[Federal Register Volume 65, Number 237 (Friday, December 8, 2000)]
[Rules and Regulations]
[Pages 77210-77219]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-31158]



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Part V





Department of Energy





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Office of Energy Efficiency and Renewable Energy



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10 CFR Part 440



Weatherization Assistance Program for Low-Income Persons; Final Rule

  Federal Register / Vol. 65, No. 237 / Friday, December 8, 2000 / 
Rules and Regulations  

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DEPARTMENT OF ENERGY

Office of Energy Efficiency and Renewable Energy

10 CFR Part 440

(RIN 1904-AB05)


Weatherization Assistance Program for Low-Income Persons

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

ACTION: Interim final rule.

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SUMMARY: The Department of Energy is issuing an interim final rule to 
amend the regulations for the Weatherization Assistance Program for 
Low-Income Persons to incorporate the regulatory changes proposed in 
the notice of proposed rulemaking published in the Federal Register on 
January 26, 2000. The preamble of this interim final rule also 
discusses the new legislative amendments that Congress recently enacted 
which were not a part of the proposed rulemaking. These statutory 
amendments, as well as other clarifying language from previous 
rulemakings will be incorporated into the program regulations in a 
final rule to be issued by the Department early next year. This interim 
final rule adds clarifying language, deletes obsolete language, and 
improves the overall operation of the Program to assist State and local 
agencies in administering the Program.

DATES: Effective January 8, 2001. Written comments are due January 8, 
2001.

ADDRESSES: Send written comments (three copies) to Greg Reamy, 
Weatherization Assistance Program Division, U.S. Department of Energy, 
Mail Stop EE-42, 5E-066, 1000 Independence Avenue, SW., Washington, DC 
20585. Copies of any comments received will be available for inspection 
between the hours of 9:00 am and 4:00 pm, Monday through Friday, except 
Federal holidays at the following address: DOE Freedom of Information 
Reading Room, Department of Energy, Room 1E-190, Forrestal Building, 
1000 Independence Avenue, SW., Washington, DC 20585 (202) 586-3142.

FOR FURTHER INFORMATION CONTACT: Greg Reamy, Weatherization Assistance 
Program Division, U.S. Department of Energy, Mail Stop EE-44, 5E-066, 
1000 Independence Avenue, SW., Washington, DC 20585, (202) 586-4074.

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

I. Introduction

    The Department of Energy (DOE or Department) amends the program 
regulations for the Weatherization Assistance Program for Low-Income 
Persons (WAP or Program). This Program is authorized by Title III of 
the Energy Conservation and Production Act, as amended (Act), 42 U.S.C. 
6561 et seq. The changes are necessitated by the evolution of the 
Program since the last publication of the rule on June 5, 1995 (60 FR 
29470). These changes help States by clarifying sections of the rule, 
thereby enhancing the interpretation and application of the program 
requirements. Some of the definitions in Sec. 440.3 are clarified and, 
where needed, new definitions are added to provide a clearer and more 
concise meaning to States and local agencies who must interpret these 
regulations. Other sections applying to energy audits and allowable 
expenditures are clarified to enhance their meanings; and certain 
obsolete items are deleted. Other regulatory changes in today's 
rulemaking: add new and eliminate obsolete terms in the Program 
definitions; add ``household with a high energy burden'' and ``high 
residential energy user'' as new categories for those receiving 
priority service; create a separate cost category for health and safety 
expenditures; provide flexibility on the purchase of vehicles by local 
agencies; reduce the eligibility criteria for certain large multi-
family buildings to 50 percent; establish new minimum energy audit 
criteria for the Program; and revise the date for reweatherization from 
1985 to 1993.
    Prior to developing and issuing this interim final rule, a proposed 
rulemaking was issued by DOE on January 26, 2000 (65 FR 4331) after 
consulting with its primary stakeholders, representatives of both State 
and local agencies, to listen to their concerns about what issues they 
wanted DOE to consider. The Program has evolved from a relatively 
simple approach of providing service to low-income homes with unskilled 
labor, installing low-cost/no cost retrofits, to a program that 
conducts advanced diagnostics and installs cost-effective energy 
conservation materials. The increased demand to maintain highly-trained 
crews has placed added strain on State and local agencies efforts to 
sustain a quality level of service to its low-income clients. Many of 
the changes lessen the administrative burden and provide flexibility 
for State and local agencies to incorporate the ever-changing technical 
enhancements as they become available. These changes also make State 
and local agencies better-suited to attract non-Federal leveraged 
resources into their programs. This interim final rule attempts to 
address as many of those concerns as possible. Many of the concerns 
that the stakeholders raised to DOE were not of a regulatory nature and 
were addressed administratively through program guidance documents.
    Other concerns were statutory in nature and formed the basis of the 
legislative initiative proposed to the Congress. The Department 
proposed on September 20, 1999 several statutory changes developed 
during discussions with State and local stakeholders. These proposed 
statutory changes were enacted on November 9, 2000, as part of the 
Energy Policy and Conservation Act Amendments of 2000. These statutory 
changes: (1) Eliminate the requirement in Sec. 440.18 that 40 percent 
of the funds used to weatherize a home be spent for materials; (2) 
restructure the method in Sec. 440.18 by which States compute their 
average cost per home by increasing the average cost per home to $2,500 
beginning in 2000; and (3) eliminate the separate per dwelling unit 
average in Sec. 440.18 for capital intensive improvements and include 
capital intensive costs as a part of the average costs. The Department 
will issue a final rule that will incorporate these changes into the 
program regulations early next year.
    DOE plans to include in the preamble of the final rule clarifying 
language on several areas of the program regulations where no actual 
changes were made. This action will provide States and local agencies 
the benefit of explanatory language used in the preambles of previous 
rulemakings which are still applicable today. This is necessary since 
many State and local staffs have changed several times over the years 
and much institutional knowledge has been lost. A comprehensive final 
rule will provide Federal, State, and local agency staff a central 
document for program regulatory information. This will also help in 
providing uniform interpretation of the regulations at all levels of 
the Program.

