[Federal Register Volume 74, Number 225 (Tuesday, November 24, 2009)]
[Proposed Rules]
[Pages 61410-61500]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E9-27914]



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Part II





Department of Energy





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10 CFR Part 431



Energy Conservation Program: Energy Conservation Standards for Small 
Electric Motors; Proposed Rule

  Federal Register / Vol. 74, No. 225 / Tuesday, November 24, 2009 / 
Proposed Rules  

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DEPARTMENT OF ENERGY

10 CFR Part 431

[Docket Number EERE-2007-BT-STD-0007]
RIN 1904-AB70


Energy Conservation Program: Energy Conservation Standards for 
Small Electric Motors

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

ACTION: Notice of proposed rulemaking and public meeting.

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SUMMARY: The Energy Policy and Conservation Act authorizes the U.S. 
Department of Energy (DOE) to establish energy conservation standards 
for various consumer products and commercial and industrial equipment. 
Such equipment includes those small electric motors for which DOE 
determines that energy conservation standards would be technologically 
feasible and economically justified, and would result in significant 
energy savings. In this notice, DOE proposes energy conservation 
standards for certain small electric motors and is announcing a public 
meeting.

DATES: Public meeting: DOE will hold a public meeting on Thursday, 
December 17, 2009, from 9 a.m. to 5 p.m., in Washington, DC. DOE must 
receive requests to speak at the public meeting before 4 p.m., 
Thursday, December 3, 2009. DOE must receive a signed original and an 
electronic copy of statements to be given at the public meeting before 
4 p.m., Thursday, December 10, 2009.
    Comments: DOE will also accept written comments, data, and 
information regarding this notice of proposed rulemaking (NOPR) before 
and after the public meeting, but received no later than January 25, 
2010. 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. 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 workshop, please 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.
    Any comments submitted must identify the NOPR for Energy 
Conservation Standards for Small Electric Motors, and provide the 
docket number EERE-2007-BT-STD-0007 and/or regulatory information 
number (RIN) number 1904-AB70. 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 the docket number and/or RIN in the 
subject line of the message.
     Mail: Ms. Brenda Edwards, U.S. Department of Energy, 
Building Technologies Program, Mailstop EE-2J, 1000 Independence 
Avenue, SW., Washington, DC 20585-0121. Please submit one signed 
original paper copy.
     Hand Delivery/Courier: Ms. Brenda Edwards, U.S. Department 
of Energy, Building Technologies Program, 950 L'Enfant Plaza, SW., 
Suite 600, Washington, DC 20024. Telephone: (202) 586-2945. Please 
submit one signed original paper copy.
    For detailed instructions on submitting comments and additional 
information on the rulemaking process, see section VII of this document 
(Public Participation).
    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., Suite 
600, Washington, DC, (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 is no longer housing rulemaking materials.

FOR FURTHER INFORMATION CONTACT: Mr. James Raba, U.S. Department of 
Energy, Office of Energy Efficiency and Renewable Energy, Building 
Technologies Program, EE-2J, 1000 Independence Avenue, SW., Washington, 
DC 20585-0121, (202) 586-8654, e-mail: [email protected].
    Mr. Michael Kido, U.S. Department of Energy, Office of General 
Counsel, GC-72, 1000 Independence Avenue, SW., Washington, DC 20585, 
(202) 586-9507, e-mail: [email protected].
    For information on how to submit or review public comments and on 
how to participate in the public meeting, contact Ms. Brenda Edwards, 
U.S. Department of Energy, Office of Energy Efficiency and Renewable 
Energy, Building Technologies Program, EE-2J, 1000 Independence Avenue, 
SW., Washington, DC 20585-0121. Telephone: (202) 586-2945. E-mail: 
[email protected].

SUPPLEMENTARY INFORMATION:

I. Summary of the Proposed Rule
II. Introduction
    A. Consumer Overview
    B. Authority
    C. Background
    1. Current Standards
    2. History of Standards Rulemaking for Small Electric Motors
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 Consumers
    b. Life-Cycle Costs
    c. Energy Savings
    d. Lessening of Utility or Performance of Products
    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
    A. Market and Technology Assessment
    1. Definition of Small Electric Motor
    a. Motor Categories
    b. Motor Enclosures
    c. Service Factors
    d. Insulation Class Systems
    e. Metric Equivalents
    f. Frame Sizes
    g. Horsepower Ratings
    2. Product Classes
    B. Screening Analysis
    C. Engineering Analysis
    1. Approach
    2. Product Classes Analyzed
    3. Cost Model
    4. Baseline Models
    5. Design Options and Limitations
    a. Manufacturability
    b. Motor Size
    c. Service Factor
    d. Skew and Stay-Load Loss
    e. Air Gap
    f. Power Factor
    g. Speed
    h. Thermal Performance
    i. Slot Fill
    j. Current and Torque Characteristics
    6. Scaling Methodology
    7. Nominal Efficiency
    8. Cost-Efficiency Results
    D. Markups To Determine Equipment Price
    1. Distribution Channels
    2. Estimation of Markups
    3. Summary of Markups
    E. Energy Use Characterization
    F. Life-Cycle Cost and Payback Period Analysis
    1. Baseline and Standard Level Efficiencies

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    2. Installed Equipment Cost
    3. Motor Applications
    4. Annual Operating Hours and Energy Use
    5. Space Constraints
    6. Power Factor
    7. Energy Prices
    8. Energy Price Trend
    9. Maintenance and Repair Costs
    10. Equipment Lifetime
    11. Discount Rate
    12. Standard Effective Date
    G. National Impact Analysis--National Energy Savings and Net 
Present Value Analysis
    1. Shipments
    H. Consumer Sub-Group Analysis
    I. Manufacturer Impact Analysis
    1. Overview
    2. Phase 1, Industry Profile
    3. Phase 2, Industry Cash-Flow Analysis
    4. Phase 3, Sub-Group Impact Analysis
    5. Government Regulatory Impact Model Analysis
    6. Manufacturer Interviews
    7. Government Regulatory Impact Model Key Inputs and Scenarios
    a. Base-Case Shipments Forecast
    b. Standards-Case Shipments Forecast
    c. Manufacturing Production Costs
    d. Manufacturing Markup Scenarios
    e. Equipment and Capital Conversion Costs
    J. Employment Impact Analysis
    K. Utility Impact Analysis
    L. Environmental Analysis
    1. Power Sector Emissions
    2. Valuation of CO2 Emissions
    3. Valuation of Other Emissions
V. Analytical Results
    A. Trial Standard Levels
    B. Economic Justification and Energy Savings
    1. Economic Impacts on Customers
    a. Life-Cycle Cost and Payback Period
    b. Life-Cycle Cost Sensitivity Calculations
    c. Customer Sub-Group Analysis
    d. Rebuttable Presumption Payback
    2. Economic Impacts on Manufacturers
    a. Industry Cash-Flow Analysis Results
    b. Impacts on Direct Employment
    c. Impacts on Manufacturing Capacity
    d. Impacts on Manufacturer Subgroups
    e. Cumulative Regulatory Burden
    3. National Impact Analysis
    a. Significance of Energy Savings
    b. Net Present Value
    c. Impacts on Employment
    4. Impact on Utility or Performance of Products
    5. Impact of Any Lessening of Competition
    6. Need of the Nation To Conserve Energy
    7. Other Factors
    C. Proposed Standard
    1. Polyphase Small Electric Motors
    2. Capacitor-Start Small Electric Motors
VI. Procedural Issues and Regulatory Review
    A. Review Under Executive Order 12866
    B. Review Under the Regulatory Flexibility Act
    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 of 1999
    I. Review Under Executive Order 12630
    J. Review Under the Treasury and General Government 
Appropriations Act of 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

    Pursuant to the Energy Policy and Conservation Act (42 U.S.C. 6291 
et seq.), as amended, (EPCA or the Act), the Department of Energy (DOE) 
is proposing new energy conservation standards for capacitor-start and 
polyphase small electric motors. These standards would achieve the 
maximum improvement in energy efficiency that is technologically 
feasible and economically justified for this equipment, and would 
result in significant conservation of energy. The proposed standards 
are shown in Table I.1, Table I.2, and Table I.3, and would apply to 
all equipment manufactured in, or imported into, the United States on 
and after 5 years following the publication of the final rule.
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BILLING CODE 6450-01-C
    DOE's analyses indicate that the proposed standards would save a 
significant amount of energy--an estimated 2.46 quads of cumulative 
energy over 30 years (2015-2045). Of this, 2.13 quads of savings result 
from standards on capacitor-start (single-phase) motors and 0.33 quads 
of savings result from standards on polyphase motors.\1\ The energy 
savings results for single-phase motors represent the combined effect 
of standards on the capacitor-start, induction-run (CSIR) \2\ and 
capacitor-start, capacitor-run (CSCR) \3\ motors markets, because 
general purpose CSIR and CSCR motors generally meet similar performance 
criteria and can often be used in the same applications.\4\ The amount 
of projected energy savings is equivalent to the total energy 7.8 
million U.S. citizens use in 1 year. The economic impacts on owners 
(hereafter ``customers'') of equipment containing single-phase small 
electric motors--i.e., the average life-cycle cost (LCC) savings--are 
positive. Polyphase small electric motor customers experience, on 
average, small LCC increases as a result of the standard.
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    \1\ A polyphase motor is an electric motor that uses three-phase 
electricity and the phase changes of the electrical supply to induce 
a rotational magnetic field, thereby supplying torque to the rotor.
    \2\ A capacitor-start induction-run motor is a single-phase 
motor with a main winding arranged for direct connection to a source 
of power and an auxiliary winding connected in series with a 
capacitor. The motor has a capacitor phase, which is in the circuit 
only during the starting period.
    \3\ A capacitor-start capacitor-run motor is a single-phase 
motor which has different values of effective capacitance for the 
starting and running conditions.
    \4\ Polyphase, CSIR, and CSCR motors can be found in a range of 
applications including, but not limited to the following: Pumps, 
blowers, fans, compressors, conveyors and general industrial 
equipment.
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    The cumulative national net present value (NPV) of total customer 
costs and savings from the proposed standards from 2015 to 2065 in 
2008$ ranges from

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$1.53 billion (at a 7-percent discount rate) to $14.15 billion (at a 3-
percent discount rate). This is the estimated total value of future 
operating-cost savings minus the estimated increased equipment costs, 
discounted to 2009. If DOE were to adopt the proposed standards, it 
expects a -12.86 percent to 10.69 percent change in manufacturer 
industry net present value (INPV) for single-phase motors and -13.8 
percent to 16.9 percent change in manufacturer INPV for polyphase 
motors, which is approximately -$44.67 to $40.70 million total. As a 
result, the NPV for customers (at the 7-percent discount rate) of $1.53 
billion would thus exceed industry losses by about 33 times. 
Additionally, based on DOE's interviews with the major manufacturers of 
small electric motors, DOE does not expect any plant closings or loss 
of employment. The major small electric motor manufacturers include: 
A.O. Smith Electrical Products Company, Baldor Electric Company, 
Emerson Motor Technologies, Regal-Beloit Corporation, and WEG. Except 
for WEG, all of these manufacturers are U.S.-based. WEG is based in 
Brazil.
    The proposed standards would have significant environmental 
benefits. All of the energy saved would be in the form of electricity. 
DOE expects the energy savings to eliminate the need for approximately 
2.49 gigawatts (GW) of generating capacity by 2030. The reduction in 
electricity generation would result in cumulative (undiscounted) 
greenhouse gas emission reductions of 124.8 million tons (Mt) of carbon 
dioxide (CO2) from 2015 to 2045. During this period, the 
standard would result in power plant emission reductions of 89.6 
kilotons (kt) of nitrogen oxides (NOX) and 0.561 tons of 
mercury (Hg). These reductions have a value of up to $2,737 million for 
CO2, $67.7 million for NOX, and $5.31 million for 
Hg, at a discount rate of 7-percent.
    The benefits and costs of today's proposed rule can also be 
expressed in terms of annualized (2008$) values from 2015-2045. 
Estimates of annualized values are shown in Table I.4. The annualized 
monetary values are the sum of the annualized national economic value 
of operating savings benefits (energy, maintenance and repair), 
expressed in 2008$, plus the monetary value of the benefits of 
CO2 emission reductions, otherwise known as the Social Cost 
of Carbon (SCC), expressed as $20 per metric ton of CO2, in 
2008$. The $20 value is a central interim value from a recent 
interagency process. The monetary benefits of cumulative emissions 
reductions are reported in 2008$ so that they can be compared with the 
other costs and benefits in the same dollar units. The derivation of 
this value is discussed in section V.B.6. Although comparing the value 
of operating savings to the value of CO2 reductions provides 
a valuable perspective, please note the following: (1) The national 
operating savings are domestic U.S. consumer monetary savings found in 
market transactions while the CO2 value of reductions is 
based on a central value from a range of estimates of imputed marginal 
SCC from $5 to $56 per metric ton (2008$), which are meant to reflect 
the global benefits of CO2 reductions; and (2) the 
assessments of operating savings and CO2 savings are 
performed with different computer models, leading to different time 
frames for analysis. The national operating cost savings is measured 
for the lifetime of small electric motors shipped in the 31-year period 
2015-2045. The value of CO2, on the other hand, is meant to 
reflect the present value of all future climate related impacts, even 
those beyond 2065.
    Using a 7-percent discount rate for the annualized cost analysis, 
the combined cost of the standards proposed in today's proposed rule 
for small electric motors is $515.4 million per year in increased 
equipment and installation costs, while the annualized benefits are 
$923.1 million per year in reduced equipment operating costs and $97.8 
million in CO2 reductions, for a net benefit of $505.5 
million per year. Using a 3-percent discount rate, the cost of the 
standards proposed in today's proposed rule is $514.0 million per year 
in increased equipment and installation costs, while the benefits of 
today's standards are $1,071.5 million per year in reduced operating 
costs and $131.8 million in CO2 reductions, for a net 
benefit of $689.3 million per year.
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    DOE has tentatively concluded that the proposed standards represent 
the maximum improvement in energy efficiency that is technologically 
feasible and economically justified and would result in significant 
conservation of energy. Based on the analyses culminating in this 
proposal, DOE found the benefits (energy savings, consumer LCC savings, 
national NPV increase, and emission reductions) outweigh the burdens 
(loss of INPV and LCC increases for some small electric motor users). 
For a discussion of the energy savings and NPV results, see TSD chapter 
10. For LCC results, see TSD chapter 8. For emissions reductions, see 
TSD chapter 15. For INPV, see TSD chapter 12.
    DOE considered higher efficiency levels as trial standard levels, 
and is still considering them in this rulemaking; however, DOE has 
tentatively concluded that the burdens of the higher efficiency levels 
would outweigh the benefits. Based on consideration of public comments 
DOE receives in response to this notice and related information, DOE 
may adopt either higher or lower efficiency levels than those presented 
in this proposal or some level(s) in between.

II. Introduction

A. Consumer Overview

    Currently, no mandatory Federal energy conservation standards apply 
to small electric motors. DOE is proposing standards for the small 
motors shown in Table I.1, Table I.2, and Table I.3. The proposed 
standards would apply to equipment manufactured for sale in the United 
States, beginning 5 years after the final rule is published in the 
Federal Register. The final rule is expected to be published by 
February 28, 2010; therefore, the effective date would be February 28, 
2015.
    The proposed standards represent an overall reduction of 
approximately 40 percent in motor energy losses. The capacitor-start 
induction-run (CSIR) standards represent a 45-percent reduction in 
losses for a 0.5 hp CSIR motor, relative to the current market average. 
The capacitor-start capacitor-run (CSCR) standards represent a 37-
percent reduction in losses for a 0.75 hp CSCR motor. The polyphase 
standards represent a 45-percent reduction in losses for a 1 hp 
polyphase motor.
    DOE's analyses indicate that commercial and industrial customers 
would benefit from the proposed standards. Although DOE expects the 
installed cost of the higher-efficiency small motors to be greater 
(ranging from 9 percent for a 0.75 hp CSCR motor to 26 percent for a 1 
hp polyphase motor than the average price of this equipment today, the 
energy efficiency gains will result in lower energy costs. A 0.5 hp 
CSIR customer will save an average of $25 per year on energy costs 
compared with an annual cost of losses of a baseline CSIR motor of $48 
per year, while a 1 hp polyphase customer will save an average of $10 
per year compared to an operational cost of motor losses of $34 per 
year for a baseline motor. A 0.75 hp CSCR customer will save $36 per 
year on their energy bill compared with a baseline CSCR motor that 
costs $57 per year in losses to operate on average. DOE estimates that 
the median payback period (PBP) for equipment meeting the proposed 
standards will be approximately 5 to 14 years. When these savings are 
summed over the lifetime of the higher efficiency equipment (and 
discounted to the present), a 0.5 hp CSIR consumer will save $49, on 
average, compared to a baseline 0.5 hp CSIR motor. A 0.75 hp CSCR 
consumer will save $28, on average, compared to a baseline CSCR motor, 
and $121, on average, compared to a baseline 0.75 hp CSIR motor. A 
consumer who purchases a 1 hp polyphase motor will experience an 
average net increase of $38 relative to the $1,274 life-cycle cost of a 
baseline polyphase small electric motor.
    DOE estimates that even though there will be a net national savings 
from the standard, a majority of motor customers may not receive net 
life-cycle cost benefits. This is because many small electric motors 
are installed in applications where the motor is running only a few 
hours per day. On the other hand, because a substantial minority of 
motors is running at nearly all hours of the day and are replaced more 
often than motors that run infrequently, these motors obtain relatively 
large savings from the standard and yield positive net benefits from 
the standard.

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, which includes small electric motors.\5\ 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 DOE recently 
adopted for small electric motors, 74 FR 32059 (July 7, 2009), appear 
at Title 10 Code of Federal Regulations (CFR) sections 431.343 and 
431.344.
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    \5\ These two parts were titled Parts B and C, but were 
redesignated as Parts A and A-1 by the United States Code for 
editorial reasons.
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    The Act defines ``small electric motors'' as follows:

    The term ``small electric motor'' means a NEMA [National 
Electrical Manufacturers Association] general purpose alternating 
current single-speed induction motor, built in a two-digit frame 
number series in accordance with NEMA Standards Publication MG1-
1987.

(42 U.S.C. 6311(13)(F))
    Moreover, pursuant to section 346(b)(3) of EPCA (42 U.S.C. 
6317(b)(3)), no standard prescribed for small electric motors shall 
apply to any such motor that is a component of a covered product under 
section 322(a) of EPCA (42 U.S.C. 6292(a)) or of covered equipment 
under section 340 (42 U.S.C. 6311).
    EPCA provides several criteria that govern adoption of new 
standards for small electric motors. After reviewing any comments 
received regarding today's notice, DOE will evaluate the information 
before it and decide whether today's proposed standards meet those 
criteria and are economically justified by determining whether the 
benefits of the standard exceed its burdens. DOE will make this 
determination by considering, to the greatest extent practicable, using 
the following seven factors set forth in 42 U.S.C. 6295(o)(2)(B)(i):
    1. The economic impact of the standard on manufacturers and 
consumers of the equipment subject to the standard;
    2. 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 
covered equipment that are likely to result from the imposition of the 
standard;
    3. The total projected energy savings likely to result directly 
from the imposition of the standard;
    4. Any lessening of the utility or the performance of the covered 
equipment 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;

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    6. The need for national energy conservation; and
    7. Other factors the Secretary considers relevant.

42 U.S.C. 6295(o)(2)(B)(i)(I)-(VII)
    Additionally, pursuant to 42 U.S.C. 6317(c), DOE will consider the 
criteria outlined in 42 U.S.C. 6295(n)--whether the standards will 
result in a significant conservation of energy, are technologically 
feasible, and are cost effective as described in 42 U.S.C. 
6295(o)(2)(B)(i)(II) (see criterion 2 listed above). These criteria are 
largely folded into the seven criteria that DOE routinely analyzes as 
part of its standards rulemaking analyses. Accordingly, DOE will 
continue to conduct its more comprehensive analyses under 42 U.S.C. 
6295(o) as part of this rulemaking.
    DOE also notes that today's notice concerns types of ``covered 
equipment'' as defined in EPCA (42 U.S.C. 6311(1)(A)), rather than 
``covered products'' as defined in EPCA (42 U.S.C. 6291(2)). Under 42 
U.S.C. 6316(a), the criteria for prescribing new standards for consumer 
products (42 U.S.C. 6295(o)) apply when promulgating standards for 
certain specified commercial and industrial equipment, including small 
electric motors. EPCA substitutes the term ``equipment'' for 
``product'' when the latter term appears in consumer product-related 
provisions that EPCA also applies to commercial and industrial 
equipment. (See 42 U.S.C. 6316(a)(3).)
    In developing energy conservation standards for small electric 
motors, DOE is also applying certain other provisions of 42 U.S.C. 
6295. First, DOE will not prescribe a standard if interested parties 
have established by a preponderance of evidence that the standard is 
likely to result in the unavailability in the United States of any 
covered equipment type (or class) with performance characteristics, 
features, sizes, capacities, and volume that are substantially the same 
as those generally available in the United States. (See 42 U.S.C. 
6295(o)(4))
    Second, DOE is applying 42 U.S.C. 6295(o)(2)(B)(iii), which 
establishes a rebuttable presumption that a standard is economically 
justified if the Secretary finds that ``the additional cost to the 
consumer of purchasing a product complying with an energy conservation 
standard level will be less than three times the value of the energy * 
* * savings during the first year that the consumer will receive as a 
result of the standard, as calculated under the applicable test 
procedure. * * *'' in place for that standard.
    Third, in setting standards for a type or class of covered product 
that has two or more subcategories, DOE will specify a different 
standard level than that which applies generally to such type or class 
of equipment ``for any group of covered products which have the same 
function or intended use, if * * * products within such group-(A) 
consume a different kind of energy from that consumed by other covered 
products within such type (or class); or (B) have a capacity or other 
performance-related feature which other products 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 products. (See 42 
U.S.C. 6295(q)(1).) In determining whether a performance-related 
feature justifies a different standard for a group of products, DOE 
considers such factors as the utility to the consumer of such a feature 
and other factors DOE deems appropriate. Any rule prescribing such a 
standard will include an explanation of the basis on which DOE 
established such higher or lower level. (See 42 U.S.C. 6295(q)(2))
    Federal energy efficiency requirements for equipment covered by 42 
U.S.C. 6317 generally supersede State laws or regulations concerning 
energy conservation testing, labeling, and standards. (42 U.S.C. 
6297(a)-(c) and 6316(a)) DOE can, however, grant waivers of preemption 
for particular State laws or regulations, in accordance with the 
procedures and other provisions of section 327(d) of the Act. (42 
U.S.C. 6297(d) and 6316(a))

C. Background

1. Current Standards
    As indicated above, there are no national energy conservation 
standards prescribed for small electric motors.
2. History of Standards Rulemaking for Small Electric Motors
    Pursuant to the requirements of the Energy Policy Act of 1992 (Pub. 
L. 102-486), DOE began to gather and analyze information to determine 
whether standards for small electric motors would meet its criteria. 
DOE began its determination analysis, by examining what motors were 
covered and concluded that the EPCA definition of ``small electric 
motor'' covers only those motors that meet the definition's frame-size 
requirements and are either three-phase, non-servo motors (polyphase 
motors) or single-phase, capacitor-start motors, including both CSIR 
and CSCR motors. 71 FR 38799, 38800-01 (July 10, 2006). DOE reached 
this conclusion because only these motor categories can meet the 
performance requirements set forth for general-purpose alternating-
current motors by NEMA MG1-1987.
    DOE then analyzed the likely range of energy savings and economic 
benefits that would result from energy conservation standards for these 
small motors, and prepared a report describing its analysis and 
provided its projected estimated energy savings from potential 
standards. In June 2006, DOE made the report, ``Determination Analysis 
Technical Support Document: Analysis of Energy Conservation Standards 
for Small Electric Motors,'' available for public comment at http://www.eere.energy.gov/buildings/appliance_standards/commercial/small_electric_motors.html.
    Pursuant to section 346(b)(3) of EPCA (42 U.S.C. 6317(b)(3)), the 
analysis did not include motors that are a component of a covered 
product or equipment. Also, the report made no recommendation as to 
what determination DOE should make. DOE received comments concerning 
this analysis from NEMA, the Small Motors and Motion Association (SMMA, 
now the Motors and Motion Association), and the American Council for an 
Energy-Efficient Economy (ACEEE).
    Thereafter, DOE analyzed whether significant energy savings would 
result from energy conservation standards for the small electric motors 
considered in its previous analysis, and incorporated the results of 
this additional analysis into a technical support document (TSD). Based 
on these results, DOE issued the following determination on June 27, 
2006:

    Based on its analysis of the information now available, the 
Department [of Energy] has determined that energy conservation 
standards for certain small electric motors appear to be 
technologically feasible and economically justified, and are likely 
to result in significant energy savings. Consequently, DOE will 
initiate the development of energy efficiency test procedures and 
standards for certain small electric motors. 71 FR 38807.

    DOE initiated this rulemaking to develop standards and another 
rulemaking to develop test procedures for small motors. DOE began this 
rulemaking by publishing ``Energy Conservation Standards Rulemaking 
Framework Document for Small Electric Motors'' on http://www.eere.energy.gov/buildings/appliance_standards/commercial/pdfs/small_motors_framework_073007.pdf.
    DOE also published a notice announcing the availability of the 
framework document and a public meeting on the document, and requesting 
public comments on the

[[Page 61417]]

matters raised in the document. 72 FR 44990 (August 10, 2007).
    On September 13, 2007, DOE held the public meeting at which it 
presented the contents of the framework document, described the 
analyses it planned to conduct during the rulemaking, sought comments 
from interested parties on these subjects, and sought to inform 
interested parties about, and facilitate their involvement in, the 
rulemaking. Interested parties that participated in the public meeting 
discussed eight major issues: the scope of covered small electric 
motors, definitions, test procedures, horsepower, and kilowatt 
equivalency, DOE's engineering analysis, life-cycle costs, efficiency 
levels, and energy savings. At the meeting and during the framework 
document comment period, DOE received many comments helping it identify 
and resolve issues involved in this rulemaking.
    DOE gathered additional information and performed preliminary 
analyses to inform the development of energy conservation standards. 
This process culminated in DOE's announcement of an informal public 
meeting to discuss and receive comments on the following matters: the 
product classes DOE planned to analyze; the analytical framework, 
models, and tools that DOE was using to evaluate standards; the results 
of the preliminary analyses DOE performed; and potential standard 
levels that DOE might consider. 73 FR 79723 (December 30, 2008). DOE 
also invited written comments on these subjects and announced the 
availability on its Web site of a preliminary TSD. Id. A PDF of the 
preliminary TSD is available at http://www1.eere.energy.gov/buildings/appliance_standards/commercial/small_electric_motors_nopr_tsd.html.
    Finally, DOE stated its interest in receiving comments on other 
issues that participants believe would affect energy conservation 
standards for small electric motors or that DOE should address in this 
NOPR. Id. at 79725.
    The preliminary TSD provided an overview of the activities DOE 
undertook and discussed the comments DOE received in developing 
standards for small electric motors. It also described the analytical 
framework that DOE used and each analysis DOE performed up to that 
point. These analyses included:
     A market and technology assessment that addressed the 
scope of this rulemaking, identified the potential classes of this 
equipment, characterized the small electric motor market, and reviewed 
techniques and approaches for improving the efficiency of small 
electric motors;
     A screening analysis that reviewed technology options to 
improve small electric motor efficiency and weighed them against DOE's 
four prescribed screening criteria;
     An engineering analysis that estimated the manufacturer 
selling prices (MSPs) associated with more energy efficient small 
electric motors;
     An energy use and end-use load characterization that 
estimated the annual energy use of small electric motors;
     A markup methodology that converted average MSPs to 
consumer-installed prices;
     An LCC analysis that calculated, at the consumer level, 
the discounted savings in operating costs throughout the estimated 
average life of the small electric motor, compared to any increase in 
installed costs likely to result directly from the imposition of the 
standard;
     A PBP analysis that estimated the amount of time it takes 
consumers to recover the higher purchase expense of more energy 
efficient equipment through lower operating costs;
     A shipments analysis that estimated shipments of small 
electric motors over the time period examined in the analysis, which 
was used in performing the national impact analysis;
     A national impact analysis that assessed the aggregate 
impacts at the national level of potential energy conservation 
standards for small motors, as measured by the net present value of 
total consumer economic impacts and national energy savings; and
     A preliminary manufacturer impact analysis that took the 
initial steps in evaluating the effects on manufacturers of new 
efficiency standards.
    The nature and function of the analyses in this rulemaking, 
including the engineering analysis, energy-use characterization, 
markups to determine installed prices, LCC and PBP analyses, and 
national impact analysis, are summarized in the December 2008 notice. 
Id. at 79725.
    The public meeting announced in the December 2008 notice took place 
on January 30, 2009. At this meeting, DOE presented the methodologies 
and results of the analyses set forth in the preliminary TSD. The 
comments received since publication of the December 2008 notice have 
helped DOE resolve the issues in this rulemaking. The submitted 
comments include a joint comment from Adjuvant Consulting, on behalf of 
the Northwest Energy Efficiency Alliance (NEEA) and Northwest Power and 
Conservation Council (NPCC); a comment from Earthjustice; a second 
joint comment from Energy Solutions, Pacific Gas and Electric Company 
(PG&E), Southern California Edison (SCE), Southern California Gas 
Company, and San Diego Gas and Electric (SDGE), a comment from NEMA); 
and a comment from Edison Electric Institute (EEI). This NOPR quotes 
and summarizes many of these comments and responds to the issues they 
raised. A parenthetical reference at the end of a quotation or 
paraphrase provides the location of the item in the public record.

III. General Discussion

A. Test Procedures

    Final test procedures were published on July 7, 2009 (74 FR 32059). 
The test procedures incorporated by reference Institute of Electrical 
and Electronics Engineers, Inc. (IEEE) Standard 112-2004 (Test Method A 
and Test Method B), IEEE Standard 114-2001, and Canadian Standards 
Association (CAN/CSA) Standard C747-94.
    In addition to incorporating by reference the above industry 
standard test procedures, the small electric motors test procedure 
final rule also codified the statutory definition for the term ``small 
electric motor;'' clarified the definition of the term ``basic model'' 
and the relationship of the term to certain product classes and 
compliance certification reporting requirements; and codified the 
ability of manufacturers to use an alternative efficiency determination 
method (AEDM) to reduce testing burden, while maintaining accuracy and 
ensuring compliance with potential future energy conservation 
standards. The test procedure notice also discussed matters of 
laboratory accreditation, compliance certification, and enforcement of 
energy conservation standards for small electric motors.
    At the public meeting presenting the preliminary analyses for the 
energy conservation standards rulemaking, WEG and Emerson voiced their 
concern about enforcement of energy efficiency standards for small 
electric motors. WEG stated that they believe that enforcement will 
become especially problematic for those small electric motors that come 
into the country embedded in a piece of equipment and are therefore 
difficult to view the nameplate and to test. (WEG, Public Meeting 
Transcript, No. 8.5 at pp. 325-26) Additionally, Emerson requested that 
DOE provide further information on how it plans on enforcing standards 
on small electric motors. (Emerson, Public Meeting Transcript, No. 8.5 
at p. 297) DOE notes certification and enforcement provisions for small 
electric motors have not yet been developed. DOE plans

[[Page 61418]]

on proposing such provisions in a separate test procedure supplementary 
NOPR, at which time DOE will welcome comment on how small electric 
motor efficiency standards can be effectively enforced.

B. Technological Feasibility

1. General
    In each standards rulemaking, DOE conducts a screening analysis, 
which it bases on information it has gathered on all current technology 
options and prototype designs that could improve the efficiency of the 
product or equipment that is the subject of the rulemaking. In 
consultation with manufacturers, design engineers, and other interested 
parties, DOE develops a list of design options for consideration. 
Consistent with its Process Rule, DOE then determines which of these 
means for improving efficiency are technologically feasible. 
``Technologies incorporated in commercially available products or in 
working prototypes will be considered technologically feasible.'' 10 
CFR 430, subpart C, appendix A, section 4(a)(4)(i).
    DOE evaluates each of the acceptable design options in light of the 
following criteria: (1) Technological feasibility; (2) practicability 
to manufacture, install, or service; (3) adverse impacts on product 
utility or availability; and (4) adverse impacts on health or safety. 
Chapter 4 of the TSD contains a description of the screening analysis. 
Also, section IV.B includes a discussion of the design options DOE 
considered, those it screened out, and those that are the basis for the 
trial standard levels (TSLs) in this rulemaking.
2. Maximum Technologically Feasible Levels
    In the engineering analysis, DOE determined the maximum 
technologically (max-tech) feasible efficiency levels for small 
electric motors using the most efficient design parameters that lead to 
the highest equipment efficiencies. (See TSD chapter 5.) Table III.1 
lists the max-tech levels that DOE determined for this rulemaking.
[GRAPHIC] [TIFF OMITTED] TP24NO09.002

    DOE developed maximum technology efficiencies by creating motor 
designs for each product class analyzed that use all of DOE's viable 
design options. The efficiency levels shown in Table III.1 correspond 
to designs that use a maximum increase in stack length, a copper rotor 
design, an exotic low-loss steel type, a maximum slot fill percentage, 
a change in run-capacitor rating (CSCR motors only), and an optimized 
end ring design. All of the design options used to create these max-
tech motors remain in the analysis and are options that DOE considers 
technologically feasible.

C. Energy Savings

1. Determination of Savings
    DOE used its national energy savings (NES) spreadsheet to estimate 
energy savings from new standards for the small electric motors that 
are the subject of this rulemaking. (The NES analysis is described in 
section IV.G and in chapter 10 of the TSD.) DOE forecasted energy 
savings beginning in 2015, the year that new standards would go into 
effect, and ending in 2045 for each TSL. DOE quantified the energy 
savings attributable to each TSL as the difference in energy 
consumption between the standards case and the base case. The base case 
represents the forecast of energy consumption in the absence of new 
energy conservation standards. DOE's base case assumes no change in the 
efficiency distribution of motors between 2008 and the end of the 
analysis period in 2045.
    The NES spreadsheet model calculates the energy savings in site 
energy expressed in kilowatt-hours (kWh). Site energy is the energy 
directly consumed by small electric motors at the locations where they 
are used. DOE reports national energy savings in terms of the source 
energy savings, which is the savings in the energy that is used to 
generate and transmit the site energy. To convert site energy to source 
energy, DOE derived conversion factors, which change with time, from 
the American Recovery and Reinvestment Act scenario of the Energy 
Information Administration's (EIA) Annual Energy Outlook 2009 (AEO 
2009), which is the latest forecast available.
2. Significance of Savings
    Standards for small electric motors must result in ``significant'' 
energy savings. (42 U.S.C. 6317(b)) 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 (DC Cir. 1985), 
indicated that Congress intended ``significant'' energy savings to be 
savings that were not ``genuinely trivial.'' The energy savings for all 
of the TSLs considered in this rulemaking are nontrivial, and therefore 
DOE considers them significant.

