[Federal Register Volume 65, Number 17 (Wednesday, January 26, 2000)]
[Proposed Rules]
[Pages 4332-4340]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-1721]



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Part IV





Department of Energy





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Office of Energy Efficiency and Renewable Energy



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10 CFR Part 440



Weatherization Assistance Program for Low-Income Persons; Proposed Rule

  Federal Register / Vol. 65, No. 17 / Wednesday, January 26, 2000 / 
Proposed Rules  

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DEPARTMENT OF ENERGY

Office of Energy Efficiency and Renewable Energy

10 CFR Part 440

RIN 1904-AB05


Weatherization Assistance Program for Low-Income Persons

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

ACTION:  Notice of proposed rulemaking and public hearings.

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SUMMARY:  The Department of Energy (DOE) proposes to amend the 
regulations for the Weatherization Assistance Program for Low-Income 
Persons. DOE is proposing changes based on a series of open forum 
discussions with numerous State and local stakeholders as well as 
through program experience gained since issuance of the final rule on 
June 5, 1995. These proposed changes add clarifying language, delete 
obsolete language, and propose certain regulatory changes to improve 
the overall operation of the Program to assist State and local agencies 
in administering the Program. Further, these proposed changes will give 
States and local agencies additional flexibility in addressing the 
particular weatherization needs of their low-income citizens while 
achieving better program results with less paperwork.

DATES:  To ensure your comments are considered, we must receive three 
copies of your comments on or before March 27, 2000. You may present 
oral views, data, and arguments at the public hearing which will be 
held in Washington, DC, on March 3, 2000. If you would like to speak at 
this hearing, contact Mr. Greg Reamy at (202) 586-4074. Each oral 
presentation is limited to 10 minutes. The hearing will last as long as 
there are persons requesting an opportunity to speak.

ADDRESSES:  Send written comments to Greg Reamy, Weatherization 
Assistance Program Division, US Department of Energy, Mail Stop EE-42, 
5E-066, 1000 Independence Avenue, SW., Washington, DC 20585, We will 
hold a public hearing at the following address: U.S. Department of 
Energy, Room 1E-245, 1000 Independence Avenue, SW, Washington, DC. 
Please bring three copies of the prepared oral statement to the 
hearing. You may read and copy written comments received, a copy of the 
public hearing transcript, and any other docket material received as a 
result of this notice at the DOE Freedom of Information Reading Room, 
1000 Independence Avenue, SW., Washington, DC 20585 between the hours 
of 9:00 a.m.-4:00 p.m., Monday through Friday except Federal holidays. 
For more information concerning public participation in this rulemaking 
proceeding, see section IV of this notice of proposed rulemaking 
(Opportunities for Public Comment).

FOR FURTHER INFORMATION CONTACT: Greg Reamy, Weatherization Assistance 
Program Division, U.S. Department of Energy, Mail Stop EE-42, 5E-066, 
1000 Independence Avenue, SW, Washington, DC 20585, (202) 586-4074.

SUPPLEMENTARY INFORMATION:  

I. Introduction
II. Amendments to the Weatherization Assistance Program
III. Other
IV. Opportunities for Public Comment
V. Procedural Requirements
VI. Other Federal Agencies
VII. The Catalog of Federal Domestic Assistance

I. Introduction

    The Department of Energy (DOE or Department) proposes amendments to 
revise the program regulations for the Weatherization Assistance 
Program for Low-Income Persons (WAP). This Program is authorized by 
title III of the Energy Conservation and Production Act, as amended 
(Act), 42 U.S.C. 6561 et seq. The proposed changes are necessitated by 
the evolution of the program since the last publication of the rule on 
June 5, 1995 (60 FR 29470). These changes would help States by 
clarifying sections to the rule, thereby enhancing the interpretation 
and application of the program requirements. Some of the definitions in 
Sec. 440.3 would be clarified and, where needed, new definitions would 
be added to provide a clearer and more concise meaning to States and 
local agencies who must interpret these regulations. Other sections 
applying to energy audits and allowable expenditures would be clarified 
to enhance their meanings; and certain obsolete items would be deleted. 
Other regulatory changes proposed in today's rulemaking would: add new 
and eliminate obsolete terms in the Program definitions; add 
``household with a high energy burden'' and ``high residential energy 
user'' as new categories for those receiving priority service; create a 
separate cost category for health and safety expenditures and the 
purchase of vehicles by local agencies; reduce the eligibility criteria 
for certain large multi-family buildings to 50 percent; establish new 
minimum energy audit criteria for the Program; and revise the date for 
reweatherization from 1985 to 1993.
    Prior to developing and issuing this proposed rulemaking, DOE 
consulted with its primary stakeholders, representatives of both State 
and local agencies, to listen to their concerns about what issues they 
wanted DOE to consider. The Program has evolved from a relatively 
simplified approach of providing service to low-income homes with 
unskilled labor, installing low-cost/no cost retrofits, to a program 
that conducts advanced diagnostics and installs cost-effective energy 
conservation materials. The increased demand to maintain highly-trained 
crews has placed added strain on State and local agencies efforts to 
sustain a quality level of service to its low-income clients. Many of 
the changes proposed today would help lessen the administrative burden 
and provide flexibility for State and local agencies to incorporate the 
ever-changing technical enhancements as they become available. These 
proposed rule changes would also make State and local agencies better-
suited to attract non-Federal leveraged resources into their programs. 
This proposed rule attempts to address as many of those concerns as 
possible. Many of the concerns that the stakeholders raised to DOE were 
not of a regulatory nature and were addressed administratively through 
program guidance documents. Other concerns were statutory in nature and 
formed the basis of the legislative initiative proposed to the 
Congress.
    In addition to the proposed regulatory changes, the Department 
proposed on September 20, 1999 several statutory changes developed 
during discussions with State and local stakeholders. These suggested 
changes are part of the Department's legislative initiative and are 
currently under consideration by the Congress. These proposed statutory 
changes are: eliminate the requirement that 40 percent of the funds 
used to weatherize a home be spent for materials; restructure the 
method by which States compute their average cost per home and 
eliminate the separate per dwelling unit average for capital intensive 
improvements; and increase the average cost per home to $2500 beginning 
in 2000 to include the cost of making capital intensive improvements.

II. Amendments to the Weatherization Assistance Program

Section 440.1  Purpose and Scope

    DOE proposes to delete the first sentence in the Scope and Purpose 
since this information is duplicative of what is stated elsewhere in 
the proposed rule.

