[Federal Register Volume 79, Number 189 (Tuesday, September 30, 2014)]
[Proposed Rules]
[Pages 58948-59020]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-22894]



[[Page 58947]]

Vol. 79

Tuesday,

No. 189

September 30, 2014

Part IV





Department of Energy





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10 CFR Part 431





Energy Conservation Program: Energy Conservation Standards for Small, 
Large, and Very Large Air-Cooled Commercial Package Air Conditioning 
and Heating Equipment; Proposed Rule

  Federal Register / Vol. 79, No. 189 / Tuesday, September 30, 2014 / 
Proposed Rules  

[[Page 58948]]


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DEPARTMENT OF ENERGY

10 CFR Part 431

[Docket Number EERE-2013-BT-STD-0007]
RIN 1904-AC95


Energy Conservation Program: Energy Conservation Standards for 
Small, Large, and Very Large Air-Cooled Commercial Package Air 
Conditioning and Heating Equipment

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

ACTION: Notice of proposed rulemaking (NOPR) and public meeting.

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SUMMARY: The Energy Policy and Conservation Act of 1975 (EPCA), as 
amended, prescribes energy conservation standards for various consumer 
products and certain commercial and industrial equipment, including 
small, large, and very large air-cooled commercial package air 
conditioning and heating equipment. EPCA also requires the U.S. 
Department of Energy (DOE) to determine whether more-stringent, amended 
standards would be technologically feasible and economically justified, 
and would save a significant amount of energy. In this document, DOE 
proposes to amend the energy conservation standards for small, large, 
and very large air-cooled commercial package air conditioning and 
heating equipment. This document also announces a public meeting to 
receive comment on these proposed standards and associated analyses and 
results.

DATES: DOE will hold a public meeting on Thursday, November 6, 2014, 
from 9 a.m. to 4 p.m., in Washington, DC. The meeting will also be 
broadcast as a webinar. See section VII Public Participation for 
webinar registration information, participant instructions, and 
information about the capabilities available to webinar participants.
    DOE will accept comments, data, and information regarding this 
notice of proposed rulemaking (NOPR) before and after the public 
meeting, but no later than December 1, 2014. See section VII Public 
Participation for details.

ADDRESSES: The public meeting will be held at the U.S. Department of 
Energy, Forrestal Building, Room 4A-104, 1000 Independence Avenue SW., 
Washington, DC 20585. To attend, please notify Ms. Brenda Edwards at 
(202) 586-2945. Please note that foreign nationals visiting DOE 
Headquarters are subject to advance security screening procedures. Any 
foreign national wishing to participate in the meeting should advise 
DOE as soon as possible by contacting Ms. Edwards to initiate the 
necessary procedures. Please also note that those wishing to bring 
laptops into the Forrestal Building will be required to obtain a 
property pass. Visitors should avoid bringing laptops, or allow an 
extra 45 minutes. Persons can attend the public meeting via webinar. 
For more information, refer to the Public Participation section VII.
    Any comments submitted must identify the NOPR for Energy 
Conservation Standards for small, large, and very large air-cooled 
commercial package air conditioning and heating equipment, and provide 
docket number EE-2013-BT-STD-0007 and/or regulatory information number 
(RIN) number 1904-AC95. Comments may be submitted using any of the 
following methods:
    1. Federal eRulemaking Portal: www.regulations.gov. Follow the 
instructions for submitting comments.
    2. Email: [email protected]. Include the docket 
number and/or RIN in the subject line of the message.
    3. Mail: Ms. Brenda Edwards, U.S. Department of Energy, Building 
Technologies Program, Mailstop EE-5B, 1000 Independence Avenue SW., 
Washington, DC 20585-0121. If possible, please submit all items on a 
CD. It is not necessary to include printed copies.
    4. 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. If possible, 
please submit all items on a CD, in which case it is not necessary to 
include printed copies.
    Written comments regarding the burden-hour estimates or other 
aspects of the collection-of-information requirements contained in this 
proposed rule may be submitted to Office of Energy Efficiency and 
Renewable Energy through the methods listed above and by email to 
[email protected].
    For detailed instructions on submitting comments and additional 
information on the rulemaking process, see section VII of this document 
(Public Participation).
    Docket: The docket, which includes Federal Register notices, public 
meeting attendee lists and transcripts, comments, and other supporting 
documents/materials, is available for review at regulations.gov. All 
documents in the docket are listed in the regulations.gov index. 
However, some documents listed in the index, such as those containing 
information that is exempt from public disclosure, may not be publicly 
available.
    A link to the docket Web page can be found at: http://www.regulations.gov/#!docketDetail;D=EERE-2013-BT-STD-0007. This Web 
page will contain a link to the docket for this notice on the 
regulations.gov site. The regulations.gov Web page will contain simple 
instructions on how to access all documents, including public comments, 
in the docket. See section VII for further information on how to submit 
comments through www.regulations.gov.
    For further information on how to submit a comment, review other 
public comments and the docket, or participate in the public meeting, 
contact Ms. Brenda Edwards at (202) 586-2945 or by email: 
[email protected].

FOR FURTHER INFORMATION CONTACT: Mr. John Cymbalsky, U.S. Department of 
Energy, Office of Energy Efficiency and Renewable Energy, Building 
Technologies Program, EE-5B, 1000 Independence Avenue SW., Washington, 
DC 20585-0121. Telephone: (202)-287-1692. Email: 
[email protected].
    Mr. Michael Kido, U.S. Department of Energy, Office of the General 
Counsel, Mailstop GC-71, 1000 Independence Avenue SW., Washington, DC 
20585-0121. Telephone: (202) 586-8145. Email: [email protected].

SUPPLEMENTARY INFORMATION: 

Table of Contents

I. Summary of the Proposed Rule
    A. Benefits and Costs to Customers
    B. Impact on Manufacturers
    C. National Benefits
II. Introduction
    A. Authority
    B. Background
    1. Current Standards
    2. History of Standards Rulemaking for Small, Large, and Very 
Large Air-Cooled Commercial Package Air Conditioning and Heating 
Equipment
III. General Discussion
    A. Energy Efficiency Descriptor
    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 Cost
    c. Energy Savings
    d. Lessening of Utility or Performance of Products
    e. Impact of Any Lessening of Competition

[[Page 58949]]

    f. Need for National Energy Conservation
    g. Other Factors
    2. Rebuttable Presumption
IV. Methodology and Discussion of Related Comments
    A. Market and Technology Assessment
    1. General
    2. Scope of Coverage and Equipment Classes
    3. Technology Options
    B. Screening Analysis
    C. Engineering Analysis
    1. Methodology
    2. Baseline Efficiency Levels
    3. Incremental Efficiency Levels
    4. Equipment Testing, Reverse Engineering, Energy Modeling, and 
Cost-Efficiency Results
    D. Markups Analysis
    E. Energy Use Analysis
    1. Energy Use Simulations
    2. Generalized Building Sample
    F. Life-Cycle Cost and Payback Period Analysis
    1. Equipment Costs
    2. Installation Costs
    3. Unit Energy Consumption
    4. Electricity Prices and Electricity Price Trends
    5. Maintenance Costs
    6. Repair Costs
    7. Lifetime
    8. Discount Rate
    9. Base Case Market Efficiency Distribution
    10. Compliance Date
    11. Payback Period Inputs
    12. Rebuttable-Presumption Payback Period
    G. Shipments Analysis
    1. Shipments by Market Segment
    2. Shipment Market Shares by Efficiency Level
    H. National Impact Analysis
    1. Efficiency Trends
    2. National Energy Savings
    3. Net Present Value of Customer Benefit
    a. Total Annual Installed Cost
    b. Total Annual Operating Cost Savings
    I. Customer Subgroup Analysis
    J. Manufacturer Impact Analysis
    1. Overview
    2. Government Regulatory Impact Model
    a. Government Regulatory Impact Model Key Inputs
    b. Government Regulatory Impact Model Scenarios
    c. Manufacturer Interviews
    K. Emissions Analysis
    L. Monetizing Carbon Dioxide and Other Emissions Impacts
    1. Social Cost of Carbon
    2. Valuation of Other Emissions Reductions
    M. Utility Impact Analysis
    N. Employment Impact Analysis
V. Analytical Results
    A. Trial Standard Levels
    B. Economic Justification and Energy Savings
    1. Economic Impacts on Individual Customers
    a. Life-Cycle Cost and Payback Period
    b. Customer Subgroup Analysis
    c. 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. Cumulative Regulatory Burden
    3. National Impact Analysis
    a. Significance of Energy Savings
    b. Net Present Value of Customer Costs and Benefits
    c. Indirect Impacts on Employment
    4. Impact on Utility or Performance
    5. Impact of Any Lessening of Competition
    6. Need of the Nation to Conserve Energy
    7. Summary of National Economic Impacts
    8. Other Factors
    C. Proposed Standards
    1. Benefits and Burdens of Trial Standard Levels Considered for 
Small, Large, and Very Large Air-Cooled Commercial Package Air 
Conditioning and Heating Equipment
    2. Summary of Benefits and Costs (Annualized) of the Proposed 
Standards
VI. Procedural Issues and Regulatory Review
    A. Review Under Executive Orders 12866 and 13563
    B. Review Under the Regulatory Flexibility Act
    1. Description and Estimated Number of Small Entities Regulated
    2. Description and Estimate of Compliance Requirements
    3. Duplication, Overlap, and Conflict with Other Rules and 
Regulations
    4. Significant Alternatives to the Rule
    C. Review Under the Paperwork Reduction Act
    D. Review Under the National Environmental Policy Act of 1969
    E. Review Under Executive Order 13132
    F. Review Under Executive Order 12988
    G. Review Under the Unfunded Mandates Reform Act of 1995
    H. Review Under the Treasury and General Government 
Appropriations Act, 1999
    I. Review Under Executive Order 12630
    J. Review Under the Treasury and General Government 
Appropriations Act, 2001
    K. Review Under Executive Order 13211
    L. Review Under the Information Quality Bulletin for Peer Review
VII. Public Participation
    A. Attendance at the Public Meeting
    B. Procedure for Submitting Prepared General Statements For 
Distribution
    C. Conduct of the 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

    Title III, Part B \1\ of the Energy Policy and Conservation Act of 
1975 (EPCA or the Act), Public Law 94-163 (42 U.S.C. 6291-6309, as 
codified), established the Energy Conservation Program for Consumer 
Products Other Than Automobiles. Pursuant to EPCA, any new or amended 
energy conservation standard that DOE prescribes for certain equipment, 
such as small, large, and very large air-cooled commercial package air 
conditioning and heating equipment (also known as commercial unitary 
air conditioners and heat pumps), shall be designed to achieve the 
maximum improvement in energy efficiency that is technologically 
feasible and economically justified. (42 U.S.C. 6313(a)(6)(A)(ii)(II)). 
Furthermore, the new or amended standard must result in a significant 
conservation of energy. (42 U.S.C. 6313(a)(6)(A)(ii)(II)). In 
accordance with these and other statutory provisions discussed in this 
notice, including EPCA's requirement that DOE review its standards for 
this equipment every six years, DOE proposes amended energy 
conservation standards for small, large, and very large air-cooled 
commercial package air conditioning and heating equipment (also 
referred to in this notice as small, large, and very large air-cooled 
commercial unitary air conditioners and commercial unitary heat pumps). 
The proposed standards, which are collectively characterized as Trial 
Standard Level 3 (TSL 3), prescribe the minimum allowable efficiency 
level based on an integrated energy efficiency ratio (IEER) and, for 
air-cooled commercial unitary heat pumps, coefficient of performance 
(COP). These proposed levels are shown in Table I.1. These proposed 
standards, if adopted, would apply to all equipment listed in Table I.1 
and manufactured in and intended for distribution and sale in the U.S., 
or imported into, the U.S. on or after the date three years after the 
publication of the final rule for this equipment.
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    \1\ For editorial reasons, upon codification in the U.S. Code, 
Part B was redesignated Part A.

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    Table I.1--Proposed Energy Conservation Standards for Small, Large, and Very Large Commercial Package Air
                                       Conditioning and Heating Equipment
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                   Equipment type                            Heating type          Proposed energy conservation
                                                                                             standard
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Small Commercial Packaged Air      AC                 Electric Resistance        14.8 IEER.
 Conditioners (AC) and Heat Pump                       Heating or No Heating.    14.6 IEER.
 (HP) (Air-Cooled)-->=65,000 Btu/                     All Other Types of
 h and <135,000 Btu/h Cooling                          Heating.
 Capacity.
                                   HP                 Electric Resistance        14.1 IEER, 3.5 COP.
                                                       Heating or No Heating.    13.9 IEER, 3.4 COP.
                                                      All Other Types of
                                                       Heating.
Large Commercial Packaged AC and   AC                 Electric Resistance        14.2 IEER.
 HP (Air-Cooled)-->=135,000 Btu/h                      Heating or No Heating.    14.0 IEER.
 and <240,000 Btu/h Cooling                           All Other Types of
 Capacity.                                             Heating.
                                   HP                 Electric Resistance        13.4 IEER, 3.3 COP.
                                                       Heating or No Heating.    13.2 IEER, 3.3 COP.
                                                      All Other Types of
                                                       Heating.
Very Large Commercial Packaged AC  AC                 Electric Resistance        13.5 IEER.
 and HP (Air-Cooled)-->=240,000                        Heating or No Heating.    13.3 IEER.
 Btu/h and <760,000 Btu/h Cooling                     All Other Types of
 Capacity.                                             Heating.
                                   HP                 Electric Resistance        12.5 IEER, 3.2 COP.
                                                       Heating or No Heating.    12.3 IEER, 3.2 COP.
                                                      All Other Types of
                                                       Heating.
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A. Benefits and Costs to Customers

    Table I.2 presents DOE's evaluation of the economic impacts of the 
proposed standards on customers of small, large, and very large air-
cooled commercial unitary air conditioners (CUAC), as measured by the 
average life-cycle cost (LCC) savings and the median payback period.\2\ 
The average LCC savings are positive for all CUAC equipment classes, 
and the PBP is less than the average lifetime of the equipment, which 
is estimated to be 18.4 years. These classes account for approximately 
90 percent of total shipments of small, large, and very large air-
cooled CUAC and commercial unitary heat pumps (CUHP).\3\
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    \2\ The payback period measures the amount of time it takes for 
savings in operating costs to equal the incremental cost increase.
    \3\ DOE did not analyze LCC impacts for small, large, and very 
large air-cooled CUHP because energy modeling was performed only for 
CUAC equipment. The reasons for this approach are discussed in 
section IV.C.4.

 Table I.2--Impacts of Proposed Standards on Customers of Small, Large,
and Very Large Commercial Package Air Conditioning and Heating Equipment
------------------------------------------------------------------------
                                                              Median
                                            Average LCC       payback
             Equipment class                  savings         period
                                              (2013$)         (years)
------------------------------------------------------------------------
Small Commercial Packaged Air                      4,779             3.9
 Conditioners-->=65,000 Btu/h and
 <135,000 Btu/h Cooling Capacity........
Large Commercial Packaged Air                      3,469             6.6
 Conditioners-->=135,000 Btu/h and
 <240,000 Btu/h Cooling Capacity........
Very Large Commercial Packaged Air                16,477             2.5
 Conditioners-->=240,000 Btu/h and
 <760,000 Btu/h Cooling Capacity........
------------------------------------------------------------------------

    DOE's analysis of the impacts of the proposed standards on 
consumers is described in section IV.F of this proposed rulemaking.

B. Impact on Manufacturers

    The industry net present value (INPV) is the sum of the discounted 
cash flows to the industry from the base year (2014) through the end of 
the analysis period (2048). Using a real discount rate of 6.2 percent, 
DOE estimates that the industry net present value for manufacturers is 
$1,261 million.\4\ Under the proposed standards, DOE expects that INPV 
will be reduced by 7.02 to 24.71 percent, which is a reduction of 
approximately $88.55 to $311.58 million. Based on comments from 
manufacturers of covered equipment, the industry is currently going 
through an extended period of consolidation. It is possible that the 
proposed standards would contribute to continued consolidation.
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    \4\ All monetary values in this document are expressed in 2013 
dollars and, where appropriate, are discounted to 2014 unless 
explicitly stated otherwise.
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    DOE's analysis of the impacts of the proposed standards on 
manufacturers is described in section IV.J of this proposed rulemaking.

C. National Benefits and Costs

    DOE's analyses indicate that the proposed standards would save a 
significant amount of energy. The lifetime savings for small, large, 
and very large air-cooled CUAC and CUHP purchased in the 30-year period 
that begins in the year of compliance with amended standards (2019-
2048), in comparison to the base case without amended standards, amount 
to 11.7 quadrillion Btu of energy (quads).\5\ This is a savings of 29 
percent relative to the energy use of this equipment in the base 
case.\6\
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    \5\ A quad is equal to 10\15\ British thermal units (Btu).
    \6\ The base case assumptions are described in section IV.H.
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    The cumulative net present value (NPV) of total customer costs and 
savings of the proposed standards for small, large, and very large air-
cooled CUAC and CUHP ranges from $16.5 billion to $50.8 billion for 7-
percent and 3-percent discount rates, respectively. This NPV expresses 
the estimated total value of future operating-cost savings minus the 
estimated increased product costs for products purchased in 2019-2048.
    In addition, the proposed standards would have significant 
environmental benefits.\7\ The energy savings described

[[Page 58951]]

above are estimated to result in cumulative emission reductions of 
1,085 million metric tons (Mt) \8\ of carbon dioxide (CO2), 
3,072 thousand tons of methane (CH4), 15.5 thousand tons of 
nitrous oxide (N2O), 2,934 thousand tons of sulfur dioxide 
(SO2), 1,021 thousand tons of nitrogen oxides 
(NOX) and 3.57 tons of mercury (Hg).\9\ The estimated 
CO2 emissions reductions through 2030 amount to 64 Mt.\10\ 
These projections are expected to change in light of recently available 
data from the estimated from the Annual Energy Outlook (AEO) 2014 data, 
which suggest a drop in potential emissions reductions over a similar 
period of time.
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    \7\ DOE calculated emissions reductions relative to the Annual 
Energy Outlook 2013 (AEO 2013) Reference case, which generally 
represents current legislation and environmental regulations for 
which implementing regulations were available as of December 31, 
2012. Emissions factors based on the Annual Energy Outlook 2014 (AEO 
2014), which became available too late for incorporation into this 
analysis, indicate that a significant decrease in the cumulative 
emission reductions of carbon dioxide, methane, nitrous oxide, 
sulfur dioxide, nitrogen oxides and mercury from the proposed 
standards can be expected if the projections of power plant 
utilization assumed in AEO 2014 are realized. For example, the 
estimated amount of cumulative emission reductions of CO2 are 
expected to decrease by 36% from DOE's current estimate (from 1,085 
Mt to 697Mt) based on the projections in AEO 2014 relative to AEO 
2013. The monetized benefits from GHG reductions would likely 
decrease by a comparable amount. DOE plans to use emissions factors 
based on the most recent AEO available for the next phase of this 
rulemaking, which may or may not be AEO 2014, depending on the 
timing of the issuance of the next rulemaking document.
    \8\ A metric ton is equivalent to 1.1 short tons. Results for 
NOX and Hg are presented in short tons.
    \9\ The reductions are measured over the period in which 
equipment purchased in 2019-2048 continue to operate.
    \10\ These results are based on emissions factors in AEO 2013, 
the most recent version available at the time of this analysis. Use 
of emissions factors in AEO 2014 would result in a 36% decrease in 
cumulative emissions reductions for CO2 thus decreasing 
the estimate of 64 Mt of CO2 reductions through the year 2030 to 41 
Mt. In the next phase of this rulemaking, DOE plans to use emissions 
factors based on the most recent AEO available, which may or may not 
be AEO 2014, depending on the timing of the issuance of the next 
rulemaking document.
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    The value of the CO2 reductions is calculated using a 
range of values per metric ton of CO2 (otherwise known as 
the Social Cost of Carbon, or SCC) developed by an interagency 
process.\11\ The derivation of the SCC values is discussed in section 
IV.L. Using discount rates appropriate for each set of SCC values (see 
Table I.3), DOE estimates the present monetary value of the 
CO2 emissions reduction to be between $6.1 billion and $95.9 
billion, with a value of $30.9 billion using the central SCC case 
represented by $40.5[sol]t in 2015. Additionally, DOE estimates the 
present monetary value of the NOX emissions reduction to be 
$343 million and $1,060 million at 7-percent and 3-percent discount 
rates, respectively.
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    \11\ Technical Update of the Social Cost of Carbon for 
Regulatory Impact Analysis Under Executive Order 12866. Interagency 
Working Group on Social Cost of Carbon, United States Government. 
May 2013; revised November 2013. http://www.whitehouse.gov/sites/default/files/omb/assets/inforeg/technical-update-social-cost-of-carbon-for-regulator-impact-analysis.pdf.
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    Table I.3 summarizes the national economic costs and benefits 
expected to result from the proposed standards for small, large, and 
very large air-cooled CUAC and CUHP.

 Table I.3--Summary of National Economic Benefits and Costs of Proposed
     Energy Conservation Standards for Small, Large, and Very Large
       Commercial Package Air Conditioning and Heating Equipment *
------------------------------------------------------------------------
                                        Present value     Discount rate
              Category                  billion 2013$          (%)
------------------------------------------------------------------------
                                Benefits
------------------------------------------------------------------------
Operating Cost Savings..............              20.6                 7
                                                  59.7                 3
CO2 Reduction Monetized Value ($12.0/              6.1                 5
 t case) **.........................
CO2 Reduction Monetized Value ($40.5/             30.9                 3
 t case) **.........................
CO2 Reduction Monetized Value ($62.4/             49.9               2.5
 t case) **.........................
CO2 Reduction Monetized Value ($119/              95.9                 3
 t case) **.........................
NOX Reduction Monetized Value (at                  0.3                 7
 $2,684/ton) **.....................
                                                   1.1                 3
Total Benefits [dagger].............              51.9                 7
                                                  91.6                 3
------------------------------------------------------------------------
                                  Costs
------------------------------------------------------------------------
Incremental Installed Costs.........               4.1                 7
                                                   8.8                 3
------------------------------------------------------------------------
                           Total Net Benefits
------------------------------------------------------------------------
Including Emissions Reduction                     47.8                 7
 Monetized Value [dagger]...........
                                                  82.8                 3
------------------------------------------------------------------------
* This table presents the costs and benefits associated with small,
  large, and very large air-cooled CUAC and CUHP shipped in 2019-2048.
  These results include benefits to customers which accrue after 2048
  from the products purchased in 2019-2048. The results account for the
  incremental variable and fixed costs incurred by manufacturers due to
  the standard, some of which may be incurred in preparation for the
  rule.
** The CO2 values represent global monetized values of the SCC, in
  2013$, in 2015 under several scenarios of the updated SCC values. The
  first three cases use the averages of SCC distributions calculated
  using 5%, 3%, and 2.5% discount rates, respectively. The fourth case
  represents the 95th percentile of the SCC distribution calculated
  using a 3% discount rate. The SCC time series used by DOE incorporate
  an escalation factor. The value for NOX is the average of the low and
  high values found in the literature.\12\
[dagger] Total Benefits for both the 3% and 7% cases are derived using
  the series corresponding to average SCC with 3-percent discount rate.

    The benefits and costs of today's proposed standards, for products 
sold in 2019-2048, can also be expressed in terms of annualized values. 
The annualized monetary values are the sum of (1) the annualized 
national economic

[[Page 58952]]

value of the benefits from consumer operation of products that meet the 
proposed standards; consisting primarily of operating cost savings from 
using less energy, minus increases in equipment purchase and 
installation costs, which is another way of representing customer NPV, 
and (2) the annualized monetary value of the benefits of CO2 
and NOX emission reductions.\13\
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    \12\ These results are based on emissions factors in AEO 2013, 
the most recent version available at the time of this analysis. Use 
of emissions factors in AEO 2014 would result in a significant 
decrease in cumulative emissions reductions for CO2, 
SO2, and Hg. For example, the estimated decrease for 
CO2 emissions reductions is 36%. The monetized benefits 
from GHG reductions would likely decrease by a comparable amount. In 
the next phase of this rulemaking, DOE plans to use emissions 
factors based on the most recent AEO available, which may or may not 
be AEO 2014, depending on the timing of the issuance of the next 
rulemaking document.
    \13\ DOE used a two-step calculation process to convert the 
time-series of costs and benefits into annualized values. First, DOE 
calculated a present value in 2013, the year used for discounting 
the NPV of total customer costs and savings, for the time-series of 
costs and benefits using discount rates of three and seven percent 
for all costs and benefits except for the value of CO2 
reductions. For the latter, DOE used a range of discount rates, as 
shown in Table I.4. From the present value, DOE then calculated the 
fixed annual payment over a 30-year period (2019 through 2048) that 
yields the same present value. The fixed annual payment is the 
annualized value. Although DOE calculated annualized values, this 
does not imply that the time-series of cost and benefits from which 
the annualized values were determined is a steady stream of 
payments.
---------------------------------------------------------------------------

    Although combining the values of operating savings and 
CO2 emission reductions provides a useful perspective, two 
issues should be considered. First, the national operating savings are 
domestic U.S. consumer monetary savings that occur as a result of 
market transactions while the value of CO2 reductions is 
based on a global value. Second, the assessments of operating cost 
savings and CO2 savings are performed with different methods 
that use different time frames for analysis. The national operating 
cost savings is measured for the lifetime of small, large, and very 
large air-cooled CUAC and CUHP shipped in 2019-2048. The SCC values, on 
the other hand, reflect the present value of some future climate-
related impacts resulting from the emission of one ton of carbon 
dioxide in each year. These impacts continue well beyond 2100.
    Estimates of annualized benefits and costs of the proposed 
standards are shown in Table I.4. The results under the primary 
estimate are as follows. Using a 7-percent discount rate for benefits 
and costs other than CO2 reduction, for which DOE used a 3-
percent discount rate along with the average SCC series that uses a 3-
percent discount rate, the cost of the standards proposed in today's 
rule is $430 million per year in increased equipment costs, while the 
benefits are $2,177 million per year in reduced equipment operating 
costs, $1,774 million in CO2 reductions,\14\ and $36 million 
in reduced NOX emissions. In this case, the net benefit 
amounts to $3,558 million per year.\15\ Using a 3-percent discount rate 
for all benefits and costs and the average SCC series, the cost of the 
standards proposed in today's rule is $507 million per year in 
increased equipment costs, while the benefits are $3,426 million per 
year in reduced operating costs, $1,774 million in CO2 
reductions,\16\ and $61 million in reduced NOX emissions. In 
this case, the net benefit amounts to $4,755 million per year.\17\
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    \14\ These results are based on emissions factors in AEO 2013, 
the most recent version available at the time of this analysis. Use 
of emissions factors in AEO 2014 would result in a significant 
decrease in cumulative emissions reductions for CO2, 
SO2, and Hg. For example, the estimated decrease for 
CO2 emissions reductions is 36%. The monetized benefits 
from GHG reductions would likely decrease by a comparable amount. In 
the next phase of this rulemaking, DOE plans to use emissions 
factors based on the most recent AEO available, which may or may not 
be AEO 2014, depending on the timing of the issuance of the next 
rulemaking document.
    \15\ These results are based on emissions factors in AEO 2013, 
the most recent version available at the time of this analysis. Use 
of emissions factors in AEO 2014 would result in a significant 
decrease in cumulative emissions reductions for CO2, 
SO2, and Hg. For example, the estimated decrease for 
CO2 emissions reductions is 36%. In the next phase of 
this rulemaking, DOE plans to use emissions factors based on the 
most recent AEO available, which may or may not be AEO 2014, 
depending on the timing of the issuance of the next rulemaking 
document.
    \16\ These results are based on emissions factors in AEO 2013, 
the most recent version available at the time of this analysis. Use 
of emissions factors in AEO 2014 would result in a significant 
decrease in cumulative emissions reductions for CO2, 
SO2, and Hg. For example, the estimated decrease for 
CO2 emissions reductions is 36%. In the next phase of 
this rulemaking, DOE plans to use emissions factors based on the 
most recent AEO available, which may or may not be AEO 2014, 
depending on the timing of the issuance of the next rulemaking 
document.
    \17\ These results are based on emissions factors in AEO 2013, 
the most recent version available at the time of this analysis. Use 
of emissions factors in AEO 2014 would result in a significant 
decrease in cumulative emissions reductions for CO2, 
SO2, and Hg. For example, the estimated decrease for 
CO2 emissions reductions is 36%. In the next phase of 
this rulemaking, DOE plans to use emissions factors based on the 
most recent AEO available, which may or may not be AEO 2014, 
depending on the timing of the issuance of the next rulemaking 
document.

  Table I.4--Annualized Benefits and Costs of Proposed Energy Conservation Standards for Small, Large, and Very
                        Large Commercial Package Air Conditioning and Heating Equipment *
----------------------------------------------------------------------------------------------------------------
                                                                           Low net benefits    High net benefits
                                     Discount rate     Primary estimate        estimate            estimate
----------------------------------------------------------------------------------------------------------------
                                                                          million 2013$/year
----------------------------------------------------------------------------------------------------------------
                                                    Benefits
----------------------------------------------------------------------------------------------------------------
Operating Cost Savings..........  7%................  2,177.............  1,984.............  2,407
                                  3%................  3,426.............  3,127.............  3,781
CO2 Reduction Monetized Value     5%................  484...............  467...............  505
 ($12.0/t case) **.
CO2 Reduction Monetized Value     3%................  1,774.............  1,714.............  1,846
 ($40.5/t case) **.
CO2 Reduction Monetized Value     2.5%..............  2,632.............  2,543.............  2,737
 ($62.4/t case) **.
CO2 Reduction Monetized Value     3%................  5,504.............  5,317.............  5,727
 ($119/t case) **.
NOX Reduction Monetized Value     7%................  36.18.............  34.75.............  37.90
 (at $2,684/ton) **.              3%................  60.89.............  58.85.............  63.40
    Total Benefits [dagger].....  7% plus CO2 range.  2,698 to 7,718....  2,486 to 7,336....  2,950 to 8,172
                                  7%................  3,988.............  3,733.............  4,291
                                  3% plus CO2 range.  3,972 to 8,991....  3,653 to 8,503....  4,349 to 9,572
                                  3%................  5,262.............  4,900.............  5,691
----------------------------------------------------------------------------------------------------------------
                                                      Costs
----------------------------------------------------------------------------------------------------------------
Incremental Product Costs.......  7%................  430...............  350...............  485

[[Page 58953]]

 
                                  3%................  507...............  433...............  550
----------------------------------------------------------------------------------------------------------------
                                                  Net Benefits
----------------------------------------------------------------------------------------------------------------
    Total [dagger]..............  7% plus CO2 range.  2,268 to 7,288....  2,135 to 6,986....  2,465 to 7,687
                                  7%................  3,558.............  3,383.............  3,806
                                  3%................  4,755.............  4,468.............  5,140
                                  3% plus CO2 range.  3,465 to 8,484....  3,220 to 8,071....  3,799 to 9,021
----------------------------------------------------------------------------------------------------------------
* This table presents the annualized costs and benefits associated with small, large, and very large air-cooled
  CUAC and CUHP shipped in 2019-2048. These results include benefits to customers which accrue after 2048 from
  the products purchased in 2019-2048. The results account for the incremental variable and fixed costs incurred
  by manufacturers due to the standard, some of which may be incurred in preparation for the rule. The Primary,
  Low Benefits, and High Benefits Estimates utilize projections of energy prices from the AEO2013 Reference
  case, Low Economic Growth case, and High Economic Growth case, respectively. In addition, incremental product
  costs reflect no change for projected product price trends in the Primary Estimate, an increasing trend for
  projected product prices in the Low Benefits Estimate, and a decreasing trend for projected product prices in
  the High Benefits Estimate. The methods used to derive projected price trends are explained in section IV.F.
** The CO2 values represent global monetized values of the SCC, in 2013$, in 2015 under several scenarios of the
  updated SCC values. The first three cases use the averages of SCC distributions calculated using 5%, 3%, and
  2.5% discount rates, respectively. The fourth case represents the 95th percentile of the SCC distribution
  calculated using a 3% discount rate. The SCC time series incorporate an escalation factor. The value for NOX
  is the average of the low and high values used in DOE's analysis.\18\
[dagger] Total Benefits for both the 3-percent and 7-percent cases are derived using the series corresponding to
  average SCC with 3-percent discount rate. In the rows labeled ``7% plus CO2 range'' and ``3% plus CO2 range,''
  the operating cost and NOX benefits are calculated using the labeled discount rate, and those values are added
  to the full range of CO2 values.

    DOE's analysis of the national impacts of the proposed standards is 
described in sections IV.H, IV.K and IV.L of this proposed rulemaking.
---------------------------------------------------------------------------

    \18\ These results are based on emissions factors in AEO 2013, 
the most recent version available at the time of this analysis. Use 
of emissions factors in AEO 2014 would result in a significant 
decrease in cumulative emissions reductions for CO2, 
SO2, and Hg. For example, the estimated decrease for 
CO2 emissions reductions is 36%. The monetized benefits 
from GHG reductions would likely decrease by a comparable amount. In 
the next phase of this rulemaking, DOE plans to use emissions 
factors based on the most recent AEO available, which may or may not 
be AEO 2014, depending on the timing of the issuance of the next 
rulemaking document.
---------------------------------------------------------------------------

    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 the 
significant conservation of energy. DOE further notes that products 
achieving these standard levels are already commercially available for 
most of the equipment classes covered by this proposal. Based on the 
analyses described above, DOE has concluded that the benefits of the 
proposed standards to the Nation (energy savings, positive NPV of 
customer benefits, customer LCC savings, and emission reductions) would 
outweigh the burdens (loss of INPV for manufacturers and LCC increases 
for some customers).
    DOE also considered more-stringent energy efficiency levels as 
trial standard levels, and is considering them in this rulemaking. 
However, DOE has concluded that the potential burdens of the more-
stringent energy efficiency levels would outweigh the projected 
benefits. Based on consideration of the public comments DOE receives in 
response to this notice and related information collected and analyzed 
during the course of this rulemaking effort, DOE may adopt energy 
efficiency levels presented in this NOPR that are either higher or 
lower than the proposed standards, or some combination of level(s) that 
incorporate the proposed standards in part.

II. Introduction

    The following section briefly discusses the statutory authority 
underlying this proposal, as well as some of the relevant historical 
background related to the establishment of standards for small, large, 
and very large air-cooled CUAC and CUHP.

A. Authority

    Title III, Part C \19\ of the Energy Policy and Conservation Act of 
1975 (EPCA or the Act), Public Law 94-163 (42 U.S.C. 6311-6317, as 
codified), was added by the National Energy Conservation Policy Act 
(Pub. L. 95-619 (Nov. 9, 1978). That law established the Energy 
Conservation Program for Certain Industrial Equipment, which includes 
provisions covering the commercial heating and air-conditioning 
equipment that is the subject of this notice.\20\ In general, this 
program addresses the energy efficiency of certain types of commercial 
and industrial equipment. Relevant provisions of the Act include 
definitions (42 U.S.C. 6311), energy conservation standards (42 U.S.C. 
6313), test procedures (42 U.S.C. 6314), labelling provisions (42 
U.S.C. 6315), and the authority to require information and reports from 
manufacturers (42 U.S.C. 6316).
---------------------------------------------------------------------------

    \19\ For editorial reasons, upon codification in the U.S. Code, 
Part C was re-designated Part A-1.
    \20\ All references to EPCA in this document refer to the 
statute as amended through the American Energy Manufacturing 
Technical Corrections Act of 2012, Public Law 112-210 (Dec. 18, 
2012).
---------------------------------------------------------------------------

    Section 342(a) of EPCA concerns energy conservation standards for 
small, large, and very large, air-cooled CUAC and CUHP. (42 U.S.C. 
6313(a)) This category of equipment has a rated capacity between 64,000 
Btu/h and 760,000 Btu/h. It is designed to heat and cool commercial 
buildings and is typically located on the building's rooftop. Section 
5(b) of the American Energy Manufacturing Technical Corrections Act of 
2012 (Pub. L. No. 112-210 (Dec. 18, 2012) (AEMTCA) amended Section 
342(a)(6) of EPCA. Among other things, AEMTCA modified the manner in 
which DOE must amend the energy efficiency standards for certain types 
of commercial and industrial equipment. DOE is typically obligated 
either to adopt those standards developed by the American Society of 
Heating, Refrigerating, and Air-Conditioning Engineers (ASHRAE)--or to 
adopt levels more stringent than the ASHRAE levels if there is clear 
and convincing evidence in support of doing so (42 U.S.C. 
6313(a)(6)(A)). AEMTCA added to this process a requirement that DOE 
initiate a rulemaking to consider amending the standards for any 
covered equipment as to which more than 6 years has elapsed since the 
issuance of

[[Page 58954]]

the most recent final rule establishing or amending a standard for the 
equipment as of the date of AEMTCA's enactment, December 18, 2012. (42 
U.S.C. 6313(a)(6)(C)(vi)) Under this new framework, DOE must issue 
either a notice of determination that the current standards do not need 
to be amended or a notice of proposed rulemaking (NOPR) containing 
proposed standards by December 31, 2013. See 42 U.S.C. 6313(a)(6)(C)(i) 
and (vi).\21\ Today's NOPR satisfies the mandatory review process 
imposed by AEMTCA.
---------------------------------------------------------------------------

    \21\ Subparagraph (A) and subparagraph (B) refer to 42 U.S.C. 
6313(a)(6).
---------------------------------------------------------------------------

    Pursuant to EPCA, DOE's energy conservation program for covered 
equipment consists essentially of four parts: (1) Testing; (2) 
labeling; (3) the establishment of Federal energy conservation 
standards; and (4) certification and enforcement procedures. Subject to 
certain criteria and conditions, DOE is required to develop test 
procedures to measure the energy efficiency, energy use, or estimated 
annual operating cost of covered equipment. (42 U.S.C. 6314) 
Manufacturers of covered equipment must use the prescribed DOE test 
procedure as the basis for certifying to DOE that their equipment 
comply with the applicable energy conservation standards adopted under 
EPCA and when making representations to the public regarding the energy 
use or efficiency of those equipment. (42 U.S.C. 6314(d)) Similarly, 
DOE must use these test procedures to determine whether the equipment 
comply with standards adopted pursuant to EPCA. Id. The DOE test 
procedures for small, large, and very large air-cooled CUAC and CUHP 
currently appear at 10 CFR 431.96.
    When setting standards for the equipment addressed by this proposed 
rulemaking, EPCA prescribes specific statutory criteria for DOE to 
consider. See generally 42 U.S.C. 6313(a)(6)(A)-(C). As indicated 
above, any amended standard for covered equipment must be designed to 
achieve the maximum improvement in energy efficiency that is 
technologically feasible and economically justified. Furthermore, DOE 
may not adopt any standard that would not result in the significant 
conservation of energy. Moreover, DOE may not prescribe a standard for 
certain equipment, if (1) no test procedure has been established for 
the equipment, or (2) if DOE determines by rule that the proposed 
standard is not technologically feasible or economically justified. In 
deciding whether a proposed standard is economically justified, DOE 
must determine whether the benefits of the standard exceed its burdens. 
DOE must make this determination after receiving comments on the 
proposed standard, and by considering, to the greatest extent 
practicable, the following seven factors:
    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 amount of energy, or as applicable, water, 
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;
    6. The need for national energy and water conservation; and
    7. Other factors the Secretary of Energy (Secretary) considers 
relevant. (42 U.S.C. 6313(a)(6)(B))
    EPCA, as codified, also contains what is known as an ``anti-
backsliding'' provision, which prevents the Secretary from prescribing 
any amended standard that either increases the maximum allowable energy 
use or decreases the minimum required energy efficiency of covered 
equipment. Also, the Secretary may not prescribe an amended or new 
standard if interested persons have established by a preponderance of 
the evidence that the standard is likely to result in the 
unavailability in the United States of any covered equipment type (or 
class) of performance characteristics (including reliability), 
features, sizes, capacities, and volumes that are substantially the 
same as those generally available in the United States. (42 U.S.C. 
6313(a)(6)(B)(iii))
    Further, under EPCA's provisions for consumer products, there is a 
rebuttable presumption that a standard is economically justified if the 
Secretary finds that the additional cost to the consumer of purchasing 
equipment complying with an energy conservation standard level will be 
less than three times the value of the energy savings during the first 
year that the consumer will receive as a result of the standard, as 
calculated under the applicable test procedure. For this rulemaking, 
DOE considered the criteria for rebuttable presumption as part of its 
analysis.
    Additionally, EPCA specifies requirements when promulgating a 
standard for a type or class of covered equipment that has two or more 
subcategories. DOE must specify a different standard level than that 
which applies generally to such type or class of equipment for any 
group of covered equipment that have the same function or intended use 
if DOE determines that equipment within such group (A) consume a 
different kind of energy from that consumed by other covered equipment 
within such type (or class); or (B) have a capacity or other 
performance-related feature which other equipment within such type (or 
class) do not have and such feature justifies a higher or lower 
standard. In determining whether a performance-related feature 
justifies a different standard for a group of equipment, DOE must 
consider such factors as the utility to the consumer of the feature and 
other factors DOE deems appropriate. Any rule prescribing such a 
standard must include an explanation of the basis on which such higher 
or lower level was established. DOE considered these criteria for this 
rulemaking.
    Federal energy conservation requirements generally preempt State 
laws or regulations concerning energy conservation testing, labeling, 
and standards. DOE may, however, grant waivers of Federal preemption 
for particular State laws or regulations.
    DOE has also reviewed this regulation pursuant to Executive Order 
13563, issued on January 18, 2011. (76 FR 3281, Jan. 21, 2011). EO 
13563 is supplemental to and explicitly reaffirms the principles, 
structures, and definitions governing regulatory review established in 
Executive Order 12866. To the extent permitted by law, agencies are 
required by Executive Order 13563 to: (1) Propose or adopt a regulation 
only upon a reasoned determination that its benefits justify its costs 
(recognizing that some benefits and costs are difficult to quantify); 
(2) tailor regulations to impose the least burden on society, 
consistent with obtaining regulatory objectives, taking into account, 
among other things, and to the extent practicable, the costs of 
cumulative regulations; (3) select, in choosing among alternative 
regulatory approaches, those approaches that maximize net benefits 
(including potential economic, environmental, public health and safety, 
and other advantages; distributive impacts; and equity); (4) to the 
extent feasible, specify performance objectives, rather than

[[Page 58955]]

specifying the behavior or manner of compliance that regulated entities 
must adopt; and (5) identify and assess available alternatives to 
direct regulation, including providing economic incentives to encourage 
the desired behavior, such as user fees or marketable permits, or 
providing information upon which choices can be made by the public.
    DOE emphasizes as well that Executive Order (EO) 13563 requires 
agencies to use the best available techniques to quantify anticipated 
present and future benefits and costs as accurately as possible. In its 
guidance, the Office of Information and Regulatory Affairs has 
emphasized that such techniques may include identifying changing future 
compliance costs that might result from technological innovation or 
anticipated behavioral changes. For the reasons stated in the preamble, 
DOE believes that this NOPR is consistent with these principles, 
including the requirement that, to the extent permitted by law, 
benefits justify costs and that net benefits are maximized. Consistent 
with EO 13563, and the range of impacts analyzed in this rulemaking, 
the energy efficiency standard proposed herein by DOE achieves maximum 
net benefits.

B. Background

1. Current Standards
    DOE most recently issued amended standards for small, large, and 
very large, air-cooled CUAC and CUHP on October 18, 2005, which 
codified both the amended standards for small and large equipment and 
the new standards for very large equipment set by the Energy Policy Act 
of 2005 (EPAct 2005), Public Law 109-58, 70 FR 60407 (Aug. 8, 2005). 
The current standards are set forth in Table II.1.

  Table II.1--Minimum Cooling and Heating Efficiency Levels for Small, Large, and Very Large Commercial Package
                                     Air Conditioning and Heating Equipment
----------------------------------------------------------------------------------------------------------------
                                                                                    Efficiency      Compliance
        Equipment type         Cooling capacity   Sub-category    Heating type        level            date
----------------------------------------------------------------------------------------------------------------
Small Commercial Packaged Air- >=65,000 Btu/h    AC             Electric         EER = 11.2.....        1/1/2010
 Conditioning and Heating       and <135,000                     Resistance
 Equipment (Air-Cooled).        Btu/h.                           Heating or No
                                                                 Heating.
                                                                All Other Types  EER = 11.0.....        1/1/2010
                                                                 of Heating.
                                                 HP             Electric         EER = 11.0.....        1/1/2010
                                                                 Resistance      COP = 3.3......
                                                                 Heating or No
                                                                 Heating.
                                                                All Other Types  EER = 10.8.....        1/1/2010
                                                                 of Heating.     COP = 3.3......
Large Commercial Packaged Air- >=135,000 Btu/h   AC             Electric         EER = 11.0.....        1/1/2010
 Conditioning and Heating       and <240,000                     Resistance
 Equipment (Air-Cooled).        Btu/h.                           Heating or No
                                                                 Heating.
                                                                All Other Types  EER = 10.8.....        1/1/2010
                                                                 of Heating.
                                                 HP             Electric         EER = 10.6.....        1/1/2010
                                                                 Resistance      COP = 3.2......
                                                                 Heating or No
                                                                 Heating.
                                                                All Other Types  EER = 10.4.....        1/1/2010
                                                                 of Heating.     COP = 3.2......
Very Large Commercial          >=240,000 Btu/h   AC             Electric         EER = 10.0.....        1/1/2010
 Packaged Air-Conditioning      and <760,000                     Resistance
 and Heating Equipment (Air-    Btu/h.                           Heating or No
 Cooled).                                                        Heating.
                                                                All Other Types  EER = 9.8......        1/1/2010
                                                                 of Heating.
                                                 HP             Electric         EER = 9.5......        1/1/2010
                                                                 Resistance      COP = 3.2......
                                                                 Heating or No
                                                                 Heating.
                                                                All Other Types  EER = 9.3......        1/1/2010
                                                                 of Heating.     COP = 3.2......
----------------------------------------------------------------------------------------------------------------

2. History of Standards Rulemaking for Small, Large, and Very Large 
Air-Cooled Commercial Package Air Conditioning and Heating Equipment
    On October 29, 1999, the American Society of Heating, 
Refrigerating, and Air-Conditioning Engineers (ASHRAE)/Illuminating 
Engineering Society of North America (IESNA) adopted Standard 90.1-
1999, ``Energy Standard for Buildings Except Low-Rise Residential 
Building'', which included amended efficiency levels for CUAC and CUHP. 
On June 12, 2001, the Department published a Framework Document that 
described a series of analytical approaches to evaluate energy 
conservation standards for air-cooled CUAC and CUHP with rated 
capacities between 65,000 Btu/h and 240,000 Btu/h, and presented this 
analytical framework to stakeholders at a public workshop. On July 29, 
2004, DOE issued an Advance Notice of Proposed Rulemaking (ANOPR) 
(hereafter referred to as the 2004 ANOPR) to solicit public comments on 
its preliminary analyses for this equipment. 69 FR 45460. Subsequently, 
Congress enacted EPAct 2005, which, among other things, established 
amended standards for small and large CUAC and CUHP and new standards 
for very large air-cooled CUAC and CUHP. As a result, EPAct 2005 
displaced the rulemaking effort that DOE had already begun. DOE 
codified these new statutorily-prescribed standards on October 18, 
2005. 70 FR 60407.
    Section 5(b) of AEMTCA amended Section 342(a)(6) of EPCA by 
requiring DOE to initiate a rulemaking to consider amending the 
standards for any covered equipment as to which more than 6 years has 
elapsed since the issuance of the most recent final rule establishing 
or amending a standard for the equipment

[[Page 58956]]

as of the date of AEMTCA's enactment, December 18, 2012. (42 U.S.C. 
6313(a)(6)(C)(vi)) Accordingly, DOE must issue either a notice of 
determination that the current standards for small, large, and very 
large, air cooled CUAC and CUHP do not need to be amended or a notice 
of proposed rulemaking containing proposed standards. DOE has, based on 
available data, chosen the latter.
    On February 1, 2013, DOE published a request for information (RFI) 
and notice of document availability for small, large, and very large, 
air cooled CUAC and CUHP. 78 FR 7296. The notice sought to solicit 
information from the public to help DOE determine whether national 
standards more stringent than those that are currently in place would 
result in a significant amount of additional energy savings and whether 
those national standards would be technologically feasible and 
economically justified. Separately, DOE also sought information on the 
merits of adopting integrated energy efficiency ratio (IEER) as the 
energy efficiency descriptor for small, large, and very large air-
cooled CUAC and CUHP (see section III.A for more details).
    DOE received a number of comments from interested parties in 
response to the RFI. These commenters are summarized in Table II.2. DOE 
considered these comments in the preparation of this NOPR. Relevant 
comments, and DOE's responses, are provided in the appropriate sections 
of this proposed rulemaking.

