[Federal Register Volume 73, Number 116 (Monday, June 16, 2008)]
[Proposed Rules]
[Pages 34094-34138]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E8-13345]



[[Page 34093]]

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Part III





Department of Energy





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Office of Energy Efficiency and Renewable Energy



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10 CFR Part 431



Energy Conservation Program: Energy Conservation Standards for 
Refrigerated Bottled or Canned Beverage Vending Machines; Proposed Rule

  Federal Register / Vol. 73, No. 116 / Monday, June 16, 2008 / 
Proposed Rules  

[[Page 34094]]


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DEPARTMENT OF ENERGY

Office of Energy Efficiency and Renewable Energy

10 CFR Part 431

[Docket No. EERE-2006-STD-0125]
RIN 1904-AB58


Energy Conservation Program: Energy Conservation Standards for 
Refrigerated Bottled or Canned Beverage Vending Machines

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

ACTION: Advance notice of proposed rulemaking and notice of public 
meeting.

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SUMMARY: The Energy Policy and Conservation Act (EPCA) directs the 
Department of Energy (DOE) to establish energy conservation standards 
for various consumer products and commercial and industrial equipment, 
including refrigerated bottled or canned beverage vending machines 
(beverage vending machines), for which DOE determines that energy 
conservation standards would be technologically feasible and 
economically justified, and would result in significant energy savings. 
DOE is publishing this Advance Notice of Proposed Rulemaking (ANOPR) 
to: (1) Announce that it is considering establishment of energy 
conservation standards for beverage vending machines; and (2) announce 
a public meeting to receive comments on a variety of related issues.

DATES: DOE will hold a public meeting on Thursday, June 26, 2008, from 
9 a.m. to 5 p.m. in Washington, DC. DOE must receive requests to speak 
at the public meeting no later than 4 p.m., Thursday, June 19, 2008. 
DOE must receive a signed original and an electronic copy of statements 
to be given at the public meeting no later than 4 p.m., Thursday, June 
19, 2008.
    DOE will accept comments, data, and information regarding this 
ANOPR before or after the public meeting, but no later than July 16, 
2008. See Section IV, ``Public Participation,'' of this ANOPR for 
details.

ADDRESSES: The public meeting will be held at the U.S. Department of 
Energy, Forrestal Building, Room 1E-245, 1000 Independence Avenue, SW., 
Washington, DC 20585. (Please note that foreign nationals visiting DOE 
Headquarters are subject to advance security screening procedures. If 
you are a foreign national and wish to participate in the public 
meeting, please inform DOE as soon as possible by contacting Ms. Brenda 
Edwards at (202) 586-2945 so that the necessary procedures can be 
completed.)
    Any comments submitted must identify the ANOPR for Beverage Vending 
Machines, and provide the docket number EERE-2006-STD-0125 and/or 
Regulatory Information Number (RIN) 1904-AB58. Comments may be 
submitted using any of the following methods:
     Federal eRulemaking Portal: http://www.regulations.gov. 
Follow the instructions for submitting comments.
     E-mail: [email protected]. Include 
docket number EERE-2006-STD-0125 and/or RIN number 1904-AB58 in the 
subject line of the message.
     Postal Mail: Ms. Brenda Edwards, U.S. Department of 
Energy, Building Technologies Program, Mailstop EE-2J, 1000 
Independence Avenue, SW., Washington, DC 20585-0121. Please submit one 
signed paper original.
     Hand Delivery/Courier: Ms. Brenda Edwards, U.S. Department 
of Energy, Building Technologies Program, 950 L'Enfant Plaza, SW., 
Suite 600, Washington, DC 20024. Telephone: (202) 586-2945. Please 
submit one signed paper original.
    For detailed instructions on submitting comments and additional 
information on the rulemaking process, see Section IV, ``Public 
Participation,'' of this document.
    Docket: For access to the docket to read background documents or 
comments received, go to the U.S. Department of Energy, Resource Room 
of the Building Technologies Program, 950 L'Enfant Plaza, SW., Suite 
600, Washington, DC, 20024, (202) 586-2945, between 9 a.m. and 4 p.m., 
Monday through Friday, except Federal holidays. Please call Ms. Brenda 
Edwards at the above telephone number for additional information 
regarding visiting the Resource Room.

FOR FURTHER INFORMATION CONTACT: Mr. Charles Llenza, U.S. Department of 
Energy, Office of Energy Efficiency and Renewable Energy, Building 
Technologies Program, EE-2J, 1000 Independence Avenue, SW., Washington, 
DC 20585-0121. Telephone: (202) 586-2192. E-mail: 
[email protected].
    Mr. Eric Stas or Ms. Francine Pinto, U.S. Department of Energy, 
Office of the General Counsel, GC-72, 1000 Independence Avenue, SW., 
Washington, DC 20585-0121. Telephone: (202) 586-9507. E-mail: 
[email protected] or [email protected].
    For information on how to submit or review public comments and on 
how to participate in the public meeting, contact Ms. Brenda Edwards, 
U.S. Department of Energy, Office of Energy Efficiency and Renewable 
Energy, Building Technologies Program, EE-2J, 1000 Independence Avenue, 
SW., Washington, DC 20585-0121. Telephone: (202) 586-2945. E-mail: 
[email protected].

SUPPLEMENTARY INFORMATION:

Table of Contents

I. Introduction
    A. Purpose of the Advance Notice of Proposed Rulemaking
    B. Overview of the Analyses Performed
    1. Engineering Analysis
    2. Markups To Determine Equipment Price
    3. Energy Use Characterization
    4. Life-Cycle Cost and Payback Period Analyses
    5. National Impact Analysis
    C. Authority
    D. Background
    1. History of Standards Rulemaking for Beverage Vending Machines
    2. Rulemaking Process
    3. Miscellaneous Rulemaking Issues
    a. Consensus Agreement
    b. Type of Standard
    c. Split Incentive Issue
    4. Test Procedure
    5. Rating Conditions
II. Energy Conservation Standards Analyses for Beverage Vending 
Machines
    A. Market and Technology Assessment
    1. Definition of ``Beverage Vending Machine''
    2. Equipment Classes
    3. Selection of Baseline Equipment--Use of the ENERGY STAR 
Criteria
    4. Normalization Metric
    5. Scope and Coverage of Equipment
    a. Combination Machines
    b. Refurbished Equipment
    6. Market Assessment
    7. Technology Assessment
    B. Screening Analysis
    1. Technology Options Screened Out
    2. Technology Options Considered Further in Analysis
    C. Engineering Analysis
    1. Approach
    2. Equipment Classes Analyzed
    3. Analytical Models
    a. Cost Model
    b. Energy Consumption Model
    4. Baseline Models
    5. Alternative Refrigerants
    6. Cost-Efficiency Results
    D. Markups To Determine Equipment Price
    E. Energy Use Characterization
    1. Selection of Efficiency Levels for Further Analysis
    2. Annual Energy Consumption Results
    F. Rebuttable Presumption Payback Periods
    G. Life-Cycle Cost and Payback Period Analyses
    1. Approach
    2. Life-Cycle Cost Analysis Inputs
     a. Baseline Manufacturer Selling Price
    b. Increase in Selling Price
     c. Markups

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    d. Installation Costs
     e. Energy Consumption
    f. Electricity Prices
    g. Electricity Price Trends
    h. Repair Costs
    i. Maintenance Costs
    j. Lifetime
    k. Discount Rate
    l. Rebound Effect
    m. Effective Date
    3. Split Incentive Issue
    4. Payback Period
    5. Life-Cycle Cost and Payback Period Results
    H. Shipments Analysis
    I. National Impact Analysis
    1. Approach
    2. Base-Case and Standards-Case Forecasted Efficiencies
    3. National Impact Analysis Inputs
    4. National Impact Analysis Results
    J. Life-Cycle Cost Sub-Group Analysis
    K. Manufacturer Impact Analysis
    1. Sources of Information for the Manufacturer Impact Analysis
    2. Industry Cash Flow Analysis
    3. Manufacturer Sub-Group Analysis
    4. Competitive Impacts Assessment
    5. Cumulative Regulatory Burden
    6. Preliminary Results for the Manufacturer Impact Analysis
    L. Utility Impact Analysis
    M. Employment Impact Analysis
    N. Environmental Assessment
    O. Regulatory Impact Analysis
III. Candidate Energy Conservation Standards Levels
IV. Public Participation
    A. Attendance at Public Meeting
    B. Procedure for Submitting Requests to Speak
    C. Conduct of Public Meeting
    D. Submission of Comments
    E. Issues on Which DOE Seeks Comment
    1. Equipment Classes
    2. Compressor and Lighting Operating Hours
    3. Refurbishment Cycles
    4. Life-Cycle Cost Baseline Level
    5. Base-Case and Standards-Case Forecasts
    6. Differential Impact of New Standards on Future Shipments by 
Equipment Classes
    7. Selection of Candidate Standard Levels for Notice of Proposed 
Rulemaking Analysis
    8. Approach to Characterizing Energy Conservation Standards
V. Regulatory Review and Procedural Requirements
VI. Approval of the Office of the Secretary

 I. Introduction

A. Purpose of the Advance Notice of Proposed Rulemaking

    Through this Advance Notice of Proposed Rulemaking, the U.S. 
Department of Energy is initiating rulemaking to consider establishing 
energy conservation standards for beverage vending machines. The 
purpose of this ANOPR is to provide interested persons with an 
opportunity to comment on:
    1. The equipment classes that DOE plans to analyze in this 
rulemaking;
    2. The analytical framework, methodology, inputs, models, and tools 
(e.g., life-cycle cost (LCC) and national energy savings (NES) 
spreadsheets) that DOE has been using to perform analyses of the 
impacts of energy conservation standards for refrigerated bottled or 
canned beverage vending machines (collectively referred to in this 
ANOPR as ``beverage vending machines'');
    3. The analyses conducted for the ANOPR, including the preliminary 
results of the engineering analysis, the markups analysis to determine 
equipment price, the energy use characterization, the LCC and payback 
period (PBP) analyses, the NES and national impact analyses, and 
preliminary manufacturer impact analysis. These analyses are summarized 
in the ANOPR Technical Support Document (TSD), Energy Efficiency 
Standards for Commercial and Industrial Equipment: Refrigerated 
Beverage Vending Machines \1\, published in tandem with this ANOPR; and
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    \1\ To view the technical support document for this rulemaking, 
visit DOE's Web site at: http://www.eere.energy.gov/buildings/
appliance_standards/commercial/beverage_machines.html.
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    4. The candidate standard levels (CSLs) that DOE has developed for 
the ANOPR from these analyses.
    Interested persons are welcome to comment on any relevant issue 
related to this ANOPR. However, throughout this Federal Register 
notice, DOE identifies areas and issues on which it specifically 
invites public comment. These critical issues are summarized in Section 
IV.E of this notice.

B. Overview of the Analyses Performed

    As noted above, EPCA, as amended, authorizes DOE to consider 
establishing or amending energy conservation standards for various 
consumer products and commercial and industrial equipment, including 
the beverage vending machines that are the subject of this ANOPR. (42 
U.S.C. 6291 et seq.) DOE conducted in-depth technical analyses for this 
ANOPR in the following areas: (1) Engineering; (2) markups to determine 
equipment price; (3) energy use characterization; (4) LCC and PBP; and 
(5) NES and net present value (NPV). The ANOPR discusses the 
methodologies, assumptions, and preliminary results for each analysis.
    For each type of analysis, Table I.1 identifies the sections in 
this document that contain the results of the analyses, and summarizes 
their methodologies, key inputs, and assumptions. In addition, DOE 
conducted several other analyses that either support the five analyses 
discussed above or are preliminary analyses that will be expanded 
during the notice of proposed rulemaking (NOPR) stage of this 
rulemaking. These analyses include the market and technology 
assessment, a screening analysis which contributes to the engineering 
analysis, and the shipments analysis which contributes to the national 
impacts analysis. In addition to these analyses, DOE has begun 
preliminary work on the life-cycle cost subgroup analysis, manufacturer 
impact analysis, utility impact analysis, employment impact analysis, 
environmental impact analysis, and the regulatory impact analysis for 
the ANOPR. These analyses will be expanded upon during the NOPR stage 
of this rulemaking.
    DOE consulted with stakeholders as part of its process in 
developing all of these analyses for the ANOPR and invites further 
public input on these topics which it will incorporate, as appropriate, 
into any revised analyses. While obtaining such input is the primary 
purpose at this ANOPR stage of the rulemaking, this notice also 
contains a synopsis of the preliminary analytical results. (The TSD 
contains a complete set of results.) The purpose of publishing these 
preliminary results in this notice is to: (1) Facilitate public comment 
on DOE's analytical methodology; (2) illustrate the level of detail 
interested persons (stakeholders \2\) will find in the TSD; and (3) 
invite stakeholders to comment on the structure and the presentation of 
those results. The preliminary analytical results presented in the 
ANOPR are subject to revision following review and input from 
stakeholders.
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    \2\ The terms ``stakeholders'' and ``interested persons'' are 
used interchangeably throughout this ANOPR to refer to any member of 
the public seeking to provide input on this rulemaking.

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                                             Table I.1.--In-Depth Technical Analyses Conducted for the ANOPR
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                                                                                                              ANOPR section for       TSD section for
           Analysis area                   Methodology             Key inputs           Key assumptions            results                results
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Engineering........................  Design option analysis  Component cost data     Component performance  Section II.C.6.......  Chapter 5, section
                                                              and performance         improvements are                              5.10, and Appendix
                                                              values.                 estimated using ANSI/                         B.
                                                                                      ASHRAE Standard 32.1-
                                                                                      2004.
Markups to Determine Equipment       Assessment of company   Distribution channels,  Markups for baseline   Section II.D.........  Chapter 6, section
 Price.                               financial reports to    market shares across    and more-efficient                            6.7.
                                      develop markups that    the different           equipment are
                                      transform               channels, State sales   different.
                                      manufacturer prices     taxes, and shipments
                                      into customer prices.   to different States.
Energy Use Characterization........  Energy use estimates    Annual energy           Vending machines       Section II.E.........  Chapter 7, section
                                      from the energy         consumption based on    certified for indoor/                         7.4.4, and Appendix
                                      performance model       hourly weather data     outdoor use are                               D.
                                      based on the            for 237 U.S.            assumed to be split
                                      engineering analysis    locations.              25% outdoors and 75%
                                      spreadsheet.                                    indoors.
LCC and Payback Period.............  Analysis of a           Manufacturer selling    Baseline efficiency    Section II.G.5.......  Chapter 8, section
                                      representative sample   prices, markups         is Level 1. Average                           8.4, and Appendix G.
                                      of commercial           (including sales        electricity prices
                                      customers by business   taxes), installation    are listed by
                                      type and location.      price, energy           customer type and
                                                              consumption,            State. The Annual
                                                              electricity prices      Energy Outlook 2007
                                                              and future trends,      (AEO2007) 3 is used
                                                              maintenance costs,      as the reference
                                                              repair costs,           case for future
                                                              equipment lifetime,     trends. Equipment
                                                              and discount rate.      lifetime is 14
                                                                                      years. Discount rate
                                                                                      is estimated using
                                                                                      the weighted average
                                                                                      cost of capital by
                                                                                      customer type.
Shipments..........................  Projection of total     Wholesaler markups      Market shares by       Section II.H.........  Chapter 9, section
                                      sales by business       from company balance-   equipment class are                           9.4.
                                      type, State and by      sheet data, current     constant. Market
                                      equipment class.        shipments data by       saturation by
                                                              equipment class, and    business type is
                                                              average equipment       constant. Shipments
                                                              lifetime.               do not change in
                                                                                      response to
                                                                                      standards.

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National Impact....................  Forecasts of equipment  Shipments; effective    Annual shipments are   Section II.I.4.......  Chapter 10, section
                                      costs, annual energy    date of standard;       from the shipments                            10.4, and Appendix
                                      consumption, and        base-case               model. The annual                             I.
                                      operating costs to      efficiencies;           weighted-average
                                      2042.                   shipment-weighted       energy efficiency,
                                                              market shares; annual   installed cost, and
                                                              energy consumption,     annual-weighted
                                                              total installed cost,   average repair costs
                                                              and repair and          are a function of
                                                              maintenance costs       the energy
                                                              (all on a per-unit      efficiency level.
                                                              basis); escalation of   Annual weighted-
                                                              electricity prices;     average maintenance
                                                              electricity site-to-    costs are constant
                                                              source conversion;      with the energy
                                                              discount rate; and      consumption level.
                                                              present year.           AEO2007 is used for
                                                                                      electricity price
                                                                                      escalation, and the
                                                                                      National Energy
                                                                                      Modeling System
                                                                                      (NEMS) is used for
                                                                                      site-to-source
                                                                                      conversion. Discount
                                                                                      rates are 3% and 7%
                                                                                      real. Future costs
                                                                                      are discounted to
                                                                                      2007.
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3 DOE will conduct the NOPR analysis using the latest available version of the AEO. Updated analytical spreadsheets using AEO2008 will be made available
  on DOE's Web site by late Spring/early Summer 2008: http://www.eere.energy. gov/buildings/appliance_standards/commercial/beverage_machines.html.

1. Engineering Analysis
    DOE uses the engineering analysis, along with the equipment price 
determination, to establish the relationship between the costs (i.e., 
end-user/customer prices) and efficiencies of equipment which DOE 
evaluates for standards, including beverage vending machines. This 
relationship serves as the basis for cost and benefit calculations for 
individual commercial customers, manufacturers, and the Nation. The 
engineering analysis identifies representative baseline equipment, 
which is the starting point for analyzing technologies expected to 
provide energy efficiency improvements. ``Baseline equipment'' here 
refers to model(s) having features and technologies typically found in 
equipment currently offered for sale. The baseline model in each 
equipment class represents the characteristics of equipment in that 
class; for equipment which is already subject to an energy efficiency 
standard, the baseline unit is typically one which just meets the 
current regulatory requirement. After identifying baseline models, DOE 
estimates manufacturer selling prices (MSPs) through an analysis of 
manufacturer costs and manufacturer markups. Manufacturer markups are 
the multipliers used to determine MSPs based on manufacturing cost.
    The engineering analysis uses cost-efficiency curves based on a 
design-options approach \4\ derived from DOE analysis. In the 
engineering analysis, DOE also discusses the equipment classes 
analyzed, sensitivity to material prices, and the use of alternative 
refrigerants. For additional detail on the engineering analysis, see 
Section II.C.1.
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    \4\ A design-options approach uses individual or combinations of 
design options to identify increases in efficiency. Under this 
approach, estimates are based on manufacturer or component supplier 
data, or through the use of engineering computer simulation models. 
Individual design options, or combinations of design options, are 
added to the baseline model in ascending order of cost-
effectiveness.
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2. Markups to Determine Equipment Price
    DOE determines customer prices for beverage vending machines from 
MSP \5\ and equipment price markups using industry balance sheet and 
U.S. Census Bureau data. To determine price markups, DOE identifies 
distribution channels for equipment sales and determines the existence 
and amount of markups within each distribution channel. For each 
distribution channel, DOE distinguishes between ``baseline markups'' 
applied to the MSP for baseline equipment and ``incremental markups'' 
applied to the incremental increase in MSP for more-efficient 
equipment. Overall baseline and overall incremental markups are 
calculated separately based on the product of all baseline and 
incremental markups at each step in a distribution channel. Together, 
the overall baseline markup applied to the baseline equipment MSP and 
the incremental markups applied to the incremental increase in MSP for 
more-efficient equipment, including sales tax, determine the final 
customer price. For additional detail on the markups used to determine 
equipment price, see Section II.D.
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    \5\ Manufacturer selling prices are derived from the 
manufacturer production costs by applying the manufacturer markup. 
The MSP is the selling price of the equipment directly from the 
manufacturing facility. If this equipment is then routed through a 
wholesaler and/or a distributor, additional markups are applied 
before reaching the customer.
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3. Energy Use Characterization
    The energy use characterization provides estimates of annual energy 
consumption for beverage vending machines. DOE uses these estimates in 
the subsequent LCC and PBP analyses and the national impact analysis 
(NIA). DOE developed daily energy consumption estimates for the 
different equipment classes analyzed in the

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engineering analysis.\6\ DOE then validated these estimates with 
simulation modeling of energy consumption on an annual basis for all 
the equipment classes and efficiency levels. The simulation modeling 
took into account the percentage of vending machines that would be 
placed indoors and outdoors and therefore, exposed to varying ambient 
temperatures. For additional detail on the energy use characterization, 
see Section II.E.
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    \6\ The daily energy consumption estimates were calculated in 
the engineering analysis based on procedures and conditions 
specified in ANSI/ASHRAE Standard 32.1-2004, Methods of Testing for 
Bottled, Canned, and Other Sealed Beverages.
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4. Life-Cycle Cost and Payback Period Analyses
    The LCC and PBP analyses determine the economic impact of potential 
standards on individual commercial customers. The LCC is the total 
customer expense for a piece of equipment over the life of the 
equipment (i.e., purchase price plus maintenance and operating costs). 
The LCC analysis compares the life-cycle costs of equipment designed to 
meet new or amended energy conservation standards with the life-cycle 
cost of the equipment likely to be installed in the absence of such 
standards. DOE determines these costs by considering: (1) Total 
installed cost to the purchaser (including MSP, sales taxes, 
distribution channel markups, and installation cost); (2) the operating 
expenses of the equipment (energy cost and maintenance and repair 
cost); (3) equipment lifetime; and (4) a discount rate that reflects 
the real cost of capital and puts the LCC in present value terms. For 
additional detail on the LCC analysis, see Section II.G.1.
    The PBP represents the number of years needed to recover the 
increase in purchase price (including installation cost) of more-
efficient equipment through savings in the operating cost. The PBP is 
the increase in total installed cost due to increased efficiency 
divided by the (undiscounted) decrease in annual operating cost from 
increased efficiency. For additional detail on the PBP analysis, see 
Section II.G.1.
5. National Impact Analysis
    The NIA estimates the NES, as well as the NPV, of total national 
customer costs and savings expected to result from new standards at 
specific efficiency levels. Stated another way, DOE calculated the NES 
and NPV for each standard level for beverage vending machines as the 
difference between a base-case forecast (i.e., without new standards) 
and the standards-case forecast (i.e., with new standards). For each 
year of the analysis, the beverage vending machine stock is composed of 
units of different types shipped in previous years (or vintages) which 
remain available for sale at present. Each vintage has a characteristic 
distribution of efficiency levels. DOE first determined the average 
energy consumption of each vintage in the stock accounting for all 
efficiency levels in that vintage. The national annual energy 
consumption is then the product of the annual average energy 
consumption per beverage vending machine at a given vintage and the 
number of beverage vending machines of that vintage in the stock for 
the particular year. This approach accounts for differences in unit 
energy consumption from year to year. Annual energy savings are 
calculated for each standard level by subtracting national energy 
consumption for that standard level from that calculated for the 
baseline. Cumulative energy savings are the sum of the annual NES 
determined from 2012 to 2042.
    In a similar fashion, DOE tracks the first costs for all equipment 
installed at each efficiency level for each vintage. It also tracks the 
annual operating cost (sum of the energy, maintenance, and repair 
costs) by vintage for all equipment remaining in the stock for each 
year of the analysis. DOE then calculates the net economic savings each 
year as the difference between total operating cost savings and 
increases in the total installed costs. The NPV is the annual net cost 
savings calculated for each year, discounted to the year 2012, and 
expressed in 2007$. Cumulative NPV savings reported are the sum of the 
annual NPV savings over the analysis period (2012-2042).\7\ Critical 
inputs to the NIA include shipment projections, rates at which users 
retire equipment (based on estimated equipment lifetimes), and 
estimates of changes in shipments and retirement rates in response to 
changes in equipment costs due to new standards. For additional detail 
on the NIA, see Section II.I.1.
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    \7\ DOE uses 31 years as the time period of analysis for its NES 
calculations in many of its rulemakings, in order to enable 
interested persons to understand the relative magnitude of energy 
savings potentials of the various equipment at the standard levels 
being considered.
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C. Authority

    Title III of EPCA sets forth a variety of provisions concerning 
energy efficiency. Part A \8\ of Title III provides for the ``Energy 
Conservation Program for Consumer Products Other Than Automobiles.'' 
(42 U.S.C. 6291-6309)
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    \8\ This part was originally titled Part B; however, it was 
redesignated Part A, after Part B of Title III was repealed by Pub. 
L. 109-58. Similarly, Part C, Certain Industrial Equipment, was 
redesignated Part A-1.
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    The amendments to EPCA contained in the Energy Policy Act of 2005 
(EPACT 2005), Pub. L. 109-58, include new or amended energy 
conservation standards and test procedures for some of these products, 
and direct DOE to undertake rulemakings to promulgate such 
requirements. In particular, section 135(c)(4) of EPACT 2005 amends 
EPCA to direct DOE to prescribe energy conservation standards for 
beverage vending machines. (42 U.S.C. 6295(v))
    Because of its placement in Part A of Title III of EPCA, the 
rulemaking for beverage vending machine energy conservation standards 
is bound by the requirements of 42 U.S.C. 6295. However, since beverage 
vending machines are commercial equipment and consistent with DOE's 
previous action to incorporate the EPACT 2005 requirements for 
commercial equipment into Title 10 of the Code of Federal Regulations 
(CFR), Part 431 (``Energy Efficiency Program for Certain Commercial and 
Industrial Equipment''), DOE intends to place the new requirements for 
beverage vending machines in 10 CFR part 431. The location of the 
provisions within the CFR does not affect either their substance or 
applicable procedure, so DOE is placing them in the appropriate CFR 
part based on their nature or type.\9\
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    \9\ Because of their placement into 10 CFR 431, beverage vending 
machines will be referred to as ``equipment'' throughout this 
notice.
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    Before DOE prescribes any such standards, however, it must first 
solicit comments on proposed standards. Moreover, DOE must design each 
new standard for beverage vending machines to achieve the maximum 
improvement in energy efficiency that is technologically feasible and 
economically justified, and will result in significant conservation of 
energy. (42 U.S.C. 6295(o)(2)(A), (o)(3), (v)) To determine whether a 
standard is economically justified, DOE must, after receiving comments 
on the proposed standard, determine whether the benefits of the 
standard exceed its burdens to the greatest extent practicable, 
considering the following seven factors:
    (1) The economic impact of the standard on manufacturers and 
consumers of products subject to the standard;
    (2) The savings in operating costs throughout the estimated average 
life of the covered product in the type (or class) compared with any 
increase in the price, initial charges, or

[[Page 34099]]

maintenance expenses for the covered product likely to result from 
imposition of the standard;
    (3) The total projected amount of energy savings likely to result 
directly from imposition of the standard;
    (4) Any lessening of the utility or performance of the covered 
products likely to result from imposition of the standard;
    (5) The impact of any lessening of competition, as determined in 
writing by the Attorney General, that is likely to result from 
imposition of the standard;
    (6) The need for national energy conservation; and
    (7) Other factors the Secretary of Energy (the Secretary) considers 
relevant.
    (42 U.S.C. 6295(o)(2)(B)(i))

D. Background

1. History of Standards Rulemaking for Beverage Vending Machines
    As noted above, section 135(c)(4) of EPACT 2005 amended section 325 
of EPCA in part by adding new subsections 325(v)(2), (3), and (4). (42 
U.S.C. 6295(v)(1), (2) and (3)).\10\ These provisions direct the 
Secretary to prescribe, by rule, energy conservation standards for 
beverage vending machines no later than August 8, 2009, and state that 
any such standards shall apply to beverage vending machines 
manufactured three years after the date of publication of the final 
rule that establishes those standards. The energy use of this equipment 
has never before been regulated at the Federal level.
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    \10\ It is noted that the relevant statutory provisions were 
renumbered pursuant to section 316 of the Energy Independence and 
Security Act of 2007, Pub. L. 110-140.
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    Section 135(a)(3) of EPACT 2005 amended section 321 of EPCA in part 
by adding new subsection 321(40) (42 U.S.C. 6291(40)), which 
establishes the definitions for ``refrigerated bottled or canned 
beverage vending machine'' as ``a commercial refrigerator that cools 
bottled or canned beverages and dispenses the bottled or canned 
beverages on payment.'' In addition, section 136(a)(3) of EPACT 2005 
amended section 340 of EPCA in part by adding a definition for 
``commercial refrigerator, freezer, and refrigerator-freezer.'' \11\
---------------------------------------------------------------------------

    \11\ This definition reads as follows:
    ``(9)(A) The term `commercial refrigerator, freezer, and 
refrigerator-freezer' means refrigeration equipment that--
    (i) is not a consumer product (as defined in section 321 [of 
EPCA; 42 U.S.C. 6291(1)]);
    (ii) is not designed and marketed exclusively for medical, 
scientific, or research purposes;
    (iii) operates at a chilled, frozen, combination chilled and 
frozen, or variable temperature;
    (iv) displays or stores merchandise and other perishable 
materials horizontally, semivertically, or vertically;
    (v) has transparent or solid doors, sliding or hinged doors, a 
combination of hinged, sliding, transparent, or solid doors, or no 
doors;
    (vi) is designed for pull-down temperature applications or 
holding temperature applications; and
    (vii) is connected to a self-contained condensing unit or to a 
remote condensing unit.''
    (42 U.S.C. 6311(9)(A))
---------------------------------------------------------------------------

    On June 28, 2006, DOE published in the Federal Register a notice 
announcing a public meeting and the availability of a Framework 
Document titled, Rulemaking Framework for Refrigerated Bottled or 
Canned Beverage Vending Machines,\12\ that describes the procedural and 
analytical approaches that DOE anticipates using to evaluate energy 
conservation standards for beverage vending machines. 71 FR 36715. DOE 
invited written comments on this analytical framework.
---------------------------------------------------------------------------

    \12\ The Framework Document is available at: http://www.eere.energy.gov/buildings/appliance_standards/commercial/
beverage_machines.html.
---------------------------------------------------------------------------

    DOE held a Framework public meeting on July 11, 2006, whose purpose 
was to discuss the procedural and analytical approaches for use in the 
rulemaking, and to inform and facilitate stakeholder involvement in the 
rulemaking process. The analytical framework presented at the public 
meeting described different analyses, such as LCC and PBP, the planned 
methods for conducting them, and the relationships among the various 
analyses.\13\ Manufacturers, trade associations, environmental 
advocates, and other interested parties attended the public meeting.
---------------------------------------------------------------------------

    \13\ PDF copies of the slides and other materials associated 
with the public meeting are available at: http://www.eere.energy.gov/buildings/appliance_standards/commercial/
beverage_machines.html.
---------------------------------------------------------------------------

    Comments received after publication of the Framework Document and 
at the July 11 public meeting helped identify and elaborated upon 
issues involved in this rulemaking and provided information that has 
contributed to DOE's efforts to resolve these issues. Many of the 
statements provided by stakeholders are quoted or summarized in this 
ANOPR. A parenthetical reference at the end of a quotation or passage 
provides the location of such item in the public record (i.e., the 
docket for this rulemaking). The ANOPR TSD describes the analytical 
framework in detail.
    During the course of this rulemaking, Congress passed the Energy 
Independence Security Act of 2007 (EISA 2007), which the President 
signed on December 19, 2007 (Pub. L. 110-140). Of relevance to the 
beverage vending machine rulemaking, section 310(3) of EISA 2007 
amended section 325 of EPCA in part by adding subsection 325(gg) (42 
U.S.C. 6295(gg)). This subsection requires any new or amended energy 
conservation standard adopted after July 1, 2010 to incorporate 
``standby mode and off mode energy use.'' (42 U.S.C. 6295(gg)(3)(A)) 
Since any standard associated with this rulemaking is required by 
August 2009, the energy use calculations will not include ``standby 
mode and off mode energy use.'' To include standby mode and off mode 
energy use requirements for this rulemaking would take a considerable 
degree of analytical effort and would likely require changes to the 
test procedure. Given the statutory deadline, DOE has decided to 
address this requirement when the standards for beverage vending 
machines are reviewed in August 2015 to consider the need for possible 
amendment in accordance with 42 U.S.C. 6295(m).
2. Rulemaking Process
    Table I.2 sets forth a list of the analyses DOE has conducted and 
intends to conduct in its evaluation of potential energy conservation 
standards for beverage vending machines. Historically, DOE performed 
the manufacturer impact analysis (MIA) in its entirety between the 
ANOPR and NOPR stages of energy conservation standards rulemakings. 
However, more recently, DOE has refined its process and has begun to 
publish a preliminary MIA in the ANOPR for public comment. DOE believes 
this change will improve the rulemaking process. Accordingly, as noted 
in the table below, DOE has performed a preliminary MIA for this ANOPR.