II. Amendments to the Weatherization Assistance Program

Section 440.1  Purpose and Scope

    DOE deletes the first sentence in the Scope and Purpose since this 
information is duplicative of what is

[[Page 77211]]

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

Section 440.3  Definitions

    DOE proposed in the notice of proposed rulemaking (NOPR) to include 
rule language in Sec. 440.21(h)(1) to encourage States to set the 
temperature(s) used to calculate heating and cooling degree data to 
more reasonably reflect their housing stock and climate, thereby 
reducing the overestimation of energy savings for most measures. By 
using, and defining in Sec. 440.3, the term ``balance point 
temperature,'' which is also used to describe the outside temperatures 
which require operation of heating or cooling equipment to maintain 
comfort, the proposed change was interpreted by some comments to be 
more substantial than DOE intended. To clarify the change described in 
Sec. 440.21(e)(1) of the interim final rule, DOE is substituting a new 
term and definition for ``base temperature'' that replaces the 
definition of ``balance point temperature'' given in the NOPR.
    DOE adds a definition for ``electric base-load measures'' to 
describe energy use outside of the traditional weatherization approach 
to heating and cooling and building envelope measures. As the Program 
evolves over the next several years into a whole house approach, DOE 
believes that electric base-load measures, which account for more than 
half the energy used in a typical household, are important when 
considering total residential energy use. Limited lighting measures are 
currently permitted in the Program and in the near future DOE may 
consider including other electric base-load measures such as the 
replacement of certain appliances. Most of the comments supported this 
change.
    DOE adds the term ``high residential energy user'' which means a 
low-income household whose residential energy expenditures exceed the 
median level of residential expenditures for all low-income households 
in the State. The definition for this category permits State and local 
agencies to better coordinate their activities and resources with many 
utility programs. Most of the comments supported this change.
    DOE also adds the term ``household with a high energy burden'' 
which means a low-income household whose residential energy burden 
(residential expenditures divided by the annual income of that 
household) exceeds the median level of energy burden for all low-income 
households in the State. The definition for this category gives States 
and local agencies greater flexibility in determining priority service 
for those households that may not have traditional priority individuals 
such as the elderly, persons with disabilities, or families with 
children, but are experiencing a particular hardship due to their high 
energy costs.Most of the comments supported this change.
    DOE substitutes the term ``persons with disabilities'' for the term 
``handicapped'' to reflect the current accepted reference. The 
definition remains unchanged.
    DOE considered both State and local agency concerns over the 
definition of ``low-income'' and the difficulties in effectively 
administering, coordinating, and leveraging between various Federal 
low-income programs using different definitions. However, in a review 
of the Act and the legislative history of the Program, DOE chose not to 
amend the existing definition. The comments were generally supportive, 
but stated that DOE should consider raising the eligibility criteria to 
be more compatible with other Federal programs. The DOE Weatherization 
Assistance Program was established to serve the neediest Americans. To 
expand the eligibility requirements to facilitate coordination with 
other Federal programs either through increasing eligibility to 80 
percent of the poverty level, permitting census tracking of 
neighborhoods, or allowing area average median income levels would 
change the scope and purpose of the Program. More importantly, 
expanding the eligibility criteria would substantially increase the 
number of households eligible for assistance which already stands at 
over 29 million. DOE has addressed this issue in detail in the annual 
program grant guidance.

Section 440.14  State Plans

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

Section 440.15  Subgrantees

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

Section 440.16  Minimum Program Requirements

    DOE adds clarifying language to Sec. 440.16(b) to allow States to 
include ``high residential energy user'' and ``household with a high 
energy burden'' as priority groups among those receiving weatherization 
services. The use of the two new priority categories is not mandatory. 
Comments received were generally favorable to this change. Most 
comments stated that by adding these two categories, DOE has provided 
State and local agencies with expanded flexibility to choose the 
categories for priority which best serve their respective programs.
    DOE amends Sec. 440.16(d) to eliminate the reference to ``JTPA'' 
and replace it

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with ``other Federal or State training programs.'' The JTPA Federal 
program was repealed effective July 1, 2000 pursuant to Pub. L. 105-
220. States should describe any ``other Federal or State training 
program'' they will be using in their annual State plans as sources of 
labor. The comments supported this change.

Section 440.17  Policy Advisory Council

    DOE received numerous comments expressing concern that DOE was 
proposing to eliminate the Policy Advisory Council (PAC). Many argued 
that the PAC performs very well in the States and provides a unique 
insight on many poverty issues, including weatherization. They stated 
that a State-body would not offer the same independent oversight and 
that the low-income would lose an important voice for the local agency 
in managing poverty programs. In proposing this flexibility to the 
State, DOE did not mean to imply that the State had the authority to 
replace without due cause any PAC. Rather, the State must show cause to 
DOE that the existing PAC is either non-existent or is not functioning 
as outlined in Sec. 440.17. DOE is aware that in most instances, the 
PAC does work as it was intended. DOE also would give preference to any 
legitimate PAC that is replaced for cause by a State council or 
commission and then later reconstituted. DOE agrees with the comments 
that the traditional role played by the PAC should be protected by the 
regulations. However, DOE and the States are also concerned that in 
some States, the PAC does not function as intended and is, in some 
instances, simply non-existent.
    Therefore, DOE amends Sec. 440.17(a) to include the language ``or a 
State commission or council'' which meets the criteria in Sec. 440.17 
and is approved by DOE. Many State agencies which operate the DOE 
Weatherization Assistance Program have existing commissions or councils 
which review and approve policies and plans for many other Federal 
programs. States which opt to utilize an existing commission or council 
have to certify to DOE, as a part of the annual application, that the 
council or commission is an independent reviewer of activities for the 
Program, and that the State will address this issue as a part of the 
public hearing held on the State Plan. Therefore, any person(s) 
employed in any State Weatherization Program can also be a member of an 
existing commission or council but will have to abstain in reviewing 
and approving the activities associated with the DOE Weatherization 
Assistance Program.

