA), 
created the Energy Conservation Program for Various Consumer Products 
other than Automobiles. 42 U.S.C. 6291-6309.
    The National Appliance Energy Conservation Act of 1987 amended the 
Act to impose prescriptive standards (design feature requirements) for 
clothes washers as part of the energy conservation program for consumer 
products. EPCA, Section 325(g), 42 U.S.C. 6295(g). The design feature 
requirement that clothes washers shall have an unheated rinse option 
was effective for appliances manufactured on or after January 1, 1988. 
The Act required the Department to conduct a rulemaking by January 1, 
1990, to determine if the above mentioned standards should be amended. 
The Act provided that any amendment to the standards would apply to 
products manufactured three years after the rulemaking. The Final Rule 
was issued on May 14, 1991, and is effective for products manufactured 
on or after May 14, 1994 (hereinafter referred to as the May 1991 Final 
Rule). 56 FR 22279. The Act also requires the Department to conduct a 
subsequent rulemaking no later than five years after the date of 
publication of the previous final rule.
    Before the Department determines whether or not an energy 
conservation standard is economically justified, it must first solicit 
comments on the proposed standard. EPCA, Section 325(p), 42 U.S.C. 
6295(p). Any new or amended standard is required to be designed so as 
to achieve the maximum improvement in energy efficiency that is 
technologically feasible and economically justified. EPCA, Section 
325(o)(2), 42 U.S.C. 6295(o)(2). After reviewing comments on the 
proposal, the Department must then determine that the benefits of the 
standard exceed its burdens based to the greatest extent practicable, 
on a weighing of the following seven factors:
    (1) The economic impact of the standard on the manufacturers and on 
the consumers of the products subject to such standard;
    (2) The savings in operating costs throughout the estimated average 
life of the covered product in the type (or class) compared to any 
increase in the price, initial charges, or maintenance expenses for the 
covered products that are likely to result directly from the imposition 
of the standard;
    (3) The total projected amount of energy, or as applicable, water, 
savings likely to result directly from the imposition of the standard;
    (4) Any lessening of the utility or the performance of the covered 
products likely to result from the imposition of the standard;
    (5) The impact of any lessening of competition, as determined in 
writing by the Attorney General, that is likely to result from the 
imposition of the standard;
    (6) The need for national energy and water conservation; and
    (7) Other factors the Secretary considers relevant.

B. Background

1. History
    The Department initiated a clothes washer rulemaking to determine 
if the standards (design feature requirements) imposed by the Act 
should be amended. The Department published an Advance Notice of 
Proposed Rulemaking (ANOPR) (53 FR 17712, May 18, 1988), a Notice of 
Proposed Rulemaking (NOPR) (54 FR 32744, August 9, 1989), and the May 
1991 Final Rule. The May 1991 Final Rule mandated performance-based 
energy conservation standards for clothes washers. The standards 
specified a minimum energy factor (EF) for two of the five classes of 
clothes washers (top-loading standard and top-loading compact). The 
energy conservation standards in the May 1991 Final Rule are effective 
for products manufactured on or after May 14, 1994.
    In the May 1991 Final Rule, the Department announced that it was 
accelerating the second review of energy efficiency standards for 
clothes washers because it became aware, after the rulemaking was 
closed, of a design option (horizontal-axis (H-axis) wash tub in a top-
loading washer) in use in Europe that was not included in the proposed 
rule and upon which no comment was received. The Department did not 
consider establishing a standard based on the top-loading H-axis design 
option because this information came to the attention of the Department 
after the close of the comment period on the proposed rule and thus was 
not subject to public debate.
    On September 28, 1990, the Department published an ANOPR for nine 
products which included the second review of energy efficiency 
standards for clothes washers. 55 FR 39624. In response to that notice, 
a number of energy efficiency advocates and appliance manufacturers 
requested that the Department delay the second review until a 1995-1996 
time frame. The additional time was requested in order to allow 
manufacturers time to meet the standards in the May 1991 Final Rule 
which became effective on May 14, 1994, and to fully evaluate new, more 
energy efficient technologies such as top-loading H-axis clothes 
washers. This additional time, manufacturers contended, would enable 
them to provide more meaningful and relevant comments on the next, 
legislatively required, rulemaking. The Department considered the 
request, and by letter, dated February 26, 1992, notified the parties 
requesting the delay that the Department had determined that it would 
conduct the rulemaking on the later schedule, as requested.
    On November 14, 1994, the Department issued an ANOPR to begin the 
second review of energy efficiency standards for clothes washers, 
dishwashers and clothes dryers. In this ANOPR, the Department presented 
the product classes that the Department planned to analyze, the 
analytical framework and models that the Department expected to use in 
performing analyses, and issues on which the Department was interested 
in gathering data. The Department received comments in response to this 
ANOPR and also collected data from the manufacturers which was compiled 
by the Association of Home Appliance Manufacturers (AHAM) on May 8, 
1995, and July 6, 1995. (AHAM, No. 27 and 38.)
2. Test Procedure
    Simultaneous with the rulemaking for clothes washer standards, the 
Department was also in the process of revising the clothes washer test 
procedure. The Department needed to address a number of innovative 
technologies for which there were no test procedures. A number of 
proposals were published, one on December 22, 1993 (58 FR 67710), and 
another on March 23, 1995. 60 FR 15330. In its comments to the March, 
1995 proposed rule, AHAM requested that DOE adopt

[[Page 64346]]

an additional new test procedure, based on current consumer habits, 
which would be used in considering the revision of the clothes washer 
energy conservation standards, and would go into effect upon issuance 
of standards.
    On April 22, 1996, the Department issued a supplemental NOPR 
proposing such a new test procedure, Appendix J1, as well as certain 
additional revisions to the currently applicable test procedure in 
Appendix J to Subpart B of 10 CFR Part 430. 61 FR 17589. The 
supplemental notice was published to seek comments on whether it should 
adopt the AHAM recommended test procedure with certain changes. The 
Final Rule, published on August 27, 1997, adopted this recommendation. 
62 FR 45484. Appendix J1 of the revised test procedure would go into 
effect upon issuance of standards. Appendix J1 includes a modified 
energy factor (MEF) which replaces the EF. Contrasting with the 
previous EF (Energy Factor) descriptor, the MEF descriptor incorporates 
clothes dryer energy by consideration of the remaining moisture content 
(RMC) of clothes leaving the clothes washer. Other substantive 
differences between the test procedures include using different water 
temperatures for testing and using cloth loads in J1 and not in J. The 
issuance of the Final Rule was a major step in accelerating the 
development of clothes washer standards because it provided the basis 
upon which the energy and water consumption, as well as the 
manufacturing costs would be submitted.
3. Process Improvement
    During consideration of the fiscal year 1996 appropriations, there 
was considerable debate about the efficacy of the standards program. 
The Department of the Interior and Related Agencies Appropriations Act 
for Fiscal Year 1996 included a moratorium on proposing or issuing 
energy conservation appliance standards for the remainder of Fiscal 
Year 1996. See Pub. L. 104-134. Congress advised DOE to correct the 
standards-setting process and to bring together stakeholders (such as 
manufacturers and environmentalists) for assistance. In September 1995, 
the Department announced a formal effort to consider further 
improvements to the process used to develop appliance efficiency 
standards, calling on energy efficiency groups, manufacturers, trade 
associations, state agencies, utilities and other interested parties to 
provide input to guide the Department. On July 15, 1996, the Department 
published a Final Rule: Procedures for Consideration of New or Revised 
Energy Conservation Standards for Consumer Products (hereinafter 
referred to as the Process Rule). 61 FR 36974.
    The Process Rule outlines the procedural improvements identified by 
the interested parties. The process improvement effort included a 
review of the: (1) economic models, such as the Manufacturer Analysis 
Model and Residential Energy Model; (2) analytical tools, such as the 
use of a Monte Carlo sampling methodology; and (3) prioritization of 
future rules. The Process Rule includes the accounting for uncertainty 
and variability by doing scenario or probability analysis (as detailed 
in the Process Rule, 10 CFR 430, Subpart C, Appendix A Secs. 1(f), 
4(d)(2), and 10(f)(1)). In addition, an Advisory Committee on Appliance 
Energy Efficiency Standards, consisting of a representative group of 
these interested parties, was established to make recommendations to 
the Secretary regarding the implementation of the Process Rule.
    The clothes washer standards rulemaking is the first rule to be 
developed under the Process Rule. Although there were two previous 
ANOPRs, the Department made a commitment to use the Process Rule to the 
extent possible in the development of the new clothes washer standards. 
In this supplemental ANOPR, the Department is presenting the framework 
by which it will develop the standards. The framework reflects 
improvements and steps detailed in the Process Rule. The rulemaking 
process is dynamic. If timely new data, models or tools that enhance 
the development of standards become available, they will be 
incorporated into the rulemaking. For example the Advisory Committee 
has made several recommendations and the Department has proposed 
responses which are discussed in this supplemental ANOPR.
    On November 15, 1996, the Department held a workshop to discuss 
proposed design options and a preliminary engineering analysis for 
clothes washers. Two reports were presented: ``Draft Report on the 
Preliminary Engineering Analysis for Clothes Washers'' and ``Draft 
Report on Design Options for Clothes Washer'' (Clothes Washer Public 
Workshop, No. 55 B and C). A number of concerns were raised relating to 
the application of the Process Rule to the clothes washer rulemaking, 
including the need for a review of the manufacturing impact analysis 
model and methodologies, and a review of non-regulatory approaches 
(Thiele, No. 55L, at 80), whether the manufacturing cost data collected 
needed to be updated (Topping, No. 55L, at 52), and whether the 
Department ought to continue relying on the old methods of doing the 
analysis. (Perlis, No. 55L at 167.)
    Responding to comments from the November 1996 workshop concerning 
the application of the Process Rule to the clothes washer rulemaking, 
the Department developed an analytical framework for appliance 
standards rulemaking. It was presented during a clothes washer workshop 
held on July 23, 1997. The analytical framework describes the different 
analyses (e.g., the LCC, payback and national impact analyses) to be 
conducted (See Table 1), the method for conducting them, e.g., the use 
of a new LCC and NES spreadsheet and the relationship between the 
various analyses. The framework will be tailored to each rulemaking. 
Therefore, the same procedures will not necessarily be followed in all 
of the rulemakings. For example, although manufacturing cost data needs 
to be collected for each rulemaking, the method for collecting the data 
can be customized to the specific product.

          Table 1.--Clothes Washer Analyses Under Process Rule
 
------------------------------------------------------------------------
            ANOPR                     NOPR               Final rule
------------------------------------------------------------------------
Screening Analysis..........  Revised Pre-ANOPR     Revise Analyses (LCC
                               Analyses (LCC and     and National
                               National Impacts      Impacts Analyses).
                               Analyses)
Engineering Analysis........  Consumer Sub-group
                               Analysis.
Life-Cycle-Cost Analysis....  Industry Cash-flow
                               Analysis (GRIM).
Preliminary National Impacts  Manufacturer Impact
 Analysis.                     Analysis.
                              Utility Impact
                               Analysis.

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                              Environmental
                               Analysis.
------------------------------------------------------------------------

    The Department is in the process of developing two new spreadsheet 
tools in an effort to meet the objectives of the Process Rule. The 
first spreadsheet calculates LCC, and payback. The second one 
calculates national energy savings (NES). Both tools will be tailored 
for specific products. These spreadsheets and the results of the 
preliminary analysis were discussed at a clothes washer workshop held 
on March 11, 1998.
    The Department has reviewed the recommendations made by the 
Advisory Committee on Appliance Energy Efficiency Standards on April 
21, 1998. (Advisory Committee, No. 96). These recommendations relate to 
using the full range of consumer marginal energy rates (CMER) in the 
LCC analysis (replacing the use of national average energy prices), 
defining a range of energy price futures for each fuel used in the 
economic analyses and defining a range of primary energy conversion 
factors and associated emission reductions, based on the generation 
displaced by energy efficiency standards for each rulemaking. The 
Department plans to incorporate the recommendations, when appropriate, 
into the various rulemaking analyses.
    Today's supplemental ANOPR pertains to clothes washers and utilizes 
the framework described in Section II. Although the November, 1994 
ANOPR included clothes dryers and dishwashers, clothes washers are 
considered a high priority product and have been separated out to 
accelerate the rulemaking. Comments previously received for the 
September 28, 1990, ANOPR and the November 1994 ANOPR relative to 
clothes washers are being addressed in this document, where applicable.

II. Clothes Washers Analyses

    This section includes a general introduction to each analysis 
section and provides a discussion of issues relative to the clothes 
washer rule.

A. Preliminary Market and Technology Assessment

    The preliminary market and technology assessment characterizes the 
relevant product markets and existing technology options including 
prototype designs.
1. Market Assessment
     a. General. When initiating a standards rulemaking, the Department 
develops information on the present and past industry structure and 
market characteristics of the product(s) concerned. This activity 
consists of both quantitative and qualitative efforts to assess the 
industry and products based on publicly available information. Issues 
to be addressed include: (1) manufacturer market share and 
characteristics; (2) trends in the number of firms; (3) the financial 
situation of manufacturers; (4) existing non-regulatory efficiency 
improvement initiatives; and (5) trends in product characteristics and 
retail markets. The information collected serves as resource material 
to be used throughout the rulemaking.
    b. Product Specific. The Department reviewed existing literature 
and data sources to get an overall picture of the clothes washer market 
in the United States. Information was compiled primarily from industry 
publications (trade journals), government agencies, trade organizations 
(AHAM) and research reports. The Department gathered the following 
information: (1) manufacturer market share; (2) historical shipments; 
(3) washer sales by outlet type; (4) top retailers; (5) price 
distribution; (6) market saturation; (7) voluntary programs; (8) fuel 
distribution of water heaters; and (9) gas and electric sales of dryers 
(brand names). Information relating to consumer impact and voluntary 
programs also was obtained. The information described is discussed in 
the sections where it is used in the analysis. The Preliminary TSD 
provides additional information.
2. Technology Assessment
    a. General. Information relative to existing technology options and 
prototype designs are used as inputs to the screening analysis. In 
consultation with interested parties, the Department develops a list of 
design options for consideration. All technologically feasible design 
options are candidates in this initial assessment.
    b. Product Specific. This clothes washer rulemaking analysis was 
originally performed using the design option approach. In this 
approach, information is gathered on all possible energy saving design 
options. The Department gathered design option information from 
previous clothes washer analyses, trade publications, industry research 
organizations, product brochures from domestic and foreign 
manufacturers, and appliance conferences, including the International 
Appliance Technical Conference (IATC). Features such as high spin speed 
(allowing for lower remaining moisture content) and automatic fill 
control became important due to changes in the clothes washer test 
procedure. AHAM provided additional information on the energy savings 
potential and viability of these designs. The ``Draft Report on Design 
Options for Clothes Washers'' and ``Draft Report on the Preliminary 
Engineering Analysis for Clothes Washers'' provide details on the 
potential technologies. (Clothes Washer Public Workshop, No. 55B and 
55C).
    The technology assessment began with a study of the efficiencies of 
washers currently on the market. To gain greater insight and to begin 
creating an efficiency distribution of current product offerings, the 
Department used both Appendix J and J1 test procedures on nine 
different clothes washers; seven vertical-axis (V-axis) models and two 
H-axis models. Products from all five major American manufacturers were 
included. The complete results are given in the Preliminary TSD. The 
testing program results show a large variation in MEF values are 
possible for clothes washers with nearly identical EF ratings. The 
Federal Trade Commission (FTC) and manufacturers (through AHAM) also 
provided energy efficiency labeling information. Further descriptions 
of the most current data are provided in the engineering section of the 
Preliminary TSD.
3. Preliminary Base Case Shipments Forecast
    a. General. The Department develops a base case forecast of product 
shipments in the absence of new standards. This forecast requires an 
assessment of the impacts of past and existing non-regulatory efforts 
by manufacturers, utilities and other interested parties. DOE considers 
information on the actual impacts of such initiatives to date, and also

[[Page 64348]]

considers information presented regarding the possible impacts that any 
existing initiatives might have in the future. Such information could 
include a demonstration of the steps manufacturers, distribution 
channels, utilities or others will take to realize such voluntary 
efficiency improvements.
    The base case shipments forecast is used as input to the national 
impacts analysis, in which a forecast of annual shipments and their 
weighted average energy efficiency is needed to the year 2030.
    b. Product Specific. In order to develop its base case forecast for 
clothes washer sales the Department reviewed: (1) Federal procurement 
guidelines; (2) voluntary programs (i.e., utility and consortium 
educational materials and/or rebates); (3) government and industry 
demonstration and information programs (e.g., Energy Star Program); and 
(4) documented discussions with organizations and individuals. Clothes 
washer sales will be forecasted by efficiency level for the time period 
of 2003 to 2030. This forecast will be more difficult for the clothes 
washer rulemaking, because the efficiency factor (EF) was changed to 
the modified energy factor (MEF). The Department has limited 
information concerning the energy performance of existing product 
offerings using the MEF descriptor. Given the vastly different nature 
of the variables and testing methods of the current J and future J1 
test procedures, the EF values cannot be translated to MEF values. In 
addition, the analysis revealed a rapidly evolving market response to 
the introduction of new H-axis model clothes washers. In 1997, the 
WashWise consortium interviewed manufacturers and asked them to 
estimate the market share of H-axis washers in five years. WashWise is 
a public/private partnership between Pacific Northwest electric, gas, 
water and wastewater utilities, appliance manufacturers and local 
retailers. Their goal is to reduce the use of energy and water by 
encouraging consumers in Washington, Oregon, Idaho and western Montana 
to purchase resource-efficient washers. The results showed a large 
divergence of estimates ranging from a low of 5 percent to a high of 25 
percent (Coming Clean About Resource-Efficient Clothes Washers: An 
Initial WashWise Program and Market Progress Report-Final Report, No. 
E98-003, January 28, 1998). (March 11, 1998 Workshop Material, No. 82 
OO).
    For the purpose of the base case forecast in the preliminary 
national impacts analysis, the effect of voluntary programs has been 
expressed as the percent of new clothes washers sold each year that 
will have efficiencies corresponding to those of H-axis washers. The H-
axis washer is characterized using the data submitted by AHAM for a 35 
percent energy reduction from the baseline MEF. The spreadsheet uses 
disaggregated values (i.e., water heater energy, dryer energy and 
mechanical energy) provided by AHAM. Disaggregated values provided by 
AHAM for the baseline washer are also used for the base case forecast. 
Calculations based on disaggregated values reflect the efficiencies of 
machines actually being sold which may differ from the minimum required 
efficiency. The preliminary base case assumes a 1.5 percent share of H-
axis machines in 1995 with a 0.5 percent increase in H-axis sales every 
year thereafter, until 2030 (i.e., 19 percent).
    The NES spreadsheet allows for changes in the distribution of 
efficiencies of clothes washers due to non-regulatory programs. The 
user specifies the percent of new clothes washer sales that will 
achieve the selected energy reduction (relative to the baseline washer 
design) in future years. In later analyses (i.e., the NOPR) the 
Department expects to use a distribution of current and forecasted 
efficiencies based on the best available information. Information is 
still being gathered for this task. The Department seeks comment on 
this forecast and welcomes any available information on current product 
efficiencies.