              Table I.2.--Beverage Vending Machine Analysis
------------------------------------------------------------------------
              ANOPR                      NOPR             Final Rule*
------------------------------------------------------------------------
 Market and technology     Revised     Revised
 assessment.                       ANOPR analyses.     NOPR analyses
 Screening analysis.....   Life-
                                   cycle cost sub-
                                   group analysis.

[[Page 34100]]

 
 Engineering analysis...  
                                   Manufacturer
                                   impact analysis.
 Energy use                Utility
 characterization.                 impact analysis.
 Markups to determine     
 equipment price.                  Employment impact
                                   analysis.
 Life-cycle cost and      
 payback period analyses.          Environmental
                                   assessment.
 Shipments analysis.....  
                                   Regulatory impact
                                   analysis.
 National impact
 analysis.
 Preliminary
 manufacturer impact analysis.
------------------------------------------------------------------------
 * During the final rule phase, DOE considers the comments submitted by
  the U.S. Department of Justice in the NOPR phase concerning the impact
  of any lessening of competition likely to result from the imposition
  of the standard. (42 U.S.C. 6295(o)(2)(B)(v))

    The analyses listed in Table I.2 also include the development of 
related economic models and analytical tools, as necessary. If timely 
new data, models, or tools that enhance the development of standards 
become available, DOE will incorporate them into this rulemaking.
3. Miscellaneous Rulemaking Issues
a. Consensus Agreement
    In response to the Framework Document, USA Technologies stated that 
there appears to be considerable consensus regarding potential energy 
conservation standards for beverage vending machines and that DOE could 
provide a valuable and meaningful service by coordinating the efforts 
of industry, manufacturers, beverage vending machine owners, and 
utilities by fostering an agreement on standards. USA Technologies 
stated that this approach could help the industry achieve significant 
energy savings in a very short time, instead of waiting until 2012. 
(USA Tech, No. 9 at p. 1) \14\ Edison Electric Institute (EEI) 
suggested that, given DOE's workload on Federal standards over the next 
several years, DOE should try to arrange a negotiated rulemaking of 
interested parties to help streamline the process. EEI noted that such 
a process was very successful with the fluorescent lamp ballast 
rulemaking.\15\ (EEI, No. 12 at p. 1)
    DOE supports efforts by interested parties to work together to 
develop and present to DOE recommendations on equipment categories and 
standard levels. Such recommendations are welcome throughout the 
standards development process, especially following issuance of the 
ANOPR. Any consensus recommendation must satisfy the statutory criteria 
provided by EPCA in determining whether an energy conservation standard 
is technologically feasible and economically justified, and will result 
in significant conservation of energy. (42 U.S.C. 6295(o)(2)(A), 
(o)(3), (v)) Any consensus recommendation should also include 
information that DOE can use to assess the seven statutory factors that 
determine whether the benefits of the standard exceed its burdens to 
the greatest extent practicable. (42 U.S.C. 6925(o)(2)(B)(i))
---------------------------------------------------------------------------

    \14\ A notation in the form ``USA Tech, No. 9 at p. 1'' 
identifies a written comment that DOE received and included in the 
docket for this rulemaking (Docket No. EERE-2006-STD-0125), 
maintained in the Resource Room of the Building Technologies 
Program. Specifically, this footnote refers to a comment made USA 
Technologies, and recorded on page 1 of document number 9. Likewise, 
a notation in the form ``Public Meeting Transcript, No. 8 at p. 
150'' identifies an oral comment that DOE received during the July 
11, 2006, Framework public meeting and which was recorded in the 
public meeting transcript in the docket for this rulemaking. 
Likewise, a notation in the form ``Joint Comment,'' No. 13 at p. 3'' 
identifies a written comment that DOE has received and has included 
in the docket of this rulemaking.
    \15\ DOE notes that in the florescent lamp ballasts rulemaking, 
a consensus process was used. 65 FR 56740, 56744 (Sept. 19, 2000).
---------------------------------------------------------------------------

b. Type of Standard
    Crane Merchandising Systems asked whether the technology options 
listed would become mandatory as part of the rulemaking. (Public 
Meeting Transcript, No. 8 at p. 150) USA Technologies stated that, in 
terms of technology options for compliance with energy conservation 
standards, the more opportunity manufacturers have to be creative, the 
better, particularly since this is a very creative industry. It stated 
that restricting manufacturers to particular design options would not 
be in the manufacturers'--or the buyers'--best interest. (Public 
Meeting Transcript, No. 8 at p. 173) Dixie-Narco likewise stated that 
the choice of technologies used to achieve standards should be left to 
the discretion of the manufacturer. (Public Meeting Transcript, No. 14 
at p. 3) Dixie-Narco further suggested that the DOE standard should not 
recommend any particular design packages or endorse any specific third-
party technologies developed for use in vending machines that original 
equipment manufacturers have not endorsed as being compatible with 
their equipment. It stated that these technologies may work against 
other energy-saving components such as variable-capacity compressors. 
(Public Meeting Transcript, No. 14 at p. 3) In contrast, the Naval 
Facilities Engineering Service Center (NFESC) recommended that DOE 
should pursue cost-effective standards for beverage vending machines, 
which would include both overall efficiency standards, as well as 
prescriptive standards that address more focused topics such as a low-
power-mode requirement for low-use periods and lighting efficiency 
within the unit. (NFESC, No. 15 at p. 2)
    In response, DOE notes that EPCA provides that an ``energy 
conservation standard'' must be either (A) ``a * * * level of energy 
efficiency'' or ``a * * * quantity of energy use,'' or (B), for certain 
specified equipment, ``a design requirement.'' (42 U.S.C. 6291(6)) 
Thus, an ``energy conservation standard'' cannot consist of both a 
design requirement and a level of efficiency or energy use.\16\ 
Moreover, item (A) above indicates that, under EPCA, a single energy 
conservation standard cannot have measures of both energy efficiency 
and energy use. Furthermore, EPCA specifically requires DOE to base its 
test procedure for this equipment on American National Standards 
Institute (ANSI)/American Society of Heating, Refrigerating and Air-
Conditioning Engineers (ASHRAE) Standard 32.1-2004, Methods of Testing 
for Rating Vending Machines for Bottled, Canned or Other Sealed 
Beverages. (42 U.S.C. 6293(b)(15)) The test methods in ANSI/ASHRAE 
Standard 32.1-2004 consist of means to measure energy consumption, not 
energy efficiency.
---------------------------------------------------------------------------

    \16\ Beverage vending machines are not one of the specified 
equipment for which EPCA allows a standard to consist of a design 
requirement. (42 U.S.C. 6291(6)(B), 6292(a)).
---------------------------------------------------------------------------

    For these reasons, DOE does not intend to develop efficiency 
standards or design requirements for this equipment. Instead, DOE 
intends to develop standards such that each beverage vending machine 
would be subject to a maximum level of energy

[[Page 34101]]

use, and manufacturers could meet these standards with their own choice 
of design methods.
c. Split Incentive Issue
    DOE mentioned the ``split incentive issue'' (explained below) at 
the Framework public meeting when discussing distribution channels for 
beverage vending machines sold to the bottler or a vending machine 
operator. The bottler or the vending machine operator installs these 
machines at different sites through location contracts, maintains and 
stocks the machines, and retains a certain percentage of the coin-box 
revenue. The site owner, in this case, allows the machine to be placed 
on-site, receives a percentage of the coin-box revenue and/or other 
remuneration, and most relevant to this rulemaking, pays the 
electricity bill and enjoys any electricity cost savings associated 
with more-efficient machines. The equipment purchaser (bottler or 
vending machine operator) does not pay the electricity bill and, 
therefore, does not receive any cost savings. In principle, the 
business site owner would be willing to accept a lower percentage of 
revenue for a machine that uses less electricity. However, where it is 
costly to renegotiate contracts, the incentive to purchase more-
efficient machines may be lessened or eliminated. Nonetheless, there 
may be a growing market for energy-efficient beverage vending machines 
because environmentally-conscious beverage companies and bottlers are 
pushing to install energy-efficient machines on-site, and certain site 
owners are demanding that energy-efficient machines be installed to 
reduce their electricity costs.
    At the Framework public meeting, Coca-Cola indicated that the 
vending machine operator may or may not pay some or all of the energy 
costs, depending on its contract with the site owner. (Public Meeting 
Transcript, No. 8 at p. 190) Meanwhile, EEI asserted that information 
about distribution channels and beverage vending machine contracts 
would be important for the LCC analysis. EEI claimed that unless there 
is a provision in the contract for energy costs, there will be a split 
incentive for machine owners and site owners. (EEI, No. 12 at p. 5)
    DOE agrees with EEI that there may be a split incentive in the 
beverage vending machine market; however, it disagrees with EEI's 
contention that the split incentive is relevant to the LCC analysis. 
DOE recognizes that when a standard results in overall operating cost 
savings that are greater than increases in the installed cost for the 
equipment, there will be a life-cycle cost benefit from the standard, a 
key piece of regulatory information independent of who receives such 
benefit. How the benefits and burdens are shared between the equipment 
purchaser and the site owner is a function of the nature of the 
contract, and this allocation may in fact change as the expenses of 
either party change as a result of subsequent events, such as changes 
in electricity prices or standards requiring more-efficient machines. 
DOE has limited data on existing beverage vending machine contracts, 
but knows that these can vary widely. DOE has no data on how these 
contracts may change as the relative expenses of either party shift. In 
summary, for the purposes of the LCC analysis and as is required by 
EPCA, DOE is evaluating the benefits and burdens of the standards from 
the standpoint of a ``customer'' who is assumed to bear the burden of 
purchasing the equipment and the benefits of any energy savings, which 
in this case, is the equipment purchaser. (42 U.S.C. 6295(o)(2)(B)(i)) 
DOE requests further comment and information on this issue.
4. Test Procedure
    A test procedure outlines the method by which manufacturers will 
determine the energy consumption of their beverage vending machines, 
and thereby assess the results used to certify compliance with an 
energy conservation standard.
    Section 135(b) of EPACT 2005 amended section 323 of EPCA in part by 
adding new subsections 323(b)(15) (42 U.S.C. 6293(b)(15)) and 323(f) 
(42 U.S.C. 6293(f)). Respectively, these subsections provide that the 
test procedure for refrigerated bottled or canned beverage vending 
machines shall be based on ANSI/ASHRAE Standard 32.1-2004, and that the 
Secretary had until August 8, 2007 to prescribe that new test 
procedure.
    On December 8, 2006, DOE published a final rule in the Federal 
Register that incorporated by reference ANSI/ASHRAE Standard 32.1-2004, 
with two modifications, as the DOE test procedure for this equipment. 
71 FR 71340, 71375; 10 CFR 431.294. The first modification DOE made was 
to specify that in Section 6.2, ``Voltage and Frequency,'' equipment 
with dual nameplate voltages must be tested at the lower of the two 
voltages only. 71 FR 71340, 71355 (Dec. 8, 2006). The second 
modification was to specify that (1) any measurement of ``vendible 
capacity'' of refrigerated bottled or canned beverage vending machines 
must be in accordance with the second paragraph of Section 5, ``Vending 
Machine Capacity,'' of ANSI/ASHRAE Standard 32.1-2004, and (2) any 
measurement of ``refrigerated volume'' of refrigerated bottled or 
canned beverage vending machines must be in accordance with the 
methodology specified in Section 5.2, ``Total Refrigerated Volume,'' 
(excluding subsections 5.2.2.2 through 5.2.2.4) of the ANSI/Association 
of Home Appliance Manufacturers (AHAM) HRF-1-2004, Energy, Performance 
and Capacity of Household Refrigerators, Refrigerator-Freezers and 
Freezers. Id.
5. Rating Conditions
    In the Framework Document, DOE requested feedback on what rating 
conditions it should use for setting standards and determining 
compliance with them. DOE's test procedure included two rating 
conditions (i.e., 75 degrees Fahrenheit ([deg]F)/45 percent relative 
humidity (RH) and 90[deg]F/65 percent RH). EEI stated that the 
75[deg]F/45 percent RH ambient conditions specified in the ANSI/ASHRAE 
Standard 32.1-2004 should provide adequate daily energy-usage 
information for most machines located solely indoors. EEI added that 
for certain indoor conditions (i.e., machines located in rooms with 
limited ventilation), the 90[deg]F/65 percent RH test conditions may be 
better. (EEI, No. 12 at p. 2)
    Dixie-Narco stated that for the majority of indoor equipment, the 
rating 75[deg]F/45 percent RH temperature is accurate and reflects 
actual conditions. (Public Meeting Transcript, No. 8 at p. 95) Dixie-
Narco stated that the 90[deg]F/65 percent RH rating condition is highly 
overstated, arguing that no location in the United States is at 
90[deg]F/65 percent RH condition 24 hours a day, 365 days a year. Royal 
Vendors and UVA Technologies agreed with Dixie-Narco, stating that the 
actual energy use of outdoor machines is likely to be overstated, in 
most cases, when determined under those conditions. (Public Meeting 
Transcript, No. 8 at pp. 96-97)
    Pacific Gas and Electric (PG&E) indicated, however, that DOE need 
not distinguish between indoor and outdoor temperature conditions in 
setting rating conditions because machines located indoors sometimes 
operate in warmer conditions, similar to the ambient conditions that 
the machine might operate in if it was located outdoors. (Public 
Meeting Transcript, No. 8 at p. 94) Coca-Cola stated energy consumption 
depends not only on ambient temperature, but also on ambient humidity 
and the heat load

[[Page 34102]]

(heat output by components) within the machine. (Coca-Cola, No. 8 at p. 
220) EEI noted that one EEI member company suggested that if DOE could 
determine a way to require outdoor-rated machines to be used 
exclusively outdoors and indoor-rated machines to be used exclusively 
indoors, there could be considerable energy savings. (EEI, No. 12 at p. 
2)
    During the Framework public meeting, EEI stated that if glass-front 
machines are placed outside, DOE might need to consider a different 
test procedure to account for the difference in radiation heat loads 
between glass-front and closed-front machines. EEI also suggested 
separate tests for winter and summer conditions for machines used 
outdoors. (Public Meeting Transcript, No. 8 at p. 66) In addition, EEI 
argued that energy usage of beverage vending machines varies 
dramatically based on ambient conditions. It suggested that DOE should 
adopt a test procedure for outdoor machines that would account for high 
ambient temperatures and/or solar loads, which would improve the 
efficiency of the equipment throughout the year, but especially on peak 
summer days. (EEI, No. 12 at p. 3) EEI added that if DOE decides to 
establish standards in terms of total daily energy consumption, then 
extreme outdoor temperature conditions must be accounted for. (EEI, No. 
12 at p. 5)
    In response to these comments, DOE understands the concerns about 
the variability in energy consumption resulting from different ambient 
conditions. However, outdoor-only beverage machines are currently 
nonexistent. Currently, all machines placed outdoors are designed for 
both indoor and outdoor use and are not designed exclusively for 
outdoor use only. If, as suggested by several manufacturers, a 90 
[deg]F/65 percent RH rating condition for a machine used outdoors would 
result in overstatement of its energy use due to changing daily and 
seasonal ambient conditions, that rating condition applied to the same 
machine used indoors would then be expected to result in an even 
greater overstatement of energy use. For example, the average annual 
temperature in Miami, FL (one of the southernmost and warmest cities in 
the United States) is approximately 75 [deg]F.\17\ Therefore, 
throughout the United States, almost all average annual outdoor 
temperatures are close to or below 75 [deg]F. DOE chooses to evaluate 
an average temperature because it believes that the increase in the 
energy consumption of a machine operating in temperatures above the 
average is offset by the decrease in energy consumption of a machine 
operating in temperatures below the average. In addition, beverage 
vending machines have closed refrigeration systems. The relative 
humidity that a beverage vending machine operates in has a much less 
significant impact than ambient temperature on the energy consumption 
of a beverage vending machine. After careful consideration of public 
comments on this issue, DOE plans to use a 75 [deg]F/45 percent RH 
rating condition for all refrigerated beverage vending machines covered 
by this rulemaking. DOE will include this rating condition requirement 
as part of any energy conservation standards developed in this 
rulemaking.
---------------------------------------------------------------------------

    \17\ Typical Meterorological Year 2 (TMY2) Data (from the 1961-
1990 National Solar Radiation Data Base). Available at: http://rredc.nrel.gov/solar/old_data/nsrdb/tmy2/.
---------------------------------------------------------------------------

II. Energy Conservation Standards Analyses for Beverage Vending 
Machines

    This section addresses the analyses DOE has performed and intends 
to perform for this rulemaking. A separate subsection addresses each 
analysis and the underlying assumptions applied to that analysis. 
Specifically, DOE will perform a set of analyses, including: (1) A 
market and technology assessment; (2) a screening analysis; (3) an 
engineering analysis; (4) an analysis to determine equipment price; (5) 
an energy use characterization; (6) an LCC and PBP analysis; (7) a 
shipments analysis; (8) a national impact analysis; and (9) a 
manufacturer impact analysis. Additional analyses consider the impact 
of a potential rule on utilities, LCC sub-groups, employment, and the 
environment. A full description of how these analyses are performed is 
contained in the TSD.\18\ However, this section of the ANOPR provides 
an overview of these analyses, while focusing on how these analyses are 
being tailored to this rulemaking and on their underlying assumptions. 
It also discusses comments received from interested parties since DOE 
published the beverage vending machines Framework Document.
---------------------------------------------------------------------------

    \18\ Available on DOE's Web site at http://www.eere.energy.gov/
buildings/appliance_standards/commercial/beverage_machines.html.
---------------------------------------------------------------------------

A. Market and Technology Assessment

    When DOE begins a standards rulemaking, it develops market 
assessment information that provides an overall picture of the market 
for the equipment concerned, including the nature of the equipment, the 
industry structure, and market characteristics for the equipment. The 
technology assessment identifies available, energy-saving technologies, 
which will be considered in the screening analysis. These activities 
consist of both quantitative and qualitative efforts based primarily on 
publicly available information. The subjects addressed in the market 
and technology assessment for this rulemaking include manufacturer 
characteristics and market shares, existing regulatory and non-
regulatory efficiency improvement initiatives, equipment classes, and 
trends in equipment markets and characteristics. This information 
serves as resource material for use throughout the rulemaking.
1. Definition of ``Beverage Vending Machine''
    As mentioned above, EPCA defines the term ``refrigerated bottled or 
canned beverage vending machine'' as ``a commercial refrigerator that 
cools bottled or canned beverages and dispenses the bottled or canned 
beverages on payment.'' (42 U.S.C. 6291(40)) Thus, whether equipment is 
a beverage vending machine covered under EPCA depends on whether it 
cools and dispenses ``bottled beverages'' and/or ``canned beverages,'' 
and, in the Framework Document, DOE requested feedback on the meaning 
of these terms. The following summarizes public comments on this issue.
    PepsiCo stated that there are many types of packaging for beverages 
that cannot be categorized as a can or bottle. (Public Meeting 
Transcript, No. 8 at p. 36) Dixie-Narco questioned how DOE's packaging 
definition will take into account evolving package types over time. 
(Public Meeting Transcript, No. 8 at p. 37) PepsiCo elaborated, asking 
how DOE will treat other types of packaging (e.g., pouch-type packaging 
and packaging that is a combination of plastic and paperboard). (Public 
Meeting Transcript, No. 8 at pp. 40-41) The National Automated 
Merchandising Association (NAMA) then asked whether DOE will include 
aseptic packaging as a bottle or can.\19\ (Public Meeting Transcript, 
No. 8 at p. 41)
---------------------------------------------------------------------------

    \19\ An aseptic package is a package that is intended to prevent 
spoilage and is used for long-term storage of its contents.
---------------------------------------------------------------------------

    Dixie-Narco suggested that DOE should use the term ``beverage 
containers'' to describe the items refrigerated beverage vending 
machines dispense. (Public Meeting Transcript, No. 8 at p. 46) EEI 
stated that DOE

[[Page 34103]]

should expand the list of vended items to more than just bottles and 
cans. (Public Meeting Transcript, No. 8 at p. 42) It suggested that DOE 
should add ``other beverage container'' to the list of vended items 
that delineate what constitutes a beverage vending machine, and that 
DOE should define that term, so as to include other combinations (e.g., 
plastic and paperboard, metal and plastic, metal and glass) or other 
materials that may contain a beverage that will be housed in a 
refrigerated beverage vending machine. EEI noted that another option 
would be to add the phrase ``packaged beverage-refrigerated'' to the 
list of vended products that define what equipment is a beverage 
vending machine. (EEI, No. 12 at p. 3)
    The Alliance to Save Energy, the American Council for an Energy 
Efficient Economy (ACEEE), the Appliance Standards Awareness Project 
(ASAP), the Natural Resources Defense Council (NRDC), the Northeast 
Energy Efficiency Partnerships (NEEP), and the Northwest Power and 
Conservation Council, in comments they jointly filed (hereafter ``Joint 
Comment''), stated that the definitions suggested by DOE for the terms 
``bottle'' and ``can'' seem workable, except that the term ``can'' 
should be broadened to include plastic. The Joint Comment also noted 
the distinction between what is a ``can'' and what is a ``bottle'' is 
not important, as long as all types of containers are included. (Joint 
Comment, No. 13 at p. 3) Dixie-Narco agreed with this comment. The 
Joint Comment suggested using the ASHRAE standard package (i.e., a 12-
ounce, 355-milliliter can) as a thermal load in the test procedure. 
(Dixie-Narco, No. 14 at p. 1)
    After carefully reviewing these comments, DOE has tentatively 
decided to consider broader definitions for the terms ``bottled'' and 
``canned'' as they apply to beverage vending machines. DOE believes a 
bottle or can in this context refers to ``a sealed container for 
beverages,'' so a bottled or canned beverage is ``a beverage in a 
sealed container.'' Such definition would avoid unnecessary 
complications regarding the material composition of the container. 
Furthermore, a single, encompassing definition will eliminate the need 
to determine whether a particular container is a bottle or a can. DOE 
seeks comment on this broader definition, both as to the definition 
itself and whether it is consistent with the intent of the Act.
    Combination vending machines are vending machines that dispense 
cooled beverages as well as other beverages and food items. These types 
of vending machines are discussed in Section 5.a below.
2. Equipment Classes
    In general, when evaluating and establishing energy conservation 
standards, DOE divides covered equipment into equipment classes by the 
type of energy used, capacity, or other performance-related features 
that affect efficiency and factors such as the utility of such 
feature(s) to users. (42 U.S.C. 6295(q)) DOE routinely establishes 
different energy conservation standards for different equipment classes 
based on these criteria.
    A number of characteristics of beverage vending machines have the 
potential to affect their energy use and efficiency, and accordingly, 
to be the basis for separate equipment classes for these machines. In 
the Framework Document, DOE suggested and sought feedback on two issues 
that could affect equipment class designations: (1) Indoor-only and 
indoor/outdoor machines; and (2) glass-front and solid-front machines.
    With regard to glass-front and solid-front machines, ACEEE stated 
it may be better to distinguish equipment classes as ``zone-cooled'' 
and ``fully-cooled'' rather than ``solid-front'' and ``glass-front'', 
respectively. It asserted that the latter two demarcations overlap to 
some extent, and some important distinctions make zone-cooled and 
fully-cooled better classifications. (Public Meeting Transcript, No. 8 
at p. 85) NAMA stated that during vending machine efficiency meetings 
with the Canadian Standards Association (CSA), the CSA's standards 
committee recommended ``zone-cooled'' and ``fully-cooled'' as the two 
classes of refrigerated beverage vending machines. (Public Meeting 
Transcript, No. 8 at p. 58) Dixie-Narco and Coca-Cola agreed that using 
these designations to define equipment classes has merit. (Public 
Meeting Transcript, No. 8 at pp. 63-64)
    As stated earlier, DOE categorizes equipment classes based on 
different performance-related or utility-related factors that affect 
efficiency. PG&E stated that the efficiency of a machine depends on 
whether it is zone-cooled or fully-cooled. (Public Meeting Transcript, 
No. 8 at p. 62) Dixie-Narco stated that, all other things being equal, 
zone-cooled machines use less energy than fully-cooled machines because 
their refrigeration system is smaller. (Public Meeting Transcript, No. 
8 at p. 103) PepsiCo expressed a similar opinion, adding that it would 
like to see standards based on energy use, rather than trying to define 
what the design of the machine should be. (Public Meeting Transcript, 
No. 8 at p. 103)
    Based on public comments, DOE agrees that ``zone-cooled'' and 
``fully-cooled'' are more appropriate descriptors for beverage vending 
machines that are solid-front and glass-front, respectively, and 
intends to use this terminology in this rulemaking.
    In addition to whether a beverage vending machine is zone-cooled or 
fully-cooled, the ambient conditions that a machine operates in can 
also affect its energy efficiency. EEI and NFESC stated that there 
should be separate equipment classes for indoor-only and indoor/outdoor 
machines. (Public Meeting Transcript, No. 8 at p. 50 and NFESC, No. 15 
at p. 4) Dixie-Narco commented that a classification is needed for the 
outdoor machines simply because of the large number of machines that 
Coca-Cola and PepsiCo own; some smaller operators may primarily have 
indoor locations, but no one should be excluded. (Public Meeting 
Transcript, No. 8 at p. 94) Coca-Cola stated that a distinction between 
indoor-only and indoor/outdoor machines has to do with weatherization 
and how they tolerate environmental effects. Specifically, Coca-Cola 
stated that indoor/outdoor machines are more weatherproof and designed 
to be less influenced by environmental effects, such as high humidity 
and direct contact with moisture. (Public Meeting Transcript, No. 8 at 
p. 55) Dixie-Narco commented that the primary differences between 
indoor-only and indoor/outdoor machines are vandalism-prevention 
features. (Public Meeting Transcript, No. 8 at p. 53)
    Southern California Edison's Refrigeration and Thermal Test Center 
(RTTC) asked whether it would be appropriate to have a category for 
outdoor-only machines since there probably will be glass-front outdoor 
machines in the future. RTTC stated that the larger refrigeration 
system needed for an outdoor machine would not be the proper size for 
indoor conditions. (Public Meeting Transcript, No. 8 at p. 89) In 
contrast, Dixie-Narco stated that outdoor machines today can be used 
indoors and outdoors, but that classification is acceptable because the 
machine can be tested to the worst-case environment. According to 
Dixie-Narco, indoor-only machines are tested to the 75 [deg]F/45 
percent RH condition, so when an outdoor machine is tested indoors, 
lower energy use is measured because of the lower rating conditions. 
Dixie-Narco did not see any need to have additional specifications. 
(Public Meeting Transcript, No. 8 at p. 89) ACEEE summarized the 
discussion at the

[[Page 34104]]

Framework public meeting, stating it heard there should be an outdoor 
category with subcategories for zone-cooled and fully-cooled machines, 
and an indoor category without any subcategories. (Public Meeting 
Transcript, No. 8 at p. 94) ACEEE suggested three equipment classes 
based on the discussion at the Framework public meeting: (1) A zone-
cooled machine tested at 90 [deg]F; (2) a fully-cooled machine tested 
at 75 [deg]F; and (3) a fully-cooled machine tested at 90 [deg]F. 
(Public Meeting Transcript, No. 8 at p. 68).
    Dixie-Narco stated that variable-speed compressors are increasingly 
being used in vending machines, and they adapt to the load indoors and 
outdoors. Moreover, Dixie-Narco argued that these compressors are no 
less efficient indoors, even if they are sized to operate outdoors. 
Dixie-Narco stated that in order to be able to meet ENERGY STAR Tier 2 
levels and above, manufacturers will have to use variable speed 
compressor technology. (Public Meeting Transcript, No. 8 at p. 91) 
Dixie-Narco recommended consolidating into one rating condition so that 
both indoor and outdoor vending machines are tested at a standard of 75 
[deg]F/45 percent RH. (Dixie-Narco, No. 14 at p. 2).
    Based on the public comments above and anecdotal information that 
few glass-front or fully-cooled machines (certified for indoor use 
only) are actually installed outdoors (because of safety and vandalism 
reasons) and very few other machines are certified for indoor use only, 
DOE now intends to designate the following two equipment classes of 
beverage vending machines for this rulemaking:
    (a) Class A Machine (fully-cooled machines).
    (b) Class B Machine (any beverage vending machine not considered to 
be Class A)
    DOE recognizes that fully-cooled beverage vending machines 
virtually always have glass fronts, and DOE has designated these 
machines as ``Class A.'' DOE has designated as ``Class B'' any other 
beverage vending machine that cannot be considered Class A. DOE intends 
to use these two equipment classes rather than four as suggested in the 
Framework Document. DOE does not find it necessary to establish 
separate equipment classes for indoor machines and outdoor machines, 
because of the similarities between average indoor and outdoor 
operating conditions. Thus, DOE intends to use two equipment classes 
(Class A and Class B), as described in further detail below.
    The ``Class A'' beverage vending machine equipment class is 
comprised of machines that cool the entire internal volume. Class A 
machines generally use ``shelf-style'' vending mechanisms and tend to 
utilize a transparent (glass or transparent polymer) front,. Because 
the next-to-be-vended product is visible to the consumer and any 
product can be selected by the consumer off of the shelf, all bottled 
or canned beverage containers are necessarily enclosed within the 
refrigerated volume.
    The ``Class B'' beverage vending machine equipment class is 
generally composed of machines that have an opaque front (which 
provides better insulation from ambient conditions) and utilize a 
``stack-style'' vending mechanism. These machines are usually installed 
either indoors or outdoors. The energy consumption of the outdoor 
machines varies with the varying ambient conditions. However, as stated 
earlier, the average energy consumption of these machines is very 
similar to that of machines installed indoors. Typically, though, 
unlike the Class A machines, only a fraction (or a zone) of the volumes 
of the Class B machines (usually the bottom third of the machine) is 
cooled. Hence, they are also sometimes referred to as ``zone-cooled'' 
machines.
3. Selection of Baseline Equipment--Use of the ENERGY STAR Criteria
    Once DOE establishes equipment classes, it selects a baseline model 
as a reference point for each class, and measures changes resulting 
from energy conservation standards against the baseline. The baseline 
model in each equipment class represents the characteristics of 
equipment typical of that class (e.g., vendible capacity, physical 
size). Generally, a baseline model is one that just meets current 
energy conservation standards, or, if no standards are in place, the 
baseline is typically the most common or least efficient unit on the 
market. At present, there are no existing energy conservation standards 
for beverage vending machines covered under this rulemaking.
    However, the U.S. Environmental Protection Agency (EPA) has 
developed voluntary energy performance criteria for beverage vending 
machines as part of the ENERGY STAR labeling program. ENERGY STAR has a 
two-tiered specification for refrigerated beverage machines. Tier 1 has 
been in effect for new machines since April 1, 2004, and for 
refurbished machines since April 31, 2006. The Tier 2 criteria went 
into effect on July 1, 2007 for all new machines.
    Originally, the top 25 percent of beverage vending machines 
qualified for ENERGY STAR Tier 1. Now, however, some manufacturers are 
producing even more-efficient machines that qualify for Tier 2, and a 
majority of the machines being manufactured meet or exceed Tier 1 
levels. However, there are some models currently in the market that are 
less efficient than the Tier 1 levels. In the Framework Document, DOE 
suggested setting the ENERGY STAR Tier 1 specification as the baseline 
efficiency level for all classes of beverage vending machines covered 
under this rulemaking. (More details regarding the specifications can 
be found in Chapter 3 of the TSD.)
    ACEEE asserted that the ENERGY STAR Tier 1 specification can 
probably be considered the baseline for solid-front machines, but that 
for glass-front machines, the baseline may have to be slightly lower. 
(Public Meeting Transcript, No. 8 at p. 114) In contrast, Dixie-Narco 
stated that Tier 1 level would be a good baseline for glass-front 
machines. Dixie-Narco further commented that all of the glass-front 
machines that both of its competitors sell are ENERGY STAR qualified, 
and that it would be comfortable meeting those levels for its glass-
front machines as well. (Public Meeting Transcript, No. 8 at p. 116) 
EEI and Royal Vendors agreed that Tier 1 would be an appropriate 
baseline level. (Public Meeting Transcript, No. 8 at p. 118; Royal, No. 
11 at p. 3)
    The Joint Comment agreed that models meeting the ENERGY STAR Tier 1 
specification should be used as the baseline because more than 90 
percent of indoor/outdoor beverage vending machines meet this 
specification, and a large and growing volume of indoor-only machines 
meet this specification as well. The Joint Comment added that in the 
next two years, it is expected that nearly all indoor-only machines 
will meet this specification, because of the trend for beverage 
companies to only want to purchase ENERGY STAR-qualified equipment. 
(Joint Comment, No. 13 at p. 3) Moreover, PepsiCo stated that it 
requires the manufacturers with which it contracts to build new 
machines to meet the California Energy Commission standard, which is 
the same as the ENERGY STAR Tier 1 requirement. (Public Meeting 
Transcript, No. 8 at p. 265) Coca-Cola stated that it has mandated that 
all Coca-Cola vending machines are to use half as much energy by 2010 
as in 2000, adding that this reduction would certainly meet ENERGY STAR 
Tier 1 qualifications.

