[Federal Register Volume 66, Number 9 (Friday, January 12, 2001)]
[Rules and Regulations]
[Pages 3336-3356]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-610]



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Part X





Department of Energy





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Office of Energy Efficiency and Renewable Energy



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10 CFR Part 431



Energy Efficiency Program for Commercial and Industrial Equipment: 
Efficiency Standards for Commercial Heating, Air Conditioning and Water 
Heating Equipment; Final Rule

  Federal Register / Vol. 66, No. 9 / Friday, January 12, 2001 / Rules 
and Regulations  

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DEPARTMENT OF ENERGY

Office of Energy Efficiency and Renewable Energy

10 CFR Part 431

[Docket No. EE-RM/STD-00-100]
RIN 1904-AB06


Energy Efficiency Program for Commercial and Industrial 
Equipment: Efficiency Standards for Commercial Heating, Air 
Conditioning and Water Heating Equipment

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

ACTION: Final rule.

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SUMMARY: The Energy Policy and Conservation Act (EPCA), as amended, 
establishes energy efficiency standards for certain commercial heating, 
air conditioning and water heating products. For some of these 
products, the Department of Energy (DOE, Department or we) is adopting 
efficiency standards contained in the new American Society of Heating, 
Refrigerating and Air-Conditioning Engineers, Inc. (ASHRAE) and 
Illuminating Engineering Society of North America (IESNA) Standard 
90.1, as revised in October 1999, as uniform national standards. This 
final rule also identifies other products covered by the recently 
revised ASHRAE/IESNA Standard 90.1-1999 that DOE will analyze further 
to determine whether more stringent standards are warranted.

DATES: Effective date: This rule is effective February 12, 2001.
    Compliance Dates: The compliance date of standards adopted in this 
rule for central water-cooled air conditioners, water source heat 
pumps, and evaporatively-cooled air conditioning products with cooling 
capacities rated at or above 135,000 Btu/h and below 240,000 Btu/h is 
October 29, 2004. For all other standards adopted in this rule, the 
compliance date is October 29, 2003.

ADDRESSES: You can read the transcript of the public workshop regarding 
this rulemaking, the public comments received, and the Screening 
Analysis report referred to in this notice in the Freedom of 
Information Reading Room (Room No. 1E-190) at the U.S. Department of 
Energy, Forrestal Building, 1000 Independence Avenue, SW., Washington, 
DC 20585, between the hours of 9:00 a.m. and 4:00 p.m., Monday through 
Friday, except Federal holidays. You can also obtain the Screening 
Analysis report electronically from the Office of Building Research and 
Standards world wide web site at the following URL address: [http://www.eren.doe.gov/buildings/codes_standards/index.htm].
    This final rule also refers to certain industry standards 
established by ASHRAE and IESNA. These industry standards are 
referenced by the single comprehensive title ``ASHRAE/IESNA Standard 
90.1.'' The revision of ASHRAE/IESNA Standard 90.1 published in 1999 is 
referenced by the title ``ASHRAE/IESNA Standard 90.1--1999.'' You can 
view this standard at the Department's Information Reading Room at the 
address stated above. You can also obtain copies by mail from the 
American Society of Heating, Refrigerating, and Air-Conditioning 
Engineers, Inc., 1971 Tullie Circle, NE, Atlanta, GA 30329, or 
electronically from ASHRAE's web site, [http://www.ashrae.org/book/bookshop.htm].

FOR FURTHER INFORMATION CONTACT: Cyrus H. Nasseri, U.S. Department of 
Energy, Office of Energy Efficiency and Renewable Energy, Mail Station, 
EE-41, 1000 Independence Avenue, SW., Washington, DC 20585-0121, (202) 
586-9138, FAX (202) 586-4617, e-mail: [email protected], or 
Edward Levy, Esq., U.S. Department of Energy, Office of General 
Counsel, Mail Station, GC-72, 1000 Independence Avenue, SW., 
Washington, DC 20585, (202) 586-9507, e-mail: [email protected].

SUPPLEMENTARY INFORMATION:
I. Introduction
    A. Consumer Overview
    B. Authority
    C. Background
    1. General
    2. ASHRAE Action
II. Discussion
    A. The Screening Analysis and Results
    1. Content and Results of the Screening Analysis
    2. Discussion of Issues Raised Concerning the Screening Analysis
    B. Treatment of Specific Products
    1. DOE Views Expressed in the Workshop Notice
    2. Discussion of Comments on General Issues Surrounding Adoption 
of Efficiency Standards in ASHRAE/IESNA Standard 90.1--1999
    3. Discussion of DOE Views Regarding Specific Products
    C. Final Rule and Other DOE Actions
III. Procedural Requirements
    A. Review Under the National Environmental Policy Act of 1969
    B. Review Under Executive Order 12866, ``Regulatory Planning and 
Review''
    C. Review Under the Regulatory Flexibility Act
    D. Review Under Executive Order 13132, ``Federalism''
    E. Review Under Executive Order 12630, ``Governmental Actions 
and Interference with Constitutionally Protected Property Rights''
    F. Review Under the Paperwork Reduction Act
    G. Review Under Executive Order 12988, ``Civil Justice Reform''
    H. Review Under Section 32 of the Federal Energy Administration 
Act of 1974
    I. Review Under Unfunded Mandates Reform Act of 1995
    J. Review Under the Plain Language Directives
    K. Review Under the Treasury and General Government 
Appropriations Act, 1999
    L. Review Under the Small Business and Regulatory Enforcement 
Fairness Act

I. Introduction

A. Consumer Overview

    This rule adopts amended ASHRAE/IESNA Standard 90.1-1999 energy 
efficiency standards for 18 product categories of commercial air 
conditioners, heat pumps, furnaces, water heaters, and hot water 
storage tanks. The effect is to replace standards specified in EPCA for 
these product categories for equipment manufactured after October 29, 
2003, or October 29, 2004, in the case of large packaged air 
conditioners and heat pumps. DOE expects the imposition of these new 
standards to save in excess of 1.1 quadrillion Btu (Quads) of energy 
nationwide between 2004 and 2030.
    The commercial air conditioners, heat pumps, furnaces, water 
heaters and hot water storage tanks subject to the standards adopted 
today apply to equipment generally found in commercial buildings. 
Today's standards do not apply to consumer products. EPCA established 
the efficiency standards for consumer appliances, and the Department is 
considering amendments for residential central air conditioners and 
heat pumps, clothes washers and water heaters under separate 
proceedings. The new commercial standards apply to products 
manufactured after the dates specified, to products installed in new 
construction as well as existing buildings.
    DOE expects the energy costs for space heating and cooling and 
water heating in commercial buildings to be reduced as a result of 
today's standards. In addition to reducing building cost-of-operation, 
the standards will result in lower emissions due to less fuel being 
used for heating and for generating electricity.
    In addition, the Department is considering more stringent standards 
than those adopted by ASHRAE for 11 categories of commercial products. 
The Department believes more stringent standards than those found in 
ASHRAE/IESNA Standard 90.1-1999 may save

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significant additional amounts of energy and be technologically 
feasible and economically justified. DOE also plans to recommend to 
ASHRAE that it consider new, amended standards for four categories of 
commercial central air conditioners and heat pumps not considered in 
the update of ASHRAE/IESNA Standard 90.1-1999. Finally, the Department 
is rejecting a standard for electric water heaters that will increase 
energy use over the level specified in EPCA and leaving the EPCA level 
in place. A summary of the actions taken by the Department is presented 
in Table 1.

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B. Authority

    Part B of Title III of the Energy Policy and Conservation Act 
(EPCA) of 1975, Pub. L. 94-163, as amended, by the National Energy 
Conservation Policy Act of 1978 (NECPA), Pub. L. 95-619, the National 
Appliance Energy Conservation Act of 1987 (NAECA), Pub. L. 100-12, the 
National Appliance Energy Conservation Amendments of 1988 (NAECA 1988), 
Pub. L. 100-357, and the Energy Policy Act of 1992 (EPACT), Pub. L. 
102-486, established the Energy Conservation Program for Consumer 
Products other than Automobiles. Part 3 of Title IV of NECPA amended 
EPCA to add ``Energy Efficiency of Industrial Equipment,'' which 
included air conditioners, furnaces, and other types of equipment.
    EPACT also amended EPCA with respect to industrial equipment, 
providing definitions, test procedures, labeling provisions, energy 
conservation standards, and the authority to require information and 
reports from manufacturers. EPCA sections 340-345, 42 U.S.C. 6311-6316. 
For example, EPCA specifies explicit minimum energy efficiency levels 
for certain commercial packaged air conditioning and heating products, 
packaged terminal air conditioners and heat pumps, warm air furnaces, 
packaged boilers, water heaters and unfired hot water storage tanks. 
EPCA section 342(a)(1)-(5), 42 U.S.C. 6313(a)(1)-(5). The efficiency 
requirements in the statute correspond to the levels in ASHRAE/IESNA 
Standard 90.1 as in effect on October 24, 1992. The statute further 
provides that if the efficiency levels in ASHRAE/IESNA Standard 90.1 
are amended after that date for any of the covered products, the 
Secretary of Energy (Secretary) must establish an amended uniform 
national standard at the new minimum level for each effective date 
specified in ASHRAE/IESNA Standard 90.1, unless (s)he determines, 
through a rulemaking supported by clear and convincing evidence, that a 
more stringent standard is technologically feasible and economically 
justified and would result in significant additional energy 
conservation. EPCA section 342(a)(6)(A), 42 U.S.C. 6313(a)(6)(A).
    If the Secretary elects to publish such a rule, it must contain the 
amended standard, and the determination must consider, to the greatest 
extent practicable: the economic impact on the manufacturers and 
consumers of the affected products; savings in operating cost 
throughout the life of the product, compared to any increases in 
initial cost or maintenance expense; the total projected amount of 
energy savings likely to result directly from the imposition of the 
standard; any lessening of the utility or performance of the affected 
products; the impact of any lessening of competition; the need for 
national energy conservation; and other factors the Secretary considers 
relevant. The Secretary may not prescribe such an amended standard if 
(s)he finds (and publishes the finding) that interested persons have 
established by a preponderance of evidence that the amended standard is 
likely to result in unavailability in the United States of products 
with performance characteristics (including reliability), features, 
sizes, capacities and volumes that are substantially the same as those 
generally available in the United States at the time of the Secretary's 
finding. EPCA section 342(a)(6)(B), 42 U.S.C. 6313(a)(6)(B).
    Finally, the Secretary may not prescribe any amended standard which 
increases maximum allowable energy use or decreases minimum required 
energy efficiency. EPCA section 342(a)(6)(B)(ii), 42 U.S.C. 
6313(a)(6)(B)(ii).