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DOE proposes to amend the Purpose and Scope to add to the priority 
categories the terms ``high residential energy user'' and ``household 
with a high energy burden.'' By adding these two categories, States 
would be better able to prioritize their low-income clients by 
targeting those experiencing high energy costs and burden, thereby 
addressing those units with the greatest potential for energy savings. 
Additionally, by including these two categories, State and local 
agencies would be better able to coordinate services with other Federal 
programs and leveraging opportunities. The current priority categories 
of elderly, persons with disabilities, and families with children would 
continue and remain unchanged. Definitions for these two terms are 
discussed in Sec. 440.3.

Section 440.3  Definitions

    DOE proposes to add the term ``balance point temperature'' to 
describe the outdoor temperature below which the furnace of a dwelling 
must operate to maintain comfort during the winter, and above which the 
air conditioner must operate during the summer. The balance point 
temperature is used to calculate heating and cooling degree day weather 
data as described in more detail in Sec. 440.21.
    DOE proposes a definition for ``electric base-load measures'' to 
describe energy use outside of the traditional weatherization approach 
to heating and cooling and building envelope measures. As the Program 
evolves over the next several years into a whole house approach, DOE 
believes that electric base-load measures, which account for more than 
half the energy used in a typical household, are important when 
considering total residential energy use. Limited lighting measures are 
currently permitted in the Program and in the near future DOE may 
consider including other electric base-load measures such as the 
replacement of certain appliances.
    DOE proposes to add the term ``high residential energy user'' which 
means a low-income household whose residential energy expenditures 
exceed the median level of residential expenditures for all low-income 
households in the State. The proposed definition for this category 
would permit State and local agencies to better coordinate their 
activities and resources with many utility programs.
    DOE also proposes to add the term ``household with a high energy 
burden'' which means a low-income household whose residential energy 
burden (residential expenditures divided by the annual income of that 
household) exceeds the median level of energy burden for all low-income 
households in the State. The proposed definition for this category 
would give States and local agencies greater flexibility in determining 
priority service for those households that may not have traditional 
priority individuals such as the elderly, persons with disabilities, or 
families with children, but are experiencing a particular hardship due 
to their high energy costs.
    DOE proposes to substitute the term ``persons with disabilities'' 
for the term ``handicapped'' to reflect the current accepted reference. 
The definition remains unchanged.
    DOE considered both State and local agency concerns over the 
definition of ``low-income'' and the difficulties in effectively 
administering, coordinating, and leveraging between various Federal 
low-income programs using different definitions. However, in a review 
of the statute and the legislative history of the Program, DOE chose 
not to amend the existing definition. The DOE Weatherization Assistance 
Program was established to serve the neediest Americans. To expand the 
eligibility requirements to facilitate coordination with other Federal 
programs either through increasing the poverty level to 80 percent, 
permitting census tracking of neighborhoods, or allowing area average 
median income levels would change the scope and purpose of the Program. 
More importantly, expanding the eligibility criteria would 
substantially increase the number of households eligible for assistance 
which already stands at over 29 million. DOE addresses this issue in 
detail in program guidance.

Section 440.14  State Plans

    DOE proposes to reorganize and revise Sec. 440.14 to eliminate 
unnecessary and duplicative information. DOE agrees with the States 
that these requirements are no longer needed and will reduce paperwork 
and time in the production of the annual State plan. In reorganizing 
this section, DOE proposes grouping items together relating to the 
public hearing. Items specific to the development of the State plan 
would also be placed together. The information for the production 
schedule is proposed to be projected annually instead of quarterly and 
include the number of previously weatherized homes expected to be 
weatherized.
    DOE proposes to eliminate Sec. 440.14(b)(2), (6), (7), and 
(b)(8)(iii). This information requirement resulted in the States 
providing little more than meaningless estimates to DOE. States will 
continue to report to DOE the number of persons served in each of these 
groups.
    DOE proposes to retain the requirement for information on the 
number of dwelling units expected to be weatherized for each area, but 
eliminate the expected number of previously weatherized units for each 
area. States have no idea how many previously weatherized homes can be 
expected to be weatherized for each area of the State.
    In Sec. 440.14(b)(6)(xi) DOE proposes to retain the requirement 
that States identify and describe the type of audit that meets the 
criteria outlined in Sec. 440.21 and that DOE has approved. However, 
the reference to Project Retro-Tech or another DOE-approved audit is 
proposed to be eliminated in this section as well as in Sec. 440.21.

Section 440.15  Subgrantees

    DOE proposes to amend Sec. 440.15(a)(3)(iv) to eliminate the 
reference to ``JTPA'' and replace it with ``other Federal or State 
training programs.'' The JTPA Federal program is repealed effective 
July 1, 2000 pursuant to Pub. L. 105-220.

Section 440.16  Minimum Program Requirements

    DOE proposes to amend Sec. 440.16(d) to eliminate the reference to 
``JTPA'' and replace it with ``other Federal or State training 
programs.'' The JTPA Federal program is repealed effective July 1, 2000 
pursuant to Pub. L. 105-220. States should describe any ``other Federal 
or State training program'' they will be using in their annual State 
plans as sources of labor.
    DOE proposes to add clarifying language to Sec. 440.16(b) to allow 
States to include ``high residential energy user'' and ``household with 
a high energy burden'' as priority groups among those receiving 
weatherization services. The use of the two new priority categories is 
not mandatory. By adding these two categories, DOE is providing State 
and local agencies with expanded flexibility to choose the categories 
for priority which best serve their respective programs.

Section 440.17  Policy Advisory Council

    DOE proposes to amend Sec. 440.17(a) to include the language ``or a 
State commission or council'' which meets the criteria in 
Sec. 440.17(a)(1), (2) and (3). Many State agencies which operate the 
DOE Weatherization Assistance Program have existing commissions or 
councils which review and approve policies and plans for many other 
Federal programs. By utilizing these existing bodies, States

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would eliminate the need to establish a separate Weatherization Policy 
Advisory Council which would essentially perform the same function. 
States which opt to utilize an existing commission or council would 
have to certify to DOE, as a part of the annual application, the 
council or commission as an independent reviewer of activities for the 
Program. Therefore, any person(s) employed in any State Weatherization 
Program can also be a member of an existing commission or council but 
would have to abstain in reviewing and approving the activities 
associated with the DOE Weatherization Assistance Program.