[[Page 34105]]

    USA Technologies noted that there are three primary manufacturers 
in the industry and that each makes three primary models. According to 
USA Technologies, these nine models probably represent more than 90 
percent of the beverage vending machines purchased each year. Thus, USA 
Technologies commented that by considering the energy consumption of 
these models and the number of units purchased over the last five 
years, the baseline model would be clear. (Public Meeting Transcript, 
No. 8 at p. 115)
    Based on stakeholder feedback and current market trends, DOE 
expects that in the absence of new standards, most, if not all, new 
machines will meet the ENERGY STAR Tier 1 level by 2012. Therefore, DOE 
is using ENERGY STAR Tier 1 as the baseline efficiency level since it 
roughly represents the least-efficient equipment likely to be sold in 
2012.
4. Normalization Metric
    For both residential and commercial refrigerators, EPCA and DOE 
implementing regulations set standards for each of several classes. 
These classes, for the most part, are not defined by size, but are 
instead based upon their design configurations and whether rated for 
indoor or outdoor use; therefore, these classes include equipment of 
varying sizes. Because a refrigerator's energy use is a function of its 
size, the standard for each class incorporated a formula which, in 
effect, prescribes a maximum amount of energy use that varies by size 
of equipment within that class. (10 CFR 430.32(a) and 10 CFR 431.66) A 
key factor in each such formula is a ``normalization metric,'' which 
represents equipment size (e.g., refrigerated volume) and allows the 
maximum allowed energy use to vary by the size of the equipment. DOE is 
using the same approach in developing standards in this beverage 
vending machine rulemaking.
    In the Framework Document, however, DOE set forth the currently 
used industry metric of vendible capacity (i.e., number of cans) of a 
beverage vending machine as well as the refrigerated volume metric as 
is being used in commercial refrigerators. During the Framework public 
meeting, DOE asked for comment on which of these normalization metrics 
would be most appropriate for the beverage vending machines in this 
rulemaking.
    In response, Coca-Cola stated that for the current test metric 
(i.e., vendible capacity), the DOE test procedure does not reflect the 
current state of the beverage vending machine industry. (Public Meeting 
Transcript, No. 8 at p. 69) Dixie-Narco, Crane Merchandising Systems, 
Coca-Cola, and PepsiCo all agreed that refrigerated volume would 
provide the best normalization metric for beverage vending machines. 
(Public Meeting Transcript, No. 8 at pp. 86-125) Dixie-Narco then asked 
whether industry consensus standards (e.g., AHAM standards) exist for 
measuring refrigerated volume in refrigerators that could be adapted 
for use in assessing beverage vending machines. (Public Meeting 
Transcript, No. 8 at p. 87) At the meeting, DOE responded that the test 
procedures in ANSI/AHAM HRF-1-2004, may be relevant and is currently in 
use for residential refrigerators.
    Dixie-Narco stated that a method to measure refrigerated volume 
must be determined. Dixie-Narco stated that the industry must examine 
residential and commercial refrigeration equipment and try to develop 
an agreed-upon method of measuring the refrigerated volume of vending 
machines. Dixie-Narco stated that once this is done, it will have 
energy-consumption data it can provide to DOE for analysis. (Public 
Meeting Transcript, No. 8 at p. 134) Royal Vendors stated that 
California just published new energy standards,\20\ and that California 
will require manufacturers to measure and report the refrigerated 
volume of all vending machines according to the AHAM 1974 volume 
calculation (i.e., ANSI/AHAM HRF-1-1979). Therefore, Royal Vendors 
stated that manufacturers will be measuring refrigerated volumes for 
their machines, and it will be public information. (Public Meeting 
Transcript, No. 8 at p. 135)
---------------------------------------------------------------------------

    \20\ California Energy Commission, Title 20, 2007 Appliance 
Efficiency Regulations.
---------------------------------------------------------------------------

    Based on the public comments and the recently published California 
standards which use refrigerated volume for all vending machines, DOE 
decided to use refrigerated volume as the normalization metric for 
measuring daily energy consumption for all equipment classes of 
beverage vending machines. DOE will collect industry data to develop a 
translation from vendible capacity to refrigerated volume.
5. Scope and Coverage of Equipment
a. Combination Machines
    At the Framework public meeting, stakeholders raised a number of 
questions regarding what types of beverage vending machines would be 
covered in the present rulemaking. Whirlpool asked whether this 
rulemaking will cover beverage vending machines that have separate 
sections for refrigerated and non-refrigerated beverages. (Public 
Meeting Transcript, No. 8 at p. 45) Dixie-Narco and Crane Merchandising 
Systems also expressed concern about zone-cooled machines that contain 
different products in different sections held at different 
temperatures. These stakeholders suggested that this may cause 
confusion and may raise questions about the definition of ``zone 
cooled.'' (Public Meeting Transcript, No. 8 at p. 104)
    EEI stated that the types and quantities of products sold in 
refrigerated vending machines are changing and will have an impact on 
energy use, which may result in confusion about what this rulemaking 
covers. EEI suggested that, based on stakeholder feedback, this 
rulemaking should cover all machines that have at least 50-75 percent 
of their capacity dedicated to refrigerated, packaged beverages. (EEI, 
No. 12 at p. 2) EEI also suggested that DOE consider a definition for a 
``refrigerated product machine'' to cover machines that sell food along 
with beverages. EEI noted that if more machines sell both food and 
beverages, and DOE does not cover this equipment in this rulemaking, 
there could be a loophole for manufacturers to produce machines that do 
not meet the standard if there is at least one food (or other non-
beverage) item for sale in the equipment. (EEI, No. 12 at p. 3) PG&E 
asked if DOE could benefit from the California designations of multi-
package equipment and non-multi-package equipment \21\ when considering 
what beverage vending machines will be included in this rulemaking. 
(Public Meeting Transcript, No. 8 at p. 62)
---------------------------------------------------------------------------

    \21\ The California Energy Commission defines a ``refrigerated 
multi-package beverage vending machine'' as a refrigerated beverage 
vending machine that is able to display and dispense at least 20 
discrete types of beverages. (California Energy Commission, Title 
20, 2007 Appliance Efficiency Regulations).
---------------------------------------------------------------------------

    EPCA does not explicitly address ``combination machines'' (i.e., 
vending machines that dispense cooled beverages as well as other 
beverages and food items). As discussed above, EPCA directs DOE to set 
standards for vending machines that cool bottled or canned beverages 
and dispense them upon payment. (42 U.S.C. 6291(40) and 6295(v)) DOE 
believes that the language used to define beverage vending machines is 
broad enough to include any vending machine, as long as some portion of 
that machine cools bottled or canned beverages and dispenses them upon 
payment. For this rulemaking, DOE interprets these provisions to cover 
any vending machine that can dispense at least one type of refrigerated 
bottled or canned beverage, regardless of the

[[Page 34106]]

other types of vended products (some of which may not be refrigerated).
b. Refurbished Equipment
    At the Framework public meeting, PepsiCo also asked whether the new 
standards would apply to refurbished and remanufactured equipment. 
(Public Meeting Transcript, No. 8 at p. 230) USA Technologies indicated 
that, to establish meaningful regulations, DOE must consider the 
existing machines that are remanufactured or refurbished, as well as 
new machines. (Public Meeting Transcript, No. 8 at p. 22)
    In response to the possibility that DOE could use ENERGY STAR 
criteria when defining energy standards for beverage vending machines, 
stakeholders commented on how this would affect their equipment that is 
currently on the market. Dixie-Narco stated they make some vending 
machines that do not meet ENERGY STAR criteria, but these machines 
could be modified to achieve them. (Public Meeting Transcript, No. 8 at 
p. 131) Royal Vendors volunteered that it also has a model series that 
does not meet ENERGY STAR criteria because of the loading configuration 
of the machines, but the series has very low sales. (Public Meeting 
Transcript, No. 8 at p. 131) PepsiCo stated that a very small 
percentage of its machines built before 2004 meet ENERGY STAR Tier 1 
criteria, but that it would be very expensive to upgrade these 
machines. (Public Meeting Transcript, No. 8 at p. 245)
    DOE has carefully considered its authority to establish energy 
conservation standards for rebuilt and refurbished beverage vending 
machines in light of these comments, and as discussed below, has 
tentatively concluded that its authority does not extend to rebuilt and 
refurbished equipment. The relevant statutory provisions are discussed 
below, as well as the agency's rationale in reaching this conclusion.
    Section 332 of EPCA provides that it shall be unlawful for any 
manufacturer or private labeler to distribute in commerce any new 
covered equipment which is not in conformity with an applicable energy 
conservation standard. (42 U.S.C. 6302(a)(5) and 6316(a)-(b) (emphasis 
added)) \22\ Congress made section 332 applicable to beverage vending 
machines because an applicable energy conservations standard is 
prescribed for that equipment under section 325(v) of EPCA. (42 U.S.C. 
6295(v)) Section 332(b) defines ``new covered product'' to mean ``a 
covered product the title of which has not passed to a purchaser who 
buys such a product for purposes other than (1) reselling such product, 
or (2) leasing such product for a period in excess of one year.'' (42 
U.S.C. 6302(b)) That is, a new covered product is one for which the 
title has not passed to a customer.\23\
---------------------------------------------------------------------------

    \22\ DOE only regulates equipment that is either specifically 
enumerated as ``covered products'' or is equipment for which DOE has 
been granted authority to regulate in another statutory provision. 
Section 325 of EPCA (42 U.S.C. 6295) grants DOE authority to 
regulate beverage vending machines, without including the specific 
language designating them as ``covered products.'' The failure to 
include the words ``covered product'' in Section 325 of EPCA or to 
include beverage vending machines in Section 322 of EPCA, which 
lists the covered products in Part A, does not mean that beverage 
vending machines will not be treated as ``covered products'' for 
purposes of DOE exercising its regulatory authority.
    \23\ In the context of this discussion, the term ``customer'' is 
used to identify equipment's end user; e.g., ``customer'' does not 
include a party that takes title of equipment solely for the purpose 
of resale or for leasing equipment for less than a year.
---------------------------------------------------------------------------

    DOE believes that the definition of ``new covered product'' in 
section 332 is ambiguous on the question of whether a rebuilt or 
refurbished beverage vending machine is subject to DOE's authority to 
set energy conservation standards. On this point, DOE notes that 
section 332 does not expressly provide that ``new covered product'' 
means new equipment the title of which is transferred by the original 
manufacturer to an original owner. Conversely, the definition of ``new 
covered product'' does not expressly exclude substantially 
remanufactured equipment that is subsequently resold (i.e., equipment 
sold or disposed of by the original owner that is rebuilt or 
refurbished by an entity which resells it to another person). In order 
to resolve this ambiguity regarding DOE's authority to regulate rebuilt 
and refurbished beverage vending machines, DOE considered both 
congressional intent and the nature of the existing beverage vending 
machine market.
    There is no legislative history that reflects Congress's intent. 
However, DOE views the way Congress chose to define ``new covered 
product'' in EPCA as the strongest indicator that the term was not 
intended to apply to rebuilt or refurbished equipment. Specifically, it 
is unlikely that Congress would have made transfer of ``title'' the 
test of whether equipment was ``new'' if it intended to cover rebuilt 
or refurbished equipment. The most reasonable interpretation of the 
statutory definition is that Congress intended that this provision 
apply to newly manufactured equipment the title of which has not passed 
for the first time to a purchaser of the equipment. Such interpretation 
provides certainty and clarity for the regulated entities subject to 
these statutory provisions.
    In addition, if DOE were to interpret ``new covered product'' as 
applying to other than newly manufactured equipment, EPCA's testing and 
labeling provisions would be much harder to implement and enforce. 
Identifying ``manufacturers'' under such an interpretation likely would 
be difficult,\24\ and it also likely would be difficult for DOE to 
distinguish between rebuilt equipment that is not covered and equipment 
that has been so extensively rebuilt as to be considered ``new,'' and 
therefore, subject to these provisions.
---------------------------------------------------------------------------

    \24\ For example, a business that rebuilds or remanufactures 
equipment, instead of reselling it and transferring title, could 
operate as a repair facility for consumers who already own the used 
equipment. The business would simply rebuild the equipment for a fee 
and return it to the owner; there would be no transfer of title.
---------------------------------------------------------------------------

    DOE understands the concern of some stakeholders that there is a 
possibility that the energy conservation standards for beverage vending 
machines could be circumvented if remanufactured machines are not 
deemed to be ``new covered products.'' DOE understands that the rebuilt 
and refurbished beverage vending machine market is comprised of either: 
(1) Equipment sold by the original manufacturer or private labeler, 
which after purchase by a commercial customer, is then modified and 
resold by another party; or (2) equipment that, following purchase by a 
commercial customer, is modified and retained by that customer. 
However, for the above-stated reasons, DOE has concluded that rebuilt 
and refurbished beverage vending machines are not ``new covered 
products'' under EPCA, and therefore, are not subject to DOE's energy 
conservation standards or test procedures.\25\ With respect to the 
first scenario, upon transfer of the title of the beverage vending 
machine to the commercial customer, the beverage vending machine is no 
longer new covered equipment, and therefore, it is not subject to DOE 
regulations even if it is subsequently resold. Similarly, with respect 
to beverage vending machines that are refurbished or rebuilt for or by 
the commercial customer (i.e., they are not resold), DOE lacks 
authority over those beverage vending machines because they are neither 
``new'' covered equipment nor distributed in commerce. Furthermore, if 
refurbished or rebuilt beverage vending machines that are sold

[[Page 34107]]

to another party were covered but not those that are refurbished or 
rebuilt for the commercial customer, DOE believes this would likely 
create an inequity that Congress would not have intended since a 
purpose of EPCA was to establish a single national standard, not 
multiple standards for the same equipment.
---------------------------------------------------------------------------

    \25\ DOE notes that de minimis use of used or recycled parts 
would not make a ``new product'' into a used product.
---------------------------------------------------------------------------

    Throughout the history of the energy conservation standards 
program, DOE has not regulated used consumer products or commercial 
equipment that has been refurbished, rebuilt, or undergone major 
repairs, since EPCA only covers new covered equipment distributed in 
commerce. For all of these reasons, DOE concludes that rebuilt or 
refurbished beverage vending machines are not new covered equipment 
under EPCA and, therefore, are not subject to DOE's energy conservation 
standards or test procedures.
6. Market Assessment
    In the market assessment, DOE develops a qualitative and 
quantitative characterization of the beverage vending machine industry 
and market structure based on publicly-available information and 
information submitted by manufacturers and other stakeholders.
    Three major beverage vending machines manufacturers hold the vast 
majority (about 75 percent) of the domestic market share:
     Crane Merchandising/Dixie-Narco, Inc.\26\
---------------------------------------------------------------------------

    \26\ Crane Merchandising purchased Dixie-Narco, Inc. on October 
23, 2006, after the Framework public meeting was held.
---------------------------------------------------------------------------

     Royal Vendors, Inc.
     Sanden-Vendo America
    Several other manufacturers also produce beverage vending machines 
for the domestic market, including:
     Automatic Merchandising Systems (AMS)
     Distributed Vending Company
     Jofemar USA
     Seaga Manufacturing, Inc.
     The Wittern Group
    PepsiCo and Coca-Cola are, by far, the largest customers of 
beverage vending machines. They do not manufacture beverage vending 
machines. Instead, they contract with manufacturers that produce 
equipment with specific design characteristics.
    DOE is considering the possibility that small businesses would be 
particularly affected by the promulgation of energy conservation 
standards for beverage vending machines. The Small Business 
Administration (SBA) lists small business size standards for this 
industry as they are described in the North American Industry 
Classification System (NAICS) code 333311, Automated Vending Machine 
Manufacturing. The size standard for an industry sets the largest 
average annual receipts or average number of employees that a for-
profit concern can have and still qualify as a small business for 
Federal Government programs. SBA defines small business manufacturing 
enterprises for beverage vending machines as having 500 employees or 
fewer. DOE identified six small business manufacturers in the beverage 
vending machine industry. DOE will study the potential impacts on these 
small businesses in detail during the manufacturer impact analysis, 
which will be conducted as part of the NOPR analysis. See Chapter 3 of 
the TSD for more information regarding small business manufacturers of 
beverage vending machines.
    DOE recognizes that smaller manufacturers, niche manufacturers, and 
manufacturers exhibiting a cost structure that differs substantially 
from the industry average may be differentially affected by the 
imposition of standards. NAMA stated that it could provide a list of 
manufacturers along with associated contact information that could be 
useful for DOE's research. (Public Meeting Transcript, No. 8 at p. 76) 
DOE is using NAMA's information on manufacturers and contacts to define 
subgroups of smaller manufacturers. DOE will use this information to 
analyze how standards enacted by this rulemaking affect smaller 
manufacturers.
    In the Framework Document, DOE requested suggestions for obtaining 
historical energy usage and equipment shipping information. NAMA stated 
that shipment data are now privately held and are not reported to NAMA 
or the Census Bureau. NAMA noted that DOE will have to request 
historical shipment information directly from manufacturers. (Public 
Meeting Transcript, No. 8 at p. 75) Dixie-Narco stated that it would 
provide historical shipment information if asked, but requested the 
data remain confidential. Dixie-Narco added that obtaining energy-usage 
information back to 1990 would be difficult, if not impossible, because 
such information was not recorded by manufacturers at that time. 
(Public Meeting Transcript, No. 8 at p. 76)
    PepsiCo and Coca-Cola recommended that DOE request historical 
shipment and energy-usage data from EPA and State organizations. 
(Public Meeting Transcript, No. 8 at pp. 78-82) PepsiCo urged all 
manufacturers to provide NAMA with all available historical shipment 
and energy-usage data for aggregation. (Public Meeting Transcript, No. 
8 at p. 79)
    NAMA stated that it collected some aggregated historical shipment 
and energy-usage data for the ENERGY STAR program. (Public Meeting 
Transcript, No. 8 at p. 83) EPA stated that it is creating a summary 
report for the 2005 shipment information from NAMA and will at least 
include the shipments of ENERGY STAR-qualified models and an estimate 
of market penetration. EPA also suggested that, depending on how high 
market penetration is, shipment of ENERGY STAR-qualified models could 
serve as a proxy for determining the makeup of the overall market, 
although the data would not be manufacturer-specific. (Public Meeting 
Transcript, No. 8 at p. 83) Dixie-Narco stated that EPA has the 
company's shipment data for 2005, but it did not collect data before 
2005. (Dixie-Narco, No. 14 at p. 2) ACEEE summarized that there seem to 
be two paths for collection and aggregation of historical shipment and 
energy-usage data: (1) By NAMA, or (2) by a DOE contractor. (Public 
Meeting Transcript, No. 8 at p. 82)
    Dixie-Narco stated at the Framework public meeting that it will try 
to provide data on its forthcoming models, keeping in mind that ENERGY 
STAR Tier 2 will take effect in July 2007. Dixie-Narco added that it 
estimates 80 percent of installed machines will exceed ENERGY STAR Tier 
1 levels by 2012. (Public Meeting Transcript, No. 8 at p. 246) Royal 
Vendors stated that it will cooperate with NAMA to develop equipment 
shipment data on an industry basis. Royal Vendors noted, however, that 
trends may be difficult to decipher. (Royal, No. 11 at p. 2)
    EEI stated that according to public meeting participants, ``stack-
style'' machines were 90 percent of the market and glass-front machines 
were 10 percent of the market in 2001. However, stack-style and glass-
front machines were each 50 percent of the market in 2006. EEI noted 
that if market shares continue changing in this direction, baseline 
energy-usage and energy-efficiency upgrade possibilities could be 
affected. (EEI, No. 12 at p. 3)
    In summary, it is evident that NAMA does not have the historical 
shipment and energy-usage data necessary to determine efficiency trends 
in the industry. Therefore, DOE will contact ENERGY STAR program staff 
and State organizations and use their websites and various industry 
reports to obtain historical shipment and energy-usage data.

[[Page 34108]]

7. Technology Assessment
    In the technology assessment, DOE identifies technologies and 
design options that could improve the efficiency of beverage vending 
machines. This assessment provides the technical background and 
structure on which DOE bases its screening and engineering analyses. 
For beverage vending machines, DOE based its list of technologically-
feasible design options on input from manufacturers, industry experts, 
component suppliers, trade publications, and technical papers. See 
Chapter 3 of the TSD for additional detail on the technology assessment 
and technologies analyzed. However, the following discussion provides 
an overview of the salient aspects of the technology assessment, 
including issues on which DOE seeks public comment.
    In the Framework Document, DOE identified and sought feedback on 
the applicable technologies and designs which have the potential to 
improve the energy efficiency of the identified equipment classes. A 
detailed discussion of these technologies and design options is given 
in Chapter 3 of the TSD. In response, Dixie-Narco asserted that certain 
technology options on DOE's list are not compatible with each other. 
(Public Meeting Transcript, No. 8 at p. 155) Furthermore, EEI commented 
that several of the technologies may already be incorporated into the 
baseline units being manufactured and installed in the United States. 
(EEI, No. 12 at p. 4)
    Several stakeholders addressed other means for reducing the energy 
use of beverage vending machines, offering both general and specific 
suggestions. Specifically, Royal Vendors stated that the important 
systems and components which may impact the energy efficiency of a 
beverage vending machine are the sealed cooling unit, evaporator/
circulating fan, lighting, insulation, and door-sealing systems. It 
noted that ENERGY STAR Tier 1 qualified machines include an effective 
combination of these systems with a focus on lighting, compressor 
efficiency, and efficient evaporator/circulating fan motor impellers. 
To improve the energy efficiency of beverage vending machines, Royal 
Vendors suggested adding T8 lamps with electronic ballasts, low-
ballast-factor ballasts, electronically-commutated fan motors with 
engineered impeller and venturi rings, and capillary tube systems with 
liquid-suction heat exchangers. Royal Vendors also stated that anti-
sweat heaters are no longer in use and can be removed from the list of 
technologies considered. (Royal, No. 11 at p. 3)
    On this issue, Coca-Cola stated that the manufacturers which supply 
the company with beverage vending machines have already discontinued 
use of capillary tube expansion devices (which consume more energy) and 
are starting to instead use more-efficient thermostatic and electronic 
expansion valves. Coca-Cola stated that some manufacturers are 
researching other technologies such as Stirling refrigeration, which 
uses temperature differential to provide electrical power. (Public 
Meeting Transcript, No. 8 at p. 92) EEI and ACEEE agreed that ballasts 
using dimming technology should be considered a technology option as a 
means of decreasing the energy consumption associated with beverage 
vending machine lighting. (Public Meeting Transcript, No. 8 at p. 92; 
Joint Comment, No. 13 at p. 3) EEI added that DOE may want to 
investigate other lighting technologies such as T5 fluorescent lamps 
and dimmable light emitting diode (LED) systems. (EEI, No. 12 at p. 4) 
PG&E expressed a similar opinion that there are many opportunities to 
save energy in lighting beverage vending machines. PG&E also suggested 
considering additional fan motor technologies. (Public Meeting 
Transcript, No. 8 at p. 172) USA Technologies stated that the 
technology options list should also include energy-management systems, 
which restrict the energy use of equipment in a room when it is not 
occupied. (Public Meeting Transcript, No. 8 at p. 149).
    DOE is addressing all the technology options suggested and welcomes 
further public comment on this issue. See the screening analysis 
portion of this ANOPR and Chapter 3 of the TSD for more details on 
these technology options.

B. Screening Analysis

    The purpose of the screening analysis is to evaluate the technology 
options identified as having the potential to improve the efficiency of 
equipment, in order to determine which technologies to consider further 
and which to screen out. DOE consulted with industry, technical 
experts, and other interested parties to develop a list of technologies 
for consideration. DOE then applied the following four screening 
criteria to determine which technologies are unsuitable for further 
consideration in the rulemaking:
    (1) Technological Feasibility. Technologies incorporated in 
commercial equipment or in working prototypes will be considered 
technologically feasible.
    (2) Practicability to Manufacture, Install, and Service. If mass 
production and reliable installation and servicing of a technology in 
commercial equipment could be achieved on the scale necessary to serve 
the relevant market at the time of the effective date of the standard, 
then that technology will be considered practicable to manufacture, 
install, and service.
    (3) Adverse Impacts on Equipment Utility or Equipment Availability. 
If a technology is determined to have significant adverse impact on the 
utility of the equipment to significant subgroups of consumers, or 
result in the unavailability of any covered equipment type with 
performance characteristics (including reliability), features, sizes, 
capacities, and volumes that are substantially the same as equipment 
generally available in the United States at the time, it will not be 
considered further.
    (4) Adverse Impacts on Health or Safety. If it is determined that a 
technology will have significant adverse impacts on health or safety, 
it will not be considered further.
    10 CFR Part 430, Subpart C, Appendix A at 4(a)(4) and 5(b).
1. Technology Options Screened Out
    In the market and technology assessment (Chapter 3 of the TSD), DOE 
developed an initial list of technologies expected to have the 
potential to reduce the energy consumption of beverage vending 
machines. In the screening analysis, DOE screened out technologies 
based on four criteria discussed above (i.e., technological 
feasibility, practicability to manufacture, changes to equipment 
utility, and safety). The list of remaining technologies becomes one of 
the key inputs to the engineering analysis (discussed subsequently). 
For reasons explained below, DOE screened out a number of technologies 
(which were not input into the energy consumption model), including 
higher-efficiency evaporator and condenser fan blades, low-pressure 
differential evaporators, and defrost mechanisms.
    Higher-efficiency evaporator and condenser fan blades reduce motor 
shaft power requirements by moving air more efficiently. Current 
beverage vending machine designs use stamped sheet metal or plastic 
axial fan blades. These fan blades are lightweight and inexpensive. DOE 
was not able to identify any axial fan blade technology that is 
significantly more efficient than that which is currently in use, but 
it did identify and consider one alternative fan blade technology that 
could potentially improve efficiency--tangential fan blades. Tangential 
fan blades can produce a wide, even airflow, and have the potential to 
allow for increased

[[Page 34109]]

saturated evaporator temperature (SET) through improved air 
distribution across the evaporator coil, which would reduce compressor 
power. However, tangential fan blades are less efficient at moving air, 
and, thus, require greater motor shaft power. Because of these 
competing effects, the use of tangential fan blades would not be 
expected to improve energy efficiency, so DOE did not consider 
tangential fan blades as a design option.
    Low-pressure differential evaporators reduce energy consumption by 
reducing the power level required of evaporator fan motors. However, in 
space-constrained equipment such as beverage vending machines, this 
reduction usually comes from a decrease in evaporator coil surface 
area, which generally requires a lower SET to achieve the same 
discharge air temperature and cooling potential. This, in turn, results 
in a reduction in compressor efficiency. Because of these competing 
effects, the use of low-pressure differential evaporators would not be 
expected to improve energy efficiency, so DOE did not consider low-
pressure differential evaporators as a design option.
    Defrosting for beverage vending machines is typically accomplished 
with off-cycle defrost (which uses no energy and decreases compressor 
on-time), although DOE understands that this function also may be 
accomplished with electric resistance heating. Because the vast 
majority of machines already use off-cycle defrost (a typical feature 
in baseline equipment), DOE has determined that there is currently no 
defrost design option capable of more effectively reducing defrost 
energy consumption for equipment that uses off-cycle defrost. For these 
reasons, DOE did not consider off-cycle defrost as a design option for 
achieving further improvements in energy efficiency.
    DOE eliminated four other technologies considered in the market and 
technology assessment--thermoacoustic refrigeration, magnetic 
refrigeration, electro-hydrodynamic heat exchangers, and copper rotor 
motors--because all four are currently in the research stage, and DOE 
believes that they would not be practicable to manufacture, install, 
and service on the scale necessary to serve the relevant market at the 
time of the effective date of the standard (i.e., 2012). Because these 
technologies are in the research stage, DOE also cannot assess whether 
they would have any adverse impacts on utility to significant subgroups 
of consumers, would result in the unavailability of any types of 
equipment, or would present any significant adverse impacts on health 
or safety. Therefore, DOE will not consider these technologies as 
design options for improving the energy efficiency of beverage vending 
machines.
2. Technology Options Considered Further in Analysis
    After screening out technologies in accordance with the provisions 
set forth in 10 CFR Part 430, Subpart C, Appendix A, (4)(a)(4) and 
(5)(b), DOE is considering the following nine technologies, or ``design 
options,'' as viable means of improving energy efficiency of the 
beverage vending machines covered under this ANOPR. The market and 
technology assessment (TSD Chapter 3) provides a detailed description 
of these design options. These design options will be considered by DOE 
in the engineering analysis:
     More-efficient lighting and ballasts.
     More-efficient evaporator fan motors.
     Evaporator fan motor controllers.
     Improved evaporator design.
     Insulation increases or improvements.
     Improved glass pack (for Class A machines).
     Higher efficiency condenser fan motors.
     Improved condenser design.
     More-efficient compressors.
    In the Framework Document, DOE stated that to the greatest extent 
possible, it would base its engineering analysis on commercially-
available equipment which incorporates one or more of the design 
options listed above. In this way, DOE is better able to apply these 
features in a manner consistent with real world applications. DOE 
stated that it would consider a proprietary design in the subsequent 
analyses only if it is not a unique path to a given efficiency level.
    Several stakeholders provided comments on the issue of proprietary 
technologies in the context of the beverage vending machine rulemaking. 
NFESC responded that DOE should consider whether efficiency levels 
attainable only through proprietary technologies can be made part of 
the efficiency standard if that technology were to be made available 
through licensing agreements at a reasonable cost. (NFESC, No. 15 at p. 
6) USA Technologies stated that its products are patented, but 
available to anyone in the industry anywhere in the world. (Public 
Meeting Transcript, No. 8 at p. 182) USA Technologies also noted that 
it has a proprietary patented design that will take many of the ENERGY 
STAR Tier 1 machines to Tier 2 levels and make some Tier 2 machines 
even more efficient. USA Technologies added that there is technology in 
the market today capable of driving energy costs down at a very 
reasonable cost to the manufacturer. USA Technologies urged DOE not to 
exclude these proprietary technologies from the analysis, although it 
also acknowledged that the market should remain competitive. (Public 
Meeting Transcript, No. 8 at p. 176).
    PepsiCo agreed with DOE's approach, claiming that certain 
proprietary technologies should be excluded. PepsiCo cited the example 
of how Coca-Cola has patented several energy management technologies 
that are not available to PepsiCo. (Public Meeting Transcript, No. 8 at 
p. 181) Dixie-Narco stated that proprietary designs that include add-on 
or non-permanent energy management devices not installed by the 
manufacturer must be excluded from consideration in this rulemaking, 
since the manufacturer is ultimately responsible for all technologies 
incorporated in beverage vending machines. (Dixie-Narco, No. 14 at p. 
4)
    As noted previously, DOE will consider all proprietary designs 
unless they are the only way to reach a given efficiency level, in 
which case they will be rejected from further analysis. With regard to 
proprietary add-on energy management devices, DOE has not considered 
these devices as design options because they are external to the 
vending machine and/or are not installed by the manufacturer. DOE is 
sensitive to stakeholder concerns regarding proprietary designs and 
will make provisions to maintain the confidentiality of any proprietary 
data stakeholders submit. This information will provide input to the 
competitive impact assessment and other economic analyses.
    For more details on how DOE developed the technology options and 
the process for screening these options and the design options that DOE 
is considering, see the market and technology assessment (Chapter 3 of 
the TSD) and the screening analysis (Chapter 4 of the TSD).

