[Federal Register Volume 80, Number 137 (Friday, July 17, 2015)]
[Rules and Regulations]
[Pages 42614-42668]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-16927]



[[Page 42613]]

Vol. 80

Friday,

No. 137

July 17, 2015

Part II





Department of Energy





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10 CFR Part 431





Energy Conservation Program for Certain Industrial Equipment: Energy 
Conservation Standards and Test Procedures for Commercial Heating, Air-
Conditioning, and Water-Heating Equipment; Final Rule

  Federal Register / Vol. 80 , No. 137 / Friday, July 17, 2015 / Rules 
and Regulations  

[[Page 42614]]


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DEPARTMENT OF ENERGY

10 CFR Part 431

[Docket No. EERE-2014-BT-STD-0015]
RIN 1904-AD23


Energy Conservation Program for Certain Industrial Equipment: 
Energy Conservation Standards and Test Procedures for Commercial 
Heating, Air-Conditioning, and Water-Heating Equipment

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

ACTION: Final rule.

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SUMMARY: The U.S. Department of Energy (DOE) is amending its energy 
conservation standards for small three-phase commercial air-cooled air 
conditioners (single package only) and heat pumps (single package and 
split system) less than 65,000 Btu/h; water-source heat pumps; and 
commercial oil-fired storage water heaters. Pursuant to the Energy 
Policy and Conservation Act of 1975 (EPCA), as amended, DOE must assess 
whether the uniform national standards for these covered equipment need 
to be updated each time the corresponding industry standard--the 
American National Standards Institute (ANSI)/American Society of 
Heating, Refrigerating, and Air-Conditioning Engineers (ASHRAE)/
Illuminating Engineering Society of North America (IESNA) Standard 90.1 
(ASHRAE Standard 90.1)--is amended, which most recently occurred on 
October 9, 2013. Under EPCA, DOE may only adopt more stringent 
standards if there is clear and convincing evidence showing that more 
stringent amended standards would be technologically feasible and 
economically justified, and would save a significant additional amount 
of energy. The levels DOE is adopting are the same as the efficiency 
levels specified in ASHRAE Standard 90.1-2013. DOE has determined that 
the ASHRAE Standard 90.1-2013 efficiency levels for the equipment types 
listed above are more stringent than existing Federal energy 
conservation standards and will result in economic and energy savings 
compared existing energy conservation standards. Furthermore, DOE has 
concluded that clear and convincing evidence does not exist that would 
justify more-stringent standard levels than the efficiency levels in 
ASHRAE Standard 90.1-2013 for any of the equipment classes. DOE has 
also determined that the standards for small three-phase commercial 
air-cooled air conditioners (split system) do not need to be amended. 
DOE is also updating the current Federal test procedure for commercial 
warm-air furnaces to incorporate by reference the most current version 
of the American National Standards Institute (ANSI) Z21.47, Gas-fired 
central furnaces, specified in ASHRAE Standard 90.1, and the most 
current version of ASHRAE 103, Method of Testing for Annual Fuel 
Utilization Efficiency of Residential Central Furnaces and Boilers.

DATES: The effective date of this rule is September 15, 2015. 
Compliance with the amended standards established for water-source heat 
pumps and commercial oil-fired storage water heaters in this final rule 
is required on and after October 9, 2015. Compliance with the amended 
standards established for small three-phase commercial air-cooled air 
conditioners (single package only) and heat pumps (single package and 
split system) less than 65,000 Btu/h in this final rule is required on 
and after January 1, 2017. The incorporation by reference of certain 
publications listed in this rule was approved by the Director of the 
Federal Register as of September 15, 2015.

ADDRESSES: The docket, which includes Federal Register notices, public 
meeting attendee lists and transcripts, comments, and other supporting 
documents/materials, is available for review at www.regulations.gov. 
All documents in the docket are listed in the www.regulations.gov 
index. However, some documents listed in the index may not be publicly 
available, such as those containing information that is exempt from 
public disclosure.
    A link to the docket Web page can be found at: www.regulations.gov/#!docketDetail;D=EERE-2014-BT-STD-0015. The www.regulations.gov Web 
page will contain instructions on how to access all documents, 
including public comments, in the docket.
    For further information on how to review the docket, contact Ms. 
Brenda Edwards at (202) 586-2945 or by email: 
[email protected].

FOR FURTHER INFORMATION CONTACT:
Ms. Ashley Armstrong, U.S. Department of Energy, Office of Energy 
Efficiency and Renewable Energy, Building Technologies Office, EE-5B, 
1000 Independence Avenue SW., Washington, DC 20585-0121. Telephone: 
(202) 586-6590. Email: [email protected].
Ms. Johanna Hariharan, U.S. Department of Energy, Office of the General 
Counsel, GC-33, 1000 Independence Avenue SW., Washington, DC 20585-
0121. Telephone: (202) 287-6307. Email: [email protected].

SUPPLEMENTARY INFORMATION: This final rule incorporates by reference 
the following industry standards into part 431:
     ANSI Z21.47-2012, ``Standard for Gas-Fired Central 
Furnaces'', approved on March 27, 2012.
    Copies of ANSI Z21.47-2012 can be obtained from ANSI. American 
National Standards Institute. 25 W. 43rd Street, 4th Floor, New York, 
NY 10036. (212) 642-4900, or by going to http://www.ansi.org.
     ASHRAE Standard 103-2007, ``Method of Testing for Annual 
Fuel Utilization Efficiency of Residential Central Furnaces and 
Boilers,'' sections 7.2.2.4, 7.8, 9.2, and 11.3.7, approved on June 27, 
2007.
    Copies of ASHRAE Standard 103-2007 can be obtained from ASHRAE. 
American Society of Heating, Refrigerating and Air-Conditioning 
Engineers Inc., 1791 Tullie Circle NE., Atlanta, Georgia 30329. (404) 
636-8400, or by going to http://www.ashrae.org.
    These standards are described in section IX.N.

Table of Contents

I. Synopsis of the Final Rule
II. Introduction
    A. Authority
    B. Background
    1. ASHRAE Standard 90.1-2013
    2. Previous Rulemaking Documents
    3. Compliance Dates for Amended Federal Test Procedures, Amended 
Federal Energy Conservation Standards, and Representations for 
Certain ASHRAE Equipment
III. General Discussion of Comments Received
    A. General Discussion of the Changes in ASHRAE Standard 90.1-
2013 and Determination of Scope for Further Rulemaking Activity
    B. The Proposed Energy Conservation Standards
IV. Test Procedure Amendments and Discussion of Related Comments
V. Methodology for Small Commercial Air-Cooled Air Conditioners and 
Heat Pumps Less Than 65,000 Btu/h
    A. Market Assessment
    1. Equipment Classes
    2. Review of Current Market
    a. Trade Association Information
    b. Manufacturer Information
    c. Market Data
    B. Engineering Analysis
    1. Approach
    2. Baseline Equipment
    3. Identification of Increased Efficiency Levels for Analysis
    4. Engineering Analysis Results
    a. Manufacturer Markups
    b. Shipping Costs
    C. Markups Analysis
    D. Energy Use Analysis

[[Page 42615]]

    E. 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. Equipment Lifetime
    8. Discount Rate
    9. Base-Case Market Efficiency Distribution
    10. Compliance Date
    11. Payback Period Inputs
    F. National Impact Analysis--National Energy Savings and Net 
Present Value Analysis
    1. Approach
    2. Shipments Analysis
    3. Base-Case and Standards-Case Forecasted Distribution of 
Efficiencies
    4. National Energy Savings and Net Present Value
VI. Methodology for Water-Source Heat Pumps
    A. Market Assessment
    1. Equipment Classes
    2. Review of Current Market
    a. Trade Association Information
    b. Manufacturer Information
    c. Market Data
    B. Engineering Analysis
    1. Approach
    2. Baseline Equipment
    3. Identification of Increased Efficiency Levels for Analysis
    4. Engineering Analysis Results
    a. Manufacturer Markups
    b. Shipping Costs
    C. Markups Analysis
    D. Energy Use Analysis
    E. 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. Equipment Lifetime
    8. Discount Rate
    9. Base-Case Market Efficiency Distribution
    10. Compliance Date
    11. Payback Period Inputs
    F. National Impact Analysis--National Energy Savings and Net 
Present Value Analysis
    1. Approach
    2. Shipments Analysis
    3. Base-Case and Standards-Case Forecasted Distribution of 
Efficiencies
    4. National Energy Savings and Net Present Value
VII. Methodology for Emissions Analysis and Monetizing Carbon 
Dioxide and Other Emissions Impacts
    A. Emissions Analysis
    B. Monetizing Carbon Dioxide and Other Emissions Impacts
    1. Social Cost of Carbon
    a. Monetizing Carbon Dioxide Emissions
    b. Development of Social Cost of Carbon Values
    c. Current Approach and Key Assumptions
    2. Valuation of Other Emissions Reductions
VIII. Analytical Results and Conclusions
    A. Efficiency Levels Analyzed
    1. Small Commercial Air-Cooled Air Conditioners and Heat Pumps 
Less Than 65,000 Btu/h
    2. Water-Source Heat Pumps
    3. Commercial Oil-Fired Storage Water Heaters
    B. Energy Savings and Economic Justification
    1. Small Commercial Air-Cooled Air Conditioners and Heat Pumps 
Less Than 65,000 Btu/h
    a. Economic Impacts on Commercial Customers
    b. National Impact Analysis
    2. Water-Source Heat Pumps
    a. Economic Impacts on Commercial Customers
    b. National Impact Analysis
    3. Commercial Oil-Fired Storage Water Heaters
    C. Need of the Nation To Conserve Energy
    D. Amended Energy Conservation Standards
    1. Small Commercial Air-Cooled Air Conditioners and Heat Pumps 
Less Than 65,000 Btu/h
    2. Water-Source Heat Pumps
    3. Commercial Oil-Fired Storage Water Heaters
IX. Procedural Issues and Regulatory Review
    A. Review Under Executive Order 12866 and 13563
    B. Review Under the Regulatory Flexibility Act
    C. Review Under the Paperwork Reduction Act of 1995
    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
    M. Congressional Notification
    N. Description of Materials Incorporated by Reference
X. Approval of the Office of the Secretary

I. Synopsis of the Final Rule

    Title III, Part C \1\ 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), added by Public Law 95-619, Title IV, section 
441(a), established the Energy Conservation Program for Certain 
Industrial Equipment, which sets forth a variety of provisions designed 
to improve energy efficiency.\2\ These encompass several types of 
commercial heating, air-conditioning, and water-heating equipment, 
including those that are the subject of this rulemaking. (42 U.S.C. 
6311(1)(B) and (K)) EPCA, as amended, also requires the U.S. Department 
of Energy (DOE) to consider amending the existing Federal energy 
conservation standard for certain types of listed commercial and 
industrial equipment (generally, commercial water heaters, commercial 
packaged boilers, commercial air-conditioning and heating equipment, 
and packaged terminal air conditioners and heat pumps) each time the 
American Society of Heating, Refrigerating and Air-Conditioning 
Engineers (ASHRAE) Standard 90.1, Energy Standard for Buildings Except 
Low-Rise Residential Buildings, is amended with respect to such 
equipment. (42 U.S.C. 6313(a)(6)(A)) For each type of equipment, EPCA 
directs that if ASHRAE Standard 90.1 is amended, DOE must adopt amended 
energy conservation standards at the new efficiency level in ASHRAE 
Standard 90.1, unless clear and convincing evidence supports a 
determination that adoption of a more-stringent efficiency level as a 
national standard would produce significant additional energy savings 
and be technologically feasible and economically justified. (42 U.S.C. 
6313(a)(6)(A)(ii)) If DOE decides to adopt as a national standard the 
efficiency levels specified in the amended ASHRAE Standard 90.1, DOE 
must establish such standard not later than 18 months after publication 
of the amended industry standard. (42 U.S.C. 6313(a)(6)(A)(ii)(I)) If 
DOE determines that a more-stringent standard is appropriate under the 
statutory criteria, DOE must establish such more-stringent standard not 
later than 30 months after publication of the revised ASHRAE Standard 
90.1. (42 U.S.C. 6313(a)(6)(B)) ASHRAE officially released ASHRAE 
Standard 90.1-2013 on October 9, 2013, thereby triggering DOE's 
previously referenced obligations pursuant to EPCA to determine for 
those types of equipment with efficiency level or design requirement 
changes beyond the current Federal standard, whether: (1) The amended 
industry standard should be adopted; or (2) clear and convincing 
evidence exists to justify more-stringent standard levels.
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    \1\ For editorial reasons, upon codification in the U.S. Code, 
Part C was redesignated Part A-1.
    \2\ All references to EPCA in this document refer to the statute 
as amended through the Energy Efficiency Improvement Act of 2014, 
Public Law 112-210 (Apr. 30, 2015).
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    DOE published a notice of proposed rulemaking on January 8, 2015, 
in the Federal Register, describing DOE's determination of scope for 
considering amended energy conservation standards with respect to 
certain heating, ventilating, air-conditioning, and water-

[[Page 42616]]

heating equipment addressed in ASHRAE Standard 90.1-2013. 80 FR 1171, 
1180-1186. ASHRAE Standard 90.1-2013 amended its efficiency levels for 
small three-phase air-cooled air conditioners (single package only) and 
heat pumps (single package and split system) less than 65,000 Btu/h, 
water-source heat pumps, commercial oil-fired storage water heaters, 
single package vertical units, and packaged terminal air conditioners. 
ASHRAE Standard 90.1-2013 also updated its referenced test procedures 
for several equipment types.
    In determining the scope of the rulemaking, DOE is statutorily 
required to ascertain whether the revised ASHRAE efficiency levels have 
become more stringent, thereby ensuring that any new amended national 
standard would not result in prohibited ``backsliding.'' For those 
equipment classes for which ASHRAE set more-stringent efficiency levels 
\3\ (i.e., small three-phase air-cooled air conditioners (single 
package only) and heat pumps (single package and split system) less 
than 65,000 Btu/h; water-source heat pumps; commercial oil-fired 
storage water heaters; single package vertical units; and packaged 
terminal air conditioners), DOE analyzed the energy savings potential 
of amended national energy conservation standards (at both the new 
ASHRAE Standard 90.1 efficiency levels and more-stringent efficiency 
levels) in the April 11, 2014 notice of data availability (NODA) (79 FR 
20114) and, except for single package vertical units and packaged 
terminal air conditioners, which are considered in separate 
rulemakings,\4\ in the January 8, 2015 NOPR (80 FR 1171). For equipment 
where more-stringent standard levels than the ASHRAE efficiency levels 
would result in significant energy savings (i.e., small three-phase 
air-cooled air conditioners and heat pumps less than 65,000 Btu/h and 
water-source heat pumps), DOE analyzed the economic justification for 
more-stringent levels in the January 2015 NOPR. 80 FR 1171, 1213-1220 
(Jan. 15, 2015).
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    \3\ ASHRAE Standard 90.1-2013 did not change any of the design 
requirements for the commercial (HVAC) and water-heating equipment 
covered by EPCA.
    \4\ See Packaged Terminal Air Conditioners and Heat Pumps 
Standards Rulemaking Web page: www1.eere.energy.gov/buildings/appliance_standards/rulemaking.aspx/ruleid/64 and Single Package 
Vertical Air Conditioners and Heat Pumps Standards Rulemaking Web 
page: www1.eere.energy.gov/buildings/appliance_standards/rulemaking.aspx?ruleid=107.
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    This final rule applies to three classes of small three-phase air-
cooled air conditioners and heat pumps less than 65,000 Btu/h, three 
classes of water-source heat pumps, and one class of commercial oil-
fired storage water heaters, which satisfy all applicable requirements 
of EPCA and will result in energy savings where models exist below the 
revised efficiency levels. DOE has concluded that, based on the 
information presented and its analyses, there is not clear and 
convincing evidence justifying adoption of more-stringent efficiency 
levels for this equipment.
    It is noted that DOE's current regulations for have a single 
equipment class for small, three-phase commercial air-cooled air 
conditioners less than 65,000 Btu/h, which covers both split-system and 
single-package models. Although ASHRAE Standard 90.1-2013 did not amend 
standard levels for the split-system models within that equipment 
class, it did so for the single-package models. Given this split, in 
this final rule, DOE is once again separating these two types of 
equipment into separate equipment classes. However, following the 
evaluation of amended standards for split-system models under the six-
year-lookback provision at 42 U.S.C. 6313(a)(6)(C), DOE has concluded 
that there is not clear and convincing evidence that would justify 
adoption of more-stringent efficiency levels for small three-phase 
split-system air-cooled air conditioners less than 65,000 Btu/h, where 
the efficiency level in ASHRAE 90.1-2013 is the same as the current 
Federal energy conservation standards.
    Thus, in accordance with the criteria discussed elsewhere in this 
document, DOE is amending the energy conservation standards for three 
classes of small three-phase air-cooled air conditioners and heat pumps 
less than 65,000 Btu/h, three classes of water-source heat pumps, and 
one class of commercial oil-fired storage water heaters by adopting the 
efficiency levels specified by ASHRAE Standard 90.1-2013, as shown in 
Table I.1. Pursuant to EPCA, the amended standards apply to all 
equipment listed in Table I.1 and manufactured in, or imported into, 
the United States on or after the date two years after the effective 
date specified in ASHRAE Standard 90.1-2013 (i.e., by January 1, 2017 
for small air-cooled air conditioners and heat pumps and by October 9, 
2015 for water-source heat pumps and oil-fired storage water heaters). 
(42 U.S.C. 6313(a)(6)(D)(i)) DOE is making a determination that 
standards for split-system air-cooled air conditioners less than 65,000 
Btu/h do not need to be amended.

     Table I.1--Current and Amended Energy Conservation Standards for Specific Types of Commercial Equipment
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                                       Current Federal        Amended Federal       Compliance date of amended
          Equipment class            Energy Conservation    Energy Conservation     Federal Energy Conservation
                                           standard               standard                   standard
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Three-Phase Air-Cooled Single-      13.0 SEER............  14.0 SEER............  January 1, 2017.
 Package Air Conditioners <65,000
 Btu/h.
Three-Phase Air-Cooled Single-      13.0 SEER, 7.7 HSPF..  14.0 SEER, 8.0 HSPF..  January 1, 2017.
 Package Heat Pumps <65,000 Btu/h.
Three-Phase Air-Cooled Split-       13.0 SEER, 7.7 HSPF..  14.0 SEER, 8.2 HSPF..  January 1, 2017.
 System Heat Pumps <65,000 Btu/h.
Oil-Fired Storage Water Heaters     78% Et...............  80% Et...............  October 9, 2015.
 >105,000 Btu/h and <4,000 Btu/h/
 gal.
Water-Source (Water-to-Air, Water-  11.2 EER, 4.2 COP....  12.2 EER, 4.3 COP....  October 9, 2015.
 Loop) Heat Pumps <17,000 Btu/h.
Water-Source (Water-to-Air, Water-  12.0 EER, 4.2 COP....  13.0 EER, 4.3 COP....  October 9, 2015.
 Loop) Heat Pumps >=17,000 and
 <65,000 Btu/h.
Water-Source (Water-to-Air, Water-  12.0 EER, 4.2 COP....  13.0 EER, 4.3 COP....  October 9, 2015.
 Loop) Heat Pumps >=65,000 and
 <135,000 Btu/h.
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[[Page 42617]]

    In addition, DOE is adopting amendments to its test procedures for 
commercial warm-air furnaces, which manufacturers will be required to 
use to certify compliance with energy conservation standards mandated 
under EPCA. See 42 U.S.C. 6314(a)(1)(A) and (4)(B)) and 10 CFR parts 
429 and 431. Specifically, these amendments, which were proposed in the 
January 2015 NOPR, update the citations and incorporations by reference 
in DOE's regulations to the most recent version of American National 
Standards Institute (ANSI) Z21.47, Standard for Gas-Fired Central 
Furnaces (i.e., ANSI Z21.47-2012), and to the most recent version of 
ASHRAE 103, Method of Testing for Annual Fuel Utilization Efficiency of 
Residential Central Furnaces and Boiler (i.e., ASHRAE 103-2007). This 
final rule satisfies the requirement to review the test procedures for 
commercial warm-air furnaces within seven years. 42 U.S.C. 
6314(a)(1)(A).

II. Introduction

    The following section briefly discusses the statutory authority 
underlying today's proposal, as well as some of the relevant historical 
background related to the establishment of standards for small three-
phase air-cooled air conditioners and heat pumps less than 65,000 Btu/
h, water-source heat pumps, and commercial oil-fired storage water 
heaters.

A. Authority

    Title III, Part C \5\ 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), added by Public Law 95-619, Title IV, section 441(a), 
established the Energy Conservation Program for Certain Industrial 
Equipment, which includes the commercial heating, air-conditioning, and 
water-heating equipment that is the subject of this rulemaking.\6\ In 
general, this program addresses the energy efficiency of certain types 
of commercial and industrial equipment. Relevant provisions of the Act 
specifically 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).
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    \5\ For editorial reasons, upon codification in the U.S. Code, 
Part C was redesignated Part A-1.
    \6\ All references to EPCA in this document refer to the statute 
as amended through the American Energy Manufacturing Technical 
Corrections Act (AEMTCA), Public Law 112-210 (Dec. 18, 2012).
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    EPCA contains mandatory energy conservation standards for 
commercial heating, air-conditioning, and water-heating equipment. (42 
U.S.C. 6313(a)) Specifically, the statute sets standards for small, 
large, and very large commercial package air-conditioning and heating 
equipment, packaged terminal air conditioners (PTACs), packaged 
terminal heat pumps (PTHPs), warm-air furnaces, packaged boilers, 
storage water heaters, instantaneous water heaters, and unfired hot 
water storage tanks. Id. In doing so, EPCA established Federal energy 
conservation standards that generally correspond to the levels in 
ASHRAE Standard 90.1, as in effect on October 24, 1992 (i.e., ASHRAE 
Standard 90.1-1989), for each type of covered equipment listed in 42 
U.S.C. 6313(a). The Energy Independence and Security Act of 2007 (EISA 
2007) amended EPCA by adding definitions and setting minimum energy 
conservation standards for single-package vertical air conditioners 
(SPVACs) and single-package vertical heat pumps (SPVHPs). (42 U.S.C. 
6313(a)(10)(A)) The efficiency standards for SPVACs and SPVHPs 
established by EISA 2007 correspond to the levels contained in ASHRAE 
Standard 90.1-2004, which originated as addendum ``d'' to ASHRAE 
Standard 90.1-2001.
    In acknowledgement of technological changes that yield energy 
efficiency benefits, the U.S. Congress further directed DOE through 
EPCA to consider amending the existing Federal energy conservation 
standard for each type of equipment listed, each time ASHRAE Standard 
90.1 is amended with respect to such equipment. (42 U.S.C. 
6313(a)(6)(A)) For each type of equipment, EPCA directs that if ASHRAE 
Standard 90.1 is amended,\7\ DOE must publish in the Federal Register 
an analysis of the energy savings potential of amended energy 
efficiency standards within 180 days of the amendment of ASHRAE 
Standard 90.1. (42 U.S.C. 6313(a)(6)(A)(i)) EPCA further directs that 
DOE must adopt amended standards at the new efficiency level in ASHRAE 
Standard 90.1, unless clear and convincing evidence supports a 
determination that adoption of a more-stringent level would produce 
significant additional energy savings and be technologically feasible 
and economically justified. (42 U.S.C. 6313(a)(6)(A)(ii)) If DOE 
decides to adopt as a national standard the efficiency levels specified 
in the amended ASHRAE Standard 90.1, DOE must establish such standard 
not later than 18 months after publication of the amended industry 
standard. (42 U.S.C. 6313(a)(6)(A)(ii)(I)) However, if DOE determines 
that a more-stringent standard is justified under 42 U.S.C. 
6313(a)(6)(A)(ii)(II), then it must establish such more-stringent 
standard not later than 30 months after publication of the amended 
ASHRAE Standard 90.1. (42 U.S.C. 6313(a)(6)(B)) In addition, DOE notes 
that pursuant to the EISA 2007 amendments to EPCA, under 42 U.S.C. 
6313(a)(6)(C), the agency must periodically review its already-
established energy conservation standards for ASHRAE equipment. In 
December 2012, this provision was further amended by the American 
Energy Manufacturing Technical Corrections Act (AEMTCA) to clarify that 
DOE's periodic review of ASHRAE equipment must occur ``[e]very six 
years.'' (42 U.S.C. 6313(a)(6)(C)(i))
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    \7\ Although EPCA does not explicitly define the term 
``amended'' in the context of ASHRAE Standard 90.1, DOE provided its 
interpretation of what would constitute an ``amended standard'' in a 
final rule published in the Federal Register on March 7, 2007 
(hereafter referred to as the ``March 2007 final rule''). 72 FR 
10038. In that rule, DOE stated that the statutory trigger requiring 
DOE to adopt uniform national standards based on ASHRAE action is 
for ASHRAE to change a standard for any of the equipment listed in 
EPCA section 342(a)(6)(A)(i) (42 U.S.C. 6313(a)(6)(A)(i)) by 
increasing the energy efficiency level for that equipment type. Id. 
at 10042. In other words, if the revised ASHRAE Standard 90.1 leaves 
the standard level unchanged or lowers the standard, as compared to 
the level specified by the national standard adopted pursuant to 
EPCA, DOE does not have the authority to conduct a rulemaking to 
consider a higher standard for that equipment pursuant to 42 U.S.C. 
6313(a)(6)(A). DOE subsequently reiterated this position in a final 
rule published in the Federal Register on July 22, 2009 (74 FR 
36312, 36313) and again on May 16, 2012 (77 FR 28928, 28937). 
However, in the AEMTCA amendments to EPCA in 2012, Congress modified 
several provisions related to ASHRAE Standard 90.1 equipment. In 
relevant part, DOE now must act whenever ASHRAE Standard 90.1's 
``standard levels or design requirements under that standard'' are 
amended. (42 U.S.C. 6313(a)(6)(A)(i)) Furthermore, DOE is now 
required to conduct an evaluation of each class of covered equipment 
in ASHRAE Standard 90.1 ``every 6 years.'' (42 U.S.C. 
6313(a)(6)(C)(i)) For any covered equipment for which more than 6 
years has elapsed since issuance of the most recent final rule 
establishing or amending a standard for such equipment, DOE must 
publish either the required notice of determination that standards 
do not need to be amended or a NOPR with proposed standards by 
December 31, 2013. (42 U.S.C. 6313(a)(6)(C)(vi)) DOE has 
incorporated these new statutory mandates into its rulemaking 
process for covered ASHRAE 90.1 equipment.
---------------------------------------------------------------------------

    AEMTCA also modified EPCA to specify that any amendment to the 
design requirements with respect to the ASHRAE equipment would trigger 
DOE review of the potential energy savings under U.S.C. 
6313(a)(6)(A)(i). Additionally, AEMTCA amended EPCA to require that if 
DOE proposes an amended standard for ASHRAE equipment at levels more 
stringent than

[[Page 42618]]

those in ASHRAE Standard 90.1, DOE, in deciding whether a standard is 
economically justified, must determine, after receiving comments on the 
proposed standard, whether the benefits of the standard exceed its 
burdens by considering, to the maximum extent practicable, the 
following seven factors:
    (1) The economic impact of the standard on manufacturers and 
consumers of the products subject to the standard;
    (2) The savings in operating costs throughout the estimated average 
life of the product in the type (or class) compared to any increase in 
the price, initial charges, or maintenance expenses of the products 
likely to result from the standard;
    (3) The total projected amount of energy savings likely to result 
directly from the standard;
    (4) Any lessening of the utility or the performance of the products 
likely to result from 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 
standard;
    (6) The need for national energy conservation; and
    (7) Other factors the Secretary considers relevant. (42 U.S.C. 
6313(a)(6)(B)(ii))
    EPCA also requires that if a test procedure referenced in ASHRAE 
Standard 90.1 is updated, DOE must update its test procedure to be 
consistent with the amended test procedure in ASHRAE Standard 90.1, 
unless DOE determines that the amended test procedure is not reasonably 
designed to produce test results that reflect the energy efficiency, 
energy use, or estimated operating costs of the ASHRAE equipment during 
a representative average use cycle. In addition, DOE must determine 
that the amended test procedure is not unduly burdensome to conduct. 
(42 U.S.C. 6314(a)(2) and(4))
    Additionally, EISA 2007 amended EPCA to require that at least once 
every seven years, DOE must conduct an evaluation of the test 
procedures for all covered equipment and either amend test procedures 
(if the Secretary determines that amended test procedures would more 
accurately or fully comply with the requirements of 42 U.S.C. 
6314(a)(2)-(3)) or publish notice in the Federal Register of any 
determination not to amend a test procedure. (42 U.S.C. 6314(a)(1)(A)) 
This final rule resulting satisfies the requirement to review the test 
procedures for commercial warm-air furnaces within seven years.
    On October 9, 2013 ASHRAE officially released and made public 
ASHRAE Standard 90.1-2013. This action triggered DOE's obligations 
under 42 U.S.C. 6313(a)(6), as outlined previously.
    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 a covered 
product. (42 U.S.C. 6313(a)(6)(B)(iii)(I)) Also, the Secretary may not 
prescribe an amended or new standard if interested persons have 
established by a preponderance of the evidence that such standard would 
likely result in the unavailability in the United States of any covered 
product 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 at the time of the Secretary's finding. (42 U.S.C. 
6313(a)(6)(B)(iii)(II)(aa))
    Further, EPCA, as codified, 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 applicable test procedure.
    Additionally, when a type or class of covered equipment such as 
ASHRAE equipment, has two or more subcategories, DOE often specifies 
more than one standard level. DOE generally will adopt a different 
standard level than that which applies generally to such type or class 
of products for any group of covered products that have the same 
function or intended use if DOE determines that products within such 
group: (A) Consume a different kind of energy from that consumed by 
other covered products within such type (or class); or (B) have a 
capacity or other performance-related feature which other products 
within such type (or class) do not have and which justifies a higher or 
lower standard. In determining whether a performance-related feature 
justifies a different standard for a group of products, DOE generally 
considers such factors as the utility to the consumer of the feature 
and other factors DOE deems appropriate. In a rule prescribing such a 
standard, DOE includes an explanation of the basis on which such higher 
or lower level was established. DOE plans to follow a similar process 
in the context of this rulemaking.