Section 440.18  Allowable Expenditures

    DOE deletes from Sec. 440.18(b) and (b)(2)(i) references to 
(c)(15), the cost of eliminating health and safety hazards from the 
amount of funds used to determine the average cost per home. State and 
local agencies indicated to DOE that including the cost of health and 
safety into the amount of funds that can be spent on a home severely 
restricts their flexibility to operate effectively their programs. In 
providing for this flexibility, DOE agrees that excluding these costs 
from the average cost per home would afford States and local agencies 
the opportunity to fund advanced technology practices into their 
weatherization programs while reducing their administrative burden.
    In the notice of proposed rulemaking, DOE proposed to create a 
separate line item for the cost of purchasing vehicles. DOE solicited 
comments on this proposal as well as an alternative approach which 
effectively deferred this large cost over both the life of the vehicle 
and the number of homes served during that period. DOE has decided to 
not create a separate line item because this distorts the actual cost 
of weatherization work done on a home. In accepting the alternative 
proposal in this interim final rule, DOE retains the cost of purchasing 
vehicles as a part of the amount of funds used to determine the average 
cost per home currently in Sec. 440.18(c)(6).
    For some local agencies, purchasing vehicles under the existing 
rule often forced them to seek low cost weatherization candidate homes 
in order to maintain their normal operation while ignoring potentially 
higher energy savings homes. To address the concerns expressed by State 
and local agencies that the cost of these vehicles and certain types of 
equipment included in the average cost per home calculation placed an 
undue burden on them, DOE amends Sec. 440.18(b) by adding paragraph 
(3). This paragraph allows State and local agencies to determine the 
average cost per unit by excluding from the average per unit cost 
calculations that portion of the purchase cost of vehicles and certain 
types of equipment made during that particular funding year. Thus, 
States may amortize these costs in their average cost calculations so 
that only that fraction of the cost of a new vehicle or equipment 
purchase which was actually ``used'' during the current year is 
included.
    For example, if a local agency purchases a new vehicle for $24,000 
with an expected life of the vehicle of 8 years (96 months), then the 
cost of that vehicle could be amortized at the rate of $3,000 per year 
or $250 per month. This approach also affects certain types of 
equipment purchases having a useful life of more than one year and a 
cost of $5,000 or more as defined by 10 CFR part 600. It also permits 
local agencies to spread these costs out over the useful life of the 
vehicle or equipment purchase, even though the full purchase price is 
reported in the year in which it occurs. DOE will address the specific 
reporting requirements for amortized costs for vehicle and equipment 
purchases in program guidance.
    The comments generally supported the proposed extension of the date 
by which a dwelling unit can be reweatherized. Therefore, DOE amends 
Sec. 440.18(e)(2)(iii) by extending the date by which homes can be 
reweatherized from 1985 to 1993. Previously, DOE extended this date 
from 1975 to 1985 based on the evolution of the Program. Between 1975 
and 1979, the Program addressed primarily building envelope measures. 
In 1985, the Program expanded to place more emphasis on mechanical 
measures, including furnace efficiency modifications. Since the last 
rulemaking which introduced new criteria for advanced energy audits, 
virtually all States have improved their energy auditing techniques. 
DOE acknowledges this overall program improvement by the States and is 
confident that by extending the date to 1993, those homes weatherized 
between 1985 and 1993 will provide an even greater opportunity to 
achieve increased energy efficiency. DOE also reminds States that homes 
which become candidates for reweatherization must have a new energy 
audit performed and that audit will take into consideration any 
previous weatherization improvements done on the home.

Section 440.19  Labor

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

Section 440.21  Standards and Techniques for Weatherization

    DOE proposed in the NOPR to rename, reorganize, and revise this 
entire section. The significant changes in response to public comments 
incorporated into this interim final rule further revise, reorganize, 
and renumber the paragraphs constituting Sec. 440.21.
    The proposed name change more accurately reflects the subject 
matter of

[[Page 77213]]

