[Federal Register Volume 66, Number 74 (Tuesday, April 17, 2001)]
[Rules and Regulations]
[Pages 19714-19717]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-9569]


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DEPARTMENT OF ENERGY

Office of Energy Efficiency and Renewable Energy

10 CFR Part 430

[Docket N. EE-RM-97-900]
RIN 1904-AA76


Energy Conservation Program for Consumer Products: Energy 
Conservation Standards for Water Heaters

AGENCY: Department of Energy (DOE).

ACTION: Final rule; denial of reconsideration and completion of 
regulatory review.

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SUMMARY: In accordance with the memorandum of January 20, 2001, from 
the Assistant to the President and Chief of Staff, entitled 
``Regulatory Review Plan,'' published in the Federal Register on 
January 24, 2001, (66 FR 7702) DOE announced that it would be reviewing 
the rule entitled ``Energy Conservation Program for Consumer Products: 
Energy Conservation Standards for Water Heaters; Final Rule'' published 
in the Federal Register on January 17, 2001 (66 FR 4474) to determine 
whether further action is warranted. DOE has now completed its review 
of that regulation, and concludes that no further rulemaking action is 
required. The petitions for reconsideration filed by the Gas Appliance 
Manufacturers Association and the American Gas Association are denied.

DATES: The effective date of the rule remains January 20, 2004.

FOR FURTHER INFORMATION CONTACT: Jill Holtzman, (202) 586-3410, 
[email protected] or Francine B. Pinto, (202) 586-7432, 
[email protected]., Office of the General Counsel.

SUPPLEMENTARY INFORMATION: Pursuant to section 325 of the Energy 
Conservation and Policy Act (ECPA) (42 U.S.C. 6295), DOE published in 
the Federal Register a final amended energy conservation standard for 
residential water heaters. This final rule did not change the current 
efficiency levels for oil-fired and instantaneous gas and electric 
water heaters. The rule creates a new class for tabletop water heaters 
with no change in standards.
    On February 2, 2001, in conformity with President Bush's Regulatory 
Review Plan, DOE announced that it would be reviewing the water heater 
rule to determine whether further action is warranted (66 FR 8745). 
Subsequently, the Gas Appliance Manufacturers Association (GAMA) and

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the American Gas Association (AGA) filed petitions for reconsideration 
of the final rule. GAMA also petitioned the United States Court of 
Appeals for the Fourth Circuit for judicial review (42 U.S.C. 6306).
    Further, a coalition of energy advocacy organizations, including 
utilities, regional and state agencies, environmental organizations, 
and organizations that develop and run energy-saving programs 
(hereinafter referred to as ``energy advocacy coalition''), submitted a 
letter on March 23, 2001, to the Secretary of Energy strongly opposing 
the GAMA petition for reconsideration and urging DOE to deny the GAMA 
petition. Two of the energy advocacy organizations, American Council 
for an Energy-Efficient Economy (ACEEE) and Natural Resources Defense 
Council (NRDC) intervened in the above-referenced court proceeding.

I. Introduction

    The GAMA petition for reconsideration raised three major complaints 
on issues concerning venting problems, reduction of hot water/safety 
risk, and DOE's response to the Department of Justice's comment 
concerning the use of a sole source blowing agent. The AGA request for 
reconsideration only addressed venting and insulation issues.
    The energy advocacy coalition gives several reasons why GAMA's 
petition should be rejected. They are: the issues have been fully 
discussed in the rulemaking proceeding and properly considered after 
opportunity for extensive comments; the record shows that GAMA's issues 
are overstated and have been adequately addressed; and there is no 
legal basis for reducing the standards. (Energy Advocacy Coalition 
Letter, at 6).
    DOE today denies the GAMA and AGA petitions and concludes that no 
further rulemaking action is warranted. All of GAMA's and AGA's issues 
have been previously discussed in the record and fully resolved. This 
final rule is supported by the rulemaking record. The Technical Support 
Document (TSD) along with the preamble to the final rule describe the 
data and DOE's analysis of the data that supports the rule. The TSD is 
available for review at http://www.eren.doe.gov/buildings/codes_standards/applbrf/waterheater.htm.
    This notice discusses the central issues raised by GAMA. The AGA 
petition raised the same issues.