C. Engineering Analysis

    The purpose of the engineering analysis is to establish the 
relationship between the cost and efficiency of beverage vending 
machines. For each equipment class, this relationship estimates the 
baseline manufacturer cost, as well as the incremental cost for 
equipment at efficiency levels above the baseline. In determining the 
performance of higher-efficiency equipment, DOE considers technologies 
and design option combinations not

[[Page 34110]]

eliminated by the screening analysis. The output of the engineering 
analysis is a set of cost-efficiency ``curves'' that are used in 
downstream analyses (i.e., the LCC and PBP analyses and the NIA).
    DOE typically structures its engineering analysis around one of 
three methodologies: (1) The design-option approach, which calculates 
the incremental costs of adding specific design options to a baseline 
model; (2) the efficiency-level approach, which calculates the relative 
costs of achieving increases in energy efficiency levels; and (3) the 
reverse-engineering or cost-assessment approach, which involves a 
``bottoms-up'' manufacturing cost assessment based on a detailed bill 
of materials derived from beverage vending machine tear-downs.
1. Approach
    In this rulemaking, DOE is adopting a design-option approach, which 
calculates the incremental costs of adding specific design options to a 
baseline model. For each equipment class, DOE analyzed three machines 
of different sizes to assess how energy use varies with size. A small, 
a medium, and a large machine were chosen for Class A and Class B 
beverage vending machines, based on current market offerings. See 
Chapter 3 of the TSD for a detailed description of the Class A and 
Class B equipment classes and Chapter 5 of the TSD for additional 
detail on the different machines analyzed.
    In the Framework Document, DOE requested feedback on possible use 
of an efficiency-level approach supported, as needed, by a design-
option approach to determine the cost-efficiency relationship for 
beverage vending machines. DOE stated that it plans to create an 
industry-wide analysis based primarily on data from stakeholders. The 
data are intended to represent the average incremental production cost 
to improve a baseline model to a specified efficiency level. This 
methodology constitutes an efficiency-level approach to the engineering 
analysis because it establishes the relationship between manufacturer 
cost and increased efficiency at predetermined efficiency levels above 
the baseline. Under this approach, manufacturers typically provide 
incremental manufacturer cost data for incremental increases in 
efficiency. Although DOE specifically requested this information from 
the industry, no such information was provided.
    Since an efficiency-level approach was not possible for beverage 
vending machines, DOE instead decided to use cost estimates of specific 
design options. This methodology constitutes a design-options approach 
because it uses individual or combinations of design options to 
identify increases in efficiency. Under this approach, estimates are 
based on manufacturer or component supplier data or derived from 
engineering computer simulation models. Individual design options or 
combinations of design options are added to the baseline model in 
ascending order of cost. This approach also involves consultation with 
outside experts and/or further review of publicly available cost and 
performance information.
    The Joint Comment stated that using manufacturer-supplied 
efficiency levels that have been checked against design options derived 
by DOE was acceptable if DOE verified a sufficient number of efficiency 
improvements with design option data to provide confidence in DOE's 
overall estimates. The Joint Comment added that for a robust approach, 
DOE must compare multiple points per equipment class and do additional 
analysis if the design option and efficiency level data are not in 
alignment. (Joint Comment, No. 13 at p. 1) The Joint Comment stated 
that DOE should explore methods of making the detailed manufacturer 
cost data publicly available, although it recognized that this task 
would be difficult given DOE's need to strike a balance between 
manufacturers' requirements for confidentiality and the public's need 
for transparency in government decision making. In making this request, 
the Joint Comment explained that manufacturer cost estimates are a 
``black box'' for other stakeholders, and making the data submitted by 
manufacturers publicly available could greatly improve the transparency 
of the process. (Joint Comment, No. 13 at p. 2)
    As explained above, an efficiency-level approach was not possible, 
so DOE relied solely on a design-option approach in the engineering 
analysis. Given that there were no manufacturer-provided cost-
efficiency curves, DOE was not able to compare the two approaches as 
suggested by the Joint Comment. However, the design-option approach 
allows advocates, manufacturers, and other stakeholders the opportunity 
to review DOE's methodology and assumptions, including cost estimates, 
as this information is made publicly available through the ANOPR TSD 
and engineering spreadsheet. Through consultation with outside experts, 
review of publicly-available cost and performance information, and 
modeling of equipment cost and energy consumption, DOE believes it has 
conducted a robust engineering analysis. Chapter 5 of the TSD describes 
the methodology used to perform the design-option analysis in detail.
 2. Equipment Classes Analyzed
    Beverage vending machines can be divided into different equipment 
classes categorized by physical characteristics that affect equipment 
efficiency. Most of these characteristics affect the merchandise that 
the equipment cools and vends, and how the customer accesses that 
merchandise. Key physical characteristics are the door type (e.g., 
glass-front or solid-front) and the machine's vendible capacity (or 
refrigerated volume). As described in Section II.A.2, DOE analyzed two 
equipment classes: Class A (fully-cooled machines) and Class B (all 
other machines). Furthermore, as discussed above, beverage vending 
machine energy use varies with volume, so DOE analyzed three different 
machine sizes for each equipment class to assess how energy use varies 
with size.
 3. Analytical Models
    In the design-option approach, DOE used models to develop cost and 
energy consumption estimates for each equipment class at each 
efficiency level. DOE used a cost model to estimate the manufacturer 
production cost (MPC) in dollars, and an energy consumption model to 
estimate the daily energy consumption in kilowatt hours (kWh) of 
covered beverage vending machines. Each of these models is discussed in 
further detail below.
a. Cost Model
    DOE used a cost model to estimate the core case cost (i.e., the MPC 
of the structure, walls, doors, shelving and fascia of the case, but 
does not include the cost of any energy-using components) of beverage 
vending machines. This model was adapted from a cost model developed 
for DOE's rulemaking on commercial refrigeration equipment.\27\ The 
approach for commercial refrigeration equipment involved disassembling 
a self-contained refrigerator, analyzing the materials and 
manufacturing processes for each component, and developing a parametric 
spreadsheet to model the cost to fabricate (or purchase) each component 
and the cost of assembly. Because of the similarities in manufacturing 
processes between self-contained commercial refrigeration equipment and 
vending machines, DOE

[[Page 34111]]

was able to adapt the commercial refrigeration equipment cost model for 
beverage vending machines by maintaining many of the assumptions about 
materials and manufacturing processes but modifying the dimensions and 
types of components to be specific to beverage vending machines. To 
confirm the accuracy of the cost model, DOE obtained input from 
stakeholders on beverage vending machine production cost estimates and 
on other assumptions used in the model. DOE believes this approach is 
acceptable, given the similarities in materials and manufacturing 
processes between commercial refrigeration equipment and beverage 
vending machines. Chapter 5 of the TSD provides details of the cost 
model.
---------------------------------------------------------------------------

    \27\ See http://www.eere.energy.gov/buildings/appliance_
standards/commercial/refrigeration_equipment.html for further 
detail on and validation of the commercial refrigeration equipment 
cost model.
---------------------------------------------------------------------------

    In the Framework Document, DOE sought feedback from manufacturers 
on incremental manufacturing costs and components in terms of design 
options to improve energy efficiency. The Joint Comment stated that the 
cost estimates should assume mass production, since efficiency 
standards could make today's expensive niche products tomorrow's lower-
cost commodity products. (Joint Comment, No. 13 at p. 2)
    The Joint Comment stated that DOE should account for market forces 
in computing typical costs using manufacturer cost estimates. Based on 
past experience, the Joint Comment explained that the various cost 
estimates that DOE will collect from manufacturers can vary 
significantly from manufacturer to manufacturer. Also, manufacturers 
with below-average costs will determine market prices, because higher-
priced manufacturers will need to reduce costs to remain competitive. 
Therefore, the Joint Comment recommended that DOE should use the simple 
average of the market-share-weighted average cost estimate and the 
lowest cost estimate. (Joint Comment, No. 13 at p. 2)
    EEI mentioned that the increasing cost of commodities such as 
steel, copper, aluminum, and plastic may affect this rulemaking. EEI 
stated that commodity prices for plastics, for example, have risen 
dramatically in the past few years because of the increase in oil 
prices. However, EEI also noted that high prices may dictate redesigns 
to avoid using those materials. (Public Meeting Transcript, No. 8 at p. 
181 and EEI, No. 12 at p. 5) PG&E stated that just as the prices of raw 
materials have gone up, so have the prices of primary energy. (Public 
Meeting Transcript, No. 8 at p. 183)
    In response to these comments, DOE conducted a sensitivity analysis 
on material prices similar to the analysis presented in the commercial 
refrigeration equipment rulemaking. DOE determined the cost of raw 
materials by using prices for copper, steel, and aluminum from the 
American Metals Market.\28\ Prices for rifled and unrifled copper 
tubing were obtained directly from a tubing manufacturer. Because metal 
prices have fluctuated drastically over the last few years, DOE used 
metal prices that reflect a five-year average of the Bureau of Labor 
Statistics Producer Price Indices (PPIs) \29\ from 2002 to 2006 with an 
adjustment to 2006$. DOE used the PPIs for copper rolling, drawing, and 
extruding, and steel mill products, and DOE made the adjustments to 
2006$ using the gross domestic product implicit price deflator. Because 
it is not clear if these material price trends will continue, DOE 
conducted a sensitivity analysis to illustrate the effect of raw 
material price variability on the cost of beverage vending machines. 
See Chapter 5 of the TSD for more details on this sensitivity analysis.
---------------------------------------------------------------------------

    \28\ American Metals Market, http://www.amm.com/.
    \29\ U.S. Department of Labor, Bureau of Labor Statistics, 
Producer Price Indices, http://www.bls.gov/ppi/.
---------------------------------------------------------------------------

    DOE applied a manufacturer markup to the MPC estimates to arrive at 
the MSP. MSP is the price of equipment sold at which the manufacturer 
can recover both production and non-production costs and earn a profit. 
DOE developed a market-share-weighted average industry markup by 
examining gross margin information from the annual reports of several 
major beverage vending machine manufacturers and Securities and 
Exchange Commission (SEC) 10-K reports.\30\ The manufacturers whose 
gross margin information DOE examined represent approximately 70 
percent of the beverage vending machine market, and each of these 
companies is a subsidiary of a more diversified parent company that 
manufactures equipment other than beverage vending machines. Because 
the SEC 10-K reports do not provide gross margin information at the 
subsidiary level, the estimated markups represent the average markups 
that the parent company applies over its entire range of offerings.
---------------------------------------------------------------------------

    \30\ Available at: http://www.sec.gov/edgar.shtml.
---------------------------------------------------------------------------

    Markups were evaluated for 2001 to 2006. The manufacturer markup is 
calculated as 100/(100 - average gross margin), where average gross 
margin is calculated as revenue - cost of goods sold (COGS). To 
validate the information, DOE reviewed its assumptions with beverage 
vending machine manufacturers. During interviews (see Chapter 12 of the 
TSD), beverage vending machine manufacturers stated that many 
manufacturers generate revenue and profit by providing other goods and 
services, and their margins for beverage vending machines are lower 
than their company-wide margin. Taking this information into 
consideration, DOE is using an industry-wide manufacturer markup of 
1.03 in the engineering analysis.
b. Energy Consumption Model
    The energy consumption model estimates the daily energy consumption 
of beverage vending machines at various performance levels using a 
design-option approach. The model is specific to the equipment covered 
under this rulemaking, but is sufficiently generalized to model the 
energy consumption of all covered equipment classes. For a given 
equipment class, the model estimates the daily energy consumption for 
the baseline and the energy consumption of several performance levels 
above the baseline. The model is used to calculate each performance 
level separately. For the baseline level, a corresponding cost is 
calculated using the cost model. For each level above the baseline, the 
cost increases resulting from the addition of various design options 
are used to recalculate the cost.
    In developing the energy consumption model, DOE made certain 
assumptions, including general assumptions about the analytical 
methodology and specific assumptions regarding load components and 
design options. DOE based its energy consumption estimates on new 
equipment tested in a controlled-environment chamber under the 
procedures and conditions specified in ANSI/ASHRAE Standard 32.1-2004, 
Methods of Testing for Bottled, Canned, and Other Sealed Beverages.\31\ 
Manufacturers of beverage vending machines must certify that their 
equipment complies with Federal standards using this test method, which 
specifies a certain ambient temperature, humidity, and other 
requirements. One relevant specification that DOE noted is absent from 
this standard is the operating hours of the display case lighting 
during a 24-hour period. Thus, DOE is considering the operating time to 
be 24 hours (i.e., that lights are on throughout the 24-hour period) 
when conducting the analyses for this rulemaking. Chapter 5 of the TSD

[[Page 34112]]

details these and other beverage vending machine considerations.
---------------------------------------------------------------------------

    \31\ These test procedures are incorporated by reference at 10 
CFR 431.294.
---------------------------------------------------------------------------

    The energy consumption model calculates daily energy consumption 
(DEC) as being comprised of two major components: (1) Compressor energy 
consumption; and (2) component energy consumption (expressed as kWh/
day). ``Component energy consumption'' is a sum of the direct 
electrical energy consumption of fan motors, lighting, vend mechanisms, 
control systems, and coin and bill validators. ``Compressor energy 
consumption'' is calculated from the total refrigeration load 
(expressed as British thermal units per hour (Btu/h)) and a compressor 
model based on the 10-coefficient compressor model in American 
Refrigeration Institute (ARI) Standard 540-2004, Performance Rating of 
Positive Displacement Refrigerant Compressors and Compressor Units. The 
total refrigeration load is a sum of the component heat load and the 
non-electric load. The component heat load is a sum of the heat emitted 
by evaporator fan motors and lighting inside the refrigerated space. 
(Condenser fan motors are outside the refrigerated space and do not 
contribute to the component heat load.) The non-electric load is a sum 
of the heat contributed by radiation through glass doors (in Class A 
machines); heat conducted through walls and doors; and sensible and 
latent loads from warm, moist air infiltration through vend doors and 
cracks. Chapter 5 of the TSD provides details on component energy 
consumption, compressor energy consumption, and heat load models.
4. Baseline Models
    As mentioned above, the engineering analysis estimates the 
incremental costs for equipment with efficiency levels above a baseline 
model in each equipment class. As an initial matter, DOE defined 
baseline specifications for each equipment class. These specifications 
include dimensions, numbers of components, operating temperatures, 
nominal power ratings, and other necessary features to calculate the 
energy consumption of each equipment class. The baseline specifications 
define the energy consumption and cost of the typical equipment (i.e., 
units of typical efficiency) on the market today, namely beverage 
vending machines meeting ENERGY STAR Tier 1.
    DOE established baseline specifications for each of the equipment 
classes modeled in the engineering analysis by reviewing available 
manufacturer data, selecting several representative units based upon 
that data, and then aggregating the physical characteristics of the 
selected units. As noted above, DOE chose the baseline specifications 
such that the baseline machines met ENERGY STAR's Tier 1 criteria (see 
TSD Chapter 3 for further details on the criteria). This process 
created a representative unit for each equipment class with average 
characteristics for physical parameters (e.g., volume, wall area), and 
typical performance for energy-consuming components (e.g., fans, 
lighting). See Chapter 5 of the TSD for these specifications.
5. Alternative Refrigerants
    Generally, DOE must consider in its engineering analysis the 
effects of regulatory changes outside DOE's statutory energy 
conservation standards rulemaking process that can affect manufacturers 
of the covered equipment. Some of these changes could also affect the 
energy efficiency or energy consumption of the equipment.
    In the Framework Document, DOE sought stakeholder input as to 
whether there are any regulatory issues that it should consider in its 
analysis of beverage vending machines. DOE identified the phaseout of 
hydrochlorofluorocarbons (HCFCs) \32\ as an example of an external 
regulatory issue the beverage vending machine industry must address 
that could affect the engineering analysis. HCFCs contain chlorine, a 
chemical known to deplete stratospheric ozone. Due to this phaseout, 
the beverage vending machine industry must transition to non-ozone-
depleting refrigerants, such as hydrofluorocarbons (HFCs), hydrocarbons 
(HCs), and other natural refrigerants (e.g., carbon dioxide 
(CO2)). As a result, the beverage vending machine industry 
generally has been transitioning away from the HCFC-based refrigerants 
in its equipment. For the beverage vending machines covered in this 
rulemaking, DOE understands that much of the industry has already been 
using HFC-based refrigerants, specifically R-134a. Therefore, to 
address the imminent phaseout of HCFCs, DOE considered the effects of 
HFC-based refrigerants from the outset of its analyses. Some 
stakeholders stated, however, that DOE should consider examining other 
types of refrigerants such as HCs and CO2.
---------------------------------------------------------------------------

    \32\ EPA is phasing out the production and importation of 
certain HCFC refrigerants (i.e., HCFC-142b and HCFC-22) in new 
equipment in the U.S. by January 1, 2010. Further, EPA is phasing 
out the production and importation of all HCFC refrigerants in new 
equipment in the U.S. by January 1, 2015. 42 U.S.C. 7671(d).
---------------------------------------------------------------------------

    Coca-Cola commented that it has made a corporate commitment to move 
beyond HCFC and HFC refrigerants to vending machines that use HCs and 
CO2 (i.e., R-744). Coca-Cola expressed concern that current 
CO2 systems are not as efficient as systems using HCFC 
refrigerants, thereby making compliance with any new energy 
conservation standard more difficult for such machines, if their unique 
characteristics are not taken into account. (Public Meeting Transcript, 
No. 8 at p. 146)
    EEI stated that the HFC [sic] phaseout begins in 2010 and that the 
final rule for this rulemaking will be in 2009, with standards becoming 
effective in 2012. EEI commented that, because of this timing, if Coca-
Cola could provide input to DOE on new refrigeration technologies, DOE 
would not have to perform its own analysis on alternative refrigerants. 
(Public Meeting Transcript, No. 8 at p. 170) (DOE notes, however, that 
the phaseout occurring in 2010 is for HCFC-based refrigerants and that 
no U.S. phaseout of HFC-based refrigerants is currently scheduled.) EEI 
also stated that it appears that new refrigerants will be in use in 
beverage vending machines by 2010. According to EEI, certain new 
technology options should be compatible with the refrigerant of choice 
starting in 2010, when HCFC-based refrigerants are phased out in the 
United States. EEI added that due to the global nature of this 
equipment and the ban on HFC-based refrigerants in some countries, 
manufacturers are considering CO2 in all beverage vending 
machines, and such action could affect design options and baseline 
energy usage. (EEI, No. 12 at p. 4)
    In response to the comments by Coca Cola and EEI, DOE conducted a 
qualitative examination of the use of HC refrigerants and 
CO2 in the beverage vending machine industry. Based on 
conversations with beverage vending machine manufacturers and industry 
experts, DOE understands that HC refrigerants (e.g., butane and 
propane) are extremely flammable, and are classified as A3 refrigerants 
(low toxicity, high flammability) in the United States. Because of this 
classification, there are significant difficulties in selling and 
certifying equipment in the United States that use hydrocarbon 
refrigerants, and there are currently no manufacturers in the beverage 
vending machine industry who do so. DOE recognizes that other countries 
(e.g., Germany) have begun to adopt the use of HC refrigerants. But in 
the United States, these barriers and the perception of high safety 
risk has prevented their wide-spread use. DOE believes that the use of 
these refrigerants in beverage vending machines is not

[[Page 34113]]

likely and, therefore, did not conduct an analysis using HC 
refrigerants.
    Although CO2 does not have the volatility issues of HC 
refrigerants, CO2 can have lower cycle efficiencies than 
HFC-based refrigerants such as R-134a. DOE also understands that 
necessary components, such as compressors, do not yet exist in the 
market in sizes appropriate for beverage vending machines. Thus, DOE 
was not able to conduct an analysis on CO2-based 
refrigeration systems.
    Therefore, due to volatility and availability issues associated 
with HC refrigerants and CO2, HFC-based refrigerants are the 
only alternative refrigerant option DOE plans to consider in this 
rulemaking. DOE requests additional stakeholder input or data on this 
issue.
6. Cost-Efficiency Results
    The results of the engineering analysis are reported as cost-
efficiency data (or ``curves'') in the form of daily energy consumption 
(DEC) (in kWh) versus MSP (in dollars), which form the basis for 
subsequent analyses in the ANOPR. DOE developed six curves representing 
the two equipment classes and three different size machines in each 
equipment class. The methodology for developing the curves started with 
determining the energy consumption for baseline equipment and MPCs for 
this equipment. Above the baseline, DOE implemented design options 
using the ratio of cost to savings, and implemented only one design 
option at each level. Design options were implemented until all 
available technologies were employed (i.e., at a max-tech level). See 
TSD Chapter 5 for additional detail on the engineering analysis and TSD 
Appendix B for complete cost-efficiency results.

D. Markups To Determine Equipment Price

    This section explains how DOE developed the distribution channel 
(supply chain) markups to determine installed prices for beverage 
vending machines (see Chapter 6 of the TSD). DOE used the supply chain 
markups it developed (including sales taxes and installation costs), 
along with the MSPs developed from the engineering analysis, to arrive 
at the final installed equipment prices for baseline and higher-
efficiency equipment. Whereas the manufacturer markup DOE used in the 
engineering analysis was applied to the MPC to arrive at the MSP, these 
supply chain markups (baseline and incremental markups described below) 
were applied to the MSPs to arrive at the final installed equipment 
prices. At the Framework public meeting, the NPCC stated that among 
universities, school districts, and other public agencies, direct 
purchases of beverage vending machines by these sectors might be a 
fairly significant fraction of total machine purchases, and it added 
that the weighting between the different sectors should be the same as 
for energy prices. (Public Meeting Transcript, No. 8 at p. 227)
    DOE subsequently reviewed different sources of data, including 
industry reports, and concluded there are three main channels of 
distribution for beverage vending machines. Businesses and other 
entities that directly purchase the equipment typically obtain their 
machines through an equipment wholesaler/distributor and not directly 
from the manufacturer. Such direct ownership of vending machines by 
site owners, however, constitutes only about five percent of the total 
market. Instead, most institutions and manufacturing facilities have 
machines installed on-site through a ``location contract'' from a 
vending machine operator or bottler/distributor that owns and stocks 
the machines.
    As Table II.1 demonstrates, DOE identified three distribution 
channels for beverage vending machines which describe how the equipment 
passes from the manufacturer to the customer. In the first distribution 
channel, the manufacturer sells the equipment directly to the beverage 
bottler/distributor, who installs and operates the machine at a given 
site. In the second and third distribution channels, the manufacturer 
sells the beverage vending machine to the equipment wholesaler/
distributor, who in turn may sell it to a vending machine operator (who 
installs and operates the machine at a given site) or to a site owner 
(who stocks and operates the machine). Table II.1 also provides the 
estimated distribution channel shares (in percentage of total sales) 
through each of the three distribution channels.

                   Table II.1.--Distribution Channels and Shares for Beverage Vending Machines
----------------------------------------------------------------------------------------------------------------
              Channel 1                             Channel 2                             Channel 3
----------------------------------------------------------------------------------------------------------------
                    Manufacturer                          Manufacturer                          Manufacturer
                          [darr]                                [darr]                                [darr]
    Beverage Bottler/Distributor      Equipment Wholesaler/Distributor      Equipment Wholesaler/Distributor
                                                                [darr]                                [darr]
                                              Vending Machine Operator                            Site Owner
----------------------------------------------------------------------------------------------------------------
                             68%                                   27%                                    5%
----------------------------------------------------------------------------------------------------------------

    For each step in the distribution channels presented above, DOE 
estimated a baseline markup and an incremental markup, which are 
additional amounts added when equipment is sold and installed. A 
baseline markup is applied for the purchase of baseline equipment. An 
incremental markup is applied to the incremental increase in MSP for 
the purchase of higher-efficiency equipment. The overall baseline or 
overall incremental markup is the product of all the markups at each 
step in the distribution channel. Overall, weighted average baseline or 
incremental markups for the entire beverage vending machine market can 
be determined using the shipment weights through each distribution 
channel and the corresponding overall baseline markup or the 
corresponding overall incremental markup, respectively, for each 
distribution channel, and any applicable sales tax.
    DOE developed markups for each step of a given distribution channel 
based on available financial data. Specifically, DOE based the 
equipment wholesaler/distributor markups on U.S. Census Bureau data 
\33\ for Other Commercial Equipment Merchant Wholesalers (NAICS 
423440). This sector includes those establishments primarily engaged in 
distributing and wholesaling

[[Page 34114]]

refrigerated beverage vending machines and other equipment to 
restaurants and hotels (NAICS 4234401) and stores (NAICS 4234402). The 
U.S. Census Bureau data for this sector include revenue and expense 
data in total dollars, rather than in typical values for an average or 
representative business. Because of this, DOE assumed the total dollar 
values that the U.S. Census Bureau reported, once converted to an 
individual entity basis, represents revenues and expenses for an 
average or typical wholesaler/distributor business.
---------------------------------------------------------------------------

    \33\ U.S. Census Bureau. 2002. 2002 Economic Census Release 
Date: 12/3/2004. Sector 42: Wholesale Trade: Industry Series: 
Product Lines by Kind of Business for the United States: 2002 at 
http://factfinder.census.gov/servlet/IBQTable?_bm=y&-MFG=10971:42&-ds_name=EC0242I3&-_lang=en (Accessed on April 16, 2007).
---------------------------------------------------------------------------

    DOE calculated baseline markups for wholesalers as total revenue 
(equal to all expenses paid plus profit) divided by the cost of goods 
sold (COGS). Expenses include direct costs for equipment, labor 
expenses, occupancy expenses, and other operating expenses (e.g., 
insurance, advertising). DOE presumed some expenses (i.e., labor and 
occupancy) to be fixed and not subject to change with the increases in 
the efficiency of the equipment being sold. Other expenses are variable 
costs that may change in response to changes in the COGS. In developing 
incremental markups, DOE again considered the labor and occupancy costs 
to be fixed, and the other operating costs and profit to be 
proportional to the MSP.
    The overall markup for a distribution channel is the product of all 
the markups plus sales tax within that channel. DOE calculated both 
baseline and incremental overall markups for each distribution channel. 
DOE calculated sales taxes based on State-by-State sales tax data 
reported by the Sales Tax Clearinghouse.\34\ Sales tax varies by State, 
so the markup analysis develops distributions of markups within each 
distribution channel as a function of State.
---------------------------------------------------------------------------

    \34\ The Sales Tax Clearinghouse. Available at: https://thestc.com/STRates.stm (Accessed on June 25, 2007).
---------------------------------------------------------------------------

    For the third distribution channel, the site owner of a beverage 
vending machine usually consists of a business type (e.g., 
manufacturing facility, office buildings, health care buildings, and 
retail). Because the State-by-State distribution of beverage vending 
machines may vary by business type (e.g., manufacturing facilities may 
be more prevalent relative to retail stores in one part of the country 
than another), a national level distribution of the markups may be 
different for each business type.
    Average overall markups in each distribution channel can be 
calculated using estimates of the shipments of beverage vending 
machines by distribution of State population. However, markups are not 
uniform among wholesalers. DOE used the Excel spreadsheet-based Crystal 
Ball program, which employs Monte Carlo analysis, to reflect this 
uncertainty in the LCC analysis. DOE applied the same baseline and 
incremental markups to all sales of beverage vending machines passing 
through equipment wholesaler/distributors, whether to the vending 
machine operator (channel 2) or to the site owner (channel 3). Table 
II.2 and Table II.3 show overall baseline and incremental markups for 
sales within each distribution channel. Chapter 6 of the TSD provides 
additional detail on markups.

            Table II.2.--Overall Average Baseline Markups by Distribution Channel Including Sales Tax
----------------------------------------------------------------------------------------------------------------
                                                            Manufacturer       Wholesaler/      Overall weighted
                                                               direct          distributor          average
----------------------------------------------------------------------------------------------------------------
Markup.................................................              1.000               1.46              1.147
Sales Tax..............................................              1.068              1.068              1.068
Overall Markup.........................................              1.068              1.559              1.226
----------------------------------------------------------------------------------------------------------------


          Table II.3.--Overall Average Incremental Markups by Distribution Channel Including Sales Tax
----------------------------------------------------------------------------------------------------------------
                                                            Manufacturer       Wholesaler/      Overall weighted
                                                               direct          distributor          average
----------------------------------------------------------------------------------------------------------------
Markup.................................................              1.000               1.20              1.064
Sales Tax..............................................              1.068              1.068              1.068
Overall Markup.........................................              1.068              1.282              1.137
----------------------------------------------------------------------------------------------------------------

E. Energy Use Characterization

    The energy use characterization analysis estimates the annual 
energy consumption of individual beverage vending machines (both 
baseline and higher-efficiency units) installed indoors or outdoors 
around the country. DOE uses this estimate, which represents typical 
energy consumption in the field, as an input in the subsequent LCC and 
PBP analyses (Chapter 8 of the TSD) and NIA (Chapter 10 of the TSD). 
DOE estimated the energy use for machines in the two equipment classes 
(Class A and Class B vending machines) \35\ analyzed in the engineering 
analysis based on the DOE test procedure \36\ (Chapter 5 of the TSD).
---------------------------------------------------------------------------

    \35\ Class A and Class B vending machines are as described in 
Section II.A.2 of the ANOPR.
    \36\ DOE incorporated by reference, ANSI/ASHRAE Standard 32.1-
2004, with two modifications, as the DOE test procedure for the 
beverage vending machines. 71 FR 71340, 71375 (Dec. 8, 2006); 10 CFR 
431.294. ``Plug loads'' are those appliances and equipment that are 
plugged into the power outlets in a building.
---------------------------------------------------------------------------

    Beverage vending machines are typically installed in manufacturing 
facilities and commercial buildings and are considered part of the 
``plug loads'' \37\ of the building. They also contribute to the heat 
gain to the building on a 24-hour basis. At the Framework public 
meeting, DOE asked whether it should quantify the effect of more-
efficient beverage vending machines (presumably contributing less heat 
to the building) on building space conditioning loads and, if so, what 
would be the most effective way of doing this. EEI responded that there 
might be some impact on building space conditioning loads for about 
five percent of the installations, based upon their location and 
concentration. (Public Meeting Transcript, No. 8 at p. 208) In general, 
EEI remarked that in many situations (e.g., a single machine in a 
facility or one machine per occupied floor) these impacts are likely to 
be minimal; however, EEI stated that there could be an appreciable 
impact on space conditioning loads in indoor areas where multiple 
machines are concentrated. On this topic, the Joint

[[Page 34115]]

Comment recommended that DOE perform a limited set of sensitivity 
analyses to determine whether a reasonable estimate of the impacts is 
feasible and whether such impacts would be significant, given 
variations in climate, space conditioning system type, and other 
building loads. (ACEEE, No. 13 at p. 4) Dixie-Narco asserted that the 
impact would be minimal and that DOE should not attempt to quantify 
this effect. (Dixie-Narco, No. 14 at p. 5) NFESC recommended that DOE 
account for the additional electricity attributable to the added heat 
load on air-conditioning systems in determining what efficiency 
standard will be cost-effective. (NFESC, No. 15 at p. 5)
---------------------------------------------------------------------------

    \37\ ``Plug loads'' are those appliances and equipment that are 
plugged into the power outlets in a building.
---------------------------------------------------------------------------

    Based on these comments, DOE conducted a brief sensitivity analysis 
of the impact of a beverage vending machine's energy consumption and 
its magnitude compared to other plug loads in a commercial building, 
where more than two-thirds of the beverage vending machines are 
installed. Using the Energy Information Administration (EIA)'s 
Commercial Building Energy Consumption Survey (CBECS) data,\38\ DOE 
examined 16 commercial building types (i.e., principal building 
activity (PBA) categories) in which beverage vending machines are 
typically installed. Annual energy consumption of these machines was 
calculated, based on 8 kWh of daily electricity consumption and 365 
days of operation, which equated to three percent of the total 
electricity consumption for lighting in a typical commercial building. 
Based on these findings which suggest that the impact is minimal, DOE 
has decided to conduct no further analyses regarding the impact of 
more-efficient beverage vending machines on building space-conditioning 
loads.
    Another question related to the energy use of beverage vending 
machines is the ``heating mode'' for machines installed outdoors in 
cold climates. At the Framework public meeting, Royal Vendors stated 
that a very small number of machines have a heater kit, although these 
kits do not run much of the time, even in very cold climates such as 
Alaska (Public Meeting Transcript, No. 8 at p. 211). Therefore, DOE 
decided that it will not consider the ``heating mode'' to be a 
significant factor in its energy use analysis.
---------------------------------------------------------------------------

    \38\ EIA 2003. EIA (Energy Information Administration), 2003, 
2003 CBECS Detailed Tables. http://www.eia.doe.gov/emeu/cbecs/cbecs2003/detailed_tables_2003/detailed_tables_2003.html. 
Accessed June 14, 2007.
---------------------------------------------------------------------------

    As discussed above, DOE analyzed two equipment classes of beverage 
vending machines, Class A and Class B. Although Class A machines may be 
certified for indoor/outdoor use, there are few Class A machines 
installed outdoors because of concerns about vandalism. Therefore, DOE 
assumed Class A machines to be installed indoors only and subject to 
the constant indoor air temperature and relative humidity conditions of 
75 [deg]F/45 percent RH, matching one of the test conditions in the DOE 
test procedure. Further, based on market data as to the installation of 
Class B machines and discussions with several beverage vending machine 
distributors, DOE assumed that 25 percent of these machines are placed 
outdoors and that the remaining 75 percent of these machines are 
installed indoors. DOE seeks stakeholder input on this approach, which 
is identified as Issue 1 under ``Issues on Which DOE Seeks Comment'' in 
Section IV.E of this ANOPR.
    Furthermore, for both Class A and Class B machines, DOE analyzed 
the three typical sizes (vendible capacities) defined in the 
engineering analysis (Chapter 5 of the TSD). Each machine has a 
different refrigerated volume as measured by ANSI/AHAM HRF-1-2004 and 
shown in Table II.4.