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. (42 U.S.C. 6295(o)(2)(B)) The following sections discuss how 
DOE has addressed each of those seven factors as part of its analysis. 
DOE invites comments on each of these elements.
a. Economic Impact on Manufacturers and Consumers
    In determining the impacts on manufacturers of a new or amended 
standard, DOE first determines the quantitative impacts using an annual 
cash-flow approach. This includes both a short-term assessment--based 
on the cost and capital requirements during the period between the 
announcement of a regulation and when the regulation comes into 
effect--and a long-term assessment. The impacts analyzed include INPV 
(which values the industry on the basis of expected future cash flows), 
cash flows by year, changes in revenue and income, and other measures, 
as appropriate. Second, DOE

[[Page 61419]]

analyzes and reports the impacts on different types of manufacturers, 
paying particular attention to impacts on small manufacturers. Third, 
DOE 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 
different DOE regulations on manufacturers.
    For small electric motor customers, measures of economic impact 
include the changes in LCC and the PBP for each TSL. The LCC, which is 
also separately specified as 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)) is discussed in the 
following section.
b. Life-Cycle Costs
    The LCC is the sum of the purchase price of a product (including 
its installation) and the operating expense (including energy and 
maintenance expenditures) discounted over the lifetime of the product. 
DOE determines these costs by considering (1) total installed price to 
the purchaser (including manufacturer selling price, distribution 
channel markups, sales taxes, and installation cost), (2) the operating 
expenses of the equipment (energy cost and maintenance and repair 
cost), (3) equipment lifetime, and (4) a discount rate that reflects 
the real cost of capital and puts the LCC in present value terms.
    For each representative small electric motor product class, DOE 
calculated both LCC and LCC savings for various efficiency levels. The 
LCC analysis estimated the LCC for representative units used in various 
representative applications, and accounted for a mixture of space-
constrained applications (20 percent) and non-space-constrained 
applications (80 percent) in the commercial, agricultural, industrial, 
and residential sectors.
    To account for uncertainty and variability in specific inputs, such 
as equipment lifetime, annual hours of operation, and discount rate, 
DOE used a distribution of values with probabilities attached to each 
value. DOE sampled a nationally representative set of input values from 
the distributions to produce a range of LCC estimates. A distinct 
advantage of this approach is that DOE can identify the percentage of 
consumers achieving LCC savings or attaining certain payback values due 
to an energy conservation standard. Thus, DOE presents the LCC savings 
as a distribution, with a mean value and a range. DOE assumed in its 
analysis that the consumer purchases the product in 2015.
c. Energy Savings
    While significant conservation of energy is a separate statutory 
requirement for imposing an energy conservation standard, DOE considers 
the total projected energy savings that are expected to result directly 
from the standard in determining the economic justification of that 
standard. (See 42 U.S.C. 6295(o)(2)(B)(i)(III)) DOE used the NES 
spreadsheet results in its consideration of total projected savings.
d. Lessening of Utility or Performance of Products
    In establishing classes of equipment, and in evaluating design 
options and the impact of potential standard levels, DOE sought to 
develop standards for small electric motors that would not lessen the 
utility or performance of this equipment. None of the TSLs DOE 
considered would reduce the utility or performance of the small 
electric motors under consideration in the rulemaking. (See 42 U.S.C. 
6295(o)(2)(B)(i)(IV).) The efficiency levels DOE considered maintain 
motor performance and power factor (i.e., approximately 75 percent for 
polyphase motors and greater than 60 percent for capacitor start 
motors) so that consumer utility is not adversely affected. DOE 
considered end-user size constraints by developing designs with size 
increase restrictions (limited to a 20-percent increase in stack 
length), as well as designs with less stringent constraints (100-
percent increase in stack length). Those designs adhering to the 20-
percent increase in stack length maintain all aspects of consumer 
utility and were created for all efficiency levels, but they may become 
very expensive at higher efficiency levels when compared with DOE's 
other designs.
e. Impact of Any Lessening of Competition
    DOE considers any lessening of competition likely to result from 
standards. Accordingly, DOE has requested that the Attorney General 
transmit to the Secretary, not later than 60 days after the publication 
of this proposed rule, a written determination of the impact, if any, 
of any lessening of competition likely to result from today's proposed 
standards, together with an analysis of the nature and extent of such 
impact. (See 42 U.S.C. 6295(o)(2)(B)(i)(V) and (B)(ii).) Along with 
this request, DOE has transmitted a copy of today's proposed rule to 
the Attorney General. DOE will address the Attorney General's 
determination in the final rule.
f. Need of the Nation To Conserve Energy
    The non-monetary benefits of the proposed standards are likely to 
be reflected in reductions in the overall demand for electricity, which 
will result in reduced costs for maintaining reliability of the 
Nation's electricity system. DOE conducts a utility impact analysis to 
estimate how standards may affect the Nation's power generation 
capacity. This analysis captures the effects of efficiency improvements 
on electricity consumption by the covered equipment, including the 
reduction in electricity generation capacity by fuel type.
    The proposed standards will also 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 estimated level of power generation displaced by energy 
conservation standards. DOE reports the environmental effects from each 
TSL in the environmental assessment in chapter 15 of the TSD. (See 42 
U.S.C. 6295(o)(2)(B)(i)(VI)).
g. Other Factors
    The Act 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)) 
Under this provision, DOE considered three factors: (1) Harmonization 
of the proposed standards with standards for similar products, (2) the 
need of some consumers to continue to have access to CSIR motors, and 
(3) the impacts of reactive power \6\ on electricity supply costs.
---------------------------------------------------------------------------

    \6\ In an alternating current power system, the reactive power 
is the root mean square (RMS) voltage multiplied by the RMS current, 
multiplied by the sine of the phase difference between the voltage 
and the current. Reactive power occurs when the inductance or 
capacitance of the load shifts the phase of the voltage relative to 
the phase of the current. While reactive power does not consume 
energy, it can increase losses and costs for the electricity 
distribution system. Motors tend to create reactive power because 
the windings in the motor coils have high inductance.
---------------------------------------------------------------------------

    Medium-sized polyphase general-purpose motors in three-digit frame 
series with output power of 1 horsepower and above are currently 
regulated under the Energy Policy Act of 1992 (EPACT 1992). DOE 
proposes a standard for polyphase small motors with output power of 1 
horsepower and above that is closely aligned with the

[[Page 61420]]

EPACT 1992 standard for medium motors.
    Some of the highest TSLs for single-phase motors would lead to very 
high prices for CSIR motors while maintaining lower prices for CSCR 
motors, or vice versa. This shift in relative price may cause the 
effective disappearance of the more expensive category of motors from 
the market. In many applications, CSCR motors can replace CSIR motors. 
However, in some instances, the space required for a second capacitor 
is not available so that a CSCR motor may not be used to replace a CSIR 
motor in some specific applications. Under 42 U.S.C. 6295(o)(4), the 
Secretary may not prescribe a standard that is ``likely to result in 
the unavailability in the United States in any covered product type (or 
class).'' In today's notice, DOE proposes standards that it believes 
will maintain a supply of both categories of motors in the single-phase 
motor market.
    DOE also notes that induction motors produce reactive power that 
can result in increased electricity supply costs because reactive power 
creates extra electrical currents that can require increased electrical 
distribution capacity. Many individual customers are not charged 
directly for this cost, but DOE did consider the economic benefits of 
potential reactive power reductions when evaluating the national 
benefits of the proposed standards.
2. Rebuttable Presumption
    Section 325(o)(2)(B)(iii) of EPCA states that there is a rebuttable 
presumption that an energy conservation standard is economically 
justified if the additional cost to the consumer that meets the 
standard level is less than three times the value of the first-year 
energy (and as applicable, water) savings resulting from the standard, 
as calculated under the applicable DOE test procedure. (42 U.S.C. 
6295(o)(2)(B)(iii) and 42 U.S.C. 6316(e)(1)) DOE's LCC and payback 
period (PBP) analyses generate values that calculate the PBP for 
customers of potential energy conservation standards, which includes, 
but is not limited to, the 3-year PBP contemplated under the rebuttable 
presumption test discussed above. However, DOE routinely conducts a 
full economic analysis that considers the full range of impacts, 
including those to the customer, manufacturer, Nation, and environment, 
as required under 42 U.S.C. 6295(o)(2)(B)(i) and 42 U.S.C. 6316(e)(1). 
The results of this analysis serve as the basis for DOE to evaluate 
definitively the economic justification for a potential standard level 
(thereby supporting or rebutting the results of any preliminary 
determination of economic justification).
    For comparison with the more detailed analysis results, DOE 
provides the results of a rebuttable presumption payback calculation in 
section V.B.1.d.

IV. Methodology and Discussion

    DOE used three spreadsheet tools to estimate the impact of today's 
proposed standards. The first spreadsheet calculates the LCCs and 
payback periods of potential new energy conservation standards. The 
second, the National Impact Analysis (NIA) spreadsheet, provides 
shipment forecasts and then calculates national energy savings and net 
present value impacts of potential new energy conservation standards. 
DOE assessed manufacturer impacts largely through use of the third 
spreadsheet, the Government Regulatory Impact Model (GRIM).
    Additionally, DOE estimated the impacts of energy efficiency 
standards for small electric motors 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 sector of the U.S. economy. EIA uses NEMS to prepare its Annual 
Energy Outlook, a widely known energy forecast for the United States. 
The version of NEMS used for appliance standards analysis is called 
NEMS-BT, and is based on the AEO 2009 version with minor modifications. 
The NEMS offers a sophisticated picture of the effect of standards 
because it accounts for the interactions between the various energy 
supply and demand sectors and the economy as a whole.
    The EIA approves the 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. 
(``BT'' stands for DOE's Building Technologies Program.) For more 
information on NEMS, refer to The National Energy Modeling System: An 
Overview, DOE/EIA-0581 (98) (Feb. 1998), available at http://tonto.eia.doe.gov/FTPROOT/forecasting/058198.pdf.

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 include product classes, 
manufacturers, quantities, and types of equipment sold and offered for 
sale; retail market trends; and regulatory and non-regulatory programs. 
See chapter 3 of the TSD for further discussion of the market and 
technology assessment.
1. Definition of Small Electric Motor
    Except for small electric motors that are components of other 
products covered by EPCA (see 42 U.S.C. 6317(b)(3)), DOE analyzed all 
CSIR and CSCR single-phase motors and polyphase motors, including, for 
example, both open and enclosed motors. DOE determined that standards 
appear to be warranted for all of them. 71 FR 38807-08. However, DOE 
has tentatively concluded that EPCA does not cover certain small motors 
for which the determination concluded standards were warranted--the 
most significant group being enclosed motors.
a. Motor Categories
    EPCA's definition of ``small electric motor'' is tied to the 
terminology and performance requirements in NEMA Standards Publication 
MG1-1987 (MG1-1987). These requirements were established for (1) 
general-purpose alternating-current motors, (2) single-speed induction 
motors, and (3) the NEMA system for designating (two-digit) frames. 
Single-speed induction motors, as delineated and described in MG1-1987, 
fall into five categories: split-phase, shaded-pole, capacitor-start 
(both CSIR and CSCR), permanent-split capacitor (PSC), and polyphase. 
Therefore, only motors in these categories meet the single-speed 
induction motor element of EPCA's definition of ``small electric 
motor.''
    In paragraph MG1-1.05, MG1-1987 defines ``general-purpose 
alternating-current motor'' as follows:
    A general-purpose alternating-current motor is an induction motor, 
rated 200 horsepower and less, which incorporates all of the following: 
(1) Open construction, (2) rated continuous duty, (3) service factor in 
accordance with MG1-12.47, and (4) Class A insulation system with a 
temperature rise as specified in MG1-12.42 for small motors or Class B 
insulation system with a temperature rise as specified in MG1-12.43 for 
medium motors. It is

[[Page 61421]]

designed in standard ratings with standard operating characteristics 
and mechanical construction for use under usual service conditions 
without restriction to a particular application or type of application.
    During the public meeting held on January 30, 2009, Emerson Motor 
Technologies commented that split-phase motors, shaded-pole motors, and 
PSC motors do not meet the torque requirements for NEMA general-purpose 
motors. Therefore, Emerson indicated that these motors should be 
excluded from the scope of coverage for this rulemaking. (Emerson, 
Public Meeting Transcript, No. 8.5 at p. 38) \7\
---------------------------------------------------------------------------

    \7\ A notation in the form ``Emerson, Public Meeting Transcript, 
No. 8.5 at p. 38'' refers to (1) a statement that was submitted by 
Emerson Motor Technologies and is recorded in the docket ``Energy 
Efficiency Program for Certain Commercial and Industrial Equipment: 
Public Meeting and Availability of the Framework Document for Small 
Electric Motors,'' Docket Number EERE-2008-BT-STD-0007, as comment 
number 8.5; and (2) a passage that appears on page 38 of the 
transcript, ``Small Electric Motors Energy Conservation Standards 
Preliminary Analyses Public Meeting,'' dated January 30, 2009. 
Likewise, a notation in the form ``NEMA, No. 13 at p. 5'' refers to 
(1) a statement by the National Electrical Manufacturers Association 
and is recorded in the docket as comment number 13; and (2) a 
passage that appears on page 5 of that document.
---------------------------------------------------------------------------

    DOE has examined this issue and, consistent with its position in 
the preliminary analyses, agrees that split-phase, shaded-pole, or PSC 
motors do not qualify as general-purpose alternating-current motors. 
Because split-phase motors are usually designed for specific purposes 
and applications, they are not designed ``for use under usual service 
conditions without restriction to a particular application or type of 
application.'' Additionally, split-phase, shaded-pole, and PSC motors 
all fail to meet MG1-1987's torque and current requirements for 
general-purpose motors, and hence are not ``designed in standard 
ratings with standard operating characteristics.'' The requirements 
that NEMA MG1-1987 defines for single-phase motors are locked-rotor 
torque at MG1-12.32.2, locked-rotor current at MG1-12.43, and breakdown 
torque at MG1-12.32. For small polyphase motors, NEMA MG1-1987 only 
defines breakdown torque in MG1-12.37. Because of these restrictions, 
none of the above motor categories are small electric motors as EPCA 
defines that term. DOE's determination that standards are warranted for 
small electric motors excluded the above motor categories, and none are 
covered by today's proposed standards.
    As for CSIR, CSCR, and polyphase motors, these motor categories do 
meet the performance requirements set forth by the MG1-1987 definition 
of ``general-purpose alternating-current motor'' and are therefore 
covered by the EPCA definition of a small electric motor.
    During the public meeting, PG&E, Earthjustice, and ACEEE expressed 
concern that small electric motors not covered by the scope of coverage 
of this rulemaking would be preempted from coverage as a result of 
energy conservation for standards for the covered small electric 
motors. (PG&E, Earthjustice, ACEEE, Public Meeting Transcript, No. 8.5 
at pp. 320-323) In their comment, Earthjustice also requested that DOE 
clarify this issue. (Earthjustice, No. 11 at pp. 3-5) DOE appreciates 
these concerns and would like to clarify the issue of preemption. The 
statutory definition of small electric motors only gives DOE the 
authority to cover, CSIR, CSCR, and polyphase motors. Therefore, state 
standards for other, non-covered motor categories, such as those 
discussed above, would not be preempted by the standards set by this 
rulemaking.
b. Motor Enclosures
    The first criterion listed in NEMA MG1-1987's definition of a 
``general-purpose alternating-current motor'' is that the motor is of 
open construction. In the latest version of NEMA MG1, MG1-2006 with 
Revision 1 2007, NEMA modified this criterion and expanded it to 
include enclosed motors. At the preliminary analyses public meeting, 
Earthjustice commented that DOE could reinterpret the statutory 
definition of small electric motor such that NEMA MG1-1987 only applies 
to the definition of two-digit frame number series and later versions 
of MG1 could be used to expand coverage to include enclosed motors. 
Earthjustice reiterated this point in a comment submitted after the 
public meeting. (Earthjustice, Public Meeting Transcript, No. 8.5 at 
pp. 47-50; Earthjustice, No. 11 at p. 1) NEMA disagreed with this 
interpretation of the statutory definition, arguing that MG1-1987 was 
intended to apply to the entire definition of a small electric motor. 
Therefore, NEMA recommended that DOE only cover open motors. (NEMA, No. 
13 at p. 17)
    DOE agrees with NEMA that the reference MG1-1987 applies to all 
facets of the statutory definition of a small electric motor. The 
language of the statute specifies that the requirements of MG1-1987 
apply in determining what constitutes a small electric motor. DOE's 
application of that definition is consistent with that language. 
Similarly, because the statute specifically mentions MG1-1987 as the 
version of MG1 on which DOE should relay, the 1987 version is the only 
applicable version of NEMA MG1. Accordingly, consistent with MG1-1987, 
only CSIR, CSCR, and polyphase motors with open construction meet the 
statutory definition.
c. Service Factors
    Additional CSIR, CSCR, and polyphase motors may fail to meet the 
NEMA definition because, for example, they fail to meet the service 
factor requirements. Service factor is a measure of the overload 
capacity at which a motor can operate without damage, while operating 
normally within the correct voltage tolerances. The rated horsepower 
multiplied by the service factor determines that overload capacity. For 
example, a 1 horsepower motor with a 1.25 service factor can operate at 
1.25 horsepower (1 horsepower x 1.25 service factor). DOE has concluded 
that motors that fail to meet service factor requirements in MG1-12.47 
are not ``small electric motors'' as EPCA uses that term. Therefore, 
today's proposed standards do not apply to them.
d. Insulation Class Systems
    The statutory definition of a small electric motor is bound to the 
definition of a general-purpose alternating-current motor as defined in 
NEMA MG 1-1987. Part of that NEMA definition says that a general-
purpose motor must incorporate a ``Class A insulation system with a 
temperature rise as specified in MG 1-12.42 for small motors or Class B 
insulation system with a temperature rise as specified in MG 1-12.43 
for medium motors.''
    The issue of insulation classes and how it pertains to DOE's scope 
of coverage was discussed at the preliminary analysis public meeting. 
Advanced Energy spoke about insulation classes and recommended that 
DOE's coverage should include Class F insulation systems. (Advanced 
Energy, Public Meeting Transcript, No. 8.5 at pp. 45-46) Advanced 
Energy noted that insulation class systems used in small electric 
motors have improved since this definition of general purpose was first 
standardized in NEMA MG1-1987. Further, as new insulation technologies 
have improved and material costs have decreased, it has become 
increasingly common for manufacturers to use insulation classes higher 
than A. Advanced Energy requested in written comments that DOE consider 
all insulation classes as covered (Advanced Energy, No. 16 at p. 4).

[[Page 61422]]

    Upon further examination of the market, DOE agrees with Advanced 
Energy. The vast majority of the motors manufactured, and otherwise 
covered by this rulemaking, satisfy the requirements for Class B or 
Class F insulation systems. DOE also found that according to MG1-1.66 
and paragraph MG1-12.42, NEMA MG 1-1987 defines four insulation class 
systems. They are divided into classes based on the thermal endurance 
of the system for temperature rating purposes. A Class A insulation 
system must have suitable thermal endurance at a temperature rise. 
Class A insulation is a minimum level of thermal endurance. A Class B 
insulation system has a greater thermal endurance rating than Class A. 
Similarly, Class F thermal endurance exceeds Class B and Class H 
insulation has the highest level of endurance among all four classes. 
Therefore, the insulation class systems are defined in a way that 
permits a Class H system to satisfy Classes A, B, and F. DOE believes 
that this approach satisfies the statute and avoids creating a loophole 
through which all small electric motors equipped with non-Class A 
insulation would be eliminated from coverage. Commenters did not 
suggest that these insulation classes should be exempt from coverage 
and DOE is proposing to consider covering insulation Classes A or 
higher as covered under this rule. Therefore, DOE interprets the NEMA 
MG1-1987 definition of a ``general-purpose, alternating-current motor'' 
as being applicable to insulation class systems rated A or higher.
e. Metric Equivalents
    EPCA defines a small electric motor based on the construction and 
rating system in MG1-1987. (42 U.S.C. 6311(13)(G)) This system uses 
English units of measurement and power output ratings in horsepower. In 
contrast, general-purpose electric motors manufactured outside the 
United States and Canada are defined and described with reference to 
the International Electrotechnical Commission (IEC) Standard 60034-1 
series, ``Rotating electrical machines,'' which employs terminology and 
criteria different from those in EPCA. The performance attributes of 
these IEC motors are rated pursuant to IEC Standard 60034-1 Part 1: 
``Rating and performance,'' which uses metric units of measurement and 
construction standards different from MG1-1987, and a rating system 
based on power output in kilowatts instead of power output in 
horsepower. The Institute of Electrical and Electronics Engineers 
(IEEE) Standard 112 recognizes this difference in the market and 
defines the relationship between horsepower and kilowatts. Furthermore, 
in 10 CFR 431.12, DOE defined ``electric motor'' in terms of both NEMA 
and IEC equivalents even though EPCA's corresponding definition and 
standards were articulated in terms of MG1-1987 criteria and English 
units of measurement. 64 FR 54114 (October 5, 1999)
    DOE received two comments on IEC-equivalent motors following the 
January 30, 2009, public meeting. NEMA commented that IEC-equivalent 
motors should be considered covered products to prevent the import of 
virtually identical products that are not compliant with energy 
efficiency standards. (NEMA, No. 13 at p. 17) A joint comment submitted 
by PG&E, SCE, SCGC, and SDGE also stated that IEC-equivalent motors 
should be covered to prevent a potential loophole in the standard. 
(Joint Comment, No. 12 at p. 2)
    Although the statutory definition of ``small electric motor'' does 
not address metric or kilowatt-rated motors, DOE agrees with the 
submitted comments. In general, IEC metric or kilowatt-equivalent 
motors can perform the identical functions of covered small electric 
motors and provide comparable rotational mechanical power to the same 
machines or equipment. Moreover, IEC metric or kilowatt-equivalent 
motors can be interchangeable with covered small electric motors. 
Therefore, DOE interprets EPCA to apply the definition of a ``small 
electric motor'' to any motor that is identical or equivalent to a 
motor constructed and rated in accordance with NEMA MG1.
    Additionally, as to motors with a standard kilowatt rating, DOE 
prescribed energy conservation standards for medium electric motors 
(i.e., NEMA three-digit frame series motors) in section 431.25(a). In 
this section of the CFR DOE establishes equivalencies of standard 
horsepower and kilowatt ratings. As demonstrated by examination of 
these specified equivalencies in section 431.25(a) and the exact 
conversions of standard kilowatt ratings to horsepower ratings laid out 
in 431.25(b)(3)--no standard kilowatt rating exactly equals a standard 
horsepower rating--and therefore an IEC motor with a standard kilowatt 
rating must sometimes meet the efficiency standard for the next higher 
horsepower or the next lower depending on what converted horsepower 
value is relative to the surrounding standard horsepower ratings. In 
all cases the standard it must meet is prescribed for a horsepower that 
is very close to an exact conversion from its kilowatt rating. Second, 
as to electric motors with non-standard kilowatt or horsepower ratings, 
section 431.25(b)(3) provides that kilowatt rating would be 
arithmetically converted to its equivalent horsepower rating, and then, 
based on whether the motor falls above or below the midpoint between 
consecutive horsepower ratings, would be required to meet the 
corresponding higher or lower energy efficiency level, respectively. 
DOE proposes to adopt similar interpretations for small electric 
motors.
f. Frame Sizes
    As to the frame sizes of motors that would be covered by DOE 
standards for small electric motors, EPCA defines small electric motor, 
in part, as a motor ``built in a two-digit frame number series in 
accordance with MG1-1987.'' (42 U.S.C. 6311(13)(G)) MG1-1987 
establishes a system for designating frames of motors, which consists 
of a series of numbers in combination with letters. The 1987 version of 
MG1 only explicitly defines three two-digit frame series: 42, 48, and 
56. These frame series have standard dimensions and tolerances 
necessary for mounting and interchangeability that are specified in 
sections MG1-11.31 and MG1-11.34.
    DOE understands that manufacturers produce other two-digit frame 
sizes, namely a 66 frame size. The 66 frame size is used for definite-
purpose or special-purpose motors and not used in general-purpose 
applications and therefore not covered under the EPCA definition of 
``small electric motor.'' DOE is unaware of any other motors with frame 
sizes that are built in accordance with NEMA MG1-1987. Should such 
frame sizes appear, DOE will evaluate whether or not they are included 
equipment at that time.
g. Horsepower Ratings
    The definition of a small electric motor does not explicitly limit 
the scope of coverage to certain horsepower ratings. However, DOE notes 
that the small electric motor industry generally considers 3 hp as the 
upper limit for rated capacity of such motors. Nonetheless, some 
manufacturers produce motors that meet the EPCA definition of small 
electric motor but have higher horsepower ratings. DOE has tentatively 
concluded that such motors are still covered by and subject to 
standards adopted under EPCA.
    Chapter 3 of the TSD provides additional detail on the nature of 
the motors covered by the standards proposed in this NOPR.

[[Page 61423]]

2. Product Classes
    When evaluating and establishing energy conservation standards, DOE 
generally divides covered equipment into classes by the type of energy 
used, capacity, or other performance-related features that affect 
efficiency. (42 U.S.C. 6295(q)) DOE routinely establishes different 
energy conservation standards for different product classes based on 
these criteria.
    At the preliminary analyses public meeting, DOE presented its 
rationale for creating 72 product classes. The 72 product classes are 
based on the combinations of three different ratings or characteristics 
of a motor based on motor category, number of poles, and horsepower. As 
these motor characteristics change, so does the utility and efficiency 
of the small electric motor.
    The motor category divides the small electric motors market into 
three major motor categories: CSIR, CSCR, and polyphase. For each motor 
category, DOE broke down the product classes by all combinations of the 
eight different horsepower ratings (i.e., \1/4\ to >= 3) and three 
different pole configurations (i.e., 2, 4, and 6). A number of reasons 
support this approach.
    First, the motor category depends on the type of energy used and 
its starting and running electrical characteristics. While all small 
electric motors use electricity, some motors operate on single phase 
electricity (which requires certain additional electronics for creating 
rotational torque) while others operate on polyphase electricity. 
Polyphase motors do not need additional circuitry to create rotational 
torque because they use the existing phase difference in the multiple 
phases of electricity applied to the motor. This difference impacts 
efficiency, and therefore becomes a factor around which DOE establishes 
a separate product class for polyphase motors.
    Within single phase small electric motors, there are 
characteristics which are important because they can affect the motor's 
utility and potential for improving efficiency. The design feature of 
incorporating a run capacitor into the small electric motor affects 
motor efficiency, making it more efficient than an induction run motor 
that does not incorporate a run capacitor.\8\ This design constitutes a 
performance-related feature that affects efficiency. Furthermore, DOE 
notes that it is not always possible to replace a CSIR motor with a 
CSCR motor due to the run capacitor, which is often mounted in an 
external housing on the motor. In certain applications, the run 
capacitor mounted on the motor will physically prohibit it from 
replacing a CSIR motor. This is a design feature that affects utility. 
For all of these reasons, DOE treats CSIR and CSCR motors as separate 
product classes.
---------------------------------------------------------------------------

    \8\ The run-capacitor and auxiliary windings in a CSCR motor 
help simulate a balanced two phase motor at full load, which helps 
minimize the current required to run the motor, thereby reducing the 
I\2\R losses (which are losses related to current flow).
---------------------------------------------------------------------------

    Second, the number of poles in an electric motor determines the 
synchronous speed (i.e., revolutions per minute). There is an inverse 
relationship between the number of poles and the maximum speed a motor 
can run at, meaning that an increase in the number of poles equates to 
a decrease in the speed of the motor (e.g., going from two to four to 
six poles, the synchronous speed drops from 3,600 to 1,800 to 1,200 
revolutions per minute). Since the full range of motor applications 
requires a variety of motor speeds, DOE considers motor speed and, 
therefore, the number of poles to have a distinct impact on the utility 
of small electric motors. Therefore, DOE uses the number of poles in a 
motor as a means of differentiating product classes because it is this 
design change that creates a change in motor speed capabilities.
    Third, in general, efficiency scales with horsepower, a capacity-
related metric of small electric motors. In other words, a 3 horsepower 
motor is usually more efficient than a \1/4\ horsepower motor. 
Horsepower is a critical performance attribute of an electric motor, 
and since there is a correlation with efficiency, DOE uses this as a 
criterion for distinguishing among product classes.
    At the public meeting, Emerson and Baldor commented that frame size 
should be considered as an additional motor characteristic when 
establishing product classes. They both stated that motors of different 
frame sizes should not be subjected to the same standards because 
motors in the smaller frames will not be able to achieve as high an 
energy efficiency rating as the larger frame size. (Baldor, Public 
Meeting Transcript, No. 8.5 at pp. 70-71; Emerson, Public Meeting 
Transcript, No. 8.5 at pp. 75-76)
    DOE agrees that motors in a smaller frame size, and therefore made 
with a potentially smaller diameter, will not be able to achieve the 
same efficiency rating as a larger frame. The smaller diameter limits 
the amount of active material that is used to reduce motor losses and 
therefore limits the maximum efficiency rating possible as well. 
However, DOE believes that frame size does not adequately account for 
efficiency limits based on the physical size of the motor. The frame 
size only dictates what the ``D'' dimension (i.e., the dimension 
comprising the length from the bottom of the feet of a motor to the 
center of its shaft). For example, a 56 frame motor could have a stator 
outside diameter ranging from 5.5 inches to 6.15 inches. Therefore, DOE 
accounts for how changes in diameter can affect product utility and 
efficiency in the engineering analysis.
    Additionally, if DOE were to add frame size to the class-setting 
criterion the number of product classes would increase from 72 to 216, 
which is a change by a factor of three for the frame sizes covered: 42, 
48, and 56. Such a large number of product classes would result in a 
large number of basic models, which would be too burdensome on 
manufacturers when seeking certification of compliance. The three 
tables below lay out the 72 product classes, including a description of 
kilowatt and horsepower equivalents.
BILLING CODE 6450-01-P

[[Page 61424]]

[GRAPHIC] [TIFF OMITTED] TP24NO09.003

[GRAPHIC] [TIFF OMITTED] TP24NO09.004

    Chapter 3 of the TSD accompanying this notice provides additional 
detail on the product classes defined for the standards proposed in 
this NOPR.

B. Screening Analysis

    DOE uses the following four screening criteria to determine which 
design options are suitable for further consideration in a standards 
rulemaking:
    1. Technological feasibility. DOE considers technologies 
incorporated in commercial products or in working prototypes to be 
technologically feasible.

[[Page 61425]]

    2. Practicability to manufacture, install, and service. If mass 
production and reliable installation and servicing of a technology in 
commercial products could be achieved on the scale necessary to serve 
the relevant market at the time the standard comes into effect, then 
DOE considers that technology practicable to manufacture, install, and 
service.
    3. Adverse impacts on product utility or product availability. If 
DOE determines a technology would have significant adverse impact on 
the utility of the product to significant subgroups of consumers, or 
would result in the unavailability of any covered product type with 
performance characteristics (including reliability), features, sizes, 
capacities, and volumes that are substantially the same as products 
generally available in the United States at the time, it will not 
consider this technology further.
    4. Adverse impacts on health or safety. If DOE determines that a 
technology will have significant adverse impacts on health or safety, 
it will not consider this technology further.

See 10 CFR part 430, subpart C, appendix A, (4)(a)(4) and (5)(b).

    DOE identified the following technology options that could improve 
the efficiency of small electric motors: utilizing a copper die-cast 
rotor, reducing skew on stack (i.e., straightening the rotor conductor 
bars), increasing the cross-sectional area of rotor conductor bars, 
increasing the end ring size, changing the copper wire gauge used in 
the stator, manipulating the stator slot size, changing capacitor 
ratings, decreasing the air gap between the rotor and stator, improving 
the grades of electrical steel, using thinner steel laminations, 
annealing steel laminations, adding stack height, using high efficiency 
lamination materials, using plastic bonded iron powder (PBIP), 
installing better ball bearings and lubricant, and installing a more 
efficient cooling system. For a description of how each of these 
technology options improves small electric motor efficiency please see 
TSD chapter 3. For the NOPR, DOE screened out two of these technology 
options: PBIP and decreasing the air gap below .0125''.
    PBIP is based on an iron powder alloy that is suspended in plastic, 
and is used in certain motor applications such as fans, pumps, and 
household appliances. The compound is then shaped into motor components 
using a centrifugal mold, reducing the number of manufacturing steps. 
Researchers claim that this technology option could cut losses by as 
much as 50 percent.\9\ The Lund University team already produces 
inductors, transformers, and induction heating coils using PBIP, but 
has not yet produced a small electric motor. In addition, it appears 
that PBIP technology is aimed at torus, claw-pole, and transversal flux 
motors, none of which fit EPCA's definition of small motors.
---------------------------------------------------------------------------

    \9\ Horrdin, H., and E. Olsson. Technology Shifts in Power 
Electronics and Electric Motors for Hybrid Electric Vehicles: A 
Study of Silicon Carbide and Iron Powder Materials. 2007. Chalmers 
University of Technology. G[ouml]teborg, Sweden.
---------------------------------------------------------------------------

    Considering the four screening criteria for this technology option, 
DOE screened out PBIP as a means of improving efficiency. Although PBIP 
has the potential to improve efficiency while reducing manufacturing 
costs, DOE does not consider this technology option technologically 
feasible, because it has not been incorporated into a working prototype 
of a small electric motor. Also, DOE is uncertain whether the material 
has the structural integrity to form into the necessary shape of a 
small electric motor steel frame. Furthermore, DOE is uncertain whether 
PBIP is practicable to manufacture, install, and service, because a 
prototype PBIP small electric motor has not been made and little 
information is available on the ability to manufacture this technology. 
However, DOE is not aware of any adverse impacts on product utility, 
product availability, health, or safety that may arise from the use of 
PBIP in small electric motors.
    Reducing the air gap between the rotor and stator can improve motor 
efficiency as well by reducing the magnetomotive force drop (i.e., the 
force producing the magnetic flux needed to operate the motor), which 
occurs across the air gap. Reducing this drop means that the motor will 
require less current to operate. For small electric motors, the air gap 
is commonly set at 15 thousandths of an inch. Although reducing this 
air gap can improve efficiency, there is some point at which the air 
gap is too tight and becomes impracticable to manufacture. For the 
preliminary analyses DOE set an air gap reduction limit at 10 
thousandths of an inch.
    During the public meeting and the comment period following it, DOE 
received comments on this technology option. At the public meeting, 
Baldor stated that reducing the air gap between the stator and rotor 
will not improve motor efficiency, but could potentially worsen it 
instead. (Baldor, Public Meeting Transcript, No. 8.5 at p. 119) 
Alternatively, in the comment submitted on behalf of Baldor and other 
manufacturers by NEMA, they stated that reducing the air gap could have 
a positive effect on efficiency for some motor designs, but not 
necessarily all. (NEMA, No. 13 at p. 5) NEMA also stated that a more 
practical limit on the air gap for small electric motors is 12.5 
thousandths of an inch. (NEMA, No. 13 at p. 3)
    DOE agrees with NEMA's comments and screened out decreasing the 
radial air gap below 12.5 thousandths of an inch as a means of 
improving efficiency. DOE believes air gaps of 10 thousandths of an 
inch are possible; however, they are more practical in non-continuous, 
stepper motors (motors whose full rotation is completed in discrete 
movements) where potential contact is not as much of a concern. DOE 
considers air gap reduction below 12.5 thousandths of an inch 
technologically feasible, because smaller air gaps do not present any 
technological barrier. Also, DOE is not aware of any adverse impacts on 
health or safety associated with reducing the radial air gap below 12.5 
thousandths of an inch. However, DOE believes that this technology 
option fails the screening criterion of being practicable to 
manufacture, install, and service because such a tight air gap may 
cause the rotor to come into contact with the stator and cause 
manufacturing and service problems. This technology option fails the 
screening criterion of adverse impacts on consumer utility and 
reliability, because the motor may experience higher failure rates in 
service when the manufactured air gaps are less than 12.5 thousandths 
of an inch.
    DOE received comments on two other technology options as well--
increasing stack length and the use of different run capacitors. Baldor 
suggested that DOE screen out changing the stack length of the motor 
because it will force some original equipment manufacturers (OEMs) that 
use small electric motors to invest in redesigning their equipment to 
fit the potentially larger motor. (Baldor, Public Meeting Transcript, 
No. 8.5 at pp. 121-22) DOE cannot screen out a technology option 
because of cost, so DOE believes adding stack height and lengthening a 
motor is a viable technology option that passes all four screening 
criterion. Accordingly, these technology options will be included in 
the engineering analysis. See the engineering analysis, section IV.C.
    NEMA recommended that DOE consider varying the rating of capacitors 
used in small electric motors as a technology option. (NEMA, No. 13 at 
p. 18) In response, DOE notes that though varying capacitor ratings was 
not explicitly listed as a technology option,

[[Page 61426]]

it was utilized in the preliminary engineering analysis. DOE agrees 
that changing the capacitor rating, specifically the run-capacitor 
rating used in CSCR motors, can provide increases in motor efficiency 
with minimal redesign effort. DOE believes that changing the capacitor 
rating meets all four screening criterion and is being included in the 
engineering analysis of this NOPR.
    DOE believes that all of the efficiency levels discussed in today's 
notice are technologically feasible. The evaluated technologies all 
have been used (or are being used) in commercially available products 
or working prototypes. These technologies all incorporate materials and 
components that are commercially available in today's supply markets 
for the motors that are the subject of this NOPR. Therefore, DOE 
believes all of the efficiency levels evaluated in this notice are 
technologically feasible.