   Table II.2--Interested Parties Providing Written Comment on the RFI
------------------------------------------------------------------------
              Name                    Abbreviation            Type
------------------------------------------------------------------------
AAON Inc.......................  AAON.................  M
Air-Conditioning, Heating and    AHRI.................  IA
 Refrigeration Institute.
Appliance Standards Awareness    ASAP, ACEEE, NRDC      EA
 Project, American Council for    (Joint Efficiency
 an Energy-Efficient Economy,     Advocates).
 Natural Resources Defense
 Council.
EBM-Papst Inc..................  EBM-Papst............  CS
Edison Electric Institute......  EEI..................  UR
Ingersoll Rand.................  Ingersoll Rand.......  M
Lennox International Inc.......  Lennox...............  M
Lentz Engineering Associates...  Lentz................  I
Modine Manufacturing Co........  Modine...............  M
New Buildings Institute........  NBI..................  ................
Northwest Energy Efficiency      NEEA.................  EA
 Alliance.
Pacific Gas and Electric         PG&E, SCGC, SDG&E,     U
 Company, Southern California     SCE, SMUD, National
 Gas Company, San Diego Gas and   Grid (Joint
 Electric, Southern California    Utilities).
 Edison, Sacramento Municipal
 Utility District, National
 Grid.
Rheem Manufacturing Co.........  Rheem................  M
UTC Climate, Controls &          Carrier..............  M
 Security.
Whole Building Systems.........  Whole Building         I
                                  Systems.
------------------------------------------------------------------------
IR: Industry Representative; M: Manufacturer; EA: Efficiency/
  Environmental Advocate;
CS: Component Supplier; I: Individual; U: Utility; UR: Utility
  Representative

III. General Discussion

A. Energy Efficiency Descriptor

    The current energy conservation standards for small, large, and 
very large air-cooled CUAC and CUHP are based on energy efficiency 
ratio (EER) for cooling efficiency and COP for CUHP heating efficiency. 
10 CFR 431.97(b)
Cooling Efficiency Metric
    In the RFI, DOE noted that it was considering whether to replace 
the existing efficiency descriptor, EER, with a new energy-efficiency 
descriptor, IEER. Unlike the EER metric, which only uses the efficiency 
of the equipment operating at full load, the IEER metric factors in the 
efficiency of operating at part-loads of 75 percent, 50 percent, and 25 
percent of capacity as well as the efficiency at full load. This is 
accomplished by weighting the full- and part-load efficiencies with the 
average amount of time operating at each loading point. The IEER metric 
incorporates part load efficiencies measured with outside temperatures 
appropriate for the load levels, i.e. at lower temperatures for lower 
load levels. 78 FR 7296, 7299 (Feb. 1, 2013). As part of a final rule 
published on May 16, 2012, DOE amended the test procedure for this 
equipment to incorporate by reference the Air-Conditioning, Heating and 
Refrigeration Institute (AHRI) Standard 340/360-2007, ``Performance 
Rating of Commercial and Industrial Unitary Air-Conditioning and Heat 
Pump Equipment'' (AHRI Standard 340/360-2007). 77 FR 28928. DOE notes 
that AHRI Standard 340/360-2007 already includes methods and procedures 
for testing and rating equipment with the IEER metric.
    ASHRAE, through its Standard 90.1, includes requirements based on 
the part-load performance metric, IEER. These IEER requirements were 
first established in Addenda from the 2008 Supplement to Standard 90.1-
2007, and became effective on January 1, 2010.\22\
---------------------------------------------------------------------------

    \22\ ASHRAE. ASHRAE Addenda. 2008 Supplement. http://www.ashrae.org/File%20Library/docLib/Public/20090317_90_1_2007_supplement.pdf.
---------------------------------------------------------------------------

    DOE may establish ``energy conservation standards'' that set either 
a single performance standard or a single design requirement--not both. 
(42 U.S.C. 6311(18)) As such, DOE may prescribe an energy conservation 
standard based either on a single performance-based standard or design 
requirement. In the case of small, large, and very large air-cooled 
CUAC and CUHP, ASHRAE Standard 90.1-2010 specifies two performance 
requirements: EER and IEER. In selecting a new performance-based energy 
conservation standard, the statute prescribes that a single standard be 
used--in this case, either an improved EER or a new standard using 
IEER. DOE did not consider altering its energy conservation standard to 
be based on a single design requirement because performance-based 
standards will provide manufacturers with more flexibility in 
developing equipment that meets the standard levels rather than 
requiring a specific design. DOE notes that a change in metrics (i.e., 
from EER to IEER) would necessitate an initial DOE determination that 
the new requirement would not result in backsliding when compared to

[[Page 58957]]

the current standards. See 42 U.S.C. 6313(a)(6)(B)(iii)(I).
    As part of the RFI, DOE conducted a review of the market to see if 
part-load performance is currently being used and accepted for rating 
CUAC and CUHP. On January 2, 2009, the Environmental Protection Agency 
(EPA) issued a draft ENERGY STAR specification for Light Commercial Air 
Conditioners and Heat Pumps equipment, i.e., small and large air-cooled 
CUAC and CUHP, which proposed to adopt IEER as part of the minimum 
energy efficiency criteria.\23\ The Air-Conditioning, Heating and 
Refrigeration Institute (AHRI) supported this change. DOE also noted in 
the RFI that the Consortium for Energy Efficiency (CEE), an 
organization for energy efficiency advocates, has adopted IEER for its 
Tier 0, 1, and 2 efficiencies for CUAC and CUHP, i.e., small, large, 
and very large air-, water-, and evaporatively-cooled air conditioners 
and air- and water-source heat pumps.\24\ 78 FR 7296, 7299 (Feb. 1, 
2013).
---------------------------------------------------------------------------

    \23\ ENERGY STAR. Re: EPA Proposed Draft Energy Star 
Specification for Light Commercial HVAC Equipment. http://www.energystar.gov/ia/partners/prod_development/revisions/downloads/lhvac/AHRI_Comments_D1.pdf.
    \24\ Consortium for Energy Efficiency. CEE Commercial Unitary AC 
and HP Specification. http://www.cee1.org/files/CEE_CommHVAC_UnitarySpec2012.pdf.
---------------------------------------------------------------------------

    DOE also noted in the RFI that IEER has gained support through 
efforts such as DOE's Commercial Building Energy Alliance (CBEA) 
technology transfer program, which sponsors the High Performance 
Rooftop Unit Challenge (RTU Challenge). This program provides a market 
mechanism that reduces barriers for manufacturers to procure greater 
than 18-IEER 10-ton \25\ equipment and encourages the private sector to 
commit to adopt energy-efficient equipment. A number of manufacturers 
are currently participating in the RTU Challenge, including Lennox, 7AC 
Technologies, Rheem, Carrier, and McQuay. Of these participants, both 
Carrier and McQuay have already begun producing AHRI-certified 
equipment meeting or exceeding 18 IEER. In conjunction with 
manufacturer support, fourteen CBEA-member private entities,\26\ such 
as Target Corp., Macy's, Inc., McDonald's Corp., and others, have also 
signaled their support and indicated their strong interest in 
potentially purchasing high-efficiency rooftop units, a sign of their 
confidence in the RTU Challenge and its ability to use IEER to 
accurately portray the energy use of air-cooled CUAC and CUHP in the 
field. 78 FR 7296, 7299 (Feb. 1, 2013).
---------------------------------------------------------------------------

    \25\ Air conditioning cooling capacity may be denoted in tons. 
An air conditioning ton is equivalent to 12,000 Btu/h of cooling 
capacity (or 3.5 kilowatts of cooling capacity).
    \26\ U.S. Department of Energy. Building Technologies Program. 
High Performance Rooftop Unit Challenge Fact Sheet. http://apps1.eere.energy.gov/buildings/publications/pdfs/alliances/techspec_rtus.pdf.
---------------------------------------------------------------------------

    As part of the RFI, DOE conducted a market analysis to compare the 
two metrics based on publicly available ratings of existing equipment 
currently available in the market. DOE made a document available for 
comment that provided the methodology and results of the investigation 
of the relationship between IEER and EER for air-cooled CUAC and CUHP 
with cooling capacities between 65,000 Btu/hr and 760,000 Btu/hr (i.e., 
5 and 63 tons). In addition, DOE looked at the variance of heating 
efficiency (i.e., COP) with IEER and EER.\27\ In the RFI, DOE noted 
that if it decides to propose standards using the IEER metric, it would 
transition the existing Federal energy conservation standards that are 
based on the EER metric to the new IEER metric to determine baseline 
energy-efficiency levels to use in the analysis. DOE sought comments 
and data regarding its consideration of transitioning metrics and the 
analysis conducted on the currently available models. 78 FR 7296, 7299 
(Feb. 1, 2013).
---------------------------------------------------------------------------

    \27\ The document is available at: http://www1.eere.energy.gov/buildings/appliance_standards/product.aspx/productid/77.
---------------------------------------------------------------------------

    In response to the RFI, DOE received a number of comments from 
interested parties concerning which energy efficiency descriptor should 
be used for this equipment--i.e. EER or IEER. The Edison Electric 
Institute (EEI), New Buildings Institute (NBI), Northwest Energy 
Efficiency Alliance (NEEA), the Joint Utilities,\28\ and the Joint 
Efficiency Advocates \29\ commented that DOE should adopt standards for 
small, large, and very large air-cooled CUAC and CUHP using both the 
EER and IEER metrics. (EEI, No. 9 at p. 4; NBI, No. 12 at p. 2; NEEA, 
No. 15 at p. 1; Joint Utilities, No. 13 at p. 2; Joint Efficiency 
Advocates, No. 11 at p. 1)
---------------------------------------------------------------------------

    \28\ A joint comment was submitted by the Pacific Gas and 
Electric Company (PG&E), Southern California Gas Company (SCGC), San 
Diego Gas and Electric (SDG&E), Southern California Edison (SCE), 
Sacramento Municipal Utility District (SMUD), and National Grid, 
which are referred to as the Joint Utilities.
    \29\ A Joint comment was submitted by the Appliance Standards 
Awareness Project (ASAP), American Council for an Energy-Efficient 
Economy (ACEEE), and Natural Resources Defense Council (NRDC), which 
are referred to as the Joint Efficiency Advocates.
---------------------------------------------------------------------------

    EEI, NEEA, and the Joint Utilities expressed concern that if DOE 
eliminated the EER metric, which measures peak load efficiency, 
manufacturers would design their equipment to improve their IEER 
ratings, which could negatively impact peak load efficiency. (EEI, No. 
9 at p. 5; NEEA, No. 15 at pp. 1-2; Joint Utilities, No. 13 at p. 3) 
NEEA commented that using only one metric leads to a bias of energy 
savings depending on the climate zone, with EER favoring hot-dry 
climates and IEER favoring milder climates. NEEA stated that maximizing 
EER tends to involve heat exchanger improvements, while IEER 
improvement involves staging of compressors, and that shifting costs 
between these two designs degrades either IEER or EER. NEEA noted that, 
based on their review of the AHRI certification database, a correlation 
between high IEER and high EER does not necessarily exist. NEEA noted 
that equipment with a high EER and high IEER exists, but may just 
reflect premium equipment available on the market that maximize both 
metrics. (NEEA, No. 15 at p. 1) EEI and the Joint Utilities commented 
that both the EER and IEER metrics should be used to prevent higher 
peak demands on utility grids and higher energy bills for customers in 
hot-dry climates, and to prevent equipment from being manufactured that 
is less efficient than the current standards. (EEI, No. 9 at p. 5; 
Joint Utilities, No. 13 at p. 3) NBI added that because the type of 
application and its emphasis on full-load versus part-load cannot be 
known beforehand, the cost-effectiveness of standards can only be 
assured by including both EER and IEER metrics. (NBI, No. 12 at pp. 1-
2)
    The Joint Utilities commented that the IEER metric, unlike the EER 
metric, accounts for potentially significant part-load energy savings 
from technologies such as inverter duty compressors, variable speed 
fans, and staged compressors. The Joint Utilities also indicated that 
continued growth and dependence on demand response programs is expected 
in California and New England, and that, during demand response events, 
controls may be used to restrict unit capacities and lower fan speeds. 
According to the Joint Utilities, if units have comparable EER values, 
the units with higher IEERs have the capability to use less energy when 
capacity is restricted and are more likely to have the capability of 
modifying compressor operation or reducing fan speed. (Joint Utilities, 
No. 13 at pp. 2-3) (Joint Utilities, No. 13 at p. 3)
    The Joint Utilities commented that there is no additional testing 
burden associated with implementing both the IEER and EER metrics as 
compared to using only IEER because the EER test is

[[Page 58958]]

part of the IEER metric. The Joint Utilities added that manufacturers 
have been reporting both EER and IEER values for AHRI certification 
since 2010. The Joint Utilities stated that, based on their review of 
the AHRI certification database, the nominal difference between the 
average IEER and EER values for each CUAC equipment class capacity 
range (i.e., small, large, and very large) varied from 1.38 and 1.87. 
The Joint Utilities stated that if standards are based only on IEER and 
the average performance difference in IEER and EER remains the same, 
then equipment meeting an IEER-only standard could have EERs as low as 
8.86 (which is approximately 10 percent to 21 percent lower than the 
current EER standards for air-cooled CUAC). (Joint Utilities, No. 13 at 
pp. 3-4, 6)
    EEI, the Joint Utilities, and the Joint Efficiency Advocates 
commented that DOE has the authority to adopt two efficiency metrics. 
(EEI, No. 9 at p. 4; Joint Utilities, No. 13 at p. 3; Joint Efficiency 
Advocates, No. 11 at p. 1) EEI stated that if DOE must demonstrate that 
a standard measured using IEER is no less stringent than a standard 
measured using EER, then the two standards must have the same 
stringency. EEI stated that, as a result, using two different metrics 
does not contravene the requirement that DOE apply a single standard. 
(EEI, No. 9 at p. 4) EEI added that this two-metric approach is 
consistent with past precedent set in the direct final rule for 
residential split system air conditioners and packaged air conditioners 
(76 FR 37408 (June 27, 2011); 76 FR 67037 (Oct. 31, 2011)), which will 
require SEER and EER standards for equipment sold in the ``Southwest'' 
region of the United States. (EEI, No. 9 at p. 5) The Joint Utilities 
commented that, based on their understanding, DOE is considering using 
a multiple metric approach in other rulemakings (e.g., commercial and 
industrial fans and blowers) and, as such, DOE should be able to do the 
same for this rulemaking. (Joint Utilities, No. 13 at p. 3)
    According to the Joint Utilities, the intent of DOE's requirement 
to adopt ASHRAE or more stringent standard levels is for the ASHRAE 
levels to serve as the standards baseline. The Joint Utilities stated 
that ASHRAE Standard 90.1 has specified both IEER and EER metrics for 
this equipment since 2010 and that industry supports and recognizes the 
need for a two metric approach for their standards. The Joint Utilities 
stated that both metrics should be used to align with the industry 
standards approach. (Joint Utilities, No. 13 at p. 2)
    As discussed above, EPCA requires that DOE establish energy 
conservation standards using either a single performance standard or a 
single design requirement--but not both. See 42 U.S.C. 6311(18). 
Consistent with this restriction, DOE is proposing an approach that 
would apply a single performance-based standard for manufacturers to 
follow. Although some commenters have suggested that DOE deviate from 
this requirement, none has suggested an approach that would 
sufficiently address the legal constraints that EPCA imposes on DOE's 
ability to set multiple metrics for the equipment at issue in this 
proposal. Accordingly, DOE is declining to adopt a multiple-metric 
approach for CUAC and CUHP equipment.
    Modine Manufacturing Company (Modine) supported the use of the IEER 
metric to allow for the optimization of efficiency at part-load 
conditions. Modine stated that equipment designed to maximize EER at 
full-load conditions, which accounts for only 2 percent of cooling 
time, may be significantly less efficient at part-load conditions. 
Modine presented data showing that a unit that is optimized around EER 
had an EER of 12.5, but the overall IEER is only 11.46, whereas a unit 
optimized around IEER had an EER of 10.3, but an IEER of 12.6. Modine 
also presented data showing that only a 2-point improvement in IEER for 
a 15-ton unit and a 20- to 30-ton unit would improve the efficiency by 
18 percent and 20 percent, respectively. (Modine, No. 5 at pp. 2, 7-9) 
The Joint Efficiency Advocates commented that if DOE concludes that 
they do not have the authority to adopt two metrics, DOE should replace 
EER with IEER to better reflect annual energy consumption and encourage 
the adoption of part-load technologies that can achieve significant 
energy savings in the field. (Joint Efficiency Advocates, No. 11 at pp. 
1-2) Whole Building Systems also supported the use of the IEER metric 
to better reflect annual energy consumption. Whole Building Systems 
added that design engineers, contactors, and owners need an annual or 
seasonal part load performance metric to make more informed purchasing 
and life-cycle cost decisions. (Whole Building Systems, No. 4 at p. 1)
    AAON and AHRI both recognized the benefits of using the IEER metric 
for representation of the equipment's overall cooling energy 
efficiency. However, AAON, AHRI, Carrier, Lennox and Ingersoll Rand 
noted the following concerns with relying solely on the IEER metric:
     DOE's definition of basic model will significantly 
increase the number of models that manufacturers are required to test 
and, in the collective view of AAON and AHRI, make the DOE test 
requirements impossible to achieve. (AAON, No. 8 at pp. 1-2; AHRI, No. 
14 at p. 4)
     The rulemaking for the Alternative Efficiency 
Determination Method (AEDM) is still incomplete. The proposed 
requirement for the overall average of AEDM outputs is, in their view, 
far more stringent than the uncertainty of the AHRI Standard 340/360-
2007 test method and any combined manufacturing or component 
tolerances. (AAON, No. 8 at p. 2; AHRI, No. 14 at p. 4)
     If the part-load IEER metric is used, then the sequence of 
operation of each subcomponent of the equipment has a great effect on 
the listed metric. This would result in many more basic models based on 
DOE's current definition. (AAON, No. 8 at p. 2; AHRI, No. 14 at p. 4)
     The uncertainty associated with modeling or testing 
(including assessment, compliance, and enforcement testing) equipment 
using the IEER metric is significantly greater than for the single EER 
test. AHRI Standard 340/360 currently has a 10 percent uncertainty 
allowance on the IEER metric because of the higher variability in 
results due to the multiple tests required, compared to a 5-percent 
uncertainty allowance on the single test EER metric. (AAON, No. 8 at p. 
2; AHRI, No. 14 at pp. 4-5; Carrier, No. 7 at p. 1; Lennox, No. 6 at p. 
1; Ingersoll Rand, No. 10 at p. 1)
    AAON, AHRI, and Ingersoll Rand indicated that they would support 
replacing EER with IEER only if DOE resolves pending issues related to 
the AEDM, the basic model definition and the uncertainty in measurement 
testing. AAON and AHRI stated that DOE should implement the testing and 
rating requirements, including the uncertainty tolerances, referenced 
in AHRI Standard 340/360 in their entirety. AHRI added that the 
sampling plan in 10 CFR 429.43 will have to be revised and adjusted 
accordingly. (AAON, No. 8 at p. 3; AHRI, No. 14 at pp. 1, 4-5; 
Ingersoll Rand, No. 10 at pp. 1-2) Carrier also commented that DOE 
should limit the basic model definition to the base refrigeration 
system to avoid the requirement that equipment be tested with factory 
options, which may negatively impact cooling or heating rating point 
efficiency, but provide efficiency benefits when considered from a 
whole building perspective (e.g., economizers and energy recovery 
ventilators). (Carrier, No. 7 at p. 1)

[[Page 58959]]

    Rheem supported the use of one efficiency metric, but not multiple 
metrics. Rheem stated that if IEER is going to replace EER, a technical 
review must be conducted to highlight the advantage to the consumer 
versus the confusion in the market place and burden on the OEM. Rheem 
stated that other aspects of the energy conservation standards for this 
equipment are in transition and must be finalized before a constructive 
evaluation can be made of the benefits of a part-load efficiency 
metric. (Rheem, No. 17 at pp. 1-2)
    Lennox commented that it has captured most of the achievable EER 
efficiency improvements with currently available technology, and that 
there are diminishing returns in requiring increasingly stringent EER 
levels. (Lennox, No. 6 at p. 3) However, Lennox supported the continued 
use of the EER metric due to the IEER test uncertainty issue discussed 
above. (Lennox, No. 6 at p. 1) Lennox commented that using the IEER 
metric now would require resolving the following issues: (1) Setting a 
baseline IEER for various equipment classes, (2) the ability to use the 
AEDMs, and (3) implementation and vetting of testing protocols. 
(Lennox, No. 6 at p. 2)
    The Joint Utilities commented that if DOE is not willing to adopt 
standards using both metrics, DOE should use the current EER metric 
instead of IEER to provide a better approximation of heating, 
ventilation, and air-conditioning (HVAC) performance during peak 
loading conditions. According to the Joint Utilities, in California and 
New England, commercial air conditioning accounts for a 
disproportionately high fraction of seasonal peak demand as compared to 
commercial HVAC energy consumption as a fraction of annual energy 
consumption. (Joint Utilities, No. 13 at p. 4) The Joint Utilities also 
commented that a substantial fraction of U.S. cities have peak 
temperatures above 95 degrees Fahrenheit ([deg]F) in the summer, and 
summer peak temperature has been increasing over time. The Joint 
Utilities stated that peak electricity demands have large effects on 
energy procurement and energy pricing, and that shifts in energy 
pricing rate structures, such as in California, will further increase 
electricity prices during peak conditions. The Joint Utilities stated 
that using an IEER-only metric would under-represent the condition that 
has the largest effect on peak energy demand and energy pricing. The 
Joint Utilities stated that an improved IEER metric that is 
representative of annual energy cost would place a heavier weighting on 
the 95[emsp14][deg]F full-load test point, but absent that change the 
Joint Utilities would support retaining EER metric. (Joint Utilities, 
No. 13 at p. 4)
    DOE notes that the issues related to the basic model definition and 
AEDM were addressed separately in DOE's Commercial Certification 
Working Group. DOE published a final rule on December 31, 2013, which 
incorporated requirements for the testing and tolerances for validation 
and verification of an AEDM, and also amended the basic model 
definition for small, large, and very large air-cooled CUAC and CUHP. 
78 FR 79579. EPCA requires that test procedures be reasonably designed 
to produce test results that measure the energy efficiency of covered 
equipment during a representative average use cycle or period of use. 
(42 U.S.C. 6314(a)(2)) As discussed above, the IEER metric weights the 
efficiency of operating at different partial loads and full load based 
on usage patterns, which collectively provide a more representative 
measure of annual energy use than the EER metric. A manufacturer that 
was involved in the development of the IEER metric indicated that the 
usage pattern weights for the IEER metric were developed by analyzing 
equipment usage patterns of several buildings across the 17 ASHRAE 
Standard 90.1-2010 (appendix B) climate zones. (Docket ID: EERE-2013-
BT-STD-0007-0018, Carrier, at p. 1) These usage patterns and climate 
zones were based on a comprehensive analysis performed by industry in 
assessing the manner in which CUAC and CUHP equipment operate in the 
field, both in terms of actual usage and the climatic conditions in 
which they are used. The weighting factors accounted for the hours of 
operation where mechanical cooling was active. Id. As a result, the 
IEER metric, as a whole, provides a more accurate representation of the 
annual energy use for this equipment than the EER metric, which only 
considers full load energy use. For these reasons, DOE is proposing 
energy conservation standards in this NOPR based on the IEER metric. 
DOE recognizes the issues regarding the uncertainty of IEER test 
measurements and welcomes additional data regarding the measurement 
uncertainties to develop appropriate sampling plans.
    Because the weighting factors for the IEER metric are 
representative of field use and because DOE is unaware of any data 
indicating that changes to these weighting factors are warranted, DOE 
is not considering changing the weighting factors for the loading 
conditions specified in AHRI Standard 340/360-2007 for the IEER metric, 
as commented by the Joint Utilities. With regards to the Joint 
Utilities comment that an improved IEER metric that is representative 
of annual energy cost would place a heavier weighting on the full-load 
test point, DOE welcomes comment and data on whether the test procedure 
for air-cooled CUAC and CUHP should be amended to revise the weightings 
for the IEER metric to place a higher weighting value on the full-load 
efficiency.
    Issue 2: DOE requests comment on whether the test procedure for 
air-cooled CUAC and CUHP should be amended to revise the weightings for 
the IEER metric to place a higher weighting value on the full-load 
efficiency. DOE also requests data to determine appropriate weighting 
factors for the full-load test condition and part-load test conditions 
(75 percent, 50 percent, and 25 percent of capacity).
    With regards to the Joint Utilities comment that DOE should use the 
current EER metric instead of IEER to provide a better approximation of 
HVAC performance during peak loading conditions, DOE notes that, as 
discussed above, EPCA does not include provisions for dual metrics for 
this equipment. See 42 U.S.C. 6311(18). DOE also notes that because the 
IEER metric includes measurements at full load capacity, the metric 
already accounts for EER. Further, ASHRAE Standard 90.1 includes 
requirements for both EER and IEER. As a result, although DOE is 
considering energy conservation standards based on the IEER metric, 
utilities would still be able to evaluate EER ratings of equipment.
    In response to the RFI, AHRI commented that the draft of addendum 
CL \30\ to ASHRAE Standard 90.1-2010 (Draft Addendum CL) would amend 
the minimum IEER levels, but did not amend the minimum EER levels 
because the ASHRAE Standard 90.1 committee was unable to justify 
raising the full load efficiency standard. (AHRI, No. 14 at pp. 1-2) 
AHRI and Ingersoll Rand commented that full load efficiencies are 
approaching their thermodynamic limits, and that further improvements 
will be both very minimal and very costly. (AHRI, No. 14 at p. 2; 
Ingersoll Rand, No. 10 at p. 1) AHRI added that while energy efficiency 
gains in the 1970s were achieved at relatively low cost, the efficiency 
improvements realized recently resulted in significant increase in 
equipment cost. AHRI stated

[[Page 58960]]

that the industry is entering a phase where efficiency of equipment is 
becoming closer to the Carnot efficiency (i.e., the thermodynamic 
limit) and full load efficiency gains in the future will be minimal but 
very costly. (AHRI, No. 14 at p. 2) AHRI noted that the ASHRAE Standard 
90.1 committee has recognized the increasing full load minimum 
efficiency standards for CUAC and CUHP has reached a point of 
diminishing returns in terms of energy savings, and instead focused 
efforts on other areas to reduce the energy consumption of this 
equipment, including the following design requirements:
---------------------------------------------------------------------------

    \30\ ASHRAE periodically updates specifications in its Standard 
90.1 through a public review process. The latest of these proposed 
changes is contained in Draft Addendum CL, which was made available 
for public review in October 2012. ``CL'' refers to the revision 
number.
---------------------------------------------------------------------------

     Mandatory use of economizers on equipment >=54,000 Btu/h 
of cooling capacity in all climate zones at the exception of zones 1a 
and 1b,
     Modulation of economizer outdoor and return air dampers to 
provide up to 100 percent of the design supply air quantity as outdoor 
air for cooling,
     More stringent damper leakage requirements
     Additional requirements for supply air temperature reset 
and static pressure reset on variable air volume systems,
     Integrated economizer control and direct expansion (i.e., 
the evaporator is in direct contact with the air stream) unit capacity 
staging requirements which necessitate two speed fans and two stages of 
mechanical cooling for constant volume systems or three or more stages 
for variable air volume systems, and
     Fan controls for both constant air volume and variable air 
volume units including extending the indoor fan part load power 
requirements down to \1/4\ horsepower. (AHRI, No. 14 at pp. 2-3)
    AHRI stated that although these requirements significantly reduce 
the energy consumption of CUAC, most of the energy savings resulting 
from their implementation is not captured by the test procedure and 
cannot be translated in an EER improvement. AHRI stated that DOE should 
consider other factors beyond EER and/or COP when conducting its 
analysis and that by appropriately modeling this equipment, DOE will 
conclude that increasing the EER and COP is not a cost-effective way of 
improving the CUAC/CUHP efficiency. (AHRI, No. 14 at p. 3)
    As discussed above, DOE determined that the IEER metric provides a 
more accurate representation of the annual energy use for this 
equipment than the EER metric, and is proposing standards based on 
IEER. DOE recognizes that raising the stringency of EER may not be a 
cost-effective way of improving the efficiency of this equipment. DOE 
reached this tentative conclusion based on the preliminary 
determination by the ASHRAE Standard 90.1 committee for Draft Addendum 
CL that raising the full load efficiency standard would not be cost-
effective. DOE also takes note of the comments from interested parties 
that manufacturers are already reaching the thermodynamic limits with 
respect to full load efficiency for CUAC and CUHP equipment, which is 
limiting the potential for further full load efficiency improvements 
for these HVAC equipment. For these reasons, DOE is not considering 
standards based on the EER metric. Based on energy modeling of design 
changes consistent with equipment available on the market (by analyzing 
the efficiency at each loading condition, including full-load EER), as 
discussed in sections IV.A through IV.C, DOE notes that the proposed 
IEER-based standard levels presented in section I would not result in 
an EER rating less than the current standard levels. DOE discusses the 
use of the COP metric in the following section.
Heating Efficiency Metric
    The current energy conservation standards for small, large, and 
very large air-cooled CUHP heating efficiency are based on the COP 
metric.\31\ 10 CFR 431.97(b)
---------------------------------------------------------------------------

    \31\ COP is defined as the ratio of the produced heating effect 
to its net work input.
---------------------------------------------------------------------------

    In response to the RFI, Ingersoll Rand commented that a performance 
metric does not exist that simulates part load performance in heating. 
(Ingersoll Rand, No. 6 at p. 4) Modine commented that DOE could 
consider creating a new metric for CUHP, an integrated COP that is 
based on heating weather bin data, to provide a more representative 
measure of energy efficiency during the heating mode. (Modine, No. 5 at 
p. 2)
    DOE is not aware of any test procedures that have been developed 
that measure part load performance in heating mode for small, large, 
and very large air-cooled CUHP. In addition, DOE notes that Modine did 
not provide any data, nor is DOE aware of any data, regarding the 
annual usage for CUHP under part-load heating conditions to determine 
whether part-load heating hours are significant and would warrant the 
development of a part-load heating metric. As discussed in section 
IV.C.3, one manufacturer noted that CUHPs typically operate in full 
load heating mode and cycle the auxiliary heat on and off because heat 
pump capacity alone is inadequate to meet the building load. In 
addition, DOE is unaware of data regarding usage patterns for CUHP to 
determine appropriate test conditions under part-load heating 
conditions. Because DOE is unaware of any test procedures or usage data 
regarding part-load performance in heating mode for CUHP that shows 
that part-load heating hours are significant, DOE is not considering 
amendments to the test procedure to measure part-load heating 
efficiency at this time. For this NOPR, DOE is proposing standards for 
the heating efficiency based on the COP metric.
Regional Standards
    In response to the RFI, NEEA and NBI stated that DOE should 
consider regional standards for small, large, and very large air-cooled 
CUAC and CUHP. (NEEA, No. 15 at p. 2; NBI, No. 12 at p. 2) NEEA 
commented that AHRI Standard 340/360 tends to favor certain climate 
zones and exclude or decrease savings by only having one efficiency 
value to characterize the 8 climate zones in the United States. NEEA 
also stated that the test procedure tends to under value fan energy as 
external static pressure values are optimistically low. According to 
NEEA and NBI, the use of regional efficiency standards would increase 
energy savings and reflect the equipment selection options for design 
engineers in selecting equipment for varying climatic zones. NEEA added 
that regional standards would increase and bolster technological 
development of air conditioning equipment for varying climate zones. 
NBI stated that, in particular, DOE should investigate regional 
standards for ``hot-dry'' climates to recognize the significant 
research and field experience that allows packaged air conditioners to 
cost-effectively achieve higher efficiencies in these climates. NBI 
stated that DOE has developed regional standards for other residential 
HVAC equipment (10 CFR 430.32(c)(5). NBI commented that DOE should 
consider adopting CCE Tier 2 ratings for ``hot-dry'' regional 
standards. (NEEA, No. 15 at p. 2; NBI, No. 12 at p. 2)
    EPCA requires that any amended standard for small, large, and very 
large air-cooled CUAC and CUHP must be a uniform national standard. (42 
U.S.C. 6313(a)(6)(A)) EPCA does not provide DOE with the authority to 
set regional standards for CUAC and CUHP equipment. As a result, DOE is 
not considering regional standards for small, large, and very large 
air-cooled CUAC and CUHP.
    Issue 1: DOE requests comment on the use of IEER as the cooling 
efficiency metric and COP as the heating efficiency metric (for CUHP) 
for the proposed energy conservation standards, including additional 
data and input

[[Page 58961]]

regarding the uncertainty of IEER test measurements.

B. Technological Feasibility

1. General
    In each energy conservation standards rulemaking, DOE conducts a 
screening analysis based on information gathered on all current 
technology options and prototype designs that could improve the 
efficiency of the products or equipment that are the subject of the 
rulemaking. As the first step in such an analysis, DOE develops a list 
of technology options for consideration in consultation with 
manufacturers, design engineers, and other interested parties. DOE then 
determines which of those means for improving efficiency are 
technologically feasible. DOE considers technologies incorporated in 
commercially available equipment or in working prototypes to be 
technologically feasible. 10 CFR part 430, subpart C, appendix A, 
section 4(a)(4)(i).
    After DOE has determined that particular technology options are 
technologically feasible, it further evaluates each technology option 
in light of the following additional screening criteria: (1) 
Practicability to manufacture, install, and service; (2) adverse 
impacts on equipment utility or availability; and (3) adverse impacts 
on health or safety. 10 CFR part 430, subpart C, appendix A, section 
4(a)(4)(ii)-(iv). Section IV.B of this proposed rulemaking discusses 
the results of the screening analysis for small, large, and very large 
air-cooled CUAC and CUHP, particularly the designs DOE considered, 
those it screened out, and those that are the basis for the TSLs in 
this rulemaking. For further details on the screening analysis for this 
rulemaking, see chapter 4 of the NOPR Technical Support Document (TSD).
2. Maximum Technologically Feasible Levels
    When DOE proposes to adopt an amended standard for a type or class 
of covered equipment, it must determine the maximum improvement in 
energy efficiency or maximum reduction in energy use that is 
technologically feasible for such equipment. Accordingly, in the 
engineering analysis, DOE determined the maximum technologically 
feasible (``max-tech'') improvements in energy efficiency for small, 
large, and very large air-cooled CUAC and CUHP, using the design 
parameters for the most efficient equipment available on the market or 
in working prototypes. (See chapter 5 of the NOPR TSD.) The max-tech 
levels that DOE determined for this rulemaking are described in section 
IV.C.3 of this proposed rule.

C. Energy Savings

1. Determination of Savings
    For each TSL, DOE projected energy savings from the products that 
are the subject of this rulemaking purchased in the 30-year period that 
begins in the year of compliance with amended standards (2019-2048). 
The savings are measured over the entire lifetime of products purchased 
in the 30-year analysis period.\32\ DOE quantified the energy savings 
attributable to each TSL as the difference in energy consumption 
between each standards case and the base case. The base case represents 
a projection of energy consumption in the absence of amended mandatory 
efficiency standards, and it considers market forces and policies that 
affect demand for more efficient products.
---------------------------------------------------------------------------

    \32\ In the past DOE presented energy savings results for only 
the 30-year period that begins in the year of compliance. In the 
calculation of economic impacts, however, DOE considered operating 
cost savings measured over the entire lifetime of products purchased 
in the 30-year period. DOE has chosen to modify its presentation of 
national energy savings to be consistent with the approach used for 
its national economic analysis.
---------------------------------------------------------------------------

    DOE used its national impact analysis (NIA) spreadsheet model to 
estimate energy savings from amended standards for the products that 
are the subject of this rulemaking. The NIA spreadsheet model 
(described in section IV.H of this proposed rule) calculates energy 
savings in site energy, which is the energy directly consumed by 
products at the locations where they are used. For electricity, DOE 
reports national energy savings in terms of the savings in the energy 
that is used to generate and transmit the site electricity. To 
calculate this quantity, DOE derives annual conversion factors from the 
model used to prepare the Energy Information Administration's (EIA) 
most recent Annual Energy Outlook (AEO).
    DOE has begun to also estimate full-fuel-cycle energy savings, as 
discussed in DOE's statement of policy and notice of policy amendment. 
76 FR 51281 (August 18, 2011), as amended at 77 FR 49701 (August 17, 
2012). The full-fuel-cycle (FFC) metric includes the energy consumed in 
extracting, processing, and transporting primary fuels (i.e., coal, 
natural gas, petroleum fuels), and thus presents a more complete 
picture of the impacts of energy efficiency standards. DOE's evaluation 
of FFC savings is driven in part by the National Academy of Science's 
(NAS) report on FFC measurement approaches for DOE's Appliance 
Standards Program.\33\ The NAS report discusses that the FFC metric was 
primarily intended for energy efficiency standards rulemakings where 
multiple fuels may be used by a particular product. In the case of this 
rulemaking, only a single fuel--electricity--is consumed by the 
equipment. DOE's approach is based on the calculation of an FFC 
multiplier for each of the energy types used by covered equipment. 
Although the addition of FFC energy savings in the rulemakings is 
consistent with the recommendations, the methodology for estimating FFC 
does not project how fuel markets would respond to this particular 
standard rulemaking. The FFC methodology simply estimates how much 
additional energy, and in turn how many tons of emissions, may be 
displaced if the estimated quantity of energy was not consumed by the 
equipment covered in this rulemaking. It is also important to note that 
inclusion of FFC savings does not affect DOE's choice of proposed 
standards.
---------------------------------------------------------------------------

    \33\ ``Review of Site (Point-of-Use) and Full-Fuel-Cycle 
Measurement Approaches to DOE/EERE Building Appliance Energy-
Efficiency Standards,'' (Academy report) was completed in May 2009 
and included five recommendations. A copy of the study can be 
downloaded at: http://www.nap.edu/catalog.php?record_id=12670.
---------------------------------------------------------------------------

    For more information on FFC energy savings, see section IV.H.2.
2. Significance of Savings
    To adopt national standards more stringent than the amended ASHRAE/
IES Standard 90.1 for small, large, and very large air-cooled CUAC and 
CUHP, DOE must determine that such action would result in significant 
additional conservation of energy. (42 U.S.C. 6313(a)(6)(A)(ii)) 
Although the term ``significant'' is not defined in the Act, the U.S. 
Court of Appeals, in Natural Resources Defense Council v. Herrington, 
768 F.2d 1355, 1373 (D.C. Cir. 1985), indicated that Congress intended 
``significant'' energy savings in the context of EPCA to be savings 
that were not ``genuinely trivial.'' The energy savings for today's 
proposed standards (presented in section V.B) are nontrivial, and, 
therefore, DOE considers them ``significant'' within the meaning of 
section 325 of EPCA.

D. Economic Justification

1. Specific Criteria
    EPCA provides seven factors to be evaluated in determining whether 
a more stringent standard for small, large, and very large air-cooled 
CUAC and CUHP is economically justified. (42 U.S.C. 6313(a)(6)(B)(ii)) 
The following sections discuss how DOE has

[[Page 58962]]

addressed each of those seven factors in this rulemaking.
a. Economic Impact on Manufacturers and Consumers
    In determining the impacts of a potential amended standard on 
manufacturers, DOE conducts a manufacturer impact analysis (MIA), as 
discussed in section IV.J. DOE first uses an annual cash-flow approach 
to determine the quantitative impacts. This step includes both a short-
term assessment--based on the cost and capital requirements during the 
period between when a regulation is issued and when entities must 
comply with the regulation--and a long-term assessment over a 30-year 
period. The industry-wide impacts analyzed include industry net present 
value (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 of impact, as appropriate. Second, DOE analyzes and 
reports the impacts on different types of manufacturers, including 
impacts on small manufacturers. Third, DOE considers the impact of 
standards on domestic manufacturer employment and manufacturing 
capacity, as well as the potential for standards to result in plant 
closures and loss of capital investment. Finally, DOE takes into 
account cumulative impacts of various DOE regulations and other 
regulatory requirements on manufacturers.
    For individual consumers, measures of economic impact include the 
changes in life-cycle cost (LCC) and payback period (PBP) associated 
with new or amended standards. These measures are discussed further in 
the following section. For consumers in the aggregate, DOE also 
calculates the national net present value of the economic impacts 
applicable to a particular rulemaking. DOE also evaluates the LCC 
impacts of potential standards on identifiable subgroups of consumers 
that may be affected disproportionately by a national standard.
b. Savings in Operating Costs Compared to Increase in Price
    EPCA requires DOE to consider the savings in operating costs 
throughout the estimated average life of the covered product compared 
to any increase in the price of the covered product that are likely to 
result from the imposition of the standard. (42 U.S.C. 
6295(o)(2)(B)(i)(II)) DOE conducts this comparison in its LCC and PBP 
analysis.
    The LCC is the sum of the purchase price of a product (including 
its installation) and the operating expense (including energy, 
maintenance, and repair expenditures) discounted over the lifetime of 
the product. To account for uncertainty and variability in specific 
inputs, such as product lifetime and discount rate, DOE uses a 
distribution of values, with probabilities attached to each value. For 
its analysis, DOE assumes that consumers will purchase the covered 
products in the first year of compliance with amended standards.
    The LCC savings and the PBP for the considered efficiency levels 
are calculated relative to a base case that reflects projected market 
trends in the absence of amended standards. DOE identifies the 
percentage of consumers estimated to receive LCC savings or experience 
an LCC increase, in addition to the average LCC savings associated with 
a particular standard level. DOE's LCC and PBP analysis is discussed in 
further detail in section IV.F.
c. Energy Savings
    Although significant conservation of energy is a separate statutory 
requirement for adopting an energy conservation standard, EPCA requires 
DOE, in determining the economic justification of a standard, to 
consider the total projected energy savings that are expected to result 
directly from the standard. (42 U.S.C. 6313(a)(6)(B)(ii)(III)) As 
discussed in section IV.H, DOE uses the NIA spreadsheet to project 
national energy savings.
d. Lessening of Utility or Performance of Products
    In establishing classes of products, and in evaluating design 
options and the impact of potential standard levels, DOE evaluates 
standards that would not lessen the utility or performance of the 
considered products. (42 U.S.C. 6313(a)(6)(B)(ii)(IV)) Based on data 
available to DOE, the standards proposed in this document would not 
reduce the utility or performance of the products under consideration 
in this rulemaking.
e. Impact of Any Lessening of Competition
    EPCA directs DOE to consider the impact of any lessening of 
competition, as determined in writing by the Attorney General, that is 
likely to result from a proposed standard. (42 U.S.C. 
6313(a)(6)(B)(ii)(V)) It also directs the Attorney General to determine 
the impact, if any, of any lessening of competition likely to result 
from a proposed standard and to transmit such determination to the 
Secretary within 60 days of the publication of a proposed rule, 
together with an analysis of the nature and extent of the impact. (42 
U.S.C. 6295(o)(2) (B)(ii)) DOE will transmit a copy of today's proposed 
rule to the Attorney General with a request that the Department of 
Justice (DOJ) provide its determination on this issue. DOE will address 
the Attorney General's determination in the final rule.
f. Need for National Energy Conservation
    In evaluating the need for national energy conservation, DOE 
expects that the energy savings from the proposed standards are likely 
to provide improvements to the security and reliability of the nation's 
energy system. Reductions in the demand for electricity also may result 
in reduced costs for maintaining the reliability of the nation's 
electricity system. DOE conducts a utility impact analysis to estimate 
how standards may affect the nation's needed power generation capacity.
    The proposed standards also are likely to result in environmental 
benefits in the form of reduced emissions of air pollutants and 
greenhouse gases associated with energy production. DOE reports the 
emissions impacts from the proposed standards, and from each TSL it 
considered, in section V.B.6 of this proposed rulemaking. DOE also 
reports estimates of the economic value of emissions reductions 
resulting from the considered TSLs, as discussed in section IV.L.
g. Other Factors
    EPCA allows the Secretary of Energy, in determining whether a 
standard is economically justified, to consider any other factors that 
the Secretary deems to be relevant. (42 U.S.C. 6313(a)(6)(B)(ii)(VII))
2. Rebuttable Presumption
    As set forth in 42 U.S.C. 6295(o)(2)(B)(iii), EPCA creates a 
rebuttable presumption that an energy conservation standard is 
economically justified if the additional cost to the consumer of a 
product that meets the standard is less than three times the value of 
the first year's energy savings resulting from the standard, as 
calculated under the applicable DOE test procedure. DOE's LCC and PBP 
analyses generate values used to calculate the effects that proposed 
energy conservation standards would have on the payback period for 
consumers. These analyses include, but are not limited to, the 3-year 
payback period contemplated under the rebuttable-presumption test. In 
addition, DOE routinely conducts an economic

[[Page 58963]]

analysis that considers the full range of impacts to consumers, 
manufacturers, the nation, and the environment, as required under 42 
U.S.C. 6295(o)(2)(B)(i). The results of this analysis serve as the 
basis for DOE's evaluation of the economic justification for a 
potential standard level (thereby supporting or rebutting the results 
of any preliminary determination of economic justification). The 
rebuttable presumption payback calculation is discussed in section 
IV.F.12 of this proposed rule.

IV. Methodology and Discussion of Related Comments

    DOE used four analytical tools to estimate the impact of today's 
proposed standards. The first tool is a spreadsheet that calculates 
LCCs and PBPs of potential new energy conservation standards. The 
second tool is a model that provides shipments forecasts, and the third 
tool is a spreadsheet that calculates national energy savings and net 
present value resulting from potential amended energy conservation 
standards. The fourth spreadsheet tool, the Government Regulatory 
Impact Model (GRIM), helped DOE to assess manufacturer impacts.
    Additionally, DOE estimated the impacts of energy conservation 
standards for small, large, and very large air-cooled commercial 
package air conditioning and heating equipment on utilities and the 
environment. DOE used a version of EIA's National Energy Modeling 
System (NEMS) for the utility and environmental analyses. The NEMS 
model simulates the energy sector of the U.S. economy. EIA uses NEMS to 
prepare its Annual Energy Outlook (AEO), a widely known energy forecast 
for the United States. The version of NEMS used for appliance standards 
analysis is called NEMS-BT \34\ and is based on the AEO version with 
minor modifications.\35\ The NEMS-BT model 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.
---------------------------------------------------------------------------

    \34\ BT stands for DOE's Building Technologies Program.
    \35\ The EIA allows 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 as used here. 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.
---------------------------------------------------------------------------

    As discussed below, specifically in section IV.D on the markups 
analysis and section IV.E on the energy use analysis, DOE utilized 
methods developed for the 2004 ANOPR to conduct these analyses. In the 
case of the markups analysis, DOE utilized the same distribution 
channels as the 2004 ANOPR to characterize how small, large, and very 
large air-cooled CUAC equipment is distributed from the manufacturer to 
the end-user. In the case of the energy use analysis, building 
simulations performed for the 2004 ANOPR laid the basis for estimating 
the annual energy consumption of small, large, and very large air-
cooled CUAC equipment. However, DOE incorporated several modifications 
to the simulations themselves as well as detailed performance data from 
the Engineering Analysis to estimate the energy consumption of 
equipment at the specific energy efficient levels evaluated in today's 
NOPR. DOE also notes that inputs to the LCC and PBP analysis, including 
the installation and maintenance costs, used the same data source as 
the 2004 ANOPR, but DOE updated the data to reflect the most recent 
version of the data source.

A. Market and Technology Assessment

1. General
    For the market and technology assessment, 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 scope of coverage, 
equipment classes, types of equipment sold and offered for sale, and 
technology options that could improve the energy efficiency of the 
equipment under examination. Chapter 3 of the NOPR TSD contains 
additional discussion of the market and technology assessment.
2. Scope of Coverage and Equipment Classes
    The proposed energy conservation standards in today's NOPR cover 
small, large, and very large, air-cooled CUAC and CUHP under section 
342(a) of EPCA. (42 U.S.C. 6313(a)) This category of equipment has a 
rated capacity between 65,000 Btu/h and 760,000 Btu/h. It is designed 
to heat and cool commercial buildings. In the case of single-package 
units, which house all of the components (i.e., compressor, condenser 
and evaporator coils and fans, and associated operating and control 
devices) within a single cabinet, these units are typically located on 
the building's rooftop. In the case of split-system units, the 
compressor and condenser coil and fan (or in the case of CUHP, the 
outdoor coil and fan) are housed in a cabinet typically located on the 
outside of the building, and the evaporator coil and fan (or in the 
case of CUHP, the indoor coil and fan) are housed in a cabinet 
typically located inside the building.
    When evaluating and establishing energy conservation standards, DOE 
divides covered equipment into equipment classes by the type of energy 
used or by capacity or other performance-related features that would 
justify a different standard. In determining whether a performance-
related feature would justify a different standard, DOE considers such 
factors as the utility to the consumer of the feature and other factors 
DOE determines are appropriate.
    The current equipment classes that EPAct 2005 established for 
small, large, and very large air-cooled CUAC and CUHP divide this 
equipment into twelve classes characterized by rated cooling capacity, 
equipment type (air conditioner versus heat pump), and heating type. 
Table IV.1 shows the current equipment class structure.

                                     Table IV.1--Proposed Equipment Classes
----------------------------------------------------------------------------------------------------------------
  Equipment class       Equipment type       Cooling capacity           Sub-category            Heating type
----------------------------------------------------------------------------------------------------------------
1..................  Small Commercial      >=65,000 Btu/h and    AC.......................  Electric Resistance
                      Packaged Air-         <135,000 Btu/h.                                  Heating or No
                      Conditioning and                                                       Heating.
                      Heating Equipment
                      (Air-Cooled).
2..................  ....................  ....................  .........................  All Other Types of
                                                                                             Heating.
3..................  ....................  ....................  HP.......................  Electric Resistance
                                                                                             Heating or No
                                                                                             Heating.

[[Page 58964]]

 
4..................  ....................  ....................  .........................  All Other Types of
                                                                                             Heating.
5..................  Large Commercial      >=135,000 Btu/h and   AC.......................  Electric Resistance
                      Packaged Air-         <240,000 Btu/h.                                  Heating or No
                      Conditioning and                                                       Heating.
                      Heating Equipment
                      (Air-Cooled).
6..................  ....................  ....................  .........................  All Other Types of
                                                                                             Heating.
7..................  ....................  ....................  HP.......................  Electric Resistance
                                                                                             Heating or No
                                                                                             Heating.
8..................  ....................  ....................  .........................  All Other Types of
                                                                                             Heating.
9..................  Very Large            >=240,000 Btu/h and   AC.......................  Electric Resistance
                      Commercial Packaged   <760,000 Btu/h.                                  Heating or No
                      Air-Conditioning                                                       Heating.
                      and Heating
                      Equipment (Air-
                      Cooled).
10.................  ....................  ....................  .........................  All Other Types of
                                                                                             Heating.
11.................  ....................  ....................  HP.......................  Electric Resistance
                                                                                             Heating or No
                                                                                             Heating.
12.................  ....................  ....................  .........................  All Other Types of
                                                                                             Heating.
----------------------------------------------------------------------------------------------------------------
AC = Air conditioner; HP = Heat pump.

    In the RFI, DOE stated that it planned to continue using these 
classes, which are also provided in Table 1 of 10 CFR 431.97. DOE 
requested feedback on the current equipment classes and sought 
information regarding other equipment classes it should consider for 
inclusion in its analysis 78 FR 7296, 7300 (Feb. 1, 2013).
    Modine, Carrier, and AAON supported the equipment class structures 
presented in the RFI. (Modine, No. 5 at p. 1; Carrier, No. 7 at p. 2; 
AAON, No. 8 at p. 3) AHRI disagreed with DOE's determination that every 
equipment category for which there is a minimum energy conservation 
standard is an equipment class. AHRI stated that equipment classes 
should be delineated based on cooling capacity and on whether the unit 
is an air conditioner or a heat pump. AHRI commented that the same 
equipment class could have two different efficiency levels (e.g., one 
for equipment with electric resistance heat (or none) and the other for 
equipment with all other types of heating element). (AHRI, No. 14 at p. 
5)
    As discussed above, EPCA specifies the criteria for separation into 
different equipment classes: (1) Type of energy used, or (2) capacity 
or other performance-related features such as those that provide 
utility to the consumer or others the Secretary determines are 
appropriate that would justify the establishment of a separate energy 
conservation standard. DOE notes that considering two different 
efficiency levels for different equipment types, as asserted by AHRI, 
would create two separate equipment classes because a performance-
related feature (e.g., type of heating) inherently affects the 
efficiency and warrants establishing a separate energy conservation 
standard. For these reasons, DOE is proposing energy conservation 
standards in this NOPR based on the existing equipment class structure 
provided in Table 1 of 10 CFR 431.97, as shown in Table IV.1.
    United CoolAir Corporation (UCA) submitted a request for exemption 
for a specific type of air conditioning equipment (``double-duct air-
cooled air conditioner''). See UCA, EERE-2013-BT-STD-0007-0020. These 
units are designed for indoor installation in constrained spaces using 
ducting to an outside wall for the supply and discharge of condenser 
air to the condensing unit. The sizing of these units is constrained 
both by the space available in the installation location and the 
available openings in the building through which the unit's sections 
must be moved to reach the final installation location. These size 
constraints, coupled with the higher power required by the condenser 
fan to provide sufficient pressure to move the condenser air through 
the supply and return ducts, affect the energy efficiency of these 
types of systems. More conventional designs that use outdoor units or 
condenser sections of packaged commercial air conditioners do not 
require this more complex ductwork and can more easily move condenser 
air using direct-driven propeller fans.
    Currently, double-ducted air conditioners are tested and rated 
under the same test conditions as single-duct air conditioners, without 
any ducting connected to, or an external static pressure applied on, 
the condenser side. This would provide more favorable conditions for 
testing and rating equipment efficiency in terms of IEER than typically 
experienced in the field. UCA has asserted that the double-duct design 
provides customer utility in that it allows interior field 
installations in existing buildings in circumstances where spacing 
constraints make an outdoor unit impractical to use. Id. DOE recognizes 
that the design features associated with the described dual-duct 
designs may affect energy use while providing justifiable customer 
utility. However, DOE also questions how much of an efficiency impact, 
in terms of IEER, the dual-duct design may provide when tested under 
the current test conditions discussed above compared to single-duct air 
conditioners and welcomes additional data regarding the impact on the 
measured IEER.
    Issue 3: DOE requests comments on whether separate equipment 
classes should be considered for dual-duct air-conditioners. DOE 
further requests detailed comments regarding the definition of such 
equipment, and any detailed information, such as test data, test 
conditions, key component design details, fan power consumption, as 
well as other relevant information that may help DOE evaluate potential 
alternative equipment class standard levels.
3. Technology Options
    As part of the market and technology assessment, DOE uses 
information about existing and past technology options and prototype 
designs to help identify technologies that manufacturers could use to 
improve energy efficiency. Initially, these technologies encompass all 
those that DOE believes are technologically feasible. Chapter 3 of the 
NOPR TSD includes the detailed list and descriptions of all technology 
options identified for this equipment.
    In the RFI, DOE stated that it planned to consider the specific 
technology options presented in Table IV.2. 78 FR 7296, 7300 (Feb. 1, 
2013).