                                          Table II.4.--Configurations of the Beverage Vending Machines Analyzed
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                          Class A machine                                 Class B machine
                                                         -----------------------------------------------------------------------------------------------
                      Configuration                         Small (A-S-    Medium (A-M-                                    Medium (B-M-
                                                               IN)*             IN)       Large (A-L-IN)  Small (B-S-IO)        IO)       Large (B-L-IO)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Vendible Capacity (number of cans)......................             270             350             410             450             650             800
Refrigerated Volume (ft\3\).............................              19              31              35              19              24              31
--------------------------------------------------------------------------------------------------------------------------------------------------------
* This nomenclature denotes a combination of equipment class, size, and assumed application. For example, A-S-IN denotes a Class A small machine used
  indoors only, whereas B-S-IO denotes a Class B small machine that can be installed either indoors or outdoors.

    DOE estimated the annual energy consumption for Class A vending 
machines as the product of the average daily energy consumption from 
the DOE test procedure indoor test condition of 75 [deg] F/45 percent 
RH, and 365 days per year. For Class A machines, the annual energy 
consumption did not vary by State.
    DOE calculated the energy consumed by Class B vending machines 
using the following relationship:

[GRAPHIC] [TIFF OMITTED] TP16JN08.007

Where:

Eann = Annual average energy consumption,
Eann,outdoor = Annual average energy consumption for an outdoor 
machine, and
Eann,indoor = Annual average energy consumption for an 
indoor machine.

    For the 25 percent of the Class B machines located outdoors, DOE 
developed a spreadsheet-based energy performance model that uses 
Typical Meteorological Year (TMY2) climate data.\39\ DOE created 
temperature and relative humidity bins with temperatures ranging from 
130 [deg]F to -40 [deg]F in 5 [deg]F increments, and percent relative 
humidity values ranging from 100 percent RH to 0 percent RH in 5 
percent RH increments. The model calculates the annual energy 
consumption of a vending machine at any of the chosen engineering 
efficiency levels (derived from the engineering

[[Page 34116]]

analysis) for a variety of temperatures and relative humidity values. 
The model calculates the annual energy use for each TMY2 city by 
stepping through the binned weather data, calculating the daily average 
energy consumption for the beverage vending machine from the energy 
performance model for each bin, dividing by 24 to convert to average 
hourly energy consumption, and multiplying by the number of hours in 
the bin. The sum of the hourly energy consumption for all bins provides 
the annual energy consumption.
---------------------------------------------------------------------------

    \39\ TMY2 data expresses the annual average weather data for 237 
cities in the United States. TMY2 National Renewable Energy 
Laboratory. Typical Meterological Years Derived from the 1961-1990 
National Solar Radiation Database (1995). Available at: http://rrede.nredl.gov/solar/old_data/nsrdb/1961-1990.
---------------------------------------------------------------------------

    DOE estimated annual energy consumed by the remaining 75 percent of 
the Class B machines located indoors as the product of the daily energy 
consumption calculated at the DOE test procedure indoor test condition 
of 75 [deg]F/45 percent RH, and 365 days per year.
    DOE calculated the average annual energy use for each Class B 
machine for all 237 TMY2 stations in the United States. DOE mapped each 
TMY2 station to a certain State, based on its location. Within each 
State, DOE assigned a relative weight to each TMY2 station, based on 
the total population of identifiable population centers (cities, towns, 
other) that can be shown to be most climatically similar to that TMY2 
location. The annual energy consumption data for the TMY locations were 
then weighted to obtain annual energy consumption data for each State.
    As described below, DOE developed the annual energy consumption for 
each equipment class and at each efficiency level for each State in the 
United States as inputs for the LCC and PBP analyses.
1. Selection of Efficiency Levels for Further Analysis
    The engineering analysis considered an efficiency level 
corresponding to the present market efficiency level (below the Tier 1 
efficiency level) which DOE designated as Level 0. DOE then developed 
up to thirteen efficiency levels for some equipment classes to obtain a 
range of cost-efficiency relationships in the engineering analysis. For 
each equipment class, DOE then down-selected only nine efficiency 
levels to consider in the energy use characterization and subsequent 
economic analyses. The efficiency levels range from a baseline 
efficiency level to the max-tech level. As part of that range, DOE 
selected ENERGY STAR levels (Tier 1 and Tier 2) and intermediate levels 
that would yield a smooth LCC curve. Table II.5 shows the mapping of 
the efficiency levels that DOE will use in the further economic 
analyses of the efficiency levels from the engineering analysis. These 
nine efficiency levels, chosen for the subsequent economic analyses, 
the corresponding annual energy consumption figures, and manufacturer 
selling prices for beverage vending machines determined in the 
engineering analysis are all inputs to DOE's LCC analysis.

  Table II.5.--Mapping of the Efficiency Levels for Subsequent Economic
              Analyses to the Engineering Efficiency Levels
------------------------------------------------------------------------
                                      Engineering         Engineering
                                   efficiency levels   efficiency levels
  Efficiency levels for LCC and       for class A         for class B
          PBP  analyses              machines (all      machines  (all
                                        sizes)              sizes)
------------------------------------------------------------------------
Level 0.........................  Level 0...........  Level 0.
Level 1 (ENERGY STAR Tier 1) or   Level 1...........  Level 1.
 Baseline Level.
Level 2.........................  Level 3...........  Level 3.
Level 3 (ENERGY STAR Tier 2)....  Level 4...........  Level 4.
Level 4.........................  Level 7...........  Level 6.
Level 5.........................  Level 8...........  Level 7.
Level 6.........................  Level 9...........  Level 9.
Level 7.........................  Level 11..........  Level 10.
Level 8 (Max Tech)..............  Level 13..........  Level 11.
------------------------------------------------------------------------

2. Annual Energy Consumption Results
    As explained above, DOE assumes that all Class A machines and 75 
percent of Class B machines are installed indoors and that 25 percent 
of Class B machines are located outdoors. To calculate a weighted 
energy use of Class B machines, DOE added aggregated State-by-State 
results by using data from each of the 237 TMY2 weather stations to the 
annual energy consumption of the remaining 75 percent of Class B 
machines located indoors, in order to determine the total energy 
consumption of all Class B machines. DOE further aggregated energy 
consumption at the State level to arrive at the national average energy 
consumption, using the 2000 Census population data.\40\ Table II.6 
presents the national average annual energy consumption figures for the 
three different sizes of Class B machines.
---------------------------------------------------------------------------

    \40\ The U.S. Census Bureau, 2000 Census, http://factfinder.census.gov/servlet/GCTTable?_bm=y&-geo_id=01000US&box_head_nbr=GCT-PHI&-context=gct&-ds_name=DEC_2000_SFI_U&-tree_id=4001&-format=US-9. (Accessed on March 25, 2007.)

                        Table II.6.--National Average Annual Energy Consumption for Class B Machines, by Efficiency Levels (kWh)
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                            Level 1                 Level 3
                                                Level 0     (ENERGY                 (ENERGY                                                     Level 8
                                                (market   STAR  Tier    Level 2   STAR  Tier    Level 4     Level 5     Level 6     Level 7   (Max Tech)
                                               baseline)      1)                      2)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Large (B-L-IO)..............................       4,033       2,244       1,901       1,740       1,598       1,533       1,348       1,336       1,315
Medium (B-M-IO).............................       3,899       2,108       1,763       1,623       1,488       1,426       1,250       1,240       1,221
Small (B-S-IO)..............................       3,699       1,934       1,589       1,461       1,376       1,214       1,149       1,140       1,125
--------------------------------------------------------------------------------------------------------------------------------------------------------


[[Page 34117]]

    Table II.7 shows annual energy consumption for each size of Class A 
machine. National average energy consumption figures are identical to 
State energy consumption figures. These national average annual energy 
consumption figures are used in the subsequent LCC, PBP, NES and 
rebuttable presumption payback period analyses.

                  Table II.7.--Annual Energy Consumption for Class A Machines, All Sizes and All Locations, by Efficiency Levels (kWh)
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                    Energy use (all locations, kWh)
                                             -----------------------------------------------------------------------------------------------------------
                                                            Level 1                 Level 3
                    Size                        Level 0     (ENERGY                 (ENERGY                                                     Level 8
                                                (market    STAR Tier    Level 2    STAR Tier    Level 4     Level 5     Level 6     Level 7   (Max Tech)
                                               baseline)      1)                      2)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Large (A-L-IN)..............................       3,173       2,452       2,229       2,045       1,882       1,790       1,773       1,654       1,586
Medium (A-M-IN).............................       3,005       2,321       2,102       1,933       1,775       1,692       1,675       1,576       1,510
Small (A-S-IN)..............................       2,796       2,117       1,902       1,737       1,585       1,518       1,502       1,417       1,356
--------------------------------------------------------------------------------------------------------------------------------------------------------

    DOE's energy use characterization assumes both that there are no 
controls limiting display lighting or compressor operation in a 
beverage vending machine to certain hours of the day and that the 
display lighting or compressor operation would not be affected by 
occupancy patterns in the building. However, using occupancy sensors 
and other controllers might reduce a vending machine's energy 
requirements during long periods of non-use, such as overnight and 
weekends. This occupancy controller option is often used when de-
lamping a vending machine is not advisable (i.e., when a vending 
machine does not have a captive audience or when de-lamping results in 
reduced vending sales revenues). Controllers can either be added on or 
enabled in certain beverage vending machines. DOE requests comments on 
the need to incorporate such controls in its energy use 
characterization analysis and, if so, how to do so in the NOPR 
analysis. See Issue 2 under ``Issues on Which DOE Seeks Comment'' in 
Section IV.E of this ANOPR. Chapter 7 of the TSD provides additional 
details on the energy use characterization.

F. Rebuttable Presumption Payback Periods

    A more energy-efficient device will usually cost more to purchase 
than a device of standard energy efficiency. However, the more-
efficient device will usually cost less to operate due to reductions in 
operating costs (i.e., lower energy bills). The payback period (PBP) is 
the time (usually expressed in years) it takes to recover the 
additional installed cost of the more-efficient device through energy 
cost savings. In considering standard setting for beverage vending 
machines, sections 325(o)(2)(B)(iii) and (v)(3) of EPCA (42 U.S.C. 
6295(o)(2)(B)(iii) and (v)(3)) establish a rebuttable presumption that 
a standard is economically justified if the Secretary finds that ``the 
additional cost to the consumer of purchasing a product complying with 
an energy conservation standard level will be less than three times the 
value of the energy * * * savings during the first year that the 
consumer will receive as a result of the standard, as calculated under 
the applicable test procedure * * *.'' (42 U.S.C. 6295(o)(2)(B)(iii)) 
This rebuttable presumption test is an alternative path to establishing 
economic justification as compared to consideration of the seven 
factors set forth in 42 U.S.C. 6295(o)(2)(B)(i)(I)-(VII).
    To evaluate the rebuttable presumption, DOE estimated the 
additional cost of a more-efficient, standard-compliant unit, and 
compared this cost to the value of the energy saved during the first 
year of operating the equipment. DOE assumed that the increased cost of 
purchasing a standard-compliant unit includes the cost of installing 
the equipment for use by the purchaser. DOE calculated the rebuttable 
presumption PBP, or the ratio of the value of the increased installed 
price above the baseline efficiency level to the first year's energy 
cost savings. When this PBP is less than three years, the rebuttable 
presumption is satisfied; when this PBP is equal to or more than three 
years, the rebuttable presumption is not satisfied.
    DOE calculated rebuttable presumption PBPs based on a distribution 
of installed costs and energy prices that included seven types of 
businesses and all 50 States. Unlike the other PBPs calculated in the 
LCC analysis (see Section II.G.4 of this ANOPR), the rebuttable 
presumption PBPs do not include maintenance or repair costs.\41\ As 
with the LCC analysis (see Section II.G.2), the baseline efficiency 
level for the rebuttable presumption calculation is Level 1. From the 
range of efficiency levels for which cost data was determined in the 
engineering analysis, DOE selected nine efficiency levels in each 
equipment class, including the baseline efficiency level, for the LCC 
and subsequent ANOPR analyses. Chapter 7 of the TSD discusses the 
selection of these efficiency levels. For each equipment class, DOE 
calculated the rebuttable presumption PBP at each efficiency level 
higher than the baseline. Inputs to the PBP calculation are the first 
seven inputs shown in Table II.9 in Section II.G.2 of this ANOPR.
---------------------------------------------------------------------------

    \41\ Energy cost savings are the only costs addressed with 
respect to rebuttable presumption payback periods. 42 U.S.C. 
6295(o)(2)(B)(iii).
---------------------------------------------------------------------------

    Table II.8 shows the nationally-averaged rebuttable presumption 
payback periods calculated for all equipment classes and efficiency 
levels. Table II.8 also shows the highest efficiency level with a 
rebuttable presumption payback of less than 3 years for each equipment 
class.
    As is the case in other DOE energy conservation standards 
rulemakings, while DOE has examined the rebuttable presumption PBPs, it 
has not determined economic justification for any of the standard 
levels analyzed based on the ANOPR rebuttable presumption analysis. 
Instead, when setting candidate standard levels (CSLs), DOE will 
consider the more detailed analysis of the economic impacts of 
increased efficiency according to section 325(o)(2)(B)(i) of EPCA. (42 
U.S.C. 6295(o)(2)(B)(i))

[[Page 34118]]



                               Table II.8.--Rebuttable Presumption Payback Periods by Efficiency Level and Equipment Class
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                            Rebuttable presumption payback period (years)
              Equipment type              --------------------------------------------------------------------------------   Highest level with PBP <3
                                            Level 1   Level 2   Level 3   Level 4   Level 5   Level 6   Level 7   Level 8              years
--------------------------------------------------------------------------------------------------------------------------------------------------------
B-L-IO...................................        NA       0.7       1.1       1.5       3.6       3.9       4.1     122.9  Level 4.
B-M-IO...................................        NA       0.7       1.1       1.6       3.8       4.1       4.4     112.3  Level 4.
B-S-IO...................................        NA       0.7       1.3       1.8       3.6       4.8       5.1       5.1  Level 4.
A-L-IN...................................        NA       1.1       1.4       1.6       2.1       2.3       6.3     145.4  Level 6.
A-M-IN...................................        NA       1.1       1.5       1.7       2.3       2.5       6.1     347.9  Level 6.
A-S-IN...................................        NA       1.2       1.4       1.7       2.2       2.4       6.1      75.4  Level 6.
--------------------------------------------------------------------------------------------------------------------------------------------------------

G. Life-Cycle Cost and Payback Period Analyses

    The LCC and PBP analyses determine the economic impact of potential 
standards on customers. The effects of standards on individual 
commercial customers include changes in operating expenses (usually 
lower) and changes in total installed cost (usually higher). DOE 
analyzed the net effect of these changes for beverage vending machines 
by calculating the changes in customers' LCCs likely to result from a 
CSL compared to a base case (no new standards). The LCC calculation 
considers total installed cost (includes MSP, sales taxes, distribution 
channel markups, and installation cost), operating expenses (i.e., 
energy, repair, and maintenance costs), equipment lifetime, and 
discount rate. DOE performed the LCC analysis from the perspective of 
the purchaser of a beverage vending machine.
    DOE calculated the LCC for all customers as if each would purchase 
a new beverage vending machine in the year the standard takes effect. 
The standard takes effect on the future date when it begins to apply to 
newly-manufactured equipment. Section 135(c)(4) of EPACT 2005 amended 
EPCA to add new subsections 325(v)(2), (3) and (4) (42 U.S.C. 
6295(v)(1), (2) and (3)), which directs the Secretary to issue a final 
rule for refrigerated bottled or canned beverage vending machines no 
later than August 8, 2009, with the energy conservation standard levels 
in the rule applying to all equipment manufactured on or after August 
8, 2012. Consistent with EPCA, DOE used these dates in the ANOPR 
analyses.
    DOE based the cost of the equipment on projected costs in 2012, 
although all dollar values are expressed in 2007$. DOE projected that 
the cost for equipment in 2012 when expressed in real terms (2007$) 
would be identical to the cost determined in the engineering analysis. 
DOE also considered annual energy prices for the life of the beverage 
vending machine, based on EIA's Annual Energy Outlook 2007 (AEO2007).
    DOE also analyzed the effect of changes in operating expenses and 
installed costs by calculating the PBP of potential standards relative 
to a base case. The PBP estimates the amount of time it would take the 
commercial customer to recover the anticipated, incrementally higher 
purchase expense of more energy-efficient equipment through lower 
operating costs. Similar to the LCC analysis, the PBP is based on the 
total installed cost and the operating expenses. However, unlike the 
LCC, the PBP only considers the first year's operating expenses. 
Because the PBP does not account for changes in operating expense over 
time or the time value of money, this calculation is also referred to 
as a simple PBP. Usually, the benefits of a regulation exceed the costs 
of that regulation if the service life of the covered equipment is 
substantially longer than the PBP.
    The following discussion provides an overview of the approach and 
inputs for the LCC and PBP analyses performed by DOE, as well as a 
summary of the preliminary results generated for the beverage vending 
machines under consideration in this rulemaking. However, for a more 
detailed discussion on the LCC and PBP analyses, see Chapter 8 of the 
ANOPR TSD.
1. Approach
    The LCC analysis estimates the impact on commercial customers of 
potential energy conservation standards for beverage vending machines 
by calculating the net cost of those machines under two scenarios: (1) 
A ``base case'' of no new standard; and (2) a ``standards case'' under 
which beverage vending machines must comply with a new energy 
efficiency standard. Recognizing that each type of commercial customer 
who uses a beverage vending machine is unique, DOE analyzed variability 
and uncertainty by performing the LCC and PBP calculations for seven 
types of businesses. Six of these typically purchase and install 
beverage vending machines in their buildings. The seventh business 
type, which is the most common purchaser of the equipment, is a local 
bottler or vending machine operator that typically has the machine 
installed in one of the other six business types, provides vending 
services, and splits the coin box receipts through a contractual 
arrangement with the site owner.
    Of the six business types analyzed, four have a Principal Building 
Activity (PBA) category assigned to them in the CBECS data. These four 
business types analyzed are: (1) Office/healthcare (including a large 
number of firms engaged in financial and other services, medical and 
dental offices, and nursing homes); (2) retail (including all types of 
retail stores and food and beverage service facilities); (3) schools 
(including colleges and universities and large groups of housing 
facilities owned by State governments, such as prisons); and (4) 
``other'' (including warehouses, hotels/motels, and assembly 
buildings). The two remaining business types analyzed are manufacturing 
facilities and military bases that are typically large utility 
customers and pay industrial rates for their electricity consumption.
    Aside from energy, the most important factors influencing the LCC 
and PBP analyses are related to where the beverage vending machine is 
installed. These factors include energy prices, installation cost, 
markup, and sales tax. The LCC analysis used the annual energy 
consumption determined in the energy use characterization analysis 
(Chapter 7 of the TSD). Energy consumption calculated using this 
approach is sensitive to climatic conditions, especially for the 
vending machines located outdoors. Therefore, energy consumption in the 
LCC analysis varies by geographical location. At the national level, 
the LCC analysis explicitly modeled both the uncertainty and the 
variability in the model's inputs using probability distributions. 
These are based on the shipment of units to different States, as 
determined by population weights.

[[Page 34119]]

2. Life-Cycle Cost Analysis Inputs
    For each efficiency level analyzed, the LCC analysis requires input 
data for the total installed cost of the equipment, the operating 
expense, and the discount rate. Table II.9 summarizes the inputs and 
key assumptions used to calculate the economic impacts to commercial 
customers of various efficiency levels for each beverage vending 
machine. A more detailed discussion of the inputs follows.

  Table II.9.--Summary of Inputs and Key Assumptions Used in the Life-
                           Cycle Cost Analysis
------------------------------------------------------------------------
               Input                             Description
------------------------------------------------------------------------
Baseline Efficiency Level.........  Energy savings and energy cost
                                     savings are compared to a pre-
                                     selected baseline efficiency level
                                     (in this case Level 1).
Higher Efficiency Levels..........  Certain number of higher efficiency
                                     levels are pre-selected up to the
                                     max-tech level for LCC and PBP
                                     analyses.
Baseline Manufacturer Selling       Price charged by manufacturer to
 Price.                              either a wholesaler or large
                                     customer for baseline equipment.
Standard-Level Manufacturer         Incremental change in manufacturer
 Selling Price Increases.            selling price for equipment at each
                                     of the higher efficiency levels.
Markups and Sales Tax.............  Associated with converting the
                                     manufacturer selling price to a
                                     customer price (see Chapter 6 of
                                     TSD).
Installation Price................  Cost to the customer of installing
                                     the equipment. This includes labor,
                                     overhead, and any miscellaneous
                                     materials and parts. The total
                                     installed cost equals the customer
                                     equipment price plus the
                                     installation price.
Equipment Energy Consumption......  Site energy use associated with the
                                     use of beverage vending machines,
                                     which includes only the use of
                                     electricity by the equipment
                                     itself.
Electricity Prices................  Average commercial electricity price
                                     ($/kWh) in each State and for seven
                                     classes of commercial and
                                     industrial customers, as determined
                                     from EIA data for 2003 converted to
                                     2007$.
Electricity Price Trends..........  Used the AEO2007 reference case to
                                     forecast future electricity prices.
Maintenance Costs.................  Labor and material costs associated
                                     with maintaining the beverage
                                     vending machines (e.g., cleaning
                                     heat exchanger coils, checking
                                     refrigerant charge levels, lamp
                                     replacement).
Repair Costs......................  Labor and material costs associated
                                     with repairing or replacing
                                     components that have failed.
Equipment Lifetime................  Age at which the beverage vending
                                     machine is retired from service
                                     (estimated to be 14 years).
Discount Rate.....................  Rate at which future costs are
                                     discounted to establish their
                                     present value to beverage vending
                                     machine purchasers.
Rebound Effect....................  A rebound effect was not taken into
                                     account in the LCC analysis.
Analysis Period...................  Analysis period is the time span
                                     over which DOE calculated the LCC
                                     (i.e., 2012-2042).
------------------------------------------------------------------------

a. Baseline Manufacturer Selling Price
    The ``baseline MSP'' is the price manufacturers charge to either a 
wholesaler/distributor or very large customer for beverage vending 
machine equipment meeting baseline efficiency levels. The MSP includes 
a markup that converts the MPC to MSP. DOE developed the baseline MSPs 
using a cost model (detailed in Chapter 5 of the TSD). MSPs were 
developed for two equipment classes and three typical sizes within each 
equipment class.
    DOE was not able to identify relative shipments data for equipment 
classes by efficiency level. For the equipment on which DOE performed a 
design-option analysis as the basis for the engineering analysis, DOE 
designated Level 1 as the baseline efficiency level. Level 1 also 
coincided with the ENERGY STAR Tier 1 level, which is assumed to 
represent the least efficient equipment likely to be sold in 2012.
b. Increase in Selling Price
    The standard-level MSP increase is the change in MSP associated 
with producing beverage vending machine equipment at higher efficiency 
levels (or with lower energy consumption). MSP increases are associated 
with decreasing equipment energy consumption (or higher efficiency) 
levels through a combination of energy consumption level and design-
option analyses. See Chapter 5 of the TSD for details. DOE developed 
these MSP increases for the two equipment classes.
c. Markups
    As discussed earlier, overall markups are based on one of three 
distribution channels for beverage vending machines. Site owners 
purchase approximately five percent of equipment from wholesaler/
distributors; vending machine operators purchase 27 percent of 
equipment from wholesaler/distributors; and beverage bottler/
distributors purchase 68 percent of equipment directly from 
manufacturers, based on input received by DOE.
d. Installation Costs
    DOE derived installation costs for beverage vending machines from 
U.S. Bureau of Labor Statistics (BLS) data.\42\ BLS provides median 
wage rates for installation, maintenance, and repair occupations that 
reflect the labor rates for each State. These data allow DOE to compute 
State labor cost indices relative to the national average for these 
occupations. DOE incorporated these cost indices into the analysis to 
capture variations in installation cost by location. DOE calculated the 
installation cost by multiplying the number of person-hours by the 
corresponding labor rate as reported by Foster-Miller Inc.\43\ Foster-
Miller data were more specific to the beverage vending machine industry 
and service calls, and were used whenever possible. DOE decided that 
the installation costs (including overhead and profit) represent the 
total installation costs for baseline equipment. Further, since data 
were not available to indicate how installation costs vary by the 
beverage vending machine class or efficiency, DOE considered 
installation costs to be fixed and independent of the cost or 
efficiency of the equipment. Although the LCC spreadsheet allows for 
alternative scenarios, DOE did not find a compelling reason to change 
its basic premise for the ANOPR analysis.
---------------------------------------------------------------------------

    \42\ Bureau of Labor Statistics, Occupational Employment and 
Wage Estimates (May 2006). Available at: http://www.bls.gov/oes_dl.htm.
    \43\ Foster-Miller, Inc., Vending Machine Service Call Redution 
Using the Vending Miser (2002).
---------------------------------------------------------------------------

    As described earlier, the total installed cost is the sum of the 
equipment purchase price and the installation cost. DOE derived the

[[Page 34120]]

customer equipment purchase price for any given efficiency level by 
multiplying the baseline MSP by the baseline markup and adding to it 
the product of the incremental MSP and the incremental markup. Because 
MSPs, markups, and the sales tax can take on a variety of values 
depending on location, the resulting total installed cost for a 
particular efficiency level will not be a single-point value, but a 
distribution of values. DOE used a Monte-Carlo analysis, which is a 
stochastic approach, to determine this distribution of values.
e. Energy Consumption
    DOE based its estimate of the annual electricity consumption of 
beverage vending machines on the energy use characterization described 
in Section II.E of this ANOPR.
f. Electricity Prices
    Electricity prices are necessary to convert electric energy savings 
into energy cost savings. In its Framework Document, DOE suggested 
using average commercial and/or industrial electricity prices depending 
on the purchaser of the beverage vending machine to develop its life-
cycle cost analysis. Based on comments made at the Framework public 
meeting, DOE estimated that about 30 percent of installed beverage 
vending machines are located at manufacturing facilities with 
industrial electricity prices.
    On this topic, EEI recommended that DOE should use industrial as 
well as commercial electricity prices in the analysis. (EEI, No. 12 at 
p. 6) In its analyses, DOE will use average electricity prices for the 
following types of locations: (1) Industrial buildings; (2) Federal 
military buildings; and (3) large office, small office, education, and 
mercantile buildings. These average electricity prices will be 
determined on a State-by-State basis in order to include regional 
variations in energy prices, while reducing the overall complexity of 
the analysis. DOE will use a Monte-Carlo stochastic analysis (using 
Crystal Ball) to capture the variation of energy prices across the 
different building types and geographic regions. Because of the wide 
variation in electricity consumption patterns, wholesale costs, and 
retail rates across the country, it is important to consider regional 
differences in electricity prices. DOE used average commercial 
electricity prices at the State level from the EIA publication, State 
Energy Consumption, Price, and Expenditure Estimates. The latest 
available prices from this source are for 2006. Because actual prices 
were available for all of 2006, DOE used the forecasted ratio between 
2007 and 2006 national commercial retail electricity prices from 
AEO2007 to adjust the 2006 State-level prices to 2007$.
    DOE decided to use average electricity prices paid by seven 
different classes of beverage vending machine customers on a State-by-
State basis. DOE also adjusted for different effective prices, since 
different kinds of businesses typically use electricity in different 
amounts at different times of the day, week, and year. To make this 
adjustment, DOE used the 2003 CBECS data set to identify the average 
prices four of the seven business types paid compared with the average 
prices all commercial customers paid. Two of the seven business types 
were manufacturing facilities and military/Federal facilities, which 
DOE assumed pay industrial electricity prices. DOE used the ratios of 
prices paid by the four types of businesses to the national average 
commercial prices seen in the 2003 CBECS as multiplying factors to 
increase or decrease the average commercial 2006 price data previously 
developed. Once the electricity prices for the four types of businesses 
were adjusted, those prices were used in the LCC analysis.
    To obtain a weighted-average national electricity price, the prices 
paid by each business in each State is weighted by the estimated sales 
of beverage vending machines to each business type. The State/business 
type weights are the probabilities that a given beverage vending 
machine unit shipped will be operated with a given electricity price. 
For evaluation purposes, the prices and weights can be depicted as a 
cumulative probability distribution. The effective electricity prices 
range from approximately 4 cents per kWh to approximately 16 cents per 
kWh. This approach will include regional variations in energy prices 
and provide for estimated electricity prices suitable for the target 
market, yet reduce the overall complexity of the analysis. The 
development and use of State-average electricity prices by business 
type is described in more detail in Chapter 8 of the TSD.
g. Electricity Price Trends
    The electricity price trend provides the relative change in 
electricity prices for future years out to the year 2042. Estimating 
future electricity prices is difficult, especially considering that 
there are efforts in many States throughout the country to restructure 
the electricity supply industry. DOE applied the AEO2007 reference case 
as the default scenario and extrapolated the trend in values from 2020 
to 2030 of the forecast to establish prices in 2030 to 2042. This 
method of extrapolation is in line with methods that EIA uses to 
forecast fuel prices for the Federal Energy Management Program (FEMP). 
DOE provides a sensitivity analysis of the life-cycle costs savings and 
PBP results to future electricity price scenarios using both the 
AEO2007 high-growth and low-growth forecasts in Chapter 8 of the TSD. 
DOE is committed to using the latest available EIA forecast of energy 
prices in this rulemaking. For the NOPR analysis, DOE expects to use 
AEO2008. Since the Final Rule is expected to be published by August 
2009, DOE expects to use AEO2009 in the Final Rule analysis. Prior to 
issuance of the NOPR, updates of the ANOPR analytical spreadsheets 
using AEO2008 will be made available on the Web: http://www.eere.energy.gov/buildings/appliance_standards/commercial/
beverage_machines.html.
h. Repair Costs
    The equipment repair cost is the cost to the customer of replacing 
or repairing failed components in the beverage vending machine. DOE 
based the annualized repair cost for baseline efficiency equipment on 
the following equation:

RC = k x EQP/LIFE

Where:

RC = repair cost in dollars,
k = fraction of equipment price (estimated to be 0.5),
EQP = baseline equipment price in dollars, and
LIFE = average lifetime of the equipment in years (estimated to be 
14 years).

