[Federal Register Volume 65, Number 51 (Wednesday, March 15, 2000)]
[Proposed Rules]
[Pages 14128-14161]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-6106]



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Part V





Department of Energy





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Office of Energy Efficiency Efficiency and Renewable Energy



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10 CFR Part 430



Energy Conservation Program for Consumer Products; Fluorescent Lamp 
Ballast Energy Conservation Standards; Proposed Rule

  Federal Register / Vol. 65, No. 51 / Wednesday, March 15, 2000 / 
Proposed Rules  

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DEPARTMENT OF ENERGY

Office of Energy Efficiency and Renewable Energy

10 CFR Part 430

[Docket Number EE-RM-97-500]
RIN 1904-AA75


Energy Conservation Program for Consumer Products: Fluorescent 
Lamp Ballasts Energy Conservation Standards

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

ACTION: Notice of proposed rulemaking and public hearing.

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SUMMARY: The Energy Policy and Conservation Act, as amended, prescribes 
energy conservation standards for certain major household appliances, 
and requires the Department of Energy (DOE, Department, or we) to 
administer an energy conservation program for these products. The 
National Appliance Energy Conservation Amendments of 1988 require DOE 
to consider amending the energy conservation standards for fluorescent 
lamp ballasts. The Department conducted several analyses regarding the 
energy savings, benefits and burdens of amended energy conservation 
standards for fluorescent lamp ballasts and has shared the results of 
these analyses with all stakeholders. Based on these analyses, several 
of the major stakeholders, including manufacturers and energy 
efficiency advocates, submitted to the Department a joint proposal for 
the highest standard level which they believe to be technically 
feasible and economically justified. Based on our review of this 
proposal and our analyses, we believe the standards they proposed are 
technically feasible and economically justified. Therefore, today we 
propose to amend the energy conservation standard for fluorescent lamp 
ballasts for commercial and industrial applications as recommended in 
the joint proposal and announce a public hearing.

DATES: Comments must be received on or before May 29, 2000. The 
Department requests 10 copies of the written comments and, if possible, 
a computer disk. Oral views, data, and arguments may be presented at 
the public hearing to be held in Washington, D.C., beginning at 9:00 
a.m. on April 18, 2000.
    Requests to speak at the hearing must be received by the Department 
no later than 4:00 p.m., April 3, 2000. Copies of statements to be 
given at the public hearing must be received by the Department no later 
than 4:00 p.m., April 6, 2000. The DOE panel will read the statements 
in advance of the hearing and would appreciate the oral presentations 
to be limited to a summary of the statement. The length of each oral 
presentation is limited to 15 minutes.

ADDRESSES: The hearing will be held at the U.S. Department of Energy, 
Forrestal Building, Room 1E-245, 1000 Independence Avenue, SW, 
Washington, DC. Written comments, oral statements, and requests to 
speak at the hearing are to be submitted to Brenda Edwards-Jones, U.S. 
Department of Energy, Office of Energy Efficiency and Renewable Energy, 
Energy Conservation Program for Consumer Products: Fluorescent Lamp 
Ballasts, Docket No. EE-RM-97-500, 1000 Independence Avenue, S.W., 
Washington, D.C. 20585-0121.
    Copies of the public comments received, the Technical Support 
Document (TSD) and the transcript of the public hearing may be read at 
the DOE Freedom of Information Reading Room, U.S. Department of Energy, 
Forrestal Building, Room 1E-190, 1000 Independence Avenue, SW, 
Washington, DC 20585, (202) 586-3142, between the hours of 9:00 a.m. 
and 4:00 p.m., Monday through Friday, except Federal holidays. Copies 
of the TSD may be obtained from: U.S. Department of Energy, Office of 
Energy Efficiency and Renewable Energy, Forrestal Building, Mail 
Station EE-41, 1000 Independence Avenue, SW, Washington, DC 20585. 
(202) 586-9127. Copies of the analysis can also be found on the Codes 
and Standards Internet site at: http://www.eren.doe.gov/buildings/
codes__standards/applbrf/ballast.html.
    For more information concerning public participation in this 
rulemaking proceeding see Section VII, ``Public Comment Procedures,'' 
of this Notice.

FOR FURTHER INFORMATION CONTACT: Carl Adams, U.S. Department of Energy, 
Office of Energy Efficiency and Renewable Energy, EE-41, 1000 
Independence Avenue, SW, Washington, DC 20585-0121, (202) 586-9127, or 
Eugene Margolis, U.S. Department of Energy, Office of General Counsel, 
GC-72, 1000 Independence Avenue, SW, Washington, DC 20585, (202) 586-
9507.

SUPPLEMENTARY INFORMATION:

I. Introduction
    a. Authority
    b. Background
II. General Discussion
    a. Test Procedures
    b. Technological Feasibility
    1. General
    2. Maximum Technologically Feasible Levels
    c. Energy Savings
    1. Determination of Savings
    2. Significance of Savings
    d. Rebuttable Presumption
    e. Economic Justification
    1. Economic Impact on Manufacturers and Consumers
    2. Life-Cycle Costs
    3. Energy Savings
    4. Lessening of Utility or Performance of Products
    5. Impact of Lessening of Competition
    6. Need of the Nation to Conserve Energy
    7. Other Factors
III. Methodology
    a. Life-Cycle-Cost Spreadsheet
    b. National Energy Savings Spreadsheet
    c. Manufacturer Impact Analysis and Government Regulatory Impact 
Model (GRIM)
    d. NEMS Environmental Analysis
IV. Discussion of Comments
V. Analytical Results
    a. Efficiency Levels Analyzed
    b. Significance of Energy Savings
    c. Payback Period
    d. Economic Justification
    1. Economic Impact on Manufacturers and Consumers
    2. Life-Cycle Cost
    3. Energy Savings, Net Present Value and Net National Employment
    4. Lessening of Utility or Performance of Products
    5. Impact of Lessening of Competition
    6. Need of the Nation to Save Energy
    7. Other Factors
    e. Conclusion
VI. Procedural Issues and Regulatory Reviews
    a. Review Under the National Environmental Policy Act
    b. Review Under Executive Order 12866, ``Regulatory Planning and 
Review''
    c. Review Under the Regulatory Flexibility Act
    d. Review Under the Paperwork Reduction Act
    e. Review Under Executive Order 12988, ``Civil Justice Reform''
    f. ``Takings'' Assessment Review
    g. Review Under Executive Order 13132
    h. Review Under the Unfunded Mandates Reform Act
    i. Review Under the Treasury and General Government 
Appropriation Act of 1999
    j. Review Under the Plain Language Directives
VII. Public Comment Procedures
    a. Participation in Rulemaking
    b. Written Comment Procedures
    c. Public Hearing
    1. Procedure for Submitting Requests to Speak
    2. Conduct of Hearing

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

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95-619, by the National Appliance Energy Conservation Act, Public Law 
100-12, by the National Appliance Energy Conservation Amendments of 
1988, Public Law 100-357, and the Energy Policy Act of 1992, Public Law 
102-486 \1\ created the Energy Conservation Program for Consumer 
Products other than Automobiles. The consumer products subject to this 
program (often referred to hereafter as ``covered products'') include 
fluorescent lamp ballasts.
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    \1\ Part B of Title III of the Energy Policy and Conservation 
Act, as amended by the National Energy Conservation Policy Act, the 
National Appliance Energy Conservation Act, the National Appliance 
Energy Conservation Amendments of 1988, and the Energy Policy Act of 
1992, is referred to in this notice as the ``Act.'' Part B of Title 
III is codified at 42 U.S.C. 6291 et seq. Part B of Title III of the 
Energy Policy and Conservation Act, as amended by the National 
Energy Conservation Policy Act only, is referred to in this notice 
as the National Energy Conservation Policy Act.
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    Under the Act, the program consists essentially of three parts: 
Testing, labeling, and Federal energy conservation standards. The 
Department, in consultation with the National Institute of Standards 
and Technology, amends or establishes new test procedures for each of 
the covered products. Section 323. The test procedures measure the 
energy efficiency, energy use, or estimated annual operating cost of a 
covered product during a representative average use cycle or period of 
use. They must not be unduly burdensome to conduct. Section 323 (b)(3). 
A test procedure is not required if DOE determines by rule that one 
cannot be developed. Section 323(d)(1). Test procedures appear at 10 
CFR part 430, subpart B.
    The Federal Trade Commission (FTC) prescribes rules governing the 
labeling of covered products after DOE publishes test procedures. 
Section 324(a). The FTC labels indicate the annual operating cost for 
the particular model and the range of estimated annual operating costs 
for other models of that product. Section 324(c)(1). Disclosure of 
estimated operating cost is not required if the FTC determines that 
such disclosure is not likely to assist consumers in making purchasing 
decisions, or is not economically feasible. In such a case, the FTC 
must require a different useful measure of energy consumption. Section 
324(c). At the present time, there are Federal Trade Commission rules 
requiring labels for the following products: Room air conditioners, 
furnaces, clothes washers, dishwashers, water heaters, refrigerators, 
refrigerator-freezers and freezers, central air conditioners and 
central air conditioning heat pumps, and fluorescent lamp ballasts.
    The National Appliance Energy Conservation Amendments of 1988 
prescribed Federal energy conservation standards for ballasts. Section 
325(g). The Act specifies that the standards are to be reviewed by the 
Department no later than January 1, 1992. Section 325(g)(7)(A).
    Any new or amended standard must be designed so as to achieve the 
maximum improvement in energy efficiency that is technologically 
feasible and economically justified. Section 325(o)(2)(A).
    Section 325(o)(2)(B)(i) provides that before DOE determines whether 
a standard is economically justified, it must first solicit comments on 
a proposed standard. After reviewing comments on the proposal, DOE 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:

    (I) The economic impact of the standard on the manufacturers and 
on the consumers of the products subject to such standard;
    (II) 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 of, or in the initial charges for, or 
maintenance expenses of, the covered products which are likely to 
result from the imposition of the standard;
    (III) The total projected amount of energy savings likely to 
result directly from the imposition of the standard;
    (IV) Any lessening of the utility or the performance of the 
covered products likely to result from the imposition of the 
standard;
    (V) 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;
    (VI) The need for national energy conservation; and
    (VII) Other factors the Secretary considers relevant.

    In addition, section 325(o)(2)(B)(iii) establishes a rebuttable 
presumption of economic justification in instances where the Secretary 
determines that ``the additional cost to the consumer of purchasing a 
product complying with an energy conservation standard level will be 
less than three times the value of the energy * * * savings during the 
first year that the consumer will receive as a result of the standard, 
as calculated under the applicable test procedure * * *'' The 
rebuttable presumption test is an alternative path to establishing 
economic justification.
    Section 327 of the Act addresses the effect of Federal rules on 
State laws or regulations concerning testing, labeling, and standards. 
Generally, all such State laws or regulations are superseded by the 
Act. Section 327(a)-(c). Exemptions to this general rule include: (1) 
State standards prescribed or enacted before January 8, 1987, and 
applicable to appliances produced before January 3, 1988 (section 
327(b)(1)); (2) State procurement standards which are more stringent 
than the applicable Federal standard (Section 327(b)(3) and (f)(1)-
(4)); (3) State regulations banning constant burning pilot lights in 
pool heaters (Section 327(b)(4)); and (4) State standards for 
television sets effective on or after January 1, 1992, may remain in 
effect in the absence of a Federal standard for such product (Section 
327(b)(6) and 327(c)).

b. Background

    The National Energy Conservation Policy Act,\2\ which amended the 
Energy Policy and Conservation Act, required DOE to establish mandatory 
energy efficiency standards for each of the 13 covered products. These 
standards were to be designed to achieve the maximum improvement in 
energy efficiency that was technologically feasible and economically 
justified.
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    \2\ The consumer products covered by the National Energy 
Conservation Policy Act included: Refrigerators and refrigerator-
freezers; freezers; dishwashers; clothes dryers; water heaters; room 
air conditioners; home heating equipment not including furnaces; 
television sets; kitchen ranges and ovens; clothes washers; 
humidifiers and dehumidifiers; central air conditioners; and 
furnaces.
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    The National Energy Conservation Policy Act provided, however, that 
no standard for a product be established if there were no test 
procedure for the product, or if DOE determined by rule either that a 
standard would not result in significant conservation of energy, or 
that a standard was not technologically feasible or economically 
justified. In determining whether a standard was economically 
justified, the Department was directed to determine whether the 
benefits of the standard exceeded its burdens by weighing the seven 
factors discussed above.
    The National Appliance Energy Conservation Act, which became law on 
March 17, 1987, amended the Energy Policy and Conservation Act in part 
by: Redefining ``covered products'' (specifically, refrigerators, 
refrigerator-freezers, and freezers were combined into one product type 
from two; humidifiers and dehumidifiers were deleted; and pool heaters 
were added); establishing Federal energy conservation standards for 11 
of the 12 covered products; and creating a schedule, according to which 
each standard is to be reviewed to determine

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if an amended standard is required. It also established the rebuttable 
presumption test of economic justification.
    The National Appliance Energy Conservation Amendments of 1988, 
which became law on June 28, 1988, established Federal energy 
conservation standards for fluorescent lamp ballasts. These amendments 
also created a review schedule for DOE to determine if any amended 
standard for fluorescent lamp ballasts is required.
    The Energy Policy Act of 1992, which became law on October 24, 
1992, addressed various commercial appliances and equipment.
    As directed by the Act, DOE published an advance notice of proposed 
rulemaking for fluorescent lamp ballasts, as well as a variety of other 
consumer products. (55 FR 39624, September 28, 1990). The advance 
notice presented the product classes that DOE planned to analyze, and 
provided a detailed discussion of the analytical methodology and 
analytical models that the Department expected to use in performing the 
analysis to support this rulemaking.
    Pursuant to section 325 of the Act, DOE proposed to revise the 
energy conservation standards applicable to fluorescent lamp ballasts, 
as well as a variety of other consumer products. 59 FR 10464 (March 4, 
1994). On January 31, 1995, the Department published a Rulemaking 
Determination that, based on comments received, it would issue a 
revised notice of proposed rulemaking for fluorescent lamp ballasts. 60 
FR 5880 (January 31, 1995).
    A moratorium was placed on publication of proposed or final rules 
for appliance efficiency standards as part of the FY 1996 
appropriations legislation. Pub. L. 104-134. That moratorium expired on 
September 30, 1996.
    On July 15, 1996, the Department published a Process Improvement 
Rule establishing procedures, interpretations and policies to guide the 
Department in the consideration of new or revised appliance efficiency 
standards (Procedures for Consideration of New or Revised Energy 
Conservation Standards for Consumer Products). 61 FR 36974.
    The Department conducted numerous meetings, workshops and 
discussions regarding energy efficiency standards for fluorescent lamp 
ballasts resulting in the publication of a Draft Report on Potential 
Impact of Possible Energy Efficiency Levels for Fluorescent Lamp 
Ballasts, July, 1997; a Summary of Inputs for the Technical Support 
Document: Energy Efficiency Standards for Fluorescent Lamp Ballasts, 
April 20, 1998; and a Ballast Manufacturer Impact Analysis Analytical 
Approach, April 10, 1998. 62 FR 38222 (July 17, 1997) and 63 FR 16706 
(April 6, 1998). A workshop was conducted on these analyses and 
documents on April 28, 1998. 63 FR 16706 (April 6, 1998). Based on 
comments and the growing popularity of electronic ballasts with T8 
lamps, the Department solicited further comments specifically on the 
issue of whether market shifts (e.g., from T12 to T8 lamps) should be 
considered in determining the impact of an energy conservation standard 
on commercial and industrial consumers, manufacturers and the nation. 
63 FR 58330 (October 30, 1998). Further comments on the above analyses, 
and modifications resulting from those comments, culminated in 
publishing a revised analysis on the Codes and Standards Internet site 
(http://www.eren.doe.gov/buildings/codes__standards/applbrf/
ballast.html) in April of 1999. We also conducted a workshop reviewing 
this analysis on June 1, 1999. 64 FR 24634 (May 7, 1999). On the basis 
of comments received on these documents, DOE reviewed its analysis and 
prepared a TSD.
    On October 12 and 13, 1999, the National Electrical Manufacturers 
Association convened a meeting where its members negotiated with 
representatives of the American Council for an Energy Efficient 
Economy, the Natural Resources Defense Council, the Alliance to Save 
Energy and the Oregon Energy Office to produce a joint comment proposal 
for amended fluorescent lamp ballast standards. (Hereafter referred to 
as the Joint Comment.) We have evaluated the impacts of the joint 
comment proposal and those results are presented in Appendix E of the 
TSD.

II. General Discussion

a. Test Procedures

    The Act provides that no standard for a product be established if 
there is no test procedure for the product. The Amendments of 1988 set 
forth test procedures and energy conservation standards for fluorescent 
lamp ballasts. Based upon the Amendments of 1988, the Department 
established Federal test procedures for fluorescent lamp ballasts. 56 
FR 18682 (April 24, 1991). As of the effective date of the energy 
conservation standards (ballasts manufactured on or after January 1, 
1990; sold by the manufacturer on or after April 1, 1990; or 
incorporated into a luminaire by a luminaire manufacturer on or after 
April 1, 1991), all ballasts, be they energy efficient magnetic, 
cathode cutout or electronic, for use in connection with F40T12, F96T12 
or F96T12HO lamps, are required to meet a ballast efficacy factor as 
measured by the Federal test procedures. No one has petitioned DOE 
indicating the Department's test procedures were inadequate for testing 
fluorescent lamp ballasts using the above technologies. Since these are 
the same technologies considered in today's proposed rule, the 
Department considers the current Federal test procedures applicable and 
appropriate for today's proposed rule. Furthermore, stakeholders 
commenting in the Joint Comments stated that they consider the current 
Federal test procedures applicable and appropriate for the new 
recommended ballast standards. (Joint Comment, No. 91 at 6).

b. Technological Feasibility

1. General
    There are lamp ballasts in the market at all of the efficiency 
levels analyzed in today's notice. The Department, therefore, believes 
all of the efficiency levels discussed in today's notice are 
technologically feasible.
2. Maximum Technologically Feasible Levels
    The Act requires the Department, in considering any new or amended 
standards, to consider those that ``shall be designed to achieve the 
maximum improvement in energy efficiency * * * which the Secretary 
determines is technologically feasible and economically justified.'' 
(Section 325 (o)(2)(A)). Accordingly, for each class of product under 
consideration in this rulemaking, a maximum technologically feasible 
(max tech) design option was identified.
    Ballast efficiency is expressed as a ballast efficacy factor, BEF. 
It is equal to BF/W, where BF is the ballast factor expressed as a 
percentage (e.g., 90, not 0.90) and W is the input power to the ballast 
in ANSI (American National Standards Institute) C82.2-1984 in Watts. 
The most efficient technology presently available is a high frequency 
electronic ballast; this is considered the maximum technologically 
feasible (MTF) design for this analysis. The operation at high 
frequency (20 Kilohertz (kHz) or more) increases the lamp efficacy and 
also allows for lower ballast losses.
    For each product class and technology that we analyzed, there is a 
range of efficiencies in the marketplace. In consideration of this 
range, we used a different approach to selecting BEF level for the 
purposes of today's analysis than

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for the setting of the trial standard levels. The analysis represents 
the probable average savings from a movement from the base case to the 
MTF option (electronic ballast), which itself has a range of BEFs. In 
contrast, the proposed trial standards set BEF levels that allow the 
large majority of electronic ballasts to meet the standard. The 
following paragraph explains the two approaches in more detail.
    For the analysis of electronic ballasts, we chose the median (50 
percentile) BEF as the value to use from the electronic ballast product 
data supplied by the National Electrical Manufacturers Association 
(NEMA). These data are found in Appendix A of the TSD. For each product 
class, about half of the ballasts on the market have efficiencies 
greater and half lower than the level chosen for the analysis. 
Therefore, the unit energy consumption calculated for a ballast at the 
median efficiency will result in an energy use close to the average for 
that product class. The Department believes this median approach 
properly reflects the energy savings impact from using electronic 
ballasts rather than magnetic ballasts.
    For the purpose of setting efficiency standards, the Department 
chose not to differentiate within a technology (such as electronic high 
frequency ballasts) and decided to choose BEF levels that the vast 
majority of models would be able to meet. Therefore, for electronic 
ballasts in each product class, we chose the 10 percentile BEF level of 
efficiency. This means that 90 percent of the existing electronic 
ballast models can meet the standard being considered. In order to 
clearly show the differences in these BEFs, we report in the table 
below both the proposed standard level BEF (10th percentile) and the 
corresponding analysis level BEF (50th percentile) for each product 
class analyzed.

         Electronic Fluorescent Lamp Ballast Efficacy Factors \3\
------------------------------------------------------------------------
                                     Analysis BEF        Standards BEF
  Application for operation of     (50th percentile)   (10th percentile)
------------------------------------------------------------------------
One F40 T12/40-watt lamp........                2.34                2.29
Two F40 T12/40-watt lamps.......                1.19                1.17
Three F40 T12/40-watt lamps.....                0.78                0.76
Two F96 T12/40-watt lamps.......                0.65                0.63
Two F96 T12HO/40-watt lamps.....                0.43                0.39
------------------------------------------------------------------------

    Another consideration in choosing MTF levels is that experience 
shows that there is some variation in the BEFs of ``identically'' 
manufactured electronic ballasts of any product class. As indicated in 
Table A.3, Appendix A of the TSD, there is sometimes only a small 
spread between the 10 and 50 percentile BEFs. By choosing the standard 
level at the 10th percentile rather than the 50 percentile level, the 
Department is allowing manufacturing tolerance to the ballast 
manufacturers.
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    \3\ It should be noted the analyses were performed assuming 
energy saver lamps and the values in the table below are for full-
wattage T12 lamps. Table 3.5 in the TSD contains both watts and BEF 
values for various ballast types operating T12 energy saver lamps.
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c. Energy Savings

1. Determination of Savings
    The Department forecasted energy savings through the use of a 
national energy savings (NES) spreadsheet, which forecasted energy 
savings over the period of analysis for candidate standards relative to 
the base case. The Department quantified the energy savings that would 
be attributable to a standard as the difference in energy consumption 
between the candidate standards case and the base case. The base case 
represents the forecast of energy consumption in the absence of amended 
mandatory efficiency standards.
    The NES spreadsheet model is described in section III.b of this 
notice, infra, and also in Appendix B of the TSD. One of the very 
important inputs to the model is the forecast of magnetic ballast 
shipments in the absence of amended mandatory standards. Two shipments 
scenarios (shipments of magnetic ballasts decline until 2015 and 
shipments decline until 2027) were examined to attempt to cover the 
range of possibilities for market shares of electronic and magnetic 
ballasts (see Chapter 5 of the TSD). Additionally, in evaluating the 
joint comment proposal, the Department used a third shipment scenario 
(flat magnetic ballast shipment forecast) as the upper bound as 
described in Appendix E of the TSD.
    The NES spreadsheet model first calculates the energy savings in 
site energy or kilowatt-hours (kWh). Site energy is the energy directly 
consumed at building sites by the lamp/ballast systems of interest. The 
energy savings to the nation is expressed in quads, that is, 
quadrillions of British thermal units (Btus). This is the source energy 
needed to generate and transmit the electricity consumed. A time series 
of conversion factors is used to convert site energy (kWh) to source 
energy (Btu). Chapter 5 of the TSD contains a table of these conversion 
factors, which are derived from DOE/EIA's Annual Energy Outlook 1999.
2. Significance of Savings
    Under section 325(o)(3)(B) of the Act, the Department is prohibited 
from adopting a standard for a product if that standard would not 
result in ``significant'' energy savings. While the term 
``significant'' has never been defined in the Act, the U.S. Court of 
Appeals, in Natural Resources Defense Council v. Herrington, 768 F.2d 
1355, 1373 (D.C. Cir. 1985), concluded that Congressional intent in 
using the word ``significant'' was to mean ``non-trivial.''

d. Rebuttable Presumption

    The National Appliance Energy Conservation Act established new 
criteria for determining whether a standard level is economically 
justified. Section 325(o)(2)(B)(iii) states:

    If the Secretary finds that the additional cost to the consumer 
of purchasing a product complying with an energy conservation 
standard level will be less than three times the value of the energy 
* * * savings during the first year that the consumer will receive 
as a result of the standard, as calculated under the applicable test 
procedure, there shall be a rebuttable presumption that such 
standard level is economically justified. A determination by the 
Secretary that such criterion is not met shall not be taken into 
consideration in the Secretary's determination of whether a standard 
is economically justified.