B. Screening Analysis

    The screening analysis reviews various technologies with regard to 
whether they: (a) are impracticable to manufacture, install and 
service; (b) have an adverse impact on product utility or product 
availability; and (c) have adverse impacts on health and safety. The 
screening analysis establishes product classes, baseline units, and 
efficiency levels (or combinations of design options) for further 
analysis.
1. Product Classes
    a. General. Product types are divided into classes using the 
following criteria: (a) the type of energy used; (b) capacity; and (c) 
performance-related features that affect consumer utility or 
efficiency. Different energy efficiency standards will apply to 
different product classes. In general, classes are defined using 
information obtained in discussions with appliance manufacturers, trade 
associations, and other interested parties.
    b. Product Specific. The Department's three proposals regarding 
clothes washer product classes and a discussion of related comments 
follow:
     Eliminate the Semi-Automatic Top-Loading, Front-Loading 
and Suds Saving classes identified in the May 1991 Final Rule. The 
Department is proposing to eliminate certain previously defined 
classifications (Semi-Automatic Top-Loading, Front-Loading and Suds 
Saving) because they do not offer any added utility which is inherently 
less energy efficient and therefore would require protection from the 
energy conservation standards. EPCA, Sec. 325(o)(2)(B)(I)(IV), 42 
U.S.C. 6295 (o)(2)(B)(I)(IV). In the May 1991 Final Rule, these classes 
were not subject to minimum energy conservation standards because they 
represented a small portion of the market, and due to a lack of 
adequate information to analyze them. However, the 1988 standard 
requiring an unheated rinse option is still applicable to these 
classes. The Department has further reviewed this topic and believes 
that these products should be subject to the minimum energy 
conservation standards applicable to either compact or standard clothes 
washers.
     Divide all products into a Compact (less than 2.0 
ft.3 capacity) Class and a Standard (2.0 ft.3 or 
greater capacity) Class. In its written comments, Whirlpool asked the 
Department to maintain the current efficiency requirement for the 
compact class due to the limited potential for energy-efficient 
improvements and the small market share for these products. Whirlpool 
also indicated that the V-axis compact clothes washer market and the 
manufacturing base for these products has changed since the current 
standards were developed. The previous stand-alone 1.6 ft.3 
compact V-axis clothes washer products have been replaced by a product 
that maintains the small cabinet (22'' width) utility and portability 
(via castors); however, its basket capacity is slightly larger. Because 
of the limited market size, Whirlpool is currently the only American 
manufacturer of these products. They also supply them to other 
appliance companies for sale under various brand names. For these 
reasons, the Department will revise the compact V-axis product class 
definition (1.6 ft.3 capacity) to include all V-axis clothes 
washers less than 2.0 ft.3 (Whirlpool, No. 69 at 3). The 
Department plans to increase the compact class to include all clothes 
washers (both V- and H-axis machines) less than 2.0 ft.3 and 
seeks comments on this change.
     Classify H- and V-Axis clothes washers as compact or 
standard rather

[[Page 64349]]

than establish a separate class for these products. Based on current 
information, the Department believes that there is no basis for 
separate classes for H- and V-axis clothes washers. Recent and near-
term product offerings, and working prototypes of horizontal and 
vertical axis clothes washers demonstrate large energy savings while 
maintaining important product features. The Department received 
comments suggesting that it identify V- and H-axis machines as a single 
product class. Whirlpool stated that the DOE's analyses to date and the 
recent consumer acceptance in the market of H-axis products confirm the 
validity of a single product class, irrespective of the axis. Whirlpool 
further stated that the concerns over clothes washer performance, 
consumer utility and reliability are unfounded in either principal or 
fact. (Whirlpool, No. 93 at 1.) The Natural Resources Defense Council 
(NRDC) stated that the ``H-axis'' design option does not affect the 
utility of clothes washers and it is not the only design option that 
can comply with the standards. According to the NRDC, the evidence does 
not support the establishment of different standards even if separate 
classes were established. (NRDC, No. 60 at 1.)
    However, other commenters feel that the Department should not 
reject separate product classes. General Electric Appliances (GEA) 
indicated that the Department is proceeding as if all relevant consumer 
utilities are met by H-axis products already on the market or by 
machines planned for production. GEA further stated that the port of 
access is not the only relevant consumer utility that must be 
addressed. Many other consumer utilities, including reliability, must 
be addressed. (GEA, No. 88 at 2.) The Department seeks additional 
comments on this issue and is currently working with stakeholders to 
formulate a process to gather additional consumer input on the issues 
surrounding clothes washer utility. This process is discussed further 
in Section II.F.2.b.
2. Baseline Units
    a. General. In order to analyze design options for energy 
efficiency improvements, the Department defines a baseline unit. For 
each product class, the assumed baseline unit is a unit that minimally 
exceeds the existing standard. To determine the characteristics of the 
baseline unit in this screening analysis, the Department gathered 
information from trade organizations, manufacturers, and consultants 
with expertise in specific product types.
    b. Product Specific. The Department issued two new test procedures 
during the course of this rulemaking: Appendices ``J'' and ``J1.'' 62 
FR 45484. (See Section I.B.2. on Test Procedure.) The engineering 
analysis for this supplemental ANOPR is based on the Appendix J1 test 
procedure. This test procedure calculates a MEF descriptor. Unlike its 
EF predecessor, the MEF uses remaining moisture content (RMC) to 
account for energy saved due to lower drying times and temperature use 
factors (TUFs). Using cloth loads and different water temperatures are 
among the many other substantive differences between the J and J1 test 
procedures. Given these different testing methods and variables, there 
is no computational relationship between the EF and MEF descriptors.
    In order to determine the MEF value for the baseline unit, clothes 
washer manufacturers were asked to take a representative clothes washer 
with an EF as close as possible to 1.18 (current minimum EF) and 
perform the new J1 procedure. If no clothes washer was available with 
an EF value close to 1.18, they were asked to adjust the water volume, 
machine energy, and/or hot water volume to obtain an EF of 1.18. Five 
manufacturers (Amana, Frigidaire, GEA, Maytag and Whirlpool) submitted 
data to AHAM. AHAM mathematically averaged these values to derive an 
industry average MEF value of 0.817 for the baseline unit (based on an 
EF=1.18).
3. Design Options/Efficiency Levels
    a. General. Following the development of an initial list of design 
options during the technology assessment and the screening analysis, 
the Department, in consultation with interested parties, will select 
appropriate efficiency levels (or combinations of design options) for 
manufacturing cost and energy use data collection.
    b. Product Specific. This clothes washer rulemaking analysis was 
originally performed using the design option approach. The November 
1994 ANOPR included a list of design options that could be considered 
in determining the potential energy savings from new clothes washers 
standards. Data on the cost and energy consumption of these design 
options were obtained from U.S. clothes washer manufacturers through 
AHAM on May 8, 1995 (AHAM, No. 27). At the July 13, 1995, Workshop, DOE 
presented a detailed design option analysis that also ranked the cost 
effectiveness of each option under consideration. On July 6, 1995, AHAM 
provided additional design option information and comments about the 
way the information should be interpreted. (AHAM, No. 38.)
    A report using the updated design option information was presented 
during a screening workshop held on November 15, 1996. The report 
entitled, ``Draft Report on Design Options for Clothes Washers,'' used 
criteria laid out in the Process Rule to screen out design options and 
preclude them from further analysis. After the workshop, AHAM commented 
that the manufacturers did not believe that disclosure of the design 
options used to achieve a given efficiency level was practical, had 
value or could be released without disclosure of proprietary 
information. (AHAM, No. 67 at 1,2.) Since the technical approach to 
achieve any particular efficiency level above the baseline likely 
involves multiple design options specific to each company, AHAM stated 
that its members believed that supplying cost and energy use data for 
several energy levels was sufficient. Several efficiency levels were 
selected which corresponded approximately to the efficiency levels 
calculated using the design-option approach. These efficiency levels 
were discussed at the March 11, 1998, workshop.
    It was agreed that the efficiency level approach would be used. 
Levels were established and utilized in the engineering analysis (See 
Section II.c.1.b).
4. Proprietary Designs
    a. General. In its analysis, the Department considers all design 
options that are commercially available or present in a working 
prototype, including proprietary designs. Proprietary designs are fully 
considered in the Department's engineering and economic analyses.
    b. Product Specific. At the November 15, 1996, workshop, it was 
acknowledged that Whirlpool had four patented proprietary prototype 
designs that used V- and H-axis platforms. Whirlpool indicated that 
these were working prototypes. (Whirlpool, No. 55L at 77.) On November 
29, 1996, the Department sent a letter to the stakeholders with the 
patent numbers for the Whirlpool designs as requested during the 
November workshop. (DOE, No. 57.)
    In response to a Department request to obtain more information, 
AHAM stated that it was inappropriate for its members to comment on the 
cost/efficiencies of the Whirlpool designs. AHAM asked that prior to 
seeking cost/efficiency information on these designs, DOE should verify 
that these clothes washer designs were viable, were able to perform 
their intended function and had

[[Page 64350]]

usage patterns and lifetimes similar to existing clothes washers. (AHAM 
No. 67 at 2.) At the July 1997 workshop, GEA expressed concern that the 
Department had not verified that the Whirlpool designs met consumer 
utility performance requirements. (GEA, No. 72L at 210.)
    In response to these concerns, the Department witnessed efficiency 
testing of the prototype design conducted according to the revised DOE 
clothes washer test procedure. The results of the testing demonstrated 
that the prototype could reach efficiency levels comparable to H-axis 
efficiency levels. The Department also witnessed other performance 
tests on the Whirlpool design. Tests performed include: (1) cleanliness 
testing, using several different stains; (2) gentleness of action 
testing; and (3) and rinsability. The test results were benchmarked by 
conducting identical tests on two other clothes washers: A top selling 
V-axis model and a top selling H-axis model. The tests were conducted 
twice for each machine using a seven pound test load. The American 
Standards Testing Material ASTM-D4265 standard was used for evaluating 
stain and soil removal. Nine different types of stained swatches were 
evaluated, six samples of each stain. The cloth used was specified in 
the AHAM test methods in addition to various other cloths. The 
gentleness testing was conducted using a material with a five hole 
pattern cut into the swatches and was evaluated based on the number of 
strands present after washing. The rinsability was determined by 
placing the washed cloths into a high speed exacter and analyzing the 
residual detergent in the water exacted. In all cases, the performance 
of the Whirlpool design fell within the range of results obtained for 
the other clothes washers tested.
    The Department will consider the Whirlpool prototype design in this 
rulemaking in the engineering and economic analyses. However, since the 
manufacturing costs estimates for the prototype are derived using a 
different approach than for other efficiency levels cost estimates, the 
economic analysis will be conducted separately. Further discussion on 
the costing of the Whirlpool prototype can be found in Section 
II.C.1.b.i.

C. Engineering Analysis

    The engineering analysis first determines the maximum 
technologically feasible energy efficiency level and then develops 
cost-efficiency relationships to show the manufacturer costs of 
achieving increased efficiency.
1. Energy Savings Potential and Manufacturing Costs
    a. General. The engineering analysis estimates the energy savings 
potential of the individual or combinations of design options not 
eliminated in the previous screening analysis. The Department, in 
consultation with stakeholders, uses the most appropriate means 
available to determine energy consumption, including an overall system 
approach or engineering modeling. Ranges and uncertainties in 
performance are established. The energy savings measures developed in 
the engineering analysis are combined with end-user costs in the LCC 
analysis.
    The engineering analysis involves adding individual or combinations 
of design options to the baseline unit. A cost-efficiency relationship 
is developed to show the manufacturer cost of achieving increased 
efficiency. The efficiency levels corresponding to various design 
option combinations are determined from manufacturer data submittals 
and from DOE engineering calculations.
    The Act requires that, in considering any new or amended standards, 
the Department must consider those that ``shall be designed to achieve 
the maximum improvement in energy efficiency that the Secretary 
determines is technologically feasible and economically justified.'' 
EPCA, Sec. 325(l)(2)(A), 42 U.S.C. 6295(l)(2)(A). Therefore an 
essential role of the engineering analysis consists of identifying the 
maximum technologically feasible level. The maximum technologically 
feasible level is one that can be reached by the addition of efficiency 
improvements and/or design options, both commercially feasible and in 
prototypes, to the baseline units. The Department believes that the 
design options comprising the maximum technologically feasible level 
must have been physically demonstrated in at least a prototype form to 
be considered technologically feasible.
    Three methodologies can be used to generate the manufacturing costs 
needed for the engineering analysis. These methods include: (1) The 
design-option approach, reporting the incremental costs of adding 
design options to a baseline model; (2) the efficiency-level approach, 
reporting relative costs of achieving energy efficiency improvements; 
and/or (3) the cost-assessment approach which requires a ``bottoms-up'' 
manufacturing cost assessment based on a detailed bill of materials. 
The Department considers public comments in determining the best 
approach for a rulemaking.
    If the efficiency-level approach is used, the Department will 
select appropriate efficiency levels for data collection on the basis 
of: (1) Energy savings potential identified from engineering models; 
(2) observation of existing products on the market; and/or (3) 
information obtained for the technology assessment. Stakeholders will 
be consulted on the efficiency level selection.
    The use of a design-option approach provides useful information 
such as the identification of potential technological paths 
manufacturers could use to achieve increased product energy efficiency. 
It also allows the use of engineering models to simulate the energy 
consumption of different design configurations under various user 
profiles and applications. However, the Department recognizes that the 
manufacturer cost information derived in the design-option approach 
does not reflect the variability in design strategies and cost 
structures that can exist between manufacturers. Therefore, the 
Department may derive additional manufacturing cost estimates from 
other approaches developed in consultation with interested parties.
    The cost-assessment approach can be used to supplement the 
efficiency-level or design option approaches under special 
circumstances when data is not publicly available because of 
proprietary reasons, the product is a prototype and/or the data is not 
provided by the manufacturers.
    b. Product Specific. At the workshop held on November 15, 1996, a 
report entitled, ``Draft Report on the Preliminary Engineering Analysis 
for Clothes Washers,'' was presented. This report analyzed the 
engineering data submitted by AHAM concerning the manufacturing cost 
and energy savings potential for different design strategies that 
combined design options. Stakeholders and peer reviewers at the 
workshop provided guidance on how the engineering analysis could be 
improved. Some manufacturers requested that the Department accept new 
data in replacement of the data originally supplied. (AHAM, No. 6 at 1; 
Whirlpool, No. 65 at 2.) New cost and performance data was available 
owing to recent experience in manufacturing efficient designs. It was 
noted that the existing data did not, as the process rule describes, 
consider uncertainty and variability in manufacturing costs. (Perlis, 
No. 55L at 161-5.) Additionally, peer reviewers commented that cost 
effectiveness is manufacturer specific and suggested that the 
Department

[[Page 64351]]