Sec. 440.21. The other major changes eliminate the base audit criteria 
and make the waiver audit criteria the minimum criteria for an energy 
audit used in the Program. In its final rule published on March 4, 1993 
(58 FR 12525), DOE provided for a waiver of the 40-percent material 
cost requirement described in Sec. 440.18(a) for those States that 
adopted advanced energy audit procedures. Today, virtually all of the 
States have incorporated an approved waiver audit and received a waiver 
of this requirement from DOE. Within the next year, all States will be 
using an approved waiver audit.
    In the NOPR published on January 26, 2000 (65 FR 4338), DOE 
proposed to make the existing waiver energy audit requirements the new 
minimum standard for all energy audit procedures. The 40-percent 
material cost requirement and the waiver provisions have become 
unnecessary and their suggested elimination from the statute is 
discussed later in this rule. States and local agencies have made great 
strides in improving the energy auditing techniques used in their 
programs during this decade. Investments in time and resources have 
paid dividends in the form of greater energy efficiency and savings on 
the types of materials and the installation techniques used in the 
Program.
    To implement this change, DOE proposed to delete all references to 
Project Retro-Tech audit procedures and the simplified cost-
effectiveness tests used with Project Retro-Tech. DOE proposed that all 
energy audits require calculation of a savings-to-investment ratio for 
weatherization measures, and assignment of priorities based on the 
resulting figures consistent with the life-cycle cost methodology 
developed by DOE's Federal Energy Management Program and the National 
Institute of Standards and Technology (NIST). While the cost-
effectiveness requirements for the selection of weatherization measures 
under the waiver audit criteria were generally not made more stringent, 
they were described in more detail since they were to become the 
minimum criteria.
    Of the 71 total comments that DOE received on the NOPR, 60 
contained comments regarding the proposed changes to Sec. 440.21. A 
large number of comments (46) expressed the belief that Sec. 440.21 was 
overly complicated, detailed, and prescriptive in contrast to the 
simplification afforded by the rest of the proposed rule changes. These 
comments suggested that much of the text in Sec. 440.21 should be moved 
to policy guidance. Further, the comments suggested that the proposed 
language locked the program into terminology and technology that time 
and research may supersede.
    Based on these comments, DOE agrees to simplify Sec. 440.21 by 
moving many of the details describing the cost-effectiveness 
requirements for measure selection from the regulations to policy 
guidance. Only a brief, general description of the cost-effectiveness 
requirement remains in the rule text.
    In Sec. 440.21(f)(1) of the NOPR, DOE proposed to address the 
interaction of measures by including the phrase ``using generally 
accepted engineering methods'' to remind States to use reasonable 
energy-estimating methods and assumptions to account for the 
interaction among weatherization measures. Since no comments were 
received, Sec. 440.21(d)(1) of the interim final rule includes this 
change.
    In Sec. 440.21(d) of the NOPR, DOE proposed to include the 
sentence, ``The lifetime of materials must not exceed the remaining 
useful life of the dwelling,'' to acknowledge that the low-income 
housing stock served by some programs is in poor condition. A 
weatherization measure may appear to be cost-effective assuming the 
energy cost savings accrue over the entire 20-year economic life of the 
material, but may not be cost-effective if the energy savings accrue 
over a shorter period of time in light of the remaining useful dwelling 
life, for example, ten years.
    Three comments pointed out the difficulty in determining accurately 
the remaining useful life of a dwelling and the possible adverse 
impacts related to this proposed requirement. In response to these 
comments as well as to other comments, DOE has agreed to remove from 
the rule the language containing this proposed requirement. The 
guidance that is eventually issued to detail the cost-effectiveness 
requirements will not mandate that the remaining useful life of a 
dwelling be used in the life-cycle cost calculations. However, States 
will be encouraged in the guidance to consider remaining use dwelling 
life when selecting the most appropriate measures in light of the 
legislative requirement to measure the rate of return of the total 
conservation investment. Determining when the remaining useful life of 
a dwelling may impact the cost-effectiveness calculations of 
weatherization measures and estimating the remaining useful life of 
such dwellings should be left to the discretion of the local agency.
    Ten comments questioned the impact of specifying the use of FEMP 
life-cycle costing analysis methods to determine measure cost-
effectiveness. The comments expressed concern about what would happen 
if FEMP did not establish standards for every material or measure that 
may be cost-effective in low-income households. DOE specified the FEMP 
annual supplement as a convenient source for the discount rate and, if 
used, the fuel cost escalation rates used to calculate savings-to-
investment ratios since the existing rule language did not give States 
an easy-to-use information source. The FEMP Handbook and annual 
supplement discuss life-cycle costing of any and all energy 
conservation investments and do not address material standards. 
However, in simplifying Sec. 440.21 and moving many of the cost-
effectiveness details to policy guidance, references to FEMP have been 
removed from the rule. Annually, DOE will either distribute the FEMP 
annual supplement to each State, or inform the States when the 
supplement is published and how it may be obtained.
    In Sec. 440.21(h) of the NOPR, DOE proposed changes to the energy 
audit requirements that do not pertain to life-cycle costing methods. 
DOE proposed in paragraph (h)(1) of the NOPR to substitute the phrase 
``climatic data'' for the existing ``number of heating or cooling 
degree days'' to acknowledge that other types of weather data besides 
heating and cooling degree days can be used in the estimation of fuel 
cost savings. Since no comments were received, this change is included 
in Sec. 440.21(e)(1) of the interim final rule.
    DOE proposed in Sec. 440.21(h)(1) of the NOPR to include rule 
language to encourage States to set the balance point temperature(s) 
used in conjunction with heating and cooling degree data to more 
reasonably reflect the outside temperatures which require operation of 
heating or cooling equipment to maintain comfort. Three comments 
questioned how balance point temperatures would realistically be 
incorporated into the program, and noted that many currently approved 
audits did not estimate balance points as NEAT does. The use of the 
term ``balance point temperature'' instead of the more appropriate 
``base temperature'' made the proposed change appear more substantial 
than DOE intended.
    Heating degree days are computed by subtracting the average daily 
temperature from a base temperature, which has traditionally been 
65 deg.F. The traditional heating degree day base temperature assumes 
that the furnace needs to run at outside temperatures less than 
65 deg.F. In reality, the furnace is typically not needed until the 
outside temperature drops below around 60 deg.F due to the heat 
generated by lights,

[[Page 77214]]