    If the increase in initial price of an appliance due to a 
conservation standard would repay itself to the consumer in energy 
savings in less than three years, then we presume that such standard is 
economically justified.\4\ This

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presumption of economic justification can be rebutted upon a proper 
showing.
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    \4\ For this calculation, the Department calculated cost-of-
operation based on the DOE test procedures with assumed usage shown 
in Table 3.5 of the TSD. Commercial and industrial consumers that 
use the ballasts less hours will experience a longer payback while 
those that use them more will have a shorter payback.
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e. Economic Justification

    As noted earlier, Section 325(o)(2)(B)(i) of the Act provides seven 
factors to be evaluated in determining whether a conservation standard 
is economically justified.
1. Economic Impact on Manufacturers and Consumers
    The July 1996 Process Improvement Rule established procedures, 
interpretations and policies to guide the Department in the 
consideration of new or revised appliance efficiency standards 
(Procedures for Consideration of New or Revised Energy Conservation 
Standards for Consumer products). 61 FR 36974 (July 15, 1996). Key 
objectives of the rule have direct bearing on the implementation of 
manufacturer impact analyses. First, the Department will utilize an 
annual cash flow approach in determining the quantitative impacts on 
manufacturers. This includes a short-term assessment based on the cost 
and capital requirements during the period between the announcement of 
a regulation and the time when the regulation comes into effect, and a 
long-term assessment. Impacts analyzed include industry net present 
value, cash flows by year, changes in revenue and income, and other 
measures of impact, as appropriate. Secondly, the Department will 
analyze and report the impacts on different types of manufacturers, 
with particular attention to impacts on small manufacturers. Thirdly, 
the Department will consider the impact of standards on domestic 
manufacturer employment, manufacturing capacity, plant closures and 
loss of capital investment. Finally, the Department will take into 
account cumulative impacts of different DOE regulations on 
manufacturers.
    For consumers, measures of economic impact are the changes in 
purchase price and annual energy expense. The purchase price and annual 
energy expense, i.e., life-cycle cost, of each standard level are 
presented in Chapter 4 of the Technical Support Document (TSD). Under 
section 325 of the Act, the life-cycle cost analysis is a separate 
factor to be considered in determining economic justification. 
Additionally, the Department has decided to consider, under factor 
seven, ``other factors the Secretary considers relevant,'' the life-
cycle cost impacts on those subgroups of commercial and industrial 
consumers who, if forced by standards to purchase electronic ballasts, 
would choose to switch from T12 to T8 lighting systems.
2. Life-Cycle Costs
    One measure of the effect of proposed standards on consumers is the 
change in operating expense as compared to the change in purchase 
price, both resulting from standards. This is quantified by the 
difference in the life-cycle costs between the baseline and the more 
efficient technologies for the lamp/ballast combinations analyzed. The 
life-cycle cost is the sum of the purchase price and the operating 
expense, including installation and maintenance expenditures, 
discounted over the lifetime of the appliance.
    For each lamp/ballast combination, we calculated the life-cycle 
costs for three technologies: energy efficient magnetic, cathode cutout 
and electronic ballasts. We used real discount rates of 4, 8 and 15 
percent for the calculations. The assumption is that the consumer 
purchases the ballast in 2003. Price forecasts are taken from the 1999 
Annual Energy Outlook of the Energy Information Administration (DOE/
EIA-0383). For the probability-based life-cycle cost analysis, we used 
a distribution of marginal electricity prices for a data base of 
commercial buildings (see Chapter 4 and Appendix B of the TSD). The 
life-cycle cost calculations include ballast and lamp costs (purchase 
prices and installation costs for both and replacement costs for lamps 
only) and annual electricity costs of the lamp/ballast system operation 
over the lifetime of the ballast. Chapter 4 of the TSD contains the 
details of the life-cycle cost calculations including those considered 
under factor seven below, infra.
3. Energy Savings
    While significant conservation of energy is a separate statutory 
requirement for imposing an energy conservation standard, the Act 
requires DOE, in determining the economic justification of a standard, 
to consider the total projected energy savings that are expected to 
result directly from revised standards. The Department used the NES 
spreadsheet results, discussed earlier, in its consideration of total 
projected savings. The savings are provided in Section V of this 
notice.
4. Lessening of Utility or Performance of Products
    This factor cannot be quantified. In establishing classes of 
products and design options and by providing exemptions, the Department 
tried to eliminate any degradation of utility or performance in the 
products under consideration in this rulemaking.
    An issue of utility that was considered was the possibility of 
interference with certain equipment, such as medical monitoring 
equipment, caused by the high frequency of electronic ballasts. To 
prevent any interference that cannot be solved by electronic ballast 
designers, the Department is not establishing a standard for T8 
ballasts, thereby allowing magnetic T8 ballasts for such applications.
5. Impact of Lessening of Competition
    It is important to note that this factor has two parts; on the one 
hand, it assumes that there could be some lessening of competition as a 
result of standards; and on the other hand, it directs the Attorney 
General to gauge the impact, if any, of that effect.
    In order to assist the Attorney General in making such a 
determination, the Department has provided the Attorney General with 
copies of this notice and the Technical Support Document for review.
6. Need of the Nation To Conserve Energy
    We report the environmental effects from each standard level for 
each product under this factor in Section V of this notice.
7. Other Factors
    This provision allows the Secretary of Energy, in determining 
whether a standard is economically justified, to consider any other 
factors that the Secretary deems to be relevant. Under this factor, the 
Secretary has decided to consider the life-cycle cost impacts on those 
subgroups of consumers who, if forced by standards to purchase 
electronic ballasts, would choose to switch from T12 to T8 lighting 
systems. This analysis is part of the Department's continuing effort to 
study the economic impact of standards on consumers. While the 
Department does not believe it can set standard levels based on 
consumer purchasing behavior given the findings of the court in Natural 
Resources Defense Council v. Herrington, 768 F. 2d 1355, 1406-07 (D.C. 
Cir. 1985), where the court stated that ``the entire point of a 
mandatory program was to change consumer behavior'' and ``the fact that 
consumers demand short payback periods was itself a major cause of the 
market failure that Congress hoped to correct,'' the Department will 
consider and evaluate the impact of likely consumer actions.
    The Secretary has also decided to consider the Joint Comment. This

[[Page 14133]]

proposal segments the ballast market by defining replacement ballasts 
and proposes extended implementation dates for all segments of the 
ballast market to comply with the new standards. The proposal also 
includes certain exemptions. All of these proposals are oriented toward 
mitigating financial impacts on manufacturers and ensuring a minimal 
level of disruption to the ballast replacement marketplace.

III. Methodology

    The Process Rule outlines the procedural improvements identified by 
the interested parties. 61 FR 36974. The process improvement effort 
also included a review of the: (1) Economic models; (2) analytical 
tools; (3) methodologies; (4) non-regulatory approaches; and (5) 
prioritization of future rules.
    The Department developed two new spreadsheet tools to meet the 
objectives of the Process Rule. The first spreadsheet calculates Life-
Cycle-Cost (LCC) and Payback. The second calculates national energy 
savings (NES). We tailored versions of these two spreadsheets for the 
ballast analyses. The Department also completely revised the 
methodology used in assessing manufacturer impacts including the 
adoption of the Government Regulatory Impact Model (GRIM).
    Additionally, DOE has developed a new approach using the National 
Energy Modeling System (NEMS) to estimate impacts of ballast energy 
efficiency standards on electric utilities and the environment. The 
Department used a version of Energy Information Administration's (EIA) 
NEMS for the utility and environmental analyses. NEMS simulates the 
energy economy of the U.S. and has been developed over several years by 
the EIA primarily for the purpose of preparing the Annual Energy 
Outlook (AEO). NEMS produces a widely-known baseline forecast for the 
U.S. through 2020 that is available in the public domain. The version 
of NEMS used for appliance standards analysis is called NEMS-BRS \5\, 
and is based on the AEO99 version with minor modifications. NEMS offers 
a sophisticated picture of the effect of standards since its scope 
allows it to measure the interactions between the various energy supply 
and demand sectors and the economy as a whole.
---------------------------------------------------------------------------

    \5\ EIA approves use of the name NEMS to describe only an AEO 
version of the model without any modification to code or data. 
Because our analysis entails some minor code modifications and the 
model is run under various policy scenarios that deviate from AEO 
assumptions, the name NEMS-BRS refers to the model as used here.
---------------------------------------------------------------------------

a. Life-Cycle-Cost Spreadsheet

    This section describes the LCC spreadsheet model used for analyzing 
the economic impacts of possible standards on individual commercial and 
industrial consumers. Details of the spreadsheet model can be found in 
Appendix A. We conduct the LCC analysis with a spreadsheet model 
developed in Microsoft Excel for Windows 95. When combined with Crystal 
Ball (a commercially available software program), the LCC model can use 
a Monte Carlo simulation to perform the analysis by incorporating 
uncertainty and variability considerations. The spreadsheet is 
organized so that ranges (distributions) can be entered for each input 
variable needed to perform the calculations. The LCC output can be 
either a point value when we use the average value of the inputs or a 
distribution when we use distributions for some or all of the inputs. 
In the analyses described in this notice, we used distributions for the 
most important input variables.
    The life-cycle cost calculations include ballast and lamp costs 
(purchase price and installation cost for both and replacement cost for 
lamps only) and annual electricity costs of the lamp/ballast system 
operation over the lifetime of the ballast. The inputs to the life-
cycle cost analysis include: The year standards take effect, the 
discount rate, the electricity price projections, ballast prices, 
annual lighting hours, ballast life, ballast input power, and initial 
and lamp replacement costs. Chapter 4 of the TSD contains the details 
of the life-cycle cost calculations.
    In certain cases (when a T8 lamp/ballast system is considered as 
replacing a T12 lamp/ballast system), an additional input (mean lamp 
lumens) was required. We used this input to normalize the unequal light 
outputs for the two lamp types.

b. National Energy Savings Spreadsheet

    In order to make the analysis more accessible and transparent to 
all stakeholders, we developed a spreadsheet model that uses Excel in 
Windows 95 to calculate the national energy savings (NES) and the 
national economic costs and savings from new standards. We can change 
input quantities within the spreadsheet. For example, one can easily 
change the ballast prices. Unlike the LCC analysis, the NES spreadsheet 
does not use distributions for inputs or outputs. We conduct 
sensitivities by running different scenarios.
    DOE uses the NES spreadsheet to perform calculations of national 
energy savings based on user inputs similar to those for the LCC 
spreadsheet. The national energy savings, energy cost savings, 
equipment costs and net present value of benefits for several product 
classes are forecast from the chosen start year through 2030. The 
forecasts provide annual and cumulative values for all four output 
parameters.
    The Department calculates the national energy savings by 
subtracting energy use under a standards scenario from energy use in a 
base case (no standards scenario). Energy use is reduced when an energy 
efficient magnetic (EEM) ballast is replaced by either a cathode cutout 
(CC) or an electronic ballast. For CC standards, the user can specify 
what percent of EEM ballasts are converted to electronic and what 
percent to CC. For an electronic standard, the user can specify what 
percent of EEM ballasts are converted to T12 or T8 electronic. Unit 
energy savings for each product class are the same as calculated in the 
LCC spreadsheet. Additional information about the NES spreadsheet can 
be found in Chapter 5 and Appendix B of the TSD.
    User inputs include: (1) A choice from among several electricity 
price projections; (2) effective date of the ballast standard; (3) 
discount rate and discount year; (4) a shipments forecast; and (5) 
ballast assumptions. Ballast assumptions include inputs such as annual 
lighting hours and ballast prices. Additionally, we use a time series 
of conversion factors to change from site to source energy.
    One of the more important components of any estimate of future 
impact is shipments. Forecasts of shipments for the base case and 
standards case were used as inputs to the NES spreadsheet. The 
shipments portion of the spreadsheet forecasts EEM ballast shipments 
from 1997 to 2030. One base case scenario assumes decreasing shipments 
of EEM ballasts until the year 2015. Another base case scenario assumes 
decreasing shipments until the year 2027. The decreasing shipments 
scenarios are determined by one user input: The year by which EEM 
ballast shipments decrease to 10 percent of the 1997 value. The 
decrease in EEM shipments is linear. Once that 10 percent value is 
reached, shipments remain at that value through 2030. Additional 
details on the various shipments forecasts are provided in Chapter 5 of 
the TSD.

[[Page 14134]]

c. Manufacturer Impact Analysis and Government Regulatory Impact Model 
(GRIM)

    The manufacturer analysis estimates the financial impact of 
standards on manufacturers and calculates impacts on employment and 
manufacturing capacity.
    Prior to initiating the detailed manufacturing impact analysis for 
the ballast rulemaking, the Department prepared a document titled 
``Ballast Manufacturer Impact Analysis Analytical Approach.'' This 
document was presented at a public workshop held on April 28, 1998. We 
developed the approach from the general framework for Manufacturing 
Impact Analyses presented by the Department in March 1997 and modified 
for its application to the ballast rule. The document outlined 
procedural steps and identified issues for consideration.
    As proposed in the Approach document, the manufacturer impact 
analyses (MIA) was conducted in four phases. Phase 1, Industry Profile 
and Issue Definition, consisted of two activities, namely, preparation 
of an industry characterization and the conduct of an issue 
identification workshop. The second phase, ``Strawman'' Industry Cash 
Flow, had as its focus the larger industry. In this phase, the GRIM was 
used to prepare a ``strawman'' industry cash flow analysis. Here the 
Department used publicly available information developed in Phase 1 to 
adapt the GRIM model structure to facilitate the analysis of new 
ballast standards. In the Phase 3, Sub-Group Impact Analysis, 
individual manufacturers used the strawman cash flow as a template from 
which individual company level cashflows were developed from GRIM. 
Phase 3 also entailed the documentation of additional impacts on 
employment and manufacturing capacity through an interview process. 
Finally in Phase 4, Industry Cash Flow, individual cash flows were 
aggregated into three groups, one including all manufacturers, a second 
including full line manufacturers of magnetic and electronic ballasts, 
and a third including manufacturers producing only electronic ballasts.
1. Phase 1, Industry Profile and Issue Definition
    Phase 1 of the Manufacturer Impact Analysis consisted of two 
activities, namely, preparation of an Industry Characterization, and 
the conduct of an issue analysis workshop. Prior to initiating the 
detailed impact studies, the Department received input on the present 
and past structure and market characteristics of the ballast industry. 
This activity involved both quantitative and qualitative efforts to 
assess the industry and products to be analyzed. Issues addressed 
included manufacturer market shares and characteristics; trends in 
number of firms; the financial situation of manufacturers; and trends 
in ballast characteristics and markets.
    We presented publicly available quantitative data published by U.S. 
Bureau of Census with regards to the ballast industry at the April 28, 
1998, workshop. These reports include such statistics as the number of 
companies, manufacturing establishments, employment, payroll, value 
added, cost of materials consumed, capital expenditures, product 
shipments, and concentration ratios.
    To further assist in performing the Industry Profile and to define 
key issues, the Department conducted a series of interviews with 
ballast manufacturers in late 1996 and early 1997. DOE distributed 
summaries of these interviews at the ``Public Workshop on the Revised 
Life Cycle Cost and Engineering Analysis of Fluorescent Lamp 
Ballasts,'' held on March 18, 1997.
    The interviews and review of public literature suggested that the 
following guidelines be followed to assess the impacts of a new ballast 
standard. First, the Manufacturer Impact Analysis should be performed 
on a company-by-company basis and the industry impact constructed from 
an aggregation of impacts on individual companies. Second, the analysis 
should recognize the increasingly global nature of the ballast 
industry. Gains or losses in U.S. sales will have consequences for 
manufacturers regardless of where their production facilities are 
located. Where possible, the analysis should be structured to assess 
impacts at U.S. National, North American, and Global levels. Finally, 
the Manufacturer Impact Analysis should include consideration of direct 
industry suppliers and luminaire and lamp manufacturers. The Department 
recognized that manufacturers do not operate in isolation and that 
changes in production levels or economic health of a manufacturer can 
have significant impacts on its suppliers and other trade allies.
2. Phase 2, ``Strawman'' Industry Cash Flow
    Phase 2 of the manufacturer analyses has as its focus the 
``larger'' industry. As such, this phase resembles the Department's 
past practice of modeling a ``prototypical'' firm with average industry 
values. The analytical tool used for calculating the financial impacts 
of standards on manufacturers is the GRIM. In phase 2, we used GRIM to 
perform a ``strawman'' industry cash flow analysis. Section III.c 
below, describes briefly the GRIM's operating principles.
    Given the relatively small number of firms in the industry, the 
Department proposed to create an Industry Cash Flow Analysis using a 
``bottom-up'' approach. Essentially, each manufacturer was asked to 
provide its own cash flow analysis to be aggregated with all other 
manufacturer submittals.
    In order to facilitate individual manufacturer analysis, the 
Department prepared ``strawman'' scenarios for a ``prototypical'' 
manufacturer from publicly available financial information. 
Manufacturers then performed their individual cash flows by modifying 
relevant parameters in the strawman to meet their own situation (price, 
cost, financial, shipments, etc.).
    For the strawman, the Department prepared a list of financial 
values to be used in the GRIM industry analysis. We estimated these by 
studying publicly available financial statements of fluorescent lamp 
ballast manufacturers. A detailed definition of financial inputs and 
their values for a ``prototypical'' ballast manufacturer is contained 
in Attachment C of the document, entitled ``Financial Inputs to GRIM 
for the Ballast Rulemaking Analysis.'' We derived strawman values for 
prices from the Bureau of Census' Current Industrial Reports (CIRs). 
The dollar value of ballast shipments from factories is divided by the 
quantity of ballasts shipped to arrive at the per unit manufacturer 
price. In order to estimate manufacturing costs-labor, materials, 
depreciation/tooling, etc.--from the average manufacturer prices 
obtained from CIRs, we developed a typical ballast industry cost 
structure from publicly available information from the Census of 
Manufacturers (CMs) and from transformer industry statistics (SIC# 
3612), and which we obtained from Robert Morris Associates (RMA) 
reports. Finally in preparing the draft industry cash flow analysis, 
the Department used the same ballast shipment scenarios developed for 
the NES spreadsheet.
3. Phase 3, Sub-Group Impact Analysis
    The Department conducted detailed interviews with ballast 
manufacturers representing over 95 percent of domestic ballast sales to 
gain insight into the potential impacts of standards. During these 
interviews, the Department solicited the information necessary to

[[Page 14135]]

evaluate cashflows and to assess employment and capacity impacts.
    The interview process had a key role in the manufacturer impact 
analyses, since it provided an opportunity for manufacturers to express 
privately their views on important issues and provide confidential 
information needed to assess financial, employment and other business 
impacts. To support the development of company cashflows, the interview 
guide solicited information on the possible impacts of new standards on 
manufacturing costs, product prices, and sales. The evaluation of the 
possible impacts on direct employment, and assets also drew heavily on 
the information gathered during the interviews. The interview guide 
solicited both qualitative and quantitative information. We requested 
supporting information whenever applicable.
    DOE asked interview participants to identify all confidential 
information provided in writing or orally. Approximately two weeks 
following the interview, we provided an interview summary to give 
manufacturers the opportunity to confirm the accuracy and protect the 
confidentiality of all collected information.
4. Phase 4, Industry Cash Flow
    As previously described, we used the GRIM spreadsheet and an 
interview guide to perform the ballast Manufacturer Impact Analysis on 
a company-by-company basis. This process has the benefit of enabling 
the impacts of standards to be evaluated at multiple levels of 
aggregation. The total industry impact was constructed from an 
aggregation of impacts on individual companies. The Department 
aggregated the individual cash flows into three groups, one including 
all manufacturers, a second including full line manufactures of 
magnetic and electronic ballasts only, and a third group including 
manufacturers producing only electronic ballasts. This aggregation 
scheme was selected as the most representative of the range of impacts 
on individual manufactures compared to the industry aggregate values.
5. GRIM Spreadsheet
    A change in standards affects a manufacturer's cashflow in three 
distinct ways. Increased levels of standards will: (1) Require 
additional investment; (2) raise production costs; and (3) affect 
revenue through higher prices and, possibly, lower quantities sold. To 
quantify these changes, the Department performs an industry and 
manufacturer cashflow analyses using the GRIM.
    The GRIM analysis uses a number of inputs--annual ballast 
shipments; ballast prices; manufacturer costs such as materials and 
labor, selling and general administration costs, taxes, and capital 
expenditures--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 future point in time. 
Additional information about the GRIM spreadsheet can be found in 
Chapter 6 of the TSD.

d. NEMS Environmental Analysis

    The environmental analysis provides estimates of changes in 
emissions of nitrogen oxides (NOX) and carbon from carbon 
dioxide (CO2). The Department used NEMS-BRS for the 
fluorescent ballast environmental analyses (as well as the utility 
analyses). NEMS-BRS is run similar to the AEO99 NEMS except that 
commercial lighting energy usage is reduced by the amount of energy 
(electricity) saved due to proposed ballast standards. The input of 
energy savings are obtained from the NES spreadsheet. For the 
environmental analysis, the output is the forecasted physical 
emissions. The net benefits of the standard is the difference between 
emissions estimated by NEMS-BRS and the AEO99 Reference Case.
    The environmental analysis is relatively straightforward from NEMS-
BRS. Carbon emissions are tracked in NEMS-BRS using a detailed carbon 
module that provides robust results because of its broad coverage of 
all sectors and inclusion of interactive effects. The only form of 
carbon tracked by NEMS-BRS is CO2. However, in this report 
the carbon savings are reported as elemental carbon.
    The two airborne pollutant emissions that have been reported in 
past analyses, SO2 and NOX, are reported by NEMS-
BRS. NOX results are based on forecasts of compliance with 
existing legislation. In the case of SO2, the Clean Air Act 
Amendments of 1990 set an emissions cap on all power generation. The 
attainment of this target, however, is flexible among generators and is 
enforced by applying market forces, through the use of emissions 
allowances and tradable permits. As a result, accurate simulation of 
SO2 trading tends to imply that physical emissions effects 
will be zero because emissions will always be at, or near, the ceiling. 
This fact has caused considerable confusion in the past. There is 
virtually no real possible SO2 environmental benefit from 
electricity savings as long as there is enforcement of the emission 
ceilings. Please see Appendix D of the TSD for a discussion of this 
issue.
    Alternative price forecasts corresponding to the high and low 
economic growth side cases found in AEO99 have also been generated for 
use by NES and will be explored in a similar fashion with NEMS-BRS 
runs.