C. 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 provides the incremental costs of adding 
to a baseline model design options 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 data as to costs for 
parts and material, labor, shipping/packaging, and investment for 
models that operate at particular efficiency levels.
1. Approach
    In this rulemaking, DOE conducted the engineering analysis using a 
modified design-option approach where DOE employed a technical expert 
with motor design software to develop motor designs at several 
efficiency levels for each analyzed product class. Based on these 
simulated designs and manufacturer and component supplier data, DOE 
calculated manufacturing costs and selling prices associated with each 
efficiency level. DOE decided on this approach after receiving 
insufficient response to its request for the manufacturer data needed 
to execute an efficiency-level approach for the preliminary analyses. 
The design-option approach allows DOE to make its engineering analysis 
methodologies, assumptions, and results publicly available, thereby 
permitting all interested parties the opportunity to review and comment 
on this information. The design options considered in the engineering 
analysis include: copper die-cast rotor, reduce skew on stack, increase 
cross-sectional area of rotor conductor bars, increase end-ring size, 
change gauge of copper wire in stator, manipulate stator slot size, 
decrease air gap between rotor and stator to 12.5 thousandths of an 
inch, improve grades of electrical steel, use thinner steel 
laminations, anneal steel laminations, add stack height, use high 
efficiency lamination materials, change capacitors ratings, install 
better ball bearings and lubricant, and install a more efficient 
cooling system. Chapter 5 of the TSD contains a detailed description of 
the product classes analyzed and the analytical models DOE used to 
conduct the small electric motors engineering analysis and chapter 3 of 
the TSD contains a detailed description of how all the design options 
increase motor efficiency.
2. Product Classes Analyzed
    As discussed in section IV.A.2 of this notice, DOE proposes 
establishing a total of 72 product classes for small electric motors, 
based on the motor category (polyphase, CSIR, or CSCR), horsepower, and 
pole configuration. However, due to scheduling and resource 
constraints, DOE was not able to conduct a separate engineering 
analysis for each and every product class. Instead, DOE carefully 
selected certain product classes to analyze, and then scaled its 
analytical findings for those representative product classes to other 
product classes that were not analyzed. Further discussion of this 
issue is presented in section IV.C.6.
    For the engineering analysis conducted during the preliminary 
analysis, DOE analyzed three representative product classes, all with 
the most popular, 4-pole configuration. In response to that analysis, 
Baldor commented that two and six-pole motors may have significant 
design differences (such as the rotor outer diameter) from 4-pole 
motors. (Baldor, Public Meeting Transcript, No. 8.5 at pp. 196-99) 
Although DOE recognizes that these design differences exist and may 
affect efficiency, DOE has continued to directly model only 4-pole 
motors in its engineering analysis because it is the most popular 
configuration within each motor category and therefore the best basis 
for scaling. As discussed in section IV.C.3, DOE has revised its 
scaling relationships between product classes to account for 
efficiency-related differences between pole configurations.
    For the NOPR, similar to its approach in the preliminary analyses, 
DOE analyzed the three representative product classes depicted in Table 
IV.4. By choosing these three product classes, DOE ensures that each 
motor category (polyphase, CSIR, and CSCR) is represented. In addition, 
DOE has chosen horsepower ratings for each motor category that are 
commonly available across most manufacturers, thus increasing the 
quantity of available data on which to base the analysis. Finally, DOE 
chose four-pole motors for each motor category, consistent with NEMA-
provided shipments data (see TSD chapter 9), which indicated that these 
motors have the highest shipment volume for 2007. See TSD chapter 5 for 
additional detail on the product classes analyzed.
[GRAPHIC] [TIFF OMITTED] TP24NO09.005

3. Cost Model
    For the preliminary analyses and this NOPR, DOE developed a cost 
model to estimate the manufacturing production cost (MPC) of small 
electric motors. The model uses outputs of the design software to 
generate a complete bill of materials, specifying quantities and 
dimensions of parts associated with the

[[Page 61427]]

manufacturing of each design. The bill of materials is multiplied by 
markups for scrap, overhead \10\ (which includes depreciation) and 
associated non-production costs such as interest payments, research and 
development, and sales and general administration. The software output 
also includes an estimate of labor time associated with each step of 
motor construction. DOE multiplied these estimates by a fully burdened 
labor rate to obtain an estimate of labor costs.
---------------------------------------------------------------------------

    \10\ DOE used a markup of 17.5% for overhead when the motor 
design used an aluminum rotor and 18.0% when the motor design used a 
copper rotor. The difference in markup is to account for increased 
depreciation of the manufacturing equipment associated with using a 
copper rotor.
---------------------------------------------------------------------------

    During the public meeting, DOE received two comments regarding 
inputs to the cost model. Edison Electric Institute expressed concern 
with how DOE would handle material pricing for input commodity prices 
since the past several years have seen drastic fluctuations in these 
prices. (EEI, Public Meeting Transcript, No. 8.5 at pp. 161-62) NEEA 
reiterated these concerns and suggested that DOE use a distribution of 
commodity prices and generate various pricing scenarios. (NEEA, Public 
Meeting Transcript, No. 8.5 at p. 164)
    DOE decided to estimate input costs by using an inflation-adjusted 
5-year average of prices for each of the input commodities: steel 
laminations, copper wiring, and aluminum and copper for rotor die-
casting. This method for calculating costs is consistent with past 
rulemakings where material costs were a significant part of 
manufacturers' costs. In calculating the 5-year average prices for 
these commodities, DOE adjusted historical prices to 2008 terms using 
the historical Producer Price Index (PPI) for that commodity's 
industry. DOE also performed a cost sensitivity analysis in which it 
examined both a high and low cost scenario for commodities. For all 
commodity prices, DOE used the PPI to determine the high and low cost 
points and then input those costs into the cost model. This allowed DOE 
to generate a high commodities cost case and a low commodities cost 
case for the engineering analysis results. Please refer to TSD chapter 
5 for additional details on DOE's commodities cost scenario.
    DOE applied a manufacturer markup to the MPC estimates to arrive at 
the MSP. MSP is the price of equipment sold at which the manufacturer 
can recover both production and non-production costs and earn a profit. 
DOE developed a market-share-weighted average industry markup by 
examining gross margin information from the annual reports of several 
major small electric motor manufacturers and Securities and Exchange 
Commission (SEC) 10-K reports.\11\ Because the SEC 10-K reports do not 
provide gross margin information for different product line offerings, 
the estimated markups represent the average markups that the company 
applies over its entire range of motor offerings.
---------------------------------------------------------------------------

    \11\ Available at: http://www.sec.gov/edgar.shtml.
---------------------------------------------------------------------------

    Markups were evaluated for 2003 to 2008. The manufacturer markup is 
calculated as 100/(100--average gross margin), where average gross 
margin is calculated as revenue--cost of goods sold (COGS). To validate 
the information, DOE reviewed its assumptions with motor manufacturers. 
During interviews (see Chapter 12 of the TSD), motor manufacturers 
stated that many manufacturers generate different levels of revenue and 
profit for different product classes, but generally agreed with the end 
markup that was generated. For the NOPR engineering analysis, DOE used 
an industry-wide manufacturer markup of 1.45 based on the information 
described above.
4. Baseline Models
    As mentioned above, the engineering analysis calculates the 
incremental costs for equipment with efficiency levels above the 
baseline in each product class analyzed. During the preliminary 
analyses, NEMA provided DOE with baseline efficiency levels for the 
four motors DOE analyzed. The baseline efficiencies reported by NEMA 
were from a set of compiled data submitted by its members. The reported 
baseline efficiency levels also corresponded to the lowest efficiencies 
of motors manufactured and sold in the market by their members at that 
time.
    For the preliminary analyses, DOE used the expertise of its 
subcontractor to develop baseline design parameters that included 
dimensions, steel grades, copper wire gauges, operating temperatures, 
and other features necessary to calculate the motor's performance. The 
subcontractor used a software program to create a baseline design that 
had an efficiency rating equivalent to that provided by NEMA and torque 
and current restrictions compliant with NEMA MG1-1987.
    After the public meeting, a few commenters raised issues related to 
baseline models. NEMA stated that DOE should use the baseline 
efficiencies that had been provided for the preliminary analyses to 
select efficiencies for the baseline models in the NOPR. (NEMA, No. 13 
at p. 5)
    For the NOPR analysis, DOE reexamined the baseline units selected. 
To establish the baseline motor for the three representative product 
classes DOE examined all available catalog data to find motors with the 
lowest efficiency on the market. The rated efficiencies for the 
polyphase and CSIR motors that DOE chose corresponded to the baseline 
efficiency levels that NEMA had recommended. However, for the CSCR 
motor DOE was unable to find a motor with as low an efficiency as that 
recommended by NEMA. Therefore, DOE selected the lowest efficiency 
level it could find in the market, which was 72 percent instead of the 
66 percent recommended by NEMA. After purchasing the small electric 
motors, DOE had its design subcontractor, as well as an accredited 
laboratory, test the motors according to the appropriate IEEE test 
procedure. See Table IV.5 for the NEMA recommended efficiencies, the 
catalog rated efficiencies, and the tested efficiencies of the three 
baseline models.
[GRAPHIC] [TIFF OMITTED] TP24NO09.006


[[Page 61428]]


    DOE also received comment on removing a motor that was analyzed for 
the preliminary analysis from further analysis. In the preliminary 
analysis, DOE analyzed two CSIR motors of the same horsepower and pole 
configuration, but with different frame sizes. After the engineering 
analysis showed little difference in the cost-efficiency relationship, 
DOE decided not to include the motor with the larger frame size in the 
subsequent NIA and LCC analyses. Adjuvant Consulting stated that they 
agreed with this decision (Adjuvant Consulting, No. 9 at p. 4) However, 
NEMA disagreed with the implication that frame size makes little 
difference on the cost-efficiency relationship in their comment and 
stated that they believed the little differences shown between the 
motors analyzed was due to the differences in other design 
characteristics of the baseline motor. (NEMA, No. 12 at p. 19)
    DOE considered both of these comments when choosing appropriate 
product classes to analyze. DOE agrees with Adjuvant Consulting and 
believes that an analysis of two motors with different frame sizes, but 
in the same product class is not necessary. DOE also agrees with NEMA's 
assessment that the reason there was little difference between the two 
CSIR motors was due to the difference in the baseline design and not 
that there are little differences in cost-efficiency relationships for 
motors with the same ratings, but in different frame sizes. However, in 
the NOPR, DOE chose not to analyze two motors in the same product class 
with different frame sizes. Instead, DOE selected motors with the most 
restricted frame size seen in the respective product classes. DOE 
believes this is the best way to assess the efficiency capabilities of 
motors in the representative product classes.
    Emerson stated that the software program used by DOE in developing 
its baseline models should be validated by actual motor designs that 
are produced. (Emerson, Public Meeting Transcript, No. 8.5 at pp. 148-
49)
    DOE established dimensional and performance specifications other 
than efficiency for the baseline models by examining all outputs of the 
IEEE test procedures and performing teardowns of the purchased motors. 
The IEEE test procedures provide several motor performance 
characteristics including speed, power factor, torque, and line current 
at various load points. After compiling these test data, DOE's 
subcontractor tore down each motor purchased to obtain internal 
dimensions, copper wire gauges, steel grade, and any other pertinent 
design information. Finally, the purchased motors were created in the 
designer's software and used as the baseline models in each analyzed 
product class for the engineering analysis. Again, the three product 
classes that were analyzed were: CSIR, \1/2\ horsepower, 4-pole; CSCR 
\3/4\ horsepower, 4-pole; and polyphase, 1 horsepower, 4-pole motors. 
The specifications of the baseline models can be found in detail in TSD 
chapter 5.
5. Design Options and Limitations
    In the market and technology assessment for the preliminary 
analyses, DOE defined an initial list of technologies that could 
increase the energy efficiency of small electric motors. In the 
screening analysis for the preliminary analyses, DOE screened out two 
of these technologies (PBIP and an air gap less than 12.5 thousandths 
of an inch) 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. The remaining technologies became inputs to the preliminary 
analyses engineering analysis as design options.
    In addition to the comments DOE received about the list of design 
options considered in the screening analysis, DOE also received several 
comments about design limitations that should be considered. Among 
these design limitations are limits on how much to apply certain design 
options and motor performance characteristics that should be monitored 
and maintained. The comments addressed all of the following issues: 
manufacturability, motor size, service factor, skew, the air gap 
between the rotor and stator, power factor, speed, service factor, slot 
fill, locked-rotor conditions, no-load conditions, breakdown torque, 
and thermal characteristics of the motor.
a. Manufacturability
    Baldor commented during the public meeting that manufacturability 
was its primary concern and urged DOE to consider this factor. (Baldor, 
Public Meeting Transcript, No. 8.5 at p. 108) NEMA and the NEEA and the 
Northwest Power and Conservation Council reiterated this view in their 
respective comments submitted after the public meeting. (NEMA, No. 13 
at p. 6; NEEA and NPCC, No. 9 at p. 4) DOE agrees with these comments 
and believes that through the application of the design limitations 
that follow in this section, DOE has maintained manufacturability in 
all motor designs it presents.
b. Motor Size
    Motor size was a topic repeatedly addressed by interested parties. 
WEG and Emerson both commented that a result of energy conservation 
standards and increasing the efficiency of small electric motors could 
be that the motor length, diameter, or both will increase. (WEG, Public 
Meeting Transcript, No. 8.5 at p. 79; Emerson, Public Meeting 
Transcript, No. 8.5 at pp. 80-81) This concerned manufacturers because 
larger motors that result from higher efficiency standards may no 
longer fit into applications and OEMs would be forced to redesign their 
equipment. DOE recognizes that lower cost high efficiency motor designs 
can be produced either with larger diameters or a longer stack length. 
DOE constrained the motor diameter in its engineering analysis and 
simplified its analysis of space constrained applications by addressing 
space constraint issues in only the stack length dimension. DOE assumes 
that motor users whose applications are not space constrained in terms 
of diameter, would purchase a motor with the next higher frame size.
    At the public meeting, WEG stated that there is no set amount of 
additional stack height that can be added to a design without affecting 
end-use application because manufacturers often push those limits (WEG, 
Public Meeting Transcript, No. 8.5 at p. 129) NEMA suggested that DOE 
use a maximum stack length increase of less than 20 percent to account 
for the size restrictions that certain motor applications will have. 
(NEMA, No. 13 at p. 4)
    When establishing design limitations for the motor designs 
produced, DOE considered these comments. DOE decided that increasing 
the stack height of a motor can result in the motor no longer fitting 
into certain applications. Taking the concerns raised during the 
comment period into account, DOE utilized a maximum increase of stack 
height of no more than 20 percent from the baseline motor. However, DOE 
also believes that not all applications would be held to this 20 
percent limitation. Because this design limitation has a drastic effect 
on the cost-efficiency relationship for small electric motors, and not 
all applications would be bound to that restriction, DOE provides a 
second set of engineering results for each product class analyzed. This 
second set of results has a much less stringent limit of increasing the 
stack height, of 100 percent. That is, DOE has two designs for each 
motor analyzed, at each efficiency level; one for the motor designs 
adhering to a maximum stack

[[Page 61429]]

height increase of 20 percent and one adhering to 100 percent. However, 
for some of the lower efficiency levels, where a change in steel grade 
or an increase of stack height above 20 percent is not needed, both 
sets of designs are the same. DOE uses a weighted average of the MSPs 
from the 20 percent constrained designs and the 100 percent constrained 
designs based on the distribution of size-constrained applications that 
use small electric motors.
c. Service Factor
    As discussed in section IV.A.1 service factor is a performance 
characteristic motor manufacturers must observe when designing their 
motors. In its comment, NEMA suggested that service factor be 
considered so that subsequent more efficient designs are still proper 
replacements of the baseline motor design. (NEMA, No. 13 at p. 7) DOE 
agrees with this comment and therefore, will maintain the service 
factor of the baseline motor design for each subsequent, more efficient 
design produced.
d. Skew and Stay-Load Loss
    Another design limitation that was discussed at the public meeting 
was decreasing the degree of rotor skew. At the preliminary analyses 
public meeting, Emerson commented that if rotor skew is removed in a 
single-phase motor, the motor will not start. (Emerson, Public Meeting 
Transcript, No. 8.5 at p. 134) Regal-Beloit also had concerns about 
this design option and stated that reducing motor skew could cause the 
rotor to be noisy when running. (Regal-Beloit, Public Meeting 
Transcript, No. 8.5 at p. 135-36)
    DOE agrees that removing all of the skew from a single-phase motor 
will prevent it from starting. DOE also agrees that too much reduction 
of skew could cause the motor to become noisy. However, DOE does 
believe that reducing the degree of skew could provide efficiency gains 
depending upon the characteristics of the baseline model. DOE 
understands that this design option is subjective and relies heavily on 
the baseline motor design and experience of the motor design engineer. 
DOE did not use this design option for the motors analyzed in the 
engineering analysis because the skew of the baseline model was 
optimized. However DOE did not eliminate it as a design option prior to 
purchasing and tearing down its baseline motors.
    Additionally, Baldor said that changing skew will affect the stray-
load losses in a motor. As mentioned DOE did not implement this design 
option, but did assume 1.0 percent for the value of stray-load loss. 
Baldor recommended that instead of assuming 1.0 percent, DOE should 
assume 1.8 percent because that is recommended in the IEEE standard. 
(Baldor, Public Meeting Transcript, No. 8.5 at p. 176) After examining 
the IEEE standard, DOE agrees with Baldor and has assumed 1.8 percent 
for the amount of stray-load loss in its motor designs.
e. Air Gap
    The air gap between the rotor and stator was another topic 
discussed at the preliminary analyses public meeting and DOE received 
two pertinent comments. As discussed in the screening analysis, Baldor 
stated that reducing the air gap between the rotor and stator could 
have negative effects on efficiency. (Baldor, Public Meeting 
Transcript, No. 8.5 at p. 119) NEMA added that although reducing the 
air gap could improve small electric motor efficiency, it recommended 
that DOE not decrease the air gap in its designs to less than 12.5 
thousandths of an inch because smaller air gaps could be problematic 
causing rotor and stator contact, especially as the motors get longer. 
(NEMA, No. 13, pp. 3, 5)
    After careful consideration of these comments, DOE agrees that 
decreasing the air gap between the stator and rotor down to 12.5 
thousandths of an inch is a viable design option. Reducing the gap 
below that amount would increase the risk of creating potential 
performance and reliability issues that could arise with contact 
between the rotor and stator as well introduce manufacturability 
concerns regarding the ability of manufacturers to build motors with 
these significantly tighter tolerances. Therefore, DOE set one of its 
design limitations as maintaining at least 12.5 thousandths of inch for 
an air gap.
f. Power Factor
    The rated power factor of a motor was an issue that was raised at 
the preliminary analyses public meeting. Baldor commented that the 
power factors of some designs in the preliminary analyses engineering 
analysis were extremely low and that such power factors would result in 
line losses that can negate gains in motor efficiency. (Baldor, Public 
Meeting Transcript, No. 8.5 at p. 174) NEMA followed up this comment 
suggesting that a minimum power factor needs to be established as a 
design limitation. (NEMA, No. 13 at p. 6) PG&E, SCE, SCGC, and SDGE 
reiterated these sentiments and suggested that a power factor of 75 
percent should be maintained for all designs. (Joint Comment, No. 12 at 
p. 3)
    DOE understands that sacrificing power factor to obtain gains in 
efficiency is counterproductive because of the negative effects on line 
efficiency. Therefore DOE agrees that power factor must be considered 
when designing more efficient small electric motors. However, DOE does 
not believe that it is necessary to maintain a power factor of 75 
percent for all designs. Instead, DOE has opted to maintain or increase 
the power factor of the baseline motor for each more efficient design 
and therefore does not negate any gains in efficiency.
g. Speed
    DOE also received comment about the rated speed of its designs 
during the preliminary analyses public meeting. Baldor commented that 
DOE should monitor the trend of full-load speed as motor designs become 
more efficient and DOE should try to maintain the speed of the baseline 
as much as possible. (Baldor, Public Meeting Transcript, No. 8.5 at pp. 
177-78) NEMA reaffirmed this position and stated that to maintain 
utility for some applications, for example a fan or pump, as efficiency 
is increased from design to design, full-load speed must be maintained 
(NEMA, No. 13 at pp. 6-7)
    DOE consulted with its own technical expert when setting a design 
limitation for full-load speed. DOE found that a decrease in full-load 
speed could have a negative impact on the utility of the motor design 
considered a replacement of the baseline. Additionally, DOE understands 
that speed is directly related to the I\2\R losses \12\ found in a 
motor and by maintaining it, those losses are kept reasonable. 
Subsequently, by not increasing I\2\R losses, it is easier to increase 
the overall efficiency of the motor. Therefore, DOE agreed with the 
comments and decided that each design created by its subcontractor 
should maintain or increase the full-load speed of the baseline motor 
that was tested and modeled.
---------------------------------------------------------------------------

    \12\ I\2\R losses stem from the current flow through the copper 
windings in the stator and conductor bars in the rotor. These losses 
are manifested as waste heat, which can shorten the service life of 
a motor.
---------------------------------------------------------------------------

h. Thermal Performance
    After the preliminary analyses public meeting, NEMA suggested that 
DOE complete a thermal analysis and urged DOE to examine rotor 
temperature during operation. (NEMA, No. 13 at p. 8)

[[Page 61430]]

    DOE carefully considered this comment for the NOPR phase of this 
rulemaking. DOE decided to create a baseline design modeled after a 
small electric motor manufactured and sold on the market today. DOE 
purchased a baseline motor for each of the product classes analyzed in 
the engineering analysis. This motor was tested according to the 
corresponding IEEE test procedure and the rotor squirrel-cage 
temperature was monitored using thermocouples. DOE believes that by 
maintaining speed and increasing efficiency, the thermal integrity of 
the baseline motor will be maintained for each subsequent design of 
increased efficiency. By maintaining the baseline speed the rotor 
resistance is not increased and by increasing efficiency there is less 
heat that must be dissipated in the motor. DOE believes the thermal 
integrity of each motor design produced for this rulemaking's analysis 
is preserved as a result these factors.
i. Slot Fill
    DOE received comments on the percentages of slot fill used in the 
designs presented for the preliminary analyses public meeting. The 
maximum level of slot fill DOE allowed in the preliminary engineering 
analysis was 75 percent. NEMA stated that a more typical limit of slot 
fill is 65 percent. (NEMA, No. 13 at p. 3) Emerson stated that 
manufacturers could surpass current limits on slot fill, but this would 
require a hand winding technique by individual workers instead of using 
automated winding machinery. (Emerson, Public Meeting Transcript, No. 
8.5 at p. 130) Lastly, NEMA also recommended that DOE use a minimum 
slot fill. (NEMA, No. 13 at p. 8)
    DOE agrees that the level of slot fill is bound by a minimum and a 
maximum. DOE understands that a minimum slot fill is necessary in order 
for a motor to work. After consultation with technical experts DOE 
decided that a minimum slot fill of 50 percent should be maintained for 
all designs. DOE also agrees with the comments that a maximum level of 
slot fill is necessary and that that level should be 65 percent. 
Although it is possible to exceed this slot fill percentage and get 
closer to 75 percent, DOE found that this would take uncommon 
techniques that could inhibit mass production.
j. Current and Torque Characteristics
    NEMA discussed in its written comments the performance 
characteristics that should be met for all motor designs produced by 
DOE for its analysis. These performance specifications include a 
minimum locked-rotor torque, a maximum locked-rotor current, a minimum 
breakdown torque, and a maximum no-load current. NEMA pointed out that 
MG1-1987 does not establish locked-rotor torque standards for polyphase 
motors, but it made no suggestion of what alternative should be used. 
NEMA also pointed out that MG1-1987 does not require a maximum locked-
rotor current for small polyphase motors, but suggested that DOE use 
the standards for medium motors of corresponding horsepower, which are 
shown in MG 1-12.35. (NEMA, No. 13 at p. 6) Breakdown torque was 
another motor performance characteristic for which NEMA directed DOE to 
specific sections of MG1-1987 for both single and polyphase motors. 
(NEMA, No. 13 at p. 6) Finally, NEMA discussed no-load characteristics 
in their comment. While they made no suggestions for single-phase 
motors, NEMA believed that an average no-load current for polyphase 
small electric motors should be 25-35 percent of the rated-load 
current. (NEMA, No. 13 at p. 7)
    DOE appreciates NEMA's comments clarifying the performance 
specifications set forth by NEMA MG1-1987 for general-purpose small 
electric motors. DOE agrees with NEMA that any motor design produced 
should meet the specifications shown in MG1-1987. That is, for single-
phase motors all designs should meet the locked-rotor torque shown in 
MG1-12.32.2, the locked-rotor current shown in MG1-12.33.2, and the 
breakdown torque shown in MG1-12.32.1. For polyphase motors, the 
breakdown torque should be in the range shown in MG1-12.37. DOE agrees 
that the locked-rotor current specifications for medium polyphase 
motors are a fair gauge, and therefore design limitation for small 
polyphase motors of corresponding horsepower ratings because of the 
similarities in design and performance. For the performance 
requirements not specified in NEMA MG1-1987, DOE believes that the best 
design limitation is to meet or exceed the performance of the baseline 
motor used for each product class analyzed because this prevents over-
restricting the design.
6. Scaling Methodology
    As has been discussed in sections IV.C.2 and IV.C.4, DOE only 
analyzed three of the 72 product classes defined for small electric 
motors. Therefore, DOE needed to scale the results for these three 
product classes to the other 69. DOE presented an approach for scaling 
at the preliminary analyses public meeting. The first step in the 
previous scaling methodology was translating efficiency standards for 
medium motors into motor losses. DOE used two equations to obtain motor 
losses. DOE then examined these data sets to find a mathematical 
relationship explaining the change of motor losses relative to changes 
in horsepower and number of poles for medium motors. Finally, DOE 
assumed the relationships found in medium motors could be extrapolated 
to describe how losses, and thus efficiency, would scale for small 
electric motors.
    DOE received comments on the scaling methodology that was presented 
at the preliminary analyses public meeting. Baldor stated that using 
medium motor efficiency standards may not be accurate because medium 
motors are manufactured in three-digit frame sizes, and thus, the 
relationships found in medium motors may not be accurate for small 
electric motors with two-digit frames. (Baldor, Public Meeting 
Transcript, No. 8.5 at p. 191) Additionally, NEMA noted that for medium 
motor efficiency standards, frame size changes with each change in 
horsepower. This is not the case for small electric motors where frame 
sizes are used for a range of horsepower ratings, and in some instances 
overlap. Therefore, NEMA said medium motors data are not applicable to 
small electric motors and should not be used. (NEMA, No. 13 at p. 10)
    DOE appreciates these comments and considered them when 
reevaluating scaling relationships for small electric motors in the 
NOPR. Because there are no current standards for small electric motors, 
efficiency data are not as widely accessible for them. However, DOE did 
examine catalog efficiency data for small electric motors to determine 
if the relationships gleaned from medium motors may be an appropriate 
approximation for small electric motors. After examining publicly 
available catalog data, DOE agrees with the conjectures made by Baldor 
and NEMA that the relationships found in medium motors are not an 
accurate representation of the relationships found in small electric 
motors. Therefore, DOE has foregone the use of medium motors efficiency 
data and has used publicly available catalog data, as well as test 
data, to scale the results of the three analyzed product classes to the 
remaining 69.
    Baldor made another comment about the two equations DOE used to 
describe motor losses. Baldor stated that it was inaccurate to use the 
first equation DOE presented, 100 - efficiency, to describe motor 
losses. Instead, DOE should only use the second equation they 
presented, which is also the accepted industry

[[Page 61431]]

equation, 100 x [(100/efficiency) - 1]. Baldor, along with NEMA, 
recommended that DOE only use the latter equation when describing motor 
losses. (Baldor, Public Meeting Transcript, No. 8.5 at pp. 188-90; 
NEMA, No. 13 at p. 9)
    DOE agrees with Baldor's and NEMA's comments about motor losses and 
has only used the industry accepted equation to calculate them for the 
NOPR. DOE hopes that by using the one equation it will promote good, 
industry-accepted equations and also simplify the methodology used to 
scale efficiencies to all product classes.
    As discussed in section IV.A.2. Baldor and Emerson commented at the 
public meeting that frame size should be a criterion for distinguishing 
product classes. (Baldor, Public Meeting Transcript, No. 8.5 at pp. 70-
71; Emerson, Public Meeting Transcript, No. 8.5 at pp. 75-76) DOE 
addressed this comment again when developing scaling relationships for 
small electric motors.
    For the NOPR analyses, DOE's scaling approach leveraged a 
combination of publicly available catalog data and test data. First, 
DOE developed a database of over 3,000 motors built in a NEMA two-digit 
frame size. The database was then filtered to create a comprehensive 
list of motors that meet the statutory definition of a small electric 
motor. Through this database, DOE could address the issue of frame size 
and how it pertains to product classes. DOE used the database to find 
the most restricted frame size seen at each product class. Having these 
data, DOE filtered the database again to remove all efficiency data 
points for motors with an unrestricted frame size. For example, for a 
polyphase \3/4\ hp 4-pole motor, manufacturers use 48 and 56 frames. 
Therefore, DOE removed all efficiency points for motors with a 56 frame 
size because its achievable efficiency is not as restricted as the 48 
frame size motor.
    DOE filtered the database again to ensure an accurate assessment of 
market efficiency levels. DOE sorted the database by manufacturer and 
examined individual product lines. If manufacturers produce two lines 
of motors based on differences in efficiency, DOE examined that data 
separately. Product lines for each manufacturer included efficiency 
data for two, four, and six pole motors where available. This approach 
allowed DOE to examine how efficiency changes with respect to 
horsepower and number of poles.
    DOE supplemented the catalog data with actual test data to validate 
conclusions drawn from that catalog data. An accredited lab performed 
IEEE standard 112, test methods A and B, and IEEE standard 114 to find 
efficiency data for 19 small electric motors. The motors selected for 
testing were pulled from the same product line for a given 
manufacturer. All three motor categories, pole configurations, and a 
full range of horsepower ratings were represented.
    Once these data sets were prepared, DOE then converted the 
efficiency into motor losses using the industry-accepted equation 
mentioned above. This allowed DOE to use the most accurate line of best 
fit to fill in any gaps of data, which then enabled DOE to obtain an 
aggregated picture of motor losses (and thus efficiency) for the market 
based on both catalog data and laboratory accredited test data. 
Finally, the motor loss levels seen for each product class were shifted 
by a percentage increase corresponding to the difference in efficiency 
level for the three analyzed motors.
    However, because information on CSCR motors was not as widely 
attainable, DOE relied on the relationships that it ascertained for 
CSIR motors to scale the results for CSCR motors. From the available 
catalog data, DOE found that efficiency tracked with horsepower the 
same way for both motor categories, but CSCR motors were more 
efficient.
7. Nominal Efficiency
    With regard to the efficiency levels analyzed for small electric 
motors, NEMA recommended that DOE select efficiency values that 
coincide with ``nominal'' efficiencies listed in Table 12-10 of NEMA 
MG1-2006, currently being used for polyphase medium motors. NEMA also 
stated that DOE should not reference the column of ``minimum'' 
efficiencies seen in that table because those values are based on 
tolerances in the determination of total losses or efficiency through 
testing polyphase medium motors in accordance with IEEE standard 112 
test method B. (NEMA, No. 13 at pp. 10-11)
    Polyphase medium electric motors (those motors manufactured in 
three-digit frame series) are currently regulated by DOE as a result of 
EPACT 1992 and EISA 2007. The efficiency levels established by these 
Acts correspond to ``nominal'' efficiencies selected from a table in 
NEMA MG1 (Table 12-6A for NEMA MG1-1987 and table 12-10 for NEMA MG1-
2006). Each ``nominal'' efficiency level shown in the table contains a 
corresponding ``minimum'' efficiency. By calculating both an average 
efficiency and a minimum efficiency from a population of motors tested, 
and by utilizing the look-up tables referenced, medium electric motor 
manufacturers report a ``nominal'' efficiency from these tables for 
compliance and labeling purposes. As the industry standard states, 
``nominal efficiency'' represents a value that characterizes the energy 
consumption of a group of motors, accounting for variations in 
materials, manufacturing processes, and tests that result in motor-to-
motor efficiency variations.
    As ``nominal efficiency'' is a widely used and appropriate metric 
to characterize the efficiency of electric motors, if an equivalent 
table for small electric polyphase and single phase motors exists, DOE 
would support its use for the calculation of small electric motor 
efficiency. However, to DOE's knowledge, and corroborated by NEMA's 
comment, no such table exists. In addition, DOE agrees with NEMA that 
the ``minimum efficiency'' values associated with the ``nominal 
efficiency'' values in the referenced tables are not necessarily 
appropriate for small electric motors. Additionally, the increments of 
the ``nominal efficiency'' values in Table 12-10 of NEMA MG1-2006 range 
from 0.1 percent to 2.0 percent. Since these increments in efficiency 
do not follow a regular pattern and can, at the larger intervals, 
constitute significant changes in efficiency, particularly for small 
electric motors, DOE feels that they cannot simply replicate a similar 
table without a significant amount of test data that would need to be 
provided by manufacturers and verified by technical experts. In 
consideration of the inapplicability of the referenced medium motor 
tables and the lack of data to produce a similar table for small 
electric motors, DOE does not feel that it is appropriate to set 
efficiency standards for small electric motors based on the values in 
Table 12-10 of NEMA MG1-2006.
    DOE also notes that the test procedure for small electric motors 
requires manufacturers to report a ``nominal full-load efficiency.'' 
This term, when discussed within the context of electric motors 
generally, is defined by EPCA as the average efficiency of a population 
of motors of duplicate design as determined in accordance with MG1-
1987. 42 U.S.C. 6311((13)(I). As this term is not defined for small 
electric motors, to ensure consistency with the statute, DOE proposes 
to apply this definition for ``nominal full-load efficiency'' to small 
electric motors and to adopt a definition consistent with such an 
application into its regulations. Because MG1-1987 (or any later 
edition

[[Page 61432]]

of the industry standard) does not contain provisions for nominal full-
load efficiency for small electric motors, DOE proposes to adopt a 
definition for ``nominal full-load efficiency'' of small electric 
motors that is equivalent to the average full-load efficiency of a 
population of small electric motors. While DOE considered amending the 
definition of ``nominal full-load efficiency'' for small electric 
motors to create a parallel definition as the one used for electric 
motors (which utilizes tables of minimum and nominal efficiencies), 
this would require a significant amount of testing and industry 
collaboration that has not yet occurred. Therefore, to ensure a 
complete test procedure and fully-defined energy conservation 
standards, DOE proposes to adopt a definition for ``nominal full-load 
efficiency'' of small electric motors that is equivalent to the average 
full-load efficiency of a population of small electric motors. If, in 
the future, a table for small electric motors similar to Table 12-10 of 
NEMA MG1-2006 is developed, DOE may conduct a separate rulemaking to 
consider amending the definition of ``nominal full-load efficiency'' to 
make it consistent with the approach taken for medium motors, which 
makes reference to a specific table of efficiencies for ``nominal full-
load efficiency.''
8. Cost-Efficiency Results
    The results of the engineering analysis are reported as cost-
efficiency data (or ``curves'') in the form of MSP (in dollars) versus 
full-load efficiency (in percentage). These data form the basis for 
subsequent analyses in the NOPR. DOE developed two curves for each 
product class analyzed, one for the set of designs restricted by a 20 
percent increase and one for those restricted by a 100 percent increase 
in stack height from the baseline. The methodology for developing the 
curves started with determining the energy efficiency for baseline 
models and MPCs for each product class analyzed. Above the baseline, 
DOE implemented various combinations of design options. Design options 
were implemented until all available technologies were employed (i.e., 
at a max-tech level). See TSD chapter 5 for additional detail on the 
engineering analysis and the complete set of cost-efficiency results.
BILLING CODE 6450-01-P

[[Page 61433]]

[GRAPHIC] [TIFF OMITTED] TP24NO09.007

BILLING CODE 6450-01-C

[[Page 61434]]

D. Markups To Determine Equipment Price

    The markups analysis develops supply-chain markups and sales taxes 
that DOE uses to convert MSPs to customer or consumer equipment prices 
for small electric motors.
1. Distribution Channels
    Before it could develop markups, DOE needed to identify 
distribution channels (i.e., how the equipment is distributed from the 
manufacturer to the end user) for each category of motor addressed in 
this rulemaking. Because most of the small electric motors are used as 
components in larger pieces of equipment, most of the market passes 
through OEMs that design, assemble, and brand products that contain 
small electric motors. OEMs obtain their motors either directly from 
the motor manufacturers or from distributors.
    For small electric motors, DOE defined three distribution channels 
and estimated their respective shares of shipments in its determination 
analysis: (1) From manufacturers to OEMs and then to end users through 
OEM distribution; (2) from manufacturers to wholesale distributors to 
OEMs and then to end users through OEM equipment distribution; and (3) 
from manufacturers to end users through distributors and retailers. 
Contractors also play a role in installing motors in equipment. DOE 
used the same distribution channel types and market shares in the 
preliminary analysis as it used in the determination analysis.
    NEMA and Emerson commented that the proportion of shipments through 
the three channels as specified in the determination analysis was 
incorrect, and the correct market shares for each distribution channel 
are: 65 Percent for direct shipments to OEMs, 30 percent for shipments 
to OEMs through distributors, and 5 percent for shipments directly to 
users (Emerson, Public Meeting Transcript, No. 8.5 at pp. 218-19; NEMA, 
No. 13 at p. 19). The NEEA and the Northwest Power Planning Council 
recommended that DOE should corroborate distribution channel market 
shares with industry input (NEEA and NPCC, No. 9 at p. 5). DOE used the 
distribution market shares recommended by NEMA and Emerson in the NOPR 
analysis.
2. Estimation of Markups
    DOE based its markups on financial data from the U.S. Census 
Business Expenses Survey (BES). DOE assumed that the sales revenues 
reported by firms reflect the prices that they charge for products, 
while the expenses that they reported to the BES reflect costs. DOE 
organized the financial data into balance sheets that break down cost 
components incurred by firms that sell the products and related these 
cost components to revenues to estimate the markups that determine 
sales price.
    DOE's markup analysis developed both baseline and incremental 
markups to transform the manufacturer sales price into an end-user 
equipment price. DOE used the baseline markups to determine the price 
of baseline models. Incremental markups are coefficients that relate 
the change in the manufacturer sales price of higher-efficiency models 
to the change in the OEM, retailer, or distributor sales price. These 
markups refer to higher-efficiency models sold under market conditions 
with new energy conservation standards.
    DOE used financial data from the BES for the ``Electrical Goods 
Merchant Wholesalers'' category to calculate markups used by 
distributors of motors for direct distribution; for the ``Machinery, 
Equipment, and Supplies Merchant Wholesalers'' category to calculate 
markups used by distributors of equipment containing small electric 
motors; and for the ``Building materials, hardware, garden supply and 
mobile home dealers'' category to calculate markups used by OEMs that 
apply to products containing motors.
    DOE based the OEM markups and distributor markups on data from the 
``2002 Economic Census Manufacturing Industry Series,'' which reports 
on the payroll (production and total), cost of materials, capital 
expenditures, and total value of shipments for manufacturers of various 
types of machinery. Six years of data are reported for each 
manufacturer type. DOE collected data for 11 types of OEMs.
    DOE calculated baseline markups for each Census industry category. 
The resulting markups range between 1.20 (industrial machinery, machine 
tools) and 1.56 (heating equipment), with an average of 1.37. DOE 
estimated incremental markups using a least squares regression of the 
value of shipments on payroll and cost of materials. Because there is a 
large range in the size of OEM types, companies with sales values 
greater than $10 billion were separated from those with sales values 
less than $10 billion. The incremental markup for larger companies was 
1.28; the incremental markup for smaller companies was 1.33.
    WEG and Emerson commented that DOE should include recertification 
and retesting costs that OEMs may incur due to a change in the motor 
that is used in OEM equipment (Public Meeting Transcript, No. 8.5 at 
pp. 244-48). The markup factors that DOE derived for OEMs include 
average administrative and regulatory overhead costs such as might 
occur with certification and testing of products for safety. Therefore, 
when the manufacturer selling price of a more efficient motor is marked 
up by an OEM, DOE's analysis provides some accounting of increased 
regulatory overhead costs. In addition, DOE uses the OEM markups to 
estimate product prices and regulation cost impacts for an analysis 
period that spans 2015 through 2045, so initial regulatory costs can be 
averaged over several years. DOE believes that over this forecast 
period, recertification and testing costs are included in the OEM 
markups that it estimated.
    During the presentation of the preliminary analysis, WEG noted that 
shipping costs to the customer should be explicitly included in the 
distribution costs (WEG, Public Meeting Transcript, No. 8.5 at p. 223). 
DOE agrees with this comment. To estimate shipping costs, DOE surveyed 
shipping and freight costs quotes available on the Internet and found a 
median value of $0.5 per pound. In the LCC analysis DOE added shipping 
costs to the installed cost of the motor based on specific motor weight 
estimates for each efficiency level from the engineering analysis. The 
engineering analysis designs provided motor weights for both space-
constrained and non-space-constrained motors.
    Emerson also commented during the preliminary analysis presentation 
that more efficient, larger motors with increased stack length could 
create large costs for OEMs that use small motors in space-constrained 
equipment designs and that this should be included in distribution 
costs (Emerson, Public Meeting Transcript, No. 8.5 at p. 241). DOE 
addressed this issue in the engineering and life-cycle cost analyses by 
estimating cost and performance characteristics for motors at all 
efficiency levels for both space-constrained and less-constrained 
designs. DOE assumed that OEMs addressed their space requirements by 
purchasing a more expensive space-constrained design for their space-
constrained application. DOE then modeled the increased cost of the 
space constraint by using the higher, space-constrained manufacturer 
selling price and by applying the same markup factors to these higher 
incremental costs to estimate the incremental cost to the consumer.
    For installation costs, DOE used information from RS Means 
Electrical

[[Page 61435]]

Cost Data \13\ to estimate markups used by contractors who install 
motors and OEM equipment. RS Means estimates material expense markups 
for electrical contractors as 10 percent, leading to a markup factor of 
1.10.
---------------------------------------------------------------------------

    \13\ RS Means Construction Publishers & Consultants, 
``Electrical Cost Data, 31st Annual Edition.'' 2008. J.H. Chiang, 
ed. Kingston, MA.
---------------------------------------------------------------------------

    The sales tax represents state and local sales taxes that are 
applied to the end-user equipment price. DOE derived state and local 
taxes from data provided by the Sales Tax Clearinghouse. These data 
represent weighted averages that include county and city rates. DOE 
then derived population-weighted average tax values for each Census 
division and large state, and then derived U.S. average tax values 
using a populated-weighted average of the Census division and large 
State values. This approach provides a national average tax rate of 
6.84 percent.
3. Summary of Markups
    Table IV.9 summarizes the markups at each stage in the distribution 
channel and the overall baseline and incremental markups, and sales 
taxes, for each of the three identified channels. Weighting the markups 
in each channel by its share of shipments yields an average overall 
baseline markup of 2.49 and an average overall incremental markup of 
1.83. DOE used these markups for each product class.
[GRAPHIC] [TIFF OMITTED] TP24NO09.009

    Using these markups, DOE generated motor end-user prices for each 
efficiency level it considered, assuming that each level represents a 
new minimum efficiency standard. Because it generated a range of price 
estimates, DOE describes prices within a range of uncertainty.
    Chapter 7 of the TSD provides additional detail on the markups 
analysis.

