[Federal Register Volume 73, Number 165 (Monday, August 25, 2008)]
[Proposed Rules]
[Pages 50072-50137]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E8-19063]



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Part II





Department of Energy





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10 CFR Part 431



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Energy Conservation Program for Commercial and Industrial Equipment; 
Proposed Rule

  Federal Register / Vol. 73, No. 165 / Monday, August 25, 2008 / 
Proposed Rules  

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DEPARTMENT OF ENERGY

10 CFR Part 431

[Docket No. EE-2006-STD-0126]
RIN 1904-AB59


Energy Conservation Program for Commercial and Industrial 
Equipment: Energy Conservation Standards for Commercial Ice-Cream 
Freezers; Self-Contained Commercial Refrigerators, Commercial Freezers, 
and Commercial Refrigerator-Freezers Without Doors; and Remote 
Condensing Commercial Refrigerators, Commercial Freezers, and 
Commercial Refrigerator-Freezers

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

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

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SUMMARY: The Energy Policy and Conservation Act prescribes energy 
conservation standards for certain commercial and industrial equipment, 
and requires the Department of Energy (DOE) to administer an energy 
conservation program for this equipment. In this notice, DOE is 
proposing new energy conservation standards for commercial ice-cream 
freezers; self-contained commercial refrigerators, commercial freezers, 
and commercial refrigerator-freezers without doors; and remote 
condensing commercial refrigerators, commercial freezers, and 
commercial refrigerator-freezers. DOE is also announcing a public 
meeting on its proposed standards.

DATES: DOE will hold a public meeting on Tuesday, September 23, 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., Tuesday, September 9, 
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., 
Tuesday, September 16, 2008.
    DOE will accept comments, data, and information regarding the 
notice of proposed rulemaking (NOPR) before and after the public 
meeting, but no later than October 24, 2008. See Section VII, ``Public 
Participation,'' of this NOPR for details.

ADDRESSES: The public meeting will be held at the U.S. Department of 
Energy, Forrestal Building, Room 8E-089, 1000 Independence Avenue, SW., 
Washington, DC 20585-0121. Please note that foreign nationals visiting 
DOE Headquarters are subject to advance security screening procedures, 
requiring a 30-day advance notice. 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 NOPR for commercial 
refrigeration equipment, and provide docket number EE-2006-STD-0126 
and/or RIN number 1904-AB59. 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 EE-2006-STD-0126 and/or RIN 1904-AB59 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. Telephone: (202) 
586-2945. Please submit one signed original paper copy.
     Hand Delivery/Courier: Ms. Brenda Edwards, U.S. Department 
of Energy, Building Technologies Program, 950 L'Enfant Plaza, SW., 6th 
Floor, Washington, DC 20024. Please submit one signed original paper 
copy.
    For detailed instructions on submitting comments and additional 
information on the rulemaking process, see Section VII, ``Public 
Participation,'' of this document.
    Docket: For access to the docket to read background documents or 
comments received, visit the U.S. Department of Energy, Resource Room 
of the Building Technologies Program, 950 L'Enfant Plaza, SW., 6th 
Floor, 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.

    Please Note: DOE's Freedom of Information Reading Room (Room 1E-
190 at the Forrestal Building) no longer houses rulemaking 
materials.


FOR FURTHER INFORMATION CONTACT: Mr. Charles Llenza, U.S. Department of 
Energy, Building Technologies Program, EE-2J, 1000 Independence Avenue, 
SW., Washington, DC 20585-0121, (202) 586-2192, 
[email protected].
    Ms. Francine Pinto, Esq., U.S. Department of Energy, Office of 
General Counsel, GC-72, 1000 Independence Avenue, SW., Washington, DC 
20585-0121, (202) 586-9507, [email protected].

SUPPLEMENTARY INFORMATION:
I. Summary of the Proposed Rule
II. Introduction
    A. Overview
    B. Authority
    C. Background
    1. Current Standards
    2. History of Standards Rulemaking for Commercial Refrigeration 
Equipment
III. General Discussion
    A. Test Procedures
    B. Technological Feasibility
    1. General
    2. Maximum Technologically Feasible Levels
    C. Energy Savings
    1. Determination of Savings
    2. Significance of Savings
    D. Economic Justification
    1. Specific Criteria
    a. Economic Impact on Manufacturers and Commercial Customers
    b. Life-Cycle Costs
    c. Energy Savings
    d. Lessening of Utility or Performance of Equipment
    e. Impact of Any Lessening of Competition
    f. Need of the Nation to Conserve Energy
    g. Other Factors
    2. Rebuttable Presumption
IV. Methodology and Discussion of Comments
    A. Market and Technology Assessment
    1. Definitions Related to Commercial Refrigeration Equipment
    a. Air Curtain Angle Definition
    b. Door Angle Definition
    2. Equipment Classes
    B. Engineering Analysis
    1. Approach
    2. Equipment Classes Analyzed
    3. Analytical Models
    a. Cost Model
    b. Energy Consumption Model
    c. Design Options
    4. Baseline Models
    5. Engineering Analysis Results
    C. Markups to Determine Equipment Price
    D. Energy Use Characterization
    E. Life-Cycle Cost and Payback Period Analyses
    1. Manufacturer Selling Price
    2. Increase in Selling Price
    3. Markups
    4. Installation Costs
    5. Energy Consumption
    6. Electricity Prices
    7. Electricity Price Trends
    8. Repair Costs
    9. Maintenance Costs
    10. Lifetime
    11. Discount Rate
    12. Payback Period
    F. Shipments Analysis
    G. National Impact Analysis
    1. Base Case and Standards Case Forecasted Efficiencies
    2. Annual Energy Consumption, Total Installed Cost, Maintenance 
Cost, and Repair Costs
    3. Escalation of Electricity Prices
    4. Electricity Site-to-Source Conversion
    H. Life-Cycle Cost Sub-Group Analysis
    I. Manufacturer Impact Analysis
    1. Overview
    a. Phase 1, Industry Profile

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    b. Phase 2, Industry Cash-Flow Analysis
    c. Phase 3, Sub-Group Impact Analysis
    2. Government Regulatory Impact Model Analysis
    3. Manufacturer Interviews
    a. Key Issues
    4. Government Regulatory Impact Model Key Inputs and Scenarios
    a. Base Case Shipments Forecast
    b. Standards Case Shipments Forecast
    c. Markup Scenarios
    d. Equipment and Capital Conversion Costs
    J. Utility Impact Analysis
    K. Employment Impact Analysis
    L. Environmental Assessment
V. Analytical Results
    A. Trial Standard Levels
    1. Miscellaneous Equipment
    B. Economic Justification and Energy Savings
    1. Economic Impacts on Commercial Customers
    a. Life-Cycle Cost and Payback Period
    b. Rebuttable Presumption Payback
    c. Life-Cycle Cost Sub-Group Analysis
    2. Economic Impacts on Manufacturers
    a. Industry Cash-Flow Analysis Results
    b. Cumulative Regulatory Burden
    c. Impacts on Employment
    d. Impacts on Manufacturing Capacity
    e. Impacts on Sub-Groups of Manufacturers
    3. National Impact Analysis
    a. Amount and Significance of Energy Savings
    b. Net Present Value
    c. Impacts on Employment
    4. Impact on Utility or Performance of Equipment
    5. Impact of Any Lessening of Competition
    6. Need of the Nation to Conserve Energy
    7. Other Factors
    C. Proposed Standard
VI. Procedural Issues and Regulatory Review
    A. Review Under Executive Order 12866
    B. Review Under the Regulatory Flexibility Act/Initial 
Regulatory Flexibility Analysis
    C. Review Under the Paperwork Reduction Act
    D. Review Under the National Environmental Policy Act
    E. Review Under Executive Order 13132
    F. Review Under Executive Order 12988
    G. Review Under the Unfunded Mandates Reform Act of 1995
    H. Review Under the Treasury and General Government 
Appropriations Act, 1999
    I. Review Under Executive Order 12630
    J. Review Under the Treasury and General Government 
Appropriations Act, 2001
    K. Review Under Executive Order 13211
    L. Review Under the Information Quality Bulletin for Peer Review
VII. 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
VIII. Approval of the Office of the Secretary

I. Summary of the Proposed Rule

    The Energy Policy and Conservation Act, as amended (EPCA), 
specifies that any new or amended energy conservation standard the U.S. 
Department of Energy (DOE) prescribes for the equipment covered by this 
notice shall be designed to ``achieve the maximum improvement in energy 
efficiency * * * which the Secretary determines is technologically 
feasible and economically justified.'' (42 U.S.C. 6295(o)(2)(A) and 
6316(e)(1)) Furthermore, the new or amended standard must ``result in 
significant conservation of energy.'' (42 U.S.C. 6295(o)(3)(B) and 
6316(e)(1)) In accordance with these and other statutory criteria 
discussed in this notice, DOE proposes to adopt new energy conservation 
standards for commercial ice-cream freezers; self-contained commercial 
refrigerators, commercial freezers, and commercial refrigerator-
freezers without doors; and remote condensing commercial refrigerators, 
commercial freezers, and commercial refrigerator-freezers.\1\ The 
proposed standards, shown in Table I-1, would apply to all commercial 
refrigeration equipment manufactured on or after January 1, 2012, and 
offered for sale in the United States. 42 U.S.C. 6313(c)(4)(A).
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    \1\ These types of equipment are referred to collectively 
hereafter as ``commercial refrigeration equipment.''
    \2\ For this rulemaking, equipment class designations consist of 
a combination (in sequential order separated by periods) of: (1) an 
equipment family code (VOP = vertical open, SVO = semivertical open, 
HZO = horizontal open, VCT = vertical transparent doors, VCS = 
vertical solid doors, HCT = horizontal transparent doors, HCS = 
horizontal solid doors, or SOC = service over counter); (2) an 
operating mode code (RC = remote condensing or SC = self-contained); 
and ( 3) a rating temperature code (M = medium temperature (38 
[deg]F), L = low temperature (0 [deg]F), or I = ice-cream 
temperature (-15 [deg]F)). For example, ``VOP.RC.M'' refers to the 
``vertical open, remote condensing, medium temperature'' equipment 
class. See discussion below and chapter 3 of the TSD, market and 
technology assessment, for a more detailed explanation of the 
equipment class terminology.

                                       Table I-1--Proposed Standard Levels
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                                       Proposed standard level
         Equipment class \2\                     * **               Equipment class      Proposed standard level
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VOP.RC.M.............................  0.82 x TDA + 4.07......  VCT.RC.I...............  0.71 x TDA + 3.05
SVO.RC.M.............................  0.83 x TDA + 3.18......  HCT.RC.M...............  0.16 x TDA + 0.13
HZO.RC.M.............................  0.35 x TDA + 2.88......  HCT.RC.L...............  0.34 x TDA + 0.26
VOP.RC.L.............................  2.28 x TDA + 6.85......  HCT.RC.I...............  0.4 x TDA + 0.31
HZO.RC.L.............................  0.57 x TDA + 6.88......  VCS.RC.M...............  0.11 x V + 0.26
VCT.RC.M.............................  0.25 x TDA + 1.95......  VCS.RC.L...............  0.23 x V + 0.54
VCT.RC.L.............................  0.6 x TDA + 2.61.......  VCS.RC.I...............  0.27 x V + 0.63
SOC.RC.M.............................  0.51 x TDA + 0.11......  HCS.RC.M...............  0.11 x V + 0.26
VOP.SC.M.............................  1.74 x TDA + 4.71......  HCS.RC.L...............  0.23 x V + 0.54
SVO.SC.M.............................  1.73 x TDA + 4.59......  HCS.RC.I...............  0.27 x V + 0.63
HZO.SC.M.............................  0.77 x TDA + 5.55......  SOC.RC.L...............  1.08 x TDA + 0.22
HZO.SC.L.............................  1.92 x TDA + 7.08......  SOC.RC.I...............  1.26 x TDA + 0.26
VCT.SC.I.............................  0.73 x TDA + 3.29......  VOP.SC.L...............  4.37 x TDA + 11.82
VCS.SC.I.............................  0.38 x V + 0.88........  VOP.SC.I...............  5.55 x TDA + 15.02
HCT.SC.I.............................  0.56 x TDA + 0.43......  SVO.SC.L...............  4.34 x TDA + 11.51
SVO.RC.L.............................  2.28 x TDA + 6.85......  SVO.SC.I...............  5.52 x TDA + 14.63
VOP.RC.I.............................  2.9 x TDA + 8.7........  HZO.SC.I...............  2.44 x TDA + 9
SVO.RC.I.............................  2.9 x TDA + 8.7........  SOC.SC.I...............  1.76 x TDA + 0.36
HZO.RC.I.............................  0.72 x TDA + 8.74......  HCS.SC.I...............  0.38 x V + 0.88
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* ``TDA'' is the total display area of the case, as measured in the Air-Conditioning and Refrigeration Institute
  (ARI) Standard 1200-2006, Appendix D.
** ``V'' is the volume of the case, as measured in ARI Standard 1200-2006, Appendix C.


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    DOE's analyses indicate that the proposed energy conservation 
standards, trial standard level (TSL) 4 (see Section V.A for a detailed 
description of TSLs), would save a significant amount of energy--an 
estimated 0.83 quadrillion British thermal units (Btu), or quads, of 
cumulative energy over 30 years (2012-2042). The economic impacts on 
commercial consumers (i.e., the average life-cycle cost (LCC) savings) 
are positive for all equipment classes.
    The cumulative national net present value (NPV) of the proposed 
standards at TSL 4 from 2012 to 2042 ranges from $1.1 billion (at a 
seven percent discount rate) to $3.24 billion (at a three percent 
discount rate), in 2007$. This is the estimated total value of future 
operating cost savings minus the estimated increased equipment costs, 
discounted to 2007$. The benefits and costs of the standard can also be 
expressed in terms of annualized 2007$ values over the forecast period 
2012 through 2062. Using a 7 percent discount rate for the annualized 
cost analysis, the cost of the standard is estimated to be $109 million 
per year in increased equipment and installation costs while the 
annualized benefits are expected to be $214 million per year in reduced 
equipment operating costs. Using a 3 percent discount rate, the 
annualized cost of the standard is expected to be $92 million per year 
while the annualized benefits of today's standard are expected to be 
$234 million per year. See Section V.B.3 for additional details. If DOE 
adopts the proposed standards, it expects manufacturers will lose 8 to 
35 percent of the industry net present value (INPV), which is 
approximately $40 to $180 million.
    DOE estimates that the proposed standards will have environmental 
benefits leading to reductions in greenhouse gas emissions (i.e., 
cumulative (undiscounted) emission reductions) of 44 million tons (Mt) 
of carbon dioxide (CO2) from 2012 to 2042.\3\ Most of the 
energy saved is electricity. In addition, DOE expects the energy 
savings from the proposed standards to eliminate the need for 
approximately 640 megawatts (MW) of generating capacity by 2042. These 
results reflect DOE's use of energy price projections from the U.S. 
Energy Information Administration (EIA)'s Annual Energy Outlook 2007 
(AEO 2007).\4\
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    \3\ Additionally, the standards would result in 17 thousand tons 
(kt) of nitrogen oxides (NOX) emissions reductions or 
generate a similar amount of NOX emissions allowance 
credits in areas where such emissions are subject to regulatory or 
voluntary emissions caps.
    \4\ DOE intends to use EIA's AEO 2008 to generate the results 
for the final rule. The AEO2008 Early Release contains reference 
case energy price forecasts which show higher commercial electricity 
prices at the national level compared with the AEO 2007 on a real 
(inflation adjusted) basis. If these early release energy prices 
remain unchanged in the final release, then incorporation of the AEO 
2008 forecasts would likely result in reduced payback periods and 
greater life-cycle cost savings and greater national net present 
value for the proposed standards.
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    DOE proposes that TSL 4 represents the maximum improvement in 
energy efficiency that is technologically feasible and economically 
justified. DOE proposes that the benefits to the Nation of TSL 4 
(energy savings, commercial consumer average LCC savings, national NPV 
increase, and emission reductions) outweigh the costs (loss of 
manufacturer INPV) and is therefore proposing TSL 4 as the energy 
conservation standards for commercial refrigeration equipment in this 
NOPR. TSL 4 is technologically feasible because the technologies 
required to achieve these levels already exist.
    In this NOPR, DOE proposes that TSL 5 is not economically justified 
because, under the current circumstances, DOE believes that the 
benefits to the Nation of TSL 5 (energy savings, commercial consumer 
average LCC savings, and emission reductions) do not outweigh the costs 
(national NPV decrease and loss of manufacturer INPV). DOE's analyses 
indicate that TSL 5 would save a greater amount of energy than TSL 4--
an estimated 1.21 quadrillion quads of cumulative energy over 30 years 
(2012-2042). At TSL 5, while the economic impacts on commercial 
consumers (i.e., LCC savings and NPV) are still positive for the 
majority of equipment classes, the impacts on commercial customers for 
five classes (VOP.RC.M, VOP.SC.M, SVO.RC.M, SVO.SC.M, and SOC.RC.M) are 
negative. The life-cycle cost savings are negative for three classes 
and NPV results for each of these five classes are negative.
    The cumulative NPV at TSL 5, from 2012 to 2042, ranges from -$200 
million (at a seven percent discount rate) to $1.16 billion (at a three 
percent discount rate), in 2007$. Using a 7 percent discount rate, the 
annualized cost of the standard is estimated to be $285 million per 
year in increased equipment and installation costs while the annualized 
benefits are expected to be $266 million per year in reduced equipment 
operating costs. Using a 3 percent discount rate, the annualized cost 
of the standard is expected to be $241 million per year while the 
annualized benefits are expected to be $292 million per year. See 
Section V.B.3 for additional details. At TSL 5, DOE expects 
manufacturers will lose 3 to 56 percent of the industry net present 
value INPV, which is approximately $18 to $285 million.
    DOE based its estimates of the economic impacts referenced above on 
current costs for energy improving technologies used in commercial 
refrigeration equipment. A key technology for energy savings benefits 
in most commercial refrigeration equipment is the use of solid state 
lighting (i.e., light emitting diodes or LEDs). At current LED prices, 
the life-cycle cost savings at TSL 5 are substantially lower than TSL 3 
and TSL 4 for several equipment classes. For example, the average per 
unit LCC savings for the VOP.RC.M equipment class is $1,551 at TSL 3, 
but this number falls by $1,785 to -$234 when moving to TSL 5. When 
accounting for the projected volume of sales for these equipment 
classes in 2012, the net effect of moving from TSL 3 to TSL 5 is a 
decrease in LCC savings of $130 million per year. To achieve the same 
or greater LCC savings at TSL 5 as other efficiency levels (e.g., TSL 3 
or 4), for all equipment classes, average LED costs would need to 
decrease by almost 45 percent.
    While considerable information is available that suggests LED costs 
are likely to decline more than assumed in DOE's analysis, DOE believes 
it must have a higher degree of confidence of further cost reductions 
than assumed in today's proposed rule. In this NOPR, DOE projected 
future LED costs based on DOE's Multi-Year Program Plan,\5\ which are 
consistent with historical LED price reductions between 2000 and 2007. 
The Multi-Year Program Plan projects that LED chip costs will continue 
to decrease at a compound annual growth rate (CAGR) of approximately -
27 percent between 2007 and 2012, which represents a price reduction of 
80 percent over that time period. Since LED chips are only a portion of 
the total LED system (other components include power supply and the LED 
fixture), the 80 percent reduction in chip costs contributes to an 
estimated decrease in total LED system cost of approximately 50 percent 
by 2012, assuming the costs of the power supply and LED fixtures do not 
change significantly. Such a decrease in cost

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would be sufficient for TSL 5 to achieve LCC savings equal to or 
greater than other TSLs.
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    \5\ U.S. Department of Energy, Solid-State Lighting Research and 
Development, Multi-Year Program Plan FY'09-FY'14. This document was 
prepared under the direction of a Technical Committee from the Next 
Generation Lighting Initiative Alliance (NGLIA). Information about 
the NGLIA and its members is available at http://www.nglia.org.
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    DOE examined whether the projected LED costs presented in the 
Multi-Year Program Plan and used in this NOPR are consistent with 
publicly available empirical historical cost data. DOE reviewed 
available price data for the LED market and found that between 2000 and 
2007, white-light LEDs had a CAGR ranging from approximately -18 to -31 
percent. DOE's LED cost projection (i.e., -27 percent CAGR) falls 
within the range of CAGRs observed. DOE expanded its examination by 
comparing this projected trend to the red-light LED market, which is a 
related technology, with cost information spanning approximately three 
decades (i.e., 1973 to 2005). DOE found that the CAGR of red-light LED 
costs was -22 percent over this longer time span. The trend in red-
light LED costs derived from empirical data over this longer time 
period is of a similar magnitude to DOE's projected costs for white-
light LEDs. Due to the technological similarities between red-light 
LEDs and white-light LEDs, DOE believes that the historical cost 
reductions for red-light LEDs are indicative of future cost reductions 
for white-light LEDs. Furthermore, the white-light LED market is 
undergoing a massive expansion and growth phase, with significant 
investment, new products and innovative applications for LED 
technology, including illumination of commercial refrigeration 
equipment. See Section V.C of this NOPR and Appendix B of the technical 
support document (TSD) for more detail on the cost projection and DOE's 
validation of those estimates. DOE seeks comment on the extent to which 
these price trends are indicative of what can be expected for 
commercial refrigeration equipment LED lighting from 2007 to 2012 and 
the extent to which the cost reduction observed for red-light LEDs is 
relevant to DOE's cost projections for white-light LEDs. DOE also seeks 
comment on the extent to which stakeholders expect projected LED cost 
reductions would occur, the timing of the projected LED cost 
reductions, and the certainty of the projected LED cost reductions. 
Finally, considering the rapid development of LED technology and the 
steady reductions in cost, DOE seeks comment on the extent to which 
manufacturers would adopt LED technology into the design of commercial 
refrigeration equipment in the absence of standards.
    DOE also performed sensitivity analyses of the effect of projected 
cost reductions in LED lighting systems on LCC and NPV. Incorporation 
of DOE LED lighting system cost projections of a 50 percent decline by 
2012 shift the calculated NPV, for 2012-2042, from -$200 million to a 
positive $1.62 billion at a seven percent discount rate, for TSL 5. See 
Section V.C of this NOPR or Chapter 8 of the TSD for additional 
details.
    TSL 5 is estimated to have environmental benefits leading to 
reductions in greenhouse gas emissions of 63 Mt of CO2 from 
2012 to 2042. Additionally, TSL 5 would result in 23 kt of 
NOX emissions reductions or generate a similar amount of 
NOX emissions allowance credits in areas where such 
emissions are subject to emissions caps. Most of the energy saved is 
electricity. In addition, DOE expects the energy savings from the 
proposed standards to eliminate the need for approximately 930 MW of 
generating capacity by 2042.
    Although DOE has tentatively rejected TSL 5 because, under the 
current circumstances, it tentatively found that the benefits to the 
Nation do not outweigh the costs, and therefore does not consider TSL 5 
economically justified, DOE expects that LED costs will decline 
substantially over the next 4-5 years and could have a dramatic effect 
on the economic impacts described above. Therefore, DOE requests data 
or information that could provide a greater level of confidence that 
the projected LED cost reductions will occur and DOE will assess that 
data in determining whether to further consider TSL 5 in its final rule 
analysis.

II. Introduction

A. Overview

    DOE proposes to set energy conservation standards for commercial 
refrigeration equipment at the levels shown in Table I-1. The proposed 
standards would apply to equipment manufactured on or after January 1, 
2012, and offered for sale in the United States. DOE has tentatively 
found that the standards would save a significant amount of energy (see 
Section III.C.2) and result in a cleaner environment. In the 30-year 
period after the new standard becomes effective, the Nation would 
tentatively save 0.83 quads of primary energy. These energy savings 
also would tentatively result in significantly reduced emissions of air 
pollutants and greenhouse gases associated with electricity production, 
by avoiding the emission of 44 Mt of CO2 and 17 kt of 
NOX. In addition, DOE expects the standard to prevent the 
construction of the new power plants that would be necessary to produce 
approximately 640 MW by 2042. In total, DOE tentatively estimates the 
net present value to the Nation of this standard to be $1.1 billion 
from 2012 to 2042 in 2007$.
    Commercial customers would see benefits from the proposed 
standards. Although DOE expects the price of the higher efficiency 
commercial refrigeration equipment to be approximately 11 percent 
higher than the average price of this equipment today, weighted by 
shipments across equipment classes, the energy efficiency gains would 
result in lower energy costs, saving customers about 26 percent per 
year on their energy bills. Based on DOE's LCC analysis, DOE 
tentatively estimates that the mean payback period for the higher 
efficiency commercial refrigeration equipment would be between a low of 
1.4 to a high of 6.1 years. In addition, when the net results of these 
price increases and energy cost savings are summed over the lifetime of 
the higher efficiency equipment, customers could save approximately 
$690 to $3800, depending on equipment class, compared to their 
expenditures on today's baseline commercial refrigeration equipment.

B. Authority

    Title III of EPCA sets forth a variety of provisions designed to 
improve energy efficiency. Part A of Title III (42 U.S.C. 6291-6309) 
provides for the Energy Conservation Program for Consumer Products 
Other Than Automobiles. Part A-1 of Title III (42 U.S.C. 6311-6317) 
establishes a similar program for certain types of commercial and 
industrial equipment.\6\ The Energy Policy Act of 2005 (EPACT 2005), 
Pub. L. 109-58, included an amendment to Part A-1 requiring that DOE 
prescribe energy conservation standards for the commercial 
refrigeration equipment that is the subject of this rulemaking. (EPACT 
2005, Section 136(c); 42 U.S.C. 6313(c)(4)(A)) Hence, DOE publishes 
today's notice of proposed rulemaking (NOPR) pursuant to Part A-1, 
which provides definitions, test procedures, labeling provisions, 
energy conservation standards, and the authority to require information 
and reports from manufacturers. The test procedures for commercial 
refrigeration equipment appear at Title 10 Code of Federal Regulations 
(CFR) Sections 431.63 and 431.64.
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    \6\ This part was originally titled Part C, however, it was 
renamed Part A-1 after Part B of Title III was repealed by EPACT 
2005.
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    EPCA provides criteria for prescribing new or amended standards for 
covered equipment. As indicated above, any

[[Page 50076]]

new or amended standard for commercial refrigeration equipment must be 
designed to achieve the maximum improvement in energy efficiency that 
is technologically feasible and economically justified.\7\ (42 U.S.C. 
6295(o)(2)(A) and 6316(e)(1)) But EPCA precludes DOE from adopting any 
standard that would not result in significant conservation of energy. 
(42 U.S.C. 6295(o)(3) and 6316(e)(1)) Moreover, DOE may not prescribe a 
standard for certain equipment if no test procedure has been 
established for that equipment, or if DOE determines by rule that the 
standard is not technologically feasible or economically justified, and 
that such standard will not result in significant conservation of 
energy. (42 U.S.C. 6295(o)(3) and 6316(e)(1)) EPCA also provides that, 
in deciding whether a standard is economically justified, DOE must 
determine whether the benefits of the standard exceed its burdens after 
receiving comments on the proposed standard. (42 U.S.C. 
6295(o)(2)(B)(i) and 6316(e)(1)) To the greatest extent practicable, 
DOE must consider the following seven factors:
---------------------------------------------------------------------------

    \7\ This notice concerns types of ``covered equipment'' as that 
term is defined in EPCA, (42 U.S.C. 6311(1)(E)) in Part A-1, Certain 
Industrial Equipment. Therefore, when DOE quotes from, paraphrases 
or describes general provisions in Part A, for instance, 42 U.S.C. 
6295(o), it substitutes the term ``equipment'' for ``product'' when 
the latter term appears in those provisions. (See 42 U.S.C. 6316 
(a)(3))
---------------------------------------------------------------------------

    (I) The economic impact of the standard on manufacturers and 
consumers of the equipment subject to the standard;
    (II) The savings in operating costs throughout the estimated 
average life of the covered equipment in the type (or class) compared 
to any increase in the price, initial charges, or maintenance expenses 
for the equipment that are likely to result from the imposition of the 
standard;
    (III) The total projected amount of energy savings likely to result 
directly from the imposition of the standard;
    (IV) Any lessening of the utility or the performance of the covered 
equipment likely to result from the imposition of the standard;
    (V) The impact of any lessening of competition, as determined in 
writing by the Attorney General, that is likely to result from the 
imposition of the standard;
    (VI) The need for national energy conservation; and
    (VII) Other factors the Secretary considers relevant.

Id.

    Furthermore, the Secretary may not prescribe an amended or new 
standard if interested persons have established by a preponderance of 
the evidence that the standard is likely to result in the 
unavailability in the United States of any equipment type (or class) 
with performance characteristics (including reliability), features, 
sizes, capacities, and volumes that are substantially the same as those 
generally available in the United States. (42 U.S.C. 6295 (o)(4) and 
6316(e)(1)) In addition, there is a rebuttable presumption that a 
standard level is economically justified if the Secretary finds that 
``the additional cost to the consumer of purchasing equipment 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) and 6316(e)(1)) The rebuttable presumption test is 
an alternative path to establishing economic justification.
    Section 325(q)(1) of EPCA addresses the situation where DOE sets a 
standard for a type or class of covered equipment that has two or more 
groups of covered equipment. DOE must specify a different standard 
level than that which applies generally to such equipment ``for any 
group of covered equipment which have the same function or intended 
use, if * * * equipment within such group--(A) consume a different kind 
of energy from that consumed by other covered equipment within such 
type (or class); or (B) have a capacity or other performance-related 
feature which other equipment within such type (or class) do not have 
and such feature justifies a higher or lower standard'' than applies or 
will apply to the other equipment. (42 U.S.C. 6295(q)(1) and 
6316(e)(1)) In determining whether a performance-related feature 
justifies a different standard for a group of equipment, DOE must 
``consider such factors as the utility to the consumer of such a 
feature'' and other factors DOE deems appropriate. Any rule prescribing 
such a standard must include an explanation of the basis on which a 
higher or lower level was established. (42 U.S.C. 6295(q)(2) and 
6316(e)(1))
    Finally, Federal energy conservation requirements for commercial 
equipment generally supersede State laws or regulations concerning 
energy conservation testing, labeling, and standards for such 
equipment. (42 U.S.C. 6316(a)-(b)) For the commercial refrigeration 
equipment covered by this rulemaking, Federal energy conservation 
requirements will supersede all such State laws or regulations 
beginning on the date of publication of the Federal standards, except 
that any state or local standard issued before that time will be 
superseded only when the Federal standards take effect. (42 U.S.C. 
6316(e)(3)) Furthermore, DOE can grant waivers of preemption to any 
State laws or regulations that are superseded in accordance with the 
procedures and other provisions of Section 327(d) of the Act. (42 
U.S.C. 6297(d) and 6316(e)(3))

C. Background

1. Current Standards
    There are no national energy conservation standards for the 
commercial refrigeration equipment covered by this rulemaking. EPACT 
2005 did amend EPCA to establish energy conservation standards that 
will apply to certain other types of commercial refrigerators, 
freezers, and refrigerator-freezers when manufactured on or after 
January 1, 2010. (42 U.S.C. 6313(c)(2)-(3)) Those standards are not at 
issue in this rulemaking.
2. History of Standards Rulemaking for Commercial Refrigeration 
Equipment
    On August 8, 2005, Section 136(c) of EPACT 2005 amended EPCA, in 
part to direct DOE to issue energy conservation standards for the 
equipment covered by this rulemaking, which standards would apply to 
equipment manufactured on or after January 1, 2012. (42 U.S.C. 
6313(c)(4)(A)) Section 136(a)(3) of EPACT 2005 also amended EPCA, by 
adding definitions for terms relevant to this equipment. (42 U.S.C. 
6311(9)) In defining the term ``commercial refrigerator, freezer, and 
refrigerator-freezer,'' EPCA states that this refrigeration equipment 
is connected to either a self-contained condensing unit or to a remote 
condensing unit. 42 U.S.C. 6311(9)(A)(vii). Subsequently, EPCA defines 
the terms ``remote condensing unit'' and ``self-contained condensing 
unit.'' 42 U.S.C. 6311(9)(E)-(F). These are the two condenser 
configurations of equipment covered by this rulemaking.
    On December 19, 2006, the Energy Independence and Security Act of 
2007 (EISA 2007) was signed into law by the President. This legislation 
affected some of the products for which DOE had rulemakings underway. 
However, it did not create any additional requirements for commercial 
refrigeration equipment.
    As an initial step to comply with EPCA's mandate to issue standards 
for commercial refrigeration equipment, and to commence this 
rulemaking, on April 25, 2006, DOE published notice of a public meeting 
and of the availability

[[Page 50077]]

of its Framework Document for this rulemaking. 71 FR 23876. The 
Framework Document described the procedural and analytical approaches 
that DOE anticipated using to evaluate energy conservation standards 
for commercial refrigeration equipment, and identified various issues 
to be resolved in conducting the rulemaking. DOE held a public meeting 
on May 16, 2006 to present the contents of the Framework Document, 
describe the analyses it planned to conduct during the rulemaking, 
obtain public comment on these subjects, and inform and facilitate 
interested persons' involvement in the rulemaking. DOE also gave 
interested persons an opportunity, after the public meeting, to submit 
written statements in response to the Framework Document. DOE received 
five statements.
    On July 26, 2007, DOE published an advance notice of proposed 
rulemaking (ANOPR) concerning energy conservation standards for 
commercial refrigeration equipment. 72 FR 41161. In the ANOPR, DOE 
described and sought comment on its proposed equipment classes for this 
rulemaking, and on the analytical framework, models, and tools (e.g., 
LCC and national energy savings (NES) spreadsheets) that DOE used to 
analyze the impacts of energy conservation standards for commercial 
refrigeration equipment. In conjunction with the ANOPR, DOE also 
published on its Web site the complete ANOPR TSD. The TSD included the 
results of DOE's preliminary (1) engineering analysis, (2) markups 
analysis to determine equipment price, (3) energy use characterization, 
(4) LCC and payback period (PBP) analyses, (5) NES and national impact 
analyses (NIA), and (6) manufacturer impact analysis (MIA). In the 
ANOPR, DOE requested comment on these results, and on a range of other 
issues. These issues included equipment classes, definitions for air-
curtain angle and door angle, case lighting operating hours, operation 
and maintenance practices, equipment lifetime, LCC baseline levels, NIA 
base case, base case and standards case forecasts, differential impact 
of new standards on future shipments, selection of standard levels for 
post-ANOPR analysis, the equation that expresses the energy 
conservation standards, and the nature of standards for commercial 
refrigerator-freezers.
    DOE held a public meeting in Washington, DC on August 23, 2007, to 
present the methodology and results of the ANOPR analyses, and to 
solicit both oral and written comments from the interested persons who 
attended. Public comment focused on DOE's assumptions, approach, and 
equipment class breakdown, and are addressed in detail in this NOPR.

III. General Discussion

A. Test Procedures

    On December 8, 2006, DOE published a final rule in which it adopted 
American National Standards Institute (ANSI)/Air-Conditioning and 
Refrigeration Institute (ARI) Standard 1200-2006, Performance Rating of 
Commercial Refrigerated Display Merchandisers and Storage Cabinets, as 
the DOE test procedure for this equipment. 71 FR 71340, 71369-70; 10 
CFR 431.63-431.64. ANSI/ARI Standard 1200-2006 contains rating 
temperature specifications of 38 [deg]F (2 [deg]F) for 
commercial refrigerators and refrigerator compartments, 0 [deg]F 
(2 [deg]F) for commercial freezers and freezer 
compartments, and -5 [deg]F (2 [deg]F) for commercial ice-
cream freezers. The standard also requires performance tests to be 
conducted according to the American Society of Heating, Refrigerating, 
and Air-Conditioning Engineers (ASHRAE) Standard 72-2005, Method of 
Testing Commercial Refrigerators and Freezers. In this final rule, DOE 
also adopted a -15 [deg]F (2 [deg]F) rating temperature for 
commercial ice-cream freezers. 71 FR 71370. In addition, DOE adopted 
ANSI/Association of Home Appliance Manufacturers (AHAM) Standard HRF-1-
2004, Energy, Performance and Capacity of Household Refrigerators, 
Refrigerator-Freezers and Freezers, for determining compartment volumes 
for this equipment. 71 FR 71369-70.

B. Technological Feasibility

1. General
    DOE considers design options technologically feasible if industry 
already uses these options or if research has progressed to the 
development of a working prototype. ``Technologies incorporated in 
commercially available equipment or in working prototypes will be 
considered technologically feasible.'' 10 CFR Part 430, Subpart C, 
Appendix A, Section 4(a)(4)(i).
    In each standards rulemaking, DOE conducts a screening analysis, 
which it bases on information it has gathered regarding all current 
technology options and prototype designs. In consultation with 
interested parties, DOE develops a list of design options for 
consideration in the rulemaking. All technologically feasible design 
options are candidates in this initial assessment. Early in the 
process, DOE eliminates from consideration any design option (a) that 
is not practicable to manufacture, install, or service; (b) that will 
have adverse impacts on equipment utility or availability; or (c) for 
which there are health or safety concerns that cannot be resolved. 
Chapter 4 of the TSD accompanying this notice contains a description of 
the screening analysis for this rulemaking.
    In the ANOPR, DOE eliminated five of the technologies considered in 
the market and technology assessment: (1) Air-curtain design, (2) 
thermoacoustic refrigeration, (3) magnetic refrigeration, (4) electro-
hydrodynamic heat exchangers, and (5) copper rotor motors. Because all 
five of these technologies are in the research stage, 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. In addition, because these technologies 
are in the research stage, DOE cannot assess whether they would have 
any adverse impacts on utility to significant subgroups of consumers, 
result in the unavailability of any types of equipment, or present any 
significant adverse impacts on health or safety. Therefore, DOE did not 
consider these technologies as design options for improving the energy 
efficiency of commercial refrigeration equipment. DOE believes that all 
the efficiency levels discussed in today's notice are technologically 
feasible because there is equipment either in the market or in working 
prototypes at all of the efficiency levels analyzed. See Chapter 4 of 
the TSD for further discussion of the screening analysis.
2. Maximum Technologically Feasible Levels
    In deciding whether to adopt a new standard for a type or class of 
commercial refrigeration equipment, DOE must ``determine the maximum 
improvement in energy efficiency or maximum reduction in energy use 
that is technologically feasible'' for such equipment. (42 U.S.C. 
6295(p)(1) and 6316(e)(1)) If such standard is not designed to achieve 
such efficiency or use, the Secretary shall state the reasons such is 
the case in the proposed rule. Id. For this rulemaking, DOE determined 
that the values in Table III-1 represent the energy use levels that 
would achieve the maximum reductions in energy use that are 
technologically feasible at this time for commercial refrigeration 
equipment. DOE identified these ``max-tech'' levels for the equipment 
classes analyzed as part of the engineering analysis (Chapter 5 of the 
TSD). For each equipment class, DOE applied the most efficient design 
options available

[[Page 50078]]

for energy-consuming components. These levels are set forth in TSL 5.

                                   Table III-1--``Max-Tech'' Energy Use Levels
----------------------------------------------------------------------------------------------------------------
                                          ``Max-Tech'' level                                ``Max-Tech'' level
           Equipment class              kilowatt hours per day      Equipment class       kilowatt hours per day
                                              (kWh/day)                                         (kWh/day)
----------------------------------------------------------------------------------------------------------------
VOP.RC.M.............................  0.68 x TDA + 4.07......  VCT.RC.I...............  0.71 x TDA + 3.05
SVO.RC.M.............................  0.69 x TDA + 3.18......  HCT.RC.M...............  0.16 x TDA + 0.13
HZO.RC.M.............................  0.35 x TDA + 2.88......  HCT.RC.L...............  0.34 x TDA + 0.26
VOP.RC.L.............................  2.28 x TDA + 6.85......  HCT.RC.I...............  0.4 x TDA + 0.31
HZO.RC.L.............................  0.57 x TDA + 6.88......  VCS.RC.M...............  0.11 x V + 0.26
VCT.RC.M.............................  0.25 x TDA + 1.95......  VCS.RC.L...............  0.23 x V + 0.54
VCT.RC.L.............................  0.6 x TDA + 2.61.......  VCS.RC.I...............  0.27 x V + 0.63
SOC.RC.M.............................  0.39 x TDA + 0.11......  HCS.RC.M...............  0.11 x V + 0.26
VOP.SC.M.............................  1.57 x TDA + 4.71......  HCS.RC.L...............  0.23 x V + 0.54
SVO.SC.M.............................  1.58 x TDA + 4.59......  HCS.RC.I...............   0.27 x V + 0.63
HZO.SC.M.............................  0.77 x TDA + 5.55......  SOC.RC.L...............  0.83 x TDA + 0.22
HZO.SC.L.............................  1.92 x TDA + 7.08......  SOC.RC.I...............  0.97 x TDA + 0.26
VCT.SC.I.............................  0.73 x TDA + 3.29......  VOP.SC.L...............  3.95 x TDA + 11.82
VCS.SC.I.............................  0.38 x V + 0.88........  VOP.SC.I...............  5.02 x TDA + 15.02
HCT.SC.I.............................  0.56 x TDA + 0.43......  SVO.SC.L...............  3.98 x TDA + 11.51
SVO.RC.L.............................  2.28 x TDA + 6.85......  SVO.SC.I...............  5.06 x TDA + 14.63
VOP.RC.I.............................  2.9 x TDA + 8.7........  HZO.SC.I...............  2.44 x TDA + 9
SVO.RC.I.............................  2.9 x TDA + 8.7........  SOC.SC.I...............  1.35 x TDA + 0.36
HZO.RC.I.............................  0.72 x TDA + 8.74......  HCS.SC.I...............  0.38 x V + 0.88
----------------------------------------------------------------------------------------------------------------

C. Energy Savings

1. Determination of Savings
    DOE used the NES spreadsheet to estimate energy savings. The 
spreadsheet forecasts energy savings over the period of analysis for 
TSLs relative to the base case. DOE quantified the energy savings 
attributable to an energy conservation standard as the difference in 
energy consumption between the trial standards case and the base case. 
The base case represents the forecast of energy consumption in the 
absence of new mandatory efficiency standards. The NES spreadsheet 
model is described in Section IV.G of this notice and in Chapter 11 of 
the TSD accompanying this notice.
    The NES spreadsheet model calculates the energy savings in site 
energy or kilowatt hours (kWh). Site energy is the energy directly 
consumed at building sites by commercial refrigeration equipment. DOE 
expresses national energy savings in terms of the source energy 
savings, which are the energy savings used to generate and transmit the 
energy consumed at the site. Chapter 11 of the TSD contains a table of 
factors used to convert kWh to Btu. DOE derives these conversion 
factors, which change with time, from DOE's EIA's AEO2007.
2. Significance of Savings
    For commercial refrigeration equipment, EPCA prohibits DOE from 
adopting a standard that would not result in significant additional 
energy savings. (42 U.S.C. 6295(o)(3)(B) and 6316(e)(1)) While the term 
``significant'' is not defined in the Act, the U.S. Court of Appeals, 
in Natural Resources Defense Council v. Herrington, 768 F.2d 1355, 1373 
(D.C. Cir. 1985), indicated that Congress intended significant energy 
savings in this context to be savings that were not ``genuinely 
trivial.'' The estimated energy savings for all of the trial standard 
levels considered in this rulemaking are nontrivial, and therefore DOE 
considers them significant within the meaning of Section 325 of the 
Act.