IV. Discussion of Comments

    As noted above, the DOE proposed to revise the energy conservation 
standards applicable to fluorescent lamp ballasts on March 4, 1994. On 
January 31, 1995, the Department published a rulemaking determination 
that, based on comments received, it would issue a revised notice of 
proposed rulemaking for fluorescent lamp ballasts. Since that time, the 
Department conducted numerous meetings, workshops and discussions 
regarding energy efficiency standards for fluorescent lamp ballasts, 
resulting in a Draft Report on Potential Impact of Possible Energy 
Efficiency Levels for Fluorescent Lamp Ballasts, July, 1997; Summary of 
Inputs for the Technical Support Document: Energy Efficiency Standards 
for Fluorescent Lamp Ballasts, April 20, 1998; and Ballast Manufacturer 
Impact Analysis Analytical Approach, April 10, 1998. 62 FR 38222 (July 
17, 1997) and 63 FR 16706 (April 6, 1998). A workshop was conducted on 
these analyses and documents on April 28, 1998. 63 FR 16706 (April 6, 
1998). Based on comments and the growing popularity of electronic 
ballasts with T8 lamps, the Department solicited further comments 
specifically on the issue of whether market shifts (e.g., from T12 to 
T8 lamps) should be considered in determining the impact of an energy 
conservation standard on commercial and industrial consumers, 
manufacturers and the nation. 63 FR 58330 (October 30, 1998). Further 
comments on the above analyses, and modifications resulting from those 
comments, culminated in publishing an analysis on the Codes and 
Standards Internet site (http://www.eren.doe.gov/buildings/
codes__standards/applbrf/ballast.html) in April of 1999. We also 
conducted a workshop on that analysis on June 1, 1999. 64 FR 24634 (May 
7, 1999). These analyses presented the impacts of standards on 
consumers, the nation and manufacturers. The Department considers all 
comments regarding this rulemaking made prior to the three documents 
and posted revised analyses listed above, to have been resolved or 
contained within comments pertaining to those documents. Therefore, in 
today's notice of proposed

[[Page 14136]]

rulemaking, the Department is only addressing comments made relative to 
those documents. Additionally, the National Electrical Manufacturers 
Association (NEMA), the American Council for an Energy Efficient 
Economy (ACEEE), the Natural Resources Defense Council (NRDC), the 
Alliance to Save Energy (Alliance) and the Oregon Energy Office 
(Oregon) submitted a joint comment for amended fluorescent lamp ballast 
standards. (Joint Comment, No. 91). While these stakeholders had 
previously commented on the above three documents and the web posting, 
the Department assumes, based on their joint comment, that it 
supercedes their previous comments. Therefore, their previous comments 
are not addressed in today's notice.

Life Cycle Cost Parameters

    Electricity price: The Edison Electric Institute and Mr. Glenn 
Schleede raised questions about the electricity prices used in the 1997 
Report, particularly about the possible effects of increased 
competition in the utility industry on prices. (EEI, No. 12 at 2-3 and 
Schleede, No. 15 at 4-8 and 13-20 and No. 21 at 2-4).
    To reflect increased competition in the electricity industry due to 
restructured markets, the AEO99 reference case assumes a transition to 
competitive retail pricing in five regions--California, New York, New 
England, the Mid-Atlantic Area Council (consisting of Pennsylvania, 
Delaware, New Jersey, and Maryland), and the Mid-America Interconnected 
Network (consisting of Illinois and parts of Wisconsin and 
Missouri).\6\ The specific restructuring plans differ from State to 
State and utility to utility, but most call for a transition period 
during which customer access will be phased in.
---------------------------------------------------------------------------

    \6\ For more information on restructuring assumptions, please 
see pp. 14-15 of the AEO99.
---------------------------------------------------------------------------

    The transition period reflects the time needed for the 
establishment of competitive market institutions and the recovery of 
stranded costs as permitted by regulators. The region-wide 10 percent 
rate reduction required in California is represented. For the other 
regions it is assumed that competition will be phased in between 1999 
and 2007, with fully competitive prices beginning in 2008. In all the 
competitively priced regions, the generation price (the price for the 
energy alone) is set by the marginal cost of generation. Transmission 
and distribution prices are assumed to remain regulated.
    Several comments, including EEI and Mr. Schleede suggested marginal 
electricity rates should be used instead of average values. (EEI, No. 
12 at 2, Schleede, No. 15 at 6 and No. 21 at 3, CDA, No. 25 at 2 and 
NEMA, No. 27 at 20-21). Mr. Schleede also suggested that instead of 
using one electricity price for all years of the analysis, a projection 
of future electricity prices should be used. (Schleede, No. 15 at 5).
    In response to comments on marginal energy prices, we performed a 
separate analysis, whose goal was to generate marginal electricity 
prices for the commercial sector. Because of the large number of 
electric utilities in the U.S., we chose a small subset of electric 
utilities for this analysis. We analyzed the electric bills (with and 
without standards) of a large number of commercial buildings in each of 
these utility districts. In the TSD (see Chapter 4), we show how a 
distribution of marginal electricity prices was obtained from this 
analysis of rate schedules for 24 utilities for the year 1997. We 
projected these marginal prices for each future year of the analysis by 
using the rate of decrease in the EIA Annual Energy Outlook 1999, as 
shown in Table 4.2 in Chapter 4 of the TSD. Alternative electricity 
price scenarios shown in Table 4.2 are also available to users of the 
Life Cycle Cost and National Energy Savings spreadsheets.
    Mr. Schleede indicated that the sensitivity analysis, which 
considered the full distribution of U.S. commercial electricity prices, 
was an improvement over the previous practice of just using a point 
estimate. (Schleede, No. 21 at 1).
    Additional comments on marginal electricity prices were received 
after the posting of analysis results on the DOE web site in April of 
1999.
    Mr. Schleede stated DOE and its contractors have continued their 
ambivalence about removing fixed costs from the life cycle cost 
calculations. (Schleede, No. 76 at 1).
    Mr. Schleede is incorrect. We have used marginal electricity prices 
for all life-cycle cost savings calculations and there are no fixed 
costs in the marginal electricity prices used as described in Appendix 
B of the TSD.
    EEI does not agree with the calculations of ``epsilon'' values as 
shown in the April 1999 text report entitled Life Cycle Cost Results. 
EEI would like to see how DOE handled the issues of lighting load 
factors (e.g., the amount of lighting actually used during the day, 
such as 90 percent of the fixtures) which affect kWh energy reductions, 
and coincidence and diversity factors which will affect the kW demand 
reductions (and their economic impact). (EEI, No.48 at 2).
    The Department describes the method in Appendix B of the TSD, 
Marginal Energy Prices report: Demand Decrement Due to Standards--The 
Role of Lighting Coincidence and Diversity.
    EEI commented that a line in the LCC results writeup reads ``the 
change in the bill divided by the change in energy usage yields the 
marginal electricity price.'' EEI stated that this is not analytically 
correct. For commercial (and industrial) customers, there is a marginal 
kWh price and a marginal kW price that should not be ``blended'' for a 
cost analysis. The change in the kWh energy portion cost of the bill 
divided by the change in energy usage yields the marginal kWh energy 
price, and the change in the kW demand cost of the bill divided by the 
change in the peak kW demand (monthly and/or on-peak) yields the 
marginal kW demand price. These two marginal costs are separate and 
calculated differently. (EEI, No. 48 at 4).
    The bill is a combination of the kWh (energy) and kW (demand) 
components, and the Department calculated them separately in order to 
derive the marginal electricity prices. The use of a proportional 
demand decrement (calculated as explained in Appendix B of the TSD, 
Marginal Energy Prices) enabled DOE to calculate each of the 
contributions to bill savings associated with kWh savings and kW 
savings.
    Published sources for average commercial prices (defined as 
revenues from energy and demand charges combined, divided by energy 
sales) are expressed on a per kWh basis, ``blending'' the energy and 
demand charges. For consistency with those sources of projected 
commercial energy prices, the Department sees no practical alternative 
to including the kW (demand) savings component, expressed on a per kWh 
basis, in the derivation of marginal commercial prices.
    EEI stated it is not sure how DOE performed the calculation of 
epsilons for industrial customers, as only the procedure for commercial 
customers was outlined in the text report (DOE web posting of April, 
1999). (EEI, No. 48 at 4).
    The epsilon distribution calculated for the commercial sector was 
also used for calculating the industrial marginal electricity prices 
from the industrial average electricity prices.
    EEI stated that DOE used the ``average'' electric price, rather 
than the marginal electricity price, on the spreadsheet under the 
``Results'' tab. This has the result of showing more favorable results 
for life cycle cost savings, paybacks, and the globalized

[[Page 14137]]

percentage of winners and losers. (EEI, No. 48 at 4).
    The results (life-cycle cost savings, payback and percent winners 
and losers) are calculated using marginal prices applied to electricity 
savings. The sheet titled ``Results'' in the LCC version 4 spreadsheet 
does use average values for the purpose of calculating a life-cycle 
cost for each technology. However, this sheet was only provided as a 
check to allow the user to estimate LCC and payback periods using 
average values and then compare them to the results obtained with 
distributions (in Crystal Ball) for the main inputs. We will relabel 
the ``Results'' sheet to ``LCC and Payback Periods Using Average Values 
for All Inputs'' to avoid confusion in any future analysis.
    Mr. Schleede stated that electricity prices are falling faster than 
the EIA forecast in Annual Energy Outlook, 1998 and 1999 Reference 
cases. (Schleede, No. 76 at 1).
    DOE used the EIA forecast over the period 2003-2030. The rate of 
decrease over the last few years is influenced by electricity 
deregulation and seems unlikely to translate into a 27 year trend.
    Mr. Schleede stated that there is a wide variation in electricity 
prices and many people and organizations would be forced to incur 
higher life cycle costs if DOE proceeds with ballast standards. 
(Schleede, No. 76 at 1).
    The Department uses a distribution of electricity prices as input 
to its LCC analysis and reports the percentage of end-users with higher 
and lower LCC from ballast standards.
    Annual Lighting Hours: The values we used for annual lighting hours 
in the 1997 Report were based on average values from energy audits 
performed by Xenergy, Inc. on over 25,000 buildings between 1990 and 
1994, as described in Section A.4 of the 1997 Report.
    EEI asked that a +/- range be given for the average annual 
operating hours. (EEI, No. 12 at 3).
    We are using ranges of annual lighting operation hours, as shown in 
Figures 4.4 through 4.9 of the TSD, in calculating consumer life cycle 
costs. These distributions range from less than 200 hours of use to 
over 8,000 hours.
    Other LCC Inputs: EEI asked if U-tube lamps were included. (EEI, 
No. 12 at 3).
    U-tube lamps are driven by the same ballasts as straight-tube 
lamps; therefore, we did not conduct separate LCC analyses for them 
(the wattages and lamp prices are only slightly different). Ballasts 
that drive U-tube lamps are included in the NEMA data to generate 
shipments data for the NES (see National Energy Savings below).
    EEI suggested that F96T8 lamp ballasts be included in the analysis. 
(EEI, No. 12 at 3). Other comments, on the limited re-opening of the 
record, also suggested including 8-foot T8 ballasts. (Osram Sylvania 
Inc, No. 34 at 3 and Motorola Lighting Inc., No. 33 at 2 and ACEEE, No. 
77 at 3).
    Since F96T8 lamp/ballast systems have small market shares, the 
Department did not collect data and analyze them separately or include 
them in today's proposed rule.
    International Consulting Services (ICS) asked that the faster lumen 
depreciation of T8s be taken into account. (ICS, No. 17 at 5).
    The Lighting Upgrade Manual published by EPA's Green Lights Program 
(EPA-430-B-95-009), February 1997 edition, Lighting Maintenance 
section, page 3, has a graph of lamp lumen depreciations. The four-foot 
T8 lamps have a flatter lamp lumen depreciation curve than do the four-
foot T12 lamps, showing that T8s have slower lumen depreciation than 
T12. The same is true for the eight-foot T12 and T8 lamps. However, we 
did not consider this effect in the LCC analysis, as it does not 
generally impact lamp lifetime or relamping times, and, therefore, does 
not affect the result of the analysis.

National Energy Impacts

    In the 1997 Report, we used the COMMEND model to project ballast 
sales and National Energy Impacts. In response to comments that COMMEND 
was difficult to understand and use, we developed a spreadsheet 
calculation tool for use in the TSD analyses as was previously 
discussed under Methodology. We used the NES spreadsheet to estimate 
national energy savings and economic parameters.
    We divided the comments received on national energy impacts into 
five categories: COMMEND-related comments, the NES model and approach, 
shipments and market shares, lighting/HVAC (heating, ventilating, and 
air conditioning) interactions, and non-regulatory programs.

COMMEND-Related Comments

    Several issues on COMMEND (e.g., ballast sales) were raised by 
comments. Since today's analysis uses the NES spreadsheet model instead 
of COMMEND, these issues are no longer relevant and are not addressed.

Non-Regulatory Programs

    EEI suggested that the impacts of voluntary efficiency programs 
should be more adequately taken into account. It also observed that 
although the dollar amount spent on Demand Side Management (DSM) 
programs has declined in recent years, the numbers of ballasts 
installed because of DSM programs may still have remained the same or 
even increased, since the price differential between magnetic and 
electronic ballasts has gone down (EEI, No. 12 at 1).
    Since the NES spreadsheet that we used to calculate energy savings 
requires projections of future ballast shipments as an input, we must 
make some assumptions concerning the annual shipments of energy 
efficient magnetic (EEM) ballasts under a scenario of no amended 
standards. Since it is not possible to know how these shipments will 
change in the future, the Department decided to analyze several 
possible future scenarios. The influence of non-regulatory programs on 
magnetic ballast shipments is implicitly accounted for in these 
shipment scenarios (described in Chapter 5 of the TSD and also later in 
this proposed rule). Scenarios in which magnetic ballast shipments 
continue to decline over time, reflect some level of continued impact 
of non-regulatory incentive programs. See section V below for a more 
detailed description of the assumptions of these scenarios.
    Since the release of the 1997 Report, the Department has undertaken 
a more detailed analysis of non-regulatory program impacts on the 
ballast market by studying utility DSM program impacts, ASHRAE/IES 
building code impacts, EPA Green Lights/EPA-DOE Energy Star Buildings, 
and DOE FEMP programs. We conducted a study \7\ to estimate the number 
of fluorescent ballasts affected by DSM rebates from 1992 to 1997. We 
combined detailed analysis of data on spending amounts and units 
receiving rebates from several major utilities, accounting for up to 30 
percent of the national total, with EIA estimates of national energy 
efficiency spending to produce estimates of ballasts rebated. Results 
indicate that the number of rebates and the percentage of the ballast 
market affected by rebates have both declined since 1995, at the same 
time that the magnetic ballast market began to level off. Under EPACT, 
the states are upgrading their building codes to match the lighting 
provisions in ASHRAE/IES Standard 90.1-1989. When revised as Standard 
90.1-1999, the code's lower lighting power density limits will be an 
incentive for increasing use of electronic

[[Page 14138]]

ballasts. DOE is preparing a new code for Federal buildings that will 
also encourage the use of electronic ballasts. The EPA programs (first 
Green Lights and now the EPA-DOE Energy Star Buildings) provide 
voluntary incentives for lighting upgrades that include electronic 
ballasts. The DOE FEMP Procurement Challenge and Federal Relighting 
Initiative are having modest but important impacts increasing the 
market share for electronic ballasts purchased for Federal buildings. 
Other programs such as the Voluntary Luminaire Program created by the 
National Lighting Collaborative under EPACT, NEMA's Energy Cost Savings 
Council, DOE's Rebuild America, and DOE's Lighting Technology Roadmap 
also provide incentives to move the market toward more efficient 
fluorescent ballasts.
---------------------------------------------------------------------------

    \7\ Busch, Chris, Turiel, I., Atkinson, B.A., McMahon, J.E., 
Eto, J.H. 1999. ``DSM Rebates for Electronic Ballasts: National 
Estimates (1992-1997) and Assessment of Market Impact.'' Lawrence 
Berkeley National Laboratory.
---------------------------------------------------------------------------

Utility and Environmental Analyses

    The NEMS has been used to estimate impacts of ballast energy 
efficiency standards on electric utilities. The Department used a 
version of EIA's NEMS, called NEMS-BRS, for the utility and 
environmental analyses. NEMS simulates the energy economy of the U.S. 
and has been developed over several years by the EIA primarily for the 
purpose of preparing the Annual Energy Outlook (AEO). NEMS produces a 
widely-known baseline forecast for the U.S. through 2020 that is 
available in the public domain. NEMS-BRS offers a picture of the effect 
of standards since its scope allows it to measure the interactions 
between the various energy supply and demand sectors and the economy as 
a whole.
    Fuels for Electricity Generation: EEI pointed out that projections 
for oil and gas generation after 1995 are available from GRI, EPRI, and 
EIA, and DOE could use them in its analysis (EEI, No. 12 at 3).
    Most analyses use EIA data such as electric utility fuel prices as 
a starting point. The important result for estimating the effect of 
standards on utility costs is not the overall fuel mix, but the 
marginal effect on fuel consumption and power plant construction.
    EEI stated that the values used for the heat rate (for conversion 
of electricity from site to source energy) are overstated. It indicated 
that the analysis is using the total U.S. generation capacity (not a 
marginal capacity type of analysis) and is using EIA methodology. EEI 
asserts the values are overstated for the following reason: EIA assigns 
the same heat rate of fossil-fuel power plants to renewable power 
plants. This assumption creates an artificial heat rate for 
hydroelectric, wind, solar, biomass, and other forms of renewable 
energy. For the approximately 10 percent (and growing) portion of 
renewable electricity generation, EIA assigns a value of over 10,000 
Btu/kWh to generation that has 0 Btu/kWh or 3,412 Btu/kWh. EEI states 
this factor alone leads to an overstatement of primary energy savings. 
In addition, EEI asserts that with the advent of restructuring, there 
are many new technologies that could lower the overall heat rate at a 
much quicker rate than shown in the 1999 Annual Energy Outlook (AEO). 
EEI proposes that the lower end of the ranges for national energy 
savings should be significantly lower to account for this possibility. 
(EEI, No. 48 at 3).
    Table 5.3 in the TSD shows the site-to-source heat rates used in 
our analysis for the period 2003-2030. They are average rates for the 
commercial sector obtained from AEO99. We have compared these values to 
marginal values we obtained from a NEMS analysis. The marginal heat 
rate is the change in fuel delivered to generating stations divided by 
the change in electricity sales. For the NEMS analysis, we only 
considered thermal generation. For most years in the analysis period, 
the marginal heat rate was lower than the average heat rate. Overall, 
if we had used a marginal heat rate rather than the average heat rate, 
source quads would be reduced by about 4 percent.
    EEI is in agreement with the analysis showing a declining heat rate 
over the analysis period. However, it asserts the values shown in AEO 
1999 should be considered to be the high end of the range of inputs for 
the analysis period. (EEI, No. 48 at 3).
    Other scenarios will show a faster rate of decline in heat rates 
over the next 20-30 years. The Department executed its analysis using 
the AEO99 Reference Case. The average heat rate extracted from AEO99 
and used in the analysis declines from 10,871 Btu/kWh in year 2001 to 
9,196 Btu/kWh in year 2030. This is equivalent to increasing the energy 
conversion efficiency of thermal power generation from 31 percent to 
almost 37 percent. This is a major assumed improvement, especially 
given that many generating assets in place today will still be serving 
marginal duty cycles during most of the forecast period.
    Conservation Load Factor: EEI also stated that it was not clear how 
the Conservation Load Factor (CLF) was calculated, and asked if it was 
calculated on a regional level first and then aggregated, or at the 
national level only. (EEI, No. 12 at 3).
    The CLF is not used in the NEMS analysis so this question is no 
longer relevant.
    SO2 and NOX emissions: EEI suggested that 
because SO2 and NOX emissions have declined over 
the past several years, marginal emissions due to energy savings will 
be lower than average emissions. (EEI, No. 12 at 3).
    Total emissions of SO2 are unlikely to be affected by 
any policy, such as efficiency standards, because emissions are capped 
by legislation. The actual reduction in NOX emissions will 
be determined by which marginal thermal generation is reduced through 
lower electricity sales. Most new capacity is likely to be both 
efficient and clean, and therefore operate at low marginal cost high in 
the dispatch order (i.e., utilities will dispatch the newer, cleaner 
sources before going to the older, more expensive sources). Generation 
from these new resources is therefore unlikely to be reduced by a 
reduction in electricity sales. On the contrary, it is likely that the 
displaced generation will be from older, dirtier plants low in the 
dispatch order.
    Appliance Standards Environmental and Utility Model (ASEUM): EEI 
and Mr. Schleede concurred that the ASEUM model's methodology may be 
outdated in an era of deregulated utilities that are unlikely to remain 
vertically integrated. (EEI, No. 12 at 4 and Schleede, No. 15 at 7-8).
    It is true that the electric utility industry is undergoing a 
radical restructuring, and the assumptions of cost recovery underlying 
ASEUM are becoming dated. We agree that we needed other methodologies 
to carry out the utility analysis, and we used the NEMS-NAECA for this 
purpose.

Ballast Market Shift (From T12 Magnetic to T8 Electronic)

    The 1997 Report, and all previous analyses, analyzed the impact of 
an electronic ballast standard by essentially assuming that users of 
magnetic ballasts with T12 lamps would switch to electronic ballasts 
with T12 lamps if the former ballast type became obsolete. As described 
in the Notice of Limited Reopening of the Record and Opportunity for 
Public Comment, the Department solicited comments on consideration of 
consumers who might choose electronic ballast T8 systems over 
electronic ballast T12 systems and consumers who might choose 
electronic ballasts over cathode cutout ballasts. 63 FR 58330 (October 
30, 1998). DOE asked for comments on certain aspects of both the 
electronic ballast and the cathode cutout ballast standard levels: 
Whether a market shift from magnetic T12

[[Page 14139]]

ballasts to electronic T8 ballasts is likely, the extent of such a 
shift, and whether the impacts of these shifts should be considered.
    In the Joint Comment, the stakeholders stated that they assumed 95 
percent of consumers of electronic ballasts would switch from T12 to T8 
lamps. (Joint Comment, No. 91 at 8).
    Northwest Energy Efficiency Alliance (NEEA) stated that in its 
region with a mature market for electronic ballasts, the standard 
practice in new construction/renovation is a fixture with an electronic 
T8 ballast; this results partially from building codes as well as from 
economics. Cathode cutout systems are rare, with customers selecting 
electronic ballasts instead because of energy-efficiency, light 
quality, and the ability to drive multiple lamps. (NEEA, No. 38 at 1-
2).
    The Tennessee Valley Authority (TVA) explained that its procedure 
is to replace failed magnetic T12 ballasts with electronic T12 ballasts 
because of availability, cost (when the lighting hours are too short 
for a good payback with a T8 system); and maintenance (if only part of 
the ballasts in a space need replacement, the T12 lamps are retained). 
For major system replacement, electronic T8 systems were considered the 
first option. (TVA, No. 36 at 1).
    The statute requires the Department to establish different classes 
where appropriate, and today's proposed rule would prescribe separate 
ballast efficacy factors for each lamp-ballast combination. To 
determine economic impact on manufacturers and consumers, DOE looks to 
reasonably predict likely market impacts. That is, some consumers with 
T12 lamps and magnetic ballasts would switch to T8 lamps with 
electronic ballasts if the magnetic T12 ballast was eliminated. 
Furthermore, the Secretary has determined to examine the impact of this 
consumer sub-group under economic factor 7.
    Mr. Glenn Schleede comments that DOE has continued its long-
standing practice of giving little consideration to the interests of 
real consumers who end up bearing the burden of energy efficiency 
standards. (Schleede, No. 76 at 2).
    The Department believes it has considered the interests of real 
consumers, and any burdens on them, by including the full range of 
electric prices, ballasts prices, operating life and ballast life that 
consumers will experience and calculating the full range of impacts on 
consumers. Furthermore, we studied the economic impact of the standard 
on consumers by considering and evaluating likely consumer actions. As 
a result, we are presenting impacts on consumers moving from T12 lamps 
with magnetic ballasts to T12 lamps with electronic ballasts and also 
consumers moving from T12 lamps with magnetic ballasts to T8 lamps with 
electronic ballasts. Both of these likely occurrences arise from the 
consumer not being able to buy a T12 magnetic ballast under the 
standard being proposed. However, while modeling and giving 
consideration to consumer actions, the Department does not believe it 
can set standard levels based on consumer purchasing behavior given the 
conclusions of the court in Natural Resources Defense Council v. 
Herrington, 768 F. 2d 1355, 1406-07 (D.C. Cir. 1985), where the court 
stated that ``the entire point of a mandatory program was to change 
consumer behavior'' and ``the fact that consumers demand short payback 
periods was itself a major cause of the market failure that Congress 
hoped to correct.''