Section 440.18  Allowable Expenditures

    DOE proposes to delete from Sec. 440.18(b) and (b)(2)(i) references 
to (c)(15), the cost of eliminating health and safety hazards from the 
amount of funds used to determine the average cost per home. State and 
local agencies have indicated to DOE that including the cost of health 
and safety into the amount of funds that can be spent on a home 
severely restricts their flexibility to operate effectively their 
programs. In providing for this flexibility, DOE agrees that excluding 
these costs from the average cost per home would afford States and 
local agencies the opportunity to fund advanced technology practices 
into their weatherization programs while reducing their administrative 
burden.
    DOE proposes to revise Sec. 440.18(c)(6) to read ``Purchase or 
annual lease of tools, equipment, and the annual lease of vehicles.'' 
DOE proposes to add a new (c)(16) as a separate line item for the cost 
of purchasing vehicles. In doing so, DOE would remove the cost of 
purchasing vehicles from the amount of funds used to determine the 
average cost per home. State and local agencies argue that having the 
cost of these vehicles included in the average cost per home 
calculation placed an undue burden on them. For some local agencies, 
purchasing vehicles force them to seek low cost weatherization 
candidate homes in order to maintain operation while ignoring 
potentially higher energy savings homes.
    The proposed rule would require States to include in their 
calculations of average per unit costs the costs of leased vehicles, 
but would now permit States to exclude the cost of purchased vehicles 
from such calculations. This proposal is being made at the urging of 
States and local agencies that expressed concerns about the 
distortionary effects that the purchase price of new vehicles had on 
average per unit costs. For small agencies, the purchase of a new 
vehicle could represent a substantial fraction of the average cost of 
weatherizing units in the year the vehicle is purchased, which 
sometimes means that the amount of weatherization performed on any unit 
would have to be arbitrarily limited in order to stay under the 
Federally-specified cap on the average cost per unit. DOE is concerned, 
however, that provisions permitting the exclusion of certain vehicle 
costs, but not others, would unnecessarily distort the decisionmaking 
of States and local agencies.
    One possible alternative to this approach would be to permit States 
to exclude from their average per unit cost calculations that portion 
of the value of any large capital assets that remained at the end of 
the funding year. This would permit States to include in their average 
cost calculations only that fraction of the cost of a new vehicle which 
was actually ``used'' during the current year. This approach might also 
permit states to exclude part or most of the purchase price of other 
large capital investments that have many years of useful life. Such an 
approach would not affect the ability of States or local agencies to 
use current funds to pay for the full purchase cost of such 
investments. DOE solicits comments on its proposal to exclude the cost 
of purchased vehicles, as well as on this alternative.
    DOE proposes to amend Sec. 440.18(e)(2)(iii) by extending the date 
by which homes can be reweatherized from 1985 to 1993. Previously, DOE 
extended this date from 1975 to 1985 based on the evolution of the 
Program. Between 1975 and 1979, the Program addressed primarily 
building envelope measures. In 1985, the Program expanded to place more 
emphasis on mechanical measures, including furnace efficiency 
modifications. Since the last rulemaking which introduced new criteria 
for advanced energy audits, virtually all States have improved their 
energy auditing techniques. DOE acknowledges this overall program 
improvement by the States and is confident that by extending the date 
to 1993, those homes weatherized between 1985 and 1993 would provide an 
even greater opportunity to achieve increased energy efficiency. DOE 
also reminds States that homes which become candidates for 
reweatherization would have a new energy audit performed and that audit 
would take into consideration any previous weatherization improvements 
done on the home.

Section 440.19  Labor

    DOE revises Sec. 440.19 by deleting references to JTPA and 
replacing it with ``other Federal or State training programs.'' The 
JTPA Federal program is repealed effective July 1, 2000 pursuant to 
Pub. L. 105-220.

Section 440.21  Standards and Techniques for Weatherization

    DOE is proposing to rename, reorganize, and revise this entire 
section. The proposed name change more accurately reflects the subject 
matter of Sec. 440.21. The other major changes eliminate the base audit 
criteria and make the waiver audit criteria the minimum criteria for an 
energy audit used in the Program. In its final rule published on March 
4, 1993 (58 FR 12525), DOE provided for a waiver of the 40-percent 
material cost requirement described in Sec. 440.18(a) for those States 
that adopted advanced energy audit procedures. Today, virtually all of 
the States have incorporated an approved waiver audit and received a 
waiver of this requirement from DOE. Within the next year, all States 
will be using an approved waiver audit. DOE is proposing to make the 
existing waiver energy audit requirements the new minimum standard for 
all energy audit procedures. The 40 percent material cost requirement 
and the waiver provisions have become unnecessary and their suggested 
elimination from the statute is discussed later in this proposed rule. 
States and local agencies have made great strides in improving the 
energy auditing techniques used in their programs during this decade. 
Investments in time and resources have paid dividends in the form of 
greater energy efficiency and savings on the types of materials and the 
installation techniques used in the Program.
    To implement this change, DOE proposes to delete all references to 
Project Retro-Tech audit procedures and the simplified cost-
effectiveness tests used with Project Retro-Tech. DOE is proposing that 
all energy audits require calculation of a savings-to-investment ratio 
for weatherization measures, and assignment of priorities based on the 
resulting figures consistent with the life-cycle cost methodology 
developed by DOE's Federal Energy Management Program and the National 
Institute of Standards and Technology (NIST). DOE is also proposing 
that all energy audit procedures require a similar calculation to 
determine the overall cost effectiveness of the ``total conservation 
investment'' including incidental repairs. As in the current rule, the 
effect of explicitly including incidental repairs is that the extent of 
such repair costs would be limited by the extent of offsetting cost 
savings.