[[Page 58965]]



                   Table IV.2--RFI Technology Options
------------------------------------------------------------------------
 
-------------------------------------------------------------------------
Heat transfer improvements:
     Electro-hydrodynamic enhancement.
Alternative refrigerants.
Condenser and evaporator fan and fan motor improvements:
     Larger fan diameters.
     More efficient fan blades (e.g., air foil centrifugal
     evaporator fans, backward-cured centrifugal evaporator fans, high
     efficiency propeller condenser fans).
     High efficiency motors (e.g., copper rotor motor, high
     efficiency induction, permanent magnet, electronically commutated).
Larger heat exchangers.
Microchannel heat exchangers.
Reduce air leakage paths within the unit.
Low-pressure-loss filters.
Compressor Improvements:
     High efficiency compressors.
     Multiple compressors.
Thermostatic expansion valves.
Electronic expansion valves.
High-side solenoid valve or discharge line check-valve to minimize
 pressure equalization.
Heat-pipes (for high latent loads).
Sub-coolers.
Reduced indoor fan belt loss:
     Synchronous (toothed) belts.
     Direct-drive fans.
Demand-control ventilation strategy.
------------------------------------------------------------------------

    The RFI sought comment from interested parties on these, as well as 
other options that DOE had not listed. Carrier commented that, in 
general, many of the technologies presented by DOE in the RFI are 
already used in equipment. (Carrier, No. 7 at p. 2) DOE agrees that 
many of the technologies are used in equipment currently available on 
the market. As a result, DOE continued to consider such technologies 
for improving the efficiency above the baseline level for this NOPR. 
DOE also notes that for the majority of the identified technology 
options, DOE considered designs in its analyses that are generally 
consistent with existing equipment on the market (e.g., heat exchanger 
sizes, fan and fan motor types, controls, air flow).
    The following sections discuss comments from interested parties on 
specific technology options.
Heat Exchanger Size
    Increasing the heat transfer surface area of the heat exchangers 
can be achieved by increasing their width, height, or depth. These 
measures can improve heat transfer effectiveness, which can reduce the 
condensing temperature and increase the evaporating temperature needed 
to transfer the cooling (or heating) load. Such temperature adjustments 
reduce the compressor's compression ratio and hence its required power 
input. Lennox indicated that evaporator coil area is already near the 
maximum for optimum efficiency and latent heat removal. Lennox stated 
that increasing the coil area leads to higher evaporating temperatures, 
lessening the ability of the coil to remove moisture from the air, 
which could lead to humidity control problems in hot humid regions. 
(Lennox, No. 6 at p. 2) Lennox also commented that adding coil rows 
increases costs proportional to the number of rows, but provides less 
than proportional efficiency gain. (Lennox, No. 6 at p. 2)
    DOE agrees with Lennox that increasing the evaporator size may lead 
to a decrease in latent heat removal. Based on a review of currently 
available equipment literature and DOE's energy modeling analyses, DOE 
determined that, for a given capacity, the heat exchanger sizes varied 
significantly, with larger coil sizes generally correlating to higher 
IEER levels (see chapter 5 of the NOPR TSD for additional 
information).\36\ As part of the engineering analysis, the design 
options DOE considered for different IEER levels include the variation 
of evaporator coil size, and DOE's analysis considered evaporator coil 
sizes consistent with equipment available on the market.
---------------------------------------------------------------------------

    \36\ The following are examples of the equipment literature DOE 
reviewed:
     (1) United Technologies Corporation. ``Carrier 50TC Cooling 
Only/Electric Heat, Packaged Rooftop, 3 to 15 Nominal Tons: Product 
Data.'' Available online at: http://www.docs.hvacpartners.com/idc/groups/public/documents/techlit/50tc-19pd.pdf (Accessed on Sept. 12, 
2013).
    (2) Lennox International Inc. ``Lennox Packaged Electric/
Electric LCH Energence[supreg] Rooftop Units: Product 
Specifications.'' Available online at: http://tech.lennoxintl.com/C03e7o14l/3rEpIb5d/ehb_lch_bbox_1306_210556_020.pdf (Accessed on Sept. 12, 2013).
    (3) Ingersoll Rand. ``Trane Product Catalog: Packaged Rooftop 
Air Conditioners, VoyagerTM Cooling and Gas/Electric, 
12\1/2\-25 Tons, 60Hz'' Available online at: http://www.trane.com/CPS/Uploads/UserFiles/DXUnitarySystems/Light%20Rooftops/RT-PRC028-EN_08022013.pdf (Accessed on Sept. 12, 2013).
---------------------------------------------------------------------------

Fans and Fan Motors
    As stated above, DOE proposed several improvements to the indoor 
and outdoor fan motors, including copper rotor motors, higher 
efficiency motors, and direct-drive fans, and synchronous belts.
    Manufacturing more efficient copper rotor motors requires using 
copper instead of aluminum for critical components of an induction 
motor's rotor (e.g., conductor bars and end rings). By using copper in 
these motor components, the efficiency of the motor can improve 
significantly because the electrical conductivity of this material, 
relative to other materials commonly used in rotor construction (e.g. 
aluminum) is much higher (i.e., lower electrical resistance). With this 
higher level of conductivity, the electrical losses that might 
otherwise present themselves during operation in a given motor are 
significantly reduced. However, using a copper-cast rotor in an 
electric motor presents a variety of production challenges. For 
example, copper melts at higher temperatures than aluminum, so the 
casting process becomes more difficult (due to higher thermal stress on 
the die mold) and is likely to increase both production time and cost 
for manufacturing a motor. EBM-Papst Inc. (EBM-Papst) commented that 
copper rotor motors provide marginally increased efficiency

[[Page 58966]]

over aluminum and aluminum alloy rotor motors. EBM-Papst noted that the 
torque characteristic of copper rotor motors is very stiff, so that 
copper rotor motors cannot control speed based on voltage and, as a 
result, variable speed copper rotor motors would require variable 
frequency drives. EBM-Papst also indicated that casting of copper 
requires very high temperatures and very specialized tools. (EBM-Papst, 
No. 16, p. 1)
    DOE agrees with EBP-Papst that copper rotor motors are more 
difficult to manufacture than aluminum rotor motors due to the high 
temperatures required for casting. However, as part of the previous 
rulemaking for this equipment, DOE noted that in the case of motor 
rotors for similar horsepower motors, copper rotors can reduce the 
electric motor total energy losses by between 15 percent and 23 percent 
as compared to aluminum rotors.\37\ DOE also notes that, based on a 
review of equipment literature, equipment is available on the market 
that offers variable speed indoor fan motors using variable frequency 
drives. As a result, DOE considered copper rotor motors as a technology 
option.
---------------------------------------------------------------------------

    \37\ See chapter 4 of the TSD for the July 2004 ANOPR, available 
online at: http://www.regulations.gov/#!documentDetail;D=EERE-2006-
STD-0103-0078.
---------------------------------------------------------------------------

    High-efficiency electric motors that drive evaporator and condenser 
fans can increase efficiency and reduce overall energy use in air-
cooled CUAC and CUHP. EBM-Papst stated that high-efficiency permanent 
magnet motors are available with ferrite magnets. EBM-Papst indicated 
that external rotor permanent magnet motors with completely integrated 
drive electronics are available up to a 6 kilowatt (kW) (8 horsepower) 
electrical input. EBM-Papst stated that versions with 7.5 kW and 12 kW 
(10 horsepower and 15 horsepower), which DOE notes may be applicable 
for very large air-cooled CUAC and CUHP indoor fan motors, will become 
available in 2013 and 2014, respectively. In light of EBM-Papst's 
information, DOE decided to consider higher efficiency permanent magnet 
motors as part of its list of technology options because they may 
reduce the energy consumption compared to motors currently used by 
manufacturers for CUAC and CUHP equipment. As discussed above, DOE's 
analysis considered fan motors consistent with equipment available on 
the market.
    Direct-drive fans connect the fan blade/wheel directly to the motor 
shaft, thereby eliminating drive belt energy loss. EBM-Papst also 
commented that direct-drive fans prevent friction power losses that can 
be found in fans with mechanical transmission components even when 
these components are perfectly aligned with properly-tightened high-
quality belts. (EBM-Papst, No. 16 at p. 2) DOE notes that certain air-
cooled CUAC and CUHP currently available on the market already 
incorporate direct-drive fans in higher efficiency equipment. As a 
result, DOE proposes to keep direct-drive fans on the list of 
technologies.
    Another option to improve efficiency would be to increase the 
diameter of the outdoor fan, which reduces the discharge velocity of 
the air leaving the condenser fan. The energy associated with the 
discharge velocity is dissipated and cannot be recovered, hence, a 
lower discharge velocity reduces this loss and reduces fan power input. 
Regarding increasing the outdoor fan diameter, EBM-Papst commented that 
fan efficiency varies significantly with the fan's duty point. EBM-
Papst noted that many fans are selected with the operating point very 
far to the right of the point of peak efficiency (i.e., fans are 
designed for higher flow rates and are sized smaller than is optimal 
for efficiency) and that such selections yield lower first cost and 
smaller equipment size. EBM-Papst stated that fan selections that match 
the duty point closer with the fan's peak efficiency are usually 
larger. Moreover, EBM-Papst commented that despite the potential 
increase in operational fan efficiency, a larger fan--while operating 
at lower rotational speed--can require a slightly higher motor torque, 
which results in the need for a larger motor frame size. (EBM-Papst, 
No. 16, p. 2) (Larger frame-sized motors provide higher horsepower and 
torque levels.) Lennox also commented that fan efficiency increases 
with fan diameter, but that cabinet size and shipping dimensions 
constrain the ability of manufacturers to increase fan diameters much 
beyond the current sizes. (Lennox, No. 6 at p. 2)
    With respect to these comments, DOE recognizes that fan efficiency 
can play a role in improving CUAC/CUHP efficiency. DOE also realizes 
that fan diameter size is limited by cabinet sizes and shipping 
dimensions. DOE has incorporated fan diameter and motor sizes 
consistent with existing equipment available on the market to ensure 
that components are appropriately sized.
    EBM-Papst suggested that DOE consider that company's 
HyBlade[supreg] axial fan and AxiTop diffuser for axial fans as 
technology options for improving condenser fan efficiency. (EBM-Papst, 
No. 16 at p. 3) EBM-Papst stated that the HyBlade[supreg] axial fan 
uses a blade with a metal core for structural strength and motor heat 
dissipation, while using injection molded blade surfaces for advanced 
geometries that allow for optimized aerodynamic shape, resulting in 
increased efficiency compared to conventional fan blades. (EBM-Papst, 
No. 16 Appendix 4 at p. 2) According to EBM-Papst, the Axitop diffuser 
reduces discharge losses due to stripping and back-flow of air and, as 
a result, boosts the pressure increase of the fan. This increases the 
efficiency of the fan and allows the fan speed to be reduced (i.e., fan 
motors may run at lower power) while producing the same air volume, 
resulting in a decrease in energy use of the overall system. EBM-Papst 
noted that in one customer application (at constant air volume), energy 
consumption was reduced by 27 percent using this technology. (EBM-
Papst, No. 16 Appendix 3 at pp. 1-2) DOE notes that both of these 
technologies are patented by EBM-Papst. DOE does not intend to consider 
energy conservation standards that would necessitate the use of any 
proprietary designs or patented technologies, which could allow a 
single manufacturer to monopolize the market. As a result, DOE is not 
considering EBM-Papst's HyBlade[supreg] axial fan and AxiTop diffuser 
as technology options in this NOPR. However, DOE notes that the 
proposed energy conservation standards would not prohibit the use of 
these technologies.
    EBM-Papst made several comments regarding indoor fan energy use and 
available design options to improve their efficiency--which, by 
extension, would improve overall CUAC/CUHP efficiency. EBM-Papst 
commented that unnecessary electrical consumption by indoor fans 
impacts the energy efficiency doubly, because of the additional heat 
load on the conditioned space. DOE recognizes that the heat load caused 
by the indoor motor may result in added energy consumption to cool the 
air heated by the motor. DOE notes that the energy modeling tool used 
in the engineering analyses is already designed to account for the heat 
load caused by the indoor fan motor as part of the overall system 
performance.
    An airfoil centrifugal fan is a type of fan that has blades shaped 
like air foils that are inclined such that the blade trailing edge is 
angled away from the rotation direction. The best airfoil fans can 
operate at efficiencies near 90 percent.\38\ Utilizing this type of fan 
for

[[Page 58967]]

indoor fan applications can improve the efficiency of the CUAC/CUHP 
system. Regarding specific indoor fan types, EBM-Papst stated that 
airfoil centrifugal fans are known for low sound. Additionally, EBM-
Papst stated that the efficiency benefits of airfoil impellers over 
backward curved impellers (which have the tips of its blades inclined 
away from the direction of the airflow, enabling it to move air at 
higher pressures) should be examined closely. (EBM-Papst, No. 16 at p. 
2) Although EBM-Papst did not provide details regarding the low sound 
feature, DOE recognizes that the airfoil centrifugal fan has less 
friction losses during operation, which produces less noise, and also 
results in lower power consumption.
---------------------------------------------------------------------------

    \38\ United States Army. December 9, 2005. Maintenance of 
Mechanical and Electrical Equipment At Command, Control, 
Communications, Computers, Intelligence, Surveillance, and 
Reconnaissance (C4isr) Facilities, HQUSACE/OCE Army Technical 
Manuals [Online Report]. DOE documented this report in the 
rulemaking docket as docket ID EERE-2013-BT-STD-0007-0019.
---------------------------------------------------------------------------

    DOE acknowledges that manufacturers may offer features that are 
beneficial to consumers, like low sound fans, but do not impact 
efficiency. A number of manufacturers indicated that airfoil 
centrifugal fans and backward curved centrifugal fans (i.e., similar to 
airfoil fans, but they have simpler blades and cannot attain comparable 
efficiencies) may improve IEER due to lower fan power consumption. As a 
result, DOE proposes to include these fan types on the list of 
technology options. As discussed above, DOE considered technology 
options and designs that are generally consistent with existing 
equipment on the market. Additionally, as part of the reverse 
engineering analysis (see section IV.C.1), DOE considered fan curves 
and test data to account for the performance of the fans as part of the 
air-cooled CUAC and CUHP.
    EBM-Papst also provided the following comments on other fan and fan 
motor efficiency improving technologies:
     Lower air-speed results in lower fan energy losses and 
EBM-Papst recommended imposing an upper limit for air speed inside of 
the commercial package equipment, referenced to air inlet area, the air 
outlet area, and/or air filter area. Air-speed of less than 2.5 meters/
second would be ideal.
     Optimize the air path in the unit to minimize airflow 
impedance.
     Optimize the fan selection in terms of fan diameter, and 
fan type (axial, centrifugal forward curved, centrifugal backward 
curved, cross flow, mixed flow) so that the fan duty point of its peak 
efficiency is: (1) Close to the actual fan duty point required by the 
commercial package equipment, and (2) that the chosen fan type enhances 
the air path in the unit.
     Fine-tune the fan design (blade angle, number of blades, 
impeller width) so that the fan's operational efficiency in the unit 
matches the fan peak efficiency exactly.
     Some electronic motor speed controllers can cause 
structure-borne noise. A better controller potentially avoids the need 
for sound attenuation, which in turn, frees up the air path for 
increased air-side efficiency.
     Improve the combination of fans with motors and speed 
controllers. A regulation harmonized with EN 13053:2006+A1 would limit 
the maximum permitted electrical power consumption of the motorized 
fan. Equation (6) in EN 13053 determines a reference power input based 
on fan static pressure and on airflow. The resulting product is 
compared against a table which categorizes the equipment in class P1 
(best) through class P7 (worst). (EBM-Papst, No. 16 at p. 3)
    DOE agrees that reducing the air speed can reduce fan power 
consumption and included variable or staged air flow as a technology 
option. DOE also recognizes that optimizing fan type and fan design may 
decrease the fan power consumption and thus improve the efficiency of 
the air-cooled CUAC and CUHP. As a result, DOE is including these 
designs on the list of technology options. DOE also agrees that 
appropriately matching the fan with the fan motor improves efficiency. 
However, DOE proposes to evaluate air-cooled CUAC and CUHP as a whole 
and does not propose to set separate performance requirements for the 
fan assembly. With regards to EBM-Papst's comments concerning 
optimizing air paths and better motor controllers, DOE's analyses 
considered air flow paths and control systems consistent with existing 
equipment available on the market.
Electronic Expansion Valves
    Expansion valves are refrigerant metering devices that control the 
amount of refrigerant flowing to the evaporator coil, decreasing the 
temperature and pressure of the refrigerant, which creates the driving 
force to move heat out of the conditioned space and into the 
evaporator. Electronic expansion valves use an electronic control 
system and sensors that measure suction line temperature and pressure 
to maintain more precise control of superheat over a wide range of 
operating conditions and, as a result, may increase energy efficiency 
under varying load conditions when paired with modulating systems.
    Lennox stated that electronic expansion valves are very costly and 
not economically justified because they provide little full load 
benefit. (Lennox, No. 6 at p. 2) As explained in section III.A, DOE 
proposes to transition to IEER, a part load efficiency metric, and 
electronic expansion valves are beneficial for partial loads because 
they can precisely control the expansion process which leads to lower 
power consumption, and therefore, a higher IEER. DOE recognizes that 
that electronic expansion valves may be more expensive that other 
expansion devices, like capillary tubes or thermostatic expansion 
valves, but DOE already considers the costs of design options 
separately as part of the engineering analyses, which means that these 
devices may be screened out once costs are factored into the analysis. 
As a result, DOE is continuing to consider electronic expansion valves 
as a technology option for purposes of its engineering analysis.
Part-Load Technology Options
    Variable-capacity or multiple-tandem compressors provide the 
ability to modulate the cooling capacity, allowing equipment to better 
match the cooling load than single speed compressors that can only 
operate by cycling on and off. The effectiveness of the heat exchangers 
is greater during operation with reduced mass flow at part load, thus 
reducing the condensing temperature and increasing the evaporating 
temperature required to transfer the load--this in turn reduces the 
compressor's operating pressure ratio and its power input. As a result, 
using variable capacity or multiple-tandem compressors may improve the 
overall system efficiency by matching part-load operating conditions 
(and reducing energy consumption) more closely than units using single 
speed compressors. Variable speed fans/motors can also improve CUAC and 
CUHP efficiency by varying fan speed to reduce air flow rate at part 
load. If the indoor/outdoor heat exchangers of a unit are served by a 
variable-capacity compressor or by a tandem compressor set, less air 
flow is needed to transfer the load. Overall system efficiency can be 
improved by reducing the indoor or outdoor air flow and reducing 
indoor/outdoor fan power.
    DOE's consideration of a shift to an IEER-based standard generated 
a number of comments. Ingersoll Rand commented that moving to an IEER 
metric will require manufacturers to optimize around part load 
performance, likely in the form of improved heat

[[Page 58968]]

transfer and airflow. (Ingersoll Rand, No. 10 at p. 3) Whole Building 
Systems, LLC, commented that DOE should include variable-capacity 
compressors, along with variable speed condenser and evaporator fans. 
It noted that these technologies are already being adopted by 
manufacturers. (Whole Building Systems, No. 4 at p. 1) Carrier added 
that compressor staging (multiple or variable capacity-compressors) and 
indoor and outdoor fan speed control would increase IEER efficiency, 
but would not impact EER. (Carrier, No. 7 at p. 2)
    DOE agrees with Whole Building Systems, Carrier, and Ingersoll Rand 
that variable-capacity compressors, compressor staging, and variable 
speed fans improve IEER because they provide the ability to modulate 
the cooling capacity and reduce the overall system power consumption 
under part-load conditions. Based on DOE's review of manufacturer 
equipment literature, these design elements are already being used in 
equipment currently available on the market. Accordingly, DOE included 
these design elements in the list of technology options considered for 
this NOPR.
    Modine commented that DOE should also consider the intelligent 
interactive modulation head pressure control, a technology option 
developed by Airedale International Air Conditioning (Airedale) to 
improve off peak load efficiencies. (Modine, No. 5 at pp. 1-2) DOE 
notes that Modine did not provide any details regarding this technology 
or the associated efficiency improvement. DOE also notes that Airedale 
was acquired by Modine in 2005. DOE does not consider proprietary 
technologies as part of its analyses and, as a result, did not consider 
the intelligent interactive modulation head pressure control developed 
by Airedale as a separate technology option. However, DOE recognizes 
that different equipment manufacturers may take different approaches 
for part-load operation control strategies.
Technology Options That Do Not Impact IEER
    DOE laid out a number of technology options for comment that have 
no impact on IEER but that could have an overall impact on energy usage 
that would not be fully captured by the use of this proposed metric. 
Demand-control ventilation strategies monitor the indoor space 
occupancy and conditions (e.g., using CO2 sensors) to 
deliver the required ventilation as needed (based on building air 
quality requirements). In contrast, conventional systems that do not 
employ these strategies may provide fixed amounts of ventilated air 
based on assumed conditions. By comparison, demand-control ventilation 
strategies would more accurately control the amount of outdoor air 
required for ventilation that needs to be conditioned by the equipment.
    Lennox and Ingersoll Rand commented that demand-control ventilation 
strategy does not benefit either EER or IEER ratings. (Lennox, No. 6 at 
p. 3; Ingersoll Rand, No. 10 at p. 3) Carrier also commented that many 
units on the market have capabilities for demand management, and with 
the development of smart meters and the smart grid, there are more 
effective ways to control peak power for this class of equipment than 
the technology options identified by DOE. Carrier stated that these 
features are not captured in EER or IEER metrics. (Carrier, No. 7 at p. 
2) Lentz Engineering Associates, Inc. commented that DOE should 
consider a technology option where the primary function of the air 
handling systems is to efficiently process or manage ventilation and 
where the primary heating and cooling plants rely on recovered energy 
instead of expending new energy assets. Lentz Engineering stated that 
this can result in energy use reductions in HVAC systems on the order 
of 85 to 90 percent. (Lentz, No. 3 at p. 1)
    DOE also considered the implementation of a high-side solenoid 
valve. A high-side solenoid valve (i.e., a solenoid valve located in 
the high-pressure-refrigerant line) and a discharge line check valve 
(i.e., a check valve located in the compressor discharge line) can be 
installed in a refrigeration system to minimize pressure equalization 
between the high-pressure and low-pressure sides. Lennox commented that 
these valves do not benefit either EER or IEER ratings, but no further 
details were provided in their comments. (Lennox, No. 6 at p. 3)
    Another option could also be used. Heat pipes are used in hot humid 
climates to increase dehumidification. Refrigerant inside the heat pipe 
pre-cools incoming supply air by absorbing the heat from it. The 
evaporator cools the supply air further, and is able to extract more 
water vapor than a conventional evaporator would. After the refrigerant 
in the tubes changes into a vapor, it flows to the condensing section 
at the other end of the system, releasing its heat and flowing back to 
the evaporator end of the pipe to begin the cycle again. Lennox also 
commented that heat-pipes for high latent loads do not benefit either 
EER or IEER ratings. (Lennox, No. 6 at p. 3)
    In addition to the items describe above, AAON noted several other 
technologies that DOE did not initially consider that can improve 
efficiency. These technologies include capacity modulation (i.e., 
modulate system capacity output for part load conditions by various 
means to reduce overall energy consumption), economizers (i.e., an 
automatic system that enables a cooling system to supply outdoor air to 
reduce or eliminate the need for mechanical cooling during mild or cold 
weather), heat recovery (i.e., a process that preconditions outdoor air 
entering the equipment through direct or indirect thermal and/or 
moisture exchange with the exhaust air) and energy efficient control 
sequences (e.g., single zone variable-air-volume) are outside the scope 
of AHRI Standard 340/360-2007 and beyond the lab facilities 
capabilities to test. AAON added that although energy can be saved 
annually by using any one of these options, the full load EER ratings 
would be decreased due to the higher pressure drop incurred with many 
of these features. AAON stated that rating system modifications exist 
to account for the energy savings of some of these technologies, such 
as those contained in AHRI Guideline V for energy recovery systems. 
(AAON, No. 8 at p. 3)
    DOE recognizes that technologies such as demand-control strategies, 
economizers, energy recovery, high-side solenoid valves or discharge 
line check-valves and heat pipes may result in annual building energy 
savings. However, DOE is not aware of any data showing that these 
technologies improve IEER based on the current DOE test procedure. As a 
result, DOE is not proposing to include these technologies in its 
analyses. However, DOE notes that the IEER metric for this equipment 
already accounts for both capacity modulation and energy efficient 
control sequences. In addition, based on a review of equipment 
literature, DOE notes that both capacity modulation and energy 
efficient control sequences are used to improve part-load performance 
for this equipment. As a result, DOE included these technology options 
as part of the analyses.
    Based on manufacturer comments and DOE's review of equipment 
literature, DOE is declining to include low pressure drop filters and 
air leakage paths within the unit from the list of technology options. 
Comments from several manufacturers during manufacturer interviews and 
public meetings held as part of the Commercial HVAC, Water Heating, and 
Refrigeration Certification Working Group (Commercial Certification 
Working

[[Page 58969]]

Group), indicated that most manufacturers test their systems without 
filters installed or use disposable filters that produce minimal 
pressure drops when used. Additionally, the filter type used in a 
system is a feature specified by the customer based on the needs of the 
installation. For example, a unit installed in a hospital will require 
filters with a high Minimum Efficiency Reporting Value (MERV) 
rating,\39\ which may cause an increase in pressure drop depending on 
the density of the filter material and an accompanying increase in fan 
power and energy use of the unit. DOE proposes to remove air leakage 
paths from the list of technology options because several manufacturers 
indicated during interviews that air leakage paths are already 
eliminated during design of air-cooled CUAC and CUHP.
---------------------------------------------------------------------------

    \39\ ASHRAE Standard 52.2-2007, ``Method of Testing General 
Ventilation Air-Cleaning Devices for Removal Efficiency by Particle 
Size,'' establishes the MERV rating, which is the standard 
comparison of the efficiency of an air filter, ranging from 1 (least 
efficient) to 16 (most efficient), and measures a filter's ability 
to remove particles from 0.3 to 10 microns in size.
---------------------------------------------------------------------------

    Based on these assertions and supplemental follow-up work 
performed, DOE considered the following technology options listed in 
Table IV.3 in formulating its proposed standards:

                 Table IV.3--Proposed Technology Options
------------------------------------------------------------------------
 
-------------------------------------------------------------------------
Heat transfer improvements:
     Electro-hydrodynamic enhancement.
Alternative refrigerants.
Condenser and evaporator fan and fan motor improvements:
     Larger fan diameters.
     More efficient fan blades (e.g., air foil centrifugal
     evaporator fans, backward-cured centrifugal evaporator fans, high
     efficiency propeller condenser fans).
     High efficiency motors (e.g., copper rotor motor, high
     efficiency induction, permanent magnet, electronically commutated).
     Variable speed fans/motors.
Larger heat exchangers.
Microchannel heat exchangers.
Compressor Improvements:
     High efficiency compressors.
     Multiple compressor staging.
     Multiple-tandem or variable-capacity compressors.
Thermostatic expansion valves.
Electronic expansion valves.
Subcoolers.
Reduced indoor fan belt loss:
     Synchronous (toothed) belts.
     Direct-drive fans.
------------------------------------------------------------------------

    Issue 4: DOE requests comment and data regarding additional design 
options or variants of the considered design options that can increase 
the range of considered efficiency improvements, including design 
options that may not yet be found on the market.

B. Screening Analysis

    After DOE identified the technologies that might improve the energy 
efficiency of electric motors, DOE conducted a screening analysis. The 
purpose of the screening analysis is to determine which options to 
consider further and which to screen out. DOE consulted with industry, 
technical experts, and other interested parties in developing a list of 
design options. DOE then applied the following set of screening 
criteria to determine which design options are unsuitable for further 
consideration in the rulemaking:
     Technological Feasibility: DOE will consider only those 
technologies incorporated in commercial equipment or in working 
prototypes to be technologically feasible.
     Practicability to Manufacture, Install, and Service: If 
mass production of a technology in commercial equipment and reliable 
installation and servicing of the technology could be achieved on the 
scale necessary to serve the relevant market at the time of the 
effective date of the standard, then DOE will consider that technology 
practicable to manufacture, install, and service.
     Adverse Impacts on Equipment Utility or Equipment 
Availability: DOE will not further consider a technology if DOE 
determines it will have a significant adverse impact on the utility of 
the equipment to significant subgroups of customers. DOE will also not 
further consider a technology that will result in the unavailability of 
any covered equipment type with performance characteristics (including 
reliability), features, sizes, capacities, and volumes that are 
substantially the same as equipment generally available in the United 
States at the time.
     Adverse Impacts on Health or Safety: DOE will not further 
consider a technology if DOE determines that the technology will have 
significant adverse impacts on health or safety.
    Technologies that pass through the screening analysis are referred 
to as ``design options'' in the engineering analysis. Details of the 
screening analysis are in chapter 4 of the NOPR TSD. In view of the 
above factors, DOE screened out the following design options.
Electro-Hydrodynamic Enhanced Heat Transfer
    Electro-hydrodynamic enhancement of heat transfer increases the net 
heat transfer coefficient by applying a high-voltage electrostatic 
potential field across a heat transfer fluid to destabilize the thermal 
boundary layer and incite fluid mixing. The improved heat transfer of 
the evaporator and condenser coils may improve a given system's overall 
efficiency. DOE notes, however, that this technology is still in the 
research stage. In response to the RFI, Lennox commented that locating 
an electrode between each of the hundreds/thousands of heat exchanger 
fins (which would be the likely method for applying this option) has 
not been adequately demonstrated for commercial deployment. (Lennox, 
No. 6 at p. 2)
    Although the technique has been shown to improve heat transfer in 
laboratory testing, DOE is not aware of any commercially available 
equipment

[[Page 58970]]

or working prototypes that use electro-hydrodynamic heat transfer. As a 
result, DOE does not believe at this time that this option meets the 
screening criterion of technological feasibility. In addition, DOE 
agrees with Lennox that this technology has not been adequately 
demonstrated for commercial deployment and, as a result, does not meet 
the criterion of practicability to install and service on a scale 
necessary to serve the relevant market at the time of the compliance 
date of a new standard. For these reasons, DOE did not consider 
electro-hydrodynamic heat transfer further in the NOPR analyses.
Alternative Refrigerants
    DOE considered ammonia, carbon dioxide, and various hydrocarbons 
(such as propane and isobutane) as alternative refrigerants to those 
that are currently in use, such as R-410A. In response to the February 
2013 RFI, Lennox stated that virtually all equipment is designed with 
R-410A as the refrigerant, and that because of the lengthy 
qualification process to develop a new refrigerant and the components 
that would need to be redesigned to use it, it is not reasonable to 
expect a new refrigerant in the timeframe for new energy conservation 
standards. (Lennox, No. 6 at p. 2) DOE notes that safety concerns need 
to be taken into consideration when using ammonia and hydrocarbons in 
air-conditioning systems. EPA created the Significant New Alternatives 
Policy (SNAP) Program to evaluate alternatives to ozone-depleting 
substances. Substitutes are reviewed on the basis of ozone depletion 
potential, global warming potential, toxicity, flammability, and 
exposure potential. DOE notes that ammonia (in vapor compression 
cycles), carbon dioxide, and hydrocarbons have been approved or are 
being considered under SNAP for certain uses, but these or other low 
GWP alternatives are not yet listed as acceptable substitutes for this 
equipment.\40\ DOE is also not aware of any other more efficient 
refrigerant options that are SNAP-approved. Because these alternative 
refrigerants have not yet been approved for this equipment, DOE did not 
consider alternate refrigerants for further analysis.
---------------------------------------------------------------------------

    \40\ On July 9, 2014, EPA proposed to list certain hydrocarbons 
and R-32 for residential self-contained A/C appliances as acceptable 
subject to use conditions to address safety concerns (See 79 FR 
38811). EPA is also evaluating new refrigerants for other A/C 
applications, including commercial A/C. Additional information 
regarding EPA's SNAP Program is available online at: http://www.epa.gov/ozone/snap/.
---------------------------------------------------------------------------

Sub-Coolers
    A sub-cooler is a device located between the condenser coil outlet 
and the expansion device inlet used to further cool the refrigerant 
exiting the condenser in order to achieve a higher cooling/heating 
capacity for a unit. In response to the RFI, Lennox added that sub-
coolers do not provide a benefit at comfort air conditioning operating 
conditions. (Lennox, No. 6 at p. 3) DOE notes that air-cooled CUAC and 
CUHP units typically sub-cool the refrigerant in the condensing coil 
(by further decreasing the temperature of the refrigerant). DOE also 
notes that additional mechanical sub-cooling from smaller, secondary 
vapor-compression circuits has not been incorporated in commercial 
equipment or in working prototypes. As a result, DOE does not believe 
sub-cooling meets the criterion of technological feasibility and did 
not consider it for further analysis.
    Based on the screening analysis, DOE considered the design options 
listed in Table IV.4.

      Table IV.4--Design Options Retained for Engineering Analysis
------------------------------------------------------------------------
 
-------------------------------------------------------------------------
Condenser and evaporator fan and fan motor improvements:
     Larger fan diameters.
     More efficient fan blades (e.g., air foil centrifugal
     evaporator fans, backward-cured centrifugal evaporator fans, high
     efficiency propeller condenser fans).
     High efficiency motors (e.g., copper rotor motor, high
     efficiency induction, permanent magnet, electronically commutated).
     Variable speed fans/motors.
Larger heat exchangers.
Microchannel heat exchangers.
Compressor Improvements:
     High efficiency compressors.
     Multiple compressor staging.
     Multiple- or variable-capacity compressors.
Thermostatic expansion valves.
Electronic expansion valves.
Reduced indoor fan belt loss:
     Synchronous (toothed) belts.
     Direct-drive fans.
------------------------------------------------------------------------

C. Engineering Analysis

    The engineering analysis estimates the cost-efficiency relationship 
of equipment at different levels of increased energy efficiency. This 
relationship serves as the basis for the cost-benefit calculations for 
commercial customers, manufacturers, and the Nation. In determining the 
cost-efficiency relationship, DOE estimates the increase in 
manufacturer cost associated with increasing the efficiency of 
equipment above the baseline up to the maximum technologically feasible 
(``max-tech'') efficiency level for each equipment class.
1. Methodology
    DOE has identified three basic methods for generating manufacturing 
costs: (1) The design-option approach, which provides the incremental 
costs of adding design options to a baseline model that will improve 
its efficiency (i.e., lower its energy use); (2) the efficiency-level 
approach, which provides the incremental costs of moving to higher 
energy efficiency levels, without regard to the particular design 
option(s) used to achieve such increases; and (3) the reverse-
engineering (or cost-assessment) approach, which provides ``bottom-up'' 
manufacturing cost assessments for achieving various levels of 
increased efficiency, based on teardown analyses (or physical 
teardowns) providing detailed data on costs for parts and material, 
labor, shipping/packaging, and investment for models that operate at 
particular efficiency levels. A supplementary method called a catalog

[[Page 58971]]

teardown uses published manufacturer catalogs and supplementary 
component data to estimate the major physical differences between a 
piece of equipment that has been physically disassembled and another 
piece of similar equipment for which catalog data are available to 
determine the cost of the latter equipment.
    In the RFI, DOE stated that in order to create the cost-efficiency 
relationship, it anticipated having to structure its engineering 
analysis using the reverse-engineering approach, including physical and 
catalog teardowns. DOE requested comments on using a reverse 
engineering approach supplemented with catalog teardowns and comments 
on what the appropriate representative capacities would be for each 
equipment class. 78 FR 7300.
    AAON commented that it is inappropriate and unethical for DOE to 
use proprietary information and trade secrets provided during 
manufacturer interviews to reverse engineer equipment supplemented by 
the catalog teardowns. AAON stated that disclosing trade secrets in a 
public forum, accessible worldwide, undermines U.S. manufacturing and 
damages the free enterprise system. (AAON, No. 8 at p. 4) DOE notes 
that it does not publicly disclose proprietary information obtained 
from individual manufacturers. Instead, as part of the manufacturer 
interviews, DOE aggregates all manufacturer responses to prevent 
disclosing of proprietary information and trade secrets.
    AAON commented that DOE's methodology is flawed because all models 
are weighted equally. AAON indicated that models with higher efficiency 
and cost are sold in much lower quantities than models with lower 
efficiency and cost. AAON added that models with higher efficiency and 
cost may not be economically justified and are only sold to consumers 
that want the highest efficiency regardless of economic justification. 
(AAON, No. 8 at p. 3) DOE intends to conduct a full analysis to 
determine the economic justification of higher efficiency levels, 
including developing incremental manufacturing costs for higher 
efficiency equipment based on energy modeling, reverse engineering 
analyses, and catalog teardowns. Although manufacturers may currently 
sell higher efficiency models at lower quantities, DOE's analysis 
considers the incremental manufacturing costs if energy conservation 
standards are set at a particular efficiency level and assumes that 
market share will shift to the new standard level.
    Carrier commented that reverse engineering of a few selected 
samples will not provide an accurate picture of manufacturing costs, 
which depend on volume, tooling approach (dedicated versus flexible) 
and assembly processes and procedures for which reverse engineering 
will not provide insight. Carrier recommended that DOE should work with 
AHRI and industry to obtain costs using a blind survey, with each 
manufacturer providing estimates for the cost increases related to the 
proposed standards. (Carrier, No. 7 at p. 3) DOE notes that it 
supplemented its reverse engineering analyses with manufacturer 
interviews and solicited feedback on the volume, tooling, and processes 
used to manufacture equipment and the manufacturing costs required to 
meet each efficiency level for each equipment class. As a result, DOE 
believes that the manufacturing cost-efficiency results from the 
engineering analyses are sufficiently representative of the 
manufacturing processes used for this equipment.
    Ingersoll Rand commented that DOE should analyze the following 
categories to adequately represent variation in equipment types: (1) 
7.5-ton cooling and heat pump, (2) 15-ton cooling and heat pump, (3) 
40-ton cooling only. (Ingersoll Rand, No. 10 at p. 3) Lennox added that 
DOE should select equipment from manufacturers that have equipment with 
baseline and higher efficiency in the same platform. (Lennox, No. 6 at 
p. 3)
    For this NOPR, DOE conducted the engineering analyses using the 
reverse-engineering approach and analyzed three specific capacities to 
represent each of the three cooling capacity categories (i.e., small, 
large, and very large). Based on a review of manufacturer equipment 
offerings and information obtained from manufacturer interviews, DOE 
selected representative capacities of 90,000 Btu/h (7.5 tons) for the 
>=65,000 to <135,000 Btu/h capacity range, 180,000 Btu/h (15 tons) for 
the >=135,000 to <240,000 Btu/h capacity range, and 360,000 Btu/h (30 
tons) for the >=240,000 to <760,000 Btu/h capacity range. DOE noted in 
the 2004 ANOPR that 7.5 tons and 15 tons represent volume shipment 
points in their respective capacity range. 69 FR 45469. These 
capacities are near the center of their respective equipment class 
capacity ranges. Additionally, DOE interviewed several equipment 
manufacturers as part of the current rulemaking and found that the 
majority of manufacturers interviewed agreed that the 7.5-ton, 15-ton, 
and 30-ton capacities adequately represent the three equipment class 
capacity ranges.
    Where feasible, DOE selected models for reverse engineering with 
low and high efficiencies from a given manufacturer that are built on 
the same platform. DOE also supplemented the teardown analysis by 
conducting catalog teardowns for equipment spanning the full range of 
capacities and efficiencies from all manufacturers selling equipment in 
the United States.
2. Baseline Efficiency Levels
    The baseline model is used as a reference point for each equipment 
class in the engineering analysis and the life-cycle cost and payback-
period analyses. Typically, DOE would consider equipment that just 
meets the minimum energy conservation standard as baseline equipment. 
However, as discussed in section III.A, DOE is proposing to replace the 
current cooling performance energy efficiency descriptor, EER, with 
IEER, and a single EER level can correspond to a range of IEERs. As a 
result, DOE must establish a baseline IEER for each equipment class. As 
part of the RFI, DOE requested comment on approaches that it should 
consider when determining a baseline IEER as well as an appropriate 
baseline IEER for each equipment class. 78 FR 7300-7301 (Feb. 1, 2013).
    Modine commented that DOE should continue to use ASHRAE Standard 
90.1 and ASHRAE Standard 189.1, ``Standard for the Design of High-
Performance Green Buildings,'' (ASHRAE Standard 189.1) \41\ for 
establishing baseline IEER levels because current technology makes it 
readily possible to achieve the ASHRAE Standard 189.1 minimum IEER 
standards. (Modine, No. 5 at p. 2) The IEER levels specified in ASHRAE 
Standard 189.1 are 0.2 to 1.1 IEER higher than the ASHRAE Standard 90.1 
levels.
---------------------------------------------------------------------------

    \41\ ASHRAE Standard 189.1 provides minimum requirements for the 
siting, design, construction, and plan for operation of high-
performance green buildings. Available online at: https://www.ashrae.org/resources-publications/bookstore/standard-189-1.
---------------------------------------------------------------------------

    As discussed in section II.A, DOE is typically obligated either to 
adopt those standards developed by ASHRAE or to adopt levels more 
stringent than the ASHRAE levels if there is clear and convincing 
evidence in support of doing so. (42 U.S.C. 6313(a)(6)(A)) DOE notes 
that ASHRAE Standard 90.1-2010 specifies minimum efficiency 
requirements using both the EER and IEER metrics. As discussed in the 
RFI, DOE evaluated the relationship between EER and IEER by considering 
models that are rated at the current DOE standard levels based on the 
EER metric

[[Page 58972]]

for each equipment class (as presented in section II.B.1). DOE then 
analyzed the distribution of corresponding rated IEER values for each 
equipment class. DOE notes that the lowest IEER values associated with 
the current DOE standards for EER generally correspond with the ASHRAE 
Standard 90.1-2010 minimum efficiency requirements. 78 FR 7296, 7299 
(Feb. 1, 2013); EERE-2013-BT-STD-0007-0001. Based on this evaluation, 
because DOE is considering energy conservation standards based on the 
IEER metric, DOE proposes to use the ASHRAE Standard 90.1-2010 minimum 
IEER requirements to characterize the baseline cooling efficiency for 
each equipment class. DOE also notes that equipment is available on the 
market that is at or near the ASHRAE Standard 90.1-2010 minimum IEER 
requirements. As a result, DOE is not considering higher IEER levels 
for the baseline.
    For CUHP, DOE is considering heating efficiency standards based on 
the COP metric. As discussed in section II.B.1, EPAct 2005 established 
minimum COP levels for small, large, and very large air-cooled CUHP, 
which DOE codified in a final rule on October 18, 2005. 70 FR 60407. 
DOE proposes to use these current COP standard levels to characterize 
the baseline heating efficiency for each equipment class.
    The baseline efficiency levels for each equipment class are 
presented below in Table IV.5.

                                     Table IV.5--Baseline Efficiency Levels
----------------------------------------------------------------------------------------------------------------
 
----------------------------------------------------------------------------------------------------------------
                   Equipment type                            Heating type           Baseline efficiency level
----------------------------------------------------------------------------------------------------------------
Small Commercial Packaged AC and   AC                 Electric Resistance        11.4 IEER.
 HP (Air-Cooled)-->=65,000 Btu/h                       Heating or No Heating.    11.2 IEER.
 and <135,000 Btu/h Cooling                           All Other Types of
 Capacity.                                             Heating.
                                   HP                 Electric Resistance        11.2 IEER,
                                                       Heating or No Heating.    3.3 COP.
                                                      All Other Types of         11.0 IEER,
                                                       Heating.                  3.3 COP.
Large Commercial Packaged AC and   AC                 Electric Resistance        11.2 IEER.
 HP (Air-Cooled)-->=135,000 Btu/h                      Heating or No Heating.    11.0 IEER.
 and <240,000 Btu/h Cooling                           All Other Types of
 Capacity.                                             Heating.
                                   HP                 Electric Resistance        10.7 IEER,
                                                       Heating or No Heating.    3.2 COP.
                                                      All Other Types of         10.5 IEER,
                                                       Heating.                  3.2 COP.
Very Large Commercial Packaged AC  AC                 Electric Resistance        10.1 IEER.
 and HP (Air-Cooled)-->=240,000                        Heating or No Heating.    9.9 IEER.
 Btu/h and <760,000 Btu/h Cooling                     All Other Types of
 Capacity.                                             Heating.
                                   HP                 Electric Resistance        9.6 IEER,
                                                       Heating or No Heating.    3.2 COP.
                                                      All Other Types of         9.4 IEER,
                                                       Heating.                  3.2 COP.
----------------------------------------------------------------------------------------------------------------

3. Incremental Efficiency Levels
    For each equipment class, DOE analyzes several efficiency levels 
and determines the incremental cost at each of these levels. For this 
NOPR, DOE developed efficiency levels based on a review of industry 
standards and available equipment. For efficiency level 1, DOE used the 
IEER levels specified in Draft Addendum CL.\42\ For the higher 
efficiency levels, DOE initially determined the levels for CUAC 
equipment classes with electric resistance heating or no heating based 
on the range of efficiency levels associated with equipment listed in 
the AHRI certification database and the California Energy Commission's 
(CEC) database. DOE evaluated the full range of capacities for the 
small, large, and very large equipment classes with a specific focus on 
7.5-ton, 15-ton, and 30-ton as the representative cooling capacities. 
DOE chose efficiency levels for CUAC with all other types of heating 
equal to the efficiency levels for equipment with electric resistance 
heating or no heating, minus the differences in the IEER specifications 
for these pairs of equipment classes prescribed in the Draft Addendum 
CL. DOE believes these decreases in IEER appropriately reflect the 
additional power required for furnace pressure drop.
---------------------------------------------------------------------------

    \42\ The Draft Addendum CL was the latest available version at 
the time DOE conducted the analyses for today's NOPR. DOE notes that 
ASHRAE has more recently finalized Addendum CL, with minor 
modifications to the IEER levels for large air-cooled CUAC and CUHP 
(i.e., cooling capacity of >=135,000 Btu/h and <240,000 Btu/h).
---------------------------------------------------------------------------

    Similarly, for the CUHP equipment classes, DOE developed cooling 
mode efficiency levels equal to the CUAC efficiency levels minus the 
difference in IEER specifications for these two equipment types 
prescribed in the Draft Addendum CL. DOE believes that these decreases 
in IEER are representative of the efficiency differences that occur due 
to losses from the reversing valve and coil circuitry required in heat 
pumps for both heating and cooling operation.
    As part of the RFI, DOE requested information on the max-tech 
efficiency levels achievable in the market. 78 FR 7301. The Joint 
Efficiency Advocates commented that, based on models in the AHRI 
certification database, the maximum-available IEER levels are 25 to 82 
percent higher than the ASHRAE Standard 90.1-2010 levels depending on 
equipment category. The Joint Efficiency Advocates stated that the 
maximum-available efficiency levels may not represent the maximum 
technologically feasible levels since there may be technology options 
that can improve efficiency that have not been employed in the most-
efficient models currently available. (Joint Efficiency Advocates, No. 
11 at p. 2) AAON commented that the max-tech efficiency levels can be 
assumed to be slightly above the current CEE Tier 2 levels.\43\ (AAON, 
No. 8 at p. 4)
---------------------------------------------------------------------------

    \43\ The CEE Commercial Unitary Air Conditioner and Heat Pump 
Specification can be found online at: http://library.cee1.org/content/cee-commercial-unitary-ac-and-hp-specification-0. DOE notes 
that the CEE Tier 2 levels represent an 18-percent to 23-percent 
increase in IEER over the proposed baseline levels.

---------------------------------------------------------------------------

[[Page 58973]]

    DOE notes that its maximum-available efficiency levels rely on the 
performance of recently introduced models. DOE evaluated available 
equipment literature and energy use information on these maximum-
available efficiency models and conducted energy modeling to determine 
the feasibility of achieving these efficiency levels. For the >=65,000 
Btu/h and <135,000 Btu/h capacity CUAC with electric resistance heating 
or no heating equipment classes, DOE noted, based on its review of the 
AHRI certification and CEC equipment databases, that the maximum-
available unit was rated at 20.9 IEER. However, sufficient information 
allowing correlation of incremental efficiency gains with specific 
design options and incremental manufacturing costs was not available to 
properly evaluate this unit. DOE also notes that a different 
manufacturer currently offers a 7.5-ton model rated at 19.9 IEER and a 
10-ton model rated at 20.8 IEER. DOE notes that there is also 
uncertainty regarding the way the design differences contribute to the 
added efficiency of the 10-ton model, making it difficult to accurately 
estimate the incremental cost associated with this efficiency gain. As 
a result, DOE is proposing to use 19.9 IEER as the maximum-available 
efficiency level representative of this equipment class. DOE is not 
aware of data showing that energy efficiency can be increased beyond 
these levels. As a result, DOE is proposing to use the maximum-
available efficiency levels as the max-tech levels for the NOPR 
analyses.
    For the CUHP equipment classes, DOE is proposing heating efficiency 
levels based on a variation of COP with IEER. In the 2004 ANOPR, DOE 
proposed to address the energy efficiency of air-cooled CUHP by 
developing functions relating COP to EER. 69 FR 45468. DOE also noted 
that this method was also used by industry to establish minimum 
performance requirements for ASHRAE Standard 90.1-1999. Id. AHRI 
supplied the ASHRAE Standard 90.1-1999 committee with curves relating 
the COP as a function of EER. Using this information, the committee 
then set the minimum COP levels to the COP corresponding to the 
selected minimum EER level. Id. DOE stated in the February 2013 RFI 
that since this method was generally accepted by industry and 
interested parties involved in the development of ASHRAE Standard 90.1-
1999, it was considering a similar approach for this rulemaking. DOE 
indicated that if it transitions to IEER as the cooling mode energy 
efficiency descriptor, DOE may establish minimum COP levels based on 
the variation of COP with IEER. As part of the RFI, DOE requested 
information on issues related to using IEER as the cooling performance 
metric when developing a correlation between COP and IEER. 78 FR 7301.
    AAON, Carrier, Ingersoll Rand, and Lennox commented that there is 
no direct correlation between the part-load metric, IEER, and the full 
load metric, COP. (AAON, No. 8 at p. 4; Carrier, No. 7 at p. 4; 
Ingersoll Rand, No. 6 at p. 4; Lennox, No. 6 at p. 3) Lennox indicated 
that in commercial applications, CUHP's typically operate in full load 
heating mode and cycle the auxiliary heat on and off because heat pump 
capacity alone is inadequate to meet the building load. Lennox stated 
that a higher IEER does not translate to a higher COP because design 
techniques that improve part load IEER performance do not improve COP. 
(Lennox, No. 6 at p. 3) Carrier noted that, based on information from 
the AHRI certification database, units with the same COP have 
significantly different IEER values. Carrier added that heating 
efficiency is much less a factor for overall energy usage than cooling 
efficiency because commercial equipment operates for many more hours in 
cooling mode than heating mode, indicating that internal building loads 
lead to high cooling loads and cooling energy use and significantly 
less heating energy use. Carrier stated that a separate analysis should 
be used for developing heating COP levels and that this process be 
completed through a consensus process working with AHRI and the 
manufacturers. (Carrier, No. 7 at pp. 3-4)
    To determine COP efficiency levels, DOE evaluated AHRI and CEC data 
for small, large, and very large air-cooled CUHP units with electric 
resistance heat or no heat to analyze the relationship between COP and 
both IEER and EER. DOE's review of data showed that the correlations 
between COP and IEER using linear regressions are no less strong than 
the correlations between COP and EER for each cooling capacity range. 
Details of this evaluation can be found in chapter 5 of the NOPR TSD. 
Based on this evaluation, DOE is proposing to use the functions 
relating COP to IEER based on AHRI and CEC data to establish COP 
efficiency levels. For each CUHP equipment class, DOE selected COP 
levels corresponding to each incremental IEER level.
    The efficiency levels for each equipment class that DOE considered 
for the NOPR analyses are presented in Table IV.6.