II. Venting Problems

    In its petition, GAMA claims that DOE's final rule will increase 
the recovery efficiency, increasing the risk of corrosion which reduces 
the margin of safety in either the vent connector or chimney. GAMA 
acknowledges that the risk can be avoided by installing a more 
expensive Type B vent connector. GAMA asserts that DOE has 
underestimated the number of households that will need a Type B vent 
connector. Furthermore, GAMA raises the concern that a significant 
number of consumers purchase residential gas-fired water heaters from 
the retail market without professional installation.
    The standard does not specify the design or recovery efficiency of 
water heaters. It is a performance standard that requires a specific 
energy factor. However, for the purpose of our analysis, DOE assumed 
that the more efficient gas-fired water heaters would have a 78 percent 
recovery efficiency. In most applications, there is no safety problem 
with a 78 percent recovery efficiency (66 FR 4484; TSD, Chapter 3.4.3, 
pp. 17-20). In certain situations, a double wall, Type B vent connector 
is needed to prevent corrosion caused by condensation. The energy 
advocacy coalition states that the potential for condensation in water 
heating venting systems exists at efficiency levels higher than those 
set in the final rule (Energy Advocacy Coalition Letter, p. 2).
    DOE analyzed the additional costs for Type B vent connectors to 
determine the economic impact on consumers. DOE estimated that a Type-B 
vent connector may be needed in 11 percent of the homes with 78 percent 
recovery efficiency based on estimates from a Gas Research Institute 
Study using AGA survey data, data from the Energy Information 
Administration's Residential Energy Conservation Survey, and data from 
high efficiency gas-fired water heaters installed in the Northwest. As 
discussed in the final rule, DOE assumed that vent connectors would be 
needed in climates exceeding 5,000 Heating Degree Days (HDD), where the 
water heater was installed in the conditioned space, since the 
combination of weather and design would increase the possibility of 
condensation of combustion gases occurring either in the vent or 
chimney. We used 5,000 HDD as a conservative approach since no 
incidence of vent system failure is associated with the installation of 
high efficiency gas-fired water heaters in the Northwest, even in 
climates as cold or colder than 7,000 HDD (66 FR 4485; TSD, Chapter 
3.4.3.2, pg 19). Some commenters stated that DOE was overestimating the 
problem and should add no extra cost for Type B vent connectors. DOE's 
conclusion that the amended energy conservation standard for gas-fired 
water heaters is economically justified is not changed by the 
additional costs for Type B vent connectors.
    In response to GAMA's concern regarding proper installation for 
gas-fired water heaters, we stated in the final rule that there is no 
safety risk if the venting system is correctly installed. We also 
stated that manufacturers should provide installation instructions for 
Type B vents, and installers should follow the National Fuel Gas Code 
requirements and local codes for safe installation of gas-fired water 
heaters (66 FR 4485). The energy advocacy coalition believes that if 
this is a significant problem, consumers should not be installing gas 
water heaters. This rule does not set standards for the installation of 
water heaters (Energy Advocacy Coalition Letter, p. 3).
    In addressing venting safety in the final rule, DOE determined 
there are water heaters currently on the market that can meet the new 
standards without reducing the margin of safety. A review of the GAMA 
April 2000, Consumer's Certified Directory of Certified Efficiency 
Ratings for Heating and Water Heating Equipment shows a number of 
existing models with a recovery efficiency of 76 percent that meet the 
standard adopted by DOE (66 FR 4484). The energy advocacy coalition 
states that 24 percent of existing water heaters can meet the new 
standard at recovery efficiencies of 76 percent (today's norm).
    In light of the above discussion on the cost, safety, and 
installation of higher recovery efficiency gas-fired water heaters, DOE 
concludes that GAMA has not presented a basis for further rulemaking 
action with regard to the venting issue.