E. Energy Use Characterization

    DOE's characterization of the energy use for small electric motors 
estimated the annual energy use and end-use load of small electric 
motors in the field. The energy use by small electric motors derives 
from three components: energy converted to useful mechanical shaft 
power, motor losses, and reactive power.\14\ Motor losses consist of 
I\2\R losses, core losses, stray losses and friction and windage 
losses. Core losses and friction and windage losses are relatively 
constant with variations in motor loading, while I\2\R losses increase 
with the square of the motor loading. Stray losses are also dependent 
upon loading. To estimate motor losses, DOE used the empirical 
estimates of losses as a function of loading for the specific motor 
designs that were developed in the engineering analysis.
---------------------------------------------------------------------------

    \14\ In an alternating current power system, the reactive power 
is created when voltage and current are shifted in phase and is 
calculated from the root mean square (RMS) voltage multiplied by the 
RMS current multiplied by the sine of the phase difference between 
the voltage and the current. Reactive power occurs when the 
inductance or capacitance of the load shifts the phase of the 
voltage relative to the phase of the current. While reactive power 
does not consume energy, it can increase losses and costs for the 
electricity distribution system. Motors tend to create reactive 
power because the windings in the motor coils have high inductance 
which shifts the phase of the voltage relative to the current.
---------------------------------------------------------------------------

    In practice, reactive power may result in significant increases in 
energy consumption before capacitors in the electrical system 
compensate (i.e., mitigate) the reactive power that is generated by 
end-user loads. DOE estimated reactive power costs in the LCC analysis 
that may arise from reactive power charges and also estimated losses 
from reactive power that may occur in the electrical system.
    In the preliminary analysis public meeting, DOE presented an 
analysis of energy use that separated motor losses into a constant 
component and a component that depends on motor loading. Both Baldor 
and NEMA commented that the approach that DOE used was non-standard and 
the equations proposed for estimating motor losses were imprecise 
(Public Meeting Transcript, No. 8.5 at pp. 228-33; NEMA, No. 13 at pp. 
12-14). Responding to this comment, DOE modified its approach for the 
NOPR analysis. Rather than model motor losses with a potentially 
imprecise simplified equation, DOE used the direct loss estimates 
provided by the

[[Page 61436]]

engineering analysis which are available as an empirical function of 
motor loading. DOE provides motor losses as a function of loading for 
each design in motor loading increments of 25 percent for all designs 
evaluated in the analysis. A more detailed description and accompanying 
motor loss tables are contained in chapter 6 of the TSD.
    The final step in estimating annual energy use from motor losses is 
estimating the annual hours of motor operation. DOE estimated the 
annual energy consumed by motor losses as the loss (in watts) times the 
annual hours of operation. The annual hours of operation of small 
electric motors is dependent mostly on the particular application to 
which the motor is being applied.
    In its preliminary analysis, DOE modeled each motor in a given 
application as operating for a fixed number of hours, equal to the 
average hours of operation determined for that application. As part of 
updating its motor application and operation analysis, DOE examined 
published data regarding the distribution of hours of operation for 
motors. DOE concluded that the available data regarding the 
distribution of hours of operation of general-purpose motors could be 
well characterized as the superposition of an exponential distribution 
and a fraction of motors run nearly continuously (8760 hours per year). 
DOE used this information to develop distributions for each motor 
application as a function of the average annual hours of operation.
    In written comments submitted following the January 30, 2009, 
public meeting, NEMA provided estimates for typical hours of operation 
for motors in compressor, small pumping, and ``general industry'' 
applications (NEMA, No. 13 at p. 19). DOE developed a model for the 
national distribution of annual hours of operation within each motor 
application that maintained as much consistency as possible with all 
available sources of data including NEMA's comment, estimates developed 
earlier in the rulemaking, and operating hour distributions available 
in the technical literature. The operating hour distributions developed 
by DOE take the form of the superposition of an exponential 
distribution (in which the number of motors decreases with increasing 
hours of operation) with a small population of motors that run 100% of 
the time. DOE found in its analysis that the typical hours of operation 
as provided by NEMA are substantially lower than average hours of 
operation as estimated by DOE, but are consistent with DOE's median 
estimates of annual operating hours for four out of five application 
categories. Details regarding DOE's estimates of hours of operation are 
available in chapter 6 of the TSD.

F. Life-Cycle Cost and Payback Period Analysis

    The LCC analysis calculates, at the consumer level, the discounted 
savings in operating costs throughout the estimated average life of the 
small electric motor, compared to any increase in installed costs 
likely to result directly from the imposition of the standard. The 
payback period analysis estimates the amount of time it takes consumers 
to recover the higher purchase expense of more energy efficient 
equipment through lower operating costs.
    The LCC is the total consumer expense over the life of the 
equipment, including purchase expense and operating costs (including 
energy expenditures). To compute LCCs for equipment users, DOE 
discounts future operating costs to the time of purchase and sums them 
over the lifetime of the equipment. The payback period is the change in 
purchase expense due to an increased efficiency standard, divided by 
the change in annual operating cost that results from the standard. 
That is, the payback period is the time period it takes to recoup the 
increased purchase cost (including installation) of a more efficient 
product through energy savings.
    Inputs to the calculation of total installed cost include the cost 
of the product--which includes manufacturer costs and markups, retailer 
or distributor markups, and sales taxes--and installation costs. Inputs 
to the calculation of operating expenses include annual energy 
consumption, energy prices and price projections, repair and 
maintenance costs, product lifetimes, discount rates, and the year that 
proposed standards take effect. DOE created distributions of values for 
some inputs to account for their uncertainty and variability. For 
example, DOE created a probability distribution of annual energy 
consumption based in part on a range of annual operating hours. This 
range of annual operating hours is based on a derived sample of end-use 
applications for small electric motors. According to this range, the 
majority of these motors operates only a few hours per day, while a 
substantial minority of motors run nearly all hours of the day. LCC 
values reflect the aggregate effect of inputs weighted according to a 
combination of point values and probability distributions. DOE also 
used probability distributions to characterize variability in markups, 
discount rates and product lifetime. Details of all the inputs to the 
LCC and PBP analysis are contained in chapter 8 of the TSD.
    As described above, DOE used samples of a population of motors and 
motor applications to characterize the variability in energy 
consumption and energy prices for this equipment. DOE also used a 
simple partitioning of motor applications to space-constrained and 
unconstrained applications.
    The computer model DOE uses to calculate LCC and PBP, which 
incorporates Crystal Ball (a commercially available software program), 
relies on a Monte Carlo simulation to incorporate uncertainty and 
variability into the analysis. The Monte Carlo simulations randomly 
sample input values from the probability distributions and equipment 
user samples. The model calculated the LCC and PBP for equipment at 
each efficiency level for 10,000 motor units per simulation run. 
Details of the spreadsheet model DOE used for analyzing the economic 
impacts of possible standards on individual consumers, and of all the 
inputs to the LCC and PBP analysis, are contained in chapter 8 of the 
TSD.
    Table IV.10 summarizes the approach and data DOE used to derive 
inputs to the LCC and PBP calculations. The table provides the data and 
approach used for the preliminary TSD and the changes made for today's 
NOPR. The following subsections discuss the initial inputs and the 
changes made to them.
BILLING CODE 6450-01-P

[[Page 61437]]

[GRAPHIC] [TIFF OMITTED] TP24NO09.010

BILLING CODE 6450-01-C

[[Page 61438]]

1. Baseline and Standard Level Efficiencies
    For the preliminary analysis, DOE used mathematical interpolation 
of specific engineering designs to estimate the costs and losses of 
motors at baseline efficiencies and a set of candidate standard levels 
that had performance characteristics different from the initial 
engineering designs. NEMA commented that it is important for the 
efficiency levels used in the consumer economic analysis to match the 
efficiency levels in the engineering analysis so that interested 
parties can have confidence that concrete designs exist that can 
satisfy the proposed standard levels (NEMA, No. 13 at p. 16). DOE 
agrees with this comment and for this NOPR it analyzed efficiency 
levels for which it developed specific engineering designs.
    In response to DOE's preliminary analysis, EEI commented that since 
medium motors are already regulated by DOE under Section 313(b) of the 
Energy Independence and Security Act of 2007, Pub. L. 110-140 (Dec. 19, 
2007) (EISA 2007), and since polyphase general purpose small electric 
motors are very similar to polyphase general purpose medium electric 
motors, it is important for DOE to consider standard levels for small 
electric motors that are closely aligned with the standard for medium 
electric motors (EEI, No. 14 at p. 2). DOE agrees with this comment and 
designed TSL 5 for polyphase small electric motors to be closely 
aligned with the efficiency level for medium motors regulated under 
EISA 2007.
2. Installed Equipment Cost
    DOE determined the baseline MSP and the MSP increases associated 
with increases in product efficiency for each small electric motor 
product class in the engineering analysis (section IV.C.7 of this NOPR 
and chapter 5 of the TSD). MSPs are the prices of the equipment at the 
factory door. They do not include distribution markups, but do include 
manufacturer markups.
    DOE determined the installed cost of small electric motors by 
adding distribution markups and installation costs to the MSPs 
determined in the engineering analysis. DOE determined the baseline and 
incremental markups for each point in the small electric motor supply 
chain, as well as shipping costs and sales taxes, in the markups 
analysis (section II.E of this ANOPR and chapter 7 of the TSD). The 
overall baseline (2.35) and incremental (1.70) markups, which include 
sales tax, are weighted averages based on the share of shipments in 
each of the three identified distribution channels. DOE applied the 
same markups for each product class.
    DOE derived installation costs for small electric motors from data 
in the ``RS Means Electrical Cost Data, 2008,'' \15\ which provides 
estimates on the labor required to install electric motors. DOE 
estimated that the average installation cost is $253. Since it found no 
information to indicate differences in installation costs among motor 
applications, DOE used the same installation cost for each product 
class. DOE determined that installation costs would not be affected 
with increased energy efficiency levels.
---------------------------------------------------------------------------

    \15\ RS Means Construction Publishers & Consultants, 
``Electrical Cost Data, 31st Annual Edition.'' 2008. J.H. Chiang, 
ed. Kingston, MA.
---------------------------------------------------------------------------

    In response to the preliminary analysis, DOE received several 
comments from interested parties regarding factors that can affect 
product prices. The comments, along with DOE's responses, are described 
in the appropriate sections of this notice that address the particular 
cost component: Costs associated with satisfying motor space and size 
constraints are addressed in the engineering analysis in IV.C above; 
costs incurred by OEMs within the motor distribution chain are 
addressed in the markup analysis in section IV.D; and costs associated 
with retooling and investments needed to manufacture more efficient 
motors are addressed in the manufacturer impact analysis described in 
section IV.I.
3. Motor Applications
    For electric motors, the hours of operation and loading 
characteristics of motor use depend on the particular application to 
which the motor is applied. In its preliminary analysis, DOE used the 
same distribution of motor applications that it used in the 
determination analysis. This distribution included a wide range of 
applications, including food processing, woodworking tools, and farm 
machinery. Comments received at the January 30, 2009, public meeting 
from Emerson, WEG, and Regal-Beloit, (Public Meeting Transcript, No. 
8.5 at pp. 270-76) and from NEMA (NEMA, No. 13 at p. 19) indicated that 
many of these applications utilize enclosed motors (as opposed to those 
that have an ``open construction'' design), and such motors are not 
covered under this rulemaking. DOE agrees with these comments, and has 
removed these applications from its analysis. To the extent that some 
motors in the applications no longer analyzed in detail may be open 
construction, and covered by this rule, DOE assumed that they are 
incorporated in the ``general industry'' category described below.
    To improve the classification of motor applications, DOE studied 
motor manufacturer and OEM catalogs that are publicly available on the 
Internet to adjust the categories and the proportion of small electric 
motors covered by this rule used in each application category. DOE 
consolidated and narrowed the applications of covered small electric 
motors to four major categories: (1) Commercial and industrial fans and 
blowers; (2) conveyors, packaging, and material handling; (3) air and 
gas compressors (outside of HVAC); and (4) pumps. In addition, covered 
motors are used in a wide and various array of other applications, 
which DOE characterized under the heading ``general industry.''
4. Annual Operating Hours and Energy Use
    To estimate annual energy use, DOE multiplied motor losses by the 
annual hours of operation. DOE obtained motor losses as a function of 
motor loading from the performance data for specific designs developed 
and analyzed in the engineering analysis. DOE estimated motor loading 
as a function of the motor application. DOE modeled variability in both 
motor loading and annual operating hours by using distributions for 
both operational characteristics.
    In response to the preliminary analysis, NEMA commented that motors 
in small compressors have estimated annual hours of operation of 200 to 
400 hours per year, motors used in small pumps have annual operating 
hours of 1,500 to 2,000 hours per year, while small motors used in 
general machinery in clean environments such as medical equipment will 
have estimated annual hours of operation of 500 to 1,000 hours per year 
(NEMA, No. 13 at p. 19). DOE agrees that these figures represent 
approximate median hours of operation for small compressors, small 
pumps and medical equipment with small electric motors. DOE included 
medical equipment in a category of ``general industry and 
miscellaneous,'' which it estimates has a significant fraction of 
applications in the range of 500 to 1,000 hours per year, but which 
also includes a large variety of miscellaneous equipment that DOE 
estimates has typical operating hours in the range of 1,000 to 2,000 
hours per year. This latter estimate is consistent with the average 
hours of operation estimates developed during the determination 
analysis phase and is consistent with equipment that runs four to eight 
hours a day during normal working hours.

[[Page 61439]]

5. Space Constraints
    In response to DOE's preliminary analysis, several interested 
parties commented on the possibility that energy conservation standards 
may affect motors used in space-constrained applications. Baldor 
commented that DOE needs to correct the statement that a ``majority of 
small motor applications are not constrained by motor length'' and that 
the LCC analysis needs to take into account what it will cost to 
redesign OEM equipment to fit larger motors (Baldor, Public Meeting 
Transcript, No. 8.5 at pp. 119-21). WEG commented that changes in stack 
length can force OEMs to redesign their product (WEG, Public Meeting 
Transcript, No. 8.5 at p. 244). A joint comment by PG&E, SCE, SCGC, and 
SDGE stated that users with space-constrained applications may be able 
to resolve the space constraint by changing the motor type (Joint 
Comment, No. 12 at p. 3).
    In the NOPR analysis, DOE addressed the issue of space constraints 
by calculating the cost and performance characteristics for both 
tightly constrained and less-constrained engineering designs for motors 
at each efficiency level. DOE then reviewed the range of applications 
and OEM equipment that uses the motors covered by the rulemaking and 
estimated that approximately 20 percent of covered motors are likely to 
be used in constrained applications. In the LCC analysis, DOE assigned 
20 percent of motors to such constrained applications and used the 
engineering costs and performance associated with the constrained 
design when calculating consumer economic impacts. At low efficiency 
levels there is no difference between more and less constrained motors, 
but at the highest efficiency levels, the space-constrained 
applications can only be served by the most expensive motor designs 
because the less expensive motors are too large to fit within 
constrained spaces. In addition, DOE provides the LCC results for 
space-constrained applications as one of the consumer subgroups in the 
LCC subgroup analysis.
6. Power Factor
    In its preliminary analysis, DOE presented real power losses and 
requested comment on power factor effects and the importance of 
including reactive power in its engineering, economic and national 
impact analyses. EEI commented that utilities like to see facility-wide 
power factor above 90 percent and that power factor penalties may 
affect the economics of small electric motor efficiency. EEI provided 
DOE with the results of a 2003 survey of power factor charges and costs 
taken of its members (EEI, No. 14 at p. 6). NEMA noted inaccuracies in 
the reactive power equations proposed by DOE in the preliminary 
analysis and urged DOE to carefully estimate and consider power factor 
effects and constraints (NEMA, No. 13 at pp. 14-15).
    DOE appreciates the comments and data provided on this issue and 
agrees with the interested parties that this information can contribute 
to a more complete and precise analysis of the consumer and utility 
impacts of power factor changes that may result from energy 
conservation standards. DOE addressed power factor and reactive power 
by first estimating power factor as a function of motor loading for 
each of the motor designs analyzed in the engineering analysis. DOE 
then included these data in the LCC analysis tools so that the analysis 
included estimates of power factor as a function of both motor loading 
and efficiency level. In the LCC spreadsheet, DOE estimated reactive 
power for each motor analyzed. DOE then used the data provided by EEI 
to estimate a reactive power cost associated with the reactive power. 
It included this cost in both the LCC analysis and in the national 
impact analysis.
7. Energy Prices
    DOE developed nationally representative distributions of 
electricity prices for different customer categories (industrial, 
commercial, and residential) from 2007 EIA form 861 data. DOE estimates 
that marginal energy prices for electric motors are close to average 
prices, which vary by customer type and utility. The average prices (in 
2008$) for each sector are 6.4 cents for the industrial and 
agricultural sectors, 8.8 cents for the commercial sector, and 10.1 
cents for the residential sector. DOE also estimated an average 
reactive power charge of $0.47 per kilovolt-amps reactive (kVAr) per 
month using data provided by EEI for those customers that are subject 
to a reactive power charge.
8. Energy Price Trend
    DOE used recent price forecasts by EIA to estimate future trends in 
electricity prices in each sector. To arrive at prices in future years 
through 2030, DOE multiplied the average prices described in the 
preceding section by the forecast of annual average price changes in 
EIA's AEO 2009. To estimate the trend after 2030, DOE followed past 
guidelines provided to the Federal Energy Management Program (FEMP) by 
EIA and used the average rate of change from 2020 to 2030 for 
electricity prices.
    DOE calculated LCC and PBP using three separate projections from 
AEO 2009: Reference, Low Price Case, and High Price Case. These three 
cases reflect the uncertainty of energy prices in the forecast period. 
For the LCC results presented in this NOPR, DOE used only the energy 
price forecasts from the Reference case.
    DOE received several comments from interested parties regarding its 
electricity price projection. At the preliminary analysis public 
meeting, Earthjustice and NEEA commented that DOE should monetize 
greenhouse gas emissions reductions benefits, possibly by including the 
cost of carbon regulation in its forecasted price of electricity. 
Interested parties also noted that DOE should avoid double counting and 
need only account for the monetary value of emissions reductions or the 
potential impact on electricity prices and should not count both 
impacts at the same time. Earthjustice commented that the Energy 
Information Administration (EIA) had performed an analysis of 
Lieberman-Warner cap and trade legislation and that DOE could use this 
forecast to describe electricity prices with carbon caps (Earthjustice, 
Public Meeting Transcript, No. 8.5 at pp. 249-54).
    DOE responds to these comments primarily in the environmental 
analysis where DOE provides estimates of the potential monetary value 
of greenhouse gas emissions reductions. DOE also provides a sensitivity 
analysis in both the LCC and the national impact analysis that includes 
an electricity price trend estimated by EIA for the case of cap and 
trade emissions control regulation. Details on the sensitivity analyses 
performed by DOE for the LCC are provided in chapter 8 of the TSD, 
while the sensitivity analyses for the national impact analysis are 
detailed in TSD chapter 10.
9. Maintenance and Repair Costs
    Small electric motors are not usually repaired, because they often 
outlast the equipment wherein they are a component. DOE found no 
evidence that repair or maintenance costs would increase with higher 
motor energy efficiency. In response to the preliminary analysis, no 
interested parties provided any comments or data indicating that 
maintenance or repair costs are likely to change with motor efficiency. 
Thus, DOE did not include changes in repair and maintenance costs for 
motors that are more efficient than baseline products.

[[Page 61440]]

10. Equipment Lifetime
    In the preliminary analysis, DOE used the information it gathered 
for the determination analysis to estimate the motor lifetime, which 
DOE defined as the age when the equipment containing the motor is 
retired from service. Based on this information, DOE used lifetime 
distributions with a mean lifetime of 7 years for capacitor-start 
motors and 9 years for polyphase motors.
    In response to the preliminary analysis, DOE received comments 
indicating that motor lifetimes should be dependent on the annual hours 
of operation. The NEEA and Northwest Power and Conservation Council 
requested that DOE further justify the relatively short motor lifetimes 
used in its analysis and take into account the inverse relationship 
between operating hours and lifetime (NEEA and NPCC, No. 9 at p. 5). In 
response to the rulemaking framework meeting, NEMA stated that motor 
lifetimes depend on the annual hours of use in addition to the 
variances of motor loading for various applications (NEMA, No. 5.1 at 
p. 7). DOE agrees that motor lifetime and annual hours of operation 
should be inversely related and the NOPR analysis has modified the 
lifetime distribution to account for the effect of annual hours of 
operation. DOE did not account for the impact of motor loading variance 
on motor lifetimes because doing so would likely result in an overly 
complicated consumer economic analysis model without changing the 
overall analytical results. The details of how DOE estimated the 
dependence of motor lifetime on annual operating hours are provided in 
chapter 8 of the TSD.
11. Discount Rate
    The discount rate is the rate at which future expenditures are 
discounted to estimate their present value. DOE used the classic 
economic definition that discount rates are equal to the cost of 
capital. The cost of capital is a combination of debt interest rates 
and the cost of equity capital to the affected firms and industries. 
For each end-use sector, DOE developed a distribution of discount rates 
from which the Monte Carlo simulations sample.
    For the industrial and commercial sectors, DOE assembled data on 
debt interest rates and the cost of equity capital for representative 
firms that use small electric motors. DOE determined a distribution of 
the weighted-average cost of capital for each class of potential owners 
using data from the Damodaran online investment survey.\16\ The 
discount rate distribution for each product class DOE analyzed in the 
LCC analysis is a weighted sample that combines estimated ownership 
percentages with their respective discount rates. DOE used the same 
distribution of discount rates for the industrial and agricultural 
sectors. The average discount rates in DOE's analysis, weighted by the 
shares of each rate value in the sectoral distributions, are 5.86 
percent for commercial end users and 5.92 percent for industrial and 
agricultural end users.
---------------------------------------------------------------------------

    \16\ The survey is available at http://pages.stern.nyu.edu/adamodar.
---------------------------------------------------------------------------

    For the residential sector, DOE assembled a distribution of 
interest or return rates on various equity investments and debt types 
from a variety of financial sources, including the Federal Reserve 
Board's ``Survey of Consumer Finances'' (SCF) in 1989, 1992, 1995, 
1998, 2001, and 2004. DOE assigned weights in the distribution based on 
the shares of each financial instrument in household financial holdings 
according to SCF data. The weighted-average discount rate for 
residential product owners is 5.5 percent.
    In response to the preliminary analysis, DOE did not receive any 
comments regarding consumer discount rates.
12. Standard Effective Date
    The effective date is the future date when a new standard becomes 
operative. Under both the report to Congress and the November 6, 2006 
Consent Decree entered for the consolidated cases of New York v. 
Bodman, No. 05 Civ. 7807 (S.D.N.Y. filed Sept. 7, 2005) and Natural 
Resources Defense Council v. Bodman, No. 05 Civ. 7808 (S.D.N.Y. filed 
Sept. 7, 2005), DOE is required to publish a final rule addressing 
energy conservation standards for small electric motors no later than 
February 28, 2010. According to 42 U.S.C. 6317(b)(3), ``(3) Any 
standard prescribed under paragraph (2) shall apply to small electric 
motors manufactured 60 months after the date such rule is published * * 
*'' Therefore, the effective date of any new energy conservation 
standards for these products will be February 2015. DOE calculated the 
LCC for all end users as if each one would purchase a new piece of 
equipment in the year the standard takes effect.

G. National Impact Analysis--National Energy Savings and Net Present 
Value Analysis

    DOE's NIA assesses the national energy savings (NES) and the 
national net present value (NPV) of total customer costs and savings 
that would be expected to result from new standards at specific 
efficiency levels.
    To make the analysis more accessible and transparent to all 
interested parties, DOE used an MS Excel spreadsheet model to calculate 
the NES and NPV from new standards. MS 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 MS Excel as the 
basis for the spreadsheet models provides interested parties 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 parties can 
review DOE's analyses by changing various input quantities within the 
spreadsheet.
    DOE uses the NIA spreadsheets to calculate NES and NPV based on the 
annual energy consumption and total installed cost data employed in the 
LCC analysis. DOE forecasts the energy savings, energy cost savings, 
equipment costs, and NPV for each product class from 2015 through 2045. 
The forecasts provide annual and cumulative values for all four output 
parameters. DOE also examines impact sensitivities by analyzing various 
scenarios.
    DOE develops a base-case forecast for each small electric motor 
product class that characterizes energy use and customer costs 
(purchase and operation) in the absence of new energy conservation 
standards. To evaluate the impacts of such standards, DOE compares the 
base-case projection with projections characterizing the market if DOE 
promulgated new standards at specific efficiency levels (i.e., the 
standards case). In characterizing the base and standards cases, DOE 
considers the mix of efficiencies sold in the absence of any new 
standards, and how that mix might change over time.
    DOE did not find evidence of historical trends toward increasing 
market share for more efficient motors within the realm of covered 
products in this rulemaking. DOE therefore assumed that, in the base 
case, the market share of different levels of efficiency would remain 
fixed at current values over the analysis period. For its forecast of 
standards-case efficiencies, DOE used a ``roll-up'' scenario. In this 
approach, product energy efficiencies in the base case that do not meet 
the standard level under consideration would ``roll up'' to meet the 
new standard level. The market share of energy efficiencies that exceed 
the standard level under consideration would be the same in the 
standards case as in the base case.

[[Page 61441]]

    DOE analyzed the relationship between cost and efficiency for three 
representative product classes (1 hp polyphase, \3/4\ hp CSCR, and \1/
2\ hp CSIR). In order to calculate the national energy savings and NPV 
of each TSL, DOE scaled both the energy consumption and equipment price 
to all other product classes. The national energy savings and NPV are 
developed from shipment-weighted sums of the energy use and equipment 
price for each product class. See section IV.C.6 for a discussion of 
the scaling of energy consumption. In order to scale prices, DOE 
examined motor catalog data from 10 motor manufacturers, available on 
the Internet. DOE developed an average price for motors in each product 
class, examined the price trend within each motor category (polyphase, 
CSCR, or CSIR) and number of poles, and developed a scaling relation to 
enable forecasts of price changes related to increasing efficiency. The 
price scaling model is discussed in chapter 8 of the accompanying TSD.
    In the preliminary analysis, DOE used data submitted by NEMA for 
the determination analysis to develop shipments in each product class. 
It also determined the national impacts of each motor category by 
multiplying the results for a single product class by the shipments of 
the category as a whole. For the analysis presented in this NOPR, DOE 
modified these shipment estimates based on the distribution of 
currently available motor models to develop updated estimates for 
shipments in each product class. DOE then used these estimated 2008 
shipments for each product class to develop NES and NPV estimates that 
better reflect the distribution of motor shipments among motor 
categories, output powers and speeds. NEMA criticized DOE's scaling 
approach in the preliminary analysis as confusing energy savings and 
net present value results from a particular product class with the 
results for the full distribution of motor sizes and speeds (NEMA, No. 
13 at p. 20). DOE agrees with this comment, and replaced its 
preliminary analysis with a more comprehensive accounting.
    During the preliminary analysis, DOE received requests from 
interested parties to provide an estimate of size of the potential 
savings from the standard relative to the amount of energy used by all 
small electric motors, including those not covered under the present 
rulemaking (ACEEE, Public Meeting Transcript, No. 8.5 at p. 234; Joint 
Comment, No. 12 at p. 2). While such detailed estimates are beyond the 
scope of this rulemaking, DOE provides a rough estimate of the energy 
use of small electric motors not covered in this rulemaking in chapter 
10 of the TSD.
1. Shipments
    Product shipment forecasts are an important component of any 
estimate of the future impact of a standard. DOE determined forecasts 
of small motor shipments for the base case and standards cases using 
the NES spreadsheet. The shipments portion of the spreadsheet forecasts 
polyphase and capacitor-start motor shipments from 2015 to 2045. DOE 
developed shipments forecasts by accounting for (1) the combined 
effects of equipment price, operating cost, and business income level; 
and (2) different market segments. Additional details on the shipments 
forecasts are in chapter 9 of the TSD.
    DOE developed four shipment scenarios, modeling a range of possible 
growth for the market of covered small motors. For three of these 
scenarios, DOE assumed that shipments of covered small electric motors 
would be driven by growth in the sectors into which the motors are sold 
(industrial, commercial, and residential). DOE's reference case is 
based on the American Recovery and Reinvestment Act scenario released 
as a supplement to AEO 2009. DOE also modeled shipments driven by the 
High Growth and Low Growth scenarios in the AEO 2009 release. These 
three AEO scenarios are updated versions of the scenarios analyzed in 
the preliminary analysis. For the NOPR analysis, DOE also analyzed a 
``falling market share'' scenario. At the January 30, 2009, public 
meeting (Public Meeting Transcript, No. 8.5 at pp 268-70) and during 
manufacturer interviews (see section IV.I), manufacturers predicted 
that the market share for motors covered by this rule will fall over 
time as customers increase their use of other motor technologies. The 
``falling market share'' scenario reflects this assessment by modeling 
a scenario in which motor shipments are fixed at their 2008 levels, 
regardless of economic growth between 2008 and 2015 or during the 
analysis period. DOE's examination of equipment product catalogues and 
economic census data did not support a conclusion of falling market 
shares for general purpose motors in the application categories in 
DOE's analysis. DOE therefore provided the ``falling market share'' 
scenario as a sensitivity analysis rather than incorporating it into 
the reference case analysis. DOE seeks further information regarding 
alternative small motor technologies and how they could potentially 
affect the projected shipments. Chapters 9 and 10 of the TSD, along 
with the appendices to chapter 10, discuss the scenarios in greater 
detail and provide NES and NPV results calculated within each scenario 
to illustrate the effect of this scenario choice.
2. Elasticity Scenarios
    DOE modeled three elasticity scenarios that estimate the change in 
motor shipments in response to increasing customer equipment prices: a 
scenario with no elasticity, a scenario with an elasticity of -0.25, 
and a scenario with an elasticity of -0.50. In the preliminary 
analysis, DOE chose the inelastic scenario as its reference case. At 
the January 30, 2009, public meeting, DOE asked for input regarding the 
likelihood of customers moving from covered motors to other motor 
categories if standards cause prices of the former to increase. In 
particular, in its preliminary analysis DOE stated that if the price of 
a baseline motor were to increase by more than 18 percent, some 
consumers may switch to enclosed motors. DOE believed the 18 percent 
increase was representative of the difference in price seen between an 
open motor and an enclosed motor with the same ratings. However, NEMA 
stated that 18 percent, which was derived from the difference in 
catalog prices, may not include the additional installation costs if 
the enclosed motor is a different size. NEMA also stated that the 
difference in cooling requirements would need to be considered. 
Finally, NEMA said that they were unaware of a study of the costs of 
replacing an open motor with an enclosed motor. (NEMA, No. 13 at p. 20) 
During manufacturer interviews, manufacturers commented that an 
increased purchase cost of covered motors would increase the rate of 
consumers switching to other motor technologies, for example, 
electronically commutated motors (ECMs). However, interested parties 
did not provide quantitative data which DOE could use to estimate the 
elasticity of small motor shipments. DOE's reference case for the NOPR 
analysis retains the ``no elasticity'' scenario. Although there is the 
potential for consumers to switch to other products, DOE believes that 
consumers are not likely to do so, even as prices for covered motors 
increase. Motor technologies such as ECMs are of a different physical 
size and require the use of an electronic controller to convert AC 
power into DC power. Whereas the ECM motor is itself typically larger 
than a capacitor start motor, the AC to DC control must also be 
physically attached to the motor or remotely located. Thus, consumers 
wishing to replace a motor covered by this rulemaking with an ECM motor 
will have additional costs associated with redesigning their

[[Page 61442]]

application due to the physical size and/or electrical compatibility. 
Given these complexities, replacing a motor covered by this rule with 
an ECM motor would require significant installer knowledge and higher 
installation costs. Furthermore, potential substitution motor 
technologies such as ECMs are not currently available in distribution 
in the full range of speeds, service factors, and frame sizes to 
adequately service the replacement market. DOE seeks input and data 
regarding how the small motor market will respond to the proposed 
standards, particularly regarding elasticity between covered motors and 
other motor technologies, such as ECMs.
    DOE notes that capacitor-start motors form a single market in which 
customers may choose a CSIR or CSCR motor to best meet their 
requirements. DOE developed a cross-elasticity model to incorporate the 
market dynamics of CSIR and CSCR motors within this single market. This 
CSIR/CSCR market share cross-elasticity is independent of the 
elasticity of the market as a whole, discussed above, which could 
change the size of the capacitor-start market. DOE calibrated its 
reference CSIR/CSCR market share model using its estimates of the 
current market share for CSCR and CSIR motors within each matched pair 
of product classes sharing a motor power and number of poles. DOE 
recognizes that there are significant uncertainties in its cross-
elasticity model. The model utilizes DOE's shipments estimates in each 
capacitor-start product class, which are based in part on the number of 
models currently available, in the absence of direct shipments data 
from motor manufacturers. In addition, the model relies on DOE's 
scaling relations for motor losses and motor prices described earlier 
in this NOPR and detailed in the TSD. DOE provides two alternate model 
scenarios (``High CSCR'' and ``Low CSCR'' scenarios), described by sets 
of cross-elasticity model parameters, which it believes bracket the 
range of possible market share responses to standards. DOE modeled two 
cases for the timescale of market share response to standards. One case 
assumed that the market would take 10 years to adjust to the market 
shares predicted, following the implementation of standards in 2015, 
while the other assumed that the market shares would adjust prior to 
the effective date of the standards in 2015. DOE treats these two cases 
as its reference cases. DOE analyzed several alternate scenarios as 
sensitivities, including the ``High CSCR'' and ``Low CSCR'' model 
parameters and a case which treats the market share shift in space-
constrained and non-space-constrained applications separately. Further 
details regarding this model and sensitivities are in TSD chapter 10. 
DOE recognizes that there are significant uncertainties in the inputs 
to its cross-elasticity model, and the resulting parameters of the 
model, and welcomes comments on each of these inputs as well as on the 
model itself. DOE also welcomes comments regarding the resulting 
forecast of the impact of standards on motor shipments and product 
class market shares.

H. Consumer Sub-Group Analysis

    In analyzing the potential impact of new or amended standards on 
customers, DOE evaluates the impact on identifiable groups of customers 
(i.e., subgroups), such as small businesses, that may not be equally 
affected by a national standard level. In this rulemaking, this 
analysis examined the economic impacts on different groups of customers 
by estimating the average change in LCC and by calculating the fraction 
of customers that would benefit. DOE analyzed the potential effect of 
standards for small businesses and customers with space-constrained 
applications, two consumer sub-groups of interest identified by DOE. 
Interested parties also supported these selections. For small 
businesses, DOE analyzed the potential impacts of standards by 
conducting the analysis with different discount rates, as small 
businesses do not have the same access to capital as larger businesses. 
DOE estimated that for businesses purchasing small motors, small 
companies have an average discount rate which is 4.2 percent higher 
than the industry average. DOE assumed that customers with space-
constrained applications constitute 20 percent of all customers, and 
are distributed across all applications.
    More details on the subgroup analysis and the results can be found 
in Chapter 11 of the TSD accompanying this notice.