                                                        Table IV.6--Incremental Efficiency Levels
--------------------------------------------------------------------------------------------------------------------------------------------------------
 
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                          Efficiency levels
                              --------------------------------------------------------------------------------------------------------------------------
             Equipment type                 Heating type         Baseline             EL1                EL2                EL3                EL4
                                                                                                                                        (Max-Tech)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Small Commercial Packaged AC   AC         Electric          11.4 IEER........  12.9 IEER........  14 IEER..........  14.8 IEER........  19.9 IEER.
 and HP (Air-Cooled)--                     Resistance
 >=65,000 Btu/h and <135,000               Heating or No
 Btu/h Cooling Capacity.                   Heating.
                                          All Other Types   11.2 IEER........  12.7 IEER........  13.8 IEER........  14.6 IEER........  19.7 IEER.
                                           of Heating.
                               HP         Electric          11.2 IEER,.......  12.2 IEER,.......  13.3 IEER,.......  14.1 IEER,.......  19.2 IEER,
                                           Resistance       3.3 COP..........  3.3 COP..........  3.4 COP..........  3.5 COP..........  3.7 COP.
                                           Heating or No
                                           Heating.
                                          All Other Types   11.0 IEER,.......  12 IEER,.........  13.1 IEER,.......  13.9 IEER,.......  19.0 IEER,
                                           of Heating.      3.3 COP..........  3.3 COP..........  3.4 COP..........  3.4 COP..........  3.6 COP.
Large Commercial Packaged AC   AC         Electric          11.2 IEER........  12.2 IEER........  13.2 IEER........  14.2 IEER........  18.4 IEER.
 and HP (Air-Cooled)--                     Resistance
 >=135,000 Btu/h and <240,000              Heating or No
 Btu/h Cooling Capacity.                   Heating.

[[Page 58974]]

 
                                          All Other Types   11.0 IEER........  12.0 IEER........  13.0 IEER........  14.0 IEER........  18.2 IEER.
                                           of Heating.
                               HP         Electric          10.7 IEER,.......  11.4 IEER,.......  12.4 IEER,.......  13.4 IEER,.......  17.6 IEER,
                                           Resistance       3.2 COP..........  3.2 COP..........  3.3 COP..........  3.3 COP..........  3.3 COP.
                                           Heating or No
                                           Heating.
                                          All Other Types   10.5 IEER,.......  11.2 IEER,.......  12.2 IEER,.......  13.2 IEER,.......  17.4 IEER,
                                           of Heating.      3.2 COP..........  3.2 COP..........  3.3 COP..........  3.3 COP..........  3.3 COP.
Very Large Commercial          AC         Electric          10.1 IEER........  11.6 IEER........  12.5 IEER........  13.5 IEER........  15.5 IEER.
 Packaged AC and HP (Air-                  Resistance
 Cooled)-->=240,000 Btu/h and              Heating or No
 <760,000 Btu/h Cooling                    Heating.
 Capacity.
                                          All Other Types   9.9 IEER.........  11.4 IEER........  12.3 IEER........  13.3 IEER........  15.3 IEER.
                                           of Heating.
                               HP         Electric          9.6 IEER,........  10.6 IEER,.......  11.5 IEER,.......  12.5 IEER,.......  14.5 IEER,
                                           Resistance       3.2 COP..........  3.2 COP..........  3.2 COP..........  3.2 COP..........  3.2 COP.
                                           Heating or No
                                           Heating.
                                          All Other Types   9.4 IEER,........  10.4 IEER,.......  11.3 IEER,.......  12.3 IEER,.......  14.3 IEER,
                                           of Heating.      3.2 COP..........  3.2 COP..........  3.2 COP..........  3.2 COP..........  3.2 COP.
--------------------------------------------------------------------------------------------------------------------------------------------------------

    Issue 5: DOE seeks comment on the incremental and max-tech 
efficiency levels identified for the analyses, including whether the 
efficiency levels identified by DOE can be achieved using the 
technologies screened-in during the screening analysis (see section 
IV.B), and whether higher efficiencies are achievable using 
technologies that were screened-in during the screening analysis. Also, 
DOE seeks comment on the approach of extrapolating the efficiency 
levels from the small, large, and very large CUAC with electric 
resistance heating or no heating equipment classes to the remaining 
equipment classes using the IEER differentials in ASHRAE Standard 90.1-
2010 draft addendum CL. In addition, input and data on the approach for 
determining the COP levels for the heat pump equipment classes using 
the relationship between IEER and COP.
4. Equipment Testing, Reverse Engineering, Energy Modeling, and Cost-
Efficiency Results
    As discussed above, for the engineering analysis, DOE specifically 
analyzed representative capacities of 7.5 tons, 15 tons, and 30 tons to 
develop incremental cost-efficiency relationships. DOE selected four 
7.5-ton, two 15-ton, and one 30-ton air-cooled CUAC models. The models 
were selected to develop a representative sample of the market at 
different efficiency levels. DOE based the selection of units for 
testing and reverse engineering on the efficiency data available in the 
AHRI certification database and the CEC equipment database. DOE also 
selected one 7.5-ton CUHP model to evaluate the design differences 
between CUAC units and CUHP units. Details of the key features of the 
tested units are presented in chapter 5 of the NOPR TSD.
    Because DOE is considering adopting energy conservation standards 
based on the IEER metric, DOE conducted testing on each unit according 
to the IEER test method specified in AHRI Standard 340/360-2007. DOE 
then conducted physical teardowns on each test unit to develop a 
manufacturing cost model and to evaluate key design features (e.g., 
heat exchangers, compressors, fan/fan motors, control strategies, 
etc.). Because DOE was only able to conduct testing and physical 
teardowns on a limited sample of equipment, DOE supplemented these data 
by conducting catalog teardowns on 346 models spanning the full range 
of capacities from all manufacturers selling equipment in the United 
States. DOE based the catalog teardowns on information provided in 
equipment literature and experience from the physical teardowns.
    For air-cooled CUAC, DOE conducted energy modeling using the 
modeling tools developed by the Center for Environmental Energy 
Engineering from the University of Maryland at College Park. The tools 
include a detailed heat exchanger modeling program and a refrigeration 
cycle modeling program. The refrigeration cycle modeling program can 
integrate the heat exchanger and compressor models to perform a 
refrigeration cycle model. If a CUAC/CUHP unit was tested, system 
control power (i.e., control circuit power and any auxiliary loads), 
indoor and outdoor fan power were obtained from actual laboratory 
testing. If a unit was not tested, fan power energy usage was estimated 
from manufacturer specification sheets at the rated air flow rates and 
static pressures. The system control power is estimated from other 
tested units with similar capacities and system configurations.
    Applying the key design features identified during physical 
equipment teardowns, DOE used the energy modeling tool to generate 
detailed performance data (e.g. capacity and EER) and validated them 
against the results obtained from laboratory testing at each IEER 
capacity level (25, 50, 75, and 100 percent), or with the published 
performance data. With the validated energy models, DOE expanded the 
modeling tasks with various system design options and identified the 
key design features (consistent with equipment available on the market) 
required for 7.5-ton, 15-ton, and 30-ton air-cooled CUAC units with 
electric resistance heating or no heating to achieve each efficiency 
level. Details of the design features for each efficiency level are 
presented in chapter 5 of the NOPR TSD. DOE also generated energy use 
profiles for air-cooled CUAC, which included wattage inputs for key 
components (i.e., compressor, indoor and outdoor fan motors, and 
controls) at each operating load level measured for the IEER test 
method, for each efficiency level to serve as inputs for the energy use 
analysis (discussed in section IV.E). DOE then used these design 
features developed by the energy modeling to determine the incremental 
manufacturing costs for each efficiency level for 7.5-ton, 15-ton and 
30-ton air-cooled CUAC units.
    Issue 6: DOE requests comments, information, and data that would 
inform adjustment of energy modeling input and/or results that would 
allow more accurate representation of the energy use impacts of design 
options using the modeling tools developed by the Center for 
Environmental Energy Engineering from the University of Maryland at 
College Park.
    DOE did not, however, conduct similar modeling for CUHP units. DOE 
notes that CUHP shipments represent a very small portion of industry 
shipments compared to CUAC

[[Page 58975]]

shipments (9 percent versus 91 percent). In addition, because CUHP 
represent a small portion of shipments, DOE noted, based on equipment 
teardowns and review of equipment literature, that manufacturers use 
the same basic design/platform for equivalent CUAC and CUHP models. DOE 
observed that equivalent CUAC and CUHP models used the same package 
size, core heat exchangers (the same face area and depth, but different 
circuiting), and indoor/outdoor fan systems (along with other 
elements), but used additional components to allow for heat pump 
operation (e.g., reversing valves, refrigerant accumulators, 
refrigerant circuiting). As a result, DOE believes that the proposed 
approach of adjusting between the cooling efficiencies of CUAC and CUHP 
to reflect the drop in efficiency resulting from the CUHP design (as 
discussed above in section IV.C.3) is consistent with the market. For 
these same reasons, DOE believes that it is appropriate to set heating 
efficiencies for CUHP based on the relationship between cooling 
efficiency and heating efficiency rather than conduct a full separate 
analysis of heating efficiency. For these reasons, DOE focused energy 
modeling solely on CUAC equipment. Although not considered in the 
engineering and LCC and PBP analyses, DOE did analyze CUHP equipment in 
the NIA. From this analysis, DOE believes the energy modeling conducted 
for CUAC equipment provides a good estimate of CUHP cooling performance 
and provides the necessary information to estimate the magnitude of the 
national energy savings from increases in CUHP equipment efficiency.
    Based on the analyses discussed above, DOE developed the cost-
efficiency results shown in Table IV.7 through Table IV.9 for each 
cooling capacity range. DOE notes that the incremental manufacturing 
production and shipping costs would be equivalent for each of the 
equipment classes within a given cooling capacity range (i.e., CUAC 
units with electric resistance heating or no heat, CUAC units with all 
other types of heating, CUHP units with electric resistance heating or 
no heat, CUHP units with all other types of heating). Details of the 
cost-efficiency analysis, including descriptions of the technologies 
DOE analyzed for each efficiency level to develop incremental costs, 
are presented in chapter 5 of the NOPR TSD.

Table IV.7--Small Air-Cooled CUAC and CUHP Cost-Efficiency Relationships
------------------------------------------------------------------------
                                          Incremental
           Efficiency level              manufacturing     Incremental
                                        production cost   shipping cost
------------------------------------------------------------------------
Baseline..............................  ...............  ...............
EL1...................................          $115.93  ...............
EL2...................................           583.47  ...............
EL3...................................           788.88  ...............
EL4 (Max-Tech)........................         1,277.04          $102.86
------------------------------------------------------------------------


Table IV.8--Large Air-Cooled CUAC and CUHP Cost-Efficiency Relationships
------------------------------------------------------------------------
                                          Incremental
           Efficiency level              manufacturing     Incremental
                                        production cost   shipping cost
------------------------------------------------------------------------
Baseline..............................  ...............  ...............
EL1...................................          $419.16  ...............
EL2...................................           792.76          $192.86
EL3...................................         1,236.98           192.86
EL4 (Max-Tech)........................         1,554.26           192.86
------------------------------------------------------------------------


     Table IV.9--Very Large Air-Cooled CUAC and CUHP Cost-Efficiency
                              Relationships
------------------------------------------------------------------------
                                          Incremental
           Efficiency level              manufacturing     Incremental
                                        production cost   shipping cost
------------------------------------------------------------------------
Baseline..............................  ...............  ...............
EL1...................................          $542.65  ...............
EL2...................................         1,296.41  ...............
EL3...................................         1,834.67  ...............
EL4 (Max-Tech)........................         2,753.32          $444.00
------------------------------------------------------------------------

    Issue 7: DOE requests input and data on the estimated incremental 
manufacturing costs, including the extrapolation of incremental costs 
for equipment classes not fully analyzed, in particular for heat pump 
equipment classes.

D. Markups Analysis

    The markups analysis develops appropriate markups in the 
distribution chain to convert the estimates of manufacturer selling 
price derived in the engineering analysis to customer prices. 
(``Customer'' refers to purchasers of the equipment being regulated.) 
DOE calculates overall baseline and incremental markups based on the 
equipment markups at each step in the distribution chain. The 
incremental markup relates the change in the manufacturer sales price 
of higher efficiency models (the incremental cost increase) to the 
change in the customer price.
    In its 2004 ANOPR, DOE used three types of distribution channels to 
describe how the equipment passes from the manufacturer to the 
customer. See, e.g. 69 FR 45460, 45476 (describing distribution 
channels used as part of DOE's prior CUAC/CUHP standards rulemaking 
effort). In the new construction market, the manufacturer sells the 
equipment to a wholesaler. The wholesaler sells the equipment to a 
mechanical contractor, who sells it to a general contractor, who in 
turn sells the equipment to the customer or end user as part of the 
building. In the replacement market, the manufacturer sells to a 
wholesaler, who sells to a mechanical contractor, who in turn sells the 
equipment to the customer or end user. In the third distribution 
channel, used in both the new construction and replacement markets, the 
manufacturer sells the equipment directly to the customer through a 
national account.
    In the RFI, DOE requested input from stakeholders on whether the 
distribution channels described above remain relevant for small and 
large CUAC/CUHP and whether they are also relevant for very large air-
cooled equipment. Carrier stated that the distribution channels 
outlined in the NOPR are relevant for all products, including very 
large air-cooled equipment. (Carrier, No. 7 at p. 4) It added that, for 
very large air-cooled equipment, there is an additional channel that 
consists of factory employees selling directly to end customers and 
mechanical contractors. Ingersoll Rand stated that the selling process, 
as described, is still relevant for these product classes. (Ingersoll 
Rand, No. 10 at p. 4) Modine stated that there are distribution paths 
in addition to those listed in the RFI, namely, manufacturer to 
distributor to mechanical contractor to end user, manufacturer to 
mechanical contractor to general contractor to end user, and 
manufacturer to mechanical contractor to end user. (Modine, No. 5 at p. 
3)
    For today's NOPR, DOE used the three distribution channels 
described previously, which were used in the 2004 ANOPR. Although it 
was not listed in the RFI, DOE did include a channel of manufacturer to 
distributor to mechanical contractor to end user (for replacement 
applications). As for the channels without a distributor cited by 
Modine, DOE was not able to determine whether these channels account 
for a meaningful share of shipments. Modine provide no supporting data 
indicating that these non-distributor channels accounted for a 
significant share of

[[Page 58976]]

shipments. Because other parties commented that the three distribution 
channels described in the RFI are still relevant, DOE retained the 
channels included in the RFI but decline to include the non-distributor 
channels suggested by Modine for the NOPR analysis.
    For the 2004 ANOPR, based on information that equipment 
manufacturers provided, commercial customers were estimated to purchase 
50 percent of the covered equipment through small mechanical 
contractors, 32.5 percent through large mechanical contractors, and the 
remaining 17.5 percent through national accounts. According to the Air 
Conditioning Contractors of America's financial analysis of the 
heating, ventilation, air-conditioning, and refrigeration (HVACR) 
contracting industry, markups used by small contractors tend to be 
larger than those used by large contractors. See 69 FR 45476.
    In the RFI, DOE requested input on the percentage of equipment 
being distributed through the various types of distribution channels 
and whether the share of equipment shipped through each channel varies 
based on equipment capacity. Ingersoll Rand stated that, while the 
percentages differ among the equipment capacities, the relative levels 
are as suggested by DOE. (Ingersoll Rand, No. 10 at p. 4) Based on this 
feedback, for this NOPR, DOE is continuing to use the same percentages 
that were used in its ANOPR analysis.
    DOE had also previously utilized several sources in preparation of 
its ANOPR to help develop markups for the parties involved in the 
distribution of the equipment, including: (1) The Air-conditioning & 
Refrigeration Wholesalers Association's 1998 wholesaler profit survey 
report to develop wholesaler markups; (2) the Air Conditioning 
Contractors of America's (ACCA) financial analysis for the HVACR 
contracting industry to develop mechanical contractor markups; and (3) 
U.S. Census Bureau economic data for the commercial and institutional 
building construction industry to develop general contractor markups.
    Carrier recommended that DOE conduct a blind survey through AHRI to 
determine the markups for all parties in the channel. As an alternative 
to this approach, DOE utilized updated versions of the sources 
mentioned previously, namely: (1) The Heating, Air Conditioning & 
Refrigeration Distributors International 2010 Profit Report to develop 
wholesaler markups; (2) the Air Conditioning Contractors of America's 
(ACCA) 2005 Financial Analysis for the HVACR Contracting Industry to 
develop mechanical contractor markups; and (3) U.S. Census Bureau 
economic data for the commercial and institutional building 
construction industry to develop general contractor markups.\44\ By 
following this alternative approach, DOE obtained updated data that 
enabled it to develop a more accurate picture of the markups currently 
being used by the various parties involved in the distribution channel.
---------------------------------------------------------------------------

    \44\ U.S. Census Bureau, 2007 Economic Census, Construction 
Industry Series and Wholesale Trade Subject Series. http://www.census.gov/econ/census07/.
---------------------------------------------------------------------------

    Chapter 6 of the NOPR TSD provides further detail on the estimation 
of markups.

E. Energy Use Analysis

    The energy use analysis provides estimates of the annual energy 
consumption of small, large, and very large air-cooled CUAC equipment 
at the considered efficiency levels. DOE uses these values in the LCC 
and PBP analyses and in the NIA. DOE did not analyze CUHP equipment 
because the energy modeling discussed in section IV.C.4 was performed 
only for CUAC equipment.
    DOE developed energy consumption estimates only for the CUAC 
equipment classes that have electric resistance heating or no heating. 
For equipment classes with all other types of heating, the incremental 
change in IEER for each efficiency level is identical to that for the 
equipment classes with electric resistance heating or no heating. 
Therefore, DOE estimated that the energy savings for any efficiency 
level relative to the baseline would be identical for both sets of 
equipment classes. In turn, the energy savings estimates for the 
efficiency levels associated with the equipment classes that have 
electric resistance heating or no heating (see Table IV.1) were used by 
DOE in the LCC and PBP analysis and the NIA to represent both sets of 
equipment classes.
    The energy use analysis for this NOPR consists of two related 
parts. In the first part, DOE calculated energy savings for small, 
large, and very large air-cooled CUAC at the considered efficiency 
levels based on modifications to the energy use simulations conducted 
for the 2004 ANOPR. These building simulation data are based on the 
1995 Commercial Building Energy Consumption Survey (CBECS). Because the 
simulation data reflect the building stock in 1995 that uses air-cooled 
CUAC equipment, in the second part, DOE developed a ``generalized 
building sample'' to represent the current installation conditions for 
the equipment covered in this rulemaking. This part involved making 
adjustments to update the building simulation data to reflect the 
building stock that uses air-cooled CUAC equipment in 2011.
1. Energy Use Simulations
    The simulation database from the 2004 ANOPR includes hourly 
profiles for more than 1,000 commercial buildings, which were based on 
building characteristics from the 1995 CBECS for the subset of 
buildings that uses air-cooled CUAC equipment. Each building was 
assigned to a specific location along with a typical meteorological 
year (TMY) hourly weather file (referred to as TMY2) to represent local 
weather. The simulations capture variability in cooling loads due to 
factors such as building activity, schedule, occupancy, local weather, 
and shell characteristics.
    DOE received comments on the RFI regarding how best to model 
equipment performance. AAON stated that full building and equipment 
modeling are required to get a credible estimate for a given building, 
equipment set, and control sequence. (AAON, No. 8 at p. 6) Carrier 
noted that EER alone cannot be used to determine energy use at part-
load conditions, as it is a measure of full-load efficiency and is tied 
more closely to the peak kilowatt (kW). (Carrier, No. 7 at p. 4) DOE's 
simulation modeling approach is based on full building and equipment 
modeling, and takes into account equipment performance at part-load 
conditions to establish the annual energy use.
    For the NOPR, DOE modified the energy use simulations conducted for 
the 2004 ANOPR to improve the modeling of equipment performance. The 
modifications that DOE performed included changes to the ventilation 
rates and economizer usage assumptions, the default part-load 
performance curve, and the minimum saturated condensing temperature 
limit.
    Although ventilation rates and economizer usage do not affect 
equipment performance per se, they do impact how often the equipment 
needs to operate, whether at full or part load. The building 
simulations for the 2004 ANOPR used ventilation rates based on ASHRAE 
Standard 62-1999.\45\ Because a report prepared by the National 
Institute for Standards and Testing

[[Page 58977]]

(NIST) on field measurements indicated that these ventilation rates 
were too high,\46\ DOE reduced the rates as part of the modified energy 
use simulations. In the case of economizer usage, the building 
simulations for the 2004 ANOPR assumed all economizers operated without 
fault. Various field studies have demonstrated that economizer usage is 
far from perfect, so in the modified simulations DOE assigned a 30-
percent probability to each building modeled that the economizer would 
be non-operational. With regard to changes made to how the equipment 
was modeled, DOE developed a modified part-load performance curve for 
the direct-expansion condenser unit model so that the overall 
performance would be more representative of a multi-compressor system. 
In addition, DOE lowered a parameter representing the minimum saturated 
condensing temperature allowed for the refrigerant. Both of these 
parameters affect the system performance under part-load and off-design 
conditions. A more detailed description of the simulation model 
modifications can be found in appendix 7-A of the NOPR TSD.
---------------------------------------------------------------------------

    \45\ American Society of Heating, Refrigerating and Air-
Conditioning Engineers, Inc. ANSI/ASHRAE Standard 62-1999 
Ventilation for Acceptable Indoor Air Quality, 1999. Atlanta, 
Georgia.
    \46\ Persily, A. and J. Gorfain. 2004. ``Analysis of Ventilation 
Data from the U.S. Environmental Protection Agency Building 
Assessment Survey and Evaluation (BASE) Study''. NISTIR 7145.
---------------------------------------------------------------------------

    DOE used a two-step process to represent the performance of 
equipment at baseline and higher efficiency levels. First, DOE 
calculated the hourly cooling loads and hourly fan operation for each 
building from the compressor and fan energy consumption results that 
were generated from the modified building simulations based on CUAC 
equipment at efficiency of 11 EER. It was estimated that these 
simulated cooling loads had to be met by the CUAC equipment for every 
hour of the year that the equipment operates. Then DOE coupled the 
hourly cooling loads and fan operation with equipment performance data, 
developed from laboratory and modeled IEER testing conducted according 
to AHRI Standard 340/360-2007, to generate the hourly energy 
consumption of baseline and more efficient CUAC equipment.
    DOE received additional comments on the RFI regarding how to scale 
equipment energy use as a function of capacity for a given cooling 
load. Carrier stated that capacity is highly dependent on differences 
in product design for performance at full- and part-load conditions, 
control strategies, air distribution method, and applications. 
(Carrier, No. 7 at p. 5) AAON stated that full modeling is required to 
determine how equipment energy use scales as a function of capacity. 
(AAON, No. 8 at p. 6)
    DOE's use of the laboratory and modeled IEER test data allowed it 
to specifically address how capacity and control strategies vary with 
outdoor temperature and building load. The laboratory and modeled IEER 
test data were used to calculate the compressor efficiency (COP) and 
capacity at varying outdoor temperatures (see section IV.4 of this NOPR 
for further discussion.) The IEER rating test consists of measuring the 
net capacity, compressor power, condenser fan power, indoor fan power, 
and control power at three to five different rating conditions. The 
number of rated conditions the equipment is tested at is determined by 
the capabilities of and the control strategies used by the equipment. 
The net capacity and COP of the compressor(s) as a linear function of 
outdoor temperature was calculated from those test results. If the 
indoor or outdoor fan was variable speed, its power consumption was 
also calculated as a linear function of outdoor temperature. The power 
for controls is a constant, but may vary by staging.
    The COP and capacity of the equipment for each hour of the year was 
calculated based on the outdoor temperature for the simulated 
buildings. The cooling capacity was calculated such that it met the 
simulated building cooling load for each hour. For multi-stage 
equipment, the staging for each hour was selected to ensure the 
equipment could meet the simulated building cooling load. When the 
cooling capacity exceeded the simulated building cooling load, the 
efficiency was adjusted for cyclic performance using the degradation 
coefficient and load factor as calculated according to section 6.2, 
Part-Load Rating, of AHRI 340/360, using the above described IEER 
rating test data. The analysis accounted for the fact that the building 
cooling load includes the heat generated by the fan. The total amount 
of cooling the compressor must provide varies as the fan efficiency 
improves with different efficiency levels.
    The hourly fan run time was set equal to the indoor fan run time of 
the simulated building for each hour of the year. Energy use was 
calculated separately for the compressor, condenser fan, indoor fan, 
and controls for each hour of the year for the simulated building. 
Compressor and condenser fan energy were summed to reflect cooling 
energy use. Indoor fan and control energy were combined into a single 
category to represent indoor fan energy use.
    The calculations provided the annual hourly cooling and fan energy 
use profiles for each building. The incremental energy savings between 
the baseline equipment and the equipment at higher efficiency levels 
was calculated for every hour for each of the 1,033 simulated 
buildings.
    The RFI requested comment on whether the building simulations 
developed for small and large air-conditioning equipment are applicable 
to very large equipment (i.e., equipment with capacities between 
240,000 Btu/h and 760,000 Btu/h). AAON stated that the simulation model 
should be applicable regardless of equipment size. (AAON, No. 8 at p. 
6) Carrier stated that building models appropriate to the equipment 
size should be used. It noted that special equipment models will be 
needed to properly model the part-load intensive equipment and changes 
in IEER. It suggested that DOE should work with the AHRI Unitary Large 
Equipment Section to define the modeling approach and obtain the 
equipment models for the various IEER and EER levels as considerable 
work has already been done. (Carrier, No. 7 at p. 5)
    As described above, DOE used the simulations to obtain hourly 
building cooling loads, fan operating hours, and associated outdoor 
temperatures and applied the IEER rating test data to determine the 
hourly performance of the equipment. Because DOE relied on the IEER 
rating test data to come up with the hourly performance of the 
equipment, it believes that this method provides a good representation 
of very large equipment performance as well as small and large 
equipment performance. Therefore, additional building simulation 
modeling for very large units does not appear necessary.
    Issue 8: DOE requests comments, information, and data that could be 
used to modify the proposed method for using laboratory and modeled 
IEER test data, which were developed in accordance to AHRI Standard 
340/360-2007, to calculate the performance of CUAC equipment at part-
load conditions.
2. Generalized Building Sample
    The NOPR analysis used a ``generalized building sample'' (GBS) to 
represent the installation conditions for the equipment covered in this 
rulemaking. The GBS was developed based on data from the 2003 CBECS 
\47\ and from the Commercial Demand Module of the National Energy

[[Page 58978]]

Modeling System version distributed with AEO2013.
---------------------------------------------------------------------------

    \47\ CBECS 2012 is currently in development but will not be 
available in time for this rulemaking.
---------------------------------------------------------------------------

    Only floor space cooled by the covered equipment is included in the 
sample. Conceptually, the main difference between the GBS and the 
sample of specific commercial buildings compiled in CBECS is that the 
GBS aggregates all building floor space associated with a particular 
set of building characteristics into a single category. The set of 
characteristics that is used to define a category includes all building 
features that are expected to influence either (1) the cooling load and 
energy use or (2) the energy costs. The set of building 
characteristics, and the specific values these characteristics can 
take, are listed in Table IV.10.

  Table IV.10--List of Characteristics and the Associated Values Used To Define the Generalized Building Sample
----------------------------------------------------------------------------------------------------------------
                                                   Number of
                Characteristic                      values                       Range of values
----------------------------------------------------------------------------------------------------------------
Region........................................              10  9 census divisions with Pacific sub-divided into
                                                                 north and south.
Building Activity.............................               7  assembly, education, food service, small office,
                                                                 large office, mercantile, warehouse.
Size (based on annual energy consumption).....               3  small: <100,000 kWh.
                                                                medium: 100,000 to 1,000,000 kWh.
                                                                large: >1,000,000 kWh.
Vintage.......................................               3  category 1: before 1950.
                                                                category 2: 1950-1979.
                                                                category 3: 1980 and later.
----------------------------------------------------------------------------------------------------------------

    The region in which the building is located affects both the 
cooling loads (through the weather) and the cost of electricity. The 
building activity affects building schedules and occupancy, which in 
turn influence the demand for cooling. The building activity categories 
are the same as those used in the NEMS commercial building energy 
demand module, limited to those building types that use the equipment 
covered in this rule. The building size influences the cost of 
electricity, because larger facilities tend to have lower marginal 
prices. The building vintage may influence shell characteristics that 
can affect the cooling loads. The combination of 10 regions, 7 building 
types, 3 sizes, and 3 vintages leads to a set of 630 independent 
categories in the GBS.
    The amount of floor space allocated to each category for buildings 
built in or before 2003 was taken from the 2003 CBECS. To update the 
building floor space to 2013, the commercial building data included 
with the 2013 version of NEMS were used. This dataset includes a 
historical component, starting in 2004, and provides both existing 
floor space and new floor space additions by year, census division, and 
building activity. The floor space additions between 2004 and 2013 were 
added to the floor space in vintage category 3.
    Load profiles for each of the 630 generalized buildings were 
developed from the simulation data just described. For each equipment 
class, a subset of the 1,033 buildings was used to develop the cooling 
energy use profiles. The subset included all buildings with a capacity 
requirement equal to or greater than 90 percent of the capacity of the 
particular representative unit. For each GBS type, a weighted average 
energy use profile, along with energy savings from the considered 
efficiency levels, was compiled from the simulated building subset. The 
average was taken over all buildings in the subset that have the same 
region, building type, size, and vintage category as the GBS category. 
This average was weighted by the number of units required to meet each 
building's cooling load. For some of the GBS categories, no simulation 
data were available. In these cases, the weighted-average energy use 
profile for the same building type and a nearby region or vintage were 
used.
    Updating the sample to 2013 required some additional adjustments to 
the energy use data. The 1,033 building simulations used TMY2 weather 
data. The TMY2 weather data files were updated to TMY3 in 2008. A 
comparison of the two datasets showed that total annual cooling degree-
days (CDD) increased by 5 percent at all locations used in this 
analysis. This is accounted for by increasing the energy use (for all 
efficiency levels) by 5 percent at all locations.
    Changes to building shell characteristics and internal loads in 
recent construction can lead to a change in the energy required to meet 
a given cooling load. The NEMS commercial demand module accounts for 
these trends by adjusting the cooling energy use with a factor that is 
a function of region and building activity. In the GBS, these same 
factors were used to adjust the cooling energy use for floor space 
constructed after 1999.
    Issue 9: DOE requests comments on the use of a ``generalized 
building sample'' to characterize the energy consumption of CUAC 
equipment in the commercial building stock. Specifically, whether there 
are any data or information that could improve the method for 
translating the results from the 1,033 simulated buildings to the 
generalized building sample.

F. Life-Cycle Cost and Payback Period Analysis

    The purpose of the LCC and PBP analysis is to analyze the effects 
of potential amended energy conservation standards on customers of 
small, large, and very large air-cooled commercial package air 
conditioning and heating equipment by determining how a potential 
amended standard affects their operating expenses (usually decreased) 
and their total installed costs (usually increased).
    The LCC is the total customer expense over the life of the 
equipment, consisting of equipment and installation costs plus 
operating costs over the lifetime of the equipment (expenses for energy 
use, maintenance, and repair). DOE discounts future operating costs to 
the time of purchase using customer discount rates. The PBP is the 
estimated amount of time (in years) it takes customers to recover the 
increased total installed cost (including equipment and installation 
costs) of a more efficient type of equipment through lower operating 
costs. DOE calculates the PBP by dividing the change in total installed 
cost (normally higher) due to a standard by the change in annual 
operating cost (normally lower) that results from the standard.
    For any given efficiency level, DOE measures the PBP and the change 
in LCC relative to an estimate of the base-case efficiency level. The 
base-case estimate reflects the market in the absence of amended energy 
conservation standards, including the

[[Page 58979]]

market for equipment that exceeds the current energy conservation 
standards.
    The RFI described how DOE would analyze the potential for 
variability and uncertainty by performing the LCC and PBP calculations 
on a representative sample of individual commercial buildings. The 
approach utilizes the sample of buildings developed for the energy use 
analysis and the corresponding simulations results. Within a given 
building, one or more air-conditioning units may serve the building's 
space-conditioning needs, depending on the cooling load requirements of 
the building. As a result, DOE would express the LCC and PBP results as 
the number of units experiencing economic impacts of different 
magnitudes. DOE models both the uncertainty and the variability in the 
inputs to the LCC and PBP analysis using Monte Carlo simulation and 
probability distributions.\48\ As a result, the LCC and PBP results are 
displayed as distributions of impacts compared to the base case 
conditions.
---------------------------------------------------------------------------

    \48\ The Monte Carlo process statistically captures input 
variability and distribution without testing all possible input 
combinations. Therefore, while some atypical situations may not be 
captured in the analysis, DOE believes the analysis captures an 
adequate range of situations in which small, large, and very large 
air-cooled commercial package air conditioning and heating equipment 
operate.
---------------------------------------------------------------------------

    The RFI requested comment from stakeholders on the overall method 
for conducting the LCC and PBP analysis. Carrier stated that DOE should 
use the procedures as developed by the ASHRAE 90.1 committee and PNNL 
for evaluating changes to the ASHRAE 90.1 standard. (Carrier, No. 7 at 
p. 5) The procedures referred to by Carrier, while potentially 
appropriate in other circumstances, such as in the development of 
building codes for new construction, are not ideal in the context of 
analyzing the potential impacts that would be likely to result from the 
imposition of new energy conservation standards. DOE's LCC and PBP 
analysis, rather than focusing solely on the impacts on new buildings 
(as would Carrier's suggested approach would do), seeks to evaluate the 
impacts of potential standards for small, large, and very large air-
cooled commercial package air conditioning and heating equipment for 
all affected customers. Such an evaluation requires a broader framework 
than the more narrow approach suggested by Carrier.
    DOE conducted an LCC and PBP analysis for the CUAC equipment 
classes. As mentioned in section IV.E, the energy savings estimates for 
the efficiency levels associated with the equipment classes that have 
electric resistance heating or no heating were used in the LCC and PBP 
analysis to represent the equipment classes with all other types of 
heating. DOE did not perform an LCC and PBP analysis for the CUHP 
equipment for the reasons discussed in section IV.C.4.
    Inputs to the LCC and PBP analysis are categorized as: (1) Inputs 
for establishing the total installed cost and (2) inputs for 
calculating the operating expense. The following sections contain brief 
discussions of comments on the inputs and key assumptions of DOE's LCC 
and PBP analysis and explain how DOE took these comments into 
consideration.
1. Equipment Costs
    In the LCC and PBP analysis, the equipment costs faced by small, 
large, and very large air-cooled commercial package air conditioning 
and heating equipment purchasers are derived from the MSPs estimated in 
the engineering analysis and the overall markups estimated in the 
markups analysis.
    To develop an equipment price trend for the NOPR, DOE derived an 
inflation-adjusted index of the producer price index (PPI) for 
``unitary air-conditioners, except air source heat pumps'' from 1978 to 
2013.\49\ Although the PPI index shows a long-term declining trend, 
data for the last decade have shown a flat-to-slightly rising trend. 
Given the uncertainty as to which of the trends will prevail in coming 
years, DOE chose to apply a constant price trend (2013 levels) for the 
NOPR. For the NIA, DOE also analyzed the sensitivity of results to 
alternative price forecasts.
---------------------------------------------------------------------------

    \49\ The PPP index for heat pumps covered too short a time 
period to provide a useful picture of pricing trends for this 
equipment.
---------------------------------------------------------------------------

2. Installation Costs
    In the RFI, DOE discussed developing installation costs for the 
current rulemaking using the most recent RS Means data available. AAON 
agreed that it is appropriate to use RS Means. (AAON, No. 8 at p. 6)
    For today's NOPR, DOE derived installation costs for CUAC equipment 
from current RS Means data.\50\ Based on these data, DOE tentatively 
concluded that data for 7.5-ton, 15-ton, and 30-ton rooftop air 
conditioners would be sufficiently representative of the installation 
costs for the >=65,000 Btu/h to <135,000 Btu/h, >=135,000 Btu/h to 
<240,000 Btu/h, and >=240,000 Btu/h to <760,000 Btu/h air-conditioning 
equipment classes, respectively. Because labor rates vary significantly 
in each region of the country, DOE used RS Means data to identify how 
installation costs vary among regions and incorporated these costs into 
the analysis.
---------------------------------------------------------------------------

    \50\ http://www.rsmeansonline.com; Accessed March 27, 2013.
---------------------------------------------------------------------------

    For the 2004 ANOPR, DOE varied installation cost as a function of 
equipment weight. Because weight tends to increase with equipment 
efficiency, installation cost increased with equipment efficiency. 69 
FR 45481. In the RFI, DOE envisioned using a similar approach for this 
rulemaking. Carrier recommended that RS Means Mechanical Cost Data be 
used to estimate installed cost based on unit tonnage rather than unit 
weight. (Carrier, No. 7 at p. 5)
    For this NOPR, DOE is using a specific cost from RS Means for each 
of the tonnage classes listed previously. Within a given capacity 
(equipment class), DOE chose to vary installation costs in direct 
proportion to the physical weight of the equipment. The weight of the 
equipment in each class and efficiency level was determined through the 
engineering analysis.
3. Unit Energy Consumption
    The calculation of annual per-unit energy consumption at each 
considered efficiency level is described in section IV.E.
4. Electricity Prices and Electricity Price Trends
    For the 2004 ANOPR, DOE determined electricity prices based on 
tariffs from a representative sample of electric utilities. 69 FR 
45481-45482. This approach calculates energy expenses based on actual 
electricity prices that customers are paying. The RFI discussed 
retaining the tariff-based approach and plans to update electricity 
prices based on recent or current tariffs. Carrier agreed with the 
tariff-based approach and that the most recent price data should be 
used. (Carrier, No. 7 at p. 6) Similarly, the Joint Efficiency 
Advocates asserted that the tariff-based approach was appropriate for 
capturing actual electricity prices paid by customers. (Joint 
Efficiency Advocates, No. 11 at p. 2)
    For this NOPR, the tariff data used for the ANOPR were used to 
develop marginal and average prices for each member of the GBS, which 
were then scaled to approximate 2013 prices. The approach uses tariff 
data that have been processed into commercial building marginal and 
average electricity prices.\51\
---------------------------------------------------------------------------

    \51\ Coughlin, K., C. Bolduc, R. Van Buskirk, G. Rosenquist and 
J. E. McMahon. Tariff-based Analysis of Commercial Building 
Electricity Prices. 2008. Lawrence Berkeley National Laboratory: 
Berkeley, CA. Report No. LBNL-55551.

---------------------------------------------------------------------------

[[Page 58980]]

    The CBECS 1992 and CBECS 1995 surveys provide monthly electricity 
consumption and demand for a large sample of buildings. DOE used these 
values to help develop usage patterns associated with various building 
types. Using these monthly values in conjunction with the tariff data, 
DOE calculated monthly electricity bills for each building. The average 
price of electricity is defined as the total electricity bill divided 
by total electricity consumption. Two marginal prices are defined, one 
for electricity demand (in $/kW) and one for electricity consumption 
(in $/kWh). These marginal prices are calculated by applying a 5 
percent decrement to the CBECS demand or consumption data and 
recalculating the electricity bill.
    Using the prices derived from the above method, an average price 
and a marginal price were assigned to each building in the GBS. For 
each member of the GBS, these prices were calculated as the average, 
weighted by floor space and survey sample weight, of all buildings in 
the CBECS 1992 and 1995 data meeting the set of characteristics 
defining the generalized building (i.e., region, vintage, building 
activity, and building energy consumption). As most tariffs are 
seasonal, average and marginal prices are calculated separately for 
summer (May-September) and winter.
    The average summer or winter electricity price multiplied by the 
baseline summer or winter electricity consumption for equipment of a 
given capacity defines the baseline LCC. For each efficiency level, the 
operating cost savings are calculated by multiplying the electricity 
consumption savings (relative to the baseline) by the marginal 
consumption price and the electricity demand reduction by the marginal 
demand price. The consumer's electricity bill is only affected by the 
electricity demand reduction that is coincident with the building's 
monthly peak load. Air-conditioning loads are strongly, but not 
perfectly, peak-coincident. Divergences between the building peak and 
the air-conditioning peak were accounted for by multiplying the 
electricity demand reduction by a random factor drawn from a triangular 
distribution centered at 0.9 +/- 0.1.
    The tariff-based prices were updated to 2013 using the commercial 
electricity price index published in the AEO (editions 2009 through 
2012). An examination of data published by the Edison Electric 
Institute \52\ indicates that the rate of increase of marginal and 
average prices is not significantly different, so the same factor was 
used for both pricing estimates. DOE projected future electricity 
prices using trends in average commercial electricity price from AEO 
2013.
---------------------------------------------------------------------------

    \52\ Edison Electric Institute. EEI Typical Bills and Average 
Rates Report (bi-annual, 2007-2012). Washington, DC.
---------------------------------------------------------------------------

    For further discussion of electricity prices, see chapter 8 of the 
NOPR TSD.
5. Maintenance Costs
    Maintenance costs are costs associated with general maintenance of 
the equipment (e.g., checking and maintaining refrigerant charge levels 
and cleaning heat-exchanger coils). For the 2004 ANOPR, DOE developed 
maintenance costs from RS Means data, and DOE estimated that 
maintenance costs do not vary with equipment efficiency. 69 FR 45485. 
The RFI discussed developing maintenance costs for the current 
rulemaking using the most recent RS Means data available, and using the 
same assumption that maintenance costs do not vary with equipment 
efficiency. AAON stated that it is appropriate to use RS Means. (AAON, 
No. 8 at p. 6)
    Carrier stated that RS Means might serve as a reasonable guide to 
assist in developing maintenance costs, but it expects that maintenance 
costs vary with efficiency due to the higher replacement cost of new, 
more complex components, and the technology required to achieve the 
higher efficiency levels. (Carrier, No. 7 at p. 6) Repair or 
replacement of components that have failed is considered a repair cost. 
DOE is not aware of information on why general maintenance would be 
higher as a result of the technology used to achieve higher efficiency 
levels. Thus, DOE retained the assumption that maintenance costs do not 
vary with equipment efficiency.
    For this NOPR, DOE derived annualized maintenance costs for 
commercial air conditioners from RS Means data.\53\ These data provided 
estimates of person-hours, labor rates, and materials required to 
maintain commercial air-conditioning equipment. The estimated 
annualized maintenance cost is $298 for a commercial unitary air 
conditioner rated between 36,000 Btu/h and 288,000 Btu/h, and $408 for 
a unit rated between 288,000 Btu/h and 600,000 Btu/h.
---------------------------------------------------------------------------

    \53\ http://www.rsmeansonline.com; Accessed March 26, 2013.
---------------------------------------------------------------------------

6. Repair Costs
    Repair costs are associated with repairing or replacing components 
that have failed. For the 2004 ANOPR, DOE estimated that repair costs 
vary as function of equipment price. 69 FR 45485. In the RFI, DOE 
requested comment as to whether repair costs vary as a function of 
equipment price, as well as any data or information on developing 
repair costs. AAON stated that it is appropriate to estimate repair 
costs as a function of equipment costs. (AAON, No. 8 at p. 7) Carrier 
stated that while it does not see repair costs increasing as a direct 
result of higher equipment prices, the higher material and component 
costs necessary to achieve higher efficiency levels (which result in 
higher equipment prices) may also drive higher repair costs. (Carrier, 
No. 7 at p. 6)
    For this NOPR, DOE assumed that any routine or minor repairs are 
included in the annualized maintenance costs. As a result, repair costs 
are not explicitly modeled in the LCC and PBP analysis. Instead, DOE 
incorporated a one-time cost for major repair (compressor replacement) 
as a primary input to the repair/replace customer choice model in the 
shipments analysis, which models the decision between repairing a 
broken unit and replacing it (see section IV.G). In the repair/replace 
customer choice model, DOE used repair costs that vary in direct 
proportion with the price of the equipment, which approximates the 
relationship between repair costs and efficiency described by Carrier.
    Issue 10: DOE requests comments on whether using RS Means cost data 
to develop maintenance, repair, and installation costs for CUAC and 
CUHP equipment is appropriate, and if not, what data should be used.
7. Lifetime
    Equipment lifetime is the age at which the equipment is retired 
from service. For the 2004 ANOPR, DOE based equipment lifetime on a 
retirement function, which was based on the use of a Weibull 
probability distribution, with a resulting median lifetime of 15 years. 
69 FR 45486. In the RFI, DOE sought comment on how it characterized 
equipment lifetime. DOE also requested any data or information 
regarding the accuracy of its 15-year lifetime and whether equipment 
lifetime varies based on equipment class.
    The Joint Efficiency Advocates encouraged DOE to reevaluate the 
estimated lifetime of commercial air-cooled air conditioners and heat 
pumps for this rulemaking. They noted that ASHRAE maintains a public 
database

[[Page 58981]]

that provides information on the service life of HVAC equipment. 
Although the ASHRAE database does not currently contain a separate 
category for commercial package air conditioners and heat pumps, it 
does contain information on ``other cooling equipment.'' In this 
category, there are data on 365 units that were in service at the time 
of the data collection. Of these 365 units, the median equipment age 
was 20 years. (Joint Efficiency Advocates, No. 11 at p. 3) NEEA also 
encouraged DOE to review actual equipment lifetime for determining the 
life-cycle cost of equipment. (NEEA, No. 15 at p. 2) AAON stated that 
equipment lifetime should not be impacted by equipment class. (AAON, 
No. 8 at p. 7)
    DOE reviewed the ASHRAE database and determined that the data 
support an increase in lifetime relative to what DOE used for the 
ANOPR. In the category ``Packaged DX unit, rooftop'' (which corresponds 
to CUAC), of the 215 units in service, the mean age is 15.6 years and 
the median is 16 years.\54\ The five units that had been replaced had a 
median age of 22 years. These data strongly suggest that the median 
lifetime of 15 years used in the ANOPR is too short. For this NOPR, DOE 
updated its CUAC lifetime to a median of 18.7 years and a mean of 18.4 
years.
---------------------------------------------------------------------------

    \54\ See http://xp20.ashrae.org/publicdatabase/system_service_life.asp?c_region=0&state=NA&building_function=NA&c_size=0&c_age=0&c_height=0&c_class=0&c_location=0&selected_system_type=1&c_equipment_type=NA
---------------------------------------------------------------------------

    The category ``heat pump, air-to-air'' (which corresponds to CUHP) 
in the ASHRAE database has 1,296 units (and only one that had been 
retired) with a median age of 14 years. These data suggest that the 15-
year lifetime used in the 2004 ANOPR remains reasonable. For the NOPR, 
DOE used a slightly updated CUHP lifetime with a median of 15.4 years 
and a mean of 15.2 years.
    DOE used the same lifetime distribution for each set of CUAC and 
CUHP equipment classes.
    Issue 11: DOE requests comments, information and data on the 
equipment lifetimes developed for CUAC and CUHP equipment; 
specifically, any information that would indicate whether the 
retirement functions yielding median lifetimes of 18.7 years and 15.4 
years for CUAC and CUHP equipment, respectively, are reasonable.
8. Discount Rate
    The discount rate is the rate at which future expenditures are 
discounted to estimate their present value. The cost of capital 
commonly is used to estimate the present value of cash flows to be 
derived from a typical company project or investment. Most companies 
use both debt and equity capital to fund investments, so the cost of 
capital is the weighted-average cost to the firm of equity and debt 
financing. DOE uses the capital asset pricing model (CAPM) to calculate 
the equity capital component, and financial data sources to calculate 
the cost of debt financing.
    For the 2004 ANOPR, DOE derived the discount rates by estimating 
the cost of capital of companies that purchase air-cooled air-
conditioning equipment. 69 FR 45486-45487. For the current rulemaking, 
DOE updated its data sources for calculating this cost. More details 
regarding DOE's estimates of customer discount rates are provided in 
chapter 8 of the NOPR TSD.
9. Base Case Market Efficiency Distribution
    For the LCC analysis, DOE analyzes the considered efficiency levels 
relative to a base case (i.e., the case without amended energy 
efficiency standards). This analysis requires an estimate of the 
distribution of product efficiencies in the base case (i.e., what 
consumers would have purchased in the compliance year in the absence of 
amended standards). DOE refers to this distribution of product energy 
efficiencies as the base case efficiency distribution.
    The RFI requested data on current small, large, and very large air-
cooled commercial package air conditioning and heating equipment 
efficiency market shares (of shipments) by equipment class, and also 
similar historical data. DOE also requested information on expected 
trends in efficiency over the next five years. Carrier stated that 
these data is not readily available for the industry as a whole, but a 
joint industry, AHRI and DOE working group should be able to develop an 
estimate based on a collection of individual manufacturer's data. 
(Carrier, No. 7 at p. 6)
    Given the statutory deadlines described earlier, the formation of a 
working group as suggested by Carrier was not feasible. The only 
available data showing air-cooled commercial package air conditioning 
and heating equipment efficiency market shares are from 1999-2001 and 
may not be representative of current market shares or the shares 
expected in the near future. Rather than rely solely on these older 
data, for this NOPR, DOE used a consumer choice model to estimate 
efficiency market shares in the expected compliance year (assumed to be 
2019, as discussed below). The consumer choice model considers customer 
sensitivity to total installation cost and annual operating cost. DOE 
used the efficiency market share data for 1999-2001 to develop the 
parameters of the consumer choice model in the shipments analysis, as 
discussed in section IV.G.1. Using the parameters, the model estimates 
the shipments at each IEER level based on the installed cost and 
operating cost at each efficiency level. Table IV.11 presents the 
estimated base case efficiency market shares for each air-cooled CUAC 
equipment class.