B. Background

1. ASHRAE Standard 90.1-2013
    As noted previously, ASHRAE released a new version of ASHRAE 
Standard 90.1 on October 9, 2013 (ASHRAE Standard 90.1-2013). The 
ASHRAE standard addresses efficiency levels for many types of 
commercial heating, ventilating, air-conditioning (HVAC), and water-
heating equipment covered by EPCA. ASHRAE Standard 90.1-2013 revised 
its efficiency levels for certain commercial equipment, but for the 
remaining equipment, ASHRAE left in place the preexisting levels (i.e., 
the efficiency levels in ASHRAE Standard 90.1-2010). Specifically, 
ASHRAE updated its efficiency levels for small three-phase air-cooled 
air conditioners (single package only) and heat pumps (single package 
and split system) less than 65,000 Btu/h; water-source heat pumps; 
commercial oil-fired storage water heaters; single package vertical 
units; and packaged terminal air conditioners. ASHRAE Standard 90.1-
2013 did not change any of the design requirements for the commercial 
HVAC and water heating equipment covered by EPCA. See 80 FR 1171, 1177-
1178 (Jan. 8, 2015).
2. Previous Rulemaking Documents
    On April 11, 2014, DOE published a notice of data availability 
(April 2014 NODA) in the Federal Register and requested public comment 
as a preliminary step required pursuant to EPCA when DOE considers 
amended energy conservation standards for certain types of commercial 
equipment covered by ASHRAE Standard 90.1. 79 FR 20114. Specifically, 
the April 2014 NODA presented for public comment DOE's analysis of the 
potential energy savings estimates related to amended national energy 
conservation standards for the types of commercial equipment for which 
DOE was triggered by ASHRAE action, based on: (1) The modified 
efficiency levels contained within ASHRAE Standard 90.1-2013; and (2) 
more-stringent efficiency levels. Id. at 20134-20136. DOE has described 
these analyses and preliminary conclusions and sought input from 
interested parties, including the submission of data and other relevant 
information. Id.
    In addition, DOE presented a discussion in the April 2014 NODA of 
the changes found in ASHRAE Standard 90.1-2013. Id. at 20119-20125. The 
April 2014 NODA includes a description of DOE's evaluation of each

[[Page 42619]]

ASHRAE equipment type in order for DOE to determine whether the 
amendments in ASHRAE Standard 90.1-2013 have increased efficiency 
levels or changed design requirements. As an initial matter, DOE sought 
to determine which requirements for covered equipment in ASHRAE 
Standard 90.1, if any: (1) Have been revised solely to reflect the 
level of the current Federal energy conservation standard (where ASHRAE 
is merely ``catching up'' to the current national standard); (2) have 
been revised but with a reduction in stringency; or (3) have had any 
other revisions made that do not change the standard's stringency, in 
which case, DOE is not triggered to act under 42 U.S.C. 6313(a)(6) for 
that particular equipment type. For those types of equipment in ASHRAE 
Standard 90.1 for which ASHRAE actually increased efficiency levels 
above the current Federal standard, DOE subjected that equipment to the 
potential energy savings analysis discussed previously and presented 
the results in the April 2014 NODA for public comment. 79 FR 20114, 
20134-20136 (April 11, 2014). Lastly, DOE presented an initial 
assessment of the test procedure changes included in ASHRAE Standard 
90.1-2013. Id. at 20124-20125.
    Following the NODA, DOE published a notice of proposed rulemaking 
(NOPR) in the Federal Register on January 8, 2015 (the January 2015 
NOPR), and requested public comment. 80 FR 1171. In the January 2015 
NOPR, DOE proposed amended energy conservation standards for small 
three-phase air-cooled air conditioners (single package only) and heat 
pumps (single package and split system) less than 65,000 Btu/h; water-
source heat pumps; and commercial oil-fired storage water heaters. As 
noted previously, packaged terminal air conditioners and single package 
vertical units were considered in separate rulemakings.
    In addition, DOE's NOPR also proposed adopting amended test 
procedures for commercial warm-air furnaces.
3. Compliance Dates for Amended Federal Test Procedures, Amended 
Federal Energy Conservation Standards, and Representations for Certain 
ASHRAE Equipment
    This final rule specifies the compliance dates for amended energy 
conservation standards as shown in Table I.1. In addition, compliance 
with the amended test procedure for commercial warm-air furnaces is 
required on or after July 11, 2016.

III. General Discussion of Comments Received

    In response to its request for comment on the January 2015 NOPR, 
DOE received eight comments from manufacturers, trade associations, 
utilities, and energy efficiency advocates. Commenters included: Lennox 
International Inc.; Goodman Global, Inc.; California Investor-Owned 
Utilities (CA IOUs); a group including Appliance Standards Awareness 
Project (ASAP), the American Council for an Energy-Efficient Economy 
(ACEEE), Alliance to Save Energy (ASE), and the Natural Resources 
Defense Council (NRDC) (jointly referred to as the Advocates); the Air-
conditioning, Heating, and Refrigeration Institute (AHRI); United 
Technologies (UTC)--Carrier; Northwest Energy Efficiency Alliance 
(NEEA); and a group of 12 associations led by the U.S. Chamber of 
Commerce (jointly referred to as the Associations). As discussed 
previously, these comments are available in the docket for this 
rulemaking and may be reviewed as described in the ADDRESSES section. 
The following section summarizes the issues raised in these comments, 
along with DOE's responses.

A. General Discussion of the Changes in ASHRAE Standard 90.1-2013 and 
Determination of Scope for Further Rulemaking Activity

    As discussed previously, before beginning an analysis of the 
potential economic impacts and energy savings that would result from 
adopting the efficiency levels specified by ASHRAE Standard 90.1-2013 
or more-stringent efficiency levels, DOE first sought to determine 
whether or not the ASHRAE Standard 90.1-2013 efficiency levels actually 
represented an increase in efficiency above the current Federal 
standard levels. DOE discussed each equipment class for which the 
ASHRAE Standard 90.1-2013 efficiency level differs from the current 
Federal standard level, along with DOE's preliminary conclusion as to 
the action DOE is taking with respect to that equipment in the January 
2015 NOPR. See 80 FR 1171, 1180-1185 (Jan. 8, 2015). (Once again, DOE 
notes that ASHRAE Standard 90.1-2013 did not change any of the design 
requirements for the commercial HVAC and water-heating equipment 
covered by EPCA, so DOE did not conduct further analysis in the NOPR on 
that basis.) DOE tentatively concluded from this analysis that the only 
efficiency levels that represented an increase in efficiency above the 
current Federal standards were those for small three-phase air-cooled 
air conditioners (single package only) and heat pumps (single package 
and split system) less than 65,000 Btu/h; water-source heat pumps, 
commercial oil-fired storage water heaters; single package vertical 
units, and packaged terminal air conditioners. For a more detailed 
discussion of this approach, readers should refer to the preamble to 
the January 2015 NOPR. See Id. DOE did not receive any comments on this 
approach.

B. The Proposed Energy Conservation Standards

    In the January 2015 NOPR, DOE proposed to adopt the efficiency 
levels in ASHRAE Standard 90.1-2013 for small three-phase air-cooled 
air conditioners (single package only) and heat pumps (single package 
and split system) less than 65,000 Btu/h; water-source heat pumps; and 
commercial oil-fired storage water heaters. 80 FR 1171, 1224-1227 (Jan. 
8, 2015). Several commenters expressed support for DOE's proposal to 
adopt the efficiency levels in ASHRAE 90.1-2013 for small three-phase 
commercial air conditioners and heat pumps less than 65,000 Btu/h 
(e.g., AHRI, No. 38 at p. 1; Goodman Global, Inc., No. 42 at p. 1; 
Lennox International Inc., No. 36 at p. 2). AHRI and Lennox 
International also agreed that standards for split-system air-cooled 
air conditioners less than 65,000 Btu/h do not need to be amended 
(AHRI, No. 38 at p. 2; Lennox International Inc., No. 36 at p. 3), 
Finally, AHRI supported the ASHRAE 90.1-2013 levels for water-source 
heat pumps and commercial oil-fired storage water heaters as well 
(AHRI, No. 38 at p. 1).
    On the other hand, the Advocates, NEEA, and the CA IOUs commented 
that DOE should adopt higher standards than those in ASHRAE 90.1-2013 
for water-source heat pumps between 17,000 and 65,000 Btu/h. 
(Advocates, No. 39 at p. 2; CA IOUs, No. 40 at p. 2; NEEA, No. 41 at p. 
2) The Advocates and CA IOUs noted that for that equipment class, 
efficiency level 2 is cost effective at both 3 and 7 percent discount 
rates, while efficiency level 3, which would save additional energy, 
would not result in a net cost to consumers. (Advocates, No. 39 at p. 
2; CA IOUs, No. 40 at p. 2) NEEA noted that the energy savings 
available supported a more in depth analysis of the economic 
justification and energy analysis for this equipment class (NEEA, No. 
41 at p. 2)
    In response to the submitted comments, DOE maintains its position 
of adopting the efficiency levels in ASHRAE 90.1-2013 for all equipment 
in

[[Page 42620]]

this rulemaking and not amending the standards for split-system air-
cooled air conditioners less than 65,000 Btu/h. DOE notes that despite 
the positive economic benefits for water-source heat pumps 17,000 to 
65,000 Btu/h at efficiency levels higher than those in ASHRAE 90.1-
2013, the uncertainty present in the energy use, shipments, and 
national impact analyses are too great to provide clear and convincing 
evidence to adopt more stringent energy conservation standards. 
Furthermore, following the NOPR, DOE did not receive any additional 
data or information that would allow it to conduct more in-depth 
analysis for this equipment. See section VIII.D.2 for further 
information.

IV. Test Procedure Amendments and Discussion of Related Comments

    EPCA requires the Secretary to amend the DOE test procedures for 
covered ASHRAE equipment to the latest version of those generally 
accepted industry testing procedures or the rating procedures developed 
or recognized by AHRI or by ASHRAE, as referenced by ASHRAE/IES 
Standard 90.1, unless the Secretary determines by rule published in the 
Federal Register and supported by clear and convincing evidence that 
the latest version of the industry test procedure does not meet the 
requirements for test procedures described in paragraphs (2) and (3) of 
42 U.S.C. 6314(a).\8\ (42 U.S.C. 6314(a)(4)(B))
---------------------------------------------------------------------------

    \8\ (2) Test procedures prescribed in accordance with this 
section shall be reasonably designed to produce test results which 
reflect energy efficiency, energy use, and estimated operating costs 
of a type of industrial equipment (or class thereof) during a 
representative average use cycle (as determined by the Secretary), 
and shall not be unduly burdensome to conduct. (3) If the test 
procedure is a procedure for determining estimated annual operating 
costs, such procedure shall provide that such costs shall be 
calculated from measurements of energy use in a representative 
average-use cycle (as determined by the Secretary), and from 
representative average unit costs of the energy needed to operate 
such equipment during such cycle. The Secretary shall provide 
information to manufacturers of covered equipment respecting 
representative average unit costs of energy.
---------------------------------------------------------------------------

    In the January 2015 NOPR, in keeping with EPCA's mandate to 
incorporate the latest version of the applicable industry test 
procedure pursuant to 42 U.S.C. 6314(a)(4)(B), DOE proposed to update 
its commercial warm air furnace test procedure by incorporating by 
reference ANSI (American National Standards Institute) Z21.47-2012, 
Standard for Gas-Fired Central Furnaces. 80 FR 1171, 1185-1186 (Jan. 8, 
2015). DOE determined that the changes to the 2012 version do not 
impact those provisions of that industry test procedure that are used 
under the DOE test procedure for gas-fired warm air furnaces, and, 
therefore, such changes do not affect the energy efficiency ratings for 
gas-fired furnaces. As such, DOE anticipated no substantive change or 
increase in test burden to be associated with this test procedure 
amendment for warm air furnaces.
    DOE is also required to review the test procedures for covered 
ASHRAE equipment at least once every seven years. (42 U.S.C. 
6314(a)(1)(A)) In addition to the updates to the referenced standards 
discussed previously, In the January 2015 NOPR, DOE also proposed to 
update the citations and incorporations by reference in DOE's 
regulations for commercial warm-air furnaces to the most recent version 
of ASHRAE 103, Method of Testing for Annual Fuel Utilization Efficiency 
of Residential Central Furnaces and Boiler (i.e., ASHRAE 103-2007). 80 
FR 1171, 1185-1186 (Jan. 8, 2015). The applicable sections of this 
standard include measurement of condensate and calculation of 
additional heat gain and heat losses for condensing furnaces. DOE noted 
that the most recent version does not contain any updates to the 
sections currently referenced by the DOE test procedure, so no 
additional burden would be expected to result from this test procedure 
update.
    In response to the NOPR, Lennox International agreed with DOE's 
proposal to incorporate the latest versions of ANSI Z21.47 and ASHRAE 
103 by reference as the applicable test procedure for commercial warm-
air furnaces. (Lennox International Inc., No. 36 at p. 2) DOE adopts 
these updates in this final rule.
    DOE is aware that some commercial furnaces are designed for make-up 
air heating (i.e., heating 100 percent outdoor air). DOE defines 
``commercial warm air furnace'' at 10 CFR 431.72 as self-contained oil-
fired or gas-fired furnaces designed to supply heated air through ducts 
to spaces that require it, with a capacity (rated maximum input) at or 
above 225,000 Btu/h. Further, DOE's definitions specify that this 
equipment includes combination warm air furnace/electric air 
conditioning units but does not include unit heaters and duct furnaces. 
Given the characteristics of this category of commercial furnaces, DOE 
concludes that gas-fired and oil-fired commercial furnaces that are 
designed for make-up air heating and that have input ratings at or 
above 225,000 Btu/h meet the definition of ``commercial warm air 
furnace'' because they are self-contained units that supply heated air 
through ducts. Consequently, DOE is clarifying that commercial warm air 
furnaces that are designed for make-up air heating are subject to DOE's 
regulatory requirements, including being tested according to the test 
procedure specified in 10 CFR 431.76.

V. Methodology for Small Commercial Air-Cooled Air Conditioners and 
Heat Pumps Less Than 65,000 Btu/h

    This section addresses the analyses DOE has performed for this 
rulemaking with respect to small commercial air-cooled air conditioners 
and heat pumps less than 65,000 Btu/h. A separate subsection addresses 
each analysis. In overview, DOE used a spreadsheet to calculate the 
life-cycle cost (LCC) and payback periods (PBPs) of potential energy 
conservation standards. DOE used another spreadsheet to provide 
shipments projections and then calculate national energy savings and 
net present value impacts of potential amended energy conservation 
standards.

A. Market Assessment

    To begin its review of the ASHRAE Standard 90.1-2013 efficiency 
levels, DOE developed 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 included both quantitative and qualitative assessments based 
primarily on publicly available information. The subjects addressed in 
the market assessment for this rulemaking include equipment classes, 
manufacturers, quantities, and types of equipment sold and offered for 
sale. The key findings of DOE's market assessment are summarized in the 
following sections. For additional detail, see chapter 2 of the final 
rule technical support document (TSD).
1. Equipment Classes
    The Federal energy conservation standards for air-cooled air 
conditioners and heat pumps are differentiated based on the cooling 
capacity (i.e., small, large, or very large). For small equipment, 
there is an additional disaggregation into: (1) equipment less than 
65,000 Btu/h and (2) equipment greater than or equal to 65,000 Btu/h 
and less than 135,000 Btu/h. ASHRAE Standard 90.1-2013 also 
differentiates the equipment that is less than 65,000 Btu/h into split 
system and single package subcategories. In the past, DOE has followed 
the same disaggregation. However, when EISA 2007 increased the 
efficiency levels to identical levels across single package and split 
system equipment, effective in 2008, DOE

[[Page 42621]]

combined the equipment classes in the CFR, resulting in only two 
equipment classes, one for air conditioners and one for heat pumps. 74 
FR 12058, 12074 (March 23, 2009). Because ASHRAE 90.1-2013 has 
increased the standard for only single package air conditioners, and 
has increased the HSPF level to a more stringent level for split system 
heat pumps than for single package heat pumps, and DOE is obligated to 
adopt, at a minimum, the increased level in ASHRAE 90.1-2013 for that 
equipment class, DOE proposed in the January 2015 NOPR re-creating 
separate equipment classes for single package and split system 
equipment in the overall equipment classes of small commercial package 
air conditioners and heat pumps (three-phase air-cooled) less than 
65,000 Btu/h. 80 FR 1171, 1186-1187 (Jan. 8, 2015). In response, AHRI 
supported DOE's proposal to re-create separate equipment classes for 
single package and split system air conditioning and heating equipment 
(air-cooled, three-phase). (AHRI, No. 38 at p. 1). In this final rule, 
DOE adopts these amended equipment classes, as shown in Table V.1.

 Table V.1--Amended Equipment Classes for Small Commercial Packaged Air-
            Conditioning and Heating Equipment <65,000 Btu/h
------------------------------------------------------------------------
             Product                Cooling capacity     Sub-category
------------------------------------------------------------------------
Small Commercial Packaged Air      <65,000 Btu/h....  AC.
 Conditioning and Heating                             HP.
 Equipment (Air-Cooled, 3-Phase,
 Split System).
Small Commercial Packaged Air      <65,000 Btu/h....  AC.
 Conditioning and Heating                             HP.
 Equipment (Air-Cooled, 3-Phase,
 Single Package).
------------------------------------------------------------------------

2. Review of Current Market
    In order to obtain the information needed for the market assessment 
for this rulemaking, DOE consulted a variety of sources, including 
manufacturer literature, manufacturer Web sites, and the AHRI-certified 
directory.\9\ The information DOE gathered serves as resource material 
throughout the rulemaking. The sections below provide an overview of 
the market assessment, and chapter 2 of the final rule TSD provides 
additional detail on the market assessment, including citations to 
relevant sources.
---------------------------------------------------------------------------

    \9\ AHRI Directory of Certified Product Performance (2013) 
(Available at: www.ahridirectory.org) (Last accessed November 11, 
2013).
---------------------------------------------------------------------------

a. Trade Association Information
    DOE researched various trade groups representing manufacturers, 
distributors, and installers of the various types of equipment being 
analyzed in this rulemaking. AHRI is one of the largest trade 
associations for manufacturers of space heating, cooling, and water 
heating equipment, representing more than 90 percent of the residential 
and commercial air conditioning, space heating, water heating, and 
commercial refrigeration equipment manufactured in the United 
States.\10\ AHRI also develops and publishes test procedure standards 
for measuring and certifying the performance of residential and 
commercial HVAC equipment and coordinates with the International 
Organization for Standardization (ISO) to help harmonize U.S. standards 
with international standards, if feasible. AHRI also maintains the AHRI 
Directory of Certified Product Performance, which is a database that 
lists all the products and equipment that have been certified by AHRI, 
thereby providing equipment ratings for all manufacturers who elect to 
participate in the program. DOE utilized this database in developing 
base-case efficiency distributions.
---------------------------------------------------------------------------

    \10\ Air-Conditioning, Heating, and Refrigeration Institute Web 
site, About Us (2013) (Available at: www.ari.org/site/318/About-Us) 
(Last accessed December 18, 2014).
---------------------------------------------------------------------------

    The Heating, Air-conditioning and Refrigeration Distributors 
International (HARDI) is a trade association that represents over 450 
wholesale heating, ventilating, air-conditioning, and refrigeration 
(HVACR) companies, plus over 300 manufacturing associates and nearly 
140 manufacturing representatives. HARDI estimates that 80 percent of 
the revenue of HVACR systems goes through its members.\11\ DOE did not 
utilize HARDI data for this rule.
---------------------------------------------------------------------------

    \11\ Heating, Air-conditioning & Refrigeration Distributors 
International Web site, About HARDI (2014) (Available at: 
www.hardinet.org/about-hardi-0) (Last accessed February 10, 2014).
---------------------------------------------------------------------------

    The Air Conditioning Contractors of America (ACCA) is another trade 
association whose members include over 4,000 contractors and 60,000 
professionals in the indoor environment and energy service community. 
According to their Web site, ACCA provides contractors with technical, 
legal, and market resources, helping to promote good practices and to 
keep buildings safe, clean, and affordable.\12\ DOE did not use ACCA 
data for this rule.
---------------------------------------------------------------------------

    \12\ Air Conditioning Contractors of America Web site, About 
ACCA (2014) (Available at: www.acca.org/acca) (Last accessed 
February 10, 2014).
---------------------------------------------------------------------------

b. Manufacturer Information
    DOE reviewed data for air-cooled commercial air conditioners and 
heat pumps currently on the market by examining the AHRI Directory of 
Certified Product Performance. DOE identified 23 parent companies 
(comprising 61 manufacturers) of small three-phase air-cooled air 
conditioners and heat pumps, which are listed in chapter 2 of the final 
rule TSD. Of these manufacturers, five were identified as small 
businesses based upon number of employees and the employee thresholds 
set by the Small Business Administration. More details on this analysis 
can be found below in section IX.B.
c. Market Data
    DOE reviewed the AHRI database to characterize the efficiency and 
performance of small commercial air-cooled air conditioners and heat 
pumps less than 65,000 Btu/h models currently on the market. The full 
results of this market characterization are found in chapter 2 of the 
final rule TSD. For split-system air conditioners, the average SEER 
value was 13.9, and 120 models (0.1 percent of the total models) have 
SEER ratings below the ASHRAE Standard 90.1-2013 level of 13.0 SEER. 
For single-package air conditioners, the average SEER value was 14.3, 
and 1,450 models (45 percent of the total models) have SEER ratings 
below the ASHRAE Standard 90.1-2013 level of 14.0 SEER.
    For single-package heat pumps, the average SEER value is 14.0. Of 
the models identified by DOE, 653 models (54 percent of the total 
models) have SEER ratings below the ASHRAE Standard 90.1-2013 level of 
14.0 SEER. The average HSPF value for this equipment class is 7.9. Of 
the models identified by DOE, 632 models (52 percent of the total 
models) have HSPF ratings below the ASHRAE Standard 90.1-2013 levels of 
8.0. For split-system

[[Page 42622]]

heat pumps, the average SEER value for this equipment class is 13.7. Of 
the models identified by DOE, 30,009 models (64 percent of the total 
models) have SEER ratings below the ASHRAE Standard 90.1-2013 level of 
14.0. The average HSPF for this equipment class is 7.9. Of the models 
identified by DOE, 36,902 models (79 percent of the total models) have 
HSPF ratings below the ASHRAE Standard 90.1-2013 level of 8.2. For more 
information on market performance data, see chapter 2 of the final rule 
TSD.

B. Engineering Analysis

    The engineering analysis establishes the relationship between an 
increase in energy efficiency and the increase in cost (manufacturer 
selling price (MSP)) of a piece of equipment DOE is evaluating for 
potential amended energy conservation standards. This relationship 
serves as the basis for cost-benefit calculations for individual 
consumers, manufacturers, and the Nation. The engineering analysis 
identifies representative baseline equipment, which is the starting 
point for analyzing possible energy efficiency improvements. For 
covered ASHRAE equipment, DOE sets the baseline for analysis at the 
ASHRAE Standard 90.1 efficiency level, because by statute, DOE cannot 
adopt any level below the revised ASHRAE level. The engineering 
analysis then identifies higher efficiency levels and the incremental 
increase in product cost associated with achieving the higher 
efficiency levels. After identifying the baseline models and cost of 
achieving increased efficiency, DOE estimates the additional costs to 
the commercial consumer through an analysis of contractor costs and 
markups and uses that information in the downstream analyses to examine 
the costs and benefits associated with increased equipment efficiency.
    DOE typically structures its engineering analysis around one of 
three methodologies: (1) The design-option approach, which calculates 
the incremental costs of adding specific design options to a baseline 
model; (2) the efficiency-level approach, which calculates the relative 
costs of achieving increases in energy efficiency levels without regard 
to the particular design options used to achieve such increases; and/or 
(3) the reverse-engineering or cost-assessment approach, which involves 
a ``bottom-up'' manufacturing cost assessment based on a detailed bill 
of materials derived from teardowns of the equipment being analyzed. A 
supplementary method called a catalog 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. Deciding which methodology to use for the engineering 
analysis depends on the equipment, the design options under study, and 
any historical data upon which DOE may draw.
1. Approach
    As explained in the January 2015 NOPR, DOE used a combination of 
the efficiency-level and the cost-assessment approach for this 
analysis. 80 FR 1171, 1187-1188 (Jan. 8, 2015). DOE used the 
efficiency-level approach to identify incremental improvements in 
efficiency for each equipment class and the cost-assessment approach to 
develop a cost for each efficiency level. The efficiency levels that 
DOE considered in the engineering analysis were representative of 
three-phase central air conditioners and heat pumps currently produced 
by manufacturers at the time the engineering analysis was developed. 
DOE relied on data reported in the AHRI Directory of Certified Product 
Performance to select representative efficiency levels.
    DOE generated a bill of materials (BOM) for each representative 
product that it disassembled. DOE did this for multiple manufacturers' 
products that span a range of efficiency levels for the equipment 
classes that are analyzed in this rulemaking. The BOMs describe the 
manufacture of the equipment in detail, listing all parts and including 
all manufacturing steps required to make each part and to assemble the 
unit. DOE also conducted catalog teardowns to supplement the 
information obtained directly from physical teardowns. Subsequently, 
DOE developed a cost model that calculates manufacturer production cost 
(MPC) for each unit, based on the detailed BOM data. Chapter 3 of the 
final rule TSD describes DOE's cost model in greater detail. The 
calculated costs were plotted as a function of the equipment efficiency 
levels (based on rated efficiency) to create cost-efficiency curves. 
DOE notes that the costs at some efficiency levels were interpolated or 
extrapolated based on the available physical and catalog teardown data.
    DOE developed cost-efficiency curves for a representative capacity 
of three tons, which it decided well represents the range of capacities 
on the market for commercial three-phase products. Because other 
capacity levels had similar designs and efficiency levels, cost-
efficiency curves were not developed for any other capacities. Instead, 
DOE was able to utilize the cost-efficiency curve for the 
representative capacity and apply it to all three-phase products.
    DOE based the cost-efficiency relationship for three-phase central 
air conditioners and heat pumps on reverse engineering conducted for 
the June 2011 direct final rule (DFR) for single-phase central air 
conditioners and heat pumps. 76 FR 37408. DOE researched manufacturer 
literature and noticed that most model numbers between single-phase 
products and three-phase equipment were interchangeable, with only a 
single-digit difference in the model number for the supply voltage. 
Although three-phase equipment contains three-phase compressors instead 
of single-phase compressors, DOE did not notice any inconsistency in 
energy efficiency ratings between single-phase products and three-phase 
equipment. To supplement the 2011 DFR data (29 physical teardowns and 
12 catalog teardowns), DOE completed one physical teardown and seven 
catalog teardowns of three-phase equipment. This approach allowed DOE 
to provide an estimate of equipment prices at different efficiencies 
and spanned a range of technologies currently on the market that are 
used to achieve the increased efficiency levels.
2. Baseline Equipment
    DOE selected baseline efficiency levels as reference points for 
each equipment class, against which it measured changes resulting from 
potential amended energy conservation standards. DOE defined the 
baseline efficiency levels as reference points to compare the 
technology, energy savings, and cost of equipment with higher energy 
efficiency levels. Typically, units at the baseline efficiency level 
just meet Federal energy conservation standards and provide basic 
consumer utility. However, EPCA requires that DOE must adopt either the 
ASHRAE Standard 90.1-2013 levels or more-stringent levels. Therefore, 
because the ASHRAE Standard 90.1-2013 levels were the lowest levels 
that DOE could adopt, DOE used those levels as the reference points 
against which more-stringent levels were evaluated.