D. Economic Justification

1. Specific Criteria
    As noted earlier, EPCA provides seven factors to be evaluated in 
determining whether an energy conservation standard is economically 
justified. The following sections discuss how DOE has addressed each 
factor thus far in this rulemaking. (42 U.S.C. 6295(o)(2)(B)(i) and 
6316(e)(1))
a. Economic Impact on Manufacturers and Commercial Customers
    DOE uses an annual cash-flow approach in determining the 
quantitative impacts of a new or amended standard on manufacturers. 
This includes both a short-term assessment based on the cost and 
capital requirements between the announcement of a regulation and when 
the regulation comes into effect, and a long-term assessment. Impacts 
analyzed include INPV, cash flows by year, and changes in revenue and 
income. Next, DOE analyzes and reports the impacts on different types 
of manufacturers, with particular attention to impacts on small 
manufacturers. DOE then considers the impact of standards on domestic 
manufacturer employment, manufacturing capacity, plant closures, and 
loss of capital investment. Finally, DOE takes into account the 
cumulative impact of regulations on manufacturers.
    For commercial consumers, measures of economic impact are generally 
the changes in installed cost and annual operating costs, i.e., the 
LCC. Chapter 6 of the TSD presents the LCC of the equipment at each 
TSL. The LCC is one of the seven factors to be considered in 
determining the economic justification for a new or amended standard. 
(42 U.S.C. 6295(o)(2)(B)(i)(II) and 6316(e)(1)) It is discussed in the 
paragraphs that follow.
b. Life-Cycle Costs
    The LCC is the sum of the purchase price, including the 
installation and operating expense (i.e., operating energy, 
maintenance, and repair expenditures) discounted over the lifetime of 
the equipment. To determine the purchase price including installation, 
DOE estimated the markups that distributors and contractors add to the 
manufacturer selling price (MSP); DOE also estimated installation costs 
from an analysis of commercial refrigeration equipment installation 
costs for each equipment class. DOE determined that preventative 
maintenance costs do not depend on efficiency but that repair costs 
increase

[[Page 50079]]

with efficiency and that the cost of replacement lighting fixtures 
(``lighting maintenance'') increased with higher efficiency. See 
Sections IV.E.8 and IV.E.9 for more detail. In estimating operating 
energy costs, DOE used average effective commercial electricity prices 
at the State level from the EIA publication, State Energy Consumption, 
Price, and Expenditure Estimates. DOE modified the 2006 average 
commercial electricity prices to reflect the average electricity prices 
for each of the four types of businesses examined in this analysis. The 
LCC analysis compares the LCCs of equipment designed to meet possible 
energy conservation standards with the LCCs of equipment likely to be 
installed in the absence of standards. The LCC analysis also identifies 
a range of energy price forecasts for the electricity prices used in 
the economic analyses and provides results showing the sensitivity of 
the LCC results to these price forecasts.
    Recognizing that each commercial building that uses commercial 
refrigeration equipment is unique, DOE analyzed variability and 
uncertainty by performing the LCC and PBP calculations for two 
prototype commercial buildings (i.e., stores) and four types of 
businesses (two types of businesses for each prototype store). The 
first store prototype is a large grocery store, which encompasses 
supermarkets and wholesaler/retailer multi-line stores such as big-box 
stores, warehouse stores, and supercenters. The second prototype is a 
small store, which encompasses convenience stores and small specialty 
stores such as meat markets; wine, beer, and liquor stores; and 
convenience stores associated with gasoline stations. Various types of 
commercial refrigeration equipment can serve a given type of store's 
refrigeration needs. DOE gives the LCC savings as a distribution, with 
a mean value and a range. DOE developed average discount rates for each 
of four business types analyzed, ranging from 5.1 to 8.4 percent for 
the calculations, and assumed that the customer purchases the equipment 
in 2012. Chapter 8 of the TSD contains the details of the LCC 
calculations.
c. Energy Savings
    While significant energy conservation is a separate statutory 
requirement for imposing an energy conservation standard, EPCA requires 
DOE, in determining the economic justification of such a standard, to 
consider the total projected energy savings that are expected to result 
directly from the standard. (42 U.S.C. 6295(o)(2)(B)(i)(III) and 
6316(e)(1)) DOE used the NES spreadsheet results in its consideration 
of total projected savings. Section IV.G.1 of this notice discusses the 
savings figures.
d. Lessening of Utility or Performance of Equipment
    In establishing equipment classes, evaluating design options, and 
assessing the impact of potential standard levels, DOE tried to avoid 
having new standards for commercial refrigeration equipment lessen the 
utility or performance of the equipment under consideration in this 
rulemaking. (42 U.S.C. 6295(o)(2)(B)(i)(IV) and 6316(e)(1)) None of the 
proposed trial standard levels considered in this rulemaking involve 
changes in equipment design or unusual installation requirements that 
would reduce the utility or performance of the equipment. See Chapter 4 
and Chapter 16 of the TSD for more detail.
e. Impact of Any Lessening of Competition
    EPCA directs DOE to consider any lessening of competition likely to 
result from standards. It directs the Attorney General to determine in 
writing the impact, if any, of any lessening of competition likely to 
result from imposition of a proposed standard. (42 U.S.C. 
6295(o)(2)(B)(i)(V) and (ii); and 6316(e)(1)) DOE has transmitted a 
written request to the Attorney General soliciting a written 
determination on this issue.
f. Need of the Nation to Conserve Energy
    The non-monetary benefits of the proposed standard are likely to be 
reflected in improvements to the security and reliability of the 
Nation's energy system. Reductions in the overall demand for energy 
will reduce the Nation's reliance on foreign sources of energy and 
increase reliability of the Nation's electricity system. DOE conducts a 
utility impact analysis to show the reduction in installed generation 
capacity. Reduced power demand (including peak power demand) generally 
improves the security and reliability of the energy system.
    The proposed standard also is likely to result in improvements to 
the environment. In quantifying these improvements, DOE has defined a 
range of primary energy conversion factors and associated emission 
reductions based on the generation that energy conservation standards 
displaced. DOE reports the environmental effects from each trial 
standard level for this equipment in the environmental assessment in 
the TSD. (42 U.S.C. 6295(o)(2)(B)(i)(VI) and 6316(e)(1))
g. Other Factors
    EPCA allows the Secretary of Energy, in determining whether a 
standard is economically justified, to consider any other factors the 
Secretary deems to be relevant. (42 U.S.C. 6295(o)(2)(B)(i)(VII) and 
6316(e)(1)) Under this provision, DOE considered LCC impacts on 
identifiable groups of customers, such as customers of different 
business types, who may be disproportionately affected by any national 
energy conservation standard level. In particular, DOE examined the LCC 
impact on independent small grocery/convenience store businesses where 
both higher discount rates and lack of access to national account 
equipment purchases might disproportionately affect those business 
types when compared to the overall commercial refrigeration equipment 
market.
2. Rebuttable Presumption
    Another criterion for determining whether a standard level is 
economically justified is the following rebuttable presumption test:

    If the Secretary finds that the additional cost to the consumer 
of purchasing equipment complying with an energy conservation 
standard level will be less than three times the value of the energy 
* * * savings during the first year that the consumer will receive 
as a result of the standard, as calculated under the applicable test 
procedure, there shall be a rebuttable presumption that such 
standard level is economically justified. A determination by the 
Secretary that such criterion is not met shall not be taken into 
consideration in the Secretary's determination of whether a standard 
is economically justified. (42 U.S.C. 6295(o)(2)(B)(iii) and 
6316(e)(1))

    If the initial price of equipment increases due to a conservation 
standard, and the consumer would recover the increase in energy savings 
in less than three years through reduced energy costs resulting from 
the standard, then DOE presumes that such standard is economically 
justified. This presumption of economic justification can be rebutted 
upon a proper showing. The rebuttable presumption payback calculation 
is discussed in Sections III.D.2 and V.B.1.b of this NOPR.

IV. Methodology and Discussion of Comments

    DOE used two spreadsheet tools to determine the impact of energy 
conservation standards on the Nation. The first spreadsheet calculates 
LCCs and payback periods of potential new energy conservation 
standards. The second provides shipments forecasts

[[Page 50080]]

and then calculates national energy savings and net present value 
impacts of potential new energy conservation standards. DOE also 
assessed manufacturer impacts, largely through use of the Government 
Regulatory Impact Model (GRIM).
    Additionally, DOE estimated the impacts of energy conservation 
standards for commercial refrigeration equipment on utilities and the 
environment. DOE used a version of EIA's National Energy Modeling 
System (NEMS) for the utility and environmental analyses. The NEMS 
model simulates the energy economy of the United States and has been 
developed over several years by the EIA primarily for the purpose of 
preparing the Annual Energy Outlook (AEO). The NEMS produces a widely 
known baseline forecast for the Nation through 2025 that is available 
on the DOE Web site. The version of NEMS used for efficiency standards 
analysis is called NEMS-BT,\8\ and is based on the AEO2007 version with 
minor modifications. The NEMS offers a sophisticated picture of the 
effect of standards, since its scope allows it to measure the 
interactions between the various energy supply and demand sectors and 
the economy as a whole.
---------------------------------------------------------------------------

    \8\ The EIA approves use of the name NEMS to describe only an 
AEO version of the model without any modification to code or data. 
Because the present analysis entails some minor code modifications 
and runs the model under various policy scenarios that deviate from 
AEO assumptions, the name NEMS-BT refers to the model used here. For 
more information on NEMS, refer to The National Energy Modeling 
System: An Overview 1998. DOE/EIA-0581 (98), February, 1998. BT is 
DOE's Building Technologies Program. NEMS-BT was formerly called 
NEMS-BRS.
---------------------------------------------------------------------------

A. Market and Technology Assessment

    When beginning an energy conservation standards rulemaking, DOE 
develops information that provides an overall picture of the market for 
the equipment concerned, including the purpose of the equipment, the 
industry structure, and market characteristics. This activity includes 
both quantitative and qualitative assessments based primarily on 
publicly available information. The subjects addressed in the market 
and technology assessment for this rulemaking (Chapter 3 of the TSD) 
include equipment classes, manufacturers, quantities, and types of 
equipment sold and offered for sale, retail market trends, and 
regulatory and non-regulatory programs.
1. Definitions Related to Commercial Refrigeration Equipment
a. Air Curtain Angle Definition
    For equipment without doors, an air curtain divides the 
refrigerated compartment from the ambient space. DOE stated in the 
ANOPR that the orientation of the air curtain affects the energy 
consumption of both remote condensing and self-contained equipment, and 
that equipment without doors can be broadly categorized by the angle of 
the air curtain. DOE considered defining the air-curtain angle as ``the 
angle between a vertical line and the line formed by the points at the 
center of the discharge air grille and the center of the return air 
grille, when viewed in cross-section.'' DOE presented this definition 
in the ANOPR, 72 FR 41173, and for discussion at the ANOPR public 
meeting, and requested feedback.
    ARI and Edison Electric Institute (EEI) recommended that DOE 
slightly modify its definition of air-curtain angle to ``the angle 
formed between a vertical line and the line formed by the points at the 
inside edge of the discharge air opening and the inside edge of the 
return air opening, when viewed in cross-section.'' For equipment 
without doors and without a discharge air grille or discharge air 
honeycomb, the air curtain should be defined as ``the angle between a 
vertical line extended down from the highest point on the 
manufacturer's recommended load limit line and the same load limit 
line.'' (ARI, No. 18 at p. 2 and EEI, No. 15 at p. 2) DOE recognizes 
that these proposed definitions are consistent with industry-approved 
standards and is therefore including the suggested modifications to the 
definition for air-curtain angle in today's proposed rule.
b. Door Angle Definition
    For equipment with doors, DOE stated in the ANOPR that the 
orientation of the doors affects the energy consumption, and that 
equipment with doors can be broadly categorized by the angle of the 
door. DOE considered defining door angle as ``the angle between a 
vertical line and the line formed by the plane of the door, when viewed 
in cross-section.'' 72 FR 41174. DOE also presented this definition for 
discussion at the ANOPR public meeting and requested feedback.
    While stakeholders agreed with DOE's proposed definition of door 
angle flat doors, it was not clear how DOE would define the door angle 
for curved doors such as those found on service over-the-counter cases. 
True stated that curved door angle should be defined by forming a plane 
between ``the end plane and the end peak in-section.'' (Public Meeting 
Transcript, No. 13.5 at p. 59) Southern California Edison (SCE) 
suggested defining door angle for curved doors in the way air-curtain 
angle is defined, by the angle formed between the vertical and a line 
drawn between the top and bottom edges. (Public Meeting Transcript, No. 
13.5 at p. 59) DOE is proposing its original definition of door angle 
for cases with flat doors. For cases with curved doors, DOE is not 
clear what True's intent was in defining door angle, and no 
clarification was made in True's written comments. DOE believes the 
approach suggested by SCE is appropriate because it accounts for the 
complex geometry of curved doors while still remaining consistent with 
the existing definition for air-curtain angle. Therefore, DOE is 
proposing to define door angle as ``the angle formed between a vertical 
line and the straight line drawn by connecting the top and bottom 
points where the display area glass joins the cabinet, when the 
equipment is viewed in cross-section.''
2. Equipment Classes
    When establishing energy conservation standards, DOE generally 
divides covered equipment into equipment classes by the type of energy 
used, capacity, or other performance-related features that affect 
efficiency. Different energy conservation standards may apply to 
different equipment classes. (42 U.S.C. 6295(q) and 6316(e)(1))
    Commercial refrigerators, commercial freezers, and commercial 
refrigerator-freezers can be divided into various equipment classes 
categorized largely by physical characteristics that affect energy 
efficiency. Some of these characteristics delineate the categories of 
equipment covered by this rulemaking.\9\ Most affect the merchandise 
that the equipment can be used to display, and how the customer can 
access that merchandise. Key physical characteristics that affect 
energy efficiency are the operating temperature, the presence or 
absence of doors (i.e., closed cases or open cases), the type of doors 
used (i.e., transparent

[[Page 50081]]

or solid), the angle of the door or air-curtain (i.e., horizontal, 
semivertical, or vertical) and the type of condensing unit (i.e., 
remote or self-contained). As discussed in the ANOPR, 72 FR 41173-77, 
and below, DOE has developed equipment classes in this rulemaking by 
(1) dividing commercial refrigerators, commercial freezers, and 
commercial refrigerator-freezers into equipment families, (2) 
subdividing these families based on condensing unit configurations and 
rating temperature designations, and (3) identifying the resulting 
classes that are within each of the three equipment categories covered 
by this rulemaking.
---------------------------------------------------------------------------

    \9\ ``Commercial refrigerators, commercial freezers, and 
commercial refrigerator-freezers'' is a type of covered commercial 
equipment. For purposes of discussion only in this proceeding, DOE 
uses the term ``categories'' to designate groupings of ``commercial 
refrigeration equipment.'' The categories of equipment are: Self-
contained commercial refrigerators, commercial freezers, and 
commercial refrigerator-freezers without doors; remote condensing 
commercial refrigerators, commercial freezers, and commercial 
refrigerator-freezers; and commercial ice-cream freezers. DOE will 
analyze specific equipment classes that fall within these general 
categories and set appropriate standards.
---------------------------------------------------------------------------

    DOE divided covered equipment into eight equipment families, which 
are shown in Table IV-1. Following the ANOPR, DOE did not receive any 
comments that it believes warranted changes to the eight equipment 
families proposed in the ANOPR and therefore, the eight families are 
unchanged. The two issues related to equipment family designations are 
discussed below.

                Table IV-1--Equipment Family Designations
------------------------------------------------------------------------
         Equipment family                        Description
------------------------------------------------------------------------
Vertical Open (VOP)...............  Equipment without doors and an air-
                                     curtain >= 0[deg] and < 10[deg]
                                     from the vertical.
Semivertical Open (SVO)...........  Equipment without doors and an air-
                                     curtain angle >= 10[deg] and <
                                     80[deg] from the vertical.
Horizontal Open (HZO).............  Equipment without doors and an air-
                                     curtain angle >= 80[deg] from the
                                     vertical.
Vertical Closed Transparent (VCT).  Equipment with hinged or sliding
                                     transparent doors and a door angle
                                     < 45[deg].
Horizontal Closed Transparent       Equipment with hinged or sliding
 (HCT).                              transparent doors and a door angle
                                     >= 45[deg].
Vertical Closed Solid (VCS).......  Equipment with hinged or sliding
                                     solid (opaque) doors and a door
                                     angle < 45[deg].
Horizontal Closed Solid (HCS).....  Equipment with hinged or sliding
                                     solid (opaque) doors and a door
                                     angle >= 45[deg].
Service Over Counter (SOC)........  Equipment with sliding or hinged
                                     doors intended for use by sales
                                     personnel and fixed or hinged glass
                                     for displaying merchandise.
------------------------------------------------------------------------

    Within each of the eight equipment families is equipment that has 
one of the two condensing unit configurations, which are shown in Table 
IV-2. Because these are the only two condensing unit configurations 
used in commercial refrigeration equipment, and since DOE did not 
receive any comments on these configurations following the ANOPR, DOE 
did not make any changes.

                Table IV-2--Condensing Unit Configuration
------------------------------------------------------------------------
   Condensing unit configuration                 Description
------------------------------------------------------------------------
Remote Condensing (RC)............  Condensing unit is remotely located
                                     from the refrigerated equipment and
                                     consists of one or more refrigerant
                                     compressors, refrigerant
                                     condensers, condenser fans and
                                     motors, and factory-supplied
                                     accessories.
Self-Contained (SC)...............  Condensing unit is an integral part
                                     of the refrigerated equipment and
                                     consists of one or more refrigerant
                                     compressors, refrigerant
                                     condensers, condenser fans and
                                     motors, and factory-supplied
                                     accessories.
------------------------------------------------------------------------

    DOE is also organizing equipment classes based on the three 
operating temperature ranges shown in Table IV-3. Based on the 
temperature at which the equipment is designed to operate, it will fall 
into one of these operating temperature ranges. This is identified as 
Issue 3 under ``Issues on Which DOE Seeks Comment'' in Section VII.E of 
this NOPR.
    Each temperature range coincides with a rating temperature used in 
the test procedure final rule for the different equipment types. 10 CFR 
431.64. Following the ANOPR, DOE did not receive any comments regarding 
the rating temperature designations proposed in the ANOPR, and 
therefore DOE did not make any changes to the rating temperature 
designations.

               Table IV-3--Rating Temperature Designations
------------------------------------------------------------------------
                                     Rating
Operating  temperature ([deg]F)    temperature         Description
                                    ([deg]F)
------------------------------------------------------------------------
>= 32 (M)......................              38  Medium temperature
                                                  (refrigerators).
< 32 and > -5 (L)..............               0  Low temperature
                                                  (freezers).
<= -5 (I)......................             -15  Ice-cream temperature
                                                  (ice-cream freezers).
------------------------------------------------------------------------

    In the ANOPR, DOE responded to several comments and presented a 
discussion (Section II.A.2) of the air-curtain angle ranges used to 
delineate vertical, semivertical, and horizontal equipment families 
without doors (VOP, SVO, and HZO). 72 FR 41173-74. In comments received 
following the Framework document publication, some stakeholders felt 
that the air-curtain angle ranges used in the data provided by ARI 
might encourage manufacturers to redesign equipment to take advantage 
of less stringent standards. Specifically, the stakeholders were 
concerned that manufacturers of VOP.RC.M equipment (a high-volume 
equipment class) would make slight alterations in their designs that 
would shift the equipment to the SVO.RC.M equipment class. If this 
shift occurred for a large number of models, and if standards for 
SVO.RC.M equipment were significantly less stringent than standards for 
VOP.RC.M equipment, a significant amount of energy savings would be 
avoided. In other words, energy savings will be less than if that 
equipment was not modified and remained under the vertical 
classification. DOE responded to these

[[Page 50082]]

comments in the ANOPR, concurring with stakeholders' concerns, and 
requesting any relevant data or feedback regarding the ranges of air-
curtain angle proposed in the ANOPR. No further comments were received 
on this issue following the ANOPR. DOE is proposing standards for the 
SVO.RC.M equipment class that are virtually equivalent to standards for 
the VOP.RC.M equipment class (see the proposed rule language of this 
NOPR). As a result, DOE believes that the proposed standards eliminate 
motivation for market shifts between these equipment classes. However, 
to assure that no changes to the air-curtain ranges for the VOP, SVO, 
and HZO equipment families are warranted, DOE seeks comment on the 
possibility of market shifts between equipment classes based on the 
proposed standards.
    As discussed in the ANOPR, 72 FR 41174 and during the ANOPR public 
meeting, DOE stated that it was considering defining two equipment 
families each for equipment with solid and transparent doors, based on 
door angles of 0[deg] to 45[deg] (vertical) and 45[deg] to 90[deg] 
(horizontal). EEI stated that DOE should consider revising its 
definition of door angle, because it is unclear whether a door angle of 
45[deg] to be vertical or horizontal. (Public Meeting Transcript, No. 
13.5 at p. 58) DOE agrees with EEI that its previous designation did 
not specify what equipment family a unit with a 45[deg] door angle 
would fall under. Therefore, DOE has tentatively decided that it will 
designate vertical equipment with transparent or solid doors as 
``equipment with hinged or sliding doors and a door angle less than 
45[deg],'' and horizontal equipment with transparent or solid doors as 
``equipment with hinged or sliding doors and a door angle greater than 
or equal to 45[deg].''
    DOE is considering 38 of the 48 equipment classes shown in Table 
IV-4.\10\ The equipment classes are organized by equipment family, 
compressor operating mode, and rating temperature. The right-hand 
column in Table IV-4 with the heading ``Equipment Class Designation'' 
identifies each of the 48 equipment classes with a particular set of 
letters. The first three letters for each class represent its equipment 
family. The next two letters represent the condensing unit 
configuration. The last letter represents the rating temperature. Table 
IV-1 through Table IV-3 set forth the meaning of the equipment class 
lettering designations.
---------------------------------------------------------------------------

    \10\ Table IV-4 identifies 48 classes of commercial 
refrigerators, commercial freezers, and commercial refrigerator-
freezers. Of the 48 classes, 10 classes are identified by asterisks. 
EPCA has already established energy conservation standards for these 
10 classes, (42 U.S.C. 6313(c)(2)-(3)) which are not covered under 
this rulemaking.

                             Table IV-4--Commercial Refrigeration Equipment Classes
----------------------------------------------------------------------------------------------------------------
                                           Condensing unit       Operating temperature       Equipment class
           Equipment family                 configuration               ([deg]F)               designation
----------------------------------------------------------------------------------------------------------------
Vertical Open........................  Remote.................  >= 32..................  VOP.RC.M
                                                                < 32 and > -5..........  VOP.RC.L
                                                                <= -5..................  VOP.RC.I
                                       Self-Contained.........  >= 32..................  VOP.SC.M
                                                                < 32 and > -5..........  VOP.SC.L
                                                                <= -5..................  VOP.SC.I
Semivertical Open....................  Remote.................  >= 32..................  SVO.RC.M
                                                                < 32 and > -5..........  SVO.RC.L
                                                                <= -5..................  SVO.RC.I
                                       Self-Contained.........  >= 32..................  SVO.SC.M
                                                                < 32 and > -5..........  SVO.SC.L
                                                                <= -5..................  SVO.SC.I
Horizontal Open......................  Remote.................  >= 32..................  HZO.RC.M
                                                                < 32 and > -5..........  HZO.RC.L
                                                                <= -5..................  HZO.RC.I
                                       Self-Contained.........  >= 32..................  HZO.SC.M
                                                                < 32 and > -5..........  HZO.SC.L
                                                                <= -5..................  HZO.SC.I
Vertical Closed Transparent..........  Remote.................  >= 32..................  VCT.RC.M
                                                                < 32 and > -5..........  VCT.RC.L
                                                                <= -5..................  VCT.RC.I
                                       Self-Contained.........  >= 32..................  VCT.SC.M*
                                                                < 32 and > -5..........  VCT.SC.L*
                                                                <= -5..................  VCT.SC.I
Horizontal Closed Transparent........  Remote.................  >= 32..................  HCT.RC.M
                                                                < 32 and > -5..........  HCT.RC.L
                                                                <= -5..................  HCT.RC.I
                                       Self-Contained.........  >= 32..................  HCT.SC.M*
                                                                < 32 and > -5..........  HCT.SC.L*
                                                                <= -5..................  HCT.SC.I
Vertical Closed Solid................  Remote.................  >= 32..................  VCS.RC.M
                                                                < 32 and > -5..........  VCS.RC.L
                                                                <= -5..................  VCS.RC.I
                                       Self-Contained.........  >= 32..................  VCS.SC.M*
                                                                < 32 and > -5..........  VCS.SC.L*
                                                                <= -5..................  VCS.SC.I
Horizontal Closed Solid..............  Remote.................  >= 32..................  HCS.RC.M
                                                                < 32 and > -5..........  HCS.RC.L
                                                                <= -5..................  HCS.RC.I
                                       Self-Contained.........  >= 32..................  HCS.SC.M*
                                                                < 32 and > -5..........  HCS.SC.L*
                                                                <= -5..................  HCS.SC.I

[[Page 50083]]

 
Service Over Counter.................  Remote.................  >= 32..................  SOC.RC.M
                                                                < 32 and > -5..........  SOC.RC.L
                                                                <= -5..................  SOC.RC.I
                                       Self-Contained.........  >= 32..................  SOC.SC.M*
                                                                < 32 and > -5..........  SOC.SC.L*
                                                                <= -5..................  SOC.SC.I
----------------------------------------------------------------------------------------------------------------
* These equipment classes are covered by standards established in EPCA and are not covered under this
  rulemaking. (42 U.S.C. 6313(c)(2)-(3))

    EPCA contains standards for self-contained commercial 
refrigerators, commercial freezers and commercial refrigerator-freezers 
with doors (42 U.S.C. 6313(c)(2)-(3)); this equipment is not included 
in this rulemaking. Equipment classes already covered by EPCA, and 
therefore not included in this rulemaking, are indicated with asterisks 
in Table IV-4. DOE has based the designations of these possible 
equipment classes on the classification methodology presented in Table 
IV-1 through Table IV-3.
    Table IV-5 presents the equipment classes covered under this 
rulemaking, organized by the three equipment categories.

                       Table IV-5--Commercial Refrigeration Equipment Classes by Category
----------------------------------------------------------------------------------------------------------------
                                                                               Operating
       Equipment category           Condensing unit    Equipment family       temperature       Equipment class
                                     configuration                             ([deg]F)           designation
----------------------------------------------------------------------------------------------------------------
Remote Condensing Commercial      Remote............  Vertical Open.....  >= 32.............  VOP.RC.M
 Refrigerators, Commercial                                                < 32 and > -5.....  VOP.RC.L
 Freezers, and Commercial
 Refrigerator-Freezers.
                                                      Semivertical Open.  >= 32.............  SVO.RC.M
                                                                          < 32 and > -5.....  SVO.RC.L
                                                      Horizontal Open...  >= 32.............  HZO.RC.M
                                                                          < 32 and > -5.....  HZO.RC.L
                                                      Vertical Closed     >= 32.............  VCT.RC.M
                                                       Transparent.       < 32 and > -5.....  VCT.RC.L
                                                      Horizontal Closed   >= 32.............  HCT.RC.M
                                                       Transparent.       < 32 and > -5.....  HCT.RC.L
                                                      Vertical Closed     >= 32.............  VCS.RC.M
                                                       Solid.             < 32 and > -5.....  VCS.RC.L
                                                      Horizontal Closed   >= 32.............  HCS.RC.M
                                                       Solid.             < 32 and > -5.....  HCS.RC.L
                                                      Service Over        >= 32.............  SOC.RC.M
                                                       Counter.           < 32 and > -5.....  SOC.RC.L
Self-Contained Commercial         Self-Contained....  Vertical Open.....  >= 32.............  VOP.SC.M
 Refrigerators, Commercial                                                < 32 and > -5.....  VOP.SC.L
 Freezers, and Commercial
 Refrigerator-Freezers without
 Doors.
                                                      Semivertical Open.  >= 32.............  SVO.SC.M
                                                                          < 32 and > -5.....  SVO.SC.L
                                                      Horizontal Open...  >= 32.............  HZO.SC.M
                                                                          < 32 and > -5.....  HZO.SC.L
Commercial Ice-Cream Freezers...  Remote............  Vertical Open.....  <= -5.............  VOP.RC.I
                                                      Semivertical Open.                      SVO.RC.I
                                                      Horizontal Open...                      HZO.RC.I
                                                      Vertical Closed                         VCT.RC.I
                                                       Transparent.
                                                      Horizontal Closed                       HCT.RC.I
                                                       Transparent.
                                                      Vertical Closed                         VCS.RC.I
                                                       Solid.
                                                      Horizontal Closed                       HCS.RC.I
                                                       Solid.
                                                      Service Over                            SOC.RC.I
                                                       Counter.
                                  Self-Contained....  Vertical Open.....                      VOP.SC.I
                                                      Semivertical Open.                      SVO.SC.I
                                                      Horizontal Open...                      HZO.SC.I
                                                      Vertical Closed                         VCT.SC.I
                                                       Transparent.
                                                      Horizontal Closed                       HCT.SC.I
                                                       Transparent.
                                                      Vertical Closed                         VCS.SC.I
                                                       Solid.
                                                      Horizontal Closed                       HCS.SC.I
                                                       Solid.
                                                      Service Over                            SOC.SC.I
                                                       Counter.
----------------------------------------------------------------------------------------------------------------

B. Engineering Analysis

    The engineering analysis develops cost-efficiency relationships to 
show the manufacturing costs of achieving increased efficiency. DOE has 
identified the following three methodologies to generate the 
manufacturing costs needed for the engineering analysis: (1) The design 
option approach, which

[[Page 50084]]

provides the incremental costs of adding design options to a baseline 
model that will improve its efficiency; (2) the efficiency-level 
approach, which provides the relative costs of achieving increases in 
energy efficiency levels without regard to the particular design 
options used to achieve such increases; and (3) the cost-assessment (or 
reverse engineering) approach, which provides ``bottom-up'' 
manufacturing cost assessments for achieving various levels of 
increased efficiency based on detailed cost data for parts and 
material, labor, shipping/packaging, and investment for models that 
operate at particular efficiency levels.
1. Approach
    In the ANOPR engineering analysis, the primary methodology was an 
efficiency-level approach, supplemented by a design option approach. 
DOE analyzed only the 15 equipment classes with shipment volumes 
greater than 100 per year. The basis of the approach was four industry-
supplied cost-efficiency curves for the four equipment classes shipped 
most frequently (i.e., VCT.RC.L, VOP.RC.M, SVO.RC.M, and HZO.RC.L). See 
Section 0 for shipment data. DOE developed these classes using an 
efficiency-level approach. DOE supplemented these industry-supplied 
curves with 15 curves it developed using a design option approach. Four 
of DOE's curves were intended only for comparison with the industry-
supplied curves, as verification of the industry data. The other 11 
curves formed the basis of analysis for the other 11 analyzed equipment 
classes. The ANOPR provides more details on this approach. 72 FR 41180.
    During the ANOPR public meeting and subsequent comment period, 
stakeholders raised concerns over using industry-supplied data as the 
basis of the engineering analysis. ARI stated that the intent was to 
use the industry curves only to validate DOE's design option analysis, 
not to use them directly in the analysis. (Public Meeting Transcript, 
No. 13.5 at p. 91) The American Council for an Energy Efficient Economy 
(ACEEE) stated that rulemakings have always used industry curves when 
they were available. (Public Meeting Transcript, No. 13.5 at p. 91) ARI 
stated that the industry data represents an average and covers the 
range of available equipment, but not all manufacturers' equipment 
would span the whole range. ARI also stated that as few as three 
manufacturers submitted data for some of the cost-efficiency curves, 
while in the best cases there were up to seven. ARI explained that 
three manufacturers might not represent the entire industry. (Public 
Meeting Transcript, No. 13.5 at pp. 94-95) Hussmann stated that it 
doesn't know, for example, how many shelf lights other manufacturers 
included in the data they submitted to ARI, and therein lies some of 
the danger of using an industry average. (Public Meeting Transcript, 
No. 13.5 at p. 95) Regarding the HZO.RC.L equipment class, EEI stated 
that DOE's data does not appear to have the same range as ARI's data. 
(Public Meeting Transcript, No. 13.5 at p. 93) Copeland also questioned 
whether the cost-efficiency curves from industry made sense [because 
they did not appear to be ordered in terms of increasing payback]. 
(Public Meeting Transcript, No. 13.5 at p. 149) ACEEE noted that the 
analytically derived price points for several equipment classes are 
significantly higher than the industry-supplied data at high 
efficiency, and suggested that DOE reexamine this data. (ACEEE, No. 16 
at p. 2) ARI stated that DOE's design option approach appears to be 
technically sound, and that the ARI cost-efficiency curves are only 
available for a limited number of equipment classes. For consistency, 
ARI recommended that DOE base its analysis solely on DOE's analytically 
derived curves. (ARI, No. 18 at p. 6)
    As mentioned above, DOE used the four cost-efficiency curves \11\ 
provided by ARI as the basis for its ANOPR engineering analysis. DOE 
was not aware of ARI's intent that they be used only to validate DOE's 
own analysis, or of ARI's concerns that the data may have been 
insufficient for some classes. DOE agrees with stakeholders that using 
the analytically derived curves (a design option approach) for all 
equipment classes would be more consistent and provide more 
transparency. Although the efficiency-level and design option 
approaches have been used together in other rulemakings, DOE recognizes 
the challenges in using the industry-supplied data as the primary 
engineering analysis approach in this rulemaking. The ARI data cannot 
be disaggregated for public review, since doing so would disclose 
sensitive manufacturer information. This prevents a rigorous 
investigation of any discrepancies or irregularities in data submitted 
by the manufacturers. At the ANOPR public meeting, Hussmann mentioned 
lighting levels as one example of a design feature that could cause 
discrepancies among data from different manufacturers. In the design 
option approach, data on design features that affect performance (such 
as lighting) are available for interested persons to review and comment 
on, along with other assumptions and calculations. The aggregation of 
industry data seems to have resulted in cost-efficiency curves that 
lack the marked cost increases at higher levels of efficiency that are 
typical of the cost-efficiency relationship. The industry-supplied 
curves tended to be ``flatter'' than those developed by DOE, and in 
some cases appear to have efficiency levels that were not in order of 
increasing payback, as noted by Copeland. DOE believes the flatness of 
the industry curves may account for some of the discrepancies in 
pricing between the industry-supplied and analytically derived data, as 
noted by ACEEE.
---------------------------------------------------------------------------

    \11\ These four curves applied to the following four equipment 
classes: VCT.RC.L, VOP.RC.M, SVO.RC.M, and HZO.RC.L. These represent 
the equipment classes with the highest shipment volumes.
---------------------------------------------------------------------------

    The extent of the industry-supplied data was also cause for 
concern. ARI's statement that not all manufacturers' equipment would 
span the whole range of efficiency levels is consistent with EEI's 
concern that the data derived using DOE's design option approach did 
not span the same range as the industry data. Because of overlapping 
ranges of efficiency of manufacturers' data, the overall cost-
efficiency data reported by ARI spans a range that in some cases is 
greater than the range covered by DOE's design option data. DOE 
realizes this could raise a concern that its analysis is incomplete, 
for example by neglecting design options that could account for 
additional increases in efficiency, and thus an increase in the span of 
efficiencies covered. However, based on the comments received, DOE 
believes the extra range in the ARI data is instead largely due to 
inconsistencies in the manufacturer data submitted to ARI, such as 
lighting levels. A smaller portion of the extra range may also be 
attributable to subtle aspects of design and manufacturing (e.g., 
airflow and air-curtain design) that have an insignificant impact on 
performance and that cannot be modeled accurately in the design option 
approach. DOE appreciates the feedback from ARI that the design option 
approach appears sound, and believes that the design option data is 
more accurate in depicting the cost-efficiency relationship for 
commercial refrigeration equipment.
    For the NOPR engineering analysis, DOE analyzed the same 15 
equipment classes as in the ANOPR analysis, but used only a design 
option approach. That approach is identical to the one used in the 
ANOPR, involving consultation with outside experts,

[[Page 50085]]

review of publicly available cost and performance information, and 
modeling of equipment cost and energy consumption, but DOE applied it 
to all 15 equipment classes analyzed. The industry-supplied data 
developed using an efficiency-level approach is used only as a check on 
DOE's data. DOE believes this approach is more reliable, and affords 
the public full transparency of assumptions and results and the ability 
to perform independent analyses for verification. See Chapter 5 of the 
TSD for more detail.
2. Equipment Classes Analyzed
    For the NOPR, DOE did not make any changes to the equipment classes 
directly analyzed in the ANOPR engineering analysis. Because of the 
large number of equipment classes in this rulemaking, DOE did not 
directly analyze all equipment classes using the design option 
approach. DOE maintained the same equipment class prioritization used 
in the ANOPR. Equipment classes with more than 100 units shipped per 
year (``primary'' classes), as well as the VOP.RC.L \12\ equipment 
class, were directly analyzed. Table IV-6 lists these equipment 
classes, which represent approximately 98 percent of the shipments of 
commercial refrigeration equipment reported by ARI.
---------------------------------------------------------------------------

    \12\ The VOP.RC.L equipment class was reported as having zero 
shipments in the ARI shipment data, but was included in the analysis 
based on recommendations from manufacturers. During interviews 
conducted for the NOPR, manufacturers reported to DOE their 
individual shipment numbers for the VOP.RC.L class. Regardless of 
the actual shipment volume, DOE believes there are significantly 
more than 100 annual shipments of the VOP.RC.L equipment class.

