[Federal Register Volume 74, Number 8 (Tuesday, January 13, 2009)]
[Proposed Rules]
[Pages 1643-1646]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E9-476]


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DEPARTMENT OF ENERGY

10 CFR Part 430

[Docket No. EERE-2006-BT-STD-0129]
RIN 1904-AA90


Energy Conservation Standards for Residential Water Heaters, 
Direct Heating Equipment, and Pool Heaters: Public Meeting and 
Availability of the Preliminary Technical Support Document

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

ACTION: Notice of public meeting and availability of preliminary 
technical support document.

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SUMMARY: The Department of Energy (DOE) will hold an informal public 
meeting to discuss and receive comments on the product classes that DOE 
plans to analyze for purposes of amending energy conservation standards 
for certain residential heating products; the analytical framework, 
models, and tools that DOE is using to evaluate standards for these 
products; the results of preliminary analyses performed by DOE for 
these products; and potential energy conservation standard levels 
derived from these analyses that DOE could consider for these products. 
DOE also encourages written comments on these subjects. To inform 
stakeholders and facilitate this process, DOE has prepared an agenda, a 
preliminary Technical Support Document (preliminary-TSD), and briefing 
materials, all of which are available at: http://www.eere.energy.gov/buildings/appliance_standards/residential/heating products.html.

DATES: DOE will hold a public meeting on Monday, February 9, 2009, from 
9 a.m. to 5 p.m. in Washington, DC. Any person requesting to speak at 
the public meeting should submit such request, along with an electronic 
copy of the statement to be given at the public meeting, before 4 p.m., 
Monday, January 26, 2009. Written comments are welcome, especially 
following the public meeting, and should be submitted by March 16, 
2009.

ADDRESSES: The public meeting will be held at the U.S. Department of 
Energy, Forrestal Building, Room 1E-245, 1000 Independence Avenue, SW., 
Washington, DC 20585-0121. Please note that foreign nationals 
participating in the public meeting are subject to advance security 
screening procedures. If a foreign national wishes to participate in 
the public meeting, please

[[Page 1644]]

inform DOE of this fact as soon as possible by contacting Ms. Brenda 
Edwards at (202) 586-2945 so that the necessary procedures can be 
completed.
    Interested persons may submit comments, identified by docket number 
EERE-2006-BT-STD-0129, by any of the following methods:
     Federal eRulemaking Portal: http://www.regulations.gov. 
Follow the instructions for submitting comments.
     E-mail: [email protected]. Include EERE-
2006-BT-STD-0129 in the subject line of the message.
     Mail: Ms. Brenda Edwards, U.S. Department of Energy, 
Building Technologies Program, Mailstop EE-2J, Public Meeting for 
Residential Water Heaters, Direct Heating Equipment, and Pool Heaters, 
EERE-2006-BT-STD-0129, 1000 Independence Avenue, SW., Washington, DC 
20585-0121. Telephone (202) 586-2945. Please submit one signed paper 
original.
     Hand Delivery/Courier: Ms. Brenda Edwards, U.S. Department 
of Energy, Building Technologies Program, 6th Floor, 950 L'Enfant 
Plaza, SW., Washington, DC 20024. Telephone (202) 586-2945. Please 
submit one signed paper original.
    Instructions: All submissions received must include the agency name 
and docket number.
    Docket: For access to the docket to read background documents, a 
copy of the transcript of the public meeting, or comments received, go 
to the U.S. Department of Energy, 6th Floor, 950 L'Enfant Plaza, SW., 
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 (202) 586-2945 for additional information regarding visiting the 
Resource Room. Please note that DOE's Freedom of Information Reading 
Room (formerly Room 1E-190 at the Forrestal Building) is no longer 
housing rulemaking materials.

FOR FURTHER INFORMATION CONTACT: Mohammed Khan, U.S. Department of 
Energy, Office of Energy Efficiency and Renewable Energy, Building 
Technologies, EE-2J, 1000 Independence Avenue, SW., Washington, DC 
20585-0121, (202) 586-7892. E-mail: [email protected]. Michael 
Kido, U.S. Department of Energy, Office of General Counsel, GC-72, 1000 
Independence Avenue, SW., Washington, DC 20585-0121, (202) 586-8145. E-
mail: [email protected].