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    The procedures and required assumptions for the life-cycle cost 
methodology are described in the ``Life-Cycle Costing Manual for the 
Federal Energy Management Program,'' which is published by NIST. ``The 
Annual Supplement of NIST Handbook 135 and SP 709, Energy Price Indices 
and Discount Factors for Life-Cycle Cost Analysis'' is updated annually 
to provide an adjusted discount rate based on an average of recent U.S. 
Treasury bonds of various maturities (less inflation as estimated by 
the President's Council of Economic Advisers), as well as adjusted, 
regional, energy cost escalation rates.
    The NIST handbook was revised in 1995 to incorporate several 
changes reflecting the eight years of experience since the 1987 
revision. DOE proposes to replace the existing references in 
Sec. 440.21 to U.S. Treasury bonds, the Economic Report of the 
President's Council of Economic Advisers, and the DOE Energy 
Information Administration with citation of the NIST life-cycle costing 
manual and its annual supplement as a convenient source of discount and 
fuel cost escalation rates for States. DOE proposes to maintain the 
States' discretion to choose a reasonable discount rate higher than the 
one provided in the annual supplement.
    In its 1993 Notice of Proposed Rulemaking, DOE allowed States to 
disregard the energy cost escalation rates if they thought that local 
energy costs would not rise faster than the rate of general price 
inflation over the long term. At the time, fuel costs were projected to 
increase, and giving this discretion allowed States to require of their 
subgrantees cost-effectiveness standards that were more stringent than 
the Federal standards. With the cost of some major fuel types now 
projected to decrease over time, disregarding fuel cost adjustment 
rates could over-estimate the cost-effectiveness of energy conservation 
measures. For this reason, DOE is proposing to require States to use 
the fuel cost escalation rates/indices in the NIST annual supplement.
    DOE is proposing to include in paragraph (d), the sentence, ``The 
lifetime of materials must not exceed the remaining useful life of the 
dwelling,'' to acknowledge that the low-income housing stock served by 
some programs is in poor condition. A weatherization measure may have a 
savings-to-investment ratio exceeding one assuming an economic life of 
twenty years for that material, but a savings-to-investment ratio of 
less than one in light of a remaining useful dwelling life of, for 
example, ten years.
    DOE is proposing to include in Sec. 440.21(f)(1) the phrase ``using 
generally accepted engineering methods'' to remind States to use 
reasonable energy-estimating methods and assumptions to account for the 
interaction among weatherization measures.
    Paragraph (h) describes the proposed requirements for energy audit 
procedures that do not pertain to life-cycle costing methods. In 
paragraph (h)(1), DOE is proposing to substitute the phrase ``climatic 
data'' for the existing ``number of heating or cooling degree days'' to 
acknowledge that other types of weather data besides heating and 
cooling degree days can be used in the estimation of fuel cost savings.
    DOE is also proposing to include language in paragraph (h)(1) to 
encourage States to set the balance point temperature(s) used in 
conjunction with heating and cooling degree data to more reasonably 
reflect the outside temperatures which require operation of heating or 
cooling equipment to maintain comfort. Heating degree days are computed 
by subtracting the average daily temperature from a balance point 
temperature, which has traditionally been 65 deg. F. The traditional 
heating degree day balance point temperature assumes that the furnace 
needs to run at outside temperatures less than 65 deg. F. In reality, 
the furnace is typically not needed until the outside temperature drops 
below around 60 deg. F due to the heat generated by lights and people. 
Similarly, air conditioning is not usually required until outside 
temperatures exceed traditional cooling degree day balance points by 
about 5 to 10 deg. F. Encouraging States to set balance points to more 
reasonably reflect their housing stock and climate would reduce the 
overestimation of energy savings for most measures, which would more 
accurately model their true cost-effectiveness.
    The State Energy Efficiency Programs Improvement Act of 1990, which 
amended 42 U.S.C. 6861 et seq., stated that energy audit procedures 
should ``establish priorities for selection of weatherization measures 
based on their cost and contribution to energy efficiency.'' DOE 
interprets this language, in part, to mean that advanced energy audit 
procedures should consider energy efficiency as well as total energy 
savings. For example, replacing an existing space heater being used to 
heat a single room, with a more energy efficient central furnace, 
capable of heating the whole house, would probably increase energy use 
even as it improved energy efficiency. The occupants would also be 
better able to use the entire dwelling unit. Unless undertaken for 
health and safety reasons, this measure is to be cost justified by the 
audit. Addressing energy efficiency in this case would require a cost 
justification that compares the energy usage of the central unit to the 
energy usage of heating the entire home with space heaters.
    The existing rule language addressing this issue states that energy 
audit procedures must ``consider the rate of energy use,'' which does 
not clearly describe the need to look at both energy efficiency and 
total energy savings. To more directly address situations similar to 
the space heater example, DOE is proposing instead to include in 
paragraph (h)(2) the phrase ``and energy requirements.'' This proposed 
change combines the requirement to determine the existing energy use 
with the need to determine existing energy requirements from actual 
energy bills or by generally accepted engineering calculations. As in 
the space heater example, the energy requirements of a dwelling unit 
may exceed its existing energy use.
    Proposed paragraph (h)(7) reminds States that DOE would have to 
approve an energy audit for each major dwelling type covered by the 
State's weatherization program in light of the different energy audit 
requirements of single-family dwellings, multi-family buildings, and 
mobile homes.
    In paragraph (i), DOE is proposing language that clarifies the type 
of information DOE requires to approve State priority lists for similar 
dwelling units. When States submit to DOE their request for priority 
list approval, they often do not provide sufficient details. For 
example, inadequate information is provided to explain how dwellings 
covered by the priority list were established. They also do not tell 
how the subset of similar dwellings used to develop the priority list 
was determined, or adequately describe the circumstances that will 
require a site-specific audit in lieu of the priority list. The 
increased energy savings resulting from advanced energy audit 
procedures could be compromised by priority lists that are not based on 
truly typical housing stock or used without comprehensive guidelines 
that tell an auditor when atypical circumstances require a site-
specific audit.
    In Sec. 440.21(k), to make the revalidation of priority lists more 
straightforward, DOE is proposing to require States to submit to DOE 
for approval every five years their complete energy audit procedures 
including priority lists and lists of general heat waste reduction 
materials. To revalidate their priority lists, States would have to

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re-run their energy audit on a subset of the similar dwellings that the 
priority list covers. States have made the logical argument that their 
housing stock and typical housing types have not changed in five years. 
However, technologies, relative costs, and auditing tools do change. 
Revalidating priority lists every five years is meaningless if States 
merely resubmit their original list and indicate that nothing has 
changed. DOE encourages the continual improvement of audit tools as 
evidenced by new versions of the National Energy Audit (NEAT) over the 
years. The best and most current audit software should be used in 
developing priority lists. Since the latest version of a State's audit 
software may not have specific DOE approval, it makes sense for the DOE 
approval process to update the energy audit, priority lists, and lists 
of general heat waste reduction measures every five years.
    Furthermore, DOE is proposing that new versions of energy audit 
software or manual methods released after a State-specific DOE 
approval, other than the NEAT and the Mobile Home Energy Audit (MHEA) 
developed by DOE, be re-approved by DOE before a State adopts a new 
version. Since DOE controls the content of NEAT and MHEA, new versions 
of these two software packages are designed to comply with the 
requirements of Sec. 440.21; thus no pre-approval would be needed. 
However, DOE has no such control over the content of new versions of 
other energy audit software. To ensure that States' energy audit 
procedures continue to comply with Sec. 440.21, language is proposed 
that would require States to get DOE approval for any and all specific 
versions of energy audit software and manual methods before a State 
adopts the energy audit.
    While not a part of this proposed rule, DOE may propose in the 
future to require States to include overhead charges (such as costs for 
supervisory personnel, tools, vehicles, etc.) in the savings to 
investment ratio calculations for individual weatherization measures. 
Such costs are a significant fraction of the total costs of 
weatherizing individual homes and should, therefore, be considered in 
the assessment of the relative costs and benefits of measures. States 
are now permitted, but not required, to include such overhead costs in 
their saving to investment ratio calculations. These costs might be 
incorporated in these calculations through the use of a standard 
percentage to adjust the material and labor costs currently used or 
States and local agencies might develop more sophisticated approaches 
to including overhead costs. DOE urges States to consider such overhead 
costs now. In developing any future proposal to require the inclusion 
of overhead costs, DOE intends to solicit the views of States or local 
agencies that have already attempted to incorporate such costs, as well 
as the views of other stakeholders. DOE is particularly interested in 
receiving information that indicates how the consideration of such 
overhead costs affects the overall cost-effectiveness of State and 
local weatherization efforts. DOE would welcome comments on this issue 
as a part of this proposed rule.