consider soliciting from manufacturers cost-efficiency curves that 
leave them free to select optimal design strategies. (Topping, No. 55H 
at 6.) (Gordon, No. 55I at 5.)
    Following the workshop, the Department received a comment from a 
manufacturer which recommended that further engineering analyses for 
the rulemaking be focused on energy efficiency (MEF) levels and not on 
design options. Whirlpool also stated that cost-efficiency curves 
should be developed for the industry. (Whirlpool, No. 65, at 5). 
Whirlpool remarked that a cost-efficiency approach, which shows 
manufacturer costs for increased efficiency, is the most suitable 
because it provides a high degree of design confidentiality. It 
recommended that this method be used in the engineering analysis, and 
that the Department should abandon the practice of adding design 
options or combinations of options to the baseline clothes washer. 
(Whirlpool, No. 69 at 3). Whirlpool recommended that the data base for 
the engineering analysis be updated where large variabilities and/or 
uncertainties existed. They noted that the market has continued to 
evolve as many new products had been introduced since the development 
of the current database. (Whirlpool, No. 92 at 3).
    Responding to DOE's request for comments on an approach to 
gathering data for the engineering analysis, AHAM stated that its 
members believed that supplying cost and energy use data for several 
energy levels was sufficient. These levels would include baseline and 
efficiencies of 5, 10, 15, 20, 35, 40, 45 and 50 percent above 
baseline. The efficiencies of 5, 10, 15 and 20 percent would apply to a 
V-axis clothes washer and, the efficiencies of 35, 40, 45, and 50 
percent would apply to a H-axis clothes washer. (AHAM, No. 67 at 1). 
These efficiency levels were selected to correspond approximately to 
the efficiency levels calculated using the design-option approach. The 
Department and the manufacturers later agreed to include data for V-
axis clothes washers 25 percent above the baseline to adjust for a 
revision to the baseline MEF from .88 to .817. A complete description 
of the data collection methodology including a discussion of 
uncertainty and variability in manufacturing costs, as well as the 
guidelines used to calculate manufacturing costs is included in the 
Preliminary TSD.
    ACEEE raised concerns relative to the manufacturer cost data 
provided by AHAM. ACEEE stated that, in general, the average 
incremental retail costs for high-efficiency washers (35 percent 
improvement and up) seemed a bit too high based on discussions that it 
had with a variety of manufacturers and clothes washer technical 
experts. More specifically, ACEEE expressed concerns that these data 
show a substantial price jump between the 40 percent and 45 percent 
improvement cases. ACEEE believes that the 45 percent improvement level 
can be met with standard H-axis machines with very small incremental 
costs relative to the 40 percent improvement H-axis machines. It 
recommends that DOE collect additional data on 40 percent and 45 
percent improvement machines, including reverse engineering and 
revising the previous measure-based engineering analysis. (ACEEE, No. 
94 at 1).
    The Department notes that the costs reported by AHAM at efficiency 
levels 40 percent and 45 percent are a representation of industry cost 
submitals for these levels. Also, given the changes in the test 
procedure, previous data from the design option engineering analysis 
cannot be used without causing significant concerns about accuracy and 
relevance. The results of the cost assessment summarized in Section 
II.C.1.b.i. will however provide a secondary source of manufacturing 
costs for several efficiency levels.
    At the March 11, 1998, workshop, the Department requested cost and 
consumption data for V-axis clothes washers at efficiencies of 30, 35, 
and 40 percent above the baseline. The Department decided to make this 
request after receiving the results of a third-party independent 
testing that was conducted on top selling clothes washer models 
manufactured and sold in the U.S. This testing was held in order to 
determine if there was a correlation between the EF and the MEF 
descriptors defined in the test procedure (Appendix J and J1) Final 
Rule for clothes washers. 62 FR 45484. Since the test procedure was 
recently finalized, there was no information available on the MEF 
values for clothes washers currently on the market. This information is 
needed to determine a distribution of shipments. The preliminary test 
results indicated that there were at least two currently available V-
axis models on the market that could reach efficiency levels near a 30 
percent improvement level.
    AHAM responded to this request for additional information on April 
3 and 8, 1998. AHAM commented that the testing performed for DOE 
reflects an incorrect assessment of energy efficiency on current models 
and indicated that manufacturers could not achieve these levels with 
traditional V-axis clothes washers. (AHAM, No. 84 and 86). Based on 
follow-up testing conducted for DOE, there appears to be a significant 
variation in the RMC values obtained in tests even for clothes washers 
of the same model. DOE plans to further review this issue. Since the 
two models approaching a 30 percent improvement in efficiency were 
``super capacity'' models, the Department will try to determine if 
capacity or volume effects the maximum achievable efficiency 
improvement in V-axis designs. The Department seeks comment on this 
issue.
    i. Manufacturing Cost--Reverse Engineering. At the November 1996 
workshop, it was acknowledged that Whirlpool had four patented 
proprietary, working prototype designs which included both vertical and 
horizontal axis platforms. (Whirlpool, No. 55L at 77). During the 
workshop, Whirlpool asked that the designs be included in the 
rulemaking analysis. It also indicated that it would be appropriate to 
conduct an independent study to estimate the manufacturing costs of the 
new designs. (Whirlpool, No. 55L at 169). Whirlpool did not see the 
practicality of each manufacturer estimating the cost of the Whirlpool 
designs. Estimates by other manufacturers would only be based on patent 
information. Therefore it could not be expected to produce consistency 
in approach or a high degree of accuracy. (Whirlpool, No. 69 at 4).
    Maytag commented that the Whirlpool designs needed to be subjected 
to a full and complete engineering and cost analysis by DOE. Maytag 
requested that all manufacturers be given the opportunity to 
participate in this process since the cost of applying these designs to 
a manufacturer's own basic washer design varies greatly from 
manufacturer to manufacturer. (Maytag, No. 64 at 1). GEA also stated 
that the analysis needed to be expanded to cover the designs disclosed 
by Whirlpool. It further stated that only a revised method focusing on 
the technical know-how, manufacturing capabilities and economic 
strengths of individual manufacturers would permit the proper 
evaluation of the impacts on ``atypical manufacturers.'' (GEA, No. 63 
at 7).
    In response the Department conducted a ``tear-down'' manufacturing 
cost assessment of one of the V-axis Whirlpool prototypes. The main 
objective of the manufacturing cost assessment is to quantify the 
differential manufacturing costs of producing high efficiency clothes 
washers based on (1) the Whirlpool proprietary V-axis design, and (2) 
commercially available V- and

[[Page 64352]]

H-axis designs. The overall project consists of two phases:
    Phase I provides detailed cost estimates for two state-of-art, high 
volume, V-axis washers as a baseline for further analysis. The major 
objective of this phase is to obtain stakeholder comment on the costing 
methodology and baseline costs. Preliminary results of Phase I were 
presented during the March 1998 workshop. The Phase I methodology and 
final results are presented in the Preliminary TSD.
    Phase II will develop a differential cost estimate for the 
proprietary V-axis design and for two commercially-available H-axis 
clothes washers, relative to the baseline clothes washers evaluated in 
Phase I. This phase is currently in progress. Preliminary results will 
be made available for public review prior to publishing the NOPR.
    Raytheon Appliances (now Alliance Laundry Systems LLC) had 
questions regarding a number of assumptions in the reverse engineering 
analysis. These assumptions concerned work shifts per day, equipment 
depreciation life, capacity utilization and production volume. After 
considering Raytheon's comments, the Department modified some of the 
assumptions used in the manufacturing cost assessment approach.
    As suggested by Raytheon, the assumption of 2.5 shifts per day was 
reduced to 2.0 shifts per day. The Department agrees that 2.5 shifts 
per day is high based on additional visits to several clothes washer 
manufacturing plants and further discussions with manufacturing staff 
in the industry. Originally, 2.5 shifts per day was chosen based on an 
average of 2 shifts per day for assembly operations and 3.0 shifts per 
day for fabrication processes (pressing, machining, injection molding, 
etc.). The baseline manufacturing cost analysis has been revised to 
reflect an average of 2.0 shifts per day for the plant.
    The assumption of a 15-17 year lifetime for baseline equipment 
depreciation life was not changed to 5-7 years as suggested. Based on 
the Department's industry structure analysis from publicly available 
sources, the Department believes a 5-7 year life would be considered 
too short for an average equipment depreciation life. Although some 
equipment does have a relatively short service life (hand tools 
 1 year), an average of 15-17 years is more appropriate for 
the overall plant and equipment. In the analysis, various equipment 
depreciation lives are used depending on the specific type of 
equipment. When summarizing the total investment, the overall average 
is approximately 15 years.
    As suggested by Raytheon, the 100 percent capacity utilization 
assumption was reduced. However it was reduced to 95 percent not 80-90 
percent as proposed. Although 100 percent utilization might seem 
unrealistic, many operations run at or above capacity, depending on 
current market conditions. Since utilization is dependent on the 
market, the Department has reduced the utilization to 95 percent to 
reflect the less than ideal situation. The Department did not lower the 
utilization to 80 or 90 percent since current market conditions for 
most manufacturers would indicate higher production. Furthermore, the 
theoretical ``greenfield'' (entirely new) plant for the baseline unit 
assumed that construction and sizing were based on current sales and 
appropriate market forecasts.
    The current assumption of a production rate of 1.5 million units 
per year remains unchanged even though it does not represent a smaller 
manufacturer such as Raytheon Appliances. The Department is aware that 
1.5 million units is not representative of the smaller (or larger) 
manufacturers, but does represent a median volume. At this time, the 
Department is keeping the production volume for the ``greenfield'' 
plant at 1.5 million units per year; however, DOE will be investigating 
an alternative scenario for a low volume (<500,000 units per year) 
manufacturer such as Raytheon Appliances. It is important to note that 
the baseline value will be used to calculate a differential cost for 
production of a higher efficiency washer at the same production volume.
    In summary, the Department has considered all the suggested 
corrections and made changes to the baseline analysis as deemed 
appropriate at this time (2.5 shifts reduced to 2.0 shifts, and 100 
percent capacity utilization reduced to 95 percent). For a baseline 
unit, the Department's industry analysis is based on public available 
data (e.g., Census of Manufacturers by U.S. Department of Commerce) 
which indicates that equipment depreciation life should remain 
unchanged. The Department will be investigating the effects of lower 
production volumes in the NOPR analysis. A sensitivity analysis was 
used to evaluate each of the assumptions commented on by Raytheon. The 
impact of these changes on the estimate of baseline cost is 
approximately 3 to 4 percent.

D. Life-Cycle-Cost (LCC) and Payback Analysis

    In determining economic justification, the Act directs the 
Department to consider a number of different factors, including the 
economic impact of potential standards on consumers. The Act also 
establishes a rebuttable presumption that a standard is economically 
justified if the additional product costs attributed to the standard 
are less than three times the value of the first year energy cost 
savings. EPCA, Sec. 325(o)(2)(B)(iii), 42 U.S.C. 6295 (o)(2)(B)(iii).
    To consider these requirements the Department calculates changes in 
LCCs to the consumers that are likely to result from the proposed 
standard and two different simple payback periods: distributions of 
payback periods and a payback period (which follows the test procedure 
without variation), calculated for purposes of the rebuttable 
presumption clause. The effect of standards on individual consumers 
includes a change in the operating expense (usually decreased) and a 
change in the purchase price (usually increased). The net effect is 
analyzed by calculating the change in LCC as compared to the base case 
(the current analysis compares the LCC of a new efficiency level to the 
AHAM baseline). Inputs to the LCC calculation include the installed 
consumer cost (purchase price plus installation cost), operating 
expenses (energy, water, sewer, and maintenance costs), lifetime of the 
appliance, and a discount rate.
    The LCC and one of the payback periods (distribution payback) are 
calculated using the LCC spreadsheet model developed in Microsoft Excel 
for Windows 95, combined with Crystal Ball (a commercially available 
software program) based on actual distributions of input variables. The 
second payback, test procedure payback, is not calculated using Crystal 
Ball and input variable distributions, but is instead based on the 
spreadsheet option allowing single input values.
    Based on the results of the LCC analysis, DOE selects candidate 
standard levels for a more detailed analysis. The range of candidate 
standard levels typically includes: (1) the most energy-efficient 
combination of design options or most energy-efficient level; (2) the 
combination of design options or efficiency level with the lowest LCC; 
and (3) the combination of design options or efficiency levels with a 
payback period of not more than three years. Additionally, candidate 
standard levels that incorporate noteworthy technologies or fill in 
large gaps

[[Page 64353]]

between efficiency levels of other candidate standards levels may be 
selected.
    The payback, for purposes of the rebuttable presumption test, 
attempts to capture the payback to consumers affected if a new standard 
was promulgated. It compares the cost and energy use of clothes washers 
consumers would buy in the year the standard becomes effective with 
what they would buy without a new efficiency standard. In some cases 
this means comparing the baseline energy efficiency and cost with the 
trial standard level, in other cases the trial standard level would 
also be compared to a higher efficiency washer purchased without new 
standards (but at a lower efficiency than the trial standard level). A 
weighted average of these payback periods, in the year a new standard 
level would take effect, is considered the payback for purposes of the 
rebuttable presumption clause. In future analyses (for the NOPR), all 
of the consumer economic analysis discussed above will be based on a 
projected distribution of efficiencies sold at the time a new standard 
becomes effective (i.e., the base case).
    In order to compare the LCCs to the distribution of washer 
efficiencies, the LCC spreadsheet will be modified to enable the user 
to input the market share of each washer efficiency level in 5 percent 
increments.
1. Life-Cycle-Cost Spreadsheet Model
    a. General. This section describes the LCC spreadsheet model used 
for analyzing the economic impacts of possible standards on individual 
consumers. The LCC analysis is conducted using a spreadsheet model 
developed in Microsoft Excel for Windows 95, combined with Crystal Ball 
(a commercially available software program). The Model uses a Monte 
Carlo simulation to perform the analysis considering uncertainty and 
variability. The spreadsheet is organized so that ranges 
(distributions) can be entered for each input variable needed to 
perform the calculations.
    In recognition that each household is unique, variability is 
explicitly accounted for in the model by performing the LCC calculation 
for a large number of individual households. A Monte Carlo simulation 
is used to sample individual households from the Energy Information 
Administration's (EIA) Residential Energy Consumption Survey (RECS) 
database. The results are expressed as the number of households having 
impacts of particular magnitudes.
    The statistics provided by the 1993 RECS are based on a sample of 
7,111 households from the population of all primary, occupied 
residential housing units in the United States. Each household is 
weighted so that the data properly represents the 96.6 million 
households in the 50 states and the District of Columbia.
    The spreadsheet has the capability to sample only subsets of 
households for the analysis of particular sub-populations, for example, 
low income households. It also has the capability of isolating 
households in the RECS database that have a particular fuel combination 
of appliances (e.g., in the case of water heating and clothes drying 
the possible combinations of appliances include electric/electric, 
electric/gas, gas/electric, gas/gas, oil/electric, or oil/gas). 
Alternately a combination of fuel types, weighted to observed 
proportions can be specified, representing the entire population. The 
spreadsheet samples subsets of the U.S. population from the RECS to 
calculate the effect on sub-group populations. A description of the 
methodology and contents of the RECS database is contained in the 
Preliminary TSD.
    Major inputs to the LCC analysis are: (1) consumer expense for 
purchasing an appliance; (2) the period of time the appliance will 
provide service (lifetime); (3) the value to a residential customer of 
saving electricity, expressed as cents per kilowatt-hour; (4) the value 
to a residential customer of saving gas, expressed as dollars per 
million British Thermal Unit (Btu); (5) the residential price of 
distillate; (6) energy and/or water consumption; (7) residential 
customer rate for water and wastewater (sewer)($/thousand gallons), 
excluding fixed charges; and (8) the rate at which expenditures (cash 
flows) are discounted to establish their present value. A more detailed 
discussion of the spreadsheet is contained in the Preliminary TSD.
    For LCC analyses the Advisory Committee recommended that DOE use 
the full range of consumer marginal energy rates instead of national 
average energy prices. Absent consumer marginal energy rate 
information, the Committee recommended DOE use a range of net energy 
rates, calculated by removing all fixed charges. The Department agrees 
the use of marginal energy rates would improve the accuracy of the 
analysis (LCC and NES) and will attempt to determine marginal rates. 
The Department believes it is unknown at this point if removing fixed 
costs is more or less reflective of marginal rates and does not intend 
to take this intermediate step.
    In order to develop consumer marginal energy rates, the Department 
proposes to collect data on current rate schedules and energy 
consumption. These rates will be assigned to a national sample of 
buildings, weighted to represent the total U.S. population of 
buildings. The result will be a weighted distribution of consumption by 
marginal rates. This approach will be applied for residential and 
commercial customers.
    DOE proposes to obtain a sample of residential buildings from 
existing surveys, such as the RECS or from a commercially available 
database. The commercially available database is more expensive, but 
has significant added value in terms of assigning the buildings to 
states or to utilities, including a broader sample of the population, 
and permitting stratification of this larger sample to distinguish 
among some subpopulations. Each building will be assigned to a 
geographic region (e.g., state or utility service territory). Energy 
consumption by month will be included in the database for each 
building, in order to treat seasonal changes in consumption and rates. 
Peak demand will be included for commercial buildings.
    Recent Federal surveys (RECS, Commercial Building Energy 
Consumption Survey (CBECS)) gather information by fuel on annual energy 
consumption and total expenditures. Total expenditures included 
customer and other fixed charges, energy rates, demand charges, taxes, 
etc. but these are not tabulated separately from each other. These 
surveys gathered customer bills but did not extract information on rate 
schedules, fixed charges or marginal rates. The Department proposes to 
explore the feasibility of extracting historical information on rate 
schedules, including the relationship between fixed charges and 
marginal rates to average prices. This effort, if successful, will 
provide information about the extent to which marginal rates differ 
from average prices, or from average prices less fixed charges.
    Given restructuring of parts of the energy supply sector, customers 
may have more than one bill (e.g., one from the distribution company, 
and one or more from generators or suppliers). To capture complete 
information, future surveys are expected to gather energy pricing 
information directly from customers, rather than from utilities or 
local distribution companies. The most efficient means to collect 
energy pricing information in the future involves changing the current 
processing of the billing information so as to gather more detail from 
the bills, to include consumption by month and pricing

[[Page 64354]]

information. The pricing information would have for each customer the 
rate schedule including the marginal rates, fixed charges, demand 
charges for commercial and industrial customers, or time-of-use rates 
where applicable. The Department will express the need for these data 
in discussions with EIA concerning the design of future surveys.
    Residential electricity rate schedules will be collected from 
Federal databases where available, or state regulatory agencies. The 
information obtained for each rate schedule will include any fixed 
charges (customer charges, etc.), block structure, and rate per 
kilowatt-hour (kWh) by block. Information from utilities or local 
distribution companies will be examined to determine: confirmation of 
the set of rate schedules, the number of customers by state using each 
rate schedule, the total electricity sales by state by rate schedule, 
and (if possible) monthly electricity sales by state by rate schedule.
    Residential natural gas rate schedules will be collected from 
Federal databases where available, or state regulatory agencies. The 
information obtained for each rate schedule will include any fixed 
charges (customer charges, etc.), block structure, and rate per therm 
by block. Information from utilities or local distribution companies 
will be examined to determine: confirmation of the set of rate 
schedules, the number of customers by state using each rate schedule, 
the total gas sales by state by rate schedule, and (if possible) 
monthly gas sales by state by rate schedule.
    Commercial and industrial electricity rate schedules will be 
examined in a similar process as for residential electricity rates, but 
with additional information to account for demand charges. The 
information obtained for each rate schedule will distinguish any fixed 
charges (customer charges, etc.), block structure, rate per kWh by 
block, and demand charges.
    In the database of buildings, such characteristics as energy 
consumption and expenditures and number of customers by state or 
utility will be used to map a rate schedule onto each of the buildings 
in the national sample. The marginal rate for each building will be the 
block from the rate schedule corresponding to that building's monthly 
energy consumption.
    For life cycle savings calculations, monthly energy savings will be 
estimated for each building. These savings will be evaluated for each 
building at the monthly marginal rate, using the rate schedule assigned 
to each building.
    Until a time series of marginal rates is available, future trends 
in energy prices will be used to derive estimates of CMER to be used in 
the economic analysis of possible energy performance standards. The 
trend in average price (by fuel and sector) will be used to create an 
index relative to current prices and applied to the current range of 
marginal rates. In other words, it will be assumed that the marginal 
rates will change in proportion to the expected change in average 
price.
    Given the uncertainty of projections of future energy prices, 
scenario analysis will be used to examine the robustness of possible 
energy efficiency standards under different energy price conditions. 
These scenarios will be used in the LCC and the NES calculations 
discussed in Section II.E.1. Each scenario will provide a self-
consistent projection, integrating energy supply and demand. The 
scenarios will differ from each other in the energy prices that result. 
The Committee suggested the use of three scenarios. While many 
scenarios can be envisioned, specification of three scenarios should be 
sufficient to bound the range of energy prices.
    The most recent DOE Annual Energy Outlook 1998 (AEO 1998) reference 
case provides a well-defined middle scenario. In addition, the range of 
scenarios used in the AEO will be examined to establish the scenarios 
with the highest and lowest energy prices in the sector and fuel of 
interest. As an example, for commercial products such as fluorescent 
lamp ballasts, commercial and industrial electricity prices will be 
examined. AEO scenarios will serve as the fall back high and low 
scenarios, and the focus of discussion with stakeholders on further 
refinements to the high and low bounds. The range of energy prices 
represented by these scenarios and the underlying assumptions will be 
made available to stakeholders for comment. Independent estimates of 
future energy prices will also be considered. Based upon stakeholder 
input, the underlying assumptions may be further revised. This process 
will result in defining a likely high and low bound on the energy price 
trends.
    The economic analysis will be conducted using a spreadsheet for 
LCC, and one for NES. The future trend in energy prices assumed in each 
of the three scenarios will be clearly labeled and accessible in each 
spreadsheet. DOE and stakeholders will be able to easily substitute 
alternative assumptions in the spreadsheets to examine additional 
scenarios as needed.
    Two approaches are proposed to estimate forecast marginal rates:
    (1) For now, the trends from the three scenarios will be converted 
to indexes and applied to the current range of consumer marginal energy 
rates to estimate future consumer marginal energy rates. So if the 
trend in average residential electricity prices were to decline by 20 
percent over some period of time, then the marginal rate for each 
household would be assumed to decline from its initial observed value 
by 20 percent over that same period of time.
    (2) Restructuring is expected to simplify rates and to homogenize 
rates to some extent. That is, rates are expected to move toward the 
middle of the range. The index approach is subject to question if the 
change in the range of marginal rates varies depending upon the initial 
marginal rate. The current range of average residential prices is from 
about 2 to 14 cents per kWh. If in the future the highest current rates 
decline, but the lowest current rates fail to decline (or even 
increase) over time, then the index approach fails. A second approach 
can account for the differences in trends by using regional data. 
National Energy Modeling System (NEMS) provides regional information on 
average prices by sector over time. The rates for buildings, including 
residential households, in each region will be scaled to correspond to 
the future trend in average prices for that region.
    b. Product Specific. This section discusses the approaches for 
analyzing the economic impacts on individual consumers from potential 
new clothes washer standards. A spreadsheet as described in Section 
II.D.1.a. is used to calculate these economic values. In future 
analyses, all three of the economic metrics will be compared to a base 
case of washer efficiencies sold in the year the new standard would 
take effect. In this preliminary analysis, only the test procedure 
payback is compared to a distribution of efficiencies forecasted to the 
year 2003.
    i. LCC Analysis. Table 2 summarizes some of the major assumptions 
used to calculate the consumer economic impacts of various energy-
efficiency levels. In addition a number of assumptions are discussed in 
more detail.