[[Page 42623]]



  Table V.2--Current Baseline and ASHRAE Efficiency Levels for Small Commercial Air-Cooled Air Conditioners and
                         Heat Pumps With Rated Cooling Capacities Less Than 65,000 Btu/h
----------------------------------------------------------------------------------------------------------------
                                                             Single-package                      Single-package
                                           Split-system AC         AC          Split-system HP         HP
----------------------------------------------------------------------------------------------------------------
                                                      SEER
----------------------------------------------------------------------------------------------------------------
Baseline--Federal Standard..............              13.0              13.0              13.0              13.0
Baseline--ASHRAE Standard...............              13.0              14.0              14.0              14.0
----------------------------------------------------------------------------------------------------------------
                                                      HSPF
----------------------------------------------------------------------------------------------------------------
Baseline--Federal Standard..............  ................  ................               7.7               7.7
Baseline--ASHRAE Standard...............  ................  ................               8.2               8.0
----------------------------------------------------------------------------------------------------------------

    Table V.3 shows the current baseline and ASHRAE efficiency levels 
for each equipment class of small commercial air-cooled air 
conditioners and heat pumps <65,000 Btu/h.

 Table V.3--Baseline Efficiency Levels for Small Commercial Air-Cooled Air Conditioners (AC) and Heat Pumps (HP)
                                                  <65,000 Btu/h
----------------------------------------------------------------------------------------------------------------
                                                             Single-package                      Single-package
                                           Split-system AC         AC          Split-system HP         HP
----------------------------------------------------------------------------------------------------------------
                                                      SEER
----------------------------------------------------------------------------------------------------------------
Baseline--Federal Standard..............              13.0              13.0              13.0              13.0
Baseline--ASHRAE Standard...............              13.0              14.0              14.0              14.0
----------------------------------------------------------------------------------------------------------------
                                                      HSPF
----------------------------------------------------------------------------------------------------------------
Baseline--Federal Standard..............  ................  ................               7.7               7.7
Baseline--ASHRAE Standard...............  ................  ................               8.2               8.0
----------------------------------------------------------------------------------------------------------------

3. Identification of Increased Efficiency Levels for Analysis
    DOE analyzed several efficiency levels and obtained incremental 
cost data for the four equipment classes under consideration. Table 
V.44 presents the efficiency levels examined for each equipment class. 
As part of the engineering analyses, DOE considered up to six 
efficiency levels beyond the baseline for each equipment class. DOE 
derived the maximum technologically feasible (``max-tech'') level from 
the market maximum in the AHRI Certified Directory,\13\ as of November 
2013. The highest available efficiency level for split-system heat 
pumps was 16.2 SEER, compared to 18.05 SEER for single-package heat 
pumps. In the January 2014 NOPR, DOE tentatively determined the ``max-
tech'' level for single-package air conditioners to be 19.15. 80 FR 
1171, 1189 (Jan. 8, 2015). DOE also determined that split-system air 
conditioners are capable of reaching the same efficiency levels as 
single-package units. Id. For the engineering analysis, DOE rounded the 
``max-tech'' levels to integer values of 18 and 19 for split-system and 
single-package heat pumps, and split-system and single-package air 
conditioners, respectively. The impact of this rounding, which results 
in efficiency levels that are whole-number values of SEER, is minimal. 
DOE did not receive any comments on its tentative determination for 
max-tech levels for single-package and split-system heat pumps and air 
conditioners and thus maintained its analysis in this final rule.
---------------------------------------------------------------------------

    \13\ The AHRI Certified Directory is available at http://www.ahridirectory.org/ahridirectory/pages/home.aspx.
---------------------------------------------------------------------------

    The final efficiency levels for each equipment class are presented 
below in Table V.4. For additional details on the efficiency levels 
selected for analysis, see chapter 3 of the final rule TSD.

                          Table V.4--Efficiency Levels for Small Commercial Air-Cooled Air Conditioners and Heat Pumps <65,000
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                         Split-system    Single-package           Split-system HP                Single-package HP
                                                              AC               AC        ---------------------------------------------------------------
                   Efficiency level                    ----------------------------------
                                                             SEER             SEER             SEER            HSPF            SEER            HSPF
--------------------------------------------------------------------------------------------------------------------------------------------------------
Federal Baseline......................................              13                13              13             7.7              13             7.7
0--ASHRAE Baseline *..................................              14                14              14             8.2              14             8.0
1.....................................................              15                15              15             8.5              15             8.4
2.....................................................              16                16              16             8.7              16             8.8
3.....................................................              17                17              17             9.0              17             8.9
4 **..................................................              18                18              18             9.2              18             9.1

[[Page 42624]]

 
5 ***.................................................              19                19  ..............  ..............  ..............  ..............
--------------------------------------------------------------------------------------------------------------------------------------------------------
* For consistency across equipment classes, DOE refers to 14 SEER as EL 0, which is only the ASHRAE Baseline for three of the equipment classes,
  excluding split-system AC.
** Efficiency Level 4 is ``Max-Tech'' for HP equipment classes.
*** Efficiency Level 5 is ``Max-Tech'' for AC equipment classes.

4. Engineering Analysis Results
    The results of the engineering analysis are cost-efficiency curves 
based on results from the cost models for analyzed units. DOE's 
calculated MPCs for small commercial air conditioners and heat pumps 
less than 65,000 Btu/h are shown in Table V.5 through Table V.8, and 
further details on the calculation of these curves can be found in 
chapter 3 of the final rule TSD. DOE used the cost-efficiency curves 
from the engineering analysis as an input for the life-cycle cost and 
payback period analyses.

   Table V.5--Manufacturer Production Costs for Three-Ton Split-System
                 Commercial Air-Cooled Air Conditioners
------------------------------------------------------------------------
                                                                  MPC
                             SEER                               [2014$]
------------------------------------------------------------------------
13...........................................................       $855
14...........................................................        937
15...........................................................      1,023
16...........................................................      1,115
17...........................................................      1,212
18...........................................................      1,316
19...........................................................      1,427
------------------------------------------------------------------------


  Table V.6--Manufacturer Production Costs for Three-Ton Single-Package
                 Commercial Air-Cooled Air Conditioners
------------------------------------------------------------------------
                                                                  MPC
                             SEER                               [2014$]
------------------------------------------------------------------------
13...........................................................     $1,003
14...........................................................      1,122
15...........................................................      1,241
16...........................................................      1,361
17...........................................................      1,480
18...........................................................      1,599
19...........................................................      1,719
------------------------------------------------------------------------


   Table V.7--Manufacturer Production Costs for Three-Ton Split-System
                    Commercial Air-Cooled Heat Pumps
------------------------------------------------------------------------
                                                                  MPC
                       SEER                            HSPF     [2014$]
------------------------------------------------------------------------
13................................................        7.7     $1,068
14................................................        8.2      1,154
15................................................        8.5      1,244
16................................................        8.7      1,377
17................................................        9.0      1,486
18................................................        9.2      1,601
------------------------------------------------------------------------


  Table V.8--Manufacturer Production Costs for Three-Ton Single-Package
                    Commercial Air-Cooled Heat Pumps
------------------------------------------------------------------------
                                                                  MPC
                       SEER                            HSPF     [2014$]
------------------------------------------------------------------------
13................................................        7.7     $1,239
14................................................        8.0      1,372
15................................................        8.4      1,504
16................................................        8.8      1,637
17................................................        8.9      1,769
18................................................        9.1      1,902
------------------------------------------------------------------------

a. Manufacturer Markups
    DOE applies a non-production cost multiplier (the manufacturer 
markup) to the full MPC to account for corporate non-production costs 
and profit. The resulting manufacturer selling price (MSP) is the price 
at which the manufacturer can recover all production and nonproduction 
costs and earn a profit. To meet new or amended energy conservation 
standards, manufacturers often introduce design changes to their 
equipment lines that result in increased manufacturer production costs. 
Depending on the competitive environment for these particular types of 
equipment, some or all of the increased production costs may be passed 
from manufacturers to retailers and eventually to commercial consumers 
in the form of higher purchase prices. As production costs increase, 
manufacturers typically incur additional overhead. The MSP should be 
high enough to recover the full cost of the equipment (i.e., full 
production and non-production costs) and yield a profit. The 
manufacturer markup has an important bearing on profitability. A high 
markup under a standards scenario suggests manufacturers can pass along 
the increased variable costs and some of the capital and product 
conversion costs (the one-time expenditures) to the consumer. A low 
markup suggests that manufacturers will not be able to recover as much 
of the necessary investment in plants and equipment.
    For small commercial air-cooled air-conditioners and heat pumps, 
DOE used a manufacturer markup of 1.3, as developed for the 2011 direct 
final rule for single-phase central air conditioners and heat pumps. 76 
FR 37408 (June 27, 2011). This markup was calculated using U.S. 
Security and Exchange Commission (SEC) 10-K reports for publicly-owned 
heating and cooling companies, as well as feedback from manufacturer 
interviews. See chapter 3 of the final rule TSD for more details about 
the methodology DOE used to determine the manufacturing markup.
b. Shipping Costs
    Manufacturers of commercial HVAC products typically pay for freight 
(shipping) to the first step in the distribution chain. Freight is not 
a manufacturing cost, but because it is a substantial cost incurred by 
the manufacturer, DOE accounts for shipping costs separately from other 
non-production costs that comprise the manufacturer markup. DOE 
calculated the MSP for small commercial air-cooled air-conditioners and 
heat pumps by multiplying the MPC at each efficiency level (determined 
from the cost model) by the manufacturer markup and adding shipping 
costs for equipment at the given efficiency level. More specifically, 
DOE calculated shipping costs at each efficiency level based on a 
typical 53-foot straight-frame trailer with a storage volume of 4,240 
cubic feet. DOE examined the sizes of small commercial air-cooled air-
conditioners and heat pumps and determined the number of units that

[[Page 42625]]

would fit in each trailer, based on assumptions about the arrangement 
of units in the trailer. See chapter 3 of the final rule TSD for more 
details about the methodology DOE used to determine the shipping costs.

C. 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 commercial consumer 
prices. (``Commercial consumer'' 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 commercial consumer price.
    In the 2014 NOPR for Central Unitary Air Conditioners (CUAC), which 
includes equipment similar to but larger than that in this rulemaking, 
DOE determined that there are three types of distribution channels to 
describe how the equipment passes from the manufacturer to the 
commercial consumer. 79 FR 58948, 58975 (Sept. 30, 2014). 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 commercial consumer 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 commercial consumer 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 analysis for this Final Rule and in the January 2015 NOPR, 
DOE used two of the three distribution channels described above to 
determine the markups. Given the small cooling capacities of air 
conditioners and heat pumps less than 65,000 Btu/h, DOE did not use the 
national accounts distribution chain in the markups analysis. National 
accounts are composed of large commercial consumers of HVAC equipment 
that negotiate equipment prices directly with the manufacturers, such 
as national retail chains. The end market consumers of three-ton 
central air conditioners and heat pumps are small offices and small 
retailers and do not fit the profile of large national chains. 80 FR 
1171, 1191 (Jan. 8, 2015).
    In the 2014 CUAC NOPR, based on information that equipment 
manufacturers provided, commercial consumers 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. 79 FR 58948, 58976 
(Sept. 30, 2014). For this analysis, DOE removed the national accounts 
distribution channel and recalculated the size of the small and large 
mechanical contractor distribution channels assuming they make up the 
entire market. Therefore, the small mechanical distribution chain 
accounts for 61 percent of equipment purchases (i.e., 50 percent 
divided by the sum of 50 percent and 32.5 percent), and the large 
mechanical contractor distribution chain represents 39 percent of 
purchases.
    In this Final Rule and in the January 2015 NOPR, DOE used the 
markups from the 2014 CUAC NOPR, for which DOE utilized updated 
versions of: (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.\14\ 80 FR 1171, 1191 (Jan. 8, 
2015).
---------------------------------------------------------------------------

    \14\ U.S. Census Bureau, 2007 Economic Census, Construction 
Industry Series and Wholesale Trade Subject Series (Available at: 
www.census.gov/econ/census/data/historical_data.html).
---------------------------------------------------------------------------

    Chapter 5 of the final rule TSD provides further detail on the 
estimation of markups.

D. Energy Use Analysis

    The energy use analysis provides estimates of the annual energy 
consumption of small air-cooled air conditioners and heat pumps with 
cooling capacities less than 65,000 btu/h at the considered efficiency 
levels. DOE uses these values in the LCC and PBP analyses and in the 
NIA.
    The cooling unit energy consumption (UEC) by equipment type and 
efficiency level came from the national impact analysis associated with 
the 2011 direct final rule (DFR) for residential central air 
conditioners and heat pumps. (EERE-2011-BT-STD-0011-0011). 
Specifically, DOE used the UECs for single-phase equipment installed in 
commercial buildings. The UECs for split system and single package 
equipment were similar in the 2011 analysis for lower efficiency 
levels, but at higher efficiency levels, the only UEC s available were 
for split-system equipment. DOE assumed that the similarities at lower 
levels could be expected to hold at higher efficiency levels; 
therefore, DOE used the UECs for split equipment for all equipment 
classes in this final rule, including split system and single package.
    In order to assess variability in the cooling UEC by region and 
building type, DOE used a Pacific Northwest National Laboratory report 
\15\ that estimated the annual energy usage of space cooling and 
heating products using a Full Load Equivalent Operating Hour (FLEOH) 
approach. DOE normalized the provided FLEOHs to the UEC data discussed 
above to vary the average UEC across region and building type. The 
building types used in this analysis are small retail establishments 
and small offices.
---------------------------------------------------------------------------

    \15\ See Appendix D of the 2000 Screening Analysis for EPACT-
Covered Commercial HVAC and Water-Heating Equipment. (EERE-2006-STD-
0098-0015)
---------------------------------------------------------------------------

    DOE reviewed the results of the simulations for the 2011 DFR and 
determined that the heating loads for these small commercial 
applications are extremely low (less than 500 kwh/year). As a result, 
DOE did not include any energy savings in the analysis for this Final 
Rule due to the increase in HSPF for this equipment. Chapter 4 of the 
final rule TSD provides further detail on energy use analysis.

E. 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 commercial 
consumers of small commercial air-cooled air conditioners and heat 
pumps less than 65,000 btu/h 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 consumer expense over the life of the 
equipment, consisting of equipment and installation costs plus 
operating costs (i.e., expenses for energy use, maintenance, and 
repair). DOE discounts future operating costs to the time of purchase 
using commercial consumer discount rates. The PBP is the estimated 
amount of time (in years) it takes commercial consumers to recover the 
increased total installed cost (including equipment and

[[Page 42626]]

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 potential 
standard. However, unlike the LCC, DOE only considers the first year's 
operating expenses in the PBP calculation. Because the PBP does not 
account for changes in operating expenses over time or the time value 
of money, it is also referred to as a simple PBP.
    For any given efficiency level, DOE measures the PBP and the change 
in LCC relative to an estimate of the base-case efficiency level. For 
split-system air conditioners, for which ASHRAE did not increase 
efficiency levels, the base-case estimate reflects the market in the 
absence of amended energy conservation standards, including the market 
for equipment that exceeds the current energy conservation standards. 
For single-package air conditioners, split-system heat pumps, and 
single-package heat pumps, the base-case estimate reflects the market 
in the case where the ASHRAE 90.1-2013 level becomes the Federal 
minimum, and the LCC calculates the LCC savings likely to result from 
higher efficiency levels compared with the ASHRAE base-case.
    DOE conducted an LCC and PBP analysis for small commercial air-
cooled air conditioners and heat pumps less than 65,000 btu/h using a 
computer spreadsheet model. When combined with Crystal Ball (a 
commercially-available software program), the LCC and PBP model 
generates a Monte Carlo simulation to perform the analyses by 
incorporating uncertainty and variability considerations in certain of 
the key parameters as discussed below. 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 the inputs and key 
assumptions of DOE's LCC and PBP analysis. They are also described in 
detail in chapter 6 of the final rule TSD.
1. Equipment Costs
    In the LCC and PBP analysis, the equipment costs faced by 
purchasers of small air-cooled air conditioning and heat pump equipment 
are derived from the MSPs estimated in the engineering analysis, the 
overall markups estimated in the markups analysis, and sales tax.
    To develop an equipment price trend for the final rule, 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, which is the PPI series most relevant to small air-cooled air-
conditioning equipment. The PPI index for heat pumps covered too short 
a time period to provide a useful picture of pricing trends, so the 
air-conditioner time series was used for both air conditioners and heat 
pumps. DOE expects this to be a reasonably accurate assessment for heat 
pumps because heat pumps are produced by the same manufacturers as air-
conditioners and contain most of the same components. Although the 
overall 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 (at 2014 levels) for the final 
rule. See chapter 6 of the final rule TSD for more information on the 
price trends.
2. Installation Costs
    DOE derived national average installation costs for small air-
cooled air conditioning and heat pump equipment from data provided in 
RS Means 2013.\16\ RS Means provides estimates for installation costs 
for the subject equipment by equipment capacity, as well as cost 
indices that reflect the variation in installation costs for 656 cities 
in the United States. The RS Means data identify several cities in all 
50 States and the District of Columbia. DOE incorporated location-based 
cost indices into the analysis to capture variation in installation 
costs, depending on the location of the consumer.
---------------------------------------------------------------------------

    \16\ RS Means Mechanical Cost Data 2013. Reed Construction Data, 
LLC (2012).
---------------------------------------------------------------------------

    Based on these data, DOE concluded that data for 3-ton rooftop air 
conditioners would be sufficiently representative of the installation 
costs for air conditioners less than 65,000 btu/h. For heat pumps, DOE 
used the installation costs for 3-ton air-source heat pumps.
    DOE also varied installation cost as a function of equipment 
weight. Because weight tends to increase with equipment efficiency, 
installation cost increased with equipment efficiency. 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 by each class 
of the subject small air-cooled air conditioning and heating equipment 
at each considered efficiency level is based on the energy use analysis 
as described above in section V.D and in chapter 4 of the final rule 
TSD.
4. Electricity Prices and Electricity Price Trends
    DOE used average and marginal electricity prices by Census Division 
based on tariffs from a representative sample of electric utilities. 
This approach calculates energy expenses based on actual commercial 
building average and marginal electricity prices that customers are 
paying.\17\ The Commercial Buildings Energy Consumption Survey (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. From this average price, the marginal 
price for electricity consumption was determined by applying a 5-
percent decrement to the average CBECS consumption data and 
recalculating the electricity bill. Using building location and the 
prices derived from the above method, an average and marginal price was 
determined for each region of the U.S.
---------------------------------------------------------------------------

    \17\ 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.
---------------------------------------------------------------------------

    The average electricity price multiplied by the baseline 
electricity consumption for each equipment class 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.
    For this final rule, DOE updated the tariff-based prices to 2014 
dollars and projected future electricity prices using trends in average 
commercial electricity price from Annual Energy Outlook (AEO) 2014. An 
examination of data published by the Edison Electric Institute \18\ 
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.
---------------------------------------------------------------------------

    \18\ Edison Electric Institute, EEI Typical Bills and Average 
Rates Report (bi-annual, 2007-2012).
---------------------------------------------------------------------------

    For further discussion of electricity prices, see chapter 6 of the 
final rule TSD.

[[Page 42627]]

5. Maintenance Costs
    Maintenance costs are costs to the commercial consumer of ensuring 
continued operation of the equipment (e.g., checking and maintaining 
refrigerant charge levels and cleaning heat-exchanger coils). DOE 
derived annualized maintenance costs for small commercial air-cooled 
air conditioners and heat pumps from RS Means data.\19\ These data 
provided estimates of person-hours, labor rates, and materials required 
to maintain commercial air-conditioning and heating equipment. The 
estimated annualized maintenance cost, in 2014 dollars, is $302 for air 
conditioners rated between 36,000 Btu/h and 288,000 Btu/h and $334 for 
heat pumps rated between 36,000 Btu/h and 288,000 Btu/h; this capacity 
range includes the equipment that is the subject of this final rule. 
DOE assumed that the maintenance costs do not vary with efficiency 
level.
---------------------------------------------------------------------------

    \19\ RS Means Facilities Maintenance & Repair Cost Data 2013. 
Reed Construction Data, LLC. (2012).
---------------------------------------------------------------------------

6. Repair Costs
    Repair costs are costs to the commercial consumer associated with 
repairing or replacing components that have failed. DOE utilized RS 
Means \20\ to find the repair costs for small commercial air-cooled air 
conditioners and heat pumps. For air conditioners, DOE used the repair 
costs for a 3-ton, single-zone rooftop unit. For heat pumps, DOE took 
the repair costs for 1.5-ton, 5-ton, and 10-ton air-to-air heat pumps 
and linearly scaled the repair costs to derive a 3-ton repair cost. DOE 
assumed that the repair would be a one-time event in year 10 of the 
equipment life. DOE then annualized the present value of the cost over 
the average equipment life of 19 or 16 years (for air conditioners and 
heat pumps, respectively) to obtain an annualized equivalent repair 
cost. This value, in 2014 dollars, ranges from $143 to $157 at the 
baseline level, depending on equipment class. The materials portion of 
the repair cost was scaled with the percentage increase in 
manufacturers' production cost by efficiency level. The labor cost was 
held constant across efficiency levels. This annualized repair cost was 
then added to the maintenance cost to create an annual ``maintenance 
and repair cost'' for the lifetime of the equipment. For further 
discussion of how DOE derived and implemented repair costs, see chapter 
6 of the final rule TSD.
---------------------------------------------------------------------------

    \20\ Id.
---------------------------------------------------------------------------

7. Equipment Lifetime
    Equipment lifetime is the age at which the subject small air-cooled 
air conditioners and heat pumps less than 65,000 Btu/h are retired from 
service. DOE based equipment lifetime on a retirement function in the 
form of a Weibull probability distribution. DOE used the inputs from 
the 2011 DFR technical support document for central air conditioners 
and heat pumps, which represented a mean lifetime of 19.01 years for 
air conditioners and 16.24 years for heat pumps, and used the same 
values for units in both residential and commercial applications. 
(EERE-2011-BT-STD-0011-0012) Given the similarity of such equipment 
types, DOE believes the lifetime for single-phase equipment is a 
reasonable approximation of the lifetime for similar three-phase 
equipment.
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.
    DOE derived the discount rates by estimating the weighted-average 
cost of capital (WACC) of companies that purchase air-cooled air-
conditioning equipment. More details regarding DOE's estimates of 
commercial consumer discount rates are provided in chapter 6 of the 
final rule 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, in this case the current Federal standards for 
split-system air conditioners, and the default scenario in which DOE is 
required to adopt the efficiency levels in ASHRAE 90.1-2013 for the 
three equipment classes triggered by ASHRAE). This analysis requires an 
estimate of the distribution of equipment efficiencies in the base case 
(i.e., what consumers would have purchased in the compliance year in 
the absence of amended standards for split-system air conditioners, or 
amended standards more stringent than those in ASHRAE 90.1-2013 for the 
three triggered equipment classes). DOE refers to this distribution of 
equipment energy efficiencies as the base-case efficiency distribution. 
For more information on the development of the base-case distribution, 
see section V.F.3 and chapter 6 of the final rule TSD.
10. Compliance Date
    DOE calculated the LCC and PBP for all commercial consumers as if 
each were to purchase new equipment in the year that compliance with 
amended standards is required. Generally, covered equipment to which a 
new or amended energy conservation standard applies must comply with 
the standard if such equipment is manufactured or imported on or after 
a specified date. EPCA states that compliance with any such standards 
shall be required on or after a date which is two or three years 
(depending on equipment size) after the compliance date of the 
applicable minimum energy efficiency requirement in the amended ASHRAE/
IES standard. (42 U.S.C. 6313(a)(6)(D)) Given the equipment size at 
issue here, DOE has applied the two-year implementation period to 
determine the compliance date of any energy conservation standard equal 
to the efficiency levels specified by ASHRAE Standard 90.1-2013 
proposed by this rulemaking. Thus, the compliance date of this final 
rule for small commercial air-cooled air conditioners and heat pumps 
less than 65,000 Btu/h manufactured on or after January 1, 2017, which 
is two years after the date specified in ASHRAE Standard 90.1-2013.
    Economic justification is not required for DOE to adopt the 
efficiency levels in ASHRAE 90.1-2013, as DOE is statutorily required 
to, at a minimum, adopt those levels. Therefore, DOE did not perform an 
LCC analysis on the ASHRAE Standard 90.1-2013 levels, and for purposes 
of the LCC analysis, DOE used 2020 as the first year of compliance with 
amended standards.
11. Payback Period Inputs
    The payback period is the amount of time it takes the commercial 
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 equipment mean that the increased total installed cost is 
not recovered in reduced operating expenses.
    Similar to the LCC, the inputs to the PBP calculation are the total 
installed cost of the equipment to the commercial consumer for each 
efficiency level and

[[Page 42628]]

the average annual operating expenditures for each efficiency level for 
each building type and Census Division, weighted by the probability of 
shipment to each market. The PBP calculation uses the same inputs as 
the LCC analysis, except that discount rates are not needed. Because 
the simple PBP does not take into account changes in operating expenses 
over time or the time value of money, DOE considered only the first 
year's operating expenses to calculate the PBP, unlike the LCC, which 
is calculated over the lifetime of the equipment. Chapter 6 of the 
final rule TSD provides additional detail about the PBP.