Manufacturer Impact Analysis

    The general MIA methodology presented by the Department in March 
1997, was developed with substantive input from ballast manufacturers 
on issues relevant to the ballast rulemaking. Ballast manufacturers 
provided very useful insights that resulted in the incorporation of new 
factors for consideration in the analysis of manufacturer impacts, 
namely impacts on domestic manufacturer employment, manufacturing 
capacity, plant closures and loss of capital investment. Cooperation 
from ballast manufacturers also helped DOE in proposing the interview 
guide approach as a critical MIA tool for identifying issues relevant 
to each individual manufacturer. The ballast rulemaking was the first 
for which DOE conducted one-on-one interviews with the manufacturers. 
This process helped DOE appreciate the usefulness of this methodology 
for assessing qualitative impacts.
    The Department of Energy held a public workshop on April 28, 1998, 
to present information and invite comment on several topics relating to 
energy-efficiency standards for fluorescent lamp ballasts. One major 
topic for discussion was the Manufacturer Impact Analysis (MIA). In 
developing the Manufacturer Impact Analysis document for the April 28, 
1998, workshop, DOE tried to address the concerns that ballast 
manufacturers raised with the Department in previous meetings or 
through personal interviews. In addition to tailoring the GRIM 
spreadsheet to the ballast rulemaking, DOE developed a revised 
questionnaire to capture all issues relevant specifically to the 
ballast industry and its suppliers.
    Subsequent to the April 28 workshop, the Department met with 
industry representatives to discuss the rationale for using the cash 
flow analysis methodology to measure financial impacts. The Department 
also reviewed details of the spreadsheet calculations at this meeting. 
The discounted cash flow approach is a widely used technique for 
evaluating a company's value (Net Present Value (NPV)), and is 
frequently used in capital budgeting decisions for evaluating capital 
spending proposals. It is also used for evaluating financial impacts of 
plant closures and business restructuring. The Department agreed to 
revise GRIM to add features that explicitly provide the capability to 
include one-time charges such as plant closures and asset write-offs.
    The Department believes that the modified GRIM accurately captured 
the financial impacts of a step change in technology. In contrast to 
other appliance rulemakings that make only incremental changes to 
standard levels, this rulemaking would result in standards based on a 
completely new technology. To comply with final standards, 
manufacturers would be required to make significantly higher capital 
investments (e.g., new plants, equipment and production processes). The 
capital investment numbers input into GRIM reflect this step change in 
technology and produce negative impacts on the manufacturer's cash 
flows. Furthermore, the Subgroup Impact Analysis proposed in the MIA 
methodology and carried out in part through interviews with 
manufacturer representatives considered impacts on employment, 
manufacturing capacity and competitive effects due to an electronic 
ballast standard.
    To ensure that the manufacturer impact analysis captured the 
potential impacts of a radically transformed ballast market, the 
Department and NEMA members developed a scenario analysis methodology 
to be included in the ballast MIA. In creating their projections for 
future revenues and profit margins, manufacturers were asked to 
consider two different competition scenarios. In the first scenario, it 
was assumed that manufacturers would maintain their current market 
share. In the second scenario, we asked manufacturers to consider the 
impact of a new entrant in the industry which would capture a 15 
percent share. Under the new entrant scenario, we redistributed market 
shares

[[Page 14140]]

and manufacturers were able to define new prices and costs (gross 
margins). The competition scenario analysis is described in greater 
detail in the TSD. Additional scenarios were constructed assuming a 
status quo in profit margins, the ``existing dynamics'' scenario, and a 
new entrant in the magnetic ballast market, or ``magnetic new entrant'' 
scenario.
    We conducted the GRIM analysis and other elements of the MIA 
separately for each manufacturer. To report a representative variation 
in impacts between manufacturer sub groups while maintaining the 
confidentiality of individual manufacturers, DOE constructed three 
different cashflows: One for manufacturers of both magnetic and 
electronic ballasts, a second for manufacturers producing electronic 
ballasts only, and a third that combines both sub groups of 
manufacturers. Likewise, we evaluated employment and manufacturing 
capacity effects from an electronic ballast standard on a company-by-
company basis and reported them for both subgroups. To the extent 
consistent with the confidentiality concerns of individual 
manufacturers, we reported important variations between manufacturers 
within subgroups qualitatively. The analysis results include a 
discussion of the impacts of the cashflow results on the business 
prospects of manufacturers in each subgroup, with reference to specific 
manufacturers where permitted by these manufacturers.
    For the participating manufacturers, the GRIM analysis did not 
distinguish plants located outside the United States from United 
States' plants. We calculated employment impacts for these same firms 
and reported separate results for domestic and Mexican plants.
    We performed a detailed analysis of the impacts of an electronic 
ballast standard on ballast manufacturer suppliers. This analysis 
included a quantitative evaluation of manufacturer cashflows and jobs. 
In total, 30 firms were invited to participate in interviews. Seventeen 
of these suppliers served magnetic ballast production, eleven 
electronic ballast production, and six served both magnetic and 
electronic markets. Nineteen organizations that serve magnetic ballast 
applications participated in interviews. Eight organizations that serve 
electronic ballast applications participated in interviews. In total, 
nine plant tours were held, five of which were at suppliers of magnetic 
products and four of which were tours of electronic supplier plants. 
The analysis demonstrated that the organizations interviewed provided a 
representative group of supplier industries, which we used to evaluate 
the impacts on supplier industries as a whole.
    Additionally we visited one lamp manufacturer's fluorescent lamp 
plant and interviewed plant and corporate representatives. The 
Department decided to gather and analyze information on manufacturer 
impacts from other lamp manufacturers as well, and an analysis of this 
information is presented in Section V.
    NEMA commented that the manufacturer impacts reported for a 
standard that began in the year 2003 were too severe and that standards 
that produced such impacts could not be economically justified. (NEMA, 
No. 85). NEMA, as a part of the Joint Comment, commented that their 
proposed staggered implementation dates mitigate such adverse impacts. 
(Joint Comment, No. 91 at 7).

Standards Proposals

    NEMA described new market data on ballasts, as well as percentage 
of lamps driven by magnetic and electronic ballasts. This shows that 
electronic ballast penetration of the total commercial and industrial 
lighting market has increased to 55 percent of total ballast shipments 
in 1998. Electronic ballast market penetration has increased from 44 
percent to 62 percent in 1998, when measured by the more relevant 
criteria of the number of lamps operated. For ballasts used only in 
commercial and industrial new construction, renovations and retrofits 
in 1998, electronic ballast penetration has increased to 63 percent, 
measured by ballast shipments, and to 70 percent measured by the number 
of lamps operated. (NEMA, No. 50 at 26 and Attachment B and NEMA, No. 
85 at 44). ACEEE agreed with NEMA that the percentage of lamps 
ballasted electronically is the most important figure; however, the 
growth rate during 1993-1995 of 9 percent was larger than the growth 
rate of 2.8 percent from 1995 to 1998, supporting the ``Decreasing 
Shipments to 2027'' base case. (ACEEE, No. 77 at 9-10). Oregon Office 
of Energy noted that the magnetic ballast shipments increased in 1997 
and remained stable in 1998, casting doubt on the base case scenarios 
that show steady decline of magnetic ballasts (Oregon, No. 81 at 5 and 
7). The CEC also stated that a national standard would complement 
California's Title 24 building code policies by ensuring that savings 
are realized in retrofit applications as well as new construction. 
(CEC, No. 82 at 1).
    Additionally, the Department received comments from the Vermont 
Residential Energy Efficiency Program, Conservation and Renewable 
Energy Systems, Broward County Florida, Alto Manufacturing Company, 
Rocky Mountain Chapter of the Sierra Club, State of Vermont, California 
Energy Commission, Northeast Energy Efficiency Partnerships, Pacific 
Gas and Electric, Northwest Energy Efficiency Alliance, Sacramento 
Municipal Utility District, Boston Edison, Eastern Utilities, Green 
Mountain Power, New York Power Authority, Eugene Water and Electric 
Board and 35 private citizens urging the Department to establish 
standards requiring electronic ballasts citing the delay in 
promulgating this rulemaking, the phasing out of utility incentive 
programs for ballasts, the energy savings and environmental and 
economic benefits.
    In commenting on the possibility of a market shift, Osram Sylvania 
(OSI) proposed that the Department separately consider each of the 
three major ballast market segments: OEM (fixtures for new 
construction/renovation), Retrofit (early replacement of systems) and 
Replacement (existing ballast replacement at failure). The first two 
markets are appropriate for electronic T8 systems, while the third has 
existing reduced-wattage lamps that are incompatible with electronic 
ballasts.
    OSI commented that 34-Watt lamps are incompatible with electronic 
ballasts because of their conductive coating that facilitates starting 
with magnetic ballasts. It stated that technical solutions were 
possible but impractical: ``Smart'' ballasts that overcome the problem 
for the 34-Watt lamp would not be compatible with 40-Watt high CRI 
lamps that meet the EPACT lamp standards and would be expensive; design 
of 34-Watt lamps without the conductive coating would be expensive; 
controlling the resistance of the conductive coating to allow 
compatibility with both ballast types would be unreliable over the 
range of lamps and over their normal lives, since the coating varies 
widely for any manufacturer and between manufacturers. The expenditure 
of resources by lamp manufacturers to design a lamp to meet this need 
would promote an obsolete system when the market should be moving 
toward T8 systems. OSI also stated that the lamp industry has the 
capacity to handle a market transition from a mixture of T12 to T8 
lamps toward T8 lamps over a 3-year period, but would require a multi-
million dollar capital investment and additional time to handle a more 
widespread transition for all market sectors. (OSI, No. 34 at 2-5).

[[Page 14141]]

    A rapid shift to electronic ballasts would require lamp companies 
to make special adjustments to the lamps, or would drive end-users to 
purchase full-wattage T12 lamps. (OSI, No. 34 at 2 and OSI, No. 84 at 
1). OSI recommended that BEFs be developed for 4-foot and 8-foot 
systems that disallow magnetic and cathode cutout ballasts (with 
several exemptions listed below) and that a standard with these BEFs be 
applied to OEM and retrofit ballasts 3 years after the standards 
publication date. Application of the standard BEFs to the replacement 
market would be delayed for 5 years beyond the effective date (a total 
of 8 years from publication), allowing development of retrofit 
incentive programs for building owners and allowing lamp manufacturers 
greater transition time for T8 lamp manufacture. Proposed exemptions 
include residential luminaires for T8 or smaller diameter lamps, 
dimming ballasts, 8-foot High Output, low-temperature, outdoor, 
magnetic ballasts, non-lighting applications, and ballasts with 
unresolved or unanticipated interference issues per application to the 
Department by a manufacturer or trade association. (OSI, No. 34 at 1-
3).
    Five comments supported the proposal by OSI to varying degrees. 
(Motorola Lighting Inc (MLI), No. 33 at 1-2, Holophane, No. 39 at 1-2, 
Lightolier, No. 40 at 1, and ASE No. 41 at 3, and Peerless Lighting, 
No. 52 at 1-3).
    Motorola supported the proposal by OSI and recommended the 
application of new BEFs to the OEM and retrofit market at the earliest 
possible date. (MLI, No. 33 at 1). Motorola agreed with delaying the 
application of BEFs to the replacement market, but recommended a delay 
of two years rather than five years from the effective date. Further, 
it urged that BEFs for T8 magnetic ballasts be developed, and that all 
of the BEF levels be achievable by major ballast manufacturers. (MLI, 
No. 33 at 2). Holophane supported the OSI proposal, particularly the 
approach recognizing systems rather than components. It proposed that 
exemptions include dimming ballasts, 8-foot High Output outdoor 
ballasts, and special ballasts addressing interference issues. The 
luminaire manufacturers will be able to incorporate electronic ballasts 
as long as the ballast manufacturers can meet the demand; the only 
impact on their market will be the adjustment of lighting levels from 
fixtures with the new systems. Holophane recommended a delay of 
application of BEFs for the replacement market for ``a reasonable 
period of time.'' (Holophane, No. 39 at 1). Lightolier noted that 80 
percent of its fixtures use electronic ballasts for T8 or T5 lamps; of 
the remainder, intended for the distributor/contractor market, less 
than half use electronic ballasts. Lightolier recommended that the 
Department give serious consideration to the OSI proposal. (Lightolier, 
No. 40 at 1). Peerless agreed with the analysis of the two market 
segments, stated that disallowing magnetic ballasts would have short-
term repercussion including the development of T12 electronic ballasts 
for a short-term market, and that a delay period would allow the lamp 
manufacturing industry to adjust to the increased T8 market. (Peerless, 
No. 53 at 1-3). ASE urged that the analysis consider the separate 
effects on the 3 different market channels, and supported OSI's 
proposal for a time-limited exemption for replacement ballasts if such 
an approach is administratively feasible. (ASE, No. 41 at 2-3).
    The Department decided to analyze the five and two year delay 
standards proposal suggested above. The description and results of this 
analysis are shown in section V of this notice.
    The Joint Comment presented the Department with a proposal for 
segmenting the market and extending the implementation dates to 
mitigate the burdens to acceptable levels while maintaining most of the 
benefits of standards. For example, the phase-in period for the 
standards proposed in the Joint Comment is approximately five years, 
until April 1, 2005. This allows the manufacturers and the marketplace 
additional time to make an orderly transition from energy efficient 
magnetic ballasts to the more efficient ballasts that would be required 
if today's proposal were adopted. In addition, the Joint Comment 
proposed an additional five-year phase in for standards for ballasts 
intended for replacement market. While it is generally impossible to 
distinguish a ballast for the replacement market from one used in new 
construction or renovation, the Joint Comment recommends that 
replacement ballasts be labeled for replacement use, have output leads 
which, when fully extended, are less than the length of the lamp it is 
intended to operate and they are shipped in packages of ten or less. 
DOE agrees replacement ballasts, as proposed by the Joint Comment would 
not likely be used other than to replace an existing ballast. In 
addition to the above, the Joint Comment also proposed limiting the 
exemptions relative to the extant standards. For example, the standards 
found in the National Appliance Energy Conservation Amendments of 1988 
provided exemptions for cold temperature and dimming ballasts. The 
Joint Comment proposed limiting the exemption for cold temperature 
ballasts to those capable of being dimmed to 50 percent or less of its 
maximum output and the cold temperature ballast exemption would be 
limited to ballasts for use with two F96T12HO lamps at an ambient 
temperature of -20 deg.F and which is for use with outdoor signs. The 
recommended changes to the dimming and cold temperature exemptions will 
result in the standards being applied to products previously not 
subject to the standards. The standard for two F96T12HO lamps has not 
been modified, however, since it would apply to more products, the 
changes proposed by the Joint Comment will result in higher energy 
savings for this product class than if the standards were raised, but 
applied with the extant exemption. (Joint Comment, No. 91 at 5).

V. Analytical Results

a. Efficiency Levels Analyzed

    The Department utilized two base case forecasts of shipments of 
magnetic ballasts without standards as follows:
Base Case: Decreasing Shipments to 2015 (5 percent reduction)
    In this base case, we assumed magnetic ballast shipments after 1997 
decrease at the rate at which most magnetic ballasts declined from 1993 
through 1997, reaching a base level by 2015. This rate of decreasing 
magnetic ballasts shipments represents a reduction of approximately 5 
percent per year relative to 1997 shipments. The base level represents 
10 percent of the magnetic ballast shipments in 1997 for each ballast 
class, and is carried out to 2030. This base case assumes that non-
regulatory programs as well as market forces result in the same rate of 
transition to electronic ballasts as observed from 1993 through 1997.
Base Case: Decreasing Shipments to 2027 (3 percent reduction)
    In this base case, we assumed magnetic ballast shipments decrease 
at a slower rate, reaching the same base level by 2027. This rate of 
decreasing magnetic ballasts shipments roughly represents a reduction 
of 3 percent per year relative to 1997 shipments. The base level 
represents 10 percent of the magnetic ballast shipments in 1997 for 
each ballast class, and is carried out to 2030. This base case assumes 
that non-regulatory programs and market forces affect a slower rate of 
transition to electronic ballasts than observed in recent years.

[[Page 14142]]

    The Department also analyzed the impact of two trial standard 
levels; one was for electronic ballasts and the other for cathode 
cutout ballasts.
Electronic Ballast Standards Scenarios
    We also evaluated the following scenarios to capture the range of 
national impacts from likely consumer choices (scenarios 1 and 2) and 
to evaluate suggested implementation schemes presented in comments 
(scenarios 3 and 4) for electronic ballast standards:
    Scenario 1. This scenario assumes that 100 percent of magnetic T12 
ballasts are converted to electronic T12 ballasts. This scenario is 
intended to model the impacts of minimal compliance with the standard 
in regard to commercial and industrial consumer choice.
    Scenario 2. This scenario assumes that all magnetic T12 ballasts 
are converted to electronic ballasts, with 5 percent becoming T12 
ballasts and 95 percent becoming T8 ERS ballasts. This scenario is 
intended to model the trends in the current market where nearly all (95 
percent) of electronic ballasts purchased from 1993--1997 have been T8 
ballasts.
    Scenario 3. This scenario assumes that the new/renovation luminaire 
market segment converts all magnetic T12 ballasts to electronic T8 
ballasts starting on the effective date. We assume that this segment 
comprises 70 percent of the total magnetic T12 ballast market, based on 
the current luminaire market. The remaining 30 percent assumed 
replacement market has an additional delay of 5 years, after which 
these ballasts are converted to electronic ballasts, with 5 percent 
becoming T12 ballasts and 95 percent becoming T8 ballasts. This 
scenario allows a differing impact of the standards on these two market 
segments by providing an additional adjustment period for the 
replacement market for users in existing buildings and on lamp 
manufacturers to prepare for the new ballast type and market shift.
    Scenario 4. This scenario has identical assumptions to scenario 3, 
except that the additional delay period for the replacement market is 2 
years.
    We compared each of the above four standard level forecasts with 
that of the two different base cases. We denoted forecasts under the 
``Decreasing Shipments to 2015'' base case as scenarios 1A, 2A, 3A, and 
4A. We called forecasts runs with the ``Decreasing Shipments to 2027'' 
base case scenarios 1B, 2B, 3B, and 4B.
Cathode Cutout Trial Standards
    For cathode cutout standards, we also evaluated the following 
scenarios to capture the range of national impacts from likely consumer 
choices for a possible cathode cutout standard:
    Scenario 5. This scenario assumes that 100 percent of magnetic T12 
ballasts are converted to cathode cutout T12 ballasts. The exception is 
the F96T12 ballast class, for which there is no cathode cutout option. 
These ballasts are assumed to remain as magnetic ballasts under the 
standards. This scenario is intended to model the impacts of minimal 
compliance with the standard in regard to commercial and industrial 
consumer choice.
    Scenario 6. This scenario assumes that the 30 percent replacement 
market T12 ballasts are converted to cathode cutout T12 ballasts, and 
the 70 percent new/renovation market T12 ballasts are converted to 
electronic ballasts, with 5 percent of the electronic ballasts becoming 
T12 ballasts and 95 percent becoming T8 ballasts.
    We denoted forecasts run with the Decreasing Shipments to 2015 base 
case as 5A and 6A. We called forecasts run with the Decreasing 
Shipments to 2027 base case Scenario 5B and 6B.
Joint Comment
    In addition, we evaluated two scenarios based on the standards 
recommended by the Joint Comment: Decreasing magnetic ballast shipments 
to 2015 and decreasing magnetic ballast shipments to 2027. In 
evaluating the joint comment proposal, the Department also used a third 
shipment scenario (flat magnetic ballast shipment forecast) as the 
upper bound as described in Appendix E of the TSD.

b. Significance of Energy Savings

    To estimate the energy savings through the year 2030 due to revised 
standards, we compared the energy consumption of ballasts under the 
base case to the energy consumption of ballasts complying with the 
standard. As discussed above, there are eight electronic ballast 
standards scenarios and four cathode cutout standards scenarios.
    The results presented in Tables V.1a and V.1b use the AEO Reference 
Case forecast. (The TSD shows the results for the AEO High and Low 
cases, with total benefits respectively higher and lower than those for 
the Reference Case.) The tables show the energy savings for each of the 
standards scenarios.

                                                  Table V.1A.--Energy Savings From Electronic Standards
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                  Electronic standards for units sold from 2003 to 2030
---------------------------------------------------------------------------------------------------------------------------------------------------------
                                                 Scen 1A T12   Scen 1B T12  Scen 2A T12/ Scen 2B T12/   Scen 3A      Scen 3B      Scen 4A      Scen 4B
                    Scenario                       Decr2015     Decr2027    T8 Decr2015  T8 Decr2027    Decr2015     Decr2027     Decr2015     Decr2027
--------------------------------------------------------------------------------------------------------------------------------------------------------
Total Quads Saved..............................         1.01          1.79         1.66         2.93         1.43         2.66         1.57         2.84
Total Quads Saved w/HVAC.......................         1.08          1.9          1.76         3.12         1.52         2.82         1.67         3.02
--------------------------------------------------------------------------------------------------------------------------------------------------------


                            Table V.1B.--Energy Savings From Cathode Cutout Standards
----------------------------------------------------------------------------------------------------------------
                            Cathode cutout standards for units sold from 2003 to 2030
-----------------------------------------------------------------------------------------------------------------
                                                   Scen 5A 100%    Scen 5B 100%   Scen 6A 37% CC  Scen 6B 37% CC
                    Scenario                        CC Decr2015     CC Decr2027       Decr2015       Decr2027
----------------------------------------------------------------------------------------------------------------
Total Quads Saved...............................            0.48            0.85            1.12            1.98
Total Quads Saved w/HVAC........................            0.51            0.91            1.19            2.11
----------------------------------------------------------------------------------------------------------------


[[Page 14143]]

    The Department finds that each of the standards scenarios 
considered above would result in a significant conservation of energy. 
Energy savings from the electronic ballast standards scenarios range 
from 1.01 Quads to 2.93 Quads of source energy without considering HVAC 
savings. The energy savings are larger for the slower decreasing 
shipments forecast to 2027 compared to those with the faster decreasing 
shipments forecast to 2015. Energy savings for scenario 2 with T8 
electronic ballasts are almost 65 percent greater than those for 
scenario 1 with T12 electronic ballasts. For scenario 3, the five-year 
phase-in period causes a savings reduction of around 10 to 15 percent 
from that of scenario 2. For scenario 4, the 2-year phase-in period 
results in a savings reduction of about 5 percent from scenario 2. For 
the cathode cutout standards scenarios, energy savings range from 0.48 
Quads to 1.98 Quads without considering HVAC savings. The scenario 6 
savings from partial conversion to electronic ballasts are about 2.3 
times higher than those of scenario 5. The additional HVAC savings 
increase the total energy savings for all levels by 6.25 percent.
    In Table V.2, we present the energy savings of the Joint Comment. 
The results use the AEO Reference Case forecast with the energy savings 
from 2005 to 2030. The energy savings of the Joint Comment range from 
1.20 Quads to 2.32 Quads without considering HVAC savings.