    Because data were unavailable on how repair costs vary with 
equipment efficiency, DOE held repair costs constant as the default 
scenario for the LCC and PBP analyses.
i. Maintenance Costs
    DOE estimated the annualized maintenance costs for beverage vending 
machines from data provided by Foster-Miller, Inc. (2002). The report 
by Foster-Miller provides estimates on the person-hours, labor rates, 
and materials required for routine preventive maintenance of beverage 
vending machines. DOE adjusted the total annual maintenance cost and 
used a single figure of $31.37/year (2007$) for preventive maintenance 
for all beverage vending machine classes. In addition to routine 
maintenance, industry contacts stated that most beverage vending 
machines are fully refurbished every three to five years at an average 
cost of approximately $930. DOE calculated the

[[Page 34121]]

annual cost of refurbishment by assuming two refurbishments (one in 
year 4 and another in year 8) and then annualizing the present value of 
the cost using the discount rate that applied to the business type 
assumed to own the beverage vending machine. DOE added the two 
maintenance components together to produce an overall annual 
maintenance cost of $165.44 (2007$). Because data are not available for 
how maintenance costs vary with equipment efficiency, DOE held 
maintenance costs constant even as equipment efficiency increased. DOE 
seeks feedback on the frequency of refurbishment cycles, its 
assumptions regarding constant maintenance costs, and how changes to 
the machines might affect energy use in the field. Section IV.E of this 
ANOPR discusses this subject, identified as Issue 3 under ``Issues on 
Which DOE Seeks Comment.''
j. Lifetime
    DOE defines ``lifetime'' as the age when a beverage vending machine 
is retired from service. Based upon discussions with industry experts 
and other stakeholders, DOE concluded that a typical equipment lifetime 
of 14 years is appropriate for beverage vending machines. As described 
earlier, beverage vending machines are refurbished every three to five 
years, and they are usually completely replaced after two rounds of 
refurbishment (by which time they are typically obsolete or physically 
worn out). Chapter 3 of the TSD, market and technology assessment, 
contains a discussion of equipment life data and the sources of such 
data.
k. Discount Rate
    The ``discount rate'' is the rate at which future expenditures are 
discounted to establish their present value. DOE received comments on 
the development of discount rates for this rulemaking at the Framework 
public meeting. Specifically, EEI stated that in terms of average cost 
of capital and discount rates, DOE should account for the rise in U.S. 
interest rates over the past few years. EEI also stated that DOE should 
determine how many vending machine owners are small businesses, which 
may have higher costs of capital and, therefore, higher discount rates. 
(EEI, No. 12 at p. 7) The following explains DOE's approach to discount 
rates for this rulemaking in light of these comments.
    DOE derived discount rates for the LCC analysis by estimating the 
cost of capital for companies that purchase beverage vending machines. 
The cost of capital is commonly used to estimate the present value of 
cash flows to be derived from a typical company project or investment. 
For most companies, the cost of capital is the weighted average of the 
cost to the company of equity and debt financing. DOE estimated the 
cost of equity financing with the Capital Asset Pricing Model (CAPM), 
among the most widely used models to estimate such costs. CAPM 
considers the cost of equity to be proportional to the amount of 
systematic risk for a company. The cost of equity financing tends to be 
high when a company faces a large degree of systematic risk and low 
when the company faces a small degree of systematic risk.
    To estimate the weighted average cost of capital (WACC; defined as 
the weighted average cost of debt and equity financing) of purchasers, 
DOE used a sample of companies involved in the six ownership 
categories, according to their type of activity. DOE sought financial 
information for all of the firms in the full sample involved in the 
seven types of business drawn from a database of 7,687 U.S. companies 
on the Damodaran Online Web site.\44\ This resulted in a sample of 
about 6,661 firms. In cases where one or more of the variables needed 
to estimate the discount rate was missing or could not be obtained, DOE 
discarded the firm from the analysis. Overall, it discarded about 36 
percent of the firms in the full database for this reason, resulting in 
a final count of 4,240 firms. The WACC approach for determining 
discount rates accounts for the current tax status of individual firms 
on an overall corporate basis. DOE did not evaluate the marginal 
effects of increased costs, and thus depreciation due to more expensive 
equipment, on the overall tax status.
---------------------------------------------------------------------------

    \44\ Damodaran Online, Leonard N. Stern School of Business, New 
York University. Available at: http://www.stern.nyu.edu/~adamodar/
New--Home--Page/data.html. (Accessed May 23, 2007.)
---------------------------------------------------------------------------

    DOE used the final sample of 4,240 companies to represent beverage 
vending machines purchasers. For each company in the sample, DOE 
derived the cost of debt, percent debt financing, and systematic 
company risk from information on the Damodaran Online Web site. 
Damodaran estimated the cost of debt financing from the long-term 
government bond rate (4.39 percent) and the standard deviation of the 
stock price. DOE then determined the weighted average values for the 
cost of debt, range of values, and standard deviation of WACC for each 
category of the sample companies. Deducting expected inflation from the 
cost of capital provided estimates of real discount rate by ownership 
category.
    The above methodology yielded the following average after-tax 
discount rates, weighted by the percentage shares of total purchases of 
beverage vending machines: (1) 5.08 percent for bottlers and 
distributors; (2) 6.04 percent for manufacturing facilities; (3) 5.07 
percent for office and health care businesses; (4) 5.98 percent for 
retail stores; (5) 2.20 percent for schools and colleges; (6) 2.89 
percent for military bases; and (7) 4.98 percent for all other types of 
businesses.\45\
---------------------------------------------------------------------------

    \45\ These discount rates are what private companies pay as 
beverage vending machine purchasers. Government agencies use three-
percent and seven-percent discount rates for economic calculations.
---------------------------------------------------------------------------

l. Rebound Effect
    A ``rebound effect'' occurs when a piece of equipment that is made 
more efficient is used more intensively, so that the expected energy 
savings from the efficiency improvement do not fully materialize. 
Because beverage vending machines operate on a 24-hour basis to 
maintain adequate conditions for the merchandise being retailed, a 
rebound effect resulting from increased refrigeration energy 
consumption seemed unlikely. Thus, there is no rebound effect to be 
accounted for in the LCC analysis.
m. Effective Date
    For purposes of this discussion, the ``effective date'' is the 
future date when a new standard becomes operative (i.e., the date by 
and after which beverage vending machine manufacturers must manufacture 
equipment that complies with the standard). DOE publication of a final 
rule in this standards rulemaking is required by August 8, 2009. 
Pursuant to section 42 U.S.C. 6295(v)(3), as amended by EPACT 2005, the 
effective date of any new energy conservation standard for beverage 
vending machines must be three years after the final rule is published. 
DOE calculated LCC for commercial customers, based upon an assumption 
that each would purchase the new equipment in the year the standard 
takes effect.
3. Split Incentive Issue
    DOE mentioned the ``split incentive issue'' in the Framework public 
meeting when discussing distribution channels for beverage vending 
machines sold directly to the bottler or a vending machine operator. 
The bottler or the vending machine operator installs these machines at 
different business sites through a ``location contract,'' maintains and 
stocks the machine, and receives a certain percentage of the coin-box 
revenue. The business site owner, in

[[Page 34122]]

this case, allows the machine to be placed on-site, receives a 
percentage of the coin-box revenue and/or other remuneration, and most 
relevant to this rulemaking, pays the electricity bill. In principle, 
the business site owner would be willing to accept a lower percentage 
of revenue for a machine that uses less electricity. However, where it 
is costly to renegotiate contracts, the incentive to purchase more-
efficient machines may be lessened or eliminated. Nonetheless, there 
may be a growing market for energy-efficient beverage vending machines 
since environmentally-conscious beverage companies and bottlers are 
pushing to install energy-efficient machines on-site, and certain 
business site owners are demanding that energy-efficient machines be 
installed to reduce electricity costs.
    At the Framework public meeting, Coca-Cola stated that it has 
``full-service vending'' (a split-incentive) that allows a Coca-Cola 
bottler to buy the vending machine and give it to an operator. The 
operator may or may not pay some or all of the energy costs, depending 
on its contract with the customer. (Public Meeting Transcript, No. 8 at 
p. 190) Meanwhile, EEI stated that information about distribution 
channels and machine contracts would be important for the LCC analysis. 
EEI explained that unless there is a provision in the contract for 
energy costs, there will be a split incentive for site owners. (EEI, 
No. 12 at p. 5).
    In response, DOE agrees that split incentive is a critical issue to 
consider in the LCC analysis. DOE will assume that operating cost 
savings due to energy cost savings are transferred to the owner/
operator of the beverage vending machine through the coin-box revenue 
contract. This assumption not only addresses the split incentive issue 
but also will result in the highest energy savings for the minimum LCC 
and the lowest total LCC. DOE will also conduct limited sensitivity 
analyses of alternate scenarios to explore how the LCC savings might 
change as the site owner retains some fraction (e.g., 50 percent) of 
the operating cost savings.
4. Payback Period
    The PBP is the amount of time it takes the customer to recover the 
incrementally higher purchase cost of more energy-efficient equipment 
as a result of lower operating costs (i.e., through energy cost 
savings). Payback analysis is a technique used to obtain a rough 
indication of whether an investment is worthwhile. Numerically, the PBP 
is the ratio of the increase in purchase cost (i.e., from a less-
efficient design to a more-efficient design) to the decrease in annual 
operating expenditures. This type of calculation is known as a ``simple 
PBP,'' because it does not take into account other changes in operating 
expenses over time or the time value of money.
    The equation for PBP is:

PBP =[Delta]IC/[Delta]OC

Where:

PBP = payback period in years,
[Delta]IC = difference in the total installed cost between the more-
efficient standard level equipment (energy consumption levels 2, 3, 
etc.) and the baseline (energy consumption level 1) equipment, and
[Delta]OC = difference in annual operating costs.

    PBPs are expressed in years. If the PBP is greater than the life of 
the equipment, then the increased total installed cost of the more-
efficient equipment would not be recovered in reduced operating costs. 
The PBP thus calculated differs from the rebuttable presumption payback 
calculation discussed in Section II.F in that it includes repair and 
maintenance costs, which are part of the annual operating costs.
    The data inputs to PBP analysis are the total installed cost of the 
equipment to the customer for each energy consumption level and the 
annual (first year) operating costs for each energy consumption level. 
The inputs to the total installed cost are the equipment price and the 
installation cost. The inputs to the operating costs are the annual 
energy cost, the annual repair cost, and the annual maintenance cost. 
The PBP uses the same inputs as the LCC analysis, except that 
electricity price trends and discount rates are not required. Since the 
PBP is a simple (undiscounted) payback, the required electricity cost 
is only for the year in which a new energy conservation standard is to 
take effect--in this case, 2012. The electricity price used in the PBP 
calculation of electricity cost was the price projected for 2012, 
expressed in 2007$, but not discounted to 2007. Discount rates are not 
used in the PBP calculation.
    PBP is one of the economic indicators that DOE uses when assessing 
economic impact to a customer. As expressed above, PBP does not take 
into account the time value of money explicitly (e.g., through a 
discount factor), the life of the efficiency measure, or changing fuel 
costs over time. In addition, because PBP takes into account the 
cumulative energy and first-cost impact of a set of efficiency 
measures, it can be sensitive to the baseline level assumed. In 
addition, what is deemed an acceptable payback period can vary. By 
contrast, when examining LCC savings by efficiency levels, there is 
generally a maximum LCC savings point (minimum LCC efficiency level) 
indicative of maximum economic benefit to the customer. The selection 
of the baseline efficiency level does not effect the identification of 
the minimum LCC efficiency level, although a baseline efficiency is 
used when calculating net LCC savings or costs. DOE considers both LCC 
and PBP as related to the seven factors discussed in Section I.C to 
determine whether a standard is economically justified and whether the 
benefits of an energy conservation standard will exceed its burdens to 
the greatest extent practicable. However, because LCC uses a range of 
discount rates (that depend on customers' cost of financing), takes 
into account changing energy prices, and does not require selection of 
a baseline efficiency level, it is given greater weight in DOE 
decision-making.
5. Life-Cycle Cost and Payback Period Results
    This section presents the LCC and PBP results for the energy 
consumption levels analyzed for this ANOPR. While both types of 
indicators of cost-effectiveness will be considered by DOE, greater 
weight is usually given to the LCC savings results because they account 
for customer discount rates and changing energy prices. Because the 
values of most inputs to the LCC analysis are uncertain, DOE represents 
them as a distribution of values rather than a single-point value. 
Thus, DOE derived the LCC results also as a distribution of values. For 
example, the difference in LCC for the different efficiency levels from 
the baseline efficiency level (Level 1 in this case) can be provided by 
percentiles of distribution of values as shown in Table II.10.
    Chapter 8 and Appendix F of the TSD provide a summary of the change 
in LCC from the baseline efficiency level (Level 1 in this case) by 
percentile groupings of the distribution of results for each equipment 
class. Table II.10 provides an example of such LCC changes for a 
portion of one equipment class (B-L-IO). Table II.10 also shows the 
mean LCC savings and the percent of units with LCC savings at each 
efficiency level.

[[Page 34123]]



 Table II.10.--Distribution of Life-Cycle Cost Savings From a Baseline Level (Level 1) by Efficiency Level for the Class B Large Indoor/Outdoor (B-L-IO)
                                                                     Equipment Class
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                        Decrease in LCC from baseline (level 1) shown by percentiles of the distribution of results              Percent
                                                                                  (2007$)                                                           of
                                    ---------------------------------------------------------------------------------------------------   Mean    units
          Efficiency level                                                                                                              savings    with
                                        0%      10%      20%      30%      40%      50%      60%      70%      80%      90%      100%              LCC
                                                                                                                                                 savings
--------------------------------------------------------------------------------------------------------------------------------------------------------
Level 2............................      $32     $123     $149     $175     $200     $223     $251     $279     $314     $374     $693     $239      100
Level 3............................       31      158      198      236      271      306      347      389      440      529      978      329      100
Level 4............................       17      174      224      272      318      362      415      468      535      649    1,215      392      100
Level 5............................      -83       65      121      167      218      265      325      375      448      568    1,189      298       97
Level 6............................     -123       59      129      187      252      311      386      451      542      692    1,494      352       97
Level 7............................     -136       45      117      175      240      300      377      441      533      686    1,501      341       95
Level 8............................   -1,304   -1,115   -1,045     -989     -935     -892     -833     -766     -672     -524      339      849        1
--------------------------------------------------------------------------------------------------------------------------------------------------------

    The following example explains how to interpret the information in 
Table II.10. The row concerning Efficiency Level 4 in Table II.10 (row 
3) shows that the minimum change in LCC for this Efficiency Level for 
B-L-IO equipment is a savings of $17 (zero percentile column). In other 
words, all beverage vending machines of this type would have an LCC 
savings at Efficiency Level 4. For 90 percent of the cases studied 
(90th percentile), the change in LCC is a reduction of $649 or less. 
The largest reduction in LCC is $1,215 (100th percentile). The mean 
change in LCC is a net savings of $392. The last column shows that 100 
percent of the sample machines have LCC savings (i.e., reductions in 
LCC greater than zero) when compared to the baseline efficiency level.
    Table II.11 provides the national average life-cycle cost savings 
calculated for each efficiency level when compared to the baseline 
efficiency (Level 1) for all three machine sizes in each of the two 
equipment classes. Review of Table II.11 shows that most of the 
efficiency levels analyzed generated national average life-cycle cost 
savings compared with the baseline efficiency level.

Table II.11.--Average Life-Cycle Cost Savings From a Baseline Efficiency Level (Level 1) by Efficiency Level and
                                                 Equipment Class
----------------------------------------------------------------------------------------------------------------
                                                           National average LCC savings (2007$)
             Equipment class             -----------------------------------------------------------------------
                                          Level 1  Level 2  Level 3  Level 4  Level 5  Level 6  Level 7  Level 8
----------------------------------------------------------------------------------------------------------------
B-L-IO..................................        0      239      329      392      298      352      341     -849
B-M-IO..................................        0      240      313      370      272      320      307     -779
B-S-IO..................................        0      238      296      318      290      253      238     -683
A-L-IN..................................        0      148      259      348      373      369      194     -774
A-M-IN..................................        0      144      242      326      343      338      187     -722
A-S-IN..................................        0      139      238      316      326      319      171     -574
----------------------------------------------------------------------------------------------------------------

    DOE seeks feedback on the validity of selecting Level 1 (which is 
the same level as ENERGY STAR Tier 1) as the baseline for the LCC 
analysis. Since more-efficient equipment is available in the market, 
DOE seeks input on whether a distribution of efficiencies should be 
used for the LCC analysis baseline instead of a single efficiency 
level, and if so, what data could be used to populate this 
distribution. Section IV.E of this ANOPR discusses this subject, 
identified as Issue 4 under ``Issues on Which DOE Seeks Comment.''
    Table II.12 provides summary PBP results for each efficiency level 
for B-L-IO equipment as an example. Results are summarized for PBP by 
percentile groupings of the distribution of results. The chart also 
shows the mean PBP for each efficiency level.

                          Table II.12.--Summary of Payback Period Results for Class B, Large Indoor/Outdoor (B-L-IO) Equipment
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                         Payback period in years shown by percentiles of the distribution of results
              Efficiency level               ---------------------------------------------------------------------------------------------------   Mean
                                                 0%      10%      20%      30%      40%      50%      60%      70%      80%      90%      100%     PBP
--------------------------------------------------------------------------------------------------------------------------------------------------------
Level 2.....................................      0.3      0.4      0.5      0.6      0.6      0.7      0.7      0.8      0.9      1.1      1.6      0.7
Level 3.....................................      0.4      0.7      0.7      0.9      1.0      1.0      1.1      1.2      1.4      1.6      2.4      1.1
Level 4.....................................      0.5      0.9      1.0      1.2      1.3      1.4      1.5      1.7      1.9      2.3      3.5      1.5
Level 5.....................................      1.1      2.0      2.3      2.7      3.0      3.3      3.6      4.1      4.7      5.6      9.7      3.6
Level 6.....................................      1.1      2.2      2.5      2.9      3.3      3.6      3.9      4.4      5.1      6.2     10.9      3.9
Level 7.....................................      1.2      2.3      2.6      3.1      3.4      3.8      4.1      4.7      5.4      6.5     11.8      4.1
Level 8.....................................      6.6     18.2     26.0     37.2     55.5     85.5    100.0    100.0    100.0    146.6  4,808.0    122.9
--------------------------------------------------------------------------------------------------------------------------------------------------------

    Table II.13 provides the national average payback calculated for 
each efficiency level when compared to the baseline efficiency level 
(Level 1) for all three machine sizes of the two equipment classes. 
Table II.13 also shows the percentage of units that would have PBPs of 
less than three years (i.e., the rebuttable presumption

[[Page 34124]]

PBP for economic justification under 42 U.S.C. 6295(o)(2)(B)(iii)). The 
results of the analysis show that purchases of more-efficient machines 
would result in PBPs (when compared to the purchase of baseline 
efficiency units) of about six years or less (often substantially less) 
for all but the most efficient machines analyzed for both equipment 
classes.

             Table II.13.--National Average Payback Periods by Efficiency Level and Equipment class
----------------------------------------------------------------------------------------------------------------
                                                          National average payback period (years)
             Equipment Class             -----------------------------------------------------------------------
                                          Level 1  Level 2  Level 3  Level 4  Level 5  Level 6  Level 7  Level 8
----------------------------------------------------------------------------------------------------------------
B-L-IO..................................       NA      0.7      1.1      1.5      3.6      3.9      4.1    122.9
B-M-IO..................................       NA      0.7      1.1      1.6      3.8      4.1      4.4    112.3
B-S-IO..................................       NA      0.7      1.3      1.8      3.6      4.8      5.1    198.0
A-L-IN..................................       NA      1.1      1.4      1.6      2.1      2.3      6.3    145.4
A-M-IN..................................       NA      1.1      1.5      1.7      2.3      2.5      6.1    347.9
A-S-IN..................................       NA      1.2      1.4      1.7      2.2      2.4      6.1     75.4
----------------------------------------------------------------------------------------------------------------
                          Percent of Units With Payback Period of Less Than Three Years
----------------------------------------------------------------------------------------------------------------
B-L-IO..................................       NA      100      100       99       39       35       25        0
B-M-IO..................................       NA      100      100       99       37       25       23        0
B-S-IO..................................       NA      100      100       93       39       21       19        0
A-L-IN..................................       NA      100       99       99       87       81        3        0
A-M-IN..................................       NA      100       99       97       83       77        5        0
A-S-IN..................................       NA      100       99       99       85       77        5        0
----------------------------------------------------------------------------------------------------------------

    The PBPs shown in Table II.13 and the rebuttable PBPs shown in 
Table II.8 account for the cumulative impact of all technologies used 
in a design option to reach a specific energy efficiency level when 
compared to the baseline equipment. Every design option is made up of a 
mix of technologies, some of which may have relatively short PBPs and 
others that may have relatively longer PBPs, if considered separately. 
For this reason, the choice of baseline efficiency level affects the 
PBP for more-efficient machines. The LCC spreadsheet allows the user to 
select alternate baseline efficiency levels for each equipment class 
and to calculate the LCC savings and PBP for all higher levels compared 
to the selected baseline. See Chapter 8 and Appendix F of the TSD for 
additional details on the LCC and PBP analyses.

H. Shipments Analysis

    This section presents DOE's shipments analysis, which is an input 
to the NIA (Section II.I) and MIA (Section II.K). DOE will undertake 
revisions to the NIA and conduct the final MIA after the ANOPR is 
published, and then report the results of both in the NOPR.
    The results of the shipments analysis are driven primarily by 
historical shipments data for the two equipment classes of beverage 
vending machines under consideration. The model estimates that, in each 
year, equipment in the existing stock of beverage vending machines 
either ages by one year or is worn out and replaced. In addition, new 
equipment can be shipped into new commercial building floor space, and 
old equipment can be removed through demolitions. DOE chose to analyze 
all efficiency levels analyzed in the LCC in the NIA. Because DOE is 
assessing impacts and presuming each level analyzed represents a 
possible standard level, DOE refers to the efficiency levels analyzed 
in the NIA as candidate standard levels (CSLs). DOE determined 
shipments forecasts for all of the CSLs analyzed in the NIA and NPV 
analysis.
    According to an analysis of the beverage vending machine 
market,\46\ there were about 3.67 million beverage vending machines in 
the United States in 2005. Industry estimates that about 5 percent of 
these units are Class A machines intended for indoor use only, while 95 
percent are Class B machines intended for either indoor or outdoor use. 
Annual shipments have decreased from about 338,000 in 2000 to less than 
100,000 in 2006. DOE estimates that total 2006 shipments were about 
67,000 units. The industry estimates that about 10 percent of units 
shipped were Class A units, while 90 percent of units shipped are Class 
B machines intended for either indoor or outdoor use. (NAMA, No. 17 at 
p. 3).
---------------------------------------------------------------------------

    \46\ Automatic Merchandiser, State of the Vending Industry 
Report (August 2006). Available at: www.AMonline.com.
---------------------------------------------------------------------------

    DOE was not able to locate any market data concerning shipments by 
machine size (i.e., vendible capacity); therefore, the shipments 
analysis focused on the three sizes (small, medium, and large) believed 
to be typical and which were analyzed in the preceding LCC and PBP 
analyses. DOE assumed that each size is about one-third of the market 
for Class A units and translated the three sizes to the corresponding 
vendible capacity. Under this approach, the large-size Class A machine 
would correspond to having a vendible capacity of 410 12-ounce cans, 
the medium-size Class A machine would have a capacity of 350 cans, and 
the small-size Class A machine would have a capacity of 270 cans. 
Similarly, DOE assumed that each size is about one-third of the market 
for Class B units. Under this approach, the large-size Class B machine 
would have a vendible capacity of 800 cans, the medium-size Class B 
machine would have a capacity of 650 cans, and the small-size Class B 
machine would have a capacity of 450 cans.
    Because several different types of businesses own beverage vending 
machines and use them in a variety of locations, machines are divided 
into several market segments. Table II.14 gives the business locations 
and the approximate size of the market segments from 2002 to 2005.

[[Page 34125]]



                   Table II.14.--Market Segments for the Beverage Vending Machines (2002-2005)
----------------------------------------------------------------------------------------------------------------
                                                  Percent of                                        Percent of
              Business location                    machines                 Ownership                machines
----------------------------------------------------------------------------------------------------------------
Manufacturing................................            30.4   Bottlers and Vendors............            75.0
Offices......................................            23.1   Business-Owned..................            25.0
Retail.......................................            13.6   Manufacturing...................             7.6
Schools/Colleges.............................            13.0   Offices and Health Care.........             7.3
Health Care..................................             6.1   Retail, Restaurants, Bars, and               4.1
                                                                 Clubs.
Hotels/Motels................................             3.0   Schools, Colleges, and Public                3.8
                                                                 Facilities (including
                                                                 correctional).
Restaurants/Bars/ Clubs......................             2.6   Military Bases..................             0.5
Correctional Facilities......................             2.3   Other (including hotels/motels).             1.8
                                                                                                 ---------------
Military Bases...............................             1.9      Subtotal, Business Owned.....            25.0
Other........................................             4.0   ................................  ..............
                                              -----------------                                  ---------------
    Total....................................           100.0      Total........................          100.0
----------------------------------------------------------------------------------------------------------------
Source: State of the Vending Industry (2006).

    Table II.15 shows the forecasted shipments of the three typical 
sizes of beverage vending machines for Class A and Class B units for 
selected years, and cumulatively, between 2012 and 2042. As equipment 
purchase price increases with higher efficiency levels, a drop in 
shipments could occur relative to the base case. On the other hand, as 
annual energy consumption is reduced, equipment sales could increase 
due to more frequent installations and use of beverage vending machines 
by retailers. DOE has no information by which to calibrate either such 
relationship. Therefore, although the spreadsheet allows for changes in 
projected shipments in response to efficiency level increases or energy 
consumption level decreases, for the ANOPR analysis, DOE presumed that 
the shipments would not change in response to the changing CSLs. Table 
II.15 also shows the cumulative shipments for the 31-year period 
between 2012 and 2042 for all beverage vending machines. Because there 
has been a decrease in shipments from 2000 to 2006 and as more and more 
units are retired, there has to be an increase in future shipments to 
replenish the existing stock of equipment. Chapter 9 of the TSD 
provides additional details on the shipments analysis.

                             Table II.15.--Forecasted Shipments for Beverage Vending Machines (Baseline Efficiency, Level 1)
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                     Year (thousands of units shipped)
                                                 -------------------------------------------------------------------------------------------------------
                 Equipment class                                                                                                            Cumulative
                                                     2012       2015       2020       2025       2030       2035       2040       2042       shipments
                                                                                                                                            (2012-2042)
--------------------------------------------------------------------------------------------------------------------------------------------------------
A-L-IN..........................................        7.7        7.6        7.9        8.3        8.8        9.2        9.7        9.9           265.9
A-M-IN..........................................        7.7        7.6        7.9        8.3        8.8        9.2        9.7        9.9           265.9
A-S-IN..........................................        7.7        7.6        7.9        8.3        8.8        9.2        9.7        9.9           265.9
B-L-IO..........................................       77.6       77.0       79.8       84.2       88.8       93.4       98.4      100.5         2,688.3
B-M-IO..........................................       77.6       77.0       79.8       84.2       88.8       93.4       98.4      100.5         2,688.3
B-S-IO..........................................       77.6       77.0       79.8       84.2       88.8       93.4       98.4      100.5         2,688.3
--------------------------------------------------------------------------------------------------------------------------------------------------------

I. National Impact Analysis

    The NIA assesses cumulative national energy savings (NES) and the 
cumulative national economic impacts of candidate standard levels. The 
analysis measures economic impacts using the NPV metric (i.e., future 
amounts discounted to the present) of total commercial customer costs 
and savings expected to result from new standards at specific 
efficiency levels. For a given CSL, DOE calculated the NPV, as well as 
the NES, as the difference between a base-case forecast and the 
standards-case forecasts. Chapter 10 of the TSD provides additional 
details on the national impacts analysis for beverage vending machines.
    For each year of the analysis, the beverage vending machine stock 
is composed of units shipped in previous years (or vintages). Each 
vintage has a characteristic distribution of efficiency levels. DOE 
first determined the average energy consumption of each vintage in the 
stock accounting for all efficiency levels in that vintage. The 
national annual energy consumption is then the product of the annual 
average energy consumption per beverage vending machine at a given 
vintage and the number of beverage vending machines of that vintage in 
the stock for the particular year. This approach accounts for 
differences in unit energy consumption from year to year. Annual energy 
savings are calculated for each standard level by subtracting national 
energy consumption for that standard level from that calculated for the 
baseline. Cumulative energy savings are the sum of the annual NES over 
the period of analysis.
    In a similar fashion, DOE tracks the first costs for all equipment 
installed at each efficiency level for each vintage. It also tracks the 
annual operating cost (sum of the energy, maintenance, and repair 
costs) by vintage for all equipment remaining in the stock for each 
year of the analysis. DOE then calculates the net economic savings each 
year as the difference between total operating cost savings and 
increases in the total installed costs (which consist of manufacturer 
selling price, sales tax, and installation cost). The NPV is the annual 
net cost savings calculated for

[[Page 34126]]

each year, discounted to the year 2012, and expressed in 2007$. 
Cumulative NPV savings reported are the sum of the annual NPV over the 
analysis period.
1. Approach
    Over time, in the standards case, more-efficient equipment 
gradually replaces less-efficient equipment. This affects the 
calculation of both the NES and NPV, both of which are a function of 
the total number of units in use and their efficiencies and thus depend 
on annual shipments and the lifetime of equipment. Both calculations 
start by using the estimate of shipments and the quantity of units in 
service, which are derived from the shipments model. As more-efficient 
beverage vending machines gradually replace less-efficient ones, the 
energy per unit of capacity that beverage vending machines in service 
use gradually decreases in the standards case relative to the base 
case, leading to an estimate of NES.
    To estimate the total energy savings for each candidate efficiency 
level, DOE first calculated the national site energy consumption \47\ 
for beverage vending machines each year, beginning with the expected 
effective date of the standards (i.e., 2012). DOE did this calculation 
for both the base-case forecast and the standards-case forecast. 
Second, DOE determined the annual site energy savings, which is the 
difference between site energy consumption in the base case and in the 
standards case. Third, DOE converted the annual site energy savings 
into the annual amount of energy saved at the source of electricity 
generation (the source energy). Then, DOE summed the annual source 
energy savings from 2012 to 2042 to calculate the total NES for that 
period. DOE performed these calculations for each CSL.
---------------------------------------------------------------------------

    \47\ ``Site energy'' is the energy directly consumed by the 
units in operation.
---------------------------------------------------------------------------

2. Base-Case and Standards-Case Forecasted Efficiencies
    A key component of DOE's estimates of NES and NPV are the energy 
efficiencies for shipped equipment that it forecasts over time for the 
base case (without new standards) and for each of the standards cases. 
The forecasted efficiencies represent the distribution of energy 
efficiency of the equipment under consideration that is shipped over 
the forecast period (i.e., from the assumed effective date of a new 
standard to 30 years after the standard becomes effective). Because key 
inputs to the calculation of the NES and NPV depend on the estimated 
efficiencies, they are of great importance to the analysis. In the case 
of the NES, the per-unit annual energy consumption is a direct function 
of efficiency. Regarding the NPV, the per-unit total installed cost and 
the per-unit annual operating cost both depend on efficiency. The per-
unit total installed cost is a direct function of efficiency. Increased 
efficiency results in reduced energy consumption which results in 
reduced energy costs. However, the maintenance cost portion of the 
operating cost may go up and hence, the per-unit annual operating cost 
is an indirect function of the equipment efficiency.
    The annual per-unit energy consumption is the average energy 
consumed by a beverage vending machine in a year as determined in the 
energy use characterization (see Chapter 7 of the TSD). The annual 
energy consumption is directly tied to the efficiency of the unit. DOE 
determined annual forecasted market shares by efficiency level that, in 
turn, enabled a determination of shipment-weighted annual national 
average energy consumption values. At the Framework public meeting, 
several manufacturers and ACEEE offered their estimates of shipments of 
new beverage vending machines that would meet ENERGY STAR levels by 
2012. ACEEE also stated that virtually 100 percent of all beverage 
vending machines will meet Tier 1 levels, and it further expects that 
100 percent of the indoor-outdoor zone-cooled (Class B) machines would 
meet Tier 2 levels. (ACEEE, No. 13 at p. 4) Dixie-Narco estimated that 
100 percent of new equipment would meet Tier 1, and about 75 percent 
would meet Tier 2 levels in 2012. (Dixie-Narco, No. 14 at p. 7). Based 
on these comments, DOE assumed for purposes of its analyses that 100 
percent of beverage vending machine shipments will meet ENERGY STAR 
Tier 1 level and that about 55 percent of shipments will meet Tier 2 
level by 2012.
    Because no data were available on market shares broken down by 
efficiency level, DOE developed estimates. First, DOE converted 2005 
shipment information by equipment class into market shares by equipment 
class, and then adapted a cost-based method similar to that used in the 
NEMS to estimate market shares for each equipment class by efficiency 
level. This cost-based method relied on cost data developed in the 
engineering and life-cycle cost analyses, as well as economic purchase 
criteria data taken directly from NEMS. From those market shares and 
shipment projections, DOE developed the future efficiency scenarios for 
a base case (i.e., without new standards) and for various standards 
cases (i.e., with new standards).
    DOE developed base-case efficiency forecasts based on the estimated 
market shares by equipment class and efficiency level. Because there 
are no historical data to indicate how equipment efficiencies or 
relative equipment class preferences have changed over time, DOE 
assumed that forecasted market shares would remain frozen at the 2012 
efficiency level until the end of the forecast period (30 years after 
the effective date or 2042). Realizing that this prediction likely 
overstates the estimates of savings associated with these efficiency 
standards, DOE seeks comment on this assumption and the potential 
significance of the overestimate. In particular, DOE requests data that 
would help characterize the likely increases in efficiency that would 
occur over the 30-year modeling period in absence of a standard.
    For its estimate of standards-case forecasted efficiencies, DOE 
used a ``roll-up'' scenario to establish the market shares by 
efficiency level for the year that standards become effective (i.e., 
2012). Information available to DOE suggests that equipment shipments 
with efficiencies in the base case that did not meet the standard level 
under consideration would roll up to meet the new standard level. Also, 
DOE assumed that all equipment efficiencies in the base case that were 
above the standard level under consideration likely would not be 
affected.
    DOE seeks feedback on how it predicts base-case and standards-case 
efficiencies, and how standards affect efficiency distributions. 
Section IV.E of this ANOPR discusses this subject, identified as Issue 
5 under ``Issues on Which DOE Seeks Comment.'' DOE also seeks feedback 
on whether higher standard levels in specific equipment classes are 
likely to cause beverage vending machine customers to shift to less-
efficient equipment classes. Section IV.E of this ANOPR discusses this 
subject, identified as Issue 6 under ``Issues on Which DOE Seeks 
Comment.''
3. National Impact Analysis Inputs
    DOE used the difference in shipments by equipment efficiency level 
between the base case and standards cases to determine the reduction in 
per-unit annual energy consumption that could result from new 
standards. The beverage vending machine stock in a given year is the 
total number of beverage vending machines shipped from earlier years 
that survive in the given year. The NES

[[Page 34127]]

spreadsheet model tracks the total number of beverage vending machines 
shipped each year. For purposes of the ANOPR NES and NPV analyses, DOE 
assumed that retirements follow a Weibull form of statistical 
distribution with a 14-year average lifetime for beverage vending 
machines. Retirements for any given vintage build to about eight 
percent per year by year 7, then tail off gradually to less than one 
percent per year by year 20. Retired units are replaced until 2042. For 
units shipped in 2042, any units still remaining at the end of 2062 are 
replaced.
    The site-to-source conversion factor is the multiplicative factor 
used for converting site energy consumption (expressed in kWh) into 
primary or source energy consumption (expressed in quads (quadrillion 
Btu)). DOE used annual site-to-source conversion factors based on U.S. 
average values for the commercial sector, calculated from AEO2007, 
Table A5. The average conversion factors vary over time, due to 
projected changes in electricity generation sources (i.e., the power 
plant types projected to provide electricity to the country).
    To estimate NPV, DOE calculated the net impact each year as the 
difference between total operating cost savings (including electricity, 
repair, and maintenance cost savings) and increases in total installed 
costs (consisting of MSP, sales taxes, distribution channel markups, 
and installation cost). DOE calculated the NPV of each CSL over the 
life of the equipment using three steps. First, DOE calculated the 
difference between the equipment costs under each CSL and the base case 
to determine the net equipment cost increase resulting from each CSL. 
Second, DOE calculated the difference between the base-case operating 
costs and the operating costs at each CSL to determine the net 
operating cost savings from each CSL. Third, DOE calculated the 
difference between the net operating cost savings and the net equipment 
cost increase to determine the net savings (or expense) for each year. 
DOE then discounted the annual net savings (or expenses) for beverage 
vending machines purchased on or after 2012 to 2007$, and summed the 
discounted values to arrive at the NPV of a CSL. An NPV greater than 
zero shows net savings (i.e., the CSL would reduce overall customer 
expenditures relative to the base case in present-value terms). An NPV 
less than zero indicates that the CSL would result in a net increase in 
customer expenditures in present-value terms. Table II.16 summarizes 
the NES and NPV inputs to the NES spreadsheet model, and briefly 
describes the data source for each input.