Section 440.22  Eligible Dwelling Units

    DOE proposes to amend Sec. 440.22(b)(2) to add certain eligible 
types of large multi-family buildings to the list of dwellings that are 
exempt from the requirement that at least 66 percent of the units are 
to be occupied by income-eligible households. In these large multi-
family buildings, as few as 50 percent of the units would have to be 
certified as eligible before weatherization. This exception would apply 
only to those large multi-family buildings where an investment of DOE 
funds would result in significant energy-efficiency improvement because 
of the upgrades to equipment, energy systems, common space, or the 
building shell. By providing this flexibility, local agencies would be 
better-suited to select the most cost-effective investments and enhance 
their partnership efforts in attracting leveraged funds and/or landlord 
contributions.

III. Other

A. Legislative Initiative

    On September 20, 1999, the Department proposed a legislative 
initiative for consideration by the Congress to make certain statutory 
changes to the Program based on discussions held with State and local 
stakeholders. The suggested statutory changes are: (1) Eliminate the 
requirement in Sec. 440.18 that 40 percent of the funds used to 
weatherize a home be spent for materials; (2) restructure the method in 
Sec. 440.18 by which States compute their average cost per home by 
increasing the average cost per home to $2500 beginning in 2000; and 
(3) eliminate the separate per dwelling unit average in Sec. 440.18 for 
capital intensive improvements and include capital intensive costs as a 
part of the average costs. If this legislative proposal is enacted, DOE 
will publish implementing regulatory amendments for public comment.

B. Inclusion of Preamble Language From Previous Rulemakings

    DOE plans to include in the preamble of the final rule clarifying 
language on several areas of the program regulations where no actual 
changes were made. This action will provide States and local agencies 
the benefit of explanatory language used in the preambles of previous 
rulemakings which are still applicable today. This is necessary since 
many State and local staffs have changed several times over the years 
and much institutional knowledge has been lost. A comprehensive final 
rule will provide Federal, State, and local agency staff a central 
document for program regulatory information. This will also help in 
providing uniform interpretation of the regulations at all levels of 
the Program.

IV. Opportunities for Public Comment

A. Participation in Rulemaking

    The Department encourages public participation in this rulemaking. 
The Department has established a period of 60 days following 
publication of this notice for persons to comment on this notice of 
proposed rulemaking. You may review all public comments and other 
docket material in the DOE Freedom of Information Reading Room at the 
address shown at the beginning of this notice of proposed rulemaking.

B. Written Comment Procedures

    Interested persons and organizations are invited to participate in 
this rulemaking by submitting data, views, or comments with respect to 
the proposed rulemaking. Please provide three copies of your comments 
to the address indicated in the ADDRESSES section of this notice of 
proposed rulemaking. DOE will consider all timely-submitted comments 
and other relevant information before issuing a final rule.

C. Public Hearing

1. Request To Speak Procedures
    The time and place of the public hearing are indicated in the DATES 
and ADDRESSES sections of this notice. The Department invites any 
person or organization having an interest in the proposed rulemaking to 
request to make an oral presentation. Your request should be directed 
to DOE at the address indicated in the ADDRESSES section of this notice 
of proposed rulemaking. You should bring three copies of your statement 
to the hearing.
2. Conduct of the Hearing
    DOE will designate an official to preside at the hearing. This will 
not be

[[Page 4337]]

an evidentiary or judicial-type hearing but will be conducted in 
accordance with 5 U.S.C. 553 and section 501 of the Department of 
Energy Organization Act, 42 U.S.C. 7191. Only those conducting the 
hearing may ask questions. At the conclusion of all initial oral 
statements, each person who has made an oral statement will be given 
the opportunity, if he or she so desires, to make a rebuttal or 
clarifying statement. The statements will be given in the order in 
which the initial statements were made and will be subject to time 
limitations.
    DOE will prepare a transcript of the hearing. DOE will retain the 
transcript and other records of this rulemaking and make them available 
for public inspection at the DOE Freedom of Information Reading Room as 
provided at the beginning of this notice of proposed rulemaking. Any 
person may purchase a copy of the transcript from the transcribing 
reporter.
    The presiding officer will announce any further procedural rules 
needed for the proper conduct of the hearing.

V. Procedural Requirements

A. Review Under Executive Order 12866

    Today's proposed regulatory action has been determined not to be 
``a significant regulatory action'' under Executive Order 12866, 
``Regulatory Planning and Review,'' 58 FR 51735 (October 4, 1993). 
Accordingly, this action was not subject to review under that Executive 
Order by the Office of Information and Regulatory Affairs of the Office 
of Management and Budget (OMB).

B. Review Under the Regulatory Flexibility Act

    The Regulatory Flexibility Act, 5 U.S.C. 601 et seq., requires 
preparation of an initial regulatory flexibility analysis for any rule 
that by law must be proposed for public comment, unless the agency 
certifies that the rule, if promulgated, will not have a significant 
economic impact on a substantial number of small entities. This 
rulemaking would amend 10 CFR part 440 to give State and local agencies 
additional flexibility in addressing the weatherization needs of low-
income citizens and to make other changes designed to streamline and 
update DOE's weatherization assistance program. The proposed rule was 
developed following extensive consultation with State and local 
stakeholders, and DOE does not think the proposed rule would have any 
adverse economic impact on any small governments, organizations or 
businesses. Accordingly, DOE certifies that the rule, if promulgated, 
will not have a significant economic impact on a substantial number of 
small entities.