I. Manufacturer Impact Analysis

1. Overview
    DOE performed an MIA to estimate the financial impact of energy 
conservation standards on small electric motor manufacturers, and to 
calculate the impact of such standards on domestic manufacturing 
employment and capacity. The MIA has both quantitative and qualitative 
aspects. The quantitative part of the MIA primarily relies on the GRIM, 
an industry-cash-flow model customized for this rulemaking. The GRIM 
inputs are data on the industry cost structure, shipments, and 
revenues. The key output is the INPV. For this rulemaking, the impact 
on INPV is reported separately for polyphase and single-phase motors. 
Due to the market interaction between CSIR and CSCR, all single-phase 
motor results are presented together. Different sets of assumptions 
(scenarios) will produce different results. The qualitative part of the 
MIA addresses factors such as motor characteristics, characteristics of 
particular firms, market trends, and an assessment of the impacts of 
standards on manufacturer subgroups. The complete MIA is outlined in 
chapter 12 of the TSD.
    DOE conducted the MIA in three phases. Phase 1, Industry Profile, 
consisted of preparing an industry characterization. Phase 2, Industry 
Cash Flow, focused on the industry as a whole. In this phase, DOE used 
the GRIM to prepare an industry cash-flow analysis. DOE used publicly 
available information developed in Phase 1 to adapt the GRIM structure 
to analyze small electric motors energy conservation standards. In 
Phase 3, Subgroup Impact Analysis, DOE interviewed manufacturers 
representing the majority of domestic small electric motors sales. 
During these interviews, DOE discussed engineering, manufacturing, 
procurement, and financial topics specific to each company, and also 
obtained each manufacturer's view of the industry as a whole. The 
interviews provided valuable information DOE used to help evaluate the 
impacts of a new standard on manufacturer cash flows, manufacturing 
capacities, and employment levels.
2. Phase 1, Industry Profile
    For phase 1 of the MIA, DOE prepared a profile of the small 
electric motors industry based on the market and technology assessment 
prepared for this rulemaking. Before initiating the detailed impact 
studies, DOE collected information on the market characteristics of the 
small electric motors industry. This industry profile includes further 
detail on the overall market, motor characteristics, estimated 
manufacturer market shares, and the trends in the number of firms in 
the small electric motors industry.
    The industry profile included a top-down cost analysis of the small 
electric motors manufacturers that DOE used to derive preliminary 
financial inputs for the GRIM (e.g., revenues; material, labor, 
overhead, depreciation costs; selling, general, and administration 
expenses (SG&A); and research and development (R&D) expenses). DOE also

[[Page 61443]]

used public information to further calibrate its initial 
characterization of the industry, including U.S. Securities and 
Exchange Commission (SEC) 10-K reports, Hoovers company financial 
reports, and U.S. Census data.
3. Phase 2, Industry Cash-Flow Analysis
    Phase 2 of the MIA focused on the financial impacts of potential 
energy conservation standards on the industry as a whole. In Phase 2, 
DOE used the GRIM to perform a preliminary industry cash-flow analysis 
to calculate the financial impacts of energy conservation standards on 
manufacturers. In performing this analysis, DOE used the financial 
values determined in Phase 1 and the shipment scenarios used in the NIA 
analysis.
4. Phase 3, Sub-Group Impact Analysis
    In Phase 3, DOE conducts interviews with manufacturers, refines its 
preliminary cash flow analysis, and uses its initial market 
characterization to evaluate the how groups of manufacturers could be 
differentially impacted. During the course of the MIA, DOE interviewed 
manufacturers representing the majority of domestic small electric 
motors sales. Many of these same companies also participated in 
interviews for the engineering analysis. The MIA interviews broadened 
the discussion from primarily technology-related issues to include 
business-related topics. One key objective for DOE was to obtain 
feedback from the industry on the assumptions used in the GRIM and to 
isolate key issues and concerns. See section IV.I.6 for a description 
of the key issues raised by manufacturers during interviews.
    Using average cost assumptions to develop an industry cash-flow 
estimate does not adequately assess differential impacts among 
manufacturer subgroups. For example, small manufacturers, niche 
players, or manufacturers exhibiting a cost structure that greatly 
differs from the industry average could be more negatively affected by 
new energy conservation standards than larger manufacturers. DOE 
established two subgroups for the MIA corresponding to large and small 
business manufacturers of small electric motors. Small electric motor 
manufacturing is classified under the North American Industry 
Classification System (NAICS) code 335312 (Motor and Generator 
Manufacturing). In order to be considered a small business under NAICS 
335312, small businesses are defined by the Small Business 
Administration (SBA) as manufacturing enterprises with 1,000 or fewer 
employees. DOE attempted to interview companies from each subgroup, 
including subsidiaries, independent firms, and public and private 
corporations to develop an understanding of how manufacturer impacts 
vary by TSL.
5. Government Regulatory Impact Model Analysis
    The GRIM analysis is a standard annual cash-flow analysis that 
incorporates MSPs, manufacturing production costs, shipments, and 
industry financial information as inputs. The analysis models changes 
in costs, distribution of shipments, investments, and associated 
margins that would result from new energy conservation standards. 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 (2010) 
and continuing to 2044. 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 to compare changes in INPV between a base case and 
various TSLs (the standards case). The difference in INPV between the 
base case and a standards case represents the financial impact of 
energy conservation standards on manufacturers. DOE collected this 
information from a number of sources, including publicly available data 
and interviews with manufacturers. The GRIM results are shown in Table 
V.18 through Table V.21. Additional details about the GRIM can be found 
in chapter 12 of the TSD.
6. Manufacturer Interviews
    During interviews with manufacturers, manufacturers discussed 
several key issues of concern if new regulations were imposed. The most 
significant of these issues are outlined below.
    Maintaining Product Availability and Features--Manufacturers 
expressed concern about the impact on typical motor characteristics 
that may result after the adoption of new energy conservation 
standards. Specifically, manufacturers were concerned that standards-
compliant small electric motors might require larger housing diameters 
and shaft lengths. Manufacturers were also greatly concerned that 
larger dimensions could eliminate the ability to retrofit newer, 
potentially larger motors into existing applications. However, 
manufacturers are concerned that their sales could be impacted if 
larger motors required end-users to modify their existing applications. 
If existing motor sizes were increased, end users could choose to use 
other horsepower motors or a different motor category that is not 
covered by today's rulemaking rather than modify the application to 
allow installation of the standards-compliant small electric motor. 
Manufacturers were also concerned that energy conservation standards 
could consolidate horsepower ratings by eliminating some of today's 
standard ratings from the market.
    Significant Capital Conversion Costs--Manufacturers expressed 
concern over the potentially large conversion costs required to 
manufacturer standards-compliant small electric motors. Large 
manufacturers that produce the vast majority of motors covered by this 
rulemaking typically also manufacturer many other categories of motors. 
The majority of manufacturers interviewed indicated that the proportion 
of covered small electric motors represents a small share of the 
manufacturer's overall business. The increased stringency at each 
standard level will require manufacturers to increase the amount of 
capital conversion costs, potentially necessitating an investment in 
new lamination dies, winding tooling, testing equipment, and even re-
allotting factory floor space. According to the majority of 
manufacturers, if the standard forces a substantial increase in motor 
dimensions or redesign costs, manufacturers could simply exit the small 
electric motors market rather than develop standards-compliant motors. 
Manufacturers indicated that the resources for manufacturing standard-
compliant motors would be taken away from other motor technologies that 
could potentially provide greater energy savings, such as variable 
speed motors.
    Substitutes--Manufacturers expressed concerns that standard-
compliant motor prices would be greater due to more costly components 
and to compensate the company for the required capital investment. 
Manufacturers stated that because the small electric motor market is 
highly price sensitive, higher selling prices could push customers 
towards other technologies (e.g., ECMs). Manufacturers believed that 
the economics for customers with equipment that use motors sparingly 
could not justify using the more-efficient, standards-compliant motors 
covered by this rulemaking because the energy savings would not 
compensate for the higher first costs of these motors.
    Narrow Focus of the Rulemaking--Manufacturers were concerned that 
the rulemaking only applies to a small number of motors. Some 
manufacturers

[[Page 61444]]

indicated they or some of their competitors could exit the small 
electric motor market if energy conservation standards were too 
stringent because this rulemaking applies to a small percentage of 
their total sales.
    Uses of Alternative Metals--All interviewed manufacturers expressed 
concerned about the use of copper and exotic steels in redesigning 
their motors. According to manufacturers, copper rotor designs would 
require new specialized tooling that manufacturers currently do not 
employ. Some manufacturers reported the need for significant changes to 
their plants if copper rotors are required to meet standards, including 
the use of special smelting and casting operations. Also, manufacturers 
indicated that the use of copper in rotors would require a significant 
R&D effort because of their lack of experience with the materials and 
determining how to optimize manufacturing these types of rotors in high 
volumes. Manufacturers specifically referenced the lack of availability 
and unproven nature of exotic steels like Hiperco as variables that 
could reduce energy use. Finally, all interviewed manufacturers were 
concerned that the extremely higher prices of motors that use these 
metals could force significant conversion costs that would not be 
recouped if higher price points led to a decline in sales. 
Manufacturers reported that most likely they would exit the market if 
exotic steels were required to meet the energy conservation standard.
    Enforcement of Standards--Manufacturers expressed concern about the 
feasibility of enforcing an energy conservation standard, particularly 
for motors embedded in other equipment. This concern was a particular 
concern for domestic manufacturers that indicated foreign companies 
could potentially import non-compliant motors as a component in other 
non-regulated equipment and put U.S. manufacturers at a competitive 
disadvantage.
7. Government Regulatory Impact Model Key Inputs and Scenarios
a. Base-Case Shipments Forecast
    The GRIM estimates manufacturer revenues based on shipment 
forecasts and the distribution by product class and efficiency. Changes 
in the efficiency mix at each standard level are a key driver of 
manufacturer finances. For this analysis, the GRIM used the NIA 
shipments forecasts from 2010 to 2044. The NIA shipments forecast 
contains several scenarios that account for various economic 
conditions, motor price elasticity, and shipment interaction between 
single-phase motors. For all scenarios, the NIA shipments forecast 
maintains total industry-wide shipments. Total shipments forecasted by 
the NIA for the base case in 2015 are shown in Table IV.11.
[GRAPHIC] [TIFF OMITTED] TP24NO09.011

    Additional shipment scenarios analyzed in the NIA include any 
combination of the scenarios listed in Table IV.12. While the GRIM is 
able to model any of the possible combinations, to calculate the likely 
INPV impacts in the MIA DOE used the reference scenario for the MIA. 
This scenario uses baseline economic growth, no shipment elasticity, 
and baseline market share between CSIR and CSCR motors. To see a 
complete set of results for all scenarios, see Chapter 12 of the TSD. 
For more information on the different possible shipment scenarios 
analyzed in the NIA, see chapter 10 of the TSD.
[GRAPHIC] [TIFF OMITTED] TP24NO09.012

    In the shipments analysis, DOE also estimated the distribution of 
efficiencies in the base case for small electric motors (chapter 9 of 
the TSD). Table IV.13 through Table IV.15 show the distribution of 
efficiencies in the base case for the polyphase, CSIR, and CSCR 
representative units, respectively.

[[Page 61445]]

[GRAPHIC] [TIFF OMITTED] TP24NO09.013

b. Standards-Case Shipments Forecast
    For each standards case, DOE assumed that shipments at efficiencies 
below the projected standard levels would roll up to those efficiency 
levels in response to an energy conservation standard. This scenario 
assumes that demand for high-efficiency motors is a function of its 
price without regard to the standard level. In the standards-case 
scenarios used to calculate INPV, shipments for polyphase and single-
phase motors are independent of each other. However, for single-phase 
motors, the NIA shipments forecast modeled an interaction between 
shipments of CSIR and CSCR motors at each TSL. This interaction is also 
captured in the MIA in the standards-case shipments. For further 
information on the interaction of CSIR and CSCR motors shipments, see 
chapter 10 of the TSD.
c. Manufacturing Production Costs
    Manufacturer production costs include all direct manufacturing 
costs (i.e., labor, material and overhead). DOE derived manufacturing 
production costs by using the MSPs found in the engineering analysis. 
In the MIA, DOE used the weighted average MSPs that combined prices for 
space constrained and non-spaced constrained motor designs. Further 
discussion of how DOE calculated projected MSPs is found in chapter 5 
of the TSD. To determine manufacturer production costs from MSP, DOE 
divided MSPs by the manufacturer markup. The manufacturer markup is a 
multiplier that converts the manufacturer production costs to MSPs. The 
manufacturer markup covers all non-production costs (i.e., selling, 
general, and administrative expenses, shipping, and research and 
development) and profit. The manufacturer markup was calculated using 
the revenues and cost of goods sold from the annual reports of 
publicly-traded companies. For additional information on DOE's scaling 
of MSPs, see section IV.G of today's notice.
d. Manufacturing Markup Scenarios
    To understand how baseline and more efficient motors are 
differentiated, DOE reviewed manufacturer catalogs and information 
gathered by manufacturers. In the base case, DOE used the MSPs from the 
engineering analysis. For the MIA, DOE considered different 
manufacturer markup scenarios for small electric motors. Markup 
scenarios were used to provide bounds to the range of expected small 
electric motor prices following new energy conservation standards. DOE 
learned from interviews that manufacturers typically only offer one 
line for each product class and that the efficiency levels offered fall 
near the baseline efficiency level. DOE also learned that manufacturers 
maintain a constant markup among different product classes. In the base 
case, DOE applied the same standard manufacturer markup of 1.45 for all 
product classes.
    For the standards case, DOE considered two markup scenarios: (1) 
The preservation of return on invested capital scenario, and (2) the 
preservation of operating profit scenario.
    Return on invested capital is defined as net operating profit after 
taxes (NOPAT) divided by the total invested capital. The total invested 
capital includes fixed assets and working capital, or net plant, 
property, and equipment plus working capital. In the preservation of 
return on invested capital scenario, the markups are set so that the 
return on invested capital the year after the effective date of the 
energy conservation standards is the same as in the base case. This 
scenario models the situation in which manufacturers maintain a similar 
level of profitability from the investments required by amended energy 
conservation standards as they do from their current business 
operations. Under this scenario, after standards, manufacturers have 
higher

[[Page 61446]]

net operating profits but also greater working capital and investment 
requirements. This scenario represents the high bound to profitability 
following standards.
    The implicit assumption behind the ``preservation-of-operating 
profit'' scenario is that the industry can only maintain its base-case 
operating profit (earnings before interest and taxes) in the year after 
implementation of the standard. The industry impacts occur in this 
scenario when manufacturers make the required capital and equipment 
conversion costs in order to manufacturer more expensive motors, but 
the operating profit does not change from current conditions. DOE 
implemented this markup scenario in the GRIM by setting the 
manufacturer markups at each TSL to yield approximately the same 
operating profit in both the base case and the standards case in the 
year after standards take effect.
e. Equipment and Capital Conversion Costs
    Energy conservation standards typically cause manufacturers to 
incur one-time conversion costs to bring their production facilities 
and designs into compliance with the energy conservation standard. For 
the purpose of the MIA, DOE classified these conversion costs into two 
major groups: (1) Equipment conversion costs, and (2) capital 
conversion costs. Equipment conversion costs are one-time investments 
in research, development, testing, and marketing, focused on making 
motor designs comply with the new energy conservation standard. Capital 
conversion costs are one-time investments in property, plant, and 
equipment to adapt or change existing production facilities so that new 
motor designs can be fabricated and assembled.
    DOE assessed the equipment conversion costs manufacturers would be 
required to make at each TSL. DOE considered a number of manufacturer 
responses for small electric motors at each TSL. In order to estimate 
the required equipment conversion costs, DOE used the technology 
options in its engineering analysis to estimate the engineering and 
product development resources needed at each TSL. Specifically, DOE 
estimated the equipment conversion costs by the effort required to 
redesign existing motors as the stack length increases and changes in 
material to copper for rotors and exotic steels for laminations are 
required. Additionally, DOE maintained the engineering analysis 
assumption that a portion of manufactured motors would have space 
constraints, requiring higher product conversion costs in comparison to 
non-space constrained motors. To take space constrained designs into 
account in the equipment conversion costs, at each TSL DOE used a 
weighted average of its estimate of the product development costs to 
develop both space constrained and non-space constrained motors. DOE 
also used the information provided by manufacturers and industry 
experts to validate its estimates. However, because DOE received 
limited feedback from manufacturers about the required capital and 
equipment conversion costs, DOE seeks additional comment from 
interested parties on the estimated equipment conversion costs.
    DOE also evaluated the level of capital conversion costs 
manufacturers would incur to comply with energy conservation standards. 
DOE used the manufacturer interviews to gather data on the level of 
capital investment required at each TSL. Manufacturers explained how 
different TSLs affected their ability to use existing plants, tooling, 
and equipment. DOE estimated the tooling and capital that would be 
necessary to achieve subsequent efficiency levels given the majority of 
current shipments are at the baseline efficiency. Additionally, DOE 
maintained the assumption from the engineering analysis that a portion 
of manufactured motors would have space constraints. At each TSL, DOE 
estimated the total capital conversion costs that would be required to 
manufacturer exclusively space constrained and non-space constrained 
motors. DOE weighted these two estimates by the percentage of motors 
that would be space constrained and non-spaced constrained to calculate 
the estimate of the industry-wide capital conversion costs at each TSL. 
DOE gathered information from industry experts to validate its 
assumptions for capital conversion costs. However, DOE received limited 
input from manufacturers regarding the required capital conversion 
costs to reach the max-tech efficiency levels that require alternative 
steel such as Hiperco. Consequently, DOE seeks additional comment from 
interested parties on its assumptions and estimates for the capital 
conversion costs.
    The investment figures used in the GRIM can be found in section 
V.B.2.a of today's notice. For additional information on the estimated 
equipment conversion and capital conversion costs and assumptions, see 
chapter 12 of the TSD.

J. Employment Impact Analysis

    Employment impacts are among the factors DOE considers in selecting 
a proposed standard. Employment impacts are the total impact on 
employment in the national economy, including the sector that 
manufactures the equipment being regulated. Thus, DOE estimated both 
the direct impact of standards on employment (i.e., any changes in the 
number of employees for small motors manufacturers, their suppliers, 
and related service firms), and the indirect employment impact of 
standards (i.e., changes in employment by energy suppliers and by other 
sectors of the economy). The MIA addresses only the employment impacts 
on manufacturers of the product being regulated.
    Indirect employment impacts from standards are 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 energy, (2) reduced spending on new energy supply by the 
utility industry, (3) increased spending on the purchase price of new 
small motors, 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, but there is no standard method for estimating these effects.
    One method for assessing the possible effects on the demand for 
labor of such shifts in economic activity is to compare sectoral 
employment statistics developed by the Labor Department's Bureau of 
Labor Statistics (BLS). BLS regularly publishes its estimates of the 
number of jobs per million dollars of economic activity in different 
sectors of the economy, as well as the jobs created elsewhere in the 
economy by this same economic activity. Data from BLS indicate that 
expenditures in the utility sector generally create fewer jobs (both 
directly and indirectly) than expenditures in other sectors of the 
economy. (See Bureau of Economic Analysis, ``Regional Multipliers: A 
User Handbook for the Regional Input-Output Modeling System (RIMS 
II),'' Washington, DC., U.S. Department of Commerce, 1992). Because 
reduced consumer expenditures for energy likely lead to increased 
expenditures in other sectors of the economy, the general effect of 
efficiency standards is to shift economic activity from a less labor-
intensive sector (i.e., the utility sector) to more labor-intensive 
sectors (e.g., the

[[Page 61447]]

retail and manufacturing sectors). Thus, based on BLS data alone, DOE 
believes net national employment will increase due to shifts in 
economic activity resulting from the proposed small motors standard.
    To investigate the indirect employment impacts, DOE used the 
Pacific Northwest National Laboratory (PNNL)'s Impact of Sector Energy 
Technologies (ImSET) model. PNNL developed ImSET, a spreadsheet model 
of the U.S. economy that focuses on 188 sectors most relevant to 
industrial, commercial, and residential building energy use, for DOE's 
Office of Energy Efficiency and Renewable Energy. ImSET is a special-
purpose version of the U.S. Benchmark National Input-Output (I-O) 
model, which has been designed to estimate the national employment and 
income effects of energy saving technologies that are deployed by DOE's 
Office of Energy Efficiency and Renewable Energy. The ImSET software 
includes a computer-based I-O model with structural coefficients to 
characterize economic flows among 188 sectors. ImSET's national 
economic I-O structure is based on the 1997 Benchmark Input-Output 
Data, which have been specially aggregated to cover 188 sectors.
    In response to the preliminary analysis, DOE received two comments 
regarding the employment analysis. NEEA and NPCC recommended that DOE 
consider a ``2008 study'' on the employment impacts of energy 
efficiency in California and attempt to extrapolate them to the 
national scale (NEEA and NPCC, No. 9 at p. 6). DOE examined the study 
referred to in the comment: ``Energy Efficiency, Innovation, and Job 
Creation in California'' by David Roland-Holst. DOE concluded that one 
component of the study that addresses indirect employment impacts due 
to decreased energy expenditures is similar to DOE's current approach. 
The second component of the study hypothesizes that ``innovation'' will 
create additional employment impact and estimated that this impact is 
approximately the same size as the indirect impacts due to decreased 
energy expenditures. But the report notes that is forecast is highly 
uncertain: ``The overall process of technological change is notoriously 
difficult to forecast, and individual innovation events virtually 
impossible,'' (David Roland-Holst, ``Energy Efficiency, Innovation, and 
Job Creation in California'' at p. 81). Given the acknowledged 
exploratory and potentially speculative nature of employment impacts 
due to innovation, DOE does not include an estimate of innovation-
induced employment impacts in its analysis at this time.
    Baldor and NEMA commented that DOE needs to make sure that the 
ImSET model properly includes pertinent industries that use small 
electric motors--i.e., OEM manufacturers (Baldor, Public Meeting 
Transcript, No. 8.5 at 312-13; NEMA, No. 13 at p. 16). DOE has 
confirmed that ImSET includes the various OEM manufacturing sectors in 
its analysis. Although commenters expected OEM employment to be 
adversely impacted, ImSET forecasts increased employment by OEMs. ImSET 
forecasts employment impacts based on changes in expenditures made in a 
particular sector. With the implementation of energy conservation 
standards, small electric motors become more expensive and as the 
equipment is marked up during OEM product manufacture, the total 
revenues going to OEMs increases. Because DOE assumes that OEMs are 
able to pass the increased cost of the motors to their customers, these 
increased revenues going to the OEM sector result in a forecast of 
increased employment for OEMs.
    For more details on the employment impact analysis, see TSD chapter 
14.

K. Utility Impact Analysis

    The utility impact analysis estimates the effects of reduced energy 
consumption due to improved appliance efficiency on the utility 
industry. This utility analysis compares forecast results for a case 
comparable to the AEO2009 Reference Case and forecasts for policy cases 
incorporating each of the small motors trial standard levels.
    The utility impact analysis reports the changes in installed 
capacity and generation by plant type that result for each trial 
standard level, as well as changes in electricity sales to the 
residential, commercial and industrial sectors. The estimated impacts 
of the standard are the difference between the value forecasted by 
NEMS-BT and the AEO 2009 Reference Case.
    DOE also received a comment from EEI noting that low motor power 
factors can have adverse impacts on the utility power distribution 
system (EEI, No. 14 at p. 2). DOE responded to this comment by 
including an estimate of utility costs as a function of changes in 
power factor and motor losses with changing standard level. These 
impacts include costs and energy losses. The national impact analysis 
estimates costs and benefits of changing power factor and reactive 
power. DOE's model estimates that the utility system losses due to 
power factor effects are generally in the range of 10 to 20 percent of 
total source energy consumption. The estimates of the losses (or 
savings) from power factor and reactive power effects are included in 
the inputs to the utility impact analysis.
    Chapter 13 of the TSD accompanying this notice presents details on 
the utility impact analysis.

L. Environmental Analysis

    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(a) to determine the environmental impacts 
of the proposed standards. DOE estimated the reduction in power sector 
emissions of CO2, NOX, and Hg using the NEMS-BT 
model.
1. Power Sector Emissions
    NEMS-BT is run similarly to the AEO NEMS, except that small 
electric motor energy use is reduced by the amount of energy saved due 
to each TSL. The inputs of national energy savings come from the NIA 
spreadsheet model; the output is the forecasted physical emissions at 
each TSL. The net benefit of the standard is the difference between 
emissions estimated by NEMS-BT at each TSL and the AEO Reference Case. 
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 preliminary NOPR analysis, DOE used 
AEO2008. For today's NOPR, DOE used the AEO2009 NEMS (stimulus 
version). For the final rule, DOE intends to revise the emissions 
analysis using the most current AEO.
    DOE has preliminarily determined that SO2 emissions from 
affected Electric Generating Units (EGUs) are subject to nationwide and 
regional emissions cap and trading programs that create uncertainty 
about standard's impact on SO2 emissions. Title IV of the 
Clean Air Act sets an annual emissions cap on SO2 for all 
affected EGUs. SO2 emissions from 28 eastern States and the 
District of Columbia (D.C.) are also limited under the Clean Air 
Interstate Rule (CAIR, published in the Federal Register on May 12, 
2005. 70 FR 25162 (May 12, 2005)), which creates an allowance-based 
trading program that will gradually replace the Title IV program in 
those States and D.C. (The recent legal history surrounding CAIR is 
discussed below.) The attainment of the emissions caps is flexible 
among EGUs and is enforced through the use of emissions allowances and 
tradable permits. The standard could lead EGUs to trade allowances and 
increase SO2 emissions that offset some or all 
SO2

[[Page 61448]]

emissions reductions attributable to the standard. DOE is not certain 
that there will be reduced overall SO2 emissions from the 
standards. The NEMS-BT modeling system that DOE plans to use to 
forecast emissions reductions currently indicates that no physical 
reductions in power sector emissions would occur for SO2. 
However, remaining uncertainty prevents DOE from estimating 
SO2 reductions from the standard at this time.
    Even though DOE is not certain that there will be reduced overall 
emissions from the standard, there 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 lessen the need to purchase SO2 
emissions allowance credits, and thereby decrease the costs of 
complying with regulatory caps on emissions.
    Much like SO2, NOX emissions from 28 eastern 
States and the District of Columbia (D.C.) are limited under the CAIR. 
Although CAIR has been remanded to EPA by the D.C. Circuit, it will 
remain in effect until it is replaced by a rule consistent with the 
Court's July 11, 2008, opinion in North Carolina v. EPA. 531 F.3d 896 
(D.C. Cir. 2008); see also North Carolina v. EPA, 550 F.3d 1176 (D.C. 
Cir. 2008). Because all States covered by CAIR opted to reduce 
NOX emissions through participation in cap-and-trade 
programs for electric generating units, emissions from these sources 
are capped across the CAIR region.
    The proposed standard would reduce NOX emissions in 
those 22 States not affected by the CAIR. As a result, DOE used the 
NEMS-BT to forecast emission reductions from the standard that are 
considered in today's NOPR.
    In contrast, in the 28 eastern States and D.C. where CAIR is in 
effect, DOE's forecasts indicate that no NOX emissions 
reductions will occur: This is because of the permanent cap. Energy 
conservation standards have the potential to produce environmentally 
related economic impact in the form of lower prices for emissions 
allowance credits, if they were large enough. However, DOE has 
preliminarily concluded that the SEM standard would not have such an 
effect because the estimated reduction in NOX emissions or 
the corresponding allowance credits in States covered by the CAIR cap 
would be too small to affect allowance prices for NOX under 
the CAIR.
    Similar to emissions of SO2 and NOX, future 
emissions of Hg would have been subject to emissions caps. The Clean 
Air Mercury Rule (CAMR) would have permanently capped emissions of 
mercury from new and existing coal-fired plants in all States beginning 
in 2010 (70 FR 28606). However, the CAMR was vacated by the D.C. 
Circuit in its decision in New Jersey v. Environmental Protection 
Agency, 517 F 3d 574 (D.C. Cir. 2008). Thus, DOE was able to use the 
NEMS-BT model to estimate the changes in Hg emissions resulting from 
the proposed rule.
    EEI stated that DOE's analysis should take into consideration 
trends in emissions reduction for CO2, NOX, 
SO2 and Hg (EEI, No. 14 at p. 3). DOE's emissions forecasts 
are based on estimates produced by the AEO2009 version of NEMS which 
include the future impacts of current regulation both in the reference 
and the standard case, but which do not include the impact of future 
regulations. With existing regulations, the model estimates a steady 
decline in NOX and Hg emissions from the power sector based 
on the future impacts of current regulation. But because of the 
speculative nature of forecasting future regulations, DOE does not in 
general include the impact of possible future regulations in its 
reference case forecasts. However, DOE may examine the impact of 
specific possible future regulations in a sensitivity analysis.
    DOE's projections of CO2 emissions from electric power 
generation are based on the AEO2009 version of NEMS. The emissions 
projections reflect market factors and policies that affect utility 
choice of power plants for electricity generation, including existing 
renewable portfolio standards. In conducting the AEO, EIA generally 
includes only those policies that are already enacted. As enactment and 
the features of a national CO2 cap and trade program are 
uncertain at this point, DOE believes it would be inappropriate to 
speculate on the nature and timing of such a policy at this stage of 
this rulemaking.
2. Valuation of CO2 Emissions
    DOE received comments on the desirability of valuing the 
CO2 emissions reductions that result from standards. Both 
NEEA and Earthjustice urged DOE to value CO2 emissions 
reductions and recommended potential models that DOE could use to do so 
(NEEA, Public Meeting Transcript, No. 8.5 at pp. 251-254; Earthjustice, 
No. 11 at pp. 2-3). AHRI commented that DOE needs to be careful to 
examine the uncertainty in potential CO2 emissions 
reductions values and how costs may be allocated to different sectors 
(AHRI, Public Meeting Transcript, No. 8.5 at pp. 255-256).
    For today's proposed rule, DOE is relying on a set of values 
recently developed by an interagency process that conducted a more 
thorough review of existing estimates of the social cost of carbon 
(SCC).
    The SCC is intended to be a monetary measure of the incremental 
damage resulting from greenhouse gas (GHG) emissions, including, but 
not limited to, net agricultural productivity loss, human health 
effects, property damage from sea level rise, and changes in ecosystem 
services. Any effort to quantify and to monetize the harms associated 
with climate change will raise serious questions of science, economics, 
and ethics. But with full regard for the limits of both quantification 
and monetization, the SCC can be used to provide estimates of the 
social benefits of reductions in GHG emissions.
    For at least three reasons, any single estimate of the SCC will be 
contestable. First, scientific and economic knowledge about the impacts 
of climate change continues to grow. With new and better information 
about relevant questions, including the cost, burdens, and possibility 
of adaptation, current estimates will inevitably change over time. 
Second, some of the likely and potential damages from climate change--
for example, the value society places on adverse impacts on endangered 
species--are not included in all of the existing economic analyses. 
These omissions may turn out to be significant, in the sense that they 
may mean that the best current estimates are too low. Third, 
controversial ethical judgments, including those involving the 
treatment of future generations, play a role in judgments about the SCC 
(see in particular the discussion of the discount rate, below).
    To date, regulations have used a range of values for the SCC. For 
example, a regulation proposed by the U.S. Department of Transportation 
(DOT) in 2008 assumed a value of $7 per ton CO2 (2006$) for 
2011 emission reductions (with a range of $0-14 for sensitivity 
analysis). Regulation finalized by DOE used a range of $0-$20 (2007$). 
Both of these ranges were designed to reflect the value of damages to 
the United States resulting from carbon emissions, or the ``domestic'' 
SCC. In the final Model Year 2011 Corporate Average Fuel Economy rule, 
DOT used both a domestic SCC value of $2/tCO2 and a global 
SCC value of $33/tCO2 (with sensitivity analysis at $80/
tCO2), increasing at 2.4 percent per year thereafter.
    In recent months, a variety of agencies have worked to develop an 
objective

[[Page 61449]]

methodology for selecting a range of interim SCC estimates to use in 
regulatory analyses until improved SCC estimates are developed. The 
following summary reflects the initial results of these efforts and 
proposes ranges and values for interim social costs of carbon used in 
this rule. It should be emphasized that the analysis described below is 
preliminary. These complex issues are of course undergoing a process of 
continuing review. Relevant agencies will be evaluating and seeking 
comment on all of the scientific, economic, and ethical issues before 
establishing final estimates for use in future rulemakings.
    The interim judgments resulting from the recent interagency review 
process can be summarized as follows: (a) DOE and other Federal 
agencies should consider the global benefits associated with the 
reductions of CO2 emissions resulting from efficiency 
standards and other similar rulemakings, rather continuing the previous 
focus on domestic benefits; (b) these global benefits should be based 
on SCC estimates (in 2007$) of $55, $33, $19, $10, and $5 per ton of 
CO2 equivalent emitted (or avoided) in 2007; (c) the SCC 
value of emissions that occur (or are avoided) in future years should 
be escalated using an annual growth rate of 3-percent from the current 
values); and (d) domestic benefits are estimated to be approximately 6 
percent of the global values. DOE has escalated the 2007$ values to 
2008$ for consistency with other dollar values presented in this 
notice, resulting in SCC estimates (in 2008$) of approximately $5, $10, 
$20, $34, and $56. These interim judgments are based on the following:
    1. Global and domestic estimates of SCC. Because of the distinctive 
nature of the climate change problem, estimates of both global and 
domestic SCC values should be considered, but the global measure should 
be ``primary.'' This approach represents a departure from past 
practices, which relied, for the most part, on measures of only 
domestic impacts. As a matter of law, both global and domestic values 
are permissible; the relevant statutory provisions are ambiguous and 
allow the agency to choose either measure. (It is true that Federal 
statutes are presumed not to have extraterritorial effect, in part to 
ensure that the laws of the United States respect the interests of 
foreign sovereigns. But use of a global measure for the SCC does not 
give extraterritorial effect to Federal law and hence does not intrude 
on such interests.)
    It is true that under OMB guidance, analysis from the domestic 
perspective is required, while analysis from the international 
perspective is optional. The domestic decisions of one nation are not 
typically based on a judgment about the effects of those decisions on 
other nations. But the climate change problem is highly unusual in the 
sense that it involves (a) a global public good in which (b) the 
emissions of one nation may inflict significant damages on other 
nations and (c) the United States is actively engaged in promoting an 
international agreement to reduce worldwide emissions.
    In these circumstances, the global measure is preferred. Use of a 
global measure reflects the reality of the problem and is expected to 
contribute to the continuing efforts of the United States to ensure 
that emission reductions occur in many nations.
    Domestic SCC values are also presented. The development of a 
domestic SCC is greatly complicated by the relatively few region- or 
country-specific estimates of the SCC in the literature. One potential 
estimate comes from the DICE (Dynamic Integrated Climate Economy, 
William Nordhaus) model. In an unpublished paper, Nordhaus (2007) 
produced disaggregated SCC estimates using a regional version of the 
DICE model. He reported a U.S. estimate of $1/tCO2 (2007 
value, 2007$), which is roughly 11 percent of the global value.
    An alternative source of estimates comes from a recent EPA modeling 
effort using the FUND (Climate Framework for Uncertainty, Negotiation 
and Distribution, Center for Integrated Study of the Human Dimensions 
of Global Change) model. The resulting estimates suggest that the ratio 
of domestic to global benefits varies with key parameter assumptions. 
With a 3-percent discount rate, for example, the US benefit is about 6 
percent of the global benefit for the ``central'' (mean) FUND results, 
while, for the corresponding ``high'' estimates associated with a 
higher climate sensitivity and lower global economic growth, the US 
benefit is less than 4 percent of the global benefit. With a 2 percent 
discount rate, the U.S. share is about 2 to 5 percent of the global 
estimate.
    Based on this available evidence, a domestic SCC value equal to 6 
percent of the global damages is used in this rulemaking. This figure 
is in the middle of the range of available estimates from the 
literature. It is recognized that the 6 percent figure is approximate 
and highly speculative and alternative approaches will be explored 
before establishing final values for future rulemakings.
    2. Filtering existing analyses. There are numerous SCC estimates in 
the existing literature, and it is legitimate to make use of those 
estimates to produce a figure for current use. A reasonable starting 
point is provided by the meta-analysis in Richard Tol, ``The Social 
Cost of Carbon: Trends, Outliers, and Catastrophes, Economics: The 
Open-Access, Open-Assessment E-Journal,'' Vol. 2, 2008-25. http://www.economics-ejournal.org/economics/journalarticles/2008-25 (2008). 
With that starting point, it is proposed to ``filter'' existing SCC 
estimates by using those that (1) are derived from peer-reviewed 
studies; (2) do not weight the monetized damages to one country more 
than those in other countries; (3) use a ``business as usual'' climate 
scenario; and (4) are based on the most recent published version of 
each of the three major integrated assessment models (IAMs): FUND, DICE 
and PAGE (Policy Analysis of the Greenhouse Effect) Policy.
    Proposal (1) is based on the view that those studies that have been 
subject to peer review are more likely to be reliable than those that 
have not been. Proposal (2) is based on a principle of neutrality and 
simplicity; it does not treat the citizens of one nation differently on 
the basis of speculative or controversial considerations. Proposal (3) 
stems from the judgment that as a general rule, the proper way to 
assess a policy decision is by comparing the implementation of the 
policy against a counterfactual state where the policy is not 
implemented. A departure from this approach would be to consider a more 
dynamic setting in which other countries might implement policies to 
reduce GHG emissions at an unknown future date, and the United States 
could choose to implement such a policy now or in the future.
    Proposal (4) is based on three complementary judgments. First, the 
FUND, PAGE, and DICE models now stand as the most comprehensive and 
reliable efforts to measure the damages from climate change. Second, 
the latest versions of the three IAMs are likely to reflect the most 
recent evidence and learning, and hence they are presumed to be 
superior to those that preceded them. It is acknowledged that earlier 
versions may contain information that is missing from the latest 
versions. Third, any effort to choose among them, or to reject one in 
favor of the others, would be difficult to defend at this time. In the 
absence of a clear reason to choose among them, it is reasonable to 
base the SCC on all of them.
    The agency is keenly aware that the current IAMs fail to include 
all relevant information about the likely impacts

[[Page 61450]]

from greenhouse gas emissions. For example, ecosystem impacts, 
including species loss, do not appear to be included in at least two of 
the models. Some human health impacts, including increases in food-
borne illnesses and in the quantity and toxicity of airborne allergens, 
also appear to be excluded. In addition, there has been considerable 
recent discussion of the risk of catastrophe and of how best to account 
for worst-case scenarios. It is not clear whether the three IAMs take 
adequate account of these potential effects.
    3. Use a model-weighted average of the estimates at each discount 
rate. At this time, there appears to be no scientifically valid reason 
to prefer any of the three major IAMs (FUND, PAGE, and DICE). 
Consequently, the estimates are based on an equal weighting of 
estimates from each of the models. Among estimates that remain after 
applying the filter, the average of all estimates within a model is 
derived. The estimated SCC is then calculated as the average of the 
three model-specific averages. This approach ensures that the interim 
estimate is not biased towards specific models or more prolific 
authors.
    4. Apply a 3-percent annual growth rate to the chosen SCC values. 
SCC is assumed to increase over time, because future emissions are 
expected to produce larger incremental damages as physical and economic 
systems become more stressed as the magnitude of climate change 
increases. Indeed, an implied growth rate in the SCC is produced by 
most studies that estimate economic damages caused by increased GHG 
emissions in future years. But neither the rate itself nor the 
information necessary to derive its implied value is commonly reported. 
In light of the limited amount of debate thus far about the appropriate 
growth rate of the SCC, applying a rate of 3-percent per year seems 
appropriate at this stage. This value is consistent with the range 
recommended by IPCC (2007) and close to the latest published estimate 
(Hope, 2008).
    For climate change, one of the most complex issues involves the 
appropriate discount rate. OMB's current guidance offers a detailed 
discussion of the relevant issues and calls for discount rates of 3-
percent and 7-percent. It also permits a sensitivity analysis with low 
rates for intergenerational problems. (``If your rule will have 
important intergenerational benefits or costs you might consider a 
further sensitivity analysis using a lower but positive discount rate 
in addition to calculating net benefits using discount rates of 3 and 
7-percent.'') The SCC is being developed within the general context of 
the current guidance.
    The choice of a discount rate, especially over long periods of 
time, raises highly contested and exceedingly difficult questions of 
science, economics, philosophy, and law. See, e.g., William Nordhaus, 
``The Challenge of Global Warming (2008); Nicholas Stern, The Economics 
of Climate Change'' (2007); ``Discounting and Intergenerational 
Equity'' (Paul Portney and John Weyant, eds., 1999). Under imaginable 
assumptions, decisions based on cost-benefit analysis with high 
discount rates might harm future generations--at least if investments 
are not made for the benefit of those generations. See Robert Lind, 
``Analysis for Intergenerational Discounting,'' id. at 173, 176-177. At 
the same time, use of low discount rates for particular projects might 
itself harm future generations, by ensuring that resources are not used 
in a way that would greatly benefit them. In the context of climate 
change, questions of intergenerational equity are especially important.
    Reasonable arguments support the use of a 3-percent discount rate. 
First, that rate is among the two figures suggested by OMB guidance, 
and hence it fits with existing National policy. Second, it is standard 
to base the discount rate on the compensation that people receive for 
delaying consumption, and the 3-percent rate is close to the risk-free 
rate of return, proxied by the return on long term inflation-adjusted 
US Treasury Bonds. (In the context of climate change, it is possible to 
object to this standard method for deriving the discount rate.) 
Although these rates are currently closer to 2.5 percent, the use of 3-
percent provides an adjustment for the liquidity premium that is 
reflected in these bonds' returns.
    At the same time, other arguments support use of a 5 percent 
discount rate. First, that rate can also be justified by reference to 
the level of compensation for delaying consumption, because it fits 
with market behavior with respect to individuals' willingness to trade 
off consumption across periods as measured by the estimated post-tax 
average real returns to private investment (e.g., the S&P 500). In the 
climate setting, the 5 percent discount rate may be preferable to the 
riskless rate because it is based on risky investments and the return 
to projects to mitigate climate change is also risky. In contrast, the 
3-percent riskless rate may be a more appropriate discount rate for 
projects where the return is known with a high degree of confidence 
(e.g., highway guardrails).
    Second, 5 percent, and not 3-percent, is roughly consistent with 
estimates implied by reasonable inputs to the theoretically derived 
Ramsey equation, which specifies the optimal time path for consumption. 
That equation specifies the optimal discount rate as the sum of two 
components. The first reflects the fact that consumption in the future 
is likely to be higher than consumption today (even accounting for 
climate impacts), so diminishing marginal utility implies that the same 
monetary damage will cause a smaller reduction of utility in the 
future. Standard estimates of this term from the economics literature 
are in the range of 3 to 5 percent. The second component reflects the 
possibility that a lower weight should be placed on utility in the 
future, to account for social impatience or extinction risk, which is 
specified by a pure rate of time preference (PRTP). A conventional 
estimate of the PRTP is 2 percent. (Some observers believe that a 
principle of intergenerational equity suggests that the PRTP should be 
close to zero.) It follows that discount rate of 5 percent is within 
the range of values which are able to be derived from the Ramsey 
equation, albeit at the low end of the range of estimates usually 
associated with Ramsey discounting.
    It is recognized that the arguments above--for use of market 
behavior and the Ramsey equation--face objections in the context of 
climate change, and of course there are alternative approaches. In 
light of climate change, it is possible that consumption in the future 
will not be higher than consumption today, and if so, the Ramsey 
equation will suggest a lower figure. Some people have suggested that a 
very low discount rate, below 3-percent, is justified in light of the 
ethical considerations calling for a principle of intergenerational 
neutrality. See Nicholas Stern, ``The Economics of Climate Change'' 
(2007); for contrary views, see William Nordhaus, The A Question of 
Balance (2008); Martin Weitzman, ``Review of the Stern Review on the 
Economics of Climate Change.'' Journal of Economic Literature, 45(3): 
703-724 (2007). Additionally, some analyses attempt to deal with 
uncertainty with respect to interest rates over time; a possible 
approach enabling the consideration of such uncertainties is discussed 
below. Richard Newell and William Pizer, ``Discounting the Distant 
Future: How Much do Uncertain Rates Increase Valuations?'' J. Environ. 
Econ. Manage. 46 (2003) 52-71.
    The application of the methodology outlined above yields estimates 
of the SCC that are reported in Table IV.16. These estimates are 
reported separately

[[Page 61451]]

using 3-percent and 5 percent discount rates. The cells are empty in 
rows 10 and 11, because these studies did not report estimates of the 
SCC at a 3-percent discount rate. The model-weighted means are reported 
in the final or summary row; they are $33 per tCO2 at a 3% 
discount rate and $5 per tCO2 with a 5% discount rate.
[GRAPHIC] [TIFF OMITTED] TP24NO09.014

    Analyses have been conducted at $34 and $5 (in 2008$, escalated 
from 2007$) as these represent the estimates associated with the 3-
percent and 5 percent discount rates, respectively. The 3-percent and 5 
percent estimates have independent appeal and at this time a clear 
preference for one over the other is not warranted. Thus, DOE has also 
included--and centered its current attention on--the average of the 
estimates associated with these discount rates, which is approximately 
$20. (Based on the $20 global value, the domestic value would be 
approximately $1 per ton of CO2 equivalent.)
    It is true that there is uncertainty about interest rates over long 
time horizons. Recognizing that point, Newell and Pizer have made a 
careful effort to adjust for that uncertainty. See Newell and Pizer, 
supra. This is a relatively recent contribution to the literature.
    There are several concerns with using this approach in this 
context. First, it would be a departure from current OMB guidance. 
Second, an approach that would average what emerges from discount rates 
of 3-percent and 5 percent reflects uncertainty about the discount 
rate, but based on a different model of uncertainty. The Newell-Pizer 
approach models discount rate uncertainty as something that evolves 
over time; in contrast, one alternative approach would assume that 
there is a single discount rate with equal probability of 3-percent and 
5 percent.
    Table IV.17 reports on the application of the Newell-Pizer 
adjustments. The precise numbers depend on the assumptions about the 
data generating process that governs interest rates. Columns (1a) and 
(1b) assume that ``random walk'' model best describes the data and uses 
3-percent and 5 percent discount rates, respectively. Columns (2a) and 
(2b) repeat this, except that it assumes a ``mean-reverting'' process. 
As Newell and Pizer report, there is stronger empirical support for the 
random walk model.