[[Page 64355]]



       Table 2.--Assumptions Used in the LCC Preliminary Analysis
------------------------------------------------------------------------
 
------------------------------------------------------------------------
Start year (effective date of standard)  2003.
Retail Prices: Baseline Clothes Washer.  Retail Price--$421 including
                                          tax; from retail price survey.
Lifetime...............................  Distribution (12-17 years).
Cycles Per Year........................  Distribution from RECS database
                                          (207-645).
Energy Price Trend.....................  AEO 1998 reference case to the
                                          year 2020 with extrapolations
                                          to the year 2030.
Water Price............................  Distribution from Ernst &
                                          Young, 1994 National Water and
                                          Wastewater Rate Survey ($0.00
                                          to $7.84 per 1000 gallons).
Annual Real change in Water and Sewer    0 percent.
 Cost (Water Price Escalator).
Discount Rate..........................  Distribution (0-15 percent).
Energy Consumption Per Cycle...........  AHAM data.
Variation in Household Energy Prices,    RECS data .
 Energy Use, and Water Heater Shares.
------------------------------------------------------------------------

    Retail Prices: The analysis accompanying this supplemental ANOPR 
uses a 2-step mark-up approach to estimate retail prices. First, the 
manufacturing costs (i.e., full production costs) are marked up to the 
manufacturer price using a manufacturer mark-up. Then the manufacturer 
price is marked up by a retail mark-up to arrive at the retail price. 
The price paid by the consumer includes the sales tax in addition to 
the retail price. This sales tax is accounted for by using a sales tax 
mark-up over the retail price of the clothes washers.
    In the Preliminary TSD, the Department used a fixed retail mark-up 
of 1.40, and a fixed mark-up of 1.052 to cover the sales tax. The 
manufacturer mark-up over full production costs was bound by a maximum 
value of 1.35, which maintains industry (manufacturer) cost structure, 
and a minimum value of 1.00, which represents a pass-through of full 
production costs. The latter includes depreciation of new capital. 
Recuperation of non-production costs are not included. In order to 
characterize the uncertainty in manufacturer mark-ups, the Department 
used a triangular distribution characterized by a maximum manufacturer 
mark-up of 1.35, a minimum manufacturer mark-up of 1.00, and a most 
likely mark-up of 1.18 (the average). Using a fixed retail mark-up of 
1.40 and a sales tax mark-up of 1.052, the total mark-up from full 
production costs to consumer price ranges from a minimum of 1.473 to a 
maximum of 1.990.
    The Preliminary TSD presents a detailed discussion on retail mark-
ups. The TSD also outlines the Department's methodology for estimating 
manufacturer mark-ups.
    In the future NOPR analyses, the Department will use a consistent 
set of assumptions for prices across all analysis sections 
(manufacturer impact, national benefits, and consumer impacts). 
Manufacturer prices will be marked up by a fixed retail mark-up 
(currently estimated at 1.40), and a sales tax mark-up (1.052) to 
arrive at the consumer price. Whereas the development of price 
scenarios for the manufacturer impact analysis will be the subject of a 
future workshop, the Department is considering an approach used in the 
1991 Arthur D. Little report 1 to AHAM. This approach 
entails creating manufacturer mark-up scenarios by conducting a 
financial analysis using the Government Regulatory Impact Model (GRIM). 
The GRIM is a standard annual cash flow analysis which uses price, 
quantity, and cost information to assess the impact of regulatory 
conditions on manufacturer income and cash flow. The model calculates 
the actual cash flows, by year, and then determines the present value 
of those cash flows, both without regulations and with regulations. The 
post-standard retail prices required in order to achieve several 
scenarios will be found by running the GRIM and treating manufacturer 
price as a variable. Additional price (mark-up) scenarios that might be 
considered include: (1) the price (mark-up) resulting in maintenance of 
current industry value; (2) the price (mark-up) reducing industry value 
to zero; and (3) the price (mark-up) resulting from pass-through of 
incremental material, labor, and burden costs only.
---------------------------------------------------------------------------

    \1\ Arthur D. Little, Inc., Financial Impact of DOE Top Loading 
Horizontal Axis Standards on U.S. Washing Machine Manufacturers, 
Report to Association of Home Appliance Manufacturers Horizontal 
Axis Task Force, August 1991. Page 19. (Speed Queen Company, No. 15, 
Appendix G)
---------------------------------------------------------------------------

    The Department received three comments on the subject of 
manufacturer mark-up. Raytheon commented that the low end of 1.00 for 
the range of manufacturer mark-up should not be used. It recommended 
that the economic justification involve not only full production costs 
but all anticipated costs. (Raytheon, No. 91, at 1). GEA commented that 
the Department's conclusion on the estimated manufacturer price was 
erroneous. GEA pointed out that the Department had inexplicably 
transformed an average manufacturer mark-up of 1.35 into an upper 
bound. (GEA, No. 88 at 3-4). Whirlpool submitted that an estimation of 
average manufacturer mark-up of 1.18 is acceptable at this point in the 
rulemaking. (Whirlpool, No. 93, at 4). In response to these comments, 
the Department notes that a simple pass through of incremental material 
costs coupled with declining volumes has been suggested in a previous 
industry submital as the ``the most likely scenario.'' As described 
previously, the Department proposes to use the GRIM model to conduct 
scenario analysis on manufacturer mark-ups to keep the set of 
assumptions for all analysis sections consistent with one another. The 
GRIM will use price-volume interactions and manufacturers will be able 
to comment on the likely price scenario for different efficiency 
levels. Shipment data will be obtained from the NES spreadsheet model 
described in Section II.E.1. It may be reasonable to assume that the 
ability to pass through incremental costs will vary as costs increase 
and/or product attributes are changed.
    The American Council for an Energy-Efficient Economy (ACEEE) 
commented that, at the March 1998 workshop, the Circuit City 
representative suggested that assuming an average 40 percent retail 
markup is probably too high. A 25 percent retail markup was more 
typical of the industry. The 40 percent estimate may have factored in 
higher markups on extended warranties and other services. (ACEEE, No. 
94 at 3). In reviewing Circuit City's comment, the Department 
understands that the statement referred to a gross margin of 25 percent 
which represents a mark-up of 1.33. This is in close agreement with the 
Department analysis of retailer financial statements having an 
important component of

[[Page 64356]]

appliances in their product mix ( 25.2 percent to 26.3 percent gross 
margin). Also, as referenced in the Preliminary TSD, this gross margin 
is the net of some buying and warehousing costs. At present the 
Department has no basis for changing the retail mark-up assumption. DOE 
will continue to research data sources and seeks comment on this issue.
    Energy Prices: The LCC spreadsheet model samples the individual 
prices paid by households in RECS(93) (latest published version of 
RECS). These prices are updated (scaled up or down based on AEO 1998 
national prices) and converted to 1997 dollars.
    Energy Price Trend: Several possible fuel price scenarios are built 
into the LCC spreadsheet model, including: (1) constant; (2) AEO 1998 
reference case; (3) Gas Research Institute 1998 (GRI 1998); (4) high 
growth; and (5) low growth. High growth and low growth currently refer 
to AEO 1998 fuel price scenarios for high and low economic growth. GEA 
indicated that the Department needs to take additional steps in 
revising the LCC analysis. Everything in recent experience shows that 
energy prices continue to decline faster than the forecasters' ability 
to discern, but the Department continues to build in high price 
assumptions.
    ACEEE indicated that the EIA residential electricity price forecast 
used in the analysis is too low. It recommends that DOE focus on the 
EIA ``high economic growth'' case price projections. This case calls 
for an average residential electricity price decrease of 8.3 percent 
over the 1996-2010 period. (ACEEE, No. 94, at 3).
    In the future, as discussed in the Department's response to the 
Advisory Committee, the Department will review the range of scenarios 
used in the AEO to establish the scenarios with the highest and lowest 
energy prices in the sector and fuel of interest. The most recent DOE 
AEO 1998 reference case provides a well-defined scenario. Sensitivities 
both above and below these values can also be modeled in the AEO low 
and high growth cases. For the above reasons AEO 1998 was used as the 
forecast used in the preliminary analysis. The range of energy prices 
represented by these scenarios and the underlying assumptions will be 
made available to stakeholders for comments. This process will result 
in defining a likely high and low bound on the energy price trend.
    Water and Sewer Prices: Information on water prices is not as 
readily available as fuel prices information. Some utilities have large 
fixed charges, while others are subsidized or paid for through taxes. 
Furthermore, there are no standard approaches to calculating water and 
sewer costs. In some locations the price of water increases as 
consumption increases. In other areas, water price decreases with 
increasing consumption. Additional consideration must be given to 
consumers who are not connected to a municipality water supply or 
sewage system. In some cases, only one or the other is connected. As 
with other variables, the Department plans to use a range of water 
prices in the economic analysis to account for the variability among 
different households.
    The main source of data on water and sewer prices is from a 1994 
survey of water prices in major metropolitan areas by Ernst & Young. 
The Ernst and Young data was adjusted for service population, base 
utility charges and average household use by Al Dietemann of Seattle 
Water. These adjusted values are the basis for the water price used in 
the preliminary analysis. For the NOPR analysis DOE plans to update the 
1994 prices.
    Water Price Escalator: The Department has found no national level 
water price forecasts. Currently, DOE's analysis assumes that future 
water rates are constant. Whirlpool stated that recent studies (Ernst & 
Young, 1994 National Water and Wastewater Rate Survey; Raftelis 
Environmental Consulting Group, 1996 Water and Wastewater Rate Survey) 
show that water and wastewater charges have increased steadily each 
year during the period from 1986 to 1996. This trend should be expected 
to continue and should be reflected in the LCC calculations. 
(Whirlpool, No. 93 at 2).
    ACEEE stated that the present analysis is much too conservative 
because it assumes that water prices will not increase in real terms. 
Submitted for the docket was a just-published study by Osann and Young 
which summarized typical water/sewer bills over the 1986-1996 period. 
ACEEE recommended that a water/sewer bill inflation rate in the 1.1--
2.7 percent range (real) be incorporated into the economic analysis. 
(ACEEE, No. 94 at
2-3).
    The study referred to in the ACEEE comment (Osann and Young) shows 
an average annual increase of 5.7 % for a residential water/sewer bill 
over the 1986-1996 time period. Since the underlying inflation rate 
given was 3.1% this provided an annual increase in water/sewer bills of 
approximately 2.6% real. In another analysis, using EPA data, in the 
(Osann and Young) report, infrastructure needs were estimated to be 
$280 billion. Accounting for the total gallons used and a discount 
rate, a rate increase of 1.1% (real) was estimated. The ACEEE comment 
refers to total cost increases and does not specify what portion of the 
increase can be assigned to an increase in marginal rate. The ACEEE 
comment recommends a water/wastewater escalation rate of 1.1 to 2.7% 
real but does not provide a single value or a distribution.
    The Department agrees that future water prices should not be 
assumed to be constant and is therefore in the process of further 
analyzing both current prices and future escalation rates. The proposed 
analysis is on going and will be completed after the ANOPR is released. 
The proposed analysis consists of updating previous data from Ernst and 
Young report as adjusted by Al Dietemann, as well as the use of new 
data obtained from the American Water Works Association (AWWA). The 
Ernst and Young data is being updated by calling 125 utilities, getting 
their water rate schedules and their forecasts for the future, as well 
as any historical information available. The Department is working on 
combining these two data sources into one database. This data will be 
organized by utility and can be mapped onto either individual RECs 
households or onto regional areas. A distribution of water prices (as 
in the current analysis) will be used, as well as a distribution of 
escalation rates. In an attempt to be consistent with the methodology 
being developed for fuel rates, the Department will attempt to 
establish marginal water rates and water prices and escalation rates 
that vary with the water/wastewater utility. The Department is seeking 
comments concerning this approach.
    Energy consumption per cycle: The energy use information used to 
calculate LCC is taken from the engineering analysis and adjusted to 
account for variability in field conditions. This adjustment is for the 
loads of laundry washed per week, which varies from house to house. It 
is expressed as a distribution of wash cycles per year that is obtained 
from the RECS.
    Several comments were received on the subject of RECS data. The use 
of outdated RECS data, especially that related to family size and 
annual loads, must be discontinued if a truer picture of potential 
savings is to be drawn. (GEA, No. 88, at 3). Whirlpool noted that a 
concern was raised at the March, 1998 workshop about the use of 1993 
RECS data for the distribution of gas vs. electric water heaters and 
dryers, family size and number of wash loads per year. Whirlpool agrees 
that the RECS data could be brought up to date, but this is not a high 
priority. Whirlpool argues that the use of the currently available

[[Page 64357]]

RECS data will not weaken any of the analyses for this rulemaking. 
(Whirlpool, No. 93 at 1). DOE intends to use updated RECS data when it 
becomes available.
    Manufacturing cost: The LCC spreadsheet is organized so that a 
range (incorporating variability and uncertainty) can be entered to 
describe the manufacturing costs associated with increases in energy 
efficiency. Efficiency improvements over the baseline model can be 
selected in increments of 5 percent up to a 50 percent efficiency 
improvement. The cost data used was provided by manufacturers. It was 
then compiled and reported to the Department by AHAM.
    Operating cost: ACEEE stated that the present analysis ignores the 
possibility that some consumers will use less detergent with new high-
efficiency machines than with standard machines. It recommends that DOE 
construct two alternative scenarios (one in which no detergent will be 
saved and the other that assumes some consumers will use less 
detergent). ACEEE indicated that the Bern Kansas study provided some 
evidence for detergent savings. (ACEEE, No. 94 at 2). Procter and 
Gamble commented that the perception that detergent dosage will be 
reduced in horizontal axis or drum washers proportionally to water 
volume is invalid. While this appears to be a popular belief, the 
detergent dosage is not substantiated by the facts. Procter and Gamble 
further stated that the important impact is that users of new lower 
water use/energy efficient washers cannot expect to find detergent cost 
savings. (Procter & Gamble, No. 9 at 1). DOE seeks additional data on 
this issue.
    ii. Payback Analysis (Distribution of Paybacks). Payback is 
calculated based on the same inputs used for the LCC analysis (with the 
difference that the values are based only on the first year the 
standard takes effect). The output is a distribution of payback 
periods. The mean payback period is also reported. Additional 
information is available in the LCC spreadsheet but is not reported in 
the Supplemental ANOPR or Preliminary TSD. This data includes charts of 
cash flow taking into account the changing annual fuel prices.
    In order to compare the Payback Periods to the distribution of 
washer efficiencies, the LCC spreadsheet will be modified to enable the 
user to input the market share of each washer efficiency level in 5 
percent increments.
    iii. Rebuttable/Test Procedure Payback. The payback for purposes of 
the rebuttable presumption clause is calculated on the LCC spreadsheet 
but without using any distributions or Crystal Ball. Payback periods 
are first calculated between the new standard level and each washer 
efficiency being sold in the year 2003. The paybacks are then weighted 
and averaged according to the percentage of each washer efficiency sold 
before a new standard is enacted. Rather than distributions, single 
point values for the inputs are used. These values (including cycles 
per year, electric fuel source, etc.) will correspond to those outlined 
in the DOE test procedure, Appendix J1. The result is a single payback 
value and not a distribution. The payback is calculated for the 
expected effective year of the standard (e.g., 2003). Examples and 
further details are presented in the TSD.
    With the presently available data, the baseline efficiency level is 
weighted with market shares of 94.5 percent for vertical axis washers 
(baseline) and 5.5 percent for horizontal axis washers (35 percent 
efficiency improvement). If available, data on a forecasted 
distribution of washer efficiencies in the year 2003 will be used to 
refine the above calculations for the NOPR analysis.
2. Preliminary Results
    a. General. Calculation of LCC captures the tradeoff between the 
purchase price and operating expenses for appliances. In addition, two 
other measures of economic impact are calculated: distributions of 
payback periods and a payback period calculated for purposes of the 
rebuttable presumption clause. The outputs of the LCC spreadsheet 
include distributions of the impact for each energy efficiency level 
compared to the baseline. A variety of graphic displays illustrate the 
implications of the analysis results. These include: (1) A cumulative 
probability distribution showing the percentage of U.S. households 
which would have a net saving by owning a more energy efficient 
appliance, and (2) a chart depicting the variation in LCC for each 
efficiency level considered.
    b. Product Specific. This section presents preliminary results for 
LCCs and payback periods for all efficiency levels in the engineering 
analysis. Since the value of most inputs are uncertain and must be 
represented by a distribution of values rather than a discrete value, 
the results presented in the Preliminary TSD are also described by a 
distribution of values. Tables 3 and 4 provide a brief overview by 
showing percentile LCCs and payback periods, respectively, for the 
efficiency level improvements. These tables are generated with the 
current LCC spreadsheet and have not yet taken into account a 
distribution of pre-new-standard washer efficiencies, but instead are 
based on the AHAM baseline value. Greater detail is provided in the 
Preliminary TSD.
    The LCC spreadsheet calculates and reports changes in LCC (delta 
LCC). The output is a distribution best illustrated by the cumulative 
charts for LCC difference shown in the Preliminary TSD. The convention 
is used whereby all values in parentheses are negative. Negative delta 
LCCs mean that the LCC after standards is lower than that without 
standards (i.e., the base case).
    Table 3 showing the percentiles of LCC change is best described by 
an example. The 0 percent value means that all delta LCCs are greater 
than the value shown. The value for the 50th percentile means half of 
the delta LCCs are higher and half are lower. The 100 percent value 
means that 100 percent of the calculated values of delta LCC are less 
than the shown value.
    Taking the first row (5 percent efficiency level) as an example, 
the values are interpreted as follows. The value shown for 0 percent 
means that there is a 0 percent probability that a household will have 
a reduction in LCC larger than the $83 in absolute value. Toward the 
middle, there is a 50 percent probability that a household will have a 
reduction in LCC larger than $16. The 100 percent column indicates that 
there is a 100 percent probability that a household will have a 
reduction in LCC larger than $2.
    The column labeled ``mean'' refers to the mean of the distribution. 
In other words, the average of all of the results of the Monte Carlo 
runs.
    The column labeled ``percent with LCC less than the baseline'' 
establishes at what percentile there will not be any difference in LCC 
between the standards case and AHAM baseline (i.e., the delta LCC is 
0). For example, for the first row of the table (5 percent energy 
efficiency increase level), there is a 100 percent probability that 
households will have a lower LCC if a standard were enacted. For the 50 
percent efficiency level, there is a 74.2 percent probability that 
households will have a lower LCC (In other words, 74.2 percent of 
households will have a lower LCC if a 50 percent standard level is 
enacted).