III. Reduction of Available Hot Water/ Safety Risk

    In its petition for reconsideration, GAMA alleges that it did not 
have the opportunity to comment on DOE's solution addressing size 
constrained water heater applications. GAMA also claims that DOE's 
method for addressing size constrained water heaters will increase the 
risk of hot water scald injuries for some consumers and their families.
    During the proceeding, DOE received comments that in many cases 
consumers will demand water heaters with the same capacity and that 
will fit in the same space. In order to fit in the

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same space, some water heaters will have smaller tanks because of 
thicker insulation to meet the amended standard. Therefore, to 
compensate for the reduction in hot water, DOE sought comment in the 
preliminary workshops and in the proposed rule on alternative 
technologies that would reduce the effects of smaller water heaters (65 
FR 25077, 25084).
    In response to DOE's request for information in the proposed rule, 
Battelle submitted a comment suggesting an increased thermostat set 
point, the addition of a tempering valve, and the use of a smaller 
water heater to maintain the same energy content as the larger water 
heater it would replace (Battelle, No. 127, p. 12-16, Transcript, June 
20, 2000, pp. 135-136). This solution is the least costly of several 
alternatives discussed in the Battelle report. GAMA, in its comment to 
the proposed rule, urged DOE to adopt Battelle's analysis that 
contained the solution used in the final rule (GAMA, No. 160, p. 4).
    DOE accounted for additional costs for tempering valves in its 
life-cycle cost analysis (66 FR 4477 and TSD, Chapter 3, 3-21). These 
added costs for tempering valves did not change DOE's decision that the 
standard is economically justified. Moreover, since DOE's final rule 
adopted a solution for size constrained applications suggested during 
the proceeding that GAMA endorsed, there is no basis for GAMA's 
complaint that it did not have an opportunity to present its viewpoint 
on this issue.
    With regard to GAMA's assertion that DOE's method for addressing 
size constrained applications will increase the risk of hot water scald 
injuries, DOE's final rule is a performance standard that does not 
mandate any action by manufacturers that would increase the risk of 
scalding. Tempering valves are used to address potential scalding 
problems. They are readily available in the market. If the replacement 
water heater is correctly installed with a tempering valve when the 
thermostat set point is above 140 deg.F, there will be minimal risk of 
scalding injury (TSD, Chapter 3.4.4, pg 21). In DOE's view, the method 
for addressing size-constrained water heaters in the rule will not 
increase the risk of scalding to consumers and their families.
    In light of the preceding discussion, DOE correctly used a solution 
presented in the record to address the issue of size constrained water 
heaters in the final rule.