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

    The national impact analysis (NIA) evaluates the effects of a 
considered energy conservation standard from a national perspective 
rather than from the consumer perspective represented by the LCC. This 
analysis assesses the net present value (NPV) (future amounts 
discounted to the present) and the national energy savings (NES) of 
total commercial consumer costs and savings, which are expected to 
result from amended standards at specific efficiency levels. For each 
efficiency level analyzed, DOE calculated the NPV and NES for adopting 
more-stringent standards than the efficiency levels specified in ASHRAE 
Standard 90.1-2013.
    The NES refers to cumulative energy savings from 2017 through 2046 
for the three equipment classes triggered by ASHRAE; however when 
evaluating more-stringent standards, energy savings do not begin 
accruing until the later compliance date of 2020. DOE calculated new 
energy savings in each year relative to a base case, defined as DOE 
adoption of the efficiency levels specified by ASHRAE Standard 90.1-
2013. DOE also calculated energy savings from adopting efficiency 
levels specified by ASHRAE Standard 90.1-2013 compared to the EPCA base 
case (i.e., the current Federal standards).
    For split-system air conditioners, the NES refers to cumulative 
energy savings from 2019 through 2048 for all standards cases. DOE 
calculated new energy savings in each year relative to a base case, 
defined as the current Federal standards, which are equivalent to the 
efficiency levels specified by ASHRAE Standard 90.1-2013.
    The NPV refers to cumulative monetary savings. DOE calculated net 
monetary savings in each year relative to the base case (ASHRAE 
Standard 90.1-2013) as the difference between total operating cost 
savings and increases in total installed cost. Cumulative savings are 
the sum of the annual NPV over the specified period. DOE accounted for 
operating cost savings until past 2100, when the equipment installed in 
the 30th year after the compliance date of the amended standards should 
be retired.
1. Approach
    The NES and NPV are a function of the total number of units in use 
and their efficiencies. Both the NES and NPV depend on annual shipments 
and equipment lifetime. Both calculations start by using the shipments 
estimate and the quantity of units in service derived from the 
shipments model.
    With regard to estimating the NES, because more-efficient air 
conditioners and heat pumps are expected to gradually replace less-
efficient ones, the energy per unit of capacity used by the air 
conditioners and heat pumps in service gradually decreases in the 
standards case relative to the base case. DOE calculated the NES by 
subtracting energy use under a standards-case scenario from energy use 
in a base-case scenario.
    Unit energy savings for each equipment class are taken from the LCC 
spreadsheet for each efficiency level and weighted based on market 
efficiency distributions. To estimate the total energy savings for each 
efficiency level, DOE first calculated the national site energy 
consumption (i.e., the energy directly consumed by the units of 
equipment in operation) for each class of air conditioner and heat 
pumps for each year of the analysis period. The NES and NPV analysis 
periods begin with the earliest expected compliance date of amended 
Federal energy conservation standards (i.e., 2017 for the equipment 
classes triggered by ASHRAE, since DOE is adopting the baseline ASHRAE 
Standard 90.1-2013 efficiency levels). For the analysis of DOE's 
potential adoption of more-stringent efficiency levels for the 
equipment classes triggered by ASHRAE, the earliest compliance date 
would be 2020, four years after DOE would likely issue a final rule 
requiring such standards. Second, DOE determined the annual site energy 
savings, consisting of the difference in site energy consumption 
between the base case and the standards case for each class of small 
commercial air conditioner and heat pump less than 65,000 Btu/h. Third, 
DOE converted the annual site energy savings into the annual primary 
and FFC energy savings using annual conversion factors derived from the 
AEO 2014 version of the Energy Information Administration's (EIA) 
National Energy Modeling System (NEMS). Finally, DOE summed the annual 
primary and FFC energy savings from 2017 to 2046 to calculate the total 
NES for that period. DOE performed these calculations for each 
efficiency level considered for small commercial air conditioners and 
heat pumps in this rulemaking.
    DOE considered whether a rebound effect is applicable in its NES 
analysis. A rebound effect occurs when an increase in equipment 
efficiency leads to an increased demand for its service. The NEMS model 
assumes a certain elasticity factor to account for an increased demand 
for service due to the increase in cooling (or heating) efficiency.\21\ 
EIA refers to this as an efficiency rebound. For the small commercial 
air conditioning and heating equipment market, there are two ways that 
a rebound effect could occur: (1) Increased use of the air conditioning 
equipment within the commercial buildings in which they are installed; 
and (2) additional instances of air conditioning of building spaces 
that were not being cooled before.
---------------------------------------------------------------------------

    \21\ An overview of the NEMS model and documentation is found at 
http://www.eia.doe.gov/oiaf/aeo/overview/index.html.
---------------------------------------------------------------------------

    DOE does not expect either of these instances to occur because the 
annual energy use for this equipment is very low; therefore, the energy 
cost savings from more-efficient equipment would likely not be high 
enough to induce a commercial consumer to increase the use of the 
equipment, either in a previously-cooled space or another previously-
uncooled space. Therefore, DOE did not assume a rebound effect in the 
January 2015 NOPR analysis. DOE sought input from interested parties on 
whether there will be a rebound effect for improvements in the 
efficiency of small commercial air conditioners and heat pumps, but did 
not receive any comment. As a result, DOE has maintained its assumption 
in this final rule.
    To estimate NPV, DOE calculated the net impact as the difference 
between net operating cost savings (including electricity cost savings 
and increased repair costs) and increases in total installed costs 
(including customer prices). DOE calculated the NPV of each considered 
standard level over the life of the equipment using the following three 
steps. First, DOE determined the difference between the equipment costs 
under the standard-level case and the base case in order to obtain the 
net equipment cost increase resulting from the higher standard level. 
As noted in

[[Page 42629]]

section V.E.1, DOE used a constant price assumption as the default 
price forecast. Second, DOE determined the difference between the base-
case operating costs and the standard-level operating costs in order to 
obtain the net operating cost savings from each higher efficiency 
level. Third, DOE determined the difference between the net operating 
cost savings and the net equipment cost increase in order to obtain the 
net savings (or expense) for each year. DOE then discounted the annual 
net savings (or expenses) to 2015 for air conditioners and heat pumps 
bought on or after 2017 (or 2019) and summed the discounted values to 
provide the NPV of an efficiency level. An NPV greater than zero shows 
net savings (i.e., the efficiency level would reduce commercial 
consumer expenditures relative to the base case in present value 
terms). An NPV that is less than zero indicates that the efficiency 
level would result in a net increase in commercial consumer 
expenditures in present value terms.
    To make the analysis more transparent to all interested parties, 
DOE used a commercially-available spreadsheet tool to calculate the 
energy savings and the national economic costs and savings from 
potential amended standards. Interested parties can review DOE's 
analyses by changing various input quantities within the spreadsheet.
    Unlike the LCC analysis, the NES spreadsheet does not use 
distributions for inputs or outputs, but relies on national average 
first costs and energy costs developed from the LCC spreadsheet. DOE 
used the NES spreadsheet to perform calculations of energy savings and 
NPV using the annual energy consumption and total installed cost data 
from the LCC analysis. DOE projected the energy savings, energy cost 
savings, equipment costs, and NPV of benefits for equipment sold in 
each small commercial air-cooled air conditioner and heat pump class 
from 2017 through 2046. The projections provided annual and cumulative 
values for all four output parameters described previously.
2. Shipments Analysis
    Equipment shipments are an important element in the estimate of the 
future impact of a potential energy conservation standard. DOE 
developed shipment projections for small commercial air-cooled air 
conditioners and heat pumps less than 65,000 Btu/h and, in turn, 
calculated equipment stock over the course of the analysis period by 
assuming a Weibull distribution with an average 19-year equipment life 
for air conditioners and a 16-year life for heat pumps. (See section 
V.E.7 for more information on lifetime.) DOE used the shipments 
projection and the equipment stock to determine the NES. The shipments 
portion of the spreadsheet model projects small commercial air-cooled 
air conditioner and heat pump shipments through 2046.
    DOE relied on 1999 shipment estimates along with trends from the 
U.S. Census and AEO 2014 to estimate shipments for this equipment. 
Table V.99 shows the 1999 shipments estimates from the 2000 Screening 
Analysis for EPACT-Covered Commercial HVAC and Water-Heating Equipment 
(EERE-2006-STD-0098-0015). While the U.S. Census provides shipments 
data for air-cooled equipment less than 65,000 Btu/h, it does not 
disaggregate the shipments into single-phase and three-phase. 
Therefore, DOE used the Census data from 1999 to 2010 \22\ as a trend 
from which to extrapolate DOE's 1999 estimated shipments data (which is 
divided by equipment class) for three-phase equipment shipments between 
2000 to 2010.
---------------------------------------------------------------------------

    \22\ 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. (Available at: 
http://www.census.gov/manufacturing/cir/historical_data/ma333m/index.html).

 Table V.9--DOE Estimated Shipments of Small Three-Phase Commercial Air
                Conditioners and Heat Pumps <65,000 Btu/h
------------------------------------------------------------------------
                     Equipment class                           1999
------------------------------------------------------------------------
Three-Phase Air-Cooled Split-System Air Conditioners              91,598
 <65,000 Btu/h..........................................
Three-Phase Air-Cooled Single-Package Air Conditioners           213,728
 <65,000 Btu/h..........................................
Three-Phase Air-Cooled Split-System Heat Pumps <65,000            11,903
 Btu/h..................................................
Three-Phase Air-Cooled Single-Package Heat Pumps <65,000          27,773
 Btu/h..................................................
------------------------------------------------------------------------

    Because the Census data end in 2010, DOE cannot use those data to 
determine whether shipments continue to decline past 2010. Therefore, 
DOE reviewed AHRI's monthly shipments data for the broader category of 
central air conditioners and heat pumps to determine more recent 
trends.\23\ DOE found that the average annual growth rate from 2005 to 
2010 was -12 percent for air conditioners and -4 percent for heat 
pumps. However, the average annual growth rate from 2010 to 2014 was 7 
percent for air conditioners and 8 percent for heat pumps. These data 
indicate that the decline in shipments through 2010 has stopped and has 
in fact begun to reverse. Therefore, DOE used the AHRI-reported growth 
rates from 2010 to 2011 (10 percent for air conditioners and 1 percent 
for heat pumps) to scale its projected 2010 shipments to 2011, at which 
time it could begin projecting shipments using AEO 2014 forecasts (2011 
through 2040) for commercial floor space. DOE assumed that shipments of 
small commercial air-cooled air conditioners and heat pumps would be 
related to the growth of commercial floor space. DOE used this 
projection, with an average annual growth rate of 1 percent, to project 
shipments for each of the four equipment classes through 2040. For 
years beyond 2040, DOE also applied an average annual growth rate of 1 
percent.
---------------------------------------------------------------------------

    \23\ AHRI, HVACR & Water Heating Industry Statistical Profile 
(2012) (Available at: http://www.ari.org/site/883/Resources/Statistics/AHRI-Industry-Statistical-Profile). See also AHRI Monthly 
Shipments: http://www.ari.org/site/498/Resources/Statistics/Monthly-Shipments; especially December 2013 release: http://www.ari.org/App_Content/ahri/files/Statistics/Monthly%20Shipments/2013/December2013.pdf; May 2014 release: http://www.ari.org/App_Content/ahri/files/Statistics/Monthly%20Shipments/2014/May2014.pdf.
---------------------------------------------------------------------------

    Table V.10 shows the projected shipments for the different 
equipment classes of small commercial air-cooled air conditioners and 
heat pumps less than 65,000 Btu/h for selected years from 2017 to 2046, 
as well as the cumulative shipments. As equipment purchase price and 
repair costs increase with efficiency, DOE recognizes that higher first 
costs and repair costs can result in a drop in shipments. However, in 
the January 2015 NOPR, DOE had no basis for estimating the elasticity 
of shipments for small commercial air-cooled air conditioners and heat 
pumps less than 65,000 Btu/h as a function of first costs, repair 
costs, or operating costs. In addition, because air-cooled air 
conditioners are likely the lowest-cost option for air conditioning 
small office and retail applications, DOE tentatively concluded in the 
NOPR that it is unlikely that shipments would change as a result of 
higher first costs and repair costs. Therefore, DOE presumed that the 
shipments projection would not change with higher standard levels. 80 
FR 1171, 1196 (Jan. 8, 2015).
    DOE sought input on this assumption. In response, Lennox 
International commented that more stringent efficiency levels increase 
equipment costs and reduce demand, citing the decline in residential 
central air conditioner shipments when SEER requirements were raised 
from 10 to 13.

[[Page 42630]]

Lennox also noted that higher prices also lead to more repairs, which 
reduces energy savings benefits. (Lennox International, No. 36 at p. 2-
3)
    DOE acknowledges Lennox's concerns. However, DOE does not have data 
available to estimate the price elasticity for this equipment. 
Furthermore, DOE does not believe that the commercial market would 
necessarily respond in a similar manner to an increased standard as 
would the residential market. Given that even without a drop in 
shipments, none of the efficiency levels in the NOPR were determined to 
be economically justified, DOE has not revised its shipments estimates 
for the final rule.
    Chapter 7 of the final rule TSD provides additional details on the 
shipments projections.

                     Table V.10--Shipments Projection for Small Commercial Air-Cooled Air Conditioners and Heat Pumps <65,000 Btu/h
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                      Units shipped by year and equipment class
                                                            --------------------------------------------------------------------------------------------
                         Equipment                                                                                                          Cumulative
                                                                2017       2020       2025       2030       2035       2040       2046       shipments
                                                                                                                                           (2017-2046) *
--------------------------------------------------------------------------------------------------------------------------------------------------------
Three-Phase Air-Cooled Split-System Air Conditioners            80,210     83,175     87,651     91,610     96,170    101,593    107,802       2,806,115
 <65,000 Btu/h.............................................
Three-Phase Air-Cooled Single-Package Air Conditioners         122,271    126,790    133,613    139,649    146,600    154,867    164,332       4,277,584
 <65,000 Btu/h.............................................
Three-Phase Air-Cooled Split-System Heat Pumps <65,000 Btu/     19,634     20,360     21,455     22,424     23,541     24,868     26,388         686,883
 h.........................................................
Three-Phase Air-Cooled Single-Package Heat Pumps <65,000        25,157     26,086     27,490     28,732     30,162     31,863     33,810         880,091
 Btu/h.....................................................
                                                            --------------------------------------------------------------------------------------------
    Total..................................................    247,272    256,411    270,210    282,415    296,473    313,191    332,333       8,650,673
--------------------------------------------------------------------------------------------------------------------------------------------------------
* Note that the analysis period for split-system air conditioners is 2019-2048, but for comparison purposes, the same time period for cumulative
  shipments is shown for each equipment class.

3. Base-Case and Standards-Case Forecasted Distribution of Efficiencies
    DOE developed base-case efficiency distributions based on model 
availability in the AHRI Certified Directory. DOE bundled the 
efficiency levels into ``efficiency ranges'' and determined the 
percentage of models within each range. DOE applied the percentages of 
models within each efficiency range to the total unit shipments for a 
given equipment class to estimate the distribution of shipments within 
the base case.
    In the January 2015 NOPR, DOE estimated a base-case efficiency 
trend of an increase of approximately 1 SEER every 35 years, based on 
the EER trend from 2012 to 2035 found in the Commercial Unitary Air 
Conditioner Advance Notice of Proposed Rulemaking (ANOPR).\24\ DOE used 
this same trend in the standards-case scenarios. 80 FR 1171, 1197 (Jan. 
8, 2015). DOE requested comment on the estimated efficiency trend but 
did not receive any comments. As a result, DOE used this same trend in 
its final rule analysis.
---------------------------------------------------------------------------

    \24\ See DOE's technical support document underlying DOE's July 
29, 2004 ANOPR. 69 FR 45460 (Available at: http://www.regulations.gov/#!documentDetail;D=EERE-2006-STD-0103-0078). DOE 
assumed that the EER trend would reasonably represent a SEER trend.
---------------------------------------------------------------------------

    In addition, DOE used a ``roll-up'' scenario to establish the 
market shares by efficiency level for the year that compliance would be 
required with amended standards (i.e., 2017 for adoption of efficiency 
levels in ASHRAE Standard 90.1-2013). Table V.8 presents the estimated 
base-case efficiency market shares for each small commercial air-cooled 
air conditioner and heat pump equipment class.

              Table V.11--Base-Case Efficiency Market Shares for Small Commercial Air-Cooled Air Conditioners and Heat Pumps <65,000 Btu/h
--------------------------------------------------------------------------------------------------------------------------------------------------------
  Three-phase air-cooled split-system air conditioners    Three-phase air-cooled single-   Three-phase air-cooled split-  Three-phase air-cooled single-
                  <65,000 Btu/h (2019)                       package air conditioners     system heat pumps 65,000 Btu/h  package heat pumps <65,000 Btu/
---------------------------------------------------------      <65,000 Btu/h (2020)                   (2020)                         h (2020)
                                                         -----------------------------------------------------------------------------------------------
                  SEER                     Market share                    Market share                    Market share                    Market share
                                                (%)            SEER             (%)            SEER             (%)            SEER             (%)
--------------------------------------------------------------------------------------------------------------------------------------------------------
13......................................              26              13               0              13               0              13               0
14......................................              50              14              52              14              80              14              69
15......................................              22              15              30              15              19              15              21
16......................................               2              16               7              16               1              16               9
17......................................               0              17               4              17               0              17               1
18......................................               0              18               7              18               0              18               1
19......................................               0              19               0  ..............  ..............  ..............  ..............
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note: The 0% market share at 13.0 SEER for three equipment classes is accounting for the default adoption of ASHRAE Standard 90.1-2013 levels in 2017.

4. National Energy Savings and Net Present Value
    The stock of small commercial air-cooled air conditioner and heat 
pump equipment less than 65,000 Btu/h is the total number of units in 
each equipment class purchased or shipped from previous years that have 
survived until

[[Page 42631]]

a given point. The NES spreadsheet,\25\ through use of the shipments 
model, keeps track of the total number of units shipped each year. For 
purposes of the NES and NPV analyses, DOE assumes that shipments of air 
conditioner and heat pump units survive for an average of 19 years and 
16 years, respectively, following a Weibull distribution, at the end of 
which time they are removed from service.
---------------------------------------------------------------------------

    \25\ The NES spreadsheet can be found in the docket for the 
ASHRAE rulemaking at: www.regulations.gov/#!docketDetail;D=EERE-
2014-BT-STD-0015.
---------------------------------------------------------------------------

    The national annual energy consumption is the product of the annual 
unit energy consumption and the number of units of each vintage in the 
stock, summed over all vintages. This approach accounts for differences 
in unit energy consumption from year to year. In determining national 
annual energy consumption, DOE estimated energy consumption and savings 
based on site energy and converted the electricity consumption and 
savings to primary energy using annual conversion factors derived from 
the AEO 2014 version of NEMS. Cumulative energy savings are the sum of 
the NES for each year over the timeframe of the analysis.
    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 Sciences, DOE 
announced its intention to use 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 (Aug. 18, 2011). After evaluating 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 the most appropriate tool for 
its FFC analysis and its intention to use NEMS for that purpose. 77 FR 
49701 (Aug. 17, 2012). The approach used for this final rule is 
described in Appendix 8A of the final rule TSD.
    In accordance with the OMB's guidelines on regulatory analysis, DOE 
calculated NPV using both a 7-percent and a 3-percent real discount 
rate. The 7-percent rate is an estimate of the average before-tax rate 
of return on private capital in the U.S. economy. DOE used this 
discount rate to approximate the opportunity cost of capital in the 
private sector, because recent OMB analysis has found the average rate 
of return on capital to be near this rate. DOE used the 3-percent rate 
to capture the potential effects of standards on private consumption 
(e.g., through higher prices for products and reduced purchases of 
energy). This rate represents the rate at which society discounts 
future consumption flows to their present value. This rate can be 
approximated by the real rate of return on long-term government debt 
(i.e., yield on United States Treasury notes minus annual rate of 
change in the Consumer Price Index), which has averaged about 3 percent 
on a pre-tax basis for the past 30 years.
    Table V.12 summarizes the inputs to the NES spreadsheet model along 
with a brief description of the data sources. The results of DOE's NES 
and NPV analysis are summarized in section VIII.B.1.b and described in 
detail in chapter 8 of the final rule TSD.

   Table V.12--Summary of Small Commercial Air-Cooled Air Conditioner and Heat Pumps <65,000 Btu/h NES and NPV
                                                  Model Inputs
----------------------------------------------------------------------------------------------------------------
                 Inputs                                                Description
----------------------------------------------------------------------------------------------------------------
Shipments..............................  Annual shipments based on U.S. Census, AHRI monthly shipment reports,
                                          and AEO2014 forecasts of commercial floor space. (See chapter 7 of the
                                          final rule TSD.)
Compliance Date of Standard............  2020 for adoption of a more-stringent efficiency level than those
                                          specified by ASHRAE Standard 90.1-2013 for the three equipment classes
                                          triggered by ASHRAE.
                                         2017 for adoption of the efficiency levels specified by ASHRAE Standard
                                          90.1-2013.
                                         2019 for split-system air conditioners.
Base-Case Efficiencies.................  Distribution of base-case shipments by efficiency level, with
                                          efficiency trend of an increase of 1 EER every 35 years.
Standards-Case Efficiencies............  Distribution of shipments by efficiency level for each standards case.
                                          In compliance year, units below the standard level ``roll-up'' to meet
                                          the standard. Efficiency trend of an increase of 1 EER every 35 years.
Annual Energy Use per Unit.............  Annual national weighted-average values are a function of efficiency
                                          level. (See chapter 4 of the final rule TSD.)
Total Installed Cost per Unit..........  Annual weighted-average values are a function of efficiency level. (See
                                          chapter 5 of the final rule TSD.)
Annualized Maintenance and Repair Costs  Annual weighted-average values are a function of efficiency level. (See
 per Unit.                                chapter 5 of the final rule TSD.)
Escalation of Fuel Prices..............  AEO2014 forecasts (to 2040) and extrapolation for beyond 2040. (See
                                          chapter 8 of the final rule TSD.)
Site to Primary and FFC Conversion.....  Based on AEO2014 forecasts (to 2040) and extrapolation for beyond 2040.
                                          (See chapter 8 of the final rule TSD.)
Discount Rate..........................  3 percent and 7 percent real.
Present Year...........................  Future costs are discounted to 2015.
----------------------------------------------------------------------------------------------------------------

VI. Methodology for Water-Source Heat Pumps

    This section addresses the analyses DOE has performed for this 
rulemaking with respect to water-source heat pumps. A separate 
subsection addresses each analysis. In overview, DOE used a spreadsheet 
to calculate the LCC and PBPs of potential energy conservation 
standards. DOE used another spreadsheet to provide shipments 
projections and then calculate national energy savings and net present 
value impacts of potential amended energy conservation standards.

A. Market Assessment

    To begin its review of the ASHRAE Standard 90.1-2013 efficiency 
levels, DOE developed 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 included both quantitative and qualitative assessments based 
primarily on publicly-available information. The subjects addressed in 
the market assessment for this rulemaking include

[[Page 42632]]

equipment classes, manufacturers, quantities, and types of equipment 
sold and offered for sale. The key findings of DOE's market assessment 
are summarized subsequently. For additional detail, see chapter 2 of 
the final rule TSD.
    As proposed in the January 2015 NOPR, DOE is adopting the following 
definition for water-source heat pumps, adapted from the ASHRAE 
Handbook \26\ and specifically referencing the new nomenclature 
included in ASHRAE 90.1-2013: ``Water-source heat pump means a single-
phase or three-phase reverse-cycle heat pump of all capacities (up to 
760,000 Btu/h) that uses a circulating water loop as the heat source 
for heating and as the heat sink for cooling. The main components are a 
compressor, refrigerant-to-water heat exchanger, refrigerant-to-air 
heat exchanger, refrigerant expansion devices, refrigerant reversing 
valve, and indoor fan. Such equipment includes, but is not limited to, 
water-to-air water-loop heat pumps.'' 80 FR 1171, 1182-1183 (Jan. 8, 
2015).
---------------------------------------------------------------------------

    \26\ 2012 ASHRAE Handbook, Heating, Ventilating, and Air-
Conditioning Systems and Equipment. ASHRAE, Chapter 9 (Available at: 
https://www.ashrae.org/resources_publications/description-of-the-2012-ashrae-handbook-hvac-systems-and-equipment).
---------------------------------------------------------------------------

1. Equipment Classes
    EPCA and ASHRAE Standard 90.1-2013 both divide water-source heat 
pumps into three categories based on the following cooling capacity 
ranges: (1) <17,000 Btu/h; (2) >=17,000 and <65,000 Btu/h; and (3) 
>=65,000 and <135,000 Btu/h. ASHRAE 90.1-2013 revised the nomenclature 
for these equipment classes to refer to ``water-to-air, water-loop.'' 
In this document, DOE is revising the nomenclature for these equipment 
classes (but not the broader category) to match that used by ASHRAE. 
Specifically, DOE revises Table 1 to 10 CFR 431.96 and Tables 1 and 2 
to 10 CFR 431.97 to refer to ``water-source (water-to-air, water-
loop)'' heat pumps rather than simply ``water-source'' heat pumps. 
Throughout this final rule, any reference to water-source heat pump 
equipment classes should be considered as referring to water-to-air, 
water-loop heat pumps.
2. Review of Current Market
    In order to obtain the information needed for the market assessment 
for this rulemaking, DOE consulted a variety of sources, including 
manufacturer literature, manufacturer Web sites, and the AHRI certified 
directory.\27\ The information DOE gathered serves as resource material 
throughout the rulemaking. The sections that follow provide an overview 
of the market assessment, and chapter 2 of the final rule TSD provides 
additional detail on the market assessment, including citations to 
relevant sources.
---------------------------------------------------------------------------

    \27\ AHRI Directory of Certified Product Performance (2013) 
(Available at: www.ahridirectory.org) (Last accessed November 11, 
2013).
---------------------------------------------------------------------------

a. Trade Association Information
    DOE identified the same trade groups relevant to water-source heat 
pumps as to those listed in section V.A.2.a for small air-cooled air 
conditioners and heat pumps, namely AHRI, HARDI, and ACCA. DOE used 
data available from AHRI in its analysis, as described in the next 
section.
b. Manufacturer Information
    DOE reviewed data for water-source (water-to-air, water-loop) heat 
pumps currently on the market by examining the AHRI Directory of 
Certified Product Performance. DOE identified 18 parent companies 
(comprising 21 manufacturers) of water-source (water-to-air, water-
loop) heat pumps, which are listed in chapter 2 of the final rule TSD. 
Of these manufacturers, seven were identified as small businesses based 
upon number of employees and the employee thresholds set by the Small 
Business Administration. More details on this analysis can be found 
below in section IX.B.
c. Market Data
    DOE reviewed the AHRI database to characterize the efficiency and 
performance of water-source (water-to-air, water-loop) heat pump models 
currently on the market. The full results of this market 
characterization are found in chapter 2 of the final rule TSD. For 
water-source heat pumps less than 17,000 Btu/h, the average EER was 
13.8, and the average coefficient of performance (COP) was 4.7. Of the 
models identified by DOE, 34 (six percent of the total models) have 
EERs rated below the ASHRAE Standard 90.1-2013 levels, and 30 (five 
percent of the total models) have COPs rated below the ASHRAE Standard 
90.1-2013 levels. For water-source heat pumps greater than or equal to 
17,000 Btu/h and less than 65,000 Btu/h, the average EER was 15.2, and 
the average COP was 4.9. Of the models identified by DOE, 72 (two 
percent of the total models) have EERs rated below the ASHRAE Standard 
90.1-2013 levels, and 133 (four percent of the total models) have COPs 
rated below the ASHRAE Standard 90.1-2013 levels. For water-source heat 
pumps greater than or equal to 65,000 Btu/h and less than 135,000 Btu/
h, the average EER was 14.7, and the average COP was 4.8. Of the models 
identified by DOE, five (one percent of the total models) have EERs 
rated below the ASHRAE Standard 90.1-2013 levels, and two (0.5 percent 
of the total models) have COPs rated below the ASHRAE Standard 90.1-
2013 levels.