C. Background

1. General
    Pursuant to the EPACT amendments to EPCA in 1992, DOE extended its 
energy conservation program for consumer products to certain commercial 
and industrial equipment, and created a new Part 431 in Title 10 of the 
Code of Federal Regulations, entitled, ``Energy Conservation Program 
for Commercial and Industrial Equipment.'' This part includes 
commercial heating, air conditioning and water heating products, as 
well as large electric motors. The new program consists of: test 
procedures, Federal energy conservation standards, labeling, 
certification and enforcement procedures.
2. ASHRAE Action
    ASHRAE's Board of Directors gave final approval to certain 
revisions to ASHRAE/IESNA Standard 90.1 on October 29, 1999. The 
revised Standard indicates that the amended commercial HVAC and water 
heater equipment efficiencies will become effective as part of the 
Standard two years after final ASHRAE approval (i.e., on October 29, 
2001).
    ASHRAE changed the efficiency standards only for some products 
covered by the ASHRAE/IESNA Standard 90.1. For the remaining products, 
ASHRAE considered some efficiency levels in the course of revising 
Standard 90.1 but left them at their preexisting values, and it 
deferred consideration of other products. The standard levels 
prescribed in EPCA and ASHRAE/IESNA Standard 90.1-1999 appear in Tables 
2 and 3.

II. Discussion

A. The Screening Analysis and Results

1. Content and Results of the Screening Analysis
    To decide whether to adopt efficiency standards contained in 
ASHRAE/IESNA Standard 90.1-1999 or to initiate the process of 
developing and analyzing more stringent standards for particular 
product categories, DOE performed a simplified Screening Analysis and 
evaluated other information. This process was designed to identify 
products covered by EPCA for which it was unlikely that a more detailed 
analysis would reveal evidence sufficient to justify more stringent 
requirements, and also to identify products for which it was reasonably 
possible such evidence would be revealed by further analysis. Screening 
products in this way allows DOE to adopt several ASHRAE/IESNA Standard 
90.1-1999 standards expeditiously without hindering appropriate 
consideration of the remaining products.

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    In conducting the Screening Analysis, the Department used existing 
data from industry and other sources, including the analysis used by 
ASHRAE in support of its deliberations over the new ASHRAE/IESNA 
Standard 90.1-1999 efficiency levels. For each product category, we 
estimated the likely cost of achieving several higher technologically 
feasible efficiency levels and then calculated for each such level the 
corresponding rate of energy consumption required to fulfill the 
product's function. Applying appropriate climate data, typical building 
design characteristics, inventories of buildings in different regions 
of the country, equipment sales volumes, economic discount rates, and 
energy prices, we computed cost/benefit measures corresponding to the 
higher efficiency levels and also estimated the nationwide energy and 
net cost savings, if any, that would result from setting more stringent 
standards than the levels in ASHRAE/IESNA Standard 90.1-1999. While the 
conclusions of the Screening Analysis by themselves do not constitute 
clear and convincing evidence to justify more stringent standards, they 
do serve to differentiate those products for which such evidence is 
unlikely to emerge from further analysis from those for which a 
reasonable likelihood exists.
    The Department examined a range of efficiency levels for each 
product analyzed. The range included the levels specified in EPCA and 
ASHRAE/IESNA Standard 90.1-1999, as well as more efficient levels 
characteristic of the most efficient products now available in the 
market and those associated with the lowest life-cycle cost. For each 
level above the EPCA standard, DOE estimated: (1) The incremental 
national energy and carbon emission savings, and (2) the net nationwide 
direct economic benefit, represented by the national net present value 
(NPV), that would result from setting a standard at that level, 
compared to the corresponding levels now in ASHRAE/IESNA Standard 90.1-
1999 and EPCA.
    Table 4 lists the 24 product categories studied in the Screening 
Analysis. It shows for each one the efficiency level that the Screening 
Analysis indicates would correspond to the lowest average life-cycle 
cost, taking into account both the costs of efficiency improvements and 
the savings from reduced energy consumption. In addition, where that 
efficiency level lies above the level specified in ASHRAE/IESNA 
Standard 90.1-1999, Table 4 shows the following potential benefits that 
the Screening Analysis suggests would result over the period from 2004 
to 2030 from setting a standard at the higher level:
    1. The estimated nationwide energy savings, expressed in trillions 
of Btu (TBtu);
    2. The estimated net nationwide direct economic benefit, 
represented by the net present value (NPV); and
    3. The estimated reductions in atmospheric carbon emissions, in 
millions of tons.
    When Table 4 shows a zero for a product in all three of these 
categories, the Screening Analysis indicates that the efficiency level 
that corresponds with the product's lowest average life cycle cost is 
the same as the level specified in ASHRAE/IESNA Standard 90.1-1999.