        Table V.2.--Energy Savings, Resulting From Joint Comment
------------------------------------------------------------------------
 Energy savings, resulting from joint comment, for units sold from 2005
                                 to 2030
-------------------------------------------------------------------------
                Scenario                     Dec 2015        Dec 2027
------------------------------------------------------------------------
Total Quads Saved.......................            1.20            2.32
Total Quads Saved w/ HVAC...............            1.27            2.46
------------------------------------------------------------------------

c. Payback Period

    The Act requires the Department to examine payback periods to 
determine if the three year rebuttable presumption of economic 
justification applies. In Table V.3, we list the median payback periods 
for product classes and design options. While we did not analyze the 
effect of a two-year delay in the effective date of the comments as 
found in the Joint Comment, because the cost of energy varies little 
between the two years (2003 and 2005), we believe the paybacks shown 
below are representative of a 2005-effective standard as well.

                                      Table V.3.--Summary of Payback Period
----------------------------------------------------------------------------------------------------------------
                                                                                                        Median
              Product class                       Design option                    Sector              payback
                                                                                                        (yrs)
----------------------------------------------------------------------------------------------------------------
1F40.....................................  T12 CC.....................  Commercial.................         24.8
                                           T12 ERS....................  Commercial.................          6.4
2F40.....................................  T12 CC.....................  Commercial.................         10.7
                                           T12 ERS....................  Commercial.................          5.4
3F40.....................................  T12 CC.....................  Commercial.................          9.9
Tandem-Wired.............................  T12 ERS....................  Commercial.................          6.4
3F40.....................................  T12 CC.....................  Commercial.................         11.5
Not Tandem-Wired.........................  T12 ERS....................  Commercial.................          3.3
4F40.....................................  T12 CC.....................  Commercial.................          9.3
                                           T12 ERS....................  Commercial.................          4.8
2F96.....................................  T12 EIS....................  Commercial.................          5.9
                                           T12 EIS....................  Industrial.................          8.8
2F96HO...................................  T12 CC.....................  Commercial.................          2.1
                                           T12 ERS....................  Commercial.................          2.4
                                           T12 CC.....................  Industrial.................          5.4
                                           T12 ERS....................  Industrial.................          3.1
----------------------------------------------------------------------------------------------------------------

d. Economic Justification

1. Economic Impact on Manufacturers and Consumers
    We performed a Manufacturer Impact Analysis (MIA) to determine the 
impact of standards on manufacturers. The complete analysis is Chapter 
6 of the TSD. In general, manufacturers of ``affected'' magnetic 
ballasts and their suppliers would be negatively impacted. Also, most 
ballast manufacturers reported that they would add additional 
electronic ballast capacity to meet a new standard. None of the 
manufacturers stated that they would leave the industry or go out of 
business as a result of an electronic ballast standard. Commercial and 
industrial consumers will also be affected by increased ballast 
standards in that they will experience higher purchase prices for 
ballasts and lower operating costs for lighting systems. These impacts 
are best captured by changes in life cycle costs which are discussed in 
section V.d.2.

Ballast Manufacturer Analysis

    In conducting the analysis, we conducted detailed interviews with 
seven ballast manufacturers that together supply more than 95 percent 
of the domestic magnetic and electronic ballast markets. The interviews 
provided valuable information used to evaluate the impacts of a new 
standard on manufacturers' cash flows, manufacturing capacities and 
employment levels. The MIA was performed on a company-by-company basis. 
We elected to group manufacturers exhibiting similar product mix 
characteristics, as this represents the most comprehensive way of 
reporting the variation of impacts on different manufacturers while 
ensuring the confidentiality of individual manufacturers' positions. 
Based on

[[Page 14144]]

information obtained from manufacturer interviews, we divided the 
manufacturers into two sub-groups:

                    Table V.4.--Ballast Manufacturer
------------------------------------------------------------------------
 Sub-group 1  Manufacturers of both    Sub-group 2  Manufacturers that
  magnetic and electronic ballasts     produce only electronic ballasts
------------------------------------------------------------------------
Advance Transformer Company          Howard Industries.
MagneTek, Inc.                       Motorola Lighting, Inc.
Robertson Worldwide                  Osram Sylvania Products Inc.
SLi Lighting/PowerLighting Products
------------------------------------------------------------------------

    Impacts on the entire industry were obtained by aggregating the 
impacts on the two sub-groups.

Impacts on Ballast Manufacturer Cash Flows

    As summarized, four cash flows were calculated for each shipment 
forecast. Manufacturers worked with us to develop their most likely 
cash flow impacts for both the 2015 and 2027 Industry shipment 
scenarios. These cash flows are identified by the name ``Manufacturer 
Submittal.'' In developing cash flow estimates under the Manufacturer 
Submittal scenario it is assumed that manufacturers retain their 1997 
shares of the electronic market in the new electronic market. The 
``Electronic Ballast New Entrant'' scenario was devised in order to 
capture the likely cash flow impacts resulting from the redistribution 
of market shares among the existing manufacturers as a new entrant 
gains a 15 percent market share of the new electronic market. A 
``Magnetic Ballast New Entrant'' Scenario was also developed to analyze 
the potential impact of a new entrant(s) in the magnetic ballast 
industry. This scenario captures possible cash flow impacts resulting 
from the redistribution of market shares among the existing 
manufacturers as a new entrant gains a 15 percent share of the magnetic 
ballast market. Finally, in order to evaluate how assumptions 
concerning future market dynamics contributed to the impacts reported 
in the Manufacturer Submittal scenario, we prepared a separate cash 
flow that assumes no change in magnetic and electronic ballast profit 
margins before and after standard: the ``Existing Dynamics'' scenario. 
The four scenarios are summarized below:
    Manufacturer Submittal: Cash flows and net present value (NPV) were 
calculated using manufacturer prices, manufacturing costs, operating 
margins, capital investment estimates, and other financial parameters 
as provided by the individual manufacturers. This scenario reflects 
each manufacturer's expectation of its ``most likely'' future 
profitability under new standards with the constraint that it assumes 
that its electronic ballast market share remains at the 1997 level.
    Electronic Ballast New Entrant: This scenario assumes that one or 
more new entrants will capture 15 percent of the new electronic ballast 
market. Manufacturer market shares in the 1997 electronic market are 
redistributed to accommodate the new market entrant(s).
    Magnetic Ballast New Entrant: This scenario assumes that one or 
more new entrants will capture 15 percent of the magnetic ballast 
market beginning in the year 2000, both in the Base Case and the 
Standards Case. This assumption is supported by the fact that a few of 
the existing electronic ballast manufacturers have publicly announced 
plans to manufacture and/or source magnetic ballasts in the U.S., 
irrespective of a DOE standard. Existing manufacturer market shares in 
the 1997 magnetic ballast market are redistributed to accommodate the 
new market entrant(s). Furthermore, this scenario assumes that the new 
entrant(s) will result in increased competition, which will reduce the 
profitability of the magnetic ballast business from its current levels 
to those seen in the more competitive electronic ballast business post-
standards.
    Existing Dynamics: This scenario assumes that there will be no 
change in competitive dynamics when an electronic ballast standard 
comes into effect, and hence electronic ballast manufacturer market 
shares and profit margins in the case of a standard will remain similar 
to their values in the absence of a standard.
    Tables V.5 and V.6 summarize the financial impacts for the four 
scenarios under the two base case forecasts of shipments. The impacts 
reported are the change in NPV and this change as a percentage of the 
industry value represented by the cash flow generated by all (magnetic 
and electronic) ballast shipments in the regulated product classes. 
Note that for the industry results, the Electronic Ballast New Entrant 
scenario is the same as the Manufacturer Submittal scenario because the 
new entrant(s) cash flow was modeled using shipment weighted average 
financial parameters of all existing electronic ballast manufacturers.

  Table V.5.--Cash Flow Impacts of an Electronic Ballast Standard Under the 2015 (5% Decline) Shipment Scenario
----------------------------------------------------------------------------------------------------------------
                                                   Base case NPV   Standard case   Change in NPV   Change in NPV
                    Scenarios                         ($mil)        NPV ($mil)        ($mil)            (%)
----------------------------------------------------------------------------------------------------------------
       Cash flow impacts on business represented by all regulated product classes--Magnetic and Electronic
----------------------------------------------------------------------------------------------------------------
                                 Sub-group 1 (magnetic and electronic producers)
----------------------------------------------------------------------------------------------------------------
Manufacturer Submittal..........................           288.9           198.9           -90.0             -31
Electronic Ballast, New Entrant.................           288.9           199.1           -89.8             -31
Magnetic Ballast, New Entrant...................           216.2           161.6           -54.6             -25
Existing Dynamics...............................           288.9           219.0           -69.9             -24
----------------------------------------------------------------------------------------------------------------
                                     Sub-group 2 (electronic only producers)
----------------------------------------------------------------------------------------------------------------
Manufacturer Submittal..........................           131.7           152.0            20.3              15
Electronic Ballast, New Entrant.................           131.7           145.8            14.1              11

[[Page 14145]]

 
Magnetic Ballast, New Entrant...................           131.7           152.0            20.3              15
Existing Dynamics...............................           131.7           141.0             9.3              7
----------------------------------------------------------------------------------------------------------------
                                         Electronic Ballast New Entrant
----------------------------------------------------------------------------------------------------------------
Electronic Ballast, New Entrant.................             0.0             6.0             6.0              -
----------------------------------------------------------------------------------------------------------------
                                          Magnetic Ballast New Entrant
----------------------------------------------------------------------------------------------------------------
Magnetic Ballast, New Entrant...................             4.5             2.0            -2.5            -55
----------------------------------------------------------------------------------------------------------------
                                                    Industry
                                           (Sub-group 1 + Sub-group 2)
----------------------------------------------------------------------------------------------------------------
Manufacturer Submittal..........................           420.6           350.9           -69.7             -17
Electronic Ballast, New Entrant.................           420.6           350.9           -69.7             -17
Magnetic Ballast, New Entrant...................           352.4           315.6           -36.8             -10
Existing Dynamics...............................           420.6           359.9           -60.7             -14
----------------------------------------------------------------------------------------------------------------


  Table V.6.--Cash Flow Impacts of an Electronic Ballast Standard Under the 2027 (3% Decline) Shipment Scenario
----------------------------------------------------------------------------------------------------------------
                                                   Base case NPV   Standard case   Change in NPV     Change in
                    Scenarios                         ($mil)        NPV ($mil)        ($mil)          NPV(%)
----------------------------------------------------------------------------------------------------------------
       Cash flow impacts on business represented by all regulated product classes--Magnetic and Electronic
----------------------------------------------------------------------------------------------------------------
                                 Sub-group 1 (magnetic and electronic producers)
----------------------------------------------------------------------------------------------------------------
Manufacturer Submittal..........................           318.3           204.6          -113.7             -36
Electronic Ballast, New Entrant.................           318.3           204.9          -113.4             -36
Magnetic Ballast, New Entrant...................           220.9           161.7           -59.2             -27
Existing Dynamics...............................           318.3           224.7           -93.6            -29
----------------------------------------------------------------------------------------------------------------
                                     Sub-group 2 (electronic only producers)
----------------------------------------------------------------------------------------------------------------
Manufacturer Submittal..........................           123.0           150.5            27.5              22
Electronic Ballast, New Entrant.................           123.0           144.3            21.3              17
Magnetic Ballast, New Entrant...................           123.0           150.5            27.5              22
Existing Dynamics...............................           123.0           139.5            16.5             13
----------------------------------------------------------------------------------------------------------------
                                         Electronic Ballast New Entrant
----------------------------------------------------------------------------------------------------------------
Electronic Ballast, New Entrant.................             0.0             6.0             6.0               -
----------------------------------------------------------------------------------------------------------------
                                          Magnetic Ballast New Entrant
----------------------------------------------------------------------------------------------------------------
Magnetic Ballast, New Entrant...................             6.2             2.2            -4.0            -65
----------------------------------------------------------------------------------------------------------------
                                                    Industry
                                           (Sub-group 1 + Sub-group 2)
----------------------------------------------------------------------------------------------------------------
Manufacturer Submittal..........................           441.3           355.1           -86.2             -20
Electronic Ballast, New Entrant.................           441.3           355.1           -86.2             -20
Magnetic Ballast, New Entrant...................           350.1           314.4           -35.7             -10
Existing Dynamics...............................           441.3           364.2           -77.1             -17
----------------------------------------------------------------------------------------------------------------

Uncertainty Analysis of Cash Flows

    The NPV values presented in the above tables incorporate 
significant restructuring costs primarily associated with plant 
closures in the U.S. and Mexico. The large majority of these costs are 
directly associated with the closure of the remaining large U.S.-based 
ballast plant. In consideration of the past trend towards consolidation 
of magnetic ballast production to Mexico, a sensitivity analysis was 
conducted on the cash flows assuming that the restructuring costs 
associated with the plant closures would occur in the base case (in 
absence of standards). It was found that these costs contribute 
approximately $14 million to the negative impacts under all scenarios.
    A sensitivity analysis was also conducted to analyze the impact of 
certain business risks. Specifically, a scenario was developed whereby 
changes in market demand would cause magnetic ballast shipments to 
decline at twice the rate, i.e., 10 percent per year between 1999 and 
2002, remain constant through 2005 and then continue declining at 5 
percent per year

[[Page 14146]]

beginning 2006. It was further assumed that these abrupt changes in 
shipments impact the magnetic ballast industry competitive dynamics by 
reducing profit margins in the 2000 through 2005 time frame, to levels 
observed in the electronic ballast market.
    The cash flow impacts with the 2003 plant closure assumption and 
the business risks as outlined above are presented in the Table V.7.

  Table V.7.--Cash Flow Impacts of an Electronic Ballast Standard Under the 2015 (5% Decline) Shipment Scenario
                                  With Plant Closures in the Base Case in 2003
----------------------------------------------------------------------------------------------------------------
                                                   Base case NPV   Standard case   Change in NPV   Change in NPV
                    Scenarios                         ($mil)        NPV ($mil)        ($mil)            (%)
----------------------------------------------------------------------------------------------------------------
       Cash flow impacts on business represented by all regulated product classes--Magnetic and Electronic
                                                   Sub-group 1
----------------------------------------------------------------------------------------------------------------
Manufacturer Submittal..........................           288.9           198.9           -90.0             -31
Manufacturer Submittal with plant closure in               275.2           198.9           -76.3             -28
 2003...........................................
Business risk: abrupt change in shipments.......           263.7           179.5           -84.2             -32
----------------------------------------------------------------------------------------------------------------
                                                   Sub-group 2
----------------------------------------------------------------------------------------------------------------
Manufacturer Submittal..........................           131.7           152.0            20.3              15
Manufacturer Submittal with plant closure in               131.7           152.0            20.3              15
 2003...........................................
Business risk: abrupt change in shipments.......           131.7           152.0            20.3             15
----------------------------------------------------------------------------------------------------------------
                                                    Industry
                                           (Sub-group 1 + Sub-group 2)
----------------------------------------------------------------------------------------------------------------
Manufacturer Submittal..........................           420.6           350.9           -69.7             -17
Manufacturer Submittal with plant closure in               406.9           350.9           -56.0             -14
 2003...........................................
Business risk: abrupt change in shipments.......           395.4           331.5           -63.9             -16
----------------------------------------------------------------------------------------------------------------

Impacts on Ballast Manufacturer Employment

    Employment impacts are reported in two categories:
    Direct employment impacts: These impacts consider jobs directly 
involved with the production of ``affected'' magnetic or electronic 
ballasts. In facilities producing ``affected'' and other types of 
ballasts, only direct and overhead jobs related to ``affected'' 
ballasts are considered in this category. In situations where ballast 
companies own component manufacturing operations, such as capacitor 
plants or magnet wire operations, job impacts on these plants are 
reported within this category. Impacts on other component suppliers are 
presented in a separate section titled ``Impact on Suppliers to the 
Fluorescent Lamp Ballast Industry.''
    Associated employment impacts: These impacts consider jobs impacted 
by business decisions driven by the ``direct'' employment impacts. For 
example, if in a manufacturing plant with 100 employees, 50 are 
producing ``affected'' magnetic ballasts and the remaining 50 are 
producing ``unaffected'' magnetic ballasts, such as residential 
ballasts, then an electronic ballast standard would result in the loss 
of 50 direct jobs. Faced with this situation the company might decide 
to close operations in its plant due to the dramatically reduced 
capacity utilization. Such a decision would result in the loss of the 
remaining 50 jobs. These 50 jobs would then be reported as 
``associated'' employment impacts.
    Manufacturers in Sub-group 1 anticipate that absent standards, 
direct employment associated with manufacturing ``affected'' magnetic 
ballasts will decrease approximately in the same proportion as 
shipments. Faced with this decline, manufacturers in Sub-group 1 intend 
to maintain high plant capacity utilization by replacing the loss in 
direct jobs with new associated jobs. These new associated jobs may be 
the result of new product introductions, plant consolidations or 
decisions to make in-house, parts currently sourced from suppliers.
    The uncertainty with regards to the timing of any plant closures in 
the base case--after the year 2003--results from the difficulty in 
anticipating how many associated jobs can be maintained in the long 
run. Gains in associated jobs will not necessarily maintain plant 
capacity utilization in the long run and a threshold may be reached 
that requires the plant to be closed. For example, one manufacturer 
suggested that for its supplier plant a drop of 30 percent in capacity 
could lead to closure.
    Table V.8 summarizes the employment impacts of an electronic 
ballast standard under the two shipment scenarios. The table assumes a 
standards effective date of 2003.

     Table V.8.--Industry-Wide Employment Impacts of an Electronic Ballast Standard (Orderly decline in U.S.
                                                 manufacturing)
----------------------------------------------------------------------------------------------------------------
                                                    Direct jobs     Associated     Direct jobs 4
                                                      lost in      jobs at risk     5 gained in
             Country of manufacture                  magnetic       in magnetic     electronic      Net direct
                                                      ballast         ballast         ballast        jobs lost
                                                   manufacturing   manufacturing   manufacturing
----------------------------------------------------------------------------------------------------------------
                                       2015 (5% decline) shipment scenario
----------------------------------------------------------------------------------------------------------------
USA.............................................            1666           2 406             500             166
Mexico..........................................            1570           3 190             700            870
----------------------------------------------------------------------------------------------------------------

[[Page 14147]]

 
                                       2027 (3% decline) shipment scenario
----------------------------------------------------------------------------------------------------------------
USA.............................................             717           2 363             557             160
Mexico..........................................            1727           3 161             769            958
----------------------------------------------------------------------------------------------------------------
1 Includes both factory and non-factory jobs supporting magnetic ballast production.
2 These ``associated'' jobs are assumed relocated to Mexico.
3 These ``associated'' jobs will be relocated to other plants in Mexico or elsewhere.
4 Includes jobs from Sub-groups 1 and 2.
5 Does not include potential associated jobs added in these plants.

Uncertainty in Ballast Manufacturer Employment Impacts

    As previously discussed, there exists some uncertainty relative to 
the closure date of current magnetic ballast production facilities in 
the base case. The employment impacts presented in Table V.8 assume a 
base case with an orderly decline in the U.S. magnetic ballast 
employment until 2015 or 2027. The large majority of these employment 
impacts are directly associated with the closure of the remaining large 
U.S.-based magnetic ballast plant.
    In consideration of the past trend towards consolidation of 
magnetic ballast production to Mexico, a sensitivity analysis was 
conducted on the employment impacts assuming that the employment 
impacts associated with the plant closures would occur in the base case 
(in absence of standards). These impacts are detailed in the Table V.9. 
The scenario assumes that the lost U.S. jobs would be picked up by 
increased manufacturing activity in the Mexican plants, thereby 
increasing the employment impact of a standard on Mexican jobs.

  Table V.9.--Industry-Wide Employment Impacts of an Electronic Ballast Standard Under the Scenario Where (U.S.
                             Magnetic Ballast Plants Close in 2003 in the Base Case)
----------------------------------------------------------------------------------------------------------------
                                         Direct jobs     Associated     Direct jobs 4
                                           lost in      jobs at risk     5 gained in
        Country of manufacture            magnetic       in magnetic     electronic      Net direct jobs lost/
                                           ballast         ballast         ballast               gained
                                        manufacturing   manufacturing   manufacturing
----------------------------------------------------------------------------------------------------------------
                                       2015 (5% decline) shipment scenario
----------------------------------------------------------------------------------------------------------------
U.S.A................................           \1\ 0           \2\ 0             500  500 jobs gained
Mexico...............................            2236         \3\ 596             700  1536 jobs lost
----------------------------------------------------------------------------------------------------------------
                                       2027 (3% decline) shipment scenario
----------------------------------------------------------------------------------------------------------------
U.S.A................................               0               0             557  557 jobs gained
Mexico...............................            2444         \3\ 524             769  1675 jobs lost
----------------------------------------------------------------------------------------------------------------
\1\ Includes both factory and non-factory jobs supporting magnetic ballast production.
\2\ These ``associated'' jobs are assumed relocated to Mexico.
\3\ These ``associated'' jobs will be relocated to other plants in Mexico or elsewhere.
\4\ Includes jobs from Sub-groups 1 and 2.
\5\ Does not include potential associated jobs added in these plants.

Impacts on Ballast Manufacturing Capacity

    It is likely that an electronic ballast standard would negatively 
impact magnetic ballast production capacity in the U.S. and Mexico. As 
mentioned previously, there is evidence to suggest that magnetic 
ballast production facilities in the U.S. may be closed regardless of a 
standard, and a sensitivity analysis was conducted to examine the 
impacts of this scenario. While there is a degree of uncertainty over 
what will happen to domestic magnetic ballast production facilities in 
the absence of a standard, in all likelihood, the imposition of a new 
electronic ballast standard will result in the closure of one magnetic 
ballast production facility in the U.S., and in the partial closure of 
another in Mexico. Additionally two manufacturer-owned (captive) 
ballast supplier facilities would most likely be impacted: A capacitor 
plant in Mexico could close and a magnet wire plant, located in the 
U.S., could also close.
    Although the scenario whereby magnetic ballast production 
facilities are closed in 2003 in the base case was examined, all 
manufacturers in Sub-group 1 suggested that in the absence of a 
standard they would continue to manufacture ``affected'' magnetic 
ballasts in their current manufacturing plants. They did not anticipate 
any plant closures or shifting of production

[[Page 14148]]

of ``affected'' magnetic ballasts from one plant to another before the 
year 2010.
    Table V.10 summarizes the possible impact of a new electronic 
ballast standard on existing manufacturing plants in the U.S. and 
Mexico, assuming plants remain open in the base case as manufacturers 
predict.