B. Engineering Analysis

    The engineering analysis establishes the relationship between an 
increase in energy efficiency and the increase in cost (manufacturer 
selling price (MSP)) of a piece of equipment DOE is evaluating for 
potential amended energy conservation standards. This relationship 
serves as the basis for cost-benefit calculations for individual 
consumers, manufacturers, and the Nation. The engineering analysis 
identifies representative baseline equipment, which is the starting 
point for analyzing possible energy efficiency improvements. For 
covered ASHRAE equipment, DOE sets the baseline for analysis at the 
ASHRAE Standard 90.1 efficiency level, because by statute, DOE cannot 
adopt any level below the revised ASHRAE level. The engineering 
analysis then identifies higher efficiency levels and the incremental 
increase in product cost associated with achieving the higher 
efficiency levels. After identifying the baseline models and cost of 
achieving increased efficiency, DOE estimates the additional costs to 
the commercial consumer through an analysis of contractor costs and 
markups, and uses that information in the downstream analyses to 
examine the costs and benefits associated with increased equipment 
efficiency.
    DOE typically structures its engineering analysis around one of 
three methodologies: (1) The design-option approach, which calculates 
the incremental costs of adding specific design options to a baseline 
model; (2) the efficiency-level approach, which calculates the relative 
costs of achieving increases in energy efficiency levels without regard 
to the particular design options used to achieve such increases; and/or 
(3) the reverse-engineering or cost-assessment approach, which involves 
a ``bottom-up'' manufacturing cost assessment based on a detailed bill 
of materials derived from teardowns of the equipment being analyzed. A 
supplementary method called a catalog teardown uses published 
manufacturer catalogs and supplementary component data to estimate the 
major physical differences between a piece of equipment that has been 
physically

[[Page 42633]]

disassembled and another piece of similar equipment for which catalog 
data are available to determine the cost of the latter equipment. 
Deciding which methodology to use for the engineering analysis depends 
on the equipment, the design options under study, and any historical 
data upon which DOE may draw.
1. Approach
    As discussed in the January 2015 NOPR, DOE used a combination of 
the efficiency-level approach and the cost-assessment approach. 80 FR 
1171, 1200 (Jan. 8, 2015). DOE used the efficiency-level approach to 
identify incremental improvements in efficiency for each equipment 
class and the cost-assessment approach to develop a cost for each 
efficiency level. The efficiency levels that DOE considered in the 
engineering analysis were representative of commercial water-source 
heat pumps currently produced by manufacturers at the time the 
engineering analysis was developed. DOE relied on data reported in the 
AHRI Directory of Certified Product Performance to select 
representative efficiency levels. This directory reported EER, COP, 
heating and cooling capacities, and other data for all three 
application types (water-loop, ground-water, ground-loop) for all AHRI-
certified units. After identifying representative efficiency levels, 
DOE used a catalog teardown or ``virtual teardown'' approach to 
estimate equipment costs at each level. DOE obtained general 
descriptions of key water-source heat pump components in product 
literature and used data collected for dozens of HVAC products to 
characterize the components' design details. This approach was used 
instead of the physical teardown approach due to time constraints.
    In the January 2015 NOPR, DOE noted the drawbacks to using a 
catalog teardown approach. 80 FR 1171, 1200 (Jan. 8, 2015). However, 
DOE tentatively concluded the approach provided a reasonable 
approximation of all cost increases associated with efficiency 
increases. DOE did not receive any comments that rejected this 
conclusion, and therefore, adopts it in this Final Rule.
    After selecting efficiency levels for each capacity class, as 
described in the sections that follow, DOE selected products for the 
catalog teardown analysis that corresponded to the representative 
efficiencies and cooling capacities. The engineering analysis included 
data for over 60 water-source heat pumps. DOE calculated the MPC for 
products spanning the full range of efficiencies from the baseline to 
the max-tech level for each analyzed equipment class. In some cases, 
catalog data providing sufficient information for cost analysis were 
not available at each efficiency level under consideration. Hence, DOE 
calculated the costs for some of the efficiency levels based on the 
cost/efficiency trends observed for other efficiency levels for which 
such catalog data were available. The engineering analysis is described 
in more detail in chapter 3 of the final rule TSD.
2. Baseline Equipment
    DOE selected baseline efficiency levels as reference points for 
each equipment class, against which it measured changes resulting from 
potential amended energy conservation standards. DOE defined the 
baseline efficiency levels as reference points to compare the 
technology, energy savings, and cost of equipment with higher energy 
efficiency levels. Typically, units at the baseline efficiency level 
just meet Federal energy conservation standards and provide basic 
consumer utility. However, EPCA requires that DOE must adopt either the 
ASHRAE Standard 90.1-2013 levels or more-stringent levels. Therefore, 
because the ASHRAE Standard 90.1-2013 levels were the lowest levels 
that DOE could adopt, DOE used those levels as the reference points 
against which more-stringent levels could be evaluated. Table VI.1 
shows the current baseline and ASHRAE efficiency levels for each water-
source heat pump equipment class. In Table VI.2 below, the ASHRAE 
levels are designated ``0'' and more-stringent levels are designated 1, 
2, and so on.

                       Table VI.1--Baseline Efficiency Levels for Water-Source Heat Pumps
----------------------------------------------------------------------------------------------------------------
                                                           Water-source       Water-source       Water-source
                                                          (water-to-air,     (water-to-air,     (water-to-air,
                                                         water-loop) heat   water-loop) heat   water-loop) heat
                                                        pumps <17,000 Btu/   pumps >=17,000   pumps >=65,000 and
                                                                h          and <65,000 Btu/h    <135,000 Btu/h
----------------------------------------------------------------------------------------------------------------
                                             Efficiency Level (EER)
----------------------------------------------------------------------------------------------------------------
Baseline--Federal Standard............................               11.2               12.0                12.0
Baseline--ASHRAE Standard.............................               12.2               13.0                13.0
----------------------------------------------------------------------------------------------------------------

3. Identification of Increased Efficiency Levels for Analysis
    DOE developed and considered potential increased energy efficiency 
levels for each equipment class. These more-stringent efficiency levels 
are representative of efficiency levels along the technology paths that 
manufacturers of residential heating products commonly use to maintain 
cost-effective designs while increasing energy efficiency. DOE 
developed more-stringent energy efficiency levels for each of the 
equipment classes, based on a review of AHRI's Directory of Certified 
Product Performance, manufacturer catalogs, and other publicly-
available literature. The efficiency levels selected for analysis for 
each water-source heat pump equipment class are shown in Table VI.2. 
Chapter 3 of the final rule TSD shows additional details on the 
efficiency levels selected for analysis.

[[Page 42634]]



                      Table VI.2--Efficiency Levels for Analysis of Water-Source Heat Pumps
----------------------------------------------------------------------------------------------------------------
                                                           Water-source       Water-source       Water-source
                                                          (water-to-air,     (water-to-air,     (water-to-air,
                                                         water-loop) heat   water-loop) heat   water-loop) heat
                                                        pumps <17,000 Btu/   pumps >=17,000   pumps >=65,000 and
                                                                h          and <65,000 Btu/h    <135,000 Btu/h
----------------------------------------------------------------------------------------------------------------
                                         Efficiency Level (EER, Btu/W-h)
----------------------------------------------------------------------------------------------------------------
Baseline--Federal Standard............................               11.2               12.0                12.0
Baseline--ASHRAE Level (0)............................               12.2               13.0                13.0
Efficiency Level 1....................................               13.0               14.6                14.0
Efficiency Level 2....................................               14.0               16.6                15.0
Efficiency Level 3....................................               15.7               18.0                16.0
Efficiency Level 4*...................................               16.5               19.2                17.2
Efficiency Level 5**..................................               18.1               21.6                   -
----------------------------------------------------------------------------------------------------------------
* Efficiency Level 4 is ``Max-Tech'' for the largest equipment classes.
** Efficiency Level 5 is ``Max-Tech'' for the two smaller equipment classes.

4. Engineering Analysis Results
    The results of the engineering analysis are cost-efficiency curves 
based on results from the cost models for analyzed units. DOE's 
calculated MPCs for the three analyzed classes of water-source heat 
pumps are shown in Table VI.3. DOE used the cost-efficiency curves from 
the engineering analysis as an input for the life-cycle cost and PBP 
analysis. Further details regarding MPCs for water-source heat pumps 
may be found in chapter 3 of the final rule TSD.

                                          Table VI.3--Manufacturer Production Costs for Water-Source Heat Pumps
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                              Water-source (water-to-air, water-  Water-source (water-to-air, water-  Water-source (water-to-air, water-
                                                loop) heat pumps <17,000 Btu/h       loop) heat pumps >=17,000 and       loop) heat pumps >=65,000 and
                                             ------------------------------------            <65,000 Btu/h                      <135,000 Btu/h
                                                                                 -----------------------------------------------------------------------
                                                     EER           MPC (2014$)           EER           MPC (2014$)           EER           MPC (2014$)
--------------------------------------------------------------------------------------------------------------------------------------------------------
ASHRAE--Level 0.............................              12.2               860              13.0             1,346              13.0             3,274
Efficiency Level 1..........................              13.0               904              14.6             1,463              14.0             3,660
Efficiency Level 2..........................              14.0               960              16.6             1,609              15.0             4,045
Efficiency Level 3..........................              15.7             1,053              18.0             1,711              16.0             4,431
Efficiency Level 4..........................              16.5             1,097              19.2             1,798              17.2             4,893
Efficiency Level 5..........................              18.1             1,185              21.6             1,974  ................  ................
--------------------------------------------------------------------------------------------------------------------------------------------------------

a. Manufacturer Markups
    As discussed in detail in section V.B.4.a, DOE applies a non-
production cost multiplier (the manufacturer markup) to the full MPC to 
account for corporate non-production costs and profit. The resulting 
manufacturer selling price (MSP) is the price at which the manufacturer 
can recover all production and nonproduction costs and earn a profit. 
Because water-source heat pumps and commercial air-cooled equipment are 
sold by similar heating and cooling product manufacturers, DOE used the 
same manufacturer markup of 1.3 that was developed for small commercial 
air-cooled air-conditioners and heat pumps, as described in chapter 3 
of the final rule TSD.
b. Shipping Costs
    Manufacturers of commercial HVAC equipment typically pay for 
freight (shipping) to the first step in the distribution chain. Freight 
is not a manufacturing cost, but because it is a substantial cost 
incurred by the manufacturer, DOE accounts for shipping costs 
separately from other non-production costs that comprise the 
manufacturer markup. DOE calculated the MSP for water-source heat pumps 
by multiplying the MPC at each efficiency level (determined from the 
cost model) by the manufacturer markup and adding shipping costs. 
Shipping costs for water-source heat pumps were calculated similarly to 
those for small commercial air-cooled air-conditioners and heat pumps 
described in section V.B.4.b. See chapter 3 of the final rule TSD for 
more details about DOE's shipping cost assumptions and the shipping 
costs per unit for each water-source heat pump product class.

C. 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 commercial consumer 
prices.\28\ 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 commercial consumer price.
---------------------------------------------------------------------------

    \28\ ``Commercial consumer'' refers to purchasers of the 
equipment being regulated.
---------------------------------------------------------------------------

    For water-source heat pumps, DOE used the same markups that DOE 
developed for small commercial air-cooled air-conditioners and heat 
pumps, as discussed in section V.C. DOE understands that all the types 
of equipment move through the same distribution channels and that, 
therefore, using the same markups is reasonable. In addition, DOE's 
development of markups within those channels is at the broader 
equipment category level, in this case heating, ventilation, and air-
conditioning equipment. As with small commercial air-cooled equipment, 
in the January 2015 NOPR, DOE did not use national accounts in its 
markups analysis for water-source heat pumps, because DOE does not 
believe that the commercial consumers of water-source heat pump

[[Page 42635]]

equipment less than 135,000 Btu/h would typically be national retail 
chains that negotiate directly with manufacturers. 80 FR 1171, 1202. 
DOE sought comment on whether the use of national accounts would be 
appropriate in this analysis. DOE did not receive any comments, and as 
such has retained its approach in this final rule.
    Chapter 6 of the final rule TSD provides further detail on the 
estimation of markups.

D. Energy Use Analysis

    The energy use analysis provides estimates of the annual energy 
consumption of water-source heat pumps at the considered efficiency 
levels. DOE uses these values in the LCC and PBP analyses and in the 
NIA.
    The cooling unit energy consumption (UEC) by equipment type and 
efficiency level used in the January 2015 NOPR came from Appendix D of 
the 2000 Screening Analysis for EPACT-Covered Commercial HVAC and 
Water-Heating Equipment. (EERE-2006-STD-0098-0015). 80 FR 1171, 1202. 
Where identical efficiency levels were available, DOE used the UEC 
directly from the screening analysis. For additional efficiency levels, 
DOE scaled the UECs based on the ratio of EER, as was done in the 
original analysis. DOE also adjusted the cooling energy use from the 
2000 Screening Analysis using factors from the NEMS commercial demand 
module that account for improvements in building shell characteristics 
and changes in internal load as a function of region and building 
activity.
    In response to the January 2015 NOPR, NEEA commented that DOE 
should revise its energy analysis for water-source heat pumps by 
factoring in the oversizing of equipment, which leads to additional 
energy use. In addition, NEEA also noted that in the field, FLEOH does 
not scale proportionally with EER at higher EER levels, instead 
decreasing at a higher rate as a result of better part load 
performance. (NEEA, No. 41 at p. 2) DOE acknowledges that the original 
2000 Screening Analysis sized equipment based on design-day peak load 
and did not explicitly account for oversizing, and as such may be a 
conservative estimate of energy usage. However, the uncertainty in the 
energy use analysis that was cited in the January 2015 NOPR extends 
well beyond the sizing factors. 80 FR 1171, 1225-1226 (Jan. 8, 2015). 
For example, DOE has no data on distribution by building type or field 
data to corroborate UEC estimates or simulations results. Furthermore, 
DOE has no data with which to modify the scaling of UEC with EER. While 
altering its assumptions on sizing and UEC scaling could impact the 
analytical results, it would not change DOE's fundamental determination 
that there is too much uncertainty in the energy use and other analyses 
to justify a standard level more stringent than those in ASHRAE 90.1-
2013. Therefore, given the lack of available data and lack of potential 
impact on the policy decision, DOE has not modified the cooling side 
energy use for the final rule.
    In the January 2015 NOPR, 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 heat pumps. 80 
FR 1171, 1202 (Jan. 8, 2015). DOE assumed that the average COP of the 
commercial unitary heat pump (CUHP) was 2.9.\29\ 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 
in the 2014 CUAC NOPR. (EERE-2013-BT-STD-0007-0027) Although this 
analysis in the NOPR related to equipment larger than some of the 
equipment that is the subject of this final rule and is directly 
applicable only to air-source heat pumps rather than water-source heat 
pumps, DOE assumed that this estimate was sufficiently representative 
of the heating energy use for all three classes of water-source heat 
pumps. DOE sought comment on this issue but did not receive any. As a 
result, DOE has retained this approach for the final rule.
---------------------------------------------------------------------------

    \29\ A heating efficiency of 2.9 COP corresponds to the existing 
minimum heating efficiency standard for commercial unitary heat 
pumps, a value which DOE believes is representative of the heat pump 
stock characterized by CBECS.
---------------------------------------------------------------------------

    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 the COPs of units with given EERs, DOE correlated COP to EER 
based on the AHRI Certified Equipment Database.\30\ Thus, for any given 
cooling efficiency of a water-source heat pump, DOE was able to use 
this method to establish the corresponding heating efficiency, and, in 
turn, the associated annual heating energy consumption.
---------------------------------------------------------------------------

    \30\ See: http://www.ahridirectory.org/ahridirectory/pages/homeM.aspx.
---------------------------------------------------------------------------

    In order to create variability in the cooling and heating UECs by 
region and building type, in the January 2015 NOPR, DOE used a Pacific 
Northwest National Laboratory report \31\ that estimated the annual 
energy usage of space cooling and heating products using a Full Load 
Equivalent Operating Hour (FLEOH) approach. 80 FR 1171, 1202-1203 (Jan. 
8, 2015). DOE normalized the provided FLEOHs to the UECs taken from the 
2011 DFR for central air conditioners and heat pumps to vary the 
average UEC across region and building type. DOE used the following 
building types: office, education, lodging, multi-family apartments, 
and healthcare. 80 FR at 1203. DOE sought comment on whether these 
building types are appropriate or whether there are other building 
types that should be considered for the water-source heat pump 
analysis. DOE did not receive any comments on this issue and retained 
the same building types for this final rule analysis.
---------------------------------------------------------------------------

    \31\ See Appendix D of the 2000 Screening Analysis for EPACT-
Covered Commercial HVAC and Water-Heating Equipment. (EERE-2006-STD-
0098-0015)
---------------------------------------------------------------------------

E. 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 commercial 
consumers of water-source heat pumps 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 consumer expense over the life of the 
equipment, consisting of equipment and installation costs plus 
operating costs (i.e., expenses for energy use, maintenance, and 
repair). DOE discounts future operating costs to the time of purchase 
using commercial consumer discount rates. The PBP is the estimated 
amount of time (in years) it takes commercial consumers 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 potential 
standard. However, unlike the LCC, DOE only considers the first year's 
operating expenses in the PBP calculation. Because the PBP does not 
account for changes in operating expense over time or the time value of 
money, it is also referred to as a simple PBP.
    For any given efficiency level, DOE measures the PBP and the change 
in LCC relative to an estimate of the base-case efficiency level. For 
water-source

[[Page 42636]]

heat pumps, the base-case estimate reflects the market in the case 
where the ASHRAE level becomes the Federal minimum, and the LCC 
calculates the LCC savings likely to result from higher efficiency 
levels compared with the ASHRAE base case.
    DOE conducted an LCC and PBP analysis for water-source heat pumps 
using a computer spreadsheet model. When combined with Crystal Ball (a 
commercially-available software program), the LCC and PBP model 
generates a Monte Carlo simulation to perform the analyses by 
incorporating uncertainty and variability considerations in certain of 
the key parameters as discussed below. 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. They are also described 
in detail in chapter 6 of the final rule TSD.
1. Equipment Costs
    In the LCC and PBP analysis, the equipment costs faced by 
purchasers of water-source heat pumps are derived from the MSPs 
estimated in the engineering analysis, the overall markups estimated in 
the markups analysis, and sales tax.
    To develop an equipment price trend, DOE derived an inflation-
adjusted index of the PPI for ``all other miscellaneous refrigeration 
and air-conditioning equipment'' from 1990-2013, which is the PPI 
series most relevant to water-source heat pumps. Although the 
inflation-adjusted index shows a declining trend from 1990 to 2004, 
data since 2008 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 (at 2013 levels) for each 
efficiency level in each equipment class for the final rule. See 
chapter 6 of the final rule TSD for more information on the price 
trends.
2. Installation Costs
    DOE derived installation costs for water-source heat pump equipment 
from current RS Means data (2013).\32\ RS Means provides estimates for 
installation costs for the subject equipment by equipment capacity, as 
well as cost indices that reflect the variation in installation costs 
for 656 cities in the United States. The RS Means data identify several 
cities in all 50 States and the District of Columbia. DOE incorporated 
location-based cost indices into the analysis to capture variation in 
installation costs, depending on the location of the consumer.
---------------------------------------------------------------------------

    \32\ RS Means Mechanical Cost Data 2013. Reed Construction Data, 
LLC. (2012).
---------------------------------------------------------------------------

    Based on these data, DOE concluded that data for 1-ton, 3-ton, and 
7.5-ton water-source heat pumps would be sufficiently representative of 
the installation costs for of water-source heat pumps with capacities 
of less than 17,000 btu/h, greater than or equal to 17,000 and less 
than 65,000 btu/h, and greater than or equal to 65,000 and less than 
135,000 btu/h, respectively.
    DOE also varied installation cost as a function of equipment 
weight. Because weight tends to increase with equipment efficiency, 
installation cost increased with equipment efficiency. 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 by each class 
of the subject water-source heat pumps at each considered efficiency 
level based on the energy use analysis is described above in section 
VI.D and in chapter 4 of the final rule TSD.
4. Electricity Prices and Electricity Price Trends
    DOE used the same average and marginal electricity prices and 
electricity price trends as discussed in the methodology for small 
commercial air-cooled air conditioners and heat pumps (see section 
V.E.4). These data were developed for the broader commercial air-
conditioning category and, thus, are also relevant to water-source heat 
pumps.
5. Maintenance Costs
    Maintenance costs are costs to the commercial consumer of ensuring 
continued operation of the equipment (e.g., checking and maintaining 
refrigerant charge levels and cleaning heat-exchanger coils). Because 
RS Means does not provide maintenance costs for water-source heat 
pumps, DOE used annualized maintenance costs for air-source heat pumps, 
the closest related equipment category, derived from RS Means data.\33\ 
80 FR 1171, 1203-1204 (Jan. 8, 2015). DOE does not expect the 
maintenance costs for water-source heat pumps to differ significantly 
from those for air-source heat pumps. These data provided estimates of 
person-hours, labor rates, and materials required to maintain 
commercial air-source heat pumps. The estimated annualized maintenance 
cost, in 2014 dollars, is $334 for a heat pump rated up to 60,000 btu/h 
and $404 for a heat pump rated greater than 60,000 btu/h. DOE applied 
the former cost to water-source heat pumps less than 17,000 Btu/h and 
heat pumps greater than or equal to 17,000 and less than 65,000 Btu/h. 
DOE applied the latter cost to water-source heat pumps greater than or 
equal to 65,000 Btu/h and less than 135,000 Btu/h. DOE requested 
comment on how maintenance costs for water-source heat pumps might be 
expected to differ from that for air-source heat pumps. DOE did not 
receive any comments, and as such has retained the same approach in the 
final rule.
---------------------------------------------------------------------------

    \33\ RS Means Facilities Maintenance & Repair Cost Data 2013. 
Reed Construction Data, LLC. (2012).
---------------------------------------------------------------------------

6. Repair Costs
    Repair costs are costs to the commercial consumer associated with 
repairing or replacing components that have failed. As with maintenance 
costs, RS Means does not provide repair costs for water-source heat 
pumps. Therefore, DOE assumed the repair costs for water-source heat 
pumps would be similar to air-source units and utilized RS Means\34\ to 
find the repair costs for air-source heat pumps. 80 FR 1171, 1204 (Jan. 
8, 2015). DOE does not expect the repair costs for water-source heat 
pumps to differ significantly from those for air-source heat pumps. DOE 
took the repair costs for 1.5-ton, 5-ton, and 10-ton air to air heat 
pumps and linearly scaled the repair costs to derive repair costs for 
1-ton, 3-ton, and 7.5-ton equipment. DOE assumed that the repair would 
be a one-time event in year 10 of the equipment life. DOE then 
annualized the present value of the cost over the average equipment 
life (see next section) to obtain an annualized equivalent repair cost. 
This value, in 2014 dollars, ranged from $93 to $240 for the ASHRAE 
baseline, depending on equipment class. The materials portion of the 
repair cost was scaled with the percentage increase in manufacturers' 
production cost by efficiency level. The labor cost was held constant 
across efficiency levels. This annualized repair cost was then added to 
the maintenance cost to create an annual ``maintenance and repair 
cost'' for the lifetime of the equipment. In the January 2015 NOPR, DOE 
requested comment on how repair costs for water-source heat pumps might 
be expected to differ from that for air-source heat

[[Page 42637]]

pumps. 80 FR 1171, 1204 (Jan. 8, 2015). DOE did not receive comment and 
as such, retained the same approach for the final rule. For further 
discussion of how DOE derived and implemented repair costs, see chapter 
8 of the final rule TSD.
---------------------------------------------------------------------------

    \34\ Id.
---------------------------------------------------------------------------

7. Equipment Lifetime
    Equipment lifetime is the age at which the subject water-source 
heat pumps are retired from service. In the January 2015 NOPR, DOE 
based equipment lifetime on a retirement function in the form of a 
Weibull probability distribution, with a mean of 19 years. 80 FR 1171, 
1204 (Jan. 8, 2015). Because a function specific to water-source heat 
pumps was not available, DOE used the function for air-cooled air 
conditioners presented in the 2011 DFR (EERE-2011-BT-STD-0011-0012), as 
it is for similar equipment and represented the desired mean lifetime 
of 19 years. In the NOPR, DOE requested data and information that would 
help it develop a retirement function specific to water-source heat 
pumps. DOE did not receive any comments, and as such retained the same 
Weibull distribution in the final rule.
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 of capital (WACC) 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.
    DOE derived the discount rates by estimating the cost of capital of 
companies that purchase water-source heat pump equipment. More details 
regarding DOE's estimates of commercial consumer discount rates are 
provided in chapter 6 of the final rule 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, in this case the default scenario in which DOE is 
statutorily required to adopt the efficiency levels in ASHRAE 90.1-
2013). This analysis requires an estimate of the distribution of 
equipment efficiencies in the base case (i.e., what consumers would 
have purchased in the compliance year in the absence of amended 
standards more stringent than those in ASHRAE 90.1-2013). DOE refers to 
this distribution of equipment energy efficiencies as the base-case 
efficiency distribution. For more information on the development of the 
base-case distribution, see section VI.F.3 and chapter 6 of the final 
rule TSD.
10. Compliance Date
    DOE calculated the LCC and PBP for all commercial consumers as if 
each were to purchase new equipment in the year that compliance with 
amended standards is required. Generally, covered equipment to which a 
new or amended energy conservation standard applies must comply with 
the standard if such equipment is manufactured or imported on or after 
a specified date. In this final rule, DOE has evaluated whether more-
stringent efficiency levels than those in ASHRAE Standard 90.1-2013 
would be technologically feasible, economically justified, and result 
in a significant additional amount of energy savings and has declined 
to implement more stringent efficiency levels. EPCA states that 
compliance with any such standards shall be required on or after a date 
which is two or three years (depending on equipment size) after the 
compliance date of the applicable minimum energy efficiency requirement 
in the amended ASHRAE/IES standard. (42 U.S.C. 6313(a)(6)(D)) Given the 
equipment size at issue here, DOE has applied the two-year 
implementation period to water-source heat pumps manufactured on or 
after October 9, 2015, which is two years after the publication date of 
ASHRAE Standard 90.1-2013.
    Economic justification is not required for DOE to adopt the 
efficiency levels in ASHRAE 90.1-2013, as DOE is statutorily required 
to, at a minimum, adopt those levels. Therefore, DOE did not perform an 
LCC analysis on the ASHRAE Standard 90.1-2013 levels, and, for purposes 
of the LCC analysis, DOE used 2020 as the first year of compliance with 
amended standards.
11. Payback Period Inputs
    The payback period is the amount of time it takes the commercial 
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 equipment mean that the increased total installed cost is 
not recovered in reduced operating expenses.
    Similar to the LCC, the inputs to the PBP calculation are the total 
installed cost of the equipment to the commercial consumer for each 
efficiency level and the average annual operating expenditures for each 
efficiency level for each building type and Census Division, weighted 
by the probability of shipment to each market. The PBP calculation uses 
the same inputs as the LCC analysis, except that discount rates are not 
needed. Because the simple PBP does not take into account changes in 
operating expenses over time or the time value of money, DOE considered 
only the first year's operating expenses to calculate the PBP, unlike 
the LCC, which is calculated over the lifetime of the equipment. 
Chapter 6 of the final rule TSD provides additional detail about the 
PBP.

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

    The NIA evaluates the effects of a considered energy conservation 
standard from a national perspective rather than from the consumer 
perspective represented by the LCC. This analysis assesses the NPV 
(future amounts discounted to the present) and the NES of total 
commercial consumer costs and savings, which are expected to result 
from amended standards at specific efficiency levels. For each 
efficiency level analyzed, DOE calculated the NPV and NES for adopting 
more-stringent standards than the efficiency levels specified in ASHRAE 
Standard 90.1-2013.
    The NES refers to cumulative energy savings from 2016 through 2045; 
\35\ however, when evaluating more-stringent standards, energy savings 
do not begin accruing until the later compliance date of 2020. DOE 
calculated new energy savings in each year relative to a base case, 
defined as DOE adoption of the efficiency levels specified by ASHRAE 
Standard 90.1-2013. DOE also calculated energy savings from adopting 
efficiency levels specified by ASHRAE Standard 90.1-2013 compared to 
the EPCA base case (i.e., the current Federal standards).
---------------------------------------------------------------------------

    \35\ Although the expected compliance date for adoption of the 
efficiency levels in ASHRAE Standard 90.1-2013 is October 9, 2015, 
DOE began its analysis period in 2016 to avoid ascribing savings to 
the three-quarters of 2015 prior to the compliance date.
---------------------------------------------------------------------------

    The NPV refers to cumulative monetary savings. DOE calculated net 
monetary savings in each year relative to the base case (ASHRAE 
Standard 90.1-2013) as the difference between total operating cost 
savings and increases in total installed cost.