 Table IV.11--Base Case Efficiency Market Shares in 2019 for Small, Large, and Very Large Air-Cooled Commercial
                                 Package Air Conditioning and Heating Equipment
----------------------------------------------------------------------------------------------------------------
 Small commercial packaged AC (Air-    Large commercial packaged AC (Air-     Very large commercial packaged AC
Cooled)-->=65,000 Btu/h and <135,000      Cooled)-->=135,000 Btu/h and        (Air-Cooled)-->=240,000 Btu/h and
       Btu/h cooling capacity            <240,000 Btu/h cooling capacity       <760,000 Btu/h cooling capacity
----------------------------------------------------------------------------------------------------------------
      IEER         Market share (%)         IEER         Market share (%)         IEER         Market share (%)
----------------------------------------------------------------------------------------------------------------
         11.4                   61             11.2                   78             10.1                   63
         12.9                   39             12.2                   20             11.6                   24
         14.0                    0             13.2                    2             12.5                    7
         14.8                    1             14.2                    0             13.5                    4
         19.9                    0             18.4                    0             15.5                    1
----------------------------------------------------------------------------------------------------------------


[[Page 58982]]

    Issue 12: DOE requests comments, information and data on the base 
case efficiency distributions of CUAC equipment. Given that historical 
market share efficiency data from 1999-2001 were used to inform a 
consumer choice model in the shipments analysis to develop estimated 
base case efficiency distributions in the compliance year (2019), DOE 
seeks more recent historical market share efficiency data would be 
useful for validating the estimated base case efficiency distributions.
10. Compliance Date
    DOE calculated the LCC and PBP for all customers as if each were to 
purchase new equipment in the year that compliance with amended 
standards is required. EPCA directs DOE to publish a final rule 
amending the standard for the products covered by this NOPR not later 
than 2 years after a notice of proposed rulemaking is issued. (42 
U.S.C. 6313(a)(6)(C)(iii)) At the time of preparation of the NOPR 
analysis, the expected issuance date was December 2013, leading to a 
final rule publication in December 2015. EPCA also states that amended 
standards prescribed under this subsection shall apply to products 
manufactured after a date that is the later of--(I) the date that is 3 
years after publication of the final rule establishing a new standard; 
or (II) the date that is 6 years after the effective date of the 
current standard for a covered product. (42 U.S.C. 6313(a)(6)(C)(iv)) 
The date under clause (I), currently projected to be December 2018, is 
later than the date under clause (II). For purposes of its analysis, 
DOE used 2019 as the first year of compliance with amended standards.
11. Payback Period Inputs
    The payback period is the amount of time it takes the consumer to 
recover the additional installed cost of more efficient equipment, 
compared to baseline equipment, through energy cost savings. Payback 
periods are expressed in years. Payback periods that exceed the life of 
the product mean that the increased total installed cost is not 
recovered in reduced operating expenses.
    The inputs to the PBP calculation are the total installed cost of 
the product to the customer for each efficiency level and the average 
annual operating expenditures for each efficiency level. The PBP 
calculation uses the same inputs as the LCC analysis, except that 
discount rates are not needed.
12. Rebuttable-Presumption Payback Period
    EPCA 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 (and, as applicable, water) savings during the first year 
that the consumer will receive as a result of the standard, as 
calculated under the test procedure in place for that standard. For 
each considered efficiency level, DOE determines the value of the first 
year's energy savings by calculating the quantity of those savings in 
accordance with the applicable DOE test procedure, and multiplying that 
amount by the average energy price forecast for the year in which 
compliance with the amended standards would be required.

G. Shipments Analysis

    DOE uses projections of product shipments to calculate the national 
impacts of standards on energy use, NPV, and future manufacturer cash 
flows. DOE develops shipment projections based on historical data and 
an analysis of key market drivers for each product. Historical 
shipments data are used to build up an equipment stock and also to 
calibrate the shipments model.
    The RFI requested comment on DOE's approach in developing the 
shipments model and forecasts. Carrier recommended forming a working 
group with AHRI to discuss shipment forecast modeling techniques for 
this rulemaking. (Carrier, No. 7 at p. 7) As indicated earlier, this 
option was not feasible in light of the statutory time constraints. 
Instead, DOE developed a shipments model that includes three market 
segments: (1) Existing buildings replacing broken equipment, (2) new 
commercial buildings acquiring equipment, and (3) existing buildings 
acquiring new equipment for the first time.
1. Shipments by Market Segment
    For existing buildings replacing broken equipment, the shipments 
model uses a stock accounting framework. Given the equipment entering 
the stock in each year and a retirement function based on the lifetime 
distribution developed in the LCC analysis, the model predicts how many 
units reach the end of their lifetime in each year. DOE typically 
refers to new shipments intended to replace retired units as 
``replacement'' shipments. Such shipments are usually the largest part 
of total shipments.
    For CUAC and CUHP, end of lifetime is generally associated with 
compressor failure. Installing a new compressor, while possible, is 
costly. This fact leads customers to typically replace the entire CUAC/
CUHP unit rather than simply replace the compressor. A new unit is more 
expensive than compressor replacement, but it may be more energy-
efficient than the existing unit, which means it would have lower 
operating costs. If standards significantly increase the cost of new 
equipment, one would expect that the repair option would become more 
attractive.
    For the small and large CUAC and CUHP equipment classes, DOE 
modeled the repair vs. replacement decision, as described below. If the 
unit is repaired (i.e., with a new compressor), its life is extended by 
another lifetime, based on the retirement function. If a unit 
encounters a second failure within the analysis period, the model 
assumes that the customer replaces the unit with a new one. For the 
very large CUAC and CUHP equipment classes, DOE assumed that all 
customers repair the unit at the first failure because the total 
installed cost of a new unit is very high relative to the cost of 
repair. If a unit encounters a second failure within the analysis 
period, DOE assumed that the customer replaces the unit with a new one, 
as further repair of very old equipment is not likely to occur.
    To model the repair vs. replacement decision, DOE developed a 
consumer choice model that estimates customer sensitivity to total 
installation cost. A sensitivity parameter was calculated using 
efficiency market share data for years 1999-2001, along with estimates 
of equipment prices and installation costs by efficiency level (the 
data sources are described below). DOE applied this sensitivity to the 
difference between the total installed cost of a new unit and the 
repair cost of the existing unit.
    The replacement cost at each efficiency level is the total 
installed cost derived in the LCC analysis. For repair cost, DOE 
developed its own estimates of the material costs for compressors. (DOE 
examined RS Means material costs for compressors and concluded that 
they were inaccurate for all size classes, as several of the estimates 
exceeded the costs for an entire new unit.) For labor and non-
compressor material costs, DOE used data in RS Means Facilities 
Maintenance & Repair Cost Data, 2013.\55\ Within each equipment class, 
DOE used repair costs that increase in direct proportion with the price 
of the equipment and with IEER level.
---------------------------------------------------------------------------

    \55\ RS Means Facilities Maintenance & Repair Cost Data 2013. 
http://www.rsmeansonline.com.
---------------------------------------------------------------------------

    DOE recognizes that the decision to repair or replace equipment is 
not solely

[[Page 58983]]

a function of the difference between the total installed cost of a new 
unit and the repair cost of the existing unit. The difference in 
operating costs may also play a role, as may general economic 
conditions and other factors. DOE did not have sufficient information 
to incorporate these factors explicitly into its model, so it developed 
an alternative approach that assumes that the factors influencing the 
repair or replace decision will be similar in the future as they were 
in the past. DOE estimated an historical average repair rate by 
minimizing the difference between actual historical shipments and 
model-predicted shipments in a ``no-repairs'' scenario. DOE developed a 
time series for historical shipments using data provided by AHRI in 
2001 for the small and large CUAC and CUHP equipment classes for the 
years 1980 to 2001, combined with Census data on manufacturer shipments 
\56\ as the basis for shipments in earlier and later years, and for 
very large CUAC and CUHP. Chapter 9 of the NOPR TSD discusses in more 
detail the AHRI and Census data and its use by DOE.
---------------------------------------------------------------------------

    \56\ U.S.Census Bureau. Current Industrial Reports for 
Refrigeration, Air Conditioning, and Warm Air Heating Equipment, 
MA333M. Note that the current industrial reports were discontinued 
in 2010, so more recent data are not available.
---------------------------------------------------------------------------

    The repair/replace model is a binary choice model with two 
parameters, ``alpha'' and ``gamma.'' ``Alpha'' represents customer 
sensitivity to the efficiency-weighted average cost difference between 
total installed cost of replacement and repair costs. DOE assumed that 
the ``alpha'' is equal to the parameter used in the customer choice 
model to represent customer sensitivity to total installed cost. (The 
customer choice model is described in section IV.G.1.) ``Gamma'' is a 
scenario parameter that limits the number of repairs and can be thought 
of as representing ``unknown replacements.'' Since ``alpha'' is assumed 
to be known, DOE estimated ``gamma'' by minimizing the difference 
between the historical average repair rate and the repair probability 
predicted by the repair/replace model. This approach ensures that the 
estimated repair rate in each forecast year in the base case is close 
to the historical average rate. In the standards cases, which have 
higher installed costs, the repair rate is higher. Chapter 9 of the 
NOPR TSD describes the repair/replace decision model in more detail.
    For existing buildings acquiring new equipment for the first time, 
DOE first estimated saturation values (percentages of total floor space 
served by different cooling capacities or types of equipment) for the 
stock. CBECS provides overall CUAC and CUHP saturation values. To 
derive percentages of floor space served by different cooling 
capacities or types of equipment, DOE used shipments data from the 
Census. DOE derived the approximate historical floor space saturations 
for each of the CUAC and CUHP equipment classes by multiplying the CUAC 
and CUHP saturation values from CBECS by the shipment shares from the 
Census. DOE used a logistic regression procedure to fit the CBECS 
historical stock saturations to produce a smooth time series of 
saturation estimates for the analysis period.
    Shipments for existing buildings acquiring new equipment for the 
first time in each future year are estimated by multiplying the 
difference in projected stock saturation values between the future year 
and the previous year with the estimated floor space without CUAC and 
CUHP equipment in the previous year. In other words, the shipments 
account for the incremental increase in stock saturation.
    For new commercial buildings acquiring equipment, shipments are 
estimated by multiplying new construction floor space in each future 
year by saturation values (percentages of new floor space served by 
different cooling capacities or types of equipment). The shipments 
model relies on AEO 2013 for forecasts of new construction floor space. 
It assumes that the saturation value in new commercial buildings is the 
same as the stock-average saturation for each year.
    Issue 13: DOE requests comments, information and data on the 
methods and key assumptions used to model the repair vs. replacement 
decision, which is based on estimates of the cost of repair vs. the 
cost of new equipment. Field data for repair costs and how they vary 
with equipment first cost and age would allow DOE to refine its 
shipments forecasting by more precisely modeling the repair vs. replace 
decision sensitivity to the difference in repair and replacement 
equipment costs.
    Issue 14: DOE requests comments, information and data regarding the 
lifetime of repaired equipment. DOE's analysis considered major repair 
consisting of replacement of the compressor and miscellaneous materials 
associated with the compressor; DOE estimated that repaired equipment 
would last as long as new replacement equipment. Information is 
requested to determine whether this estimate is reasonable.
    Issue 15: DOE requests comments, information, and data on the 
repair of CUACs and CUHPs in the >=240,000 Btu/h and <760,000 Btu/h 
equipment classes. For this equipment, the shipments analysis estimated 
that any equipment experiencing their first failure would be repaired 
rather than replaced. Information is requested to determine whether 
this estimate is reasonable.
2. Shipment Market Shares by Efficiency Level
    The approach described in the preceding section provides total 
shipments in each equipment class for each year. To estimate the market 
shares of the considered efficiency levels in future shipments, DOE 
developed a customer choice model. The model was calibrated by 
estimating values for two parameters, representing customer sensitivity 
to total installation cost and annual operating cost. To calibrate the 
model, DOE used EER market share data for small and large CUAC 
equipment classes provided by AHRI for the previous rulemaking. These 
market shares are for 1999-2001. DOE used the equipment prices by EER 
level from the 2004 ANOPR to assign equipment prices to each EER bin, 
along with the installation costs and maintenance costs developed for 
this NOPR. DOE derived unit energy consumption (UEC) values for each of 
the EER bins using the UEC to EER relationships presented in the 2004 
ANOPR TSD, and then applied historic electricity prices to calculate 
annual energy costs.
    To estimate values for the parameters, DOE used a non-linear 
regression approach that minimized the sum of the squared difference 
between historical market shares and the predicted values at each 
efficiency level for the small and large CUAC equipment classes. 
Starting in 2013, application of the parameters, along with data on the 
installed cost and operating cost at each efficiency level under 
consideration, determines the market shares of each efficiency level. 
The same parameters were used to estimate market shares for each 
equipment class. The details of this approach can be found in chapter 9 
of the NOPR TSD.

H. National Impact Analysis

    The NIA assesses the national energy savings (NES) and the national 
NPV of total customer costs and savings that would be expected to 
result from amended 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 energy savings and the national customer costs and

[[Page 58984]]

savings from each TSL.\57\ The NIA calculations are based on the annual 
energy consumption and total installed cost data from the energy use 
analysis and the LCC analysis. DOE forecasted the lifetime energy 
savings, energy cost savings, equipment costs, and NPV of customer 
benefits for each equipment class for equipment sold from 2019 through 
2048.
---------------------------------------------------------------------------

    \57\ DOE understands that 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 evaluated the impacts of potential new and amended standards 
for small, large, and very large air-cooled commercial package air 
conditioning and heating equipment by comparing base-case projections 
with standards-case projections. The base-case projections characterize 
energy use and customer costs for each equipment class in the absence 
of new and amended energy conservation standards. DOE compared these 
projections with those characterizing the market for each equipment 
class if DOE were to adopt amended standards at specific energy 
efficiency levels (i.e., the standards cases) for that class.

          Table IV.12--Inputs for the National Impact Analysis
------------------------------------------------------------------------
               Input                             Description
------------------------------------------------------------------------
Shipments.........................  Annual shipments from shipments
                                     model.
Compliance date of standard.......  January 1, 2019.
Base case efficiencies............  Estimated by customer choice model.
Standards case efficiencies.......  Estimated by customer choice model.
Annual energy consumption per unit  Calculated for each efficiency level
                                     and equipment class based on inputs
                                     from the energy use analysis.
Total installed cost per unit.....  Calculated equipment prices by
                                     efficiency level using manufacturer
                                     selling prices and weighted-average
                                     overall markup values. Installation
                                     costs vary in direct proportion to
                                     the weight of the equipment.
Electricity expense per unit......  Annual energy use for each equipment
                                     class is multiplied by the
                                     corresponding average energy price.
Escalation of electricity prices..  AEO 2013 forecasts (to 2040) and
                                     extrapolation beyond 2040.
Electricity site-to-primary energy  A time series conversion factor;
 conversion.                         includes electric generation,
                                     transmission, and distribution
                                     losses.
Discount rates....................  3% and 7% real.
Present year......................  2013.
------------------------------------------------------------------------

1. Efficiency Trends
    A key component of DOE's estimates of NES and NPV are the equipment 
energy efficiencies forecasted over time for the base case and for each 
of the standards cases. For the 2004 ANOPR, DOE used a combination of 
historical commercial and residential equipment efficiency data to 
forecast efficiencies for the base case. To estimate the impact that 
standards would have in the year compliance becomes required, DOE used 
a ``roll-up'' scenario, which assumes that equipment efficiencies in 
the base case that do not meet the standard level under consideration 
would ``roll up'' to meet the new standard level and equipment 
shipments at efficiencies above the standard level under consideration 
are not affected. 69 FR 45489-45490.
    The Joint Efficiency Advocates encouraged DOE to consider a 
``shift'' scenario (one in which efficiencies above the standard level 
under consideration are affected in a standards case) for the national 
impact analysis. (Joint Efficiency Advocates, No. 11 at p. 3) DOE did 
not have sufficient data on current efficiency market shares or 
information on market behavior to be able to develop a ``shift'' 
scenario.
    The RFI requested information on expected trends in efficiency over 
the long run, but DOE did not receive comments. For this NOPR, DOE used 
the customer choice model in the shipments analysis to estimate 
efficiency market shares in each year of the shipments projection 
period. For each standards case, the efficiency levels that are below 
the standard are removed from the possible choices available to 
customers. The base case shows a slight increasing trend for small 
CUAC, but the shares are fairly constant for large and very large CUAC. 
The estimated efficiency trends in the base case and standards cases 
are described in chapter 9 of the NOPR TSD.
2. National Energy Savings
    For each year in the forecast period, DOE calculates the national 
energy savings for each standard level by multiplying the shipments of 
small, large, and very large air-cooled CUAC and CUHP by the per-unit 
annual energy savings. Cumulative energy savings are the sum of the 
annual energy savings over the lifetime of all equipment shipped during 
2019-2048.
    For small, large, and very large air-cooled CUAC, the per-unit 
annual energy savings for each considered efficiency level come from 
the energy use analysis, which estimated energy consumption for 2019. 
For later years, DOE adjusted the per-unit annual site energy use to 
account for changes in climate based on projections in AEO 2013.
    For small, large, and very large air-cooled CUHP, DOE did not 
conduct an energy use analysis. Because the cooling-side performance of 
CUHP is nearly identical to that of CUAC, DOE used the energy 
consumption estimates developed for CUACs to characterize the cooling-
side performance of CUHP of the same size. To characterize the heating-
side performance, DOE analyzed CBECS 2003 data to develop a national-
average annual energy use per square foot for buildings that use CUHPs. 
DOE assumed that the average COP of the CUHP was 2.9.\58\ DOE converted 
the energy use per square foot value to annual energy use per ton using 
a ton per square foot relationship derived from the energy use analysis 
for CUAC. This value is different for each equipment class. Because 
equipment energy use is a function of efficiency, DOE assumed that the 
annual heating energy consumption of a unit scales proportionally with 
its heating COP efficiency level. Finally, to determine

[[Page 58985]]

the COPs of units with given IEERs, DOE correlated COP to IEER based on 
the AHRI Certified Equipment Database.\59\ Thus, for any given cooling 
efficiency of a CUHP unit, DOE was able to establish the corresponding 
heating efficiency, and, in turn, the associated annual heating energy 
consumption.
---------------------------------------------------------------------------

    \58\ A heating efficiency of 2.9 COP corresponds to the existing 
minimum heating efficiency standard for CUHP, a value which the 
Department believes is representative of the heat pump stock 
characterized by CBECS.
    \59\ http://www.ahridirectory.org/ahridirectory/pages/homeM.aspx.
---------------------------------------------------------------------------

    For CUAC and CUHP, DOE did not adjust its estimate of energy 
savings to account for a rebound effect. A direct rebound effect occurs 
when an increase in efficiency is accompanied by more intensive use of 
the equipment. DOE is not aware of any evidence to support the notion 
that commercial customers would run more efficient equipment longer or 
more frequently. The operation of CUAC and CUHP is generally matched to 
the indoor comfort needs of the building, regardless of the equipment 
efficiency.
    Issue 16: DOE requests comments on its decision to not include a 
rebound effect for more-efficient CUAC and CUHP.
    DOE calculates the total annual site energy savings for a given 
standards case by subtracting total energy use in the standards case 
from total energy use in the base case. Part of the reduction in a 
standards case is due to decreasing shipments resulting from customers 
choosing to repair than replace broken equipment. The NES calculation 
also includes the estimated energy use of units that are repaired 
rather than replaced. The units repaired in each year are from a number 
of different vintages (year built). For each vintage, DOE estimated an 
average efficiency based on an estimated historical trend, and 
estimated the average energy use by scaling the energy use for baseline 
units in 2013 according to the estimated efficiency in each year. The 
average energy use of units that are repaired in each year is weighted 
by the number of units in each vintage.
    DOE converted the site electricity consumption and savings to 
primary energy (power sector energy consumption) using annual 
conversion factors derived from the AEO 2013 version of the NEMS. 
Cumulative energy savings are the sum of the NES for each year in which 
equipment shipped during 2019-2048 continue to operate.
    DOE has historically presented NES in terms of primary energy 
savings. In response to the recommendations of a committee on ``Point-
of-Use and Full-Fuel-Cycle Measurement Approaches to Energy Efficiency 
Standards'' appointed by the National Academy of Science, DOE announced 
its intention to use full-fuel-cycle (FFC) measures of energy use and 
greenhouse gas and other emissions in the national impact analyses and 
emissions analyses included in future energy conservation standards 
rulemakings. 76 FR 51281 (August 18, 2011). While DOE stated in that 
notice that it intended to use the Greenhouse Gases, Regulated 
Emissions, and Energy Use in Transportation (GREET) model to conduct 
the analysis, it also said it would review alternative methods, 
including the use of EIA's National Energy Modeling System (NEMS). 
After evaluating both models and the approaches discussed in the August 
18, 2011 notice, DOE published a statement of amended policy in the 
Federal Register in which DOE explained its determination that NEMS is 
a more appropriate tool for this specific use. 77 FR 49701 (August 17, 
2012). Therefore, DOE is using NEMS to conduct FFC analyses. The 
approach used for this NOPR, and the FFC multipliers that were applied, 
are described in appendix 10-A of the NOPR TSD.
3. Net Present Value of Customer Benefit
    The inputs for determining the NPV of the total costs and benefits 
experienced by customers of the considered equipment are: (1) Total 
annual installed cost; (2) total annual savings in operating costs; and 
(3) a discount factor. DOE calculates the lifetime net savings for 
equipment shipped each year as the difference between the base case and 
each standards case in total lifetime savings in lifetime operating 
costs and total lifetime increases in installed costs. DOE calculates 
lifetime operating cost savings over the life of each small, large, and 
very large air-cooled commercial package air conditioning and heating 
equipment shipped during the forecast period.
a. Total Annual Installed Cost
    The total installed cost includes both the equipment price and the 
installation cost. For each equipment class, DOE calculated equipment 
prices by efficiency level using manufacturer selling prices and 
weighted-average overall markup values (weights based on shares of the 
distribution channels used). Installation costs vary in direct 
proportion to the weight of the equipment. Because DOE calculated the 
total installed cost as a function of equipment efficiency, it was able 
to determine annual total installed costs based on the annual shipment-
weighted efficiency levels determined in the shipments model.
    For small, large, and very large air-cooled CUHPs, to estimate the 
cost at higher efficiency levels, DOE applied the same incremental 
equipment costs that were developed for the comparable CUAC efficiency 
levels for each equipment class (see section IV.C.4).
    As noted in section IV.F.1, DOE assumed no change in small, large, 
and very large air-cooled CUAC and CUHP prices over the analysis 
period. However, DOE conducted sensitivity analyses using alternative 
price trends: one in which prices decline after 2013, and one in which 
prices rise. These price trends, and the NPV results from the 
associated sensitivity cases, are described in appendix 10-B of the 
NOPR TSD.
    The NPV calculation includes the repair cost of units that are 
repaired rather than replaced. The approach used to estimate such costs 
is described in section IV.G.
b. Total Annual Operating Cost Savings
    DOE calculates the total annual operating cost savings for a given 
standards case relative to operating costs in the base case. Part of 
the operating cost savings in a standards case is due to a decrease in 
shipments resulting from customers choosing to repair than replace 
broken equipment. The NPV calculation includes the estimated operating 
costs of units that are repaired rather than replaced. These costs were 
estimated based on the average energy use of such units and the average 
electricity price in each year.
    The per-unit energy savings were derived as described in section 
IV.H.2. To calculate future electricity prices, DOE applied the 
projected trend in national-average commercial electricity price from 
the AEO 2013 Reference case, which extends to 2040, to the tariff-based 
prices derived in the LCC and PBP analysis. DOE used the trend from 
2030 to 2040 to extrapolate beyond 2040. In addition, DOE analyzed 
scenarios that used the trends in the AEO 2013 Low Economic Growth and 
High Economic Growth cases. These cases have higher and lower energy 
price trends compared to the Reference case. These price trends, and 
the NPV results from the associated cases, are described in appendix 
10-C of the NOPR TSD.
    DOE estimated that annual maintenance costs (including minor 
repairs) do not vary with efficiency within each equipment class, so 
they do not figure into the annual operating cost savings for a given 
standards case. In addition, as noted previously, DOE included major 
repair costs in its shipments model rather than developing

[[Page 58986]]

annualized repair costs. As a result, repair costs do not factor 
directly into the determination of total operating cost savings for 
shipments.
    In calculating the NPV, DOE multiplies the net savings in future 
years by a discount factor to determine their present value. DOE 
estimates the NPV using both a 3-percent and a 7-percent real discount 
rate, in accordance with guidance provided by the Office of Management 
and Budget (OMB) to Federal agencies on the development of regulatory 
analysis.\60\ The discount rates for the determination of NPV are in 
contrast to the discount rates used in the LCC analysis, which are 
designed to reflect a consumer's perspective. The 7-percent real value 
is an estimate of the average before-tax rate of return to private 
capital in the U.S. economy. The 3-percent real value represents the 
``social rate of time preference,'' which is the rate at which society 
discounts future consumption flows to their present value.
---------------------------------------------------------------------------

    \60\ OMB Circular A-4, section E (Sept. 17, 2003). Available at: 
http://www.whitehouse.gov/omb/circulars_a004_a-4.
---------------------------------------------------------------------------

I. Customer Subgroup Analysis

    In analyzing the potential impacts of new or amended standards, DOE 
evaluates impacts on identifiable groups (i.e., subgroups) of customers 
that may be disproportionately affected by a national standard. For the 
NOPR, DOE evaluated impacts on a small business subgroup using the LCC 
spreadsheet model. The customer subgroup analysis is discussed in 
detail in chapter 11 of the NOPR TSD.

J. Manufacturer Impact Analysis

1. Overview
    DOE performed an MIA to determine the financial impact of amended 
energy conservation standards on manufacturers of CUAC and to estimate 
the potential impact of such standards on employment and manufacturing 
capacity. The MIA has both quantitative and qualitative aspects. The 
quantitative part of the MIA primarily relies on the Government 
Regulatory Impact Model (GRIM), an industry cash-flow model with inputs 
specific to this rulemaking. The key GRIM inputs are data on the 
industry cost structure, equipment costs, shipments, and assumptions 
about markups and conversion expenditures. The key output is the 
industry net present value (INPV). Different sets of assumptions 
(markup scenarios) will produce different results. The qualitative part 
of the MIA addresses factors such as product characteristics, impacts 
on particular subgroups of firms, and important market and product 
trends. The complete MIA is outlined in chapter 12 of the NOPR TSD.
    DOE conducted the MIA for this rulemaking in three phases. In Phase 
1 of the MIA, DOE prepared a profile of the CUAC and CUHP industry that 
includes a top-down manufacturer cost analysis of manufacturers used to 
derive preliminary financial inputs for the GRIM (e.g., sales, general, 
and administration (SG&A) expenses; research and development (R&D) 
expenses; and tax rates). DOE used public sources of information, 
including company SEC 10-K filings,\61\ corporate annual reports, the 
U.S. Census Bureau's Economic Census,\62\ and Hoover's reports.\63\
---------------------------------------------------------------------------

    \61\ U.S. Securities and Exchange Commission. Annual 10-K 
Reports. Various Years. http://sec.gov.
    \62\ U.S. Census Bureau, Annual Survey of Manufacturers: General 
Statistics: Statistics for Industry Groups and Industries. http://factfinder2.census.gov/faces/nav/jsf/pages/searchresults.xhtml?refresh=t.
    \63\ Hoovers Inc. Company Profiles. Various Companies. http://www.hoovers.com.
---------------------------------------------------------------------------

    In Phase 2 of the MIA, DOE prepared an industry cash-flow analysis 
to quantify the potential impacts of an amended energy conservation 
standard. In general, energy conservation standards can affect 
manufacturer cash flow in three distinct ways: (1) Create a need for 
increased investment; (2) raise production costs per unit; and (3) 
alter revenue due to higher per-unit prices and possible changes in 
sales volumes.
    In Phase 3 of the MIA, DOE conducted structured, detailed 
interviews with a representative cross-section of manufacturers. During 
these interviews, DOE discussed engineering, manufacturing, 
procurement, and financial topics to validate assumptions used in the 
GRIM and to identify key issues or concerns. See section IV.J.2 for a 
description of the key issues manufacturers raised during the 
interviews.
    Additionally, in Phase 3, DOE evaluated subgroups of manufacturers 
that may be disproportionately impacted by new standards or that may 
not be accurately represented by the average cost assumptions used to 
develop the industry cash-flow analysis. For example, small 
manufacturers, niche players, or manufacturers exhibiting a cost 
structure that largely differs from the industry average could be more 
negatively affected. DOE identified one subgroup (i.e., small 
manufacturers) for a separate impact analysis.
    DOE applied the small business size standards published by the 
Small Business Administration (SBA) to determine whether a company is 
considered a small business. 65 FR 30836, 30848 (May 15, 2000), as 
amended at 65 FR 53533, 53544 (Sept. 5, 2000) and codified at 13 CFR 
part 121. To be categorized as a small business under North American 
Industry Classification System (NAICS) code 333415, ``Air-Conditioning 
and Warm Air Heating Equipment and Commercial and Industrial 
Refrigeration Equipment Manufacturing,'' a CUAC and CUHP manufacturer 
and its affiliates may employ a maximum of 750 employees. The 750-
employee threshold includes all employees in a business's parent 
company and any other subsidiaries. Based on this classification, DOE 
identified at least two manufacturers that qualify as small businesses. 
The small manufacturer subgroup is discussed in section VI.B of this 
notice and in chapter 12 of the NOPR TSD.
2. Government Regulatory Impact Model
    DOE uses the GRIM to quantify the changes in cash flow due to new 
standards that result in a higher or lower industry value. The GRIM 
analysis uses a standard, annual cash-flow analysis that incorporates 
manufacturer costs, markups, shipments, and industry financial 
information as inputs. The GRIM models changes in costs, distribution 
of shipments, investments, and manufacturer margins that could result 
from an amended energy conservation standard. The GRIM spreadsheet uses 
the inputs to arrive at a series of annual cash flows, beginning in 
2014 (the base year of the analysis) and continuing to 2048. DOE 
calculated INPVs by summing the stream of annual discounted cash flows 
during this period. For CUAC and CUHP manufacturers, DOE used a real 
discount rate of 6.2 percent, which was derived from industry 
financials and then modified according to feedback received during 
manufacturer interviews.
    The GRIM calculates cash flows using standard accounting principles 
and compares changes in INPV between a base case and each standards 
case. The difference in INPV between the base case and a standards case 
represents the financial impact of the amended energy conservation 
standard on manufacturers. As discussed previously, DOE collected this 
information on the critical GRIM inputs from a number of sources, 
including publicly-available data and interviews with a number of 
manufacturers (described in the next section). The GRIM results are 
shown in

[[Page 58987]]

section V.B.2. Additional details about the GRIM, the discount rate, 
and other financial parameters can be found in chapter 12 of the NOPR 
TSD.
a. Government Regulatory Impact Model Key Inputs
Manufacturer Production Costs
    Manufacturing higher-efficiency equipment is typically more 
expensive than manufacturing baseline equipment due to the use of more 
complex components, which are typically more costly than baseline 
components. The changes in the manufacturer production costs (MPCs) of 
the analyzed equipment can affect the revenues, gross margins, and cash 
flow of the industry, making these equipment cost data key GRIM inputs 
for DOE's analysis.
    In the MIA, DOE used the MPCs for each considered efficiency level 
calculated in the engineering analysis, as described in section IV.C.3 
and further detailed in chapter 5 of the NOPR TSD. In addition, DOE 
used information from its teardown analysis, described in chapter 5 of 
the TSD, to disaggregate the MPCs into material, labor, and overhead 
costs. To calculate the MPCs for equipment above the baseline, DOE 
added the incremental material, labor, and overhead costs from the 
engineering cost-efficiency curves to the baseline MPCs. These cost 
breakdowns and product markups were validated and revised with 
manufacturers during manufacturer interviews.
Shipments Forecasts
    The GRIM estimates manufacturer revenues based on total unit 
shipment forecasts and the distribution of these values by efficiency 
level. Changes in sales volumes and efficiency mix over time can 
significantly affect manufacturer finances. For this analysis, the GRIM 
uses the NIA's annual shipment forecasts derived from the shipments 
analysis from 2014 (the base year) to 2048 (the end year of the 
analysis period). The NIA shipments forecasts are, in part, based on a 
consumer choice model that estimates customer sensitivity to total 
installed cost as well as operating costs. See section IV.G. above and 
chapter 9 of the NOPR TSD for additional details.
Product and Capital Conversion Costs
    An amended energy conservation standard would cause manufacturers 
to incur one-time conversion costs to bring their production facilities 
and product designs into compliance. DOE evaluated the level of 
conversion-related expenditures that would be needed to comply with 
each considered efficiency level in each equipment class. For the MIA, 
DOE classified these conversion costs into two major groups: (1) 
Capital conversion costs; and (2) product conversion costs. Capital 
conversion costs are one-time investments in property, plant, and 
equipment necessary to adapt or change existing production facilities 
such that new compliant equipment designs can be fabricated and 
assembled. Product conversion costs are one-time investments in 
research, development, testing, marketing, and other non-capitalized 
costs necessary to make product designs comply with the amended energy 
conservation standard. These expenditures are made between the 
announcement year of the standard and the effective date of the 
standard.
    To evaluate the level of capital conversion expenditures 
manufacturers would likely incur to comply with amended energy 
conservation standards, DOE used manufacturer interviews to gather data 
on the anticipated level of capital investment that would be required 
at each efficiency level. DOE supplemented manufacturer comments with 
estimates of capital expenditure requirements derived from the product 
teardown analysis and engineering analysis described in chapter 5 of 
the TSD.
    DOE assessed the product conversion costs at each considered 
efficiency level by integrating data from quantitative and qualitative 
sources. DOE considered market-share-weighted feedback regarding the 
potential costs of each efficiency level from multiple manufacturers to 
estimate product conversion costs and validated those numbers against 
engineering estimates of redesign efforts. Additionally, DOE 
incorporated estimates of the incremental Certification, Compliance & 
Enforcement (CC&E) testing costs that would result from the proposed 
test procedure change. This results in product conversion costs which 
occur even at the baseline because manufacturers would need to re-rate 
all existing basic models.
    The testing costs that occur at baseline total $12.7M for the 
industry. This value is based the 6,366 product listings found in the 
AHRI database at the time of analysis. DOE assumed that the 29 brands 
in the industry would each need to run 2 validation tests for each of 
the 12 equipment classes, resulting in 696 physical tests at an average 
cost of $10,000 per test, which includes the cost of the test units. 
Additionally, the industry would likely use AEDMs to determine the IEER 
rating of all remaining basic models. While simulation times ranged 
from 6 to 24 hours of engineering time, depending on the size and 
complexity of the equipment being modeled, DOE estimated the average 
AEDM calculation required 13.8 hrs of engineering time to complete. The 
cost of physically testing 696 units totaled $6.96M and the cost of 
using AEDMs to determine the rating of the 6,366 product listings would 
total $5.76M.
    Issue 17: DOE requests comments, information, and data that would 
inform adjustment of the DOE's estimate of $12.7M in conversion costs 
that occurs in the base case.
    In general, DOE assumes that all conversion-related investments 
occur between the year of publication of the final rule and the year by 
which manufacturers must comply with the new standard. The conversion 
cost figures used in the GRIM can be found in section V.B.2.a of this 
notice. For additional information on the estimated product and capital 
conversion costs, see chapter 12 of the NOPR TSD.
b. Government Regulatory Impact Model Scenarios
Markup Scenarios
    As discussed above, MSPs include direct manufacturing production 
costs (i.e., labor, materials, and overhead estimated in DOE's MPCs) 
and all non-production costs (i.e., SG&A, R&D, and interest), along 
with profit. To calculate the MSPs in the GRIM, DOE applied non-
production cost markups to the MPCs estimated in the engineering 
analysis for each equipment class and efficiency level. Modifying these 
markups in the standards case yields different sets of impacts on 
manufacturers. For the MIA, DOE modeled two standards-case markup 
scenarios to represent the uncertainty regarding the potential impacts 
on prices and profitability for manufacturers following the 
implementation of amended energy conservation standards: (1) A 
preservation of gross margin percentage markup scenario; and (2) a 
preservation of per unit operating profit markup scenario. These 
scenarios lead to different markups values that, when applied to the 
inputted MPCs, result in varying revenue and cash flow impacts.
    Under the preservation of gross margin percentage scenario, DOE 
applied a single uniform ``gross margin percentage'' markup across all 
efficiency levels, which assumes that manufacturers would be able to 
maintain the same amount of profit as a percentage of revenues at all 
efficiency levels within an equipment class. As production costs 
increase with

[[Page 58988]]

efficiency, this scenario implies that the absolute dollar markup will 
increase as well. Based on publicly-available financial information for 
manufacturers of small, large, and very large air-cooled CUAC and CUHP 
as well as comments from manufacturer interviews, DOE assumed the 
average non-production cost markup--which includes SG&A expenses, R&D 
expenses, interest, and profit--to be the following for each CUAC and 
CUHP equipment class:

                     Table IV.13--Base Case Markups
------------------------------------------------------------------------
                         Equipment                              Markup
------------------------------------------------------------------------
Small Commercial Packaged Air-Conditioners (Air-Cooled)--            1.3
 >=65,000 Btu/h and <135,000 Btu/h.........................
Small Commercial Packaged Heat Pumps (Air-Cooled)-->=65,000          1.3
 Btu/h and <135,000 Btu/h..................................
Large Commercial Packaged Air-Conditioners (Air-Cooled)--           1.34
 >=135,000 Btu/h and <240,000 Btu/h........................
Large Commercial Packaged Heat Pumps (Air-Cooled)--                 1.34
 >=135,000 Btu/h and <240,000 Btu/h........................
Very Large Commercial Packaged Air-Conditioners (Air-               1.41
 Cooled)-->=240,000 Btu/h and <760,000 Btu/h...............
Very Large Commercial Packaged Heat Pumps (Air-Cooled)--            1.41
 >=240,000 Btu/h and <760,000 Btu/h........................
------------------------------------------------------------------------

    Because this markup scenario assumes that manufacturers would be 
able to maintain their gross margin percentage markups as production 
costs increase in response to an amended energy conservation standard, 
it represents a high bound to industry profitability.
    In the preservation of per unit operating profit scenario, 
manufacturer markups are set so that operating profit one year after 
the compliance date of the amended energy conservation standard is the 
same as in the base case on a per unit basis. Under this scenario, as 
the costs of production increase under a standards case, manufacturers 
are generally required to reduce their markups to a level that 
maintains base-case operating profit per unit. The implicit assumption 
behind this markup scenario is that the industry can only maintain its 
operating profit in absolute dollars per unit after compliance with the 
new standard is required. Therefore, operating margin in percentage 
terms is reduced between the base case and standards case. DOE adjusted 
the manufacturer markups in the GRIM at each TSL to yield approximately 
the same earnings before interest and taxes in the standards case as in 
the base case. This markup scenario represents a low bound to industry 
profitability under an amended energy conservation standard.
c. Manufacturer Interviews
    DOE interviewed manufacturers representing approximately 97 percent 
of the market by revenue. The information gathered during these 
interviews enabled DOE to tailor the GRIM to reflect the unique 
financial characteristics of the small, large, and very large air-
cooled CUAC and CUHP industry. In interviews, DOE asked manufacturers 
to describe their major concerns with potential rulemaking involving 
CUAC and CUHP equipment. The following sections highlight 
manufacturers' statements that helped shape DOEs understanding of 
potential impacts of an amended standard on the industry. Manufacturers 
raised a range of general issues for DOE to consider, including CC&E, 
repair and replacement rates, and alignment with ASHRAE standards. 
Below, DOE summarizes these issues, which were informally raised in 
manufacturer interviews, in order to obtain public comment and related 
data.
Certification, Compliance, and Enforcement
    Nearly all manufacturers expressed concern over certification, 
compliance, and enforcement (CC&E) costs. In particular, confusion over 
the definition of ``basic model,'' ``equipment class,'' and the still-
pending implementation of alternative efficiency determination methods 
(AEDMs) has made it difficult for some manufacturers to anticipate 
their total testing needs and total testing costs. These issues, 
depending on how they are addressed by DOE, will impact the number of 
models to require testing.
    Additionally, manufacturers noted that the replacement of the 
current EER standard with the proposed IEER standard would introduce 
additional testing complications. IEER testing necessitates four data 
points, at 25%, 50%, 75%, and 100% capacity, which introduces 
additional cumulative uncertainty. Accordingly, manufacturers expressed 
the need for additional increases in the testing tolerance. 
Manufacturers noted that the confidence limits currently required by 
the CC&E regulations at 10 CFR 429.43 are more stringent than current 
laboratory capabilities as well as current industry standard practice.
Repair and Replacement Rates
    During interviews, most manufacturers expressed concerns that an 
increase in standards may make customers more likely to repair an old 
unit rather than replace it with a new one. Manufacturers noted that 
more efficient units tend to be larger, and customers may need to make 
significant alterations to roofs in existing buildings in order to 
accommodate larger equipment. The high cost of redesigning, 
reconstructing, or possibly replacing a roof to hold a new unit could 
deter customers from purchasing one. According to manufacturers, 
another reason an amended standard may lead to a drop in shipments is 
the price sensitivity of end users. More efficient units tend to be 
more expensive. The lower cost of fixing an old unit, versus purchasing 
a new unit, may be a more attractive option for some customers. 
Furthermore, manufacturers indicated that there could be a reduction in 
energy savings from a higher standard due to the increase in the number 
of older, less efficient units that are repaired rather than replaced 
with newer, more efficient units. Manufacturers expressed concern over 
a potential contraction in market size resulting from amended 
standards.
Alignment With ASHRAE Standards
    Several manufacturers suggested during interviews that DOE 
standards should be aligned with other industry standards set by ASHRAE 
and AHRI. A few standards, such as ASHRAE 37, ASHRAE 41, and AHRI 340/
360 are currently being revised, and manufacturers believe that a 
coordination of standards between DOE and industry organizations would 
be a practical way to reduce the amount of time they need to spend on 
redesigning products and meeting multiple regulations.

K. Emissions Analysis

    In the emissions analysis, DOE estimated the reduction in power 
sector emissions of carbon dioxide (CO2), nitrogen oxides 
(NOX), sulfur dioxide (SO2), and mercury (Hg) 
from potential energy conservation standards for small, large, and very 
large air-cooled commercial package air conditioning

[[Page 58989]]

and heating equipment. In addition, DOE estimates emissions impacts in 
production activities (extracting, processing, and transporting fuels) 
that provide the energy inputs to power plants. These are referred to 
as ``upstream'' emissions. Together, these emissions account for the 
full-fuel-cycle (FFC). In accordance with DOE's FFC Statement of Policy 
(76 FR 51282 (Aug. 18, 2011)), the FFC analysis includes impacts on 
emissions of methane (CH4) and nitrous oxide 
(N2O), both of which are recognized as greenhouse gases.
    DOE conducted the emissions analysis using emissions factors that 
were derived from data in the Energy Information Agency's (EIA's) 
Annual Energy Outlook 2013 (AEO 2013), supplemented by data from other 
sources.\64\ DOE developed separate emissions factors for power sector 
emissions and upstream emissions. The method that DOE used to derive 
emissions factors is described in chapter 13 of the NOPR TSD.
---------------------------------------------------------------------------

    \64\ Emissions factors based on the Annual Energy Outlook 2014 
(AEO 2014), which became available too late for incorporation into 
this analysis, indicate that a significant decrease in the 
cumulative emission reductions of carbon dioxide, methane, nitrous 
oxide, sulfur dioxide, nitrogen oxides and mercury from the proposed 
standards can be expected if the projections of power plant 
utilization assumed in AEO 2014 are realized. For example, the 
estimated amount of cumulative emission reductions of CO2 are 
expected to decrease by 36% from DOE's current estimate (from 1,085 
Mt to 697Mt) based on the projections in AEO 2014 relative to AEO 
2013. The monetized benefits from GHG reductions would likely 
decrease by a comparable amount. DOE plans to use emissions factors 
based on the most recent AEO available for the next phase of this 
rulemaking, which may or may not be AEO 2014, depending on the 
timing of the issuance of the next rulemaking document.
---------------------------------------------------------------------------

    For CH4 and N2O, DOE calculated emissions 
reduction in tons and also in terms of units of carbon dioxide 
equivalent (CO2eq). Gases are converted to CO2eq 
by multiplying by the gas' global warming potential (GWP) over a 100-
year time horizon. Based on the Fourth Assessment Report of the 
Intergovernmental Panel on Climate Change,\65\ DOE used GWP values of 
25 for CH4 and 298 for N2O.
---------------------------------------------------------------------------

    \65\ Forster, P., V. Ramaswamy, P. Artaxo, T. Berntsen, R. 
Betts, D.W. Fahey, J. Haywood, J. Lean, D.C. Lowe, G. Myhre, J. 
Nganga, R. Prinn, G. Raga, M. Schulz and R. Van Dorland. 2007: 
Changes in Atmospheric Constituents and in Radiative Forcing. In 
Climate Change 2007: The Physical Science Basis. Contribution of 
Working Group I to the Fourth Assessment Report of the 
Intergovernmental Panel on Climate Change. S. Solomon, D. Qin, M. 
Manning, Z. Chen, M. Marquis, K.B. Averyt, M.Tignor and H.L. Miller, 
Editors. 2007. Cambridge University Press, Cambridge, United Kingdom 
and New York, NY, USA. p. 212.
---------------------------------------------------------------------------

    EIA prepares the Annual Energy Outlook using the National Energy 
Modeling System (NEMS). Each annual version of NEMS incorporates the 
projected impacts of existing air quality regulations on emissions. AEO 
2013 generally represents current legislation and environmental 
regulations, including recent government actions, for which 
implementing regulations were available as of December 31, 2012.
    SO2 emissions from affected electric generating units 
(EGUs) are subject to nationwide and regional emissions cap-and-trade 
programs. Title IV of the Clean Air Act sets an annual emissions cap on 
SO2 for affected EGUs in the 48 contiguous States and the 
District of Columbia (D.C.). SO2 emissions from 28 eastern 
states and D.C. were also limited under the Clean Air Interstate Rule 
(CAIR; 70 FR 25162 (May 12, 2005)), which created an allowance-based 
trading program that operates along with the Title IV program. CAIR was 
remanded to the U.S. Environmental Protection Agency (EPA) by the U.S. 
Court of Appeals for the District of Columbia Circuit but it remained 
in effect. See North Carolina v. EPA, 550 F.3d 1176 (D.C. Cir. 2008); 
North Carolina v. EPA, 531 F.3d 896 (D.C. Cir. 2008). On July 6, 2011 
EPA issued a replacement for CAIR, the Cross-State Air Pollution Rule 
(CSAPR). 76 FR 48208 (August 8, 2011). On August 21, 2012, the D.C. 
Circuit issued a decision to vacate CSAPR. See EME Homer City 
Generation, LP v. EPA, No. 11-1302, 2012 WL 3570721 at *24 (D.C. Cir. 
Aug. 21, 2012). The court ordered EPA to continue administering CAIR. 
The AEO 2013 emissions factors used for this NOPR assumes that CAIR 
remains a binding regulation through 2040.
    The attainment of emissions caps is typically flexible among EGUs 
and is enforced through the use of emissions allowances and tradable 
permits. Under existing EPA regulations, any excess SO2 
emissions allowances resulting from the lower electricity demand caused 
by the adoption of an efficiency standard could be used to permit 
offsetting increases in SO2 emissions by any regulated EGU. 
In past rulemakings, DOE recognized that there was uncertainty about 
the effects of efficiency standards on SO2 emissions covered 
by the existing cap-and-trade system, but it concluded that negligible 
reductions in power sector SO2 emissions would occur as a 
result of standards.
    Beginning in 2015, however, SO2 emissions will fall as a 
result of the Mercury and Air Toxics Standards (MATS) for power plants, 
which were announced by EPA on December 21, 2011. 77 FR 9304 (Feb. 16, 
2012). In the final MATS rule, EPA established a standard for hydrogen 
chloride as a surrogate for acid gas hazardous air pollutants (HAP), 
and also established a standard for SO2 (a non-HAP acid gas) 
as an alternative equivalent surrogate standard for acid gas HAP. The 
same controls are used to reduce HAP and non-HAP acid gas; thus, 
SO2 emissions will be reduced as a result of the control 
technologies installed on coal-fired power plants to comply with the 
MATS requirements for acid gas. AEO 2013 assumes that, in order to 
continue operating, coal plants must have either flue gas 
desulfurization or dry sorbent injection systems installed by 2015. 
Both technologies, which are used to reduce acid gas emissions, also 
reduce SO2 emissions. Under the MATS, NEMS shows a reduction 
in SO2 emissions when electricity demand decreases (e.g., as 
a result of energy efficiency standards). Emissions will be far below 
the cap established by CAIR, so it is unlikely that excess 
SO2 emissions allowances resulting from the lower 
electricity demand would be needed or used to permit offsetting 
increases in SO2 emissions by any regulated EGU. Therefore, 
DOE believes that efficiency standards will reduce SO2 
emissions in 2015 and beyond.
    CAIR established a cap on NOX emissions in 28 eastern 
States and the District of Columbia. Energy conservation standards are 
expected to have little effect on NOX emissions in those 
States covered by CAIR because excess NOX emissions 
allowances resulting from the lower electricity demand could be used to 
permit offsetting increases in NOX emissions. However, 
standards would be expected to reduce NOX emissions in the 
States not affected by the caps, so DOE estimated NOX 
emissions reductions from the standards considered in this NOPR for 
these States.
    The MATS limit mercury emissions from power plants, but they do not 
include emissions caps and, as such, DOE's energy conservation 
standards would likely reduce Hg emissions. DOE estimated mercury 
emissions reduction using emissions factors based on AEO 2013, which 
incorporates the MATS.