[[Page 61452]]

[GRAPHIC] [TIFF OMITTED] TP24NO09.015

    The resulting estimates of the social cost of carbon are 
necessarily greater. When the adjustments from the random walk model 
are applied, the estimates of the social cost of carbon are $10 and $56 
(2008$), with the 5 percent and 3 percent discount rates, respectively. 
The application of the mean-reverting adjustment yields estimates of $6 
and $37 (in 2008$).
    Since the random walk model has greater support from the data, 
analyses are also conducted with the value of the SCC set at $10 and 
$56 (2008$).
    In summary, DOE considered in its decision process for this notice 
of proposed rulemaking the potential global benefits resulting from 
reduced CO2 emissions valued at $5, $10, $20, $34 and $56 
per metric ton, and has also presented the domestic benefits derived 
using a value of approximately $1 per metric ton. All of these unit 
values represent emissions that are valued in 2008$ and final net 
present values for cumulative emissions are also reported in 2008$ so 
that they can be compared with other rulemaking analyses in the same 
dollar units.
    DOE recognizes that scientific and economic knowledge about the 
contribution of CO2 and other GHG to changes in the future 
global climate and the potential resulting damages to the world economy 
continues to evolve rapidly. Thus, any value placed in this rulemaking 
on reducing CO2 emissions is subject to change.
    DOE, together with other Federal agencies, will continue to review 
various methodologies for estimating the monetary value of reductions 
in CO2 and other greenhouse gas emissions. This ongoing 
review will consider the comments on this subject that are part of the 
public record for this and other rulemakings, as well as other 
methodological assumptions and issues. However, consistent with DOE's 
legal obligations, and taking into account the uncertainty involved 
with this particular issue, DOE has included in this proposed rule the 
most recent values and analyses resulting from the ongoing interagency 
review process.
3. Valuation of Other Emissions
    DOE also investigated the potential monetary benefit of reduced 
SO2, NOX, and Hg emissions from the TSLs it 
considered. As previously stated, DOE's initial analysis assumed the 
presence of nationwide emission caps on SO2 and caps on 
NOX emissions in the 28 States covered by the CAIR. In the 
presence of these caps, the NEMS-BT modeling system that DOE used to 
forecast emissions reduction indicated that no physical reductions in 
power sector emissions would occur for SO2, but that the 
standards could put slight downward pressure on the prices of emissions 
allowances in cap-and-trade markets. Estimating this effect is very 
difficult because such factors as credit banking can change the 
trajectory of prices. From its modeling to date, DOE is unable to 
estimate a benefit from SO2 emissions reductions at this 
time. See chapter 15 of the TSD for further details.
    Because the courts have decided to allow the CAIR rule to remain in 
effect, projected annual NOX allowances from NEMS-BT are 
relevant. The update to the AEO2009-based version of NEMS-BT includes 
the representation of CAIR. As noted above, standards would not produce 
an economic impact in the form of lower prices for emissions allowance 
credits in the 28 eastern States and D.C. covered by the CAIR cap. New 
or amended energy conservation standards would reduce NOX 
emissions in those 22 States that are not affected by the CAIR. For the 
area of the United States not covered by the CAIR, DOE estimated the 
monetized value of NOX emissions reductions resulting from 
each of the TSLs considered for today's proposed rule based on 
environmental damage estimates from the literature. Available estimates 
suggest a very wide range of monetary values for NOX 
emissions, ranging from $370 per ton to $3,800 per ton of 
NOX from stationary sources, measured in 2001$ (equivalent 
to a

[[Page 61453]]

range of $442 to $4,540 per ton in 2008$). Refer to the OMB, Office of 
Information and Regulatory Affairs, ``2006 Report to Congress on the 
Costs and Benefits of Federal Regulations and Unfunded Mandates on 
State, Local, and Tribal Entities,'' Washington, DC, for additional 
information.
    For Hg emissions reductions, DOE estimated the national monetized 
values resulting from the TSLs considered for today's rule based on 
environmental damage estimates from the literature. DOE conducted 
research for today's proposed rule and determined that the impact of 
mercury emissions from power plants on humans is considered highly 
uncertain. However, DOE identified two estimates of the environmental 
damage of mercury based on two estimates of the adverse impact of 
childhood exposure to methyl mercury on intelligence quotient (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 in 
American children that results from exposure to mercury of U.S. power 
plant origin ($1.3 billion per year in year 2000$), which works out to 
$33.3 million per ton emitted per year (2008$). Refer to L. Trasande et 
al., ``Applying Cost Analyses to Drive Policy that Protects Children,'' 
1076 Ann. N.Y. Acad. Sci. 911 (2006) for additional information. The 
low-end estimate is $0.66 million per ton emitted (in 2004$) or $0.745 
million per ton in 2008$. DOE derived this estimate 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. See 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 (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.
    Earthjustice stated that DOE must also calculate and monetize the 
value of the reductions in emissions of particulate matter (PM) that 
will result from standards; even if DOE cannot consider secondary PM 
emissions, it must consider primary emissions. (Earthjustice, No. 11 at 
pp. 5-6).
    DOE agrees that PM impacts are of concern due to human exposures 
that can impact health. But impacts of PM emissions reduction are much 
more difficult to estimate than other emissions reductions due to the 
complex interactions between PM, other power plant emissions, 
meteorology and atmospheric chemistry that impact human exposure to 
particulates. Human exposure to PM usually occurs at a significant 
distance from the power plants that are emitting particulates and 
particulate precursors. When power plant emissions travel this distance 
they undergo highly complex atmospheric chemical reactions. While the 
Environmental Protection Agency (EPA) does keep inventories of direct 
PM emissions of power plants, in its source attribution reviews the EPA 
does not separate direct PM emissions from power plants from the 
particulates indirectly produced through complex atmospheric chemical 
reactions. This is in part because SO2 emissions react with 
direct PM emissions particles to produce combined sulfate particulates. 
Thus it is not useful to examine how the standard impacts direct PM 
emissions independent of indirect PM production and atmospheric 
dynamics. DOE is not currently able to run a model that can make these 
estimates reliably at the national level. See chapter 15 of the TSD for 
a more detailed discussion.

V. Analytical Results

A. Trial Standard Levels

    DOE analyzed the benefits and burdens of a number of TSLs for the 
small electric motors that are the subject of today's proposed rule. 
Table V.1 and Table V.2 present the trial standard levels and the 
corresponding efficiencies for the three representative product 
classes.
[GRAPHIC] [TIFF OMITTED] TP24NO09.016

    DOE's polyphase TSLs represent the increasing efficiency of the 
range of motors DOE modeled in its engineering analysis. TSLs 1, 2, and 
3 represent incremental improvements in efficiency as a result of 
increasing the stack height and the slot fill percentage. TSL 4 is 
comparable to the efficiency of a three-digit frame series medium 
electric motor that meets the efficiency requirements of EPACT. TSL 5 
is comparable to the efficiency standard of a three-digit frame series 
medium electric motor that meets the NEMA Premium level, which will 
become an energy conservation standard for medium motors as prescribed 
by Section 313(b) of EISA 2007. TSL 6 represents a level at which DOE 
has reached the 20 percent limit of increased stack height, increased 
grades of steel and included a copper die-cast rotor. At TSL 7, the 
``max-tech'' level, for the restricted designs DOE has reached the 
design limitation maximum increase in stack height of 20 percent and 
increased grades of steel. At this level, DOE has also implemented an 
exotic steel type (Hiperco 50), a copper die-cast rotor, a max slot 
fill percentage of nearly 65 percent. For the lesser space constrained 
design, DOE has decreased the stack height from that seen for the 
design at TSL 6, however, and has moved to a copper rotor, while also 
reaching the design limitation maximum slot fill percentage.

[[Page 61454]]

[GRAPHIC] [TIFF OMITTED] TP24NO09.017

    Each TSL for capacitor-start small motors consists of a combination 
of efficiency levels for induction-run motors and capacitor-run motors. 
CSIR and CSCR motors are used in similar applications and generally can 
be used interchangeably provided the applications are not bound by 
strict space constraints and will allow the presence of a second 
capacitor shell on the motor. Standards may impact the relative market 
share of CSIR and CSCR motors for general-purpose single-phase 
applications by changing the upfront cost of motors as well as their 
estimated losses. Section IV.G of this NOPR and chapter 10 of the TSD 
describe DOE's model of this market dynamic.
    DOE developed seven possible efficiency levels for CSIR motors and 
eight possible efficiency levels for CSCR motors. Rather than present 
all possible combinations of these efficiency levels, DOE chose a 
representative set of 8 TSLs that span the range from low energy 
savings to the maximum national energy savings. Because of the 
interaction between the combined CSIR and CSCR market share, there is 
not a simple relationship between the combination of efficiency levels 
and the resulting energy savings. DOE's capacitor-start cross-
elasticity model was used to evaluate the impacts of each TSL on motor 
shipments in each product class. The model predicts that TSLs 1 through 
5 result in relatively minor changes in product class market shares, 
while TSLs 6, 7, and 8 result in more significant changes. 
Uncertainties in the cross-elasticity model, and in the timescale of 
market share response to standards, lead to greater uncertainty in the 
national impacts of TSLs 6, 7, and 8, than of TSLs 1 through 5. A 
summary of results for all combinations of CSIR and CSCR efficiency 
levels is presented in chapter 10 of the TSD.
    TSL 1 is a combination consists of the fourth efficiency level 
analyzed for CSIR motors and the second efficiency level for CSCR 
motors. This TSL uses similar engineering design options for both CSIR 
and CSCR motors, and the efficiency levels correspond to what 
manufacturers would consider an EPACT 1992 equivalent efficiency 
standard. TSL 2 increases the efficiency level of the CSCR motor to the 
third efficiency level, which corresponds to the minimum life-cycle 
cost. The efficiency level for the CSIR motor remains the same as in 
TSL 1. TSL 3 raises the CSIR efficiency level, which DOE meets by 
implementing a copper die-cast rotor, increasing slot fill, and 
reaching the 20 percent limit on increased stack height, or by doubling 
the original stack height and increasing slot fill. However, the CSCR 
efficiency level remains at the minimum LCC.
    TSLs 4, and 5, both show the same efficiency level for CSIR motors, 
but different efficiency levels for CSCR motors. To obtain the 
efficiency level for CSIR motors, DOE had to use either a copper rotor 
in combination with a thinner and higher grade of steel and a stack 
increase of 20 percent, or only a higher grade of steel with a stack 
exceeding a 20 percent increase. The 80.3 percent efficiency level for 
CSCR motors in TSL 5 corresponds again to the same design and 
efficiency level for TSL 2 and 3. To achieve the 81.6 percent 
efficiency level for CSCR motors, DOE created designs with a 20 percent 
increase in stack height and a higher grade of steel or used a copper 
rotor with a stack height above a 20 percent increase. TSL 4 represents 
the combination of the highest CSIR and CSCR levels which have more 
customers who benefit than customers who are harmed according to DOE's 
LCC analysis. TSL 5 increases energy savings relative to TSL 4 because 
DOE estimates greater CSCR market share, and the CSCR efficiency level 
again corresponds with the minimum LCC. At this TSL, the efficiency 
levels for both CSIR and CSCR motors equate to what manufacturers would 
consider a NEMA Premium level.
    TSL 6 represents ``max-tech'' levels for CSIR and CSCR motors, as 
determined by DOE's engineering analysis; at this level CSCR motors are 
very expensive relative to CSIR motors, and DOE forecasts almost 
complete market shift to CSIR motors. TSLs 7 and 8 represent cases in 
which CSIR motors are, on average, very expensive relative to CSCR 
motors as a result of standards, and DOE forecasts almost complete 
market shifts to CSCR motors in both of its reference scenarios. 
Because CSCR motors are more efficient at these levels, national energy 
savings are increased beyond that of the ``max-tech'' level, TSL 6. TSL 
7 pairs the ``max-tech'' requirements for CSIR motors with the minimum 
LCC efficiency level for CSCR motors, while TSL 8 level pairs max-tech 
CSIR requirements with the second-highest CSCR motor efficiency level 
that DOE analyzed. The ordering of TSLs 5, 6, 7, and 8, with respect to 
energy savings is robust in the face of uncertainties in the inputs to, 
and the parameters of, DOE's cross-elasticity model.

B. Economic Justification and Energy Savings

    In examining the potential for energy savings for small electric 
motors, DOE analyzed whether standards would be economically justified. 
As part of this examination, a variety of elements were examined. These 
elements are based on the various criteria specified in EPCA. See 
generally, 42 U.S.C. 6295.
1. Economic Impacts on Customers
    DOE analyzed the economic impacts on small electric motor customers 
by looking at the effects standards would have on the LCC, PBP, and 
various subgroups. DOE also examined the effects of the rebuttable 
presumption payback period set out in 42 U.S.C. 6295. All of these 
analyses are discussed below.

[[Page 61455]]

a. Life-Cycle Cost and Payback Period
    To evaluate the net economic impact of the trial standard levels on 
customers, DOE conducted LCC and PBP analyses for each of these levels. 
Higher-efficiency small electric motors 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. Section 
IV.F discusses the inputs used for calculating the LCC and PBP. Inputs 
used for calculating the LCC include total installed costs (equipment 
price plus installation costs), annual energy savings, electricity 
rates, electricity price trends, repair costs, maintenance costs, 
equipment lifetime, and discount rates.
    The key outputs of the LCC analysis are average LCC savings for 
each product class for each considered efficiency level, relative to 
the base case, as well as a probability distribution of LCC reduction 
or increase. The LCC analysis also estimates, for each product class, 
the fraction of customers for which the LCC will either decrease (net 
benefit), or increase (net cost), or exhibit no change (no impact) 
relative to the base case forecast. No impacts occur when the equipment 
efficiencies of the base case forecast already equal or exceed the 
considered efficiency level. Small electric motors are used in 
applications that can have a wide range of operating hours. Motors that 
are running at all hours will tend to have a large net LCC benefit 
because of the large operating cost savings, while for some types of 
applications (e.g. portable compressors) a majority of motors may run 
only a few hours per day. Because of the large benefits seen by a 
minority of motors that run at all times, a majority of motors may see 
a net LCC cost even when on average for all motors there is a net LCC 
benefit.
    Other key outputs of the LCC analysis are the mean and median 
payback periods at each efficiency level. Table V.3, Table V.4, and 
Table V.5 show the results for the three representative product 
classes: 1 hp, four-pole, polyphase; 0.5 hp, four-pole, CSIR; and 0.75 
hp, four-pole, CSCR motors. Frequency plots of the distributions of 
life-cycle costs and payback periods for all three motor categories are 
available in chapter 8 of the TSD.
[GRAPHIC] [TIFF OMITTED] TP24NO09.018

    For polyphase small electric motors, customers experience net LCC 
savings, on average, through efficiency level 4. Efficiency level 3 has 
the minimum average life-cycle cost. The long average payback periods 
are due to the significant fraction of customers with relatively few 
annual operating hours. DOE feels that the median payback period better 
characterizes the distribution.

[[Page 61456]]

[GRAPHIC] [TIFF OMITTED] TP24NO09.019

    For CSIR small electric motors, customers experience net LCC 
savings, on average, through efficiency level 6. CSIR efficiency level 
4 has the minimum average life-cycle cost.
    For CSCR small electric motors, customers experience net LCC 
savings, on average, through efficiency level 5. CSCR efficiency level 
3 has the greatest average life-cycle cost savings. Table V.5 also 
includes the life-cycle cost of a baseline 0.75 horsepower CSIR motor. 
This motor has an installed cost similar to the baseline-efficient CSCR 
motor, but significantly higher annual operating costs and life-cycle 
cost. DOE's national energy savings calculations, described in sections 
IV.G and V.B.3, model the market share of CSIR and CSCR motors in each 
product class in order to account for customers selecting CSIR or CSCR 
motors to reduce their life-cycle costs.
[GRAPHIC] [TIFF OMITTED] TP24NO09.020


[[Page 61457]]


b. Life-Cycle Cost Sensitivity Calculations
    In addition to the reference case results reported in the tables 
above, DOE performed extensive sensitivity analyses of the LCC 
estimates. These sensitivity analyses examined the magnitude by which 
the estimates varied depending on analysis inputs such as the cost of 
electricity, the purchase year of the motor, the motor capacity, the 
number of poles and other inputs and assumptions of the analysis. DOE 
reports the details of the sensitivity calculations in chapter 8 of the 
TSD and the accompanying appendices.
    For polyphase motors, DOE performed a sensitivity calculation using 
a full distribution of motor sizes and poles, the full cost of reactive 
power, and a purchase year of 2030 (the middle of the forecast period). 
This sensitivity calculation also examines the proportion of motors 
with <2% life-cycle cost impact as a measure of the fraction of motors 
that may have relatively small impacts from a standard. Table V.6 
provides the results of this sensitivity calculation. Under this 
analytical scenario, life-cycle cost savings increase slightly.
[GRAPHIC] [TIFF OMITTED] TP24NO09.021

    For comparison purposes, DOE calculated the same sensitivity for 
single-phase motors including CSIR and CSCR motors. The results of 
these sensitivity calculations are provided in Table V.7 and Table V.8.

[[Page 61458]]

[GRAPHIC] [TIFF OMITTED] TP24NO09.022

    DOE also made sensitivity calculations for the case where CSIR 
motor owners switch to CSCR motors. DOE reports the details of the 
sensitivity calculations in chapter 8 of the TSD and the accompanying 
appendices. Section V.A above describes the relationship between 
efficiency levels for the two categories of capacitor-start motors and 
the TSLs. For TSLs where there is a large increase in first cost for 
CSIR motors and only a moderate increase in price for CSCR motors, DOE 
forecasts that a large fraction of CSIR motor customers will switch to 
CSCR motors. Table V.7 shows the shipments-weighted average of the LCC 
for CSIR motors including those users that switch

[[Page 61459]]

to CSCR. The table shows a negative average LCC is forecast for only 
TSL 6 which is that level where both CSIR and CSCR motors are at the 
maximum technologically feasible efficiency for space-constrained 
designs.
[GRAPHIC] [TIFF OMITTED] TP24NO09.023

c. Customer Sub-Group Analysis
    Using the LCC spreadsheet model, DOE determined the impact of the 
trial standard levels on the following customer sub-groups: small 
businesses and customers with space-constrained applications.
Small Businesses
    For small business owners, the LCC impacts and payback periods are 
different than for the general population. Table V.10, Table V.11, and 
Table V.12 show the LCC impacts and payback periods for small 
businesses purchasing polyphase, CSIR, and CSCR motors, respectively. 
For polyphase motors, LCC savings are positive for efficiency levels 1, 
2, 3, and 4 for motor customers as a whole, but level 1 has negative 
savings for small businesses. Efficiency level 3 shows the greatest 
savings for all customers as well as for small businesses. For CSIR 
motors, LCC savings are somewhat smaller for small businesses, but the 
results are generally similar between small businesses and motor 
customers as a whole. For CSCR motors, LCC savings are positive for 
efficiency levels 1 through 5 for motor customers as a whole, but level 
5 has negative savings for small businesses. Efficiency level 3 shows 
the greatest savings for all customers as well as for small businesses. 
Small businesses do not have as attractive consumer benefits as the 
general population because they do not have the same access to capital 
as larger businesses, resulting in higher average discount rates than 
the industry average.

[[Page 61460]]

[GRAPHIC] [TIFF OMITTED] TP24NO09.024


[[Page 61461]]


[GRAPHIC] [TIFF OMITTED] TP24NO09.025

Customers With Space-Constrained Applications
    One of the design options DOE considered in developing more 
efficient motors was to increase the motor stack length. Increasing 
stack length can increase motor efficiency by lowering core losses.\17\ 
Customers with space-constrained applications (defined as those 
customers whose motor stack length can increase no more than 20 
percent), cannot use this design option as effectively as those without 
constraints. In order to meet efficiency targets without increasing 
stack length, other, more costly, design options are used. Customers 
with these constraints, therefore, have less attractive economic 
benefits to efficiency, particularly for motors at the higher 
efficiency levels considered by DOE. The LCC results presented in 
section IV.F assume that 20 percent of customers face space 
constraints, while 80 percent of customers may use any stack length (up 
to the 100 percent increase considered by DOE). Customers without space 
constraints have customer economic benefits which are more attractive 
than the overall results, particularly at higher levels of efficiency.
---------------------------------------------------------------------------

    \17\ Core losses are generated in the steel components of the 
motor by two electromagnetic phenomena: hysteresis losses and eddy 
currents. Hysteresis losses are caused by magnetic domains resisting 
reorientation to the alternating magnetic field (i.e., 60 times per 
second, or 60 hertz). Eddy currents are physical currents that are 
induced in the steel laminations by the magnetic flux of the 
windings.
---------------------------------------------------------------------------

    Table V.13, Table V.14, and Table V.15 show the results of the LCC 
analysis for the space-constrained subgroup. Polyphase levels 1 through 
4, CSIR levels 1 through 3 and 5, and CSCR level 1 are unchanged for 
space-constrained consumers because motor designs meeting these 
efficiency levels have stack length increases of less than or equal to 
20 percent. CSIR efficiency level 6 and CSCR efficiency level 5 are the 
only levels which change from positive LCC average savings for all 
customers to negative LCC savings for space-constrained customers.

[[Page 61462]]

[GRAPHIC] [TIFF OMITTED] TP24NO09.026


[[Page 61463]]


[GRAPHIC] [TIFF OMITTED] TP24NO09.027

d. Rebuttable Presumption Payback
    As discussed in section II.C, EPCA provides a rebuttable 
presumption that, in essence, an energy conservation standard is 
economically justified if the increased purchase cost for a product 
that meets the standard is less than three times the value of the 
first-year energy savings resulting from the standard. However, DOE 
routinely conducts a full economic analysis that considers the full 
range of impacts, including those to the customer, manufacturer, 
Nation, and environment, as required under 42 U.S.C. 6295(o)(2)(B)(i) 
and 42 U.S.C. 6316(e)(1). The results of this analysis serve as the 
basis for DOE to evaluate definitively the economic justification for a 
potential standard level (thereby supporting or rebutting the results 
of any preliminary determination of economic justification).
    For comparison with the more detailed analysis results, DOE 
calculated a rebuttable presumption payback period for each TSL. Table 
V.16 and Table V.17 show the rebuttable presumption payback periods for 
the representative product classes.

[[Page 61464]]

[GRAPHIC] [TIFF OMITTED] TP24NO09.028

[GRAPHIC] [TIFF OMITTED] TP24NO09.029

    No polyphase TSL has a rebuttable presumption payback period of 
less than 3 years. For CSIR and CSCR motors, TSLs 1 through 3 have 
rebuttable presumption payback periods of less than 3 years.
2. Economic Impacts on Manufacturers
    DOE used the INPV in the MIA to compare the financial impacts of 
different TSLs on small electric motor manufacturers. The INPV is the 
sum of all net cash flows discounted by the industry's cost of capital 
(discount rate). DOE used the GRIM to compare the INPV in the base case 
(i.e., no new energy conservation standards) with the INPV for each TSL 
in the standards case. To evaluate the range of cash-flow impacts on 
the small electric motors industry, DOE modeled two different scenarios 
using different assumptions for markups and shipments that correspond 
to the range of anticipated market responses. Each scenario results in 
a unique set of cash flows and corresponding industry value at each 
TSL. The difference in INPV between the base case and a standards case 
is an estimate of the economic impacts that implementing that standard 
level would have on the entire industry.
a. Industry Cash-Flow Analysis Results
    To assess the potential impacts on manufacturers, DOE used the two 
markup scenarios described in section IV.I. For both markup scenarios, 
DOE considered the shipment scenario that uses a reference level of 
economic growth, no elasticity, and a baseline market share between 
CSCR and CSIR motors. To assess the lower end of the range of potential 
impacts on the small electric motors industry, DOE considered the 
preservation of return on invested capital markup scenario. This 
scenario assumes that manufacturers would be able to maintain the ratio 
of net operating profit (after taxes) to invested capital after new 
energy conservation standards. To assess the higher end of the range of 
potential impacts on the small electric motors industry, DOE considered 
the preservation of operating profit markup scenario. This scenario 
assumes that the industry can only maintain its operating profit (i.e., 
earnings before interest and taxes) after the effective date of the 
standard. The industry would do so by not passing through all of the 
higher costs to customers. Table V.18 through Table V.21 show the low 
end and high end of the range of MIA results, respectively, for each 
TSL using the scenarios described above. The results present the 
impacts of energy conservation standards for polyphase small electric 
motors separately and combine the impacts for CSIR and CSCR small 
electric motors.
BILLING CODE 6450-01-P

[[Page 61465]]

[GRAPHIC] [TIFF OMITTED] TP24NO09.030


[[Page 61466]]


[GRAPHIC] [TIFF OMITTED] TP24NO09.031

BILLING CODE 6450-01-C
Polyphase Small Electric Motors
    DOE estimated the impacts on INPV at TSL 1 to range from $0.52 
million to -$1.14 million, or a change in INPV of 0.80 percent to -1.78 
percent. At this level industry cash flow decreases by approximately 
9.1 percent, to $4.68 million, compared to the base-case value of $5.15 
million in the year leading up to the energy conservation standards. 
TSL 1 represents an efficiency increase of 2 percent over the baseline 
for polyphase motors. The majority of manufacturers have motors that 
meet this efficiency. All manufacturers that were interviewed stated 
that their existing motor designs allow for simple modifications that 
would require minor capital and equipment conversion costs to reach TSL 
1. A possible modification analyzed in the engineering analysis is a 
roughly 7 percent increase in number of laminations within both space 
constrained and non-space constrained motors. Manufacturers indicated 
that modifications like an increase in laminations could be made within 
existing baseline motor designs without significantly altering their 
size. In addition, these minor design changes will not raise the 
production costs beyond the cost of most motors sold today, resulting 
in minimal impacts on industry value.
    DOE estimated the impacts in INPV at TSL 2 to range from $1.11 
million to -$1.56 million, or a change in INPV of 1.74 percent to -2.42 
percent. At this level industry cash flow decreases by approximately 
11.53 percent, to $4.55 million, compared to the base-case value of 
$5.15 million in the year leading up to the energy conservation 
standards. TSL 2 represents an efficiency increase of 4 percent over 
the baseline for polyphase motors. Similar to TSL 1, at TSL 2 
manufacturers stated that their existing motor designs allows for 
simple modifications that would entail only minor capital and equipment 
conversion costs. A possible modification analyzed in the engineering 
analysis increases the number of laminations by approximately 15-
percent from the baseline within both space constrained and non-spaced 
constrained motors. Manufacturers indicated that these modifications 
could be made within baseline motor designs without significantly 
changing their size. At TSL 2, the production costs of standards 
compliant motors do not increase enough to significantly affect INPV.
    At TSL 3, DOE estimated the impacts in INPV to range from $1.83 
million to -$2.01 million, or a change in INPV of 2.86 percent to -3.14 
percent. At this level industry cash flow decreases by approximately 
12.35 percent, to $4.51 million, compared to the base-case value of 
$5.15 million in the year leading up to the energy conservation 
standards. TSL 3 represents an efficiency increase of 6-percent over 
the baseline for polyphase motors. Similar to TSL 1 and TSL 2, at TSL 3 
manufacturers stated that their existing motor designs would still 
allow for simple modifications that would not require significant 
capital and equipment conversion costs. In the engineering analysis, 
standards compliant motors that meet the efficiency requirements at TSL 
3 have 17-percent more laminations than the baseline design within both 
space constrained and non-spaced constrained motors. These changes do 
not result in significant impacts on INPV.
    At TSL 4, DOE estimated the impacts in INPV to range from $2.41 
million to -$2.39 million, or a change in INPV of 3.76 percent to -3.73 
percent. At this level industry cash flow decreases by approximately 
13.44 percent, to $4.46 million, compared to the base-case value of 
$5.15 million in the year leading up to the energy conservation 
standards. TSL 4 represents an efficiency increase of 7-percent over 
the baseline for polyphase motors. Most manufacturers that were 
interviewed are able to reach this level without significant redesigns. 
At TSL 4, a possible design pathway for manufacturers could be to 
increase the number of laminations by approximately 20 percent over the 
baseline designs within space constrained and non-space constrained 
motors. However, manufacturers reported that TSL 4 would be the highest 
efficiency level achievable before required efficiencies could 
significantly change motor designs and production equipment. However, 
past TSL 4 the size of the motors may need to be significantly 
modified.
    At TSL 5, DOE estimated the impacts in INPV to range from $10.85 
million to -$8.83 million, or a change in INPV of 16.91 percent to -
13.76 percent. At this level industry cash flow decreases by 
approximately 46.20 percent, to $2.77 million, compared to the base-
case value of $5.15 million in the year leading up to the energy 
conservation standards. TSL 5 represents an efficiency increase of 10-
percent over the baseline for polyphase motors. TSL 5 is equivalent to 
the current NEMA premium level that manufacturers produce for medium-
sized electric

[[Page 61467]]

motors. Although some manufacturers reported having existing small 
electric motors that reach TSL 5, the designs necessary are more 
complex than their cost optimized designs at lower TSLs. A possible 
redesign for non-space constrained motors would include adding up to 49 
percent more laminations relative to the baseline motor design and 
improving the grade of steel. For space constrained motors, redesigns 
could require up to 114 percent more laminations of a thinner and 
higher grade of steel. Manufacturers are concerned that redesigns at 
TSL 5 could possibly increase the size of the motors if they do not 
currently have motors that reach the NEMA premium efficiency levels. A 
shift to larger motors could be detrimental to sales due to the 
inability of OEMs to use standards-compliant motors as direct 
replacements in some applications. According to manufacturers, at TSL 5 
the industry would incur significantly higher capital and equipment 
conversion costs in comparison to the lower efficiency levels analyzed. 
DOE estimates that the capital and equipment conversion costs required 
to make the redesigns at TSL 5 would be approximately four times the 
amount required to meet TSL 1. At TSL 5 manufacturers would also be 
required to shift their entire production of baseline motors to higher 
priced and higher efficiency motors, making their current cost-
optimized designs obsolete. These higher production costs could have a 
greater impact on the industry value if operating profit does not 
increase. Manufacturers indicated that setting energy conservation 
standards at TSL 5 could cause some manufacturers to consider exiting 
the small electric motor market because of the lack of resources, 
potentially unjustifiable investments for a small segment of their 
business, and the possibility of lower revenues if OEMs will not accept 
large motors.
    At TSL 6, DOE estimated the impacts in INPV to range from $15.94 
million to -$13.09 million, or a change in INPV of 24.84 percent to -
20.41 percent. At this level industry cash flow decreases by 
approximately 71.78 percent, to $1.45 million, compared to the base-
case value of $5.15 million in the year leading up to the energy 
conservation standards. TSL 6 represents an efficiency increase of 12-
percent over the baseline for polyphase motors. Currently, no small 
electric motors are rated above the equivalent to the NEMA premium 
standard (TSL 5). Possible redesigns for space constrained motors at 
TSL 6 include the use of copper rotors and a 114-percent increase in 
the number of laminations of a thinner and higher grade of steel. These 
changes would cause manufacturers to incur significant capital and 
equipment conversion costs to redesign their space constrained motors 
due to the lack of experience in using copper. According to 
manufacturers, copper tooling is significantly costlier and not 
currently used by any manufacturers for the production of small 
electric motors. If copper rotor designs are required, manufacturers 
with in-house die-casting capabilities will need completely new 
machinery to process copper. Manufacturers that outsource rotor 
production would pay higher prices for their rotor designs. In both 
cases, TSL 6 results in significant equipment conversion costs to 
modify current manufacturing processes in addition to redesigning 
motors to use copper in the applications of general purpose small 
electric motors. Largely due to the significant changes to space 
constrained motors, at TSL 6 DOE estimates that manufacturers would 
incur close to six times the total conversion costs required at TSL 1 
(a total of approximately $9.2 million). However, for non-space 
constrained motors, manufacturers are able to redesign their existing 
motors without the use of copper rotors by using twice the number of 
laminations that are contained in the baseline design. Therefore, for 
non-space constrained motors the impacts at TSL 6 are significantly 
less because manufacturers can maintain existing manufacturing 
processes without the potentially significant changes associated with 
copper rotors. At TSL 6 the impacts for non-space constrained motors 
are mainly due to higher motor costs and the possible decrease in 
profitability if manufacturers are unable to fully pass through their 
higher production costs.
    At TSL 7, DOE estimated the impacts in INPV to range from $85.23 
million to -$59.74 million, or a change in INPV of 132.87 percent to -
93.14 percent. At this level industry cash flow decreases by 
approximately 258.82 percent, to -$8.18 million, compared to the base-
case value of $5.15 million in the year leading up to the energy 
conservation standards. TSL 7 represents an efficiency increase of 14-
percent over the baseline for polyphase motors. Currently, the market 
does not have any motors that reach TSL 7. In addition to possibly 
using copper rotors, at TSL 7 space constrained motor designs could 
also require exotic steels. There is some uncertainty about the 
magnitude of the impacts on the industry of using Hiperco steel. 
Manufacturers were unsure about the required conversion costs to reach 
TSL 7 because of the unproven properties and applicability of the 
technology in the general purpose motors covered by this rulemaking. 
Significant R&D for both manufacturing processes and motor redesigns 
would be necessary to understand the applications of exotic steels to 
general purpose small electric motors. According to manufacturers, 
requiring this technology could possibly cause some competitors to exit 
the small electric motor market. If manufacturers' concerns of having 
to use both copper rotors and new steels materialize, manufactures 
could be significantly impacted. For non-space constrained motors, DOE 
estimates that manufacturers would require the use of copper rotors but 
not exotic steels. If manufacturers are required to redesign non-spaced 
constrained motors with copper, the total conversion for the industry 
increases greatly because all motors require substantially different 
production equipment. Finally, the production costs of motors that meet 
TSL 7 could be up to 18 times higher than the production costs of 
baseline motors. The cost to manufacture standards-compliant motors 
could have a significant impact on the industry if operating profit 
does not increase with production costs.
Capacitor-Start, Induction Run and Capacitor-Start, Capacitor-Run Small 
Electric Motors
    At TSL 1, DOE estimated the impacts in INPV to range from $11.21 
million to -$14.87 million, or a change in INPV of 4.02 percent to -
5.33 percent. At this level, industry cash flow decreases by 
approximately 28.51 percent, to $15.99 million, compared to the base-
case value of $22.34 million in the year leading up to the energy 
conservation standards. TSL 1 represents an efficiency increase of 19-
percent over the baseline for CSIR motors and 10-percent over the 
baseline for CSCR motors. At TSL 1 for CSIR motors, DOE estimates 
manufacturers would need to increase the number of laminations for 
space constrained motors by approximately 33-percent and use a thinner 
and higher grade of steel. For non-space constrained CSIR motors, 
manufacturers could increase laminations by approximately 61-percent 
with the use of a thinner grade steel. For space constrained CSCR 
motors, manufacturers could increase laminations by ten percent and use 
a higher grade of steel. For non-space constrained CSCR motors, 
manufactures could increase laminations by approximately 37 percent. 
For both

[[Page 61468]]