   Table IV-6--Equipment Classes Directly Analyzed in the Engineering
                                Analysis
------------------------------------------------------------------------
       Equipment class                        Description
------------------------------------------------------------------------
VOP.RC.M.....................  Vertical Refrigerator without Doors with
                                a Remote Condensing Unit, Medium
                                Temperature.
VOP.RC.L.....................  Vertical Freezer without Doors with a
                                Remote Condensing Unit, Low Temperature.
SVO.RC.M.....................  Semi-Vertical Refrigerator without Doors
                                with a Remote Condensing Unit, Medium
                                Temperature.
HZO.RC.M.....................  Horizontal Refrigerator without Doors
                                with a Remote Condensing Unit, Medium
                                Temperature.
HZO.RC.L.....................  Horizontal Freezer without Doors with a
                                Remote Condensing Unit, Low Temperature.
VCT.RC.M.....................  Vertical Refrigerator with Transparent
                                Doors with a Remote Condensing Unit,
                                Medium Temperature.
VCT.RC.L.....................  Vertical Freezer with Transparent Doors
                                with a Remote Condensing Unit, Low
                                Temperature.
SOC.RC.M.....................  Service Over Counter Refrigerator with a
                                Remote Condensing Unit, Medium
                                Temperature.
VOP.SC.M.....................  Vertical Refrigerator without Doors with
                                a Self-Contained Condensing Unit, Medium
                                Temperature.
SVO.SC.M.....................  Semi-Vertical Refrigerator without Doors
                                with a Self-Contained Condensing Unit,
                                Medium Temperature.
HZO.SC.M.....................  Horizontal Refrigerator without Doors
                                with a Self-Contained Condensing Unit,
                                Medium Temperature.
HZO.SC.L.....................  Horizontal Freezer without Doors with a
                                Self-Contained Condensing Unit, Low
                                Temperature.
VCT.SC.I.....................  Vertical Ice-Cream Freezer with
                                Transparent Doors with a Self-Contained
                                Condensing Unit, Ice-Cream Temperature.
VCS.SC.I.....................  Vertical Ice-Cream Freezer with Solid
                                Doors with a Self-Contained Condensing
                                Unit, Ice-Cream Temperature.
HCT.SC.I.....................  Horizontal Ice-Cream Freezer with
                                Transparent Doors with a Self-Contained
                                Condensing Unit, Ice-Cream Temperature.
------------------------------------------------------------------------

3. Analytical Models
    In the design option approach, DOE used models to develop estimates 
of cost and energy consumption 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 kWh for each of the 15 primary 
equipment classes analyzed.
a. Cost Model
    Development of the cost model involved the disassembly of a self-
contained refrigerator with transparent doors, an analysis of the 
materials and manufacturing processes, and the development of a 
parametric spreadsheet model flexible enough to cover all equipment 
classes. The manufacturing cost model estimated MPC and reported it in 
aggregated form to maintain confidentiality of sensitive cost data. DOE 
obtained input from stakeholders on the MPC estimates and assumptions 
to confirm accuracy. The cost model was used for 7 of the 15 examined 
equipment classes and the results were extended to 6 of the remaining 
examined equipment classes. The cost of the remaining two equipment 
classes was estimated using available manufacturer list price (MLP) 
information discounted to MPC. Details of the cost model are provided 
in chapter 5 of the TSD.
    Following the ANOPR, no comments were received regarding DOE's cost 
model, and therefore no significant changes were made to the 
methodology used in the NOPR analysis. One change was made to the 
manufacturer markup assumption, which is discussed below.
    One key element of DOE's cost model concerned features and 
structural elements common in commercial refrigeration equipment, but 
that would not affect the energy use of the equipment. Development of 
this part of the cost model involved disassembling a self-contained 
refrigerator with transparent doors, analyzing the materials and 
manufacturing processes, and developing a parametric spreadsheet model 
flexible enough to cover all equipment classes. The other key part of 
the cost model estimated the costs of particular features or design 
options that would affect the energy use of the equipment. DOE obtained 
input from stakeholders on the MPC estimates and assumptions to confirm 
their accuracy. DOE used the cost model for 7 of the 15 examined 
equipment classes and extended the results to 6 of the remaining 
examined equipment classes. DOE estimated the cost of the remaining two 
equipment classes using available manufacturer list price (MLP) 
information reduced to MPC. Chapter 5 of the TSD provides details of 
the cost model.
    A manufacturer markup is applied to the MPC estimates to arrive at 
the MSP. This is the price of equipment sold at which the manufacturer 
can recover both production and non-production costs and can earn a 
profit. DOE calculated the manufacturer markup as the market share 
weighted average value for the industry. For the ANOPR, DOE developed 
this manufacturer markup by examining several major commercial 
refrigeration equipment manufacturers' gross margin information from 
annual reports and the Securities and Exchange Commission (SEC) 10-K 
reports. The manufacturers DOE analyzed account for approximately 80 
percent of the market, and each company is a subsidiary of a more 
diversified parent company that manufactures equipment other than 
commercial refrigeration equipment. Because the 10-K reports do

[[Page 50086]]

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 equipment offerings and does not 
necessarily represent the manufacturer markup of the subsidiary.
    The ANOPR analysis indicated that the average manufacturer markup 
is 1.39. However, DOE adjusted the markups to be more representative of 
the industry following discussions with manufacturers during the MIA 
interviews (Chapter 13). An aggregation of the MIA interview responses 
gives a market share weighted average manufacturer markup value of 
1.32. For the NOPR, DOE used this revised manufacturer markup with the 
MPC values from the engineering analysis to arrive at the MSP values 
used in the GRIM.
    As explained in the ANOPR, DOE received industry-supplied curves 
from ARI in the form of daily energy consumption versus MLP, both 
normalized by total display area (TDA). Since DOE developed its 
analytically derived curves in the form of calculated daily energy 
consumption (CDEC) versus MSP, it was necessary for DOE to estimate an 
industry list price markup so that it could make comparisons between 
the two sets of curves. The industry list price markup is a markup to 
the selling price that provides the list price. To make comparisons 
between the analytically derived and industry-supplied cost-efficiency 
curves, DOE discounted the industry data with the list price markup and 
normalized the analytically derived curves by TDA.
    Manufacturers typically offer a discount from the MLP, which 
depends on factors such as the relationship with the customer and the 
volume and type of equipment being purchased. For the estimate of list 
price markup, DOE relied on information gathered on self-contained 
commercial refrigeration equipment, since list price information is 
readily available and typically published by manufacturers of this 
equipment. A review of the data shows that the list price markup is 
typically 2.0 (i.e., manufacturers will typically sell their equipment 
for 50 percent off the published list price). DOE further verified the 
estimate by obtaining list price quotes from several remote condensing 
equipment manufacturers. During manufacturer interviews, some 
commercial refrigeration equipment manufacturers agreed with the 2.0 
markup estimate, while others stated the estimate was somewhat high. 
Although the list price markup can vary significantly by manufacturer 
and by customer, DOE believes the estimated list price markup of 2.0 is 
representative of the industry. DOE applied this markup to all 
equipment classes.
    DOE did not receive any additional comments or information 
indicating that revision of the cost model used in the ANOPR analysis 
is warranted. Therefore DOE has adhered to that model in the NOPR 
analysis.
b. Energy Consumption Model
    The energy consumption model estimates the daily energy consumption 
of commercial refrigeration equipment at various performance levels 
using a design options approach. The model is specific to the 
categories of 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 levels of performance above the baseline. The model is used to 
calculate each performance level separately.
    In developing the energy consumption model, DOE made general 
assumptions about the analysis methodology and specific numerical 
assumptions regarding load components and design options. DOE based its 
energy consumption estimates on new equipment tested in a controlled-
environment chamber in accordance with ANSI/ARI Standard 1200-2006, the 
DOE test procedure for commercial refrigeration equipment, which 
references the ANSI/ASHRAE Standard 72-2005 test method.\13\ Once 
Federal standards for this equipment become operative, manufacturers 
will be required to test units with this test method, which specifies a 
certain ambient temperature, humidity, light level, and other 
requirements. This test method, however, contains no specification as 
to the operating hours of the display case lighting, and DOE's energy 
consumption model considers the operating hours to be 24 hours per day 
(i.e., that lights are on continuously). This assumption is consistent 
with the lighting operating time assumption used in the energy use 
characterization (see Section IV.D). Chapter 5 of the TSD discusses 
further the assumptions used in the energy consumption model.
---------------------------------------------------------------------------

    \13\ The test procedures are found at 10 CFR 431.64.
---------------------------------------------------------------------------

    The energy consumption model calculates CDEC as having two major 
components: Compressor energy consumption and component energy 
consumption (expressed as kWh/day). Component energy consumption is the 
sum of the direct electrical energy consumption of fan motors, 
lighting, defrost and drain heaters, anti-sweat heaters, and pan 
heaters. Compressor energy consumption is calculated from the total 
refrigeration load (expressed in Btu/h) and one of two compressor 
models: One version for remote condensing equipment and one for self-
contained equipment. The total refrigeration load is a sum of the 
component load and the non-electric load. The component load is the sum 
of the heat emitted by evaporator fan motors, lighting, defrost and 
drain heaters, and anti-sweat heaters inside and adjacent to the 
refrigerated space (condenser fan motors and pan heaters are outside of 
the refrigerated space and do not contribute to the component heat 
load). The non-electric load is the sum of the heat contributed by 
radiation through glass and openings, heat conducted through walls and 
doors, and sensible and latent loads from warm, moist air infiltration 
through openings. Chapter 5 of the TSD discusses component energy 
consumption, compressor energy consumption, and load models.
    DOE made one change to the methodology of calculating the radiation 
load for cases without doors (VOP, SVO, and HZO equipment families). In 
the ANOPR analysis, the view factor \14\ from the interior of the case 
to the walls of the test chamber was estimated as 0.025. This value was 
kept as a constant for all cases and sizes in the ANOPR analysis, but 
it is clear this value should change somewhat as the geometry and the 
overall size of the case changes. For the NOPR, DOE calculated the view 
factor separately for each equipment class depending on the geometry 
specific to the baseline design specifications of that class. The view 
factor from the case to the room is calculated as the ratio of TDA 
(i.e., the area of the plane separating the case from the room) to the 
test chamber wall surface area.
---------------------------------------------------------------------------

    \14\ A view factor is the proportion of all radiation that 
leaves one surface and strikes another.
---------------------------------------------------------------------------

    Stakeholders raised questions regarding DOE's method of calculating 
the infiltration load \15\ for commercial refrigeration equipment. 
Carrier asserted that DOE's method of using defrost water to model 
infiltration has limitations. Carrier pointed out that as the case is 
run at higher suction temperatures, the coil has a tendency to run as a 
wet coil and does not retain much of the moisture on its exterior. 
Typically on manufacturer specification sheets, defrost meltwater is 
only the

[[Page 50087]]

water that comes out during a defrost period, and Carrier noted that 
there may be additional water that would come off the coil between 
defrost periods. Carrier believes DOE may be underestimating the 
infiltration load using information from the specification sheets, and 
estimated that the infiltration load is typically around 75 percent of 
total cooling water. Carrier questioned whether or not DOE compared its 
estimates with the calculated infiltration loads. (Public Meeting 
Transcript, No. 13.5 at p. 83) Hussmann stated that when it publishes 
data for defrost meltwater, it does so for the sole purpose of sizing 
sewer lines and not for estimating the infiltration load. (Public 
Meeting Transcript, No. 13.5 at p. 85)
---------------------------------------------------------------------------

    \15\ The mass of warm ambient store air that displaces the cold 
air inside of the case.
---------------------------------------------------------------------------

    In the ANOPR analysis, DOE calculated infiltration load using 
empirical defrost meltwater data obtained from manufacturers' detailed 
specification sheets. DOE assumed that defrost meltwater could be 
correlated with infiltration load, given certain known parameters such 
as ambient relative humidity. This methodology was calibrated with 
detailed refrigeration load data obtained from Southern California 
Edison for several large-volume equipment classes. DOE agrees with the 
assessment made by stakeholders and has altered its methodology 
accordingly. In the NOPR engineering design specifications, defrost 
meltwater (in pounds per hour, lbs/hr) is replaced with infiltrated air 
(also in lbs/hr) for all equipment classes. DOE estimated infiltrated 
air by using manufacturers' detailed specification sheets, recognizing 
that infiltration load is the only load component that cannot be 
directly calculated. Using physical parameters about each case, the 
other load components (internal load, conduction load, radiation load) 
are calculated. DOE subtracted these load components from the listed 
total refrigeration load, and it is assumed that the remaining load is 
due to infiltration. Chapter 5 of the TSD provides more details of the 
change to this methodology.
    At the public meeting, stakeholders expressed concern over the 
refrigerants DOE used in the analysis. EEI asked if hydrofluorocarbon 
(HFC) refrigerants were already assumed to be in use in the baseline. 
(Public Meeting Transcript, No. 13.5 at p. 97) ARI stated that most of 
the data it provided to DOE was based on such refrigerants and no 
changes are expected in that regard. (Public Meeting Transcript, No. 
13.5 at p. 97) In its analysis, DOE assumed that HFC refrigerants are 
already fully in use for commercial refrigeration equipment. For all 
remote condensing equipment, in accordance with the DOE test procedure 
in ANSI/ARI Standard 1200-2006, DOE assumes the use of a compressor 
using an HFC refrigerant (i.e., R-404A). Likewise, all of the 
compressors DOE used in modeling self-contained equipment use either R-
404A or R-134A, another HFC refrigerant.
c. Design Options
    In the market and technology assessment for the ANOPR, DOE defined 
an initial list of technologies that have the potential to reduce the 
energy consumption of commercial refrigeration equipment. In the 
screening analysis for the ANOPR, DOE screened out some of these 
technologies based on four screening criteria: Technological 
feasibility; practicability to manufacture, install and service; 
impacts on equipment utility or availability; and impacts on health or 
safety. 72 FR 41179-80. The remaining technologies became inputs to the 
ANOPR engineering analysis as design options. However, for reasons 
described in the ANOPR, DOE did not incorporate all of these 
technologies as design options in the energy consumption model. 72 FR 
41182-83. Stakeholders commented that some of these technologies should 
be included in the NOPR engineering analysis, and recommended 
additional design options DOE should consider. Comments pertaining to 
each suggested technology and DOE's response are provided below. As a 
general comment about design options, ACEEE stated that some design 
options that were screened out should be considered for further 
analysis and that prevalence in the marketplace is not necessarily a 
good reason to screen out a design option. (Public Meeting Transcript, 
No. 13.5 at p. 62) DOE screened out five technologies in the ANOPR 
screening analysis. These are air-curtain design, thermoacoustic 
refrigeration, magnetic refrigeration, electro-hydrodynamic heat 
exchangers, and copper rotor motors. All five of these design options 
were screened out because they are in the research stage and would not 
be practical to manufacture, install, and service. Since the 
publication of the ANOPR, DOE is not aware of any significant changes 
to the status of these technologies, and has not included them in the 
NOPR analysis.
    ACEEE recommended that variable-speed compressors be included in 
the analysis. (ACEEE, No. 16 at p. 2) EEI also suggested that DOE 
consider the use of variable-speed drives for compressors. (EEI, No. 15 
at p. 2) Variable-speed compressors could potentially improve the 
efficiency of commercial refrigeration equipment classes that are self-
contained units without doors and self-contained ice-cream freezers. 
Variable-speed compressors can reduce energy consumption under real-
world conditions by matching cooling capacity to the refrigeration 
load, which can change due to variations in ambient conditions and 
product loading. This load matching allows for a more constant 
temperature inside the case, eliminating the large fluctuations in 
temperature that are typical of single-speed compressors. The stability 
in temperature allows manufacturers to design equipment with higher 
evaporator temperatures, improving compressor efficiency. However, the 
energy-saving benefit of variable-speed compressors is not clear under 
ANSI/ASHRAE Standard 72-2005, because it is a steady-state test for 
commercial refrigeration equipment. Further, DOE is not aware of any 
test data showing the energy savings benefit of variable speed 
compressors in the types of equipment covered in this rule. Certain 
test data does exist for walk-ins and residential refrigerators, but 
DOE does not believe that this data can be used to predict the 
performance of variable-speed compressors in commercial refrigeration 
equipment. Therefore, DOE did not include variable-speed compressors as 
a design option in its engineering analysis.
    ACEEE recommended that variable-speed evaporator fans be included 
in the analysis. (ACEEE, No. 16 at p. 2) San Diego Gas & Electric 
Company (SDGE) also recommended that DOE include in its analysis the 
energy savings, cost-effectiveness, and feasibility of such fans for 
enclosed refrigeration equipment served by remote refrigeration 
compressors. (SDGE, No. 22 at p. 2) SCE recommended that DOE consider 
the cost-effectiveness of variable-speed evaporator fans for this 
equipment. SCE asserted that variable-speed fan control was a very 
effective and cost-effective means of increasing refrigerated warehouse 
efficiency and should be applicable to commercial refrigeration 
equipment as well. SCE stated that this reduces the energy consumption 
of the fan and the amount of load that the refrigerant must reject. SCE 
also noted that its work in support of California building and 
appliance standards showed variable-speed controls on evaporator fans 
had approximately one-year simple paybacks in both refrigerated 
warehouses and small walk-in coolers. (Public Meeting Transcript, No. 
13.5 at p. 69 and SCE, No. 19 at p. 3) EEI also

[[Page 50088]]

suggested that DOE consider the use of variable-speed drives for 
evaporator fans and compressors. (EEI, No. 15 at p. 2)
    Variable-speed evaporator fans can operate at speeds that match 
changing conditions in the case. DOE recognizes that the use of these 
fans provides some opportunity for energy savings, because the buildup 
and removal of frost creates differing pressure drops across the 
evaporator coil. Theoretically, less fan power is required when the 
coil is free of frost. Additionally, when an evaporator fan operates at 
variable speeds, the coil would operate at a more stable temperature 
during the period of frost build-up. However, the effectiveness of the 
air curtain in equipment without doors is very sensitive to changes in 
airflow, so fan motor controllers would likely disrupt air curtains. 
DOE believes the likely disturbance to the air curtain, which would 
lead to higher infiltration loads and higher overall energy 
consumption, would negate the use of evaporator fan motor controllers 
in equipment without doors, even if there were some reduction in fan 
energy use. In addition, the ANSI/ASHRAE Standard 72-2005 test method 
is a steady-state test for commercial refrigeration equipment, so 
similar to variable-speed compressors, the energy-saving benefit of 
variable-speed fans is not clear. Therefore, DOE did not include 
variable-speed fans as a design option in its engineering analysis.
    ACEEE recommended that remote ballast location be included in the 
analysis. (ACEEE, No. 16 at p. 2) Fluorescent lamp ballasts generate 
heat, and their relocation outside the refrigerated space can reduce 
energy consumption by lessening the refrigeration load on the 
compressor. However, for the majority of commercial refrigeration 
equipment currently manufactured, ballasts are already located in 
electrical trays outside of the refrigerated space, in either the base 
or top of the equipment. The notable exceptions are the equipment 
classes in the VCT equipment family, where ballasts are most often 
located on the interior of each door mullion. Most commercial 
refrigeration equipment manufacturers purchase doors for VCT units that 
are preassembled with the entire lighting system in place rather than 
configured for separate ballasts. DOE believes that most commercial 
refrigeration equipment manufacturers choose these kinds of doors 
because it would be labor intensive and time consuming to relocate 
these ballasts at the factory, and because of the additional cost and 
labor of wiring separate ballasts. Manufacturers have indicated that 
the potential energy savings are also small, since modern electronic 
ballasts are very efficient and typically contribute only a few watts 
(W) each to the refrigeration load. Because (1) lamp ballasts are 
already located externally on most equipment; (2) most units that have 
internally located lamp ballasts use preassembled lighting systems; and 
(3) potential energy savings are small, DOE did not consider remote 
relocation of ballasts as a design option in its engineering analysis.
    ACEEE recommended that improved insulation be included in the 
analysis. (ACEEE, No. 15 at p. 2) Potential improvements to insulation 
material used in commercial refrigeration equipment cabinets include 
better polyurethane foams and vacuum panels. In consultation with 
insulation material manufacturers, DOE determined that there are no 
significant differences in ``grades'' of insulation material, so 
equipment manufacturers are already using the best commercially 
available foam materials in their equipment. Vacuum panels are an 
alternative form of insulation; however, they may degrade in 
performance in time as small leaks develop. Based on knowledge of 
typical manufacturing practices, DOE also believes it would be 
impractical to use vacuum panels to construct commercial refrigeration 
equipment, because they cannot be penetrated by fasteners, and do not 
provide the rigidity of ``foamed-in-place'' polyurethane insulation 
panels. Thicker insulation is another possible option, but could be 
problematic because it would likely result in either a reduced volume 
for the refrigerated space or an increase in the overall size of the 
equipment cabinet. Reducing the volume of the refrigerated space could 
affect the utility of the equipment, and because the outer dimensions 
of commercial refrigeration equipment are often limited (e.g., by 
interior dimensions of shipping containers), it is often not practical 
to increase the overall size of the cabinet. For all these reasons, DOE 
did not consider insulation thickness increases or improvements as a 
design option in its ANOPR engineering analysis.
    However, DOE did add increases in insulation thickness as a design 
option in the NOPR engineering analysis, because it now believes this 
is a cost-effective option in several equipment types, most notably 
self-contained ice-cream freezers with doors. DOE understands that in 
equipment classes where conduction makes up a significant portion of 
the total refrigeration load, a modest increase in insulation thickness 
can lead to small, but significant energy savings. In relatively large 
units, which make up the largest portion of the shipments of commercial 
refrigeration equipment, even if such added insulation results in 
reduction of the refrigerated volume, any such reduction would not be 
substantial. DOE does not foresee any impact on the availability of 
this type of equipment from the use of increased insulation that would 
trigger EPCA's prohibition at 42 U.S.C. 6295(o)(4) and 6316(e)(1). As 
to smaller units, DOE assumes that their outer dimensions are less 
constrained than the dimensions of larger units, and that therefore 
manufacturers could accommodate a small increase in insulation 
thickness, and maintain the amount of refrigerated volume, by making a 
small increase in the overall size of the cabinet. Therefore, in the 
NOPR, DOE modeled a \1/2\-inch increase in insulation thickness for all 
equipment classes. When implemented as a design option, this increase 
in thickness was added to the baseline value of insulation thickness 
and DOE recalculated the conduction load. DOE based the cost of 
increasing the insulation thickness on a sunk cost per unit, 
considering foam fixture engineering and tooling costs, production line 
lifetime, and number of fixtures and units produced. Chapter 5 of the 
TSD provides details of the assumptions DOE used to calculate the 
additional cost of insulation thickness increases.
    ACEEE recommended that DOE include defrost cycle control in the 
analysis. (ACEEE, No. 16 at p. 2) Defrost cycle control can reduce 
energy consumption by reducing the frequency and duration of defrost 
periods. The majority of equipment currently manufactured already uses 
partial defrost cycle control in the form of cycle termination control. 
However, defrost cycle initiation is still scheduled at regular 
intervals. Full defrost cycle control would involve detecting frost 
buildup and initiating defrost. As described in the market and 
technology assessment (Chapter 3 of the TSD), this could be 
accomplished through an optical sensor or by sensing the temperature 
differential across the evaporator coil. However, both methods are 
unreliable due to problems with fouling of the coil from dust and other 
surface contaminants. This becomes more of an issue as the display case 
ages. Because of these issues, DOE did not consider defrost cycle 
control as a design option in its engineering analysis.
    SCE asserted that doors should be considered a design option for 
open

[[Page 50089]]

units, and that open units without doors should be held to energy 
consumption standards at levels warranted for units with doors. (Public 
Meeting Transcript, No. 13.5 at p. 44) SCE advocates, in essence, that 
manufacture of new, open commercial refrigeration equipment be 
discontinued and replaced by manufacture of equipment with doors. It 
stated that this would be a cost-effective way of saving substantial 
amounts of energy. (SCE, No. 19 at p. 2) Although SCE did not state it 
explicitly, DOE understands that its main argument for advocating that 
doors be considered for open cases is that doors should be regarded as 
a design option and not a feature, such that there are not separate 
equipment classes for equipment with and without doors.
    DOE acknowledges SCE's position. Substantial, cost-effective energy 
savings might well result from standards that would, in effect, require 
the manufacture of commercial refrigeration equipment with doors 
instead of without. DOE has not considered such standards in this 
proceeding, however, nor has it studied their potential energy savings 
or economic justification (including the extent of their impact on 
product utility), because it believes EPCA precludes their adoption. 
First, DOE believes that, for commercial refrigeration equipment, the 
existence or lack of doors (i.e., whether the case is open or closed) 
does affect the utility of the equipment to its owner and user, and 
therefore is a ``feature'' as that term is used in 42 U.S.C. 6295(o)(4) 
and 6316(e)(1). Because a standard based on combining open and closed 
equipment classes would result in the unavailability of open cases, as 
described above, such a standard would violate EPCA's prohibition 
against any standard that would ``result in the unavailability'' of 
equipment with ``features * * * that are substantially the same'' as 
those currently available in the United States. (42 U.S.C. 6295(o)(4) 
and 6316(e)(1)) Second, EPCA prescribes energy conservation standards 
for self-contained equipment with doors, and mandates that DOE issue 
standard levels for ``self-contained commercial refrigerators, 
freezers, and refrigerator-freezers without doors.'' (42 U.S.C. 
6313(c)(2)-(4)) The latter equipment is one of the subjects of this 
rulemaking. Hence, the plain language of EPCA covers standards for 
commercial refrigeration equipment with and without doors. DOE must 
follow this legislative mandate. For these reasons, DOE did not 
consider doors as a design option for open equipment in its engineering 
analysis. The design options DOE considered in the NOPR engineering 
analysis are:
     Higher efficiency lighting and ballasts for the VOP, SVO, 
HZO, and SOC equipment families (horizontal fixtures);
     Higher efficiency lighting and ballasts for the VCT 
equipment family (vertical fixtures);
     Higher efficiency evaporator fan motors;
     Increased evaporator surface area;
     Increased insulation thickness;
     Improved doors for the VCT equipment family, low 
temperature;
     Improved doors for the VCT equipment family, medium 
temperature;
     Improved doors for the HCT equipment family, ice-cream 
temperature;
     Improved doors for the SOC equipment family, medium 
temperature;
     Higher efficiency condenser fan motors (for self-contained 
equipment only);
     Increased condenser surface area (for self-contained 
equipment only); and
     Higher efficiency compressors (for self-contained 
equipment only).\16\
---------------------------------------------------------------------------

    \16\ Improvements to the condensing unit are not considered for 
remote condensing equipment, since the test procedure and standard 
apply only to the cabinet and not the condensing unit.
---------------------------------------------------------------------------

    At the public meeting and during the comment period, stakeholders 
raised concerns about some of the design option data DOE used in its 
analysis and about DOE's depiction of some of the design options. 
Several stakeholders were concerned with the lighting design option 
data. Zero Zone stated that DOE's estimate of the incremental increase 
in cost for light emitting diode (LED) lighting was too low. (Public 
Meeting Transcript, No. 13.5 at p. 89) ARI seemed to agree with Zero 
Zone's assessment, stating that DOE appears to have significantly 
underestimated the incremental cost for LED lighting by about 50 
percent.
    DOE revised its cost assumption for LED lighting used in the VOP, 
SVO, HZO, and SOC equipment families (horizontal four-foot fixtures) 
and the VCT equipment family (vertical 5-foot fixtures). For the ANOPR, 
DOE based LED lighting costs on an LED retrofit case study, but DOE 
revised some of its assumptions for the NOPR based on conversations 
with manufacturers of LED chips and LED fixtures. Specifically, DOE 
revised its assumptions on the relative weight of the costs of LED 
chips, power supplies, and the balance of fixtures (which includes 
labor). These changes cause the original equipment manufacturer (OEM) 
cost (i.e., the cost to commercial refrigeration equipment 
manufacturers) of LED fixtures to increase for both horizontal and 
vertical fixtures. DOE believes the cost estimates for LED fixtures are 
now more accurate and are consistent with the costs commercial 
refrigeration equipment manufacturers would experience in today's 
market at mass-production volumes. Further discussion of the 
assumptions used to calculate LED fixture costs are provided in Chapter 
5 of the TSD.
    Although DOE found that current LED costs are higher than 
originally estimated in the ANOPR analysis, through a closer 
examination of cost data for currently available LEDs, DOE recognizes 
that LED technology has historically exceeded DOE's efficiency and cost 
targets. In this NOPR, DOE conducted a sensitivity study that analyzed 
future LED costs based on DOE's Multi-Year Program Plan,\17\ which are 
consistent with historical LED price reductions between 2000 and 2007 
(see Appendix B of the TSD). The Multi-Year Program Plan projects that 
LED chip costs will continue to decrease at a compound annual growth 
rate (CAGR) of approximately -27 percent between 2007 and 2012, which 
represents a price reduction of 80 percent over that time period. Also 
in agreement, EIA's NEMS uses a technology characterization for LED 
light sources, which show that LED chip costs are expected to decline 
by approximately 71 percent for the same time period. Since LED chips 
are only a portion of the total LED system (other components include 
power supply and the LED fixture), the 80 percent reduction in chip 
costs contributes to an estimated decrease in total LED system cost of 
approximately 50 percent by 2012, assuming the costs of the power 
supply and LED fixtures do not change significantly.
---------------------------------------------------------------------------

    \17\ U.S. Department of Energy, Solid-State Lighting Research 
and Development, Multi-Year Program Plan FY'09-FY'14. This document 
was prepared under the direction of a Technical Committee from the 
Next Generation Lighting Initiative Alliance (NGLIA). Information 
about the NGLIA and its members is available at http://www.nglia.org.
---------------------------------------------------------------------------

    DOE examined whether the projected LED costs presented in the 
Multi-Year Program Plan and used in this NOPR are consistent with 
publicly available empirical historical cost data. DOE reviewed 
available price data for the LED market and found that between 2000 and 
2007, white-light LEDs had a CAGR ranging from approximately -18 to -31 
percent. DOE's LED cost projection (i.e., -27 percent CAGR) falls 
within the range of CAGRs observed.

[[Page 50090]]

    DOE expanded its examination by comparing this projected trend to 
the red-light LED market, which is a related technology, with price 
information spanning approximately three decades (i.e., 1973 to 2005). 
DOE found that the CAGR of red-light LED costs was -22 percent over 
this longer time span. The trend in red-light LED costs derived from 
empirical data over this longer time period is of a similar magnitude 
to DOE's projected costs for white-light LEDs. Due to the technological 
similarities between red-light LEDs and white-light LEDs, DOE believes 
that the historical cost reductions for red-light LEDs are indicative 
of future cost reductions for white-light LEDs. Furthermore, the white-
light LED market is undergoing a massive expansion and growth phase, 
with significant investment, new products and innovative applications 
for LED technology, including illumination of commercial refrigeration 
equipment. See Section V.C of this NOPR and Appendix B of the TSD for 
more detail on the cost projection and DOE's validation of those 
estimates. DOE seeks comment on the extent to which these price trends 
are indicative of what can be expected for commercial refrigeration 
equipment LED lighting from 2007 to 2012 and the extent to which the 
cost reduction observed for red-light LEDs is relevant to DOE's cost 
projections for white-light LEDs. Also, in order to consider that LED 
costs are to decline more than assumed in this analysis, DOE will need 
more information than currently available on the extent, timing, and 
certainty of such further price reductions. Finally, DOE seeks comment 
on the extent to which manufacturers would adopt LED technology into 
the design of commercial refrigeration equipment in the absence of 
standards considering the rapid development of LED technology and the 
steady reductions in cost. See Section VII.E.1 for details.
    The design option data for doors on VCT equipment were another area 
of concern for stakeholders. Zero Zone stated that the incremental 
increase in cost for high-efficiency doors (particularly cooler doors) 
seemed too high. (Public Meeting Transcript, No. 13.5 at p. 89) ACEEE 
also indicated that DOE's costs for high-efficiency doors are too high. 
(ACEEE, No. 16 at p. 2) ARI stated that it does not believe that the 
door used in DOE's analysis (one that uses no energy) is available in 
the market today. According to ARI, high-efficiency door models 
currently in the market have no heat in the door, but the frame 
installed in the case uses at least 40 W per door. ARI also stated that 
this option is not available to manufacturers in all applications 
because it is not intended for stores that operate outside a condition 
of 75 [deg]F dry bulb and 55 percent relative humidity, which requires 
higher wattage anti-condensate heaters in the doors/frames. (ARI, No. 
18 at p. 6) Zero Zone made similar comments, stating that building 
humidity could be an issue in the use and functionality of higher 
efficiency doors without heaters. Zero Zone also recommended that DOE 
revise its analysis and use 40 W per door for the high-efficiency 
medium temperature frame, and that high-efficiency doors should be 
dropped from the analysis because they can result in condensate and 
water on the floor, such that they are not safe to use in a number of 
stores. (Public Meeting Transcript, No. 13.5 at p. 119 and Zero Zone, 
No. 17 at p. 2)
    DOE did not revise its costs for doors on VCT equipment. After 
reviewing the information collected for the ANOPR analysis, DOE 
concluded that its preliminary cost estimates were reasonable. 
Notwithstanding the stakeholder observations just set forth, none of 
them provided any specific additional data that would warrant revision 
of DOE's cost assessments, and DOE is not aware of such data. However, 
DOE revised the values for the anti-sweat heater power for glass doors 
for VCT.RC.L and VCT.RC.I equipment in the NOPR engineering analysis. 
Based on discussion with manufacturers and data from manufacturer 
specification sheets, the anti-sweat heater power for both the baseline 
and high-efficiency doors was increased (from 160 W to 200 W for 
baseline doors and from 60 W to 110 W for high-efficiency doors). DOE 
also revised the anti-sweat heater power for glass doors for VCT.RC.M 
equipment in the NOPR engineering analysis based on comments and data 
received from manufacturer specification sheets. DOE increased the 
anti-sweat heater power for both the baseline doors (from 60 W to 100 
W) and high-efficiency doors (from 0 W to 50 W). See Chapter 5 of the 
TSD for more detail.
    Regarding the compressor design options, Emerson noted that 
possible efficiency improvements for compressors in self-contained 
units may be too optimistic. True believes that because the test 
procedure is not steady-state (due to door openings), variable-speed 
compressors may be an effective design option. (Public Meeting 
Transcript, No. 13.5 at p. 75) However, True also noted that few 
variable-speed compressors are available in the appropriate power 
range, but that their development is continuing. (Public Meeting 
Transcript, No. 13.5 at p. 76) Emerson also believes that high-
efficiency compressors may not be readily available and that it may be 
particularly hard to find compressors capable of this level of 
increased efficiency for low temperature equipment. (Public Meeting 
Transcript, No. 13.5 at p. 65) For the NOPR, DOE revised the 
assumptions it used to estimate the changes in cost and efficiency for 
high-efficiency, single-speed compressors. Based on discussions with 
manufacturers and other experts, DOE concluded that the assumptions 
used in the ANOPR analysis (a 10 percent increase in cost results in a 
20 percent reduction in energy use) overstated the actual efficiency 
gains that are possible for today's compressors. Therefore, DOE now 
assumes that a five percent increase in cost would result in a 10 
percent reduction in compressor energy use. Per-dollar efficiency gains 
are equivalent with these new assumptions, but the overall magnitude of 
power reduction and the cost premium are reduced. This change affects 
only the self-contained equipment classes analyzed in the engineering 
analysis.
    Additionally, in the NOPR analysis, DOE revised the capacity values 
used to select self-contained compressors in the energy consumption 
model. DOE's energy consumption model selects the most appropriate 
compressor by comparing each compressor's capacity to the total 
refrigeration load in the case multiplied by the compressor oversize 
factor. Because compressor capacity is dependent on the conditions the 
compressor is tested at (compressor manufacturers provide capacity data 
over a range of conditions), it is important to select the compressor 
capacity based on the same conditions used to calculate total 
refrigeration load. For the ANOPR analysis, DOE listed capacity at 
standard ASHRAE rating conditions. However, the standard rating 
conditions used in the ASHRAE 540-2004 standard differ from the 
operating conditions used in the model, and each set of conditions 
results in different capacity values.\18\ Because the standard 
conditions and modeled

[[Page 50091]]

conditions differed, the model typically overestimated the capacity of 
the selected compressors. To compensate, DOE adjusted the compressor 
oversize factor to an unrealistic level (typically 1) in order for the 
ANOPR model to select the correct compressor. For the NOPR, DOE used 
capacities based on the same conditions used to calculate total 
refrigeration load and revised the oversize factor (typically 1.4 in 
the NOPR model) for all self-contained equipment classes to maintain 
the selection of the correct compressor size. See Chapter 5 of the TSD 
for more detail.
---------------------------------------------------------------------------

    \18\ ASHRAE Standard 540-2004 lists standard rating conditions 
for hermetic refrigeration compressors. For medium-temperature 
equipment, compressors are rated at 20 [deg]F suction dewpoint, 120 
[deg]F discharge dewpoint, 40 [deg]F return gas, and 0 [deg]F 
subcooling. For low-temperature equipment, compressors are rated at 
-10 [deg]F suction dewpoint, 120 [deg]F discharge dewpoint, 40 
[deg]F return gas, and 0 [deg]F subcooling. For ice-cream-
temperature equipment, compressors are rated at -25 [deg]F suction 
dewpoint, 105 [deg]F discharge dewpoint, 40 [deg]F return gas, and 0 
[deg]F subcooling.
---------------------------------------------------------------------------

    In the analysis for the ANOPR, the calculation of LED energy use 
assumed that the LED lighting fixtures at the ends of VCT cases were 
identical to those between doors. With fluorescent fixtures, 
manufacturers install the same lamp regardless of whether it is at the 
end of the case (attached to an end mullion) or between doors (attached 
to an interior mullion). This causes excess light at the ends of the 
case. The light output of a single lamp between two doors is directed 
in both directions (i.e., behind two doors), whereas lamps at the ends 
direct light only on the contents behind the end door. LED fixtures are 
inherently scalable, so manufacturers can install an LED fixture in the 
end mullion that uses fewer LEDs than fixtures in interior mullions. In 
the NOPR analysis, the calculation assumes single-row LED fixtures are 
used in the end mullions and that these fixtures use roughly 75 percent 
of the energy of double-row fixtures in interior mullions. See Chapter 
5 of the TSD for more detail.
4. Baseline Models
    As mentioned above, the engineering analysis estimates the 
incremental costs for equipment with efficiency levels above the 
baseline in each equipment class. DOE was not able to identify a 
voluntary or industry standard that provided a minimum baseline 
efficiency requirement for commercial refrigeration equipment. 
Therefore, it was necessary for DOE to determine baseline 
specifications for each equipment class to define the energy 
consumption and cost of the typical, baseline equipment. These 
specifications include dimensions, number of components, temperatures, 
nominal power ratings, and other case features that affect energy 
consumption, as well as a basic case cost (the cost of a piece of 
equipment not including the major efficiency-related components such as 
lights, fan motors, and evaporator coils).
    DOE established baseline specifications for each equipment class 
modeled in the engineering analysis by reviewing available manufacturer 
data, selecting several representative units from available 
manufacturer data, and then aggregating the physical characteristics of 
the selected units. This process created a unit representative of 
commercial refrigeration equipment currently being offered for sale in 
each equipment class, with average characteristics for physical 
parameters (e.g., volume, TDA), and minimum performance of energy-
consuming components (e.g., fans, lighting). DOE used the cost model to 
develop the basic case cost for each equipment class. See Appendix B of 
the TSD for these specifications.
    Zero Zone expressed concern over DOE's method for calculating the 
internal case volume. Zero Zone suggested that DOE update its analysis 
to use ARI Standard 1200 for calculating the internal volume of a case. 
This standard calculates internal volume using the internal height and 
depth of the case from the inside of the door to the rear wall or rear 
duct. This is typically how the industry calculates internal volume. 
(Zero Zone, No. 17 at p. 1)
    In its engineering analysis, DOE followed the methodology in ANSI/
ARI Standard 1200-2006 when calculating the refrigerated volume 
parameter used in the baseline design specifications. DOE used the 
internal height and depth of the case from inside of the door to the 
rear wall. No subtractions were made for shelving or other protrusions 
within the case interior envelope.
    At the public meeting, Zero Zone expressed concern over the 
lighting technology for the baseline models in each equipment class. 
Zero Zone stated that T12 lighting is no longer used in closed cases, 
and that T8 lighting is now the baseline for those cases. (Public 
Meeting Transcript, No. 13.5 at p. 88) Further, Zero Zone reiterated in 
writing that the baseline lighting for cases with a vertical 
transparent door should be T8. (Zero Zone, No. 17 at p. 3) DOE has 
changed the baseline specifications and is now using T8 lighting in the 
analysis of baseline models.
    Stakeholders raised concerns over the accuracy of some of the data 
used for the baseline models. Zero Zone stated that the TDA for 
VCT.RC.L and VCT.RC.M cases may be incorrect, and that the sum of the 
TDA for each door did not equal the TDA of the entire case for these 
two equipment classes. (Zero Zone, No. 17 at p. 3)
    In the NOPR analysis, DOE made several revisions to the baseline 
specifications. Appendix B of the TSD shows changes to baseline design 
specifications relative to the ANOPR analysis. DOE revised the TDA for 
VCT.RC.L and VCT.RC.M equipment so that the sum of the display area of 
the doors matches the TDA of the case. The baseline models used in the 
NOPR analysis are more representative of actual equipment than those 
DOE used in the ANOPR analysis, but in some situations, the changes to 
baseline characteristics affected the baseline energy consumption 
significantly compared to the ANOPR. Four equipment classes (HZO.RC.M, 
HZO.SC.M, HZO.SC.L, and VCS.SC.I) had changes that resulted in a 
significant increase in the baseline energy consumption, and one 
equipment class (SOC.RC.M) had changes that resulted in a decrease in 
the baseline energy consumption. See Appendix B of the TSD for more 
detail.
    For the ANOPR analysis, DOE calculated a baseline energy usage of 
0.16 kWh/ft\2\ for the HZO.RC.M equipment class. During manufacturer 
interviews, some manufacturers stated that this seemed unreasonably 
low. DOE reviewed the data it presented in the ANOPR TSD, as to the 
energy consumption of equipment on the market and realized that its 
figure for baseline energy usage for HZO.RC.M cases was well below the 
amounts indicated by the market data. DOE identified problems with the 
ANOPR design specifications for the HZO.RC.M equipment class, namely a 
lack of electric defrost and a mismatch between the size of the case 
(TDA) and the amount of infiltration load. For the NOPR analysis, DOE 
revised its baseline design specifications for this equipment to 
include electric defrost based on discussions with manufacturers during 
the MIA interviews and a review of market data. Although electric 
defrost is not always required on HZO.RC.M cases, about two-thirds of 
such equipment on the market use electric defrost. Based on 
manufacturer interviews, DOE understands there are lower infiltration 
loads (on a per-TDA basis) in horizontal open cases because of the 
natural ``well'' of cold air that tends to sit inside the case. In 
contrast, for a vertical or semivertical open case, the cold air tends 
to spill out of the opening under the influence of gravity. With a 
lower infiltration load for a given TDA, there is less heat available 
to melt frost from the evaporator coil using off-cycle defrost. Thus, 
most HZO.RC.M case designs necessitate the use of electric resistance 
heating for defrost. DOE also revised the specifications for

[[Page 50092]]

the HZO.RC.M equipment class to include a higher infiltration load (in 
accordance with the updated infiltration methodology), and updated 
dimensions. In the ANOPR analysis, DOE used defrost meltwater to 
estimate the infiltration load. In accordance with the updated 
infiltration methodology, DOE used refrigeration load data to calculate 
the baseline infiltration load, which was higher than the load 
estimated using meltwater data in the ANOPR analysis (Chapter 5 for 
details). DOE also revised the dimensions of the HZO.RC.M class to 
reflect a somewhat smaller case size that was more representative of 
cases currently on the market. This change involved reducing the TDA, 
volume, wall area, and case interior surface area, all of which DOE 
matched to the infiltration load and other case components. See 
Appendix B of the TSD for more detail.
    For the HZO.SC.M and HZO.SC.L equipment classes, DOE made changes 
similar to those described in the preceding paragraph. These two 
equipment classes are in the same equipment family as the HZO.RC.M 
equipment class, so they share similarities to that class (e.g., having 
the same cabinet). Because of a lack of detailed data for the HZO.SC.M 
and HZO.SC.L equipment classes, DOE based its baseline specifications 
on the HZO.RC.M equipment class, making reasonable adjustments for 
design features specific to self-contained equipment. In particular, 
self-contained equipment has a lower compressor energy efficiency ratio 
(EER), and an added drain pan heater to evaporate defrost meltwater. 
Similar to the HZO.RC.M class, the change in infiltration load 
calculation led to a higher infiltration load for the HZO.SC.M class. 
DOE also added electric defrost to the HZO.SC.M class and increased the 
anti-sweat heater load. For the HZO.SC.L class, electric defrost was 
already included, since it is necessary for low-temperature equipment. 
However, DOE revised the infiltration load in accordance with the 
change in methodology and increased the anti-sweat heater load. See 
Appendix B of the TSD for more detail.
    Discussions during the manufacturer interviews revealed that in the 
ANOPR analysis, the baseline energy usage for the VCS.SC.I equipment 
class was unrealistically low. Therefore, in the NOPR analysis, DOE 
made revisions that increased energy usage in the baseline equipment 
for this class. DOE was unable to verify the accuracy of the baseline 
specifications in the ANOPR analysis, because of a lack of publicly 
available performance data for this class. For the NOPR, DOE revised 
its baseline assumptions to reflect a two-door case instead of the 
three-door model analyzed in the ANOPR. DOE believes this change more 
accurately reflects the current market for VCS.SC.I cases and is more 
in line with the electric defrost power level. DOE increased 
infiltration load somewhat relative to the ANOPR specifications and 
added anti-sweat power. See Appendix B of the TSD for more detail.
5. Engineering Analysis Results
    The results of the engineering analysis are reported as cost-
efficiency data (or ``curves'') in the form of CDEC (in kWh) versus MSP 
(in dollars), both normalized by TDA (or volume for the VCS.SC.I 
equipment class). DOE created 15 cost-efficiency curves in the 
engineering analysis.
    Table IV-7 presents data for these curves. See Chapter 5 of the TSD 
for additional detail on the engineering analysis and comparisons of 
DOE's analytically derived curves to industry-supplied curves. See 
Appendix B of the TSD for complete cost-efficiency results.
BILLING CODE 6450-01-P

[[Page 50093]]

[GRAPHIC] [TIFF OMITTED] TP25AU08.000

BILLING CODE 6450-01-C

C. Markups to Determine Equipment Price

    This section explains how DOE developed the distribution channel 
markups it used (Chapter 6 of the TSD). DOE used these markups, along 
with sales taxes, installation costs, and the MSPs developed in the 
engineering analysis, to arrive at the final installed equipment prices 
for baseline and higher efficiency commercial refrigeration equipment. 
As explained in the ANOPR, 72 FR 41184, and as shown in Table IV-8, DOE 
defined three distribution channels for commercial refrigeration 
equipment to describe how the equipment passes from the manufacturer to 
the customer.

[[Page 50094]]



              Table IV-8--Distribution Channel Market Shares for Commercial Refrigeration Equipment
                                                  [In percent]
----------------------------------------------------------------------------------------------------------------
                                                                     Channel 1       Channel 2       Channel 3
                                                                 -----------------------------------------------
                                                                   Manufacturer    Manufacturer,   Manufacturer,
                                                                 ----------------   wholesaler      wholesaler,
                                                                                 ----------------   contractor
                                                                     Customer                    ---------------
                                                                                     Customer        Customer
----------------------------------------------------------------------------------------------------------------
Remote Condensing Equipment.....................................              70              15              15
Self-Contained Equipment........................................              30              35              35
----------------------------------------------------------------------------------------------------------------

    For the ANOPR analysis, DOE estimated shares of 86 percent, 7 
percent, and 7 percent for the manufacturer, manufacturer/wholesaler, 
and manufacturer/wholesaler/contractor channels, respectively, for all 
commercial refrigeration equipment, based on market estimates from 
consultants. At the ANOPR public meeting, ARI and Carrier commented 
that the breakdown should be changed to 70 percent, 15 percent, and 15 
percent among the three channels, respectively, for remote condensing 
equipment and 30 percent, 35 percent, and 35 percent, respectively, for 
self-contained equipment. (Public Meeting Transcript, No. 13.5 at p. 
122; ARI, No. 18 at p. 7) No other alternative estimates were provided 
of shipments through these distribution channels. Therefore, in the 
NOPR, DOE decided to modify the breakdown and it recalculated the 
overall markups using the same procedure described in the ANOPR (72 FR 
41184), but based upon the industry comments from ARI and Carrier. The 
new overall baseline and incremental markups for sales to supermarkets 
within each distribution channel are shown in Table IV-9, Table IV-10, 
Table IV-11, and Table IV-12, respectively. Chapter 6 of the TSD 
provides additional details on markups.