[[Page 64358]]



                                                                Table 3.--Percentile LCC
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                      Change in                             Percent with LCC less than baseline
                                                      LCC from   ---------------------------------------------------------------------------------------
                                                    baseline \1\
                                                      shown by
                                                     percentiles
             Percent efficiency level                  of the
                                                    distribution      0          10         25         50         75         90        100        Mean
                                                     of results
                                                     \2\ (values
                                                        in $)
 
--------------------------------------------------------------------------------------------------------------------------------------------------------
 5................................................        ($83)       ($33)      ($24)      ($16)      ($11)       ($8)       ($2)      ($19)      100.0
10................................................       ($232)       ($82)      ($55)      ($36)      ($23)      ($15)       $13       ($43)       99.5
15................................................       ($402)      ($140)      ($90)      ($55)      ($33)      ($19)       $63       ($68)       95.6
20................................................       ($504)      ($161)      ($98)      ($55)      ($26)       $10       $129       ($67)       86.7
25................................................     ($1,486)      ($465)     ($303)     ($164)      ($67)        $4       $137      ($205)       89.2
35................................................     ($1,997)      ($639)     ($408)     ($211)      ($59)       $79       $570      ($252)       83.4
40................................................     ($2,039)      ($649)     ($412)     ($207)      ($64)       $75       $645      ($253)       83.7
45................................................     ($2,068)      ($606)     ($365)     ($155)        $9       $159       $666      ($199)       73.6
50................................................     ($2,075)      ($617)     ($374)     ($156)        $6       $153       $571      ($204)      74.2
--------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ The baseline LCC, based on SWA of the most likely costs, is $1,554.
\2\ For sample size of 10,000 trials. Energy price trends are for AEO 1998. Operating costs include water prices. No escalator is assumed for water
  price.


                                                                Table 4.--Payback Period
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                      Payback period in years shown by percentiles of the distribution of results \1\
                    Percent efficiency level                     ---------------------------------------------------------------------------------------
                                                                      0          10         25         50         75         90        100        Mean
--------------------------------------------------------------------------------------------------------------------------------------------------------
 5..............................................................        0.0        0.0        0.0        0.0        0.0        0.2        3.7        0.1
10..............................................................        0.0        0.0        0.0        0.1        0.5        1.6       15.8        0.6
15..............................................................        0.0        0.0        0.1        0.2        0.6        4.1       40.7        1.4
20..............................................................        0.0        0.1        0.2        0.5        5.2       10.8       57.9        3.6
25..............................................................        0.0        0.8        1.8        3.6        6.0        8.8       34.5        4.4
35..............................................................        0.8        2.0        2.8        4.2        6.9       11.4       49.8        5.8
40..............................................................        0.7        2.0        2.8        4.3        6.9       11.4       57.8        5.8
45..............................................................        0.7        2.4        3.6        5.8        9.3       13.9       54.0        7.2
50..............................................................        0.9        2.7        3.8        5.9        9.1       13.5       54.5       7.2
--------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ For sample size of 10,000 trials. Energy price trends are for AEO 1998. Operating costs include water prices. No escalator is assumed for water
  price.

    Table 5 below shows the simple payback for purposes of the 
rebuttable presumption clause. This means it follows test procedure 
assumptions for electric water heaters and dryers.

          Table 5.--Rebuttable Presumption Payback in Years \1\
------------------------------------------------------------------------
                                                0        35
                                             percent   percent  Weighted
         Percent efficiency level              to        to      payback
                                            standard  standard
------------------------------------------------------------------------
 5........................................       0.1        NA       0.1
10........................................       0.2        NA       0.2
15........................................       0.6        NA       0.6
20........................................       1.8        NA       1.8
25........................................       2.7        NA       2.7
35........................................       3.7        NA       3.7
40........................................       3.7       3.7       3.7
45........................................       4.9      29.2       6.2
50........................................       5.0      19.6      5.8
------------------------------------------------------------------------
\1\ Market shares of 94.5 percent V-axis and 5.5 percent H-axis are
  assumed for the year 2003.

E. Preliminary National Impacts Analysis

    The national impacts analysis assesses the net present value (NPV) 
of total consumer LCC, energy (and water, if appropriate) savings and 
indirect employment impacts. A preliminary assessment of the aggregate 
impacts at the national level is conducted for the ANOPR. Analyzing 
impacts of Federal energy-efficiency standards requires a comparison of 
projected U.S. residential energy consumption with and without 
standards. The base case, which is the projected U.S. residential 
energy consumption without standards, includes the mix of efficiencies 
being sold at the time the standard becomes effective. Sales 
projections together with efficiency levels of the washers sold, are 
important inputs to determine the total energy consumption due to 
clothes washers under both base case and standards case scenarios. The 
differences between the base case and standards case provides the 
energy and cost savings. Depending on the analysis method used, the 
sales under a standards case projection may differ from those of a base 
case projection.
    The Department estimates national energy and water, if applicable, 
consumption for each year beginning with the expected effective date of 
the standards. National annual energy and water savings are calculated 
as the difference between two projections: a base case and a standards 
case. Analysis includes estimated energy savings by fuel type for 
electricity, natural gas, and oil. Energy consumption and savings are 
estimated based on site energy (kWh of electricity, million Btu of 
natural gas or oil used in the home), then the electricity consumption 
and savings are converted to source energy.
    DOE agrees with the Advisory Committee's recommendation that the 
assumption of a constant conversion factor should be dropped in favor 
of a conversion factor that changes from year

[[Page 64359]]

to year. The conversion factor would be calculated for each year of the 
analysis based on the generating capacity displaced and the amount of 
site energy saved (see detail procedure below). For future conversion 
factors, DOE proposes to use the following method:
    (1) Start with an integrated projection of electricity supply and 
demand (e.g., the NEMS Annual Energy Outlook reference case), and 
extract the source energy consumption.
    (2) Estimate projected energy savings due to possible standards for 
each year (e.g., using the NES spreadsheet).
    (3) Feed these energy savings back to NEMS as a new scenario, 
specifically a deviation from the reference case, to obtain the 
corresponding source energy consumption.
    (4) Obtain the difference in source energy consumption between this 
standard level scenario and the reference case.
    (5) Divide the source energy savings in Btu, adjusted for class 
specific transmission and distribution losses, by the site energy 
savings in kilowatt-hours to provide the time series of conversion 
factors in Btu per kilowatt-hour.
    The resulting conversion factors will change over time, and will 
account for the displacement of generating sources. Furthermore, the 
NES spreadsheet models will include a clearly defined column of 
conversion factors, one for each year of the projection. DOE and 
stakeholders can examine the effects of alternative assumptions by 
replacing this column of numbers.
    Measures of impact reported include the NPV of total consumer LCC, 
NES and water savings, if appropriate, and indirect employment impacts. 
Each of the above are determined for selected trial standard levels. 
These calculations are done by the use of a spreadsheet tool called the 
NES Spreadsheet Model, which has been developed for all the standard 
rulemakings and tailored to each specific appliance rulemaking.
1. National Energy Savings (NES) Spreadsheet Model
    a. General. In order to make the analysis more accessible and 
transparent to all stakeholders, a spreadsheet model was developed 
using Microsoft Excel in Windows 95 to calculate the national energy 
and water savings, and the national economic costs and savings from new 
standards. Input quantities can be changed within the spreadsheet. For 
example, the markup factor to determine retail price from the 
manufacturing cost can be easily changed in the spreadsheet. Unlike the 
LCC analysis, in the NES Spreadsheet, distributions are not used for 
inputs or outputs. Sensitivities can be demonstrated by running 
different scenarios.
    One of the more important components of any estimate of future 
impact is shipments. Forecasts of shipments for the base case and the 
standard case need to be obtained as an input to the NES.
    The most basic method for forecasting future shipments is a simple 
saturation-based method which assumes saturations remain unchanged and 
solves for a growth rate in shipments sufficient to keep saturations 
constant in light of population growth. There are several factors that 
can make this estimate inaccurate. These factors include possible 
changes in: the number of households, saturation levels, appliance 
lifetimes, prices (including operating costs), and consumer decisions 
about whether to repair rather than replace an appliance. Because of 
these complexities, and to improve on the forecasts, the following four 
different statistical models were studied.
Auto-Regressive Moving Average (ARIMA) Model
    Under this model, a univariate time series data analysis approach 
is used to predict future values of a time series using only its 
current and past data. The advantage of the ARIMA univariate approach 
is that only time series data is needed to run the model. The 
disadvantages of this approach are that (1) historical trends may not 
be a good guide to the future, and (2) the model cannot explicitly 
account for changes in the number of households, percent of household 
owning washers, price, or operating expense.
    AHAM has commented that it believes that the use of regression 
analysis is inappropriate to project shipments of washers to the year 
2030. AHAM suggests that a time series (ARIMA) type model is better. 
AHAM commented that since the method presented at the July 23, 1997, 
workshop seems to be heavily based on assumptions regarding the 
saturation of certain housing types, the Department needs to provide 
these underlying assumptions prior to any calculation of NES. (AHAM, 
No. 76.) An ARIMA type model is among those being analyzed to obtain 
shipment forecasts by the Department.
Multi-Variate Time Series Fit
    In addition to the ARIMA univariate process for projecting sales, a 
multi-variate time series data analysis was also reviewed. This 
analysis is based not only on sales but new housing starts as well. The 
advantage of the multi-variate time series method is that only two time 
series are needed to build the model (i.e., shipments from the previous 
year and the change in the number of households from the previous 
year). The disadvantages of this approach are that (1) again, 
historical trends may not be a good guide to the future, and (2) the 
model cannot explicitly account for replacement sales, changes in 
saturation, price, and operating cost.
Saturation/Lifetime Model
    A saturation/lifetime (S/L) model was developed as yet another 
alternative for forecasting sales. The S/L model assumes that the 
saturation of an appliance varies with time. Appliance removals are 
based upon assumptions regarding the distribution of the appliance 
lifetimes, and the above functional form of the model allows for 
flexibility in that different assumptions regarding saturations and 
lifetimes can be used in an attempt to get the best fit to historical 
data. The advantages of the saturation/lifetime method are that (1) the 
method explicitly accounts for lifetimes, (2) housing and saturation 
stocks are based only on time-series data, so that different housing 
and saturation fits can be used to get ``good'' fits to historical 
sales. The disadvantages of this approach are that (1) removals must be 
based on assumptions about lifetimes, and (2) the model cannot 
explicitly account for the impact of price and operating cost on 
housing and saturation stocks.
Accounting Model
    The accounting model seeks to forecast shipments by determining 
sales destined for new homes plus the additional sales meant to replace 
appliances being retired from service. For those sales meant for the 
replacement market, the model accounts for the impact of homes which 
are being retired from the existing housing stock. The advantages of 
the accounting model are that (1) it is a straightforward and simple 
model, (2) it explicitly accounts for new appliances separately in new 
houses and replacements, and (3) price and operating costs can be 
incorporated into saturation terms. The disadvantages of the accounting 
model are that (1) saturations of appliances in new and stock homes 
must be forecasted, (2) housing starts must be forecasted (e.g., based 
on AEO projections), and removals must be based on assumptions about 
lifetimes.
    Table 6 shows the degree to which each approach accounts for 
different variables that impact actual shipments.

[[Page 64360]]



                       Table 6.--Variables Accounted for by Different Forecast Approaches
----------------------------------------------------------------------------------------------------------------
                                                                   Variable accounted for:
                                           ---------------------------------------------------------------------
                   Model                                                                              Price and
                                            Washer sales    Number of    Saturation      Washer       operating
                                                           households                   lifetime        cost
----------------------------------------------------------------------------------------------------------------
ARIMA.....................................            X   ............  ............  ............
Multi-variate.............................            X             X   ............  ............  ............
Saturation/Life...........................            X             X             X             X   ............
Accounting................................            X             X             X             X             X
----------------------------------------------------------------------------------------------------------------

    Among the important drivers of energy consumption are: voluntary 
programs promoting higher energy efficiency products and consumers 
response to changes in price and operating expense. The extent to which 
voluntary programs may increase the share of energy efficient products, 
prior to the implementation date of any new standards, is estimated in 
the base case. How consumers respond to changes in prices and operating 
expenses can be expressed by means of elasticities. An elasticity is 
the percent change in one quantity in response to a percent change in a 
driving variable. Elasticity will be taken into account if a method of 
quantifying the price elasticity can be developed or perhaps several 
scenarios can be modeled.
    Other quantities in the NES spreadsheet are: energy price 
projections including an analysis of consumer marginal energy rates for 
each fuel (See Section II.D.1.a); effective date of the standard (start 
year); discount rate and the year of the NPV (1997); manufacturing 
cost; appliance purchase price; water cost and escalation rate; 
baseline energy use;, impacts of other appliances applicable to the 
rulemaking analysis; lifetime; fuel mix; and the conversion factor from 
site to source energy.
    The energy savings and NPV are calculated from the expected date 
any standard level would take effect to the year 2030. Both individual 
year and cumulative data are generated. Output charts and tables 
provide: cumulative energy and water savings, (where applicable), the 
cost and savings per year (in a chart) and the cost and NPV due to 
standards.
    b. Product Specific. The model to be used for the clothes washer 
rulemaking is the one described above in Section II.E.1.a. Following is 
a discussion of the application of this model for the clothes washer 
rulemaking analysis.
    Table 7 shows the assumptions used in NES for the preliminary 
analysis which are summarized below and discussed in greater detail in 
the Preliminary TSD.