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    On May 15, 2000, the Department published a Notice of Document 
Availability and Public Workshop (Workshop Notice), in which we 
described the Screening Analysis, announced the public availability of 
the Screening Analysis report, and published our preliminary 
inclinations with respect to the commercial heating, air conditioning, 
and water heating products covered by EPCA, including several product 
categories not included in the Screening Analysis. 65 FR 30929. We also 
invited comments and conducted a public workshop on July 11, 2000.
2. Discussion of Issues Raised Concerning the Screening Analysis
    Several comments took issue with different aspects of the Screening 
Analysis. These views are listed below, along with DOE's responses. In 
general, many of the comments will be useful in more detailed 
evaluations of ASHRAE/IESNA 90.1-1999 efficiency levels which are not 
adopted as national standards in today's rule. On the other hand, none 
of the comments on the analysis itself indicates that clear and 
convincing evidence exists to justify more stringent standards than 
those adopted today.
    Comment: DOE relied too heavily on equipment cost and efficiency 
relationships initially developed in 1994 for ASHRAE's deliberations in 
amending ASHRAE/IESNA Standard 90.1. These relationships are out of 
date and contain errors. (No. 8, Rheem Manufacturing Company, p. 1; No. 
11, Air-Conditioning and Refrigeration Institute, p. 6; No. 16, 
California Energy Commission, p. 2; No. 19, American Council for an 
Energy-Efficient Economy, p. 3; No. 22, Lennox Industries, Inc., p. 3).
    Response: DOE updated baseline cost data in the Screening Analysis 
through interviews with manufacturers, distributors and contractors and 
by application of appropriate price indices. However, the relative 
costs of alternative efficiency levels are assumed not to have changed 
since 1994. DOE did not expect that these costs had changed 
sufficiently to warrant collecting new independent data as part of an 
analysis to provide a framework for deciding which efficiency levels in 
ASHRAE/IESNA Standard 90.1-1999 to adopt, and which required further 
study. Notwithstanding, we did invite and receive public comments 
related to cost and efficiency relationships, and these are reflected 
in today's rule. The analysis in support of a future rulemaking for any 
product will entail collection of current cost and efficiency data, 
which will be subjected to public comment.
    Comment: The Screening Analysis should have included copies of all 
referenced material from non-published sources. (No. 15, GARD 
Analytics/Gas Research Institute, p. 2).
    Response: Although DOE attempts to make all referenced material 
available to interested parties, including copies of this material in 
reports is not always practical due to its volume.
    Comment: The seven percent discount rate, taken from OMB Circular 
A-94 to reflect the time value of money in DOE's economic analysis, is 
too low. (No. 2, Air Conditioning and Refrigeration Institute, p. 10; 
No. 11, Air-Conditioning and Refrigeration Institute, p. 7), or too 
high. (No. 12, American Gas Association, p. 3).
    Response: DOE believes that the OMB guidance is appropriate, 
reflecting the approximate marginal pretax rate of return on average 
investments, expressed in real terms (net of inflation), for evaluating 
the economic impact of Federal actions on the economy. In pursuing 
further evaluation of products for which amended efficiency levels are 
not adopted in today's rule, DOE will account for differing opinions 
concerning discount rates through sensitivity analyses in evaluating 
the economic impact of standards on consumers and manufacturers. For 
example, in past rulemakings, DOE has evaluated the impact on consumer 
life-cycle-cost by considering alternative discount rates varying from 
two percent to fifteen percent.
    Comment: DOE's level gas price projections underestimate the effect 
of gas industry restructuring and technological innovation. The Gas 
Research Institute projects a 1.5% annual decline in gas prices between 
2000 and 2015. (No. 12, American Gas Association, p. 3).
    Response: DOE considers the projections, taken from the Energy 
Information Administration's Annual Energy Outlook 2000, to be 
authoritative and reasonable for the purposes of the Screening 
Analysis. In addition, concerning products for which DOE is adopting 
ASHRAE/IESNA Standard 90.1-1999 levels, any decline in gas prices that 
does occur would likely make higher efficiencies less cost-effective 
for gas-fueled equipment and thus diminish the likelihood of uncovering 
clear and convincing evidence that more stringent standards are 
technically feasible and economically justified. For all covered gas-
fueled products, except gas-fired boilers, DOE has decided to adopt the 
ASHRAE/IESNA Standard 90.1-1999 levels as they are, so any diminished 
likelihood of finding evidence to support more stringent standards for 
these products would serve to reinforce DOE's decision with respect to 
them. In evaluating the potential impacts of more stringent standards 
for gas-fired boilers, DOE will assess the impact of alternative fuel 
price scenarios on the life-cycle costs of achieving higher efficiency 
levels as well as the impacts of standards on the Net Present Value 
(NPV).
    Comment: It is unclear whether the energy conversion factor in the 
Screening Analysis for electricity includes losses of fuel delivered to 
the powerplant. (No. 15, GARD Analytics/Gas Research Institute, p. 2).
    Response: Losses of fuel delivered to the powerplant prior to 
combustion are not included in the conversion factors, but DOE 
considers these losses to be small in relation to the fuel actually 
consumed and thus to have little impact on national aggregate energy 
savings and greenhouse gas emissions reduction estimates.
    Comment: The 15-zone prototype building model does not represent 
individual building types adequately, use of historical CBECS building 
data does not account for newer buildings built to 1989 and 1999 ASHRAE 
standards, not treating health care buildings as a separate category 
creates inaccuracy, and window-to-wall ratios seem too low. (No. 15, 
GARD Analytics/Gas Research Institute, p. 2).
    Response: The 15-zone model provides estimates of building energy 
consumption which, DOE believes, are representative of most building 
types, and from which we can infer the effects of standards on products 
used in most building types with sufficient precision. We recognize 
that individual buildings may have different energy uses, depending on 
building location, operation, age and other building-specific factors. 
However, we believe this modeling approach is valid for the purpose of 
reaching a decision on whether the potential exists for additional 
energy savings, beyond those resulting from the adoption of the ASHRAE/
IESNA Standard 90.1-1999 levels, that warrant consideration of higher 
standards.
    Comment: Air conditioners and heat pumps often exceed the minimum 
energy efficiency level specified in EPCA, leading DOE to overestimate 
the energy savings impacts of more stringent standards. (No. 2, Air 
Conditioning and Refrigeration Institute, p.6; No. 4, Carrier 
Corporation, p. 4-5; No. 11, Air-Conditioning and Refrigeration 
Institute, p. 6; No. 13,

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Carrier Corporation, p. 2; No. 22, Lennox Industries, Inc., p. 3). ARI 
believes the current shipment-weighted efficiencies for PTAC's and 
PTHP's exceed current minimum efficiency levels by about 10 percent. 
(No. 11, Air-Conditioning and Refrigeration Institute, p. 4).
    Response: To the extent DOE, in computing the base case, i.e., no 
adoption of a further standard, used an average efficiency lower than 
what actually occurs, ARI may have a valid point because a more 
stringent standard would result in lower energy savings than what was 
estimated. But ARI has provided no data to indicate the amount of the 
possible overstatement of energy savings. Morever, to some extent, any 
such overstatement would be offset because, for the purpose of this 
analysis, we also assumed that under new standards the average 
efficiency would be equal to the new standard. We expect the shipment-
weighted efficiency to be higher than the standard, however, and this 
would have the effect of modestly underestimating the energy savings 
due to standards. Aside from these considerations, given the amount of 
energy that could potentially be saved by more stringent standards on 
these products, even if it is less than estimated, we believe they 
warrant further consideration as candidates for more stringent 
standards. In evaluating the impacts of more stringent standards, DOE 
will attempt to capture the effect of the market demand for more 
efficient products than required by a minimum efficiency standard.
    Comment: Use of Full Load Equivalent Operating Hours (FLEOH's) 
overstates energy consumption by air conditioning equipment, since 
part-load operation is more efficient than at full load for this 
equipment. (No. 2, Air Conditioning and Refrigeration Institute, p. 8; 
No. 4, Carrier Corporation, p. 4; No. 11, Air-Conditioning and 
Refrigeration Institute, p. 4; No. 13, Carrier Corporation, p. 2-3; No. 
15, GARD Analytics/Gas Research Institute, p. 1; No. 22, Lennox 
Industries, Inc., p. 3).
    Response: DOE agrees that FLEOH's do not capture the part load 
performance of products. The Department used FLEOH's for the Screening 
Analysis because of a limited amount of part load efficiency data and 
because the standard under investigation is expressed in terms of full 
load operation. DOE believes that any discrepancies introduced by use 
of FLEOH's would not materially alter the likelihood that clear and 
convincing evidence supporting stricter standards will ultimately be 
found, because efficiencies at full and part load are correlated. 
Nonetheless, the Department welcomes suggestions concerning better ways 
to account for performance under part-load conditions as it conducts 
further analysis of air-conditioning products.
    Comment: DOE understated energy costs for air conditioners by 
failing to account adequately for seasonal electric rate variation and 
demand charges. (No. 15, GARD Analytics/Gas Research Institute, p. 1, 
2; No. 19, American Council for an Energy-Efficient Economy, p. 5-6).
    Response: The Screening Analysis includes calculations of energy 
savings and life-cycle costs for specific products at regional and 
national levels, and DOE believes that it handled electric costs 
appropriately, based on surveys of actual rate data, and that its 
conclusions reflect existing market conditions today. DOE recognizes, 
however, that rate levels and structures could change in the future in 
unpredictable ways with utility industry restructuring, but we believe 
that this uncertainty does not remove the reasonable likelihood that 
more stringent standards may be justified in the case of products DOE 
plans to analyze further, nor does uncertainty by itself make finding 
such a justification appreciably more likely in the case of products 
for which DOE is adopting standards in today's rule. Any seasonal rates 
and demand charges that increase the cost of energy consumed by air 
conditioners will serve to make more stringent efficiency requirements 
cost-effective, thus reinforcing DOE's decision to study air-cooled air 
conditioners further before adopting the levels contained in ASHRAE/
IESNA Standard 90.1-1999. For water-cooled air-conditioners, DOE is 
adopting ASHRAE/IESNA Standard 901.-1999 efficiency requirements today, 
because these products are less common and for this reason do not 
appear to afford opportunities for significant energy savings. This 
determination does not depend on the cost of electric power. In 
conducting further investigation of electric product efficiencies, we 
may also apply appropriate sensitivity analysis to capture prevailing 
ranges of opinion concerning the various rate scenarios. We welcome 
suggestions from stakeholders regarding better methodologies to account 
for seasonal rates and demand charges within any detailed rulemaking, 
including suggestions on how to address their wide variety in the 
commercial sector (e.g., specific utility service territory, type of 
building, end-use application, hours of usage, prior usage patterns, 
and correlations with kWh consumption).
    Comment: Heating operation should be included along with cooling in 
analyzing heat-pumps, since cooling efficiency improvements can reduce 
energy costs for heating as well. (No. 15, GARD Analytics/Gas Research 
Institute, p. 1).
    Response: DOE agrees with this point and will include heating and 
cooling operations together in the detailed analysis of efficiency 
levels for air-source heat pumps. Higher efficiencies in cooling mode 
are likely to result in improved heating performance as well, 
increasing the likelihood that higher standards for these products are 
economically justified and will lead to significant additional 
conservation of energy. This consideration therefore reinforces DOE's 
decision to conduct further analysis of air-source heat pumps along 
with corresponding air-source air-conditioners. For water-source heat 
pumps, DOE is adopting ASHRAE/IESNA Standard 90.1-1999 efficiency 
requirements, because these products are less common and for this 
reason do not appear to afford opportunities for significant energy 
savings. This determination does not depend on the combined cost or 
efficiency of heating and cooling.
    Comment: Cost and efficiency relationships used by ASHRAE and 
subsequently in the Screening Analysis reflect use of R-22 refrigerant, 
which must be replaced by 2010. (No. 2, Air Conditioning and 
Refrigeration Institute, p. 9-10; No. 8, Rheem Manufacturing Company, 
p. 1; No. 11, Air-Conditioning and Refrigeration Institute, p. 6).
    Response: DOE recognizes the possibility that alternatives to R-22 
may alter the cost effectiveness of achieving higher efficiency levels 
for equipment sold after 2010 and will take this factor into account in 
conducting further analysis of air-source heat pumps and air-cooled 
air-conditioners. Since the effect of as yet undetermined alternative 
refrigerants on the cost of achieving higher efficiency levels is 
unknown at this point and the subject of debate, DOE does not believe 
that the refrigerant requirement eradicates the reasonable likelihood 
of uncovering evidence supporting higher standards for air-cooled 
products. As indicated above, the decision to adopt ASHRAE 90.1-1999 
efficiency requirements for water-source, water-cooled, and 
evaporatively cooled equipment stems from low aggregate energy 
consumption and not cost-effective efficiency considerations.
    Comment: DOE's analysis of packaged terminal air conditioners and 
heat pumps does not accurately reflect the life and usage 
characteristics of these products, thereby incorrectly estimating