appliances, and people. Because of the thermal mass of a dwelling and 
other reasons, air conditioning is not usually required until outside 
temperatures exceed the traditional cooling degree day base temperature 
(65 deg.F) by about 5 to 10 deg.F.
    Encouraging States to use degree day data calculated at base 
temperature(s) that more reasonably reflect their housing stock and 
climate would not only reduce the overestimation of energy savings for 
most measures, but would also more accurately model their true cost-
effectiveness. While ideally the base temperature(s) used would be the 
building's balance point, DOE recognizes the prohibitive analytical 
burden this would impose. Instead, States are encouraged to select 
appropriate heating and cooling degree day base temperatures based on 
the validation of their energy estimating software or other reasonable 
basis. DOE has substituted the term ``base temperature'' (and 
definition in Sec. 440.3) for proposed ``balance point temperature'' in 
Sec. 440.21(e)(1) of the interim final rule and reworded this paragraph 
to more accurately reflect the intended change.
    The State Energy Efficiency Programs Improvement Act of 1990, which 
amended 42 U.S.C. 6861 et seq., stated that energy audit procedures 
should ``establish priorities for selection of weatherization measures 
based on their cost and contribution to energy efficiency.'' DOE 
interprets this language, in part, to mean that advanced energy audit 
procedures should consider energy efficiency as well as total energy 
savings. For example, replacing an existing space heater being used to 
heat a single room, with a more energy efficient central furnace, 
capable of heating the whole house, would probably increase energy use 
even as it improved energy efficiency. The occupants would also be 
better able to use the entire dwelling unit. Unless undertaken for 
health and safety reasons, this measure must be cost justified by the 
audit. Addressing energy efficiency in this case would require a cost 
justification that compares the energy usage of the central unit to the 
energy usage of heating the entire home with space heaters.
    The existing rule language addressing this issue states that energy 
audit procedures must ``consider the rate of energy use,'' which does 
not clearly describe the need to look at both energy efficiency and 
total energy savings. To more directly address situations similar to 
the space heater example, DOE proposed instead to include the phrase 
``and energy requirements.'' This proposed change combined the 
requirement to determine the existing energy use with the need to 
determine existing energy requirements from actual energy bills or by 
generally accepted engineering calculations. As in the space heater 
example, the energy requirements of a dwelling unit may exceed its 
existing energy use.
    The one comment addressing this proposed change agreed with the 
need to consider both energy efficiency and total energy savings. 
However, the comment expressed concern about encouraging the conversion 
of zone, or room, heating systems to whole-house systems. DOE realizes 
that these types of situations must be considered on a case-by-case 
basis, but believes that the proposed change clarifies the original 
intent of the legislation. Therefore, DOE has included this change in 
Sec. 440.21(e)(2) of the interim final rule.
    Proposed Sec. 440.21(h)(7) included language to remind States that 
DOE would have to approve an energy audit for each major dwelling type 
covered by the State's weatherization program in light of the different 
energy audit requirements of single-family dwellings, multi-family 
buildings, and mobile homes. One comment expressed concern about this 
requirement for programs that only weatherize a few mobile homes or 
multifamily buildings each year. The comment stated that the 
requirement should only apply if mobile homes or multifamily buildings 
represented over five percent of the units weatherized by the State 
each year. Based on this comment, DOE has included in Sec. 440.21(e)(7) 
of the interim final rule revised language which states, ``that 
represents a significant portion of the State's weatherization 
program.'' Future guidance will define ``significant'' at an 
appropriate level to be determined.
    Proposed Sec. 440.21(i) included language that clarified the type 
of information DOE currently requires to approve State priority lists 
for similar dwelling units. When States submit to DOE their request for 
priority list approval, they often do not provide sufficient detail. 
For example, an adequate description of the types of dwelling units 
(e.g., 1-story ranch, 1\1/2\-story Cape Cod) covered by the priority 
list(s) often is missing. The methodology used to select the 
representative sample of dwellings used to develop the priority list 
often is not explained, nor are the circumstances that will require a 
site-specific audit in lieu of the priority list adequately described. 
The increased energy savings resulting from advanced energy audit 
procedures could be compromised by priority lists that are not based on 
truly typical housing stock or used without comprehensive guidelines 
that tell an auditor when atypical circumstances require a site-
specific audit.
    Three comments disapproved of the perceived increased DOE scrutiny 
of priority lists. While DOE encourages the site-specific energy audit 
of every dwelling weatherized, it realizes that this is often not 
possible considering the constraints on field staff imposed by funding 
limitations and production pressures. The comments suggested that time 
spent conducting an energy audit might be better spent on increasingly 
sophisticated diagnostic testing to ensure that the dwelling is 
adequately ventilated, combustion appliances are operating safely and 
efficiently, and that the combustion appliances vent properly. DOE 
agrees that priority lists are valuable tools in reducing energy costs 
in the greatest possible number of low-income households. Yet, DOE is 
responsible for ensuring the technical soundness of priority lists in 
light of the substantial Federal investment. For this reason, DOE has 
retained in Sec. 440.21(h) of the interim final rule the existing 
documentation requirements for the approval of priority lists.
    One comment pointed out that proposed Sec. 440.21(j), which 
requires every State to document the performance of the same 
presumptively cost-effective general heat waste (GHW) reduction 
materials, needlessly duplicates effort. The comment further noted that 
this documentation often comes from publications authored by DOE. The 
comment suggested that DOE issue an initial list of approved GHW 
materials as policy guidance. DOE agrees with this comment and has 
revised that paragraph, which is now Sec. 440.21(g), and will issue 
guidance specifying approved GHW materials. States may request approval 
for GHW materials not listed in DOE policy guidance by providing the 
required documentation.
    Existing regulations require priority lists to be revalidated every 
five years. To make the revalidation of priority lists more 
straightforward, DOE proposed in Sec. 440.21(k) and (l) to require 
States to submit to DOE for approval every five years their complete 
energy audit procedures including priority lists and lists of general 
heat waste reduction materials. To revalidate their priority lists, 
States would have to re-run their energy audit on a subset of the 
similar dwellings that the priority list covers. Prior to the issuance 
of the NOPR, States have logically argued that their housing stock and 
typical housing types do not change significantly over a five-year

[[Page 77215]]