 Table 7.--Assumptions Used for Generating Preliminary National Impacts
------------------------------------------------------------------------
 
------------------------------------------------------------------------
Fuel Price.............................  EIA Annual Energy Outlook 1998
                                          to the year 2020 and
                                          extrapolated to the year 2030.
Water Price............................  Average--$3.18 per 1000
                                          gallons.
Discount Rate and the Year of the NPV..  7 percent discounted to the
                                          year 1997.
Start Year for New Standards...........  2003.
Annual Real Change in Water & Sewer      0 percent.
 Cost (water price escalator).
Manufacturing Cost.....................  Shipment-weighted average of
                                          the most likely (from AHAM
                                          data).
Total Mark up on Manufacturer Costs....  1.731.
 Energy Consumption Data...............  AHAM data.
Clothes Washer Shipments...............  Assumed same for standards and
                                          base case (inelastic to price
                                          and energy savings).
Percent Horizontal-Axis Washers........  1.5 percent in 1995, increasing
                                          by 0.5 percent each year.
Primary Energy Conversion Factors......  AEO 1998.
------------------------------------------------------------------------

    Fuel Price: The energy price scenarios to be considered for the 
clothes washer analysis include: AEO 1998 reference; GRI 1998; and high 
and low cases (which are currently AEO high and low economic cases.) 
Other boundary cases may be analyzed in response to the Advisory 
Committee on Appliance Energy Efficiency Standards recommendations 
relating to defining a range of energy price futures for each fuel used 
in the rulemaking economic analysis. (Advisory Committee, No. 96 at 2) 
(See Section II.D.1.a). See Preliminary TSD for more information on 
extrapolation of prices between 2020 and 2030. The Department is 
planning to revise the method contained in the current spreadsheet used 
for the preliminary ANOPR analysis. AEO 1998 forecasts only go out to 
the year 2020. Since the analysis needs projections to the year 2030, 
other methods must be used for this time period. The Department plans 
to use the EIA approach to forecast fuel prices for the Federal Energy 
Management Program (FEMP). For petroleum prices, EIA uses the average 
annual growth rate of the world oil price over the years 2010 to 2020 
and then adds the implied refinery and distribution markups for each 
petroleum product to arrive at the regional prices for the 2021 to 2030 
period. Natural gas prices are similarly derived using the average 
annual growth of wellhead natural gas over 2010 to 2020 and adding on 
regional markups. Electricity prices are assumed to be constant after 
2020 on the assumption that the transition to a restructured industry 
will have been completed.
    Annual Real Change in Water and Sewer Cost (water price escalator): 
For the preliminary analysis the cost of water and the escalation rate 
of water prices used in the analysis is specified in Table 7. For the 
NOPR analysis, DOE plans to update prices and estimate future prices 
and escalation rates. (See Section II.D.b.i.)
    AHAM commented that the Department cannot use water savings in its 
economic justification of standards. Under the provisions of NAECA, 
this is not a specified consideration and is no more than a side-
benefit of the energy savings. (AHAM, No. 76 at 1.) The

[[Page 64361]]

Department believes that water savings should be accounted for. EPCA 
states that in determining whether a standard is economically justified 
the Secretary shall determine whether the benefits of the standard 
exceed its burdens by, to the greatest extent practicable considering 
``the total project amount of energy or as applicable, water savings 
likely to result directly from the imposition of the standard,'' ``the 
need for national energy and water conservation'' and ``other factors 
the Secretary considers relevant.'' EPCA, 
Sec. 325(o)(2)(B)(I)(III)(VI)(VII), 42 U.S.C. 
6295(o)(2)(B)(I)(III)(VI)(VII).
    Clothes Washer Shipments: In the analysis presented in the 
Preliminary TSD the sales forecast for the base case and the standard 
case are assumed to be the same. While DOE is reviewing the different 
models to forecast shipments, shipment forecasts were created using the 
Residential Energy Model (REM). The purpose for using this data is to 
provide some data to demonstrate the NES methodology. This data does 
not reflect how shipments will be determined. These forecasts will be 
changed for the NOPR analysis.
    The accounting model is still under development as price and 
operating cost effects have yet to be incorporated. Research is on-
going to develop new estimates of price and operating expense 
elasticities to account for: (1) changing the definition of operating 
expense to include water and wastewater rates; (2) changing the 
definition of the value of energy savings from average prices to 
marginal rates; and (3) a longer time series to include more recent 
data. Inasmuch as the accounting model is the only approach that will 
take into account price and operating costs, the Department believes it 
should be the primary tool for forecasting clothes washer shipments. 
The Department seeks comments about the determination of price and 
operating cost elasticities.
    The base case assumes that clothes washers efficiencies will 
increase due to non-regulatory reasons. Voluntary programs are expected 
to increase the share of higher energy efficiency clothes washers sold. 
The Department has reviewed existing literature relating to voluntary 
programs (e.g., the Energy Star and WashWise Programs). See the 
voluntary programs section of the Preliminary TSD for a summary of this 
review.
    Based on this review, in the preliminary analysis the impact of 
voluntary programs is expressed as the percent of new clothes washers 
each year that have efficiencies corresponding to those of H-axis 
washers (35 percent energy reduction from the baseline MEF). The 
initial share of H-axis machines is estimated to be 1.5 percent of 
total washer sales in 1995. The impact of voluntary programs is 
estimated to cause a 0.5 percent increase in H-axis share every year 
thereafter. The current assumption is that in 2003 the percentage of 
horizontal axis washers will be 5.5 percent. The energy information 
used in the spreadsheet is taken from the disaggregated data provided 
by AHAM for the standard level with the lowest efficiency H-axis model 
(35 percent increase in energy efficiency). Additional work is underway 
to estimate future efficiencies under the base case scenario. Current 
estimates will be revised as additional data becomes available. The 
Department welcomes any additional data useful for forecasting future 
sales of high-efficiency washers due to non-regulatory reasons.
    Primary Energy Conversion Factors: In the spreadsheet DOE is using 
the AEO 1998 projections.
    Clothes Washer Lifetime: To account for the savings over the 
lifetime of new clothes washer sales, the analysis continues to the 
year 2030. Clothes washers are expected to have a lifetime of about 12-
16 years. Some washers bought in 2002--prior to the new standards--are 
expected to be replaced as late as 2018. In those cases, one lifetime 
for washers meeting the new standards will end in 2030-2034.
2. Preliminary Results
    a. General. National energy consumption is calculated for the base 
case and each candidate standards level by multiplying the number of 
clothes washers by vintage times unit energy consumption by vintage. 
The vintage is the age of the washer (one-year old up to sixteen-years 
old). National annual energy savings are calculated as the difference 
between two projections: a base case (without new standards) and a 
standards case. Cumulative energy and water savings, if appropriate, 
are the sum of the annual national energy or water savings, 
respectively, over several time periods (e.g., 2003-2010, 2003-2020, 
and 2003-2030).
    Once the energy savings have been determined, economic impacts are 
calculated. The primary metric for measuring national economic impact 
is the NPV. NPV (of total life-cycle costs) is the difference between 
the present value of the energy savings over the life of the appliance 
and the present value of (usually increased) initial costs of a more 
efficient appliance. The NPV calculations also captures any differences 
in installation or maintenance costs. On a national level the 
efficiencies and number of appliances sold each year are also taken 
into account. Another way of describing NPV is to determine the LCCs 
(for all appliances sold) with and without standards and take the 
difference.
    Costs are typically increases in the purchase price associated with 
the higher energy efficiency of appliances purchased in the standards 
case compared to the base case. Costs are calculated as the difference 
in the purchase price between the base case and standards case for new 
appliances purchased each year multiplied by the appliance sales in the 
standards case. Price increases appear as negative values in the NPV.
    Savings are typically decreases in operating costs associated with 
the higher energy efficiency of appliances purchased in the standards 
case compared to the base case. Total operating cost savings is the 
product of savings per unit and the number of units of each vintage 
surviving in a particular year. Savings appear as positive values in 
the NPV.
    Net savings each year are calculated as the difference between 
Total Operating Cost Savings and Total Equipment Costs. The savings are 
calculated over the life of the appliance, accounting for the 
differences in yearly energy rates.
    Future annual costs and savings are discounted to the present time 
and summed. The NPV is the difference between the present value of 
increased costs of a more efficient appliance and the present value of 
energy savings, relative to the base case expenditures. In other words 
the NPV resembles the difference in total consumer LCC between the base 
case and standards case, after correcting for any change in sales of 
clothes washers. NPV greater than zero indicates net savings (i.e., 
that the standard reduces consumer expenditures in the standards case 
relative to the base case). NPV less than zero indicates that the 
standard incurs net costs.
    The elements of the NPV can be expressed in another form, as the 
benefit/cost ratio. The benefit is the savings in decreased energy 
expenses, while the cost is the increase in the purchase price due to 
standards relative to the base case. When the NPV is greater than zero, 
the benefit/cost ratio is greater than one.
    b. Product Specific. The results shown in Table 8 below, are based 
on a single shipment weighted average (SWA) cost instead of a cost 
distribution. Below is a description of the columns in the

[[Page 64362]]

Preliminary National Energy Savings Results, Table 8.
    The first column shows the efficiency improvement over the base 
case. This is the value of energy efficiency improvement based on the 
baseline MEF provided by AHAM.
    The second column shows the energy savings in quads. This 
represents the amount of primary energy savings accumulated from the 
years 2003 to 2030. The energy savings are a result of consumers buying 
more efficient washers than they would normally have bought had no new 
standard levels been enacted.
    The third column shows the water savings in trillions of gallons at 
the corresponding efficiency level.
    The fourth column, NPV, shows the dollar savings corresponding to 
the energy and water savings and accounting for increase in the 
purchase price. The energy prices change from year to year and AEO 1998 
projections of future prices are used.
    The Preliminary TSD explains the results variables in greater 
detail and has charts to accompany the tables.

   Table 8.--Preliminary National Energy Savings Results (2003 to 2030
                               Cumulative)
------------------------------------------------------------------------
                                                                   Net
                                                       Water     present
 Percent efficiency improvement over the    Energy    savings    benefit
                base case                   savings  (trillion    (NPV)
                                            (quads)   gallons)  (billion
                                                                 1997$)
------------------------------------------------------------------------
5........................................      0.36       0.46      1.02
10.......................................      1.18       0.46      2.41
15.......................................      2.18       0.45      3.80
20.......................................      2.66       0.59      3.67
25.......................................      5.09      10.13     11.07
35.......................................      7.85      14.62     13.47
40.......................................      7.90      14.62     13.53
45.......................................      9.49      12.47      8.81
50.......................................     10.06      12.47      9.07
------------------------------------------------------------------------

3. Indirect Employment Impacts
    a. General. The July 1996 Process Rule includes employment impacts 
among the factors to be considered in selecting a proposed standard. 
The Department estimates the impacts of standards on employment for 
appliance manufacturers, relevant service industries, energy suppliers, 
and the economy in general. Employment impacts are separated into 
indirect and direct impacts. Direct employment impacts would result if 
standards lead to a change in the number of employees at manufacturing 
plants and related supply and service firms. Direct impacts will be 
further discussed in the section on manufacturing analysis. Indirect 
impacts are impacts on the national economy other than in the 
manufacturing sector being regulated. Indirect impacts may result from 
both expenditures shifting among goods (substitution effect), and 
income changing, which will lead to a change in overall expenditure 
levels (income effect).
    Indirect employment impacts from standards are defined as net jobs 
eliminated or created in the general economy as a consequence of 
increased spending on the purchase price of appliances and reduced 
household spending on energy. New appliance standards are expected to 
increase the purchase price of appliances (retail price plus sales tax, 
and installation). The same standards are also expected to decrease 
energy consumption, and therefore reduce household expenditures for 
energy. Over time, the increased purchase price is paid back through 
energy savings. The savings in energy expenditures may be spent on 
other items. Using an input/output model of the U.S. economy, this 
analysis seeks to estimate the effects on different sectors, and the 
net impact on jobs. National impacts will be estimated for major 
sectors of the U.S. economy. Public and commercially available data 
sources and software will be utilized to estimate employment impacts. 
At least three scenarios will be analyzed to bound the range of 
uncertainty in future energy prices. All methods and documentation will 
be made available for review.
    b. Product Specific. For purposes of national impact analysis, 
possible indirect employment impacts for appliance manufacturers, 
relevant service industries, energy suppliers, and the economy in 
general (i.e., national employment) due to efficiency standards will be 
analyzed. The Department is proposing to use a model, which focuses on 
those sectors of the economy most relevant to buildings, developed by 
the Office of Building Technologies and State Programs. This software, 
IMBUILD, is a PC-based economic analysis system that characterizes the 
interconnections among 35 sectors as national input-output structural 
matrices. The model can be applied to future time periods. The IMBUILD 
output includes employment, industry output, and wage income. The 
impacts of new appliance standards are estimated in the NES spreadsheet 
as household energy savings (reduced energy expenditures), and 
increased appliance purchase price. These impacts are output from NES 
and input to IMBUILD. Additional detail is provided in the Preliminary 
TSD.

F. Consumer Analyses

    The consumer analysis evaluates impacts to any identifiable groups, 
such as consumers of different income levels, who may be 
disproportionately affected by any national energy efficiency standard 
level.
    The Department could evaluate variations in regional energy prices, 
water and sewer prices, variations in energy use and variations in 
installation costs that might affect the NPV of a standard to consumer 
sub-populations. To the extent possible, DOE obtains estimates of the 
variability in each input quantity and considers this variability in 
its calculation of consumer impacts. The analysis is structured to 
answer questions such as: How many households are better off with 
standards and by how much? How many households are not better off and 
by how much? The variability in each input quantity and likely sources 
of information are discussed with stakeholders.
    Variations in energy use for a particular appliance can depend on 
factors such as: climate, type of household, people in household, etc. 
Annual energy use can be estimated by a calculation based on an 
accepted test procedure or it can be measured directly in the field. 
The Department could perform sensitivity analyses to consider how 
differences in energy use will affect sub-groups of consumers.
    The impact on consumer sub-groups will be determined using the LCC 
spreadsheet model. Details of this model are explained in the LCC 
section of the Preliminary TSD. Of particular interest is the potential 
effect of standards on households with different income levels.
1. Purchase Price
    a. General. The Department will be sensitive to increases in the 
purchase price to avoid negative impacts to identifiable population 
groups, such as consumers of different income levels. Additionally, the 
Department will assess the likely impacts of an increased purchase 
price on product sales and fuel switching.
    b. Product Specific. In order to determine the effect of an 
increase in the purchase price, it would be useful to know what the 
elasticity of clothes washer prices is. The Department is still 
determining how these data could be obtained. While preliminary 
analyses indicate that factors, such as the current state of the 
economy have a greater correlation to sales of washers than do an 
increase in clothes washer prices, it is still important to estimate 
the impact

[[Page 64363]]

of changing prices on the sales of clothes washers. In making estimates 
of these price effects, the Department needs to gauge the difference in 
clothes washer sales from a change in the price of all clothes washers, 
as could result from revised energy efficiency standards. In addition, 
the Department will be estimating how price changes from revised energy 
efficiency standards for clothes washers will affect the behavior of 
consumers.
2. Consumer Participation
    a. General. The Department seeks to inform and involve consumers 
and consumer representatives in the process of developing standards. 
This includes notification of consumer representatives during the 
rulemaking process and where appropriate, seeking direct consumer 
input.
    b. Product Specific. The Act requires that ``the Secretary 
consider, among other factors, if any lessening of the utility or the 
performance of the products is likely to result from the imposition of 
the standard. EPCA, Sec. 325 (o)(2)(B)(I)(3), 42 U.S.C. 6295 
(o)(2)(B)(I)(3). In this rulemaking because comments have been received 
specifically to the consumer utility and performance of V- and H-axis 
clothes washers, the Department reviewed existing literature pertaining 
to these issues.
    The Department has made available a ``Draft Report on Consumer 
Research for Clothes Washers.'' This document is included in the 
appendix of the Preliminary TSD. The report summarizes research 
relative to consumer satisfaction with H-axis washing machines. Sources 
and projects summarized in the report include:
     Major studies by consortia,
     Individual utility demand side management & market 
transformation studies,
     Consumer test publications,
     Trade organizations, and
     Government projects.
    Based on the December 1997 Advisory Committee meeting, the Consumer 
Subcommittee made two key recommendations to obtain consumer input:
    (1) Adopt a three-step process:
     Obtain background research
     Hold focus groups
     Conduct interviews/surveys.
    (2) Initiate the consumer analysis process in the clothes washer 
rule.
    In accordance with the Advisory Committee's recommendations, the 
Department reviewed background information regarding consumer issues 
related to clothes washers as discussed in the ``Draft Report on 
Consumer Research for Clothes Washers.'' At the March 11, 1998, Clothes 
Washer Workshop, the background research findings were presented and a 
working group was formed to develop a method for obtaining additional 
consumer input pertinent to the rule. Two comments were received on the 
subject of additional consumer research. ACEEE found the body of 
existing studies to be fairly compelling, and did not see a need for 
extensive additional work. (ACEEE, No. 94 at 4). Raytheon recommended 
that consumer purchase studies should involve consumers at all income 
levels and be made using existing retail prices excluding rebate 
incentives, for both V-axis and H-axis clothes washers. (Raytheon, No. 
91 at 2).
    The working group held a conference call on April 30, 1998, to 
evaluate different techniques for obtaining consumer input. Focus 
groups, surveys, and a conjoint analysis were all considered. The 
working group recommended a three-step approach for obtaining 
additional consumer input:
    (1) Develop a list of attributes. Based on the working groups' 
individual members' research and knowledge. Each member has submitted a 
list of clothes washer attributes valued by consumers,
    (2) Conduct a consumer survey to refine the list of attributes that 
would be included in a quantitative consumer analysis study,
    (3) Conduct a conjoint analysis to quantitatively estimate the 
value consumers place on the clothes washer attributes.
    The Department must first announce the process to use for 
conducting any type of public survey in the Federal Register notice in 
accordance with the requirements of the Paperwork Reduction Act of 
1995, Public Law 104-13 (44 U.S.C. 3506(c)(2)(A)). This will be a 
separate notice which is in process of being published. The Department 
will then solicit bids for a marketing research firm to conduct the 
focus groups to refine the list of attributes and to conduct the 
conjoint analysis.