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the energy savings and life-cycle-cost effects of more stringent 
standards. Packaged terminal air conditioners and heat pumps have a 
useful life of 10 years or less, not 15 as assumed in the Screening 
Analysis. The shorter lifetime is due to application in hotels and 
motels, which undergo more frequent renovations, and to corrosion from 
salt near the seacoast. (No. 2, Air Conditioning and Refrigeration 
Institute, p. 6; No. 4, Carrier Corporation, p. 3; No. 11, Air-
Conditioning and Refrigeration Institute, p. 4; No. 13, Carrier 
Corporation, p. 2; No. 14, EnviroMaster International Corporation, p. 
2). The ``generic building'' approach to estimating heating and cooling 
loads fails to reflect the unique design characteristics of hotels and 
motels, where PTAC's and PTHP's are most commonly used. (No. 11, Air-
Conditioning and Refrigeration Institute, p. 4). These products are 
used less during hours of peak electric demand than other air-
conditioning equipment, since the rooms are frequently vacant during 
the day. (No. 14, EnviroMaster International Corporation, p. 1).
    Response: DOE accepts the possibility that the lifetime assumed for 
these products in the Screening Analysis may not reflect the likelihood 
of the units being replaced earlier during routine renovations. A more 
frequent replacement would increase the cost associated with these 
products. It is also possible that these products are used less during 
hours of peak electric demand than other air-conditioning products and 
thus do not conform to a ``generic building'' operating schedule, and 
that a different operating schedule may be warranted for them during 
analyses. Although shorter working life and fewer hours of operation 
under peak conditions would reduce the estimated energy and cost 
savings associated with more stringent standards, the potential saving 
identified by the Screening Analysis for these products is so large, in 
DOE's view, as to compensate for the simplifying assumptions involved 
in calculating them. Potential national energy savings of over 500 
trillion Btu for packaged terminal heat pumps leaves considerable room 
for error in determining that a reasonable likelihood exists that 
evidence would support more stringent standards. However, we welcome 
additional independent data on equipment life and operating schedules 
for these products, so we can improve the precision of the detailed 
analysis we will be undertaking for these products.
    Comment: DOE overestimated the feasibility and underestimated the 
cost of improving efficiencies of PTAC's and PTHP's by failing to take 
into account the small wall openings (16" by 42") into which they must 
fit, especially for retrofit applications. (No. 2, Air Conditioning and 
Refrigeration Institute, p. 7-8; No. 4, Carrier Corporation, p. 3; No. 
9, First Company, p. 2; No. 11, Air-Conditioning and Refrigeration 
Institute, p. 5; No. 13, Carrier Corporation, p. 2; No. 14, 
EnviroMaster International Corporation, p. 1). Also, DOE failed to 
account for recently introduced ``vertical'' PTAC's, which have 
different design constraints from traditional units covered by the 
analysis. (No. 14, EnviroMaster International Corporation, p. 1).
    Response: DOE will model PTAC's and PTHP's performance in simulated 
environments that match their actual applications as closely as 
possible. However, the comments contain no conclusions bearing on the 
impact of these two sets of considerations on DOE's decision to 
continue its evaluation of these products before adopting uniform 
national efficiency standards for them, and DOE does not believe that 
the considerations eliminate the reasonable likelihood of uncovering 
evidence supporting more stringent standards under the terms of EPCA.
    Comment: The Screening Analysis may not have correctly reflected 
the preponderance of commercial boiler shipments to the Northeast and 
North Central regions of the country, greatly overstated shipments of 
copper tube or coil-type commercial gas water heaters, and 
overestimated potential energy savings for these products. (No. 20, Gas 
Appliance Manufacturers Association, p. 1-3). Fluctuations in the GAMA 
shipment data for gas water heaters need further explanation, and the 
projected one percent annual growth rate for water heaters until 2030 
is overly optimistic. (No. 12, American Gas Association, p. 3, 4). The 
shipment figures for oil-fired boilers appear too high, possibly 
because they include dual-fuel boilers, and the analysis does not 
adequately account for differences in boiler installation costs at 
higher efficiencies. (No. 15, GARD Analytics/Gas Research Institute, p. 
2).
    Response: DOE will verify shipment data during its further analysis 
of boilers and tankless water heaters, and we will account for 
differences in installation costs at higher efficiencies. However, DOE 
does not believe that these considerations remove the reasonable 
likelihood of discovering adequate evidence to support more stringent 
standards for these products according to EPCA criteria. Installation 
is only a small component of the total cost of acquisition, and 
alternative shipping patterns and growth rates could effect energy 
savings and economic justification either way. Greater predominance of 
shipments to states with colder climates, for example, increases the 
likelihood that more stringent standards would be cost effective, while 
slower growth in shipments diminishes the energy savings likely to 
result from higher efficiencies in the future.
    Comment: The Screening Analysis did not handle jacket and standby 
losses properly. (No. 20, Gas Appliance Manufacturers Association, p. 
1-3).
    Response: With regard to jacket and standby loss, we believe that 
the Standby Loss Correction for boilers is in fact needed to estimate 
the energy use of these devices correctly. The difference between 
thermal and combustion efficiency is primarily reflected in the shell 
loss of the boiler, and during operating hours, the thermal efficiency 
of the boiler accounts for these losses. However for much of the year, 
the boiler is maintained on a hot standby status. The amount of time on 
hot standby is assumed in the Screening Analysis to be the total number 
of hours the boiler is available for use minus the full load operating 
hours for the year. Values for the hot standby periods were taken from 
the 1997 ASHRAE Handbook of Fundamentals, as shown in Appendix A (A.9) 
of the Screening Analysis. During these hot standby periods, we have 
assumed the boiler standby loss to be 5% for the base boiler (the 
assumed difference between combustion and thermal efficiency). To 
capture the energy used during the hot standby period, the Screening 
Analysis applied an adjustment factor for the FLEOH, calculated as:
[GRAPHIC] [TIFF OMITTED] TR12JA01.076


[[Page 3347]]


    Variation in boiler design or setback of system temperature through 
the year will have some effect on this adjustment factor, however for 
purposes of the Screening Analysis, we believe the methodology outlined 
above to be a fair assessment of the contribution of hot standby to 
energy consumption.
    Comment: In the amended ASHRAE/IESNA Standard 90.1-1999, ASHRAE 
changed the definition of ``storage volume'' for electric storage water 
heaters from ``measured volume'' to ``rated volume.'' (No. 16, 
California Energy Commission, p. 3; No. 17, Oregon Office of Energy, p. 
3).
    Response: DOE recognized this change and accounted for it in the 
Screening Analysis.