L. Monetizing Carbon Dioxide and Other Emissions Impacts

    As part of the development of this proposed rule, DOE considered 
the estimated monetary benefits from the reduced emissions of 
CO2 and NOX that are expected to result from each 
of the TSLs considered. In order to make this calculation similar to 
the calculation of the NPV of consumer benefit, DOE considered the 
reduced emissions expected to result over the lifetime of equipment 
shipped in the forecast period for each TSL. This section

[[Page 58990]]

summarizes the basis for the monetary values used for each of these 
emissions and presents the values considered in this rulemaking.
    For this NOPR, DOE is relying on a set of values for the social 
cost of carbon (SCC) that was developed by an interagency process. A 
summary of the basis for these values is provided below, and a more 
detailed description of the methodologies used is provided as an 
appendix to chapter 14 of the NOPR TSD.
1. Social Cost of Carbon
    The SCC is an estimate of the monetized damages associated with an 
incremental increase in carbon emissions in a given year. It is 
intended to include (but is not limited to) changes in net agricultural 
productivity, human health, property damages from increased flood risk, 
and the value of ecosystem services. Estimates of the SCC are provided 
in dollars per metric ton of carbon dioxide. A domestic SCC value is 
meant to reflect the value of damages in the United States resulting 
from a unit change in carbon dioxide emissions, while a global SCC 
value is meant to reflect the value of damages worldwide.
    Under section 1(b)(6) of Executive Order 12866, ``Regulatory 
Planning and Review,'' 58 FR 51735 (Oct. 4, 1993), agencies must, to 
the extent permitted by law, assess both the costs and the benefits of 
the intended regulation and, recognizing that some costs and benefits 
are difficult to quantify, propose or adopt a regulation only upon a 
reasoned determination that the benefits of the intended regulation 
justify its costs. The purpose of the SCC estimates presented here is 
to allow agencies to incorporate the monetized social benefits of 
reducing CO2 emissions into cost-benefit analyses of 
regulatory actions. The estimates are presented with an acknowledgement 
of the many uncertainties involved and with a clear understanding that 
they should be updated over time to reflect increasing knowledge of the 
science and economics of climate impacts.
    As part of the interagency process that developed the SCC 
estimates, technical experts from numerous agencies met on a regular 
basis to consider public comments, explore the technical literature in 
relevant fields, and discuss key model inputs and assumptions. The main 
objective of this process was to develop a range of SCC values using a 
defensible set of input assumptions grounded in the existing scientific 
and economic literatures. In this way, key uncertainties and model 
differences transparently and consistently inform the range of SCC 
estimates used in the rulemaking process.
a. Monetizing Carbon Dioxide Emissions
    When attempting to assess the incremental economic impacts of 
carbon dioxide emissions, the analyst faces a number of challenges. A 
recent report from the National Research Council points out that any 
assessment will suffer from uncertainty, speculation, and lack of 
information about: (1) Future emissions of greenhouse gases; (2) the 
effects of past and future emissions on the climate system; (3) the 
impact of changes in climate on the physical and biological 
environment; and (4) the translation of these environmental impacts 
into economic damages. As a result, any effort to quantify and monetize 
the harms associated with climate change will raise questions of 
science, economics, and ethics and should be viewed as provisional.
    Despite the limits of both quantification and monetization, SCC 
estimates can be useful in estimating the social benefits of reducing 
carbon dioxide emissions. The agency can estimate the benefits from 
reduced emissions in any future year by multiplying the change in 
emissions in that year by the SCC value appropriate for that year. The 
net present value of the benefits can then be calculated by multiplying 
the future benefits by an appropriate discount factor and summing 
across all affected years.
    It is important to emphasize that the interagency process is 
committed to updating these estimates as the science and economic 
understanding of climate change and its impacts on society improves 
over time. In the meantime, the interagency group will continue to 
explore the issues raised by this analysis and consider public comments 
as part of the ongoing interagency process.
b. Development of Social Cost of Carbon Values
    In 2009, an interagency process was initiated to offer a 
preliminary assessment of how best to quantify the benefits from 
reducing carbon dioxide emissions. To ensure consistency in how 
benefits are evaluated across agencies, the Administration sought to 
develop a transparent and defensible method, specifically designed for 
the rulemaking process, to quantify avoided climate change damages from 
reduced CO2 emissions. The interagency group did not 
undertake any original analysis. Instead, it combined SCC estimates 
from the existing literature to use as interim values until a more 
comprehensive analysis could be conducted. The outcome of the 
preliminary assessment by the interagency group was a set of five 
interim values: Global SCC estimates for 2007 (in 2006$) of $55, $33, 
$19, $10, and $5 per metric ton of CO2. These interim values 
represented the first sustained interagency effort within the U.S. 
government to develop an SCC for use in regulatory analysis. The 
results of this preliminary effort were presented in several proposed 
and final rules.
c. Current Approach and Key Assumptions
    After the release of the interim values, the interagency group 
reconvened on a regular basis to generate improved SCC estimates. 
Specifically, the group considered public comments and further explored 
the technical literature in relevant fields. The interagency group 
relied on three integrated assessment models commonly used to estimate 
the SCC: The FUND, DICE, and PAGE models. These models are frequently 
cited in the peer-reviewed literature and were used in the last 
assessment of the Intergovernmental Panel on Climate Change (IPCC). 
Each model was given equal weight in the SCC values that were 
developed.
    Each model takes a slightly different approach to model how changes 
in emissions result in changes in economic damages. A key objective of 
the interagency process was to enable a consistent exploration of the 
three models while respecting the different approaches to quantifying 
damages taken by the key modelers in the field. An extensive review of 
the literature was conducted to select three sets of input parameters 
for these models: climate sensitivity, socio-economic and emissions 
trajectories, and discount rates. A probability distribution for 
climate sensitivity was specified as an input into all three models. In 
addition, the interagency group used a range of scenarios for the 
socio-economic parameters and a range of values for the discount rate. 
All other model features were left unchanged, relying on the model 
developers' best estimates and judgments.
    In 2010, the interagency group selected four sets of SCC values for 
use in regulatory analyses.\66\ Three sets of values are based on the 
average SCC from three integrated assessment models, at discount rates 
of 2.5 percent,

[[Page 58991]]

3 percent, and 5 percent. The fourth set, which represents the 95th-
percentile SCC estimate across all three models at a 3-percent discount 
rate, is included to represent higher-than-expected impacts from 
climate change further out in the tails of the SCC distribution. The 
values grow in real terms over time. Additionally, the interagency 
group determined that a range of values from 7 percent to 23 percent 
should be used to adjust the global SCC to calculate domestic effects, 
although preference is given to consideration of the global benefits of 
reducing CO2 emissions. Table IV.14 presents the values in 
the 2010 interagency group report, which is reproduced in appendix 14-A 
of the NOPR TSD.
---------------------------------------------------------------------------

    \66\ Social Cost of Carbon for Regulatory Impact Analysis Under 
Executive Order 12866. Interagency Working Group on Social Cost of 
Carbon, United States Government, February 2010. http://www.whitehouse.gov/sites/default/files/omb/inforeg/for-agencies/Social-Cost-of-Carbon-for-RIA.pdf.

                     Table IV.14--Annual SCC Values From 2010 Interagency Report, 2010-2050
                                      [In 2007 dollars per metric ton CO2]
----------------------------------------------------------------------------------------------------------------
                                                                    Discount rate %
                                     ---------------------------------------------------------------------------
                Year                          5                  3                 2.5                 3
                                     ---------------------------------------------------------------------------
                                           Average            Average            Average        95th percentile
----------------------------------------------------------------------------------------------------------------
2010................................                4.7               21.4               35.1               64.9
2015................................                5.7               23.8               38.4               72.8
2020................................                6.8               26.3               41.7               80.7
2025................................                8.2               29.6               45.9               90.4
2030................................                9.7               32.8               50.0              100.0
2035................................               11.2               36.0               54.2              109.7
2040................................               12.7               39.2               58.4              119.3
2045................................               14.2               42.1               61.7              127.8
2050................................               15.7               44.9               65.0              136.2
----------------------------------------------------------------------------------------------------------------

    The SCC values used for this NOPR were generated using the most 
recent versions of the three integrated assessment models that have 
been published in the peer-reviewed literature.\67\ Table IV.15 shows 
the updated sets of SCC estimates from the 2013 interagency update in 
five-year increments from 2010 to 2050. Appendix 14-B of the NOPR TSD 
provides the full set of values and a discussion of the revisions made 
in 2013. The central value that emerges is the average SCC across 
models at 3-percent discount rate. However, for purposes of capturing 
the uncertainties involved in regulatory impact analysis, the 
interagency group emphasizes the importance of including all four sets 
of SCC values.
---------------------------------------------------------------------------

    \67\ Technical Update of the Social Cost of Carbon for 
Regulatory Impact Analysis Under Executive Order 12866. Interagency 
Working Group on Social Cost of Carbon, United States Government, 
May 2013; revised November 2013. http://www.whitehouse.gov/sites/default/files/omb/assets/inforeg/technical-update-social-cost-of-carbon-for-regulator-impact-analysis.pdf.

                     Table IV.15--Annual SCC Values From 2013 Interagency Update, 2010-2050
                                      [In 2007 dollars per metric ton CO2]
----------------------------------------------------------------------------------------------------------------
                                                                    Discount rate %
                                     ---------------------------------------------------------------------------
                Year                          5                  3                 2.5                 3
                                     ---------------------------------------------------------------------------
                                           Average            Average            Average        95th percentile
----------------------------------------------------------------------------------------------------------------
2010................................                 11                 32                 51                 89
2015................................                 11                 37                 57                109
2020................................                 12                 43                 64                128
2025................................                 14                 47                 69                143
2030................................                 16                 52                 75                159
2035................................                 19                 56                 80                175
2040................................                 21                 61                 86                191
2045................................                 24                 66                 92                206
2050................................                 26                 71                 97                220
----------------------------------------------------------------------------------------------------------------

    It is important to recognize that a number of key uncertainties 
remain, and that current SCC estimates should be treated as provisional 
and revisable since they will evolve with improved scientific and 
economic understanding. The interagency group also recognizes that the 
existing models are imperfect and incomplete. The National Research 
Council report mentioned above points out that there is tension between 
the goal of producing quantified estimates of the economic damages from 
an incremental ton of carbon and the limits of existing efforts to 
model these effects. There are a number of analytic challenges that are 
being addressed by the research community, including research programs 
housed in many of the Federal agencies participating in the interagency 
process to estimate the SCC. The interagency group intends to 
periodically review and reconsider those estimates to reflect 
increasing knowledge of the science and economics of climate impacts, 
as well as improvements in modeling.
    In summary, in considering the potential global benefits resulting 
from reduced CO2 emissions resulting from this proposed 
rule, DOE used the values from the 2013 interagency report, adjusted to 
2013$ using the Gross Domestic Product price deflator. For each of the 
four SCC cases specified, the values used for emissions in 2015 were

[[Page 58992]]

$12.0, $40.5, $62.4, and $119 per metric ton avoided (values expressed 
in 2013$). DOE derived values after 2050 using the relevant growth 
rates for the 2040-2050 period in the interagency update.
    DOE multiplied the CO2 emissions reduction estimated for 
each year by the SCC value for that year in each of the four cases. To 
calculate a present value of the stream of monetary values, DOE 
discounted the values in each of the four cases using the specific 
discount rate that had been used to obtain the SCC values in each case.
    DOE solicits comment on the application of the new SCC values used 
to determine the social benefits of CO2 emissions reductions 
over the rulemaking analysis period. In particular, the agency solicits 
comment on its derivation of SCC values after 2050, where the agency 
applied the average annual growth rate of the SCC estimates in 2040-
2050 associated with each of the four sets of values.
    Issue 18: DOE solicits comment on the application of the new SCC 
values used to determine the social benefits of CO2 
emissions reductions over the rulemaking analysis period. In 
particular, the agency solicits comment on its derivation of SCC values 
after 2050, where the agency applied the average annual growth rate of 
the SCC estimates in 2040-2050 associated with each of the four sets of 
values.
2. Valuation of Other Emissions Reductions
    As noted above, DOE has taken into account how new or amended 
energy conservation standards would reduce NOX emissions in 
those 22 states not affected by the CAIR. DOE estimated the monetized 
value of NOX emissions reductions resulting from each of the 
TSLs considered for this NOPR based on estimates found in the relevant 
scientific literature. Estimates of monetary value for reducing 
NOX from stationary sources range from $476 to $4,893 per 
ton in 2013$.\68\ DOE calculated monetary benefits using a medium value 
for NOX emissions of $2,684 per short ton (in 20123), and 
real discount rates of 3-percent and 7-percent.
---------------------------------------------------------------------------

    \68\ U.S. Office of Management and Budget, 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.
---------------------------------------------------------------------------

    DOE is evaluating appropriate monetization of avoided 
SO2 and Hg emissions in energy conservation standards 
rulemakings. It has not included monetization in the current analysis.

M. Utility Impact Analysis

    The utility impact analysis estimates several effects on the power 
generation industry that would result from the adoption of new or 
amended energy conservation standards. In the utility impact analysis, 
DOE analyzes the changes in installed electricity capacity and 
generation that would result for each trial standard level. The utility 
impact analysis uses a variant of NEMS,\69\ which is a public domain, 
multi-sectored, partial equilibrium model of the U.S. energy sector. 
DOE uses a variant of this model, referred to as NEMS-BT,\70\ to 
account for selected utility impacts of new or amended energy 
conservation standards. DOE's analysis consists of a comparison between 
model results for the most recent AEO Reference Case and for cases in 
which energy use is decremented to reflect the impact of potential 
standards. The energy savings inputs associated with each TSL come from 
the NIA. Chapter 15 of the NOPR TSD describes the utility impact 
analysis in further detail.
---------------------------------------------------------------------------

    \69\ For more information on NEMS, refer to the U.S. Department 
of Energy, Energy Information Administration documentation. A useful 
summary is National Energy Modeling System: An Overview 2003, DOE/
EIA-0581 (2003) (March, 2003).
    \70\ DOE/EIA approves use of the name NEMS to describe only an 
official version of the model without any modification to code or 
data. Because this analysis entails some minor code modifications 
and the model is run under various policy scenarios that are 
variations on DOE/EIA assumptions, DOE refers to it by the name 
``NEMS-BT'' (``BT'' is DOE's Building Technologies Program, under 
whose aegis this work has been performed).
---------------------------------------------------------------------------

N. Employment Impact Analysis

    Employment impacts from new or amended energy conservation 
standards include direct and indirect impacts. Direct employment 
impacts are any changes in the number of employees of manufacturers of 
the equipment subject to standards; the MIA addresses those impacts. 
Indirect employment impacts are changes in national employment that 
occur due to the shift in expenditures and capital investment caused by 
the purchase and operation of more efficient equipment. Indirect 
employment impacts from standards consist of the jobs created or 
eliminated in the national economy, other than in the manufacturing 
sector being regulated, due to: (1) Reduced spending by end users on 
energy; (2) reduced spending on new energy supply by the utility 
industry; (3) increased consumer spending on the purchase of new 
equipment; and (4) the effects of those three factors throughout the 
economy.
    One method for assessing the possible effects on the demand for 
labor of such shifts in economic activity is to compare sector 
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. There are many reasons for these differences, including wage 
differences and the fact that the utility sector is more capital-
intensive and less labor-intensive than other sectors. Energy 
conservation standards have the effect of reducing consumer utility 
bills. 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 retail and service sectors). Thus, based 
on the BLS data alone, DOE believes net national employment may 
increase because of shifts in economic activity resulting from amended 
standards.
    For the standard levels considered in the NOPR, DOE estimated 
indirect national employment impacts using an input/output model of the 
U.S. economy called Impact of Sector Energy Technologies, Version 3.1.1 
(ImSET). ImSET is a special-purpose version of the ``U.S. Benchmark 
National Input-Output'' (I-O) model, which was designed to estimate the 
national employment and income effects of energy-saving technologies. 
The ImSET software includes a computer-based I-O model having 
structural coefficients that characterize economic flows among the 187 
sectors. ImSET's national economic I-O structure is based on a 2002 
U.S. benchmark table, specially aggregated to the 187 sectors most 
relevant to industrial, commercial, and residential building energy 
use. DOE notes that ImSET is not a general equilibrium forecasting 
model, and understands the uncertainties involved in projecting 
employment impacts, especially changes in the later years of the 
analysis. Because ImSET does not incorporate price changes, the 
employment effects predicted by ImSET may over-estimate actual job 
impacts over the long run. For the NOPR, DOE used ImSET only to 
estimate short-term employment impacts.

[[Page 58993]]

    For more details on the employment impact analysis, see chapter 16 
of the NOPR TSD.

V. Analytical Results

A. Trial Standard Levels

    At the NOPR stage, DOE develops Trial Standard Levels (TSLs) for 
consideration. TSLs are formed by grouping different efficiency levels, 
which are potential standard levels for each equipment class. DOE 
analyzed the benefits and burdens of the TSLs developed for this 
proposed rule. DOE examined four TSLs for small, large, and very large 
air-cooled commercial package air conditioning and heating equipment.
    Table V.1 presents the TSLs analyzed and the corresponding 
efficiency level for each equipment class. The efficiency levels in 
each TSL can be characterized as follows: TSL 4 is comprised of the 
max-tech efficiency level, which is efficiency level 4 for each 
equipment class. TSL 3 is comprised of efficiency level 3 for each 
equipment class. TSL 2 is comprised of efficiency level 2 for each 
equipment class, and TSL 1 is comprised of efficiency level 1 for each 
equipment class.

 Table V.1--Summary of TSLs for Small, Large, and Very Large Air-Cooled Commercial Package Air Conditioning and
                                                Heating Equipment
----------------------------------------------------------------------------------------------------------------
                 Equipment class                       TSL 1           TSL 2           TSL 3           TSL 4
----------------------------------------------------------------------------------------------------------------
                                                                        Efficiency level *
                                                 ---------------------------------------------------------------
Small Commercial Packaged Air Conditioners--                   1               2               3               4
 >=65,000 Btu/h and <135,000 Btu/h Cooling
 Capacity.......................................
Large Commercial Packaged Air Conditioners--                   1               2               3               4
 >=135,000 Btu/h and <240,000 Btu/h Cooling
 Capacity.......................................
Very Large Commercial Packaged Air Conditioners--              1               2               3               4
 >=240,000 Btu/h and <760,000 Btu/h Cooling
 Capacity.......................................
Small Commercial Packaged Heat Pumps-->=65,000                 1               2               3               4
 Btu/h and <135,000 Btu/h Cooling Capacity......
Large Commercial Packaged Heat Pumps-->=135,000                1               2               3               4
 Btu/h and <240,000 Btu/h Cooling Capacity......
Very Large Commercial Packaged Heat Pumps--                    1               2               3               4
 >=240,000 Btu/h and <760,000 Btu/h Cooling
 Capacity.......................................
----------------------------------------------------------------------------------------------------------------
* For the IEERs that correspond to efficiency levels 1 through 4, see Table IV.6.

B. Economic Justification and Energy Savings

    As discussed in section II.A, EPCA provides seven factors to be 
evaluated in determining whether a more stringent standard for small, 
large, and very large air-cooled CUAC and CUHP is economically 
justified. (42 U.S.C. 6313(a)(6)(B)(ii)) The following sections 
generally discuss how DOE is addressing each of those factors in this 
rulemaking.
1. Economic Impacts on Individual Customers
    DOE analyzed the economic impacts on small, large, and very large 
air-cooled commercial package air conditioning and heating equipment 
customers by looking at the effects standards would have on the LCC and 
PBP. DOE also examined the impacts of potential standards on customer 
subgroups. These analyses are discussed below.
a. Life-Cycle Cost and Payback Period
    To evaluate the net economic impact of standards on small, large, 
and very large air-cooled CUAC customers, DOE conducted LCC and PBP 
analyses for each TSL. In general, higher-efficiency equipment would 
affect customers in two ways: (1) Annual operating expense would 
decrease, and (2) purchase price would increase. Section IV.F of this 
notice discusses the inputs DOE used for calculating the LCC and PBP. 
As stated there, DOE did not do an LCC and PBP analysis for the CUHP 
equipment classes because energy modeling was performed only for CUAC 
equipment.
    For each representative unit, the key outputs of the LCC analysis 
are a mean LCC savings and a median PBP relative to the base case, as 
well as the fraction of customers for which the LCC will decrease (net 
benefit), increase (net cost), or exhibit no change (no impact) 
relative to the base-case product forecast. No impacts occur when the 
base-case efficiency equals or exceeds the efficiency at a given TSL. 
Table V.2 through Table V.4 show the key results for each 
representative unit.

   Table V.2--Summary Life-Cycle Cost and Payback Period Results for Small Commercial Package Air Conditioners
                          [7.5 ton, >=65,000 Btu/h and <135,000 Btu/h Cooling Capacity]
----------------------------------------------------------------------------------------------------------------
              Trial standard level                       1               2               3               4
----------------------------------------------------------------------------------------------------------------
Efficiency Level................................               1               2               3               4
IEER............................................            12.9            14.0            14.8            19.9
Total Installed Cost............................          $8,535          $9,923         $10,323         $12,166
Mean LCC Savings ($)............................          $1,094            $937          $4,779          $6,771
Customers with LCC Increase (Cost) (%) *........              0%             27%              0%              0%
Customers with LCC Decrease (Benefit) (%) *.....             61%             72%             99%            100%
Customers with No Change in LCC (%) *...........             39%              1%              0%              0%
Median PBP (Years)..............................             2.2             8.0             3.9             4.7
----------------------------------------------------------------------------------------------------------------
* Rounding may cause some items to not total 100 percent.


[[Page 58994]]


   Table V.3--Summary Life-Cycle Cost and Payback Period Results for Large Commercial Package Air Conditioners
                                  [15 ton, >=135,000 Btu/h and <240,000 Btu/h]
----------------------------------------------------------------------------------------------------------------
              Trial standard level                       1               2               3               4
----------------------------------------------------------------------------------------------------------------
Efficiency Level................................               1               2               3               4
IEER............................................            12.2            13.2            14.2            18.4
Total Installed Cost............................         $14,935         $16,858         $17,753         $18,975
Mean LCC Savings ($)............................          $1,038          $2,214          $3,469          $7,508
Customers with LCC Increase (Cost) (%) *........              3%              8%              6%              2%
Customers with LCC Decrease (Benefit) (%) *.....             74%             90%             93%             98%
Customers with No Change in LCC (%) *...........             22%              2%              0%              0%
Median PBP (Years)..............................             6.0             7.2             6.6             5.1
----------------------------------------------------------------------------------------------------------------
* Rounding may cause some items to not total 100 percent.


Table V.4--Summary Life-Cycle Cost and Payback Period Results for Very Large Commercial Package Air Conditioners
                                  [30 ton, >=240,000 Btu/h and <760,000 Btu/h]
----------------------------------------------------------------------------------------------------------------
              Trial standard level                       1               2               3               4
----------------------------------------------------------------------------------------------------------------
Efficiency Level................................               1               2               3               4
IEER............................................            11.6            12.5            13.5            15.5
Total Installed Cost............................         $29,385         $31,738         $32,828         $36,200
Mean LCC Savings ($)............................          $4,103          $4,801         $16,477         $19,842
Customers with LCC Increase (Cost) (%) *........              2%             12%              3%              5%
Customers with LCC Decrease (Benefit) (%) *.....             62%             76%             92%             94%
Customers with No Change in LCC (%) *...........             36%             13%              6%              1%
Median PBP (Years)..............................             2.6             5.5             2.5             3.5
----------------------------------------------------------------------------------------------------------------
* Rounding may cause some items to not total 100 percent.

b. Customer Subgroup Analysis
    In the customer subgroup analysis, DOE estimated the impacts of the 
considered TSLs on small business customers. The LCC savings and 
payback periods for small business customers are similar to the impacts 
for all customers. Chapter 11 of the NOPR TSD presents detailed results 
of the customer subgroup analysis.
c. Rebuttable Presumption Payback
    As discussed in section III.E.2, EPCA establishes a rebuttable 
presumption that an energy conservation standard is economically 
justified if the increased purchase cost for equipment that meets the 
standard is less than three times the value of the first-year energy 
savings resulting from the standard. DOE calculated a rebuttable-
presumption PBP for each TSL to determine whether DOE could presume 
that a standard at that level is economically justified.
    DOE based the calculations on average usage profiles. As a result, 
DOE calculated a single rebuttable-presumption payback value, and not a 
distribution of PBPs, for each TSL. Table V.5 shows the rebuttable-
presumption PBPs for the considered TSLs. The rebuttable presumption is 
fulfilled in those cases where the PBP is three years or less. However, 
DOE routinely conducts an economic analysis that considers the full 
range of impacts to the customer, manufacturer, Nation, and 
environment, as required by EPCA. The results of that analysis serve as 
the basis for DOE to definitively evaluate the economic justification 
for a potential standard level (thereby supporting or rebutting the 
results of any three-year PBP analysis). Section V.C addresses how DOE 
considered the range of impacts to select today's proposed standards.

Table V.5--Rebuttable-Presumption Payback Periods (years) for Small, Large, and Very Large Air-Cooled Commercial
                                 Package Air Conditioning and Heating Equipment
----------------------------------------------------------------------------------------------------------------
              Trial standard level                       1               2               3               4
----------------------------------------------------------------------------------------------------------------
Efficiency Level................................               1               2               3               4
Small Commercial Packaged Air Conditioners--                 2.2             8.0             3.9             4.7
 >=65,000 Btu/h and <135,000 Btu/h Cooling
 Capacity.......................................
Large Commercial Packaged Air Conditioners--                 6.0             7.2             6.6             5.1
 >=135,000 Btu/h and <240,000 Btu/h Cooling
 Capacity.......................................
Very Large Commercial Packaged Air Conditioners--            2.6             5.5             2.5             3.5
 >=240,000 Btu/h and <760,000 Btu/h Cooling
 Capacity.......................................
----------------------------------------------------------------------------------------------------------------

2. Economic Impacts on Manufacturers
    As noted above, DOE performed an MIA to estimate the impact of 
amended energy conservation standards on manufacturers of small, large, 
and very large air-cooled commercial package air conditioning and 
heating equipment. The following section describes the expected impacts 
on manufacturers at each considered TSL. Chapter 12 of the NOPR TSD 
explains the analysis in further detail.

[[Page 58995]]

a. Industry Cash-Flow Analysis Results
    Table V.6 and Table V.7 depict the financial impacts (represented 
by changes in INPV) of amended energy standards on manufacturers of 
small, large, and very large air-cooled commercial package air 
conditioning and heating equipment, as well as the conversion costs 
that DOE expects manufacturers would incur for all equipment classes at 
each TSL. To evaluate the range of cash flow impacts on the commercial 
packaged air conditioner and heat pump industry, DOE modeled two 
different mark-up scenarios using different assumptions that correspond 
to the range of anticipated market responses to amended energy 
conservation standards: (1) The preservation of gross margin 
percentage; and (2) the preservation of per unit operating profit. Each 
of these scenarios is discussed immediately below.
    To assess the lower (less severe) end of the range of potential 
impacts, DOE modeled a preservation of gross margin percentage markup 
scenario, in which a uniform ``gross margin percentage'' markup is 
applied across all potential efficiency levels. In this scenario, DOE 
assumed that a manufacturer's absolute dollar markup would increase as 
production costs increase in the standards case.
    To assess the higher (more severe) end of the range of potential 
impacts, DOE modeled the preservation of per unit operating profit 
markup scenario, which assumes that manufacturers would not be able to 
greater operating profit on a per unit basis in the standards case. 
Rather, as manufacturers make the necessary investments required to 
convert their facilities to produce new standards-compliant products 
and incur higher costs of goods sold, their percentage markup 
decreases. Operating profit does not change in absolute dollars and 
decreases as a percentage of revenue.
    As noted in the MIA methodology discussion (see IV.J.2), in 
addition to markup scenarios, the MPC, shipments, and conversion cost 
assumptions also affect INPV results. Of particular note in this 
rulemaking is the decline in cumulative shipments as the TSL increases 
that is forecasted in the NIA shipments. This change in shipments is 
summarized in Table V.10.
    The set of results below shows potential INPV impacts for small, 
large, and very large air-cooled commercial package air conditioning 
and heating equipment manufacturers; Table V.6 reflects the lower bound 
of impacts, and Table V.7 represents the upper bound.
    Each of the modeled scenarios results in a unique set of cash flows 
and corresponding industry values at each TSL. In the following 
discussion, the INPV results refer to the difference in industry value 
between the base case and each standards case that results from the sum 
of discounted cash flows from the base year 2014 through 2048, the end 
of the analysis period.
    To provide perspective on the short-run cash flow impact, DOE 
includes in the discussion of the results below a comparison of free 
cash flow between the base case and the standards case at each TSL in 
the year before new standards would take effect. This figure provides 
an understanding of the magnitude of the required conversion costs 
relative to the cash flow generated by the industry in the base case.

 Table V.6--Industry Valuation and Financial Impacts--Preservation of Gross Margin Percentage Markup Scenario *
----------------------------------------------------------------------------------------------------------------
                                                                             Trial standard level
                                     Units        Base case  ---------------------------------------------------
                                                                   1            2            3            4
----------------------------------------------------------------------------------------------------------------
INPV.........................  $M..............     1,260.91     1,249.47     1,208.04     1,172.36     1,142.78
Change in INPV...............  $M..............  ...........      (11.45)      (52.87)      (88.55)     (118.13)
                               %...............  ...........       (0.91)       (4.19)       (7.02)       (9.37)
Product Conversion Costs.....  $M..............        12.72        38.73        58.52       120.90       210.96
Capital Conversion Costs.....  $M..............  ...........        14.94        39.23       105.54       113.31
Total Conversion Costs.......  $M..............        12.72        53.68        97.75       226.44       324.28
Free Cash Flow (2018)........  $M..............        73.38        58.19        40.82       (9.32)      (42.13)
Free Cash Flow (2018)........  % Change........  ...........      (20.70)      (44.37)     (112.70)     (157.42)
----------------------------------------------------------------------------------------------------------------


Table V.7--Industry Valuation and Financial Impacts--Preservation of Per Unit Operating Profit Markup Scenario *
----------------------------------------------------------------------------------------------------------------
                                                                             Trial standard level
                                     Units        Base case  ---------------------------------------------------
                                                                   1            2            3            4
----------------------------------------------------------------------------------------------------------------
INPV.........................  $M..............     1,260.91     1,187.02     1,015.61       949.34       822.75
Change in INPV...............  $M..............  ...........      (73.89)     (245.30)     (311.58)     (438.16)
                               %...............  ...........       (5.86)      (19.45)      (24.71)      (34.75)
Product Conversion Costs.....  $M..............        12.72        38.73        58.52       120.90       210.96
Capital Conversion Costs.....  $M..............            -        14.94        39.23       105.54       113.31
Total Conversion Costs.......  $M..............        12.72        53.68        97.75       226.44       324.28
Free Cash Flow (2018)........  $M..............        73.38        58.19        40.82       (9.32)      (42.13)
Free Cash Flow (2018)........  % Change........  ...........      (20.70)      (44.37)     (112.70)     (157.42)
----------------------------------------------------------------------------------------------------------------
* Values in parentheses are negative values.

    Base case conversion costs of $12.72 million are attributed to CC&E 
costs associated with new product certification under the proposed test 
procedure. This amount consists of modeling and equipment testing costs 
incurred to recertify currently available products.
    TSL 1 represents EL 1 for all equipment classes. At TSL 1, DOE 
estimates impacts on INPV for commercial packaged air conditioning 
manufacturers to range from -5.86 percent to -0.91 percent, or a change 
in INPV of -$73.89 million to -$11.45

[[Page 58996]]

million. At this potential standard level, industry free cash flow is 
estimated to decrease by approximately 20.70 percent to $58.19, 
compared to the base-case value of $73.38 million in the year before 
the compliance date (2018).
    At TSL 1, the industry is likely to face a small contraction. 
Industry wide shipments drop by approximately 5.04% in the standard 
year (2019), relative to the base case. In addition, manufacturers 
incur conversion costs totaling $53.68 million due to CC&E 
requirements, product redesigns for the Very Large equipment classes, 
and new tooling associated with their highest capacity equipment 
offerings. While impacts on the industry as a whole are relatively 
mild, small manufacturers may have greater difficulty with re-rating 
their products to an IEER metric since they generally do not have the 
testing capacity or engineering resources of larger competitors.
    TSL 2 represents EL 2 across all equipment classes. At TSL 2, DOE 
estimates impacts on INPV for commercial packaged air conditioning 
manufacturers to range from -19.45 percent to -4.19 percent, or a 
change in INPV of -$245.30 million to -$52.87 million. At this 
potential standard level, industry free cash flow is estimated to 
decrease by approximately 44.37 percent to $40.82 million, compared to 
the base-case value of $73.38 million in the year before the compliance 
date (2018).
    At TSL 2, industry-wide shipments drop by 28.32% in the standard 
year (2019) relative to the base case. Additionally, DOE anticipates 
conversion costs to increase to $97.75 million for the industry as 
roughly 67% of equipment listed in the AHRI directory would need to be 
redesigned in order to meet the higher proposed efficiency levels. 
Given the industry's existing trend of consolidation, DOE expects 
further consolidation at TSL 2. Manufacturers with limited market share 
may choose to sell off their small, large, and very large air-cooled 
commercial package air conditioning and heating equipment business to 
larger competitors.
    TSL 3 represents EL 3 for all equipment classes. At TSL 3, DOE 
estimates impacts on INPV for commercial packaged air conditioning 
manufacturers to range from -24.71 percent to -7.02 percent, or a 
change in INPV of -$311.58 million to -$88.55 million., Industry-wide 
shipments drop by 28.76% relative to the base case in the standards 
year. DOE anticipates large capital conversion costs at TSL 3, as 
redesigns necessitate additional investments in tooling for cabinets 
and heat exchangers to meet amended efficiency standards. Roughly 81% 
of equipment listings would require changes to meet the standard. 
Conversion costs total $226.44 million for the industry. A key 
indicator of impact on the industry is the industry free cash flow, 
which is estimated to decrease by approximately 112.70 percent to -
$9.32 relative to the base case value of $73.38 million in the year 
before the compliance date (2018). The negative free cash flow 
indicates that players in the industry would need to access cash 
reserves or borrow money from capital markets to cover conversion 
costs. Given expectation for a shrinking market and high conversion 
costs, some manufacturers indicated they would move production to 
lower-cost foreign markets at this level.
    TSL 4 represents max tech across all equipment classes. At TSL 4, 
DOE estimates impacts on INPV for commercial packaged air conditioning 
manufacturers to range from -34.75 percent to -9.37 percent, or a 
change in INPV of -$438.16 million to -$118.13 million. At this 
potential standard level, industry free cash flow is estimated to 
decrease by approximately 157.42 percent relative to the base-case 
value of $73.38 million in the year before the compliance date (2018).
    At max-tech, DOE estimates a 35.12% drop in shipments in the 
standards years, a maximum loss of over 34.75% of industry value over 
the analysis period, and conversion costs approaching $650 million for 
the industry. Only 2% of equipment listings could meet this trial 
standard level today. Manufacturers voiced concerns over the lack of 
product differentiation and the commoditization at upper TSLs. TSL 4 
would leave no room for product differentiation based on efficiency. 
Furthermore, given the level of R&D and production line modifications 
necessary at this level, it is unclear whether the industry could make 
the necessary changes in the allotted conversion period. At TSL 4, most 
manufacturers would re-evaluate their role in the industry. Those that 
do remain would strongly consider all cost cutting measures, including 
relocation to foreign countries.
    Issue 19: DOE requests comment on the capital conversion costs and 
product conversion costs estimated for each TSL. In particular, DOE 
seeks comment on the conversion costs at max-tech, at TSL 4.
b. Impacts on Direct Employment
    To quantitatively assess the impacts of energy conservation 
standards on direct employment in the small, large, and very large air-
cooled commercial package air conditioning and heating equipment 
industry, DOE used the GRIM to estimate the domestic labor expenditures 
and number of employees in the base case and at each TSL from 2015 
through 2048. DOE used statistical data from the U.S. Census Bureau's 
2011 Annual Survey of Manufacturers (ASM),\71\ the results of the 
engineering analysis, and interviews with manufacturers to determine 
the inputs necessary to calculate industry-wide labor expenditures and 
domestic employment levels. Labor expenditures related to manufacturing 
of the product are a function of the labor intensity of the product, 
the sales volume, and an assumption that wages remain fixed in real 
terms over time. The total labor expenditures in each year are 
calculated by multiplying the MPCs by the labor percentage of MPCs.
---------------------------------------------------------------------------

    \71\ ``Annual Survey of Manufactures (ASM),'' U.S. Census Bureau 
(2011) (Available at: http://www.census.gov/manufacturing/asm/).
---------------------------------------------------------------------------

    The total labor expenditures in the GRIM were then converted to 
domestic production employment levels by dividing production labor 
expenditures by the annual payment per production worker (production 
worker hours times the labor rate found in the U.S. Census Bureau's 
2011 ASM). The estimates of production workers in this section cover 
workers, including line-supervisors who are directly involved in 
fabricating and assembling a product within the manufacturing facility. 
Workers performing services that are closely associated with production 
operations, such as materials handling tasks using forklifts, are also 
included as production labor. DOE's estimates only account for 
production workers who manufacture the specific products covered by 
this rulemaking. The total direct employment impacts calculated in the 
GRIM are the changes in the number of production workers resulting from 
the amended energy conservation standards for small, large, and very 
large air-cooled commercial package air conditioning and heating 
equipment, as compared to the base case. In general, more efficient 
equipment is larger, more complex, and more labor intensive to build. 
Per unit labor requirements and production time requirements increase 
with a higher energy conservation standard. As a result, the total 
labor calculations described in this paragraph are considered an upper 
bound to direct employment forecasts.
    On the other hand, the domestic HVAC industry has had a track 
record of consolidation over the past decade. See, e.g. Daikin Acquires 
Goodman,

[[Page 58997]]

Daikin Corporate News (Aug. 29, 2012); Ingersoll Rand to Acquire Trane 
Inc. for Approximately $10.1 Billion, Trane Press Release (Dec. 17, 
2007); and JCI Buys Pennsylvania Firm, Grand Rapids Press, C6 (Aug. 26, 
2005) (noting purchase of York International by Johnson Controls, 
Inc.). DOE recognizes the potential for industry consolidation and its 
concomitant impacts on employment levels, especially at higher TSLs. As 
shipments drop and conversion costs increase, some manufacturers may 
choose not to make the necessary investments to meet the amended 
standard for all equipment classes. Alternatively, they may choose to 
relocate production facilities where conversion costs and production 
costs are lower. To establish a lower bound to negative employment 
impacts, DOE estimated the maximum potential job loss due to 
manufacturers either leaving the industry or moving production to 
foreign locations as a result of an amended standard. These lower bound 
estimates were based on GRIM results, conversion cost estimates, and 
content from manufacturers interviews. The lower bound of employment is 
presented in Table V.8 below.
    DOE estimates that in the absence of amended energy conservation 
standards, there would be 1,085 domestic production workers for small, 
large, and very large air-cooled commercial package air conditioning 
and heating equipment. DOE estimates that 50 percent of small, large, 
and very large air-cooled commercial package air conditioning and 
heating equipment sold in the United States are manufactured 
domestically. Table V.8 shows the range of the impacts of potential 
amended energy conservation standards on U.S. production workers of 
small, large, and very large air-cooled commercial package air 
conditioning and heating equipment.

  Table V.8--Potential Changes in the Total Number of Small, Large, and Very Large Air-Cooled Commercial Package Air Conditioning and Heating Equipment
                                                               Production Workers in 2019
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                    Trial standard level *
                                    --------------------------------------------------------------------------------------------------------------------
                                            Base case                   1                      2                      3                      4
--------------------------------------------------------------------------------------------------------------------------------------------------------
Potential Changes in Domestic        ......................  (181) to (10).........  (482) to (69)........  (543) to (27)........  (1,085) to (31).
 Production Workers in 2019
 (relative to a base case
 employment of 1,085).
--------------------------------------------------------------------------------------------------------------------------------------------------------
* Parentheses indicate negative values.

    DOE notes that the employment impacts discussed here are 
independent of the indirect employment impacts to the broader U.S. 
economy, which are documented in chapter 15 of the NOPR TSD.
c. Impacts on Manufacturing Capacity
    According to the commercial packaged air conditioning manufacturers 
interviewed, amended energy conservation standards could lead to higher 
fabrication labor hours. However, manufacturers noted that industry 
shipments are down 40% from their peak in the 2007-2008 timeframe. 
Excess capacity in the industry today and any drop in shipments that 
result from higher prices could offset the additional production times. 
In the long-term, no manufacturers interviewed expected to have 
capacity constraints.
    Manufacturers did note concerns about engineering and testing 
capacity in the time period between the announcement year and the 
effective year of the proposed standard. Manufacturers worried about 
the level of technical resources required to redesign and test all 
products at higher TSLs. The engineering analysis shows increasingly 
complex components and control strategies are required as standard 
levels increase. Manufacturers noted in interviews that the industry 
would need to add electrical engineering and control systems 
engineering talent beyond current staffing to meet the redesign 
requirements of higher TSLs. Additional training might be needed for 
manufacturing engineers, laboratory technicians, and service personnel 
if variable speed components are broadly adopted. Furthermore, as 
standards increase, units tend to grow in size, requiring more lab 
resources and time to test. Some manufacturers were concerned that an 
amended standard would trigger the need for construction of new test 
lab facilities, which require significant lead time.
    Issue 20: DOE requests comments and data on capacity constraints at 
each TSL--including production capacity constraints, engineering 
resource constraints, and testing capacity constraints that are 
directly related to an amended standard for small, large, and very 
large CUAC and CUHP. In particular, DOE requests comment on whether the 
proposed effective date allows for a sufficient conversion period to 
make the equipment design and facility updates necessary to meet an 
amended standard.
d. Impacts on Subgroups of Manufacturers
    Small manufacturers, niche equipment manufacturers, and 
manufacturers exhibiting a cost structure substantially different from 
the industry average could be affected disproportionately. Using 
average cost assumptions developed for an industry cash-flow estimate 
is inadequate to assess differential impacts among manufacturer 
subgroups.
    For the commercial packaged air conditioner and heat pump industry, 
DOE identified and evaluated the impact of amended energy conservation 
standards on one subgroup--small manufacturers. The SBA defines a 
``small business'' as having 750 employees or less for NAICS 333415, 
``Air-Conditioning and Warm Air Heating Equipment and Commercial and 
Industrial Refrigeration Equipment Manufacturing.'' Based on this 
definition, DOE identified three manufacturers in the commercial 
packaged air conditioning industry that qualify as small businesses. 
For a discussion of the impacts on the small manufacturer subgroup, see 
the regulatory flexibility analysis in section VI.B of this notice and 
chapter 12 of the NOPR TSD.
e. Cumulative Regulatory Burden
    While any one regulation may not impose a significant burden on 
manufacturers, the combined effects of recent or impending regulations 
may have serious consequences for some manufacturers, groups of 
manufacturers, or an entire industry. Assessing the impact of a single 
regulation may overlook this cumulative regulatory burden. In addition 
to energy conservation standards, other regulations can significantly 
affect manufacturers' financial operations. Multiple regulations 
affecting the same

[[Page 58998]]

manufacturer can strain profits and lead companies to abandon product 
lines or markets with lower expected future returns than competing 
products. For these reasons, DOE conducts an analysis of cumulative 
regulatory burden as part of its rulemakings pertaining to appliance 
efficiency.
    For the cumulative regulatory burden analysis, DOE looks at other 
regulations that could affect small, large, and very large air-cooled 
commercial package air conditioning and heating equipment manufacturers 
that will take effect approximately three years before or after the 
2019 compliance date of amended energy conservation standards for these 
products. In interviews, manufacturers cited Federal regulations on 
equipment other than small, large, and very large air-cooled commercial 
package air conditioning and heating equipment that contribute to their 
cumulative regulatory burden. The compliance years and expected 
industry conversion costs of relevant amended energy conservation 
standards are indicated in the table below. Included in the table are 
Federal regulations that have compliance dates beyond the three year 
range of DOE's analysis. Those regulations were cited multiple times by 
manufacturers in interviews and written comments, and are included here 
for reference.

 Table V.9--Compliance Dates and Expected Conversion Expenses of Federal
Energy Conservation Standards Affecting Small, Large, and Very Large Air-
    Cooled Commercial Package Air Conditioning And Heating Equipment
                              Manufacturers
------------------------------------------------------------------------
                                                        Estimated total
    Federal energy conservation        Approximate          industry
             standards               compliance date       conversion
                                                            expense
------------------------------------------------------------------------
2007 Residential Furnaces &                      2015     * $88M (2006$)
 Boilers 72 FR 65136 (Nov. 19,
 2007)............................
2011 Residential Furnaces 76 FR                  2015   ** $2.5M (2009$)
 37408 (June 27, 2011); 76 FR
 67037 (Oct. 31, 2011)............
2011 Residential Central Air                     2015         ** $ 26.0M
 Conditioners and Heat Pumps 76 FR                               (2009$)
 37408 (June 27, 2011); 76 FR
 67037 (Oct. 31, 2011)............
2010 Gas Fired and Electric                      2015     $95.4M (2009$)
 Storage Water Heaters 75 FR 20112
 (April 16, 2010).................
Walk-in Coolers and Freezers......               2017   $33.6.0M (2012$)
Furnace Fans......................               2019     $40.6M (2012$)
Packaged Terminal Air Conditioners                TBD                TBD
 and Heat Pumps ***...............
Commercial and Industrial Fans and                TBD                TBD
 Blowers ***......................
------------------------------------------------------------------------
* Conversion expenses for manufacturers of oil-fired furnaces and gas-
  and oil-fired boilers associated with the November 2007 final rule for
  residential furnaces and boilers are excluded from this figure. The
  2011 direct final rule for residential furnaces sets a higher standard
  and earlier compliance date for oil furnaces than the 2007 final rule.
  As a result, manufacturers will be required design to the 2011 direct
  final rule standard. The conversion costs associated with the 2011
  direct final rule are listed separately in this table. EISA 2007
  legislated higher standards and earlier compliance dates for
  residential boilers than were in the November 2007 final rule. As a
  result, gas-fired and oil-fired boiler manufacturers were required to
  design to the EISA 2007 standard beginning in 2012. The conversion
  costs listed for residential gas-fired and oil-fired boilers in the
  November 2007 residential furnaces and boilers final rule analysis are
  not included in this figure.
** Estimated industry conversion expense and approximate compliance date
  reflect a court-ordered May 1, 2013 stay of the residential non-
  weatherized and mobile home gas furnaces standards set in the 2011
  Energy Conservation Standards for Residential Furnaces and Residential
  Central Air Conditioners and Heat Pumps.
*** The final rule for this energy conservation standard has not been
  published. The compliance date and analysis of conversion costs are
  estimates and have not been finalized at this time.

    In addition to Federal energy conservation standards, DOE 
identified other regulatory burdens that would affect manufacturers of 
small, large, and very large air-cooled commercial package air 
conditioning and heating equipment:
DOE Certification, Compliance, and Enforcement (CC&E) Rule
    Any amended standard that DOE would also require accompanying CC&E 
requirements for manufacturers of small, large, and very large air-
cooled commercial package air conditioning equipment to follow. DOE 
conducted a rulemaking to expand AEDM coverage to commercial HVAC, 
including the equipment covered by this rulemaking, and issued a final 
rule on December 31, 2013. (78 FR 79579) An AEDM is a computer modeling 
or mathematical tool that predicts the performance of non-tested basic 
models. In the final rule, DOE is allowing manufacturers of small, 
large, and very large air-cooled commercial package air conditioning 
equipment to rate basic models using AEDMs, reducing the need for 
sample units and reducing burden on manufacturers. The final rule 
establishes revised verification tolerances for small, large, and very 
large air-cooled commercial package air conditioning equipment 
manufacturers. More information can be found at http://www1.eere.energy.gov/buildings/appliance_standards/implement_cert_and_enforce.html.
EPA Phase-Out of Hydrochlorofluorocarbons (HCFCs)
    The U.S. is obligated under the Montreal Protocol to limit 
production and consumption of HCFCs through incremental reductions, 
culminating in a complete phase-out of HCFCs by 2030.\72\ On December 
15, 2009, EPA published the ``2010 HCFC Allocation Rule,'' which 
allocates production and consumption allowances for HCFC-22 for each 
year between 2010 and 2014. 74 FR 66412. The rule also prohibited the 
manufacture of new appliances using virgin HCFC-22, effective January 
1, 2010, with limited exceptions. On April 3, 2013, EPA published the 
``2012-2014 HCFC Allocation Proposed Rule,'' which lifted the 
regulatory ban on the production and consumption of HCFC-22 (following 
a court decision \73\ in August 2010 to vacate a portion of the ``2010 
HCFC Allocation Rule'') by establishing company-by-company HCFC-22 
baselines and allocating allowances for 2012-2014. 78 FR 20004. On 
December 24, 2013, EPA published the ``2015-2019 HCFC Allocation 
Proposed Rule,'' which would provide HCFC allowances, including HCFC-
22, through 2019. 78 FR 78072. Effective January 1, 2020, there will be 
no new production or import of virgin HCFC-22.
---------------------------------------------------------------------------

    \72\ ``Montreal Protocol.'' United Nations Environment 
Programme. Web. 26 Aug. 2010. http://ozone.unep.org/new_site/en/montreal_protocol.php.
    \73\ See Arkema v. EPA, 618 F.3d 1 (D.C. Cir. 2010).
---------------------------------------------------------------------------

    Manufacturers of small, large, and very large air-cooled commercial 
package air conditioning equipment must comply with the allowances

[[Page 58999]]

established by the allocation rule as well as the prohibition on 
manufacture of new HFC-22 appliances that took effect January 1, 2010. 
As such, no covered manufacturers offer R-22 products today. The MPCs 
used for the baseline and higher efficiency design options account for 
the move away from R-22 and the changes in production costs that 
resulted from the shift to HFC refrigerants.
    Issue 21: DOE requests comment on the identified regulations and 
their contribution to cumulative regulatory burden. Additionally, DOE 
requests feedback on product-specific regulations that take effect 
between 2016 and 2022 that were not listed, including identification of 
the specific regulations and data quantifying the associated burdens.
3. National Impact Analysis
    For small, large, and very large air-cooled commercial package air 
conditioning and heating equipment, projections of shipments are an 
important part of the NIA. As discussed in section IV.G, DOE applied a 
repair/replace decision model to estimate how many units coming to the 
end of their lifetime would be repaired rather than replaced with a new 
unit. Because the decision is very sensitive to the installed cost of 
new equipment, the impact of standards on shipments increases with the 
minimum efficiency required. Table V.10 presents the estimated 
cumulative shipments in 2019-2048 in the base case and under each TSL.

  Table V.10--Projected Cumulative Shipments of Small, Large, and Very
    Large Air-Cooled Commercial Package Air Conditioning and Heating
                         Equipment in 2019-2048
------------------------------------------------------------------------
                                                      Percent reduction
                                   Million units      from base case (%)
------------------------------------------------------------------------
Base Case.....................                  9.7                  N/A
TSL 1.........................                  9.2                  4.8
TSL 2.........................                  7.5                 22.5
TSL 3.........................                  7.5                 22.8
TSL 4.........................                  7.1                 27.0
------------------------------------------------------------------------

a. Significance of Energy Savings
    For each TSL, DOE projected energy savings for small, large, and 
very large air-cooled commercial package air conditioning and heating 
equipment purchased in the 30-year period that begins in the year of 
anticipated compliance with amended standards (2019-2048). The savings 
are measured over the entire lifetime of equipment purchased in the 30-
year period. DOE quantified the energy savings attributable to each TSL 
as the difference in energy consumption between each standards case and 
the base case. Table V.11 presents the estimated primary energy savings 
for each considered TSL, and Table V.12 presents the estimated FFC 
energy savings for each TSL. The approach for estimating national 
energy savings is further described in section IV.H.

Table V.11--Cumulative Primary Energy Savings for Small, Large, and Very
    Large Air-Cooled Commercial Package Air Conditioning and Heating
       Equipment Trial Standard Levels for Units Sold in 2019-2048
------------------------------------------------------------------------
                                         Trial standard level
       Equipment class       -------------------------------------------
                                  1          2          3          4
------------------------------------------------------------------------
                                                 quads
                             -------------------------------------------
Small Commercial Packaged           1.2        4.3        5.4        8.3
 Air Conditioners-->=65,000
 Btu/h and <135,000 Btu/h
 Cooling Capacity...........
Large Commercial Packaged           0.8        1.8        2.6        3.8
 Air Conditioners-->=135,000
 Btu/h and <240,000 Btu/h
 Cooling Capacity...........
Very Large Commercial               0.7        1.5        2.7        3.4
 Packaged Air Conditioners--
 >=240,000 Btu/h and
 <760,000 Btu/h Cooling
 Capacity...................
Small Commercial Packaged           0.1        0.5        0.7        1.0
 Heat Pumps-->=65,000 Btu/h
 and <135,000 Btu/h Cooling
 Capacity...................
Large Commercial Packaged           0.0        0.1        0.1        0.2
 Heat Pumps-->=135,000 Btu/h
 and <240,000 Btu/h Cooling
 Capacity...................
Very Large Commercial               0.0        0.1        0.1        0.2
 Packaged Heat Pumps--
 >=240,000 Btu/h and
 <760,000 Btu/h Cooling
 Capacity...................
                             -------------------------------------------
    Total All Classes.......        2.9        8.3       11.7       16.8
------------------------------------------------------------------------


[[Page 59000]]


 Table V.12--Cumulative Full-Fuel-Cycle Energy Savings for Small, Large,
    and Very Large Air-Cooled Commercial Package Air Conditioning and
   Heating Equipment Trial Standard Levels for Units Sold in 2019-2048
------------------------------------------------------------------------
                                         Trial standard level
       Equipment class       -------------------------------------------
                                  1          2          3          4
------------------------------------------------------------------------
                                                 quads
                             -------------------------------------------
Small Commercial Packaged           1.2        4.3        5.5        8.4
 Air Conditioners-->=65,000
 Btu/h and <135,000 Btu/h
 Cooling Capacity...........
Large Commercial Packaged           0.8        1.8        2.6        3.8
 Air Conditioners-->=135,000
 Btu/h and <240,000 Btu/h
 Cooling Capacity...........
Very Large Commercial               0.8        1.6        2.7        3.5
 Packaged Air Conditioners--
 >=240,000 Btu/h and
 <760,000 Btu/h Cooling
 Capacity...................
Small Commercial Packaged           0.1        0.5        0.7        1.0
 Heat Pumps-->=65,000 Btu/h
 and <135,000 Btu/h Cooling
 Capacity...................
Large Commercial Packaged           0.0        0.1        0.1        0.2
 Heat Pumps-->=135,000 Btu/h
 and <240,000 Btu/h Cooling
 Capacity...................
Very Large Commercial               0.0        0.1        0.1        0.2
 Packaged Heat Pumps--
 >=240,000 Btu/h and
 <760,000 Btu/h Cooling
 Capacity...................
                             -------------------------------------------
    Total All Classes.......        3.0        8.4       11.8       17.1
------------------------------------------------------------------------

    For this rulemaking, DOE undertook a sensitivity analysis using 
nine rather than 30 years of equipment shipments. The choice of a nine-
year period is a proxy for the timeline in EPCA for the review of 
certain energy conservation standards and potential revision of and 
compliance with such revised standards.\74\ This timeframe may not be 
statistically relevant with regard to the equipment lifetime, equipment 
manufacturing cycles or other factors specific to small, large, and 
very large air-cooled commercial package air conditioning and heating 
equipment. Thus, this information is presented for informational 
purposes only and is not indicative of any change in DOE's analytical 
methodology. The NES results based on a 9-year analytical period are 
presented in Table V.13. The impacts are counted over the lifetime of 
small, large, and very large air-cooled commercial package air 
conditioning and heating equipment purchased in 2019-2027.
---------------------------------------------------------------------------

    \74\ EPCA requires DOE to review its standards at least once 
every 6 years, and requires, for certain products, a 3-year period 
after any new standard is promulgated before compliance is required, 
except that in no case may any new standards be required within 6 
years of the compliance date of the previous standards. While adding 
a 6-year review to the 3-year compliance period adds up to 9 years, 
DOE notes that it may undertake reviews at any time within the 6 
year period and that the 3-year compliance date may yield to the 6-
year backstop. A 9-year analysis period may not be appropriate given 
the variability that occurs in the timing of standards reviews and 
the fact that for some consumer products, the compliance period is 5 
years rather than 3 years.