SUPPLEMENTARY INFORMATION:

A. Statutory Authority

    Title III of the Energy Policy and Conservation Act (42 U.S.C. 
6291, et seq.) (EPCA) established the Energy Conservation Program for 
Consumer Products Other than Automobiles, covering major household 
appliances including water heaters and home heating equipment. 
Subsequent amendments expanded Title III of EPCA to include additional 
consumer products and certain commercial and industrial equipment, 
including residential pool heaters. (42 U.S.C. 6291, et seq.) 
Furthermore, the National Appliance Energy Conservation Act of 1987 
(NAECA) amended EPCA by establishing energy conservation standards for 
residential water heaters, ``direct heating equipment'' (replacing the 
term ``home heating equipment'' previously used in EPCA), and pool 
heaters, as well as requirements for determining whether these 
standards should be amended. (42 U.S.C. 6295(e)(1) through (4))
    Before DOE prescribes an amended standard for any of these 
products, however, it must first solicit comments on a proposed 
standard. Moreover, DOE must design each new or amended standard for 
these products to (1) achieve the maximum improvement in energy 
efficiency that is technologically feasible and economically justified, 
and (2) result in significant conservation of energy. (42 U.S.C. 
6295(o)(2)(A)) and (3) To determine whether a proposed standard is 
economically justified, DOE must, after receiving comments on the 
proposed standard, determine whether the benefits of the standard 
exceed its burdens to the greatest extent practicable, weighing the 
following seven factors:
    1. The economic impact of the standard on manufacturers and 
consumers of products subject to the standard;
    2. The savings in operating costs throughout the estimated average 
life of the covered products in the type (or class) compared to any 
increase in the price, initial charges, or maintenance expenses for the 
covered products which are likely to result from the imposition of the 
standard;
    3. The total projected amount of energy savings likely to result 
directly from the imposition of the standard;
    4. Any lessening of the utility or the performance of the covered 
products likely to result from the imposition of the standard;
    5. The impact of any lessening of competition, as determined in 
writing by the Attorney General, that is likely to result from the 
imposition of the standard;
    6. The need for national energy conservation; and
    7. Other factors the Secretary considers relevant.
(42 U.S.C. 6295(o)(2)(B)(i).)
    Prior to proposing a standard, DOE typically seeks public input on 
the analytical framework, models, and tools that DOE will use to 
evaluate standards for the product at issue; the results of preliminary 
analyses performed by DOE for the product; and potential energy 
conservation standard levels derived from these analyses that DOE could 
consider. DOE is publishing this document to announce the availability 
of the preliminary TSD, which details the preliminary analyses, 
discusses the comments on the Framework document, and summarizes the 
preliminary results. In addition, DOE is announcing a public meeting to 
solicit feedback from interested parties on its analytical framework, 
models, and preliminary results.

B. History of Standards Rulemaking for Residential Heating Products

 1. Background

    As indicated above, NAECA amended EPCA to establish energy 
conservation standards for each of the three heating products, 
applicable to units manufactured on or after January 1, 1990. For water 
heaters, EPCA prescribed minimum efficiency levels that vary depending 
on the storage volume of the product and the type of energy it uses 
(i.e., gas, oil, or electricity). (42 U.S.C. 6295(e)(1)) For gas-fired 
direct heating equipment, EPCA prescribed a range of minimum annual 
fuel utilization efficiency (AFUE) levels, each of which applies to 
units of a particular type and heating capacity range. (42 U.S.C. 
6295(e)(3)) In addition, for gas-fired pool heaters, EPCA prescribed a 
minimum thermal efficiency of 78 percent for all units. (42 U.S.C. 
6295(e)(2)) For all three of the products, EPCA further requires that 
DOE conduct two cycles of rulemakings to determine whether the 
standards should be amended. (42 U.S.C. 6295(e)(4)).
    On January 17, 2001, DOE published a final rule (the January 2001 
final rule), effective on January 20, 2004, amending the energy 
conservation standards for residential water heaters. 66 FR 4474. DOE 
has not amended the energy conservation standards for direct heating 
equipment or pool heaters.
    As to direct heating equipment, before the enactment of NAECA, EPCA 
included ``home heating equipment'' in