              Table V.10.--Impacts on Manufacturing Capacity Due to an Electronic Ballast Standard
----------------------------------------------------------------------------------------------------------------
              Plant                         Location                 Description                 Action
----------------------------------------------------------------------------------------------------------------
Plant 1..........................  U.S.A....................  Magnetic ballast........  Closure.
Plant 2..........................  U.S.A....................  Magnet Wire.............  Possible Closure.
Plant 3..........................  Mexico...................  Magnetic ballast........  Partial Closure.
Plant 4..........................  Mexico...................  Capacitors..............  Closure.
Plant 5..........................  U.S.A....................  Electronic ballast......  Expansion.
Plant 6..........................  U.S.A....................  Electronic ballast......  Expansion.
Plant 7..........................  Mexico...................  Electronic ballast......  Expansion.
Plant 8..........................  Mexico...................  Electronic ballast......  Expansion.
----------------------------------------------------------------------------------------------------------------

    An electronic ballast standard would lead to increased electronic 
ballast manufacturing capacity in the U.S. and Mexico. In order to meet 
increased sales resulting from a new electronic ballast standard, two 
of the four manufacturers in Sub-group 1 plan to develop additional 
electronic ballast manufacturing capacities in Mexico. The smaller 
manufacturers in Sub-group 1 plan no major plant closures or expansions 
and will accommodate the new product mix requirements within their 
existing facilities. In Sub-group 2, two manufacturers stated that they 
would add significant electronic ballast manufacturing capacity in the 
U.S. to meet the new standard.

Impact on Small Ballast Manufacturers

    Two relatively small manufacturers currently produce both 
``affected'' magnetic and electronic ballasts. One of these 
manufacturers would be a ``small business'' as defined in the 
Regulatory Flexibility Act (See discussion in the Procedural Issues and 
Regulatory Reviews section of this preamble). Both the small 
manufacturers had their respective electronic and magnetic ballast 
manufacturing operations in the same plants. It seems their smaller 
size and less automated operations provides them with the flexibility 
to adapt to a new electronic ballast standard without significant asset 
write-offs or plant closures. However, the negative impacts on the 
small manufacturers' cash flows from operations were similar in 
proportion to those reported by the two large manufacturers in Sub-
group 1. As a result, in the 5% scenario, we estimate that small 
manufacturers will experience a 16 percent loss in their NPV compared 
to a 34 percent loss in NPV for the two large manufacturers.
    As with other Sub-group 1 manufacturers, neither of these 
manufacturers stated that an electronic ballast standard would force 
them to leave the industry or go out of business.

Impact on Ballast Industry Suppliers

    New energy-efficiency standards for fluorescent lamp ballasts will 
also affect ballast industry suppliers. To estimate this impact, we 
performed a detailed analysis of the impacts of an electronic ballast 
standard on suppliers to the ballast industry. We invited 31 supplier 
firms to participate in interviews. These firms were identified by 
manufacturers to represent the key components contained in the bills of 
materials for ``affected'' magnetic and electronic ballasts. Eleven of 
these suppliers served magnetic ballast production, eleven electronic 
ballast production, and nine supplier plants served both magnetic and 
electronic production. Sixteen of the 20 organizations serving magnetic 
ballast production participated in interviews and/or provided plant 
tours. Eleven of the 20 organizations serving electronic ballast 
production participated in interviews and/or provided plant tours.
    Table V.11 shows an average (weighted by shipment levels) 
distribution of materials and components cost for ``affected'' magnetic 
ballasts. Interviews and literature sources provided information needed 
to estimate financial and employment impacts of a new energy efficiency 
standard for ballasts on suppliers responsible for approximately 91 
percent of the cost of materials.

    Table V.11.--Cost of Materials for ``Affected'' Magnetic Ballasts
------------------------------------------------------------------------
                                                            Contribution
                                                              to total
                       Material type                           cost of
                                                              materials
                                                                 (%)
------------------------------------------------------------------------
Magnet and Lead Wire......................................            40
Steel case and CRML.......................................            23
Capacitors................................................            16
Thermal protectors, clamps, potting.......................            12
Other.....................................................             9
------------------------------------------------------------------------

    The industries analyzed and represented are:
     Cold rolled steel finished for ballast cases
     Cold rolled motor laminate (CRML) steel for use primarily 
in transformers
     Magnet wire
     Lead wire
     Thermal protectors
     Clamps to secure the stack of CRML stamped sections making 
up the ballast transformer to the proper size
     Potting and impregnation compounds
     Capacitors
    With the exception of a very small fraction of metallized film 
capacitors produced outside the U.S. and materials produced in plants 
owned and operated by the ballast manufacturers themselves, all of 
these components are produced domestically in the United States. Except 
for the clamps, all these industries (not necessarily the same plants) 
also serve the production of electronic ballasts. The analyses for 
financial and employment impacts considered materials supplied to 
magnetic and electronic ballasts together for those industries which 
serve both markets.
    Table V.12 exhibits a similar distribution of materials and 
components costs for an electronic ballast alternative to the 
``affected'' magnetic ballast. The table shows a higher number of 
components for electronic ballasts. The cost of materials for 
electronic ballasts is approximately 30 percent higher than that for 
``affected'' magnetic ballasts.

          Table V.12.--Benchmark Costs for Electronic Ballasts
------------------------------------------------------------------------
                                                            Contribution
                                                              to total
                           Item                                cost of
                                                              materials
                                                                 (%)
------------------------------------------------------------------------
Film Capacitors...........................................            17
PC Board, Thermal Protectors, Potting.....................            15

[[Page 14149]]

 
Steel case and CRML.......................................            12
Magnet and lead wire, connectors..........................            12
Transistors...............................................            10
Ceramic and Electrolytic capacitors.......................             7
Bobbins...................................................             6
Diodes....................................................             6
Ferrite Cores.............................................             5
Others....................................................            10
------------------------------------------------------------------------

    The analysis of supplier impacts focuses on domestic (production 
facilities within the United States) suppliers. A substantial portion 
of the components that go into producing electronic ballasts is 
produced in foreign plants. We estimated the fraction of each component 
produced domestically in 1997. To the extent that domestic suppliers 
can maintain this market share, they could recover some of the 
``affected'' magnetic ballast revenue and associated employment level 
that they would lose if an electronic ballast energy efficiency 
standard were to go into effect. The industries analyzed were producers 
of printed circuit boards and bobbins. No first hand financial or 
employment information was collected from industry representatives for 
transistors, diodes, or ferrite cores. We combined these three 
industries with a half dozen other smaller contributors to the cost of 
materials and assumed pro-rated values for net income, depreciation, 
and capital expenditure levels to estimate cash flow for this group. 
This ``other'' group of suppliers represents approximately 27 percent 
of supplier revenue, meaning about 73 percent of electronic ballast 
supplier financial values is based on direct contact with industry 
representatives. The comparable figure for the magnetic ballast 
supplier side is 9 percent ``other'' and 91 percent based on interviews 
with suppliers.
    The analysis considers a reference case wherein domestic suppliers 
maintain their 1997 market shares in the electronic ballast component 
market. Through discussions with supplier industries it became apparent 
that there existed some uncertainty as to the probability that ballast 
manufacturers would continue to source their components domestically in 
the event of an electronic standard. To bracket the uncertainty, 
separate cash flows were performed for the extreme case where all 
components for electronic ballasts were purchased from foreign sources. 
The financial impacts associated with the reference and ``worst'' cases 
are summarized in the following Tables.

 Table V.13.--Estimated NPV in $Millions for Supplier Industries, Assuming Domestic Supplier Industries Maintain
                                    Their 1997 Market Shares (Reference Case)
----------------------------------------------------------------------------------------------------------------
                                            5% Scenario, 1998-2015                 3% Scenario, 1998-2027
                                   -----------------------------------------------------------------------------
             Industry                              Standard                               Standard
                                     Base case       case     Change $mil   Base case       case     Change $mil
----------------------------------------------------------------------------------------------------------------
Capacitor.........................         1.28         1.59         0.31         1.34         1.74         0.41
Magnet, Lead Wire, Connectors.....        11.40         8.83        -2.57        12.39         9.27        -3.13
TP, Metal Clamps, Potting &                8.55         7.05        -1.51        10.24         7.59        -2.65
 Impregnating.....................
Steel.............................        16.59        12.45        -4.14        18.74        14.21        -4.53
Other Mag/Electronic Suppliers....         6.11         4.87        -1.23         6.81         5.18        -1.63
PC Board, Bobbins.................         1.87         2.81         0.94         1.45         2.69         1.24
Other Electronic Suppliers........          .79         1.44         0.65         1.04         1.88         0.84
                                   -----------------------------------------------------------------------------
    Total.........................        46.59        39.04        -7.55        52.01        42.56        -9.45
----------------------------------------------------------------------------------------------------------------


 Table V.14.--Estimated NPV in $Millions for Supplier Industries, Assuming Foreign Suppliers Capture All the New
                                     Electronic Ballast Market (worst case).
----------------------------------------------------------------------------------------------------------------
                                           5% Scenario, 1998-2015                 3% Scenario, 1998-2027
                                  ------------------------------------------------------------------------------
             Industry                             Standard                               Standard
                                    Base case       case     Change $mil   Base case       case      Change $mil
----------------------------------------------------------------------------------------------------------------
Capacitor........................         1.28          .89         -.39         1.34           .92        -0.41
Magnet, Lead Wire, Connectors....        11.40         8.06        -3.34        12.39          8.37        -4.03
TP, Metal Clamps, Potting &               8.55         5.69        -2.86        10.24          5.92        -4.31
 Impregnating....................
Steel............................        16.59        11.05        -5.54        18.74         11.54        -7.20
Other............................         6.11         4.13        -1.97         6.81          4.31        -2.50
PC Board, Bobbins................         1.87         0.25        -1.62         1.45          0.15         -1.3
Other Electronic Suppliers.......         0.79         0.16        -0.64         1.04          0.09        -0.94
                                  ------------------------------------------------------------------------------
    Total........................        46.59        30.23       -16.36        52.01         31.3        -20.69
----------------------------------------------------------------------------------------------------------------

    The financial impact ranges from a reference case $7.55 million 
decline in NPV cash flow under the 5% scenario to a ``worst'' case 
$20.69 million decline under the 3% scenario.

Impacts on Supplier Employment

    The reference-case employment impacts under the 3% and 5% scenarios 
are summarized in Table V.15 and indicate a range of 313-340 jobs lost 
and potential for 129-144 to be gained back. If all the new electronic 
ballast market were to go to foreign firms, no jobs would be gained 
back, and thus in the worst case about 313-340 domestic jobs would be 
lost.

[[Page 14150]]



  Table V.15.--Estimated Employment Impacts for Supplier Industries Assuming Domestic Suppliers Maintain Their
                                               1997 Market Shares.
----------------------------------------------------------------------------------------------------------------
                                            5% Scenario, 1998-2015                 3% Scenario, 1998-2027
                                   -----------------------------------------------------------------------------
             Industry                                           Net jobs                               Net jobs
                                     Jobs lost    Potential       lost      Jobs lost    Potential       lost
                                                 jobs gained    [gained]                jobs gained    [gained]
----------------------------------------------------------------------------------------------------------------
Capacitor.........................           27           34          [7]           29           37          [8]
Magnet & Lead.....................           69           10           59           76           11           65
TP, Metal Clamp,..................           52           14           38           57           15           42
Steel.............................           58           13           45           63           14           49
Metallized Film...................           44            1           43           48            1           47
Other Magnetic/Electronic.........           40            8           32           44            9           35
PC Board, Bobbins.................            0           23         [23]            0           27         [27]
Other Electronic..................            0           26         [26]            0           30         [30]
Associated Plant Closure..........           23  ...........           23           23  ...........           23
                                   -----------------------------------------------------------------------------
    Total.........................          313          129          184          340          144          196
----------------------------------------------------------------------------------------------------------------

Impacts on Luminaire Manufacturers

    The Department interviewed eight luminaire manufactures with a 
combined market share approaching 85 percent of the market segments 
affected by a new ballast standard. The Department specifically 
investigated how a new energy efficiency standard for ballasts might 
change luminaire manufacturer profitability and cash flow. Of the eight 
manufacturers interviewed, two reported they will suffer no impacts and 
two others believe their impacts would be minimal. The four other 
manufacturers believe they will suffer varying levels of decreased 
company value.
    From the information obtained in the interviews, estimates of 
reductions in NPV were prepared for each of the four manufacturers 
reporting negative impacts. These projections incorporated the 
financial figures and rationale provided by the manufacturers. Three 
different rationales were presented in support of diminished 
profitability and value.
    One or more manufacturers are experiencing greater profitability 
with electronic ballasts. The NPV reduction assumes that a standard 
which eliminates magnetics as the commodity product would render 
electronic ballasts the commodity product and competition would 
eliminate the premium for electronic ballasts.
    One or more manufacturers are experiencing greater profitability 
with magnetic ballasts. The NPV reduction is a direct consequence of 
replacing sales of higher margin products by lower margin sales.
    The third view presented concerns the high price sensitivity of 
low-end luminaires, particularly one and two lamp strip lights. It was 
assumed for that analysis that not all incremental costs for electronic 
ballasts could be passed on to consumers with a corresponding reduction 
in profit margin.
    For both shipment scenarios, the aggregated reduction in NPV for 
the four firms totals approximately 13.5 million dollars assuming the 
current difference in margins for luminaires incorporating magnetic or 
electronic ballasts would continue absent standards. This appears to be 
a very speculative assumption given the trend towards convergence of 
magnetic and electronic luminaire margins reported by most luminaire 
manufacturers. If in fact margins do converge by the implementation 
date of a new standard, the impacts attributed to price margin 
differences disappear and the total impacts are reduced to a value of 
approximately 4.5 million dollars.
    In addition to the previous financial impacts, manufacturers 
reported significant other costs and business disruptions associated 
with potential new ballast standards. There were concerns expressed 
that a standard would divert resources from new product and technology 
introduction and result in lost opportunities. Large efforts would also 
be needed to revise product literature and perform photometric tests. 
Further, many business processes and information systems relative to 
materials management and other systems would need to be revised. The 
costs associated with these issues, not including lost opportunities 
were reported to be approximately one million dollars.

Impacts on Luminaire Manufacturer Employment

    Of the eight luminaire manufacturers interviewed, six stated that 
employment impacts from an electronic ballast standard would be be 
minimal, if any, within their companies. Two manufacturers, however, 
believe a new standard would probably reduce employment levels in their 
U.S. facilities. This reduction is assumed to be caused by reductions 
in export sales and a loss of flourescent luminaire sales in favor of 
incandescent luminaires. Based on its analysis of these issues and in 
agreement with the majority view of interview participants, the 
Department believes the employment impacts of a ballast standard would 
be minimal.
    Two manufacturers expressed a concern that since their export 
markets are primariliy magnetic, a drop in domestic ballast 
manufacturing volumes would cause upward pressure on magnetic luminaire 
prices and compel them to raise export prices for luminaires. Local 
luminaire manufacturers, they believe, could find less costly sources 
for magnetic ballasts resulting in decreased export sales for U.S. 
companies. Furthermore, these manufactures fear that given the 
importance of linear flourscent fixtures in most customer orders, 
winning or losing a project can depend heavily on price levels of the 
these luminaires. If flourecscent luminaire sales are lost to local 
competitors then, they believe, U.S. companies could also lose sales of 
HID luminaires, emergency lighting, exit signs and various other 
products. The Department believes these employment impacts would be 
very small for two reasons. First economic theory and real world 
experience suggests that in competitive markets, overcapacity leads to 
increased--not decreased--price competition. Second the export market 
is concentrated in the Canadian and Mexican markets where U.S. ballast 
manufacturers are major participants and could compete with local 
ballasts manufacturers.
    Another stated potential cause of reduced U.S. luminaire 
manufacturing jobs is the possible movement away from flourescent 
luminaires in favor of incandescent luminaires in the more

[[Page 14151]]

first cost sensitive commercial market segments. However, there was 
considerable differences of opinion as to the significance of any such 
movement in lighting systems. The general view was that there is 
already a significant cost premium for fluorescent lighting and this 
premium is not likely to greatly increase given ballast pricing trends. 
Therefore the Department has not included any employment reductions for 
luminaire manufacturers because of this potential effect.

Impacts on Lamp Manufacturers

    Three major manufacturers, GE Lighting, OSI, and Philips Lighting 
Company dominate the domestic market for linear fluorescent lamps. 
Together these three manufacturers serve approximately 90 percent of 
the U.S. market. As trade allies of the fluorescent ballast 
manufacturing industry, they may experience an impact from a new 
energy-efficiency standard applied to fluorescent lamp ballasts. Some 
ballast and lamp industry sources and others have speculated that a new 
energy-efficiency standard for ballasts would substantially accelerate 
the transition from T12 lamps to T8, thus having an impact on lamp 
manufacturers as well as ballast manufacturers.
    As discussed previously, OSI commented that the lamp industry had 
the capacity to handle the transition from T12 lamps to T8 lamps in the 
OEM market resulting from an electronic ballast rule over a period of 
three years. OSI believes, however, it doubtful the lamp industry could 
handle, in addition, any significant transition to T8 lamps of the 
installed base of T12 lamps in less than 8 years following an 
electronic ballast rule. OSI commented that if magnetic ballasts were 
no longer available, large resources would be diverted to the 
development of energy saving T12 lamps compatible with electronic 
ballasts or electronic ballasts compatible with energy saving T12 
lamps.
    The Department invited representatives from each of the three major 
lamp manufacturers to estimate the impact that a new ballast standard 
might have on them. One manufacturer chose not to participate in the 
discussions, so the following results are based on talks with two major 
manufacturers.
    There was agreement that a new standard would accelerate the shift 
in market share from T12 to T8 lamps. The manufacturers further agreed 
the current transition to T8 lamps is being handled well and that any 
acceleration in the transition must be served while retaining enough 
T12 capacity to serve the replacement market. The replacement market 
for T12 lamps is large, over 85 percent of the 1998 market of 340 
million lamps were T12 lamps. The lamp manufacturing industry can gear 
up to serve the increase in OEM demand for T8 lamps with a 3-4 year 
lead-time. However, to serve any increased replacement market at the 
same time would require an acceleration in capacity expansion for T8 
production and early retirement of T12 capacity which would have 
financial impacts.
    The Department is uncertain as to how the replacement market might 
respond to today's proposed standard. Consumers might make spot 
replacements, as suggested by ACEEE earlier, or ballast manufacturers 
may develop electronic T12 ballasts compatible with T12 energy saver 
lamps or there could be an acceleration to T8 lamps in the replacement 
market. Given this uncertainty, we did not attempt to quantify the 
impact on lamp manufacturers of an electronic ballast standard applied 
to the replacement ballast market before the 8 year implementation date 
suggested by OSI.
2. Life-Cycle Cost
    More efficient ballasts would affect commercial and industrial 
consumers in two ways: operating expense would probably decrease and 
purchase price would probably increase. We analyzed the net effect by 
calculating the LCC. Inputs required for calculating LCC include end-
user prices for ballasts and lamps, electricity rates (cents/
kiloWatthour), energy savings, annual lighting operating hours, labor 
rates, installation times, period of the analysis, ballast lifetimes, 
lamp lifetimes, and discount rates. A detailed discussion of the 
sources and methods used for arriving at an estimate of these 
parameters is in the TSD. Briefly, we obtained end-user prices for 
ballasts from a survey of ballast distributors from various parts of 
the country; we estimated marginal electricity rates as described later 
in this section; we based operating hours upon Xenergy building energy 
audit data; we derived installation costs from journeyman wages listed 
in the National Electrical Estimator 1995; the period of analysis is 
the ratio of ballast life to the annual operating hours; lamp life is 
the average of lamp life under spot and group replacement where spot 
replacement lamp life is the lamp rated life from manufacturer's 
catalog and group replacement is 75 percent of the rated life; and the 
discount rate is 8 percent.
    We estimated the marginal electricity rates by first calculating 
the marginal rate faced by a sample of commercial customers in 
buildings throughout the U.S. This was compared with the average 
electricity rates for the same customers. The percent difference 
between the average and marginal rates (Epsilon) was calculated for 
each customer. We then used this Epsilon distribution to convert the 
average electricity price from a specific United States utility into 
marginal electricity price by using the formula:

Marginal Electricity Price = Average Electricity Price x (1 + Epsilon)

    We performed a probability-based LCC analysis with a computer 
program called Crystal Ball. For each of four inputs (ballast price, 
electricity price, ballast lifetime, and annual lighting hours) to the 
LCC model, we defined a probability-based distribution of the input to 
account for the variability of the input. Instead of using a single 
``average'' value to represent the input in its entirety, we used the 
whole distribution to calculate the LCC. The output of the LCC model is 
a mean LCC savings for each product class as well as a probability 
distribution or likelihood of LCC reduction or increase.
    We present a summary of the results in Table V.16. The column 
titled ``Delta LCC'' gives the change in LCC when switching from the 
baseline option of EEM ballast to the listed design option. ``% 
Winners'' represents the probability of the design option resulting in 
reduced LCC. Table 4.4 of the TSD also shows the life cycle cost 
impacts when starting from an energy efficient magnetic T8 ballast.

                                   Table V.16.--Summary of Delta LCC* Results
----------------------------------------------------------------------------------------------------------------
                                                                                                 Delta LCC
                                                                                          ----------------------
           Product class             % Market      Design option            Sector            Mean
                                                                                            (1997$)   %Winners**
----------------------------------------------------------------------------------------------------------------
1F40..............................          5  T12 CC..............  Commercial..........         -4           7

[[Page 14152]]

 
                                               T12 ERS.............  Commercial..........          4          68
2F40..............................         36  T12 CC..............  Commercial..........         -2          31
                                               T12 ERS.............  Commercial..........          6          80
3F40..............................          1  T12 CC..............  Commercial..........         -2          33
Tandem-Wired......................             T12 ERS.............  Commercial..........          5          68
3F40 Not..........................         10  T12 CC..............  Commercial..........         -4          23
Tandem-Wired......................             T12 ERS.............  Commercial..........         18          98
4F40..............................         22  T12CC...............  Commercial..........         -2          36
                                               T12 ERS.............  Commercial..........         12          87
2F96..............................         23  T12 EIS.............  Commercial..........          7          75
                                               T12 EIS.............  Industrial..........         -2          35
2F96HO............................          2  T12 CC..............  Commercial..........         11          90
                                               T12 ERS.............  Commercial..........         28          98
                                               T12 CC..............  Industrial..........          1          50
                                               T12 ERS.............  Industrial..........         15         94
----------------------------------------------------------------------------------------------------------------
*A positive Delta LCC implies a LCC savings whereas a negative number implies an increase in LCC
**% ballasts with reduced life cycle cost (winners), noted as ``certainty level'' by Crystal Ball.