   Table II.16.--National Energy Savings and Net Present Value Inputs
------------------------------------------------------------------------
          Input data                          Description
------------------------------------------------------------------------
Shipments....................  Annual shipments from shipments model
                                (see Chapter 9 of the TSD, Shipments
                                Analysis).
Effective Date of Standard...  2012.
Base-Case Efficiencies.......  Distribution of base-case shipments by
                                efficiency level.
Standards-Case Efficiencies..  Distribution of shipments by efficiency
                                level for each standards case. Standards-
                                case annual market shares by efficiency
                                level remain constant over time for the
                                base case and each standards case.
Annual Energy Consumption per  Annual weighted-average values are a
 Unit.                          function of energy consumption level per
                                unit, which are established in the
                                Energy Use Characterization (Chapter 7
                                of the TSD).
Total Installed Cost per Unit  Annual weighted-average values are a
                                function of energy consumption level
                                (see Chapter 8 of the TSD).
Repair Cost per Unit.........  Annual weighted-average values increase
                                with manufacturer's cost level (see
                                Chapter 8 of the TSD).
Maintenance Cost per Unit....  Annual weighted-average value equals
                                $165.44 (see Chapter 8 of the TSD).
Escalation of Electricity      EIA AEO2007 forecasts (to 2030) and
 Prices.                        extrapolation beyond 2030 (see Chapter 8
                                of the TSD).
Electricity Site-to-Source     Conversion varies yearly and is generated
 Conversion.                    by DOE/EIA's NEMS * model (a time-series
                                conversion factor that includes electric
                                generation, transmission, and
                                distribution losses).
Discount Rate................  3% and 7% real.
Present Year.................  Future costs are discounted to 2008.
Rebound Effect...............  As explained in the LCC inputs section,
                                DOE does not anticipate unit energy
                                consumption rebounding above the levels
                                used in the LCC analysis and passed to
                                the NIA analysis. Further, the shipments
                                model develops shipment projections in
                                order to meet historical market
                                saturation levels. The shipment model
                                does not further adjust shipments as a
                                function of unit energy consumption
                                levels, because DOE has no information
                                by which to calibrate such a
                                relationship.
------------------------------------------------------------------------
* Chapter 13 (utility impact analysis) and Chapter 14 (environmental
  assessment) provide more detail on NEMS.

4. National Impact Analysis Results
    Table II.17 presents the cumulative NES results for the CSLs 
analyzed for three sizes of each equipment class of beverage vending 
machines. Results are cumulative to 2042 and are shown as primary 
energy savings in quads. Inputs to the NES spreadsheet model are based 
on weighted-average values, yielding results that are discrete point 
values, rather than a distribution of values as in the LCC analysis. 
DOE based all the results on electricity price forecasts from the 
AEO2007 reference case. The range of overall cumulative energy impacts 
for standards above the baseline efficiency level (Level 1) is from 
0.006 quad (Class A machines) and 0.048 quad (Class B machines) for a 
standard established at Level 2, to 0.036 quad (Class A machines) and 
0.351 quad (Class B machines) at the max tech efficiency level (Level 
8).

       Table II.17.--Cumulative National Energy Savings for Beverage Vending Machines (2012-2042) (Quads)
----------------------------------------------------------------------------------------------------------------
                                                    National energy savings (Quads) by candidate standard level
                 Equipment class                  --------------------------------------------------------------
                                                   Level 2  Level 3  Level 4  Level 5  Level 6  Level 7  Level 8
----------------------------------------------------------------------------------------------------------------
Class A..........................................    0.006    0.011    0.018    0.023    0.023    0.031    0.036

[[Page 34128]]

 
Class B..........................................    0.048    0.106    0.181    0.222    0.234    0.300    0.351
----------------------------------------------------------------------------------------------------------------

    Below are the NPV results for the CSLs DOE considered for the three 
sizes of each of the two equipment classes of beverage vending 
machines. Results are cumulative and shown as the discounted value at 
seven percent of these savings in present dollar terms. The present 
value of increased total installed costs is the total installed cost 
increase (i.e., the difference between the standards case and base 
case), discounted to 2007, and summed over the time period in which DOE 
evaluates the impact of standards (i.e., from the effective date of 
standards, 2012 to 2062 when the last beverage vending machine is 
retired).
    Under the NPV analysis, savings represent decreases in operating 
costs (including electricity, repair, and maintenance) associated with 
the higher energy efficiency of beverage vending machines purchased in 
the standards case compared to the base case. Total operating cost 
savings are the savings per unit multiplied by the number of units of 
each vintage (i.e., the year of manufacture) surviving in a particular 
year. The beverage vending machine consumes energy and must be 
maintained over its entire lifetime. For units purchased in 2042, the 
operating cost includes energy consumed and maintenance and repair 
costs incurred until the last unit retires from service in 2062.
    Table II.18 shows the NPV results for the CSLs for beverage vending 
machines based on a seven-percent discount rate. DOE based all results 
on electricity price forecasts from the AEO2007 reference case. 
Appendix H of the TSD provides detailed results showing the breakdown 
of the NPV into national equipment costs and national operating costs. 
At a seven-percent discount rate, the maximum national NPV benefits 
calculated for different CSL scenarios above the baseline was about $30 
million for Class A machines and about $280 million for Class B 
machines.

   Table II.18.--Cumulative Net Present Value Results Based on a Seven-Percent Discount Rate (Billion 2007$) *
----------------------------------------------------------------------------------------------------------------
                                                                           Standard level
                 Equipment class                  --------------------------------------------------------------
                                                   Level 2  Level 3  Level 4  Level 5  Level 6  Level 7  Level 8
----------------------------------------------------------------------------------------------------------------
Class A..........................................    0.009    0.018    0.028    0.030    0.027  (0.009)  (0.221)
Class B..........................................    0.079    0.171    0.269    0.280    0.264  (0.081)  (1.916)
 
----------------------------------------------------------------------------------------------------------------
* Values in parentheses indicate negative NPV.

    Table II.19 provides the NPV results based on the three-percent 
discount rate and electricity price forecasts from the AEO2007 
reference case. Appendix H of the TSD provides detailed results showing 
the breakdown of the NPV into national equipment costs and national 
operating costs based on a three-percent discount rate. At this rate, 
the maximum overall NPV benefits calculated for different CSL scenarios 
above the assumed baseline was $80 million for Class A machines and 
$764 million for Class B machines.

   Table II.19.--Cumulative Net Present Value Results Based on a Three-Percent Discount Rate (Billion 2007$) *
----------------------------------------------------------------------------------------------------------------
                                                                           Standard level
                 Equipment class                  --------------------------------------------------------------
                                                   Level 2  Level 3  Level 4  Level 5  Level 6  Level 7  Level 8
----------------------------------------------------------------------------------------------------------------
Class A..........................................    0.021    0.046    0.072    0.080    0.079    0.010  (0.419)
Class B..........................................    0.204    0.443    0.709    0.764    0.741    0.085  (3.654)
 
----------------------------------------------------------------------------------------------------------------
* Values in parentheses indicate negative NPV.

    As discussed previously in Section II.E, roughly 25 percent of the 
Class B machines are used outdoors, and DOE assumes that all Class A 
machines are used indoors. To be thorough, DOE developed analytical 
tools with the capability of separately analyzing Class B machines 
certified for indoor use only and Class A machines certified for 
indoor/outdoor use. However, DOE was not able to locate any sales data 
for these two equipment markets, so sales are assumed to be zero and 
DOE did not report LCC or NIA results separately for these equipment 
markets.

J. Life-Cycle Cost Sub-Group Analysis

    The LCC sub-group analysis evaluates impacts of standards on 
identifiable groups of customers, such as customers of different 
business types that may be disproportionately affected by a national 
energy conservation standards level. In the NOPR phase of this 
rulemaking, DOE will analyze the LCCs and PBPs for these customers, and 
determine whether they would be adversely affected by any of the CSLs.
    Also, DOE plans to examine variations in energy prices and energy 
use that might affect the NPV of a standard to customer sub-
populations. To the extent possible, DOE will obtain estimates of the 
variability of each input parameter and consider this variability in 
the calculation of customer impacts.

[[Page 34129]]

Variations in energy use for a particular equipment class may depend on 
factors such as climate and type of business.
    DOE will determine the effect on customer sub-groups using the LCC 
spreadsheet model. The standard LCC analysis includes various customer 
types that use beverage vending machines. DOE can analyze the LCC for 
any sub-group, such as a particular type of school or institution, by 
using the spreadsheet model and sampling only that sub-group. Section 
II.G explains the details of this model. DOE will be especially 
sensitive to purchase price increases (``first-cost'' increases) to 
avoid negative impacts on identifiable population groups such as small 
businesses (i.e., those with low annual revenues) that may not be able 
to afford a significant increase in the price of beverage vending 
machines. Some of these customers may retain equipment past its useful 
life. This older equipment is generally less efficient, and its 
efficiency may deteriorate further if it is retained beyond its useful 
life. Large increases in first cost also could preclude the purchase 
and use of equipment altogether, resulting in a potentially large loss 
of utility to the customer.
    Although DOE does not know business income and annual revenues for 
the types of businesses analyzed in the LCC analysis, the floor space 
occupied by a business may be an indicator of annual income. If this 
proves true, DOE can perform sub-group analyses on smaller businesses. 
DOE can also use SBA data for businesses with 500 or fewer employees as 
a proxy for ``smaller businesses.''

K. Manufacturer Impact Analysis

    The purpose of the manufacturer impact analysis is to identify the 
likely impacts of energy conservation standards on manufacturers. DOE 
has begun and will continue to conduct this analysis with input from 
manufacturers and other interested parties and apply this methodology 
to its evaluation of standards. DOE will also consider financial 
impacts and a wide range of quantitative and qualitative industry 
impacts that might occur following the adoption of a standard. For 
example, a particular standard level adopted by DOE could require 
changes to beverage vending machine manufacturing practices. DOE will 
identify and understand these impacts through interviews with 
manufacturers and other stakeholders during the NOPR stage of its 
analysis.
    DOE announced changes to its process for the manufacturer impact 
analysis through a report submitted to Congress on January 31, 2006 (as 
required by section 141 of EPACT 2005), entitled ``Energy Conservation 
Standards Activities.'' Previously, DOE did not report any manufacturer 
impact analysis results during the ANOPR phase; however, under this new 
process, DOE has collected, evaluated, and reported preliminary 
information and data in the ANOPR (see Section II.K.6 of this ANOPR). 
Such preliminary information includes the anticipated conversion 
capital expenditures by efficiency level and the corresponding 
anticipated impacts on jobs. DOE solicited this information during the 
ANOPR engineering analysis manufacturer interviews and reported the 
results in the preliminary manufacturer impact analysis (see Chapter 12 
of the TSD).
    DOE conducts the manufacturer impact analysis in three phases, and 
then tailors the analytical framework based on public comments. In 
Phase I, DOE creates an industry profile to characterize the industry 
and conducts a preliminary manufacturer impact analysis to identify 
important issues that require consideration. The ANOPR TSD presents 
results of the Phase I analysis. In Phase II, DOE prepares an industry 
cash flow model and an interview questionnaire to guide subsequent 
discussions. In Phase III, DOE interviews manufacturers and assesses 
the impacts of standards both quantitatively and qualitatively. DOE 
uses the Government Regulatory Impact Model (GRIM) to assess industry 
and sub-group cash flow and net present value, and then assesses 
impacts on competition, manufacturing capacity, employment, and 
regulatory burden based on manufacturer interviews. The NOPR TSD 
presents results of the Phase II and Phase III analyses. For more 
detail on the manufacturer impact analysis, see Chapter 12 of the TSD.
1. Sources of Information for the Manufacturer Impact Analysis
    Many of the analyses described above provide input data for the 
MIA. Such information includes manufacturing costs and prices from the 
engineering analysis, retail price forecasts, and shipments forecasts. 
DOE will supplement this information with company financial data and 
other information gathered during manufacturer interviews. This 
interview process plays a key role in the manufacturer impact analysis 
because it allows interested parties to privately express their views 
on important issues. To preserve confidentiality, DOE aggregates these 
perspectives across manufacturers, creating a combined opinion or 
estimate for DOE. This process enables DOE to incorporate sensitive 
information from manufacturers in the rulemaking process without 
specifying which manufacturer provided a certain set of data.
    DOE conducts detailed interviews with manufacturers to gain insight 
into the range of potential impacts of standards. During the 
interviews, DOE typically solicits both quantitative and qualitative 
information on the potential impacts of efficiency levels on sales, 
direct employment, capital assets, and industrial competitiveness. DOE 
prefers interactive interviews, rather than written responses to a 
questionnaire, because DOE can clarify responses and identify 
additional issues. Before the interviews, DOE circulates a draft 
document showing the estimates of the financial parameters based on 
publicly-available information. DOE solicits comments and suggestions 
on these estimates during the interviews.
    DOE asks interview participants to identify any confidential 
information that they have provided, either orally or in writing. DOE 
considers all information collected, as appropriate, in its decision-
making process. However, DOE does not make confidential information 
available in the public record. DOE also asks participants to identify 
all information that they wish to have included in the public record, 
but do not want to have associated with their interview. DOE 
incorporates this information into the public record, but reports it 
without attribution.
    DOE collates the completed interview questionnaires and prepares a 
summary of the major issues. For more detail on the methodology used in 
the manufacturer impact analysis, see Chapter 12 of the TSD.
2. Industry Cash Flow Analysis
    The industry cash flow analysis relies primarily on the GRIM. DOE 
uses the GRIM to analyze the financial impacts of more stringent energy 
conservation standards on the industry. The GRIM analysis uses several 
factors to determine annual cash flows from a new standard: (1) Annual 
expected revenues; (2) manufacturer costs (including COGS, 
depreciation, research and development, selling, and general and 
administrative expenses); (3) taxes; and (4) conversion capital 
expenditures. DOE compares the GRIM results against base-case 
projections that involve no new standards. The financial impact of new 
standards is the difference between the two sets of discounted annual 
cash flows. For more information on the

[[Page 34130]]

industry cash flow analysis, see Chapter 12 of the TSD.
3. Manufacturer Sub-Group Analysis
    Industry-wide cost estimates are not adequate to assess 
differential impacts among sub-groups of manufacturers. For example, 
small and niche manufacturers, or manufacturers whose cost structure 
differs significantly from the industry average, could experience a 
more negative impact. Ideally, DOE would consider the impact on every 
firm individually; however, it typically uses the results of the 
industry characterization to group manufacturers exhibiting similar 
characteristics.
    During the interviews, DOE will discuss the potential sub-groups 
and sub-group members it has identified for the analysis. DOE will 
encourage manufacturers to recommend sub-groups or characteristics that 
are appropriate for the sub-group analysis. For more detail on the 
manufacturer sub-group analysis, see Chapter 12 of the TSD.
4. Competitive Impacts Assessment
    DOE must also consider whether a new standard is likely to reduce 
industry competition, and the Attorney General must determine the 
impacts, if any, of any reduced competition. DOE makes a determined 
effort to gather and report firm-specific financial information and 
impacts. The competitive analysis includes an assessment of the impacts 
on smaller manufacturers. DOE bases this assessment on manufacturing 
cost data and on information collected from interviews with 
manufacturers. The manufacturer interviews focus on gathering 
information to help assess asymmetrical cost increases to some 
manufacturers, increased proportions of fixed costs that could increase 
business risks, and potential barriers to market entry (e.g., 
proprietary technologies).
5. Cumulative Regulatory Burden
    DOE recognizes and seeks to mitigate the overlapping effects on 
manufacturers of new or revised DOE standards and other regulatory 
actions affecting the same equipment. DOE will analyze and consider the 
impact on manufacturers of multiple, equipment-specific regulatory 
actions.
    In the Framework Document, DOE asked what regulations or pending 
regulations it should consider in the analysis of cumulative regulatory 
burden. DOE stated it will study the potential impacts of these 
cumulative burdens in greater detail during the MIA conducted during 
the NOPR phase.
    During the Framework comment period, several stakeholders commented 
on cumulative regulatory burden on beverage vending machine 
manufacturers. PepsiCo stated that the beverage vending machine 
rulemaking should not establish standards that interfere with other 
Federal requirements, such as those related to greenhouse gases and 
global warming. (Public Meeting Transcript, No. 8 at p. 147) Dixie-
Narco stated that other regulatory burdens are Restriction of Hazardous 
Substance rules, California Energy Commission regulations, Natural 
Resources Canada regulations, and new State and municipality 
regulations. (Public Meeting Transcript, No. 8 at p. 256) Royal Vendors 
stated that coordination with the California Energy Commission's and 
Canadian Standards Association's regulations would reduce the burden on 
the industry. (Public Meeting Transcript, No. 8 at p. 273) USA 
Technologies stated that the current technology puts U.S. manufacturers 
at a disadvantage in relation to other nations as we look toward 2012. 
In addition, USA Technologies commented that DOE should be aware that 
the phaseout of refrigerants currently used in beverage vending 
machines will require a complete overhaul of current parameters, which 
will make DOE's current work obsolete. (USA Technologies, No. 9 at p. 
1) EEI stated that, regarding cumulative regulatory burden, DOE should 
consider current, new, and upcoming regulations in Canada, Europe, and 
Mexico (along with any U.S. State regulations) that may affect the 
refrigerated vending machine industry. (EEI, No. 12 at p. 7) Dixie-
Narco stated that other burdens include requirements set by specific 
customers (e.g., Coca-Cola company and PepsiCo) relating to 
performance, marketing, and merchandising of the equipment; Dixie-Narco 
also suggested that DOE should consider sanitary standards published by 
NAMA and the National Sanitation Foundation applicable to vending 
equipment. (Dixie-Narco, No. 14 at p. 4)
    In response, DOE identified several regulations relevant to 
beverage vending machines through its own research and discussions with 
manufacturers, including existing or new standards for beverage vending 
machines, phaseout of HCFCs and foam insulation blowing agents, 
standards for other equipment made by beverage vending machine 
manufacturers, State energy conservation standards, and international 
energy conservation standards. See Chapter 12 of the TSD for more 
detail. DOE understands that complying with such regulations requires 
corporations to invest in both human and capital resources. In 
addition, the emphasis on cumulative regulatory burden in the comments 
submitted during the Framework comment period further highlights the 
importance of such regulations to stakeholders. DOE will consider the 
substantial impact of other regulatory programs, both domestic and 
international, on beverage vending machine manufacturers. As mentioned 
above, DOE will study the potential impacts of these cumulative burdens 
in greater detail in the MIA conducted during the NOPR phase. DOE 
invites additional comment and data from stakeholders and manufacturers 
on regulations applicable to beverage vending machine manufacturers 
that contribute to their regulatory burden.
6. Preliminary Results for the Manufacturer Impact Analysis
    DOE received views from manufacturers through preliminary 
interviews about what they perceive to be the possible impact of new 
standards on profitability. They stated that a new energy conservation 
standard has the potential to affect financial performance in several 
ways. The capital investment needed to upgrade or redesign equipment 
and equipment platforms before they have reached the end of their 
useful life can require conversion costs that otherwise would not be 
expended, resulting in stranded investments. In addition, more 
stringent standards can result in higher per-unit costs that may deter 
some customers from buying higher-margin units with more features, 
thereby decreasing manufacturer profitability.
    DOE estimates that a beverage vending machine production line would 
have a life cycle of approximately 5 to 10 years in the absence of 
standards. During that period, manufacturers would not make major 
equipment changes that alter the underlying platforms. Thus, a standard 
that took effect and resulted in a major platform redesign before the 
end of the platform's life would strand a portion of the earlier 
capital investments.
    DOE asked manufacturers what level of conversion costs they 
anticipated if efficiency standards were to take effect. In general, 
manufacturers expected only conversion costs associated with 
redesigning insulation foaming fixtures. Manufacturers stated that no 
capital investments would be needed to go from ENERGY STAR Tier 1 to 
Tier 2. One manufacturer estimated the retooling capital investments 
needed to comply with efficiency levels beyond Tier 2 to

[[Page 34131]]

be several million dollars. One manufacturer indicated that it would 
experience stranded assets if standards were too stringent and 
production facilities needed to be moved out of the country.
    The impact of new energy conservation standards on employment is 
another important consideration in the rulemaking process. To assess 
how domestic employment patterns might be affected by new energy 
conservation standards for beverage vending machines, DOE posed several 
questions to manufacturers on that topic.
    In response, some beverage vending machine manufacturers stated 
that they have considered moving their production out of the United 
States, primarily because of concerns about profitability and the 
opportunity for lower labor costs if future standards are too 
stringent. If manufacturers need to make large capital investments to 
produce redesigned platforms, they have strong financial incentives to 
invest in a location with lower labor costs. Mexico is the most common 
location for U.S. manufacturers to establish new production capacity 
since it offers low labor rates (relative to the United States) and 
proximity to the U.S. market.
    DOE asked manufacturers to what degree they expect industry 
consolidation to occur in the absence of standards. Manufacturers 
stated that they expect no industry consolidation in the future. Three 
companies now account for a large majority of beverage vending machine 
sales. Historically, the beverage vending machine industry has not seen 
extensive consolidation, although there has been a lot of consolidation 
in recent years of the industry's customers, such as bottling 
companies.
    Manufacturers also discussed how standards would affect their 
ability to compete. Some stated that new standards would not 
disproportionately advance or harm their competitive positions. Others 
stated that if a company had more available access to capital, that 
company might meet the standard at a lower cost or in a shorter 
timeframe, and such company would thus have a better competitive 
position and possibly gain market share. For more preliminary results 
of the manufacturer impact analysis, such as impacts on financial 
performance, equipment utility and performance, and cumulative 
regulatory burden, see Chapter 12 of the TSD.

L. Utility Impact Analysis

    For the NOPR, the utility impact analysis will estimate the effects 
on the utility industry of reduced energy consumption due to improved 
equipment efficiency resulting from any energy conservation standard 
for beverage vending machines. The analysis compares modeling results 
for the base case with results for each candidate standard's case. It 
consists of forecasted differences between the base case and standards 
case for electricity generation, installed capacity, sales, and prices.
    To estimate the effects of potential beverage vending machine 
standard levels on the electric utility industry, DOE intends to use a 
variant of the EIA's NEMS.\48\ NEMS, which is available in the public 
domain, is a large, multi-sectoral, partial equilibrium model of the 
U.S. energy sector. EIA uses NEMS to produce the AEO2007, which is a 
widely recognized baseline energy forecast for the U.S. DOE will use a 
variant of NEMS known as NEMS-Building Technologies (BT) to provide key 
inputs to the utility impact analysis. Again, NEMS-BT produces a widely 
recognized reference case forecast for the United States and is 
available in the public domain.
---------------------------------------------------------------------------

    \48\ For more information on NEMS, please see the U.S. 
Department of Energy, Energy Information Administration (EIA) 
documentation. A useful summary is National Energy Modeling System: 
An Overview 2003, Report number: DOE/EIA-0581 (March 2003) 
(available at: http://tonto.eia.gov/FTPROOT/forecasting/05812003.pdf). DOE/EIA approves use of the name ``NEMS'' to describe 
only an official version of the model without any modification to 
code or data. Because the present analysis entails some minor code 
modifications and the model is run under various policy scenarios 
that are variations on DOE/EIA assumptions, DOE refers to it by the 
name ``NEMS-BT'' in this analysis.
---------------------------------------------------------------------------

    The use of NEMS-BT for the utility impact analysis offers several 
advantages. As the official DOE energy forecasting model, it relies on 
a set of assumptions that are transparent and have received wide 
exposure and commentary. NEMS-BT allows an estimate of the interactions 
between the various energy supply and demand sectors and the economy as 
a whole. The utility impact analysis will determine the changes for 
electric utilities in installed capacity and generation by fuel type 
produced by each CSL, as well as changes in electricity sales to the 
commercial sector. At the Framework public meeting, DOE asked whether 
there are tools besides NEMS-BT that the Department should consider 
using for conducting its utility impact analysis. EEI suggested that 
DOE consider the industrial building demand module in NEMS for this 
analysis, because beverage vending machines are installed in 
manufacturing and military/Federal facilities that typically pay 
industrial rates on their utility bills. (EEI, No. 12 at p. 7) DOE will 
investigate using this module in addition to the commercial building 
demand module during the NOPR phase of this rulemaking.
    DOE plans to conduct the utility analysis as a policy deviation 
from the AEO2007, applying the same basic set of premises. For example, 
the operating characteristics (e.g., energy conversion efficiency, 
emissions rates) of future electricity generating plants are the same 
in the AEO2007 reference case, as are the prospects for natural gas 
supply.
    DOE also will explore deviations from some of the reference case 
premises to represent alternative future outcomes. Two alternative 
scenarios use the high- and low-economic-growth cases of AEO2007. (The 
reference case corresponds to medium growth.) The high-economic-growth 
case projects higher growth rates for population, labor force, and 
labor productivity, resulting in lower predicted inflation and interest 
rates relative to the reference case and higher overall aggregate 
economic growth. The opposite is true for the low-growth case. Starting 
in 2012, the high-growth case predicts growth in per capita gross 
domestic product of 3.5 percent per year, compared with 3.0 percent per 
year in the reference case and 2.5 percent per year in the low-growth 
case. While supply-side growth determinants vary in these cases, 
AEO2007 uses the same reference case energy prices for all three 
economic growth cases so that the impact of differences in the three 
scenarios are comparable. Different economic growth scenarios will 
affect the rate of growth of electricity demand in different ways.
    The electric utility industry analysis will consist of NEMS-BT 
forecasts for generation, installed capacity, sales, and prices. The 
model uses predicted growth in demand for each end use to create a 
projection of the total electric system load growth for each of fifteen 
electricity market module supply regions, and then to predict the 
necessary additions to capacity. For electrical end uses, the NEMS-BT 
accounts for the implementation of energy conservation standards by 
decrementing the appropriate reference case load shape. DOE determines 
the size of the decrement using data on the per-unit energy savings 
developed in the LCC and PBP analyses (Chapter 8 of the TSD) and the 
forecast of shipments developed for the NIA (see Chapter 9 of the TSD).
    The predicted reduction in capacity additions is sensitive to the 
standard's peak load impacts. DOE will investigate the need to adjust 
the hourly load

[[Page 34132]]

profiles that include this end use in NEMS-BT. Since the AEO2007 
version of NEMS-BT forecasts only to 2030, DOE must extrapolate the 
results to 2042. It is not feasible to extend the forecast period of 
NEMS-BT for the purpose of this analysis, nor does EIA have an approved 
method for extrapolation of many outputs beyond 2030. Therefore, DOE 
will use the approach developed by EIA to forecast fuel prices for the 
FEMP. FEMP uses these prices to estimate LCCs of Federal equipment 
procurements. For petroleum products, EIA uses the average growth rate 
for the world oil price from 2010 to 2025, in combination with refinery 
and distribution markups from 2025, to determine regional price 
forecasts. Similarly, EIA derives natural gas prices from an average 
growth rate figure in combination with regional price margins from 
2025. Results of the analysis will include changes in commercial 
electricity sales, and installed capacity and generation by fuel type, 
for each CSL in five-year, forecasted increments extrapolated to 2042. 
For more information on the utility impact analysis, refer to Chapter 
13 of the TSD.

M. Employment Impact Analysis

    At the NOPR stage, DOE estimates the impacts of standards on 
employment for equipment manufacturers, relevant service industries, 
energy suppliers, and the economy in general. The following discussion 
explains the methodology DOE plans to use in conducting the employment 
impact analysis for this rulemaking. Both indirect and direct 
employment impacts are analyzed. Direct employment impacts would result 
if standards led to a change in the number of employees at 
manufacturing plants and related supply and service firms.
    Indirect employment impacts are impacts on the national economy 
other than the manufacturing sector being regulated. Indirect impacts 
may result both from expenditures shifting among goods (substitution 
effect) and changes in income that lead to a change in overall 
expenditure levels (income effect). DOE defines indirect employment 
impacts from standards as net jobs eliminated or created in the general 
economy as a result of increased spending driven by the increased 
equipment prices and reduced spending on energy.
    Using an input/output model of the U.S. economy, this analysis 
seeks to estimate the effects on different sectors and the net impact 
on jobs. DOE will estimate national employment impacts for major 
sectors of the U.S. economy in the NOPR, using public and commercially-
available data sources and software. DOE will make all methods and 
documentation pertaining to the employment impact analysis available 
for review in the TSD published in conjunction with the NOPR.
    DOE developed Impact of Sector Energy Technologies (ImSET), a 
spreadsheet model of the U.S. economy that focuses on 188 sectors most 
relevant to industrial, commercial, and residential building energy 
use.\49\ ImSET is a special-purpose version of the U.S. Benchmark 
National Input-Output (I-O) model, which was designed to estimate the 
national employment and income effects of energy-saving technologies 
that are considered by the DOE Office of Energy Efficiency and 
Renewable Energy. The current version of the model allows for more 
complete and automated analysis of the essential features of energy-
efficiency investments in buildings, industry, transportation, and the 
electric power sectors compared to previous versions used in earlier 
rulemakings.
---------------------------------------------------------------------------

    \49\ Roop, J. M., M. J. Scott, and R. W. Schultz, ``ImSET: 
Impact of Sector Energy Technologies,'' PNNL-15273 (Pacific 
Northwest National Laboratory, Richland, WA) (2005).
---------------------------------------------------------------------------

    The ImSET software includes a personal computer-based I-O model 
with structural coefficients to characterize economic flows among the 
188 sectors. ImSET's national economic I-O structure is based on the 
1997 Benchmark U.S. table (Lawson, et al. 2002),\50\ specially 
aggregated to 188 sectors. The time scale of the model is 50 years, 
with annual increments.
---------------------------------------------------------------------------

    \50\ Lawson, Ann M., Kurt S. Bersani, Mahnaz Fahim-Nader, and 
Jiemin Guo, ``Benchmark Input-Output Accounts of the U.S. Economy, 
1997,'' Survey of Current Business (Dec. 2002), pp. 19-117.
---------------------------------------------------------------------------

    The model is a static I-O model, which allows a great deal of 
flexibility concerning the types of energy-efficiency effects that it 
can accommodate. For example, certain economic effects of energy 
efficiency improvements require an assessment of inter-industry 
purchases, which is handled in the model. Some energy-efficiency 
investments will not only reduce the costs of energy in the economy but 
the costs of labor and other goods and services as well, which is 
accommodated through a recalculation of the I-O structure in the model. 
Output from the ImSET model can be used to estimate changes in 
employment, industry output, and wage income in the overall U.S. 
economy resulting from changes in expenditures in the various sectors 
of the economy.
    Although DOE intends to use ImSET for its analysis of employment 
impacts, it welcomes input on other tools and factors it might 
consider. For more information on the employment impacts analysis, see 
Chapter 14 of the TSD.