CSIR and CSCR motors, the additional stack length needed to reach TSL 1 
is still within the tolerances of many manufacturers existing motors. 
DOE estimates that these changes would cause the industry to incur 
capital and equipment conversion costs of approximately $17 million to 
reach TSL 1. TSL 1 would increase production costs, but the cost 
increases are not enough to severely affect INPV under the scenarios 
analyzed.
    At TSL 2, DOE estimated the impacts in INPV to range from $12.22 
million to -$15.64 million, or a change in INPV of 4.38 percent to -
5.61 percent. At this level industry cash flow decreases by 
approximately 30.58 percent, to $15.53 million, compared to the base-
case value of $22.34 million in the year leading up to the energy 
conservation standards. TSL 2 represents an efficiency increase of 19-
percent over the baseline for CSIR motors and 13-percent over the 
baseline for CSCR motors. For CSIR motors, the same changes to meet TSL 
1 are necessary for TSL 2. For CSCR motors, TSL 2 represents what 
manufacturers would consider a NEMA Premium equivalent efficiency 
level. The changes required for CSCR motors could cause manufacturers 
to incur additional capital conversion costs to accommodate the 
required increase in laminations. Imposing standards would increase 
production costs for both CSIR and CSCR motors, but the cost increases 
for both types of motors are not enough to severely affect INPV.
    At TSL 3, DOE estimated the impacts in INPV to range from $18.03 
million to -$22.87 million, or a change in INPV of 6.47 percent to -
8.20 percent. At this level, industry cash flow decreases by 
approximately 41.16 percent, to $13.17 million, compared to the base-
case value of $22.34 million in the year leading up to the energy 
conservation standards. TSL 3 represents an efficiency increase of 23-
percent over the baseline for CSIR motors and 13-percent over the 
baseline for CSCR motors. At TSL 3, space constrained CSIR motors could 
require redesigns that use copper rotors. Using copper rotors for space 
constrained CSIR motors could cause manufacturers to incur 
approximately $25 million in capital and equipment conversion costs, 
largely to purchase the equipment necessary to produce these redesigned 
motors. As with polyphase motors, manufacturers reported that copper 
rotor tooling is significantly costlier than traditional aluminum rotor 
tooling and not currently used by the industry for the production of 
small electric motors. Similarly, in-house die-casting capabilities 
would need completely new machinery to process copper and the 
alternative of outsourcing rotor production would greatly increase 
material costs. For non-space constrained CSIR motors, manufacturers 
could redesign motors by increasing the number of laminations without 
the use of copper rotors, resulting in significantly smaller impacts. 
At TSL 3, the impacts for non-space constrained motors are mainly due 
to higher motor material costs and a possible decline in profit 
margins. TSL 3 represents what manufacturers would consider a NEMA 
Premium equivalent efficiency level for CSCR motors. The required 
efficiencies for space constrained CSCR motors could possibly be met by 
manufacturers by increasing the number of laminations by 15-percent and 
using higher steel grades. The required efficiencies for non-spaced 
constrained CSCR motors could be met by increasing the number of 
laminations by 53-percent. Because the redesigns for CSCR motors are 
less substantial, the impacts at TSL 3 are driven largely by the 
required CSIR efficiencies.
    At TSL 4, DOE estimated the impacts in INPV to range from $31.21 
million to -$31.57 million, or a change in INPV of 11.19 percent to -
11.32 percent. At this level industry cash flow decreases by 
approximately 46.63 percent, to $11.94 million, compared to the base-
case value of $22.34 million in the year leading up to the energy 
conservation standards. TSL 4 represents an efficiency increase of 27-
percent over the baseline for CSIR motors and 15-percent over the 
baseline for CSCR motors. TSL 4 currently represents a NEMA premium 
equivalent level for CSIR motors. Possible redesigns for both CSIR and 
CSCR motors to meet TSL 4 involve both increasing the number of 
laminations as well as using higher grades of steel. For space 
constrained CSIR motors, redesigns could require the use of copper 
rotors. Because of these redesigns, standards-compliant motors at TSL 4 
have significantly higher costs than manufacturers' baseline motors. 
These changes increase the engineering and capital resources that must 
be employed, especially for CSCR motors. The negative impacts at TSL 4 
are driven by the conversion costs that potentially require some 
single-phase motors to use copper rotors, and the higher production 
costs of standards-compliant motors.
    At TSL 5, DOE estimated the impacts in INPV to range from $27.96 
million to -$29.01 million, or a change in INPV of 10.03 percent to -
10.41 percent. At this level industry cash flow decreases by 
approximately 41.16 percent, to $13.17 million, compared to the base-
case value of $22.34 million in the year leading up to the energy 
conservation standards. TSL 5 represents an efficiency increase of 27-
percent over the baseline for CSIR motors and 13-percent over the 
baseline for CSCR motors. TSL 5 represents NEMA premium equivalent 
efficiency levels for both CSIR and CSCR motors. At TSL 5, space 
constrained CSIR motors could require the use of copper rotors. The 
required efficiencies for non-space constrained CSIR motors could be 
met by manufacturers by increasing the number of laminations by 82-
percent and using a higher grade of steel. The required efficiencies 
for space constrained CSCR motors could be met by manufacturers by 
increasing the number of laminations by 15-percent and using higher 
steel grades. The required efficiencies for non-spaced constrained CSCR 
motors could be met by increasing the number of laminations by 53-
percent. Although manufacturers reported that meeting TSL 5 is 
feasible, the production costs of motors at TSL 5 increase 
substantially and require approximately $25 million in total capital 
and equipment conversion costs. The negative impacts at TSL 5 are 
driven by these conversion costs that potentially require some CSIR 
motors to use copper rotors, and the impacts on profitability if the 
higher production costs of standards-compliant motors cannot be fully 
passed through to customers.
    At TSL 6, DOE estimated the impacts in INPV to range from $187.88 
million to -$137.53 million, or a change in INPV of 67.39 percent to -
49.33 percent. At this level, industry cash flow decreases by 
approximately 131.38 percent, to -$7.02 million, compared to the base-
case value of $22.34 million in the year leading up to the energy 
conservation standards. TSL 6 represents an efficiency increase of 33-
percent over the baseline for CSIR motors and 23-percent over the 
baseline for CSCR motors. Currently, the market does not have any CSIR 
and CSCR motors that reach TSL 6. TSL 6 represents the max-tech level 
for both CSIR and CSCR motors. In addition to the possibility of using 
copper rotors for both CSIR and CSCR motors, at TSL 6 space constrained 
motor designs could require exotic steels. There is a great deal of 
uncertainty about the impact of Hiperco steel on the industry, 
primarily due to uncertainty about capital conversion costs required to 
use a new, exotic steel. Significant R&D in manufacturing processes 
would be necessary to understand the

[[Page 61469]]

applications of exotic steels in general purpose small electric motors. 
Because all space constrained motors could require copper rotors and 
exotic steel and all non-spaced constrained motors could require copper 
rotors, the capital conversion costs are a significant driver of INPV 
at TSL 6. Finally, the production costs of motors that meet TSL 6 can 
be as high as 13 times the production cost of baseline motors, which 
impact profitability if the higher production costs cannot be fully 
passed through to OEMs. Manufacturers indicated that the potentially 
large impacts on the industry at TSL 6 could force some manufacturers 
to exit the small electric motor market because of the lack of 
resources and unjustifiable investment for a small segment of their 
total business.
    At TSL 7, DOE estimated the impacts in INPV to range from $29.80 
million to -$35.84 million, or a change in INPV of 10.69 percent to -
12.86 percent. At this level, industry cash flow decreases by 
approximately 81.21 percent, to $4.20 million, compared to the base-
case value of $22.34 million in the year leading up to the energy 
conservation standards. TSL 7 represents an efficiency increase of 33-
percent over the baseline for CSIR motors and 13-percent over the 
baseline for CSCR motors. TSL 7 corresponds to the NEMA premium 
equivalent efficiency for CSCR motors. The required efficiencies for 
space constrained CSCR motors could be met by manufacturers by 
increasing the number of laminations by 15-percent and using higher 
steel grades. The required efficiencies for non-spaced constrained CSCR 
motors could be met by increasing the number of laminations by 53-
percent. Consequently, the industry is not severely impacted by the 
CSCR efficiency requirements at TSL 7 because these design changes 
could be met with relatively minor changes to baseline designs. 
However, there are no CSIR motors currently on the market that reach 
TSL 7 (the max-tech level for CSIR). At TSL 7 space constrained CSIR 
redesigns could require the use of both copper rotors and exotic steels 
while non-space constrained CSIR motors could require only copper 
rotors. Manufacturers continue to have the same concerns about copper 
rotors and exotic steels for CSIR motors as with other efficiency 
levels that may require these technologies. The impacts on INPV for 
non-spaced constrained CSIR motors are significantly less because of 
the exclusion of exotic steels in motor redesigns. The INPV impacts for 
all single-phase motors at TSL 7 are less severe than at TSL 6 due to a 
change in balance of shipments between CSIR and CSCR motors. At TSL 7, 
the high cost of CSIR motors would likely cause customers to migrate to 
CSCR motors. For the analysis, DOE assumes that manufacturers would 
invest in the alternative technologies for CSIR motors regardless of 
the modeled migration to CSCR motors because of the variability in that 
migration. The industry is impacted by the high conversion costs for 
CSIR motors even though these are a small portion of total shipments 
after standards. However, because the total volume of single-phase 
motors does not decline with the shift from CSIR to CSCR motors, the 
higher revenues from standards-compliant CSCR mitigate the significant 
redesign costs for CSIR motors.
    At TSL 8, DOE estimated the impacts in INPV to range from $56.70 
million to -$53.30 million, or a change in INPV of 20.34 percent to -
19.12 percent. At this level, industry cash flow decreases by 
approximately 90.42 percent, to $2.14 million, compared to the base-
case value of $22.34 million in the year leading up to the energy 
conservation standards. TSL 8 represents an efficiency increase of 33-
percent over the baseline for CSIR motors and 20-percent over the 
baseline for CSCR motors. As with TSL 7, CSIR motors are at the max-
tech level at TSL 8. However, the impacts on INPV are worse at TSL 7 
because the efficiency requirements for CSCR motors increase. At TSL 8, 
both space constrained and non-space constrained CSCR motors could 
require the use of copper, which increases the total conversion costs 
for the industry. Manufacturers continue to share the same concerns 
about the copper and exotic steel investments for CSCR and CSIR motors 
as at TSL 6 and TSL 7. Like TSL 7, TSL 8 causes a migration of CSIR 
motors to CSCR motors. DOE assumed that manufacturers would incur the 
required conversion costs for both CSCR and CSIR motors, despite the 
low market share of CSIR motors after the effective date of the energy 
conservation standards. After standards, the shift to CSCR motors 
increases total industry revenue and helps to mitigate the significant 
capital conversion costs necessary for CSIR motors to use both copper 
and exotic metals.
b. Impacts on Direct Employment
    To assess the impacts of energy conservation standards on small 
electric motors direct manufacturing employment, DOE used the GRIM to 
estimate domestic labor expenditures and employment levels. DOE used 
the latest available statistical data from the U.S. Census Bureau's 
2006 Annual Survey of Manufacturers (2006 ASM), results from other 
analyses, and interviews with manufacturers to estimate the inputs 
necessary to calculate industry-wide domestic labor expenditures and 
employment levels. In the GRIM, total labor expenditures are a function 
of the labor content, the sales volume, and the wage rate which remains 
fixed in real terms over time. The total employment figures presented 
for the small electric motor industry includes both production and non-
production workers.
    DOE estimates that there are approximately 1,800 U.S. production 
and non-production workers in the small electric motors industry.
    DOE does not believe that standards would materially alter the 
domestic employment levels of the small electric motors industry. Most 
manufacturers indicated that employment levels would stay constant 
regardless of any changes in regulations. However, some manufacturers 
stated that if efficiency levels were raised significantly enough for 
the company to exit the small electric motor market, a small number of 
jobs could be eliminated. Even in the event that some manufacturers 
exit the market, the direct employment impact will likely be minimal. 
Most covered small motors are manufactured on shared production lines 
and in factories that also produce a substantial number of other 
products. If a manufacturer decided to exit the market, these employees 
would likely be used in some other capacity, reducing the number of 
headcount reductions. These manufacturers estimated that no production 
jobs would be lost due to energy conservation standards, but rather the 
engineering departments could be reduced by up to one engineer per 
dropped product line.
    The employment impacts calculated by DOE are independent of the 
employment impacts from the broader U.S. economy, which are documented 
in chapter 15 of the TSD accompanying this notice. For further 
information and results on direct employment see chapter 12 of the TSD.
c. Impacts on Manufacturing Capacity
    New energy conservation standards would not significantly affect 
the production capacity of small electric motor manufacturers. For 
small electric motor manufacturers, any necessary redesign will not 
change the fundamental assembly of the products and there will likely 
be no long-term capacity constraints. Manufacturers indicated that 
producing more efficient small electric motors would not be

[[Page 61470]]

technically difficult and that they would not need to build new 
facilities to accommodate the manufacturing of a more efficient motor. 
Additionally, manufacturers indicated that the industry is currently 
experiencing over capacity. As a result, manufacturers have scaled back 
manufacturing to cut costs and inventory. Accordingly, DOE believes 
manufacturers can use any available excess capacity to mitigate any 
possible capacity constraint as a result of energy conservation 
standards. The real risk is that some motors would be discontinued due 
to lower demand after standard rather than constrained capacity. For 
further explanation of the impacts on manufacturing capacity for small 
electric motors, see chapter 12 of the TSD.
d. Impacts on Manufacturer Subgroups
    As discussed above, using average cost assumptions to develop an 
industry cash-flow estimate is inadequate for assessing differential 
impacts among manufacturer subgroups. Small manufacturers, niche 
players, and 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, which reduced the 
need to analyze manufacturer subgroups to only investigating small 
businesses. However, during interviews DOE did not identify any small 
manufacturers of covered motors. After conducting further research, 
including the examination of catalogs and contacting manufacturers to 
discuss their product lines, DOE still did not identify any small 
manufacturers in the small electric motor industry.
e. Cumulative Regulatory Burden
    While any one regulation may not impose a significant burden on 
manufacturers, DOE understands the combined effects of several existing 
and 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. For this reason, DOE conducts an analysis 
of cumulative regulatory burden as part of its appliance efficiency 
rulemakings.
    In addition to the energy conservation standards for small electric 
motors, other regulations can significantly affect manufacturers' 
financial operations. Multiple regulations affecting the same 
manufacturer can quickly strain profits and possibly cause it to exit 
the market. DOE has identified other regulations these manufacturers 
are facing for other products and equipment they manufacture within 3 
years prior to and 3 years after the effective date of the new energy 
conservation standards for small electric motors.
    Small electric motor manufacturers described some of the current 
regulations affecting their business during manufacturer interviews. 
Manufacturers mentioned the European Union's Restriction of Hazardous 
Substances (RoHS) and the Registration, Evaluation, Authorization and 
Restriction of Chemical Substances (REACH). Also, manufacturers 
indicated both the International Electrotechnical Commission (IEC) and 
the National Electric Manufacturers Association (NEMA) have implemented 
voluntary standards for small electric motors. Some manufacturers also 
indicated that the Canadian Standards Association (CSA) would likely to 
apply the same standards set by DOE in the final rule. In addition to 
the energy conservation standards on small electric motor products, 
several other DOE regulations and pending regulations apply to other 
products produced by the same manufacturers. DOE recognizes that each 
regulation has the potential to impact manufacturers' financial 
operations. For a detail explanation and results for the cumulative 
regulatory burden, see chapter 12 of the TSD.
3. National Impact Analysis
    Examining the national impact of small electric motor standards 
required DOE to assess a variety of factors. DOE needed to assess the 
significance of the projected amount of energy savings flowing from an 
energy conservation standard for small electric motors. It also had to 
ascertain the cumulative benefits and costs that a standard would be 
likely to bring. Finally, DOE analyzed the projected employment impacts 
resulting from a standard.
a. Significance of Energy Savings
    To estimate the energy savings due to revised and new energy 
efficiency standards, DOE compared the energy consumption of small 
electric motors under the base case to energy consumption of these 
products under the trial standard levels. As described in section IV.G, 
DOE used scaling relations for energy use and equipment price to extend 
its average energy use and price for representative product classes 
(analyzed in the LCC analysis) to all product classes, and then 
developed shipment-weighted sums to estimate the national energy 
savings. As described in section IV.G, DOE conducted separate national 
impact analyses for polyphase and capacitor-start (single-phase) 
motors. Standards for CSIR and CSCR motors are reflected in the 
capacitor-start energy savings and NPV results, which account for the 
interchangeability of CSIR and CSCR motors in many applications.
    Table V.22 through Table V.23 show the forecasted national energy 
savings through 2045 at each of the TSLs. The tables also show the 
magnitude of the energy savings if the savings are discounted at rates 
of 7 and 3-percent. Discounted energy savings represent a policy 
perspective where energy savings farther in the future are less 
significant than energy savings closer to the present. The energy 
savings (undiscounted) due to possible standards for polyphase small 
electric motors range from 0.04 to 0.41 quads, and the savings for 
capacitor-start small electric motors range from 1.08 to 2.51 quads. 
Capacitor-start results are presented as a range of values between 
DOE's two reference scenarios, which correspond to 1) market share 
shifts in response to standards complete by 2015 and 2) market shares 
in 2015 equal to DOE's estimated market shares in 2009, and a shift 
over 10 years to the shares forecast by DOE's cross-elasticity model.

[[Page 61471]]

[GRAPHIC] [TIFF OMITTED] TP24NO09.032

    DOE conducted a wide range of sensitivity analyses, including 
scenarios demonstrating the effects of variation in shipments, response 
of customers to higher motor prices, the cost of electricity due to a 
carbon cap and trade regime, reactive power costs, and (for capacitor-
start motors) the dynamics of CSIR/CSCR consumer choice. These 
scenarios show a range of possible outcomes from projected energy 
conservation standards, and illustrate the sensitivity of these results 
to different input and modeling assumptions. In general, however, they 
do not dramatically change the relationship between results at one TSL 
with those at another TSL with the relative economic savings and energy 
savings of different TSLs remaining roughly the same. The estimated 
overall magnitude of savings, however, can change substantially, which 
can be due to a change in the estimated total number of small electric 
motors in use. Details of each scenario are available in chapter 10 of 
the TSD and its appendices, along with the national energy savings 
estimated for each scenario.
    For the shipments sensitivity analysis, DOE analyzed the total 
energy savings from capacitor-start motors in ``low CSCR'' and ``high 
CSCR'' scenarios, which model different market barriers to adoption of 
CSCR motors. These scenarios can have a significant impact on the 
relative energy savings in different TSLs. Table V.24 shows the results 
for the national energy savings (through 2045) in these scenarios.

[[Page 61472]]

[GRAPHIC] [TIFF OMITTED] TP24NO09.033

b. Net Present Value
    The NPV analysis provides a measure of the cumulative benefit or 
cost to the Nation from customer costs and savings from the proposed 
standards. 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 NPV using both a 7-percent and a 3-
percent real discount rate. The 7-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. DOE used the 3-percent rate to capture 
the potential effects of standards on private consumption (e.g., 
through higher prices for products and purchase of reduced amounts of 
energy). 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 
(i.e., yield on Treasury notes minus annual rate of change in the 
Consumer Price Index), which has averaged about 3-percent on a pre-tax 
basis for the last 30 years.
    The NPV was calculated using DOE's reference shipments forecast, 
which is based on the American Recovery and Reinvestment Act scenario 
of the AEO 2009 forecast. In this scenario, shipments are inelastic 
with respect to motor price, and DOE used its calibrated reference 
model for the market dynamics of CSIR and CSCR motors. DOE's reference 
scenario also includes 100 percent of the cost or benefit from changes 
in reactive power charges, which are faced either by electricity 
customers or by utilities (which then include them in electricity 
rates). Table V.25 and Table V.26 show the estimated NPV at each of the 
TSLs for polyphase and capacitor-start small electric motors. For 
polyphase motors, the NPV is positive at TSLs 1 through 5. For 
capacitor-start motors, NPV is positive at all TSLs except TSL 6. The 
latter TSL corresponds with max-tech for both CSIR and CSCR motors, 
which have high installed costs and negative lifecycle cost savings.
    DOE notes that across motors, for certain for TSLs, DOE estimates 
there will be a net national savings or positive NPV from the standard, 
even though a majority of motor customers may face life-cycle cost 
increases. Life-cycle cost increases result from the large number of 
small electric motors installed in applications with very low operating 
hours. The consumers of these motors cannot recuperate the increased 
equipment costs through decreased electricity costs, thus experiencing 
life-cycle cost increases. On the other hand, a substantial minority of 
motors run at nearly all hours of the day and thus obtain relatively 
large savings from the standard.
    DOE's National Impacts Analysis (NIA) estimates positive NPV based 
on several assumptions. First, DOE assumes a higher replacement rate 
for the substantial minority of high operating hour motors installed in 
certain applications. Second, based on EIA's AEO forecast, DOE assumes 
that electricity prices in the year 2015 will be significantly lower 
than those later in the analysis period. Because the NIA takes into 
account purchases beyond the year 2015 (in which consumers obtain 
larger electricity cost savings), the overall national savings from the 
standard exceed the life-cycle cost increases calculated. Third, DOE 
accounts for reactive power differently in the customer life-cycle cost 
and NIA models. In life-cycle cost, 25 percent of customers were 
assumed to face a direct cost due to reactive power (a percentage 
consistent with national data for commercial and industrial customers). 
By contrast, the NIA analysis includes 100 percent of the cost of 
reactive power in order to reflect costs to utilities as well as motor 
users. DOE seeks comment on its use of these assumptions in reaching a 
positive NPV where the majority of consumers for certain TSLs face 
life-cycle cost increases.

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    As discussed above, DOE conducted a wide range of sensitivity 
analyses, which can have a significant impact on the relative net 
present value of different trial standard levels. For the shipments 
sensitivity analysis, DOE analyzed the NPV from capacitor-start motor 
standards in the ``low CSCR'' and ``high CSCR'' scenarios, which model 
different market barriers to adoption of CSCR motors. Table V.27 and 
Table V.28 show the NPV results in these scenarios.

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    Future regulation of greenhouse gas emissions would have a 
significant impact on electricity prices and on the annual operating 
cost of small electric motors. DOE analyzed the NPV of trial standard 
levels in such a carbon cap and trade scenario. Table V.29 and Table 
V.30 show the NPV results in this scenario. These results show that the 
significantly higher electricity prices (particularly late in the 
analysis period) modeled under this scenario would significantly 
increase the NPV of each TSL compared with the reference cases. Chapter 
10 of the NOPR TSD, along with its appendices, presents NPV results for 
the other sensitivity analyses that DOE conducted.

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c. Impacts on Employment
    In accordance with the Process Rule, section 4(d)(7)(vi), DOE 
estimated the employment impacts of proposed standards on the economy 
in general. See 10 CFR part 430, subpart C, appendix A. As discussed 
above, DOE expects energy conservation standards for small electric 
motors to reduce energy bills for customers, with the resulting net 
savings redirected to other forms of economic activity. 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 (as described in section, IV.J). As shown in Table V.31 and 
Table V.32, both of which are detailed in chapter 14 of the TSD, DOE 
estimates that net indirect employment impacts from the proposed 
standards are positive.
    Neither the BLS data set nor the input/output model DOE uses 
includes the quality or wage level of the jobs. Taking into 
consideration these concerns about employment impacts, DOE concludes 
that the proposed small electric motors standards are likely to result 
in no appreciable job losses to the Nation because direct employment 
impacts are expected to be small, while indirect employment impacts are 
positive.

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4. Impact on Utility or Performance of Products
    As presented in section III.D.1.d of this notice, DOE concluded 
that none of the efficiency levels considered in this notice reduces 
the utility or performance of the small electric motors under 
consideration in this rulemaking. Furthermore, manufacturers of these 
products currently offer small electric motors that meet or exceed the 
proposed standards or are capable of manufacturing motors that meet or 
exceed the proposed standards. (See 42 U.S.C. 6295(o)(2)(B)(i)(IV))
5. Impact of Any Lessening of Competition
    DOE considers any lessening of competition likely to result from 
standards. The Attorney General determines the impact, if any, of any 
lessening of competition likely to result from a proposed standard, and 
transmits such determination to the Secretary, together with an 
analysis of the nature and extent of such impact. (See 42 U.S.C. 
6295(o)(2)(B)(i)(V) and (B)(ii))
    To assist the Attorney General in making such a determination, DOE 
has provided the U.S. Department of Justice (DOJ) with copies of this 
notice and the TSD for review. DOE will consider DOJ's comments on the 
proposed rule in preparing the final rule.
6. Need of the Nation To Conserve Energy
    An improvement in the energy efficiency of small electric motors is 
likely to improve the security of the Nation's energy system by 
reducing overall demand for energy. Reduced electricity demand also may 
improve the reliability of the electricity system. As a measure of this 
reduced demand, DOE expects the proposed standard to eliminate the need 
for the construction of approximately 2.45 GW of generating capacity 
and, in 2030, to save an amount of electricity greater than that 
generated by nine 250 megawatt power plants.
    Enhanced energy efficiency also produces environmental benefits. 
The expected energy savings from the proposed small electric motors 
standards will reduce the emissions of air pollutants and greenhouse 
gases associated with electricity production. Table V.33 and Table V.34 
show the cumulative CO2, NOX, and Hg emissions 
reductions over the analysis period at each TSL. The cumulative 
CO2, NOX, and Hg emissions reductions from 
polyphase motors range up to 23.8 Mt, 17.1 kt, and 0.13 tons, 
respectively, and up to 127.0 Mt, 91.2 kt, and 0.53 tons, respectively, 
from single-phase motors. DOE reports annual CO2, 
NOX, and Hg emissions reductions for each trial standard 
level in the environmental assessment, chapter 15 of the TSD.

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    DOE estimated the cumulative NPV of the monetized benefits 
associated with CO2, NOX, and Hg emissions 
reductions resulting from amended standards on small electric motors. 
As discussed in section IV.L, DOE estimated the potential global 
benefits resulting from reduced CO2 emissions valued at 
approximately $5, $10, $20, $34, and $56 (2008$), and has also 
presented the domestic benefits derived using a value of approximately 
$1 per metric ton. DOE calculated the present value for each TSL using 
both a 7-percent and 3-percent discount rate for each emission type so 
that they can be compared directly to other economic quantities that 
DOE calculated for this proposed rule (Table V.35 through Table V.42).
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    The NPV of the monetized benefits associated with emissions 
reductions can be viewed as a complement to the NPV of the consumer 
savings calculated for each TSL considered in this rulemaking. Table 
V.43 presents the NPV values for polyphase small electric motors that 
would result if DOE were to apply the low- and high-end estimates of 
the potential benefits resulting from reduced CO2, 
NOX and Hg emissions to the NPV of consumer savings 
calculated for each TSL considered in this rulemaking, at both a 7- and 
3-percent discount rate. Table V.44 presents the same NPV values for 
capacitor-start small electric motors. Table V.45 presents the NPV 
values for polyphase small electric motors that would result if DOE 
were to apply the low- and high-end estimates of the potential global 
benefits resulting from reduced CO2 emissions to the NPV of 
consumer savings calculated for each TSL considered in this rulemaking, 
at both a 7- and 3-percent discount rate. Table V.46 presents the same 
NPV values for capacitor-start small electric motors. For 
CO2, only the range of global benefit values are used, $5 
and $56 in 2008$.
    Although comparing the value of consumer savings to the values of 
emission reductions provides a valuable perspective, please note the 
following: (1) The national consumer savings are domestic U.S. consumer 
monetary savings found in market transactions while the values of 
emission reductions are based on ranges of estimates of imputed 
marginal social costs, which, in the case of CO2, are meant 
to reflect global benefits; and (2) the assessments of consumer savings 
and emission-related benefits are performed with different computer 
models, leading to different time frames for the analyses The present 
value of national consumer savings is measured for the period 2015-2065 
(31 years from 2015 to 2045 inclusive, plus the longest lifetime of the 
equipment shipped in the 31st year). However, the timeframes of the 
benefits associated with the emission reductions differ. For example, 
the value of CO2 emission reductions is meant to reflect the 
present value of all future climate related impacts, even those beyond 
2065.
    DOE seeks comment on the above presentation of NPV values and on 
the consideration of GHG emissions in future energy efficiency 
standards rulemakings, including alternative methodological approaches 
to including GHG emissions in its analysis. More specifically, DOE 
seeks comment on both how it integrates monetized GHG emissions or 
Social Cost of Carbon values, as well as other monetized benefits or 
costs, into its analysis and models, and also on suggested alternatives 
to the current approach.
7. Other Factors
    The Secretary of Energy, in determining whether a standard is 
economically justified, may consider any other factors that the 
Secretary deems to be relevant. (See 42 U.S.C. 6295(o)(2)(B)(i)(VI))) 
The Secretary has decided that harmonization with medium motors was 
another relevant factor to consider.
    California utilities expressed concern in their joint comments over 
the possible differences in energy efficiency standards between medium 
electric motors and small electric motors. They believe that if a 
significantly lower efficiency standard is set for those small electric 
motors that share overlapping horsepower ratings with medium motors, 
the medium motor standard would be rendered meaningless, since there 
would be a risk that demand would shift toward using less efficient 
(and presumably cheaper) small electric motors instead. The utilities 
recommended that the new energy efficiency standards for small electric 
motors be comparable to the medium motor standards in order to avoid 
``gaming of the regulatory system.'' (Joint Comment, No. 12 at p. 3)
    DOE appreciates this comment and considered it when proposing new 
standards for small electric motors in this notice. Although 
harmonization is not a specifically enumerated factor that DOE must 
consider under EPCA, it was an additional factor considered as 
permitted by the statute. DOE agrees with the California utilities and 
recognizes that the harmonization of polyphase small electric motors 
with medium electric motors is an added benefit of the proposed 
standard level.

C. Proposed Standard

    EPCA 42 U.S.C. 6295(o)(2)(A), specifies that any new or amended 
energy conservation standard for any type (or class) of covered product 
shall be designed to achieve the maximum improvement in energy 
efficiency that the Secretary determines is technologically feasible 
and economically justified. 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)) The new or amended standard must also ``result in 
significant conservation of energy.'' (42 U.S.C. 6295(o)(3)(B))
    DOE developed TSLs independently for polyphase and capacitor-start 
small electric motors. For the capacitor-start motor categories, DOE 
developed TSLs as a combination of CSIR and CSCR efficiency levels. DOE 
combined CSCR and CSIR motors into a single set of TSLs because motors 
in these categories may be used interchangeably in most applications. 
As a result of this interchangeability, the standard level for CSIR 
motors affects the demand for CSCR motors, and vice versa. DOE 
considered 7 TSLs for polyphase motors and 8 TSLs for capacitor start 
motors.
    In selecting the proposed energy conservation standards for both 
classes of small electric motors for consideration in today's notice of 
proposed rulemaking, DOE started by examining the standard levels with 
the highest energy savings, and determined whether those levels were 
economically justified. If DOE found those levels not to be justified, 
DOE considered TSLs sequentially lower in energy savings until it 
reached the level with the greatest energy savings that was both 
technologically feasible and economically justified. For polyphase 
small electric motors, the standard level with the highest energy 
savings corresponded to the max-tech level. However, due to the 
interaction of the CSIR and CSCR markets and the efficiency differences 
between the two products, the highest energy savings level for 
capacitor-start motors does not necessarily correspond to the ``max-
tech'' level. With certain combinations of efficiency levels (or TSLs) 
for the two motor categories it becomes economically beneficial to 
purchase a CSCR motor instead of a CSIR motor. This migration can cause 
the energy savings for these TSLs to be higher than the TSLs 
corresponding to ``max-tech'' for both motor categories.
    To aid the reader as DOE discusses the benefits and/or burdens of 
each TSL, Table V.47, Table V.48 and Table V.49, collectively, present 
summaries of quantitative analysis results for each TSL for polyphase 
and capacitor-start small electric motors, based on the assumptions and 
methodology discussed above. These tables present the results or, in 
some cases, a range of results, for each TSL. The range of values 
reported in these tables for industry impacts represents the results 
for the different markup scenarios that DOE used to estimate 
manufacturer impacts as shown in section IV.I. Additional quantitative 
results, including the expected migration of shipments between CSIR and 
CSCR motors, are provided in section IV.G.
    In addition to the quantitative results, DOE also considers other 
burdens and benefits that affect economic

[[Page 61485]]

justification. These include pending standards for medium motors as a 
result of EISA 2007.
1. Polyphase Small Electric Motors
    Table V.47 presents a summary of the quantitative analysis results 
for each TSL for polyphase small electric motors.
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    First, DOE considered TSL 7, the most efficient level for polyphase 
small electric motors. TSL 7 would save an estimated 0.41 quads of 
energy through 2045, an amount DOE considers significant. Discounted at 
7-percent, the projected energy savings through 2045 would be 0.10 
quads. For the Nation as a whole, DOE projects that TSL 7 would result 
in a net decrease of $6.38 billion in NPV, using a discount rate of 7-
percent. The emissions reductions at TSL 7 are 23.8 Mt of 
CO2, up to 17.1 kt of NOX, and up to 0.130 tons 
of Hg. These reductions have a value of up to $493 million for 
CO2, $11.6 million for NOX, and $1.102 million 
for Hg, at a discount rate of 7-percent. At a $20 per ton value for the 
social cost of carbon, the estimated monetized benefit of 
CO2 emissions reductions is $170 million at a discount rate 
of 7-percent. DOE also estimates that at TSL 7, total electric 
generating capacity in 2030 will decrease compared to the base case by 
0.48 GW.
    At TSL 7, DOE projects that the average polyphase small electric 
motor customer purchasing equipment in 2015 will experience an increase 
in LCC of $818 compared to the baseline. DOE estimates the fraction of 
customers experiencing LCC increases will be 98.1 percent. The median 
PBP for the average polyphase small electric motor customer at TSL 7, 
55.1 years, is projected to be substantially longer than the mean 
lifetime of the equipment. When all polyphase product classes are 
considered and weighted by shipments, DOE estimates that small electric 
motor customers experience slightly lower increases in LCC of $778.
    The projected change in industry value ranges from a decrease of 
$59.7 million to an increase of $149 million. The impacts are driven 
primarily by the assumptions regarding the ability to pass on larger 
increases in MPCs to the customer. At TSL 7, DOE recognizes the risk of 
very large negative impacts if manufacturers' expectations about 
reduced profit margins are realized. In particular, if the high end of 
the range of impacts is reached as DOE expects, TSL 7 could result in a 
net loss of 93.1 percent in INPV to the polyphase small motor industry. 
DOE believes manufacturers would likely have a more difficult time 
maintaining current gross margin levels with larger increases in 
manufacturing production costs, as standards increase the need for 
capital conversion costs, equipment retooling, and increased research 
and development spending. Specifically, at this TSL, the majority of 
manufacturers would need to significantly redesign all of their 
polyphase small electric motors.
    After carefully considering the analysis and weighing the benefits 
and burdens of TSL 7, the Secretary has reached the following initial 
conclusion: At TSL 7, the benefits of energy savings, emissions 
reductions (both in physical reductions and the monetized value of 
those reductions), would be outweighed by the economic burden of a net 
cost to the Nation (over 30 years), the economic burden to customers 
(as indicated by the large increase in life-cycle cost) and the 
potentially large reduction in INPV for manufacturers resulting from 
large conversion costs and reduced gross margins. Consequently, the 
Secretary has tentatively concluded that trial standard level 7 is not 
economically justified.
    DOE then considered TSL 6, which would likely save an estimated 
0.36 quads of energy through 2045, an amount DOE considers significant. 
Discounted at 7-percent, the projected energy savings through 2045 
would be 0.09 quads. For the Nation as a whole, DOE projects that TSL 6 
would result in a net decrease of $290 million in NPV, using a discount 
rate of 7-percent. The estimated emissions reductions at TSL 6 are 20.5 
Mt of CO2, up to 14.7 kt of NOX, and up to 0.112 
tons of Hg. These reductions have a value of up to $424 million for 
CO2, $10.0 million for NOX, and $0.947 for Hg, at 
a discount rate of 7-percent. At a $20 per ton value for the social 
cost of carbon, the estimated monetized benefit of CO2 
emissions reductions is $146 million at a discount rate of 7-percent. 
Total electric generating capacity in 2030 is estimated to decrease 
compared to the base case by 0.41 GW under TSL 6.
    At TSL 6, DOE projects that the average polyphase small electric 
motor customer purchasing equipment in 2015 will experience an increase 
in LCC of $85 compared to the baseline. DOE estimates the fraction of 
customers experiencing LCC increases will be 82 percent. The median PBP 
for the average polyphase small electric motor customer at TSL 6, 18.9 
years, is projected to be substantially longer than the mean lifetime 
of the equipment. When all polyphase product classes are considered and 
weighted by shipments, DOE estimates that small electric motor 
customers experience slightly lower increases in LCC of $54.
    The projected change in industry value ranges from a decrease of 
$13.1 million to an increase of $15.9 million. The impacts are driven 
primarily by the assumptions regarding the ability to pass on larger 
increases in MPCs to the customer. At TSL 6, DOE recognizes the risk of 
very large negative impacts if manufacturers' expectations about 
reduced profit margins are realized. In particular, if the high end of 
the range of impacts is reached as DOE expects, TSL 6 could result in a 
net loss of 20.4 percent in INPV to the polyphase small motor industry. 
DOE believes manufacturers would likely have a more difficult time 
maintaining current gross margin levels with larger increases in 
manufacturing production costs, as standards increase the need for 
capital conversion costs, equipment retooling, and increased research 
and development spending. Specifically, at this TSL, the majority of 
manufacturers would need to significantly redesign all of their 
polyphase small electric motors.
    After carefully considering the analysis and weighing the benefits 
and burdens of TSL 6, the Secretary has reached the following initial 
conclusion: At TSL 6, the benefits of energy savings, emissions 
reductions (both in physical reductions and the monetized value of 
those reductions), would be outweighed by the economic burden of a net 
cost to the Nation (over 30 years), the economic burden to consumers 
(as indicated by the increased life-cycle cost), and the potential 
reduction in INPV for manufacturers resulting from large conversion 
costs and reduced gross margins. Consequently, the Secretary has 
tentatively concluded that trial standard level 6 is not economically 
justified.
    DOE then considered TSL 5, which provides for polyphase small 
electric motors the maximum efficiency level that the analysis showed 
to have positive NPV for the Nation. TSL 5 would likely save an 
estimated 0.33 quads of energy through 2045, an amount DOE considers 
significant. Discounted at 7-percent, the projected energy savings 
through 2045 would be 0.08 quads. For the Nation as a whole, DOE 
projects that TSL 5 would result in a net increase of $60 million in 
NPV, using a discount rate of 7-percent. The estimated emissions 
reductions at TSL 5 are 18.6 Mt of CO2, up to 13.3 kt of 
NOX, and up to 0.102 tons of Hg. These reductions have a 
value of up to $385 million for CO2, $9.1 million for 
NOX, and $0.861 million for Hg, at a discount rate of 7-
percent. At a $20 per ton value for the social cost of carbon, the 
estimated benefits of CO2 emissions reductions is $133 
million at a discount rate of 7-percent. Total electric generating 
capacity in 2030 is estimated to decrease compared to the base case by 
0.37 GW under TSL 5.
    At TSL 5, DOE projects that the average polyphase small electric 
motor customer purchasing the equipment in 2015 will experience an 
increase in LCC of $38 compared to the baseline