3. Energy Savings, Net Present Value and Net National Employment
    As indicated, we conclude that standards will result in significant 
savings of electricity by ballasts for each standards scenario. These 
energy savings have value to society, as measured by the net present 
value analysis. The net present value analysis is a measure of the net 
savings to society from standards and are summarized in the following 
tables.

                                                Table V.17a.--Net Present Value From Electronic Standards
--------------------------------------------------------------------------------------------------------------------------------------------------------
                           Electronic standards for units sold from 2003 to 2030 discounted at 7% to 1997 (in billion 1997 $)*
---------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                         Scen 2B T12/
                    Scenario                     Scen 1A T12   Scen 1B T12  Scen 2A T12/      T8        Scen 3A      Scen 3B      Scen 4A      Scen 4B
                                                   Decr2015     Decr2027    T8 Decr2015    Decr2027     Decr2015     Decr2027     Decr2015     Decr2027
--------------------------------------------------------------------------------------------------------------------------------------------------------
Total Benefit..................................         1.97          3.13         3.22         5.13         2.68         4.46         2.98         4.85
Total Equipment Cost...........................         1.01          1.62          0.8         1.27         0.64         1.08         0.72         1.18
Net Present Value..............................         0.96          1.51         2.43         3.86         2.03         3.38         2.26        3.68
--------------------------------------------------------------------------------------------------------------------------------------------------------
*Total Benefit and Net Present Value do not include HVAC savings.


                          Table V.17b.--Net Present Value From Cathode Cutout Standards
----------------------------------------------------------------------------------------------------------------
     Cathode cutout standards for units sold from 2003 to 2030 discounted at 7% to 1997 (in billion 1997 $)
-----------------------------------------------------------------------------------------------------------------
                                                   Scen 5A 100%    Scen 5B 100%   Scen 6A 37% CC  Scen 6B 37% CC
                    Scenario                        CC Decr2015     CC Decr2027      Decr2015        Decr2027
----------------------------------------------------------------------------------------------------------------
Total Benefit...................................            0.94            1.49            2.18            3.47
Total Equipment Cost............................            0.78            1.26            0.58            0.93
Net Present Value...............................            0.16            0.23            1.60            2.54
----------------------------------------------------------------------------------------------------------------

    Since the covered lamp ballasts are commercial products, these net 
savings apply to American business and industry. NPV is the difference 
between additional equipment costs and electricity cost savings. The 
NPV for the electronic ballast standards scenarios ranges from about 
0.96 billion to 3.86 billion dollars (1997 dollars). NPV increases 
under the slower decreasing shipments forecast to 2027. NPVs for 
scenario 2 with T8 electronic ballasts are about 2.5 times those for 
scenario 1 with T12 electronic ballasts. For scenario 3, the five-year 
phase-in period causes an NPV reduction of around 15 percent over 
scenario 2. For scenario 4, the 2-year phase-in period results in an 
NPV reduction of about 5 percent over Scenario 2.
    For the cathode cutout standards scenarios, NPV ranges from 0.16 to 
2.54 billion dollars. For scenario 6, the NPV is 10 to 11 times greater 
than that of scenario 5. Note that we did not include HVAC energy cost 
savings in any of the NPV calculations.
    The net present value analysis from the standards in the Joint 
Comments is summarized in Table V.18.

       Table V.18.--Net Present Value Resulting From Joint Comment
------------------------------------------------------------------------
 Joint comment standards for units sold from 2005 to 2030 discounted at
                     7% to 1997 (in billion 1997 $)
-------------------------------------------------------------------------
                     Scenario                        Dec2015    Dec2027
------------------------------------------------------------------------
Total Benefit.....................................       1.95       3.51
Total Equipment Cost..............................       0.53       0.91
Net Present Value.................................       1.42       2.60
------------------------------------------------------------------------

    The Department committed in its 1996 Process Improvement Rule to 
develop estimates of the employment

[[Page 14153]]

impacts of proposed standards in the economy in general. 61 FR 36983.
    As discussed above, energy efficiency standards for ballasts are 
expected to reduce electricity bills for commercial and industrial 
consumers, although these savings are likely to be partially offset by 
increased costs for lighting equipment. The resulting net savings are 
expected to be redirected to other forms of economic activity. These 
shifts in spending and economic activity are expected to affect the 
demand for labor, but there is no generally accepted method for 
estimating these effects.
    One method to assess the possible effects on the demand for labor 
of such shifts in economic activity is to compare sectoral employment 
statistics developed by the Labor Department's Bureau of Labor 
Statistics (BLS). The BLS regularly publishes its estimates of the 
number of jobs per million dollars of economic activity in different 
sectors of the economy, as well as the jobs created elsewhere in the 
economy by this same economic activity. BLS data indicate that 
expenditures in the electric sector generally are associated with fewer 
jobs (both directly and indirectly) than expenditures in other sectors 
of the economy. There are many reasons for these differences, including 
the capital-intensity of the utility sector and wage differences. Based 
on the BLS data alone, we believe the increase in the demand for labor 
resulting from shifts in economic activity would offset any reduced 
demand in the domestic ballast industry as a result of a ballast 
standard.
    In developing this proposed rule, the Department attempted a more 
precise analysis of the impacts on national labor demand using an 
input/output model of the U.S. economy. The model characterizes the 
interconnections among 35 economic sectors using the data from the 
Bureau of Labor Statistics. Since the electric utility sector is more 
capital-intensive and less labor-intensive than other sectors (see 
Bureau of Economic Analysis, Regional Multipliers: A User Handbook for 
the Regional Input-Output Modeling System (RIMS II), Washington, D.C., 
U.S. Department of Commerce, 1992), a shift in spending away from 
energy bills into other sectors would be expected to increase overall 
employment. The results of the Department's analysis are shown in 
Appendix E of the TSD. This analysis also concluded that the shifts in 
sectoral expenditures likely to result from the proposed ballast 
standard would likely increase the net national demand for labor.
    While both this input/output model and the direct use of BLS 
employment data suggest the proposed ballast standards are likely to 
increase the net demand for labor in the economy, the gains would most 
likely be very small relative to total national employment. For several 
reasons, however, even these modest benefits are in doubt:
     Unemployment is now at the lowest rate in 30 years. If 
unemployment remains very low during the period when the proposed 
standards are put into effect, it is unlikely that the standards could 
result in any net increase in national employment levels.
     Neither the BLS data nor the input-output model used by 
DOE include the quality or wage level of the jobs. One reason that the 
demand for labor increases in the model may be that the jobs expected 
to be created pay less than the jobs being lost. The benefits from any 
potential employment gains would be reduced if job quality and pay are 
reduced.
     The net benefits from potential employment changes are a 
result of the estimated net present value of benefits or losses likely 
to result from the proposed standards, it may not be appropriate to 
separately identify and consider any employment impacts beyond the 
calculation of net present value.
    Taking into consideration these legitimate concerns regarding the 
interpretation and use of the employment impacts analysis, the 
Department concludes only that the proposed ballast standards are 
likely to produce employment benefits that are sufficient to offset 
fully the expected adverse impacts on employment in the domestic 
ballast industry.
    Because this is the first time DOE has performed such an analysis 
for an efficiency standards rulemakings, public comments are solicited 
on the validity of the analytical methods used and the appropriate 
interpretation and use of the results of this analysis.
4. Lessening of Utility or Performance of Products
    An issue of utility that was considered was the possibility of 
interference with certain equipment, such as medical monitoring 
equipment, caused by the high frequency of electronic ballasts. To 
prevent any interference that cannot be solved by electronic ballast 
designers, the Department is not establishing a standard for T8 
ballasts, thereby allowing magnetic T8 ballasts for such applications.
5. Impact of Lessening of Competition
    The determination of this factor must be made by the Attorney 
General.
6. Need of the Nation to Save Energy
    Enhanced energy efficiency improves the Nation's energy security, 
strengthens the economy and reduces the environmental impacts of energy 
production. The energy savings from ballast standards result in reduced 
emissions of carbon and NOX. Cumulative emissions savings 
over the 18-year period modeled are shown in Table V.19.

                            Table V.19.--Cumulative Emissions Reductions (2003-2020)
----------------------------------------------------------------------------------------------------------------
                                                                     Range for       Range for
                                                                    Electronic    Cathode Cutout       Range
                            Emission                                 Standards       Standards    Resulting from
                                                                  (standards  1-   (standards 5   Joint Comments
                                                                        4)            and 6)
----------------------------------------------------------------------------------------------------------------
Carbon (Mt).....................................................           12-30            6-20           11-19
NOX (kt)........................................................           41-97           20-65           34-60
----------------------------------------------------------------------------------------------------------------

    The annual carbon emission reductions range up to 2.3 Mt in 2020 
and the NOX emissions reductions up to 5.7 kt in 
2015.\8,\\9\ Total carbon and NOX emissions for each of the 
12 studied standards are reported in Tables D-1a and D-1b, Appendix D, 
of the TSD. In addition, equivalent results for the high and low 
economic growth cases for standards level 2b are reported in Table D-2 
of the TSD. The outcome of the analysis for each case is shown as both

[[Page 14154]]

emissions and deviations from the AEO99 Reference Case result. 
Emissions for the Joint Comment are presented in Appendix E of the TSD.
---------------------------------------------------------------------------

    \8\ million metric tons (Mt).
    \9\ thousand metric tons (kt).
---------------------------------------------------------------------------

7. Other Factors
    We present in Table V.20 a summary of the life-cycle cost results 
for those subgroups of commercial and industrial consumers who, if 
forced by standards to purchase electronic ballasts, would choose to 
switch from T12 to T8 lighting systems. The column titled ``Delta LCC'' 
gives the change in LCC when switching from the baseline option of EEM 
ballast to the listed design option. ``% Winners'' represents the 
probability of the design option resulting in reduced LCC.

                                   Table V.20.--Summary of Delta LCC* Results
----------------------------------------------------------------------------------------------------------------
                                                                                             Delta LCC
           Product Class                Design Option              Sector        -------------------------------
                                                                                   Mean (1997$)     %Winners**
----------------------------------------------------------------------------------------------------------------
1F40..............................  T8 ERS...............  Commercial...........              17              98
2F40..............................  T8 ERS...............  Commercial...........              18              98
3F40 Tandem-Wired.................  T8 ERS...............  Commercial...........              27              98
3F40 Not Tandem-Wired.............  T8 ERS...............  Commercial...........              56             100
4F40 w/o Dual Switching...........  T8 ERS...............  Commercial...........              54             100
4F40 Dual Switching...............  T8 ERS...............  Commercial...........              44             99
----------------------------------------------------------------------------------------------------------------
*A positive Delta LCC implies a LCC savings whereas a negative number implies an increase in LCC
** % ballasts with reduced life cycle cost (winners), noted as ``certainty level'' by Crystal Ball.

    For commercial and industrial consumers that choose four foot T8 
lamps with their electronic ballasts, who in the current market 
represent 95 percent of purchasers of electronic ballasts, 98 to 100 
percent will have life cycle cost savings which average 17 to 54 
dollars. We did not evaluate commercial and industrial consumers of 
eight foot lamps, but we expect them to have similarly robust positive 
results.
    As stated, the Department analyzed the Joint Comment in terms of 
national energy savings, net present value, national employment impacts 
and emission reductions. These results are also shown in Appendix E of 
the TSD. For the common scenario between the Department's analysis and 
the Joint Comment proposal of a market transformation by 2027 and a 
shift to T8 lamps, the above benefits are approximately 24 percent less 
than the Department's analysis which started the standards in the year 
2003. However, the burdens on the manufacturers are also reduced to 
lower levels. The manufacturers have commented that their proposed 
staggered implementation dates mitigate the adverse impacts.

e. Conclusion

    Section 325(l) of the Act specifies that the Department must 
consider, for amended standards, those standards that ``achieve the 
maximum improvement in energy efficiency which the Secretary determines 
is technologically feasible and economically justified'' and which will 
``result in significant conservation of energy.'' Accordingly, the 
Department first considered the benefits and burdens of the max tech 
level of efficiency, i.e., electronic ballast standards. Furthermore, 
in considering this standard level, the Department considered the 
staggered implementation scheme recommended in the Joint Comments.

Significant Conservation of Energy

    The Department concludes that an electronic ballast standard saves 
a significant amount of energy. The energy savings reported for an 
electronic ballast standard in the Department's analysis ranged between 
1.20 to 2.32 Quads of energy, not including the HVAC effects. The 
Department considers energy savings within this range to be 
significant.

Technological Feasibility

    The Department concludes that an electronic ballast standard is 
technologically feasible as these products are currently available and 
comprise roughly half of the market.

Summary of Economic Impacts

    In determining economic justification, the Department considered 
the burdens and benefits of an electronic ballast standard. The burdens 
accrue to the manufacturers of magnetic ballasts, some of their 
suppliers and employees, and to some commercial and industrial 
consumers who, because of factors such as lower than average electric 
costs or hours of operation, will experience increased life cycle 
costs. On the other hand, most commercial and industrial consumers will 
benefit from lower life cycle costs due to energy savings. These lower 
costs to the nation's businesses and industries produce increased jobs 
in the economy at large and the energy savings result in reduced 
atmospheric emissions. The Department gave considerable weight to the 
recommendations of the Joint Comment which attempts to balance these 
burdens and benefits. The proposal reduces energy savings by 
approximately 24 percent compared to the Department's analysis for the 
common scenario of a market transformation by 2027 and a shift to T8 
lamps. These reductions come mainly from delaying the effective dates 
of the standards from the year 2003 to 2005 and later for replacement 
ballasts. However, these same extensions also reduce the impacts of the 
standards on manufacturers from what the Department estimated to levels 
which the manufacturers state are mitigated. While the Department did 
not revise the MIA, we believe the manufacturers' statement in the 
Joint Comment that the impacts on them from the proposal are mitigated 
is sufficient to conclude that, given the benefits, today's proposed 
standards are economically justified.

Economic Impact on Manufacturers

    Over the range of cash flow scenarios and shipment forecasts that 
the Department studied for standards starting for all classes in 2003, 
we estimated that manufacturers that produce both magnetic and 
electronic ballasts would loose between 54.6 and 113.7 millions of 
dollars of NPV as a result of electronic standards. Manufacturers that 
currently produce electronic ballasts only were estimated to gain 9.3 
to 27.5 millions of dollars of NPV. Domestic suppliers to the ballast 
industry were expected to loose between 7.55 and 20.69 millions of 
dollars of NPV. Luminaire manufacturers were expected to loose between 
5.5 and 14.5 millions of dollars

[[Page 14155]]

of NPV. Cumulatively, the Department estimates that businesses involved 
in the ballast industry would have net losses of between 47.4 and 121.4 
millions of dollars of NPV as a result of electronic standards starting 
in the year 2003. This loss of value comes mainly from the lower 
profitability of the electronic ballast market compared to the magnetic 
ballast market. Additionally, restructuring costs associated with plant 
closures and expansions and changes in capacity utilization make up the 
rest of the loss in value.
    Manufacturers report that a domestic magnetic ballast manufacturing 
plant, and possibly a domestic magnet wire plant, would close if an 
electronic ballast standard became effective in 2003. It was also 
reported that a capacitor plant and part of a magnetic ballast 
manufacturing plant, both located in Mexico, would also close. 
Additionally, it was reported that two domestic electronic ballast 
manufacturing plants, and two located in Mexico, would expand. The 
Department has included these assumptions in the above NPV values.
    However, given the downward trend in magnetic ballast shipments, 
statements by manufacturers that the market is transitioning away from 
magnetic ballasts and the movement of domestic magnetic ballast 
manufacturing facilities to Mexico in recent years, it certainly seems 
possible that the plants associated with magnetic ballasts might be 
closed, or moved to Mexico, even in the absence of standards. 
Therefore, the Department also considered a scenario where the domestic 
magnetic ballast manufacturing facilities close in the base case. Under 
this assumption the losses to manufacturers that produce both magnetic 
and electronic ballasts, and to the total industry, would be reduced by 
13.7 million dollars from the previous figures to a range of 33.7 to 
107.7 millions of dollars of NPV.

Employment Impacts

    Given the manufacturer reported plant closure and expansion 
assumptions, the Department estimated that between 666 and 717 direct 
domestic magnetic ballast manufacturing jobs, along with 313 to 340 
domestic supplier jobs, would be lost. The Department also estimated 
that between 500 and 557 direct domestic electronic ballast 
manufacturing jobs, along with zero to 144 supplier jobs would be 
created. Thus, the Department estimated that the impact on direct 
domestic employment in the ballast industry would be a net loss of 
between 350 and 500 jobs.
    However, given the movement of domestic magnetic ballast 
manufacturing facilities to Mexico in recent years, it certainly seems 
possible that many of these jobs would be moved to Mexico in the 
absence of an electronic ballast standard. Therefore, the Department 
also considered a scenario where the domestic magnetic ballast 
manufacturing facility closes in the base case. Under this scenario, no 
direct domestic magnetic ballast manufacturing jobs would be lost and 
the impact on direct domestic employment in the ballast industry would 
be a net gain of between 500 and 557 jobs.
    In addition to the direct domestic jobs, the Department also 
estimated that there are between 363 and 406 associated domestic jobs 
in the ballast industry that, while not being eliminated, are at risk 
of being moved to Mexico as a result of business decisions. 
Additionally, the Department estimated that between 1,570 and 1,727 
direct magnetic ballast manufacturing jobs in Mexico would be lost 
while 700 to 769 direct electronic ballast manufacturing jobs would be 
created in Mexico. Under the scenario where the domestic magnetic 
ballast manufacturing facility closes in the base case, no associated 
domestic jobs are at risk of being moved to Mexico as result of 
standards, while the direct magnetic ballast manufacturing jobs lost in 
Mexico grows to between 2,236 and 2,444 jobs.

Consumer Impacts

    As a result of the Department's analysis, we believe most 
commercial and industrial consumers will save money. In total, we 
estimated the energy savings to have a net present value to American 
business and industry of 1.42 to 2.60 billion dollars, depending on the 
forecast of switching from magnetic ballasts to electronic ballasts in 
the absence of standards, and the rate of switching from T12 to T8 
lamps in the face of standards.
    Commercial consumers will experience lower life cycle costs which 
range from an average savings of 4 dollars for a 1F40T12 ballast to an 
average savings of 18 dollars for a 3F40T12 not tandem-wired ballast. 
Within these respective averages, 68 to 98 percent of the consumers 
will have lower life cycle costs while 32 to 2 percent will have higher 
life cycle costs. Those commercial consumers who also switch to T8 
lamps will experience even lower life cycle costs which range from an 
average savings of 17 dollars for a 1F40T8 ballast to an average 
savings of 56 dollars for a 3F40T8 ballast. Within these respective 
averages 98 to 100 percent of the consumers will have lower life cycle 
costs. The Department believes almost every commercial consumer who 
switches to an electronic ballast for T8 lamps will save money.
    Industrial consumers using F96T12 lamps, who represent 26 percent 
of F96T12 lamps, will experience higher life cycle costs with average 
costs of 2 dollars per ballast. Within that average, 35 percent will 
have lower life cycle costs while 65 percent will have higher life 
cycle costs. The above industrial consumer impacts are for T12 lamps 
and, while we did not evaluate industrial consumers of eight foot T8 
lamps, we expect them to have a much larger proportion with lower life 
cycle costs as was the case for all consumers of four foot lamps who 
switch from T12 to T8 lamps.

National Impacts

    As stated earlier, the energy savings reported for an electronic 
ballast standard in the Department's analysis ranged from 1.20 to 2.32 
Quads of energy. These energy savings would result in carbon emission 
reductions of 11 to 19 million metric tons and NOX emission 
reductions of 34 to 60 thousand metric tons.

Net Benefits of Proposed Standard

    After carefully considering the analysis, comments and benefits 
versus burdens, the Department proposes to amend the energy 
conservation standards for fluorescent lamp ballasts as proposed by the 
Joint Comment. The Department concludes this standard saves a 
significant amount of energy and is technologically feasible and 
economically justified. In determining economic justification, the 
Department finds that the benefits of energy savings, consumer life 
cycle cost savings, national net present value increase, job creation 
and emission reductions resulting from the standard outweigh the 
burdens of the loss of manufacturer net present value, possible plant 
closings and job loss and consumer life cycle cost increases for some 
users of fluorescent lamp ballasts covered by today's notice.