    Table IV-9--Baseline Markups by Distribution Channel Including Sales Tax for Self-Contained Equipment in
                                                  Supermarkets
----------------------------------------------------------------------------------------------------------------
                                                                    Mechanical       National
                                                                    contractor        account
                                                    Wholesaler       (includes    (manufacturer-      Overall
                                                                    wholesaler)       direct)
----------------------------------------------------------------------------------------------------------------
Distributor(s) Markup...........................           1.436           2.182           1.218           1.631
Sales Tax.......................................           1.068           1.068           1.068           1.068
Overall Markup..................................           1.533           2.330           1.300           1.742
----------------------------------------------------------------------------------------------------------------


  Table IV-10--Baseline Markups by Distribution Channel Including Sales Tax for Remote Condensing Equipment in
                                                  Supermarkets
----------------------------------------------------------------------------------------------------------------
                                                                    Mechanical       National
                                                                    contractor        account
                                                    Wholesaler       (includes    (manufacturer-      Overall
                                                                    wholesaler)       direct)
----------------------------------------------------------------------------------------------------------------
Distributor(s) Markup...........................           1.436           2.182           1.218           1.395
Sales Tax.......................................           1.068           1.068           1.068           1.068
Overall Markup..................................           1.533           2.330           1.300           1.490
----------------------------------------------------------------------------------------------------------------


  Table IV-11--Incremental Markups by Distribution Channel Including Sales Tax for Self-Contained Equipment in
                                                  Supermarkets
----------------------------------------------------------------------------------------------------------------
                                                                    Mechanical       National
                                                                    contractor        account
                                                    Wholesaler       (includes    (manufacturer-      Overall
                                                                    wholesaler)       direct)
----------------------------------------------------------------------------------------------------------------
Distributor(s) Markup...........................           1.107           1.362           1.054           1.180
Sales Tax.......................................           1.068           1.068           1.068           1.068
Overall Markup..................................           1.182           1.454           1.125           1.260
----------------------------------------------------------------------------------------------------------------


[[Page 50095]]


 Table IV-12--Incremental Markups by Distribution Channel Including Sales Tax for Remote Condensing Equipment in
                                                  Supermarkets
----------------------------------------------------------------------------------------------------------------
                                                                    Mechanical       National
                                                                    contractor        account
                                                    Wholesaler       (includes    (manufacturer-      Overall
                                                                    wholesaler)       direct)
----------------------------------------------------------------------------------------------------------------
Distributor(s) Markup...........................           1.107           1.362           1.054           1.108
Sales Tax.......................................           1.068           1.068           1.068           1.068
Overall Markup..................................           1.182           1.454           1.125           1.183
----------------------------------------------------------------------------------------------------------------

D. Energy Use Characterization

    The energy use characterization estimates the annual energy 
consumption of commercial refrigeration equipment systems (including 
the remote condensing units). This estimate is used in the subsequent 
LCC and PBP analyses (Chapter 8 of the TSD) and NIA (Chapter 11 of the 
TSD). DOE estimated the energy consumption of the 15 equipment classes 
analyzed in the engineering analysis (Chapter 5 of the TSD) using the 
relevant test procedure. DOE then validated these energy consumption 
estimates with annual whole-building simulation modeling of selected 
equipment classes and efficiency levels. One of the key assumptions in 
both the engineering analysis and the whole-building simulation in the 
ANOPR analysis was that the display case lighting operated 24 hours per 
day. DOE conducted a limited sensitivity analysis to explore how 
variation in display case lighting operating hours affected the energy 
savings. The sensitivity analysis showed that energy savings fell as 
lighting operating hours were reduced for all equipment classes that 
used display case lighting. The magnitude of this effect depended on 
the equipment class.
    At the ANOPR public meeting, SCE stated that it was studying 
display case lighting and will gladly share results of the study with 
DOE as soon as the study is done. (Public Meeting Transcript, No. 13.5 
at p. 117) Hussman stated that with today's low-temperature cabinets, 
store owners won't turn those lights off because they may not come back 
on when they are so cold. (Public Meeting Transcript, No. 13.5 at p. 
118) Hill Phoenix stated that turning off fluorescent lights at night 
can lead to maintenance issues because of moisture infiltration, so it 
is typical to leave the lights on all night. LEDs don't have that 
problem. They agreed that 24-hour lighting is not a bad assumption. 
(Public Meeting Transcript, No. 13.5 at p. 118) Another manufacturer, 
Zero Zone, also agreed that 24 hours is a valid assumption for case 
lighting operating hours. (Zero Zone, No. 17 at p. 4) ARI recommended 
that the DOE analysis be based on 24 hours-per-day operation as this 
represents the worst-case scenario and many stores are open for 24 
hours. (ARI, No. 18 at p. 4) Based on these comments, DOE decided to 
leave the assumption of display case lighting operating hours of 24 
hours per day unchanged for the NOPR analysis. Additional detail on the 
energy use characterization can be found in Chapter 7 of the TSD.
    DOE also requested comments on other operational factors that might 
be encountered in the field that would differ from that found in the 
relevant test procedure, the relative frequency of these factors, and 
how it could account for them in its energy analysis. DOE received a 
comment from the Chinese delegation to the World Trade Organization 
stating that it should consider all kinds of on-site factors in 
operation and maintenance practices of the commercial refrigerating 
equipment when evaluating the optional standard class of the equipment. 
(China, No. 20 at pp. 3-4) No specifics on what these factors might be 
or how to take them into account were provided, however. Chapter 7 of 
the TSD provides additional detail on the energy use characterization.

E. Life-Cycle Cost and Payback Period Analyses

    In response to the requirements of Section 325(o)(2)(B)(i) of EPCA, 
DOE conducted LCC and PBP analyses to evaluate the economic impacts of 
possible new commercial refrigeration equipment standards on individual 
customers. This section describes the LCC and PBP analyses and the 
spreadsheet model DOE used for analyzing the economic impacts of 
possible standards on individual commercial customers. Details of the 
spreadsheet model, and of all the inputs to the LCC and PBP analyses, 
are in TSD Chapter 8. DOE conducted the LCC and PBP analyses using a 
spreadsheet model developed in Microsoft Excel for Windows 2003.
    The LCC is the total cost for a unit of commercial refrigeration 
equipment, over the life of the equipment, including purchase and 
installation expense and operating costs (energy expenditures and 
maintenance). To compute the LCC, DOE summed the installed price of the 
equipment and its lifetime operating costs discounted to the time of 
purchase. The PBP is the change in purchase expense due to a given 
energy conservation standard divided by the change in first-year 
operating cost that results from the standard. DOE expresses PBP in 
years. Otherwise stated, the payback period is the number of years it 
would take for the customer to recover the increased costs of a higher-
efficiency product through energy savings. DOE measures the changes in 
LCC and in PBP associated with a given energy use standard level 
relative to a base case forecast of equipment energy use. The base case 
forecast reflects the market in the absence of mandatory energy 
conservation standards.
    The data inputs to the PBP calculation are the purchase expense 
(otherwise known as the total installed customer cost or first cost) 
and the annual operating costs for each selected design. The inputs to 
the equipment purchase expense were the equipment price and the 
installation cost, with appropriate markups. The inputs to the 
operating costs were the annual energy consumption, the electricity 
price, and the repair and maintenance costs. The PBP calculation uses 
the same inputs as the LCC analysis but, since it is a simple payback, 
the operating cost is for the year the standard takes effect, assumed 
to be 2012. For each efficiency level analyzed, the LCC analysis 
required input data for the total installed cost of the equipment, the 
operating cost, and the discount rate.
    Table IV-13 summarizes the inputs and key assumptions used to 
calculate the customer economic impacts of various energy consumption 
levels. Equipment price, installation cost, and baseline and standard 
design selection affect the installed cost of the equipment. Annual 
energy use, electricity costs, electricity price trends, and repair and 
maintenance costs affect

[[Page 50096]]

the operating cost. The effective date of the standard, the discount 
rate, and the lifetime of equipment affect the calculation of the 
present value of annual operating cost savings from a proposed 
standard. Table IV-13 also shows how DOE modified these inputs and key 
assumptions for the NOPR, relative to the ANOPR.

 Table IV-13--Summary of Inputs and Key Assumptions Used in the LCC and
                              PBP Analyses
------------------------------------------------------------------------
            Input                  Description        Changes for NOPR
------------------------------------------------------------------------
Baseline Manufacturer         Price charged by      Data reflects
 Selling Price.                manufacturer to       updated engineering
                               either a wholesaler   analysis.
                               or large customer
                               for baseline
                               equipment.
Standard-Level Manufacturer   Incremental change    Data reflects
 Selling Price Increases.      in manufacturer       updated engineering
                               selling price for     analysis.
                               equipment at each
                               of the higher
                               efficiency standard
                               levels.
Markups and Sales Tax.......  Associated with       Markups updated
                               converting the        based on revised
                               manufacturer          distribution
                               selling price to a    channel shipment
                               customer price        estimates.
                               (Chapter 6 of TSD).
Installation Price..........  Cost to the customer  Installation prices
                               of installing the     for remote
                               equipment. This       condensing and self-
                               includes labor,       contained equipment
                               overhead, and any     revised based on
                               miscellaneous         ANOPR comments.
                               materials and
                               parts. The total
                               installed cost
                               equals the customer
                               equipment price
                               plus the
                               installation price.
Equipment Energy Consumption  Site energy use       Data reflects
                               associated with the   updated engineering
                               use of commercial     analysis for each
                               refrigeration         efficiency level.
                               equipment, which
                               includes only the
                               use of electricity
                               by the equipment
                               itself.
Electricity Prices..........  Average commercial    Electricity prices
                               electricity price     updated to 2007$
                               ($/kWh) in each       using Electricity
                               State and for four    EIA Monthly
                               classes of            Electricity
                               commercial            Database for base
                               customers, as         commercial
                               determined from EIA   electricity prices;
                               data for 2003$        and AEO2007 to
                               converted to 2006$.   convert 2006 prices
                                                     to 2007 prices.
Electricity Price Trends....  Used the AEO2006      Used the AEO2007
                               reference case to     reference case to
                               forecast future       forecast future
                               electricity prices.   electricity prices.
Maintenance Costs...........  Labor and material    No change in
                               costs associated      methodology. Lamp
                               with maintaining      replacement costs
                               the commercial        reflect updated
                               refrigeration         engineering
                               equipment (e.g.,      analysis costs and
                               cleaning heat         are in 2007$.
                               exchanger coils,
                               checking
                               refrigerant charge
                               levels, lamp
                               replacement).
Repair Costs................  Labor and material    Repair costs in NOPR
                               costs associated      reflect estimates
                               with repairing or     of individual
                               replacing             component life and
                               components that       cost to replace.
                               have failed. Based    Repair costs
                               on a fixed            increase with
                               percentage of         increasing
                               baseline equipment    component costs.
                               costs.
Equipment Lifetime..........  Age at which the      Average equipment
                               commercial            life for small
                               refrigeration         grocery and
                               equipment is          convenience stores
                               retired from          adjusted to 15
                               service (estimated    years.
                               to be 10 years).
Discount Rate...............  Rate at which future  Updated to 2007
                               costs are             version of the
                               discounted to         Damodaran website
                               establish their       with very little
                               present value to      change to discount
                               commercial            rates.
                               refrigeration
                               equipment users.
Rebound Effect..............  A rebound effect was  No change.
                               not taken into
                               account in the LCC
                               analysis.
------------------------------------------------------------------------

    The following sections contain brief discussions of the methods 
underlying each input and key assumption in the LCC analysis. Where 
appropriate, DOE also summarizes comments on these inputs and 
assumptions and explains how it took these comments into consideration.
1. Manufacturer Selling Price
    The baseline MSP is the price charged by manufacturers to either a 
wholesaler/distributor or very large customer for equipment meeting 
existing energy use (or baseline) levels. The MSP includes a markup 
that converts the MPC to MSP. DOE obtained the baseline MSPs through 
industry-supplied efficiency-level data supplemented with a design 
option analysis. Refer to Chapter 5 of the TSD for details.
    DOE developed MSPs for equipment classes consisting of eight 
possible equipment families, two possible condensing unit 
configurations (remote condensing and self-contained), and three 
possible operating temperature ranges. Not all covered equipment 
classes have significant actual shipments (Chapter 3 of the TSD). DOE 
carried out the LCC and PBP analyses on the 15 primary equipment 
classes identified earlier. DOE estimated the MSP for each primary 
equipment class between the baseline efficiency level and for four to 
seven additional more-efficient levels. Refer to Chapter 5 of the TSD 
for details.
    DOE was not able to identify data on relative shipments for 
equipment classes by efficiency level, and DOE did not find equivalent 
data in the literature or studies. DOE designated the equipment with 
the highest energy use as Level 1, and selected this as the baseline 
equipment.
    In the ANOPR analysis, DOE requested feedback on whether the Level 
1 baseline is valid for the LCC analysis, and if not, what changes 
should be made to provide a more realistic baseline level. DOE also 
asked whether a distribution of efficiencies should be used to 
establish the baseline for the LCC analysis. 72 FR 41193, 41208. DOE 
received comments on the engineering analysis and the use of the 
analytically derived curves versus the industry-supplied curves. DOE 
modified the engineering analysis, which resulted in a modified Level 1 
baseline. See Section IV.B for details.
    ARI stated that it would try to provide energy efficiency 
distribution data to DOE, but was unable to provide that data in time 
for the NOPR. (Public Meeting Transcript, No. 13.5 at p. 143) EEI 
stated that Electric Power Research Institute (EPRI) end use studies 
might provide some data that could be used to establish distributions. 
(Public Meeting Transcript, No. 13.5 at p. 141) ACEEE suggested that 
DOE check with the Northwest Energy Efficiency Alliance for possible 
energy efficiency distribution data. (Public Meeting Transcript, No. 
13.5 at p. 142) However, ARI agreed with DOE's approach to use the 
Level 1 data established in the engineering analysis as the appropriate 
baseline for DOE's LCC analysis. DOE was able to explore some of the 
data available with the Northwest Energy Efficiency Alliance; however, 
the

[[Page 50097]]

available data generally provides only frequency of use of specific 
design features and not energy use. Based on this, DOE chose to 
continue to use the Level 1 energy efficiency level as the baseline 
efficiency level for the LCC analysis. See Chapter 8 of the TSD.
2. Increase in Selling Price
    The standard level MSP increase is the change in MSP associated 
with producing equipment at lower energy consumption levels associated 
with higher standards. DOE developed MSP increases 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 MSP 
increases as a function of equipment energy consumption for each of the 
15 equipment classes. Although the engineering analysis produced up to 
11 energy consumption levels, depending on equipment class, the LCC and 
PBP analyses used only up to eight selected energy consumption levels.
3. Markups
    As discussed earlier, overall markups are based on one of three 
distribution channels and the calculation of baseline and incremental 
markups. The distribution channels defined in the ANOPR were also used 
for the NOPR analysis, but DOE modified the relative fractions of 
shipments through each distribution channel based on stakeholder input. 
See Section IV.C, Markups to Determine Equipment Price, for details.
4. Installation Costs
    In the ANOPR, DOE derived installation costs for commercial 
refrigeration equipment from data provided in RS Means Mechanical Cost 
Data.\19\ RS Means provides estimates on the person-hours required to 
install commercial refrigeration equipment and the labor rates 
associated with the type of crew required to install the equipment. DOE 
developed separate installation costs for self-contained and remote 
condensing equipment. DOE considered the installation costs to be 
fixed, independent of the cost or efficiency of the equipment. Although 
the LCC spreadsheet allows for alternative scenarios, DOE did not find 
a basis for changing its basic premise for the ANOPR analysis.
---------------------------------------------------------------------------

    \19\ RS Means Company, Inc. 2005. Mechanical Cost Data 28th 
Annual Edition. Kingston, Massachusetts.
---------------------------------------------------------------------------

    DOE received comments on the RS Means installation costs. Zero Zone 
commented that the installation costs seem low, and that it tracks 
installation costs and would provide installation cost data to DOE. 
(Public Meeting Transcript, No. 13.5 at p. 133) Separately, Zero Zone 
provided installation costs of $2,000 and $750, respectively, for 
remote condensing and self-contained equipment. DOE has decided to use 
these cost data in the NOPR analysis. Zero Zone also stated that a 
high-efficiency case installation isn't going to cost significantly 
more than a standard case unless there are more controls to tune and 
adjust. SCE stated that if the installation cost doesn't change with 
the equipment efficiency, then it doesn't affect the relative life-
cycle cost. (Public Meeting Transcript, No. 13.5 at p. 117)
    The total installed cost is the sum of the equipment price and the 
installation cost. DOE derived the customer equipment price for any 
given standard level by multiplying the baseline MSP by the baseline 
markup and adding to it the product of the incremental MSP and the 
incremental markup. Because MSPs, markups, and the sales tax can take 
on a variety of values depending on location, the resulting total 
installed cost for a particular standard level will not be a single-
point value, but a distribution of values. See Chapter 8 of the TSD.
5. Energy Consumption
    The electricity consumed by the commercial refrigeration equipment 
was based on the engineering analysis estimates as described previously 
in Section IV.B. No change was made to the ANOPR methodology.
6. Electricity Prices
    Electricity prices are necessary to convert the electric energy 
savings into energy cost savings. Because of the wide variation in 
electricity consumption patterns, wholesale costs, and retail rates 
across the country, it is important to consider regional differences in 
electricity prices. DOE used average commercial electricity prices at 
the State level from the EIA Monthly Electricity Database.\20\ The 2006 
prices were then converted to 2007$ using AEO2007.
---------------------------------------------------------------------------

    \20\ EIA form 826. Annual 1991 through 2006, Jan-Feb 2007. 
http://www.eia.doe.gov/cneaf/electricity/page/data.html. Accessed 
May 29, 2007.
---------------------------------------------------------------------------

    Different kinds of businesses typically use electricity in 
different amounts at different times of the day, week, and year, and 
therefore face different effective prices. To make this adjustment, DOE 
used the 2003 Commercial Building Energy Consumption Survey (CBECS) 
data to identify the average prices the four kinds of businesses in 
this analysis paid compared with the average prices all commercial 
customers paid. The ratios of prices paid by the four types of 
businesses to the national average commercial prices seen in the 2003 
CBECS were used 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, the 
resulting prices were used in the analysis.
    To obtain a weighted-average national electricity price, the prices 
paid by each business in each State was weighted by the estimated sales 
of frozen and refrigerated food products, which also serves as the 
distribution of commercial refrigeration equipment units in each State, 
to each prototype building. The State/business type weights are the 
probabilities that a given commercial refrigeration equipment 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 5 cents per kWh to approximately 22 cents per kWh.
    During the ANOPR public meeting, EEI concurred with the DOE 
analysis that shows grocery stores and food markets having lower 
electric prices than typical commercial facilities. (EEI, No. 15 at p. 
3) DOE continued to use the same approach to develop electric prices 
for the NOPR analysis; however, DOE updated electric costs to 2007$. 
The section below describes the development and use of State-average 
electricity prices by building type; Chapter 8 of the TSD provides more 
detail.
7. Electricity Price Trends
    The electricity price trend provides the relative change in 
electricity prices for future years to 2030. Estimating future 
electricity prices is difficult, especially considering that many 
States are attempting 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 the EIA uses to forecast fuel prices for the Federal 
Energy Management Program (FEMP). DOE provided a sensitivity analysis 
of the life-cycle cost savings and PBP results to future electricity 
price scenarios using both the AEO2007 high-growth and low-growth 
forecasts in

[[Page 50098]]

Chapter 8 of the TSD. ACEEE suggested that the NOPR economic analysis 
be recalculated using AEO2008 price forecasts. (ACEEE, No. 16 at p. 2) 
However, the AEO2008 was not available when DOE was completing the NOPR 
analysis. DOE used the most recent AEO forecast available (AEO2007) 
when it performed the LCC analysis for the NOPR.
8. Repair Costs
    The equipment repair cost is the cost to the customer of replacing 
or repairing components in commercial refrigeration equipment that have 
failed. For the ANOPR analysis, DOE calculated the annualized repair 
cost for baseline efficiency equipment using the following expression:

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 10 years for large grocery and multi-line retail chains and 15 
years for small grocery and convenience stores)

    DOE placed replacement of lighting components (lamps and ballasts) 
under maintenance expenses since the typical lamp life is known and 
commonly considered a maintenance item by customers of commercial 
refrigeration equipment.
    Because data were not available for how repair costs vary with 
equipment efficiency, DOE held repair costs constant as the default 
scenario for the ANOPR LCC and PBP analyses. DOE received several 
comments on the use of constant repair costs for higher efficiency 
equipment. Carrier stated that while it had no data to support this, 
higher efficiency design options--like adding controls--could cost more 
to repair, and it encouraged DOE to find more accurate repair costs 
that would correlate with more sophisticated controls. (Public Meeting 
Transcript, No. 13.5 at p. 135) Carrier felt that making repair costs 
proportional was better than making them flat. ARI stated that the 
assumption that repair costs are constant and do not vary with 
equipment efficiency is incorrect. (ARI, No. 18 at p. 7) Industry 
experience indicates that higher efficiency equipment is more expensive 
to repair because it uses more sophisticated and more expensive 
components. If actual cost data are not available, ARI recommended that 
DOE assume the repair cost to increase as a function of equipment cost. 
True stated that many routine maintenance items are affected by higher 
efficiency fan motors and lighting systems. (Public Meeting Transcript, 
No. 13.5 at p. 136) Hill Phoenix stated that higher maintenance costs 
would be incurred with almost any new technology. (Public Meeting 
Transcript, No. 13.5 at p. 136) However, True Manufacturing also stated 
that no data exists as to whether components such as energy efficient 
motors would have the same lifetime or costs as existing components. 
(Public Meeting Transcript, No. 13.5 at p. 138) ACEEE stated that it 
would caution against a straight ratio of repair cost to initial 
purchase cost; for controls this might be appropriate, but it shouldn't 
affect repair costs for heat exchangers. (Public Meeting Transcript, 
No. 13.5 at p. 137) ACEEE suggested that any measures requiring 
increased repair costs be treated on a measure-by-measure basis. 
(ACEEE, No. 16 at p. 3)
    To address comments on repair costs, DOE contacted users and 
manufacturers of commercial refrigeration equipment to determine 
typical repair frequency for components used in commercial 
refrigeration equipment. Based on this review, DOE estimated 
replacement frequencies for five key components that appear to 
represent the most common repairs, and for which higher efficiency and 
more costly components were used in the engineering analysis for higher 
efficiency commercial refrigeration equipment. DOE then annualized the 
expected costs for these components at each efficiency level and added 
these component costs to the baseline repair cost estimates. This 
resulted in repair costs that increase with higher efficiency 
equipment. Refer to Chapter 8 of the TSD for details.
9. Maintenance Costs
    DOE estimated the annualized maintenance costs for commercial 
refrigeration equipment from data in RS Means Facilities Maintenance & 
Repair Cost Data.\21\ RS Means provides estimates on the person-hours, 
labor rates, and materials required to maintain commercial 
refrigeration equipment on a semi-annual basis. DOE used a single 
figure of $160/year (2007$) for preventive maintenance for all classes 
of commercial refrigeration equipment based on data from RS Means. 
Because data were not available to indicate whether, and if so, how, 
maintenance costs vary with equipment efficiency, DOE held preventive 
maintenance costs constant even as equipment efficiency increased. Lamp 
replacement and other lighting maintenance activities are required 
maintenance for commercial refrigeration equipment, which DOE 
considered to be separate from preventive maintenance, and were not 
itemized in the preventive maintenance activities described by RS 
Means. Different commercial refrigeration equipment classes have 
different numbers of lamps (and ballasts), and many of the efficiency 
options DOE considered in the engineering analysis involved changes to 
the lighting configuration (lamp, ballast, or use of LED lighting 
systems). Because the lighting configurations can vary by energy 
consumption level, DOE estimated the relative maintenance costs for 
lighting for each case type for which a design-option analysis was 
performed. DOE estimated the frequency of failure and replacement of 
individual lighting components, estimated the cost of replacement in 
the field, and developed an annualized maintenance cost based on the 
sum of the total lighting maintenance costs (in 2007$) over the 
estimated life of the equipment divided by the estimated life of the 
equipment.
---------------------------------------------------------------------------

    \21\ RS Means Company, Inc. 2006. Means Costworks 2006: Facility 
Maintenance & Repair Cost Data. Kingston, Massachusetts.
---------------------------------------------------------------------------

    DOE based costs for fluorescent lamp and ballast replacements on a 
review of the OEM costs used in the engineering analysis, RS Means 
estimates, cost data from Grainger, Inc., and previous studies. DOE 
estimated the costs of field replacement using labor cost hours from RS 
Means Electrical Cost Data \22\ for typical lamp or ballast replacement 
for other lighting fixtures using a 150-percent multiplier on OEM costs 
for lamps and ballasts (provided in the engineering analysis 
spreadsheets) to reflect retail pricing. See Chapter 8 of the TSD for 
details.
---------------------------------------------------------------------------

    \22\ RS Means Company, Inc. 2005. 2005 RS Means Electrical Cost 
Data. Kingston, Massachusetts.
---------------------------------------------------------------------------

    Fluorescent lamp and ballast technology is mature, so DOE made no 
change in inflation-adjusted costs for these components. However, 
because of rapid technological improvement, costs for LED lamps are 
declining. DOE estimated the cost for field replacement of LED lighting 
fixtures (believed to occur approximately 6 years after the effective 
date of the standard, or 2018) at 140 percent of the OEM cost of LED 
lighting fixtures (2007 MPC cost in 2007$), plus installation. This 
estimate includes installation labor and all retail markups for 
replacement fixtures. This estimate of replacement LED costs was based 
on 2007 OEM prices for LED fixtures, but with additional contractor 
markups for replacement fixtures similar to that used for fluorescent 
light ballasts and lamps (150 percent of OEM

[[Page 50099]]

costs). In addition, because of the rapid development of LED technology 
and the projected OEM cost reductions for LED systems, DOE performed an 
LCC sensitivity analysis that examined the impact of reducing the cost 
of the LED replacement fixtures in 2018 by 50 percent of the cost used 
in the base analysis.\23\ DOE recognizes that both life and cost 
estimates for LED replacement are projections and seeks comment on how 
it can best estimate the price for replacement LED fixture costs in the 
LCC analysis. This is identified as Issue 1 under ``Issues on Which DOE 
Seeks Comment'' in Section VII.E of this NOPR. Chapter 8 of the TSD 
provides details on the development of maintenance costs.
---------------------------------------------------------------------------

    \23\ DOE anticipates a reduction in installed cost of LED 
systems over time. The projected reduction in price for LED systems 
is provided and discussed in Sections V.C and IV.B.3.c of this NOPR 
and Appendix B of the TSD.
---------------------------------------------------------------------------

10. Lifetime
    DOE defines lifetime as the age when a commercial refrigeration 
equipment unit is retired from service. In its ANOPR analysis, DOE 
based equipment lifetime on discussions with industry experts and other 
stakeholders, as well as a review of estimates in the subject 
literature. DOE concluded that a typical lifetime of 10 years is 
appropriate for commercial refrigeration equipment. In commenting on 
the ANOPR analysis, ARI stated that, on average, equipment lifetime is 
approximately 10 years. ARI noted, however, that properly installed and 
maintained equipment typically has a useful life longer than end-use 
customers retain it due to retail store customer business models and 
competitive demands to upgrade and remodel stores. (ARI, No. 18 at p. 
5) Zero Zone stated that door cases may be changed in store remodels 
every 10 years at larger chains, but small independent chains will use 
cases for 20 years. (Zero Zone, No. 17 at p. 4) True stated that most 
self-contained equipment has a life expectancy of 7 to 12 years, 
although it regularly services equipment that is 25 years old. (Public 
Meeting Transcript, No. 13.5 at p. 98) For the NOPR analysis, DOE used 
an average life of 10 years for large grocery and multi-line retailers, 
but modified the lifetime in the LCC analysis to use a longer average 
15-year life for the small grocery and convenience store business 
types, consistent with stakeholder comments and equipment life 
estimates from industry experts regarding smaller stores and 
independent grocers and chains. See Chapter 3 of the TSD for more 
detail.
    Commercial refrigeration equipment units are typically replaced 
when stores are renovated, which is before the units would have 
physically worn out. Therefore, there is a used equipment market for 
commercial refrigeration equipment. Due to the difficulty of 
incorporating used equipment into grocery store display case line-ups, 
the salvage value to the original purchaser is very low. Therefore, the 
ANOPR LCC analysis did not take the used equipment market into account. 
This methodology was also maintained in the NOPR LCC analysis.
11. Discount Rate
    The discount rate is the rate at which future expenditures are 
discounted to establish their present value. DOE derived the discount 
rates for the LCC analysis by estimating the cost of capital for 
companies that purchase commercial refrigeration equipment. 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. Most companies 
use both debt and equity capital to fund investments, so their 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 by using the Capital 
Asset Pricing Model (CAPM). The CAPM, among the most widely used models 
to estimate the cost of equity financing, considers the cost of equity 
to be proportional to the amount of systematic risk associated with a 
company. The cost of equity financing tends to be high when a company 
faces a large degree of systematic risk, and it tends to be low when 
the company faces a small degree of systematic risk.
    To estimate the weighted average cost of capital (WACC) (including 
the weighted average cost of debt and equity financing) of commercial 
refrigeration equipment purchasers, DOE used a sample of companies 
involved in grocery and multi-line retailing drawn from a database of 
7,319 U.S. companies on the Damodaran Online website. The WACC approach 
taken to determine discount rates takes into account the current tax 
status of the individual firms on an overall corporate basis. DOE did 
not evaluate the marginal effects of increased costs (and thus 
depreciation due to higher cost equipment on the overall tax status).
    DOE used a sample of 17 companies to represent the purchasers of 
commercial refrigeration equipment. For each company in the sample, DOE 
derived the cost of debt, percent debt financing, and systematic 
company risk from information provided by Damodaran Online. DOE 
estimated the cost of debt financing from the long-term Government bond 
rate (4.39 percent) and the standard deviation of the stock price. The 
cost of capital for small, independent grocers; convenience store 
franchisees; gasoline station owner-operators; and others with more 
limited access to capital is more difficult to determine. Individual 
credit-worthiness varies considerably, and some franchisees have access 
to the financial resources of the franchising corporation. However, 
personal contacts with a sample of commercial bankers yielded an 
estimate for the small operator weighted cost of capital of about 200 
to 300 basis points (2 percent to 3 percent) above the rates for large 
grocery chains. A central value equal to the weighted average of large 
grocery chains, plus 250 basis points (2.5 percent), was used for small 
operators. Deducting expected inflation from the cost of capital 
provides the estimates of the real discount rate by ownership category. 
The average after-tax discount rate, weighted by the percentage shares 
of total purchases of commercial refrigeration equipment, is 5.87 
percent for large grocery stores, 5.11 percent for multi-line 
retailers, and 8.37 percent for convenience stores and convenience 
stores associated with gasoline stations. DOE received no comments on 
the discount rates developed in the ANOPR but took advantage of the 
availability of 2007 financial data to update the discount rate 
assumptions in the NOPR. See Chapter 8 of the TSD.
12. 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. 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 changes in operating cost over 
time or the time value of money, that is, the calculation is done at an 
effective discount rate of zero percent.
    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.


[[Page 50100]]


    The data inputs to the 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. 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 affect 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 II.B 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 an explicit discount rate, takes 
into account changing energy prices, and does not require selection of 
a baseline efficiency level, it is considered by DOE to be a better 
indicator of the likely economic impacts on consumers.

F. Shipments Analysis

    One of the more important components of any estimate of the future 
impact of a standard is equipment shipments. DOE developed forecasts of 
shipments for the base case and standards cases and includes those 
forecasts in the NES spreadsheet. The shipments portion of the 
spreadsheet forecasts shipments of commercial refrigeration equipment 
from 2012 to 2042. DOE developed shipments forecasts for the 15 primary 
equipment classes by accounting for the shipments to replace the 
existing stock of commercial refrigeration equipment, commercial 
refrigeration shipments into new commercial floor spaces, and old 
equipment removed through demolitions. Chapter 10 of the TSD provides 
additional details on the shipments forecasts.
    The results of the shipments analysis are driven primarily by 
historical shipments data for the 15 equipment classes of commercial 
refrigeration equipment, DOE estimates of average equipment life, 
relative shipment estimates to each of the four business types, the 
existing total floor space in food sales buildings, and the anticipated 
growth in food sales floor space estimated in EIA's NEMS. The model 
estimates that, in each year, the existing stock of commercial 
refrigeration equipment either ages by one year or is worn out and 
replaced. In addition, new equipment can be shipped into new commercial 
floor space, and old equipment can be removed through demolitions. DOE 
chose to preserve the capability to analyze all efficiency levels 
analyzed in the LCC in the NIA.
    The shipments analysis is a description of commercial refrigeration 
equipment stock flows as a function of year and age. While there are 15 
equipment classes, the shipment analysis treats each category of 
equipment independently such that future shipments in any one class are 
unaffected by shipments in any other equipment classes and the relative 
fraction of shipments in each product class compared to all commercial 
refrigeration equipment shipments is assumed to be constant over time. 
DOE recognizes that a retailer of refrigerated or frozen food can 
choose to use different classes of commercial refrigeration equipment 
to sell the same food product as long as the equipment is in the 
required temperature range (i.e. refrigerator, freezer, or ice-cream 
temperature range). The decision to adopt one equipment class over 
another within the same temperature range will depend on first costs, 
operating costs, and the perceived ability to merchandise product. In 
addition, relative sales refrigerated versus frozen foods could change 
in the future. However, DOE had no information with which to develop 
and calibrate a shipments model incorporating these factors.
    DOE formulated the equations used in the analysis as updates of the 
distribution of stock in any given year, as a function of age, to the 
following year using the following steps:
    1. DOE first converted the equipment units to linear feet of 
display space cooled by those units by taking the national statistics 
on sales of equipment and calculating equipment capacity per linear 
foot of retail grocery building display space.
    2. DOE used this calculation of existing stock, and the average age 
of the equipment, as a basis for calculating replacement sales.
    3. DOE subtracted replacement sales from historical total sales 
statistics to calculate new sales of commercial refrigeration 
equipment.
    4. DOE forecasted new sales as a function of new construction of 
retail food sales space.
    5. DOE recorded sales of new and replacement equipment by the year 
sold, and depreciated each annual vintage over the estimated life of 
the equipment.
    6. DOE allocated sales in each year to the 15 equipment classes in 
proportion to their relative historical sales.
    In response to DOE's presentation of the ANOPR shipment analysis, 
the public made two primary comments. True stated that while food sales 
buildings are probably representative of remote condensing equipment, 
as much as 25 percent of the self-contained market goes into unusual 
conditions, but that the majority does end up in some sort of food-
sales type application. (Public Meeting Transcript, No. 13.5 at p. 165) 
However, in a follow-up conversation, True agreed that for self-
contained equipment without doors, which is the majority of the self-
contained equipment covered in this rulemaking, the amount of equipment 
not shipped to food sales buildings represents a very small fraction of 
the total market. DOE concluded that it was therefore unnecessary to 
include other business types or building categories for the analysis of 
self-contained equipment to be valid and representative.
    Other stakeholders commented on the assumption of zero shipments in 
the ANOPR for the VOP.RC.L equipment class based on the submitted ARI 
shipment data. (Public Meeting Transcript, No. 13.5 at p. 164) ARI, in 
turn, stated that zero values in its data submittal to DOE may 
represent an equipment class where only one or two manufacturers have 
shipments. These data were excluded to maintain confidentiality. 
(Public Meeting

[[Page 50101]]

Transcript, No. 13.5 at p. 52) To address these issues, DOE estimated 
the shipments for the VOP.RC.L equipment class at five percent of the 
similarly designed VOP.RC.M equipment class based on information 
provided in manufacturer interviews.
    Finally, DOE received comments on the impact of the used equipment 
market on shipments in the presence of new equipment standards. True 
stated that DOE should consider how long existing low-efficiency 
equipment will be in service. (Public Meeting Transcript, No. 13.5 at 
p. 98) As you drive the cost higher, the life expectancy of existing 
equipment increases. ACEEE countered, however, that the issue of used 
equipment has come up in other rulemakings. Customers may use existing 
equipment longer, but the average was only one or two years more, which 
has a small impact on the energy savings projected through 2042. It may 
be more of a factor in the manufacturer impact analysis, because that 
could affect sales in at least the first year. (Public Meeting 
Transcript, No. 13.5 at p. 102)
    True stated that the used equipment market is often ignored. As you 
drive costs of capital up, you drive the need for low-end users to buy 
used equipment and that the higher the cost per unit, the more the used 
equipment market thrives. True stated that this is very significant in 
the restaurant industry, where studies suggest that 90 percent of all 
new non-chain restaurants fail within the first year. Most of these 
businesses are buying used equipment. (Public Meeting Transcript, No. 
13.5 at p. 202-207) EEI suggested that, if possible, DOE should 
investigate the use of used versus new equipment in restaurants, and 
make sure that new standards do not increase the purchase of older, 
less efficient equipment. (EEI, No. 15 at p. 2)
    Follow-up conversations with True lead DOE to believe that it is 
unnecessary to take the restaurant business type into account since it 
is not a large market for the equipment covered under this rulemaking. 
DOE determined that it would not try to account for life extension in 
the NIA. While DOE recognizes that there may be some initial life 
extension for existing markets for some customers, no data are 
available to forecast the frequency and amount of life extension that 
might occur within the industry. DOE agrees with ACEEE that this would 
result in a relatively small impact on energy savings and, given that 
it would also reduce expenditures for new equipment, would have an even 
smaller impact on calculated NPV. For the NOPR analysis, DOE did not 
assume an initial decrease in sales and life extension for commercial 
refrigeration equipment covered in this rulemaking.
    Table IV-14 shows the results of the shipments analysis for the 15 
commercial refrigeration equipment classes for the base case (baseline 
efficiency level or Level 1). As equipment purchase price increases 
with higher efficiency levels, a drop in shipments can be expected 
relative to the base case. However, as annual energy consumption is 
reduced, there is potentially a countering effect of increased 
equipment sales due to more frequent installations and use of 
commercial refrigeration equipment by retailers (a potential rebound 
effect). Although there is a provision in the spreadsheet for a change 
in projected shipments in response to efficiency level increases (or 
energy consumption level decreases), DOE has no information with which 
to calibrate such a relationship. No such data was provided in comments 
on the ANOPR analysis. Therefore, for the NOPR analysis, DOE assumed 
that the overall shipments do not change in response to the changing 
TSLs. Additional details on the shipments analysis can be found in 
Chapter 10 of the TSD.

                            Table IV-14--Forecasted Shipments for Commercial Refrigeration Equipment, 2012-2042, (Base Case)
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                         Thousands of linear feet shipped by year and equipment class
                  Equipment class                   ----------------------------------------------------------------------------------------------------
                                                        2012       2015       2020       2025       2030       2035       2040       2042     Cumulative
--------------------------------------------------------------------------------------------------------------------------------------------------------
VOP.RC.M...........................................        451        436        451        464        497        531        582        604       15,270
VOP.RC.L...........................................         23         22         23         23         25         27         29         30          763
VOP.SC.M...........................................         30         29         30         31         33         36         39         41        1,027
VCT.RC.M...........................................         32         31         32         33         35         38         42         43        1,091
VCT.RC.L...........................................        448        433        448        461        494        527        578        600       15,167
VCT.SC.I...........................................         11         11         11         11         12         13         14         15          374
VCS.SC.I...........................................          3          3          3          3          3          3          4          4           93
SVO.RC.M...........................................        344        332        344        354        379        405        444        460       11,647
SVO.SC.M...........................................         45         44         45         47         50         53         59         61        1,537
SOC.RC.M...........................................         87         84         87         89         96        102        112        116        2,936
HZO.RC.M...........................................         53         51         53         54         58         62         68         71        1,790
HZO.RC.L...........................................        166        161        166        171        183        196        214        222        5,627
HZO.SC.M...........................................          4          4          4          4          4          5          5          5          132
HZO.SC.L...........................................          8          8          8          8          9         10         10         11          274
HCT.SC.I...........................................         36         35         36         37         39         42         46         48        1,214
--------------------------------------------------------------------------------------------------------------------------------------------------------

G. National Impact Analysis

    The NIA assesses future NES and the national economic impacts of 
different efficiency 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.
    To make the analysis more accessible and transparent to the public, 
DOE used an Excel spreadsheet model to calculate the energy savings and 
the national economic costs and savings from new standards. Excel is 
the most widely used spreadsheet calculation tool in the United States 
and there is general familiarity with its basic features. Thus, DOE's 
use of Excel as the basis for the spreadsheet models provides 
interested persons with access to the models within a familiar context. 
In addition, the TSD and other documentation that DOE provides during 
the rulemaking help explain the models and how to use them, and 
interested persons can review DOE's analyses by changing various input 
quantities within the spreadsheet.
    Unlike the LCC analysis, the NES spreadsheet does not use 
distributions for inputs or outputs. DOE examined sensitivities by 
applying different scenarios. DOE used the NES spreadsheet to perform 
calculations of national energy savings and NPV using

[[Page 50102]]

the annual energy consumption and total installed cost data from the 
LCC analysis and estimates of national shipments for each of the 15 
primary commercial refrigeration equipment classes. DOE forecasted the 
energy savings, energy cost savings, equipment costs, and NPV of 
benefits for all primary commercial refrigeration equipment classes 
from 2012 through 2062. The forecasts provided annual and cumulative 
values for all four output parameters.
    DOE calculated the NES by subtracting energy use under a standards 
scenario from energy use in a base case (no new standards) scenario. 
Energy use is reduced when a unit of commercial refrigeration equipment 
in the base case efficiency distribution is replaced by a more 
efficient piece of equipment. Energy savings for each equipment class 
are the same national average values as calculated in the LCC and 
payback period spreadsheet. However, these results are normalized on a 
per-unit-length basis by equipment class and applied to the total 
annual estimated shipments in terms of line-up length of all equipment 
with the class. Table IV-15 shows key inputs to the NIA. Chapter 11 of 
the TSD provides additional information about the NES spreadsheet.