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DOE's appliance standards program. DOE construed this term as covering 
unvented as well as vented products, and prescribed a separate test 
procedure for each. 43 FR 20128, 20132 (May 2, 1978). Each of these 
test procedures has since been amended and both are codified in 10 CFR 
part 430, Subpart B, Appendix G (``Uniform Test Method for Measuring 
the Energy Consumption of Unvented Home Heating Equipment'') and 
Appendix O (``Uniform Test Method for Measuring the Energy Consumption 
of Vented Home Heating Equipment''). However, when NAECA replaced the 
term ``home heating equipment'' with ``direct heating equipment'' in 
NAECA's amendments to EPCA in 1987 (42 U.S.C. 6295(e)(3)), the new 
energy conservation standards for this equipment only affected gas 
products and the statutorily-prescribed standards used the AFUE 
descriptor, which applies to vented, but not unvented, equipment. 
Because of the limitation imposed by the statute's use of the AFUE 
descriptor, subsequent DOE actions concerning direct heating equipment 
have focused solely on vented products.\1\
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    \1\ See 59 FR 10464, (March 4, 1994) (NOPR proposing standards 
for eight separate products) and 62 FR 26140 (May 12, 1997) (final 
rule prescribing test procedure amendments affecting direct heating 
equipment).
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    The current test procedure for unvented equipment also does not 
include a method for measuring energy efficiency. Despite this fact, 
because of the manner in which unvented heating products operate, which 
is to dissipate any heat losses directly into the conditioned space, 
the amount of energy efficiency losses from these products is minimal. 
In view of this belief, at this time, DOE is unaware of how the 
addition of a procedure to measure the energy efficiency of these 
particular products would yield significant energy efficiency benefits 
or would otherwise be practical.
    DOE also notes that while the NAECA amendments authorized DOE to 
regulate unvented direct heating equipment, the rulemaking DOE is 
currently considering would address standards only for vented direct 
heating equipment since there is currently no energy efficiency 
descriptor or test procedure that DOE could apply as the basis for an 
amended standard for unvented heating products.

2. Current Rulemaking Process

    To initiate the process to develop standards, on September 27, 
2006, DOE published on its Web site the Rulemaking Framework for 
Residential Water Heaters, Direct Heating Equipment, and Pool Heaters 
(the framework document), which describes the procedural and analytic 
approaches it anticipated using to evaluate the establishment of energy 
conservation standards for these products. This document is available 
at http://www.eere.energy.gov/buildings/appliance_standards/residential/pdfs/heating_equipment_framework_092706.pdf. DOE also 
published a notice announcing the availability of the framework 
document and a public meeting to discuss the proposed analytical 
framework, and inviting written comments concerning the development of 
standards for the three heating products. 71 FR 67825 (November 24, 
2006).
    The focus of the public meeting, which was held on January 16, 
2007, was to discuss the analyses and issues identified in various 
sections of the framework document. At the meeting, DOE described the 
different analyses it would conduct, the methods proposed for 
conducting them, and the relationships among the various analyses. 
Manufacturers, trade associations, environmental advocates, regulators, 
and other interested parties attended. Information related to the 
meeting is available at http://www.eere.energy.gov/buildings/appliance_standards/residential/heating_equipment_mtg.html.
    In response to the requests of interested parties at the public 
meeting, DOE subsequently published in the Federal Register a notice 
that extended the comment period by two weeks. 72 FR 4219 (January 30, 
2007). Written comments submitted during the comment period elaborated 
on the issues raised at the meeting and addressed other major issues, 
including
     Scope of coverage;
     Product classes;
     Efficiency levels analyzed for the engineering analysis;
     Installation, repair, and maintenance costs; and
     Product and fuel switching.
    Comments received since publication of the framework document have 
helped identify issues DOE needs to address in developing a proposed 
standard and provided information contributing to DOE's proposed 
resolution of these issues.