B. Treatment of Specific Products

1. DOE Views Expressed in the Workshop Notice
    In the Workshop Notice, DOE stated its inclination to adopt as 
national standards, without further study, the efficiency levels in 
ASHRAE/IESNA Standard 90.1-1999 for 12 of the 24 products included in 
the Screening Analysis. 65 FR at 30933, 30935. The 12 products comprise 
several categories of air conditioners and heat pumps, warm air 
furnaces, and certain water heating products. DOE stated that the 
Analysis estimated that most of these efficiency levels have the lowest 
life-cycle cost (LCC) for the product, and for the remainder a slightly 
higher efficiency would have the lowest LCC but would save relatively 
little additional energy.
    For four categories of 3-phase air conditioners and heat pumps with 
capacities under 65,000 Btu per hour, DOE stated its inclination to 
take no action to adopt standards at this time but to encourage ASHRAE 
to consider an addendum to ASHRAE/IESNA Standard 90.1-1999. 65 FR at 
30933-34, 30935. DOE noted that ASHRAE did not address these products 
in revising Standard 90.1, although the Screening Analysis indicates 
that higher efficiency standards for them may well have benefits.
    For seven of the eight remaining categories analyzed in the 
Screening Analysis, DOE stated its inclination to propose consideration 
of an addendum to ASHRAE/IESNA Standard 90.1-1999, and to further study 
whether more stringent efficiency levels than those adopted by ASHRAE 
are warranted. 65 FR at 30934, 30935. DOE stated that it appears such 
levels would result in significant, cost-effective energy savings. The 
products involved are certain types of air conditioners and heat pumps, 
as well as boilers and tankless instantaneous gas water heaters. 
Electric water heaters was the other product included in the Analysis, 
and DOE tentatively decided to leave the EPCA standard in force based 
on its view that the efficiency level in ASHRAE/IESNA Standard 90.1-
1999 would increase energy use relative to that standard. 65 FR at 
30934, 30935.
    DOE excluded certain commercial air conditioning, heating and water 
heating products from the Screening Analysis for reasons such as 
insufficient data, small sales volumes, and difficulty in assessing 
efficiency performance. 65 FR at 30934. For several of these products, 
DOE stated its intent to adopt ASHRAE/IESNA Standard 90.1-1999 
standards because the products have small markets and higher standards 
are unlikely to result in significant energy savings. For the heating 
COP of several heat pump categories, and the efficiency level for oil-
fired boilers, DOE indicated it did not plan to adopt the levels in 
ASHRAE/IESNA Standard 90.1-1999 because they should be considered 
either as part of other evaluations that would be undertaken or 
subsequent to such other evaluations. 65 FR at 30934-35. For all other 
heat pumps covered by EPCA, DOE stated its intention to adopt the 
amended ASHRAE/IESNA Standard 90.1-1999 COP levels as uniform national 
standards.
2. Discussion of Comments on General Issues Surrounding Adoption of 
Efficiency Standards in ASHRAE/IESNA Standard 90.1-1999
    Comment: Stakeholders were divided on DOE's discretion to impose 
more stringent standards than those in ASHRAE/IESNA Standard 90.1-1999 
and on the Department's duty to scrutinize each efficiency level 
strictly. Some emphasized the limitations on DOE's authority to set 
more stringent standards than those contained in ASHRAE 90.1-1999 in 
the absence of certain clear and convincing evidence, and they 
encouraged adoption of ASHRAE's amended standards in their entirety. 
(No. 2, Air Conditioning and Refrigeration Institute, pp. 4-5; No. 3, 
Gas Appliance Manufacturers Association, pp. 1-2; No. 10, Edison 
Electric Institute, pp. 1-2; No. 11, Air-Conditioning and Refrigeration 
Institute, p. 3). Others emphasized what they felt was DOE's duty to 
seek such evidence more exhaustively before adopting any of the ASHRAE 
standards. (No. 16, California Energy Commission, pp. 1-2; No. 17, 
Oregon Office of Energy, pp. 1-2; No. 19, American Council for an 
Energy-Efficient Economy, pp. 1, 10-11)
    Response: DOE believes it has struck an appropriate balance, 
consistent with EPCA, between the requirement to adopt the efficiency 
standards contained in ASHRAE/IESNA Standard 90.1-1999 and the 
discretion to adopt more stringent standards if they are warranted by 
clear and convincing evidence. Specifically, DOE performed a Screening 
Analysis of the amended standards in ASHRAE/IESNA Standard 90.1-1999, 
and invited public comments on the Analysis, in order to assess the 
likelihood of uncovering such clear and convincing evidence. Based on 
those steps, DOE is adopting in today's rule over half of the amended 
standards in ASHRAE Standard 90.1-1999, and is undertaking further 
analysis of virtually all of the remaining ASHRAE standards. The 
Department believes it is exercising due care in performing the role 
defined in the statute for the Secretary.
    Comment: Numerous comments addressed ASHRAE's process in arriving 
at ASHRAE/IESNA Standard 90.1-1999. Several comments commended ASHRAE 
for its analytical and procedural integrity and recommended adopting 
the resulting standards on the strength of ASHRAE's process. (No. 1, 
ASHRAE, p. 1; No. 2, Air Conditioning and Refrigeration Institute, pp. 
2-3; No. 4, Carrier Corporation, p. 1; No. 10, Edison Electric 
Institute, p. 1; No. 11, Air-Conditioning and Refrigeration Institute, 
pp. 2-3; No. 13, Carrier Corporation, p. 1; No. 18, National Rural 
Electric Cooperative Association, p. 1; No. 22, Lennox Industries, 
Inc., p. 2). Others criticized ASHRAE's process for analytical and 
procedural shortcomings and recommended strict scrutiny of the 
standards. (No. 5, California Energy Commission, pp. 1-2; No. 16, 
California Energy Commission, pp. 2-3; No. 17, Oregon Office of Energy, 
pp. 1-4; No. 19, American Council for an Energy-Efficient Economy, pp. 
1-3).
    Response: DOE recognizes that opinions differ on the strengths and 
weaknesses of ASHRAE's process in arriving at the requirements in 
Standard 90.1-1999. Nevertheless, EPCA stipulates that DOE must adopt 
the amended ASHRAE standards unless certain conditions are met, and, 
for the reasons stated in our response to the previous comment, we 
believe our actions here properly reflect the status that EPCA affords 
to Standard 90.1-1999.
    Comment: Subjecting standards to further DOE analysis would delay 
the realization of energy savings that might occur sooner if amended 
ASHRAE standards were adopted immediately. (No. 8, Rheem Manufacturing 
Company, p. 1). On the other hand, voluntary adherence to the amended 
standards

[[Page 3348]]

and state adoption of the updated ASHRAE/IESNA Standard 90.1-1999 in 
building codes will serve to offset the effect of any delay at the 
Federal level. (No. 16, California Energy Commission, pp. 4-5; No. 17, 
Oregon Office of Energy, p. 4). In addition, DOE's further analysis 
could create a situation in which manufacturers would have to redesign 
their products twice in rapid succession: Once to comply with ASHRAE/
IESNA Standard 90.1-1999 and shortly afterward, to comply with 
standards resulting from a possible DOE rulemaking. (No. 4, Carrier 
Corporation, p. 2; No. 11, Air-Conditioning and Refrigeration 
Institute, p. 7; No. 13, Carrier Corporation, p. 3; No. 14, 
EnviroMaster International Corporation, p. 2; No. 22, Lennox 
Industries, Inc., p. 3-4).
    Response: Any future rulemaking by DOE will take into account the 
impacts of more stringent standards on affected manufacturers, 
including the effect of timing on product development cycles, and it 
will analyze the influence of effective dates on energy savings 
resulting from the standards. DOE notes also that the process it 
envisions can be terminated for any product whenever DOE concludes that 
the EPCA criteria for a more stringent standard are not likely to be 
satisfied. This could occur either as a result of further analysis by 
DOE during a rulemaking process or by ASHRAE adopting a new Addendum to 
ASHRAE/IESNA Standard 90.1-1999 for which a more stringent alternative 
is not justified.
    Comment: DOE has no authority to propose that ASHRAE consider 
addenda to Standard 90.1 in cases where it feels that the requirements 
in ASHRAE/IESNA Standard 90.1-1999 are not sufficiently stringent. In 
these cases, the Department must proceed with a rulemaking if higher 
efficiencies meet the requirements of EPCA. (No. 12, American Gas 
Association, pp. 1-2).
    Response: While EPCA does not specifically authorize the Department 
to propose addenda to ASHRAE standards, DOE can find no statutory 
prohibition against doing so and indeed has traditionally provided 
technical support to ASHRAE's standard-setting processes in the 
interest of encouraging and taking advantage of open, consensus-based 
approaches. In addition, section 307(b) of the Energy Conservation and 
Production Act, 42. U.S.C. 6836, seems to contemplate that DOE would 
provide such support to ASHRAE, and even that it would propose addenda 
to ASHRAE.
3. Discussion of DOE Views Regarding Specific Products
    Comment: Industry data used in ASHRAE's standard setting process 
and DOE's Screening Analysis overstated the cost of efficiency 
improvements for central air-source air-conditioners between 65,000 Btu 
per hour and 135,000 Btu per hour. (No. 19, American Council for an 
Energy-Efficient Economy, pp. 3-5). Some industry comments opposed this 
view. ( No. 11, Air-Conditioning and Refrigeration Institute, p. 5; No. 
13, Carrier Corporation, p. 3).
    Response: Since the American Council for an Energy-Efficient 
Economy (ACEEE) supported its contention regarding air-source air-
conditioners with price survey data, and the potential savings from 
efficiency improvements for this product category are potentially large 
on account of its widespread use, DOE has decided that clear and 
convincing evidence may exist to justify more stringent standards for 
air-source air-conditioners in the 65,000 Btu/h to 135,000 Btu/h range. 
The Department has therefore added this product category to those that 
will be subjected to further study and will review the cost-efficiency 
data.
    Comment: Industry data used in ASHRAE's standard setting process 
and DOE's Screening Analysis also overstated the cost of efficiency 
improvements for 3-ton water-source heat pumps. (No. 19, American 
Council for an Energy-Efficient Economy, pp. 3-5).
    Response: For water-source heat pumps, the data to support the 
ACEEE comment is considered proprietary and has not been submitted to 
DOE, so the Department is unable to verify the comment. In any case, 
the nation-wide energy use for this product appears to be so small that 
the Department considers it unlikely that more stringent standards for 
this product would satisfy EPCA criteria. Accordingly, the Department 
is adopting the ASHRAE/IESNA Standard 90.1-1999 efficiency level for 
this product category in today's rule.
    Comment: Industry data used in ASHRAE's standard setting process 
and DOE's Screening Analysis also overstated the cost of efficiency 
improvements for gas-fired boilers. (No. 19, American Council for an 
Energy-Efficient Economy, pp. 3-5).
    Response: Since the gas-fired boilers are proposed to be analyzed 
further, based on the Screening Analysis, ACEEE's comment would not 
affect the decision embodied in today's rule.
    Comment: DOE should include Integrated Part-Load Values in 
standards governing air conditioning equipment. (No. 16, California 
Energy Commission, p. 5; No. 17, Oregon Office of Energy, p. 3).
    Response: DOE recognizes that Integrated Part-Load Value is 
increasingly common as a rating metric and believes that it has the 
authority to establish minimum requirements using this metric if ASHRAE 
has amended the standard corresponding to the air-conditioning 
equipment in question, and EPCA's requirements for a more stringent 
standard are met. DOE is also aware that Integrated Part Load Value 
only applies to the performance of equipment with modulated capacity 
and thus will not capture part-load efficiencies for most single-stage 
air-conditioners. DOE will therefore consider including Integrated 
Part-Load Values in any prospective rulemaking for air conditioning 
equipment. However the Department has reached no conclusions on their 
appropriateness as part of a future standard and will seek public 
comment before proceeding.
    Comment: Standards for 3-phase air-conditioners and heat pumps 
under 65,000 Btu per hour should be the same as those for single phase 
models, which are used in residential applications and are more 
numerous. (No. 8, Rheem Manufacturing Company, p. 2; No. 11, Air-
Conditioning and Refrigeration Institute, pp. 3-4; No. 13, Carrier 
Corporation, p. 3; No. 22, Lennox Industries, Inc., p. 2-3).
    Response: DOE agrees that the products are closely related, and 
that standard-setting for them should be coordinated. There may be 
valid reasons, however, for the standards themselves to differ. Once 
ASHRAE/IESNA Standard 90.1-1999 is amended with respect to these 
products, DOE will evaluate the new standards to determine if they 
should be adopted or if a more stringent standard is likely to save a 
significant amount of energy, and be technologically feasible and 
economically justified.
    Comment: More stringent standards for gas space heating and water 
heating equipment will serve to shift customers to electric equipment, 
with a detrimental effect on gas equipment sales and energy 
consumption. (No. 12, American Gas Association, p. 2). Further changes 
in efficiency levels for PTAC's and PTHP's will particularly hurt small 
manufacturers. (No. 9, First Company, p. 3).
    Response: Under EPCA, if DOE adopts a more stringent standard, it 
must consider, to the greatest extent practicable, the economic impact 
on the manufacturers and consumers of the affected products, savings in 
operating