C. Review Under the Paperwork Reduction Act

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

D. Review Under the National Environmental Policy Act

    This proposed rulemaking has been reviewed according to the 
requirements of the Department's regulations (10 CFR Part 1021) 
implementing the National Environmental Policy Act of 1969, 42 U.S.C. 
4321 et seq. This rulemaking would amend 10 CFR Part 440 to give State 
and local agencies additional flexibility in addressing the 
weatherization needs of their low-income citizens and to make other 
changes designed to streamline and update DOE's weatherization 
assistance program. The Department has determined that this proposed 
rulemaking is covered by the Categorical Exclusion in paragraph A5 to 
subpart D, 10 CFR Part 1021 (rulemaking interpreting or amending an 
existing regulation, no change in environmental effect.) Accordingly, 
neither an Environmental Assessment nor an Environmental Impact 
Statement is required.

E. Review Under Executive Order 13132

    Executive Order 13132 (64 FR 43255, August 10, 1999) imposes 
certain requirements on agencies formulating and implementing policies 
or regulations that preempt State law or that have federalism 
implications. Agencies are required to examine the constitutional and 
statutory authority supporting any action that would limit the 
policymaking discretion of the States and carefully assess the 
necessity for such actions. DOE has examined today's proposed rule and 
has determined that it does not preempt State law and does not have a 
substantial direct effect on the States, on the relationship between 
the national government and the States, or on the distribution of power 
and responsibilities among the various levels of government. No further 
action is required by Executive Order 13132.

F. Review Under Executive Order 12988

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

G. Review Under the Unfunded Mandates Reform Act

    Title II of the Unfunded Mandates Reform Act of 1995 (Pub. L. No. 
104-4) requires each Federal agency to prepare a written assessment of 
the effects of any Federal mandate in a proposed or final rule that may 
result in the expenditure by State, local, and tribal governments, in 
the aggregate, or by the private sector, of $100 million in any one 
year. The Act also requires a Federal agency to develop an effective 
process to permit timely input by elected officers of State, local, and 
tribal governments on a proposed ``significant intergovernmental 
mandate,'' and it requires an agency to develop a plan for giving 
notice and opportunity for timely input to potentially affected small 
governments before establishing any requirement that might 
significantly or uniquely affect small governments. The proposed rule 
published today does not contain any Federal mandate, so these 
requirements do not apply.

H. Review Under the Treasury and General Government Appropriations Act

    Section 654 of the Treasury and General Government Appropriations

[[Page 4338]]

Act, 1999 (Pub. L. No. 105-277) requires Federal agencies to issue a 
Family Policymaking Assessment for any proposed rule or policy that may 
affect family well-being. Today's proposal would not have any impact on 
the autonomy or integrity of the family as an institution. Accordingly, 
DOE has concluded that it is not necessary to prepare a Family 
Policymaking Assessment.

VI. Other Federal Agencies

    DOE provided draft copies of the proposed rule to the Department of 
Health and Human Services' Low-Income Home Energy Assistance Program 
and the Department of Agriculture's Farmers Home Administration. We 
have received no comments. DOE also provided a draft copy to the 
Administrator of the Environmental Protection Agency, pursuant to 
Sec. 7 of the Federal Energy Administration Act, as amended, 15 U.S.C. 
766. The Administrator has made no comments.

VII. The Catalog of Federal Domestic Assistance

    The Catalog of Federal Domestic Assistance number for the 
Weatherization Assistance Program for Low-Income Persons is 81.042.

List of Subjects in 10 CFR Part 440

    Administrative practice and procedure, Aged, Energy conservation, 
Grant programs-Energy, Grant programs-Housing and community 
development, Persons with disabilities, Housing standards, Indians, 
Reporting and recordkeeping requirements, weatherization.

    Issued in Washington, DC, on January 18, 2000.
Dan W. Reicher,
Assistant Secretary, Energy Efficiency and Renewable Energy.

    For the reasons set forth in the preamble, DOE proposes to amend 
Part 440 of Title 10, Code of Federal Regulations, as set forth below.

PART 440--WEATHERIZATION ASSISTANCE PROGRAM FOR LOW-INCOME PERSONS

    1. The authority citation for part 440 is revised to read as 
follows:

    Authority:  Title IV, Energy Conservation and Production Act, 
(42 U.S.C. 6861 et seq.), as amended; Department of Energy 
Organization Act, (42 U.S.C. 7101 et seq.).

    2. Section 440.1 is revised to read as follows:


Sec. 440.1  Purpose and scope.

    This part implements a weatherization assistance program to 
increase the energy efficiency of dwellings owned or occupied by low-
income persons, reducing their total residential expenditures, and 
improve their health and safety, especially low-income persons who are 
particularly vulnerable such as the elderly, persons with disabilities, 
families with children, high residential energy users, and households 
with high energy burden.
    3. In Sec. 440.3, remove the definition for ``JTPA'' and 
``Handicapped Person'' and add the following definitions in 
alphabetical order to read as follows:


Sec. 440.3  Definitions.

* * * * *
     Balance point temperature means the outdoor temperature below 
which the furnace of a dwelling must operate to maintain comfort during 
the winter, or above which the air conditioner must operate during the 
summer.
* * * * *
     Electric base-load measures means measures which address the 
energy efficiency and energy usage of lighting and appliances.
* * * * *
     High residential energy user means a low-income household whose 
residential energy expenditures exceed the median level of residential 
expenditures for all low-income households in the State.
     Household with a high energy burden means a low-income household 
whose residential energy burden (residential expenditures divided by 
the annual income of that household) exceeds the median level of energy 
burden for all low-income households in the State.
* * * * *
     Persons With Disabilities means any individual--
    (1) Who is a handicapped individual as defined in section 7(6) of 
the Rehabilitation Act of 1973,
    (2) Who is under a disability as defined in section 1614(a)(3)(A) 
or 223(d)(1) of the Social Security Act or in section 102(7) of the 
Developmental Disabilities Services and Facilities Construction Act, or
    (3) Who is receiving benefits under chapter 11 or 15 of title 38, 
U.S.C.
* * * * *
    4. Section 440.14 is revised to read as follows:


Sec. 440.14  State plans.