C. Summary of the Analyses Performed by DOE

    For each of the three heating products currently under 
consideration, DOE conducted in-depth technical analyses in the 
following areas: (1) Engineering, (2) energy-use characterization, (3) 
markups to determine product price, (4) life-cycle cost (LCC) and 
payback period (PBP) analyses, and (5) national impact analysis (NIA). 
These analyses resulted in a preliminary TSD that presents the 
methodology and results of each of these analyses. The preliminary TSD 
is available at the Web address given in the SUMMARY section of this 
notice. The analyses are described in more detail below.
    DOE also conducted several other analyses that either support the 
five major analyses or are preliminary analyses that will be expanded 
upon during the notice of proposed rulemaking (NOPR).\2\ These analyses 
include the market and technology assessment, the screening analysis, 
which contributes to the engineering analysis, and the shipments 
analysis, which contributes to the NIA. In addition to these analyses, 
DOE has begun some preliminary work on the manufacturer impact analysis 
(MIA) and identified the methods to be used for the LCC subgroup 
analysis, the environmental assessment, the employment analysis, the 
regulatory impact analysis, and the utility impact analysis. DOE will 
expand on these analyses in the NOPR.
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    \2\ For past rulemakings, DOE was required to issue an Advanced 
Notice of Proposed Rulemaking (ANOPR) following publication of the 
framework document. The Energy Independence and Security Act of 2007 
(EISA) eliminated the requirement that DOE issue an ANOPR as part of 
the standards rulemaking process; see EISA, at sec. 307. Instead, 
DOE is using this alternative process to provide the same 
information and ability for public comment as the ANOPR, but without 
publication of analyses in the Federal Register.
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1. Engineering Analysis

    The engineering analysis establishes the relationship between the 
cost and efficiency of a product DOE is evaluating for amended energy 
conservation standards. This relationship serves as the basis for cost-
benefit calculations for individual consumers, manufacturers, and the 
Nation. The engineering analysis identifies representative baseline 
products, which is the starting point for analyzing technologies that 
provide energy efficiency improvements. Baseline product refers to a 
model or models having features and technologies typically found in 
products currently offered for sale. The baseline model in each product 
class represents the characteristics of products in that class and, for 
products already subject to energy conservation standards, usually is a 
model that just meets the current standard. After identifying the 
baseline models, DOE estimated manufacturer selling prices through an 
analysis of (1) manufacturer costs, and (2) markups,

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which are the multipliers used to determine the manufacturer selling 
prices based on manufacturing cost. Chapter 5 of the preliminary TSD 
discusses the engineering analysis.

2. Energy Use Characterization

    The energy use characterization provides estimates of annual energy 
consumption for the three heating products, which DOE uses in the LCC 
and PBP analyses and the NIA. DOE developed energy consumption 
estimates for all of the product classes analyzed in the engineering 
analysis as the basis for its energy use estimates. Chapter 7 of the 
preliminary TSD discusses the energy use characterization.

3. Markups To Determine Product Prices

    DOE derives consumer prices for products based on manufacturer 
markups, retailer markups, distributor markups, contractor markups, 
builder markups, and sales taxes. In deriving these markups, DOE has 
determined (1) The distribution channels for product sales; (2) the 
markup associated with each party in the distribution channels; and (3) 
the existence and magnitude of differences between markups for baseline 
products (baseline markups) and for more-efficient products 
(incremental markups). DOE calculates both overall baseline and overall 
incremental markups based on the product markups at each step in the 
distribution channel. The overall incremental markup relates the change 
in the manufacturer sales price of higher-efficiency models (the 
incremental cost increase) to the change in the retailer or distributor 
sales price. Chapter 6 of the preliminary TSD discusses the estimation 
of markups.