Table V.13--Cumulative Primary Energy Savings for Small, Large, and Very
    Large Air-Cooled Commercial Package Air Conditioning and Heating
       Equipment Trial Standard Levels for Units Sold in 2019-2027
------------------------------------------------------------------------
                                         Trial standard level
       Equipment class       -------------------------------------------
                                  1          2          3          4
------------------------------------------------------------------------
                                                 quads
                             -------------------------------------------
Small Commercial Packaged           0.3        0.7        0.9        1.4
 Air Conditioners-->=65,000
 Btu/h and <135,000 Btu/h
 Cooling Capacity...........
Large Commercial Packaged           0.2        0.4        0.5        0.7
 Air Conditioners-->=135,000
 Btu/h and <240,000 Btu/h
 Cooling Capacity...........
Very Large Commercial               0.1        0.2        0.3        0.3
 Packaged Air Conditioners--
 >=240,000 Btu/h and
 <760,000 Btu/h Cooling
 Capacity...................
Small Commercial Packaged           0.0        0.1        0.2        0.2
 Heat Pumps-->=65,000 Btu/h
 and <135,000 Btu/h Cooling
 Capacity...................
Large Commercial Packaged           0.0        0.0        0.0        0.0
 Heat Pumps-->=135,000 Btu/h
 and <240,000 Btu/h Cooling
 Capacity...................
Very Large Commercial               0.0        0.0        0.0        0.0
 Packaged Heat Pumps--
 >=240,000 Btu/h and
 <760,000 Btu/h Cooling
 Capacity...................
                             -------------------------------------------
    Total All Classes.......        0.6        1.4        1.9        2.7
------------------------------------------------------------------------

    Issue 22: For this rulemaking, DOE analyzed the effects of 
potential standards on equipment purchased over a 30-year period, and 
it undertook a sensitivity analysis using 9 years rather than 30 years 
of product shipments. The choice of a 30-year period of shipments is 
consistent with the DOE analysis for other products and commercial 
equipment. The choice of a 9-year period is a proxy for the timeline in 
EPCA for the review of certain energy conservation standards and 
potential revision of and compliance with such amended standards. DOE 
is seeking

[[Page 59001]]

input on ways to refine the analytic timeline.
b. Net Present Value of Customer Costs and Benefits
    DOE estimated the cumulative NPV of the total costs and savings for 
customers that would result from the TSLs considered for small, large, 
and very large air-cooled commercial package air conditioning and 
heating equipment. In accordance with OMB's guidelines on regulatory 
analysis,\75\ DOE calculated the 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 on private capital in the U.S. 
economy, and reflects the returns on real estate and small business 
capital as well as corporate capital. This discount rate approximates 
the opportunity cost of capital in the private sector (OMB analysis has 
found the average rate of return on capital to be near this rate). The 
3-percent rate reflects the potential effects of standards on private 
consumption (e.g., through higher prices for equipment and reduced 
purchases of energy). This rate represents the rate at which society 
discounts future consumption flows to their present value. It can be 
approximated by the real rate of return on long-term government debt 
(i.e., yield on United States Treasury notes), which has averaged about 
3 percent for the past 30 years.
---------------------------------------------------------------------------

    \75\ OMB Circular A-4, section E (Sept. 17, 2003). Available at: 
http://www.whitehouse.gov/omb/circulars_a004_a-4.
---------------------------------------------------------------------------

    Table V.14 shows the customer NPV results for each TSL considered 
for small, large, and very large air-cooled commercial package air 
conditioning and heating equipment. In each case, the impacts cover the 
lifetime of equipment purchased in 2019-2048.

    Table V.14--Net Present Value of Customer Benefits for Small, Large, and Very Large Air-Cooled Commercial
        Package Air Conditioning and Heating Equipment Trial Standard Levels for Units Sold in 2019-2048
----------------------------------------------------------------------------------------------------------------
                                                                       Trial standard level
         Equipment class           Discount rate ---------------------------------------------------------------
                                         %               1               2               3               4
----------------------------------------------------------------------------------------------------------------
                                                                           billion 2012$
                                                 ---------------------------------------------------------------
Small Commercial Packaged Air                  3             6.9            20.7            26.0            36.2
 Conditioners-->=65,000 Btu/h
 and <135,000 Btu/h Cooling
 Capacity.......................
Large Commercial Packaged Air     ..............             3.0             6.8             9.7            15.6
 Conditioners-->=135,000 Btu/h
 and <240,000 Btu/h Cooling
 Capacity.......................
Very Large Commercial Packaged    ..............             3.4             6.4            11.0            13.5
 Air Conditioners-->=240,000 Btu/
 h and <760,000 Btu/h Cooling
 Capacity.......................
Small Commercial Packaged Heat    ..............             0.8             2.3             3.1             4.2
 Pumps-->=65,000 Btu/h and
 <135,000 Btu/h Cooling Capacity
Large Commercial Packaged Heat    ..............             0.2             0.3             0.5             0.8
 Pumps-->=135,000 Btu/h and
 <240,000 Btu/h Cooling Capacity
Very Large Commercial Packaged    ..............             0.2             0.3             0.6             0.7
 Heat Pumps-->=240,000 Btu/h and
 <760,000 Btu/h Cooling Capacity
                                 -------------------------------------------------------------------------------
    Total All Classes...........  ..............            14.4            36.9            50.8            71.0
----------------------------------------------------------------------------------------------------------------
Small Commercial Packaged Air                  7             2.5             7.1             9.0            11.8
 Conditioners-->=65,000 Btu/h
 and <135,000 Btu/h Cooling
 Capacity.......................
Large Commercial Packaged Air     ..............             0.9             2.0             2.9             4.8
 Conditioners-->=135,000 Btu/h
 and <240,000 Btu/h Cooling
 Capacity.......................
Very Large Commercial Packaged    ..............             1.0             1.8             3.3             3.9
 Air Conditioners-->=240,000 Btu/
 h and <760,000 Btu/h Cooling
 Capacity.......................
Small Commercial Packaged Heat    ..............             0.3             0.8             1.1             1.5
 Pumps-->=65,000 Btu/h and
 <135,000 Btu/h Cooling Capacity
Large Commercial Packaged Heat    ..............             0.1             0.1             0.2             0.3
 Pumps-->=135,000 Btu/h and
 <240,000 Btu/h Cooling Capacity
Very Large Commercial Packaged    ..............             0.1             0.1             0.2             0.2
 Heat Pumps-->=240,000 Btu/h and
 <760,000 Btu/h Cooling Capacity
                                 -------------------------------------------------------------------------------
    Total All Classes...........  ..............             4.8            11.9            16.5            22.5
----------------------------------------------------------------------------------------------------------------

    The NPV results based on the afore-mentioned nine-year analytical 
period are presented in Table V.15. The impacts are counted over the 
lifetime of equipment purchased in 2019-2027. As mentioned previously, 
this information is presented for informational purposes only and is 
not indicative of any change in DOE's analytical methodology or 
decision criteria.

[[Page 59002]]



    Table V.15--Net Present Value of Customer Benefits for Small, Large, and Very Large Air-Cooled Commercial
        Package Air Conditioning and Heating Equipment Trial Standard Levels for Units Sold in 2019-2027
----------------------------------------------------------------------------------------------------------------
                                                                       Trial standard level
         Equipment class           Discount rate ---------------------------------------------------------------
                                         %               1               2               3               4
----------------------------------------------------------------------------------------------------------------
                                                                           billion 2013$
                                                 ---------------------------------------------------------------
Small Commercial Packaged Air                  3             2.1             5.0             6.3             8.2
 Conditioners-->=65,000 Btu/h
 and <135,000 Btu/h Cooling
 Capacity.......................
Large Commercial Packaged Air     ..............             0.9             1.7             2.4             3.7
 Conditioners-->=135,000 Btu/h
 and <240,000 Btu/h Cooling
 Capacity.......................
Very Large Commercial Packaged    ..............             0.4             0.8             1.4             1.7
 Air Conditioners-->=240,000 Btu/
 h and <760,000 Btu/h Cooling
 Capacity.......................
Small Commercial Packaged Heat    ..............             0.2             0.6             0.9             1.0
 Pumps-->=65,000 Btu/h and
 <135,000 Btu/h Cooling Capacity
Large Commercial Packaged Heat    ..............             0.0             0.1             0.1             0.2
 Pumps-->=135,000 Btu/h and
 <240,000 Btu/h Cooling Capacity
Very Large Commercial Packaged    ..............             0.0             0.0             0.1             0.1
 Heat Pumps-->=240,000 Btu/h and
 <760,000 Btu/h Cooling Capacity
                                 -------------------------------------------------------------------------------
    Total All Classes...........  ..............             3.7             8.3            11.3            14.9
----------------------------------------------------------------------------------------------------------------
Small Commercial Packaged Air                  7             1.1             2.7             3.3             4.1
 Conditioners-->=65,000 Btu/h
 and <135,000 Btu/h Cooling
 Capacity.......................
Large Commercial Packaged Air     ..............             0.4             0.7             1.0             1.7
 Conditioners-->=135,000 Btu/h
 and <240,000 Btu/h Cooling
 Capacity.......................
Very Large Commercial Packaged    ..............             0.2             0.4             0.7             0.8
 Air Conditioners-->=240,000 Btu/
 h and <760,000 Btu/h Cooling
 Capacity.......................
Small Commercial Packaged Heat    ..............             0.1             0.3             0.5             0.5
 Pumps-->=65,000 Btu/h and
 <135,000 Btu/h Cooling Capacity
Large Commercial Packaged Heat    ..............             0.0             0.0             0.1             0.1
 Pumps-->=135,000 Btu/h and
 <240,000 Btu/h Cooling Capacity
Very Large Commercial Packaged    ..............             0.0             0.0             0.0             0.0
 Heat Pumps-->=240,000 Btu/h and
 <760,000 Btu/h Cooling Capacity
                                 -------------------------------------------------------------------------------
    Total All Classes...........  ..............             1.8             4.1             5.6             7.3
----------------------------------------------------------------------------------------------------------------

c. Indirect Impacts on Employment
    DOE expects energy conservation standards for small, large, and 
very large air-cooled commercial package air conditioning and heating 
equipment to reduce energy costs for equipment owners, and the 
resulting net savings to be redirected to other forms of economic 
activity. Those shifts in spending and economic activity could affect 
the demand for labor. As described in section IV.N, DOE used an input/
output model of the U.S. economy to estimate indirect employment 
impacts of the TSLs that DOE considered in this rulemaking. DOE 
understands that there are uncertainties involved in projecting 
employment impacts, especially changes in the later years of the 
analysis. Therefore, DOE generated results for near-term time frames, 
where these uncertainties are reduced.
    The results suggest that the proposed standards are likely to have 
negligible impact on the net demand for labor in the economy. The net 
change in jobs is so small that it would be imperceptible in national 
labor statistics and might be offset by other, unanticipated effects on 
employment. Chapter 16 of the NOPR TSD presents detailed results.
4. Impact on Utility or Performance
    DOE believes that the standards it is proposing today will not 
lessen the utility or performance of small, large, and very large air-
cooled commercial package air conditioning and heating equipment.
5. Impact of Any Lessening of Competition
    DOE considers any lessening of competition that is likely to result 
from amended 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.
    To assist the Attorney General in making such determination, DOE 
will provide DOJ with copies of this NOPR and the TSD for review. DOE 
will consider DOJ's comments on the proposed rule in preparing the 
final rule, and DOE will publish and respond to DOJ's comments in that 
document.
6. Need of the Nation to Conserve Energy
    Enhanced energy efficiency, where economically justified, improves 
the Nation's energy security, strengthens the economy, and reduces the 
environmental impacts or costs of energy production. Reduced 
electricity demand due to energy conservation standards is also likely 
to reduce the cost of maintaining the reliability of the electricity 
system, particularly during peak-load periods. As a measure of this 
reduced demand, chapter 15 in the NOPR TSD presents the estimated 
reduction in generating capacity for the TSLs that DOE considered in 
this rulemaking.
    Energy savings from standards for small, large, and very large air-
cooled commercial package air conditioning and heating equipment could 
also produce environmental benefits in the form of reduced emissions of 
air pollutants and greenhouse gases associated with electricity 
production. Table V.16 provides DOE's estimate of cumulative emissions 
reductions projected to result from the TSLs considered in this 
rulemaking. For the

[[Page 59003]]

proposed standards (TSL 3), the upstream emissions reduction accounts 
for 3 percent of total CO2 emissions, 48 percent of total 
NOX emissions, and 0.3 percent of total SO2 
emissions.\76\ DOE reports annual emissions reductions for each TSL in 
chapter 13 of the NOPR TSD.
---------------------------------------------------------------------------

    \76\ The upstream share of the total reduction for NOx is high 
because power sector emissions are capped in many States and because 
changes in the projected power plant mix cause NOx emissions to 
increase in some years under the standards case.

   Table V.16--Cumulative Emissions Reduction Estimated for Small, Large, and Very Large Air-Cooled Commercial
                     Package Air Conditioning and Heating Equipment Trial Standard Levels *
----------------------------------------------------------------------------------------------------------------
                                                                       Trial Standard Level
                                                 ---------------------------------------------------------------
                                                         1               2               3               4
----------------------------------------------------------------------------------------------------------------
                                             Power Sector Emissions
----------------------------------------------------------------------------------------------------------------
CO2 (million metric tons).......................          262             745           1,049           1,514
NOX (thousand tons).............................          129             375             528             767
SO2 (thousand tons).............................          725           2,077           2,927           4,232
Hg (tons).......................................            0.88            2.52            3.55            5.13
N2O (thousand tons).............................            3.73           10.74           15.13           21.90
CH4 (thousand tons).............................           19.2            54.4            76.7           110.6
----------------------------------------------------------------------------------------------------------------
                                               Upstream Emissions
----------------------------------------------------------------------------------------------------------------
CO[ihel4] (million metric tons).................            8.98           25.4            35.8            51.5
NOX (thousand tons).............................          124             350             492             710
SO[ihel2] (thousand tons).......................            1.92            5.44            7.66           11.04
Hg (tons).......................................            0.00            0.01            0.02            0.03
N[ihel2] (thousand tons)........................            0.09            0.25            0.36            0.52
CH[ihel4] (thousand tons).......................          753           2,127           2,996           4,317
----------------------------------------------------------------------------------------------------------------
                                                 Total Emissions
----------------------------------------------------------------------------------------------------------------
CO[ihel2] (million metric tons).................          271             770           1,085           1,565
NOX (thousand tons).............................          252             725           1,021           1,477
SO[ihel2] (thousand tons).......................          727           2,083           2,934           4,243
Hg (tons).......................................            0.89            2.53            3.57            5.16
N[ihel2]O (thousand tons).......................            3.82           10.99           15.48           22.41
N[ihel2]O (thousand tons CO2eq) **..............        1,138           3,275           4,614           6,679
CH[ihel4] (thousand tons).......................          772           2,181           3,072           4,427
CH[ihel2] (million tons CO2eq) **...............           19.3            54.5            76.8           110.7
----------------------------------------------------------------------------------------------------------------
* The reduction is measured over the period in which equipment purchased in 2019-2048 continue to operate.
** CO[ihel2]eq is the quantity of CO[ihel2] that would have the same global warming potential (GWP).
These results are based on emissions factors in AEO 2013, the most recent version available at the time of this
  analysis. Use of emissions factors in AEO 2014 would result in a significant decrease in cumulative emissions
  reductions for CO[ihel2], SO[ihel2], and Hg. For example, the estimated decrease for CO[ihel2] emissions
  reductions is 36%. In the next phase of this rulemaking, DOE plans to use emissions factors based on the most
  recent AEO available, which may or may not be AEO 2014, depending on the timing of the issuance of the next
  rulemaking document.

    As mentioned in section I, emissions factors based on the Annual 
Energy Outlook 2014 (AEO 2014), which became available too late for 
incorporation into this analysis, show a significant decrease in the 
cumulative emissions reductions from the proposed standards. For 
CO[ihel2], the emissions reduction at TSL 3, the proposed standards, is 
697 Mt rather than 1,085 Mt.
    As part of the analysis for this rule, DOE estimated monetary 
benefits likely to result from the reduced emissions of CO2 
and NOX that DOE estimated for each of the TSLs considered. 
As discussed in section IV.L, DOE used the most recent values for the 
SCC developed by an interagency process. The four sets of SCC values 
resulting from that process (expressed in 2013$) are represented by 
$12.0/metric ton (the average value from a distribution that uses a 5-
percent discount rate), $40.5/metric ton (the average value from a 
distribution that uses a 3-percent discount rate), $62.4/metric ton 
(the average value from a distribution that uses a 2.5-percent discount 
rate), and $119/metric ton (the 95th-percentile value from a 
distribution that uses a 3-percent discount rate). These values 
correspond to the value of emission reductions in 2015; the values for 
later years are higher due to increasing damages as the projected 
magnitude of climate change increases.
    Table V.17 presents the global value of CO2 emissions 
reductions at each TSL. For each of the four cases, DOE calculated a 
present value of the stream of annual values using the same discount 
rate as was used in the studies upon which the dollar-per-ton values 
are based. DOE calculated domestic values as a range from 7 percent to 
23 percent of the global values, and these results are presented in 
chapter 14 of the NOPR TSD.

[[Page 59004]]



Table V.17--Estimates of Global Present Value of CO2 Emissions Reduction
  Under Small, Large, and Very Large Air-Cooled Commercial Package Air
        Conditioning and Heating Equipment Trial Standard Levels
------------------------------------------------------------------------
                                    SCC Case *
         ---------------------------------------------------------------
   TSL      5% discount     3% discount    2.5% discount    3% discount
           rate, average   rate, average   rate, average    rate, 95th
                 *               *               *          percentile*
------------------------------------------------------------------------
                                   Billion 2013$
------------------------------------------------------------------------
                         Power Sector Emissions
------------------------------------------------------------------------
1.......            1.51            7.55           12.17           23.41
2.......            4.21           21.21           34.25           65.80
3.......            5.92           29.88           48.24           92.67
4.......            8.50           42.99           69.45          133.36
------------------------------------------------------------------------
                           Upstream Emissions
------------------------------------------------------------------------
1.......            0.05            0.26            0.42            0.81
2.......            0.15            0.73            1.18            2.26
3.......            0.20            1.03            1.65            3.18
4.......            0.29            1.47            2.38            4.57
------------------------------------------------------------------------
                             Total Emissions
------------------------------------------------------------------------
1.......            1.56            7.81           12.59           24.22
2.......            4.35           21.94           35.43           68.06
3.......            6.13           30.90           49.90           95.86
4.......            8.79           44.47           71.83          137.93
------------------------------------------------------------------------
* For each of the four cases, the corresponding SCC value for emissions
  in 2015 is $12.0, $40.5, $62.4, and $119 per metric ton (2013$).\77\

     
---------------------------------------------------------------------------

    \77\ These results are based on emissions factors in AEO 2013, 
the most recent version available at the time of this analysis. Use 
of emissions factors in AEO 2014 would result in a significant 
decrease in cumulative emissions reductions for CO2, 
SO2, and Hg. For example, the estimated decrease for 
CO2 emissions reductions is 36%. The monetized benefits 
from GHG reductions would likely decrease by a comparable amount. In 
the next phase of this rulemaking, DOE plans to use emissions 
factors based on the most recent AEO available, which may or may not 
be AEO 2014, depending on the timing of the issuance of the next 
rulemaking document.
---------------------------------------------------------------------------

    DOE is well aware that scientific and economic knowledge about the 
contribution of CO2 and other greenhouse gas (GHG) emissions 
to changes in the future global climate and the potential resulting 
damages to the world economy continues to evolve rapidly. Thus, any 
value placed on reducing CO2 emissions in this rulemaking 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 GHG 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 interagency process.
    DOE also estimated the cumulative monetary value of the economic 
benefits associated with NOX emissions reductions 
anticipated to result from amended standards for small, large, and very 
large air-cooled commercial package air conditioning and heating 
equipment. The dollar-per-ton values that DOE used are discussed in 
section IV.L. Table V.18 presents the cumulative present values for 
each TSL calculated using seven-percent and three-percent discount 
rates.

 Table V.18--Estimates of Present Value of NOX Emissions Reduction under
     Small, Large, and Very Large Air-Cooled Commercial Package Air
      Conditioning and Heating Equipment Trial Standard Levels \78\
------------------------------------------------------------------------
                                            3% discount     7% discount
                   TSL                         rate            rate
------------------------------------------------------------------------
                                                   Million 2013$
------------------------------------------------------------------------
                         Power Sector Emissions
------------------------------------------------------------------------
1.......................................             128            36.7
2.......................................             369           105.5
3.......................................             520             148
4.......................................             753             215
------------------------------------------------------------------------
                           Upstream Emissions
------------------------------------------------------------------------
1.......................................             139            52.0
2.......................................             384             138
3.......................................             540             194

[[Page 59005]]

 
4.......................................             773             275
------------------------------------------------------------------------
                             Total Emissions
------------------------------------------------------------------------
1.......................................             267            88.7
2.......................................             753             243
3.......................................            1060             343
4.......................................            1527             490
------------------------------------------------------------------------

7. Summary of National Economic Impacts
    The NPV of the monetized benefits associated with emissions 
reductions can be viewed as a complement to the NPV of the customer 
savings calculated for each TSL considered in this rulemaking. Table 
V.19 presents the NPV values that result from adding the estimates of 
the potential economic benefits resulting from reduced CO2 
and NOX emissions in each of four valuation scenarios to the 
NPV of customer savings calculated for each TSL considered in this 
rulemaking, at both a seven-percent and three-percent discount rate. 
The CO2 values used in the columns of each table correspond 
to the four sets of SCC values discussed above.
---------------------------------------------------------------------------

    \78\ These results are based on emissions factors in AEO 2013, 
the most recent version available at the time of this analysis. Use 
of emissions factors in AEO 2014 would result in a significant 
decrease in cumulative emissions reductions for CO2, 
SO2, and Hg. For example, the estimated decrease for 
CO2 emissions reductions is 36%. In the next phase of 
this rulemaking, DOE plans to use emissions factors based on the 
most recent AEO available, which may or may not be AEO 2014, 
depending on the timing of the issuance of the next rulemaking 
document.

Table V.19--Net Present Value of Customer Savings Combined With Present Value of Monetized Benefits From CO2 and
                                            NOX Emissions Reductions
----------------------------------------------------------------------------------------------------------------
                                                           Customer NPV at 3% discount rate added with:
                                                 ---------------------------------------------------------------
                       TSL                        SCC Case $12.0/ SCC Case $40.5/ SCC Case $62.4/ SCC Case $119/
                                                    metric ton      metric ton      metric ton      metric ton
                                                      CO2\*\          CO2\*\          CO2\*\          CO2\*\
----------------------------------------------------------------------------------------------------------------
                                                                           Billion 2013$
                                                 ---------------------------------------------------------------
1...............................................            16.0            22.5            27.2            39.1
2...............................................            41.3            59.5            73.0           106.3
3...............................................            57.2            82.8           101.8           148.6
4...............................................            80.1           117.0           144.4           211.7
----------------------------------------------------------------------------------------------------------------


 
                                                           Customer NPV at 7% Discount Rate added with:
                                                 ---------------------------------------------------------------
                       TSL                        SCC Case $12.0/ SCC Case $40.5/ SCC Case $62.4/ SCC Case $119/
                                                    metric ton      metric ton      metric ton      metric ton
                                                      CO2\*\          CO2\*\          CO2\*\          CO2\*\
----------------------------------------------------------------------------------------------------------------
                                                                           Billion 2013$
                                                 ---------------------------------------------------------------
1...............................................             6.4            12.7            17.5            29.2
2...............................................            16.3            34.1            47.6            80.4
3...............................................            22.7            47.8            66.8           113.0
4...............................................            31.4            67.5            94.8           161.3
----------------------------------------------------------------------------------------------------------------
* These label values represent the global SCC in 2015, in 2013$. For NOX emissions, each case uses the medium
  value, which corresponds to $2,684 per ton.\79\

    Although adding the value of customer savings to the values of 
emission reductions provides a valuable perspective, two issues should 
be considered. First, the national operating cost savings are domestic 
U.S. customer monetary savings that occur as a result of market 
transactions, while the value of CO2 reductions is based on 
a global value. Second, the assessments of operating cost savings and 
the SCC are performed with different methods that use different time 
frames for analysis. The national operating cost savings is measured 
for the lifetime of equipment shipped in 2019-2048. The SCC values, on 
the other hand, reflect the present value of future climate-related 
impacts resulting from the emission of one metric ton of CO2 
in each year. These impacts continue well beyond 2100.
---------------------------------------------------------------------------

    \79\ These results are based on emissions factors in AEO 2013, 
the most recent version available at the time of this analysis. Use 
of emissions factors in AEO 2014 would result in a significant 
decrease in cumulative emissions reductions for CO2, 
SO2, and Hg. For example, the estimated decrease for 
CO2 emissions reductions is 36%. The monetized benefits 
from GHG reductions would likely decrease by a comparable amount. In 
the next phase of this rulemaking, DOE plans to use emissions 
factors based on the most recent AEO available, which may or may not 
be AEO 2014, depending on the timing of the issuance of the next 
rulemaking document.

---------------------------------------------------------------------------

[[Page 59006]]

8. 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. (42 U.S.C. 6313(a)(6)(B)(ii)(VII)) No 
other factors were considered in this analysis.

C. Proposed Standards

    To adopt national standards more stringent than the amended ASHRAE/
IES Standard 90.1 for small, large, and very large air-cooled CUAC and 
CUHP, DOE must determine that such action would result in significant 
additional conservation of energy and is technologically feasible and 
economically justified. (42 U.S.C. 6313(a)(6)(A)(ii)). As discussed 
previously, EPCA provides seven factors to be evaluated in determining 
whether a more stringent standard for small, large, and very large air-
cooled CUAC and CUHP is economically justified. (42 U.S.C. 
6313(a)(6)(B)(ii)).
    For this NOPR, DOE considered the impacts of standards at each TSL, 
beginning with the most energy-efficient level, to determine whether 
that level was economically justified. Where the most energy-efficient 
level was not justified, DOE then considered the next most efficient 
level and undertook the same evaluation until it reached the highest 
efficiency level that is technologically feasible, economically 
justified and saves a significant amount of energy.
    To aid the reader in understanding the benefits and/or burdens of 
each TSL, tables in this section summarize the quantitative analytical 
results for each TSL, based on the assumptions and methodology 
discussed herein. The efficiency levels contained in each TSL are 
described in section V.A. In addition to the quantitative results 
presented in the tables, DOE also considers other burdens and benefits 
that affect economic justification. These include the impacts on 
identifiable subgroups of customers who may be disproportionately 
affected by a national standard (see section V.B.1.b), and impacts on 
employment. DOE discusses the impacts on employment in small, large, 
and very large air-cooled commercial package air conditioning and 
heating equipment manufacturing in section V.B.2, and discusses the 
indirect employment impacts in section V.B.3.c.
1. Benefits and Burdens of Trial Standard Levels Considered for Small, 
Large, and Very Large Air-Cooled Commercial Package Air Conditioning 
and Heating Equipment
    Table V.20 and Table V.21 summarize the quantitative impacts 
estimated for each TSL for small, large, and very large air-cooled 
commercial package air conditioning and heating equipment.
---------------------------------------------------------------------------

    \80\ These results are based on emissions factors in AEO 2013, 
the most recent version available at the time of this analysis. Use 
of emissions factors in AEO 2014 would result in a significant 
decrease in cumulative emissions reductions for CO2, 
SO2, and Hg. For example, the estimated decrease for 
CO2 emissions reductions is 36%. The monetized benefits 
from GHG reductions would likely decrease by a comparable amount. In 
the next phase of this rulemaking, DOE plans to use emissions 
factors based on the most recent AEO available, which may or may not 
be AEO 2014, depending on the timing of the issuance of the next 
rulemaking document.

  Table V.20--Summary of Analytical Results for Small, Large, and Very Large Air-Cooled Commercial Package Air
                            Conditioning and Heating Equipment: National Impacts \80\
----------------------------------------------------------------------------------------------------------------
            Category                    TSL 1                TSL 2               TSL 3               TSL 4
----------------------------------------------------------------------------------------------------------------
                                        National FFC Energy Savings quads
----------------------------------------------------------------------------------------------------------------
                                 3.0................  8.4...............  11.8..............  17.1
----------------------------------------------------------------------------------------------------------------
                                     NPV of Customer Benefits 2013$ billion
----------------------------------------------------------------------------------------------------------------
3% discount rate...............  14.4...............  36.9..............  50.8..............  71.0
7% discount rate...............  4.8................  11.9..............  16.5..............  22.5
----------------------------------------------------------------------------------------------------------------
                              Cumulative Emissions Reduction (Total FFC Emissions)
----------------------------------------------------------------------------------------------------------------
CO2 million metric tons........  271................  770...............  1,085.............  1,565
NOX thousand tons..............  252................  725...............  1,021.............  1,477
SO2 thousand tons..............  727................  2,083.............  2,934.............  4,243
Hg tons........................  0.89...............  2.53..............  3.57..............  5.16
N2O thousand tons..............  3.82...............  10.99.............  15.48.............  22.41
N2O thousand tons CO2eq *......  1,138..............  3,275.............  4,614.............  6,679
CH4 thousand tons..............  772................  2,181.............  3,072.............  4,427
CH4 million tons CO2eq*........  19.3...............  54.5..............  76.8..............  110.7
----------------------------------------------------------------------------------------------------------------
                               Value of Emissions Reduction (Total FFC Emissions)
----------------------------------------------------------------------------------------------------------------
CO2 2013$ billion **...........  1.56 to 24.2.......  4.35 to 68.1......  6.13 to 95.9......  8.79 to 138
NOX--3% discount rate 2013$      267................  753...............  1060..............  1,527
 million.
NOX--7% discount rate 2013$      88.7...............  243...............  343...............  490
 million.
----------------------------------------------------------------------------------------------------------------
* CO2eq is the quantity of CO2 that would have the same global warming potential (GWP).
** Range of the economic value of CO2 reductions is based on estimates of the global benefit of reduced CO2
  emissions.


[[Page 59007]]


  Table V.21--Summary of Analytical Results for Small, Large, and Very Large Air-Cooled Commercial Package Air
                      Conditioning and Heating Equipment: Manufacturer and Consumer Impacts
----------------------------------------------------------------------------------------------------------------
            Category                     TSL 1               TSL 2               TSL 3               TSL 4
----------------------------------------------------------------------------------------------------------------
                                              Manufacturer Impacts
----------------------------------------------------------------------------------------------------------------
Change in Industry NPV ($         (73.89) to (11.45)  (245.30) to         (311.58) to         (438.16) to
 million) [dagger].                                    (52.87).            (88.55).            (118.13).
Change in Industry NPV (%)        (5.86) to (0.91)..  (19.45) to (4.19).  (24.71) to (7.02).  (34.75) to (9.37).
 [dagger].
----------------------------------------------------------------------------------------------------------------
                                         Customer Mean LCC Savings 2013$
----------------------------------------------------------------------------------------------------------------
Small Commercial Packaged Air     1,094.............  937...............  4,779.............  6,711.
 Conditioners-->=65,000 Btu/h
 and <135,000 Btu/h Cooling
 Capacity.
Large Commercial Packaged Air     1,038.............  2,214.............  3,469.............  7,508.
 Conditioners-->=135,000 Btu/h
 and <240,000 Btu/h Cooling
 Capacity.
Very Large Commercial Packaged    4,103.............  4,801.............  16,477............  19,842.
 Air Conditioners-->=240,000 Btu/
 h and <760,000 Btu/h Cooling
 Capacity.
Weighted Average *..............  1,257.............  1,472.............  5,150.............  7,675.
----------------------------------------------------------------------------------------------------------------
                                            Customer Median PBP years
----------------------------------------------------------------------------------------------------------------
Small Commercial Packaged Air     2.2...............  8.0...............  3.9...............  4.7.
 Conditioners-->=65,000 Btu/h
 and <135,000 Btu/h Cooling
 Capacity.
Large Commercial Packaged Air     6.0...............  7.2...............  6.6...............  5.1.
 Conditioners-->=135,000 Btu/h
 and <240,000 Btu/h Cooling
 Capacity.
Very Large Commercial Packaged    2.6...............  5.5...............  2.5...............  3.5.
 Air Conditioners-->=240,000 Btu/
 h and <760,000 Btu/h Cooling
 Capacity.
Weighted Average *..............  3.1...............  7.7...............  4.5...............  4.7.
Small CUAC-->=65,000 Btu/h and
 <135,000 Btu/h: **
    Customers with Net Cost %...  0%................  27%...............  0%................  0%.
    Customers with Net Benefit %  61%...............  72%...............  99%...............  100%.
    Customers with No Impact %..  39%...............  1%................  0%................  0%.
Large CUAC-->=135,000 Btu/h and
 <240,000 Btu/h: **
    Customers with Net Cost %...  3%................  8%................  6%................  2%.
    Customers with Net Benefit %  74%...............  90%...............  93%...............  98%.
    Customers with No Impact %..  22%...............  2%................  0%................  0%.
Very Large CUAC-->=240,000 Btu/h
 and <760,000 Btu/h: **
    Customers with Net Cost (%).  2%................  12%...............  3%................  5%.
    Customers with Net Benefit    62%...............  76%...............  92%...............  94%.
     (%).
    Customers with No Impact (%)  36%...............  13%...............  6%................  1%.
Weighted Average: *
    Customers with Net Cost (%).  1%................  22%...............  2%................  1%.
    Customers with Net Benefit    64%...............  77%...............  97%...............  99%.
     (%).
    Customers with No Impact (%)  35%...............  2%................  0%................  0%.
----------------------------------------------------------------------------------------------------------------
* Weighted by shares of each equipment class in total projected shipments in 2019.
** Rounding may cause some items to not total 100 percent.
[dagger] Values in parentheses are negative values.

    First, DOE considered TSL 4, the most efficient level (max tech), 
which would save an estimated total of 17.1 quads of energy, an amount 
DOE considers significant. TSL 4 has an estimated NPV of customer 
benefit of $22.5 billion using a 7 percent discount rate, and $70.1 
billion using a 3 percent discount rate.
    The cumulative emissions reductions at TSL 4 are 11,565 million 
metric tons of CO2, 1,477 thousand tons of NOX, 
4,243 thousand tons of SO2, and 5.16 tons of Hg. The 
estimated monetary value of the CO2 emissions reductions at 
TSL 4 ranges from $9 billion to $138 billion.\81\
---------------------------------------------------------------------------

    \81\ These results are based on emissions factors in AEO 2013, 
the most recent version available at the time of this analysis. Use 
of emissions factors in AEO 2014 would result in a significant 
decrease in cumulative emissions reductions for CO2, 
SO2, and Hg. For example, the estimated decrease for 
CO2 emissions reductions is 36%. The monetized benefits 
from GHG reductions would likely decrease by a comparable amount. In 
the next phase of this rulemaking, DOE plans to use emissions 
factors based on the most recent AEO available, which may or may not 
be AEO 2014, depending on the timing of the issuance of the next 
rulemaking document.
---------------------------------------------------------------------------

    At TSL 4, the average LCC savings is $6,711 for small CUAC, $7,508 
for large CUAC, and $19,842 for very large CUAC. The median PBP is 4.7 
years for small CUAC, 5.1 years for large CUAC, and 3.5 years for very 
large CUAC. The share of customers experiencing a net LCC benefit is 
100 percent for small CUAC, 98 percent for large CUAC, and 94 percent 
for very large CUAC.
    At TSL 4, the projected change in INPV ranges from a decrease of 
$438.16 million to decrease of $118.13 million. If the larger decrease 
is realized, TSL 4 could result in a net loss of 34.75 percent in INPV 
to manufacturers of covered small, large, and very large air-cooled 
commercial package air conditioning and heating equipment. Conversion 
costs are expected to total $210.96 million. Only 2% of industry 
product listings meet this proposed standard today. At this level, DOE 
recognizes that manufacturers could face technical resource 
constraints. Manufacturers stated they would require additional 
engineering expertise and additional test laboratory capacity. It is 
unclear whether manufacturers could complete the hiring of the 
necessary technical expertise and construction of the necessary test 
facilities in time to allow for the redesign of all products to meet 
max-tech by 2019. Furthermore, DOE

[[Page 59008]]

recognizes that a standard set at max-tech could greatly limit product 
differentiation in the small, large, and very large air-cooled CUAC and 
CUHP market. By commoditizing a key differentiating feature, a standard 
set a max-tech would likely accelerate consolidation in the industry.
    In view of the foregoing, DOE concludes that, at TSL 4 for small, 
large, and very large air-cooled commercial package air conditioning 
and heating equipment, the benefits of energy savings, positive NPV of 
total customer benefits, customer LCC savings, emission reductions and 
the estimated monetary value of the emissions reductions would be 
outweighed by the large reduction in industry value at TSL 4. 
Consequently, DOE has concluded that TSL 4 is not economically 
justified.
    Next, DOE considered TSL 3, which would save an estimated total of 
11.8 quads of energy, an amount DOE considers significant. TSL 3 has an 
estimated NPV of customer benefit of $16.5 billion using a 7 percent 
discount rate, and $50.8 billion using a 3 percent discount rate.
    The cumulative emissions reductions at TSL 3 are 1,085 million 
metric tons of CO2, 1,021 thousand tons of NOX, 
2,934 thousand tons of SO2, and 3.57 tons of Hg. The 
estimated monetary value of the CO2 emissions reductions at 
TSL 4 ranges from $6 billion to $96 billion.\82\
---------------------------------------------------------------------------

    \82\ These results are based on emissions factors in AEO 2013, 
the most recent version available at the time of this analysis. Use 
of emissions factors in AEO 2014 would result in a significant 
decrease in cumulative emissions reductions for CO2, 
SO2, and Hg. For example, the estimated decrease for 
CO2 emissions reductions is 36%. The monetized benefits 
from GHG reductions would likely decrease by a comparable amount. In 
the next phase of this rulemaking, DOE plans to use emissions 
factors based on the most recent AEO available, which may or may not 
be AEO 2014, depending on the timing of the issuance of the next 
rulemaking document.
---------------------------------------------------------------------------

    At TSL 3, the average LCC savings is $4,779 for small CUAC, $3,469 
for large CUAC, and $16,477 for very large CUAC. The median PBP is 3.9 
years for small CUAC, 6.6 years for large CUAC, and 2.5 years for very 
large CUAC.\83\ The share of customers experiencing a net LCC benefit 
is 99 percent for small CUAC, 93 percent for large CUAC, and 92 percent 
for very large CUAC.
---------------------------------------------------------------------------

    \83\ Large CUAC experiences relatively lower LCC savings and 
longer PBPs than either small and very large CUACs due to the design 
measures being utilized to achieve higher rated IEER in the 
Engineering Analysis. In the case of small and very large CUACs, 
increased efficiency at TSL 3 is attained in large part due to 
increased compressor staging, which results in significant 
improvements in part-load performance. In the case of large CUAC, 
increased efficiency is attained without increasing compressor 
staging, i.e., the baseline design has the same number of stages as 
the design at TSL 3. Although the other design measures for large 
CUAC increase the rated IEER of the product, part-load performance 
is not impacted significantly. Because CUAC equipment operates 
frequently in part-load, the TSL 3 design for large CUAC results in 
annual energy savings and operating cost savings that are lower 
relative to what is attained with the designs for the small and very 
large CUACs.
---------------------------------------------------------------------------

    At TSL 3, the projected change in INPV ranges from a decrease of 
$311.58 million to decrease of $88.55 million. If the larger decrease 
is realized, TSL 3 could result in a net loss of 24.71 percent in INPV 
to manufacturers of covered small, large, and very large air-cooled 
commercial package air conditioning and heating equipment. Conversion 
costs are expected to total $120.90 million. 19% of industry product 
listings meet this standard level today.
    After considering the analysis and weighing the benefits and the 
burdens, DOE has tentatively concluded that at TSL 3 for small, large, 
and very large air-cooled commercial package air conditioning and 
heating equipment, the benefits of energy savings, positive NPV of 
customer benefit, positive impacts on consumers (as indicated by 
positive average LCC savings, favorable PBPs, and the large percentage 
of customers who would experience LCC benefits), emission reductions, 
and the estimated monetary value of the emissions reductions would 
outweigh the potential reductions in INPV for manufacturers. The 
Secretary of Energy has concluded that TSL 3 would save a significant 
amount of energy and is technologically feasible and economically 
justified.
    Based on the above considerations, DOE today proposes to adopt the 
energy conservation standards for small, large, and very large air-
cooled commercial package air conditioning and heating equipment at TSL 
3. Table V.22 presents the proposed energy conservation standards for 
small, large, and very large air-cooled commercial package air 
conditioning and heating equipment.

    Table V.22--Proposed Energy Conservation Standards for Small, Large, and Very Large Air-Cooled Commercial
                                 Package Air Conditioning and Heating Equipment
----------------------------------------------------------------------------------------------------------------
 
----------------------------------------------------------------------------------------------------------------
Equipment type                                                Heating type............  Proposed energy
                                                                                        conservation
                                                                                        standard
----------------------------------------------------------------------------------------------------------------
Small Commercial Packaged AC and HP    AC                     Electric Resistance       14.8 IEER.
 (Air-Cooled)-->=65,000 Btu/h and                              Heating or No Heating.
 <135,000 Btu/h Cooling Capacity.
                                       .....................  All Other Types of        14.6 IEER.
                                                               Heating.
                                       HP                     Electric Resistance       14.1 IEER.
                                                               Heating or No Heating.
                                       .....................  All Other Types of        3.5 COP.
                                                               Heating.
Large Commercial Packaged AC and HP    AC                     Electric Resistance       13.9 IEER.
 (Air-Cooled)-->=135,000 Btu/h and                             Heating or No Heating.
 <240,000 Btu/h Cooling Capacity.
                                       .....................  All Other Types of        3.4 COP.
                                                               Heating.
                                       HP                     Electric Resistance       14.2 IEER.
                                                               Heating or No Heating.
                                                              All Other Types of
                                                               Heating.
Very Large Commercial Packaged AC and  AC                     Electric Resistance       14.0 IEER.
 HP (Air-Cooled)-->=240,000 Btu/h and                          Heating or No Heating.   13.4 IEER
 <760,000 Btu/h Cooling Capacity.
                                       .....................  All Other Types of        3.3 COP.
                                                               Heating.
                                       HP                     Electric Resistance       13.2 IEER.
                                                               Heating or No Heating.
                                       .....................  All Other Types of        3.3 COP.
                                                               Heating.
----------------------------------------------------------------------------------------------------------------


[[Page 59009]]

2. Summary of Benefits and Costs (Annualized) of the Proposed Standards
    The benefits and costs of today's proposed standards, for equipment 
sold in 2019-2048, can also be expressed in terms of annualized values. 
The annualized monetary values are the sum of (1) the annualized 
national economic value of the benefits from consumer operation of 
equipment that meet the proposed standards (consisting primarily of 
operating cost savings from using less energy, minus increases in 
equipment purchase and installation costs, which is another way of 
representing consumer NPV), and (2) the annualized monetary value of 
the benefits of emission reductions, including CO2 emission 
reductions.\84\
---------------------------------------------------------------------------

    \84\ DOE used a two-step calculation process to convert the 
time-series of costs and benefits into annualized values. First, DOE 
calculated a present value in 2013, the year used for discounting 
the NPV of total customer costs and savings, for the time-series of 
costs and benefits using discount rates of three and seven percent 
for all costs and benefits except for the value of CO2 
reductions. For the latter, DOE used a range of discount rates. From 
the present value, DOE then calculated the fixed annual payment over 
a 30-year period (2019 through 2048) that yields the same present 
value. The fixed annual payment is the annualized value. Although 
DOE calculated annualized values, this does not imply that the time-
series of cost and benefits from which the annualized values were 
determined is a steady stream of payments.
---------------------------------------------------------------------------

    Although combining the values of operating savings and 
CO2 emission reductions provides a useful perspective, two 
issues should be considered. First, the national operating savings are 
domestic U.S. customer monetary savings that occur as a result of 
market transactions while the value of CO2 reductions is 
based on a global value. Second, the assessments of operating cost 
savings and CO2 savings are performed with different methods 
that use different time frames for analysis. The national operating 
cost savings is measured for the lifetime of small, large, and very 
large air-cooled commercial package air conditioning and heating 
equipment shipped in 2019 -2048. The SCC values, on the other hand, 
reflect the present value of some future climate-related impacts 
resulting from the emission of one ton of carbon dioxide in each year. 
These impacts continue well beyond 2100.
    Estimates of annualized benefits and costs of the proposed 
standards for small, large, and very large air-cooled commercial 
package air conditioning and heating equipment are shown in Table V.23. 
The results under the primary estimate are as follows. Using a 7-
percent discount rate for benefits and costs other than CO2 
reduction, for which DOE used a 3-percent discount rate along with the 
average SCC series that uses a 3-percent discount rate, the cost of the 
standards proposed in this rule is $430 million per year in increased 
equipment costs; while the estimated benefits are $2,177 million per 
year in reduced equipment operating costs, $1,744 million in 
CO2 reductions, and $36.2 million in reduced NOX 
emissions. In this case, the net benefit would amount to $3,558 million 
per year. Using a 3-percent discount rate for all benefits and costs 
and the average SCC series, the estimated cost of the standards 
proposed in this rule is $507 million per year in increased equipment 
costs; while the estimated benefits are $3,426 million per year in 
reduced operating costs, $1,774 million in CO2 reductions, 
and $60.9 million in reduced NOX emissions. In this case, 
the net benefit would amount to approximately $4,755 million per 
year.\85\
---------------------------------------------------------------------------

    \85\ These results are based on emissions factors in AEO 2013, 
the most recent version available at the time of this analysis. Use 
of emissions factors in AEO 2014 would result in a significant 
decrease in cumulative emissions reductions for CO2, 
SO2, and Hg. For example, the estimated decrease for 
CO2 emissions reductions is 36%. The monetized benefits 
from GHG reductions would likely decrease by a comparable amount. In 
the next phase of this rulemaking, DOE plans to use emissions 
factors based on the most recent AEO available, which may or may not 
be AEO 2014, depending on the timing of the issuance of the next 
rulemaking document.

   Table V.23--Annualized Benefits and Costs of Proposed Standards for Small, Large, and Very Large Air-Cooled
                            Commercial Package Air Conditioning and Heating Equipment
----------------------------------------------------------------------------------------------------------------
                                                                           Low net benefits    High net benefits
                                     Discount rate    Primary estimate *      estimate *          estimate *
----------------------------------------------------------------------------------------------------------------
                                                                million 2013$/year
----------------------------------------------------------------------------------------------------------------
                                                    Benefits
----------------------------------------------------------------------------------------------------------------
Operating Cost Savings..........  7%................  2,177.............  1,984.............  2,407
                                  3%................  3,426.............  3,127.............  3,781
CO2 Reduction Monetized Value     5%................  484...............  467...............  505
 ($12.0/t case) **.
CO2 Reduction Monetized Value     3%................  1,774.............  1,714.............  1,846
 ($40.5/t case) **.
CO2 Reduction Monetized Value     2.5%..............  2,632.............  2,543.............  2,737
 ($62.4/t case) **.
CO2 Reduction Monetized Value     3%................  5,504.............  5,317.............  5,727
 ($119/t case) **.
NOX Reduction Monetized Value     7%................  36.18.............  34.75.............  37.90
 (at $2,684/ton) **.
                                  3%................  60.89.............  58.85.............  63.40
Total Benefits [dagger].........  7% plus CO2 range.  2,698 to 7,718....  2,486 to 7,336....  2,950 to 8,172
                                  7%................  3,988.............  3,733.............  4,291
                                  3% plus CO2 range.  3,972 to 8,991....  3,653 to 8,503....  4,349 to 9,572
                                  3%................  5,262.............  4,900.............  5,691
----------------------------------------------------------------------------------------------------------------
                                                      Costs
----------------------------------------------------------------------------------------------------------------
Incremental Product Costs.......  7%................  430...............  350...............  485
                                  3%................  507...............  433...............  550
----------------------------------------------------------------------------------------------------------------

[[Page 59010]]

 
                                                  Net Benefits
----------------------------------------------------------------------------------------------------------------
    Total [dagger]..............  7% plus CO2 range.  2,268 to 7,288....  2,135 to 6,986....  2,465 to 7,687
                                  7%................  3,558.............  3,383.............  3,806
                                  3%................  4,755.............  4,468.............  5,140
                                  3% plus CO2 range.  3,465 to 8,484....  3,220 to 8,071....  3,799 to 9,021
----------------------------------------------------------------------------------------------------------------
* This table presents the annualized costs and benefits associated with small, large, and very large air-cooled
  CUAC and CUHP shipped in 2019-2048. These results include benefits to customers which accrue after 2048 from
  the products purchased in 2019-2048. The results account for the incremental variable and fixed costs incurred
  by manufacturers due to the standard, some of which may be incurred in preparation for the rule. The Primary,
  Low Benefits, and High Benefits Estimates utilize projections of energy prices from the AEO2013 Reference
  case, Low Economic Growth case, and High Economic Growth case, respectively. In addition, incremental product
  costs reflect no change for projected product price trends in the Primary Estimate, an increasing trend for
  projected product prices in the Low Benefits Estimate, and a decreasing trend for projected product prices in
  the High Benefits Estimate. The methods used to derive projected price trends are explained in section IV.F.
** The CO2 values represent global monetized values of the SCC, in 2013$, in 2015 under several scenarios of the
  updated SCC values. The first three cases use the averages of SCC distributions calculated using 5%, 3%, and
  2.5% discount rates, respectively. The fourth case represents the 95th percentile of the SCC distribution
  calculated using a 3% discount rate. The SCC time series incorporate an escalation factor. The value for NOX
  is the average of the low and high values used in DOE's analysis.\86\
[dagger] Total Benefits for both the 3-percent and 7-percent cases are derived using the series corresponding to
  average SCC with 3-percent discount rate. In the rows labeled ``7% plus CO2 range'' and ``3% plus CO2 range,''
  the operating cost and NOX benefits are calculated using the labeled discount rate, and those values are added
  to the full range of CO2 values.