N. Environmental Assessment

    For the NOPR, DOE will assess the impacts of energy conservation 
standards for beverage vending machine standard levels on certain 
environmental indicators, using NEMS-BT to provide key inputs to the 
analysis. The environmental assessment produces results in a manner 
similar to those provided in AEO2007. DOE anticipates that the primary 
environmental effects will be reduced power plant emissions resulting 
from reduced electricity consumption.
    The intent of the environmental assessment is to provide estimates 
of reduced power plant emissions and to fulfill requirements to 
properly quantify and consider the environmental effects of all new 
Federal rules. The environmental assessment that will be produced by 
NEMS-BT considers potential environmental impacts from three pollutants 
(sulfur dioxide (SO2), nitrogen oxides (NOX), and 
mercury (Hg)) and from CO2 emissions. For each of the trial 
standard levels, DOE will calculate total undiscounted and discounted 
power plant emissions using NEMS-BT and will use further external 
analysis as needed.
    DOE will conduct each portion of the environmental assessment 
performed for this rulemaking as an incremental policy impact (i.e., an 
energy conservation standard for beverage vending machines) of the 
AEO2007 forecast, applying the same basic set of assumptions used in 
AEO2007. For example, the emissions characteristics of an electricity 
generating plant will be exactly those used in AEO2007. Also, forecasts 
conducted with NEMS-BT consider the supply-side and demand-side effects 
on the electric utility industry. Thus, DOE's analysis will account for 
any factors affecting the type of electricity generation and, in turn, 
the type and amount of airborne emissions the utility industry 
generates.
    The NEMS-BT model tracks carbon emissions with a specialized carbon 
emissions estimation subroutine, producing reasonably accurate results 
due to the broad coverage of all sectors and inclusion of interactive 
effects. Past experience with carbon results from NEMS-BT suggests that 
emissions estimates are somewhat lower than emissions based on simple 
average factors. One reason for this divergence is that NEMS-BT tends 
to predict that conservation measures will slow generating capacity 
growth in future

[[Page 34133]]

years, and new generating capacity is expected to be more efficient 
than existing capacity. On the whole, NEMS-BT provides carbon emissions 
results of reasonable accuracy, at a level consistent with other 
Federal published results. In addition to providing estimates of 
quantitative impacts of beverage vending machine standards on 
CO2 emissions, DOE will consider the use of monetary values 
to represent the potential value of such emissions reductions. DOE 
invites comment on how to estimate such monetary value of such effects 
or on any widely accepted values which might be used in DOE's analyses.
    NEMS-BT also reports on SO2 and NOX, which 
DOE has reported in past analyses. The Clean Air Act Amendments of 1990 
\51\ set an SO2 emissions cap on all large power plants. 
However, attainment of this target is flexible among generators through 
the use of emissions allowances and tradable permits. Although NEMS-BT 
includes a module for SO2 allowance trading and delivers a 
forecast of SO2 allowance prices, accurate simulation of 
SO2 trading implies that the effect of energy conservation 
standards on physical emissions will be zero because emissions will 
always be at or near the ceiling. However, there may be an 
SO2 economic benefit from energy conservation in the form of 
a lower SO2 allowance price. Since the impact of any one 
standard on the allowance price is likely to be small and highly 
uncertain, DOE does not plan to monetize any potential SO2 
benefit.
---------------------------------------------------------------------------

    \51\ The Clean Air Act Amendments of 1990 were signed into law 
as Pub. L. 101-549 on November 15, 1990. The amendment can be viewed 
at http://www.epa.gov/air/caa/.
---------------------------------------------------------------------------

    NEMS-BT also has an algorithm for estimating NOX 
emissions from power generation. The impact of these emissions, 
however, will be affected by the Clean Air Interstate Rule (CAIR) 
issued by the U.S. Environmental Protection Agency on March 10, 
2005.\52\ 70 FR 25162 (May 12, 2005). CAIR will permanently cap 
emissions of NOX in 28 eastern States and the District of 
Columbia. As with SO2 emissions, a cap on NOX 
emissions means that equipment energy conservation standards are not 
likely to have a physical effect on NOX emissions in States 
covered by the CAIR caps. Therefore, while the emissions cap may mean 
that physical emissions reductions in those States will not result from 
standards, standards could produce an environmental-related economic 
benefit in the form of lower prices for emissions allowance credits. 
However, as with SO2 allowance prices, DOE does not plan to 
monetize this benefit for those States because the impact on the 
NOX allowance price from any single energy conservation 
standard is likely to be small and highly uncertain. DOE seeks comment 
on how it might value NOX emissions for the 22 States not 
covered under CAIR.
---------------------------------------------------------------------------

    \52\ See http://www.epa.gov/cleanairinterstaterule/.
---------------------------------------------------------------------------

    With regard to mercury emissions, NEMS-BT has an algorithm for 
estimating these emissions from power generation, and, as it has done 
in the past, DOE is able to report an estimate of the physical quantity 
of mercury emissions reductions associated with an energy conservation 
standard. DOE assumed that these emissions would be subject to EPA's 
Clean Air Mercury Rule \53\ (CAMR), which would permanently cap 
emissions of mercury for new and existing coal-fired plants in all 
States by 2010. Similar to SO2 and NOX, DOE 
assumed that under such system, energy conservation standards would 
result in no physical effect on these emissions, but may result in a 
small and highly uncertain environmental-related economic benefit in 
the form of a lower price for emissions allowance credits.
---------------------------------------------------------------------------

    \53\ 70 FR 28606 (May 18, 2005).
---------------------------------------------------------------------------

    On February 8, 2008, the U.S. Court of Appeals for the District of 
Columbia Circuit (D.C. Circuit) issued its decision in State of New 
Jersey, et al. v. Environmental Protection Agency,\54\ in which the 
Court, among other actions, vacated the CAMR referenced above. 
Accordingly, DOE is considering whether changes are needed to its plan 
for addressing the issue of mercury emissions. DOE invites public 
comment on addressing mercury emissions in this rulemaking.
---------------------------------------------------------------------------

    \54\ No. 05-1097, 2008 WL 341338, at *1 (D.C. Cir. Feb. 8, 
2008).
---------------------------------------------------------------------------

    With regard to particulates, these emissions are a special case 
because they arise not only from direct emissions, but also from 
complex atmospheric chemical reactions that result from NOX 
and SO2 emissions. DOE does not intend to analyze or report 
on the particulate emissions from power stations because of the highly 
complex and uncertain relationship between particulate emissions and 
particulate concentrations that impact air quality.
    In sum, the methodology for the environmental assessment is similar 
to the methodology (i.e., based on NEMS) used to estimate the 
environmental impacts published in the AEO2007. These results include 
power sector emissions for SO2, NOX, mercury and 
CO2 in five-year forecasted increments extrapolated to 2042. 
The outcome of the NOPR analysis for each trial standard level is 
reported as a deviation from the AEO2007 reference (base) case. For 
more detail on the environmental assessment, see the environmental 
assessment report of the TSD.

O. Regulatory Impact Analysis

    DOE will prepare a draft regulatory impact analysis in compliance 
with Executive Order 12866, ``Regulatory Planning and Review,'' signed 
on September 30, 1993, which will be subject to review by the Office of 
Management and Budget's Office of Information and Regulatory Affairs 
(OIRA). 58 FR 51735 (Oct. 4, 1993).
    As part of the regulatory impact analysis (and as discussed in 
Section II.K of this ANOPR), DOE will identify and seek to mitigate the 
overlapping effects on manufacturers of new or revised DOE standards 
and other regulatory actions affecting the same equipment. Through 
manufacturer interviews and literature searches, DOE will compile 
information on burdens from existing and impending regulations 
affecting the beverage vending machines covered under this rulemaking. 
DOE also seeks input from stakeholders about regulations whose impacts 
it should consider.
    The regulatory impact analysis also will address the potential for 
non-regulatory approaches to supplant or augment energy conservation 
standards to improve the efficiency of beverage vending machines. The 
following list includes non-regulatory means of achieving energy 
savings that DOE may consider:
     No new regulatory action
     Consumer tax credits
     Manufacturer tax credits
     Performance standards
     Rebates
     Voluntary energy efficiency targets
     Early replacement
     Bulk government purchases
    In support of DOE's NOPR, the TSD will include a complete 
quantitative analysis of each alternative to the proposed conservation 
standard. The methodology for this analysis is discussed briefly below.
    DOE will use the NES spreadsheet model (discussed in Sections I.B.5 
and II.I of this ANOPR) to calculate the NES and the NPV corresponding 
to each alternative to the proposed standards. See Chapter 10 of the 
TSD for details on the NES spreadsheet model. To compare each 
alternative quantitatively to the proposed conservation standards, the 
model will need to quantify the effect of each alternative on the 
purchase and

[[Page 34134]]

use of energy-efficient commercial equipment. Once each alternative is 
properly quantified, DOE will make the appropriate revisions to the 
inputs in the NES spreadsheet model. The following are key inputs that 
DOE may revise in the NES spreadsheet model:
     Energy prices and escalation factors;
     Implicit market discount rates for trading off purchase 
price against operating expense when choosing equipment efficiency;
     Customer purchase price, operating cost, and income 
elasticities;
     Customer price versus efficiency relationships; and
     Equipment stock data (purchase of new equipment or 
turnover rates for inventories).
    The following are the key measures of the impact of each 
alternative:
     Commercial energy use (EJ = 1018 joule) is the 
cumulative energy use of the equipment from the effective date of the 
new standard (i.e., 2012) to 2042. DOE will report electricity 
consumption as primary energy.
     NES is the cumulative national energy use from the base-
case projection less the alternative standards-case projection.
     NPV is the value of future operating cost savings from 
beverage vending machines bought between the effective date of the new 
standard and 2042. DOE calculates the NPV as the difference between the 
present value of equipment and operating expenditures (including 
energy) in the base case, and the present value of expenditures in each 
alternative policy case. DOE discounts future operating and equipment 
expenditures to 2007 using a seven-percent real discount rate. DOE 
calculates operating expenses (including energy) for the life of the 
equipment.
    For more information on the regulatory impact analysis, see the 
regulatory impact analysis report in the TSD.

III. Candidate Energy Conservation Standards Levels

    In terms of process, DOE specifies CSLs in the ANOPR, but it does 
not propose a particular standard at this stage of the rulemaking. DOE 
selected up to nine energy consumption levels for each class of 
beverage vending machine for use in the LCC and NIA. Based on the 
results of the ANOPR analysis, DOE selects a subset from the CSLs 
analyzed in the ANOPR for more detailed analysis during the NOPR stage 
of the rulemaking. The range of CSLs selected includes the most energy-
efficient level or most energy-efficient combination of design options, 
the combination of design options or efficiency level with the minimum 
LCC, and a combination of design options or efficiency level with a PBP 
of no more than three years. DOE may also select CSLs that incorporate 
noteworthy technologies or fill in large gaps between efficiency levels 
of other CSLs.
    As noted above, DOE has included the most energy-efficient level 
analyzed as a CSL, and DOE has identified the level with the maximum 
LCC savings for each equipment class. The calculated national average 
PBPs from the LCC analysis suggested that many of the energy efficiency 
levels analyzed provided a national average payback of less than three 
years when compared with the baseline equipment. DOE chose to designate 
the maximum energy efficiency level that provided a payback of less 
than three years as a CSL. These three selection criteria provided two 
or three CSL selections per equipment class. Therefore, DOE selected 
two other lower efficiency levels for each equipment class to provide 
greater variation in CSLs for future analysis. The selection of these 
additional levels reflects DOE review of the relative cost 
effectiveness of the levels when compared with the baseline equipment 
and other efficiency levels.
    DOE selected four CSLs for each equipment class. Table III.1 shows 
the selected CSLs based on the energy consumption of the specific 
equipment analyzed in the engineering analysis. DOE seeks feedback on 
its selection of these specific candidate standard levels for the post-
ANOPR analysis phase. Section IV.E of this ANOPR discusses this 
subject, identified as Issue 7 under ``Issues on Which DOE Seeks 
Comment.''
    DOE will refine its final selection of CSLs for further analysis 
after receiving input from stakeholders on the ANOPR and after any 
revision of the ANOPR analyses. The CSLs will then be recast as Trial 
Standard Levels (TSLs). DOE will analyze specific TSLs during the post-
ANOPR analysis and report the results in the NOPR.

                          Table III.1.--Candidate Standard Levels and Factors Considered in Their Selection for Future Analysis
--------------------------------------------------------------------------------------------------------------------------------------------------------
 
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                     Candidate standard level selection considerations
                                ------------------------------------------------------------------------------------------------------------------------
        Equipment class           Maximum efficiency  Maximum efficiency   Efficiency level   Highest efficiency    Additional candidate standard level
                                         level             level with       with minimum LCC   level with PBP <3        selected for future analysis
                                                          positive LCC                               years
                                                            savings
--------------------------------------------------------------------------------------------------------------------------------------------------------
Class A........................  Level 8............  Level 7...........  Level 5...........  Level 6...........  Level 4...........  Level 3.
Class B........................  Level 8............  Level 7...........  Level 4...........  Level 4...........  Level 5...........  Level 3.
--------------------------------------------------------------------------------------------------------------------------------------------------------

    Because the equipment classes cover a variety of equipment sizes, 
DOE has suggested defining the standard in terms of upper limits on 
daily energy consumption normalized by refrigerated volume (``V,'' as 
measured by ANSI/AHAM HRF-1-2004). Table III.2 presents the CSLs for 
the analyzed equipment classes in terms of these normalized metrics.

[[Page 34135]]



                                    Table III.2.--Candidate Standard Levels for Analyzed Equipment Classes Expressed in Terms of the Normalized Test Metrics
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                  Candidate standard level in order of efficiency expressed in terms of the test metric
         Equipment class                Test metric     ----------------------------------------------------------------------------------------------------------------------------------------
                                                                  Baseline                      CSL1                        CSL2                       CSL3                       CSL4
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Class A..........................  Daily Energy          1.08 (Level 1)............  0.90 (Level 4)............  0.75 (Level 6)...........  0.70 (Level 7)...........  0.64 (Level 8).
                                    Consumption/
                                    Refrigerated Volume
                                    kWh/day/ft 3.
Class B..........................  Daily Energy          2.93 (Level 1)............  2.61 (Level 3)............  2.47 (Level 4)...........  2.46 (Level 5)...........  2.39 (Level 6).
                                    Consumption/
                                    Refrigerated Volume
                                    kWh/day/ft 3.
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

    When an energy conservation standard is defined for an equipment 
class, DOE must consider how to express the level in a manner suitable 
for all equipment within that class. This is of particular concern when 
the rating is in terms of energy consumption and energy consumption 
varies within a class due to variations in equipment size or capacity.
    DOE plans to define energy conservation standards for refrigerated 
beverage vending machines in terms of:

Maximum energy consumption M (kWh/day) = B x V + K

Where:

B is expressed in terms of kWh/day/ft\3\ of measured volume,
V is the measured volume (ft\3\) calculated for the equipment class, 
and
K is an offset factor expressed in kWh/day.

    DOE seeks feedback on this approach for characterizing energy 
conservation standards for refrigerated beverage vending machines. If 
this approach is acceptable, DOE seeks comments on how it could develop 
the appropriate offset factor, K, for the two classes of equipment. 
Section IV.E of this ANOPR discusses this subject, identified as Issue 
8 under ``Issues on Which DOE Seeks Comment.''

IV. Public Participation

A. Attendance at Public Meeting

    The time, date, and location of the public meeting are set forth in 
the DATES and ADDRESSES sections at the beginning of this document. 
Anyone who wishes to attend the public meeting must notify Ms. Brenda 
Edwards at (202) 586-2945. As explained in the ADDRESSES section, 
foreign nationals visiting DOE Headquarters are subject to advance 
security screening procedures.

B. Procedure for Submitting Requests to Speak

    Any person who has an interest in today's notice, or who represents 
a group or class of persons with an interest in these issues, may 
request an opportunity to make an oral presentation at the public 
meeting. Please hand deliver requests to speak to the address shown 
under the heading ``Hand Delivery/Courier'' in the ADDRESSES section of 
this ANOPR between 9 a.m. and 4 p.m., Monday through Friday, except 
Federal holidays. Requests may also be sent by mail to the address 
shown under the heading ``Postal Mail'' in the ADDRESSES section of 
this ANOPR, or by e-mail to [email protected].
    Persons requesting to speak should briefly describe the nature of 
their interest in this rulemaking and provide a telephone number for 
contact. DOE asks persons scheduled to make an oral presentation at the 
public meeting to submit a copy of their statements at least two weeks 
before the public meeting, either in person, by postal mail, or by e-
mail. Please include an electronic copy of your statement on a computer 
diskette or compact disk when delivery is by postal mail or in person. 
Electronic copies must be in WordPerfect, Microsoft Word, Portable 
Document Format (PDF), or text (American Standard Code for Information 
Interchange (ASCII)) file format. At its discretion, DOE may permit any 
person who cannot supply an advance copy of his or her statement to 
make an oral presentation, if that person has made alternative 
arrangements with the Building Technologies Program. In such 
situations, the request to give an oral presentation should ask for 
alternative arrangements.

C. Conduct of Public Meeting

    DOE will designate a DOE official to preside at the public meeting 
and may also use a professional facilitator to aid discussion. The 
meeting will not be a judicial or evidentiary-type public hearing, but 
DOE will conduct it in accordance with 5 U.S.C. 553 and section 336 of 
EPCA. (42 U.S.C. 6306) A court reporter will be present to record and 
transcribe the proceedings. DOE reserves the right to schedule the 
order of presentations and to establish the procedures governing the 
conduct of the public meeting. After the public meeting, interested 
parties may submit further comments about the proceedings, and any 
other aspect of the rulemaking, until the end of the comment period.
    The public meeting will be conducted in an informal conference 
style. DOE will present summaries of comments received before the 
public meeting, allow time for presentations by participants, and 
encourage all interested parties to share their views on issues 
affecting this rulemaking. Each participant will be allowed to make a 
prepared general statement (within time limits determined by DOE) 
before discussion of a particular topic. DOE will permit other 
participants to comment briefly on any general statements.
    At the end of all prepared statements on a topic, DOE will permit 
participants to clarify their statements briefly and comment on 
statements made by others. Participants should be prepared to answer 
questions by DOE and by other participants concerning these issues. DOE 
representatives may also ask questions of participants concerning other 
matters relevant to the public meeting. The official conducting the 
public meeting will accept additional comments or questions from those 
attending, as time permits. The presiding official will announce any 
further procedural rules or modification of the above procedures that 
may be needed for proper conduct of the public meeting.
    DOE will make the entire record of this proposed rulemaking, 
including the transcript from the public meeting, available for 
inspection at the U.S. Department of Energy, Resource Room of the 
Building Technologies Program, 950 L'Enfant Plaza, Suite 600, SW, 
Washington, DC, 20024, (202) 586-2945, between 9:00 a.m. and 4:00 p.m., 
Monday through Friday, except Federal holidays. Any person may purchase 
a copy of the transcript from the transcribing reporter.

[[Page 34136]]

D. Submission of Comments

    DOE will accept comments, data, and information regarding all 
aspects of this ANOPR before or after the public meeting, but no later 
than July 16, 2008. Please submit comments, data, and information by e-
mail to: [email protected]. Please submit 
electronic comments in WordPerfect, Microsoft Word, PDF, or ASCII file 
format and avoid the use of special characters or any form of 
encryption. Comments in electronic format should be identified by the 
Docket Number EERE-2006-STD-0125 and/or RIN 1904-AB58, and whenever 
possible carry the electronic signature of the author. Absent an 
electronic signature, comments submitted electronically must be 
followed and authenticated by a signed original paper document. No 
telefacsimiles (faxes) will be accepted.
    Under 10 CFR Part 1004.11, any person submitting information that 
he or she believes to be confidential and exempt by law from public 
disclosure should submit two copies. One copy of the document shall 
include all the information believed to be confidential, and the other 
copy of the document shall have the information believed to be 
confidential deleted. DOE will make its own determination about the 
confidential status of the information and treat it according to its 
determination.
    Factors that DOE considers when evaluating requests to treat 
submitted information as confidential include: (1) A description of the 
items; (2) whether and why such items are customarily treated as 
confidential within the industry; (3) whether the information is 
generally known by, or available from, other sources; (4) whether the 
information has previously been made available to others without 
obligation concerning its confidentiality; (5) an explanation of the 
competitive injury to the submitting person that would result from 
public disclosure; (6) when such information might lose its 
confidential character due to the passage of time; and (7) why 
disclosure of the information would be contrary to the public interest.

E. Issues on Which DOE Seeks Comment

    DOE is interested in receiving comments on all aspects of this 
ANOPR. DOE particularly invites comments or data to improve DOE's 
analysis, including data or information that will respond to the 
following questions or concerns addressed in this ANOPR.
1. Equipment Classes
    In accordance with EPCA section 325(p)(1)(A), DOE identified the 
equipment classes covered under this rulemaking. (42 U.S.C. 
6295(p)(1)(A)) In making that determination, DOE decided to focus the 
present ANOPR analyses on two equipment classes of beverage vending 
machines based upon their two predominant applications, namely, Class A 
machines that are installed indoors and Class B machines that are 
installed both indoors and outdoors. Pursuant to EPCA section 
325(p)(1)(B), DOE requests comments on the validity of this approach 
and invites interested persons to submit written presentations of data, 
views, and arguments. (42 U.S.C. 6295(p)(1)(B)) (See Section II.A.2 of 
this ANOPR for further details.)
2. Compressor and Lighting Operating Hours
    DOE's energy use characterization presumes that there are no 
controls that limit display lighting or compressor operation in a 
beverage vending machine to certain hours of the day or would be 
affected by occupancy patterns in the building. It is known, however, 
that such controllers exist and can either be added on or enabled in 
certain beverage vending machines. DOE requests comments on the need to 
incorporate such controls in its energy analysis and how it might do so 
in the NOPR analysis. (See Section II.E of this ANOPR for further 
details.)
3. Refurbishment Cycles
    DOE requests comments on refurbishment cycles for beverage vending 
machines that may be prevalent in the field and may differ from 
standardized practices or the two cycles during the equipment lifetime 
assumed by DOE. These refurbishment cycles could affect actual energy 
consumption savings as a result of increased energy efficiency as 
compared to those savings estimated in the energy use characterization 
analysis and as reported in the TSD. DOE requests comments on: (1) The 
frequency of refurbishment cycles; (2) how refurbishing the vending 
machines might affect energy use in the field; and (3) whether and how 
DOE could account for these changes in assessing the overall impacts of 
the candidate standards levels on beverage vending machines. (See 
Section IV.E.3 of this ANOPR for further details.)
4. Life-Cycle Cost Baseline Level
    DOE did not receive data from the industry or in the manufacturer 
interviews concerning the average energy efficiency of beverage vending 
machines currently being shipped. An analysis of the literature 
suggests that little data on the energy characteristics of beverage 
vending machines in the general market are available. Therefore, DOE 
used the Level 1 established in the engineering analysis as the 
baseline efficiency for the LCC analysis.
    Selection of the baseline efficiency level impacts the LCC and PBP 
analyses. It affects PBP, since payback is calculated from the baseline 
efficiency level, and affects the maximum efficiency level showing LCC 
savings, and the magnitude of LCC savings. It can also affect the 
number of users who experience LCC savings at any level. The selection 
of the baseline level does not generally affect the efficiency level 
with maximum LCC savings. DOE requests feedback on whether the Level 1 
baseline DOE selected is valid for the LCC analysis, and if not, what 
changes DOE should make to provide a more realistic baseline. Since 
higher efficiency equipment is sold in the market, DOE also seeks input 
on whether it should use a distribution of efficiencies for the LCC 
analysis baseline, and if so, what data could be used to populate this 
distribution. If more detailed data to develop a distribution of 
efficiencies in the baseline cannot be provided, DOE seeks input on how 
a sensitivity analysis to alternative baselines could best be used to 
inform the LCC and NES analyses supporting the rulemaking. (See Section 
II.G.5 of this ANOPR for further details.)
5. Base-Case and Standards-Case Forecasts
    Because key inputs to the calculation of the NES and NPV depend on 
the estimated efficiencies under the base case (without standards) and 
the standards case (with standards), forecasted efficiencies are of 
great importance to the analysis. Information available to DOE suggests 
that forecasted market shares would remain frozen throughout the 
analysis period (i.e., 2012-2042). For its determination of standards-
case forecasted efficiencies, DOE used a roll-up scenario to establish 
market shares by efficiency level for the year that standards become 
effective (i.e., 2012). Available information suggests that equipment 
shipments with efficiencies in the base case that did not meet the 
standard level under consideration would roll up to meet the new 
standard level. Available information also suggests that no equipment 
efficiencies in the base case that were above the standard level under 
consideration would be affected. DOE requests feedback on its 
development of standards-case efficiency forecasts from the base-case 
efficiency forecast, and on how it

[[Page 34137]]

determined that standards would affect efficiency distributions in the 
year that standards are to take effect. (See Section II.I.2 of this 
ANOPR for further details.)
6. Differential Impact of New Standards on Future Shipments by 
Equipment Classes
    The shipment model used in the NES and NIA presumes that the 
relative market share of the different classes of beverage vending 
machines remains constant over the time period analyzed. While DOE is 
aware that market preferences for certain types of equipment may change 
in the future, DOE has no data with which to predict or characterize 
those changes. DOE is particularly concerned whether higher standards 
for one class of beverage vending machines are likely to generate 
significant market shifts to other equipment that may have higher 
energy consumption (or lower efficiency). By developing standards for 
both classes of beverage vending machines within the scope of this 
rulemaking using the same economic criteria, DOE hopes to mitigate this 
concern. However, DOE requests stakeholder input on the potential for 
standards-driven market shifts between equipment classes that could 
reduce national energy savings, and on how the standards-setting 
process can reduce or eliminate these shifts. (See Section II.I.2 of 
this ANOPR for further details.)
7. Selection of Candidate Standard Levels for Notice of Proposed 
Rulemaking Analysis
    DOE is required to examine specific criteria for the selection of 
CSLs. Some of these criteria are economically based and the resulting 
CSLs selected may be affected by updates to the ANOPR analysis after 
input from stakeholders. DOE has discretion over the selection of 
additional standard levels it chooses to analyze. DOE seeks input on 
the candidate standard levels selected for future analysis shown in 
Table III.1 (See Section III of this ANOPR for further details.)
8. Approach to Characterizing Energy Conservation Standards
    When an efficiency or energy conservation standard is defined for a 
class of equipment, DOE must consider how to express the level in a 
manner suitable for all equipment within that class. DOE seeks input on 
its approach for characterizing energy conservation standards for 
beverage vending machines as discussed in Section III. If the approach 
is acceptable, DOE seeks comments on how it could develop appropriate 
offset factors (K) for the two classes of equipment. (See Section III 
of this ANOPR for further details.)

V. Regulatory Review and Procedural Requirements

    DOE submitted this ANOPR for review to the Office of Management and 
Budget (OMB), under Executive Order 12866, ``Regulatory Planning and 
Review,'' 58 FR 51735 (October 4, 1993). If DOE later proposes energy 
conservation standards for certain beverage vending machines, and if 
the proposed rule constitutes a significant regulatory action, DOE 
would prepare and submit to OMB for review the assessment of costs and 
benefits required under section 6(a)(3) of the Executive Order. The 
Executive Order requires that each agency identify in writing the 
market failure or other specific problem that it intends to address 
that warrant new agency action, as well as assess the significance of 
that problem, to enable assessment of whether any new regulation is 
warranted. (Executive Order 12866, Sec.  1(b)(1)) DOE presumes that a 
perfectly functioning market would result in efficiency levels that 
maximize benefits to all affected persons. Consequently, without a 
market failure or other specific problem, a regulation would not be 
expected to result in net benefits to customers and the Nation. 
However, DOE also notes that whether it establishes standards for this 
equipment is determined by the statutory criteria expressed in EPCA. 
Even in the absence of a market failure or other specific problem, DOE 
nevertheless may be required to establish standards under existing law.
    DOE's preliminary analysis suggests that beverage vending machines 
are predominantly owned either by site owners (i.e., the owner of the 
establishment where the vending machine is installed), or by bottlers 
or vending machine operators (i.e., the operator that installs, stocks, 
and services the equipment and retains a percentage of the coin-box-
revenue). DOE believes that these owners and operators lack corporate 
direction in terms of energy policy. The transaction costs for these 
owners or operators to research, purchase, and install optimum-
efficiency equipment are too high to make such action commonplace. DOE 
believes that there is a lack of information and/or information 
processing capability about energy efficiency opportunities in the 
beverage vending machine market available to site owners. Unlike 
residential heating and air conditioning equipment, beverage vending 
machines are not included in energy labeling programs such as the 
Federal Trade Commission's energy labeling program. Furthermore, the 
energy use of beverage vending machines is dependent on how often the 
machines are used and, as such, the relevant information is not readily 
available for the owners or operators to make a decision on whether 
improving the energy efficiency of beverage vending machines is cost-
effective. To better understand this market, DOE seeks data on the 
efficiency levels of existing beverage vending machines in use by owner 
(i.e., site owner or machine operator), electricity price, equipment 
class (Class A or Class B machines) and installation type (i.e., 
indoors or outdoors).
    DOE recognizes that beverage vending machines are not purchased in 
the same manner as regulated appliances that are sold in retail stores 
(e.g., room air conditioners). When purchased by the end user, beverage 
vending machines are more likely purchased directly from individual 
manufacturers through equipment catalogs or specification sheets. NAMA, 
unlike other industry trade associations, does not publish a directory 
of covered equipment. DOE seeks comment on the availability of energy 
efficiency information and the extent to which the information leads to 
informed choices, specifically given how such equipment is purchased.
    To the extent there is potentially a substantial information 
problem, one could expect the energy efficiency for beverage vending 
machines to be more or less randomly distributed across key variables 
such as energy prices and usage levels. However, since data are not 
available on how such equipment is purchased, DOE seeks detailed data 
on the distribution of energy efficiency levels for both the new site 
owner and equipment operator markets. DOE plans to use these data to 
test the extent to which purchasers of this equipment behave as if they 
are unaware of the costs associated with their energy consumption. DOE 
requests data on, and suggestions for the existence and extent of 
potential market failures to complete an assessment of the significance 
of these failures and, thus, the net benefits of regulation.
    A related issue is the problem of asymmetric information (one party 
to a transaction has more and better information than the other) and/or 
high transactions costs (costs of gathering information and effecting 
exchanges of goods and services). In the case of beverage vending 
machines, in most cases, the party responsible for the equipment 
purchase may not be the one who pays the cost to operate it. For 
example, in the case where the bottler

[[Page 34138]]

or beverage vending machine operator owns the equipment and the site 
owner pays the utilities, the vending machine operator may make the 
purchasing decision about the beverage vending machine without input 
from the site owner and may not offer options to the site owner to 
upgrade them.
    In addition, this rulemaking is likely to yield certain 
``external'' benefits resulting from improved energy efficiency of 
beverage vending machines that are not captured by the users of such 
equipment. These include both environmental and energy security-related 
externalities that are not reflected in energy prices, such as reduced 
emissions of greenhouse gases and reduced use of natural gas and oil 
for electricity generation. DOE invites comments on the weight that 
should be given to these factors in DOE's determination of the maximum 
energy efficiency level at which the total benefits are likely to 
exceed the total costs resulting from a DOE standard.
    In addition, various other analyses and procedures may apply to 
such future rulemaking action, including those required by the National 
Environmental Policy Act (Pub. L. 91-190, 42 U.S.C. 4321 et seq.); the 
Unfunded Mandates Reform Act of 1995 (Pub. L. 104-4); the Paperwork 
Reduction Act (44 U.S.C. 3501 et seq.); the Regulatory Flexibility Act 
(5 U.S.C. 601 et seq.); and certain Executive Orders.
    The draft of today's action and any other documents submitted to 
OMB for review are part of the rulemaking record and are available for 
public review at the U.S. Department of Energy, Resource Room of the 
Building Technologies Program, 950 L'Enfant Plaza, Suite 600, SW., 
Washington, DC 20024, (202) 586-2945, between 9:00 a.m. and 4:00 p.m., 
Monday through Friday, except Federal holidays.

VI. Approval of the Office of the Secretary

    The Secretary of Energy has approved publication of today's ANOPR.

    Issued in Washington, DC, on June 9, 2008.
Alexander A. Karsner,
Assistant Secretary, Energy Efficiency and Renewable Energy.
[FR Doc. E8-13345 Filed 6-13-08; 8:45 am]
BILLING CODE 6450-01-P