[[Page 42638]]

Cumulative savings are the sum of the annual NPV over the specified 
period. DOE accounted for operating cost savings until past 2100, when 
the equipment installed in the thirtieth year after the compliance date 
of the amended standards should be retired.
1. Approach
    The NES and NPV are a function of the total number of units and 
their efficiencies. Both the NES and NPV depend on annual shipments and 
equipment lifetime. Both calculations start by using the shipments 
estimate and the quantity of units in service derived from the 
shipments model. DOE used the same approach to determine NES and NPV 
for water-source heat pumps which was used for small commercial air-
cooled air-conditioning and heating equipment, as described in section 
V.F.1. In this case, the analysis period runs from 2016 through 2045.
    In the January 2015 NOPR, DOE considered whether a rebound effect 
is applicable in its NES analysis, a concept explained in detail in 
section V.F. 1. 80 FR 1171, 1205 (Jan. 8, 2015). DOE did not expect 
commercial consumers with water-source heat pump equipment to increase 
their use of the equipment, either in a previously cooled space or 
another previously uncooled space. Water-source heat pumps are part of 
engineered water-loop systems designed for specific applications. It is 
highly unlikely that the operation or installation of these systems 
would be changed simply as a result of energy cost savings. Therefore, 
DOE did not assume a rebound effect in the NOPR analysis. DOE sought 
input from interested parties on whether there will be a rebound effect 
for improvements in the efficiency of water-source heat pumps, but did 
not receive any comment. As a result, DOE retained its assumptions in 
this final rule.
2. Shipments Analysis
    Equipment shipments are an important element in the estimate of the 
future impact of a potential energy conservation standard. DOE 
developed shipment projections for water-source heat pumps and, in 
turn, calculated equipment stock over the course of the analysis period 
by assuming a Weibull distribution with an average 19-year equipment 
life. (See section V.E.7 for more information on equipment lifetime.) 
DOE used the shipments projection and the equipment stock to determine 
the NES. The shipments portion of the spreadsheet model projects water-
source heat pump shipments through 2045.
    DOE based its shipments analysis for water-source heat pumps on 
data from the U.S. Census. The U.S. Census published historical (1980, 
1983-1994, 1997-2006, and 2008-2010) water-source heat pump shipment 
data.\36\ Table VI.4 exhibits the shipment data provided for a 
selection of years. DOE analyzed data from the years 1990-2010 to 
establish a trend from which to project shipments beyond 2010. DOE used 
a linear trend. Because the Census data do not distinguish between 
equipment capacities, DOE used the shipments data by equipment class 
provided by AHRI in 1999, and published in the 2000 Screening Analysis 
for EPACT-Covered Commercial HVAC and Water-Heating Equipment (EERE-
2006-STD-0098-0015), to distribute the total water-source heat pump 
shipments to individual equipment classes. Table VI.5 exhibits the 
shipment data provided for 1999. DOE assumed that this distribution of 
shipments across the various equipment classes remained constant and 
has used this same distribution in its projection of future shipments 
of water-source heat pumps. The complete historical data set and the 
projected shipments for each equipment class can be found in the 
chapter 7 of the final rule TSD.
---------------------------------------------------------------------------

    \36\ 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 (Available at: http://www.census.gov/manufacturing/cir/historical_data/ma333m/index.html).

         Table VI.4--Total Shipments of Water-Source Heat Pumps
                    [Census product code: 333415E181]
------------------------------------------------------------------------
                                            1989       1999       2009
------------------------------------------------------------------------
Total..................................   157,080    120,545    180,101
------------------------------------------------------------------------


      Table VI.5--Total Shipments of Water-Source Heat Pumps (AHRI)
------------------------------------------------------------------------
                   Equipment class                      1999     Percent
------------------------------------------------------------------------
WSHP <17000 Btu/h...................................    41,000        31
WSHP 17000-65000 Btu/h..............................    86,000        65
WSHP 65000-135000 Btu/h.............................     5,000         4
------------------------------------------------------------------------

    Table VI.6 shows the projected shipments for the different 
equipment classes of water-source heat pumps for selected years from 
2016 to 2045, as well as the cumulative shipments.

                                              Table VI.6--Shipments Projection for Water-Source Heat Pumps
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                       Units shipped by year and equipment class
                                                              ------------------------------------------------------------------------------------------
                          Equipment                                                                                                          Cumulative
                                                                  2016       2020       2025       2030       2035       2040       2045      shipments
                                                                                                                                             (2016-2045)
--------------------------------------------------------------------------------------------------------------------------------------------------------
WSHP <17000 Btu/h............................................     62,934     68,072     74,495     80,918     87,341     93,764    100,187     2,446,810
WSHP 17000-65000 Btu/h.......................................    132,007    142,785    156,258    169,731    183,203    196,676    210,148     5,132,334
WSHP 65000-135000 Btu/h......................................      7,675      8,301      9,085      9,868     10,651     11,435     12,218     7,579,144
                                                              ------------------------------------------------------------------------------------------
    Total....................................................    202,616    219,159    239,838    260,517    281,195    301,874    322,553     7,877,536
--------------------------------------------------------------------------------------------------------------------------------------------------------

    As equipment purchase price and repair costs increase with 
efficiency, DOE recognizes that higher first costs and repair costs can 
result in a drop in shipments. However, in the January 2015 NOPR, DOE 
had no basis for estimating the elasticity of shipments for water-
source heat pumps as a function of first costs, repair costs, or 
operating costs. 80 FR 1171, 1206 (Jan. 8, 2015). In addition, because 
water-source heat pumps are often installed for their higher efficiency 
as compared to air-cooled equipment, DOE had tentatively concluded in 
the January 2015 NOPR that it was unlikely that shipments would change 
as a result of higher first costs and repair costs. Therefore, DOE 
presumed that the shipments projection would not change with higher 
standard levels. DOE sought input on this assumption in the January 
2015 NOPR. Id. As noted in section V.F.2, in response, Lennox 
International commented that they with increased costs they expected a 
drop in shipments

[[Page 42639]]

and an increase in repairs. (Lennox International, No. 36 at p. 2-3)
    DOE acknowledges Lennox's concerns. However, DOE does not have data 
available to estimate the price elasticity for this equipment. Given 
that even without a drop in shipments, none of the efficiency levels in 
the January 2015 NOPR were determined to be economically justified, DOE 
has not revised its shipments estimates for this final rule. Chapter 7 
of the final rule TSD provides additional details on the shipments 
forecasts.
3. Base-Case and Standards-Case Forecasted Distribution of Efficiencies
    DOE estimated base-case efficiency distributions based on model 
availability in the AHRI certified directory. In the January 2015 NOPR, 
DOE also estimated a base-case efficiency trend of an increase of 
approximately 1 EER every 35 years, based on the trend from 2012 to 
2035 found in the Commercial Unitary Air Conditioner Advance Notice of 
Proposed Rulemaking (ANOPR).\37\ 80 FR 1171, 1207 (Jan. 8, 2015). DOE 
used this same trend in the standards-case scenarios. DOE requested 
comment on its estimated efficiency trends, but did not receive any. As 
a result, DOE used the same trend for this final rule.
---------------------------------------------------------------------------

    \37\ See DOE's technical support document underlying DOE's July 
29, 2004 ANOPR. 69 FR 45460 (Available at: www.regulations.gov/#!documentDetail;D=EERE-2006-STD-0103-0078).
---------------------------------------------------------------------------

    For each efficiency level analyzed, DOE used a ``roll-up'' scenario 
to establish the market shares by efficiency level for the first full 
year that compliance would be required with amended standards (i.e., 
2016 for adoption of efficiency levels in ASHRAE Standard 90.1-2013 or 
2020 if DOE adopts more-stringent efficiency levels than those in 
ASHRAE Standard 90.1-2013). Table VI.7 presents the estimated base-case 
efficiency market shares for each water-source heat pump equipment 
class.

               Table VI.7--Base-Case Efficiency Market Shares in 2020 for Water-Source Heat Pumps
----------------------------------------------------------------------------------------------------------------
  Water-source (water-to-air, water-loop) heat      Water-source (water-to-air,     Water-source (water-to-air,
               pumps <17,000 Btu/h                    water-loop) heat pumps          water-loop) heat pumps
-------------------------------------------------   >=17,000 and <65,000 Btu/h      >=65,000 and <135,000 Btu/h
                                                 ---------------------------------------------------------------
               EER                 Market share                    Market share                    Market share
                                     (percent)          EER          (percent)          EER          (percent)
----------------------------------------------------------------------------------------------------------------
11.2............................             0.0            12.0             0.0            12.0             0.0
12.2............................             0.7            13.0             7.6            13.0             0.0
13.0............................            49.7            14.6            55.1            14.0            29.8
14.0............................            22.0            16.6            25.0            15.0            48.5
15.7............................            20.5            18.0             8.9            16.0            20.1
16.5............................             4.9            19.2             2.5            17.0             1.7
18.1............................             2.3            21.6             1.0  ..............  ..............
----------------------------------------------------------------------------------------------------------------
Note: The 0% market share at the first listed EER level is accounting for the default adoption of ASHRAE
  Standard 90.1-2013 levels in 2016.

4. National Energy Savings and Net Present Value
    The stock of water-source heat pump equipment is the total number 
of units in each equipment class purchased or shipped from previous 
years that have survived until a given point in time. The NES 
spreadsheet,\38\ through use of the shipments model, keeps track of the 
total number of units shipped each year. For purposes of the NES and 
NPV analyses, DOE assumes that shipments of water-source heat pump 
units survive for an average of 19 years, following a Weibull 
distribution, at the end of which time they are removed from service.
---------------------------------------------------------------------------

    \38\ The NES spreadsheet can be found in the docket for the 
ASHRAE rulemaking at: www.regulations.gov/#!docketDetail;D=EERE-
2014-BT-STD-0015.
---------------------------------------------------------------------------

    The national annual energy consumption is the product of the annual 
unit energy consumption and the number of units of each vintage in the 
stock, summed over all vintages. This approach accounts for differences 
in unit energy consumption from year to year. In determining national 
annual energy consumption, DOE estimated energy consumption and savings 
based on site energy and converted the electricity consumption and 
savings to primary energy using annual conversion factors derived from 
the AEO 2014 version of NEMS. Cumulative energy savings are the sum of 
the NES for each year over the timeframe of the analysis.
    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 Sciences, DOE 
announced its intention to use 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 (Aug. 18, 2011). After evaluating 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 the most appropriate tool for 
its FFC analysis and its intention to use NEMS for that purpose. 77 FR 
49701 (Aug. 17, 2012). The approach used for this final rule is 
described in Appendix 8A of the final rule TSD.
    Table VI.8 summarizes the inputs to the NES spreadsheet model along 
with a brief description of the data sources. The results of DOE's NES 
and NPV analysis are summarized in section VIII.B.2.b and described in 
detail in chapter 7 of the final rule TSD.

 Table VI.8--Summary of Water-Source Heat Pump NES and NPV Model Inputs
------------------------------------------------------------------------
              Inputs                             Description
------------------------------------------------------------------------
Shipments.........................  Annual shipments based on U.S.
                                     Census data. (See chapter 7 of the
                                     final rule TSD.)

[[Page 42640]]

 
Compliance Date of Standard.......  2020 for adoption of a more-
                                     stringent efficiency level than
                                     those specified by ASHRAE Standard
                                     90.1-2013.
                                    2016 for adoption of the efficiency
                                     levels specified by ASHRAE Standard
                                     90.1-2013.
Base-Case Efficiencies............  Distribution of base-case shipments
                                     by efficiency level, with
                                     efficiency trend of an increase of
                                     1 EER every 35 years.
Standards-Case Efficiencies.......  Distribution of shipments by
                                     efficiency level for each standards
                                     case. In compliance year, units
                                     below the standard level ``roll-
                                     up'' to meet the standard.
                                     Efficiency trend of an increase of
                                     1 EER every 35 years.
Annual Energy Use per Unit........  Annual national weighted-average
                                     values are a function of efficiency
                                     level. (See chapter 4 of the final
                                     rule TSD.)
Total Installed Cost per Unit.....  Annual weighted-average values are a
                                     function of efficiency level. (See
                                     chapter 5 of the final rule TSD.)
Annualized Maintenance and Repair   Annual weighted-average values are a
 Costs per Unit.                     function of efficiency level. (See
                                     chapter 5 of the final rule TSD.)
Escalation of Fuel Prices.........  AEO2014 forecasts (to 2040) and
                                     extrapolation for beyond 2040. (See
                                     chapter 8 of the final rule TSD.)
Site to Primary and FFC Conversion  Based on AEO2014 forecasts (to 2040)
                                     and extrapolation for beyond 2040.
                                     (See chapter 8 of the final rule
                                     TSD.)
Discount Rate.....................  3 percent and 7 percent real.
Present Year......................  Future costs are discounted to 2015.
------------------------------------------------------------------------

VII. Methodology for Emissions Analysis and Monetizing Carbon Dioxide 
and Other Emissions Impacts

A. Emissions Analysis

    In the emissions analysis, DOE estimates the reduction in power 
sector emissions of carbon dioxide (CO2), nitrogen oxides 
(NOX), sulfur dioxide (SO2), and mercury (Hg) 
from potential amended energy conservation standards for the ASHRAE 
equipment that is the subject of this document. 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 51281 (Aug. 18, 
2011) as amended at 77 FR 49701 (August 17, 2012)), the FFC analysis 
also includes impacts on emissions of methane (CH4) and 
nitrous oxide (N2O), both of which are recognized as 
greenhouse gases. The combustion emissions factors and the method DOE 
used to derive upstream emissions factors are described in chapter 9 of 
the final rule TSD. The cumulative emissions reduction estimated for 
the subject ASHRAE equipment is presented in section VIII.C.
    DOE primarily conducted the emissions analysis using emissions 
factors for CO2 and most of the other gases derived from 
data in AEO 2014. Combustion emissions of CH4 and 
N2O were estimated using emissions intensity factors 
published by the U.S. Environmental Protection Agency (EPA) in its 
Greenhouse Gas (GHG) Emissions Factors Hub.\39\ 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 9 of the final rule TSD.
---------------------------------------------------------------------------

    \39\ See http://www.epa.gov/climateleadership/inventory/ghg-emissions.html.
---------------------------------------------------------------------------

    EIA prepares the AEO using NEMS. Each annual version of NEMS 
incorporates the projected impacts of existing air quality regulations 
on emissions. AEO 2014 generally represents current legislation and 
environmental regulations, including recent government actions, for 
which implementing regulations were available as of October 31, 2013.
    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 (DC). (42 U.S.C. 7651 et seq.) SO2 
emissions from 28 eastern States and DC were also limited under the 
Clean Air Interstate Rule (CAIR). 70 FR 25162 (May 12, 2005). CAIR, 
which created an allowance-based trading program that operates along 
with the Title IV program, was remanded to the EPA by the U.S. Court of 
Appeals for the District of Columbia Circuit, but it remained in 
effect.\40\ In 2011, EPA issued a replacement for CAIR, the Cross-State 
Air Pollution Rule (CSAPR). 76 FR 48208 (Aug. 8, 2011). On August 21, 
2012, the D.C. Circuit issued a decision to vacate CSAPR.\41\ The court 
ordered EPA to continue administering CAIR. The emissions factors used 
for this final rule, which are based on AEO 2014, assume that CAIR 
remains a binding regulation through 2040.\42\
---------------------------------------------------------------------------

    \40\ 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).
    \41\ See EME Homer City Generation, LP v. EPA, 696 F.3d 7, 38 
(D.C. Cir. 2012), cert. granted, 81 U.S.L.W. 3567, 81 U.S.L.W. 3696, 
81 U.S.L.W. 3702 (U.S. June 24, 2013) (No. 12-1182).
    \42\ On April 29, 2014, the U.S. Supreme Court reversed the 
judgment of the D.C. Circuit and remanded the case for further 
proceedings consistent with the Supreme Court's opinion. The Supreme 
Court held in part that EPA's methodology for quantifying emissions 
that must be eliminated in certain states due to their impacts in 
other downwind states was based on a permissible, workable, and 
equitable interpretation of the Clean Air Act provision that 
provides statutory authority for CSAPR. See EPA v. EME Homer City 
Generation, No 12-1182, slip op. at 32 (U.S. April 29, 2014). On 
October 23, 2014, the D.C. Circuit lifted the stay of CSAPR. 
Pursuant to this action, CSAPR will go into effect (and the Clean 
Air Interstate Rule will sunset) as of January 1, 2015. However, 
because DOE used emissions factors based on AEO 2014 for this final 
rule, the analysis assumes that CAIR, not CSAPR, is the regulation 
in force. The difference between CAIR and CSAPR is not relevant for 
the purpose of DOE's analysis of SO2 emissions.
---------------------------------------------------------------------------

    The attainment of emissions caps is typically flexible among EGUs 
and is enforced through the use of emissions allowances and tradable 
permits. Beginning in 2016, however, SO2 emissions will 
decline significantly as a result of the Mercury and Air Toxics 
Standards (MATS) for power plants. 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 2014 assumes that, in order to 
continue operating, coal plants must have either flue gas

[[Page 42641]]

desulfurization or dry sorbent injection systems installed by 2016. 
Both technologies are used to reduce acid gas emissions, and also 
reduce SO2 emissions. Under the MATS, 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 energy efficiency standards will reduce 
SO2 emissions in 2016 and beyond.
    CAIR established a cap on NOX emissions in 28 eastern 
States and the District of Columbia.\43\ 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 final rule 
for these States.
---------------------------------------------------------------------------

    \43\ CSAPR also applies to NOX, and it would 
supersede the regulation of NOX under CAIR. As stated 
previously, the current analysis assumes that CAIR, not CSAPR, is 
the regulation in force. The difference between CAIR and CSAPR with 
regard to DOE's analysis of NOX is slight.
---------------------------------------------------------------------------

    The MATS limit mercury emissions from power plants, but they do not 
include emissions caps. DOE estimated mercury emissions using emissions 
factors based on AEO 2014, which incorporates the MATS.

B. Monetizing Carbon Dioxide and Other Emissions Impacts

    As part of the development of this final rule, DOE considered the 
estimated monetary benefits from the reduced emissions of 
CO2 and NOX that are expected to result from each 
of the efficiency levels considered. In order to make this calculation 
analogous 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 efficiency level. 
This section summarizes the basis for the monetary values used for each 
of these emissions and presents the values considered in this final 
rule.
    For this final rule, DOE relied on a set of values for the social 
cost of carbon (SCC) that was developed by a Federal interagency 
process. The basis for these values is summarized in the next section, 
and a more detailed description of the methodologies used is provided 
as an appendix to chapter 10 of the final rule 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 CO2. A domestic SCC value is 
meant to reflect the value of damages in the United States resulting 
from a unit change in CO2 emissions, while a global SCC 
value is meant to reflect the value of damages worldwide.
    Under section 1(b) 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 these 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 
CO2 emissions, the analyst faces a number of challenges. A 
report from the National Research Council \44\ points out that any 
assessment will suffer from uncertainty, speculation, and lack of 
information about: (1) future emissions of GHGs; (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.
---------------------------------------------------------------------------

    \44\ National Research Council, Hidden Costs of Energy: Unpriced 
Consequences of Energy Production and Use, National Academies Press: 
Washington, DC (2009).
---------------------------------------------------------------------------

    Despite the limits of both quantification and monetization, SCC 
estimates can be useful in estimating the social benefits of reducing 
CO2 emissions. The agency can estimate the benefits from 
reduced (or costs from increased) emissions in any future year by 
multiplying the change in emissions in that year by the SCC values 
appropriate for that year. The NPV of the benefits can then be 
calculated by multiplying each of these 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 Federal 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,

[[Page 42642]]

$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. Three sets of values are based on the 
average SCC from the three integrated assessment models, at discount 
rates of 2.5, 3, and 5 percent. The fourth set, which represents the 
95th percentile SCC estimate across all three models at a 3-percent 
discount rate, was 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,\45\ although preference is given to consideration of the 
global benefits of reducing CO2 emissions. Table VII.1 
presents the values in the 2010 interagency group report,\46\ which is 
reproduced in appendix 10A of the final rule TSD.
---------------------------------------------------------------------------

    \45\ It is recognized that this calculation for domestic values 
is approximate, provisional, and highly speculative. There is no a 
priori reason why domestic benefits should be a constant fraction of 
net global damages over time.
    \46\ 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) (Available at: 
www.whitehouse.gov/sites/default/files/omb/inforeg/for-agencies/Social-Cost-of-Carbon-for-RIA.pdf).

                     Table VII.1--Annual SCC Values From 2010 Interagency Report, 2010-2050
                                           [2007$ per metric ton CO2]
----------------------------------------------------------------------------------------------------------------
                                                                           Discount rate
                                                 ---------------------------------------------------------------
                                                        5%              3%             2.5%             3%
                      Year                       ---------------------------------------------------------------
                                                                                                       95th
                                                      Average         Average         Average       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 document were generated using the most 
recent versions of the three integrated assessment models that have 
been published in the peer-reviewed literature.\47\
---------------------------------------------------------------------------

    \47\ 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) (Available at: http://www.whitehouse.gov/sites/default/files/omb/assets/inforeg/technical-update-social-cost-of-carbon-for-regulator-impact-analysis.pdf).
---------------------------------------------------------------------------

    Table VII.2 shows the updated sets of SCC estimates from the 2013 
interagency update in 5-year increments from 2010 to 2050. The full set 
of annual SCC estimates between 2010 and 2050 is reported in appendix 
10B of the final rule TSD. The central value that emerges is the 
average SCC across models at the 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.

[[Page 42643]]



                     Table VII.2--Annual SCC Values From 2013 Interagency Report, 2010-2050
                                           [2007$ per metric ton CO2]
----------------------------------------------------------------------------------------------------------------
                                                                           Discount rate
                                                 ---------------------------------------------------------------
                                                        5%              3%             2.5%             3%
                      Year                       ---------------------------------------------------------------
                                                                                                       95th
                                                      Average         Average         Average       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 because they will evolve with improved scientific and 
economic understanding. The interagency group also recognizes that the 
existing models are imperfect and incomplete. The 2009 National 
Research Council report mentioned previously 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 
analytical 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, DOE used the values from the 
2013 interagency report adjusted to 2014$ using the implicit price 
deflator for gross domestic product (GDP) from the Bureau of Economic 
Analysis. For each of the four sets of SCC cases specified, the values 
for emissions in 2015 were $12.2, $41.2, $63.4, and $121 per metric ton 
avoided (values expressed in 2014$). 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 was used to obtain the SCC values in each case.
    In response to the NOPR, the Associations stated that DOE should 
not use SCC values to establish monetary figures for emissions 
reductions until the SCC undergoes a more rigorous notice, review, and 
comment process. (The Associations, No. 37 at p. 4) In conducting the 
interagency process that developed the SCC values, 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. Key uncertainties and model 
differences transparently and consistently inform the range of SCC 
estimates. These uncertainties and model differences are discussed in 
the interagency working group's reports, which are reproduced in 
appendix 10A and 10B of the final rule TSD, as are the major 
assumptions. The 2010 SCC values have been used in a number of Federal 
rulemakings in which the public had opportunity to comment. In November 
2013, the OMB announced a new opportunity for public comment on the TSD 
underlying the revised SCC estimates. See 78 FR 70586 (Nov. 26, 2013). 
OMB is currently reviewing comments and considering whether further 
revisions to the 2013 SCC estimates are warranted. DOE stands ready to 
work with OMB and the other members of the interagency working group on 
further review and revision of the SCC estimates as appropriate.
2. Valuation of Other Emissions Reductions
    As noted previously, DOE has taken into account how considered 
energy conservation standards would reduce site NOX 
emissions nationwide and increase power sector NOX emissions 
in those 22 States not affected by the CAIR. DOE estimated the 
monetized value of net NOX emissions reductions resulting 
from each of the efficiency levels considered for this final rule based 
on estimates found in the relevant scientific literature. Estimates of 
monetary value for reducing NOX from stationary sources 
range from $484 to $4,971 per ton in 2014$.\48\ DOE calculated monetary 
benefits using a medium value for NOX emissions of $2,727 
per short ton (in 2014$) and real discount rates of 3 percent and 7 
percent.
---------------------------------------------------------------------------

    \48\ 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 (2006) (Available at: www.whitehouse.gov/sites/default/files/omb/assets/omb/inforeg/2006_cb/2006_cb_final_report.pdf).
---------------------------------------------------------------------------

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

VIII. Analytical Results and Conclusions

A. Efficiency Levels Analyzed

1. Small Commercial Air-Cooled Air Conditioners and Heat Pumps Less 
Than 65,000 Btu/h
    The methodology for small commercial air-cooled air conditioners 
and heat pumps less than 65,000 Btu/h was presented in section V of 
this this final rule. Table VIII.1 presents the market baseline 
efficiency level and the higher efficiency levels analyzed for each 
equipment class of small commercial air-cooled air conditioners and 
heat pumps less than 65,000 Btu/h subject to this rule. The EPCA 
baseline efficiency levels correspond to the lowest efficiency levels 
currently available on the market. The efficiency levels above the 
baseline represent efficiency levels specified by ASHRAE

[[Page 42644]]

Standard 90.1-2013 and efficiency levels more stringent than those 
specified in ASHRAE Standard 90.1-2013 where equipment is currently 
available on the market. Note that for the energy savings and economic 
analysis, efficiency levels above those specified in ASHRAE Standard 
90.1-2013 are compared to ASHRAE Standard 90.1-2013 as the baseline 
rather than the EPCA baseline (i.e., the current Federal standards). 
For split-system air conditioners, for which ASHRAE 90.1-2013 did not 
change the efficiency level, all efficiency levels are compared to the 
Federal or EPCA baseline.

Table VIII.1--Efficiency Levels Analyzed for Small Commercial Air-Cooled Air Conditioners and Heat Pumps <65,000
                                                      Btu/h
----------------------------------------------------------------------------------------------------------------
                                      Small three-phase  Small three-phase                     Small three-phase
                                      air-cooled split-  air-cooled single- Small three-phase  air-cooled single-
                                          system air        package air     air-cooled split-     package heat
                                         conditioners       conditioners    system heat pumps  pumps <65,000 Btu/
                                        <65,000 Btu/h      <65,000 Btu/h      <65,000 Btu/h            h
----------------------------------------------------------------------------------------------------------------
                                          Efficiency Level (SEER/HSPF)
----------------------------------------------------------------------------------------------------------------
Baseline--Federal Standard..........                 13                 13             13/7.7             13/7.7
ASHRAE Level (0)....................               * 14                 14             14/8.2             14/8.0
Efficiency Level 1..................                 15                 15             15/8.5             15/8.4
Efficiency Level 2..................                 16                 16             16/8.7             16/8.8
Efficiency Level 3..................                 17                 17             17/9.0             17/8.9
Efficiency Level 4 **...............                 18                 18           18.0/9.2           18.0/9.1
Efficiency Level 5 ***..............                 19                 19  .................  .................
----------------------------------------------------------------------------------------------------------------
* For split system air conditioners, the ASHRAE level is 13.0 SEER. DOE analyzed the 14.0 SEER level as a level
  more stringent than ASHRAE, but designated it as efficiency level 0 for consistency in SEER level across
  equipment classes.
** Efficiency Level 4 is ``Max-Tech'' for HP equipment classes.
*** Efficiency Level 5 is ``Max-Tech'' for AC equipment classes.

2. Water-Source Heat Pumps
    The methodology for water-source heat pumps was presented in 
section VI of this final rule. Table VIII.2 presents the baseline 
efficiency level and the more-stringent efficiency levels analyzed for 
each equipment class of water-source heat pumps subject to this rule. 
The baseline efficiency levels correspond to the lowest efficiency 
levels currently available on the market. The efficiency levels above 
the baseline represent efficiency levels specified in ASHRAE Standard 
90.1-2013 and more-stringent efficiency levels where equipment is 
currently available on the market.

                      Table VIII.2--Efficiency Levels Analyzed for Water-Source Heat Pumps
----------------------------------------------------------------------------------------------------------------
                                                                                                  Water-source
                                                            Water-source       Water-source      (water-to-air,
                                                           (water-to-air,     (water-to-air,    water-loop) heat
                                                          water-loop) heat   water-loop) heat    pumps >=65,000
                                                         pumps <17,000 Btu/   pumps >=17,000   and <135,000 Btu/
                                                                 h          and <65,000 Btu/h          h
----------------------------------------------------------------------------------------------------------------
                                           Efficiency Level (EER/COP)
----------------------------------------------------------------------------------------------------------------
Baseline--Federal Standard.............................           11.2/4.2           12.0/4.2           12.0/4.2
ASHRAE Level (0).......................................           12.2/4.3           13.0/4.3           13.0/4.3
Efficiency Level 1.....................................           13.0/4.6           14.6/4.8           14.0/4.7
Efficiency Level 2.....................................           14.0/4.8           16.6/5.3           15.0/4.8
Efficiency Level 3.....................................           15.7/5.1           18.0/5.6           16.0/5.0
Efficiency Level 4 *...................................           16.5/5.3           19.2/5.9           17.2/5.1
Efficiency Level 5 **..................................           18.1/5.6           21.6/6.5  .................
----------------------------------------------------------------------------------------------------------------
* Efficiency Level 4 is ``Max-Tech'' for the largest equipment class.
** Efficiency Level 5 is ``Max-Tech'' for the two smaller equipment classes.

3. Commercial Oil-Fired Storage Water Heaters
    Table VIII.3 presents the baseline efficiency level and the more-
stringent efficiency levels analyzed for the class of oil-fired storage 
water heaters subject to this rule. The baseline efficiency levels 
correspond to the lowest efficiency levels currently available on the 
market. The efficiency levels above the baseline represent efficiency 
levels specified in ASHRAE Standard 90.1-2013 and more-stringent 
efficiency levels where equipment is currently available on the market.