VI. Procedural Issues and Regulatory Review

A. Review Under Executive Orders 12866 and 13563

    Section 1(b)(1) of Executive Order 12866, ``Regulatory Planning and 
Review,'' 58 FR 51735 (Oct. 4, 1993), requires each agency to identify 
the problem that it intends to address, including, where applicable, 
the failures of private markets or public institutions that warrant new 
agency action, as well as to assess the significance of that problem. 
The proposed standards address the following problems:
---------------------------------------------------------------------------

    \86\ These results are based on emissions factors in AEO 2013, 
the most recent version available at the time of this analysis. Use 
of emissions factors in AEO 2014 would result in a significant 
decrease in cumulative emissions reductions for CO2, 
SO2, and Hg. For example, the estimated decrease for 
CO2 emissions reductions is 36%. In the next phase of 
this rulemaking, DOE plans to use emissions factors based on the 
most recent AEO available, which may or may not be AEO 2014, 
depending on the timing of the issuance of the next rulemaking 
document.
---------------------------------------------------------------------------

    (1) There is a lack of customer information in the commercial space 
conditioning market, and the high costs of gathering and analyzing 
relevant information leads some customers to miss opportunities to make 
cost-effective investments in energy efficiency.
    (2) In some cases the benefits of more efficient equipment are not 
realized due to misaligned incentives between purchasers and users. An 
example of such a case is when the equipment purchase decision is made 
by a building contractor or building owner who does not pay the energy 
costs.
    (3) There are external benefits resulting from improved energy 
efficiency of CUAC and CUHP that are not captured by the users of such 
equipment. These benefits include externalities related to public 
health, environmental protection and national security that are not 
reflected in energy prices, such as reduced emissions of air pollutants 
and greenhouse gases that impact human health and global warming.
    The proposed standards address these issues by setting minimum 
levels of energy efficiency, which remove from the market equipment 
that might be purchased by poorly informed customers or by customers 
who would not be paying the costs of operating the equipment. In the 
process of so doing, DOE assembles, analyzes, and receives informed 
comment on a large quantity of information that indicates that most 
customers would be better off purchasing equipment that meets the 
standards rather than less-efficient equipment. In cases in which the 
user of the equipment is not able to make the purchase decision, the 
standards help to ameliorate the problem of misaligned incentives 
between purchasers and users. Finally, the standards account to some 
extent for externalities that are not represented in market 
transactions.
    In addition, DOE has determined that this regulatory action is an 
``economically significant regulatory action'' under section 3(f)(1) 
(``significant regulatory action'') of Executive Order 12866, as it has 
an annual effect on the economy of 100 million or more. Accordingly, 
section 6(a)(3) of the Executive Order requires that DOE prepare a 
regulatory impact analysis (RIA) on this rule and that the Office of 
Information and Regulatory Affairs (OIRA) in the Office of Management 
and Budget (OMB) review this rule. DOE presented to OIRA for review the 
draft rule and other documents prepared for this rulemaking, including 
the RIA, and has included these documents in the rulemaking record. The 
assessments prepared pursuant to Executive Order 12866 can be found in 
the technical support document for this rulemaking.
    DOE has also reviewed this proposal pursuant to Executive Order 
13563, issued on January 18, 2011. 76 FR 3281 (Jan. 21, 2011). EO 13563 
is supplemental to and explicitly reaffirms the principles, structures, 
and definitions governing regulatory review established in Executive 
Order 12866. To the extent permitted by law, agencies are required by 
Executive Order 13563 to: (1) propose or adopt a regulation only upon a 
reasoned determination that its benefits justify its costs (recognizing 
that some benefits and costs are difficult to quantify); (2) tailor 
regulations to impose the least burden on society, consistent with 
obtaining regulatory objectives, taking into account, among other 
things, and to the extent practicable, the costs of cumulative 
regulations; (3) select, in choosing among alternative regulatory 
approaches, those approaches that maximize net benefits (including 
potential economic, environmental, public health and safety, and other 
advantages; distributive impacts; and equity); (4) to the extent 
feasible, specify performance objectives, rather than specifying the 
behavior or manner of compliance that regulated entities must adopt; 
and (5) identify and assess

[[Page 59011]]

available alternatives to direct regulation, including providing 
economic incentives to encourage the desired behavior, such as user 
fees or marketable permits, or providing information upon which choices 
can be made by the public.
    DOE emphasizes as well that Executive Order 13563 requires agencies 
to use the best available techniques to quantify anticipated present 
and future benefits and costs as accurately as possible. In its 
guidance, the Office of Information and Regulatory Affairs has 
emphasized that such techniques may include identifying changing future 
compliance costs that might result from technological innovation or 
anticipated behavioral changes. (DOE also discusses cumulative 
regulatory burdens above in section V.B.2.e.) For the reasons stated in 
the preamble, DOE believes that this NOPR is consistent with these 
principles, including the requirement that, to the extent permitted by 
law, benefits justify costs and that net benefits are maximized.

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 (IRFA) for 
any rule that by law must be proposed for public comment, unless the 
agency certifies that the rule, if promulgated, will not have a 
significant economic impact on a substantial number of small entities. 
As required by Executive Order 13272, ``Proper Consideration of Small 
Entities in Agency Rulemaking,'' 67 FR 53461 (August 16, 2002), DOE 
published procedures and policies on February 19, 2003, to ensure that 
the potential impacts of its rules on small entities are properly 
considered during the rulemaking process. 68 FR 7990. DOE has made its 
procedures and policies available on the Office of the General 
Counsel's Web site (http://energy.gov/gc/office-general-counsel). DOE 
has prepared the following IRFA for the products that are the subject 
of this rulemaking.
    For manufacturers of small, large, and very large air-cooled CUAC 
and CUHP, the Small Business Administration (SBA) has set a size 
threshold, which defines those entities classified as ``small 
businesses'' for the purposes of the statute. DOE used the SBA's small 
business size standards to determine whether any small entities would 
be subject to the requirements of the rule. 65 FR 30836, 30848 (May 15, 
2000), as amended at 65 FR 53533, 53544 (Sept. 5, 2000) and codified at 
13 CFR part 121. The size standards are listed by North American 
Industry Classification System (NAICS) code and industry description 
and are available at http://www.sba.gov/category/navigation-structure/contracting/contracting-officials/small-business-size-standards. 
Manufacturing of small, large, and very large air-cooled CUAC and CUHP 
is classified under NAICS 333415, ``Air-Conditioning and Warm Air 
Heating Equipment and Commercial and Industrial Refrigeration Equipment 
Manufacturing.'' The SBA sets a threshold of 750 employees or less for 
an entity to be considered as a small business for this category.
1. Description and Estimated Number of Small Entities Regulated
    To estimate the number of companies that could be small business 
manufacturers of equipment covered by this rulemaking, DOE conducted a 
market survey using available public information to identify potential 
small manufacturers. DOE's research involved examining industry trade 
association membership directories (including AHRI), public databases 
(e.g., AHRI Directory,\87\ the California Energy Commission Appliance 
Efficiency Database \88\), individual company Web sites, and market 
research tools (e.g., Hoovers reports) to create a list of companies 
that manufacture or sell products covered by this rulemaking. DOE also 
asked stakeholders and industry representatives if they were aware of 
any other small manufacturers during manufacturer interviews and at DOE 
public meetings. DOE reviewed publicly-available data and contacted 
select companies on its list, as necessary, to determine whether they 
met the SBA's definition of a small business manufacturer of covered 
commercial packaged air conditioners. DOE screened out companies that 
do not offer products covered by this rulemaking, do not meet the 
definition of a ``small business,'' or are foreign owned and operated.
---------------------------------------------------------------------------

    \87\ See www.ahridirectory.org/ahriDirectory/pages/home.aspx.
    \88\ See http://www.energy.ca.gov/appliances/.
---------------------------------------------------------------------------

    DOE initially identified at least 13 potential manufacturers of 
commercial packaged air conditioners sold in the U.S. DOE then 
determined that 10 were large manufacturers, manufacturers that are 
foreign owned and operated, or manufacturers that do not produce 
products covered by this rulemaking. DOE was able to determine that 3 
manufacturers meet the SBA's definition of a ``small business'' and 
manufacture products covered by this rulemaking.
    Before issuing this NOPR, DOE spoke with two of the small business 
manufacturers of commercial packaged air conditioners. DOE also 
obtained information about small business impacts while interviewing 
large manufacturers.
    Based on DOE's research, one small manufacturer focused exclusively 
on the design and specification of equipment--but had no production 
assets of its own. All production was outsourced. The other small 
manufacturers performed all design and specification work but also 
owned domestic production facilities and employed production workers.
    Issue 23: DOE requests additional information on the number of 
small businesses in the industry, the names of those small businesses, 
and their role in the market.
2. Description and Estimate of Compliance Requirements
    The proposed standards for commercial packaged air conditioners 
could cause small manufacturers to be at a disadvantage relative to 
large manufacturers. One way in which small manufacturers could be at a 
disadvantage is that they may be disproportionately affected by product 
conversion costs. Product redesign, testing, and certification costs 
tend to be fixed and do not scale with sales volume. For each product 
model, small businesses must make investments in research and 
development to redesign their products, but because they have lower 
sales volumes, they must spread these costs across fewer units. 
Moreover, smaller manufacturers may experience higher testing costs 
relative to larger manufacturers as they may not possess their own test 
facility and therefore must outsource all testing at a higher per unit 
cost. In general, the small manufacturers had a number of equipment 
lines that was similar to that of larger competitors with similar 
market share. However, because small manufacturers have fewer engineers 
than large manufacturers, they may have greater difficulty bringing 
their portfolio of equipment in-line with an amended energy 
conservation standard within the allotted timeframe or may have to 
divert engineering resources from customer and new product initiatives 
for a longer period of time.
    Furthermore, smaller manufacturers may lack the purchasing power of 
larger manufacturers. For example, since motor suppliers give discounts 
to manufacturers based on the number of motors they purchase, larger 
manufacturers may have a purchasing and pricing advantage because their 
higher volume demands. This

[[Page 59012]]

purchasing power differential between high-volume and low-volume orders 
applies to other commercial packaged air conditioner components as 
well.
    In order to meet the proposed standard, manufacturers may have to 
seek outside capital to cover expenses related to testing and product 
design equipment. Smaller firms typically have a higher cost of 
borrowing due to higher risk on the part of investors, largely 
attributed to lower cash flows and lower per unit profitability. In 
these cases, small manufacturers may observe higher costs of debt than 
larger manufacturers.
    To estimate how small manufacturers would be potentially impacted, 
DOE compared required conversion costs at each TSL for a small 
manufacturer with on-site production and an average large manufacturer 
(see Table VI.1 and Table VI.2). In the following tables, TSL 3 
represents the proposed standard.

                                             Table VI.1--Impacts of Conversion Costs on a Small Manufacturer
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                      Capital conversion cost
                                                         as a percentage of    Product conversion cost   Total conversion cost    Total conversion cost
                                                           annual capital         as a percentage of       as a percentage of       as a percentage of
                                                            expenditures          annual R&D expense         annual revenue            annual EBIT
--------------------------------------------------------------------------------------------------------------------------------------------------------
TSL 1...............................................                      122                      526                       14                      159
TSL 2...............................................                      199                      932                       24                      276
TSL 3...............................................                      407                     1948                       49                      573
TSL 4...............................................                      430                     3369                       77                      896
--------------------------------------------------------------------------------------------------------------------------------------------------------


                                             Table VI.2--Impacts of Conversion Costs on a Large Manufacturer
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                      Capital conversion cost
                                                         as a percentage of    Product conversion cost   Total conversion cost    Total conversion cost
                                                           annual capital         as a percentage of       as a percentage of       as a percentage of
                                                            expenditures          annual R&D expense         annual revenue            annual EBIT
--------------------------------------------------------------------------------------------------------------------------------------------------------
TSL 1...............................................                       42                      213                        5                       62
TSL 2...............................................                      105                      287                        9                      100
TSL 3...............................................                      279                      536                       19                      216
TSL 4...............................................                      310                      898                       26                      307
--------------------------------------------------------------------------------------------------------------------------------------------------------

    At TSL 3, the level proposed in this NOPR, DOE estimates capital 
conversion costs of $2.32 million and product conversion costs of $7.04 
million for an average small manufacturer that owns production 
facilities, compared to capital conversion costs of $9.08 million and 
product conversion costs of $11.05 million for an average large 
manufacturer.
    At these levels, the amended standard could contribute to the 
consolidation of the industry. As noted in section V.B.2.a, the GRIM 
free cash flow results indicated that some manufacturers may need to 
access the capital markets in order to fund conversion costs directly 
related to an amended standard. These conversion costs would continue 
to be borne by the identified small manufacturers in spite of any 
outsourcing of manufacturing activities because they must still incur 
the necessary product conversion costs to design, test, certify, and 
market equipment complying with any new standards that DOE may 
promulgate. Given that small manufacturers tend to have less access to 
capital and that the necessary conversion costs are high relative to 
the size of a small business, it is possible the small manufacturers 
will choose to leave the industry or choose to be purchased by or 
merged with larger market players.
    Since the proposed standard could cause small manufacturers to be 
at a disadvantage relative to large manufacturers, DOE cannot certify 
that the proposed standards would not have a significant impact on a 
significant number of small businesses, and consequently, DOE has 
prepared this IRFA analysis.
    Issue 24: DOE requests data on the cost of capital for small 
manufacturers to better quantify how small manufacturers might be 
disadvantaged relative to large competitors.
    Issue 25: DOE requests comment and data on the impact of the 
proposed standard on small business manufacturers, including any 
potential cumulative regulatory effects.
3. Duplication, Overlap, and Conflict with Other Rules and Regulations
    DOE is not aware of any rules or regulations that duplicate, 
overlap, or conflict with the rule being considered today.
4. Significant Alternatives to the Rule
    The discussion above analyzes impacts on small businesses that 
would result from DOE's proposed rule. In addition to the other TSLs 
being considered, the proposed rulemaking TSD includes a regulatory 
impact analysis that discusses the following policy alternatives: (1) 
Consumer rebates; (2) consumer tax credits; (3) manufacturer tax 
credits; (4) voluntary energy efficiency targets; and (5) bulk 
government purchases. While these alternatives may mitigate to some 
varying extent the economic impacts on small entities compared to the 
standards, DOE determined that the energy savings of these alternatives 
are significantly smaller than those that would be expected to result 
from adoption of the proposed standard levels. Accordingly, DOE is 
declining to adopt any of these alternatives and is proposing the 
standards set forth in this rulemaking. (See chapter 17 of the NOPR TSD 
for further detail on the policy alternatives DOE considered.)
    Issue 26: DOE request input on regulatory alternatives to consider 
that would lessen the impact of the rulemaking on small business.

C. Review Under the Paperwork Reduction Act

    Manufacturers of small, large, and very large air-cooled commercial 
package air conditioning and heating equipment must certify to DOE that 
their products comply with any applicable energy conservation 
standards. In certifying compliance, manufacturers must test their 
products according to the DOE test procedures for small, large, and 
very large air-cooled commercial package air conditioning and heating 
equipment, including any amendments adopted for those test procedures. 
DOE has established regulations for the certification and recordkeeping 
requirements for all covered consumer products and

[[Page 59013]]

commercial equipment, including small, large, and very large air-cooled 
commercial package air conditioning and heating equipment. 76 FR 12422 
(March 7, 2011). The collection-of-information requirement for the 
certification and recordkeeping is subject to review and approval by 
OMB under the Paperwork Reduction Act (PRA). This requirement has been 
approved by OMB under OMB control number 1910-1400. Public reporting 
burden for the certification is estimated to average 20 hours per 
response, including the time for reviewing instructions, searching 
existing data sources, gathering and maintaining the data needed, and 
completing and reviewing the collection of information.
    Notwithstanding any other provision of the law, no person is 
required to respond to, nor shall any person be subject to a penalty 
for failure to comply with, a collection of information subject to the 
requirements of the PRA, unless that collection of information displays 
a currently valid OMB Control Number.

D. Review Under the National Environmental Policy Act of 1969

    Pursuant to the National Environmental Policy Act (NEPA) of 1969, 
DOE has determined that the proposed rule fits within the category of 
actions included in Categorical Exclusion (CX) B5.1 and otherwise meets 
the requirements for application of a CX. See 10 CFR Part 1021, App. B, 
B5.1(b); 1021.410(b) and Appendix B, B(1)-(5). The proposed rule fits 
within the category of actions under CX B5.1 because it is a rulemaking 
that establishes energy conservation standards for consumer products or 
industrial equipment, and for which none of the exceptions identified 
in CX B5.1(b) apply. Therefore, DOE has made a CX determination for 
this rulemaking, and DOE does not need to prepare an Environmental 
Assessment or Environmental Impact Statement for this proposed rule. 
DOE's CX determination for this proposed rule is available at http://cxnepa.energy.gov/.

E. Review Under Executive Order 13132

    Executive Order 13132, ``Federalism'' 64 FR 43255 (Aug. 10, 1999), 
imposes certain requirements on Federal 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. EPCA governs and 
prescribes Federal preemption of State regulations as to energy 
conservation for the products that are the subject of this 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,'' 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. 61 FR 
4729 (Feb. 7, 1996). 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

    Title II of the Unfunded Mandates Reform Act of 1995 (UMRA) 
requires each Federal agency to assess the effects of Federal 
regulatory actions on State, local, and Tribal governments and the 
private sector. Public Law 104-4, sec. 201 (codified at 2 U.S.C. 1531). 
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 annually for inflation), section 202 of UMRA requires a 
Federal agency to publish a written statement that estimates the 
resulting costs, benefits, and other effects 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. DOE's policy 
statement is also available at http://energy.gov/gc/office-general-counsel.
    Although this proposed rule does not contain a Federal 
intergovernmental mandate, it may require expenditures of $100 million 
or more on the private sector. Specifically, the proposed rule will 
likely result in a final rule that could require expenditures of $100 
million or more. Such expenditures may include: (1) Investment in 
research and development and in capital expenditures by small, large, 
and very large air-cooled commercial package air conditioning and 
heating equipment manufacturers in the years between the final rule and 
the compliance date for the new standards, and (2) incremental 
additional expenditures by consumers to purchase higher-efficiency 
small, large, and very large air-cooled commercial package air 
conditioning and heating equipment, starting at the compliance date for 
the applicable standard.
    Section 202 of UMRA authorizes a Federal agency to respond to the 
content requirements of UMRA in any other statement or analysis that 
accompanies the proposed rule. 2 U.S.C. 1532(c). The content 
requirements of section 202(b) of UMRA relevant to a private sector 
mandate substantially overlap the economic analysis requirements that 
apply under section 325(o) of EPCA and Executive Order 12866. The 
SUPPLEMENTARY INFORMATION section of the NOPR and the ``Regulatory 
Impact

[[Page 59014]]

Analysis'' section of the TSD for this proposed rule respond to those 
requirements.
    Under section 205 of UMRA, the Department is obligated to identify 
and consider a reasonable number of regulatory alternatives before 
promulgating a rule for which a written statement under section 202 is 
required. 2 U.S.C. 1535(a). DOE is required to select from those 
alternatives the most cost-effective and least burdensome alternative 
that achieves the objectives of the proposed rule unless DOE publishes 
an explanation for doing otherwise, or the selection of such an 
alternative is inconsistent with law. This proposed rule would 
establish energy conservation standards for small, large, and very 
large air-cooled commercial package air conditioning and heating 
equipment that are designed to achieve the maximum improvement in 
energy efficiency that DOE has determined to be both technologically 
feasible and economically justified. A full discussion of the 
alternatives considered by DOE is presented in the ``Regulatory Impact 
Analysis'' section of the TSD for this proposed rule.

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

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

I. Review Under Executive Order 12630

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

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

    Section 515 of the Treasury and General Government Appropriations 
Act, 2001 (44 U.S.C. 3516, note) provides for Federal 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 (Feb. 22, 
2002), and DOE's guidelines were published at 67 FR 62446 (Oct. 7, 
2002). DOE has reviewed this NOPR 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 OIRA 
at OMB, a Statement of Energy Effects for any proposed significant 
energy action. A ``significant energy action'' is defined as any action 
by an agency that 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.
    DOE has tentatively concluded that this regulatory action, which 
sets forth proposed energy conservation standards for small, large, and 
very large air-cooled commercial package air conditioning and heating 
equipment, is not a significant energy action because the proposed 
standards are not likely to have a significant adverse effect on the 
supply, distribution, or use of energy, nor has it been designated as 
such by the Administrator at OIRA. Accordingly, DOE has not prepared a 
Statement of Energy Effects on the proposed rule.

L. Review Under the Information Quality Bulletin for Peer Review

    On December 16, 2004, OMB, in consultation with the Office of 
Science and Technology Policy (OSTP), issued its Final Information 
Quality Bulletin for Peer Review (the Bulletin). 70 FR 2664 (Jan. 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,'' which the Bulletin defines 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.
    In response to OMB's Bulletin, DOE conducted formal in-progress 
peer reviews of the energy conservation standards development process 
and analyses and has prepared a Peer Review Report pertaining to the 
energy conservation standards rulemaking analyses. Generation of this 
report involved a rigorous, formal, and documented evaluation using 
objective criteria and qualified and independent reviewers to make a 
judgment as to the technical/scientific/business merit, the actual or 
anticipated results, and the productivity and management effectiveness 
of programs and/or projects. The ``Energy Conservation Standards 
Rulemaking Peer Review Report'' dated February 2007 has been 
disseminated and is available at the following Web site: 
www.eere.energy.gov/buildings/appliance_standards/peer_review.html.

VII. Public Participation

A. Attendance at the Public Meeting

    The time, date, and location of the public meeting are listed in 
the DATES and ADDRESSES sections at the beginning of this notice. If 
you plan 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.
    In addition, you can attend the public meeting via webinar. Webinar 
registration information, participant instructions, and information 
about the capabilities available to webinar participants will be 
published on DOE's Web site at: http://www.eere.energy.gov/buildings/appliance_standards/rulemaking.aspx/ruleid/59. Participants are 
responsible for ensuring their systems are compatible with the webinar 
software.

B. Procedure for Submitting Prepared General Statements for 
Distribution

    Any person who has plans to present a prepared general statement 
may request that copies of his or her statement be made available at 
the public meeting. Such persons may

[[Page 59015]]

submit requests, along with an advance electronic copy of their 
statement in PDF (preferred), Microsoft Word or Excel, WordPerfect, or 
text (ASCII) file format, to the appropriate address shown in the 
ADDRESSES section at the beginning of this notice. The request and 
advance copy of statements must be received at least one week before 
the public meeting and may be emailed, hand-delivered, or sent by mail. 
DOE prefers to receive requests and advance copies via email. Please 
include a telephone number to enable DOE staff to make follow-up 
contact, if needed.

C. Conduct of the 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 prepared general statements by 
participants, and encourage all interested parties to share their views 
on issues affecting this rulemaking. Each participant will be allowed 
to make a general statement (within time limits determined by DOE), 
before the discussion of specific topics. DOE will allow, as time 
permits, other participants to comment briefly on any general 
statements.
    At the end of all prepared statements on a topic, DOE will permit 
participants to clarify their statements briefly and comment on 
statements made by others. Participants should be prepared to answer 
questions by DOE and by other participants concerning these issues. DOE 
representatives may also ask questions of participants concerning other 
matters relevant to 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 needed for the proper conduct of the public meeting.
    A transcript of the public meeting will be included in the docket, 
which can be viewed as described in the Docket section at the beginning 
of this notice. In addition, any person may buy a copy of the 
transcript from the transcribing reporter.

D. Submission of Comments

    DOE will accept comments, data, and information regarding this 
proposed rule before or after the public meeting, but no later than the 
date provided in the DATES section at the beginning of this proposed 
rule. Interested parties may submit comments, data, and other 
information using any of the methods described in the ADDRESSES section 
at the beginning of this notice.
    Submitting comments via www.regulations.gov. The regulations.gov 
Web page will require you to provide your name and contact information. 
Your contact information will be viewable to DOE Building Technologies 
staff only. Your contact information will not be publicly viewable 
except for your first and last names, organization name (if any), and 
submitter representative name (if any). If your comment is not 
processed properly because of technical difficulties, DOE will use this 
information to contact you. If DOE cannot read your comment due to 
technical difficulties and cannot contact you for clarification, DOE 
may not be able to consider your comment.
    However, your contact information will be publicly viewable if you 
include it in the comment itself or in any documents attached to your 
comment. Any information that you do not want to be publicly viewable 
should not be included in your comment, nor in any document attached to 
your comment. Otherwise, persons viewing comments will see only first 
and last names, organization names, correspondence containing comments, 
and any documents submitted with the comments.
    Do not submit to regulations.gov information for which disclosure 
is restricted by statute, such as trade secrets and commercial or 
financial information (hereinafter referred to as Confidential Business 
Information (CBI)). Comments submitted through regulations.gov cannot 
be claimed as CBI. Comments received through the Web site will waive 
any CBI claims for the information submitted. For information on 
submitting CBI, see the Confidential Business Information section 
below.
    DOE processes submissions made through regulations.gov before 
posting. Normally, comments will be posted within a few days of being 
submitted. However, if large volumes of comments are being processed 
simultaneously, your comment may not be viewable for up to several 
weeks. Please keep the comment tracking number that regulations.gov 
provides after you have successfully uploaded your comment.
    Submitting comments via email, hand delivery/courier, or mail. 
Comments and documents submitted via email, hand delivery, or mail also 
will be posted to regulations.gov. If you do not want your personal 
contact information to be publicly viewable, do not include it in your 
comment or any accompanying documents. Instead, provide your contact 
information in a cover letter. Include your first and last names, email 
address, telephone number, and optional mailing address. The cover 
letter will not be publicly viewable as long as it does not include any 
comments
    Include contact information each time you submit comments, data, 
documents, and other information to DOE. If you submit via mail or hand 
delivery/courier, please provide all items on a CD, if feasible. It is 
not necessary to submit printed copies. No facsimiles (faxes) will be 
accepted.
    Comments, data, and other information submitted to DOE 
electronically should be provided in PDF (preferred), Microsoft Word or 
Excel, WordPerfect, or text (ASCII) file format. Provide documents that 
are not secured, that are written in English, and that are free of any 
defects or viruses. Documents should not contain special characters or 
any form of encryption and, if possible, they should carry the 
electronic signature of the author.
    Campaign form letters. Please submit campaign form letters by the 
originating organization in batches of between 50 to 500 form letters 
per PDF or as one form letter with a list of supporters' names compiled 
into one or more PDFs. This reduces comment processing and posting 
time.
    Confidential Business Information. 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 via 
email, postal mail, or hand delivery/courier two well-marked copies: 
One copy of the document marked confidential including all the 
information believed to be confidential, and one copy of the document 
marked non-confidential with the information believed to be 
confidential deleted. Submit these documents via email or on a CD, if 
feasible. DOE will make its own determination about the confidential

[[Page 59016]]

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.
    It is DOE's policy that all comments may be included in the public 
docket, without change and as received, including any personal 
information provided in the comments (except information deemed to be 
exempt from public disclosure).

E. Issues on Which DOE Seeks Comment

    Although DOE welcomes comments on any aspect of this proposal, DOE 
is particularly interested in receiving comments and views of 
interested parties concerning the following issues:
    1. Use of the IEER as the cooling efficiency metric and COP as the 
heating efficiency metric (for CUHP) for the proposed energy 
conservation standards, including additional data and input regarding 
the uncertainty of IEER test measurements. (See section III.A of this 
notice for additional information.)
    2. Comment on whether the test procedure for air-cooled CUAC and 
CUHP should be amended to revise the weightings for the IEER metric to 
place a higher weighting value on the full-load efficiency. DOE also 
requests data to determine appropriate weighting factors for the full-
load test condition and part-load test conditions (75 percent, 50 
percent, and 25 percent of capacity). (See section III.A of this notice 
for additional information.)
    3. DOE requests comments and detailed information regarding any 
design features, including dual-duct air conditioners, that DOE should 
consider for establishing separate equipment classes in this 
rulemaking. DOE requests that such information provide test data 
illustrating the additional challenges faced by models having such 
design features and a discussion of the customer utility aspects of the 
design feature. In particular, DOE requests detailed comments regarding 
the definition of such equipment classes, and any detailed information, 
such as test data, test conditions, key component design details, as 
well as other relevant information (e.g., fan power consumption) that 
may help DOE evaluate potential alternative equipment class standard 
levels. See section IV.A.2 of this notice for additional information.)
    4. Comment and data regarding additional design options or variants 
of the considered design options that can increase the range of 
considered efficiency improvements, including design options that may 
not yet be found on the market. (See section IV.A.3 of this notice for 
additional information.)
    5. The incremental and max-tech efficiency levels identified for 
the analyses, including whether the efficiency levels identified by DOE 
can be achieved using the technologies screened-in during the screening 
analysis (see section IV.B), and whether higher efficiencies are 
achievable using technologies that were screened-in during the 
screening analysis. Also, DOE seeks comment on the approach of 
extrapolating the efficiency levels from the small, large, and very 
large CUAC with electric resistance heating or no heating equipment 
classes to the remaining equipment classes using the IEER differentials 
in ASHRAE Standard 90.1-2010 draft addendum CL. In addition, input and 
data on the approach for determining the COP levels for the heat pump 
equipment classes using the relationship between IEER and COP. (See 
section IV.C.3 of this for additional information.)
    6. Comments, information, and data that would inform adjustment of 
energy modeling input and/or results that would allow more accurate 
representation of the energy use impacts of design options using the 
modeling tools developed by the Center for Environmental Energy 
Engineering from the University of Maryland College Park. (See section 
IV.C.4 of this notice for additional information.)
    7. Input and data on the estimated incremental manufacturing costs, 
including the extrapolation of incremental costs for equipment classes 
not fully analyzed, in particular for heat pump equipment classes. (See 
section IV.C.4 of this notice for additional information.)
    8. Comments, information, and data that could be used to modify the 
proposed method for using laboratory and modeled IEER test data, which 
were developed in accordance to AHRI Standard 340/360-2007, to 
calculate the performance of CUAC equipment at part-load conditions. 
(See section IV.E.1 of this notice for additional information.)
    9. Comments on the use of a ``generalized building sample'' to 
characterize the energy consumption of CUAC equipment in the commercial 
building stock. Specifically, whether there are any data or information 
that could improve the method for translating the results from the 
1,033 simulated buildings to the generalized building sample. (See 
section IV.E.2 of this notice for additional information.)
    10. Whether using RS Means cost data to develop maintenance, 
repair, and installation costs for CUAC and CUHP equipment is 
appropriate, and if not, what data should be used. (See section IV.F.6 
of this notice for additional information.)
    11. Comments, information and data on the equipment lifetimes 
developed for CUAC and CUHP equipment. Specifically, any information 
that would indicate whether the retirement functions yielding median 
lifetimes of 18.7 years and 15.4 years for CUAC and CUHP equipment, 
respectively, are reasonable. (See section IV.F.7 of this notice for 
additional information.)
    12. Comments, information and data on the base case efficiency 
distributions of CUAC equipment. Given that historical market share 
efficiency data from 1999-2001 were used to inform a consumer choice 
model in the shipments analysis to develop estimated base case 
efficiency distributions in the compliance year (2019), DOE seeks more 
recent historical market share efficiency data would be useful for 
validating the estimated base case efficiency distributions. (See 
section IV.F.9 of this notice for additional information.)
    13. Comments, information and data on the methods used to develop 
the two consumer choice models in the shipments analysis--i.e. one 
model for estimating the selection of CUAC and CUHP equipment by 
efficiency level and another model for the repair vs. replacement 
decision. With regards to the repair vs. replacement decision, the 
model is based on estimates of the cost of repair vs. the cost of new 
equipment. Field data for repair costs and how they vary with equipment 
first cost and age would allow DOE to refine its shipments forecasting 
by more precisely modeling the repair vs. replace decision sensitivity 
to the difference in repair and replacement equipment costs. (See 
section IV.G of this notice for additional information.)
    14. Comments, information and data regarding the lifetime of 
repaired equipment. DOE's analysis considered

[[Page 59017]]

major repair consisting of replacement of the compressor and 
miscellaneous materials associated with the compressor; DOE estimated 
that repaired equipment would last as long as new replacement 
equipment. Information is requested to determine whether this estimate 
is reasonable. (See section IV.G of this notice for additional 
information.)
    15. Comments, information, and data on the repair of CUACs and 
CUHPs in the >=240,000 Btu/h and <760,000 Btu/h equipment classes. For 
this equipment, the shipments analysis estimated that any equipment 
experiencing their first failure would be repaired rather than 
replaced. Information is requested to determine whether this estimate 
is reasonable. (See section IV.G of this notice for additional 
information.)
    16. Comments on its decision to not include a rebound effect for 
more-efficient CUAC and CUHP. (See section IV.H of this notice for 
additional information.)
    17. Comments, information, and data that would inform adjustment of 
the DOE's estimate of $12.7M in conversion costs that occur in the base 
case. (See section IV.J.2.a of this notice for additional information.)
    18. DOE solicits comment on the application of the new SCC values 
used to determine the social benefits of CO2 emissions 
reductions over the rulemaking analysis period. In particular, the 
agency solicits comment on its derivation of SCC values after 2050, 
where the agency applied the average annual growth rate of the SCC 
estimates in 2040-2050 associated with each of the four sets of values. 
(See section IV.L of this notice for additional information.) Comments, 
information, and data on the capital conversion costs and product 
conversion costs estimated for each TSL. In particular, DOE seeks 
comment on the conversion costs at max-tech. (See section V.B.2.a of 
this notice for additional information.)
    19. Comments, information, and data on capacity constraints at each 
TSL--including production capacity constraints, engineering resource 
constraints, and testing capacity constraints that are directly related 
to an amended standard for small, large, and very large CUAC and CUHP. 
In particular, DOE requests comment on whether the proposed effective 
allows for a sufficient conversion period to make the equipment design 
and facility updates necessary to meet an amended standard. (See 
section V.B.2.c of this notice for additional information.)
    20. DOE requests comment on the identified regulations and their 
contribution to cumulative regulatory burden. Additionally, DOE 
requests feedback on product-specific regulations that take effect 
between 2016 and 2022 that were not listed, including identification of 
the specific regulations and data quantifying the associated burdens. 
(See section V.B.2.e of this notice for additional information.)
    21. For this rulemaking, DOE analyzed the effects of potential 
standards on equipment purchased over a 30-year period, and it 
undertook a sensitivity analysis using 9 years rather than 30 years of 
product shipments. The choice of a 30-year period of shipments is 
consistent with the DOE analysis for other products and commercial 
equipment. The choice of a 9-year period is a proxy for the timeline in 
EPCA for the review of certain energy conservation standards and 
potential revision of and compliance with such amended standards. DOE 
is seeking input on ways to refine the analytic timeline. (See section 
V.B.3.a of this notice for additional information.)
    22. Comments, information, and data on the number of small 
businesses in the industry, the names of those small businesses, and 
their role in the market. (See section VI.B.1 of this notice for 
additional information.)
    23. DOE requests data on the cost of capital for small 
manufacturers to better quantify how small manufacturers might be 
disadvantaged relative to large competitors. (See section VI.B.2 of 
this notice for additional information.)
    24. DOE requests comment and data on the impact of the proposed 
standard on small business manufacturers, including any potential 
cumulative regulatory effects.
    25. DOE also seeks comment on whether there are features or 
attributes of the more energy-efficient CUAC and CUHP that 
manufacturers would produce to meet the standards in this proposed rule 
that might affect how they would be used by consumers. DOE requests 
comment specifically on how any such effects should be weighed in the 
choice of standards for the final rule. (See section IV.A.3 of this 
notice for additional information.)
    26. Input on regulatory alternatives to consider that would lessen 
the impact of the rulemaking on small business.

VIII. Approval of the Office of the Secretary

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

List of Subjects in 10 CFR Part 431

    Administrative practice and procedure, Confidential business 
information, Energy conservation, Household appliances, Imports, 
Intergovernmental relations, Reporting and recordkeeping requirements, 
and Small businesses.

    Issued in Washington, DC, on September 18, 2014.
David T. Danielson,
Assistant Secretary, Energy Efficiency and Renewable Energy.
    For the reasons set forth in the preamble, DOE proposes to amend 
part 431 of chapter II, subchapter D, of title 10 of the Code of 
Federal Regulations, as set forth below:

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

0
1. The authority citation for part 431 continues to read as follows:

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

0
2. Section 431.97 is amended by:
0
a. Revising paragraph (b) including Tables 1 through 3;
0
b. Redesignating Tables 4 through 8 as Tables 5 through 9;
0
c. Adding new Table 4; and
0
c. Revising paragraph (c).
    The revision and additions read as follows:


Sec.  431.97  Energy efficiency standards and their compliance dates.

* * * * *
    (b) Each commercial air conditioner or heat pump (not including 
single package vertical air conditioners and single package vertical 
heat pumps, packaged terminal air conditioners and packaged terminal 
heat pumps, computer room air conditioners, and variable refrigerant 
flow systems) manufactured starting on the compliance date listed in 
the corresponding table must meet the applicable minimum energy 
efficiency standard level(s) set forth in Tables 1, 2, 3, and 4 of this 
section.

[[Page 59018]]



    Table 1 to Sec.   431.97--Minimum Cooling Efficiency Standards for Air-Conditioning and Heating Equipment
    [Not including single package vertical air conditioners and single package vertical heat pumps, packaged
    terminal air conditioners and packaged terminal heat pumps, computer room air conditioners, and variable
                          refrigerant flow multi-split air conditioners and heat pumps]
----------------------------------------------------------------------------------------------------------------
                                                                                                    Compliance
                                                                                                 date:  products
        Equipment type         Cooling capacity      Sub-        Heating type      Efficiency      manufactured
                                                   category                          level        on and after .
                                                                                                       . .
----------------------------------------------------------------------------------------------------------------
Small Commercial Packaged Air- <65,000 Btu/h...  AC            All............  SEER = 13......  June 16, 2008.
 Conditioning and Heating                        HP            All............  SEER = 13......  June 16, 2008.
 Equipment (Air-Cooled, 3
 Phase).
Small Commercial Packaged Air- >=65,000 Btu/h    AC            Electric         EER = 11.2.....  January 1,
 Conditioning and Heating       and <135,000                    Resistance      EER = 11.0.....   2010.\1\
 Equipment (Air-Cooled).        Btu/h.                          Heating or No                    January 1,
                                                                Heating.                          2010.\1\
                                                               All Other Types
                                                                of Heating.
                                                 HP            Electric         EER = 11.0.....  January 1,
                                                                Resistance                        2010.\1\
                                                                Heating or No
                                                                Heating.
                                                               All Other Types  EER = 10.8.....  January 1,
                                                                of Heating.                       2010.\1\
Large Commercial Packaged Air- >=135,000 Btu/h   AC            Electric         EER = 11.0.....  January 1,
 Conditioning and Heating       and <240,000                    Resistance      EER = 10.8.....   2010.\1\
 Equipment (Air-Cooled).        Btu/h.                          Heating or No                    January 1,
                                                                Heating.                          2010.\1\
                                                               All Other Types
                                                                of Heating.
Heating Equipment (Air-        >240,000 Btu/h..  HP            Electric         EER = 10.6.....  January 1,
 Cooled).                                                       Resistance                        2010.\1\
                                                                Heating or No
                                                                Heating.
                                                               All Other Types  EER = 10.4.....  January 1,
                                                                of Heating.                       2010.\1\
Very Large Commercial          >=240,000 Btu/h   AC            Electric         EER = 10.0.....  January 1,
 Packaged Air-Conditioning      and <760,000                    Resistance      EER = 9.8......   2010.\1\
 and Heating Equipment (Air-    Btu/h.                          Heating or No                    January 1,
 Cooled).                                                       Heating.                          2010.\1\
                                                               All Other Types
                                                                of Heating.
                                                 HP            Electric         EER = 9.5......  January 1,
                                                                Resistance                        2010.\1\
                                                                Heating or No
                                                                Heating.
                                                               All Other Types  EER = 9.3......  January 1,
                                                                of Heating.                       2010.\1\
Small Commercial Packaged Air- <17,000 Btu/h...  AC            All............  EER = 12.1.....  October 29,
 Conditioning and Heating      >=17,000 Btu/h    HP            All............  EER = 11.2.....   2003.
 Equipment (Water-Cooled,       and <65,000 Btu/ AC            All............  EER = 12.1.....  October 29,
 Evaporatively-Cooled, and      h.               HP            All............  EER = 12.0.....   2003.
 Water-Source).                                                                                  October 29,
                                                                                                  2003.
                                                                                                 October 29,
                                                                                                  2003.
                               >=65,000 Btu/h    AC            Electric         EER = 11.5.....  October 29,
                                and <135,000                    Resistance                        2003.\2\
                                Btu/h.                          Heating or No
                                                                Heating.
                                                               All Other Types  EER = 11.3.....  October 29,
                                                                of Heating.                       2003.\2\
                                                 HP            All............  EER = 12.0.....  October 29,
                                                                                                  2003.\2\
Large Commercial Packaged Air- >=135,000 Btu/h   AC            All............  EER = 11.0.....  October 29,
 Conditioning and Heating       and <240,000     HP            All............  EER = 11.0.....   2004.\3\
 Equipment (Water-Cooled,       Btu/h.                                                           October 29,
 Evaporatively-Cooled, and                                                                        2004.\3\
 Water-Source).
Very Large Commercial          >=240,000 Btu/h   AC            Electric         EER = 11.0.....  January 10,
 Packaged Air-Conditioning      and <760,000                    Resistance      EER = 10.8.....   2011.\3\
 and Heating Equipment (Water-  Btu/h.                          Heating or No                    January 10,
 Cooled, Evaporatively-                                         Heating.                          2011.\3\
 Cooled, and Water-Source).                                    All Other Types
                                                                of Heating.
                                                 HP            Electric         EER = 11.0.....  January 10,
                                                                Resistance                        2011.\3\
                                                                Heating or No
                                                                Heating.
                                                               All Other Types  EER = 10.8.....  January 10,
                                                                of Heating.                       2011.\3\
----------------------------------------------------------------------------------------------------------------
\1\ And manufactured before [date 3 years after final rule Federal Register publication]. See Table 3 of this
  section for updated efficiency standards.
\2\ And manufactured before June 1, 2013. See Table 3 of this section for updated efficiency standards.
\3\ And manufactured before June 1, 2014. See Table 3 of this section for updated efficiency standards.


[[Page 59019]]


    Table 2 to Sec.   431.97--Minimum Heating Efficiency Standards for Air Conditioning and Heating Equipment
                                                  [Heat pumps]
----------------------------------------------------------------------------------------------------------------
                                                                                             Compliance date:
            Equipment type                 Cooling capacity         Efficiency level      Products manufactured
                                                                                           on and  after . . .
----------------------------------------------------------------------------------------------------------------
Small Commercial Packaged Air-         <65,000 Btu/h..........  HSPF = 7.7.............  June 16, 2008.
 Conditioning and Heating Equipment
 (Air-Cooled, 3 Phase).
Small Commercial Packaged Air-         >=65,000 Btu/h and       COP = 3.3..............  January 1, 2010.\1\
 Conditioning and Heating Equipment     <135,000 Btu/h.
 (Air-Cooled).
Large Commercial Packaged Air-         >=135,000 Btu/h and      COP = 3.2..............  January 1, 2010.\1\
 Conditioning and Heating Equipment     <240,000 Btu/h.
 (Air-Cooled).
Very Large Commercial Packaged Air-    >=240,000 Btu/h and      COP = 3.2..............  January 1, 2010.\1\
 Conditioning and Heating Equipment     <760,000 Btu/h.
 (Air-Cooled).
Small Commercial Packaged Air-         <135,000 Btu/h.........  COP = 4.2..............  October 29, 2003.
 Conditioning and Heating Equipment
 (Water-Source).
----------------------------------------------------------------------------------------------------------------
\1\ And manufactured before [date 3 years after final rule Federal Register publication]. See Table 4 of this
  section for updated heating efficiency standards.


 Table 3 to Sec.   431.97--Updates to the Minimum Cooling Efficiency Standards for Air-Conditioning and Heating
                                                    Equipment
    [Not including single package vertical air conditioners and single package vertical heat pumps, packaged
    terminal air conditioners and packaged terminal heat pumps, computer room air conditioners, and variable
                          refrigerant flow multi-split air conditioners and heat pumps]
----------------------------------------------------------------------------------------------------------------
                                                                                                    Compliance
                                                                                   Efficiency     date: Products
        Equipment type         Cooling capacity  Sub-category    Heating type        level       manufactured on
                                                                                                 and after . . .
----------------------------------------------------------------------------------------------------------------
Small Commercial Packaged Air- >=65,000 Btu/h    AC..........  Electric         IEER = 14.8....  [date 3 years
 Conditioning and Heating       and <135,000                    Resistance      IEER = 14.6....   after final
 Equipment (Air-Cooled).        Btu/h.                          Heating or No                     rule Federal
                                                                Heating.                          Register
                                                               All Other Types                    publication].
                                                                of Heating.
                                                 HP..........  Electric         IEER = 14.1....  [date 3 years
                                                                Resistance      IEER = 113.9...   after final
                                                                Heating or No                     rule Federal
                                                                Heating.                          Register
                                                               All Other Types                    publication].
                                                                of Heating.
Large Commercial Packaged Air- >=135,000 Btu/h   AC..........  Electric         IEER = 14.2....  [date 3 years
 Conditioning and Heating       and <240,000                    Resistance      IEER = 14.0....   after final
 Equipment (Air-Cooled).        Btu/h.                          Heating or No                     rule Federal
                                                                Heating.                          Register
                                                               All Other Types                    publication].
                                                                of Heating.
                                                 HP..........  Electric         IEER = 13.4....  [date 3 years
                                                                Resistance      IEER = 13.2....   after final
                                                                Heating or No                     rule Federal
                                                                Heating.                          Register
                                                               All Other Types                    publication].
                                                                of Heating.
Very Large Commercial          >=240,000 Btu/h   AC..........  Electric         IEER = 13.5....  [date 3 years
 Packaged Air-Conditioning      and <760,000                    Resistance      IEER = 13.3....   after final
 and Heating Equipment (Air-    Btu/h.                          Heating or No                     rule Federal
 Cooled).                                                       Heating.                          Register
                                                               All Other Types                    publication]
                                                                of Heating.
                                                 HP..........  Electric         IEER = 12.5....  [date 3 years
                                                                Resistance      IEER = 12.3....   after final
                                                                Heating or No                     rule Federal
                                                                Heating.                          Register
                                                               All Other Types                    publication]
                                                                of Heating.
Small Commercial Packaged Air- >=65,000 Btu/h    ............  Electric         EER = 12.1.....  June 1, 2013.
 Conditioning and Heating       and <135,000                    Resistance      EER = 11.9.....  June 1, 2013.
 Equipment (Water-Cooled).      Btu/h.                          Heating or No
                                                                Heating.
                                                               All Other Types
                                                                of Heating.
Large Commercial Packaged Air- >=135,000 Btu/h   ............  Electric         EER = 12.5.....  June 1, 2014.
 Conditioning and Heating       and <240,000                    Resistance      EER = 12.3.....  June 1, 2014.
 Equipment (Water-Cooled).      Btu/h.                          Heating or No
                                                                Heating.
                                                               All Other Types
                                                                of Heating.
Very Large Commercial          >=240,000 Btu/h   ............  Electric         EER = 12.4.....  June 1, 2014.
 Packaged Air-Conditioning      and <760,000                    Resistance      EER = 12.2.....  June 1, 2014.
 and Heating Equipment (Water-  Btu/h.                          Heating or No
 Cooled).                                                       Heating.
                                                               All Other Types
                                                                of Heating.

[[Page 59020]]

 
Small Commercial Packaged Air- >=65,000 Btu/h    ............  Electric         EER = 12.1.....  June 1, 2013.
 Conditioning and Heating       and <135,000                    Resistance      EER = 11.9.....  June 1, 2013.
 Equipment (Evaporatively-      Btu/h.                          Heating or No
 Cooled).                                                       Heating.
                                                               All Other Types
                                                                of Heating.
Large Commercial Packaged Air- >=135,000 Btu/h   ............  Electric         EER = 12.0.....  June 1, 2014.
 Conditioning and Heating       and <240,000                    Resistance      EER = 11.8.....  June 1, 2014.
 Equipment (Evaporatively-      Btu/h.                          Heating or No
 Cooled).                                                       Heating.
                                                               All Other Types
                                                                of Heating.
Very Large Commercial          >=240,000 Btu/h   ............  Electric         EER = 11.9.....  June 1, 2014.
 Packaged Air-Conditioning      and <760,000                    Resistance      EER = 11.7.....  June 1, 2014.
 and Heating Equipment          Btu/h.                          Heating or No
 (Evaporatively-Cooled).                                        Heating.
                                                               All Other Types
                                                                of Heating.
----------------------------------------------------------------------------------------------------------------


  Table 4 to Sec.   431.97--Updates to the Minimum Heating Efficiency Standards for Air-Cooled Air Conditioning
                                              and Heating Equipment
                                                  [Heat pumps]
----------------------------------------------------------------------------------------------------------------
                                                                                               Compliance date:
                                                                           Efficiency level        Products
         Equipment type           Cooling capacity      Heating type             \1\            manufactured on
                                                                                                and after . . .
----------------------------------------------------------------------------------------------------------------
Small Commercial Packaged Air-   >=65,000 Btu/h and  Electric            COP = 3.5..........  [date 3 years
 Conditioning and Heating         <135,000 Btu/h.     Resistance         COP = 3.4..........   after final rule
 Equipment (Air-Cooled).                              Heating or No                            Federal Register
                                                      Heating.                                 publication].
                                                     All Other Types of
                                                      Heating.
Large Commercial Packaged Air-   >=135,000 Btu/h     Resistance Heating  COP = 3.3..........  [date 3 years
 Conditioning and Heating         and <240,000 Btu/   or No Heating.                           after final rule
 Equipment (Air-Cooled).          h.                 All Other Types of                        Federal Register
                                                      Heating.                                 publication]
Very Large Commercial Packaged   >=240,000 Btu/h     Resistance Heating  COP = 3.2..........  [date 3 years
 Air-Conditioning and Heating     and <760,000 Btu/   or No Heating.                           after final rule
 Equipment (Air-Cooled).          h.                 All Other Types of                        Federal Register
                                                      Heating.                                 publication]
----------------------------------------------------------------------------------------------------------------
\1\ For units tested by AHRI Standards, all COP values must be rated at 47[emsp14][deg]F outdoor dry-bulb
  temperature for air-cooled equipment.

    (c) Each packaged terminal air conditioner (PTAC) and packaged 
terminal heat pump (PTHP) manufactured starting on January 1, 1994, but 
before October 8, 2012 (for standard size PTACs and PTHPs) and before 
October 7, 2010 (for non-standard size PTACs and PTHPs) must meet the 
applicable minimum energy efficiency standard level(s) set forth in 
Table 5 of this section. Each standard size PTAC and PTHP manufactured 
starting on October 8, 2012, and each non-standard size PTAC and PTHP 
manufactured starting on October 7, 2010, must meet the applicable 
minimum energy efficiency standard level(s) set forth in Table 6 of 
this section.
* * * * *
[FR Doc. 2014-22894 Filed 9-29-14; 8:45 am]
BILLING CODE 6450-01-P