[[Page 3349]]

cost throughout the life of the product compared to any increases in 
initial cost or maintenance expense, and the total projected amount of 
energy savings likely to result directly from the imposition of the 
standard. EPCA section 342(a)(6)(B)(i), 42 U.S.C. 6313(a)(6)(B)(i). DOE 
will therefore carefully consider possible effects due to fuel 
switching as well as impacts on small businesses as it proceeds with 
any further analysis of these products that might lead to more 
stringent standards.
    Comment: More stringent standards could affect the availability of 
types of boilers that have no cost-effective substitute for certain 
building applications. (No. 3, Gas Appliance Manufacturers Association, 
pp. 2-5). They could also affect the availability of PTAC's and PTHP's 
that will fit in existing limited spaces. (No. 9, First Company, pp. 1-
2).
    Response: DOE recognizes that EPCA prohibits an amended standard 
that is likely to result in unavailability in the United States of 
products with performance characteristics (including reliability), 
features, sizes, capacities and volumes that are substantially the same 
as those generally available beforehand. EPCA section 342(a)(6)(B)(ii), 
42 U.S.C. 6313(a)(6)(B)(ii). This prohibition would govern any future 
rulemaking with respect to these products.
    Comment: Since ASHRAE amended the standard for electric water 
heaters, DOE has the authority to evaluate and consider more stringent 
standards than those in EPCA for these products and should do so. (No. 
15, GARD Analytics/Gas Research Institute, p. 2; No. 16, California 
Energy Commission, p. 3). Heat pump water heaters should be considered 
among the technological alternatives. (No. 15, GARD Analytics/Gas 
Research Institute, p. 2)
    Response: DOE agrees with the comment regarding DOE's authority. 
However, in rejecting the ASHRAE/IESNA Standard 90.1-1999 provision, 
which allows for increased energy consumption, the Department does not 
intend to subject electric water heaters to further evaluation or 
consideration of more stringent standards. The standard for electric 
water heaters will remain as originally stipulated in EPCA. This 
decision is based on the low likelihood of finding sufficient evidence 
to support a more stringent standard for them. The heat pump water 
heater is the most promising (but significantly more complex) 
technology to significantly improve the heating efficiency of electric 
water heaters above current levels. However, when DOE considered this 
technology for our residential water heater rulemaking, we concluded 
that it was not economically justified due to the cost of 
manufacturing, installing, servicing, and sometimes a potential loss of 
product utility. These concerns might also apply to commercial heat 
pump water heaters. Furthermore, currently there is no suitable test 
procedure for these products to measure the efficiency in commercial 
applications, so a standard predicated on heat pump technology would be 
difficult to enforce.

C. Final Rule and Other DOE Actions

    EPCA requires DOE to adopt ASHRAE's amended efficiency standards 
for certain commercial heating, air conditioning and water heating 
products unless the Secretary determines, supported by clear and 
convincing evidence, that adoption of a more stringent uniform national 
standard is technologically feasible and economically justified and 
would result in significant additional energy conservation. DOE 
believes that this language places a burden on DOE not to initiate a 
standards development process unless there is at least a reasonable 
possibility that strong evidence exists to show that significant 
additional energy savings could be achieved through more stringent 
efficiency standards that would be both technologically feasible and 
economically justified.
    To decide whether to adopt efficiency standards contained in 
ASHRAE/IES Standard 90.1-1999, or to initiate the process of developing 
and analyzing more stringent standards for particular product 
categories, DOE performed a simplified Screening Analysis and evaluated 
other information. This process was designed to identify products 
covered by EPCA for which it was reasonable to expect that more 
detailed and sophisticated analysis was unlikely to reveal evidence 
sufficient to justify more stringent requirements, and also to identify 
other products for which such evidence was reasonably likely to be 
revealed by further analysis. Screening products in this way allows DOE 
to adopt several ASHRAE 90.1-1999 standards expeditiously and thereby 
to:
     Minimize any possible adverse effects on energy savings of 
delaying the imposition of more stringent national efficiency 
standards;
     Minimize uncertainty faced by manufacturers as they design 
products to meet future standards; and
     Manage the resources within DOE efficiently, concentrating 
comprehensive analyses of the cost-effectiveness and energy savings of 
alternatives to ASHRAE standards where the clear and convincing 
evidence required by EPCA for more stringent standards is most likely 
to be found.
    As further discussed below, based on evaluation of the results of 
the Screening Analysis, other information for products not included in 
the analysis, and the comments received in response to the Workshop 
Notice, the Department has decided to pursue, for each product 
category, one of four courses of action:
     Adopt immediately the ASHRAE/IES Standard 90.1-1999 
efficiency level as a uniform national standard;
     Propose consideration of an addendum to ASHRAE/IES 
Standard 90.1-1999 where ASHRAE did not consider a more efficient 
level, and a more efficient level appears warranted;
     Propose consideration of an addendum to ASHRAE/IES 
Standard 90.1-1999 and undertake a more thorough evaluation to 
determine whether a higher standard is justified, where ASHRAE 
considered amending or amended the standard, and a more efficient level 
appears warranted than is contained in ASHRAE/IES Standard 90.1-1999; 
or
     Reject the ASHRAE/IES Standard 90.1-1999 efficiency level 
if it increases maximum allowable energy use or decreases minimum 
required efficiency.
    As to the ASHRAE 90.1-1999 efficiency levels that DOE is 
immediately adopting, these standards are being adopted because (a) 
significant improvements in energy efficiency beyond the level 
recommended by ASHRAE appear unlikely to be technically feasible or 
economically justified, (b) the national energy savings that would 
result from any cost-effective efficiency improvements appear unlikely 
to be significant, or (c) the additional energy savings resulting from 
a more stringent standard are not likely to offset the loss in energy 
savings likely to result from the delay that would be caused by the DOE 
analytical and rulemaking process.
    As to efficiency levels in the third category above--where DOE is 
proposing further consideration by ASHRAE and undertaking further 
analysis--DOE selected these products for further analysis, because the 
findings of the Screening Analysis suggested at least a reasonable 
possibility, and in several instances a high likelihood, of uncovering 
clear and convincing evidence that more stringent standards would be 
technologically feasible and economically justified and would result in 
significant additional energy conservation. Implicit in DOE's