VI. Procedural Issues and Regulatory Review

a. Review Under the National Environmental Policy Act

    In issuing the March 4, 1994 Proposed Rule for energy efficiency 
standards for eight products, one of which was fluorescent lamp 
ballasts, the Department prepared an Environmental

[[Page 14156]]

Assessment (EA) (DOE/EA-0819) that was published within the Technical 
Support Document for that Proposed Rule. (DOE/EE-0009, November 1993.) 
We found the environmental effects associated with various standard 
levels for fluorescent lamp ballasts, as well as the other seven 
products, to be not significant, and we published a Finding of No 
Significant Impact (FONSI). 59 FR 15868 (April 5, 1994).
    In conducting the analysis for today's Proposed Rule, the 
Department evaluated design options as suggested in comments. As a 
result, the energy savings estimates and resulting environmental 
effects from revised energy efficiency standards for fluorescent lamp 
ballasts in today's proposal differ somewhat from those that we 
presented for fluorescent lamp ballasts in the 1994 Proposed Rule. 
Nevertheless, the environmental effects expected from today's Proposed 
Rule would fall within ranges of environmental impacts from the revised 
energy efficiency standards for fluorescent lamp ballasts that DOE 
found in the FONSI not to be significant.

b. Review Under Executive Order 12866, 'Regulatory Planning and Review'

    Today's regulatory action has been determined to be an 
``economically significant regulatory action'' under Executive Order 
12866, ``Regulatory Planning and Review.'' (58 FR 51735, October 4, 
1993). Accordingly, today's action was subject to review under the 
Executive Order by the Office of Information and Regulatory Affairs 
(OIRA).
    The draft submitted to OIRA and other documents submitted to OIRA 
for review have been made a part of the rulemaking record and are 
available for public review in the Department's Freedom of Information 
Reading Room, 1000 Independence Avenue, SW, Washington, DC 20585, 
between the hours of 9:00 a.m. and 4:00 p.m., Monday through Friday, 
telephone (202) 586-3142.
    The following summary of the Regulatory Analysis focuses on the 
major alternatives considered in arriving at the proposed approach to 
improving the energy efficiency of consumer products. The reader is 
referred to the complete draft ``Regulatory Impact Analysis,'' which is 
contained in the TSD, available as indicated at the beginning of this 
NOPR. It consists of: (1) A statement of the problem addressed by this 
regulation, and the mandate for government action; (2) a description 
and analysis of the feasible policy alternatives to this regulation; 
(3) a quantitative comparison of the impacts of the alternatives; and 
(4) the national economic impacts of the proposed standard.
    DOE identified the following eight major policy alternatives for 
achieving consumer product energy efficiency. These alternatives 
include:
     No New Regulatory Action
     Informational Action

    --Product Labeling
    --Consumer Education

     Financial Incentives

    --Tax Credits
    --Rebates

     Voluntary Energy Efficiency Targets
     Mass Government Purchases
     Lighting Research and Development
     Building Codes
     The Proposed Approach (Performance Standards)
    Each alternative has been evaluated in terms of its ability to 
achieve significant energy savings at reasonable costs, and has been 
compared to the effectiveness of the proposed rule. These alternatives 
were analyzed with the NES model, as explained in the RIA section and 
Appendix B of the TSD. The results are reported for lighting energy 
savings only (HVAC interactive impacts would increase the savings by 
6.25 percent). Many alternatives assume a conversion rate, which means 
the percentage of ballasts that would be magnetic for any year in the 
base case that are T8 electronic in the alternative case; the base case 
already assumes that some ballasts would be electronic without policy 
action. The performance standards case has a 100 percent conversion 
rate to electronic ballasts.
    If no new regulatory action were taken, then no new standards would 
be implemented for these products. This is essentially the ``base 
case.'' For this analysis, we considered two base cases (the 
``Decreasing shipments to 2015'' case and the ``Decreasing shipments to 
2027'' case). In this section, we report two values for the base cases 
and policy alternatives, corresponding to each base case respectively. 
For the base cases, between the years 2003 and 2030, there would be 
expected energy use of 83.3-90.6 Quads (87.9-96.6 EJ) of primary 
energy, with no energy savings and a zero net present value (see 
Appendix B of the TSD for the derivation of these estimates).
    Several alternatives to the base cases can be grouped under the 
heading of informational action. They include consumer product labeling 
and DOE public education and information programs. Both of these 
alternatives are already mandated by, and are being implemented under 
the Act. In addition, there are other programs that promote currently-
efficient technologies. These include the National Electrical 
Manufacturers Association's Energy Cost Savings Council, the 
Environmental Protection Agency's Energy Star Buildings/Green Lights 
Program, and the Energy Policy Act's Voluntary Luminaire Program. One 
base case alternative would be to estimate the energy conservation 
potential of enhancing these programs. To model this possibility, we 
assumed that the market impacts of these programs resulted in a 3 
percent annual conversion rate to electronic ballasts. This resulted in 
energy savings equal to 0.05-0.09 Quad (0.05-0.09 EJ), with net present 
value estimated to be $0.08-0.12 billion.
    Another base case alternative would be to assume that enhanced 
labeling and consumer education promote advanced technologies, such as 
daylighting. To model this possibility, we assumed that some consumers 
influenced by the policy would select electronic dimming ballasts, 
while others would select regular electronic ballasts. For those using 
dimming ballasts, we assumed that the fluorescent lamp ballast 
kiloWatthour savings were 40 percent higher for F40 and F96 fluorescent 
lamp ballasts, that there was no daylighting potential for industrial 
sector F96HO, that incremental prices for dimming fluorescent lamp 
ballasts were seven dollars higher than for regular electronic 
ballasts, and that there was an annual 0.6 percent conversion rate to 
dimming fluorescent lamp ballasts. The annual conversion rate for the 
remaining consumers affected by the policy who selected regular 
electronic ballasts was 2.4 percent. This possibility resulted in 
energy savings of 0.05-0.10 Quad (0.06-0.10 EJ), with a net present 
value of $0.08-0.13 billion.
    Various financial incentive alternatives were tested. These 
included tax credits and rebates to consumers, as well as tax credits 
to manufacturers. Both the tax credits to consumers and the consumer 
rebates were assumed to reduce the incremental ballast expense for 
electronic ballasts by 50 percent. We assumed that the tax credits 
caused a conversion rate to electronic ballasts of 7 percent. The tax 
credits to consumers showed a change from the base case, saving 0.12-
0.21 Quad (0.12-0.22 EJ) with a net present value of $0.20-0.31 
billion. Consumer rebates were assumed to result in a conversion rate 
of 12 percent. Consumer rebates showed slightly higher energy savings; 
they would save 0.20-0.36 Quad (0.21-0.38 EJ), with a net present value 
of $0.34-0.53 billion.

[[Page 14157]]

    Another financial incentive that was considered was a tax credit to 
manufacturers for the additional costs of producing electronic 
ballasts. In this scenario, we assumed a tax credit of 20 percent of 
the increased costs to manufacturers for retooling in the years 2001-
2003 (when these costs would be incurred). \10\ These costs depreciated 
over a ballast lifetime resulted in a $0.04 reduction in the 
incremental purchase price. The tax credits to manufacturers had an 
insignificant effect, with no energy savings and a zero net present 
value.
---------------------------------------------------------------------------

    \10\ Manufacturer Impact Analysis, conversion capital 
expenditures (see the TSD, chapter 6).
---------------------------------------------------------------------------

    Two scenarios of voluntary energy-efficiency targets were examined. 
In the first one, the proposed energy conservation standards were 
assumed to be voluntarily adopted by all the relevant manufacturers 5 
years later than mandatory standards. In the second scenario, the 
proposed standards were assumed to be adopted 10 years later. In these 
scenarios, voluntary improvements having a 5-year delay, compared to 
implementation of mandatory standards, would result in energy savings 
of 0.84-1.91 Quads (0.88-2.02 EJ), and a net present value of $0.96-
2.04 billion; voluntary improvements having a 10-year delay would 
result in 0.34-1.05 Quads (0.36-1.1 EJ) being saved, and a net present 
value of $0.33-0.96 billion. These scenarios assume that there would be 
universal voluntary adoption of the energy conservation standards by 
fluorescent lamp ballast manufacturers, an assumption for which there 
is no reasonable assurance.
    Another policy option that we reviewed was that of massive 
purchases of electronic ballasts by Federal, State, and local 
governments. We modeled this policy by assuming that all ballasts 
purchased by these government entities were electronic ballasts, which, 
coupled with a modest impact on the remaining market, resulted in a 10 
percent national conversion rate. This policy option resulted in energy 
savings of 0.17-0.30 Quad (0.18-0.32 EJ) and a net present value of 
$0.25-0.40 billion.
    We also reviewed a policy of lighting research that could [there is 
no cost reduction in this policy] add more efficient alternatives to 
fluorescent electronic T-12 and T-8 ballasts. To analyze this option, 
we assumed that the conversion rate to controls, such as dimming 
fluorescent lamp ballasts, was 1.6 percent, that there was a time delay 
of 5 years for new technology options to reach the market, that the 
incremental kiloWatthour savings was 40 percent, and the increase in 
the incremental electronic ballast cost was seven dollars. This 
resulted in energy savings of 0.01-0.04 Quad (0.01-0.05 EJ), with a net 
present value that we estimated to be $0.01-0.04 billion.
    Still another policy option that we reviewed was one of aggressive 
promotion of state adoption and enforcement of commercial building 
codes, including those for major lighting system renovations. To 
analyze this option, we assumed a one percent to three percent 
electronic ballast conversion, for each base case, respectively. This 
resulted in energy savings of 0.05-0.15 Quad (0.05-0.16 EJ), and a net 
present value of $0.06-0.18 billion.
    Lastly, all of these alternatives must be gauged against the 
performance standards that are being proposed in this NOPR. Such 
performance standards would result in energy savings of 1.20-4.90 Quads 
(1.27-5.17 EJ) (without HVAC savings) and the net present value would 
be an expected $1.42-5.41 billion. (These estimates represent the lower 
and upper bounds of the results of all scenarios analyzed). As 
indicated in the paragraphs above, none of the alternatives that were 
examined for these products saved as much energy as the proposed rule. 
Also, most of the alternatives would require that enabling legislation 
be enacted, since authority to carry out those alternatives does not 
presently exist.

c. Review under the Regulatory Flexibility Act

    The Regulatory Flexibility Act, 5 U.S.C. 601 et seq., requires an 
assessment of the impact of regulations on small businesses. Small 
businesses are defined as those firms within an industry that are 
privately owned and less dominant in the market.
    The Standard Industrial Classification (SIC) Code for fluorescent 
lamp ballast manufacturers is 36124. To be categorized as a ``small'' 
fluorescent lamp ballast manufacturer, a firm must employ no more than 
750 employees.
    In the fluorescent lamp ballast industry, there is one ``small'' 
manufacturer who produces both ``affected'' magnetic and electronic 
ballasts. The ``small'' manufacturer has its electronic and magnetic 
ballast manufacturing operations in the same plant. Its smaller size 
and less automated operations would seem to provide it with the 
flexibility to adapt to a new electronic ballast standard without 
significant asset write-offs or plant closures.
    The negative impacts on the ``small'' manufacturer's cash flows 
from operations, however, would likely be similar in proportion to 
those of the larger manufacturers.
    Since only one of the seven manufacturers of fluorescent lamp 
ballasts is ``small,'' the Department concludes that its proposed 
energy-efficiency standards rulemaking would not affect a 
``substantial'' number of ``small'' manufacturers. In addition, the 
firm's flexible manufacturing operations, along with the expected 
proportional financial impacts, strongly suggests that the proposed 
energy-efficiency standards would not produce ``significant'' economic 
impacts on that one manufacturer.
    In view of the foregoing, the Department has determined and hereby 
certifies pursuant to section 605(b) of the Regulatory Flexibility Act 
that, for this particular industry, the proposed standard levels in 
today's Proposed Rule will not ``have a significant economic impact on 
a substantial number of small entities,'' and it is not necessary to 
prepare a regulatory flexibility analysis.

d. Review Under the Paperwork Reduction Act

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

e. Review Under Executive Order 12988, ``Civil Justice Reform''

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

[[Page 14158]]

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 reviewed today's proposed rule under the standards of section 3 of 
the Executive Order and determined that, to the extent permitted by 
law, the final regulations meet the relevant standards.

f. ``Takings'' Assessment Review

    It has been determined pursuant to Executive Order 12630, 
``Governmental Actions and Interference with Constitutionally Protected 
Property Rights,'' 52 FR 8859 (March 18, 1988), that this regulation 
would not result in any takings that might require compensation under 
the Fifth Amendment to the United States Constitution.

g. Review Under Executive Order 13132

    Executive Order 13132 (64 FR 43255, August 4, 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 would 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. State regulations that may have existed 
on the products that are the subject of today's proposed rule were 
preempted by the Federal standards established in the NAECA Amendments 
of 1988. States can petition the Department for exemption from such 
preemption based on criteria set forth in EPCA.

h. Review Under the Unfunded Mandates Reform Act

    With respect to a proposed regulatory action that may result in the 
expenditure by the private sector of $100 million or more (adjusted 
annually for inflation), section 202 of the Unfunded Mandates Reform 
Act of 1995 (UMRA) requires a Federal agency to publish estimates of 
the resulting costs, benefits and other effects on the national 
economy. 2 U.S.C. 1532(a), (b). Section 202 of UMRA authorizes an 
agency to respond to the content requirements of UMRA in any other 
statement or analysis that accompanies the proposed rule. 2 U.S.C. 
1532(c).
    The content requirements of section 202(b) of UMRA relevant to a 
private sector mandate substantially overlap the economic analysis 
requirements that apply under section 325(o) of EPCA and Executive 
Order 12866. The Supplementary Information section of the Notice of 
Proposed Rulemaking and ``Regulatory Impact Analysis'' section of the 
TSD for this Proposed Rule responds to those requirements.
    Under section 205 of UMRA, the Department is obligated to identify 
and consider a reasonable number of regulatory alternatives before 
promulgating a rule for which a written statement under section 202 is 
required. DOE is required to select from those alternatives the most 
cost-effective and least burdensome alternative that achieves the 
objectives of the rule unless DOE publishes an explanation for doing 
otherwise or the selection of such an alternative is inconsistent with 
law. As required by section 325(o) of the Energy Policy and 
Conservation Act (42 U.S.C. 6295(o)), this Proposed Rule would 
establish energy conservation standards for fluorescent lamp ballasts 
that are designed to achieve the maximum improvement in energy 
efficiency that DOE has determined to be both technologically feasible 
and economically justified. A full discussion of the alternatives 
considered by DOE is presented in the ``Regulatory Impact Analysis'' 
section of the TSD for this Proposed Rule.

i. Review Under the Treasury and General Government Appropriations Act 
of 1999

    Section 654 of the Treasury and General Government Appropriations 
Act, 1999 (Pub. L. 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.

j. Review Under the Plain Language Directives

    Section 1(b)(12) of Executive Order 12866 requires that each agency 
shall draft its regulations to be simple and easy to understand, with 
the goal of minimizing the potential for uncertainty and litigation 
arising from such uncertainty. Similarly, the Presidential memorandum 
of June 1, 1998 (63 FR 31883) directs the heads of executive 
departments and agencies to use, by January 1, 1999, plain language in 
all proposed and final rulemaking documents published in the Federal 
Register, unless the rule was proposed before that date.
    Today's proposed rule uses the following general techniques to 
abide by Section 1(b)(12) of Executive Order 12866 and the Presidential 
memorandum of June 1, 1998 (63 FR 31883):
     Organization of the material to serve the needs of the 
readers (stakeholders).
     Use of common, everyday words in short sentences.
     Shorter sentences and sections.
    We invite your comments on how to make this proposed rule easier to 
understand.

VII. Public Comment Procedures

a. Participation in Rulemaking

    The Department encourages the maximum level of public participation 
possible in this rulemaking. Individual commercial and industrial 
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 also encourages 
interested persons to participate in the public hearing to be held in 
Washington, DC, at the time and place indicated at the beginning of 
this notice.
    The DOE has established a comment period of 75 days following 
publication of this notice for persons to comment on this proposal. We 
will make available for review in the DOE Freedom of Information 
Reading Room all public comments received and the transcript of the 
public hearing.

b. Written Comment Procedures

    Interested persons are invited to participate in this proceeding by 
submitting written data, views or arguments with respect to the 
subjects set forth in this notice. We provided instructions for 
submitting written comments at the beginning of this notice and below.
    You should label comments both on the envelope and on the 
documents, ``Fluorescent Lamp Ballast Rulemaking (Docket No. EE-RM-97-
500),'' and submit them for DOE receipt by the date specified at the 
beginning of this notice. Please submit one signed copy and a computer 
diskette (WordPerfect 8) or ten (10) copies (no telefacsimiles) to:

[[Page 14159]]

U.S. Department of Energy, Attn: Brenda Edwards-Jones, Office of Energy 
Efficiency and Renewable Energy, EE-41, 1000 Independence Avenue, SW, 
Washington, DC 20585-0121, (202) 586-2945, e-mail: [email protected].
    The Department will also accept electronically-mailed comments, but 
you must supplement such comments with a signed hard copy.
    All comments received by the date specified at the beginning of 
this notice and other relevant information will be considered by DOE 
before final action is taken on the proposed regulation.
    All written comments received on the proposed rule will be 
available for public inspection at the DOE Freedom of Information 
Reading Room, as provided at the beginning of this notice.
    If you submit information or data that you believe is confidential, 
and should not be publicly disclosed, you should submit one complete 
copy of your document and ten (10) copies or one electronic copy from 
which the information believed to be confidential has been deleted. We 
will make our own determination regarding the confidentiality of the 
information or data according to our regulations at 10 CFR 1004.11.
    Factors of interest to DOE, 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 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. Public Hearing

1. Procedure for Submitting Requests to Speak
    The time and place of the public hearing are indicated at the 
beginning of this notice. The Department invites any person who has an 
interest in these proceedings, or who is a representative of a group or 
class of persons having an interest, to make a written request for an 
opportunity to make an oral presentation at the public hearing. Such 
requests should be labeled both on the letter and the envelope, 
``Fluorescent Lamp Ballast Rulemaking (Docket No. EE-RM-97-500),'' and 
should be sent to the address, and must be received by the time 
specified, at the beginning of this notice. Requests may be hand-
delivered or telephoned between the hours of 8:30 a.m. and 4:30 p.m., 
Monday through Friday, except Federal holidays.
    The person making the request should briefly describe the interest 
concerned and, if appropriate, state why he or she is a proper 
representative of the group or class of persons that has such an 
interest, and give a telephone number where he or she may be contacted. 
Each person selected to be heard will be so notified by DOE as to the 
approximate time they will be speaking.
    Each person selected to be heard is requested to submit an advance 
copy of his or her statement prior to the hearing as indicated at the 
beginning of this notice. In the event any persons wishing to testify 
cannot meet this requirement, that person may make alternative 
arrangements in advance by so indicating in the letter requesting to 
make an oral presentation.
2. Conduct of Hearing
    The Department reserves the right to select the persons to be heard 
at the hearing, to schedule the respective presentations, and to 
establish the procedures governing the conduct of the hearing. The 
length of each presentation is limited to 15 minutes.
    A DOE official will be designated to preside at the hearing. The 
hearing will not be a judicial or an evidentiary-type hearing, but will 
be conducted in accordance with 5 U.S.C. 533 and section 336 of the 
Act. At the conclusion of all initial oral statements at each day of 
the hearing, each person who has made an oral statement will be given 
the opportunity to make a rebuttal statement, subject to time 
limitations. The rebuttal statement will be given in the order in which 
the initial statements were made. The official conducting the hearing 
will accept additional comments or questions from those attending, as 
time permits. Any interested person may submit, to the presiding 
official, written questions to be asked of any person making a 
statement at the hearing. The presiding official will determine whether 
the question is relevant, and whether time limitations permit it to be 
presented for answer.
    Further questioning of speakers will be permitted by DOE. The 
presiding official will afford any interested person an opportunity to 
question other interested persons who made oral presentations, and 
employees of the United States who have made written or oral 
presentations with respect to disputed issues of material fact relating 
to the proposed rule. This opportunity will be afforded after any 
rebuttal statements, to the extent that the presiding official 
determines that such questioning is likely to result in a more timely 
and effective resolution of such issues. If the time provided is 
insufficient, DOE will consider affording an additional opportunity for 
questioning at a mutually convenient time. Persons interested in making 
use of this opportunity must submit their request to the presiding 
official no later than shortly after the completion of any rebuttal 
statements and be prepared to state specific justification, including 
why the issue is one of disputed fact and how the proposed questions 
would expedite their resolution.
    Any further procedural rules regarding proper conduct of the 
hearing will be announced by the presiding official.
    A transcript of the hearing will be made, and the entire record of 
this rulemaking, including the transcript, will be retained by DOE and 
made available for inspection at the DOE Freedom of Information Reading 
Room as provided at the beginning of this notice. Any person may 
purchase a copy of the transcript from the transcribing reporter.

List of Subjects in 10 CFR Part 430

    Administrative practice and procedure, Energy conservation, 
Household appliances.

    Issued in Washington, D.C., on January 18, 2000.
Dan W. Reicher,
Assistant Secretary, Energy Efficiency and Renewable Energy.
    For the reasons set forth in the preamble Part 430 of Chapter II of 
Title 10, Code of Federal Regulations, is proposed to be amended as set 
forth below.

PART 430--ENERGY CONSERVATION PROGRAM FOR CONSUMER PRODUCTS

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

    Authority: 42 U.S.C. 6291-6309; 28 U.S.C. 2461 note.

    2. Section 430.32 of subpart C is amended by revising paragraph (m) 
to read as follows:

[[Page 14160]]

Sec. 430.32  Energy conservation standards and effective dates.

* * * * *
    (m) Fluorescent lamp ballasts.
    (1) Except as provided in paragraphs (m)(2), (m)(3), and (m)(4) of 
this section, each fluorescent lamp ballast--
    (i) (A) Manufactured on or after January 1, 1990;
    (B) Sold by the manufacturer on or after April 1, 1990; or
    (C) Incorporated into a luminaire by a luminaire manufacturer on or 
after April 1, 1991; and
    (ii) Designed --
    (A) To operate at nominal input voltages of 120 or 277 volts;
    (B) To operate with an input current frequency of 60 Hertz; and
    (C) For use in connection with an F40T12, F96T12, or F96T12HO lamps 
shall have a power factor of 0.90 or greater and shall have a ballast 
efficacy factor not less than the following:

----------------------------------------------------------------------------------------------------------------
                                                                                                      Ballast
                  Application for operation of                     Ballast input   Total nominal     efficacy
                                                                      voltage       lamp watts        factor
----------------------------------------------------------------------------------------------------------------
One F40 T12 lamp................................................             120              40           1.805
                                                                             277              40           1.805
Two F40 T12 lamps...............................................             120              80           1.060
                                                                             277              80           1.050
Two F96T12 lamps................................................             120             150           0.570
                                                                             277             150           0.570
Two F96T12HO lamps..............................................             120             220           0.390
                                                                             277             220           0.390
----------------------------------------------------------------------------------------------------------------

    (2) The standards described in paragraph (m)(1) of this section do 
not apply to:
    (i) a ballast that is designed for dimming or for use in ambient 
temperatures of 0 deg. F or less, or
    (ii) A ballast that has a power factor of less than 0.90 and is 
designed for use only in residential building applications.
    (3) Except as provided in paragraph (m)(4) of this section, each 
fluorescent lamp ballast--
    (i) (A) Manufactured on or after April 1, 2005;
    (B) Sold by the manufacturer on or after July 1, 2005; or
    (C) Incorporated into a luminaire by a luminaire manufacturer on or 
after April 1, 2006; and
    (ii) Designed--
    (A) To operate at nominal input voltages of 120 or 277 volts;
    (B) To operate with an input current frequency of 60 Hertz; and
    (C) For use in connection with an F40T12, F96T12, or F96T12HO 
lamps; shall have a power factor of 0.90 or greater and shall have a 
ballast efficacy factor not less than the following:

----------------------------------------------------------------------------------------------------------------
                                                                                                      Ballast
                  Application for operation of                     Ballast Input   Total nominal     efficacy
                                                                      voltage       lamp watts        factor
----------------------------------------------------------------------------------------------------------------
One F40 T12 lamp................................................             120              40            2.29
                                                                             277              40            2.29
Two F40 T12 lamps...............................................             120              80            1.17
                                                                             277              80            1.17
Two F96T12 lamps................................................             120             150            0.63
                                                                             277             150            0.63
Two F96T12HO lamps..............................................             120             220            0.39
                                                                             277             220            0.39
----------------------------------------------------------------------------------------------------------------

    (4) (i) The standards described in paragraph (m)(3) of this section 
do not apply to:
    (A) A ballast that is designed for dimming to 50 percent or less of 
its maximum output;
    (B) A ballast that is designed for use with two F96T12HO lamps at 
ambient temperatures of -20 deg. F or less and for use in an outdoor 
sign;
    (C) A ballast that has a power factor of less than 0.90 and is 
designed and labeled for use only in residential building applications; 
or
    (D) A replacement ballast as defined in subparagraph (ii).
    (ii) For purposes of this paragraph (m), a replacement ballast is 
defined as a ballast that:
    (A) Is manufactured on or before June 30, 2010;
    (B) Is designed for use to replace an existing ballast in a 
previously installed luminaire;
    (C) Is marked ``FOR REPLACEMENT USE ONLY'';
    (D) Is shipped by the manufacturer in packages containing not more 
than 10 ballasts;
    (E) Has output leads that when fully extended are a total length 
that is less than the length of the lamp with which it is intended to 
be operated; and
    (F) Meets or exceeds the ballast efficacy factor in the following 
table:

[[Page 14161]]



----------------------------------------------------------------------------------------------------------------
                                                                                                      Ballast
                  Application for operation of                     Ballast input   Total nominal     efficacy
                                                                      voltage       lamp watts        factor
----------------------------------------------------------------------------------------------------------------
One F40 T12 lamp................................................             120              40           1.805
                                                                             277              40           1.805
Two F40 T12 lamps...............................................             120              80           1.060
                                                                             277              80           1.050
Two F96T12 lamps................................................             120             150           0.570
                                                                             277             150           0.570
Two F96T12HO lamps..............................................             120             220           0.390
                                                                             277             220           0.390
----------------------------------------------------------------------------------------------------------------

* * * * *
[FR Doc. 00-6106 Filed 3-14-00; 8:45 am]
BILLING CODE 6450-01-P