period. However, technologies, material and energy costs, and auditing 
tools do change. DOE encourages the continual improvement of audit 
tools as evidenced by new versions of NEAT over the years. The best and 
most current audit software should be used in developing priority 
lists. Additionally, since the latest version of a State's audit 
software may not have specific DOE approval, it makes sense for the DOE 
approval process to update the energy audit and priority lists every 
five years.
    One comment supported the proposed change to include energy audit 
procedures in the priority list revalidation requirement. Five comments 
disagreed with the proposed change as well as the existing requirement 
to revalidate priority lists every five years. The comments against the 
proposed change argue that revalidation of priority lists should be 
based on factors that measure cost-effectiveness, such as fuel and 
material costs. While DOE does not wish to impose unnecessary 
documentation requirements on States, the Department is responsible for 
ensuring that only cost-effective weatherization measures be installed 
with DOE funds.
    One comment argued that DOE-approved energy audits should stay 
approved until they no longer comply with the requirements. Since 
States constantly change and improve their energy audit practices and 
protocols, DOE believes it is prudent to conduct periodic technical 
assessments of States' entire energy auditing procedures. DOE looks at 
not just the energy audit software but how the State uses the software. 
DOE energy audit approval process reviews all of the procedures States 
use to select and install weatherization measures, as well as health 
and safety practices affecting clients and field crews.
    Thirty-nine (39) comments stated that the process by which DOE 
reviews energy audits, including garnering State and expert input, 
should be described in the rule, as well as the process by which the 
Department will update the guidance. The comments also wanted DOE to 
include in the rule its plan for assuring uniform consideration by its 
regional offices and processes for appeals should a proposed audit be 
turned down. While existing guidance and review practices effectively 
address many of these concerns, DOE will revisit its energy audit 
approval process and will seek State and expert input. However, DOE 
believes that policy guidance is the most appropriate place to describe 
processes for reviewing energy audits and updating guidance since such 
processes are likely to change over time.
    Although Sec. 440.21(h) of the interim final rule retains the 
general five-year revalidation requirement, DOE has revised the 
proposed rule language to indicate that the policy guidance (issued 
after seeking State and expert input) will specify the information that 
States must submit and the circumstances that reduce or increase 
documentation requirements. The documentation required to revalidate 
priority lists will likely be substantially reduced in cases where the 
factors affecting the cost-effectiveness of weatherization measures on 
the priority lists (e.g., housing stock, costs, energy estimating 
algorithms) have not changed significantly since original DOE approval.
    Twenty-one (21) comments addressed the proposed Sec. 440.21(k) 
requirement for States to submit to DOE for approval each new version 
of non-NEAT/MHEA energy audit software released subsequent to State-
specific DOE approval. The comments were concerned that the requirement 
might stifle the adoption of evolutionary software improvements and 
would increase the reporting burden on States. As indicated in 
Sec. 440.21(h) of the interim final rule, DOE agrees with these 
comments and will include in policy guidance (to be issued after 
seeking State and expert input) the reduced reporting requirements 
regarding new releases of energy audit software.
    Thirty-nine comments suggested that the policy guidance should also 
address the manner in which new technologies will be addressed and 
incorporated into the program. These comments also asked how additional 
benefits other than energy efficiency, such as climate change benefits, 
will be added to the program. The Millennium Implementation Planning 
Committee has assembled a panel of stakeholders that is currently 
developing a new system to identify, assess, and incorporate advanced 
technology into the program in a more open and expedient manner. The 
non-energy benefits of the Weatherization Assistance Program are often 
included in overall program evaluations and program justification 
discussions. Perhaps the program can use these non-energy benefits to 
its advantage in future emissions trading systems. However, DOE 
believes more information on this issue needs to be explored before 
making a final decision.
    One comment requested that the cleaning and tuning of air 
conditioners be added to Appendix A. The comment explained that an air 
conditioner clean and tune typically involves cleaning the cooling coil 
and straightening the fins. Under the heading ``Heating and Cooling 
System Repairs and Tune-Ups/Efficiency Improvements,'' cleaning heat 
exchangers of heating systems is listed. DOE considers the lack of a 
specific listing for cleaning cooling coils an oversight that will be 
resolved when Appendix A is updated in the near future.
    In the preamble of the proposed rule, DOE indicated the possibility 
of proposing in the future a requirement for States to include overhead 
charges (such as costs for off-site supervisory personnel, tools, 
vehicles, etc.) in the savings-to-investment ratio calculations for 
individual weatherization measures. In that discussion, DOE stated that 
such costs are a significant fraction of the total costs of 
weatherizing individual homes and should, therefore, be considered in 
the assessment of the relative costs and benefits of measures. DOE 
received five comments on this suggestion. Four of the comments were 
interested in accounting for overhead costs but believed that these 
costs should perhaps be a part of an overall State evaluation of the 
Program instead of impacting measure selection on a home-by-home basis. 
DOE will continue to urge States to consider such overhead costs in the 
measure cost-effectiveness calculations. However, in developing any 
future proposal to require the inclusion of overhead costs, DOE intends 
to study this issue further with the stakeholders.

Section 440.22  Eligible Dwelling Units

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

[[Page 77216]]

buildings. In the proposed rule, DOE made it clear that this 
flexibility will be targeted to only these certain types of buildings 
because of the large investment involved and the potential for greater 
energy savings.

III. Opportunities for Public Comment

A. Participation in Rulemaking

    The Department encourages public participation in this rulemaking. 
The Department has established a period of 30 days following 
publication of this interim final rule for persons to comment. You may 
review all public comments and other docket material in the DOE Freedom 
of Information Reading Room at the address shown at the beginning of 
this notice of the interim final rule.

B. Written Comment Procedures

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

IV. Procedural Requirements

A. Review Under Executive Order 12866

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

B. Review Under the Regulatory Flexibility Act

    The Regulatory Flexibility Act, 5 U.S.C. 601 et seq., requires 
preparation of an initial regulatory flexibility analysis for any rule 
that by law must be proposed for public comment, unless the agency 
certifies that the rule, if promulgated, will not have a significant 
economic impact on a substantial number of small entities. DOE 
published a notice of proposed rulemaking to amend 10 CFR part 440 to 
give State and local agencies additional flexibility in addressing the 
weatherization needs of low-income citizens and to make other changes 
designed to streamline and update DOE's Weatherization Assistance 
Program. The proposed rule was developed following extensive 
consultation with State and local stakeholders and after reviewing 
comments received. DOE said that the proposed rule would have not any 
adverse economic impact on any small governments, organizations or 
businesses. Accordingly, DOE certified that the proposed rule, as 
promulgated, will not have a significant economic impact on a 
substantial number of small entities. DOE did not receive any comments 
of this certification, and the addition of mandated cost sharing 
requirements does not warrant reconsideration of the certification.

C. Review Under the Paperwork Reduction Act

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

D. Review Under the National Environmental Policy Act

    DOE has concluded that promulgation of this interim final rule 
falls into a class of actions that would not individually or 
cumulatively have a significant impact on the human environment, as 
determined by DOE regulations implementing the National Environmental 
Policy Act of 1969, (42 U.S.C. 4321 et seq.) Specifically, this interim 
final rule is covered under the Categorical Exclusion in paragraph A5 
to subpart D, 10 CFR part 1021, which covers rulemakings that interpret 
or amend an existing regulation without changing the environmental 
effect of the regulation. Accordingly, neither an environmental 
assessment nor an environmental impact statement is required.

E. Review Under Executive Order 13132

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

F. Review Under Executive Order 12988

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

G. Review Under the Unfunded Mandates Reform Act

    Title II of the Unfunded Mandates Reform Act of 1995 (Pub. L. No. 
104-4) requires each Federal agency to prepare a written assessment of 
the effects of any Federal mandate in a proposed or final rule that may 
result in the expenditure by State, local, and tribal governments, in 
the aggregate, or by the private sector, of $100 million in any one 
year. The Act also requires a Federal agency to develop an effective 
process to permit timely input by elected officers of State, local, and 
tribal governments on a proposed ``significant intergovernmental 
mandate,'' and it requires an agency to develop a plan for giving 
notice and opportunity for timely input to potentially affected small 
governments before establishing any requirement that might 
significantly or uniquely affect small governments. The interim final 
rule published today does

[[Page 77217]]

not contain any Federal mandate, so these requirements do not apply.