IV. Alternative Insulation Blowing Agents

    GAMA claims that DOE's analysis of insulation materials is 
deficient and unresponsive to Justice Department antitrust concerns. 
During the entirety of the rulemaking proceeding, there was significant 
discussion concerning which blowing agent would be available and could 
substitute for HFC-141b, the current blowing agent being used by the 
water heater industry that will be phased out by 2003. DOE's analysis 
in the proposed rule relied upon HFC-245fa, an alternative that is 
available from a single source. Manufacturers and the Justice 
Department were concerned that promulgating a standard based upon a 
blowing agent that is supplied by a sole source could adversely affect 
competition if it were the only blowing agent that could be used to 
meet the standard.
    In response, DOE sought to determine whether there are alternative 
blowing agents available that manufacturers could use to meet the 
standard. We identified two alternatives, HFC-134a and pentane/
cyclopentane. These had been previously discussed in the proposed rule. 
By determining through further analysis that at least two other blowing 
agents are available in the market with comparable performance and at 
approximately the same cost, DOE eliminated the concern that 
manufacturers must rely on a single blowing agent from a sole source 
supplier to meet the standard (TSD, Chapter 3.4, pg. 12).
    The energy advocacy coalition notes that HFC-134a will be used by a 
major U.S. refrigerator manufacturer. They also state that pentane/
cyclopentane is viable because many European factories have made the 
conversion and it is cheaper per water heater. They claim that these 
two alternative foam blowing agents will provide competitive pressure 
to the price of HFC-245fa (Energy Coalition Letter, pp. 4-5).
    However, the industry asserts that DOE's analysis of alternative 
foam blowing agents is inadequate. Furthermore, GAMA alleges that DOE's 
final rule is not justified in claiming that water heaters using an 
HFC-134a insulation blowing agent can achieve the same energy factor as 
water heaters using HFC-245fa.
    To the contrary, DOE believes its analysis is adequate to support 
DOE's finding that there are alternative blowing agents to HFC-245fa 
that are available to meet the new standard. DOE performed an 
engineering analysis which accounted for the energy efficiency 
performance, as well as manufacturers' costs and the retail prices and 
installation costs to consumers. This analysis shows that energy 
factors are the same for all three blowing agents and costs are within 
a few dollars of HFC-245fa. In the record supporting DOE's analysis, 
DOE show the cost/pound for several foam insulations, including HFC-
245fa, HFC-134a, and pentane/cyclopentane. These costs were used in the 
analysis of the alternative blowing agents ( TSD, Chapter 3.4, pg. 11-
17 and TSD, Chapter 8.6, pp 83-85). The energy advocacy coalition 
states that it supports DOE's analysis of insulation cost and 
performance (Energy Advocacy Coalition Letter, p. 3-4).
    GAMA believes that HFC-134a and HFC-245fa cannot achieve the same 
water heater performance at the same insulation thickness. As the final 
rule stated, although there is a 10 percent reduction in insulation 
effectiveness for HFC-134a, the energy factor of water heaters using 
HFC-134a is similar to those using HFC-245fa or pentane/cyclopentane as 
shown in our engineering analysis. This issue was discussed at a public 
workshop on November 10, 1998 (Transcript, No. 38, pp 14-15, 27-28). At 
that public workshop, the National Institute of Standards and 
Technology (NIST) presented the results of a study demonstrating that 
insulation has a small effect on water heater performance (energy 
factor). (Thermal Performance of Water Heaters Using Alternative 
Blowing Agents, Fanney and Zarr, November 10, 1998) NIST showed that 
even a large change in insulation effectiveness results in a small 
change in energy factor. In the presentation, NIST explained that when 
insulation effectiveness is reduced by 50 percent, the energy factor 
drops by .06 EF, a small reduction. Since HFC-134a is only 10 percent 
less effective than HFC-245fa, the resulting change in performance is 
minimal. In the engineering analysis, DOE accounts for the 10 percent 
reduction in insulation effectiveness which results in an energy factor 
of .90 EF for a 50 gallon electric water heater. (TSD, Chapter 8.6, 
p.83-84). The engineering analysis also shows that water heaters 
insulated with HFC-245fa and pentane/cyclopentane have a .90EF at the 
same insulation thickness. Therefore, DOE correctly concluded that HFC-
134a performs comparably to HFC-245fa and pentane/cyclopentane.
    Finally, GAMA claims that the extent of DOE's analysis of the 
alternative blowing agents was not equal to the analysis of HFC-245fa. 
DOE made its decision to only conduct additional

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engineering and cost analyses because the results showed that the two 
blowing agent alternatives can be used to achieve similar performance 
for similar costs to HFC-245fa. DOE estimates are reasonable and 
address the concern of the Department of Justice to provide more than 
one choice of insulation blowing agent with comparable performance and 
at approximately the same cost.
    Based on the analysis of the three different types of blowing 
agents, HFC-245fa-, pentane/cyclopentane- and HFC-134a, DOE concluded 
that water heater manufacturers will have several choices to reach the 
standard, including blends of these blowing agents, and therefore, will 
not have to rely on a sole source supplier.

V. Conclusion

    After careful consideration of the GAMA and AGA petitions for 
reconsideration before the Secretary of Energy, a review of the letter 
from the coalition of energy advocacy organizations, and a detailed 
review of the record that supports this final rule, DOE hereby denies 
the petitions for reconsideration and concludes that no further action 
is warranted.

    Issued in Washington, D.C. on April 12, 2001.
Spencer Abraham,
Secretary of Energy.
[FR Doc. 01-9569 Filed 4-13-01; 1:00 pm]
BILLING CODE 6450-01-P