    Table VIII.3--Efficiency Levels Analyzed for Commercial Oil-Fired
                     Storage Water-Heating Equipment
------------------------------------------------------------------------
                                                            Oil-fired
                                                         storage water-
                                                             heating
                                                            equipment
                                                         (>105,000 Btu/h
                                                        and <4,000 Btu/h/
                                                            gal) (%)
------------------------------------------------------------------------
                          Efficiency Level (Et)
------------------------------------------------------------------------
Baseline--Federal Standard............................                78

[[Page 42645]]

 
ASHRAE Level (0)......................................                80
Efficiency Level 1....................................                81
Efficiency Level 2--``Max-Tech'' -....................                82
------------------------------------------------------------------------

B. Energy Savings and Economic Justification

1. Small Commercial Air-Cooled Air Conditioners and Heat Pumps Less 
Than 65,000 Btu/h
a. Economic Impacts on Commercial Customers
1. Life-Cycle Cost and Payback Period
    To evaluate the net economic impact of potential amended energy 
conservation standards on commercial consumers of small commercial air-
cooled air conditioners and heat pumps, DOE conducted LCC and PBP 
analyses for each efficiency level. In general, higher-efficiency 
equipment would affect commercial consumers in two ways: (1) Purchase 
price would increase, and (2) annual operating costs would decrease. 
Inputs used for calculating the LCC and PBP include total installed 
costs (i.e., equipment price plus installation costs), and operating 
costs (i.e., annual energy usage, energy prices, energy price trends, 
repair costs, and maintenance costs). The LCC calculation also uses 
equipment lifetime and a discount rate.
    The output of the LCC model is a mean LCC savings (or cost \49\) 
for each equipment class, relative to the baseline small commercial 
air-cooled air conditioner and heat pump efficiency level. The LCC 
analysis also provides information on the percentage of commercial 
consumers that are negatively affected by an increase in the minimum 
efficiency standard.
---------------------------------------------------------------------------

    \49\ An LCC cost is shown as a negative savings in the results 
presented.
---------------------------------------------------------------------------

    DOE also performed a PBP analysis as part of the LCC analysis. The 
PBP is the number of years it would take for the commercial consumer to 
recover the increased costs of higher-efficiency equipment as a result 
of energy savings based on the operating cost savings. The PBP is an 
economic benefit-cost measure that uses benefits and costs without 
discounting. Chapter 6 of the final rule TSD provides detailed 
information on the LCC and PBP analyses.
    DOE's LCC and PBP analyses provided five key outputs for each 
efficiency level above the baseline (i.e., efficiency levels above the 
current Federal standard for split-system air conditioners or 
efficiency levels more stringent than those in ASHRAE Standard 90.1-
2013 for the three triggered equipment classes), as reported in Table 
VIII.4 through Table VIII.11 below. These outputs include the 
proportion of small commercial air-cooled air conditioner and heat pump 
purchases in which the purchase of such a unit that is compliant with 
the amended energy conservation standard creates a net LCC increase, no 
impact, or a net LCC savings for the commercial consumer. Another 
output is the average net LCC savings from standard-compliant 
equipment, as well as the average PBP for the consumer investment in 
standard-compliant equipment.
    Chapter 6 of the final rule TSD provides detailed information on 
the LCC and PBP analyses.
    Table VIII.4 through Table VIII.11 show the LCC and PBP results for 
all efficiency levels considered for each class of small commercial 
air-cooled air conditioner and heat pump in this final rule. In the 
first of each pair of tables, the simple payback is measured relative 
to the baseline equipment (i.e., equipment at the current Federal 
standards for split-system air conditioners or equipment with the 
efficiency levels required in ASHRAE Standard 90.1-2013 for the three 
triggered equipment classes). In the second tables, the LCC savings are 
measured relative to the base-case efficiency distribution in the 
compliance year (i.e., the range of equipment expected to be on the 
market in the absence of amended standards for split-system air 
conditioners or the default case where DOE adopts the efficiency levels 
in ASHRAE Standard 90.1-2013 for the three triggered equipment 
classes).

       Table VIII.4--Average LCC and PBP Results by Efficiency Level for Small Three-Phase Air-Cooled Split-System Air Conditioners <65,000 Btu/h
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                Average costs 2014$
                                                         ----------------------------------------------------------------     Simple          Average
                    Efficiency level                                       First year's      Lifetime                     payback  years     lifetime
                                                          Installed cost  operating cost  operating cost        LCC                            years
--------------------------------------------------------------------------------------------------------------------------------------------------------
Baseline................................................          $3,901            $776          $7,532         $11,433             N/A              19
0.......................................................           4,150             773           7,497          11,647              68              19
1.......................................................           4,401             766           7,433          11,834              49              19
2.......................................................           4,670             760           7,373          12,043              47              19
3.......................................................           4,927             763           7,409          12,335              80              19
4.......................................................           5,194             768           7,449          12,643             148              19
5.......................................................           5,474             774           7,507          12,981             560              19
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note: The results for each efficiency level are calculated assuming that all commercial consumers use equipment with that efficiency level. The PBP is
  measured relative to the baseline equipment.


[[Page 42646]]


     Table VIII.5--LCC Savings Relative to the Base-Case Efficiency
     Distribution for Small Three-Phase Air-Cooled Split-System Air
                       Conditioners <65,000 Btu/h
------------------------------------------------------------------------
                                                 Life-cycle cost savings
                                               -------------------------
                                                    % of       Average
                                                 customers     savings*
               Efficiency level                     that    ------------
                                                 experience
                                               -------------    2014$
                                                  Net cost
------------------------------------------------------------------------
0.............................................           26        ($56)
1.............................................           75        (198)
2.............................................           97        (402)
3.............................................          100        (695)
4.............................................          100      (1,002)
5.............................................          100      (1,341)
------------------------------------------------------------------------
* The calculation includes households with zero LCC savings (no impact).


      Table VIII.6--Average LCC and PBP Results by Efficiency Level for Small Three-Phase Air-Cooled Single-Package Air Conditioners <65,000 Btu/h
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                Average costs 2014$
                                                         ----------------------------------------------------------------     Simple          Average
                    Efficiency level                                       First year's      Lifetime                     payback  years     lifetime
                                                          Installed cost  operating cost  operating cost        LCC                            years
--------------------------------------------------------------------------------------------------------------------------------------------------------
ASHRAE Baseline.........................................          $4,781            $772          $7,516         $12,297             N/A              19
1.......................................................           5,090             758           7,381          12,471              22              19
2.......................................................           5,400             753           7,329          12,729              32              19
3.......................................................           5,702             757           7,368          13,070              61              19
4.......................................................           6,007             761           7,407          13,414             110              19
5.......................................................           6,375             766           7,457          13,833             270              19
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note: The results for each efficiency level are calculated assuming that all commercial consumers use equipment with that efficiency level. The PBP is
  measured relative to the baseline equipment.


     Table VIII.7--LCC Savings Relative to the Base-Case Efficiency
    Distribution for Small Three-Phase Air-Cooled Single-Package Air
                       Conditioners <65,000 Btu/h
------------------------------------------------------------------------
                                                 Life-cycle cost savings
                                               -------------------------
                                                    % of       Average
                                                 customers     savings*
               Efficiency level                     that    ------------
                                                 experience
                                               -------------    2014$
                                                  Net cost
------------------------------------------------------------------------
1.............................................           49        ($89)
2.............................................           81        (299)
3.............................................           89        (602)
4.............................................           93        (922)
5.............................................          100      (1,340)
------------------------------------------------------------------------
* The calculation includes households with zero LCC savings (no impact).


          Table VIII.8--Average LCC and PBP Results by Efficiency Level for Small Three-Phase Air-Cooled Split-System Heat Pumps <65,000 Btu/h
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                Average costs 2014$
                                                         ----------------------------------------------------------------     Simple          Average
                    Efficiency level                                       First year's      Lifetime                     payback  years     lifetime
                                                          Installed cost  operating cost  operating cost        LCC                            years
--------------------------------------------------------------------------------------------------------------------------------------------------------
ASHRAE Baseline.........................................          $4,513            $796          $7,070         $11,584             N/A              16
1.......................................................           4,774             783           6,957          11,731              20              16
2.......................................................           5,118             777           6,906          12,024              33              16
3.......................................................           5,401             778           6,911          12,312              49              16
4.......................................................           5,694             778           6,918          12,612              69              16
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note: The results for each efficiency level are calculated assuming that all commercial consumers use equipment with that efficiency level. The PBP is
  measured relative to the baseline equipment.


[[Page 42647]]


     Table VIII.9--LCC Savings Relative to the Base-Case Efficiency
  Distribution for Small Three-Phase Air-Cooled Split-System Heat Pumps
                              <65,000 Btu/h
------------------------------------------------------------------------
                                                 Life-cycle cost savings
                                               -------------------------
                                                    % of       Average
                                                 customers     savings*
               Efficiency level                     that    ------------
                                                 experience
                                               -------------    2014$
                                                  Net cost
------------------------------------------------------------------------
1.............................................           75       ($118)
2.............................................           99        (410)
3.............................................          100        (697)
4.............................................          100        (997)
------------------------------------------------------------------------
* The calculation includes households with zero LCC savings (no impact).


         Table VIII.10--Average LCC and PBP Results by Efficiency Level for Small Three-Phase Air-Cooled Single-Package Heat Pumps <65,000 Btu/h
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                Average costs 2014$
                                                         ----------------------------------------------------------------     Simple          Average
                    Efficiency level                                       First year's      Lifetime                     payback  years     lifetime
                                                          Installed cost  operating cost  operating cost        LCC                            years
--------------------------------------------------------------------------------------------------------------------------------------------------------
ASHRAE Baseline.........................................          $5,155            $797          $7,084         $12,239             N/A              16
1.......................................................           5,499             784           6,969          12,468              27              16
2.......................................................           5,830             777           6,909          12,739              34              16
3.......................................................           6,161             778           6,916          13,077              53              16
4.......................................................           6,550             779           6,923          13,473              77              16
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note: The results for each efficiency level are calculated assuming that all commercial consumers use equipment with that efficiency level. The PBP is
  measured relative to the baseline equipment.


     Table VIII.11--LCC Savings Relative to the Base-Case Efficiency
 Distribution for Small Three-Phase Air-Cooled Single-Package Heat Pumps
                              <65,000 Btu/h
------------------------------------------------------------------------
                                                 Life-cycle cost savings
                                               -------------------------
                                                    % of       Average
                                                 customers     savings*
               Efficiency level                     that    ------------
                                                 experience
                                               -------------    2014$
                                                  Net cost
------------------------------------------------------------------------
1.............................................           68       ($158)
2.............................................           90        (402)
3.............................................           99        (735)
4.............................................           99      (1,128)
------------------------------------------------------------------------
* The calculation includes households with zero LCC savings (no impact).

b. National Impact Analysis
1. Amount and Significance of Energy Savings
    To estimate the lifetime energy savings for equipment shipped 
through 2046 (or 2048) due to amended energy conservation standards, 
DOE compared the energy consumption of small commercial air-cooled air 
conditioners and heat pumps less than 65,000 Btu/h under the ASHRAE 
Standard 90.1-2013 efficiency levels (or current Federal levels for 
split-system air conditioners) to energy consumption of the same small 
commercial air-cooled air conditioners and heat pumps under more-
stringent efficiency standards. For the three equipment classes 
triggered by ASHRAE, DOE also compared the energy consumption of those 
small commercial air-cooled air conditioners and heat pumps under the 
ASHRAE Standard 90.1-2013 efficiency levels to energy consumption of 
small commercial air-cooled air conditioners and heat pumps under the 
current EPCA base case (i.e., under current Federal standards). DOE 
examined up to five efficiency levels higher than those of ASHRAE 
Standard 90.1-2013. Table VIII.12 through Table VIII.15 show the 
projected national energy savings at each of the considered standard 
levels. (See chapter 8 of the final rule TSD.)

Table VIII.12--Potential Energy Savings for Small Three-Phase Air-Cooled
               Split-System Air Conditioners <65,000 Btu/h
------------------------------------------------------------------------
                                          Primary energy    FFC Energy
                                              savings         savings
            Efficiency level                 estimate        estimate
                                              (quads)         (quads)
------------------------------------------------------------------------
Level 0-14 SEER.........................            0.02            0.02
Level 1-15 SEER.........................            0.08            0.08
Level 2-16 SEER.........................            0.13            0.14
Level 3-17 SEER.........................            0.16            0.17
Level 4-18 SEER.........................            0.18            0.19
Level 5-``Max-Tech''-19 SEER............            0.19            0.20
------------------------------------------------------------------------


[[Page 42648]]


Table VIII.13--Potential Energy Savings for Small Three-Phase Air-Cooled
              Single-Package Air Conditioners <65,000 Btu/h
------------------------------------------------------------------------
                                          Primary energy    FFC Energy
                                              savings         savings
            Efficiency level                estimate\*\     estimate\*\
                                              (quads)         (quads)
------------------------------------------------------------------------
Level 0-ASHRAE-14 SEER..................            0.04            0.04
Level 1-15 SEER.........................            0.05            0.06
Level 2-16 SEER.........................            0.11            0.12
Level 3-17 SEER.........................            0.15            0.15
Level 4-18 SEER.........................            0.18            0.18
Level 5-``Max-Tech''-19 SEER............            0.19            0.20
------------------------------------------------------------------------
* The potential energy savings for efficiency levels more stringent than
  those specified by ASHRAE Standard 90.1-2013 were calculated relative
  to the efficiency levels that would result if ASHRAE Standard 90.1-
  2013 standards were adopted.


Table VIII.14--Potential Energy Savings for Small Three-Phase Air-Cooled
                  Split-System Heat Pumps <65,000 Btu/h
------------------------------------------------------------------------
                                          Primary energy    FFC Energy
                                              savings         savings
            Efficiency level                estimate\*\     estimate\*\
                                              (quads)         (quads)
------------------------------------------------------------------------
Level 0-ASHRAE-14 SEER..................            0.01            0.01
Level 1-15 SEER.........................            0.01            0.01
Level 2-16 SEER.........................            0.02            0.02
Level 3-17 SEER.........................            0.03            0.03
Level 4-``Max-Tech''-18 SEER............            0.03            0.03
------------------------------------------------------------------------
* The potential energy savings for efficiency levels more stringent than
  those specified by ASHRAE Standard 90.1-2013 were calculated relative
  to the efficiency levels that would result if ASHRAE Standard 90.1-
  2013 standards were adopted.


Table VIII.15--Potential Energy Savings for Small Three-Phase Air-Cooled
                 Single-Package Heat Pumps <65,000 Btu/h
------------------------------------------------------------------------
                                          Primary energy    FFC Energy
                                              savings         savings
            Efficiency level                estimate\*\     estimate\*\
                                              (quads)         (quads)
------------------------------------------------------------------------
Level 0-ASHRAE-14 SEER..................            0.01            0.01
Level 1-15 SEER.........................            0.01            0.01
Level 2-16 SEER.........................            0.02            0.02
Level 3-17 SEER.........................            0.03            0.03
Level 4-``Max-Tech''-18 SEER............            0.04            0.04
------------------------------------------------------------------------
* The potential energy savings for efficiency levels more stringent than
  those specified by ASHRAE Standard 90.1-2013 were calculated relative
  to the efficiency levels that would result if ASHRAE Standard 90.1-
  2013 standards were adopted.

2. Net Present Value of Customer Costs and Benefits
    The NPV analysis is a measure of the cumulative commercial consumer 
benefit or cost of standards to the Nation. In accordance with OMB's 
guidelines on regulatory analysis (OMB Circular A-4, section E (Sept. 
17, 2003)), DOE calculated NPV using both a 7-percent and a 3-percent 
real discount rate. Table VIII.16 and Table VIII.17 provide an overview 
of the NPV results. (See chapter 8 of the final rule TSD for further 
detail.)

          Table VIII.16--Summary of Cumulative Net Present Value for Small Three-Phase Air-Cooled Air Conditioners and Heat Pumps <65,000 Btu/h
                                                              (Discounted at Seven Percent)
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                            Efficiency      Efficiency      Efficiency      Efficiency      Efficiency      Efficiency
                     Equipment class                          level 0         level 1         level 2         level 3         level 4         level 5
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                            Net Present Value (Billion 2014$)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Three-Phase Air-Cooled Split-System Air Conditioners              (0.05)          (0.18)          (0.38)          (0.66)          (0.95)          (1.17)
 <65,000 Btu/h..........................................
Three-Phase Air-Cooled Single-Package Air Conditioners            N/A\*\          (0.14)          (0.43)          (0.82)          (1.25)          (1.63)
 <65,000 Btu/h..........................................
Three-Phase Air-Cooled Split-System Heat Pumps <65,000            N/A\*\          (0.03)          (0.09)          (0.15)          (0.19)         N/A\**\
 Btu/h..................................................

[[Page 42649]]

 
Three-Phase Air-Cooled Single-Package Heat Pumps <65,000          N/A\*\          (0.04)          (0.11)          (0.20)          (0.28)         N/A\**\
 Btu/h..................................................
--------------------------------------------------------------------------------------------------------------------------------------------------------
Notes: Numbers in parentheses indicate negative NPV.
The net present value for efficiency levels more stringent than those specified by ASHRAE Standard 90.1-2013 were calculated relative to the efficiency
  levels that would result if ASHRAE Standard 90.1-2013 standards were adopted.
* Economic analysis was not conducted for the ASHRAE levels (EL 0).
** The max-tech level for this equipment class is EL 4.


  Table VIII.17--Summary of Cumulative Net Present Value for Small Three-Phase Air-Cooled Air Conditioners and Heat Pumps <65,000 Btu/h (Discounted at
                                                                     Three Percent)
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                            Efficiency      Efficiency      Efficiency      Efficiency      Efficiency      Efficiency
                     Equipment class                          level 0         level 1         level 2         level 3         level 4         level 5
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                            Net Present Value (Billion 2014$)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Three-Phase Air-Cooled Split-System Air Conditioners              (0.07)          (0.27)          (0.64)          (1.15)          (1.71)          (2.09)
 <65,000 Btu/h..........................................
Three-Phase Air-Cooled Single-Package Air Conditioners            N/A\*\          (0.21)          (0.74)          (1.47)          (2.30)          (2.96)
 <65,000 Btu/h..........................................
Three-Phase Air-Cooled Split-System Heat Pumps <65,000            N/A\*\          (0.05)          (0.15)          (0.26)          (0.33)         N/A\**\
 Btu/h..................................................
Three-Phase Air-Cooled Single-Package Heat Pumps <65,000          N/A\*\          (0.07)          (0.19)          (0.35)          (0.48)         N/A\**\
 Btu/h..................................................
--------------------------------------------------------------------------------------------------------------------------------------------------------
Notes: Numbers in parentheses indicate negative NPV. The net present value for efficiency levels more stringent than those specified by ASHRAE Standard
  90.1-2013 were calculated relative to the efficiency levels that would result if ASHRAE Standard 90.1-2013 standards were adopted.
* Economic analysis was not conducted for the ASHRAE levels (EL 0).
** The max-tech level for this equipment class is EL 4.

2. Water-Source Heat Pumps
a. Economic Impacts on Commercial Customers
1. Life-Cycle Cost and Payback Period
    Table VIII.18 through Table VIII.23 show the LCC and PBP results 
for all efficiency levels considered for each class of water-source 
heat pump in this final rule. In the first of each pair of tables, the 
simple payback is measured relative to the baseline equipment (i.e., 
equipment with the efficiency level specified in ASHRAE Standard 90.1-
2013). In the second tables, the LCC savings are measured relative to 
the base-case efficiency distribution in the compliance year (i.e., the 
range of equipment expected to be on the market in the default case 
where DOE adopts the efficiency levels in ASHRAE Standard 90.1-2013).

           Table VIII.18--Average LCC and PBP Results by Efficiency Level for Water-Source Heat Pumps (Water-to-Air, Water-Loop) <17,000 Btu/h
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                Average costs 2014$
                                                         ----------------------------------------------------------------     Simple          Average
                    Efficiency level                                       First year's      Lifetime                     payback  years     lifetime
                                                          Installed cost  operating cost  operating cost        LCC                            years
--------------------------------------------------------------------------------------------------------------------------------------------------------
ASHRAE Baseline.........................................          $3,216            $654          $7,692         $10,908              --              19
1.......................................................           3,354             645           7,578          10,932              14              19
2.......................................................           3,530             638           7,492          11,022              19              19
3.......................................................           3,822             628           7,377          11,199              23              19
4.......................................................           3,958             624           7,334          11,292              25              19
5.......................................................           4,233             618           7,263          11,496              28              19
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note: The results for each efficiency level are calculated assuming that all commercial consumers use equipment with that efficiency level. The PBP is
  measured relative to the baseline equipment.


[[Page 42650]]


     Table VIII.19--LCC Savings Relative to the Base-Case Efficiency
   Distribution for Water-Source (Water-to-Air, Water-Loop) Heat Pumps
                             <17,000 Btu//h
------------------------------------------------------------------------
                                                 Life-cycle cost savings
                                               -------------------------
                                                    % of       Average
                                                 customers     savings*
               Efficiency level                     that    ------------
                                                 experience
                                               -------------    2014$
                                                  Net cost
------------------------------------------------------------------------
1.............................................            0         ($0)
2.............................................           46         (46)
3.............................................           68        (175)
4.............................................           89        (262)
5.............................................           95        (462)
------------------------------------------------------------------------
* The calculation includes households with zero LCC savings (no impact).


 Table VIII.20--Average LCC and PBP Results by Efficiency Level for Water-Source (Water-to-Air, Water-Loop) Heat Pumps >=17,000 Btu/h and <65,000 Btu/h
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                               Average costs  2014$
                                                         ----------------------------------------------------------------     Simple          Average
                    Efficiency level                                       First year's      Lifetime                     payback  years     lifetime
                                                          Installed cost  operating cost  operating cost        LCC                            years
--------------------------------------------------------------------------------------------------------------------------------------------------------
ASHRAE Baseline.........................................          $4,882          $1,118         $13,169         $18,052              --              19
1.......................................................           5,162           1,075          12,655          17,817             6.4              19
2.......................................................           5,513           1,039          12,232          17,745             8.0              19
3.......................................................           5,758           1,023          12,041          17,799             9.2              19
4.......................................................           5,968           1,013          11,930          17,898              10              19
5.......................................................           6,392             997          11,732          18,124              12              19
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note: The results for each efficiency level are calculated assuming that all commercial consumers use equipment with that efficiency level. The PBP is
  measured relative to the baseline equipment.


     Table VIII.21--LCC Savings Relative to the Base-Case Efficiency
   Distribution for Water-Source (Water-to-Air, Water-Loop) Heat Pumps
                    >=17,000 Btu/h and <65,000 Btu/h
------------------------------------------------------------------------
                                                 Life-cycle cost savings
                                               -------------------------
                                                    % of       Average
                                                 customers     savings*
               Efficiency level                     that    ------------
                                                 experience
                                               -------------    2014$
                                                  Net cost
------------------------------------------------------------------------
1.............................................            2           19
2.............................................           29           64
3.............................................           52           17
4.............................................           66         (78)
5.............................................           76        (303)
------------------------------------------------------------------------
* The calculation includes households with zero LCC savings (no impact).


 Table VIII.22--Average LCC and PBP Results by Efficiency Level for Water-Source (Water-to-Air, Water-Loop) Heat Pumps >=65,000 Btu/h and <135,000 Btu/h
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                               Average costs  2014$
                                                         ----------------------------------------------------------------     Simple          Average
                    Efficiency level                                       First year's      Lifetime                     payback  years     lifetime
                                                          Installed cost  operating cost  operating cost        LCC                            years
--------------------------------------------------------------------------------------------------------------------------------------------------------
ASHRAE Baseline.........................................         $12,005          $2,202         $25,958         $37,963              --              19
1.......................................................          12,961           2,126          25,065          38,026              13              19
2.......................................................          13,919           2,087          24,599          38,518              17              19
3.......................................................          14,830           2,054          24,213          39,042              19              19

[[Page 42651]]

 
4.......................................................          15,977           2,022          23,834          39,811              22              19
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note: The results for each efficiency level are calculated assuming that all commercial consumers use equipment with that efficiency level. The PBP is
  measured relative to the baseline equipment.


     Table VIII.23--LCC Savings Relative to the Base-Case Efficiency
   Distribution for Water-Source (Water-to-Air, Water-Loop) Heat Pumps
                    >=65,000 Btu/h and <135,000 Btu/h
------------------------------------------------------------------------
                                                 Life-cycle cost savings
                                               -------------------------
                                                    % of       Average
                                                 customers    savings *
               Efficiency level                     that    ------------
                                                 experience
                                               -------------    2014$
                                                  Net cost
------------------------------------------------------------------------
1.............................................         ** 0        ** $0
2.............................................           27        (148)
3.............................................           72        (560)
4.............................................           93      (1,315)
------------------------------------------------------------------------
* The calculation includes households with zero LCC savings (no impact).
** The base-case efficiency distribution has 0-percent market share at
  the ASHRAE baseline; therefore, there are no savings for EL1.

b. National Impact Analysis
1. Amount and Significance of Energy Savings
    To estimate the lifetime energy savings for equipment shipped 
through 2045 due to amended energy conservation standards, DOE compared 
the energy consumption of commercial water-source heat pumps under the 
ASHRAE Standard 90.1-2013 efficiency levels to energy consumption of 
the same water-source heat pumps under more-stringent efficiency 
standards. DOE also compared the energy consumption of those commercial 
water-source heat pumps under the ASHRAE Standard 90.1-2013 efficiency 
levels to energy consumption of commercial water-source heat pumps 
under the current EPCA base case (i.e., under current Federal 
standards). DOE examined up to five efficiency levels higher than those 
of ASHRAE Standard 90.1-2013. Table VIII.24 through Table VIII.26 show 
the projected national energy savings at each of the considered 
standard levels. (See chapter 8 of the final rule TSD.)

 Table VIII.24--Potential Energy Savings for Water-Source (Water-to-Air,
                  Water-Loop) Heat Pumps <17,000 Btu/h
------------------------------------------------------------------------
                                    Primary energy
        Efficiency level          savings estimate *  FFC Energy savings
                                        (quads)       estimate * (quads)
------------------------------------------------------------------------
Level 0--ASHRAE--12.2 EER **....  ..................  ..................
Level 1--13.0 EER...............              0.0002              0.0002
Level 2--14.0 EER...............                0.02                0.02
Level 3--15.7 EER...............                0.06                0.06
Level 4--16.5 EER...............                0.08                0.08
Level 5--``Max-Tech''--18.1 EER.                0.11                0.11
------------------------------------------------------------------------
* The potential energy savings for efficiency levels more stringent than
  those specified by ASHRAE Standard 90.1-2013 were calculated relative
  to the efficiency levels that would result if ASHRAE Standard 90.1-
  2013 standards were adopted.
** The base-case efficiency distribution has 0-percent market share at
  the Federal baseline; therefore, there are no savings for the ASHRAE
  level.


 Table VIII.25--Potential Energy Savings for Water-Source (Water-to-Air,
            Water-Loop) Heat Pumps >=17,000 and <65,000 Btu/h
------------------------------------------------------------------------
                                    Primary energy
        Efficiency level          savings estimate *  FFC Energy savings
                                        (quads)       estimate * (quads)
------------------------------------------------------------------------
Level 0--ASHRAE--13.0 EER **....  ..................  ..................
Level 1--14.6 EER...............                0.02                0.03
Level 2--16.6 EER...............                0.26                0.27
Level 3--18.0 EER...............                0.45                0.47
Level 4--19.2 EER...............                0.60                0.63
Level 5--``Max-Tech''--21.6 EER.                0.83                0.87
------------------------------------------------------------------------
* The potential energy savings for efficiency levels more stringent than
  those specified by ASHRAE Standard 90.1-2013 were calculated relative
  to the efficiency levels that would result if ASHRAE Standard 90.1-
  2013 standards were adopted.
** The base-case efficiency distribution has 0-percent market share at
  the Federal baseline; therefore, there are no savings for the ASHRAE
  level.