H. Review under the Treasury and General Government Appropriations Act

    Section 654 of the Treasury and General Government Appropriations 
Act, 1999 (Pub. L. No. 105-277) requires Federal agencies to issue a 
Family Policymaking Assessment for any rule or policy that may affect 
family well-being. Today's interim final rule will 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.

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

    As required by 5 U.S.C. 801, DOE will report to Congress on the 
promulgation of the rule prior to its effective date. The report will 
state that it has been determined that the rule is not a ``major rule'' 
as defined by 5 U.S.C. 804(3).

V. Other Federal Agencies

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

VI. The Catalog of Federal Domestic Assistance

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

List of Subjects in 10 CFR Part 440

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

    Issued in Washington, DC, on November 29, 2000.
Dan W. Reicher,
Assistant Secretary, Energy Efficiency and Renewable Energy.
    For the reasons set forth in the preamble, DOE amends part 440 of 
title 10, Code of Federal Regulations, as set forth below.

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

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

    Authority: 42 U.S.C. 6861 et seq.; 42 U.S.C. 7101 et seq.

    2. Section 440.1 is revised to read as follows:


Sec. 440.1  Purpose and scope.

    This part implements a weatherization assistance program to 
increase the energy efficiency of dwellings owned or occupied by low-
income persons, reduce their total residential expenditures, and 
improve their health and safety, especially low-income persons who are 
particularly vulnerable such as the elderly, persons with disabilities, 
families with children, high residential energy users, and households 
with high energy burden.

    3. In Sec. 440.3:
    a. Remove the definition for ``JTPA'';
    b. Revise the words in the definitions for ``Handicapped Person'' 
to read ``Persons with disabilities'' and place it in alphabetical 
order; and
    c. Add the following definitions in alphabetical order to read as 
follows:


Sec. 440.3  Definitions.

* * * * *
    Base temperature means the temperature used to compute heating and 
cooling degree days. The average daily outdoor temperature is 
subtracted from the base temperature to compute heating degree days, 
and the base temperature is subtracted from the average daily outdoor 
temperature to compute cooling degree days.
* * * * *
    Electric base-load measures means measures which address the energy 
efficiency and energy usage of lighting and appliances.
* * * * *
    High residential energy user means a low-income household whose 
residential energy expenditures exceed the median level of residential 
expenditures for all low-income households in the State.
    Household with a high energy burden means a low-income household 
whose residential energy burden (residential expenditures divided by 
the annual income of that household) exceeds the median level of energy 
burden for all low-income households in the State.
* * * * *
    Non-Federal leveraged resources means those benefits identified by 
State or local agencies to supplement the Federal grant activities and 
that are made available to or used in conjunction with the DOE 
Weatherization Assistance Program for the purposes of the Act for use 
in eligible low-income dwelling units.
* * * * *

    4. Section 440.14 is revised to read as follows:


Sec. 440.14  State plans.

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

[[Page 77218]]

family or other high energy-consuming dwelling units;
    (iv) The amount of non-Federal resources to be applied to the 
program;
    (v) The amount of Federal resources, other than DOE weatherization 
grant funds, to be applied to the program;
    (vi) The amount of weatherization grant funds allocated to the 
State under this part;
    (vii) The expected average cost per dwelling to be weatherized, 
taking into account the total number of dwellings to be weatherized and 
the total amount of funds, Federal and non-Federal, expected to be 
applied to the program;
    (viii) The average amount of the DOE funds specified in 
Sec. 440.18(c)(1) through (9) to be applied to any dwelling unit;
    (ix) The average amount of DOE funds applied to any dwelling unit 
for weatherization materials as specified in Sec. 440.18(c)(1);
    (x) The procedures used by the State for providing additional 
administrative funds to qualified subgrantees as specified in 
Sec. 440.18(d);
    (xi) Procedures for determining the most cost-effective measures in 
a dwelling unit;
    (xii) The definition of ``low-income'' which the State has chosen 
for determining eligibility for use statewide in accordance with 
Sec. 440.22(a);
    (xiii) The definition of ``children'' which the State has chosen 
consistent with Sec. 440.3; and
    (xiv) The amount of Federal funds and how they will be used to 
increase the amount of weatherization assistance that the State obtains 
from non-Federal sources, including private sources, and the expected 
leveraging effect to be accomplished.

    5. Section 440.15 is amended by revising paragraph (a)(3)(iv) to 
read as follows:


Sec. 440.15  Subgrantees.

    (a) * * *
    (3) * * *
    (iv) The ability of the subgrantee to secure volunteers, training 
participants, public service employment workers, and other Federal or 
State training programs.
* * * * *

    6. Section 440.16 is amended by revising paragraphs (b) and (d) to 
read as follows:


Sec. 440.16  Minimum program requirements.

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

    7. In Sec. 440.17 paragraph (a) introductory text is revised and 
paragraphs (b) and (c) are added to read as follows:


Sec. 440.17  Policy advisory council.

    (a) Prior to the expenditure of any grant funds, a State policy 
advisory council, or a State commission or council which serves the 
same functions as a State policy advisory council, must be established 
by a State or by the Regional Office Director if a State does not 
participate in the Program which:
* * * * *
    (b) Any person employed in any State Weatherization Program may 
also be a member of an existing commission or council, but must abstain 
from reviewing and approving activities associated with the DOE 
Weatherization Assistance Program.
    (c) States which opt to utilize an existing commission or council 
must certify to DOE, as a part of the annual application, of the 
council's or commission's independence in reviewing and approving 
activities associated with the DOE Weatherization Assistance Program.

    8. Section 440.18 is amended by:
    a. Revising paragraph (a);
    b. Removing the phrase ``and (c)(15)'' in the introductory text to 
paragraph (b) and in paragraph (b)(2)(i);
    c. Adding paragraph (b)(3);
    d. Revising paragraph (c)(6); and
    e. Revising ``September 30, 1985'' to read ``September 30, 1993'' 
in paragraph (e)(2)(iii).
    The revisions and addition read as follows:


Sec. 440.18  Allowable expenditures.