  Table IV-15--Summary of National Energy Savings and Net Present Value
                                 Inputs
------------------------------------------------------------------------
         Input data                Description        Changes for NOPR
------------------------------------------------------------------------
Shipments...................  Annual shipments      Shipments model
                               from shipments        modified to use a
                               model (Chapter 10,    distribution of
                               Shipments Analysis).  equipment lifetimes
                                                     based on a 10-year
                                                     average life in
                                                     large grocery and
                                                     multi-line retail,
                                                     and a 15-year
                                                     average life in
                                                     small grocery and
                                                     convenience stores.
                                                     Estimates for
                                                     shipments for the
                                                     VOP.RC.L equipment
                                                     class were added
                                                     and are provided.
Effective Date of Standard..  2012................  No change.
Base Case Efficiencies......  Distribution of base  No change in
                               case shipments by     methodology to
                               efficiency level.     derive base case
                                                     shipments by
                                                     efficiency level.
Standards Case Efficiencies.  Distribution of       No change in
                               shipments by          methodology to
                               efficiency level      derive shipments by
                               for each standards    efficiency level in
                               case. Standards       each standards
                               case annual market    case.
                               shares by
                               efficiency level
                               remain constant
                               over time for the
                               base case and each
                               standards case.
Annual Energy Consumption     Annual weighted-      No change in
 per Linear Foot.              average values are    methodology. Energy
                               a function of         consumption
                               energy consumption    estimates reflect
                               level, which are      updates to NOPR
                               established in the    engineering
                               engineering           analysis.
                               analysis (Chapter 5
                               of the TSD).
                               Converted to a per
                               linear foot basis.
Total Installed Cost per      Annual weighted-      No change in
 Linear Foot.                  average values are    methodology.
                               a function of         Installed costs
                               energy consumption    reflect updates to
                               level (Chapter 8 of   NOPR LCC.
                               the TSD). Converted
                               to a per linear
                               foot basis.
Repair Cost per Linear Foot.  Annual weighted-      No change in
                               average values are    methodology. Repair
                               constant with         costs reflected
                               energy consumption    updates to NOPR
                               level (Chapter 8 of   LCC.
                               the TSD). Converted
                               to a per linear
                               foot basis.
Maintenance Cost per Linear   Annual weighted-      No change in
 Foot.                         average value         methodology, but
                               equals $156           annual weighted-
                               (Chapter 8 of the     average value
                               TSD), plus lighting   updated to $160 in
                               maintenance cost.     2007$.
                               Converted to a per
                               linear foot basis.
Escalation of Electricity     EIA AEO2006           EIA AEO2007
 Prices.                       forecasts (to 2030)   forecasts (to 2030)
                               and extrapolation     and extrapolation
                               for beyond 2030       for beyond 2030
                               (Chapter 8 of the     (Chapter 8 of the
                               TSD).                 TSD).
Electricity Site-to-Source    Conversion varies     Conversion factor
 Conversion.                   yearly and is         varies yearly and
                               generated by DOE/     is generated by
                               EIA's NEMS* program   EIA's NEMS model.
                               (a time series        Includes the impact
                               conversion factor;    of electric
                               includes electric     generation,
                               generation,           transmission, and
                               transmission, and     distribution
                               distribution          losses.
                               losses).
Discount Rate...............  3 and 7 percent real  No change.
Present Year................  Future costs are      Future costs are
                               discounted to year    discounted to year
                               2007.                 2008.
Rebound Effect..............  A rebound effect      No change.
                               (due to changes in
                               shipments resulting
                               from standards) was
                               not considered in
                               the NIA.
------------------------------------------------------------------------

1. 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 standards case. 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).
    The annual per-unit energy consumption is the site energy consumed 
by a commercial refrigeration equipment unit per year. The annual 
energy consumption is directly tied to the efficiency of the unit. 
Thus, knowing the efficiency of a commercial refrigeration equipment 
unit determines the corresponding annual energy consumption. DOE 
determined annual forecasted market shares by efficiency level that, in 
turn, enabled determination of shipment-weighted annual energy 
consumption values.
    Because no data were available on market shares broken down by 
efficiency level, DOE determined market shares by efficiency level for 
commercial refrigeration based on its own analysis. DOE first 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 projections of shipments by equipment class, DOE developed 
the future efficiency scenarios for a base

[[Page 50103]]

case (i.e., without new standards) and for various standards cases 
(i.e., with new standards). DOE did not have data to calibrate this 
approach to actual market shipments by efficiency level. DOE requested 
comment on this approach to generating market shares by efficiency 
level in the ANOPR.
    Commenting on the distribution of market efficiency, ARI stated 
that experience with other equipment tells us that the majority of the 
shipments are usually at the lower end of the curve of the highest 
efficiency. ARI was surprised that DOE had only 25 percent or 30 
percent of the shipments at that efficiency level. They also cautioned 
DOE that the industry-supplied curves are cost curves and do not mean 
that such equipment is on the market today. As Section IV.E, Life-Cycle 
Cost, discusses, ARI offered to try to provide data on the distribution 
of efficiencies in current equipment but was not able to do so. (Public 
Meeting Transcript, No. 13.5 at p. 143) Other stakeholders, such as EEI 
and ACEEE, suggested possible avenues that DOE could examine but did 
not have data DOE could use to establish a distribution of 
efficiencies. (Public Meeting Transcript, No. 13.5 at p. 141-142; p. 
173) Because of the lack of data on market shipments by efficiency 
level, DOE chose to continue to use the ANOPR approach to estimate 
shipments by efficiency level.
    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 
predicted 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, 2042). DOE requested comments on this assumption.
    Copeland commented that since DOE plans to update the forecast in 
five years, no one can really figure out what that distribution of 
efficiency in the future looks like. (Public Meeting Transcript, No. 
13.5 at p. 175) EEI suggested DOE make further contacts with national 
accounts that use commercial refrigeration equipment. No suggestions 
for improving this assumption were received. For the NOPR, DOE 
continued to use the assumption of flat market shares by efficiency 
level for the forecast period.
    For its determination of standards case forecasted efficiencies, 
DOE used a ``roll-up'' scenario to establish the market shares by 
efficiency level for 2012, the year that standards become effective. 
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, and 
that all equipment efficiencies in the base case that were above the 
standard level under consideration would not be affected. Emerson 
commented that a standard brings some compression in the distribution 
of efficiencies. (Public Meeting Transcript, No. 13.5 at p. 175) 
However, ARI stated the roll-up scenario best represents what is likely 
to happen when energy conservation standards take effect. (ARI, No. 18 
at p. 5) DOE continued to use the roll-up scenario for the NOPR 
analysis.
    Finally, DOE recognizes that baseline efficiency trends can change 
if equipment costs are different than those projected. For example, if 
LED prices drop more than assumed in the engineering analysis, consumer 
demand for equipment with LEDs could change. DOE seeks comment on 
whether shipments of equipment with LEDs would change if LED costs drop 
and if so, the extent and timing of such shipment changes. See Section 
VII.E.1.
2. Annual Energy Consumption, Total Installed Cost, Maintenance Cost, 
and Repair Costs
    The difference in shipments by equipment efficiency level between 
the base and standards cases was the basis for determining the 
reduction in per-unit annual energy consumption that could result from 
new standards. The commercial refrigeration equipment stock in a given 
year is the total linear footage of commercial refrigeration equipment 
shipped from earlier years that survive in the given year. The NES 
spreadsheet model keeps track of the total linear footage of commercial 
refrigeration equipment units shipped each year and estimates the total 
commercial refrigeration equipment stock for each year. The annual 
energy consumption by efficiency level for each equipment category 
comes from the LCC analysis and is converted to a per-linear-foot basis 
by dividing by the length of the specific equipment analyzed in the 
engineering analysis. Similarly, the total installed cost, maintenance 
cost, and repair costs for each efficiency level for each equipment 
class analyzed in the LCC are converted to a per linear foot basis. 
Using the total estimated shipments and total estimated stock by 
equipment category and efficiency level, DOE calculates the annual 
energy consumption for the commercial refrigeration equipment stock in 
each year, the maintenance and repair costs associated with the 
equipment stock, and the total installed costs associated with new 
shipments in each year based on the standards scenario and associated 
distribution of shipments by efficiency level.
3. Escalation of Electricity Prices
    DOE uses the most recent AEO reference case to forecast energy 
prices for standard rulemakings. For the ANOPR, DOE used the AEO2006 
reference case forecasts to estimate future electricity prices. ACEEE 
commented that it would like DOE to use the AEO2008 forecasts for the 
NOPR analysis. (ACEEE, No. 16 at p. 2) However, this forecast was not 
available when DOE completed the NOPR analysis. DOE used the AEO2007 
reference case forecasts for future electricity prices, extended out to 
the end of the analysis period. DOE extrapolated the trend in values 
from 2020 to 2030 of the forecast to establish prices for the remainder 
of the analysis period. DOE intends to update its analysis for the 
final rule to reflect the AEO 2008 electricity price forecasts when 
final versions of these price forecasts are available. An AEO Revised 
Early Release for the AEO 2008 reference case only has indicated that 
the reference case electricity prices are higher in real (inflation 
adjusted) terms and if this holds true in the final release it would 
generally result in more favorable economics for higher efficiency 
standard levels (i.e. shorter payback periods, greater life-cycle cost 
savings, and greater national net present value).
4. Electricity Site-to-Source Conversion
    The site-to-source conversion factor is a multiplier used for 
converting site energy consumption, expressed in kWh, into primary or 
source energy consumption, expressed in quadrillion Btu (quads). The 
site-to-source conversion factor accounts for losses in electricity 
generation, transmission, and distribution. For the ANOPR, DOE used 
site-to-source conversion factors based on U.S. average values for the 
commercial sector, calculated from AEO2006, 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). For the NOPR, DOE developed 
marginal site-source conversion factors that relate the national 
electrical energy savings at the point of use to the fuel savings at 
the power plant. These factors use the NEMS model and the examination 
of the corresponding energy savings from

[[Page 50104]]

standards scenarios considered in DOE's utility analysis (Chapter 14 of 
the TSD). The 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) and power plant 
dispatch scenarios. Average U.S. conversion factors were used in the 
ANOPR because the utility analysis which is used to determine marginal 
conversion factors appropriate to efficiency standards for commercial 
refrigeration equipment occurs in the NOPR stage of DOE's analysis.
    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 (including MSP, sales taxes, distribution channel markups, and 
installation cost). DOE calculated the NPV of each TSL over the life of 
the equipment using three steps. First, DOE determined the difference 
between the equipment costs under the TSL and the base case to 
calculate the net equipment cost increase resulting from the TSL. 
Second, DOE determined the difference between the base case operating 
costs and the TSL operating costs to calculate the net operating cost 
savings from the TSL. Third, DOE determined the difference between the 
net operating cost savings and the net equipment cost increase to 
calculate the net savings (or expense) for each year. DOE then 
discounted the annual net savings (or expenses) for commercial 
refrigeration equipment purchased on or after 2012 to 2008, and summed 
the discounted values to determine the NPV of a TSL. An NPV greater 
than zero shows net savings (i.e., the TSL would reduce overall 
customer expenditures relative to the base case in present value 
terms). An NPV less than zero indicates that the TSL would result in a 
net increase in customer expenditures in present value terms.

H. Life-Cycle Cost Sub-Group Analysis

    In analyzing the potential impact of new or amended standards on 
commercial customers, DOE evaluates the impact on identifiable groups 
(i.e., sub-groups) of customers, such as different types of businesses 
that may be disproportionately affected by a National standard level. 
For this rulemaking, DOE identified independent small grocery and 
convenience stores as a commercial refrigeration equipment customer 
sub-group that could be disproportionately affected, and examined the 
impact of proposed standards on this group.
    DOE determined the impact on this commercial refrigeration 
equipment customer sub-group using the LCC spreadsheet model. DOE 
conducted the LCC and PBP analyses for commercial refrigeration 
equipment customers. The standard LCC and PBP analyses (described in 
Section IV.E) includes various types of businesses that use commercial 
refrigeration equipment. The LCC spreadsheet model allows for the 
identification of one or more sub-groups of businesses, which can then 
be analyzed by sampling only each such sub-group. The results of DOE's 
LCC sub-group analysis are summarized in Section V.B.1.c and described 
in detail in Chapter 12 of the TSD.

I. Manufacturer Impact Analysis

1. Overview
    DOE performed an MIA to estimate the financial impact of energy 
conservation standards on manufacturers of commercial refrigeration 
equipment, and to assess the impact of such standards on employment and 
manufacturing capacity. The MIA has both quantitative and qualitative 
aspects. The quantitative part of the MIA relies on the GRIM, an 
industry-cash-flow model customized for this rulemaking. The GRIM 
inputs are information regarding the industry cost structure, 
shipments, and revenues. This includes information from many of the 
analyses described above, such as manufacturing costs and prices from 
the engineering analysis and shipments forecasts. The key GRIM output 
is the industry net present value (INPV). The model estimates the 
financial impact of energy conservation standards by comparing changes 
in INPV between the base case and the various trial standard levels. 
Different sets of assumptions (scenarios) will produce different 
results. The qualitative part of the MIA addresses factors such as 
equipment characteristics, characteristics of particular firms, and 
market and equipment trends, and includes assessment of the impacts of 
standards on sub-groups of manufacturers. Chapter 13 of the TSD 
outlines the complete MIA.
    DOE conducted the MIA for commercial refrigeration equipment in 
three phases. Phase 1, Industry Profile, consisted of preparing an 
industry characterization, including data on market share, sales 
volumes and trends, pricing, employment, and financial structure. Phase 
2, Industry Cash Flow Analysis, focused on the industry as a whole. In 
this phase, DOE used the GRIM to prepare an industry cash-flow 
analysis. Using publicly available information developed in Phase 1, 
DOE adapted the GRIM's generic structure to perform an analysis of 
commercial refrigeration equipment energy conservation standards. In 
Phase 3, Sub-Group Impact Analysis, DOE conducted interviews with 
manufacturers representing the majority of domestic commercial 
refrigeration equipment sales. This group included large and small 
manufacturers, providing a representative cross-section of the 
industry. During these interviews, DOE discussed engineering, 
manufacturing, procurement, and financial topics specific to each 
company and obtained each manufacturer's view of the industry. The 
interviews provided valuable information DOE used to evaluate the 
impacts of an energy conservation standard on manufacturer cash flows, 
manufacturing capacities, and employment levels. For more detail on the 
manufacturer impact analysis, refer to Chapter 13 of the TSD.
a. Phase 1, Industry Profile
    In Phase 1 of the MIA, DOE prepared a profile of the commercial 
refrigeration equipment industry based on the market and technology 
assessment prepared for this rulemaking. Before initiating the detailed 
impact studies, DOE collected information on the present and past 
structure and market characteristics of the commercial refrigeration 
equipment industry. The information DOE collected at that time included 
market share, equipment shipments, markups, and cost structure for 
various manufacturers. The industry profile includes further detail on 
equipment characteristics, estimated manufacturer market shares, the 
financial situation of manufacturers, trends in the number of firms, 
the market, and equipment characteristics of the commercial 
refrigeration equipment industry.
    The industry profile included a top-down cost analysis of 
commercial refrigeration equipment manufacturers that DOE used to 
derive cost and preliminary financial inputs for the GRIM (e.g., 
revenues; material, labor, overhead, and depreciation expenses; 
selling, general, and administrative expenses (SG&A); and research and 
development (R&D) expenses). DOE also used public sources of 
information to further calibrate its initial characterization of the 
industry, including U.S. Securities and Exchange Commission (SEC) 10-K 
reports, Standard & Poor's (S&P) stock reports, and corporate annual 
reports.
b. Phase 2, Industry Cash-Flow Analysis
    Phase 2 of the MIA focused on the financial impacts of energy 
conservation

[[Page 50105]]

standards on the industry. Higher energy conservation standards can 
affect a manufacturer's cash flow in three distinct ways, resulting in: 
(1) A need for increased investment; (2) higher production costs per 
unit; and (3) altered revenue by virtue of higher per-unit prices and 
changes in sales values. To quantify these impacts in Phase 2 of the 
MIA, DOE used the GRIM to perform a cash-flow analysis of commercial 
refrigeration equipment manufacturers. In performing these analyses, 
DOE used the financial values derived during Phase 1 and the shipment 
scenarios used in the NES analyses.
c. Phase 3, Sub-Group Impact Analysis
    Using average cost assumptions to develop an industry-cash-flow 
estimate is not adequate for assessing differential impacts among sub-
groups of manufacturers. For example, small manufacturers, niche 
equipment manufacturers, or manufacturers exhibiting a cost structure 
that largely differs from the industry average could be more negatively 
affected. DOE used the results of the industry characterization 
analysis (in Phase 1) to group manufacturers that exhibit similar 
characteristics.
    During the interview process, DOE discussed the potential sub-
groups and sub-group members it identified for the analysis. DOE 
encouraged the manufacturers to recommend sub-groups or characteristics 
that are appropriate for the sub-group analysis. DOE identified small 
commercial refrigeration equipment manufacturers as a potential 
manufacturing sub-group. DOE found that small business manufacturers 
generally have the same concerns as large manufacturers regarding 
energy conservation standards. In addition, DOE found no significant 
differences in the R&D emphasis or marketing strategies between small 
business manufacturers and large manufacturers. Therefore, for the 
equipment classes comprised primarily of small business manufacturers, 
DOE believes the GRIM analysis, which models each equipment class 
separately, is representative of the small business manufacturers 
affected by standards.
2. Government Regulatory Impact Model Analysis
    As mentioned above, DOE uses the GRIM to quantify changes in cash 
flow that result in a higher or lower industry value. The GRIM analysis 
uses a standard annual cash-flow analysis that incorporates 
manufacturer prices, manufacturing costs, shipments, and industry 
financial information. The GRIM models changes in costs, distribution 
of shipments, investments, and associated margins that would result 
from new regulatory conditions (in this case, standard levels). The 
GRIM spreadsheet uses a number of inputs to arrive at a series of 
annual cash flows, beginning with the base year of the analysis, 2007, 
and continuing to 2042. DOE calculated INPVs by summing the stream of 
annual discounted cash flows during this period.
    DOE used the GRIM to calculate cash flows using standard accounting 
principles and compare changes in INPV between a base case and 
different TSLs (the standards cases). Essentially, the difference in 
INPV between the base case and a standards case represents the 
financial impact of the energy conservation standards on manufacturers. 
DOE collected this information from a number of sources, including 
publicly available data and interviews with manufacturers (Chapter 13 
of the TSD).
3. Manufacturer Interviews
    As part of the MIA, DOE discussed potential impacts of energy 
conservation standards with manufacturers responsible for a majority of 
commercial refrigeration equipment sales. The manufacturers interviewed 
manufacture close to 90 percent of the commercial refrigeration 
equipment on the market. These interviews were in addition to those DOE 
conducted as part of the engineering analysis. The interviews provided 
valuable information that DOE used to evaluate the impacts of energy 
conservation standards on manufacturers' cash flows, manufacturing 
capacities, and employment levels.
a. Key Issues
    Manufacturers identified the following key issues for DOE to 
consider in developing energy conservation standards:
     Meeting Standards. Manufacturers expressed concern that 
they would have difficulty meeting certain efficiency levels for 
certain equipment classes. First, some manufacturers stated that they 
could not meet or would have extreme difficulty meeting any of the 
possible efficiency levels presented during interviews for self-
contained equipment (e.g., horizontal open units). One manufacturer 
stated that due to the small number of parts in the self-contained 
equipment, efficiency improvements are constrained to these parts and 
are therefore limited. The same manufacturer stated that it already 
implements the most efficient options on the market that are available 
within its price range. For some manufacturers, self-contained 
equipment represents only a small portion of their business. These 
manufacturers make more remote condensing equipment and simply convert 
the design into self-contained units. Second, some manufacturers stated 
that they could not meet efficiency levels 3 and 4 for medium-
temperature equipment (e.g., SOC.RC.M, VCT.RC.M, VOP.RC.M), and that 
they would need advances in technology to achieve these levels by 2012. 
One manufacturer stated that it does not manufacture any equipment in 
the VOP.RC.M equipment class that meets DOE's baseline level.
     Customer Needs. Manufacturers are concerned that increased 
equipment efficiency will come at the expense of equipment 
functionality, utility, and customizability. The commercial 
refrigeration equipment industry is focused on customers' need to sell 
products, and customers place a higher priority on marketing and 
displaying their goods than they do on energy efficiency. Customers 
demand high levels of customization to differentiate themselves from 
other retail stores. They do not want to lose any functionality or 
utility in their equipment, such as display area, that affects their 
ability to sell products. Often, the desire of customers for easy 
product access requires equipment that is less energy efficient. They 
also do not want to lose any flexibility in design choices, such as 
lighting options. For example, some customers specify certain lighting 
configurations (e.g., color rendering, color temperature, light 
distribution) to maximize the sale of products such as fresh meat, 
produce, or dairy. Manufacturers believe that setting standards at the 
maximum level will affect their customers' ability to merchandise 
products by limiting the flexibility to choose from among different 
designs, which they expect would commoditize the industry and lead to 
reduced profit margins. Having some allowance in the efficiency 
thresholds would allow tradeoffs in design selection that would ease 
the reconciliation of energy savings with the ability to sell products.
     Customer Awareness. Manufacturers expressed concern that 
their retail customers are not sufficiently aware of pending energy 
conservation standards and the impacts these standards may have on 
their purchasing decisions. The supermarket industry is a low-margin 
industry, which places much emphasis on low-first-cost equipment. 
Manufacturers believe that many customers may not be able to handle an 
increase in equipment

[[Page 50106]]

price effectively since they operate with a fixed budget, or a fixed 
amount of capital available for purchasing commercial refrigeration 
equipment. Manufacturers stated that customers with a fixed capital 
budget would tend to extend refurbishment periods and cut back on 
equipment growth to deal with the increase in price of higher 
efficiency equipment, which manufacturers say will reduce annual sales 
of commercial refrigeration equipment. Manufacturers expect that 
smaller stores and even small regional chains will feel significant 
financial pressure when faced with the increase in prices. Single 
family-owned stores and local stores in large cities may have no 
capital budget with which to replace existing cases with cases that are 
30 percent to 50 percent higher in price. Manufacturers stated that a 
reduction in sales would lead to employee layoffs since labor is 
proportional to units sold, not equipment price. Manufacturers also 
stated that customers have usually been unwilling to adopt energy 
efficiency improvements unless there is a 12-month payback period or 
less.
     Equipment Classes. Manufacturers expressed concern 
regarding how equipment they manufacture would be categorized in DOE's 
equipment classes. Manufacturers stated that certain pieces of low-
volume equipment they manufacture do not easily fit into DOE's 
equipment classes, and other pieces of equipment are excluded from 
coverage. For example, custom pieces of equipment, especially hybrid or 
combination units, do not easily fall within the DOE equipment classes 
since they could be classified in more than one category. A self-
contained case with a service over counter upper portion and an open 
lower portion could be classified as a self-contained service over 
counter unit as well as a self-contained open unit. Another example is 
wedges--transition pieces placed at the corners of a case lineup. These 
do not have a reasonable TDA and therefore do not have meaningful 
energy consumption levels when normalized to TDA. Some manufacturers 
stated that low-volume equipment that cannot meet energy conservation 
standards may be discontinued because the cost to increase the 
efficiency will not be worth the benefit gained. Manufacturers also 
expressed concern regarding secondary coolant systems, which may 
provide a loophole. Manufacturers estimate that secondary coolant 
systems represent about 10 percent of the market currently and consume 
about five percent more energy than their direct expansion equivalent. 
Some manufacturers stated that customers might purchase these lower 
efficiency secondary coolant systems instead of the direct expansion 
equipment that are subject to standards. This concerns manufacturers 
since it would defeat the purpose of regulatory action.
     Component Manufacturers. Manufacturers expressed concern 
that they have little control over the options available and the price 
they pay for components used to manufacture commercial refrigeration 
equipment. Commercial refrigeration equipment manufacturers purchase 
many of the components needed to build the equipment and therefore rely 
heavily on component manufacturers to deliver parts, such as doors, 
motors, fans, and lights. However, commercial refrigeration equipment 
manufacturers state that higher efficiency components may not be 
readily available to meet standards. For example, the high-efficiency 
compressors needed for self-contained equipment to meet energy 
conservation standards may not be readily available. Manufacturers said 
that the compressors they purchase for commercial refrigeration are 
left over from the white goods (home appliances) industry since that 
industry has a much higher sales volume compared to commercial 
refrigeration equipment. Also, manufacturers stated that component 
suppliers set their own pricing, and manufacturers have no control over 
this. Manufacturers are concerned about what prices they would have to 
pay for higher efficiency components in the future.
4. Government Regulatory Impact Model Key Inputs and Scenarios
a. Base Case Shipments Forecast
    The GRIM estimates manufacturer revenues based on total unit 
shipment forecasts and the distribution of these values by efficiency 
level. Changes in the efficiency mix at each standard level are a key 
driver of manufacturer finances. For this analysis, the GRIM used the 
NES shipments forecasts from 2007 to 2042. Total shipments forecasted 
by the NES for the base case in 2012 are shown in Table IV-16 and 
further discussed in this section of today's Notice.

  Table IV-16--Total NES-Forecasted Shipments in 2012 (Number of Units)
------------------------------------------------------------------------
                                                         Total industry
                   Equipment class                         shipments
------------------------------------------------------------------------
VOP.RC.M.............................................             37,607
VOP.RC.L.............................................              1,880
VOP.SC.M.............................................              7,585
VCT.RC.M.............................................              2,533
VCT.RC.L.............................................             35,184
VCT.SC.I.............................................              2,571
VCS.SC.I.............................................                637
SVO.RC.M.............................................             28,685
SVO.SC.M.............................................             11,357
SOC.RC.M.............................................              7,231
HZO.RC.M.............................................              4,408
HZO.RC.L.............................................             13,859
HZO.SC.M.............................................                976
HZO.SC.L.............................................              2,024
HCT.SC.I.............................................             10,487
------------------------------------------------------------------------

    In the shipments analysis, DOE also estimated the distribution of 
efficiencies in the base case for commercial refrigeration equipment 
(Chapter 10 of the TSD). Table IV-17 shows one example of the 
distribution of efficiencies in the base case for the VOP.RC.M 
equipment class. The distribution of efficiencies in the base case for 
other equipment classes are shown in Chapter 10 of the TSD.

                                        Table IV-17--GRIM Distribution of Shipments in the Base Case for VOP.RC.M
--------------------------------------------------------------------------------------------------------------------------------------------------------
           TSL (CDEC/TDA--kWh/day/ft\2\)             Baseline 1.09      TSL 1 0.98       TSL 2 0.95       TSL 3 0.89      TSL 4 * 0.89      TSL 5 0.76
--------------------------------------------------------------------------------------------------------------------------------------------------------
Distribution of Shipments (%).....................            17.6             36.3             16.6             14.0             14.0            15.6
--------------------------------------------------------------------------------------------------------------------------------------------------------
* For VOP.RC.M, TSL 4 is set at the same efficiency level as TSL 3. Therefore, the shipment distribution is the same for both of these TSLs.

b. Standards Case Shipments Forecast
    For each standards case, DOE assumed that shipments at efficiencies 
below the projected standard levels were most likely to roll up to 
those efficiency levels in response to an energy conservation standard. 
This scenario assumes that demand for high-efficiency equipment is a 
function of its

[[Page 50107]]

price without regard to the standard level. See Chapter 12 of the TSD 
for additional details.
c. Markup Scenarios
    To understand how baseline and more efficient equipment are 
differentiated, DOE reviewed manufacturer catalogs and information 
gathered by manufacturers. To estimate the manufacturer price of the 
equipment sold, DOE applied markups to the production costs. For the 
analysis, DOE considered different markup scenarios, based on 
manufacturer input, for commercial refrigeration equipment. Scenarios 
were used to bound the range of expected equipment prices following new 
energy conservation standards. For each equipment class, DOE used the 
markup scenarios that best characterized the prevailing markup 
conditions and described the range of market responses manufacturers 
expect as a result of new energy conservation standards. DOE learned 
from interviews with manufacturers that the majority of manufacturers 
only offer one equipment line. A single equipment line means that there 
is no markup used to differentiate baseline equipment from premium 
equipment.
    After discussions with manufacturers, DOE believes its adoption of 
standards for commercial refrigeration equipment would likely result in 
one of two distinct markup scenarios: Preservation-of-gross-margin-
percentage or preservation-of-operating-profit. Under the preservation-
of-gross-margin-percentage scenario, DOE applied a single uniform gross 
margin percentage markup across all efficiency levels. As production 
cost increases with efficiency, this scenario implies that the absolute 
dollar markup will increase. DOE assumed the non-production cost 
markup--which includes SG&A expenses, R&D expenses, interest, and 
profit--to be 1.32. Manufacturers believe it is optimistic to assume 
that as their production costs increase in response to an efficiency 
standard, they would be able to maintain the same gross margin 
percentage markup. Therefore, DOE assumes that this scenario represents 
a high bound to industry profitability under an energy conservation 
standard.
    Gross margin is defined as revenues less cost of goods sold. The 
implicit assumption behind this markup scenario is that the industry 
can maintain its gross margin from the baseline (in absolute dollars) 
after the standard. The industry would do so by passing through its 
increased production costs to customers without passing through its 
increased R&D and selling, general, and administrative expenses so the 
gross profit per unit is the same in absolute dollars. DOE implemented 
this scenario in the GRIM by setting the production cost markups for 
each TSL to yield approximately the same gross margin in the standards 
cases in the year standard are effective (2012) as is yielded in the 
base case.
d. Equipment and Capital Conversion Costs
    New efficiency standards typically cause manufacturers to incur 
one-time conversion costs to bring their production facilities and 
equipment designs into compliance with the new regulation. For the 
purpose of the MIA, DOE classified these one-time conversion costs into 
three major groups. Capital conversion expenditures are one-time 
investments in property, plant, and equipment to adapt or change 
existing production facilities so that new equipment designs can be 
fabricated and assembled under the new regulation. Equipment conversion 
expenditures are one-time investments in research, development, 
testing, and marketing focused on creating equipment designs that 
comply with the new efficiency standard. Stranded assets are equipment 
or tooling that become obsolete as a result of new regulation.
    During the MIA interviews, DOE asked manufacturers for their 
estimates of the conversion costs they would incur due to new energy 
conservation standards. DOE then used the costs provided by each 
manufacturer and their respective market shares to develop estimates 
for the conversion costs of the entire industry at varying TSLs. 
Chapter 13 of the TSD summarizes these estimates.

J. Utility Impact Analysis

    The utility impact analysis estimates the effects of reduced energy 
consumption due to improved equipment efficiency on the utility 
industry. This utility analysis consists of a comparison between 
forecast results for a case comparable to the AEO2007 reference case 
and forecasts for policy cases incorporating each of the commercial 
refrigeration equipment TSLs.
    DOE analyzed the effects of proposed standards on electric utility 
industry generation capacity and fuel consumption using a variant of 
the EIA's NEMS. NEMS, which is available on the DOE website, is a 
large, multi-sector, partial-equilibrium model of the U.S. energy 
sector. EIA uses NEMS to produce its AEO, a widely recognized baseline 
energy forecast for the United States. DOE used a variant known as 
NEMS-BT. The NEMS-BT is run similarly to the AEO2007 NEMS, except that 
commercial refrigeration equipment energy usage is reduced by the 
amount of energy (by fuel type) saved due to the TSLs. DOE obtained the 
inputs of national energy savings from the NES spreadsheet model. For 
the final rule, DOE intends to report utility analysis results using a 
version of NEMS-BT based on the AEO2008 NEMS.
    DOE conducted the utility analysis as policy deviations from the 
AEO2007, applying the same basic set of assumptions. In the utility 
analysis, DOE reported the changes in installed capacity and generation 
by fuel type that result for each TSL, as well as changes in end-use 
electricity sales. Chapter 14 of the TSD provides details of the 
utility analysis methods and results.

K. Employment Impact Analysis

    Employment impact is one of the factors that DOE considers in 
selecting a standard. Employment impacts include direct and indirect 
impacts. Direct employment impacts are any changes in the number of 
employees for commercial refrigeration equipment manufacturers, their 
suppliers, and related service firms. Indirect impacts are those 
changes of employment in the larger economy that occur due to the shift 
in expenditures and capital investment caused by the purchase and 
operation of more efficient commercial refrigeration equipment. The MIA 
in this rulemaking addresses only the direct employment impacts on 
manufacturers of commercial refrigeration equipment. Chapter 15 of the 
TSD describes other, primarily indirect, employment impacts.
    Indirect employment impacts from commercial refrigeration equipment 
standards consist of the net jobs created or eliminated in the national 
economy, other than in the manufacturing sector being regulated, as a 
consequence of (1) reduced spending by end users on electricity (offset 
to some degree by the increased spending on maintenance and repair); 
(2) reduced spending on new energy supply by the utility industry; (3) 
increased spending on the purchase price of new commercial 
refrigeration equipment; and (4) the effects of those three factors 
throughout the economy. DOE expects the net monetary savings from 
standards to be redirected to other forms of economic activity. DOE 
also expects these shifts in spending and economic activity to affect 
the demand for labor.
    In developing this proposed rule, DOE estimated indirect national 
employment impacts using an input/output model of

[[Page 50108]]

the U.S. economy, called ImSET (Impact of Sector Energy Technologies), 
developed by DOE's Building Technologies Program. ImSET is a personal-
computer-based, economic-analysis model that characterizes the 
interconnections among 188 sectors of the economy as national input/
output structural matrices, using data from the U.S. Department of 
Commerce's 1997 Benchmark U.S. input-output table. The ImSET model 
estimates changes in employment, industry output, and wage income in 
the overall U.S. economy resulting from changes in expenditures in 
various sectors of the economy. DOE estimated changes in expenditures 
using the NES spreadsheet. ImSET then estimated the net national 
indirect employment impacts of potential commercial refrigeration 
equipment efficiency standards on employment by sector. In comments on 
the ANOPR, Zero Zone asked if DOE was going to contact second tier 
suppliers (e.g., door suppliers, fluorescent lighting suppliers, shaded 
pole motor suppliers) regarding employment impacts. (Public Meeting 
Transcript, No. 13.5 at pp. 230-231) ARI noted that this had been done 
in the central air conditioning rulemaking. (Public Meeting Transcript, 
No. 13.5 at p. 231)
    DOE stated that the ImSET tool would not be able to address this in 
detail, but that it has been done within the MIA for other equipment. 
In the public meeting, DOE commented that there would be impacts from 
standards, but the effective date is different from the issuance date 
partly to allow time for adjustments in manufacturing.
    The ImSET input/output model suggests that the proposed commercial 
refrigeration equipment efficiency standards could increase the net 
demand for labor in the economy and the gains would most likely be very 
small relative to total national employment. DOE therefore concludes 
that the proposed commercial refrigeration equipment standards are only 
likely to produce employment benefits that are sufficient to fully 
offset any adverse impacts on employment in the commercial 
refrigeration equipment industry. For more details on the employment 
impact analysis, see Chapter 15 of the TSD.

L. Environmental Assessment

    DOE has prepared a draft Environmental Assessment (EA) pursuant to 
the National Environmental Policy Act and the requirements of 42 U.S.C. 
6295(o)(2)(B)(i)(VI) and 6316(e)(1)(A), to determine the environmental 
impacts of the proposed standards. Specifically, DOE estimated the 
reduction in power plant emissions of CO2, NOX, 
and mercury (Hg) using the NEMS-BT computer model. However, the 
Environmental Assessment (Chapter 16 of the TSD) does not include the 
estimated reduction in power plant emissions of SO2 because, 
DOE has determined that due to the presence of national caps on 
SO2 emissions as addressed below, any such reduction 
resulting from an energy conservation standard would not affect the 
overall level of SO2 emissions in the United States.
    The NEMS-BT is run similarly to the AEO2007 NEMS, except that 
commercial refrigeration equipment energy use is reduced by the amount 
of energy saved (by fuel type) due to the TSLs. DOE obtained the inputs 
of national energy savings from the NES spreadsheet model. For the 
environmental analysis, the output is the forecasted physical 
emissions. The net benefit of the standard is the difference between 
emissions estimated by NEMS-BT and the AEO2007 Reference Case. The 
NEMS-BT tracks CO2 emissions using a detailed module that 
provides results with broad coverage of all sectors and inclusion of 
interactive effects. For the final rule, DOE intends to revise the 
emissions analysis using the AEO2008 NEMS model using the process 
outlined above.
    The Clean Air Act Amendments of 1990 set an emissions cap on 
SO2 for all power generation. The attainment of this target, 
however, is flexible among generators and is enforced through the use 
of emissions allowances and tradable permits. As a result, accurate 
simulation of SO2 trading tends to imply that the effect of 
energy conservation standards on physical emissions will be near zero 
because emissions will always be at, or near, the ceiling. Thus, it is 
unlikely that there will be an SO2 environmental benefit 
from electricity savings as long as there is enforcement of the 
emissions ceilings.
    Although there may not be an actual reduction in SO2 
emissions from electricity savings, there still may be an economic 
benefit from reduced demand for SO2 emission allowances. 
Electricity savings decrease the generation of SO2 emissions 
from power production, which can decrease the need to purchase or 
generate SO2 emissions allowance credits, and decrease the 
costs of complying with regulatory caps on emissions.
    Like SO2, future emissions of NOX and Hg 
would have been subject to emissions caps under the Clean Air 
Interstate Act and Clean Air Mercury Rule. As discussed later, these 
rules have been vacated by a Federal court. DOE calculated a forecast 
of reductions for these emissions under an uncapped scenario. DOE 
assumes that the uncapped emissions reduction estimate would have 
corresponded generally to the generation of emissions allowance credits 
under an emissions cap scenario.

V. Analytical Results

A. Trial Standard Levels

    DOE selected between four and eight energy consumption levels for 
each commercial refrigeration equipment class in the LCC analysis. 
Based on the results of the LCC analysis, DOE selected five trial 
standard levels above the baseline level for each equipment class for 
the NOPR stage of the rulemaking. The range of TSLs selected includes 
the most energy efficient combination of design options with a positive 
NPV at the seven percent discount rate, and the combination of design 
options with the minimum LCC. Additionally, TSLs were selected that 
filled large gaps between the baseline and the level with the minimum 
LCC.
    Because of the size variation within each equipment class and the 
use of daily energy consumption as the efficiency metric, DOE presented 
a methodology to express efficiency standards in terms of a normalizing 
metric. This allows for a single energy conservation standard to be 
used for a broad range of equipment sizes within a given equipment 
class. DOE proposed the use of TDA as the normalizing metric for 
equipment with display capability. For equipment classes without 
display capability (e.g., equipment with solid doors), DOE proposed the 
use of internal volume as the normalizing metric. See Chapter 9 of the 
TSD for more detail.
    True commented that all self-contained units (including any open 
units) should be tested using volume as a normalizing factor to provide 
a straight comparison between open and closed-door self-contained 
units. (Public Meeting Transcript, No. 13.5 at pp. 202-207) DOE 
understands the usefulness of comparing self-contained equipment with 
and without doors on the basis of volume. However, the self-contained 
equipment covered in this rulemaking is frequently installed in 
supermarkets and convenience stores, where its primary purpose is to 
display and merchandise food. The most common application of remote 
condensing equipment is also in supermarkets and convenience stores. 
Therefore, DOE believes that, with respect to the purpose of equipment, 
the self-contained equipment covered in this rulemaking is more similar 
to remote condensing equipment than

[[Page 50109]]

other self-contained equipment (i.e., equipment with doors). DOE 
discussed this issue with manufacturers, and determined that TDA is the 
most appropriate normalization metric for the self-contained equipment 
covered in this rulemaking, since that is the metric used for remote 
condensing equipment.
    DOE expressed the ANOPR efficiency levels in terms of a normalized 
energy consumption using these normalization factors. DOE proposed 
equations for final standards that would have maximum energy 
consumption for equipment whose display area is directly proportional 
to TDA. DOE also suggested that for equipment normalized to volume, it 
might be necessary to develop equations that use offset factors to 
account for a potential non-linear variation of energy consumption with 
volume. At the ANOPR public meeting and during the comment period, 
stakeholders expressed concerns about the size of equipment DOE 
analyzed as the representative model for each equipment class. Zero 
Zone stated that its analysis indicates that using a two-door case as 
the baseline (for the VCT.RC.L class) is more reasonable because of the 
end effects in those cases. Zero Zone reported a 10 percent increase in 
energy consumption per door for a two-door case with the same design 
features as a five-door case. A two-door case consumes more energy per 
door than a five-door case because of the lighting and end effects. 
Zero Zone noted that if the standard is based on a five-door case, it 
will penalize any smaller cabinet, and could eliminate smaller cases 
from production due to their size. (Public Meeting Transcript, No. 13.5 
at p. 87) At the public meeting, Zero Zone stated that it would give 
some thought to what should be used for a representative model--a two-
door case, or some combination of two-door and five-door cases. Zero 
Zone also noted that not all manufacturers make all case sizes. (Public 
Meeting Transcript, No. 13.5 at p. 88) Later, in a written comment, 
Zero Zone recommended that DOE base its analysis on the smaller case 
models instead of the larger case models to avoid accidentally 
outlawing smaller cases. (Zero Zone, No. 17 at p. 3) ARI commented that 
it generally agrees with the approach proposed by DOE for 
characterizing energy conservation standards for commercial 
refrigeration equipment, and offered to work with DOE in developing 
appropriate offset factors. (ARI, No. 18 at p. 6)
    For the NOPR, DOE developed offset factors as a way to adjust the 
energy efficiency requirements for smaller-sized equipment in each 
equipment class analyzed. These offset factors account for certain 
components of the refrigeration load (such as the conduction end 
effects) that remain constant even when equipment sizes vary. These 
constant loads affect smaller cases disproportionately. The offset 
factors are intended to approximate these constant loads and provide a 
fixed end point, corresponding to a zero TDA or zero volume case, in an 
equation that describes the relationship between energy consumption and 
the corresponding TDA or volume metric. See Chapter 5 of the TSD for 
further details on the development of these offset factors for each 
equipment class. This is identified as Issue 4 under ``Issues on Which 
DOE Seeks Comment'' in Section VII.E of this NOPR.
    DOE preserved the general methodology and themes it used for the 
selection of efficiency levels in the ANOPR in establishing specific 
efficiency levels for equipment classes. These levels are based on the 
results of the updated LCC analysis and make up the TSLs used in the 
NOPR. Table V-1 shows the TSL levels DOE selected for energy use for 
the equipment classes analyzed. TSL 5 is the max-tech level for each 
equipment class. TSL 4 is the maximum efficiency level with a positive 
NPV at the seven percent discount rate, except for VOP.RC.M, where the 
minimal difference in energy efficiency between the minimum life-cycle 
cost level as determined by the LCC analysis and the maximum efficiency 
level with positive NPV prompted DOE to select the minimum life-cycle 
cost level in preference to the maximum level with positive NPV. TSL 4 
is a combination of the efficiency levels selected for TSL 3 and TSL 5. 
For a given equipment class, the efficiency levels selected for TSL 4 
are either equivalent to that of TSL 3 or that of TSL 5. TSL 3 is the 
efficiency level that provides the minimum life-cycle cost as 
determined by the LCC analysis. TSL 2 and TSL 1 represent lower 
efficiency levels that fill in the gap between the current baseline and 
the levels determined to have the minimum LCC.
    Table V-2 shows the same TSL levels in terms of proposed equations 
that establish a maximum daily energy consumption (MEC) limit through a 
linear equation of the form:

MEC = A x TDA + B (for equipment using TDA as a normalizing metric) or
MEC = A x V + B (for equipment using volume as a normalizing metric)

    Coefficients A and B are uniquely derived for each equipment class 
based on the calculated offset factor B (see Chapter 5 of the TSD for 
offset factors) and the equation slope A, which would be used to 
describe the efficiency requirements for equipment of different sizes 
within the same equipment class. Chapter 9 of the TSD explains the 
methodology DOE used for selecting trial standard levels and developing 
the coefficients shown in Table V-2.
BILLING CODE 6450-01-P

[[Page 50110]]

[GRAPHIC] [TIFF OMITTED] TP25AU08.001

[GRAPHIC] [TIFF OMITTED] TP25AU08.002

BILLING CODE 6450-01-C

    In addition to the 15 primary equipment classes analyzed, DOE 
intends to establish standards for the remaining 23 secondary equipment 
classes of commercial refrigeration equipment covered in this 
rulemaking that were not directly analyzed in the engineering analysis 
due to low annual shipments (less than 100 units per year). DOE's 
approach involves extension multipliers developed using both the 15 
primary equipment classes analyzed and a set of focused matched-pair 
analyses. In addition, DOE believes that standards for certain primary 
equipment classes can be directly applied to other similar secondary 
equipment classes.