    (a) Before submitting to DOE an application, a State must provide 
at least 10 days notice of a hearing to inform prospective subgrantees, 
and must conduct one or more public hearings to receive comments on a 
proposed State plan. The notice for the hearing must specify that 
copies of the plan are available and state how the public may obtain 
them. The State must prepare a transcript of the hearings and accept 
written submission of views and data for the record.
    (b) The proposed State plan must:
    (1) Identify and describe proposed weatherization projects, 
including a statement of proposed subgrantees and the amount each will 
receive;
    (2) Address the other items contained in paragraph (c) of this 
section; and
    (3) Be made available throughout the State prior to the hearing.
    (c) After the hearing, the State must prepare a final State plan 
that identifies and describes:
    (1) The production schedule for the State indicating projected 
expenditures and the number of dwelling units, including previously 
weatherized units which are expected to be weatherized annually during 
the program year;
    (2) The climatic conditions within the State;
    (3) The type of weatherization work to be done;
    (4) An estimate of the amount of energy to be conserved;
    (5) Each area to be served by a weatherization project within the 
State, and must include for each area:
    (i) The tentative allocation;
    (ii) The number of dwelling units expected to be weatherized during 
the program year; and
    (iii) Sources of labor.
    (6) How the State plan is to be implemented, including:
    (i) An analysis of the existence and effectiveness of any 
weatherization project being carried out by a subgrantee;
    (ii) An explanation of the method used to select each area served 
by a weatherization project;
    (iii) The extent to which priority will be given to the 
weatherization of single-family or other high energy-consuming dwelling 
units;
    (iv) The amount of non-Federal resources to be applied to the 
program;
    (v) The amount of Federal resources, other than DOE weatherization 
grant funds, to be applied to the program;
    (vi) The amount of weatherization grant funds allocated to the 
State under this part;
    (vii) The expected average cost per dwelling to be weatherized, 
taking into account the total number of dwellings to be weatherized and 
the total amount of funds, Federal and non-Federal, expected to be 
applied to the program;

[[Page 4339]]

    (viii) The average amount of the DOE funds specified in 
Sec. 440.18(c)(1) through (9) to be applied to any dwelling unit;
    (ix) The average amount of DOE funds applied to any dwelling unit 
for weatherization materials as specified in Sec. 440.18(c)(1);
    (x) The procedures used by the State for providing additional 
administrative funds to qualified subgrantees as specified in 
Sec. 440.18(d);
    (xi) Procedures for determining the most cost-effective measures in 
a dwelling unit;
    (xii) The definition of ``low-income'' which the State has chosen 
for determining eligibility for use statewide in accordance with 
Sec. 440.22(a);
    (xiii) The definition of ``children'' which the State has chosen 
consistent with Sec. 440.3; and
    (xiv) The amount of Federal funds and how they will be used to 
increase the amount of weatherization assistance that the State obtains 
from non-Federal sources, including private sources, and the expected 
leveraging effect to be accomplished.
    5. Section 440.15 is amended by revising paragraph (a)(3)(iv) as 
follows:


Sec. 440.15  Subgrantees.

    (a) * * *
    (3) * * *
    (iv) The ability of the subgrantee to secure volunteers, training 
participants, public service employment workers, and other Federal or 
State training programs.
* * * * *
    6. Section 440.16 is amended by revising paragraphs (b) and (d) to 
read as follows:


Sec. 440.16  Minimum program requirements.

* * * * *
    (b) Priority is given to identifying and providing weatherization 
assistance to:
    (1) Elderly persons;
    (2) Persons with disabilities;
    (3) Families with children;
    (4) High residential energy users; and
    (5) Households with a high energy burden.
* * * * *
    (d) To the maximum extent practicable, the grantee will secure the 
services of volunteers when such personnel are generally available, 
training participants and public service employment workers, other 
Federal or State training program workers, to work under the 
supervision of qualified supervisors and foremen;
* * * * *
    7. In Sec. 440.17 paragraph (a) introductory text is revised and 
paragraphs (b) and (c) are added to read as follows:


Sec. 440.17  Policy Advisory Council.

    (a) Prior to the expenditure of any grant funds, a State policy 
advisory council, or a State commission or council which serves the 
same functions as a State policy advisory council, must be established 
by a State or by the Support Office Director if a State does not 
participate in the Program which:
* * * * *
    (b) Any person employed in any State Weatherization Program may 
also be a member of an existing commission or council, but must abstain 
from reviewing and approving activities associated with the DOE 
Weatherization Assistance Program.
    (c) States which opt to utilize an existing commission or council 
must certify to DOE, as a part of the annual application, of the 
council's or commission's independence in reviewing and approving 
activities associated with the DOE Weatherization Assistance Program.
    8. Section 440.18 is amended by revising paragraph (a), removing 
the phrase ``and (c)(15)'' in the introductory text to paragraph (b) 
and in paragraph (b)(2)(i); revising paragraph (c)(6); adding paragraph 
(c)(16); and revising ``September 30, 1985'' to read ``September 30, 
1993'' in paragraph (e)(2)(iii) to read as follows:


Sec. 440.18  Allowable expenditures.

    (a) States must spend an average of at least 40 percent of the 
funds provided them for weatherization materials, labor and related 
matters listed in paragraphs (c)(1) through (9) of this section. DOE 
may approve a State's application to waive the 40 percent requirement 
under Sec. 440.21.
* * * * *
    (c) * * *
    (6) Purchase or annual lease of tools and equipment and the annual 
lease of vehicles;
* * * * *
    (16) The cost of purchasing vehicles, except that any purchase of 
vehicles must be referred to DOE for prior approval in every instance.
* * * * *
    9. Section 440.19 is revised to read as follows:


Sec. 440.19  Labor.

    Payments for labor costs under Sec. 440.18(c)(2) must consist of:
    (a) Payments permitted by the Department of Labor to supplement 
wages paid to training participants, public service employment workers, 
or other Federal or State training programs; and
    (b) Payments to employ labor or to engage a contractor 
(particularly a nonprofit organization or a business owned by 
disadvantaged individuals which perform weatherization services), 
provided a grantee has determined an adequate number of volunteers, 
training participants, public service employment workers, or other 
Federal or State training programs are not available to weatherize 
dwelling units for a subgrantee under the supervision of qualified 
supervisors.
    10. Section 440.21 is revised to read as follows:


Sec. 440.21  Weatherization materials standards and energy audit 
procedures.

    (a) Paragraph (b) of this section describes the required standards 
for weatherization materials. Paragraphs (c) through (g) of this 
section describe the cost-effectiveness tests that weatherization 
materials must pass before they may be installed in an eligible 
dwelling unit. Paragraph (h) of this section lists the other energy 
audit requirements that do not pertain to cost-effectiveness tests of 
weatherization materials. Paragraphs (i) and (j) of this section 
describe the use of priority lists and lists of presumptively cost-
effective general heat waste reduction materials as part of a State's 
energy audit procedures. Paragraphs (k) and (l) of this section explain 
that a State's energy audit procedures, priority lists, and lists of 
general heat waste reduction materials must be re-approved by DOE every 
5 years.
    (b) State and local agencies may only purchase weatherization 
materials which meet or exceed standards prescribed and listed in 
Appendix A to this part with funds provided under this part. However, 
States may submit to DOE an unlisted material for review and approval.
    (c) Except for materials to eliminate health and safety hazards 
allowable under Sec. 440.18(c)(15), each individual weatherization 
material and package of weatherization materials installed in an 
eligible dwelling unit must be cost-effective by meeting a savings-to-
investment ratio that is greater than or equal to one. The savings-to-
investment ratio of an individual weatherization material or package of 
weatherization materials is the net fuel cost savings over the lifetime 
of the material(s), discounted to present value, divided by the 
material, installation, and related costs as defined in paragraphs (e) 
and (g) of this section.
    (d) The net fuel cost savings over the lifetime of an individual 
weatherization material or package of weatherization materials must be 
discounted using the DOE discount rate from the Annual Supplement to 
NIST Handbook 135,