[[Page 3350]]

selection is the judgment that additional energy savings resulting from 
more stringent standards are likely to offset the loss in energy 
savings likely to result from the delay in the imposition of a new 
standard due to DOE's analytical and rulemaking process.
    Based on our consideration of the Screening Analysis, DOE has 
identified the ten products listed below as not warranting further 
consideration of standards that are more stringent than those in 
ASHRAE/IESNA Standard 90.1-1999 and is consequently adopting the 
ASHRAE/IESNA Standard 90.1-1999 efficiency levels for these products 
today as uniform national standards.
     Central Water Source Heat Pumps, 17 kBtu/h-65 kBtu/h
     Central Water Cooled Air Conditioners, 65 kBtu/h-135 kBtu/
h
     Central Water Cooled Air Conditioners, 135 kBtu/h-240 
kBtu/h
     Central Water Cooled Air Conditioners, 65 kBtu/h
     Central Water Source Heat Pumps, 17 kBtu/h
     Central Water Source Heat Pumps, 65 kBtu/h-135 kBtu/h
     Gas-Fired Warm Air Furnaces, 225 kBtu/h
     Gas Storage Water Heaters, 155 kBtu/h
     Gas Storage Water Heaters, >155 kBtu/h
     Gas Instantaneous Water Heaters with Tanks
    In all except the first three of the ten product categories listed 
above, the ASHRAE/IESNA Standard 90.1-1999 efficiency levels are the 
same as those identified in the Screening Analysis as achieving the 
lowest life-cycle costs. Therefore, the Department considers it 
unlikely that further analysis would reveal clear and convincing 
evidence that more stringent standards would be economically justified 
for these products. For the central water-source heat pumps between 17 
and 65 thousand Btu/hour, and the two sizes of central water-cooled air 
conditioners between 65 and 240 thousand Btu/hour, the Screening 
Analysis estimates that the efficiency levels corresponding to minimum 
life-cycle cost are slightly higher than ASHRAE's, but the total 
cumulative energy savings that could be achieved cost-effectively by 
adopting the three higher levels would amount to only 70 trillion Btu 
between 2004 and 2030. In the case of these products, for which 
potential energy savings appear to be relatively small, the Department 
considers it unlikely that further analysis would reveal clear and 
convincing evidence that a more stringent standard would result in 
significant energy conservation.
    Of the remaining products studied in the Screening Analysis, the 
Analysis suggests that efficiency standards higher than those in 
ASHRAE/IESNA Standard 90.1-1999 for four categories of 3-phase air 
conditioners and heat pumps with capacities under 65,000 Btu per hour 
may well have significant energy savings potential and economic 
benefits. According to the Screening Analysis, adopting the efficiency 
levels corresponding to the lowest average life-cycle cost for all four 
of these product categories would result in estimated cost-effective 
nationwide cumulative energy savings of as much as 1.9 quadrillion Btu 
between 2004 and 2030, leading the Department to believe that further 
evaluation could reasonably be expected to uncover clear and convincing 
evidence supporting a more stringent standard. However, these products 
were not addressed by ASHRAE in revising ASHRAE/IESNA Standard 90.1, so 
DOE has decided not to take any action at this time to adopt a standard 
with respect to them. Based on the results of the Screening Analysis, 
DOE encourages ASHRAE to consider adopting an addendum to ASHRAE/IESNA 
Standard 90.1-1999 and will support ASHRAE in its future deliberations 
concerning these products in conjunction with ongoing development of 
NAECA standards for similar, but single phase, residential equipment. 
Should ASHRAE amend the efficiency standards for these air conditioners 
or heat pumps in the future, DOE will then act on such amendments as 
required by EPCA. The four categories of 3-phase air conditioners and 
heat pumps with capacities under 65,000 Btu per hour are:
     3-phase Single Package Air Source Air Conditioners, 65 
kBtu/h;
     3-phase Split Air Source Air Conditioners, 65 kBtu/h;
     3-phase Single Package Air Source Heat Pumps, 65 kBtu/h; 
and
     3-phase Split Air Source Heat Pumps, 65 kBtu/h.
    For seven of the eight remaining product categories analyzed, 
ASHRAE amended the efficiency standards contained in ASHRAE/IESNA 
Standard 90.1, but the Screening Analysis indicates that it is at least 
reasonably likely that significant, cost-effective energy savings would 
result from even more stringent standards. Therefore, DOE believes that 
the clear and convincing evidence required by EPCA may well be revealed 
by further analysis. These products are the following:
     Central air-source air conditioners, 135 kBtu/h-240 kBtu/
h;
     Central air-source heat pumps, 135 kBtu/h-240 kBtu/h;
     Packaged terminal air conditioners;
     Packaged terminal heat pumps;
     Small gas-fired steam and hot water boilers, 0.3 MMBtu/h-
2.5 MMBtu/h;
     Large gas-fired steam and hot water boilers, >2.5 MMBtu/h; 
and
     Tankless Gas Instantaneous Water Heaters.
    Although the Screening Analysis did not identify a potential for 
cost-effective energy savings for central air-cooled air conditioners 
and air-source heat pumps between 65 kBtu/h and 135 kBtu/h, the 
Department received public comments that included data, derived from 
sale price surveys, supporting the contention that higher efficiencies 
could be achieved at lower cost than indicated in the Screening 
Analysis for these products. Based on the data we received, the 
Department believes that evidence to support more stringent standards 
is sufficiently likely to be uncovered by further study to warrant a 
more thorough evaluation, with resources allocated within the 
Department's priority-setting framework, to determine whether higher 
standards are justified under the terms of EPCA for these products. DOE 
also intends to propose consideration of an addendum to ASHRAE/IESNA 
Standard 90.1-1999.
    For one product category, electric water heaters, the new 
efficiency level in ASHRAE/IESNA Standard 90.1-1999 would increase 
energy consumption relative to the standard in EPCA. Under these 
circumstances, DOE cannot adopt the new level, since EPCA stipulates 
that the standards it contains cannot be relaxed. Therefore, DOE is not 
adopting the requirement in ASHRAE/IESNA Standard 90.1-1999 for this 
product, and the original standard remains in force.
    Eighteen commercial products covered by Section 342(a) of EPCA were 
not analyzed in the Screening Analysis. These products, for which 
performance characteristics were not analyzed in detail, fall into 
groups as follows:
     Heating coefficients of performance (COP) and heating 
seasonal performance factors (HSPF) for all heat pump product 
categories;
     Efficiencies of water-cooled air conditioners and water-
source heat pumps with capacities between 135 kBtu/h and 240 kBtu/h;
     Evaporatively cooled air-conditioning products;
     Oil-fired warm air furnaces, storage and instantaneous 
water heaters, and packaged boilers; and
     Unfired hot water storage tanks

[[Page 3351]]

    DOE believes that the water-cooled and evaporatively cooled air-
conditioning products, oil-fired warm air furnaces and water heaters, 
and unfired hot water storage tanks have small markets and are 
therefore unlikely to represent significant energy savings as required 
to justify more stringent standards under EPCA, so we are adopting 
ASHRAE/IESNA Standard 90.1-1999 standards for these products in today's 
rule. Since the heating COP is closely related to the cooling 
efficiency for heat pumps, DOE is not adopting at this point the 
heating COP levels contained in ASHRAE/IESNA Standard 90.1-1999 for: 
(1) Three-phase heat pumps with capacities under 65 thousand Btu per 
hour, which ASHRAE did not address in formulating Standard 90.1-1999; 
(2) central air-source heat pumps with capacities between 65 thousand 
and 240 thousand Btu per hour, which would be the subject of further 
analysis with respect to cooling as a result of the Screening Analysis 
and public comments; and (3) packaged terminal heat pumps, which also 
would be the subject of further analysis of their cooling performance.
    DOE recognizes that ASHRAE did not evaluate the efficiency levels 
for oil-fired packaged boilers explicitly, and the published values in 
ASHRAE/IESNA Standard 90.1-1999 were tied to the corresponding 
efficiencies for gas-fired packaged boilers. Since DOE intends to 
evaluate gas-fired packaged boilers as a result of the Screening 
Analysis, we plan to wait for that evaluation to be complete before 
adopting efficiency standards for the equivalent oil-fired products. 
Finally, ASHRAE/IESNA Standard 90.1-1999 provides, in effect, that its 
boiler efficiency standards apply only to low pressure boilers. In 
another rulemaking, DOE is addressing the question of whether EPCA 
efficiency requirements apply also to high pressure boilers. (See 65 FR 
48838, 48843, Aug. 9, 2000). We intend to address in that proceeding 
the impact, if any, of ASHRAE/IESNA Standard 90.1-1999 on efficiency 
standards under EPCA for high pressure boilers.
    In sum, today's rule adopts ASHRAE/IESNA Standard 90.1-1999 
standard levels as uniform national standards for 18 product 
categories. These product categories appear in Table 5, along with the 
Department's intentions with respect to an additional 16 products, for 
which DOE is not adopting new efficiency levels at the present time. 
For the latter products, the levels prescribed in EPCA remain unaltered 
at present.

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III. Procedural Requirements

A. Review Under the National Environmental Policy Act of 1969

    EPCA prescribes energy efficiency standards for certain commercial 
products and stipulates that if ASHRAE/IESNA Standard 90.1 is amended, 
the Secretary must adopt new efficiency requirements in ASHRAE/IESNA 
Standard 90.1 for covered products, unless (s)he determines that 
certain conditions for requiring more stringent standards are met. 
Where these conditions are not met, the Secretary has no discretion to 
adopt a higher standard. In today's rule, we are adopting standards for 
a variety of commercial products included in ASHRAE/IESNA Standard 
90.1-1999, as published in October of 1999, as uniform national 
standards. Under the terms of EPCA, these standards are at the lowest 
levels permitted by law.
    We have reviewed today's rule under the National Environmental 
Policy Act of 1969 (NEPA), 42 U.S.C. 4321 et seq., the regulations of 
the Council on Environmental Quality, 40 CFR parts 1500-1508, the 
Department's regulations for compliance with NEPA, 10 CFR Part 1021, 
and the Secretarial Policy on the National Environmental Policy Act 
(June 1994). Implementation of today's rule would not result in 
negative environmental impacts. We have therefore determined that 
today's rule is covered under the Categorical Exclusion found at 
paragraph A6 of appendix A to subpart D of the Department's NEPA 
Regulations, which applies to rulemakings that are strictly procedural. 
Accordingly, neither an environmental assessment nor an environmental 
impact statement is required.