[[Page 61488]]

representative unit for analysis (1 hp, 4 pole polyphase motor). This 
corresponds to approximately a 2.9 percent increase in average LCC. 
Based on this analysis, DOE estimates that approximately 71 percent of 
customers would experience LCC increases and that the median PBP would 
be 13.8 years, which is longer than the mean lifetime of the equipment. 
However, in consideration of the relatively small percentage increase 
in LCC at TSL 5, DOE examined sensitivity analyses to assess the 
likelihood of consumers in fact experiencing significant LCC increases. 
These included calculating a shipment-weighted LCC savings and 
examining the impacts on consumers who purchase motors after the year 
2015.
    At TSL 5, when accounting for the full-range of horsepowers and 
pole configurations of polyphase motors, the average LCC increase is 
reduced to $10. This corresponds to approximately 54.5 percent of 
customers experiencing greater than 2-percent increases. The remaining 
44 percent of customers, those with greater operating hours, experience 
either very small losses (less than 2-percent) or net savings.
    The projected change in industry value ranges from a decrease of 
$8.83 million to an increase of $10.9 million. The impacts are driven 
primarily by the assumptions regarding the ability to pass on larger 
increases in MPCs to the customer. At TSL 5, DOE recognizes the risk of 
negative impacts if manufacturers' expectations about reduced profit 
margins are realized. If the high end of the range of impacts is 
reached, TSL 5 could result in a net loss of 13.8 percent in INPV to 
the polyphase small motor industry.
    Trial standard level 5 has other advantages that are not directly 
economic. This level is approximately harmonized with the efficiency 
level for medium motors to be implemented in 2010 which requires four-
pole, 1 hp polyphase motors to be at least 85.5% efficient. Since 
many--but not all--three digit frame size polyphase motors of this size 
can also be used in two-digit frames with minimal adjustment, DOE 
believes that there is a benefit to harmonizing small polyphase and 
medium polyphase motor efficiency standards in this size range. In 
particular, DOE does not believe the design changes necessary for TSL 5 
would force all manufacturers to significantly redesign all of their 
polyphase small electric motors or their production processes. 
Therefore, DOE believes manufacturers are not at a significant risk to 
experience highly negative impacts.
    After considering the analysis and the benefits and burdens of 
trial standard level 5, the Secretary has reached the following 
tentative conclusion: Trial standard level 5 offers the maximum 
improvement in energy efficiency that is technologically feasible and 
economically justified, and will result in significant conservation of 
energy. The Secretary has reached the initial conclusion that the 
benefits of energy savings, emissions reductions (both in physical 
reductions and the monetized value of those reductions), the positive 
net economic savings and benefits of harmonization with the existing 
medium polyphase electric motor standards outweigh the potential 
reduction in INPV for manufacturers and the economic burden on 
consumers, which is relatively small on average. Therefore, DOE today 
proposes to adopt the energy conservation standards for polyphase small 
electric motors at trial standard level 5.
2. Capacitor-Start Small Electric Motors
    Table V.48 and Table V.49 present a summary of the quantitative 
analysis results for each TSL for capacitor-start small electric 
motors.
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    First, DOE considered TSL 8, the combination of CSIR and CSCR 
efficiency levels generating the greatest national energy savings. TSL 
8 would likely save an estimated 2.51 to 2.61 quads of energy through 
2045, an amount DOE considers significant. Discounted at 7-percent, the 
projected energy savings through 2045 would be 0.59 to 0.64 quads. For 
the Nation as a whole, DOE projects that TSL 8 would result in a net 
benefit of $290 million to $4.09 billion in NPV, using a discount rate 
of 7-percent. The estimated emissions reductions at TSL 8 are up to 
127.0 Mt of CO2, up to 91.2 kt of NOX, and up to 
0.529 tons of Hg. These reductions have a value of up to $2,715 million 
for CO2, $67.7 million for NOX, and $5.14 million 
for Hg, at a discount rate of 7-percent. At a $20 per ton (2008$) value 
for the social cost of carbon, the estimated benefits of CO2 
emissions reductions is $910 to $938 million at a discount rate of 7-
percent. DOE also estimates that at TSL 8, total electric generating 
capacity in 2030 will decrease compared to the base case by 2.37 to 
2.44 GW.
    At TSL 8, DOE projects that for the average customer, compared to 
the baseline, the LCC of a CSIR and CSCR motor will increase by $346 
and $47, respectively. At TSL 8, DOE estimates the fraction of 
customers experiencing LCC increases will be 64 percent for CSIR motors 
and 72.6 percent for CSCR motors. The median PBP for the average 
capacitor-start small electric motor customers at TSL 8, 11.2 years for 
CSIR motors and 12.1 years for CSCR motors, is projected to be 
substantially longer than the mean lifetime of the equipment. DOE also 
considered market migration between CSIR and CSCR users and how that 
would affect the LCC of CSIR users at TSL 8. When considering that some 
CSIR consumers will choose to purchase CSCR motors, the CSIR customers 
still experience on average LCC savings of approximately $20. This 
corresponds to 58 percent of CSIR consumers experiencing LCC increases.
    DOE also examined LCC savings for a sensitivity case where the 
calculation was performed in the middle of the forecast period (i.e., 
the year 2030), with a full distribution of motor sizes and speeds and 
where the full cost of reactive power was included. Under these 
conditions, for the average customer, the LCC of a CSIR and CSCR motor 
will increase by $315 and decrease by $34, respectively, compared to 
the baseline. DOE also examined what fraction of motors would have 
changes in LCC that are greater than 2-percent. At TSL 8, DOE estimates 
the fraction of customers experiencing LCC increases of greater than 2-
percent will be 53.0 percent for CSIR motors and 46.1 percent for CSCR 
motors.
    The projected change in industry value ranges from a decrease of 
$53.3 million to an increase of $56.7 million. The impacts are driven 
primarily by the assumptions regarding the ability to pass on larger 
increases in MPCs to the customer. At TSL 8, DOE recognizes the risk of 
negative impacts if manufacturers' expectations about reduced profit 
margins are realized. In particular, if the high end of the range of 
impacts is reached as DOE expects, TSL 8 could result in a net loss of 
19.1 percent in INPV to the capacitor-start small motor industry. DOE 
believes manufacturers would likely have a more difficult time 
maintaining current gross margin levels with larger increases in 
manufacturing production costs, as standards increase the need for 
capital conversion costs, equipment retooling, and increased research 
and development spending. Specifically, at this TSL, the majority of 
manufacturers would need to significantly redesign all of their 
capacitor-start small electric motors.
    After carefully considering the analysis and weighing the benefits 
and burdens of TSL 8, the Secretary has reached the following initial 
conclusion: At TSL 8, the benefits of energy savings, emissions 
reductions (both in physical reductions and the monetized value of 
those reductions), and the positive net economic savings (over 30 
years) would be outweighed by the economic burden on existing CSCR 
customers and CSIR customers who do not migrate from CSIR to CSCR 
motors (as indicated by the large increase in LCC) and the potentially 
large reduction in INPV for manufacturers resulting from large 
conversion costs and reduced gross margins. Consequently, the Secretary 
has tentatively concluded that trial standard level 8 is not 
economically justified.
    DOE then considered TSL 7, which would likely save an estimated 
2.10 to 2.13 quads of energy through 2045, an amount DOE considers 
significant. Discounted at 7-percent, the projected energy savings 
through 2045 would be 0.51 to 0.52 quads. For the Nation as a whole, 
DOE projects that TSL 7 would result in a net benefit of $1.47 to $5.67 
billion in NPV, using a discount rate of 7-percent. The estimated 
emissions reductions at TSL 7 are up to 110.0 Mt of CO2, up 
to 79.0 kt of NOX, and up to 0.459 tons of Hg. These 
reductions have a value of up to $2,352 million for CO2, 
$58.6 million for NOX, and $4.45 million for Hg, at a 
discount rate of 7-percent. At a $20 per ton value for the social cost 
of carbon, the estimated benefits of CO2 emissions 
reductions is $785 to $812 million at a discount rate of 7-percent. 
Total electric generating capacity in 2030 is estimated to decrease 
compared to the base case by 2.05 to 2.12 GW under TSL 7.
    At TSL 7, DOE projects that for the average customer, the LCC of 
capacitor-start small electric motors will increase by $346 for CSIR 
motors and decrease by $28 for CSCR motors compared to the baseline. At 
TSL 7, DOE estimates the fraction of CSIR customers experiencing LCC 
increases will be 64 percent, but only 46.3 percent for CSCR motor 
customers. However, DOE believes that at this TSL, which is the ``max-
tech'' level for CSIR motors, the relative difference in cost between a 
CSIR motor and a CSCR motor becomes substantial and will have large 
effects on customers. Rather than buy an expensive CSIR motor, those 
customers whose applications permit them to, will purchase a CSCR motor 
with the same number of poles and horsepower ratings. DOE is unsure of 
the magnitude of the migration of CSIR users to CSCR users, but 
believes that the market share

[[Page 61493]]

of CSCR motors could grow from 5 percent to 80 to 99 percent once 
standards are effective. This would mean that the high LCC increases 
that CSIR motor users would experience would be mitigated and many of 
those users would switch to CSCR motors with a decrease in LCC on 
average. When taking into account this potential migration, the average 
CSIR customer experiences net LCC savings of $49. Even though CSIR 
motors with switching may result in a net LCC savings, DOE estimates 
that approximately 51 percent of CSIR customers would still experience 
an LCC increase.
    DOE also examined LCC savings for a sensitivity case where the 
calculation was performed in the middle of the forecast period (i.e., 
the year 2030), with a full distribution of motor sizes and speeds and 
where the full cost of reactive power was included. Under these 
conditions, for the average customer, compared to the baseline, the LCC 
of a CSIR and CSCR motor will increase by $315 and decrease by $89, 
respectively. DOE also examined what fraction of motors would have 
changes in LCC that are greater than 2-percent. At TSL 8, DOE estimates 
the fraction of customers experiencing LCC increases of greater than 2-
percent will be 53.0 percent for CSIR motors and 18.7 percent for CSCR 
motors.
    The economics literature provides a wide-ranging discussion of how 
consumers trade-off upfront costs and energy savings in the absence of 
government intervention. Much of this literature attempts to explain 
why consumers appear to undervalue energy efficiency improvements. This 
undervaluation suggests that regulation that promotes energy efficiency 
can produce significant net private gains (as well as producing social 
gains by, for example, reducing pollution). There is evidence that 
consumers undervalue future energy savings as a result of (1) a lack of 
information, (2) a lack of sufficient savings to warrant delaying or 
altering purchases (e.g., an inefficient ventilation fan in a new 
building or the delayed replacement of a water pump), (3) inconsistent 
(e.g., excessive short-term) weighting of future energy cost savings 
relative to available returns on other investments, (4) computational 
or other difficulties associated with the evaluation of relevant 
tradeoffs, and (5) a divergence in incentives (e.g., renter versus 
owner; builder v. purchaser). Other literature indicates that with less 
than perfect foresight and a high degree of uncertainty about the 
future, consumers may tradeoff these types of investments at a higher 
than expected rate between current consumption and uncertain future 
energy cost savings. While DOE is not prepared at present to provide a 
fuller quantifiable framework for this discussion, DOE seeks comments 
on how to assess these possibilities.
    The projected change in industry value ranges from a decrease of 
$35.8 million to an increase of $29.8 million. The impacts are driven 
primarily by the assumptions regarding the ability to pass on larger 
increases in MPCs to the customer. At TSL 7, DOE recognizes the risk of 
negative impacts if manufacturers' expectations about reduced profit 
margins are realized. In particular, if the high end of the range of 
impacts is reached as DOE expects, TSL 7 could result in a net loss of 
12.9 percent in INPV to the capacitor-start small motor industry. At 
this TSL, the combination of efficiency levels could cause a migration 
from CSIR motors to CSCR motors; however, DOE believes that the capital 
conversion costs, equipment retooling and R&D spending associated with 
this migration would not be severe.
    After carefully considering the analysis and weighing the benefits 
and burdens of TSL 7, the Secretary has reached the following initial 
conclusion: Trial standard level 7 offers the maximum improvement in 
energy efficiency that is technologically feasible and economically 
justified and will result in significant conservation of energy. The 
Secretary has reached the initial conclusion that the benefits of 
energy savings, emissions reductions (both in physical reductions and 
the monetized value of those reductions), the positive net economic 
savings to the Nation (over 30 years) and the harmonization of 
efficiency requirements between CSIR and CSCR motors would outweigh the 
potential reduction in INPV for manufacturers and the economic burden 
on those CSIR customers who are unable to switch to CSCR motors. 
Further, benefits from carbon dioxide reductions (at a central value of 
$20) would increase NPV by between $785 million and $812 million 
(2008$) at a 7% discount rate and between $2.12 billion and $2.20 
billion at a 3% discount rate. These benefits from carbon dioxide 
emission reductions, when considered in conjunction with the consumer 
savings NPV and other factors described above support DOE's tentative 
conclusion that trial standard level 7 is economically justified. 
Therefore, DOE today proposes to adopt the energy conservation 
standards for capacitor-start small electric motors at trial standard 
level 7.
    However, DOE recognizes that this conclusion assumes that CSIR 
customers can and will migrate to CSCR motors at this level. This shift 
in motor usage and the magnitude of its impacts are based on several 
assumptions made throughout the analyses, including: the costs 
associated with purchasing motors for space-constrained applications, 
the portion of space-constrained applications in the market, shipments 
in each product class, the scaling of motor losses and prices between 
product classes, and the mathematical form of DOE's cross-elasticity 
model. DOE requests comment on these assumptions and the combined 
effect that they may have on the uncertainties in DOE's forecasts. DOE 
also invites comment on what migration levels would be expected at TSL 
7, and whether it should adopt a different TSL for capacitor-start 
small electric motors given the range of uncertainty in its forecasts.

VI. Procedural Issues and Regulatory Review

A. Review Under Executive Order 12866

    Section 1(b)(1) of Executive Order 12866, ``Regulatory Planning and 
Review,'' 58 FR 51735 (October 4, 1993), requires each agency to 
identify the problem the agency intends to address that warrants new 
agency action (including, where applicable, the failures of private 
markets or public institutions), as well as assess the significance of 
that problem, to enable assessment of whether any new regulation is 
warranted. EPCA requires DOE to establish standards for the small 
motors covered in today's rulemaking, In addition, today's proposed 
standards also address the following: (1) Misplaced incentives, which 
separate responsibility for selecting equipment and for paying their 
operating costs; and (2) Lack of consumer information and/or 
information processing capability about energy efficiency 
opportunities. The market for small electric motors is dominated by the 
presence and actions of OEMs, who sell small electric motors to end-
users as a component of a larger piece of equipment. There is a very 
large diversity of equipment types that use small electric motors and 
the market for any particular type of equipment may be very small. 
Consumers lack information and choice regarding the motor component. 
OEMs and consumers may be more concerned with other aspects of the 
application system than with selecting the most cost effective motor 
for the end user. Space constraints may also restrict the ability of 
the consumer

[[Page 61494]]

to replace the motor with a more efficient model.
    In addition, DOE has determined that today's regulatory action is a 
``significant regulatory action'' under section 3(f)(1) of Executive 
Order 12866. Accordingly, section 6(a)(3) of the Executive Order 
required that DOE prepare a regulatory impact analysis (RIA) on today's 
proposed rule and that the Office of Information and Regulatory Affairs 
(OIRA) in the OMB review this proposed rule. 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 DOE's Building Technologies Program, 950 L'Enfant Plaza, SW., 
Suite 600, Washington, DC 20024, (202) 586-2945, between 9 a.m. and 4 
p.m., Monday through Friday, except Federal holidays.
    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 standards.
    The RIA calculates the effects of feasible policy alternatives to 
small electric motors standards, and provides a quantitative comparison 
of the impacts of the alternatives. DOE evaluated each alternative in 
terms of its ability to achieve significant energy savings at 
reasonable costs, and compared it to the effectiveness of the proposed 
rule. DOE analyzed these alternatives using a series of regulatory 
scenarios as inputs to the NES/shipments model for small electric 
motors, which it modified to allow inputs for these measures.
    DOE identified the following major policy alternatives for 
achieving increased energy efficiency in small electric motors:

 No new regulatory action
 Financial incentives
    [rtrif] Tax credits
    [rtrif] Rebates
 Voluntary energy efficiency targets
 Bulk government purchases
 The proposed approach (performance standards)

    DOE evaluated each alternative in terms of its ability to achieve 
significant energy savings at reasonable costs (see Table IV.1), and 
compared it to the effectiveness of the proposed rule.
[GRAPHIC] [TIFF OMITTED] TP24NO09.053

    The net present value amounts shown in Table VI.1 refer to the NPV 
for consumers. The costs to the government of each policy (such as 
rebates or tax credits) are not included in the costs for the NPV 
since, on balance, consumers are both paying for (through taxes) and 
receiving the benefits of the payments. For each of the policy 
alternatives other than standards, Table VI.1 shows the energy savings 
and NPV in the case where the CSIR and CSCR market share shift in 
response to the policy prior to 2015, or immediately in 2015 when 
compliance with the standards would be required. The NES and NPV in the 
case of the proposed standard are shown as a range between this 
scenario and a scenario in which the market shift takes ten years to 
complete, and begins in 2015 . The following paragraphs discuss each of 
the policy alternatives listed in Table VI.1. (See TSD, RIA.)
    No new regulatory action. The case in which no regulatory action is 
taken with regard to small electric motors constitutes the ``base 
case'' (or ``No Action'') scenario. In this case, between 2015 and 
2045, capacitor-start small electric motors purchased in or after 2015 
are expected to consume 3.65 quads of primary energy (in the form of 
losses), while polyphase small electric motors purchased in or after 
2015 are expected to consume 0.90 quads of primary energy. Since this 
is the base case, energy savings and NPV are zero by definition.
    Rebates. DOE evaluated the possible effect of a rebate consistent 
with current motor rebate practices in the promotion of premium 
efficiency motors which cover a portion of the incremental price 
difference between equipment meeting baseline efficiency levels and 
equipment meeting improved efficiency requirements. The current average

[[Page 61495]]

motor rebate for an efficient 1 horsepower motor is approximately $25, 
and DOE scaled this rebate to be approximately proportional to the 
retail price of the motor. DOE evaluated rebates targeting TSL 5 for 
polyphase motors, and evaluated several target efficiency levels for 
capacitor-start motors (including TSLs 7, 5, and 2). Existing rebate 
programs for polyphase motors target three-digit frame series motors 
with efficiencies equivalent to TSL 5 for small polyphase motors. At 
rebate efficiency levels corresponding to TSL 7 for capacitor-start 
motors, DOE estimates that rebates consistent with current practice 
would have an insignificant impact on increasing the market share of 
CSIR motors. For this case, meeting the target level requires the 
purchase of a motor with a very high average first cost because for TSL 
7, CSIR motors are at the maximum technologically feasible efficiency. 
As a result, rebates targeting TSLs 5 and 2 have larger energy savings. 
TSLs 7, 5, and 2 correspond to the same efficiency level (EL 3) for 
CSCR motors.
    For rebate programs TSL 5 for both polyphase and capacitor start 
motors, DOE estimates the market share of equipment meeting the energy 
efficiency levels targeted would increase from 0 percent to 0.4 percent 
for polyphase motors, from 0 percent to 0.3 percent for capacitor-
start, induction-run motors, and from 21.0 to 29.5 percent for 
capacitor-start, capacitor-run motors. DOE assumed the impact of this 
policy would be to permanently transform the market so that the 
shipment-weighted efficiency gain seen in the first year of the program 
would be maintained throughout the forecast period. At the estimated 
participation rates, the rebates would provide 0.07 quads of national 
energy savings and an NPV of $0.25 billion (at a 7-percent discount 
rate).
    DOE found that a rebate targeting the efficiency levels 
corresponding to TSL 2 for capacitor-start motors would result in 
larger energy savings than one targeting the efficiency levels of TSL 5 
or TSL 7. Such rebates would increase the market share among capacitor-
start induction-run motors meeting the efficiency level corresponding 
to TSL 2 from 3.0 percent to 13.2 percent. Combined with unchanged 
polyphase motor rebates targeting TSL 5, DOE estimates these rebates 
would provide 0.19 quads of national energy savings and an NPV of $0.52 
billion (at a 7-percent discount rate).
    DOE also analyzed an alternative rebate program for capacitor-start 
motors which would give rebates of twice the value of the previously-
analyzed rebate for CSCR motors which meet the requirements of TSL 7 (a 
$50 rebate for a 1 HP motor, scaled to other product classes), and no 
rebates for CSIR motors. DOE estimates that these rebates would have no 
effect on the efficiency distribution of capacitor-start induction-run 
motors, and would increase the market share among capacitor-start 
capacitor-run motors meeting TSL 7 by 23.9 percent to 44.9 percent. In 
addition, DOE estimates that this rebate would increase shipments of 
capacitor-start capacitor-run motors over the period from 2015 to 2045 
by 5.7 million to 12.6 million. Combined with unchanged polyphase motor 
rebates at TSL 5, DOE estimates these rebates would provide 0.13 quads 
of national energy savings and an NPV of $0.43 billion (at a 7-percent 
discount rate).
    Although DOE estimates that rebates will provide national benefits, 
they are much smaller than the benefits resulting from national 
performance standards. Thus, DOE rejected rebates as a policy 
alternative to national performance standards.
    Consumer Tax Credits. If customers were offered a tax credit 
equivalent to the amount mentioned above for rebates, DOE's research 
suggests that the number of customers buying a small electric motor 
that would take advantage of the tax credit would be approximately 60 
percent of the number that would take advantage of rebates. Thus, as a 
result of the tax credit, the percentage of customers purchasing the 
products with efficiencies corresponding to TSL 5 for both polyphase 
and capacitor-start motors would increase by 0.1 percent to 0.1 percent 
for polyphase motors, by 0.2 percent to 0.2 percent for capacitor-
start, induction-run motors, and by 5.1 percent to 26.1 percent for 
capacitor-start, capacitor-run motors. DOE assumed the impact of this 
policy would be to permanently transform the market so that the 
shipment-weighted efficiency gain seen in the first year of the program 
would be maintained throughout the forecast period. DOE estimated that 
tax credits would yield a fraction of the benefits that rebates would 
provide. DOE rejected rebates, as a policy alternative to national 
performance standards, because the benefits that rebates provide are 
much smaller than those resulting from performance standards. Thus, 
because consumer tax credits provide even smaller benefits than 
rebates, DOE also rejected consumer tax credits as a policy alternative 
to national performance standards.
    Manufacturer Tax Credits. DOE believes even smaller benefits would 
result from availability of a manufacturer tax credit program that 
would effectively result in a lower price to the consumer by an amount 
that covers part of the incremental price difference between products 
meeting baseline efficiency levels and those meeting trial standard 
level 5 for polyphase small electric motors and trial standard level 5 
for capacitor-start small electric motors. Because these tax credits 
would go to manufacturers instead of customers, DOE believes that fewer 
customers would be aware of this program relative to a consumer tax 
credit program. DOE assumes that 50 percent of the customers who would 
take advantage of consumer tax credits would buy more-efficient 
products offered through a manufacturer tax credit program. Thus, as a 
result of the manufacturer tax credit, the percentage of customers 
purchasing the more-efficient products would increase by 0.04 percent 
to 0.04 percent (i.e., 50 percent of the impact of consumer tax 
credits) for polyphase motors, by 0.1 percent to 0.1 percent for 
capacitor-start, induction-run motors, and by 2.6 percent to 23.6 
percent for capacitor-start, capacitor-run motors.
    DOE assumed the impact of this policy would be to permanently 
transform the market so that the shipment-weighted efficiency gain seen 
in the first year of the program will be maintained throughout the 
forecast period. DOE estimated that manufacturer tax credits would 
yield a fraction of the benefits that consumer tax credits would 
provide. DOE rejected consumer tax credits as a policy alternative to 
national performance standards because the benefits that consumer tax 
credits provide are much smaller than those resulting from performance 
standards. Thus, because manufacturer tax credits provide even smaller 
benefits than consumer tax credits, DOE also rejected manufacturer tax 
credits as a policy alternative to national performance standards.
    Voluntary Energy-Efficiency Targets. There are no current federal 
or industry marketing efforts to increase the use of efficient small 
electric motors which meet the requirements of trial standard level 5 
for polyphase small electric motors or trial standard level 7 for 
capacitor-start small electric motors. NEMA and the Consortium for 
Energy Efficiency promote ``NEMA Premium'' efficient three-digit frame 
series motors, and DOE analyzed this program as a model for the market 
effects of a similar program for small electric motors. DOE evaluated 
the potential impacts of such a program that would encourage purchase 
of products meeting the trial

[[Page 61496]]

standard level efficiency levels. DOE modeled the voluntary efficiency 
program based on this scenario and assumed that the resulting shipment-
weighted efficiency gain would be maintained throughout the forecast 
period. DOE estimated that the enhanced effectiveness of voluntary 
energy-efficiency targets would provide 0.82 quads of national energy 
savings and an NPV of $0.35 billion (at a 7-percent discount rate). 
Although this would provide national benefits, they are much smaller 
than the benefits resulting from national performance standards. Thus, 
DOE rejected use of voluntary energy-efficiency targets as a policy 
alternative to national performance standards.
    Bulk Government Purchases. Under this policy alternative, the 
government sector would be encouraged to purchase increased amounts of 
polyphase equipment that meet the efficiency levels in trial standard 
level 5 and capacitor-start equipment that meets the efficiency levels 
in trial standard level 7. Federal, State, and local government 
agencies could administer such a program. At the Federal level, this 
would be an enhancement to the existing Federal Energy Management 
Program (FEMP). DOE modeled this program by assuming an increase in 
installation of equipment meeting the efficiency levels of the target 
standard levels among the commercial and public buildings and 
operations which are run by government agencies. DOE estimated that 
bulk government purchases would provide 0.34 quads of national energy 
savings and an NPV of -$0.01 billion (at a 7-percent discount rate), 
benefits which are much smaller than those estimated for national 
performance standards. DOE rejected bulk government purchases as a 
policy alternative to national performance standards.
    National Performance Standards. DOE proposes to adopt the 
efficiency levels listed in section VI.C. As indicated in the 
paragraphs above, none of the alternatives DOE examined would save as 
much energy as today's proposed standards. Also, several of the 
alternatives would require new enabling legislation, since authority to 
carry out those alternatives does not presently exist.

B. Review Under the Regulatory Flexibility Act

    The Regulatory Flexibility Act (5 U.S.C. 601 et seq.) requires 
preparation of an initial regulatory flexibility analysis 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 the General 
Counsel's Web site, http://www.gc.doe.gov.
    DOE reviewed today's proposed rule under the provisions of the 
Regulatory Flexibility Act and the procedures and policies published on 
February 19, 2003. A regulatory flexibility analysis examines the 
impact of the rule on small entities and considers alternative ways of 
reducing negative impacts.
    In the context of this rulemaking, ``small businesses,'' as defined 
by the SBA, for the small electric motor manufacturing industry are 
manufacturing enterprises with 1,000 employees or fewer. See http://www.sba.gov/idc/groups/public/documents/sba_homepage/serv_sstd_tablepdf.
    DOE used this small business definition to determine whether any 
small entities would be required to comply with the rule. (65 FR 30836, 
30850 (May 15, 2000), as amended at 65 FR 53533, 53545 (September 5, 
2000) and codified at 13 CFR part 121. The size standards are listed by 
NAICS code and industry description. The manufacturers impacted by this 
rule are generally classified under NAICS 335312, ``Motor and Generator 
Manufacturing,'' which sets a threshold of 1,000 employees or less for 
an entity in this category to be considered a small business.
    DOE identified producers of equipment covered by this rulemaking, 
which have manufacturing facilities located within the United States 
and could be considered small entities, by two methods: (1) Asking 
larger manufacturers in MIA interviews to identify any competitors they 
believe may be a small business, and (2) researching NEMA-identified 
fractional horsepower motor manufacturers. DOE then looked at publicly-
available data and contacted manufacturers, as necessary, to determine 
if they meet the Small Business Administration (SBA) definition of a 
small manufacturing company. In total, DOE identified 11 companies that 
could potentially be small businesses. During initial review of the 11 
companies in its list, DOE either contacted or researched each company 
to determine if it sold covered small electric motors. Based on its 
research, DOE screened out companies that did not offer motors covered 
by this rulemaking. Consequently, DOE estimated that only one out of 11 
companies listed were potentially small business manufacturers of 
covered products. DOE then contacted this potential small business 
manufacturer and determined that the company's equipment would not be 
covered by this proposed rulemaking. Thus, based on its initial 
screening and subsequent interviews, DOE did not identify any company 
as a small business manufacturer based on SBA's definition of a small 
business manufacturer for this industry.
    On the basis of the foregoing, DOE certifies that the proposed 
rule, if promulgated, would have no significant economic impact on a 
substantial number of small entities. Accordingly, DOE has not prepared 
a regulatory flexibility analysis for this rulemaking. DOE will 
transmit the certification and supporting statement of factual basis to 
the Chief Counsel for Advocacy of the Small Business Administration for 
review under 5 U.S.C. 605(b).
    DOE seeks comment on the above analysis, as well as any information 
concerning small businesses that may be impacted by this rulemaking and 
what those impacts may be.

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

D. Review Under the National Environmental Policy Act

    DOE has prepared a draft environmental assessment (EA) of the 
impacts of the proposed rule 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). This assessment includes 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. The draft EA has been incorporated into the TSD. 
Before issuing a final rule for small electric motors, DOE will 
consider public comments and, as appropriate, determine whether to 
issue a finding of

[[Page 61497]]

no significant impact as part of a final EA or to prepare an 
environmental impact statement (EIS) for this rulemaking.

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 to 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 preempt State law or 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 products that are 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) 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. For a 
proposed regulatory action likely to result in a rule that may cause 
the expenditure by State, local, and Tribal governments, in the 
aggregate, or by the private sector of $100 million or more in any one 
year (adjusted for inflation), section 202 of UMRA requires an agency 
to publish a written statement assessing the costs, benefits, and other 
effects of the rule on the national economy. (2 U.S.C. 1532(a), (b)) 
The UMRA also requires a Federal agency to develop an effective process 
to permit timely input by elected officers of State, local, and Tribal 
governments on a proposed ``significant intergovernmental mandate,'' 
and requires an agency plan for giving notice and opportunity for 
timely input to potentially affected small governments before 
establishing any requirements that might significantly or uniquely 
affect small governments. On March 18, 1997, DOE published a statement 
of policy on its process for intergovernmental consultation under UMRA 
(62 FR 12820) (also available at http://www.gc.doe.gov).
    Although today's proposed rule does not contain a Federal 
intergovernmental mandate, today's proposed rule will likely result in 
a final rule that could impose expenditures of $100 million or more 
after 2015 for private sector commercial and industrial users of 
equipment with small electric motors. DOE estimated annualized impacts 
for the proposed rule using the results of the national impacts 
analysis. The national impact analysis results expressed as annualized 
values are $923-$1,137 million in total annualized benefits from the 
proposed rule, $292-$786 million in annualized costs, and $183-$845 
million in annualized net benefits. Details are provided in chapter 10 
of the TSD. Therefore, DOE must publish a written statement assessing 
the costs, benefits, and other effects of the rule on the national 
economy. Section 205 of UMRA also requires DOE to identify and consider 
a reasonable number of regulatory alternatives before promulgating a 
rule for which UMRA requires such a written statement. DOE must 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.
    Today's proposed energy conservation standards for small electric 
motors would achieve the maximum improvement in energy efficiency that 
DOE has determined to be both technologically feasible and economically 
justified. A discussion of the alternatives considered by DOE is 
presented in the regulatory impact analysis section of the TSD for this 
proposed rule. Also, Section 202(c) of UMRA authorizes an agency to 
prepare the written statement required by UMRA in conjunction with or 
as part of any other statement or analysis that accompanies the 
proposed rule. (2 U.S.C. 1532(c)) The TSD, preamble, and regulatory 
impact analysis for today's proposed rule contain a full discussion of 
the rule's costs, benefits, and other effects on the national economy, 
and therefore satisfy UMRA's written statement requirement.

H. Review Under the Treasury and General Government Appropriations Act 
of 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

[[Page 61498]]

might require compensation under the Fifth Amendment to the United 
States Constitution.

J. Review Under the Treasury and General Government Appropriations Act 
of 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 OMB. OMB's guidelines 
were published at 67 FR 8452 (February 22, 2002); 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 
Office of Information and Regulatory Affairs (OIRA) a Statement of 
Energy Effects for any proposed significant energy action. A 
``significant energy action'' is defined as any action by an agency 
that promulgates 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, which proposes standards to increase the 
energy efficiency of 72 product classes of small electric motors, would 
not have a significant adverse effect on the supply, distribution, or 
use of energy. The rule was also not designated by OIRA as a 
significant energy action. Therefore, today's proposed rule 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

    In consultation with the Office of Science and Technology (OSTP), 
OMB issued on December 16, 2004, its ``Final Information Quality 
Bulletin for Peer Review'' (the 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. DOE prepared the ``Energy Conservation Standards 
Rulemaking Peer Review Report,'' dated February 2007, which pertains to 
these rulemaking analyses. DOE disseminated the report, and it 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 listed in 
the DATES and ADDRESSES sections at the beginning of this document. To 
attend the public meeting, please notify Ms. Brenda Edwards at (202) 
586-2945 or [email protected]. 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. 
Such persons may hand-deliver requests to speak, along with a computer 
diskette or CD in WordPerfect, Microsoft Word, PDF, or text (ASCII) 
file format, to the address shown in the ADDRESSES section at the 
beginning of this notice of proposed rulemaking between the hours of 9 
a.m. and 4 p.m., Monday through Friday, except Federal holidays. 
Requests may also be sent by mail, 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 requests persons selected to be heard to submit an advance 
copy of their statements at least one week before the public meeting. 
At its discretion, DOE may permit any person who cannot supply an 
advance copy of their statement to participate, if that person has made 
advance alternative arrangements with the Building Technologies 
Program. The request to give an oral presentation should ask for such 
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 section 336 of EPCA, 42 U.S.C. 
6306. A court reporter will be present to record the proceedings and 
prepare a transcript. 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 on the proceedings as well as on any 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 the discussion of specific topics. 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 from DOE and from other participants concerning these issues. 
DOE representatives may also ask questions of participants concerning 
other matters relevant to this rulemaking. 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

[[Page 61499]]

needed for the 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., 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 the 
proposed rule before or after the public meeting, but no later than the 
date provided at the beginning of this notice of proposed rulemaking. 
Comments, data, and information submitted to DOE's e-mail address for 
this rulemaking should be provided in WordPerfect, Microsoft Word, PDF, 
or text (ASCII) file format. Interested parties should avoid the use of 
special characters or any form of encryption and, wherever possible, 
comments should carry the electronic signature of the author. Comments, 
data, and information submitted to DOE via mail or hand delivery/
courier should include one signed original paper copy. No 
telefacsimiles (faxes) will be accepted.
    According to 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 the following issues:
    1. The proposal of product classes based on motor category, pole 
configuration, and horsepower.
    2. The proposal to include other insulation class systems besides 
A, in particular B and F insulation class systems.
    3. The baseline models and efficiencies used in the engineering 
analysis.
    4. The various markups used in the engineering analysis, in 
particular the difference in overhead markups for designs that use a 
copper rotor and those that use an aluminum rotor.
    5. The design options and limitations presented in the engineering 
analysis such as the limitations on motor size, the air gap between the 
rotor and stator, and the power factor.
    6. The approach to scale the engineering analysis results to 
product classes for which a complete analysis was not performed, 
especially the decision to use the relationships found for CSIR motors 
to scale results for CSCR motors.
    7. The proposal to define nominal efficiency as the average full-
load efficiency of a large population of motors of the same design.
    8. The preservation of operating profits as the lower bound 
scenario and the preservation of return on invested capital as the 
upper bound scenario for the INPV results generated in the manufacturer 
impact analysis.
    9. The capital investment costs needed to reach each efficiency 
level.
    10. Input and data regarding how the single-phase small motor 
market will respond to the proposed standards. In particular, DOE seeks 
comment regarding its CSIR/CSCR cross-elasticity model; the current 
market shares of CSIR and CSCR motors in each combination of motor 
power and number of poles; the barriers the customers face if they 
switch from CSIR to CSCR motors or vice versa; and the timescale over 
which market share shifts would take place in response to standards. 
DOE also welcomes additional comments and data regarding the scaling of 
motor losses and prices between product classes.
    11. Input and data regarding how the small electric motors market 
will respond to the proposed standards. In particular, DOE seeks 
comment regarding alternative small electric motor technologies and how 
elasticity between the market for these alternative technologies and 
the market for covered motors could potentially affect the projected 
shipments and energy savings.
    12. The behavior of customers with space-constrained applications, 
the costs they face, and the time-frame over which they may need to 
redesign a system or large piece of equipment to accommodate a larger-
component small electric motor. DOE also seeks further information 
regarding the population and distribution of space-constrained 
customers among motor applications.
    13. The combined effect of the several assumptions and estimates 
that DOE makes in order to estimate the impact of standards under 
expected market shifts. DOE seeks comment regarding its approach and 
suggestions on how forecast uncertainty can be estimated and weighed 
against the potential increases in benefits when selecting a higher 
standard level that may induce a shift in motor purchases.
    14. The appropriateness of using other discount rates in addition 
to seven percent and three percent real to discount future emissions 
reductions; and
    15. The determination of the anticipated environmental impacts of 
the proposed rule, particularly with respect to the methods for valuing 
the expected CO2 and NOX emissions savings due to 
the proposed standards.
    16. The proposed standard level for polyphase small electric 
motors.
    17. The proposed standard level for single-phase (capacitor-start) 
small electric motors.

VIII. Approval of the Office of the Secretary

    The Secretary of Energy has approved publication of today's 
proposed rule.

List of Subjects in 10 CFR Part 431

    Administrative practice and procedure, Confidential business 
information, Energy conservation, Reporting and recordkeeping 
requirements.

    Issued in Washington, DC, on October 27, 2009.
Cathy Zoi,
Assistant Secretary, Energy Efficiency and Renewable Energy.
    For the reasons stated in the preamble, DOE proposes to amend 
chapter II of title 10, Code of Federal Regulations, part 431 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:


[[Page 61500]]


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

    2. Section 431.442 is amended by adding, in alphabetical order, a 
new definition for ``nominal full load efficiency'' to read as follows:


Sec.  431.442  Definitions concerning small electric motors.

* * * * *
    Nominal Full Load Efficiency means the arithmetic mean of the full 
load efficiencies of a population of electric motors of duplicate 
design, where the full load efficiency of each motor in the population 
is the ratio (expressed as a percentage) of the motor's useful power 
output to its total power input when the motor is operated at its full 
rated load, rated voltage, and rated frequency.
* * * * *
    3. Section 431.446 is added to read as follows:


Sec.  431.446  Small electric motors energy conservation standards and 
their effective dates.

    (a) Each small electric motor manufactured (alone or as a component 
of another piece of non-covered equipment) after February 28, 2015, 
shall have a nominal full load efficiency of not less than the 
following:
[GRAPHIC] [TIFF OMITTED] TP24NO09.054

    (b) For purposes of determining the required minimum nominal full 
load efficiency of an electric motor that has a horsepower or kilowatt 
rating between two horsepower or two kilowatt ratings listed in any 
table of efficiency standards in paragraph (a) of this section, each 
such motor shall be deemed to have a listed horsepower or kilowatt 
rating, determined as follows:
    (1) A horsepower at or above the midpoint between the two 
consecutive horsepower ratings shall be rounded up to the higher of the 
two horsepower ratings;
    (2) A horsepower below the midpoint between the two consecutive 
horsepower ratings shall be rounded down to the lower of the two 
horsepower ratings; or
    (3) A kilowatt rating shall be directly converted from kilowatts to 
horsepower using the formula 1 kilowatt = (1/0.746) hp, without 
calculating beyond three significant decimal places, and the resulting 
horsepower shall be rounded in accordance with paragraphs (b)(1) or 
(b)(2) of this section, whichever applies.

[FR Doc. E9-27914 Filed 11-18-09; 11:15 am]
BILLING CODE 6450-01-P