[[Page 4340]]

Energy Price Indices and Discount Factors for Life-Cycle Cost Analysis 
(NISTIR 85-3273-14). The discount rate and regional fuel cost 
adjustment rates/indices provided in the annual supplement must be used 
in accordance with the procedures in NIST Handbook 135, Life-Cycle 
Costing Manual for the Federal Energy Management Program. The lifetime 
of materials must not exceed the remaining useful life of the dwelling. 
In their computation of savings-to-investment ratios, States:
    (1) May keep the discount rate constant up to 5 years and may use a 
reasonably higher real discount rate subject to a ceiling of 10 percent 
and a floor of 3 percent;
    (2) May keep the fuel cost adjustment rates/indices constant up to 
5 years; and
    (3) Must use figures for the lifetime of the materials and for the 
cost of materials and cost of the installation of the materials that 
are generally accepted in the relevant trade.
    (e) In calculating the savings-to-investment ratio of an individual 
weatherization material, the denominator must include the costs for 
materials, labor, and on-site supervisory personnel to be claimed as 
allowable under Sec. 440.18(c)(1), (2), and (7), and any other 
significant, related cost that a State requires to be included.
    (f) The energy audit procedures must assign priorities among 
individual weatherization materials in descending order of their 
savings-to-investment ratios according to paragraphs (c) through (e) of 
this section after:
    (1) Adjusting those savings-to-investment ratios for interaction 
between architectural and mechanical weatherization materials by using 
generally accepted engineering methods to decrease the estimated fuel 
cost savings for a lower priority weatherization material in light of 
fuel cost savings for a related higher priority weatherization 
material; and
    (2) Eliminating any weatherization material if its savings-to-
investment ratio, as adjusted under paragraph (f)(1) of this section, 
is less than one.
    (g) In calculating the savings-to-investment ratio of a package of 
weatherization materials to be installed in an eligible dwelling unit, 
the denominator must include the costs for materials, labor, on-site 
supervisory personnel, and incidental repairs to be claimed as 
allowable under Sec. 440.18(c)(1), (2), (7), and (9), and any other 
significant, related cost that a State requires to be included. To 
ensure that the total conservation investment in a dwelling unit has a 
positive rate of return, the numerator of the overall savings-to-
investment ratio must include the cumulative net fuel cost savings of 
all weatherization materials installed in the dwelling unit, discounted 
to present value according to paragraphs (c) and (d) of this section 
and adjusted for interaction among energy efficiency measures, if any, 
according to paragraph (f) of this section.
    (h) The energy audit procedures also must--
    (1) Compute the cost of fuel saved per year by taking into account 
the climatic data of the area of where the dwelling unit is located, 
where the balance point temperature(s) of the dwelling unit represents 
conditions when operation of heating or cooling equipment is required 
to maintain comfort, and must otherwise use reasonable energy 
estimating methods and assumptions;
    (2) Determine existing energy use and energy requirements of the 
dwelling unit from actual energy bills or by generally accepted 
engineering calculations;
    (3) Address significant heating and cooling needs;
    (4) Make provision for the use of advanced diagnostic and 
assessment techniques which DOE has determined are consistent with 
sound engineering practices;
    (5) Identify health and safety hazards to be abated with DOE funds 
in compliance with the State's DOE-approved health and safety 
procedures under Sec. 440.16(h);
    (6) Treat the dwelling unit as a whole system by examining its 
heating and cooling system, its air exchange system, and its occupants' 
living habits and needs, and making necessary adjustments to the 
priority of weatherization materials with adequate documentation of the 
reasons for such an adjustment; and
    (7) Be specifically approved by DOE for use on each major dwelling 
type covered by the State's weatherization program in light of the 
varying energy audit requirements of different dwelling types including 
single-family dwellings, multi-family buildings, and mobile homes.
    (i) For similar dwelling units without unusual energy-consuming 
characteristics, energy audits may be accomplished by using a priority 
list developed by conducting, in compliance with paragraphs (b) through 
(h) of this section, site-specific energy audits of a representative 
subset of these dwelling units. For DOE approval, States must describe 
how the priority list was developed, how the subset of similar homes 
was determined, and circumstances that will require site-specific 
audits rather than the use of the priority lists. States also must 
provide the input data and list of weatherization measures recommended 
by the energy audit software or manual methods for several dwelling 
units from the subset of similar units.
    (j) Subject to DOE approval, a State may use as a part of an energy 
audit a list of presumptively cost-effective general heat waste 
reduction weatherization materials. States must show these materials 
are cost-effective in typical dwelling units for major dwelling unit 
types in the State based on documentation of analytic reports, 
published articles, sample energy calculations, or a representative 
number of site-specific energy audits. States must also describe the 
circumstances under which such materials may be presumed cost-effective 
without need for further site-specific audit justification.
    (k) States must resubmit their energy audit procedures to DOE for 
approval every 5 years including the current version of the energy 
audit software or manual methods used by the State. New versions of 
energy audit software or manual methods released after State-specific 
DOE approval, other than the National Energy Audit (NEAT) and the 
Mobile Home Energy Audit (MHEA) developed by DOE, must be re-approved 
by DOE before adoption by a State.
    (l) Priority lists and lists of general heat waste reduction 
materials developed in accordance with paragraphs (i) and (j) of this 
section, if applicable, must also be resubmitted to DOE for approval 
every 5 years. Priority lists and lists of general heat waste reduction 
materials must be revalidated by conducting a representative sample of 
site-specific energy audits with the version of energy audit software 
or manual methods that the State submits for DOE approval in accordance 
with paragraph (k) of this section.
    11. Section 440.22 is amended by revising paragraph (b)(2) 
introductory text to read as follows:


Sec. 440.22  Eligible dwelling units.

* * * * *
    (b) * * *
    (2) Not less than 66 percent (50 percent for duplexes and four-unit 
buildings, and certain eligible types of large multi-family buildings ) 
of the dwelling units in the building:
* * * * *
[FR Doc. 00-1721 Filed 1-25-00; 8:45 am]
BILLING CODE 6450-01-P