G. Manufacturer Impact Analysis

    The manufacturer impact analysis estimates the financial impact of 
standards on manufacturers and calculates impacts on competition, 
employment, and manufacturing capacity.
    Prior to initiating the detailed manufacturing impact analysis the 
Department will prepare an approach document and have it available for 
review. While the general framework will serve as a guide, the 
Department intends to tailor the methodology for each rule on the basis 
of stakeholder comments. The document will outline procedural steps and 
outline issues for consideration. Three important elements of the 
approach consist of the preparation of an industry cash-flow, the 
development of a process to consider sub-group cash-flow, and the 
design of an interview guide.
    The policies outlined in the process rule required substantial 
revisions to the analytical framework to be used in performing 
manufacturer impact analysis for each rulemaking. In the approach 
document, the Department will describe and obtain comments on the 
methodology to be used in performing the manufacturer impact analyses. 
The manufacturer impact analyses will be conducted in three phases. 
Phase 1 consists of two activities, namely, preparation of an industry 
characterization and identification of issues. The second phase has as 
its focus the larger industry. In this phase, the GRIM will be used to 
perform an industry cash flow analysis. Phase 3 involves repeating the 
process described in Phase 2 (the industry cash-flow analysis) but on 
different sub-groups of manufacturers. Phase 3 also entails calculating 
additional impacts on competition, employment, and manufacturing 
capacity.
1. Industry Cash Flow
    a. General.  A change in standards affects the analysis in three 
distinct ways. Increased levels of standards will require additional 
investment, will raise production costs, and will affect revenue 
through higher prices and, possibly, lower quantities sold. To quantify 
these changes the Department performs an industry cashflow analysis 
using the GRIM. Usually this analysis will use manufacturing costs, 
shipments forecasts, and price forecasts developed for the other 
analyses. Financial information, also required as an input to GRIM, 
will be developed based on publicly available data and confidentially 
submitted manufacturer information.
    The GRIM analysis uses a number of factors--annual expected 
revenues; manufacturer costs such as cost of sales, selling and general 
administration costs, taxes, and capital expenditures related to 
depreciation, new standards, and maintenance--to arrive at a series of 
annual cash flows beginning from before implementation of standards and 
continuing explicitly for several years after implementation. The 
measure of industry net present values are calculated by discounting 
the annual cash flows from the period before implementation of 
standards to some

[[Page 64364]]

future point in time. The Preliminary TSD describes the GRIM's 
operating principles and presents alternative approaches to developing 
the information necessary to perform the computations.
    b. Product Specific. The Department has received manufacturing cost 
data from manufacturers which was compiled and reported by AHAM. This 
data will be used to conduct an industry cash flow analysis for the 
NOPR. A draft document ``Financial Inputs to GRIM for the Clothes 
Washer Rulemaking Analysis'' has been prepared for stakeholder review. 
This document outlines and documents the financial assumptions to be 
used in GRIM when performing the industry cash flow analyses. The 
Department intends to use the manufacturing costs, retail prices, and 
shipment values from the preliminary analysis in the GRIM model. This 
will be distributed to interested parties prior to the workshop to be 
held after publication of this Supplemental ANOPR.
2. Manufacturer Sub-Group Analysis
    a. General. Using industry ``average'' cost values is not adequate 
for assessing the variation in impacts among sub-groups of 
manufacturers. Smaller manufacturers, niche players or manufacturers 
exhibiting a cost structure largely different from industry averages 
could be more negatively impacted. Ideally, the Department would 
consider the impact on every firm individually. In highly concentrated 
industries this may be possible. In industries having numerous 
participants, the Department will use the results of the industry 
characterization to group manufacturers exhibiting similar 
characteristics. The financial analysis of the ``prototypical'' firm 
performed in the Phase 2 industry analysis can serve as a benchmark 
against which manufacturer sub-groups can be analyzed.
    The manufacturing cost data collected for the engineering analysis 
will be used to the extent practical in the sub-group impact analysis. 
To be useful, however, this data should be disaggregated to reflect the 
variability in costs between relevant sub-groups of firms.
    The Department will conduct detailed interviews with as many 
manufacturers as is possible to gain insight into the potential impacts 
of standards. During these interviews, the Department will solicit the 
information necessary to evaluate cashflows and to assess competitive, 
employment and capacity impacts. Firm-specific cumulative burden will 
also be considered.
    b. Product Specific. In order to conduct a manufacturer sub-group 
analysis, it will be necessary to define representative sub-groups and 
conduct separate cash flow analysis for each. For example, one option 
consists of conducting separate cash flows for all manufacturers. 
Another option, could entail conducting cash flow analysis only for 
those manufacturers which believe their impacts are more severe then 
industry average. The Department will outline and discuss these and 
other approaches at the post supplemental ANOPR analysis workshop.
    Whirlpool proposed that the GRIM model be changed from input to 
output aggregation. Each industry member would develop its own inputs 
to the GRIM model over a range of MEF levels proposed by the DOE. The 
GRIM models would be run by industry members to generate a range of 
individual company outputs. The outputs of the individual companies 
could then be aggregated to determine industry impact. Individual 
companies would not be required to submit detailed input assumptions, 
but only changes in revenues, shipments, profit after tax, and cash 
flow, capital investment and design and marketing spending could also 
be provided. A third party could do the aggregation and then conduct a 
reality check by comparing the aggregated output to currently available 
industry data. (Whirlpool No. 66 at 3). The Department seeks further 
input as to how the data for the GRIM analysis should be collected from 
the manufacturers and how it should be utilized.
3. Interview Process
    a. General. The revised rulemaking process provides for greater 
public input and for improved analytical approaches, with particular 
emphasis on earlier and more extensive information gathering from 
interested parties. The proposed three-phase manufacturer impact 
analysis process will draw on multiple information sources, including 
structured interviews with manufacturers and a broad cross-section of 
interested parties. Interviews may be conducted in any and all phases 
of the analyses as determined in Phase 1.
    The interview process has a key role in the manufacturer impact 
analyses, since it provides an opportunity for interested parties to 
privately express their views on important issues. A key characteristic 
of the interview process is that it is designed to allow confidential 
information to be considered in the rulemaking decision.
    The initial industry characterization will collect information from 
relevant industry and market publications, industry trade 
organizations, company financial reports, and product literature. This 
information will aid in the development of detailed and focused 
questionnaires, as needed, to perform all phases of the manufacturer 
impact analyses. It is the intention of the Department that the 
contents of questionnaires and the list of interview participants be 
publicly vetted prior to initiating the interview process.
    The Phase 3 (sub-group analysis) questionnaire will solicit 
information on the possible impacts of potential efficiency levels on 
manufacturing costs, product prices, and sales. Evaluation of the 
possible impacts on direct employment, capital assets, and industry 
competitiveness will also draw heavily on the information gathered 
during the interviews. The questionnaires will solicit both qualitative 
and quantitative information. Supporting information will be requested 
whenever applicable.
    Interviews will be conducted according to DOE procedures. 
Interviews will be scheduled well in advance in order to provide every 
opportunity for key individuals to be available for comment. Although a 
written response to the questionnaire is acceptable, an interactive 
interview process is preferred because it helps clarify responses and 
provides the opportunity for additional issues to be identified.
    Interview participants will be requested to identify all 
confidential information provided in writing or orally. Approximately 
two weeks following the interview, an interview summary will be 
provided to give participants the opportunity to confirm the accuracy 
and protect the confidentiality of all collected information. All the 
information transmitted will be considered, when appropriate, in DOE's 
decision-making process. However, confidential information will not be 
made available in the public record.
    DOE will collate the completed interview questionnaires and prepare 
a summary of the major issues and outcomes. The Department will seek 
comment on the outcome of the interview process.
    b. Product Specific. The Department is developing an interview 
guide to supplement the sub-group GRIM cash-flow analysis. The 
interview will solicit information on the possible impacts of potential 
efficiency levels on manufacturing costs, product prices, and sales. As 
such it will contribute to the Department's understanding of how sub-
groups may have different values for these quantities compared with the

[[Page 64365]]

overall industry. This will allow the Department to report and explain 
significant variances when publishing the analysis results.
    Evaluation of the possible impacts on direct employment, capital 
assets, and industry competitiveness will also draw heavily on the 
information gathered during the interviews. The questionnaires will 
solicit both qualitative and quantitative information. Supporting 
information will be requested whenever applicable.
    The Department plans to make a draft of the questionnaire available 
prior to the post-supplemental ANOPR analysis workshop.

H. Competitive Impact Assessment

    a. General. Legislation directs the Department to consider any 
lessening of competition that is likely to result from standards. It 
further directs the Attorney General to gauge the impacts, if any, of 
any lessening of competition. DOE will make a determined effort to 
gather and report firm-specific financial information and impacts. The 
competitive analysis will focus on assessing the impacts to smaller, 
yet significant, manufacturers. The assessment will be based on 
manufacturing cost data and on information collected from interviews 
with manufacturers, consistent with Phase 3 of the manufacturer impact 
analyses. The Department of Justice (DOJ) has offered to help in 
drafting questions to be used in the manufacturer interviews. These 
questions will pertain to the assessment of the likelihood of increases 
in market concentration levels and other market conditions that could 
lead to anti-competitive pricing behavior. The manufacturer interviews 
will focus on gathering information that would help in assessing 
asymmetrical cost increases to some manufacturers, increased proportion 
of fixed costs potentially increasing business risks, and potential 
barriers to market entry (proprietary technologies, etc.).
    b. Product Specific. The Department met with DOJ on June 11, 1998, 
for initial discussions pertaining to the manufacturer impacts of 
potential clothes washers standards. DOJ has agreed to review the 
manufacturer questionnaire prior to discussions with the manufacturers.

I. Utility Analysis

    The utility analysis estimates the effects of proposed standards on 
electric and gas utilities.
1. Proposed Methodology
    a. General. The Department proposes to use a version of EIA's 
widely recognized NEMS for the utility and environmental analyses. NEMS 
is a large multi-sectoral partial equilibrium model of the U.S. energy 
sector that has been developed over several years by the EIA primarily 
for the purpose of preparing the Annual Energy Outlook (AEO). NEMS 
produces a widely recognized baseline forecast for the U.S. through 
2020 and is available in the public domain. The version of NEMS to be 
used for appliance standards analysis will be called NEMS-NAECA, and 
will be based on the AEO 1998 version with minor 
modifications.2
---------------------------------------------------------------------------

    \2\ EIA approves use of the name NEMS only to describe an AEO 
version of the model without any modification to code or data. 
Since, in this work, there will be some minor code modifications and 
the model will be run under various policy scenarios that deviate 
from AEO assumptions, DOE proposes use of the name NEMS-NAECA for 
the model as used here.
---------------------------------------------------------------------------

    NEMS offers a sophisticated picture of the effect of appliance 
standards since its scale allows it to measure the interactions between 
the various energy supply and demand sectors and the economy as a 
whole. In addition, the scale of NEMS permits analysis of the effects 
of standards on both the electric and gas utility industries.
    To analyze the effect of standards, NEMS-NAECA is first run exactly 
as it would be to produce an AEO forecast, then a second run is 
conducted with residential energy usage reduced by the amount of energy 
(gas, oil, and electricity) saved due to appliance standards for the 
appliance being analyzed. The energy savings input is obtained from the 
NES spreadsheet. Outputs available are the same as those in the 
original NEMS model including residential energy prices, generation and 
installed capacity (and in the case of electricity, which primary fuel 
is used for generation).
    b. Product Specific. I. Assumptions. Other than the difference in 
energy consumption due to clothes washer standards, input assumptions 
into NEMS-NAECA will follow those used to produce AEO 1998. The entire 
utility analysis will be conducted as a policy deviation from the AEO 
1998, and the assumptions will be the basic set of assumptions applied. 
For example, the operating characteristics (energy conversion 
efficiency, emissions rates, etc.) of future electricity generating 
plant will be exactly those used in AEO 1998, and the prospects for 
natural gas supply will be exactly those assumed in AEO 1998.
    Since the AEO 1998 version of NEMS-NAECA forecasts only to the year 
2020, a method for extrapolating price data to 2030 is required. The 
adopted method uses the EIA approach to forecast fuel prices for the 
Federal Energy Management Programs (FEMP). These are the prices used by 
FEMP to estimate life-cycle costs of Federal equipment procurements. 
For petroleum products, the average growth rate for the world oil price 
over the years 2010 to 2020 is used in combination with the refinery 
and distribution markups from the year 2020 to determine the regional 
price forecasts. Similarly, natural gas prices are derived from an 
average growth rate figure in combination with regional price margins 
from the year 2020. Electricity prices are held constant at 2020 levels 
on the assumption that the transition to a restructured utility 
industry will have been completed.
    ii. Results. In principle, any of the forecasts that appear in AEO 
1998 could be estimated by NEMS-NAECA to take into account the effects 
of a particular clothes washer standard level. The Department intends 
to report the major results on residential sales of fuels, prices of 
fuels, and generating sources displaced by energy savings. As might be 
expected, as the total energy use of America is much larger than that 
possible due to the savings from clothes washers, there is little 
expected difference in the forecasted price of energy.

J. Environmental Analysis

    An Environmental Assessment is required pursuant to the National 
Environmental Policy Act of 1969 (NEPA) (42 U.S.C. 4321 et seq.), 
regulations of the Council on Environmental Quality (49 CFR parts 1500-
1508), the Department regulations for compliance with NEPA (10 CFR part 
1021), and the Secretarial Policy on the National Environmental Policy 
Act (June 1994). The Environmental Assessment will be presented as part 
of the NOPR and an opportunity will be provided for comments prior to 
the final rule.
    The main environmental concern addressed is emissions from fossil 
fuel-fired electricity generation. Power plant emissions include oxides 
of nitrogen (NOX) and sulfur (SO2), as well as 
carbon dioxide (CO2). The first two are major causes of acid 
precipitation, which can affect humans by reducing the productivity of 
farms, forests and fisheries, decreasing recreational opportunities and 
degrading susceptible buildings and monuments. NOX is also a 
precursor gas to urban smog and is

[[Page 64366]]

particularly detrimental to air quality during hot, still weather. 
CO2 emissions contribute to raising the global temperature 
via the ``greenhouse effect.'' The long-term consequences of higher 
temperatures may include perturbed air and ocean currents, perturbed 
precipitation patterns, changes in the gaseous equilibrium between the 
atmosphere and the biosphere, and the melting of some of the ice now 
covering polar lands and oceans, causing a rise in sea level.
1. Proposed Methodology
    a. General. The Department proposes to use the EIA widely 
recognized NEMS for the appliance environmental analyses (as well as 
the utility analyses). The version of NEMS to be used for appliance 
standards analysis will be called NEMS-NAECA, and will be based on the 
AEO 1998 version with minor modifications. NEMS-NAECA is run exactly 
the same as the original NEMS except that residential energy usage is 
reduced by the amount of energy (gas, oil, and electricity) saved due 
to appliance standards for the appliance being analyzed. The input of 
energy savings is obtained from the NES spreadsheet. For the 
environmental analysis, the output is the forecasted physical 
emissions. The net benefits of a standard will be the difference 
between emissions estimated by the AEO 1998 version of NEMS-NAECA and 
those it estimates with a standard in place.
    b. Product Specific. The environmental analysis should be 
relatively straightforward using NEMS-NAECA. Carbon emissions are 
tracked in NEMS using quite a detailed carbon module that provides good 
results because of its broad coverage of all sectors and inclusion of 
interactive effects. The only form of carbon tracked by NEMS-NAECA is 
CO2, so the carbon discussed in this report is only in the 
form of CO2 but is reported as elemental carbon to remain 
consistent with the AEO 1998.3
---------------------------------------------------------------------------

    \3\ The conversion factor from carbon to CO2 is 
approximately 3.6667.
---------------------------------------------------------------------------

    The two airborne pollutant emissions that have been reported in 
past analyses, SO2 and NOX, are reported by NEMS-
NAECA. In the case of SO2, the Clean Air Act Amendments of 
1990 set an SO2 emissions cap on all power generation. The 
attainment of this target is flexible among generators through the use 
of emissions allowances and tradable permits. NEMS includes a module 
for SO2 allowance trading and delivers a forecast of 
SO2 allowance prices. Please note that accurate simulation 
of SO2 trading tends to imply that physical emissions 
effects will be zero because emissions will always be at the ceiling. 
This fact has caused considerable confusion in the past. However, there 
is an SO2 benefit from conservation in the form of a lower 
allowance price and, if big enough to be calculable by NEMS-NAECA, this 
value will be reported. Please see TSD for further discussion of this 
issue. One small effect that NEMS-NAECA must consider in addition to 
AEO 1998 calculations is the effect of standards on SO2 
emissions from in-house combustion of oil, since the emissions cap does 
not apply to households. This effect is calculated using simple 
emissions factors.
    The NEMS algorithm for estimating NOX emissions also 
does not estimate in-house emissions, nor are the emissions calculated 
for ozone non-attainment areas. In-house emissions account for the 
combustion of fossil fuels, primarily natural gas, within individual 
homes. Since households that use natural gas, fuel oil or coal do 
contribute to NOX emissions, the effect on in-home 
NOX emissions will be calculated externally to NEMS-NAECA, 
using simple emissions factors.
    Energy use for selected appliance efficiency levels will be the 
same as those in the NES spreadsheet. Other input assumptions into 
NEMS-NAECA will follow those used to produce AEO 1998. In principle, 
any of the forecasts that appear in AEO 1998 could be estimated by 
NEMS-NAECA to take into account the effects of a particular clothes 
washer standard level, but in the standard reporting, the Department 
intends to report emissions of SO2, NOX and 
CO2. The time horizon of NEMS-NAECA is 2020. Beyond this 
point, results will be extrapolated using a simple formula (for 
methodology, see preliminary TSD) to extend the forecast to 2030. 
Alternative price forecasts corresponding to the side cases found in 
AEO 1998 will also be generated for use by NES and will be explored in 
a similar fashion with NEMS-NAECA runs.

K. Regulatory Impact Analysis

    DOE will be preparing a draft regulatory analysis pursuant to E.O. 
12866, ``Regulatory Planning and Review,'' which will be subject to 
review under the Executive Order by the Office of Information and 
Regulatory Affairs (OIRA) 58 FR 51735 (October 4, 1993). Six major 
alternatives were identified by DOE as representing feasible policy 
options to achieve consumer product energy efficiency. Each alternative 
will be evaluated in terms of ability to achieve significant energy 
savings at a reasonable cost and will be compared to the effectiveness 
of the rule.
    As part of the docket for the Refrigerator Products Energy 
Conservation Standards (Docket No. EE-RM93-801) AHAM stated that the 
Department needs to improve the evaluation of non-regulatory means of 
achieving energy savings. (AHAM, No. 207 at 7).
    Under the Process Rule policies, the Department is committed to 
continually explore non-regulatory alternatives to standards. In the 
table below is a discussion of what was examined in 1994 and what is 
being proposed for this rulemaking. The Department is seeking comments 
on this approach. This approach is further discussed in the TSD.

------------------------------------------------------------------------
                                             Alternatives to examine in
       Alternatives examined in 1994                    1998
------------------------------------------------------------------------
--No action...............................  --No new regulatory action.
--Consumer tax credits....................  --Consumer tax credits.
--Manufacturer tax credits................  --Manufacturer tax credits.
--Performance standards...................  --Performance standards.
--Consumer rebates........................  --Rebates.
--Prescriptive standards
--Voluntary standard......................  --Voluntary energy
                                             efficiency targets.
--Enhanced labeling and consumer education
                                            --Early replacement.
                                            --Mass government purchases.
------------------------------------------------------------------------

III. Standards Scenarios

    Upon reviewing the preliminary LCC and NES results, the Department 
observes that the efficiency levels analyzed, 5 to 50 percent 
efficiency improvement over baseline efficiency, produced a range of 
impacts. For example, the NES impacts show a range from 0.36-10.06 
quads of energy saved over the 2003 to 2030 period. As expected, the 
higher the efficiency level, the greater the savings. Similarly, the 
analysis shows an increase in water savings from 0.46 to 12.47 
trillions of gallons saved. On the other hand, the NPV shows an 
increase from $1.02 billion at the 5 percent level, to a maximum of 
$13.53 billion at the 40 percent level, and then a reduction to $9.07 
billion at the 50 percent level. The LCC and payback analyses show 
results similar to the NPV analysis where the greatest economic benefit 
is at the 40 percent level.
    Based on the analyses performed, the 40 percent efficiency level 
standard would appear to result in the greatest

[[Page 64367]]

economic benefit to the Nation. (See Tables 3, 4 and 8.) The national 
net present benefit at the 40 percent efficiency level (which 
represents an equivalent to a moderate H-axis level) is $13.53 billion. 
This is approximately 22 percent higher than the NPV benefit at the 25 
percent efficiency level (which represents the current highest V-axis 
level) and 49 percent higher than the 50 percent level, the maximum 
technologically feasible level. The LCC results in Table 3 indicate 
that a 40 percent efficiency level has the greatest consumer mean LCC 
savings. At 40 percent, the consumer mean LCC savings is $253, or $48 
and $49 greater than the 25 and 50 percent levels, respectively. In 
addition, at the 40 percent level, the range in LCC impacts is a 
savings of $2,039 (0th percentile) to an increase of $645 (100th 
percentile). The LCC analysis further shows that at the 40 percent 
level approximately 83.7 percent of consumers will experience a LCC 
savings; and that only 16.3 percent of the Nation's population will 
experience an increase in LCC. Whereas, the LCC analysis indicates that 
at the 25 percent efficiency level, standards will negatively impact 
10.8 percent of the Nation's population and at the 50 percent level, 
standards will adversely impact 25.8 percent of the population. (See 
Table 3.)
    Also, the rebuttable presumption payback periods shown in Table 5 
indicate that all efficiency levels from 5 percent up to 25 percent 
show a less than 3 year payback. The 40 percent efficiency level shows 
a 3.7 year payback which represents a reasonable payback period 
considering the increased energy savings at this level. There is a 
significant jump in the payback period at the 45 and 50 percent 
efficiency levels therefore making these efficiency levels look less 
attractive.
    These observations are based on preliminary LCC and NES results 
which will be updated and revised in the NOPR and final rule analyses. 
These observations, however, do not include analyses results from the 
manufacturer impact or consumer subgroup and survey information.
    The following are examples of possible alternative standards 
scenarios for consideration by the Department:
     A moderate standard at an early effective date. For 
example, a level at a 25 percent improvement, effective three years 
after the publication of the Final Rule.
     A stringent standard, at a later effective date. For 
example, a level at 45 percent improvement effective five years after 
the publication of the Final Rule.
     A two phase approach. For example, a level at 20 percent 
effective three years after the publication of the Final Rule 
(projected effective date--October, 2002) and a level at 40 percent 
effective eight years after publication of the Final Rule.
    The Department seeks comments on the alternative standard scenarios 
for consideration in the analysis for the proposed rule.