    (a) States must spend an average of at least 40 percent of the 
funds provided them for weatherization materials, labor and related 
matters listed in paragraphs (c)(1) through (9) of this section. DOE 
may approve a State's application to waive the 40 percent requirement 
under Sec. 440.21.
* * * * *
    (b) * * *
    (3) For the purposes of determining the average cost per dwelling 
limitation, costs for the purchase of vehicles or other certain types 
of equipment as defined in 10 CFR part 600 may be amortized over the 
useful life of the vehicle or equipment.
* * * * *
    (c) * * *
    (6) The cost of purchasing vehicles, except that any purchase of 
vehicles must be referred to DOE for prior approval in every instance.
* * * * *

    9. Section 440.19 is revised to read as follows:


Sec. 440.19  Labor.

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

    10. Section 440.21 is revised to read as follows:


Sec. 440.21  Weatherization materials standards and energy audit 
procedures.

    (a) Paragraph (b) of this section describes the required standards 
for weatherization materials. Paragraphs (c) and (d) of this section 
describe the cost-effectiveness tests that weatherization materials 
must pass before they may be installed in an eligible dwelling unit. 
Paragraph (e) of this section lists the other energy audit requirements 
that do not pertain to cost-effectiveness tests of weatherization 
materials. Paragraphs (f) and (g) of this section describe the use of 
priority lists and presumptively cost-effective general heat waste 
reduction materials as part of a State's energy audit procedures. 
Paragraph (h) of this section explains that a State's energy audit 
procedures and priority lists must be re-approved by DOE every 5 years.
    (b) Only weatherization materials which are listed in Appendix A to 
this part and which meet or exceed standards prescribed in Appendix A 
to this part may be purchased with funds

[[Page 77219]]

provided under this part. However, DOE may approve an unlisted material 
upon application from any State.
    (c) Except for materials to eliminate health and safety hazards 
allowable under Sec. 440.18(c)(15), each individual weatherization 
material and package of weatherization materials installed in an 
eligible dwelling unit must be cost-effective. These materials must 
result in energy cost savings over the lifetime of the measure(s), 
discounted to present value, that equal or exceed the cost of 
materials, installation, and on-site supervisory personnel as defined 
by the Department. States have the option of requiring additional 
related costs to be included in the determination of cost-
effectiveness. The cost of incidental repairs must be included in the 
cost of the package of measures installed in a dwelling.
    (d) The energy audit procedures must assign priorities among 
individual weatherization materials in descending order of their cost-
effectiveness according to paragraph (c) of this section after:
    (1) Adjusting for interaction between architectural and mechanical 
weatherization materials by using generally accepted engineering 
methods to decrease the estimated fuel cost savings for a lower 
priority weatherization material in light of fuel cost savings for a 
related higher priority weatherization material; and
    (2) Eliminating any weatherization materials that are no longer 
cost-effective, as adjusted under paragraph (d)(1) of this section.
    (e) The energy audit procedures also must--
    (1) Compute the cost of fuel saved per year by taking into account 
the climatic data of the area where the dwelling unit is located, where 
the base temperature that determines the number of heating or cooling 
degree days (if used) reasonably approximates conditions when operation 
of heating and cooling equipment is required to maintain comfort, and 
must otherwise use reasonable energy estimating methods and 
assumptions;
    (2) Determine existing energy use and energy requirements of the 
dwelling unit from actual energy bills or by generally accepted 
engineering calculations;
    (3) Address significant heating and cooling needs;
    (4) Make provision for the use of advanced diagnostic and 
assessment techniques which DOE has determined are consistent with 
sound engineering practices;
    (5) Identify health and safety hazards to be abated with DOE funds 
in compliance with the State's DOE-approved health and safety 
procedures under Sec. 440.16(h);
    (6) Treat the dwelling unit as a whole system by examining its 
heating and cooling system, its air exchange system, and its occupants' 
living habits and needs, and making necessary adjustments to the 
priority of weatherization materials with adequate documentation of the 
reasons for such an adjustment; and
    (7) Be specifically approved by DOE for use on each major dwelling 
type that represents a significant portion of the State's 
weatherization program in light of the varying energy audit 
requirements of different dwelling types including single-family 
dwellings, multi-family buildings, and mobile homes.
    (f) For similar dwelling units without unusual energy-consuming 
characteristics, energy audits may be accomplished by using a priority 
list developed by conducting, in compliance with paragraphs (b) through 
(e) of this section, site-specific energy audits of a representative 
subset of these dwelling units. For DOE approval, States must describe 
how the priority list was developed, how the subset of similar homes 
was determined, and circumstances that will require site-specific 
audits rather than the use of the priority lists. States also must 
provide the input data and list of weatherization measures recommended 
by the energy audit software or manual methods for several dwelling 
units from the subset of similar units.
    (g) States may use, as a part of an energy audit, general heat 
waste reduction weatherization materials that DOE has determined to be 
generally cost-effective. States may request approval to use general 
heat waste materials not listed in DOE policy guidance by providing 
documentation of their cost-effectiveness and a description of the 
circumstances under which such materials will be used.
    (h) States must resubmit their energy audit procedures (and 
priority lists, if applicable, under certain conditions) to DOE for 
approval every five years. States must also resubmit to DOE, for 
approval every five years, their list of general heat waste materials 
in addition to those approved by DOE in policy guidance, if applicable. 
Policy guidance will describe the information States must submit to DOE 
and the circumstances that reduce or increase documentation 
requirements.

    11. Section 440.22 is amended by revising paragraph (b)(2) 
introductory text to read as follows:


Sec. 440.22  Eligible dwelling units.

* * * * *
    (b) * * *
    (2) Not less than 66 percent (50 percent for duplexes and four-unit 
buildings, and certain eligible types of large multi-family buildings) 
of the dwelling units in the building:
* * * * *

[FR Doc. 00-31158 Filed 12-7-00; 8:45 am]
BILLING CODE 6450-01-P