[[Page 50111]]

Chapter 5 of the TSD discusses the development of the extension 
multipliers and the set of focused matched-pair analyses.
    Using this approach, DOE developed an additional set of TSLs for 
these secondary equipment classes that corresponds to each of the 
equations shown in Table V-2 at each TSL. Table V-3 shows this 
additional set of corresponding TSL levels. The levels shown in Table 
V-3 do not necessarily reflect the minimum life-cycle cost or max-tech 
efficiency levels for these equipment classes, and do not reflect TSLs 
that DOE has analyzed in its impact analyses. The primary purpose of 
presenting these levels in this section is to provide interested 
persons with the range of efficiency standards that DOE is considering 
for these secondary equipment classes. This is identified as Issue 5 
under ``Issues on Which DOE Seeks Comment'' in Section VII.E of this 
NOPR.
[GRAPHIC] [TIFF OMITTED] TP25AU08.003

1. Miscellaneous Equipment
    In the ANOPR, DOE proposed as part of its commercial refrigeration 
equipment test procedure that all equipment be tested at one of three 
rating temperatures: 38 [deg]F for refrigerators, 0 [deg]F for 
freezers, and -15 [deg]F for ice-cream freezers. Zero Zone, Hill 
Phoenix, Carrier/Tyler Refrigeration, and True expressed concern 
because they produce equipment that is not designed to operate at these 
designated rating temperatures. (Public Meeting Transcript, No. 13.5 at 
pp. 28-33) ARI stated that DOE should not require all equipment to be 
tested at these three rating temperatures alone. Doing so may require 
manufacturers to produce equipment that is less efficient solely for 
the purpose of meeting a specific rating condition, thus defeating the 
intent of the regulation. (ARI, No. 18 at p. 4) Hill Phoenix and True 
stated that the equipment they manufacture that is unable to meet these 
rating temperatures is only one percent to two percent of their 
shipments. Hill Phoenix added that, if possible, it would prefer to 
avoid the excessive paperwork of applying for waivers for equipment 
that cannot meet the three rating temperatures in the test procedure. 
(Public Meeting Transcript, No. 13.5 at p. 33)
    Zero Zone recommended developing regulations that apply to the 
special circumstances of the rating temperature (Zero Zone, No. 17 at 
p. 2) and that DOE should consider developing additional rating 
temperatures. (Public Meeting Transcript, No. 13.5 at p. 28) ACEEE 
suggested that DOE develop a method to interpolate the standard based 
on the

[[Page 50112]]

standards at the three official rating temperatures. (ACEEE, No. 16 at 
p. 2) ARI recommended that any equipment specifically designed to hold 
temperatures higher than the rating temperature should be tested at its 
application temperature, but must still meet the energy standard for 
its respective equipment class. (ARI, No. 18 at p. 4)
    The DOE test procedure for commercial refrigeration equipment 
specifies three rating temperatures, 38 [deg]F, 0 [deg]F, and -15 
[deg]F, that are required to be used in the testing of this equipment, 
each applied to designated equipment classes. 71 FR 71357. Since all of 
this equipment must be tested at one of these three rating 
temperatures, any manufacturer that is unable to test such equipment at 
its designated rating temperature, must request a test procedure waiver 
from DOE pursuant to the provisions described in 10 CFR 431.401. If the 
equipment is unable to meet the maximum daily energy consumption (MDEC) 
limit for its designated equipment class, a manufacturer can petition 
DOE's Office of Hearing and Appeals (OHA) for exception relief from the 
energy conservation standard pursuant to OHA's authority under section 
504 of the DOE Organization Act (42 U.S.C. 7194), as implemented at 
subpart B of 10 CFR part 1003. OHA grants such relief on a case-by-case 
basis if it determines that a manufacturer has demonstrated that 
meeting the standard would cause hardship, inequity, or unfair 
distributions of burdens. DOE believes that the majority of equipment 
covered by this rulemaking can be tested using the three specified 
rating temperatures (38 [deg]F, 0 [deg]F and -15 [deg]F) provided in 
the test procedure.
    Certain types of equipment meet the definition of ``commercial 
refrigeration equipment'' (Section 136(a)(3) of EPACT 2005), but do not 
fall directly into any of the 38 equipment classes defined in the 
market and technology assessment. One of these types is hybrid cases, 
where two or more compartments are in different equipment families and 
are contained in one cabinet. Another is refrigerator-freezers, which 
have two compartments in the same equipment family but with different 
operating temperatures. Hybrid refrigerator-freezers, where two or more 
compartments are in different equipment families and have different 
operating temperatures, may also exist. Another is wedge cases, which 
form miter transitions (a corner section between two refrigerated 
display merchandisers) between standard display case lineups. DOE is 
proposing language that will allow manufacturers to determine 
appropriate standard levels for these types of equipment.
    An example of a pure hybrid case (one with two or more compartments 
in different equipment families and at the same temperature) is a unit 
with one open and one closed medium-temperature compartment, such as 
those seen in coffee shops that merchandise baked goods and beverages. 
These hybrid cases may be either self-contained or remote condensing, 
and may be cooled by one or more condensing units. They may also have 
one evaporator cooling both compartments or one evaporator feeding each 
compartment separately.
    An example of a refrigerator-freezer is a unit with doors where one 
compartment operates at medium temperature and one compartment operates 
at low temperature. Remote condensing commercial refrigerator-freezers 
(with and without doors) and self-contained commercial refrigerator-
freezers without doors may operate in one of two ways. First, they may 
operate as separate chilled and frozen compartments with evaporators 
fed by two sets of refrigerant lines or two compressors. Second, they 
may operate as separate chilled and frozen compartments fed by one set 
of low-temperature refrigerant lines (with evaporator pressure 
regulator (EPR) valves or similar devices used to raise the evaporator 
pressure) or one compressor.
    An example of a hybrid refrigerator-freezer is a unit with one open 
compartment at medium temperature and one closed compartment at low 
temperature. As with pure hybrid cases, these cases may be either self-
contained or remote condensing, and may be cooled by one or more 
condensing units. In the case of remote condensing equipment, they may 
operate as separate chilled and frozen compartments with evaporators 
fed by two sets of refrigerant lines or two compressors. Or they may 
operate as separate chilled and frozen compartments fed by one set of 
low-temperature refrigerant lines (with EPR valves or similar devices 
used to raise the evaporator pressure of one compartment) or one 
compressor.
    During the ANOPR public meeting, stakeholders commented on how to 
handle these types of cases. True suggested that for self-contained 
refrigerator-freezer equipment, DOE should use a weighted average of 
the minimum standard requirements for the freezer and refrigerator. 
This is the present standard used in California and Canada, and [EPACT] 
2005 for self-contained equipment with doors: 1.63 times freezer volume 
plus the refrigerated volume gives you a number [adjusted volume]. 
(Public Meeting Transcript, No. 13.5 at p. 215) Copeland followed up on 
the True comment on refrigerator-freezers, suggesting that a 
refrigerator-freezer standard for remote cases should be simple, and 
that they should be treated as if they have two separate compressors. 
(Public Meeting Transcript, No. 13.5 at p. 215) Zero Zone stated that a 
manufacturer could build equipment with one or two separate suction 
lines. If it is built with one, measure the suction pressure for that 
one and base the EER on that suction pressure, without concern for what 
is happening upstream of the case. (Public Meeting Transcript, No. 13.5 
at p. 215)
    DOE has reviewed the comments and is proposing the following 
language for requiring manufacturers to meet standards for hybrid 
cases, refrigerator-freezers, and hybrid refrigerator/freezers:
     For commercial refrigeration equipment with two or more 
compartments (hybrid refrigerators, hybrid freezers, hybrid 
refrigerator-freezers, and non-hybrid refrigerator/freezers), the MDEC 
for each model shall be the sum of the MDEC values for all of its 
compartments. For each compartment, measure the TDA or volume of that 
compartment, and determine the appropriate equipment class based on 
that compartment's equipment family, condensing unit configuration, and 
designed operating temperature. The MDEC limit for each compartment 
shall be the calculated value obtained by entering that compartment's 
TDA or volume into the standard equation in subsection (d)(1) for that 
compartment's equipment class. Measure the calculated daily energy 
consumption (CDEC) or total daily energy consumption (TDEC) for the 
entire case as follows:
    [cir] For remote condensing commercial hybrid refrigerators, hybrid 
freezers, hybrid refrigerator-freezers, and non-hybrid refrigerator-
freezers, where two or more independent condensing units each 
separately cool only one compartment, measure the total refrigeration 
load of each compartment separately according to the ANSI/ASHRAE 
Standard 72-2005 test procedure. Calculate compressor energy 
consumption (CEC) for each compartment using Table 1 in ANSI/ARI 
Standard 1200-2006 using the saturated evaporator temperature for that 
compartment. The calculated daily energy consumption (CDEC) for the 
entire case shall be the sum of the CEC for each compartment, fan 
energy

[[Page 50113]]

consumption (FEC), lighting energy consumption (LEC), anti-condensate 
energy consumption (AEC), defrost energy consumption (DEC), and 
condensate evaporator pan energy consumption (PEC) (as measured in 
ANSI/ARI Standard 1200-2006).
    [cir] For remote condensing commercial hybrid refrigerators, hybrid 
freezers, hybrid refrigerator-freezers, and non-hybrid refrigerator-
freezers, where two or more compartments are cooled collectively by one 
condensing unit, measure the total refrigeration load of the entire 
case according to the ANSI/ASHRAE Standard 72-2005 test procedure. 
Calculate a weighted saturated evaporator temperature for the entire 
case by (i) multiplying the saturated evaporator temperature of each 
compartment by the volume of that compartment (as measured in ANSI/ARI 
Standard 1200-2006), (ii) summing the resulting values for all 
compartments, and (iii) dividing the resulting total by the total 
volume of all compartments. Calculate the CEC for the entire case using 
Table 1 in ANSI/ARI Standard 1200-2006, using the total refrigeration 
load and the weighted average saturated evaporator temperature. The 
CDEC for the entire case shall be the sum of the CEC, FEC, LEC, AEC, 
DEC, and PEC.
    [cir] For self-contained commercial hybrid refrigerators, hybrid 
freezers, hybrid refrigerator-freezers, and non-hybrid refrigerator-
freezers, measure the total daily energy consumption (TDEC) for the 
entire case according to the ANSI/ASHRAE Standard 72-2005 test 
procedure.
     For remote-condensing and self-contained wedge cases, 
measure the CDEC or TDEC according to the ANSI/ASHRAE Standard 72-2005 
test procedure. The MDEC for each model shall be the amount derived by 
incorporating into the standards equation in subsection (d)(1) for the 
appropriate equipment class a value for the TDA that is the product of 
(1) the vertical height of the air-curtain (or glass in a transparent 
door) and (2) the largest overall width of the case, when viewed from 
the front. This is identified as Issue 6 under ``Issues on Which DOE 
Seeks Comment'' in Section VII.E of this NOPR.

B. Economic Justification and Energy Savings

1. Economic Impacts on Commercial Customers
a. Life-Cycle Cost and Payback Period
    To evaluate the economic impact of the TSLs on customers, DOE 
conducted an LCC analysis for each level. More efficient commercial 
refrigeration equipment would affect customers in two ways: Annual 
operating expense would decrease and purchase price would increase. DOE 
analyzed the net effect by calculating the LCC. Inputs used for 
calculating the LCC include total installed costs (i.e., equipment 
price plus installation costs), annual energy savings, average 
electricity costs by customer, energy price trends, repair costs, 
maintenance costs, equipment lifetime, and discount rates.
    DOE's LCC and PBP analyses provided five outputs for each TSL that 
are reported in Table V-4 through Table V-18. The first three outputs 
are the proportion of commercial refrigeration equipment purchases 
where the purchase of a standard-compliant piece of equipment would 
create a net LCC increase, no impact, or a net LCC savings for the 
customer. DOE used the estimated distribution of shipments by 
efficiency level for each equipment class to determine the affected 
customers. The fourth output is the average net LCC savings from 
standard-compliant equipment. The fifth output is the average PBP for 
the customer investment in standard-compliant equipment. The payback 
period is the number of years it would take for the customer to recover 
through energy savings the increased costs of higher efficiency 
equipment compared with the purchase of baseline efficiency equipment.

                       Table V-4--Summary LCC and PBP Results for VOP.RC.M Equipment Class
----------------------------------------------------------------------------------------------------------------
                                                                    Trial standard level
                                           ---------------------------------------------------------------------
                                                  1             2             3             4             5
----------------------------------------------------------------------------------------------------------------
Equipment with Net LCC Increase (%).......           0             0             0             0            63
Equipment with No Change in LCC (%).......          65            47            30            30             2
Equipment with Net LCC Savings (%)........          35            53            70            70            34
Mean LCC Savings ($)......................       1,201         1,143         1,551         1,551          -234
Mean Payback Period (years)...............           0.9           1.5           2.2           2.2           9.7
----------------------------------------------------------------------------------------------------------------


                       Table V-5--Summary LCC and PBP Results for VOP.RC.L Equipment Class
----------------------------------------------------------------------------------------------------------------
                                                                    Trial standard level
                                           ---------------------------------------------------------------------
                                                  1             2             3             4             5
----------------------------------------------------------------------------------------------------------------
Equipment with Net LCC Increase (%).......           0             0             0             0             0
Equipment with No Change in LCC (%).......          68            52            22             8             8
Equipment with Net LCC Savings (%)........          32            48            78            92            92
Mean LCC Savings ($)......................       3,132         4,005         4,089         3,364         3,364
Mean Payback Period (years)...............           0.8           1.2           1.3           3.0           3.0
----------------------------------------------------------------------------------------------------------------


                       Table V-6--Summary LCC and PBP Results for VOP.SC.M Equipment Class
----------------------------------------------------------------------------------------------------------------
                                                                    Trial standard level
                                           ---------------------------------------------------------------------
                                                  1             2             3             4             5
----------------------------------------------------------------------------------------------------------------
Equipment with Net LCC Increase (%).......           0             0             0             0            19
Equipment with No Change in LCC (%).......          65            32            17            17             3
Equipment with Net LCC Savings (%)........          35            68            83            83            78
Mean LCC Savings ($)......................         758         1,065         1,342         1,342           703

[[Page 50114]]

 
Mean Payback Period (years)...............           0.8           1.8           2.7           2.7           5.9
----------------------------------------------------------------------------------------------------------------


                       Table V-7--Summary LCC and PBP Results for VCT.RC.M Equipment Class
----------------------------------------------------------------------------------------------------------------
                                                                    Trial standard level
                                           ---------------------------------------------------------------------
                                                  1             2             3             4             5
----------------------------------------------------------------------------------------------------------------
Equipment with Net LCC Increase (%).......           0             0             0            19            19
Equipment with No Change in LCC (%).......          79            57            25             7             7
Equipment with Net LCC Savings (%)........          21            43            75            74            74
Mean LCC Savings ($)......................         286           581         1,107           867           867
Mean Payback Period (years)...............           0.9           1.4           4.6           6.1           6.1
----------------------------------------------------------------------------------------------------------------


                       Table V-8--Summary LCC and PBP Results for VCT.RC.L Equipment Class
----------------------------------------------------------------------------------------------------------------
                                                                    Trial standard level
                                           ---------------------------------------------------------------------
                                                  1             2             3             4             5
----------------------------------------------------------------------------------------------------------------
Equipment with Net LCC Increase (%).......           0             0             0             0             0
Equipment with No Change in LCC (%).......          60            40            28             8             8
Equipment with Net LCC Savings (%)........          40            60            72            92            92
Mean LCC Savings ($)......................         676         3,594         3,662         3,546         3,546
Mean Payback Period (years)...............           1.2           2.6           2.6           3.7           3.7
----------------------------------------------------------------------------------------------------------------


                       Table V-9--Summary LCC and PBP Results for VCT.SC.I Equipment Class
----------------------------------------------------------------------------------------------------------------
                                                                    Trial standard level
                                           ---------------------------------------------------------------------
                                                  1             2             3             4             5
----------------------------------------------------------------------------------------------------------------
Equipment with Net LCC Increase (%).......           0             0             0             0             0
Equipment with No Change in LCC (%).......          52            37            15             7             7
Equipment with Net LCC Savings (%)........          48            63            85            93            93
Mean LCC Savings ($)......................       2,305         3,806         3,841         3,818         3,818
Mean Payback Period (years)...............           1.1           1.7           2.4           2.5           2.5
----------------------------------------------------------------------------------------------------------------


                      Table V-10--Summary LCC and PBP Results for VCS.SC.I Equipment Class
----------------------------------------------------------------------------------------------------------------
                                                                    Trial standard level
                                           ---------------------------------------------------------------------
                                                  1             2             3             4             5
----------------------------------------------------------------------------------------------------------------
Equipment with Net LCC Increase (%).......           0             0             0             0             0
Equipment with No Change in LCC (%).......          76            49            11            11            11
Equipment with Net LCC Savings (%)........          24            51            89            89            89
Mean LCC Savings ($)......................         640         1,191         1,565         1,565         1,565
Mean Payback Period (years)...............           0.4           0.6           1.4           1.4           1.4
----------------------------------------------------------------------------------------------------------------


                      Table V-11--Summary LCC and PBP Results for SVO.RC.M Equipment Class
----------------------------------------------------------------------------------------------------------------
                                                                    Trial standard level
                                           ---------------------------------------------------------------------
                                                  1             2             3             4             5
----------------------------------------------------------------------------------------------------------------
Equipment with Net LCC Increase (%).......           0             0             0             0            62
Equipment with No Change in LCC (%).......          62            42            24            24             4
Equipment with Net LCC Savings (%)........          38            58            76            76            34
Mean LCC Savings ($)......................         810           782         1,106         1,106          -170
Mean Payback Period (years)...............           0.8           1.5           2.1           2.1           9.7
----------------------------------------------------------------------------------------------------------------


[[Page 50115]]


                      Table V-12--Summary LCC and PBP Results for SVO.SC.M Equipment Class
----------------------------------------------------------------------------------------------------------------
                                                                    Trial standard level
                                           ---------------------------------------------------------------------
                                                  1             2             3             4             5
----------------------------------------------------------------------------------------------------------------
Equipment with Net LCC Increase (%).......           0             0             0             0            17
Equipment with No Change in LCC (%).......          67            34            19            19             4
Equipment with Net LCC Savings (%)........          33            66            81            81            79
Mean LCC Savings ($)......................         527           756           988           988           516
Mean Payback Period (years)...............           0.7           1.6           2.6           2.6           5.9
----------------------------------------------------------------------------------------------------------------


                      Table V-13--Summary LCC and PBP Results for SOC.RC.M Equipment Class
----------------------------------------------------------------------------------------------------------------
                                                                    Trial standard level
                                           ---------------------------------------------------------------------
                                                  1             2             3             4             5
----------------------------------------------------------------------------------------------------------------
Equipment with Net LCC Increase (%).......           0             0             0             0            71
Equipment with No Change in LCC (%).......          83            66            32            32             5
Equipment with Net LCC Savings (%)........          17            34            68            68            24
Mean LCC Savings ($)......................         363           759           819           819          -673
Mean Payback Period (years)...............           0.6           0.9           1.9           1.9          12.6
----------------------------------------------------------------------------------------------------------------


                      Table V-14--Summary LCC and PBP Results for HZO.RC.M Equipment Class
----------------------------------------------------------------------------------------------------------------
                                                                    Trial standard level
                                           ---------------------------------------------------------------------
                                                  1             2             3             4             5
----------------------------------------------------------------------------------------------------------------
Equipment with Net LCC Increase (%).......           0             0             0             0             0
Equipment with No Change in LCC (%).......          80            60            39            19            19
Equipment with Net LCC Savings (%)........          20            40            61            81            81
Mean LCC Savings ($)......................         376           792           942           917           917
Mean Payback Period (years)...............           0.6           0.9           1.4           1.8           1.8
----------------------------------------------------------------------------------------------------------------


                      Table V-15--Summary LCC and PBP Results for HZO.RC.L Equipment Class
----------------------------------------------------------------------------------------------------------------
                                                                    Trial standard level
                                           ---------------------------------------------------------------------
                                                  1             2             3             4             5
----------------------------------------------------------------------------------------------------------------
Equipment with Net LCC Increase (%).......           0             0             0             0             0
Equipment with No Change in LCC (%).......          59            39            19            19            19
Equipment with Net LCC Savings (%)........          41            61            81            81            81
Mean LCC Savings ($)......................         593           927           971           971           971
Mean Payback Period (years)...............           1.1           1.5           1.8           1.8           1.8
----------------------------------------------------------------------------------------------------------------


                      Table V-16--Summary LCC and PBP Results for HZO.SC.M Equipment Class
----------------------------------------------------------------------------------------------------------------
                                                                    Trial standard level
                                           ---------------------------------------------------------------------
                                                  1             2             3             4             5
----------------------------------------------------------------------------------------------------------------
Equipment with Net LCC Increase (%).......           0             0             0             0             0
Equipment with No Change in LCC (%).......          73            45            21            10            10
Equipment with Net LCC Savings (%)........          27            55            79            90            90
Mean LCC Savings ($)......................         312           551           759           721           721
Mean Payback Period (years)...............           0.4           1.1           2.0           2.5           2.5
----------------------------------------------------------------------------------------------------------------


                      Table V-17--Summary LCC and PBP Results for HZO.SC.L Equipment Class
----------------------------------------------------------------------------------------------------------------
                                                                    Trial standard level
                                           ---------------------------------------------------------------------
                                                  1             2             3             4             5
----------------------------------------------------------------------------------------------------------------
Equipment with Net LCC Increase (%).......           0             0             0             0             0
Equipment with No Change in LCC (%).......          73            45            21            10            10
Equipment with Net LCC Savings (%)........          27            55            79            90            90
Mean LCC Savings ($)......................         610         1,094         1,585         1,559         1,559
Mean Payback Period (years)...............           0.4           0.9           1.6           1.9           1.9
----------------------------------------------------------------------------------------------------------------


[[Page 50116]]


                      Table V-18--Summary LCC and PBP Results for HCT.SC.I Equipment Class
----------------------------------------------------------------------------------------------------------------
                                                                    Trial standard level
                                           ---------------------------------------------------------------------
                                                  1             2             3             4             5
----------------------------------------------------------------------------------------------------------------
Equipment with Net LCC Increase (%).......           0             0             0             0             0
Equipment with No Change in LCC (%).......          64            46            30            14            14
Equipment with Net LCC Savings (%)........          36            54            70            86            86
Mean LCC Savings ($)......................         192           692           710           693           693
Mean Payback Period (years)...............           0.7           1.5           1.6           2.1           2.1
----------------------------------------------------------------------------------------------------------------

    For three equipment classes (VOP.RC.M, SVO.RC.M, and SOC.RC.M) TSL 
5 resulted in a negative LCC savings compared with the purchase of 
baseline equipment. For all other equipment classes, TSL 5 showed 
positive LCC savings. DOE noted that for equipment classes with 
lighting, the inclusion of LED lighting at TSL 5 had a significant 
impact on the calculated LCC savings. For equipment classes without 
lighting (i.e., VCS.SC.I, HZO.RC.L, HZO.SC.M, HZO.SC.L, HCT.SC.I), the 
LCC savings at TSL 5 was either identical to that of TSL 3, or less 
(between $17 and $38 over the life of the equipment). However, for 
equipment classes with lighting the difference in the LCC calculated 
between TSL 3 and TSL 5 varied from $23 for VCT.SC.I to $1785 for 
VOP.RC.M. When compared to TSL 3, the estimated reduction in LCC 
savings for TSL 5 was most pronounced for the three medium temperature 
equipment classes identified above as having negative LCC compared to 
the baseline (VOP.RC.M, SOC.RC.M, and SVO.RC.M), varying between $1276 
and $1785 dollars. For three additional equipment classes (VOP.RC.L, 
SVO.SC.M, and VOP.SC.M), when compared to TSL 3, the difference in LCC 
was greater than $500. DOE noted that these are all medium temperature 
cases with the exception of VOP.RC.L, which is a small sales volume 
unit, similar in design to a medium temperature VOP.RC.M case.
    The inclusion of LED lighting systems result in an incremental 
increase in installed price. It also increases annualized lighting 
maintenance cost, since LED lights were assumed to be replaced after 
50,000 hours or 5.7 years of steady operation. DOE performed two 
sensitivity analyses of the effect of projected cost reductions in LED 
lighting systems on LCC. These analyses involved five equipment 
classes: VOP.RC.M, VOP.SC.M, SVO.RC.M, SVO.SC.M, and SOC.RC.M. In the 
first sensitivity analysis, DOE determined the reduction in LED fixture 
cost, applied to the installed price in 2012, that would be necessary 
to reduce the average LCC for TSL 5 to a level equivalent to the LCC 
savings at TSL 3, the maximum LCC level. DOE determined that for these 
five equipment classes, a LED cost reduction ranging from 37 percent to 
44 percent, depending on equipment class, would provide an LCC at TSL 5 
equivalent to that at TSL 3.
    In the second sensitivity analysis, DOE presumed that the cost for 
replacement LED fixtures in 2018 would be reduced by 50 percent of the 
cost assumed in the base LCC analysis, and then calculated the 
reduction in LED fixture cost necessary by 2012 to reduce the average 
LCC for TSL 5 to a level that provided equivalent LCC savings as TSL 3. 
DOE determined that for these five equipment classes an LED cost 
reduction ranging from 29 percent to 40 percent, depending on equipment 
class, would provide a LCC at TSL 5 equivalent to that at TSL 3.
    Based on these analyses, DOE concluded that a reduction in LED 
fixture costs of approximately 45 percent would be sufficient to result 
in the maximum LCC savings for all five equipment classes at TSL 5. DOE 
estimated that this reduction in LED fixture costs would also increase 
LCC savings for all other equipment classes with installed lighting at 
TSL 5. DOE estimates that for all equipment classes to achieve their 
maximum LCC savings at TSL 5, LED fixture costs must decrease by at 
least 45 percent. DOE concluded that a reduction in LED costs of less 
than 45 percent could result in only certain commercial refrigeration 
equipment classes achieving their maximum LCC savings at TSL 5.
b. Rebuttable Presumption Payback
    As discussed above, EPCA provides a rebuttable presumption that an 
energy conservation standard is economically justified if the increased 
purchase cost for the equipment that meets the standard is less than 
three times the value of the first year energy savings resulting from 
the standard. DOE calculated a rebuttable presumption payback period 
for each TSL to determine if DOE could presume that a standard at that 
level is economically justified. Rather than using distributions for 
input values, DOE used discrete values and, as required by EPCA, based 
the calculation on the DOE commercial refrigeration equipment test 
procedure assumptions. As a result, DOE calculated a single rebuttable 
presumption payback value for each standard level, and not a 
distribution of payback periods.
    To evaluate the rebuttable presumption, DOE estimated the 
additional customer price of a more efficient, standard-compliant unit 
using the average customer markup, and compared this cost to the value 
of the energy saved during the first year of operation of the equipment 
as determined by ANSI/ARI Standard 1200-2006. DOE interprets 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.
    Rebuttable presumption PBPs were calculated based on single-point 
national average values for installed costs and energy prices 
appropriate to commercial refrigeration equipment. Equipment prices are 
based on a shipment-weighted average distribution markup for remote 
condensing equipment or self-contained equipment, as applied to the MSP 
for each equipment class. The installed cost is based on the national 
average equipment price and the national average installation cost for 
remote condensing or self-contained equipment as appropriate. Average 
first-year energy costs were calculated as the product of the annual 
energy consumption used in the LCC and the shipment-weighted national-
average electricity price, which was calculated using the shipment 
weights for the four business types

[[Page 50117]]

using commercial refrigeration equipment.
    The equation for the rebuttable PBP is:

PBP = [Delta]IC/[Delta]EC

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]EC = difference in annual energy costs.

    PBPs are expressed in years. PBPs greater than the life of the 
equipment means that the increased total installed cost of the more 
efficient equipment is not recovered in reduced operating costs for the 
more efficient equipment. The rebuttable presumption PBPs differ from 
the other PBPs calculated in the LCC analysis (see Section IV.E.12 of 
this NOPR) because they do not include maintenance or repair costs and 
they are based on single point values instead of distributions for 
installation costs or energy costs. The baseline efficiency level for 
the rebuttable presumption calculation is the baseline established in 
the engineering analysis.
    Table V-19 shows the nationally averaged rebuttable presumption 
paybacks calculated for all equipment classes and efficiency levels. 
The highest efficiency level with a rebuttable presumption payback of 
less than three years is also shown in Table V-19 for each equipment 
class. For eight equipment classes, the rebuttable presumption criteria 
were satisfied at all TSLs. At TSL 4, the rebuttable presumption 
criteria are satisfied for 13 equipment classes. At TSL 3, the 
rebuttable presumption criteria are satisfied for 14 equipment classes. 
At TSL 2, the rebuttable presumption criteria were satisfied for all 
equipment classes. However, while DOE has examined the rebuttable 
presumption PBPs, DOE has not determined economic justification for any 
of the standard levels analyzed based on the ANOPR rebuttable 
presumption analysis. The economic justification for each TSL for each 
equipment class will take into account the more detailed analysis of 
the economic impacts of increased efficiency pursuant to Section 
325(o)(2)(B)(i) of EPCA. (42 U.S.C. 6295(o)(2)(B)(i) and 6316(e)(1)).

                               Table V-19--Rebuttable Presumption Payback Periods by Efficiency Level and Equipment Class
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                           Rebuttable presumption payback period (years)                    Highest TSL
                     Equipment type                      --------------------------------------------------------------------------------  with PBP < 3
                                                              Level 1         Level 2         Level 3         Level 4         Level 5          Years
--------------------------------------------------------------------------------------------------------------------------------------------------------
VOP.RC.M................................................             0.8             1.1             1.7             1.7             5.9               4
VOP.RC.L................................................             0.7             1.1             1.2             2.5             2.5               5
VOP.SC.M................................................             0.8             1.5             2.3             2.3             4.5               4
VCT.RC.M................................................             0.8             1.2             4.1             5.4             5.4               2
VCT.RC.L................................................             1.0             2.4             2.4             3.3             3.3               3
VCT.SC.I................................................             1.0             1.6             2.2             2.3             2.3               5
VCS.SC.I................................................             0.4             0.6             1.3             1.3             1.3               5
SVO.RC.M................................................             0.8             1.1             1.7             1.7             5.9               4
SVO.SC.M................................................             0.6             1.3             2.2             2.2             4.5               4
SOC.RC.M................................................             0.5             0.8             1.4             1.4             7.1               4
HZO.RC.M................................................             0.5             0.8             1.2             1.6             1.6               5
HZO.RC.L................................................             1.0             1.3             1.6             1.6             1.6               5
HZO.SC.M................................................             0.4             1.0             1.9             2.3             2.3               5
HZO.SC.L................................................             0.3             0.8             1.5             1.7             1.7               5
HCT.SC.I................................................             0.7             1.4             1.5             2.0             2.0               5
--------------------------------------------------------------------------------------------------------------------------------------------------------

c. Life-Cycle Cost Sub-Group Analysis
    Using the LCC spreadsheet model, DOE estimated the impact of the 
TSLs on the following customer sub-group: small businesses. For the 
retail food sales business, the Small Business Association (SBA) 
defines as small businesses supermarkets and other grocery stores and 
convenience stores with less than $25 million in total annual sales. 
For specialty stores (e.g., meat markets, bakeries, fish and seafood 
markets), this limit is set at less than $6.5 million in annual sales. 
According to the Food Marketing Institute, the average supermarket had 
sales of approximately $15 million in 2006, so a small business could 
be represented by one to two average-size supermarkets or a chain of 
smaller grocery or convenience stores. The Food Marketing Institute 
defines independent stores as a retailer with one to ten stores, so 
most small supermarkets or grocery businesses as defined by SBA would 
be classified as independent grocery stores by the industry. A somewhat 
larger chain of convenience stores could still be classified as a small 
business.
    DOE estimated the LCC and PBP for small food sales businesses 
defined by SBA by presuming that most small business customers could be 
represented by the analysis performed for small grocery and convenience 
store owners. DOE assumed, however, that the smaller, independent 
grocery and convenience store chains may not have access to national 
accounts, but would instead purchase equipment primarily through 
distributors and grocery wholesalers. DOE modified the distribution 
channels for remote condensing and self-contained equipment to these 
small businesses as follows:
     For remote condensing equipment, 15 percent of the sales 
were assumed to pass through a manufacturer-to-distributor-to-
contractor-to-customer channel, and 85 percent were assumed to be 
purchased through a manufacturer-to-distributor-to-customer channel.
     For self-contained equipment, 35 percent of sales were 
assumed to pass through a manufacturer-to-distributor-to-contractor-to-
customer channel, and 65 percent were assumed to be purchased through a 
manufacturer-to-distributor-to-customer channel.
    In both cases, the distribution chain markups were calculated 
accordingly. Table V-20 shows the mean LCC savings from proposed energy 
conservation standards for the small business sub-group, and Table V-21 
shows the mean payback period (in years) for this sub-group. More 
detailed discussion on the LCC sub-group analysis and results can be 
found in Chapter 12 of the TSD.

[[Page 50118]]



   Table V-20--Mean Life-Cycle Cost Savings for Commercial Refrigeration Equipment Purchased by LCC Sub-Group
                                           (Small Business) (2007$) *
----------------------------------------------------------------------------------------------------------------
         Equipment class               TSL 1           TSL 2           TSL 3           TSL 4           TSL 5
----------------------------------------------------------------------------------------------------------------
VOP.RC.M........................           1,536           1,524           2,096           2,096             564
VOP.RC.L........................           3,995           5,158           5,301           4,688           4,688
VOP.SC.M........................             968           1,413           1,840           1,840           1,308
VCT.RC.M........................             366             757           1,689           1,625           1,625
VCT.RC.L........................             876           4,842           4,941           5,042           5,042
VCT.SC.I........................           2,957           4,981           5,155           5,151           5,151
VCS.SC.I........................             805           1,511           2,031           2,031           2,031
SVO.RC.M........................           1,036           1,044           1,492           1,492             400
SVO.SC.M........................             669             994           1,346           1,346             953
SOC.RC.M........................             461             973           1,107           1,107           (175)
HZO.RC.M........................             476           1,013           1,221           1,202           1,202
HZO.RC.L........................             766           1,206           1,274           1,274           1,274
HZO.SC.M........................             393             708           1,005             974             974
HZO.SC.L........................             766           1,394           2,069           2,052           2,052
HCT.SC.I........................             244             898             925             919            919
----------------------------------------------------------------------------------------------------------------
* Numbers in parentheses indicate negative savings.


    Table V-21--Mean Payback Period for Commercial Refrigeration Equipment Purchased by LCC Sub-Group (Small
                                                Business) (Years)
----------------------------------------------------------------------------------------------------------------
         Equipment class               TSL 1           TSL 2           TSL 3           TSL 4           TSL 5
----------------------------------------------------------------------------------------------------------------
VOP.RC.M........................             0.8             1.3             2.0             2.0             8.5
VOP.RC.L........................             0.7             1.1             1.2             2.7             2.7
VOP.SC.M........................             0.8             1.6             2.4             2.4             5.2
VCT.RC.M........................             0.8             1.3             4.2             5.6             5.6
VCT.RC.L........................             1.1             2.4             2.4             3.4             3.4
VCT.SC.I........................             1.0             1.6             2.1             2.2             2.2
VCS.SC.I........................             0.4             0.6             1.3             1.3             1.3
SVO.RC.M........................             0.8             1.3             1.9             1.9             8.5
SVO.SC.M........................             0.6             1.4             2.3             2.3             5.2
SOC.RC.M........................             0.5             0.8             1.7             1.7            10.8
HZO.RC.M........................             0.5             0.8             1.2             1.6             1.6
HZO.RC.L........................             1.0             1.4             1.7             1.7             1.7
HZO.SC.M........................             0.4             1.0             1.8             2.3             2.3
HZO.SC.L........................             0.3             0.8             1.5             1.7             1.7
HCT.SC.I........................             0.6             1.3             1.4             1.9             1.9
----------------------------------------------------------------------------------------------------------------

    For commercial refrigeration equipment, the LCC and PBP impacts for 
small businesses are similar to those of all customers as a whole. 
While the discount rate for small grocery stores is higher than that 
for commercial refrigeration equipment customers as a whole and 
equipment prices are higher due to the higher markups, these small 
business customers appear to retain commercial refrigeration equipment 
over longer periods, and generally, smaller stores tend to pay higher 
electrical prices. The average LCC savings for the small business sub-
group is slightly higher than that calculated for the average 
commercial refrigeration equipment customer, and the average PBP is 
slightly shorter than the national average. DOE tentatively concluded 
that the small food sales businesses as defined by SBA will not 
experience economic impacts significantly different or more negative 
than those impacts on food sales businesses as a whole.
2. Economic Impacts on Manufacturers
    DOE performed an MIA to estimate the impact of amended energy 
conservation standards on commercial refrigeration equipment 
manufacturers (Chapter 13 of the TSD).
a. Industry Cash-Flow Analysis Results
    Table V-22 and Table V-23 show the MIA results for each TSL using 
both markup scenarios described above for commercial refrigeration 
equipment.\24\
---------------------------------------------------------------------------

    \24\ The MIA estimates the impacts on commercial refrigeration 
equipment manufacturers of equipment in the entire range of 
equipment classes (i.e., the MIA results in Table V-22 and Table V-
23 take into consideration the impacts on manufacturers of equipment 
from all equipment classes).

  Table V-22--Manufacturer Impact Analysis for the Commercial Refrigeration Equipment Industry Under the Preservation of Gross Margin Percentage Markup
                                                                        Scenario
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                 Preservation of gross margin percentage markup scenario with a rollup shipment scenario
---------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                         Efficiency level
                                            Units            Base case   -------------------------------------------------------------------------------
                                                                                 1               2               3               4               5
--------------------------------------------------------------------------------------------------------------------------------------------------------
INPV..............................  2007$ Millions......             510        510             517             493             471             493

[[Page 50119]]

 
Change in INPV....................  2007$ Millions......  ..............        (0)               6            (17)            (40)            (18)
                                    (%).................  ..............          0.00%           1.22%          -3.30%          -7.76%          -3.49%
Energy Conservation Standards       2007$ Millions......  ..............          0.5             2.8            20.6            40.4            51.6
 Equipment Conversion Expenses.
Energy Conservation Standards       2007$ Millions......  ..............          0.8             5.0            36.3            71.2            90.8
 Capital Investments.
    Total Investment Required.....  2007$ Millions......  ..............          1.3             7.8            57.0           111.6           142.4
--------------------------------------------------------------------------------------------------------------------------------------------------------


 Table V-23--Manufacturer Impact Analysis for the Commercial Refrigeration Equipment Industry Under the Preservation of Operating Profit Markup Scenario
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                    Preservation of operating profit markup scenario with a rollup shipment scenario
---------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                         Efficiency level
                                            Units            Base case   -------------------------------------------------------------------------------
                                                                                 1               2               3               4               5
--------------------------------------------------------------------------------------------------------------------------------------------------------
INPV..............................  2007$ Millions......             510        447             423             382             330             226
Change in INPV....................  2007$ Millions......  ..............       (63)            (88)           (129)           (180)           (285)
                                    (%).................  ..............        -12.34%         -17.16%         -25.20%         -35.32%         -55.77%
Energy Conservation Standards       2007$ Millions......  ..............          0.5             2.8            20.6            40.4            51.6
 Equipment Conversion Expenses.
Energy Conservation Standards       2007$ Millions......  ..............          0.8             5.0            36.3            71.2            90.8
 Capital Investments.
    Total Investment Required.....  2007$ Millions......  ..............          1.3             7.8            57.0           111.6           142.4
--------------------------------------------------------------------------------------------------------------------------------------------------------

    At TSL 1, the impact on INPV and cash flow varies greatly depending 
on the manufacturers and their ability to pass on MPC increases to the 
customer. DOE estimated the impacts in INPV at TSL 1 to range from 
approximately no impact to -$63 million, which is a change in INPV of 
zero percent to -12.34 percent. At this level, the industry cash flow 
is $50.9 million, which is nearly the same as the base case value of 
$51.4 million in the year leading up to the standards. Since DOE 
estimates that more than 80 percent of the equipment being sold is 
already at or above this level, manufacturers that currently meet TSL 1 
will not have to make additional modifications to their equipment lines 
to conform to the energy conservation standards. DOE expects the lower 
end of the impacts to be reached, because manufacturers will be able to 
fully recover the increase in manufacturer production cost from 
customers. Therefore, DOE expects that industry revenues and costs will 
not be significantly negatively affected at TSL 1.
    At TSL 2, the impact on INPV and cash flow continues to vary 
depending on the manufacturers and their ability to pass on MPC 
increases to the customer. DOE estimated the impacts in INPV at TSL 2 
to range from approximately $6 million to -$88 million, which is a 
change in INPV of 1.22 percent to -17.16 percent. At this level, the 
industry cash flow decreases by approximately 6 percent, to $48.2 
million, compared to the base case value of $51.4 million in the year 
leading up to the standards. DOE estimates that roughly 45 percent of 
the equipment being sold is already at or above this level. The 
required higher level of efficiency will cause some manufactures to 
modify their equipment lines to conform to the energy conservation 
standards. DOE does not expect industry revenues and costs to be 
affected significantly as long as manufacturers fully recover the 
increase in manufacturer production cost from customers. The positive 
INPV value is

[[Page 50120]]

explained by the assumption that MSP increases due to higher costs of 
the equipment, so that manufacturers fully recover and even surpass the 
investments needed to achieve this level.
    At TSL 3, DOE estimated the impacts in INPV to range from 
approximately -$17 million to -$129 million, which is a change in INPV 
of -3.3 percent to -25.2 percent. At this level, the industry cash flow 
decreases by approximately 45.5 percent, to $28 million, compared to 
the base case value of $51.4 million in the year leading up to the 
standards. Based on information submitted by industry, the majority of 
manufacturers would require a complete redesign of their equipment, and 
therefore DOE expects that commercial refrigeration equipment 
manufacturers will have some difficulty fully passing on larger MPC 
increases to customers. Manufacturers expect that the actual impacts 
will be closer to the higher end of the range of impacts (i.e., a drop 
of 25.2 percent in INPV).
    At TSL 4, DOE estimated the impacts on INPV to range from -$40 
million to -$180 million, which is a change in INPV of approximately -
7.76 percent to -35.32 percent. At this level, the industry cash flow 
decreases by approximately 88.4 percent to $5.5 million, compared to 
the base case value of $51.4 million in the year leading up to the 
standards. TSL 4 was created as a combination of TSL 3 (minimum LCC) 
and TSL 5 (max-tech). Manufacturers were not directly asked about this 
combination TSL during interviews. However, DOE estimated the range of 
impacts at TSL 4 based on the expected impacts manufacturers reported 
for TSL 3 and TSL 5. Since manufacturers expect that the actual impacts 
will be closer to the higher range of impacts at TSL 3 and TSL 5, DOE 
expects that the actual impacts for TSL 4 will also be at the higher 
range (i.e., a drop of 35.32 percent in INPV).
    At TSL 5 (max-tech), DOE estimated the impacts in INPV to range 
from -$18 million to -$285 million, which is a change in INPV of 
approximately -3.49 percent to -55.77 percent. At this level, the 
industry cash flow decreases by approximately 114 percent to -$7.2 
million, compared to the base case value of $51.4 million in the year 
leading up to the standards. At higher TSLs, manufacturers have more 
difficulty fully passing on larger MPC increases to customers, and 
therefore manufacturers expect that the actual impacts will be closer 
to the higher end of the range of impacts (i.e., a drop of 55.77 
percent in INPV). Currently, there is only one model being manufactured 
at these efficiency levels for most equipment classes, and some 
equipment classes have no equipment at these levels. At TSL 5, DOE 
recognizes that there is a risk of very large negative impacts if 
manufacturers' expectations are accurate about reduced profit margins. 
During the interviews, manufacturers expressed great concern at the 
possibility of requiring an entire equipment line to be manufactured at 
the max-tech levels.
b. Cumulative Regulatory Burden
    While any one regulation may not impose a significant burden on 
manufacturers, the combined effects of several impending regulations 
may have serious consequences for some manufacturers, groups of 
manufacturers, or an entire industry. Assessing the impact of a single 
regulation may overlook this cumulative regulatory burden.
    In addition to the energy conservation regulations on commercial 
refrigeration equipment, several other Federal regulations and pending 
regulations apply to commercial refrigeration equipment and other 
equipment produced by the same manufacturers or parent companies. DOE 
recognizes that each regulation can significantly affect manufacturers' 
financial operations. Multiple regulations affecting the same 
manufacturer can quickly strain manufacturers' profits and possibly 
cause an exit from the market. An example of these additional 
regulations is the U.S. Environmental Protection Agency (EPA)-mandated 
phaseout of hydrochlorofluorocarbons (HCFCs) and the potential 
residential central air conditioners and heat pumps Federal energy 
conservation standard. Table V-24 provides the timetables for these 
mandatory or potential regulations. DOE believes that the cumulative 
burden of the HCFC phaseout is minimal because much of the commercial 
refrigeration equipment industry has already initiated the transition 
to HFC refrigerants. As shown in Section IV.B.3 above, ARI stated that 
the data it provided to DOE was based on HFC refrigerants, and DOE 
therefore used HFC refrigerants in its analysis. DOE is aware of the 
industry's transition to HFC refrigerants, but requests comment on any 
cumulative regulatory burdens from the combined effects of impending 
regulations that may affect manufacturers.