IV. Public Comment Procedures

A. Participation in Rulemaking

    The Department encourages the maximum level of public participation 
possible in this rulemaking. Individual consumers, representatives of 
consumer groups, manufacturers, associations, States or other 
governmental entities, utilities, retailers, distributors, 
manufacturers, and others are urged to submit written statements on the 
proposal.
    The Department has established a period of 75 days following 
publication of this document for persons to comment on this proposal. 
All public comments received will be available for review in the 
Department's Freedom of Information Reading Room. In addition, the 
following data is available in the Department's Freedom of Information 
Reading Room:
     Copies of the Preliminary TSD
     Transcripts of the public hearings
     Copies of the public comments received by the Department
     Previous Federal Register notices relating to this clothes 
washer rulemaking
    A public hearing will be held on December 14 (1:00-4:00 p.m.) and 
15 (9:00 a.m.-4:00 p.m.), 1998, at the U.S. Department of Energy, 
Forrestal Building, 1000 Independence Avenue SW, Room 1E-245, 
Washington, D.C. 20585. The December 14 session will be a training 
session for the Government Regulatory Impact Model (GRIM). More 
detailed information about this hearing will be on the Office of Codes 
and Standards web site beginning in November. The web site address is 
as follows: http://www.eren.doe.gov/buildings/codes__standards/
index.htm.

B. Written Comment Procedures

    Interested persons are invited to participate in this proceeding by 
submitting written data, views, or arguments with respect to the 
subjects set forth in this document. Comments will not be accepted by 
fax or e-mail. Instructions for submitting written comments are set 
forth at the beginning of this document and below.
    Comments should be labeled both on the envelope and on the 
documents, ``Clothes Washer Rulemaking (Docket No. EE-RM-94-403),'' and 
must be received by the date specified at the beginning of this 
document. Ten copies are requested to be submitted. Additionally, the 
Department would appreciate an electronic copy of the comments to the 
extent possible. The Department is currently using 
WordPerfectTM 6.1. All comments and other relevant 
information received by the date specified at the beginning of this 
document will be considered by the Department in the proposed rule.
    All written comments received on the supplemental Advance Notice of 
Proposed Rulemaking will be available for public inspection at the 
Freedom of Information Reading Room, as provided at the beginning of 
this document.
    Pursuant to the provisions of 10 CFR 1004.11, any person submitting 
information or data that is believed to be confidential, and exempt by 
law from public disclosure, should submit one complete copy of the 
document and ten (10) copies, if possible, from which the information 
believed to be confidential has been deleted. The Department will make 
its own determination with regard to the confidential status of the 
information or data and treat it according to its determination.
    Factors of interest to the Department, when evaluating requests to 
treat information as confidential, include: (1) a description of the 
item; (2) an indication as to whether and why such items of information 
have been treated by the submitting party as confidential, and whether 
and why such items are customarily treated as confidential, and whether 
and why such items are customarily treated as confidential within the 
industry; (3) whether the information is generally known or available 
from other sources; (4) whether the information has previously been 
available to others without obligation concerning its confidentiality; 
(5) an explanation of the competitive injury to the submitting person 
that would result from public disclosure; (6) an indication as to when 
such information might lose its confidential character due to the 
passage of time; and (7) whether disclosure of the information would be 
in the public interest.

C. Issues for Public Comment

    The Department is interested in receiving comments and data to 
improve its preliminary analysis. In particular, the Department is 
interested in seeking response to the following questions and/or 
concerns that were addressed in this rulemaking.

[[Page 64368]]

    Information on the energy efficiency and relative market shares of 
current products on the market as described by the Modified Energy 
Descriptor (MEF):
     The Department has limited information concerning the 
energy performance of existing product offerings using the MEF 
descriptor. Given the vastly different nature of the variables and 
testing methods of the current J and future J1 test procedures, the EF 
values cannot be translated to MEF values.
    Proposed product classes for products in this rulemaking:
     In their written comments, Whirlpool asked the Department 
to maintain the current efficiency requirement for the compact class 
due to the limited potential for energy-efficient improvements and the 
small market share for these products. Whirlpool also indicated that 
the V-axis compact clothes washer market and the manufacturing base for 
these products has changed since the current standards were developed. 
The previous stand-alone 1.6 ft.\3\ compact V-axis clothes washer 
products have been replaced by a product that maintains the small 
cabinet (22'' width) utility and portability (via castors); however, 
its basket capacity is slightly larger. Because of the limited market 
size, Whirlpool is currently the only manufacturer of these products. 
They also supply them to other appliance companies for sale under 
various brand names. For these reasons, the Department will revise the 
compact V-axis product class definition (1.6 ft.\3\ capacity) to 
include all V-axis clothes washers less than 2.0 ft.\3\ (Whirlpool, No. 
69 at 3). The Department plans to increase the compact class to include 
all clothes washers (both V- and H-axis machines) less than 2.0 ft.\3\ 
and seeks comments on this change.
     The Department received comments suggesting that it 
identify V- and H-axis machines as a single product class. Whirlpool 
stated that the DOE's analyses to date and the recent consumer 
acceptance in the market of H-axis products confirm the validity of a 
single product class, irrespective of the axis. Whirlpool further 
stated that the concerns over clothes washer performance, consumer 
utility and reliability are unfounded in either principle or fact. 
(Whirlpool, No. 93 at 1.) The Natural Resources Defense Council (NRDC) 
stated that the ``H-axis'' design option does not affect the utility of 
clothes washers and it is not the only design option that can comply 
with the standards. According to the NRDC, the evidence does not 
support the establishment of different standards even if separate 
classes were established. (NRDC, No. 60 at 1.)
    However, other commenters feel that the Department should not 
reject separate product classes. General Electric Appliances (GEA) 
indicated that the Department is proceeding as if all relevant consumer 
utilities are met by H-axis products already on the market or by 
machines planned for production. GEA further stated that the port of 
access is not the only relevant consumer utility that must be 
addressed. Many other consumer utilities, including reliability, must 
be addressed. (GEA, No. 88 at 2.) The Department seeks additional 
comments on this issue and is currently working with stakeholders to 
formulate a process to gather additional consumer input on the issues 
surrounding clothes washer utility. This process is discussed further 
in Section II.F.2.b.
    The relationship between clothes washer capacity and the maximum 
achievable efficiency using conventional V-axis designs:
     AHAM commented that the testing performed for DOE reflects 
an incorrect assessment of energy efficiency on current models and 
indicated that manufacturers could not achieve these levels with 
traditional V-axis clothes washers. (AHAM, No. 84 and 86). Based on 
follow-up testing conducted for DOE, there appears to be a significant 
variation in the RMC values obtained in tests even for clothes washers 
of the same model. DOE plans to further review this issue. Since the 
two models approaching a 30 percent improvement in efficiency were 
``super capacity'' models, the Department will try to determine if 
capacity or volume effects the maximum achievable efficiency 
improvement in V-axis designs. The Department seeks comment on this 
issue.
    Data as to whether detergent use is a factor in consumer operating 
cost and savings:
     ACEEE stated that the present analysis ignores the 
possibility that some consumers will use less detergent with new high-
efficiency machines than with standard machines. They recommend that 
DOE construct two alternative scenarios (one that no detergent will be 
saved and the other that some consumers will use less detergent). ACEEE 
indicated that the Bern Kansas study provided some evidence for 
detergent savings. (ACEEE, No. 94 at 2). Proctor and Gamble commented 
that the perception that detergent dosage will reduce in horizontal 
axis or drum washers essentially proportionally to water volume is 
invalid. This appears to be a popular belief, but it is not 
substantiated by the facts. The important impact is that users of new 
lower water/energy efficient washers cannot expect to find detergent 
cost savings. (Proctor & Gamble, No. 9 at 1). DOE seeks additional data 
on this issue.
    Data on retail mark-up assumption:
     The American Council for an Energy-Efficient Economy 
(ACEEE) commented that at the March 1998 workshop the Circuit City 
representative suggested that assuming an average 40 percent retail 
markup is probably too high. A 25 percent retail markup was more 
typical of the industry. The 40 percent estimate may have factored in 
higher markups on extended warranties and other services. (ACEEE, No. 
94 at 3). In reviewing Circuit City's comment, the Department 
understands that the statement referred to a gross margin of 25 percent 
which represents a mark-up of 1.33. This is in close agreement with the 
Department analysis of retailer financial statements having an 
important component of appliances in their product mix (25.2 percent to 
26.3 percent gross margin). Also, as referenced in the Preliminary TSD, 
this gross margin is the net of some buying and warehousing costs. At 
present the Department has no basis for changing the retail mark-up 
assumption. DOE will continue to research data sources and seeks 
comment on this issue.
    Information on national level historical, current, and projections 
of water and sewer rates:
     Information on water prices is not as readily available as 
fuel prices information. Some utilities have large fixed charges, while 
others are subsidized or paid for through taxes. Furthermore, there are 
no standard approaches to calculating water and sewer costs. In some 
locations the price of water increases as consumption increases. In 
other areas, water price decreases with increasing consumption. 
Additional consideration must be given to consumers who are not 
connected to a municipality water supply or sewage system. In some 
cases, only one or the other is connected. As with other variables, the 
Department plans to use a range of water prices in the economic 
analysis to account for the variability among different households. DOE 
seeks information on national level historical, current, and 
projections of water and sewer rates.
     The Department agrees that future water prices should not 
be assumed to be constant and is therefore in the process of further 
analyzing both current prices and future escalation rates. The proposed 
analysis is on going and will be completed after the ANOPR

[[Page 64369]]

is released. The proposed analysis consists of updating previous data 
from Ernst and Young report as adjusted by Al Dietemann, as well as the 
use of new data obtained from the American Water Works Association 
(AWWA). The Ernst and Young data is being updated by calling 125 
utilities, getting their water rate schedules and their forecasts for 
the future, as well as any historical information available. The 
Department is working on combining these two data sources into one 
database. This data will be organized by utility and can be mapped onto 
either individual RECs households or onto regional areas. A 
distribution of water prices (as in the current analysis) will be used, 
as well as a distribution of escalation rates. In an attempt to be 
consistent with the methodology being developed for fuel rates, the 
Department will attempt to establish marginal water rates and water 
prices and escalation rates that vary with the water/wastewater 
utility. The Department is seeking comments concerning this approach.
    Information relating to the determination of price and operating 
cost elasticities:
     In order to determine the effect of an increase in the 
purchase price, it would be useful to know what the elasticity of 
clothes washer prices is. The Department is still determining how these 
data could be obtained. While preliminary analyses indicate that 
factors, such as the current state of the economy have a greater 
correlation to sales of washers than do an increase in clothes washer 
prices, it is still important to estimate the impact of changing prices 
on the sales of clothes washers. In making estimates of these price 
effects, the Department needs to gauge the difference in clothes washer 
sales from a change in the price of all clothes washers, as could 
result from revised energy efficiency standards. In addition, the 
Department will be estimating how price changes from revised energy 
efficiency standards for clothes washers will affect the behavior of 
consumers.
    Information on how the data for the GRIM analysis should be 
collected from the manufacturers:
     Whirlpool proposed that the GRIM model be changed from 
input to output aggregation. Each industry member would develop their 
own inputs to the GRIM model over a range of MEF levels proposed by the 
DOE. The GRIM models would be run by industry members to generate a 
range of individual company outputs. The outputs of the individual 
companies could then be aggregated to determine industry impact. 
Individual companies would not be required to submit detailed input 
assumptions, but only changes in revenues, shipments, profit after tax, 
and cash flow, capital investment and design and marketing spending 
could also be provided. A third party could do the aggregation and then 
conduct a reality check by comparing the aggregated output to currently 
available industry data. (Whirlpool No. 66 at 3). The Department seeks 
further input as to how the data for the GRIM analysis should be 
collected from the manufacturers and how it should be utilized.
    Comments on the proposed DOE approach for determining shipments:
     In as much as the accounting model is the only approach 
that will take into account price and operating costs, the Department 
believes it should be the primary tool for forecasting clothes washer 
shipments. The Department seeks comments about the determination of 
price and operating cost elasticities.
     For the purpose of the base case forecast in the 
preliminary analysis, the impact of voluntary programs has been 
expressed as the percent of new clothes washers sold each year that 
will have efficiencies corresponding to those of H-axis washers. The H-
axis washer is characterized using the data submitted by AHAM for a 35 
percent energy reduction from the baseline MEF. The spreadsheet uses 
disaggregated values (i.e., water heater energy, dryer energy and 
mechanical energy) provided by AHAM. Disaggregated values provided by 
AHAM for the baseline washer are also used for the base case forecast. 
Calculations based on disaggregated values reflect the efficiencies of 
machines actually being sold which may differ from the minimum required 
efficiency. The preliminary base case assumes a 1.5 percent share of H-
axis machines in 1995 with a 0.5 percent increase in H-axis sales every 
year thereafter, until 2030 (i.e., 19 percent).
    The NES spreadsheet allows for changes in the distribution of 
efficiencies of clothes washers due to non-regulatory programs. The 
user specifies the percent of new clothes washer sales that will 
achieve the selected energy reduction (relative to the baseline washer 
design) in future years. In later analyses (i.e., the NOPR) the 
Department expects to use a distribution of current and forecasted 
efficiencies based on the best available information. Information is 
still being gathered for this task. The Department seeks comment on 
this forecast and welcomes any available information on current product 
efficiencies.
    Data on the possible adverse affects of standards on identifiable 
groups of consumers that experience below-average utility or usage 
rates:
     The consumer analysis evaluates impacts to any 
identifiable groups, such as consumers of different income levels, who 
may be disproportionately affected by any national energy efficiency 
standard level.
    Information on what non-regulatory alternatives to standards need 
to be reviewed:
     Under the Process Rule policies, the Department is 
committed to continually explore non-regulatory alternatives to 
standards. In the table below is a discussion of what was examined in 
1994 and what is being proposed for this rulemaking. The Department is 
seeking comments on this approach. This approach is further discussed 
in the TSD.

------------------------------------------------------------------------
       Alternatives examined in 1994          Alternatives to examined
------------------------------------------------------------------------
--No action...............................  --No new regulatory action.
--Consumer tax credits....................  --Consumer tax credits.
--Manufacturer tax credits................  --Manufacturer tax credits.
--Performance standards...................  --Performance standards.
--Consumer rebates........................  --Rebates.
--Prescriptive standards.
--Voluntary standards.....................  --Voluntary energy
                                             efficiency targets.
--Enhanced labeling and consumer
 education.
                                            --Early replacement.
                                            --Mass government purchases.
------------------------------------------------------------------------

    Comments on the alternative standard scenarios:
     The following are examples of possible alternative 
standards scenarios for consideration by the Department:
     A moderate standard at an early effective date. For 
example, a level at a 25 percent improvement, effective three years 
after the publication of the Final Rule.
     A stringent standard, at a later effective date. For 
example, a level at 45 percent improvement effective five years after 
the publication of the Final Rule.
     A two phase approach. For example, a level at 20 percent 
effective three years after the publication of the Final Rule 
(projected effective date--October, 2002) and a level at 40 percent 
effective eight years after publication of the Final Rule.

V. Review Under Executive Order 12866

    DOE provided to the Office of Information and Regulatory Affairs

[[Page 64370]]

(OIRA) in the Office of Management and Budget a copy of this document 
for comment. At the proposal stage for this rulemaking, DOE and OIRA 
will determine whether this rulemaking is a significant regulatory 
action under Executive Order 12866, Regulatory Planning and Review. 58 
FR 51735 (October 4, 1993). Were DOE to propose amendments to the 
energy conservation standards for clothes washer, the rulemaking could 
constitute an economically significant regulatory action and DOE would 
prepare and submit to OIRA for review the assessment of costs and 
benefits required by Section 6(a)(3) of Executive Order 12866. Other 
procedural and analysis requirements in other Executive Orders and 
statutes also may apply to such future rulemaking action, including the 
requirements of the Regulatory Flexibility Act, 5 U.S. C. 601 et seq.; 
the Paperwork Reduction Act, 44 U.S.C. 3501 et seq.; and the Unfunded 
Mandates Act of 1995, Pub. L. 104-4; and the National Environmental 
Policy Act of 1969, 42 U.S. C. 4321 et seq.
    The draft of today's action and any other documents submitted to 
OIRA for review have been made a part of the rulemaking record and are 
available for public review in the Department's Freedom of Information 
Reading Room, 1000 Independence Avenue, SW, Room 1E-190, Washington, DC 
20585 between the hours of 9:00 and 4:00, Monday through Friday, 
telephone (202) 586-6020.

    Issued in Washington, DC, on October 23, 1998.
Dan W. Reicher,
Assistant Secretary, Energy Efficiency and Renewable Energy.
[FR Doc. 98-30555 Filed 11-18-98; 8:45 am]
BILLING CODE 6450-01-P