B. Review Under Executive Order 12866, ``Regulatory Planning and 
Review''

    Today's rule has been determined not to be a ``significant 
regulatory action,'' as defined in section 3(f) of Executive Order 
12866, ``Regulatory Planning and Review'' 58 FR 51735 (October 4, 
1993). Accordingly, this action was not subject to review under the 
Executive Order by the Office of Information and Regulatory Affairs.

C. Review Under the Regulatory Flexibility Act

    The Regulatory Flexibility Act of 1980, 5 U.S.C. 603, requires the 
preparation of an initial regulatory flexibility analysis for every 
rule which the agency must propose for public comment, by law, unless 
the agency certifies that the rule, if promulgated, will not have a 
significant economic impact on a substantial number of small entities. 
A regulatory flexibility analysis examines the impact of the rule on 
small entities and considers alternative ways of reducing negative 
impacts.
    The Regulatory Flexibility Act does not apply in this case. First, 
today's rule need not have been proposed for comment. Second, even if 
the rule were required to be proposed for comment, no less stringent 
standard is permitted under the statute, so any impact on small 
business is due to EPCA and not to today's rule.

D. Review Under Executive Order 13132, ``Federalism''

    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. The rule published today will primarily 
codify energy efficiency standards at the minimum levels allowed by 
EPCA and will not regulate the states. We have determined that today's 
rule 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.

E. Review Under Executive Order 12630, ``Governmental Actions and 
Interference with Constitutionally Protected Property Rights''

    We have determined under 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 which might require compensation under the Fifth 
Amendment to the United States Constitution.

F. Review Under the Paperwork Reduction Act

    Today's rule will codify energy efficiency standards for certain 
commercial products and will not require any additional reports or 
record-keeping. Accordingly, this action was not subject to review 
under the Paperwork Reduction Act.

G. 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 the Executive Order 
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) provide 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 the Executive Order requires agencies to 
review regulations in light of applicable standards Section 3(a) and 
Section 3(b) to determine whether they are met or it is unreasonable to 
meet one or more of them.
    We reviewed today's rule under the standards of Section 3 of the 
Executive Order and determined that, to the extent permitted by law, it 
meets the requirements of those standards.

H. Review Under Section 32 of the Federal Energy Administration Act of 
1974

    Under Section 301 of the Department of Energy Organization Act 
(Pub. L. 95-91), the Department of Energy must comply with Section 32 
of the Federal Energy Administration Act of 1974, as amended by the 
Federal Energy Administration Authorization Act of 1977 (FEAA). 15 
U.S.C. 788. Section 32(c) provides that the Secretary may not 
incorporate commercial standards within any rule nor prescribe any rule 
specifically authorizing or requiring commercial standards, unless 
(s)he has consulted with the Attorney General and the Chairman of the 
Federal Trade Commission concerning the impact of the standards on 
competition, and neither official recommends against incorporating or 
using them.
    This rule incorporates efficiency levels specified by a commercial 
standard, ASHRAE/IESNA Standard 90.1-1999, for certain commercial 
products. However, since EPCA specifically directs the adoption of 
these

[[Page 3354]]

levels at a minimum, Section 32 of the FEAA does not apply to the 
incorporation of these commercial standards in today's rule.

I. Review Under Unfunded Mandates Reform Act of 1995

    Section 202 of the Unfunded Mandates Reform Act of 1995 requires 
each Federal agency, unless otherwise prohibited by law, to assess the 
effects of Federal regulatory actions on state, local and tribal 
governments and the private sector (other than to the extent that such 
regulations incorporate requirements specifically set forth in law). 2 
U.S.C. 1531. The statute also requires a written statement, before 
promulgating any general notice of proposed rulemaking or any final 
rule for which a general notice of proposed rulemaking was published, 
if the rule in question contains a mandate that may result in aggregate 
expenditures of over $100,000,000 by state, local and tribal 
governments and the private sector. 2 U.S.C. 1532 (a).
    In adopting the efficiency standards in today's rule, DOE is 
incorporating requirements specifically set forth in EPCA. Furthermore, 
no notice of proposed rulemaking was required, nor has one been 
published. Therefore, the requirements of Title II of the Unfunded 
Mandates Reform Act do not apply to this action.

J. Review Under the Plain Language Directives

    The President's Memorandum, ``Plain Language in Government 
Writing,'' 63 FR 31885 (June 10, 1998) directs each Federal agency to 
write all published rulemaking documents in plain language. The 
Memorandum includes general guidance on what constitutes ``plain 
language.'' Plain language requirements will vary from one document to 
another, depending on the intended audience, but all plain language 
documents should be logically organized and clearly written.
    We have written this final rule to be easy to understand by 
organizing it to suit the needs of stakeholders better, by avoiding 
unnecessary technical jargon, and by following Departmental 
instructions and guidelines related to plain language. We conclude 
that, to the extent practicable, the language of this final rule is 
consistent with the President's Memorandum on ``Plain Language in 
Government Writing.''

K. Review Under the Treasury and General Government Appropriations Act, 
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 rule is not a proposed rule, nor will the 
rule have any impact on the autonomy or the integrity of the family as 
an institution. Accordingly, DOE has concluded that it is not necessary 
to prepare a Family Policymaking Assessment.

L. Review Under the Small Business and Regulatory Enforcement Fairness 
Act

    Consistent with Subtitle E of the Small Business and Regulatory 
Enforcement Fairness Act of 1996, 5 U.S.C. 801-808, DOE will submit to 
Congress a report regarding the issuance of today's final rule before 
the effective date set forth at the outset of this notice. The report 
will state that it has been determined that this rule is not a ``major 
rule'' as defined by 5 U.S.C. 804 (2).

List of Subjects in 10 CFR Part 431

    Administrative practice and procedure, Commercial and Industrial 
Equipment, Energy conservation,

    Issued in Washington, DC, on January 4, 2001.
Dan J. Leiter,
Principal Deputy Assistant Secretary, Energy Efficiency and Renewable 
Energy.

    For the reasons set forth in the preamble, Title 10, Part 431 of 
the Code of Federal Regulations is amended as set forth below:

PART 431--ENERGY EFFICIENCY PROGRAM FOR CERTAIN COMMERCIAL AND 
INDUSTRIAL EQUIPMENT

    1. The authority citation for Part 431 continues to read as 
follows:

    Authority: 42 U.S.C. 6311-6316.

    2. Subpart Q is added to read as follows:
Subpart Q--Amended Energy Conservation Standards for Certain Commercial 
Equipment, and Effective Dates
Sec.
431.701   Purpose and scope.
431.702   Commercial warm air furnaces.
431.703   Small and large commercial package air conditioning and 
heating equipment.
431.704   Commercial water heaters and unfired hot water storage 
tanks.

Subpart Q--Amended Energy Conservation Standards for Certain 
Commercial Equipment, and Effective Dates


Sec. 431.701  Purpose and scope.

    This subpart sets forth the minimum efficiency levels for 
commercial equipment, contained in ASHRAE/IES Standard 90.1-1999, that 
the Department of Energy has adopted as national standards, effective 
in 2003 or 2004 as specified in Secs. 431.701 through 431.704. On their 
effective dates, these levels will amend and replace some of the 
efficiency levels required for certain commercial equipment by Section 
342(a) of EPCA. The Department has not adopted the efficiency levels 
specified in ASHRAE/IES Standard 90.1-1999 for products not identified 
in this subpart, and the levels specified in Section 342(a) of EPCA for 
those products will remain in force unless and until they are amended. 
The Department adopted the efficiency levels in this subpart pursuant 
to Section 342(a)(6) of EPCA, which addresses the establishment of 
national standards at minimum levels specified in amendments to ASHRAE/
IES Standard 90.1, in place of the efficiency levels required in 
Section 342(a) of EPCA.


Sec. 431.702  Commercial warm air furnaces.

    Each commercial warm air furnace manufactured after October 29, 
2003 must meet the following energy efficiency standard levels:
    (a) For a gas-fired commercial warm air furnace with capacity of 
225,000 Btu per hour or more, the thermal efficiency at the maximum 
rated capacity must be not less than 80 percent.
    (b) For an oil-fired commercial warm air furnace with capacity of 
225,000 Btu per hour or more, the thermal efficiency at the maximum 
rated capacity must be not less than 81 percent.


Sec. 431.703  Small and large commercial package air conditioning and 
heating equipment.

    Each commercial water- or evaporatively-cooled air conditioner and 
water-source heat pump manufactured after October 29, 2003 (except for 
large commercial package air-conditioning and heating equipment, for 
which the effective date is October 29, 2004) must meet the applicable 
minimum energy efficiency standard level(s) for heating and cooling set 
forth in Tables 1 and 2 of this section.

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