                Table V-24--Federal Regulation Timetables
------------------------------------------------------------------------
                                       Key affected
            Regulation                  appliance        Effective date
------------------------------------------------------------------------
Potential DOE energy conservation  Central air                  06/2011.
 standards.                         conditioners and
                                    heat pumps
                                    (residential).
Potential DOE energy conservation  Room air                      06/2011
 standards.                         conditioners.
EPA phaseout of HCFC refrigerant   Room and                      01/2010
 on new equipment.                  residential
                                    central air
                                    conditioners, and
                                    commercial air
                                    conditioners.
EPA phaseout of HCFC blowing       Commercial                   01/2010.
 agents on new equipment.           refrigeration
                                    equipment.
------------------------------------------------------------------------

    Production of foam insulation uses a blowing agent. The EPA 
strategy for meeting U.S. obligations under the Montreal Protocol 
requires the United States to phase out the production and use of HCFC 
blowing agents. HCFC-22 and HCFC-142b will be phased out on January 1, 
2010. This affects equipment manufacturing in the United States after 
this date and causes manufacturers to switch to other blowing agents 
with no ozone depletion potential.
    DOE recognizes that some parent companies of commercial 
refrigeration equipment manufacturers could also be affected by the 
potential energy conservation standards for central air conditioners 
and heat pumps and for room air conditioners. Additional investments 
necessary to meet these potential standards could have significant 
impacts on manufacturers of commercial refrigeration equipment. DOE 
seeks comment on the magnitude of impacts for cumulative regulatory 
burden on manufacturers for potential energy conservation standards for 
central air conditioners and heat pumps and for room air conditioners.
c. Impacts on Employment
    DOE used the GRIM to assess the impacts of energy conservation 
standards on commercial refrigeration equipment employment. DOE used 
statistical data from the U.S. Census Bureau's 2006 Annual Survey of 
Manufacturers, the results of the

[[Page 50121]]

engineering analysis, and interviews with manufacturers to estimate the 
inputs necessary to calculate industry-wide labor expenditures and 
employment levels.
    Currently the vast majority of commercial refrigeration equipment 
is manufactured in the U.S. Based on the GRIM results and interviews 
with manufacturers, DOE expects that there would be positive direct 
employment impacts among domestic commercial refrigeration equipment 
manufacturers for TSL 1 through TSL 5. This conclusion ignores the 
possible relocation of domestic jobs to lower-labor-cost countries 
which may occur independently of new standards or may be influenced by 
the level of investments required by new standards. Because the labor 
impacts in the GRIM do not take relocation into account, the labor 
impacts would be different if manufacturers chose to relocate to lower 
cost countries. Manufactures stated that, although there are no current 
plans to relocate production facilities, at higher TSLs there would be 
increased pressure to cut costs, which could result in relocation. 
Chapter 13 of the TSD further discusses the employment impacts and 
exhibits the actual changes in employment levels by TSL.
    The conclusions in this section are independent of any conclusions 
regarding employment impacts from the broader U.S. economy estimated in 
the Employment Impact Analysis. These impacts are documented in Chapter 
15 of this TSD.
d. Impacts on Manufacturing Capacity
    According to the majority of commercial refrigeration equipment 
manufacturers, new energy conservation standards will not significantly 
affect manufacturers' production capacity. Any necessary redesign of 
commercial refrigeration equipment will not change the fundamental 
assembly of the equipment. However, manufacturers anticipate some minor 
changes to tooling. Thus, DOE believes manufacturers will be able to 
maintain manufacturing capacity levels and continue to meet market 
demand under new energy conservation standards.
e. Impacts on Sub-Groups of Manufacturers
    As discussed above, using average cost assumptions to develop an 
industry cash-flow estimate is not adequate for assessing differential 
impacts among sub-groups of manufacturers. Small manufacturers, niche 
equipment manufacturers, or manufacturers exhibiting a cost structure 
that differs largely from the industry average could be affected 
differently. DOE used the results of the industry characterization to 
group manufacturers exhibiting similar characteristics.
    DOE evaluated the impact of new energy conservation standards on 
small businesses, as defined by the SBA for the commercial 
refrigeration equipment industry, as manufacturing enterprises with 750 
or fewer employees. DOE shared the interview guides with small 
commercial refrigeration equipment manufacturers and tailored specific 
questions for them. During DOE's interviews, small manufacturers 
suggested that the impacts of standards on them would not differ from 
impacts on larger companies within the industry (Chapter 13 of the 
TSD).
3. National Impact Analysis
a. Amount and Significance of Energy Savings
    To estimate the energy savings through 2042 due to new energy 
conservation standards, DOE compared the energy consumption of 
commercial refrigeration equipment under the base case to energy 
consumption of commercial refrigeration equipment under a new standard. 
The energy consumption calculated in the NIA is source energy, taking 
into account energy losses in the generation and transmission of 
electricity as discussed in Section IV.J.
    DOE tentatively determined the amount of energy savings at each of 
the 5 TSLs being considered for the 15 primary equipment class analyzed 
and aggregated the results. Table V-25 shows the forecasted aggregate 
national energy savings for all 15 equipment classes at each TSL. The 
table also shows the magnitude of the estimated energy savings if the 
savings are discounted at seven percent and three percent. Each TSL 
considered in this rulemaking would result in significant energy 
savings, and the amount of savings increases with higher energy 
conservation standards (Chapter 11 of the TSD).

Table V-25--Summary of Cumulative National Energy Savings for Commercial Refrigeration Equipment (Energy Savings
                                        for Units Sold from 2012 to 2042)
----------------------------------------------------------------------------------------------------------------
                                                                   Primary national energy savings (quads)  (sum
-----------------------------------------------------------------            of all equipment classes)
                                                                 -----------------------------------------------
                      Trial standard level                         Undiscounted   3%  Discounted  7%  Discounted
----------------------------------------------------------------------------------------------------------------
1...............................................................           0.141           0.073           0.034
2...............................................................           0.545           0.284           0.132
3...............................................................           0.715           0.372           0.173
4...............................................................           0.832           0.433           0.201
5...............................................................           1.208           0.630           0.292
----------------------------------------------------------------------------------------------------------------

    DOE reports both undiscounted and discounted values of energy 
savings. Each TSL analyzed results in additional energy savings, 
ranging from an estimated 0.141 quads to 1.208 quads for TSLs 1 through 
5 (undiscounted).
b. Net Present Value
    The net present value analysis is a measure of the cumulative 
benefit or cost of standards to the Nation. In accordance with the 
Office of Management and Budget (OMB)'s guidelines on regulatory 
analysis (OMB Circular A-4, Section E, September 17, 2003), DOE 
calculated an estimated NPV using both a seven percent and a three 
percent real discount rate. The seven percent rate is an estimate of 
the average before-tax rate of return to private capital in the U.S. 
economy, and reflects the returns to real estate and small business 
capital as well as corporate capital. DOE used this discount rate to 
approximate the opportunity cost of capital in the private sector, 
since recent OMB analysis has found the average rate of return to 
capital to be near this rate. In addition, DOE used the three percent 
rate to capture the potential effects of standards on private 
consumption (e.g., through higher prices for equipment and purchase of 
reduced amounts of energy).

[[Page 50122]]

This rate represents the rate at which society discounts future 
consumption flows to their present value. This rate can be approximated 
by the real rate of return on long-term Government debt (e.g., the 
yield on Treasury notes minus the annual rate of change in the Consumer 
Price Index), which has averaged about three percent on a pre-tax basis 
for the last 30 years.
    Table V-27 shows the estimated cumulative NPV for commercial 
refrigeration equipment resulting from the sum of the NPV calculated 
for each of the 15 primary equipment classes analyzed. Table V-27 
assumes the AEO2007 reference case forecast for electricity prices. At 
a seven percent discount rate, TSL 1-4 show positive cumulative NPVs. 
The highest NPV is provided by TSL 3 at $1.20 billion. TSL 4 provided 
$1.10 billion, close to that of TSL 3. TSL 5 showed a negative NPV at -
$200 million, the result of negative NPV observed in five equipment 
classes (VOP.RC.M, VOP.SC.M, SVO.RC.M, SVO.SC.M, and SOC.RC.M). DOE 
determined through a sensitivity analysis that a 50 percent reduction 
in LED fixture costs, applied to equipment sold during the analysis 
period starting in 2012, would yield a NPV of $1.62 billion for TSL 
5.\25\
---------------------------------------------------------------------------

    \25\ DOE anticipates a reduction in installed cost of LED 
systems over time. The projected reduction in price for LED systems 
is provided and discussed in Sections V.C and IV.B.3.c of this NOPR 
and Appendix B of the TSD.
---------------------------------------------------------------------------

    At a three percent discount rate, all TSLs showed a positive NPV, 
with the highest NPV provided at TSL 3 (i.e., $3.25 billion). TSL 4 
provided a near equivalent NPV at $3.24 billion. TSL 5 provided a NPV 
of $1.16 billion dollars. Three equipment classes (VOP.RC.M, SVO.RC.M, 
and SOC.RC.M) were estimated to have negative NPVs at a three percent 
discount rate at TSL 5. DOE determined through a sensitivity analysis 
that a 50 percent reduction in LED fixture costs, applied to all 
equipment sold during the analysis period starting in 2012, would 
result in the greatest NPV at TSL 5 with $4.76 billion.
    DOE also determined that a six percent reduction in LED system 
costs by 2012 would be sufficient to provide a positive NPV at TSL 5 in 
aggregate across all equipment classes at a seven percent discount 
rate. DOE recognizes that the aggregate six percent reduction in LED 
system costs could be attained by 2012 because of the rapid development 
of LED technology. In addition, DOE expects that a 50 percent reduction 
in LED system costs is possible in 2012, given the projections 
discussed previously, and considers a 50 percent reduction likely to 
occur by 2018 as examined in the LCC LED replacement cost sensitivity 
analysis.
    Table V-26 shows the estimated NPV results at TSL 5, for projected 
LED system cost reductions of six percent and 50 percent.

  Table V-26--Summary of Net Present Value Results With LED System Cost
                              Sensitivity*
------------------------------------------------------------------------
                                               TSL 5           TSL 5
                                           Including 6%    Including 50%
                                 TSL 5      LED system      LED system
                                          cost reduction  cost reduction
------------------------------------------------------------------------
NPV (2007$ billion):
    7% Discount Rate.........     (0.20)            0.03            1.62
    3% Discount Rate.........       1.16            1.62            4.76
------------------------------------------------------------------------
* Parentheses indicate negative (-) values.

    In addition to the reference case, DOE examined the NPV under the 
AEO2007 high-growth and low-growth electricity price forecasts. The 
results of this examination can be found in Chapter 11 of the TSD.

   Table V-27--Summary of Cumulative Net Present Value for Commercial
             Refrigeration Equipment--AEO2007 Reference Case
------------------------------------------------------------------------
                                               NPV* (billion 2007$)
------------------------------------------------------------------------
                                           7% discount      3% discount
          Trial standard level                 rate            rate
------------------------------------------------------------------------
1......................................            0.33             0.82
2......................................            0.98             2.59
3......................................            1.20             3.25
4......................................            1.10             3.24
5......................................           (0.20)            1.16
------------------------------------------------------------------------
* Numbers in parentheses indicate negative NPV, i.e., a net cost.

c. Impacts on Employment
    DOE develops general estimates of the indirect employment impacts 
of proposed standards on the economy. As discussed above, DOE expects 
energy conservation standards for commercial refrigeration equipment to 
reduce energy bills for commercial customers, and the resulting net 
savings to be redirected to other forms of economic activity. DOE also 
realizes that these shifts in spending and economic activity could 
affect the demand for labor. To estimate these effects, DOE used an 
input/output model of the U.S. economy using Bureau of Labor Statistics 
(BLS) data (as described in Section IV.K; see Chapter 15 of the TSD for 
details).
    This input/output model suggests the proposed commercial 
refrigeration equipment energy conservation standards are likely to 
slightly increase the net demand for labor in the economy. Neither the 
BLS data nor the input/output model used by DOE includes the quality or 
wage level of the jobs. As shown in Table V-28, DOE estimates that net 
indirect employment impacts from a proposed commercial refrigeration 
equipment standard are likely to be very small. The net increase in 
jobs is so small that it would be

[[Page 50123]]

imperceptible in national labor statistics and might be offset by 
other, unanticipated effects on employment.

                      Table V-28--Net National Change in Indirect Employment, Jobs in 2042
----------------------------------------------------------------------------------------------------------------
                                                                          Net national change in jobs
                    Trial standard level                     ---------------------------------------------------
                                                                  2012         2022         2032         2042
----------------------------------------------------------------------------------------------------------------
1...........................................................            0          324          448          505
2...........................................................           -6        1,270        1,744        1,970
3...........................................................          -15        1,680        2,312        2,606
4...........................................................          -94        2,204        3,047        3,434
5...........................................................         -315        3,317        4,607        5,187
Maximum Job Impact..........................................         -315        3,317        4,607        5,187
----------------------------------------------------------------------------------------------------------------

4. Impact on Utility or Performance of Equipment
    In performing the engineering analysis, DOE considered design 
options that would not lessen the utility or performance of the 
individual classes of equipment. (42 U.S.C. 6295(o)(2)(B)(i)(IV) and 
6316(e)(1)) As presented in the screening analysis (Chapter 4 of the 
TSD), DOE did not consider design options that reduce the utility of 
the equipment. Because no design options were considered that reduce 
utility, DOE tentatively concluded that none of the efficiency levels 
proposed for commercial refrigeration equipment reduce the utility or 
performance of the equipment.
5. Impact of Any Lessening of Competition
    EPCA directs DOE to consider any lessening of competition that is 
likely to result from standards. It directs the Attorney General to 
determine in writing the impact, if any, of any lessening of 
competition likely to result from a proposed standard. (42 U.S.C. 
6295(o)(2)(B)(i)(V) and 6316(e)(1)) To assist the Attorney General in 
making such a determination, DOE has provided the Department of Justice 
(DOJ) with copies of this Notice and the TSD for review. During MIA 
interviews, domestic manufacturers indicated that foreign manufacturers 
have entered the commercial refrigeration equipment market over the 
past several years. Manufacturers also stated that while there has been 
significant consolidation with supermarket chains, little or no 
consolidation has occurred among commercial refrigeration manufacturers 
in recent years. DOE believes that these trends will continue to happen 
in this market regardless of the proposed standard level chosen.
6. Need of the Nation to Conserve Energy
    An improvement in the energy efficiency of commercial refrigeration 
equipment is likely to improve the security of the Nation's energy 
system by reducing overall demand for energy, and thus reduce the 
Nation's reliance on foreign sources of energy. Reduced demand may also 
improve the reliability of the electricity system, particularly during 
peak-load periods. As a measure of this reduced demand, DOE expects the 
proposed standards (TSL 4) to prevent the need for the construction of 
new power plants totaling approximately 643 MW of electricity 
generation capacity in 2042.
    Enhanced energy efficiency also produces environmental benefits. 
The expected energy savings from higher commercial refrigeration 
equipment standards will reduce the emissions of air pollutants and 
greenhouse gases associated with energy production and fossil fuel 
usage. Table V-29 shows estimated cumulative CO2, 
NOX, and Hg emissions reductions for all the commercial 
refrigeration equipment classes over the forecast period. The expected 
energy savings from commercial refrigeration equipment standards will 
reduce the emissions of greenhouse gases associated with energy 
production, and it may reduce the cost of maintaining nationwide 
emissions standards and constraints.

               Table V-29--Summary of Emissions Reductions for Commercial Refrigeration Equipment
                               (cumulative reductions for equipment, 2012 to 2042)
----------------------------------------------------------------------------------------------------------------
                                                                      Trial Standard Levels
----------------------------------------------------------------------------------------------------------------
                                                    TSL 1        TSL 2        TSL 3        TSL 4        TSL 5
----------------------------------------------------------------------------------------------------------------
Emissions Reductions...........................
CO2 (Mt).......................................         7.37        28.47        37.37        43.50        63.17
NOX (kt).......................................         2.74        10.58        13.88        16.16        23.47
Hg (t).........................................         0.09         0.36         0.47         0.54         0.80
----------------------------------------------------------------------------------------------------------------
Mt = million metric tons.
kt = thousand tons.
t = tons.

    The estimated cumulative CO2, NOX, and Hg 
emission reductions for the proposed standard are 43.5 Mt, 16.16 kt, 
and 0.54 t, respectively, for all 15 equipment classes over the period 
from 2012 to 2042. However, TSL 5 provides the greatest reduction of 
emissions of all the TSLs considered. In the environmental assessment 
(Chapter 16 of the TSD), DOE reports estimated annual changes in 
CO2, NOX, and Hg emissions attributable to each 
TSL. As discussed in Section IV.L, DOE does not report SO2 
emissions reduction from power plants because reductions from an energy 
conservation standard would not affect the overall level of 
SO2 emissions in the United States due to the emissions caps 
for SO2.
    The NEMS-BT modeling assumed that NOX would be subject 
to the Clean Air Interstate Rule (CAIR) issued by the U.S. 
Environmental Protection Agency

[[Page 50124]]

on March 10, 2005.\26\ 70 FR 25162 (May 12, 2005). On July 11, 2008, 
the U.S. Court of Appeals for the District of Columbia Circuit (D.C. 
Circuit) issued its decision in North Carolina v. Environmental 
Protection Agency,\27\ in which the court vacated the CAIR. If left in 
place, the CAIR would have permanently capped emissions of 
NOX in 28 eastern States and the District of Columbia. As 
with the SO2 emissions cap, a cap on NOX 
emissions would have meant that equipment energy conservation standards 
are not likely to have a physical effect on NOX emissions in 
States covered by the CAIR caps. While the caps would have meant that 
physical emissions reductions in those States would not have resulted 
from the energy conservation standards we are proposing today, the 
standards might have produced an environmental-related economic impact 
in the form of lower prices for emissions allowance credits, if large 
enough. DOE notes that the estimated total reduction in NOX 
emissions, including projected emissions or corresponding allowance 
credits in States covered by the CAIR cap was between 0.004 and 0.034 
percent of the nationwide NOX emissions as a whole, 
percentages that DOE estimated were too small to affect allowance 
prices for NOX under the CAIR.
---------------------------------------------------------------------------

    \26\ See http://www.epa.gov/cleanairinterstaterule/.
    \27\ Case No. 05-1244, 2008 WL 2698180 at *1 (D.C. Cir. July 11, 
2008).
---------------------------------------------------------------------------

    Even though the D.C. Circuit vacated the CAIR, DOE notes that the 
D.C. Circuit left intact EPA's 1998 NOX SIP Call rule, which 
capped seasonal (summer) NOX emissions from electric 
generating units and other sources in 23 jurisdictions and gave those 
jurisdictions the option to participate in a cap and trade program for 
those emissions. See 63 Fed. Reg. 57356, 57359 (Oct. 27, 1998).\28\ 
Accordingly, DOE is considering whether changes are needed to its plan 
for addressing the issue of NOX reduction. DOE invites 
public comment on how the agency should address this issue, including 
how it might value NOX emissions for States now that the 
CAIR has been vacated.\29\
---------------------------------------------------------------------------

    \28\ In the NOX SIP Call rule, EPA found that sources 
in the District of Columbia and 22 ``upwind'' states (States) were 
emitting NOX (an ozone precursor) at levels that 
significantly contributed to ``downwind'' states not attaining the 
ozone NAAQS or at levels that interfered with states in attainment 
maintaining the ozone NAAQS. In an effort to ensure that 
``downwind'' states attain or continue to attain the ozone NAAQS, 
EPA established a region-wide cap for NOX emissions from 
certain large combustion sources and set a NOX emissions 
budget for each State. Unlike the cap that CAIR would have 
established, the NOX SIP Call Rule's cap only constrains 
seasonal (summer time) emissions. In order to comply with the 
NOX SIP Call Rule, States could elect to participate in 
the NOX Budget Trading Program. Under the NOX 
Budget Trading Program, each emission source is required to have one 
allowance for each ton of NOX emitted during the ozone 
season. States have flexibility in how they allocate allowances 
through their State Implementation Plans but States must remain 
within the EPA-established budget. Emission sources are allowed to 
buy, sell and bank NOX allowances as appropriate. It 
should be noted that, on April 16, 2008, EPA determined that Georgia 
is no longer subject to the NOX SIP Call rule.
    \29\ In anticipation of CAIR replacing the NOX SIP 
Call Rule, many States adopted sunset provisions for their plans 
implementing the NOX SIP Call Rule. The impact of the 
NOX SIP Call Rule on NOX emissions will 
depend, in part, on whether these implementation plans are 
reinstated.
---------------------------------------------------------------------------

    With regard to mercury emissions, DOE is able to report an estimate 
of the physical quantity changes in mercury emissions associated with 
an energy conservation standard. Based on the NEMS-BT modeling, Hg 
emissions show a slight decrease in the period from 2012 to 2042. These 
changes in Hg emissions, as shown in Table V-29, are extremely small 
with a range of between 0.02 and 0.14 percent of national base case 
emissions depending on TSL.
    The NEMS-BT model assumed that mercury emissions would be subject 
to EPA's Clean Air Mercury Rule \30\ (CAMR), which would have 
permanently capped 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 a system, energy 
conservation standards would result in no physical effect on these 
emissions, but might result in an environmental-related economic 
benefit in the form of a lower price for emissions allowance credits, 
if large enough. DOE estimated that the change in Hg emissions from 
standards would not be large enough to influence allowance prices under 
CAMR.
---------------------------------------------------------------------------

    \30\ 70 FR 28606 (May 18, 2005).
---------------------------------------------------------------------------

    On February 8, 2008, the D.C. Circuit issued its decision in New 
Jersey v. Environmental Protection Agency,\31\ 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 in light of the D.C. 
Circuit's decision. DOE invites public comment on addressing mercury 
emissions in this rulemaking.
---------------------------------------------------------------------------

    \31\ No. 05-1097, 2008 WL 341338, at *1 (D.C. Cir. Feb. 8, 
2008).
---------------------------------------------------------------------------

    DOE is considering taking into account a monetary benefit of 
CO2 emission reductions associated with this rulemaking. 
During the preparation of its most recent review of the state of 
climate science, the Intergovernmental Panel on Climate Change (IPCC) 
identified various estimates of the present value of reducing carbon-
dioxide emissions by one ton over the life that these emissions would 
remain in the atmosphere. The estimates reviewed by the IPCC spanned a 
range of values. In the absence of a consensus on any single estimate 
of the monetary value of CO2 emissions, DOE used an estimate 
identified by the study cited in Summary for Policymakers prepared by 
Working Group II of the IPCC's Fourth Assessment Report to estimate the 
potential monetary value of the CO2 reductions likely to 
result from the standards under consideration in this rulemaking.
    The estimated year-by-year reductions in CO2 emissions 
were converted into monetary values ranging from the $0 and $14 per 
ton. These monetary estimates were based on an assumption of no benefit 
to an average benefit value reported by the IPCC and the values include 
a range of discount factors used in their development.\32\ Based on 
DOE's consideration of the IPCC report, DOE escalated the average 
benefit value per ton in real 2007$ at 2.4 percent per year. The 
resulting estimates of the potential range of benefits associated with 
the reduction of CO2 emissions are reflected in Table V-30.
---------------------------------------------------------------------------

    \32\ According to the IPCC, the mean social cost of carbon (SCC) 
reported in studies published in peer-reviewed journals was US$43 
per ton of carbon. This translates into about $12 per ton of carbon 
dioxide. The social costs estimated represented the discounted 
present value of increasing (or decreasing) current emissions of 
carbon dioxide (or an equivalent greenhouse gas) by one ton. The 
literature review (Tol 2005) from which this mean was derived did 
not report the year in which these dollars are denominated. However, 
since the underlying studies spanned several years on either side of 
2000, the estimate is often treated as year 2000 dollars. Updating 
that estimate to 2007 dollars yields a SCC of $14 per ton of carbon 
dioxide. Tol concluded that when only peer-reviewed studies 
published in recognized journals are considered, ``* * * climate 
change impacts may be very uncertain but is unlikely that the 
marginal damage costs of carbon dioxide emissions exceed $50 per 
tonne carbon [about $14 per metric ton of CO2 or about 
$12.66 per short ton][emphasis added].'' He also concluded that the 
costs may be substantially lower than $50 per tonne of C. Tol's 
survey showed that 10 percent of the SCC estimates were actually 
negative, so that a lower bound of zero is not unreasonable.

[[Page 50125]]



     Table V-30--Preliminary Estimates of Savings From CO2 Emissions Reductions Under Considered Commercial
                                  Refrigeration Equipment Trial Standard Levels
----------------------------------------------------------------------------------------------------------------
                                                           Value of estimated CO2       Value of estimated CO2
                                      Estimated total    emission reductions based    emission reductions based
                TSL                  CO2 (Mt) emission   on IPCC range (million $)    on IPCC range (million $)
                                         reductions         at 7% discount rate          at 3% Discount Rate
----------------------------------------------------------------------------------------------------------------
1..................................               7.37  0 to 43....................  0 to 93
2..................................              28.47  0 to 166...................  0 to 361
3..................................              37.37  0 to 218...................  0 to 473
4..................................              43.50  0 to 253...................  0 to 551
5..................................              63.17  0 to 368...................  0 to 800
----------------------------------------------------------------------------------------------------------------

    DOE relied on the average of the IPCC reported estimate as an upper 
bound on the benefits resulting from reducing each metric ton of U.S. 
CO2 emissions. It is important to note that estimate of the 
$14 per ton of CO2 represents an average value of worldwide 
impacts from potential climate impacts caused by CO2 
emissions, and is not confined to impacts likely to occur within the 
U.S. In contrast, most of the other estimates of costs and benefits of 
increasing the efficiency of commercial refrigeration equipment 
discussed in this proposal include only the economic values of impacts 
that would be experienced in the U.S. Consequently, as DOE considers a 
monetary value for CO2 emission reductions, the value might 
be restricted to a representation of those cost/benefits likely to be 
experienced in the United States. Currently, there are no estimated 
values for the U.S. benefits likely to result from CO2 
emission reductions. However, DOE expects that, if such values were 
developed, DOE would use those U.S. benefit values, and not world 
benefit values, in its analysis. DOE further expects that, if such 
values were developed, they would be lower than comparable global 
values. DOE invites public comment on the above discussion of 
CO2.
    DOE also investigated the potential monetary impact resulting from 
the impact of today's efficiency standards on SO2, 
NOX, and mercury (Hg) emissions. As previously stated, DOE's 
analysis assumed the presence of nationwide emission caps on 
SO2 and caps on NOX emissions in the 28 states 
covered by the CAIR caps. In the presence of emission caps, DOE 
concluded that no physical reductions in total sector emissions would 
occur, however DOE's estimates for reduction of these emissions could 
correspond to incremental changes in the prices of emissions allowances 
in cap-and-trade emissions markets rather than to physical emissions 
reductions. For SO2, the changes in annual emissions from 
today's rule would be less than 0.03 percent of the annual 
SO2 allowances, a change that DOE estimated is too small to 
influence allowance prices. Similarly, for NOX, in the 28 
CAIR states, the emissions savings from today's rule would be less than 
0.018 percent of NOX allowances, also a change that DOE also 
estimated is too small to influence allowance prices.
    In DOE's analysis, for 22 non-CAIR states, emissions of 
NOX from electricity generation were not controlled by a 
regulatory cap. By 2012, DOE projected that the NOX 
emissions in the non-CAIR states would be about 25 percent of the 
national total.\33\ Mercury emissions are also not controlled by a 
regulatory cap. For these two emissions, DOE estimated the national 
monetized benefits of emissions reductions from today's rule based on 
environmental damage estimates from the literature. Non-CAIR emissions 
would not be controlled by an emissions cap so those emissions would 
actually be reduced by the PTAC-PTHP energy savings. Available 
estimates suggest a very wide range of monetary values for 
NOX emissions, ranging from $370 per ton to $3,800 per ton 
of NOX from stationary sources, measured in 2001 dollars 
\34\ or a range of $432 per ton to $4,441 per ton in 2007 dollars. The 
basic science linking mercury emissions from power plants to impacts on 
humans is considered highly uncertain. However, DOE located two 
estimates of the environmental damages of mercury based on two 
estimates of the adverse impact of childhood exposure to methyl mercury 
on IQ for American children, and subsequent loss of lifetime economic 
productivity resulting from these IQ losses. The high end estimate is 
based on an estimate of the current aggregate cost of the loss of IQ 
that results from exposure of American children of U.S. power plant 
origin of $1.3 billion per year in year 2000$, which works out to $32.6 
million per ton emitted per year (2007$).\35\ The low-end estimate was 
$664,000 per ton emitted in 2004$ or $729,000 per ton in 2007$), which 
DOE derived from a published evaluation of mercury control using 
different methods and assumptions from the first study, but also based 
on the present value of the lifetime earnings of children exposed.\36\ 
The resulting estimates of the potential range of the present value 
benefits associated with the reduction of NOX in the 22 non-
CAIR states and national reductions in Hg emissions are reflected in 
Table V.31 and Table V.32
---------------------------------------------------------------------------

    \33\ U.S. NOX emissions have been trending downward 
steadily since 1995, falling from 31.5 million tons in 1995 to 15.2 
million in 2006 (EIA 2007). Although non-CAIR states' emissions have 
also fallen, the emissions in the CAIR states have fallen more 
rapidly; thus, the CAIR states' percentage of the total has also 
fallen from 87.4% in 1997 to 80.9% in 2006. For purposes of this 
analysis, DOE assumed that the CAIR states, percentage of emissions 
continues to decline until it reaches 75 percent in 2012. Seventy-
five percent of emissions reductions are allocated to the CAIR 
states thereafter. Consequently non-CAIR state emissions would be 
about 25% of the total. [Reference: EIA (Energy Information 
Administration). 2007. Estimated Emissions for U.S. Electric Power 
Industry by State, 1990-2006. State Historical Tables for 2006. 
Released: October 26, 2007. Next Update: October 2008 http://www.eia.doe.gov/cneaf/electricity/epa/emission_state.xls].
    \34\ 2006 Report to Congress on the Costs and Benefits of 
Federal Regulations and Unfunded Mandates on State, Local, and 
Tribal Entities. Office of Management and Budget Office of 
Information and Regulatory Affairs, Washington, DC.
    \35\ Trasande, L., et al., ``Applying Cost Analyses to Drive 
Policy that Protects Children'' 1076 ANN. N.Y. ACAD. SCI. 911 
(2006).
    \36\ Ted Gayer and Robert Hahn, Designing Environmental Policy: 
Lessons from the Regulation of Mercury Emissions, Regulatory 
Analysis 05-01. AEI-Brookings Joint Center For Regulatory Studies, 
Washington, DC, 31 pp., 2004. A version of this paper was published 
in the Journal of Regulatory Economics in 2006. The estimate was 
derived by back-calculating the annual benefits per ton from the net 
present value of benefits reported in the study.

[[Page 50126]]



 Table V.31--Preliminary Estimates of Monetary Savings From Reductions of Hg (Nation) and NOX (Non-CAIR States)
                                  by Trial Standard Level at a 7% Discount Rate
----------------------------------------------------------------------------------------------------------------
                                                                     Value of                        Value of
                                                     Estimated     estimated NOX     Estimated     estimated Hg
                                                  cumulative NOX     emission     cumulative  Hg     emission
                Standard size TSL                  (kt) emission    reductions        (tons)        reductions
                                                   reductions *      (million        emission        (million
                                                                      2007$)        reductions*       2007$)
----------------------------------------------------------------------------------------------------------------
1...............................................            2.74       $0.1-$0.6            0.09       $0.0-$0.1
2...............................................           10.58         0.2-2.3            0.36         0.0-0.5
3...............................................           13.88         0.3-3.0            0.47         0.0-0.6
4...............................................           16.16         0.3-3.5            0.54         0.0-0.7
5...............................................           23.47         0.5-5.1            0.80        0.0-1.0
----------------------------------------------------------------------------------------------------------------
* Values in Table V.31 may not appear to sum to the cumulative values in Table V-29 due to rounding.


 Table V.32--Preliminary Estimates of Monetary Savings From Reductions of Hg (Nation) and NOX (Non-CAIR States)
                                  by Trial Standard Level at a 3% Discount Rate
----------------------------------------------------------------------------------------------------------------
                                                                     Value of                        Value of
                                                     Estimated     estimated NOX     Estimated     estimated Hg
                                                  cumulative NOX     emission      cumulative Hg     emission
                Standard size TSL                  (kt) emission    reductions        (tons)        reductions
                                                   reductions *      (million        emission        (million
                                                                      2007$)        reductions        2007$)
----------------------------------------------------------------------------------------------------------------
1...............................................            2.74       $0.1-$1.5            0.09       $0.0-$1.0
2...............................................           10.58         0.5-5.6            0.36         0.1-3.9
3...............................................           13.88         0.7-7.4            0.47         0.1-5.1
4...............................................           16.16         0.8-8.6            0.54         0.1-5.9
5...............................................           23.47        1.2-12.5            0.80        0.2-8.6
----------------------------------------------------------------------------------------------------------------
* Values in Table V.32 may not appear to sum to the cumulative values in Table V-29 due to rounding.

    As discussed above, with the D.C. Circuit vacating the CAIR, DOE is 
considering how it should address the issue of NOX reduction 
and corresponding monetary valuation. DOE invites public comment on how 
the agency should address this issue, including how to value 
NOX emissions for States in the absence of the CAIR.
7. Other Factors
    EPCA allows the Secretary of Energy, in determining whether a 
standard is economically justified, to consider any other factors that 
the Secretary deems to be relevant. (42 U.S.C. 6295(o)(2)(B)(i)(VII) 
and 6316(e)(1)) Under this provision, DOE considered LCC impacts on 
identifiable groups of customers, such as customers of different 
business types, who may be disproportionately affected by any national 
energy conservation standard level. DOE also considered the reduction 
in generated capacity that could result from the imposition of any 
national energy conservation standard level.

C. Proposed Standard

    EPCA specifies that any new or amended energy conservation standard 
for any type (or class) of covered equipment shall be designed to 
achieve the maximum improvement in energy efficiency that the Secretary 
determines is technologically feasible and economically justified. (42 
U.S.C. 6295(o)(2)(A) and 6316(e)(1)) In determining whether a standard 
is economically justified, the Secretary must determine whether the 
benefits of the standard exceed its burdens. (42 U.S.C. 
6295(o)(2)(B)(i) and 6316(e)(1)) The new or amended standard must 
``result in significant conservation of energy.'' (42 U.S.C. 
6295(o)(3)(B) and 6316(e)(1))
    DOE considered the impacts of standards at each of five trial 
standard levels, beginning with the most efficient level (TSL 5) and 
worked down to a level where DOE determined the benefits of potential 
standards outweighed the burdens of potential standards. To aid the 
reader as DOE discusses the benefits and/or burdens of each TSL, Table 
V-33 presents a summary of quantitative analysis results for each TSL 
based on the assumptions and methodology discussed above. This table 
presents the results or, in some cases, a range of results, for each 
TSL. The range of values reported in this table for industry impacts 
represents the results for the different markup scenarios that DOE used 
to estimate manufacturer impacts.

           Table V-33--Summary of Results Based Upon the AEO2007 Reference Case Energy Price Forecast*
----------------------------------------------------------------------------------------------------------------
                                       TSL 1           TSL 2           TSL 3           TSL 4           TSL 5
----------------------------------------------------------------------------------------------------------------
Primary Energy Saved (quads)....           0.141           0.545           0.715           0.832           1.208
7% Discount Rate................           0.034           0.132           0.173           0.201           0.292
3% Discount Rate................           0.073           0.284           0.372           0.433           0.603
Generation Capacity Reduction              0.109           0.421           0.552           0.643           0.934
 (GW) **........................
NPV (2007$ billion):
    7% Discount Rate............            0.33            0.98            1.20            1.10          (0.20)
    3% Discount Rate............            0.82            2.59            3.25            3.24            1.16
Industry Impacts:
    Industry NPV (2007$ million)          0-(63)          6-(88)      (17)-(129)      (40)-(180)      (18)-(285)
    Industry NPV (% Change).....          0-(12)          1-(17)        (3)-(25)        (8)-(35)        (3)-(56)
Cumulative Emissions Impacts:
 [dagger]

[[Page 50127]]

 
    CO2 (Mt)....................            7.37           28.47           37.37           43.50           63.17
    NOX (kt)....................            2.74           10.58           13.88           16.16           23.47
    Hg (t)......................            0.09            0.36            0.47            0.54            0.80
Life-Cycle Cost:
    Net Savings (%).............           17-48           34-68           61-89           68-93           24-93
    Net Increase (%)............               0               0               0            0-19            0-71
    No Change (%)...............           52-83           32-66           11-39            7-32            2-19
    Mean LCC Savings (2007$)....        192-3132        551-4005        710-4089        693-3818      (673)-3818
    Mean PBP (yrs)..............         0.4-1.2         0.6-2.6         1.3-4.6         1.4-6.1       1.4-12.6
----------------------------------------------------------------------------------------------------------------
* Parentheses indicate negative (-) values. For LCCs, a negative value means an increase in LCC by the amount
  indicated.
** Change in installed generation capacity by the year 2042 based on AEO2007 Reference Case.
[dagger] CO2 emissions impacts include physical reductions at power plants. NOX emissions impacts include
  physical reductions at power plants as well as production of emissions allowance credits where NOX emissions
  are subject to emissions caps.

    First, DOE considered TSL 5, the most efficient level for all 
equipment classes. TSL 5 would likely save an estimated 1.208 quads of 
energy through 2042, an amount DOE considers significant. Discounted at 
seven percent, the projected energy savings through 2042 would be 0.292 
quads. For the Nation as a whole, DOE projects that TSL 5 would result 
in a net decrease of $200 million in NPV, using a discount rate of 
seven percent. Five equipment classes (VOP.RC.M, VOP.SC.M, SVO.RC.M, 
SVO.SC.M, and SOC.RC.M) show negative NPV at TSL 5. The emissions 
reductions at TSL 5 are 63.17 Mt of CO2 and up to 23.47 kt 
of NOX. DOE also estimates that under TSL 5, total 
generating capacity in 2042 will decrease compared to the base case by 
0.934 gigawatts (GW).
    At TSL 5, DOE projects that the average commercial refrigeration 
equipment customer will experience a reduction in LCC compared to the 
baseline for 12 of the 15 equipment classes analyzed, while three 
equipment classes (VOP.RC.M, SVO.RC.M, SOC.RC.M) experienced an 
increase in LCC. These three equipment classes are among the five 
identified above that DOE showed had negative NPV. The two additional 
classes, SVO.SC.M and VOP.SC.M, had positive LCC savings at TSL 5, but 
at substantially reduced values compared to those shown at TSL 4 or TSL 
3. LCC savings for all 15 equipment classes vary from negative (-$673) 
to positive $3,818. At TSL 5, DOE estimates the fraction of customers 
experiencing LCC increases will vary between 0 and 71 percent depending 
on equipment class. The mean payback period for the average commercial 
refrigeration equipment customer at TSL 5 compared to the baseline 
level is projected to be between 1.4 and 12.6 years, depending on 
equipment class.
    At higher TSLs, manufacturers have a more difficult time fully 
passing on larger increases in MPC to customers, and therefore 
manufacturers expect the higher end of the range of impacts to be 
reached at TSL 5 (i.e., a drop of 55.77 percent in INPV). At TSL 5, 
there is the risk of very large negative impacts on the industry if 
manufacturers' profit margins are reduced. Manufacturers expressed 
great concern at the possibility of having to manufacture an entire 
equipment line at the max-tech levels, because customers put a much 
higher priority on marketing and displaying their goods than they do on 
energy efficiency. For this reason, manufacturers fear that they will 
be unable to recover the additional cost incurred from producing the 
most efficient equipment possible. See Section IV.I for additional 
manufacturer concerns.
    After carefully considering the analysis and weighing the benefits 
and burdens of TSL 5, DOE tentatively concludes that the estimated 
benefits of energy savings and related benefits would not outweigh the 
potential $200 million net economic cost to the Nation (at the seven 
percent discount rate), as well as the economic burden on consumers and 
the potential negative impact on manufacturers through reduction in 
INPV.
    As discussed above, DOE proposes to reject TSL 5 because DOE finds 
that the benefits to the Nation of TSL 5 (energy savings, commercial 
consumer average LCC savings, and emission reductions) do not outweigh 
the costs (national NPV decrease and loss of manufacturer INPV), and, 
therefore, DOE proposes that TSL 5 is not economically justified. This 
proposal reflects DOE's tentative conclusion that there remains too 
much uncertainty regarding the timing and extent of anticipated 
reductions in LED costs to justify standards at the TSL 5 level. While 
considerable information is available that suggests LED costs are 
likely to decline more than assumed in DOE's analysis (see discussion 
in sections IV.B.3.c, V.B.1.a, and V.B.3.b), DOE believes that it must 
have a higher degree of confidence that the timing and extent of such 
further cost reductions will warrant higher standards before it imposes 
such requirements. DOE is soliciting public comments on these and other 
issues, and will reconsider this tentative conclusion during the 
development of its final rule. (See Section VII.E.1.)
    As mentioned above, if LED system costs achieve the 50 percent 
reduction projection by 2012, the estimated NPV at TSL 5 would be a 
positive $1.62 billion at a seven percent discount rate and $4.76 
billion at the three percent discount rate, and is likely to result in 
a net benefit. DOE requests comment on whether the benefits of TSL 5 
would outweigh the burdens of TSL 5, considering the potential impacts 
of future LED cost projections. This is identified as Issue 7 under 
``Issues on Which DOE Seeks Comment'' in Section VII.E of this NOPR. 
DOE also seeks comment on the extent to which stakeholders expect 
projected LED cost reductions would occur, the timing of the projected 
LED cost reductions, and the certainty of the projected LED cost 
reductions. Also, considering the rapid development of LED technology 
and the steady reductions in cost, DOE seeks comment on the extent to 
which manufacturers would adopt LED technology into the design of 
commercial refrigeration equipment in the absence of standards.
    DOE then considered TSL 4, which provides for all equipment classes 
the maximum efficiency levels that the analysis showed to have positive 
NPV to the Nation. TSL 4 would likely save an estimated 0.832 quads of 
energy through 2042, an amount DOE considers significant. Discounted at 
seven percent, the projected energy savings through 2042 would be 0.201 
quads. For the

[[Page 50128]]

Nation as a whole, DOE projects that TSL 4 would result in a net 
increase of $1.10 billion in NPV, using a discount rate of seven 
percent. The estimated emissions reductions at TSL 4 are 43.50 Mt of 
CO2 and up to 16.16 kt of NOX. Total generating 
capacity in 2042 is estimated to decrease compared to the base case by 
0.643 GW under TSL 4.
    At TSL 4, DOE projects that the average commercial refrigeration 
equipment customer will experience a reduction in LCC compared to the 
baseline for all 15 equipment classes analyzed, ranging from $693 to 
$3,818 depending on equipment class. The mean payback period for the 
average commercial refrigeration equipment customer at TSL 4 is 
projected to be between 1.4 and 6.1 years compared to the purchase of 
baseline equipment.
    As is the case with TSL 5, DOE believes the majority of 
manufacturers would need to completely redesign most equipment offered 
for sale, and therefore DOE expects that commercial refrigeration 
manufacturers will have some difficulty fully passing on larger MPC 
increases to customers. Similar to TSL 5, manufacturers expect the 
higher end of the range of impacts to be reached at TSL 4 (i.e., a drop 
of 35.3 percent in INPV). However, compared to the baseline, all 15 
equipment classes showed significant positive life-cycle cost savings 
on a national average basis and few customers experienced an increase 
in LCC with a standard at TSL 4 compared with purchasing baseline 
equipment. The payback periods calculated for all equipment classes 
were lower than the life of the equipment.
    After carefully considering the analysis and weighing the benefits 
and burdens of TSL 4, DOE proposes that TSL 4 represents the maximum 
improvement in energy efficiency that is technologically feasible and 
economically justified and that the estimated benefits to the Nation 
outweigh the costs. DOE proposes that TSL 4 is technologically feasible 
because the technologies required to achieve these levels are already 
in existence. Therefore, DOE is proposing TSL 4 as the energy 
conservation standards for commercial refrigeration equipment in this 
NOPR.
    However, for the reasons discussed above, DOE also requests 
comments on whether it should adopt TSL 5 for all or some of the 
equipment classes.