4. Life-Cycle Cost and Payback Period Analyses

    The LCC and PBP analyses determine the economic impact of potential 
standards on individual consumers. The LCC is the total consumer 
expense for a product over the life of the product. The LCC analysis 
compares the LCCs of products designed to meet possible energy 
conservation standards with the LCCs of the products likely to be 
installed in the absence of standards. DOE determines LCCs by 
considering (1) Total installed cost to the purchaser (which consists 
of manufacturer selling price, sales taxes, distribution chain markups, 
and installation cost); (2) the operating expenses of the products 
(energy use and maintenance); (3) product lifetime; and (4) a discount 
rate that reflects the real consumer cost of capital and puts the LCC 
in present-value terms. The PBP represents the number of years needed 
to recover the increase in purchase price (including installation cost) 
of more efficient products through savings in the operating cost of the 
product. It is the change in total installed cost due to increased 
efficiency divided by the change in annual operating cost from 
increased efficiency. Chapter 8 of the preliminary TSD discusses the 
LCC and PBP analyses.

5. National Impact Analysis

    The NIA estimates the national energy savings (NES) and the net 
present value (NPV) of total consumer costs and savings expected to 
result from new standards at specific efficiency levels (referred to as 
candidate standard levels). Examining the three heating products, DOE 
calculated NES and NPV for each efficiency level as the difference 
between a base-case forecast (without new standards) and the standards 
case forecast (with standards). DOE determined national annual energy 
consumption by multiplying the number of units in use (by vintage, 
which is expressed in years) by the average unit energy consumption 
(also by vintage). Cumulative energy savings are the sum of the annual 
NES determined over a specified time period. The national NPV is the 
sum over time of the discounted net savings each year, which consists 
of the difference between total operating cost savings and increases in 
total installed costs. Critical inputs to this analysis include 
shipments projections, retirement rates (based on estimated product 
lifetimes), and estimates of changes in shipments and retirement rates 
in response to changes in product costs due to standards. Chapter 10 of 
the preliminary TSD discusses the NIA.
    DOE consulted with stakeholders and other interested persons as 
part of its process for conducting all of the analyses and invites 
further input from the public on these topics. The preliminary 
analytical results are subject to revision following review and input 
from the public. A complete and revised TSD will be made available upon 
issuance of a NOPR. The final rule will contain the final analysis 
results and be accompanied by a final rule TSD.
    DOE encourages those who wish to participate in the public meeting 
to obtain the preliminary TSD and to be prepared to discuss its 
contents. A copy of the preliminary TSD is available at the Web address 
given in the SUMMARY section of this notice. However, public meeting 
participants need not limit their comments to the topics identified in 
the preliminary TSD. DOE is also interested in receiving views 
concerning other relevant issues that participants believe would affect 
energy conservation standards for these products or that DOE should 
address in the NOPR.
    Furthermore, DOE welcomes all interested parties, whether or not 
they participate in the public meeting, to submit in writing by March 
16, 2009, comments and information on matters addressed in the 
preliminary TSD and on other matters relevant to consideration of 
standards for residential water heaters, direct heating equipment, and 
pool heaters.
    The public meeting will be conducted in an informal, conference 
style. A court reporter will be present to record the minutes of the 
meeting. There shall be no discussion of proprietary information, costs 
or prices, market shares, or other commercial matters regulated by 
United States antitrust laws.
    After the public meeting and the expiration of the period for 
submitting written statements, DOE will consider all comments and 
additional information that is obtained from interested parties or 
through further analyses, and it will prepare a NOPR. The NOPR will 
include proposed energy conservation standards for the products covered 
by this rulemaking, and members of the public will be given an 
opportunity to submit written and oral comments on the proposed 
standards.

    Issued in Washington, DC, on January 5, 2009.
John F. Mizroch,
Acting Assistant Secretary, Energy Efficiency and Renewable Energy.
 [FR Doc. E9-476 Filed 1-12-09; 8:45 am]
BILLING CODE 6450-01-P