VI. Procedural Issues and Regulatory Review

A. Review Under Executive Order 12866

    DOE has determined that today's regulatory action is an 
``economically significant'' action under Section 3(f)(1) of Executive 
Order 12866, ``Regulatory Planning and Review.'' 58 FR 51735 (October 
4, 1993). The Executive Order requires that each agency identify in 
writing the specific market failure or other specific problem that it 
intends to address that warrants new agency action, as well as assess 
the significance of that problem to determine whether any new 
regulation is warranted. Executive Order 12866, Sec.  1(b)(1).
    In the ANOPR for this rulemaking, DOE requested feedback and data 
on a number of issues related to Executive Order 12866 and the 
existence of a market failure in the commercial refrigeration equipment 
industry. This request included (1) Data on, and suggestions for 
testing the existence and extent of, potential market failures to 
complete an assessment in the proposed rule of the significance of any 
failures; (2) data on the efficiency levels of existing commercial 
refrigeration equipment in use by store type; (3) comment on the 
Federal ENERGYSTAR program and its penetration into the commercial 
refrigeration equipment market as a resource on the availability and 
benefits of energy efficient refrigeration units; (4) data on owner-
occupied buildings versus leased/non-owner occupied buildings for given 
store types and their associated use of high-efficiency equipment; and 
(5) comment on the weight that should be given to these factors in 
DOE's determination of the maximum efficiency level at which the total 
benefits are likely to exceed the total burdens resulting from a DOE 
standard. Following publication of the ANOPR and subsequent public 
comment period, DOE did not receive any feedback related to these 
requests.
    Much of the industry segment that uses commercial refrigeration 
equipment tends to be large grocery stores, multi-line retailers, small 
grocery stores, or convenience stores. DOE believes that these owners 
may lack corporate direction on energy policy. The transaction costs 
for these owners to research, purchase, and install optimum efficiency 
equipment options are too high to make such action commonplace. DOE 
believes that there is a lack of information about energy efficiency 
opportunities in the commercial refrigeration equipment market 
available to these owners. Unlike residential heating and air 
conditioning equipment, commercial refrigeration equipment is not 
included in energy labeling programs such as the Federal Trade 
Commission's energy labeling program. Furthermore, the energy use of 
this equipment depends on usage. Information is not readily available 
for the owners to make a decision on whether improving the energy 
efficiency of commercial refrigeration equipment is cost-effective. DOE 
seeks data on the efficiency levels of existing commercial 
refrigeration equipment in use by owners, electricity price, and 
equipment class. Being part of the food merchandising industry, energy 
efficiency and energy cost savings are not the primary drivers of the 
business, as is selling food products to shoppers. This may incur 
transaction costs, thus preventing access to capital to finance energy 
efficiency investment.
    Today's action also required a regulatory impact analysis (RIA) 
and, under the Executive Order, was subject to review by the Office of 
Information and Regulatory Affairs (OIRA) in the OMB. DOE presented to 
OIRA for review the draft proposed rule and other documents prepared 
for this rulemaking, including the RIA, and has included these 
documents in the rulemaking record. They are available for public 
review in the Resource Room of the Building Technologies Program, 950 
L'Enfant Plaza, SW., 6th Floor, Washington, DC 20024, (202) 586-9127, 
between 9 a.m. and 4 p.m., Monday through Friday, except Federal 
holidays.
    The RIA is contained in the TSD prepared for the rulemaking. The 
RIA consists of (1) a statement of the problem addressed by this 
regulation and the mandate for Government action; (2) a description and 
analysis of the feasible policy alternatives to this regulation; (3) a 
quantitative comparison of the impacts of the alternatives; and (4) the 
national economic impacts of the proposed standard.
    The RIA calculates the effects of feasible policy alternatives to 
commercial refrigeration equipment standards and provides a 
quantitative comparison of the impacts of the alternatives. DOE 
evaluated the alternatives in terms of their ability to achieve 
significant energy savings at reasonable cost, and compared it to the 
effectiveness of the proposed rule. DOE analyzed these alternatives 
using a series of regulatory scenarios as input to the NES/shipments 
model for commercial refrigeration equipment, which DOE modified to 
provide inputs for these voluntary measures.
    DOE identified the following major policy alternatives for 
achieving

[[Page 50129]]

increased commercial refrigeration equipment energy efficiency:
     No new regulatory action.
     Commercial customer rebates.
     Commercial customer tax credits.
    DOE evaluated each alternative's ability to achieve significant 
energy savings at reasonable cost (Table VI-1), and compared it to the 
effectiveness of the proposed rule.

                              Table VI-1--Non-Regulatory Alternatives to Standards
----------------------------------------------------------------------------------------------------------------
                                                                                  Net present value\**\ (billion
                                                                      Energy                  2007$)
                       Policy alternatives                          savings\*\   -------------------------------
                                                                      (quads)       7% discount     3% discount
                                                                                       rate            rate
----------------------------------------------------------------------------------------------------------------
No New Regulatory Action........................................           0               0               0
Commercial Customer Rebates.....................................           0.099           0.139           0.315
Commercial Customer Tax Credits[dagger].........................           0.084           0.178           0.381
Today's Standards at TSL 4......................................           0.832           1.10            3.24
----------------------------------------------------------------------------------------------------------------
\*\ Energy savings are in source quads.
\**\ Net present value is the value in the present of a time series of costs and savings. DOE determined the net
  present value from 2012 to 2062 in billions of 2007$.
[dagger] These are example values for TSL 3.

    The net present value amounts shown in Table VI-1 refer to the NPV 
for commercial customers. The following paragraphs discuss each policy 
alternative listed in Table VI-1. (See Chapter 17 of the TSD, 
Regulatory Impact Analysis, for further details.)
    No new regulatory action. The case in which no regulatory action is 
taken for commercial refrigeration equipment constitutes the base case 
(or No Action) scenario. By definition, no new regulatory action yields 
zero energy savings and a net present value of zero dollars.
    Commercial Customer Rebates. DOE modeled the impact of the customer 
rebate policy by determining the increased customer participation rate 
due to the rebates (i.e., the percent increase in customers purchasing 
high-efficiency equipment). DOE modeled a national rebate program after 
existing utility rebate programs that provide incentives for 
incorporating high-efficiency technologies into commercial 
refrigeration equipment. The reduction in retail cost of the higher 
efficiency cases was calculated and the methodology developed for the 
NIA used to assess relative shipments by efficiency level was used to 
assess relative shipments by efficiency level under the rebate 
scenario. DOE applied the resulting increase in market share of 
efficient units to the NES spreadsheet model to estimate the resulting 
NES and NPV for the rebate scenario with respect to the base case.
    Commercial Customer Tax Credits. DOE assumed a commercial or 
industrial customer Federal tax credit patterned after the tax credits 
created in EPACT 2005. EPACT 2005 provided tax credits to customers who 
purchase and install specific products such as energy efficient 
windows, insulation, doors, roofs, and heating and cooling equipment. 
DOE presumed the presence of a certification or other program that 
could be used to identify high-efficiency commercial refrigeration 
equipment by energy consumption, and assumed TSL 3 as a likely 
candidate level for a tax credit incentive, given that it was the 
minimum LCC level. DOE then reviewed the incremental customer price 
increase to reach TSL 3 from the baseline for all 15 equipment classes. 
For 12 of the equipment classes, the incremental cost was between 6.1 
and 21.3 percent. For three equipment classes (SOC.RC.M, HZO.RC.M, 
HZO.RC.L), the incremental cost was less than five percent. In its tax 
credit analysis, DOE assumed a flat tax credit equal to five percent of 
the customer price for equipment sold at TSL 3 or higher for each 
primary equipment class, with the exception of SOC.RC.M, HZO.RC.M, and 
HZO.RC.L. DOE assumed a 100 percent application rate for the tax credit 
from commercial refrigeration equipment customers and reduced the 
retail equipment price by five percent for TSL 3, TSL 4, and TSL 5 for 
the 12 equipment classes. The reductions in retail cost of commercial 
refrigeration equipment at these levels was calculated and the 
methodology developed for the NIA used to assess relative shipments by 
efficiency level under the tax credit scenario. DOE applied the 
resulting increase in market share of efficient units to the NES 
spreadsheet model to estimate the resulting NES and NPV for the tax 
credit scenario with respect to the base case. To see results for tax 
credits for equipment meeting or exceeding TSL 5, see the Regulatory 
Impact Analysis of the TSD.
    Performance Standards. Each of the non-regulatory alternatives must 
be gauged against the performance standards DOE is proposing in this 
proposed rule. DOE also considered, but did not analyze, the potential 
of bulk Government purchases and early replacement incentive programs 
as alternatives to the proposed standards. In the case of bulk 
Government purchases, commercial refrigeration equipment is a very 
small part of the total market and the volume of high-efficiency 
equipment purchases that the Federal Government might make would have 
very limited impact on improving the overall market efficiency of 
commercial refrigeration equipment. In the case of replacement 
incentives, several policy options exist to promote early replacement, 
including a direct national program of customer incentives, incentives 
paid to utilities to promote an early replacement program, market 
promotions through equipment manufacturers, and replacement of 
Federally owned equipment. Previous analysis by DOE of methods to 
promote early replacement for other covered equipment have suggested 
that the energy savings realized through a one-time early replacement 
of existing stock equipment has not resulted in energy savings 
commensurate to the cost to run and administer the program. As a 
consequence, DOE did not analyze this option in detail.
    As Table VI-1 indicates, none of the alternatives DOE examined 
would save as much energy as today's proposed rule. Also, several of 
the alternatives would require new enabling legislation, since 
authority to carry out those alternatives does not exist. The tax 
credit scenario would also require the development of a database of 
commercial refrigeration equipment that would meet or exceed the TSL 3 
efficiency level in order to determine compliance with the tax credit.

[[Page 50130]]

B. Review Under the Regulatory Flexibility Act/Initial Regulatory 
Flexibility Analysis

    The Regulatory Flexibility Act (5 U.S.C. 601 et seq.) requires 
preparation of an initial regulatory flexibility analysis (IRFA) for 
any rule that by law must be proposed for public comment, unless the 
agency certifies that the rule, if promulgated, will not have a 
significant economic impact on a substantial number of small entities. 
As required by Executive Order 13272, ``Proper Consideration of Small 
Entities in Agency Rulemaking'' 67 FR 53461 (August 16, 2002), DOE 
published procedures and policies on February 19, 2003, to ensure that 
the potential impacts of its rules on small entities are properly 
considered during the rulemaking process. 68 FR 7990. DOE has made its 
procedures and policies available on the Office of General Counsel's 
Web site, http://www.gc.doe.gov.
    Small businesses, as defined by the Small Business Administration 
(SBA) for the commercial refrigeration equipment manufacturing 
industry, are manufacturing enterprises with 750 employees or fewer. 
DOE used the small business size standards published on January 31, 
1996, as amended by the SBA to determine whether any small entities 
would be required to comply with the rule. 61 FR 3286 and codified at 
13 CFR Part 121. The size standards are listed by North American 
Industry Classification System (NAICS) code and industry description. 
Commercial refrigeration equipment manufacturing is classified under 
NAICS 333415.
    Prior to issuing this notice of proposed rulemaking, DOE 
interviewed two small businesses affected by the rulemaking. DOE also 
obtained information about small business impacts while interviewing 
manufacturers that exceed the small business size threshold of 750 
employees.
    DOE reviewed ARI's listing of its commercial refrigeration 
equipment manufacturer members and surveyed the industry to develop a 
list of all domestic manufacturers. DOE also asked stakeholders and ARI 
representatives within the industry if they were aware of any other 
small business manufacturers. DOE then examined publicly available data 
and contacted manufacturers, when needed, to determine if they meet the 
SBA's definition of a small manufacturing facility and if their 
manufacturing facilities are located within the United States. Based on 
this analysis, DOE identified nine small manufacturers of commercial 
refrigeration equipment. DOE conducted on-site interviews with two 
small manufacturers who agreed to be interviewed to determine if there 
are differential impacts on these companies that may result from new 
energy conservation standards.
    DOE found that, in general, small manufacturers have the same 
concerns as large manufacturers regarding new energy conservation 
standards. DOE summarized the key issues for commercial refrigeration 
equipment manufacturers in Section IV.I.3.a of today's notice. Both 
manufacturers echoed the same concerns regarding new energy 
conservation standards as the larger manufacturers, including 
investments needed to meet standards, meeting customer needs, equipment 
sales, and coverage of niche equipment. Specifically, DOE found no 
significant differences in the R&D emphasis or marketing strategies 
between small business manufacturers and large manufacturers. 
Therefore, for the equipment classes manufactured primarily by the 
small businesses, DOE believes the GRIM analysis, which models each 
equipment class separately, is representative of the small businesses 
affected by standards. The qualitative and quantitative GRIM results 
are summarized in Section V.B.2 of today's notice.
    DOE reviewed the standard levels considered in today's notice of 
proposed rulemaking under the provisions of the Regulatory Flexibility 
Act and the procedures and policies published on February 19, 2003. 
Based on this review, DOE has prepared an IRFA for this rulemaking. The 
IRFA describes potential impacts on small businesses associated with 
commercial refrigeration equipment design and manufacturing.
    The potential impacts on commercial refrigeration equipment 
manufacturers are discussed in the following sections. DOE has 
transmitted a copy of this IRFA to the Chief Counsel for Advocacy of 
the Small Business Administration for review.
1. Reasons for the Proposed Rule
    Part A-1 of Title III of EPCA addresses the energy efficiency of 
certain types of commercial and industrial equipment. (42 U.S.C. 6311-
6317) EPACT 2005, Pub. L. 109-58, included an amendment to Part A-1 
requiring that DOE prescribe energy conservation standards for the 
commercial refrigeration equipment that is the subject of this 
rulemaking. (EPACT 2005, Section 136(c); 42 U.S.C. 6313(c)(4)(A)) 
Hence, DOE is proposing in today's notice, energy conservation 
standards for commercial ice-cream freezers; self-contained commercial 
refrigerators, commercial freezers, and commercial refrigerator-
freezers without doors; and remote condensing commercial refrigerators, 
commercial freezers, and commercial refrigerator-freezers.
2. Objectives of, and Legal Basis for, the Proposed Rule
    EPCA provides that any new or amended standard for commercial 
refrigeration equipment must be designed to achieve the maximum 
improvement in energy efficiency that is technologically feasible and 
economically justified. (42 U.S.C. 6295(o)(2)(A) and 6316(e)(1)) But 
EPCA precludes DOE from adopting any standard that would not result in 
significant conservation of energy. (42 U.S.C. 6295(o)(3) and 
6316(e)(1)) Moreover, DOE may not prescribe a standard for certain 
equipment if no test procedure has been established for that equipment, 
or if DOE determines by rule that the standard is not technologically 
feasible or economically justified, and that such standard will not 
result in significant conservation of energy. (42 U.S.C. 6295(o)(3) and 
6316(e)(1)) EPCA also provides that, in deciding whether a standard is 
economically justified, DOE must determine whether the benefits of the 
standard exceed its burdens after receiving comments on the proposed 
standard. (42 U.S.C. 6295(o)(2)(B)(i) and 6316(e)(1)) To determine 
whether economic justification exists, DOE reviews comments received 
and conducts analysis to determine whether the economic benefits of the 
proposed standard exceed the burdens to the greatest extent 
practicable, taking into consideration seven factors set forth in 42 
U.S.C. 6295(o)(2)(B) and 6316(e)(1) (see Section II.B of this 
preamble).
    EPCA also states that the Secretary may not prescribe an amended or 
new standard if interested persons have established by a preponderance 
of the evidence that the standard is likely to result in the 
unavailability in the United States of any equipment type (or class) 
with performance characteristics (including reliability), features, 
sizes, capacities, and volumes that are substantially the same as those 
generally available in the United States. (42 U.S.C. 6295(o)(4) and 
6316(e)(1)) Further information concerning the background of this 
rulemaking is provided in Chapter 1 of the TSD.

[[Page 50131]]

 3. Description and Estimated Number of Small Entities Regulated
    DOE reviewed ARI's listing of commercial refrigeration equipment 
manufacturer members and surveyed the industry to develop a list of 
every manufacturer. DOE also asked stakeholders and ARI representatives 
within the industry if they were aware of any other small business 
manufacturers. DOE then looked at publicly available data and contacted 
manufacturers, where needed, to determine if they meet the SBA's 
definition of a small business manufacturing facility and have their 
manufacturing facilities located within the U.S. Based on this 
analysis, DOE estimates that there are nine small commercial 
refrigeration equipment manufacturers. See Chapter 13 of the TSD for 
further discussion about the methodology used in DOE's manufacturer 
impact analysis and its analysis of small-business impacts.
4. Description and Estimate of Compliance Requirements
    Potential impacts on manufacturers, including small businesses, 
come from impacts associated with commercial refrigeration equipment 
design and manufacturing. The margins and/or market share of 
manufacturers, including small businesses, in the commercial 
refrigeration equipment industry could be negatively impacted in the 
long term by the standard levels under consideration in this notice of 
proposed rulemaking, specifically TSL 4. The level of research and 
development needed to meet energy conservation standards increases with 
more stringent energy conservation standards. DOE expects that small 
manufacturers will have more difficulty funding the required research 
and development necessary to meet energy conservation standards than 
larger manufacturers. Therefore, at proposed TSL 4, as opposed to lower 
TSLs, small manufacturers would have less flexibility in choosing a 
design path. However, as discussed under subsection 6 (Significant 
alternatives to the rule) below, DOE expects that the differential 
impact on small commercial refrigeration equipment manufacturers 
(versus large businesses) would be smaller in moving from proposed TSL 
1 to proposed TSL 2 than it would be in moving from proposed TSL 4 to 
proposed TSL 5. The rationale for DOE's expectation is best discussed 
in a comparative context and is therefore elaborated upon in subsection 
6 (Significant alternatives to the rule). As discussed in the 
introduction to this IRFA, DOE expects that the differential impact 
associated with commercial refrigeration equipment design and 
manufacturing on small businesses would be negligible.
5. Duplication, Overlap, and Conflict With Other Rules and Regulations
    DOE is not aware of any rules or regulations that duplicate, 
overlap, or conflict with the rule being considered today.
6. Significant Alternatives to the Rule
    The primary alternatives to the proposed rule considered by DOE are 
the other TSLs besides the one being considered today, proposed TSL 4. 
In addition to the other TSLs considered, the TSD associated with this 
proposed rule includes a report referred to in Section VI.A in the 
preamble as the regulatory impact analysis (RIA-discussed earlier in 
this report and in detail in the TSD). This report discusses the 
following policy alternatives: (1) No new regulatory action, (2) 
commercial customer rebates, and (3) commercial customer tax credits. 
The energy savings of these regulatory alternatives are one to two 
orders of magnitude smaller than those expected from the standard 
levels under consideration. The range of economic impacts of these 
regulatory alternatives is an order of magnitude smaller than the range 
of impacts expected from the standard levels under consideration.
    The commercial refrigeration equipment industry is highly 
customized. Customers demand high levels of customization from 
commercial refrigeration equipment manufacturers to differentiate 
themselves from other retail stores. They do not want to lose any 
functionality or utility in their equipment, such as display area, 
because this affects their ability to merchandise products. Often, the 
customer's desire for easy consumer access requires equipment that is 
less energy efficient. They also do not want to lose any flexibility in 
design choices, such as lighting options. All manufacturers, including 
small businesses, would have to develop designs to enable compliance to 
higher TSLs. Product redesign costs tend to be fixed and do not scale 
with sales volume. Thus, small manufacturers would be at a relative 
disadvantage at higher TSLs because research and development efforts 
would be on the same scale as those for larger companies, but these 
expenses would be recouped over smaller sales volumes.
    At proposed TSL 5, the max-tech level, manufacturers stated their 
concerns over the ability to be able to produce equipment by the future 
effective date of the standard. At proposed TSL 5, DOE estimates that 
the majority of manufacturers would be negatively impacted. Based on 
manufacturer interviews, some manufacturers stated that they could not 
meet proposed TSL 5 for medium-temperature equipment, and that they 
would need technological innovation to achieve these levels by 2012. 
Manufacturers believe that setting standards at the maximum level will 
affect their customers' ability to merchandise products by limiting the 
flexibility in choosing design options. For example, at TSL 5 
specifically, the use of LED lighting technology may be necessary to 
meet the proposed levels for many equipment classes. Manufacturers 
expect that having limited choices in design options would commoditize 
the industry and reduce profit margins. This concern was echoed by all 
manufacturers, not just small business manufacturers.
    For the proposed standard, TSL 4, and for alternative TSLs, TSL 1 
through 3, DOE expects that impacts to small manufacturers would be 
less than the impacts described above for TSL 5. At lower TSLs, the 
differential impacts to small manufacturers are diminished because 
research and development efforts are less at lower TSLs. Chapter 12 of 
the TSD contains additional information about the impact of this 
rulemaking on manufacturers. As mentioned above, the other policy 
alternatives (no new regulatory action, commercial customer rebates, 
and commercial customer tax credits) are described in Section VI.A of 
the preamble and in the Regulatory Impact Analysis, Chapter 17 of the 
TSD. Since the impacts of these policy alternatives are lower than the 
impacts described above for TSL 5, DOE expects that the impacts to 
small manufacturers would also be less than the impacts described above 
for the proposed standard levels. DOE requests comment on the impacts 
to small business manufacturers for these and any other possible 
alternatives to the proposed rule. DOE will consider any comments 
received regarding impacts to small business manufacturers for all the 
alternatives identified, including those in the RIA, for the Final 
Rule.

C. Review Under the Paperwork Reduction Act

    This rulemaking will impose no new information or record keeping 
requirements. Accordingly, OMB clearance is not required under the

[[Page 50132]]

Paperwork Reduction Act. (44 U.S.C. 3501 et seq.)

D. Review Under the National Environmental Policy Act

    DOE is preparing an environmental assessment of the impacts of the 
proposed rule. DOE is preparing an environmental assessment of the 
impacts of the proposed rule. The assessment will include an 
examination of the potential effects of emission reductions likely to 
result from the rule in the context of global climate change as well as 
other types of environmental impacts. DOE anticipates completing a 
Finding of No Significant Impact (FONSI) before publishing the final 
rule on commercial refrigeration equipment, pursuant to the National 
Environmental Policy Act of 1969 (42 U.S.C. 4321 et seq.), the 
regulations of the Council on Environmental Quality (40 CFR Parts 1500-
1508), and DOE's regulations for compliance with the National 
Environmental Policy Act (10 CFR Part 1021).

E. Review Under Executive Order 13132

    Executive Order 13132, Federalism, 64 FR 43255 (August 4, 1999) 
imposes certain requirements on agencies formulating and implementing 
policies or regulations that preempt State law or that have federalism 
implications. The Executive Order requires agencies to examine the 
constitutional and statutory authority supporting any action that would 
limit the policymaking discretion of the States and carefully assess 
the necessity for such actions. The Executive Order also requires 
agencies to have an accountable process to ensure meaningful and timely 
input by State and local officials in the development of regulatory 
policies that have federalism implications. On March 14, 2000, DOE 
published a statement of policy describing the intergovernmental 
consultation process it will follow in the development of such 
regulations. 65 FR 13735. DOE has examined today's proposed rule and 
has determined that it would not have a substantial direct effect on 
the States, on the relationship between the National Government and the 
States, or on the distribution of power and responsibilities among the 
various levels of government. EPCA governs and prescribes Federal 
preemption of State regulations as to energy conservation for the 
equipment that is the subject of today's proposed rule. States can 
petition DOE for exemption from such preemption to the extent, and 
based on criteria, set forth in EPCA. (42 U.S.C. 6297(d) and 
6316(b)(2(D)) No further action is required by Executive Order 13132.

F. Review Under Executive Order 12988

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

G. Review Under the Unfunded Mandates Reform Act of 1995

    DOE reviewed this regulatory action under Title II of the Unfunded 
Mandates Reform Act of 1995 (Pub. L. 104-4) (UMRA), which requires each 
Federal agency to assess the effects of Federal regulatory actions on 
State, local and Tribal governments and the private sector. Today's 
final rule may impose expenditures of $100 million or more on the 
private sector. It does not contain a Federal intergovernmental 
mandate.
    Section 202 of UMRA authorizes an agency to respond to the content 
requirements of UMRA in any other statement or analysis that 
accompanies the proposed rule. 2 U.S.C. 1532(c). The content 
requirements of section 202(b) of UMRA relevant to a private sector 
mandate substantially overlap the economic analysis requirements that 
apply under section 325(o) of EPCA and Executive Order 12866. The 
Supplementary Information section of the notice of final rulemaking and 
the ``Regulatory Impact Analysis'' section of the TSD for this final 
rule respond to those requirements.
    Under section 205 of UMRA, the Department is obligated to identify 
and consider a reasonable number of regulatory alternatives before 
promulgating a rule for which a written statement under section 202 is 
required. DOE is required to select from those alternatives the most 
cost-effective and least burdensome alternative that achieves the 
objectives of the rule unless DOE publishes an explanation for doing 
otherwise or the selection of such an alternative is inconsistent with 
law. As required by sections 325(o), 345(a) and 342(c)(4)(A) of EPCA 
(42 U.S.C. 6295(o), 6316(a) and 6313(c)(4)(A)), today's proposed rule 
would establish energy conservation standards for commercial 
refrigeration equipment that are designed to achieve the maximum 
improvement in energy efficiency that DOE has determined to be both 
technologically feasible and economically justified. A full discussion 
of the alternatives considered by DOE is presented in the ``Regulatory 
Impact Analysis'' section of the TSD for today's final rule.

H. Review Under the Treasury and General Government Appropriations Act, 
1999

    Section 654 of the Treasury and General Government Appropriations 
Act, 1999 (Pub. L. 105-277) requires Federal agencies to issue a Family 
Policymaking Assessment for any rule that may affect family well-being. 
This rule would not have any impact on the autonomy or integrity of the 
family as an institution. Accordingly, DOE has concluded that it is not 
necessary to prepare a Family Policymaking Assessment.

I. Review Under Executive Order 12630

    DOE has determined, under Executive Order 12630, Governmental 
Actions and Interference with Constitutionally Protected Property 
Rights, 53 FR 8859 (March 18, 1988), that this regulation would not 
result in any takings that might require compensation under the Fifth 
Amendment to the U.S. Constitution.

J. Review Under the Treasury and General Government Appropriations Act, 
2001

    The Treasury and General Government Appropriations Act, 2001 (44 
U.S.C. 3516 note) provides for agencies to review most disseminations 
of information to the public under guidelines established by each 
agency pursuant to general guidelines issued by

[[Page 50133]]

OMB. The OMB's guidelines were published at 67 FR 8452 (February 22, 
2002), and DOE's guidelines were published at 67 FR 62446 (October 7, 
2002). DOE has reviewed today's Notice under the OMB and DOE guidelines 
and has concluded that it is consistent with applicable policies in 
those guidelines.

K. Review Under Executive Order 13211

    Executive Order 13211, Actions Concerning Regulations That 
Significantly Affect Energy Supply, Distribution, or Use, 66 FR 28355 
(May 22, 2001) requires Federal agencies to prepare and submit to the 
OIRA, OMB, a Statement of Energy Effects for any proposed significant 
energy action. A significant energy action is defined as any action by 
an agency that promulgated or is expected to lead to promulgation of a 
final rule, and that (1) is a significant regulatory action under 
Executive Order 12866, or any successor order; and (2) is likely to 
have a significant adverse effect on the supply, distribution, or use 
of energy, or (3) is designated by the Administrator of OIRA as a 
significant energy action. For any proposed significant energy action, 
the agency must give a detailed statement of any adverse effects on 
energy supply, distribution, or use should the proposal be implemented, 
and of reasonable alternatives to the action and their expected 
benefits on energy supply, distribution, and use.
    Today's regulatory action would not have a significant adverse 
effect on the supply, distribution, or use of energy and, therefore, is 
not a significant energy action. Accordingly, DOE has not prepared a 
Statement of Energy Effects.

L. Review Under the Information Quality Bulletin for Peer Review

    On December 16, 2004, the OMB, in consultation with the Office of 
Science and Technology (OSTP), issued its Final Information Quality 
Bulletin for Peer Review (Bulletin). 70 FR 2664 (January 14, 2005). The 
Bulletin establishes that certain scientific information shall be peer 
reviewed by qualified specialists before it is disseminated by the 
Federal Government, including influential scientific information 
related to agency regulatory actions. The purpose of the bulletin is to 
enhance the quality and credibility of the Government's scientific 
information. Under the Bulletin, the energy conservation standards 
rulemaking analyses are ``influential scientific information.'' The 
Bulletin defines ``influential scientific information'' as ``scientific 
information the agency reasonably can determine will have, or does 
have, a clear and substantial impact on important public policies or 
private sector decisions.'' 70 FR 2667 (January 14, 2005).
    In response to OMB's Bulletin, DOE conducted formal, in-progress 
peer reviews of the energy conservation standards development process 
and analyses and has prepared a Peer Review Report pertaining to the 
energy conservation standards rulemaking analyses. The Energy 
Conservation Standards Rulemaking Peer Review Report dated February 
2007 has been disseminated and is available at http://www.eere.energy.gov/buildings/appliance_standards/ peer_review.html.

VII. Public Participation

A. Attendance at Public Meeting

    The time, date and location of the public meeting are provided in 
the DATES and ADDRESSES sections at the beginning of this document. 
Anyone who wants 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 is a 
representative of a group or class of persons that has an interest in 
these issues, may request an opportunity to make an oral presentation. 
Please hand-deliver requests to speak to the address shown under the 
heading ``Hand Delivery/Courier'' in the ADDRESSES section of this 
NOPR, between 9 a.m. and 4 p.m., Monday through Friday, except Federal 
holidays. Also, requests may be sent by mail to the address shown under 
the heading ``Postal Mail'' in the ADDRESSES section of this NOPR, 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 selected to be heard 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 as described in the preceding 
paragraph. 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 participate, 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, SW., 6th Floor,

[[Page 50134]]

Washington, DC 20024, (202) 586-2945, between 9 a.m. and 4 p.m., Monday 
through Friday, except Federal holidays. Any person may purchase a copy 
of the transcript from the transcribing reporter.

D. Submission of Comments

    DOE will accept comments, data, and information regarding all 
aspects of this NOPR before or after the public meeting, but no later 
than the date provided at the beginning of this notice of proposed 
rulemaking. Please submit comments, data, and information 
electronically to the following e-mail address: 
[email protected]. 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 EE-2006-
STD-0126 and/or RIN 1904-AB59, and whenever possible carry the 
electronic signature of the author. Absent an electronic signature, 
comments submitted electronically must be followed and authenticated by 
submitting a signed original paper document. No telefacsimiles (faxes) 
will be accepted.
    Under 10 CFR 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 including 
all the information believed to be confidential, and one copy of the 
document with 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 of interest to DOE 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 which 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 particularly interested in receiving comments and views of 
interested parties concerning:
1. LED Price Projections
    TSL 5 has an estimated -$200 million burden on the Nation. DOE 
recognizes that anticipated reductions in LED lighting costs by the 
effective date of the rule could shift the NPV, at the seven percent 
discount rate, for TSL 5 from a negative NPV (-$200 million) to a 
positive NPV. DOE calculated that a reduction in LED system cost of six 
percent would be sufficient to ensure a slightly positive aggregate NPV 
at TSL 5, at the seven percent discount rate, when compared with the 
base case. DOE fully expects that the aggregate six percent reduction 
in LED system costs could be attained and even exceeded by 2012 because 
of the rapid development of LED technology. Furthermore, if LED system 
costs achieve the 50 percent reduction projection, the NPV at a seven 
percent discount rate for TSL 5 would be substantially positive. DOE 
requests data or information on projected LED cost reductions and basis 
for such projections. DOE also seeks comment on its consideration of 
projected LED prices. DOE also seeks comment on the extent to which 
stakeholders expect projected LED cost reductions would occur, the 
timing of the projected LED cost reductions, and the certainty of the 
projected LED cost reductions. Also, considering the rapid development 
of LED technology and the steady reductions in cost, DOE seeks comment 
on the extent to which manufacturers would adopt LED technology into 
the design of commercial refrigeration equipment in the absence of 
standards. DOE recognizes that LED system replacement costs assumed in 
its LCC analysis would also be affected by projected LED cost 
reductions and seeks comment on how it can best predict the cost for 
LED fixture replacements in the LCC analysis. (See Section V.C of this 
NOPR for further details.)
2. Base Case Efficiency
    DOE recognizes that baseline efficiency trends can change if 
equipment costs are different than those projected. For example, if LED 
prices drop more than assumed in the engineering analysis, consumer 
demand for LED-equipped equipment could change. DOE seeks comment on 
whether shipments of LED-equipped equipment would change if LED costs 
drop and if so, the extent and timing of such shipment changes. See 
Section IV.G.1.
3. Operating Temperature Ranges
    One factor in determining which equipment class a commercial 
refrigeration equipment unit belongs to is its designed operating 
temperature. DOE is organizing equipment classes based on three 
operating temperature ranges. Medium temperature equipment operates at 
or above 32 [deg]F, low temperature equipment operates at temperatures 
below 32 [deg]F and greater than 5 [deg]F, and ice-cream temperature 
equipment operates at or below -15 [deg]F. DOE seeks comment on the 
temperatures selected to categorize equipment classes. (See Section 
IV.A.2 of this NOPR for further details.)
4. Offset Factors
    For the NOPR, DOE developed offset factors as a way to adjust the 
energy efficiency requirements for smaller-sized equipment in each 
equipment class analyzed. These offset factors account for certain 
components of the refrigeration load (such as the conduction end 
effects) that remain constant even when equipment sizes vary. These 
constant loads affect smaller cases disproportionately. The offset 
factors are intended to approximate these constant loads and provide a 
fixed end point, corresponding to a zero TDA or zero volume case, in an 
equation that describes the relationship between energy consumption and 
the corresponding TDA or volume metric. DOE seeks comment on the use of 
offset factors and the methodology used to calculate them. (See Section 
V.A of this NOPR and Chapter 5 of the TSD for further details.)
5. Extension of Standards
    DOE developed an extension approach to applying the standards 
developed for these 15 primary equipment classes to the remaining 23 
secondary classes. This approach involves extension multipliers 
developed using both the 15 primary equipment classes analyzed and a 
set of focused matched-pair analyses. DOE believes that standards for 
certain primary equipment classes can be directly applied to other 
similar secondary equipment classes. DOE seeks comment on its approach 
to extending the results of the engineering analysis to the 23 
secondary equipment classes. (See Section V.A of this NOPR and Chapter 
5 of the TSD for further details.)
6. Standards for Hybrid Cases and Wedges
    There are certain types of equipment that meet the definition of 
commercial refrigeration equipment (Section 136(a)(3) of EPACT 2005), 
but do not fall easily into any of the 38 equipment classes defined in 
the market and technology assessment. One of these types is hybrid 
cases, where two or

[[Page 50135]]

more compartments are in different equipment families and contained in 
one cabinet. Another is refrigerator-freezers, which have two 
compartments in the same equipment family but with different operating 
temperatures. There may also exist hybrid refrigerator-freezers, where 
two or more compartments are in different equipment families and have 
different operating temperatures. Another is wedge cases, which form 
miter transitions between standard display case lineups. DOE seeks 
comment on proposed language that will allow manufacturers to determine 
appropriate standard levels for these types of equipment. (See Section 
0 of this NOPR for further details.)
7. Standard Levels
    If, based on comment, DOE were to revise the LED system costs as 
described above (section V.C) the economic impacts of TSL 5 would 
change. DOE seeks comments on its consideration of TSL 5 and whether 
the benefits would outweigh the burdens.

VIII. Approval of the Office of the Secretary

    The Secretary of Energy has approved publication of this proposed 
rule.

    Issued in Washington, DC, on August 12, 2008.
Alexander A. Karsner,
Assistant Secretary, Energy Efficiency and Renewable Energy.

List of Subjects in 10 CFR Part 431

    Administrative practice and procedure, Energy conservation, 
Household appliances.

    For the reasons set forth in the preamble, Chapter II of Title 10, 
Code of Federal Regulations, Part 431 is proposed to be amended to read 
as set forth below.

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

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

    Authority: 42 U.S.C. 6291-6317.

    2. Section 431.62 of subpart C is amended by adding in alphabetical 
order new definitions for ``air-curtain angle,'' ``commercial hybrid 
refrigerator, freezer, and refrigerator-freezer,'' ``door angle,'' 
``horizontal closed,'' horizontal open'', ``semivertical open,'' 
``vertical closed,'' ``vertical open,'' and ``wedge case'' to read as 
follows:


Sec.  431.62  Definitions concerning commercial refrigerators, freezers 
and refrigerator-freezers.

    Air-curtain angle means:
    (1) For equipment without doors and without a discharge air grille 
or discharge air honeycomb, the angle between a vertical line extended 
down from the highest point on the manufacturer's recommended load 
limit line and the load limit line itself, when the equipment is viewed 
in cross-section; and
    (2) For all other equipment without doors, the angle formed between 
a vertical line and the straight line drawn by connecting the point at 
the inside edge of the discharge air opening with the point at inside 
edge of the return air opening, when the equipment is viewed in cross-
section.
* * * * *
    Commercial hybrid refrigerator, freezer, and refrigerator-freezer 
means a commercial refrigerator, freezer, or refrigerator-freezer that 
has two or more chilled and/or frozen compartments that are (1) in two 
or more different equipment families, (2) contained in one cabinet and 
(3) sold as a single unit.
* * * * *
    Door angle means:
    (1) For equipment with flat doors, the angle between a vertical 
line and the line formed by the plane of the door, when the equipment 
is viewed in cross-section; and
    (2) For equipment with curved doors, the angle formed between a 
vertical line and the straight line drawn by connecting the top and 
bottom points where the display area glass joins the cabinet, when the 
equipment is viewed in cross-section.
* * * * *
    Horizontal Closed means equipment with hinged or sliding doors and 
a door angle greater than or equal to 45[deg].
    Horizontal Open means equipment without doors and an air-curtain 
angle greater than or equal to 80[deg] from the vertical.
* * * * *
    Semivertical Open means equipment without doors and an air-curtain 
angle greater than or equal to 10[deg] and less than 80[deg] from the 
vertical.
* * * * *
    Vertical Closed means equipment with hinged or sliding doors and a 
door angle less than 45[deg].
    Vertical Open means equipment without doors and an air-curtain 
angle greater than or equal to 0[deg] and less than 10[deg] from the 
vertical.
    Wedge case means a commercial refrigerator, freezer, or 
refrigerator-freezer that forms the transition between two regularly-
shaped display cases.
    3. Section 431.66 of subpart C is amended by adding new paragraphs 
(a)(3) and (d) to read as follows:


Sec.  431.66  Energy conservation standards and their effective dates.

    (a) * * *
    (3) The term ``TDA'' means the total display area (ft\2\) as 
defined in the Air-Conditioning and Refrigeration Institute Standard 
1200-2006.
* * * * *
    (d) Each commercial refrigerator, freezer, and refrigerator-freezer 
with a self-contained condensing unit and without doors; commercial 
refrigerator, freezer, and refrigerator-freezer with a remote 
condensing unit; and commercial ice-cream freezer, manufactured on or 
after January 1, 2012, shall have a daily energy consumption (in 
kilowatt hours per day) that does not exceed the levels specified:
    (1) For equipment other than hybrid equipment, refrigerator-
freezers or wedge cases:
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[GRAPHIC] [TIFF OMITTED] TP25AU08.004

BILLING CODE 6450-01-C
    (2) For commercial refrigeration equipment with two or more 
compartments (hybrid refrigerators, hybrid freezers, hybrid 
refrigerator-freezers, and non-hybrid refrigerator freezers), the 
maximum daily energy consumption (MDEC) for each model shall be the sum 
of the MDEC values for all of its compartments. For each compartment, 
measure the TDA or volume of that compartment, and determine the 
appropriate equipment class based on that compartment's equipment 
family, condensing unit configuration, and designed operating 
temperature. The MDEC value for each compartment shall be the amount 
derived by entering that compartment's TDA or volume into the standard 
equation in paragraph (d)(1) of this section for that compartment's 
equipment class. Measure the calculated daily energy consumption (CDEC) 
or total daily energy consumption (TDEC) for the entire case:
    (i) For remote condensing commercial hybrid refrigerators, hybrid 
freezers, hybrid refrigerator-freezers, and non-hybrid refrigerator-
freezers, where two

[[Page 50137]]

or more independent condensing units each separately cool only one 
compartment, measure the total refrigeration load of each compartment 
separately according to the ANSI/ASHRAE Standard 72-2005 test 
procedure. Calculate compressor energy consumption (CEC) for each 
compartment using Table 1 in ANSI/ARI Standard 1200-2006 using the 
evaporator temperature for that compartment. The calculated daily 
energy consumption (CDEC) for the entire case shall be the sum of the 
CEC for each compartment, fan energy consumption (FEC), lighting energy 
consumption (LEC), anti-condensate energy consumption (AEC), defrost 
energy consumption (DEC), and condensate evaporator pan energy 
consumption (PEC) (as measured in ANSI/ARI Standard 1200-2006).
    (ii) For remote condensing commercial hybrid refrigerators, hybrid 
freezers, hybrid refrigerator-freezers, and non-hybrid refrigerator-
freezers, where two or more compartments are cooled collectively by one 
condensing unit, measure the total refrigeration load of the entire 
case according to the ANSI/ASHRAE Standard 72-2005 test procedure. 
Calculated a weighted saturated evaporator temperature for the entire 
case by (A) multiplying the saturated evaporator temperature of each 
compartment by the volume of that compartment (as measured in ANSI/ARI 
Standard 1200-2006), (B) summing the resulting values for all 
compartments, and (C) dividing the resulting total by the total volume 
of all compartments. Calculate the CEC for the entire case using Table 
1 in ANSI/ARI Standard 1200-2006, using the total refrigeration load 
and the weighted average saturated evaporator temperature. The CDEC for 
the entire case shall be the sum of the CEC, FEC, LEC, AEC, DEC, and 
PEC.
    (iii) For self-contained commercial hybrid refrigerators, hybrid 
freezers, hybrid refrigerator-freezers, and non-hybrid refrigerator-
freezers, measure the total daily energy consumption (TDEC) for the 
entire case according to the ANSI/ASHRAE Standard 72-2005 test 
procedure.
    (3) For remote-condensing and self-contained wedge cases, measure 
the CDEC or TDEC according to the ANSI/ASHRAE Standard 72-2005 test 
procedure. The MDEC for each model shall be the amount derived by 
incorporating into the standards equation in paragraph (d)(1) of this 
section for the appropriate equipment class a value for the TDA that is 
the product of (i) the vertical height of the air-curtain (or glass in 
a transparent door) and (ii) the largest overall width of the case, 
when viewed from the front.

 [FR Doc. E8-19063 Filed 8-22-08; 8:45 am]
BILLING CODE 6450-01-P