[[Page 42652]]


 Table VIII.26--Potential Energy Savings for Water-Source (Water-to-Air,
           Water-Loop) Heat Pumps >=65,000 and <135,000 Btu/h
------------------------------------------------------------------------
                                    Primary energy
        Efficiency level          savings estimate *  FFC Energy savings
                                        (quads)       estimate * (quads)
------------------------------------------------------------------------
Level 0--ASHRAE--13.0 EER **....  ..................  ..................
Level 1--14.0 EER **............  ..................  ..................
Level 2--15.0 EER...............                0.01                0.01
Level 3--16.0 EER...............                0.03                0.03
Level 4--``Max-Tech''--17.2 EER.                0.05                0.05
------------------------------------------------------------------------
* The potential energy savings for efficiency levels more stringent than
  those specified by ASHRAE Standard 90.1-2013 were calculated relative
  to the efficiency levels that would result if ASHRAE Standard 90.1-
  2013 standards were adopted.
** The base-case efficiency distribution has 0-percent market share at
  the Federal baseline and the ASHRAE baseline; therefore, there are no
  savings for the ASHRAE level or EL1.

2. Net Present Value of Customer Costs and Benefits
    Table VIII.27 and Table VIII.28 provide an overview of the NPV 
results. (See chapter 8 of the final rule TSD for further detail.)

  Table VIII.27--Summary of Cumulative Net Present Value for Water-Source (Water-to-Air, Water-Loop) Heat Pumps
                                          (Discounted at Seven Percent)
----------------------------------------------------------------------------------------------------------------
                                                         Net present value (billion 2014$)
                                 -------------------------------------------------------------------------------
         Equipment class            Efficiency      Efficiency      Efficiency      Efficiency      Efficiency
                                      level 1         level 2         level 3         level 4         level 5
----------------------------------------------------------------------------------------------------------------
Water-Source (Water-to-Air,               (0.00)          (0.04)          (0.14)          (0.21)          (0.33)
 Water-Loop) HP <17,000 Btu/h...
Water-Source (Water-to-Air,                 0.01            0.00          (0.11)          (0.27)          (0.59)
 Water-Loop) HP >=17,000 to
 <65,000 Btu/h..................
Water-Source (Water-to-Air,                (\*\)          (0.01)          (0.06)          (0.11)          N/A **
 Water-Loop) HP >=65,000 to
 135,000 Btu/h..................
----------------------------------------------------------------------------------------------------------------
Notes: Numbers in parentheses indicate negative NPV.
The net present value for efficiency levels more stringent than those specified by ASHRAE Standard 90.1-2013
  were calculated relative to the efficiency levels that would result if ASHRAE Standard 90.1-2013 standards
  were adopted. Economic analysis was not conducted for the ASHRAE levels (EL 0).
* The base-case efficiency distribution has 0-percent market share at the ASHRAE baseline; therefore, there are
  no savings for EL1.
** The max-tech level for this equipment class is EL 4.


  Table VIII.28--Summary of Cumulative Net Present Value for Water-Source (Water-to-Air, Water-Loop) Heat Pumps
                                          (Discounted at Three Percent)
----------------------------------------------------------------------------------------------------------------
                                                         Net present value (billion 2014$)
                                 -------------------------------------------------------------------------------
         Equipment class            Efficiency      Efficiency      Efficiency      Efficiency      Efficiency
                                      level 1         level 2         level 3         level 4         level 5
----------------------------------------------------------------------------------------------------------------
Water-Source (Water-to-Air,               (0.00)          (0.05)          (0.20)          (0.30)          (0.49)
 Water-Loop) HP <17,000 Btu/h...
Water-Source (Water-to-Air,                 0.03            0.26            0.21            0.03          (0.37)
 Water-Loop) HP >=17,000 to
 <65,000 Btu/h..................
Water-Source (Water-to-Air,                  (*)          (0.02)          (0.08)          (0.15)          ** N/A
 Water-Loop) HP >=65,000 to
 135,000 Btu/h..................
----------------------------------------------------------------------------------------------------------------
Notes: Numbers in parentheses indicate negative NPV.
The net present value for efficiency levels more stringent than those specified by ASHRAE Standard 90.1-2013
  were calculated relative to the efficiency levels that would result if ASHRAE Standard 90.1-2013 standards
  were adopted. Economic analysis was not conducted for the ASHRAE levels (EL 0).
* The base-case efficiency distribution has 0-percent market share at the ASHRAE baseline; therefore, there are
  no savings for EL1.
** The max-tech level for this equipment class is EL 4.

3. Commercial Oil-Fired Storage Water Heaters
    DOE estimated the potential primary energy savings in quads (i.e., 
10\15\ Btu) for each efficiency level considered within each equipment 
class analyzed. Table VIII.29 shows the potential energy savings 
resulting from the analyses conducted as part of the April 2014 NODA. 
79 FR 20114, 20136 (April 11, 2014).

[[Page 42653]]



  Table VIII.29--Potential Energy Savings Estimates for Commercial Oil-
     Fired Storage Water Heaters >105,000 Btu/h and <4,000 Btu/h/gal
------------------------------------------------------------------------
                                    Primary energy
        Efficiency level          savings estimate *  FFC Energy savings
                                        (Quads)       estimate * (Quads)
------------------------------------------------------------------------
Level 0--ASHRAE--80% Et.........               0.002               0.002
Level 1--81% Et.................               0.001               0.001
Level 2--``Max-Tech''--82% Et...               0.002               0.002
------------------------------------------------------------------------
* The potential energy savings for efficiency levels more stringent than
  those specified by ASHRAE Standard 90.1-2013 were calculated relative
  to the efficiency levels that would result if ASHRAE Standard 90.1-
  2013 standards were adopted.

    DOE did not conduct an economic analysis for this oil-fired storage 
water heater equipment category because of the minimal energy savings.

C. Need of the Nation To Conserve Energy

    An improvement in the energy efficiency of the equipment subject to 
this rule, where economically justified, is likely to improve the 
security of the nation's energy system by reducing overall demand for 
energy, to strengthen the economy, and to reduce the environmental 
impacts or costs of energy production. Reduced electricity demand may 
also improve the reliability of the electricity system, particularly 
during peak-load periods. Reductions in national electric generating 
capacity estimated for each efficiency level considered in this 
rulemaking, throughout the same analysis period as the NIA, are 
reported in chapter 11 of the final rule TSD.
    Energy savings from amended standards for the small air-cooled air 
conditioners and heat pumps less than 65,000 Btu/h, water-source heat 
pumps, and oil-fired storage water heaters covered in this final rule 
could also produce environmental benefits in the form of reduced 
emissions of air pollutants and greenhouse gases.
    Table VIII.30 and Table VIII.31 provide DOE's estimate of 
cumulative emissions reductions projected to result from the efficiency 
levels analyzed in this rulemaking.\50\ The tables include both power 
sector emissions and upstream emissions. The upstream emissions were 
calculated using the multipliers discussed in section VII.A. DOE 
reports annual CO2, NOX, and Hg emissions 
reductions for each efficiency level in chapter 9 of the final rule 
TSD. As discussed in section VII.A, DOE did not include NOX 
emissions reduction from power plants in States subject to CAIR, 
because an energy conservation standard would not affect the overall 
level of NOX emissions in those States due to the emissions 
caps mandated by CAIR.
---------------------------------------------------------------------------

    \50\ Because DOE did not conduct additional analysis for oil-
fired storage water heaters, estimates of environmental benefits for 
amended standards for that equipment type are not shown here.

  Table VIII.30--Cumulative Emissions Reduction for Potential Standards for Small Three-Phase Air-Cooled Air Conditioners and Heat Pumps <65,000 Btu/h
                     (2017-2046 for ASHRAE Level; 2020-2046 for More-Stringent Levels; 2019-2048 for Split-System Air Conditioners)
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                 Efficiency level
                                                         -----------------------------------------------------------------------------------------------
                                                             ASHRAE/0            1               2               3               4               5
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                 Power Sector Emissions
--------------------------------------------------------------------------------------------------------------------------------------------------------
CO2 (million metric tons)...............................             3.7             8.9            16.8            20.8            24.3            25.9
SO2 (thousand tons).....................................             2.9             6.9            13.0            16.1            18.8            20.1
NOX (thousand tons).....................................             2.8             6.7            12.6            15.6            18.2            19.4
Hg (tons)...............................................            0.01            0.02            0.04            0.05            0.06            0.06
N2O (thousand tons).....................................            0.05            0.13            0.24            0.30            0.35            0.37
CH4 (thousand tons).....................................            0.38            0.90            1.69            2.10            2.45            2.61
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                   Upstream Emissions
--------------------------------------------------------------------------------------------------------------------------------------------------------
CO2 (million metric tons)...............................            0.22            0.54            1.00            1.24            1.45            1.54
SO2 (thousand tons).....................................            0.04            0.09            0.17            0.22            0.25            0.27
NOX (thousand tons).....................................             3.2             7.6            14.3            17.7            20.7            22.0
Hg (tons)...............................................          0.0001          0.0002          0.0004          0.0005          0.0006          0.0006
N2O (thousand tons).....................................           0.002           0.005           0.009           0.011           0.012           0.013
CH4 (thousand tons).....................................              19              45              83             103             121             128
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                   Total FFC Emissions
--------------------------------------------------------------------------------------------------------------------------------------------------------
CO2 (million metric tons)...............................             4.0             9.5            17.8            22.1            25.8            27.4
SO2 (thousand tons).....................................             2.9             7.0            13.2            16.4            19.1            20.3
NOX (thousand tons).....................................             6.0            14.3            26.8            33.4            38.9            41.4
Hg (tons)...............................................            0.01            0.02            0.04            0.05            0.06            0.06
N2O (thousand tons).....................................            0.06            0.13            0.25            0.31            0.36            0.39
CH4 (thousand tons).....................................              19              45              85             105             123             131
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note: The potential emissions reduction for efficiency levels more stringent than those specified by ASHRAE Standard 90.1-2013 were calculated relative
  to the efficiency levels that would result if ASHRAE Standard 90.1-2013 standards were adopted.


[[Page 42654]]


   Table VIII.31--Cumulative Emissions Reduction for Potential Standards for Water-Source Heat Pumps (2016-2045 for ASHRAE Level; 2020-2045 for More-
                                                                    Stringent Levels)
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                 Efficiency level
                                                         -----------------------------------------------------------------------------------------------
                                                           ASHRAE/0 \*\          1               2               3               4               5
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                 Power Sector Emissions
--------------------------------------------------------------------------------------------------------------------------------------------------------
CO2 (million metric tons)...............................              --             1.4            16.3            30.5            41.5            56.7
SO2 (thousand tons).....................................              --             1.1            12.9            24.1            32.9            44.9
NOX (thousand tons).....................................              --             1.1            12.3            23.1            31.4            42.9
Hg (tons)...............................................              --           0.003           0.040           0.074           0.101           0.139
N2O (thousand tons).....................................              --            0.02            0.23            0.44            0.60            0.81
CH4 (thousand tons).....................................              --            0.14            1.63            3.06            4.16            5.68
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                   Upstream Emissions
--------------------------------------------------------------------------------------------------------------------------------------------------------
CO2 (million metric tons)...............................              --            0.08            0.97            1.81            2.47            3.36
SO2 (thousand tons).....................................              --            0.01            0.17            0.32            0.43            0.59
NOX (thousand tons).....................................              --             1.2            13.8            25.9            35.2            48.0
Hg (tons)...............................................              --         0.00003         0.00037         0.00070         0.00095         0.00129
N2O (thousand tons).....................................              --           0.001           0.008           0.016           0.021           0.029
CH4 (thousand tons).....................................              --             7.0            80.4           150.7           205.0           279.6
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                   Total FFC Emissions
--------------------------------------------------------------------------------------------------------------------------------------------------------
CO2 (million metric tons)...............................              --             1.5            17.3            32.3            44.0            60.1
SO2 (thousand tons).....................................              --             1.1            13.1            24.5            33.3            45.5
NOX (thousand tons).....................................              --             2.3            26.1            48.9            66.6            90.9
Hg (tons)...............................................              --           0.004           0.040           0.075           0.102           0.140
N2O (thousand tons).....................................              --            0.02            0.24            0.45            0.62            0.84
CH4 (thousand tons).....................................              --             7.2            82.0           153.8           209.1           285.3
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note: The potential emissions reduction for efficiency levels more stringent than those specified by ASHRAE Standard 90.1-2013 were calculated relative
  to the efficiency levels that would result if ASHRAE Standard 90.1-2013 standards were adopted.
* There are no reductions for the ASHRAE level because there is no market share projected at the Federal baseline in the base case.

    As part of the analysis for this final rule, DOE estimated monetary 
benefits likely to result from the reduced emissions of CO2 
and NOX estimated for each of the efficiency levels analyzed 
for small air-cooled air conditioners and heat pumps less than 65,000 
Btu/h, water-source heat pumps, and oil-fired storage water heaters. As 
discussed in section VII.B.1, for CO2, DOE used values for 
the SCC developed by an interagency process. The interagency group 
selected four sets of SCC values for use in regulatory analyses. Three 
sets are based on the average SCC from three integrated assessment 
models, at discount rates of 2.5 percent, 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 temperature change further out in the 
tails of the SCC distribution. The four SCC values for CO2 
emissions reductions in 2015, expressed in 2014$, are $12.2/ton, $41.2/
ton, $63.4/ton, and $121/ton. The values for later years are higher due 
to increasing emissions-related costs as the magnitude of projected 
climate change increases.
    Table VIII.32 and Table VIII.33 present the global value of 
CO2 emissions reductions at each efficiency level. 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 10 of the final rule TSD.

Table VIII.32--Global Present Value of CO2 Emissions Reduction for Potential Standards for Small Three-Phase Air-
                              Cooled Air Conditioners and Heat Pumps <65,000 Btu/h
----------------------------------------------------------------------------------------------------------------
                                                                           SCC Scenario*
                                                 ---------------------------------------------------------------
                Efficiency level                                                                    3% Discount
                                                    5% Discount     3% Discount    2.5% Discount    rate, 95th
                                                   rate, average   rate, average   rate, average    percentile
----------------------------------------------------------------------------------------------------------------
                                                                           million 2014$
----------------------------------------------------------------------------------------------------------------
                                             Power Sector Emissions
----------------------------------------------------------------------------------------------------------------
ASHRAE/0........................................              24             115             184             356
1...............................................              57             273             437             846
2...............................................             110             521             832           1,613
3...............................................             136             646           1,031           1,999
4...............................................             159             754           1,204           2,334
5...............................................             170             804           1,283           2,489
----------------------------------------------------------------------------------------------------------------

[[Page 42655]]

 
                                               Upstream Emissions
----------------------------------------------------------------------------------------------------------------
ASHRAE/0........................................             1.4             6.8              11              21
1...............................................             3.3              16              26              50
2...............................................             6.4              31              49              95
3...............................................             7.9              38              61             118
4...............................................             9.3              44              71             138
5...............................................              10              47              76             147
----------------------------------------------------------------------------------------------------------------
                                               Total FFC Emissions
----------------------------------------------------------------------------------------------------------------
ASHRAE/0........................................              25             122             195             377
1...............................................              60             289             463             896
2...............................................             116             552             881           1,708
3...............................................             144             684           1,092           2,117
4...............................................             168             799           1,275           2,472
5...............................................             179             851           1,359           2,635
----------------------------------------------------------------------------------------------------------------
Note: The potential emissions reduction for efficiency levels more stringent than those specified by ASHRAE
  Standard 90.1-2013 were calculated relative to the efficiency levels that would result if ASHRAE Standard 90.1-
  2013 standards were adopted.
* For each of the four cases, the corresponding SCC value for emissions in 2015 is $12.2, $41.2, $63.4 and $121
  per metric ton (2014$).


  Table VIII.33--Global Present Value of CO2 Emissions Reduction for Potential Standards for Water-Source Heat
                                                      Pumps
----------------------------------------------------------------------------------------------------------------
                                                                          SCC Scenario *
                                                 ---------------------------------------------------------------
                Efficiency level                                                                    3% Discount
                                                    5% Discount     3% Discount    2.5% Discount    rate, 95th
                                                   rate, average   rate, average   rate, average    percentile
----------------------------------------------------------------------------------------------------------------
                                                                           million 2014$
----------------------------------------------------------------------------------------------------------------
                                             Power Sector Emissions
----------------------------------------------------------------------------------------------------------------
ASHRAE/0**......................................              --              --              --              --
1...............................................             9.3              44              71             137
2...............................................             106             504             805           1,560
3...............................................             198             943           1,507           2,922
4...............................................             270           1,285           2,052           3,979
5...............................................             370           1,758           2,808           5,446
----------------------------------------------------------------------------------------------------------------
                                               Upstream Emissions
----------------------------------------------------------------------------------------------------------------
ASHRAE/0**......................................              --              --              --              --
1...............................................             0.5             2.6             4.1             8.0
2...............................................             6.1              30              47              92
3...............................................              12              55              89             172
4...............................................              16              75             121             234
5...............................................              21             103             165             320
----------------------------------------------------------------------------------------------------------------
                                               Total FFC Emissions
----------------------------------------------------------------------------------------------------------------
ASHRAE/0**......................................              --              --              --              --
1...............................................             9.8              47              75             145
2...............................................             112             533             852           1,652
3...............................................             209             999           1,596           3,094
4...............................................             285           1,360           2,173           4,213
5...............................................             391           1,862           2,973           5,765
----------------------------------------------------------------------------------------------------------------
Note: The potential emissions reduction for efficiency levels more stringent than those specified by ASHRAE
  Standard 90.1-2013 were calculated relative to the efficiency levels that would result if ASHRAE Standard 90.1-
  2013 standards were adopted.
* For each of the four cases, the corresponding SCC value for emissions in 2015 is $12.2, $41.2, $63.4 and $121
  per metric ton (2014$).
** There are no reductions for the ASHRAE level because there is no market share projected at the Federal
  baseline in the base case.

    DOE is well aware that scientific and economic knowledge about the 
contribution of CO2 and other GHG emissions to changes in 
the future global climate and the potential resulting damages to the 
world economy

[[Page 42656]]

continues to evolve rapidly. Thus, any value placed in this rulemaking 
on reducing CO2 emissions is subject to change. DOE, 
together with other Federal agencies, will continue to review various 
methodologies for estimating the monetary value of reductions in 
CO2 and other 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 final rule the most recent 
values and analyses resulting from the interagency review process.
    DOE also estimated a range for the cumulative monetary value of the 
economic benefits associated with NOX emissions reductions 
anticipated to result from amended standards for the small air-cooled 
air conditioners and heat pumps less than 65,000 Btu/h, water-source 
heat pumps, and oil-fired storage water heaters that are the subject of 
this final rule. The dollar-per-ton values that DOE used are discussed 
in section VII.B.2.
    Table VIII.34 and Table VIII.35 present the present value of 
cumulative NOX emissions reductions for each efficiency 
level calculated using the average dollar-per-ton values and 7-percent 
and 3-percent discount rates.

  Table VIII.34--Present Value of NOX Emissions Reduction for Potential
  Standards for Small Three-Phase Air-Cooled Air Conditioners and Heat
                           Pumps <65,000 Btu/h
[(2017-2046 for ASHRAE level; 2020-2046 for more-stringent levels; 2019-
                2048 for split-system air conditioners)]
------------------------------------------------------------------------
                                            3% Discount     7% Discount
            Efficiency level                   rate            rate
------------------------------------------------------------------------
                                                   million 2014$
------------------------------------------------------------------------
                         Power Sector Emissions
------------------------------------------------------------------------
ASHRAE/0................................             3.5             1.5
1.......................................             8.2             3.5
2.......................................              16             7.0
3.......................................              20             8.6
4.......................................              23              10
5.......................................              25              11
------------------------------------------------------------------------
                           Upstream Emissions
------------------------------------------------------------------------
ASHRAE/0................................             3.8             1.5
1.......................................             9.0             3.6
2.......................................              17             7.2
3.......................................              22             8.9
4.......................................              25              10
5.......................................              27              11
------------------------------------------------------------------------
                           Total FFC Emissions
------------------------------------------------------------------------
ASHRAE/0................................             7.3             3.0
1.......................................              17             7.1
2.......................................              33              14
3.......................................              41              17
4.......................................              48              20
5.......................................              51              22
------------------------------------------------------------------------
Note: The potential emissions reduction for efficiency levels more
  stringent than those specified by ASHRAE Standard 90.1-2013 were
  calculated relative to the efficiency levels that would result if
  ASHRAE Standard 90.1-2013 standards were adopted.


  Table VIII.35--Present Value of NOX Emissions Reduction for Potential
                  Standards for Water-Source Heat Pumps
   [(2016-2045 for ASHRAE level; 2020-2045 for more-stringent levels)]
------------------------------------------------------------------------
                                            3% Discount     7% Discount
            Efficiency level                   rate            rate
------------------------------------------------------------------------
                                                   million 2014$
------------------------------------------------------------------------
                         Power Sector Emissions
------------------------------------------------------------------------
ASHRAE/0 *..............................  ..............  ..............
1.......................................             1.4             0.6
2.......................................              15             6.6
3.......................................              29              12
4.......................................              39              17
5.......................................              54              23
------------------------------------------------------------------------
                           Upstream Emissions
------------------------------------------------------------------------
ASHRAE/0 *..............................  ..............  ..............
1.......................................             1.5             0.6

[[Page 42657]]

 
2.......................................              17             6.7
3.......................................              31              13
4.......................................              42              17
5.......................................              58              24
------------------------------------------------------------------------
                           Total FFC Emissions
------------------------------------------------------------------------
ASHRAE/0 *..............................  ..............  ..............
1.......................................             2.8             1.2
2.......................................              32              13
3.......................................              60              25
4.......................................              82              34
5.......................................             112              47
------------------------------------------------------------------------
Note: The potential emissions reduction for efficiency levels more
  stringent than those specified by ASHRAE Standard 90.1-2013 were
  calculated relative to the efficiency levels that would result if
  ASHRAE Standard 90.1-2013 standards were adopted.
* There are no reductions for the ASHRAE level because there is no
  market share projected at the Federal baseline in the base case.

D. Amended Energy Conservation Standards

1. Small Commercial Air-Cooled Air Conditioners and Heat Pumps Less 
Than 65,000 Btu/h
    As noted previously, EPCA specifies that, for any commercial and 
industrial equipment addressed under 42 U.S.C. 6313(a)(6)(A)(i), DOE 
may prescribe an energy conservation standard more stringent than the 
level for such equipment in ASHRAE Standard 90.1, as amended, only if 
``clear and convincing evidence'' shows that a more-stringent standard 
would result in significant additional conservation of energy and is 
technologically feasible and economically justified. (42 U.S.C. 
6313(a)(6)(A)(ii)(II)) This requirement also applies to split-system 
air conditioners evaluated under the 6-year look back. (42 U.S.C. 
6313)(a)(6)(C)(i)(II))
    In evaluating more-stringent efficiency levels than those specified 
by ASHRAE Standard 90.1-2013 for small air-cooled air conditioners and 
heat pumps less than 65,000 Btu/h, DOE reviewed the results in terms of 
their technological feasibility, significance of energy savings, and 
economic justification.
    DOE has concluded that all of the SEER and HSPF levels considered 
by DOE are technologically feasible, as units with equivalent 
efficiency appeared to be available in the current market at all levels 
examined.
    DOE examined the potential energy savings that would result from 
the efficiency levels specified in ASHRAE Standard 90.1-2013 and 
compared these to the potential energy savings that would result from 
efficiency levels more stringent than those in ASHRAE Standard 90.1-
2013. DOE estimates that 0.05 quads of energy would be saved if DOE 
adopts the efficiency levels set in ASHRAE Standard 90.1-2013 for each 
small air-cooled air conditioner and heat pump class specified in that 
standard. If DOE were to adopt efficiency levels more stringent than 
those specified by ASHRAE Standard 90.1-2013, the potential additional 
energy savings range from 0.02 quads to 0.45 quads. Associated with 
proposing more-stringent efficiency levels for the three triggered 
equipment classes is a three-year delay in implementation compared to 
the adoption of energy conservation standards at the levels specified 
in ASHRAE Standard 90.1-2013 (see section V.E.10). This delay in 
implementation of amended energy conservation standards would result in 
a small amount of energy savings being lost in the first years (2017 
through 2020) compared to the savings from adopting the levels in 
ASHRAE Standard 90.1-2013; however, this loss may be compensated for by 
increased savings in later years. Taken in isolation, the energy 
savings associated with more-stringent standards might be considered 
significant enough to warrant adoption of such standards. However, as 
noted previously, energy savings are not the only factor that DOE must 
consider.
    In considering whether potential standards are economically 
justified, DOE also examined the LCC savings and national NPV that 
would result from adopting efficiency levels more stringent than those 
set forth in ASHRAE Standard 90.1-2013. The analytical results show 
negative average LCC savings and negative national NPV at both 7-
percent and 3-percent discount rate for all efficiency levels in all 
four equipment classes. These results indicate that adoption of 
efficiency levels more stringent than those in ASHRAE Standard 90.1-
2013 as Federal energy conservation standards would likely lead to 
negative economic outcomes for the Nation. Consequently, this criterion 
for adoption of more-stringent standard levels does not appear to have 
been met.
    As such, DOE does not have ``clear and convincing evidence'' that 
any significant additional conservation of energy that would result 
from adoption of more-stringent efficiency levels than those specified 
in ASHRAE Standard 90.1-2013 would be economically justified. Comments 
on the NOPR did not provide any additional information to alter this 
conclusion. Therefore, DOE is adopting amended energy efficiency levels 
for this equipment as set forth in ASHRAE Standard 90.1-2013. For 
split-system air conditioners, for which the efficiency level was not 
updated in ASHRAE Standard 90.1-2013, DOE is making a determination 
that standards for the product do not need to be amended for the 
reasons stated above. Table VIII.36 presents the amended energy 
conservation standards and compliance dates for small air-cooled air 
conditioners and heat pumps less than 65,000 Btu/h.

[[Page 42658]]



 Table VIII.36--Amended Energy Conservation Standards for Small Three-Phase Air-Cooled Air Conditioners and Heat
                                               Pumps <65,000 Btu/h
----------------------------------------------------------------------------------------------------------------
          Equipment type                      Efficiency level                        Compliance date
----------------------------------------------------------------------------------------------------------------
Three-Phase Air-Cooled Split       13.0 SEER *...........................  June 16, 2008.
 System Air Conditioners <65,000
 Btu/h.
Three-Phase Air-Cooled Single      14.0 SEER.............................  January 1, 2017.
 Package Air Conditioners <65,000
 Btu/h.
Three-Phase Air-Cooled Split       14.0 SEER, 8.2 HSPF...................  January 1, 2017.
 System Heat Pumps <65,000 Btu/h.
Three-Phase Air-Cooled Single      14.0 SEER, 8.0 HSPF...................  January 1, 2017.
 Package Heat Pumps <65,000 Btu/h.
----------------------------------------------------------------------------------------------------------------
* 13.0 SEER is the existing Federal minimum energy conservation standard for three-phase air-cooled split system
  air conditioners <65,000 Btu/h.

2. Water-Source Heat Pumps
    In evaluating more-stringent efficiency levels for water-source 
heat pumps than those specified by ASHRAE Standard 90.1-2013, DOE 
reviewed the results in terms of their technological feasibility, 
significance of energy savings, and economic justification.
    DOE has concluded that all of the EER and COP levels considered by 
DOE are technologically feasible, as units with equivalent efficiency 
appeared to be available in the current market at all levels examined.
    DOE examined the potential energy savings that would result from 
the efficiency levels specified in ASHRAE Standard 90.1-2013 and 
compared these to the potential energy savings that would result from 
efficiency levels more stringent than those in ASHRAE Standard 90.1-
2013. DOE does not estimate any energy savings from adopting the levels 
set in ASHRAE Standard 90.1-2013, as very few models exist on the 
market below that level, and by 2020, DOE expects those models to be 
off the market. If DOE were to adopt efficiency levels more stringent 
than those specified by ASHRAE Standard 90.1-2013, the potential 
additional energy savings range from 0.03 quads to 1.0 quads. 
Associated with proposing more-stringent efficiency levels is a four-
and-a-half-year delay in implementation compared to the adoption of 
energy conservation standards at the levels specified in ASHRAE 
Standard 90.1-2013 (see section VI.E.10). This delay in implementation 
of amended energy conservation standards would result in a small amount 
of energy savings being lost in the first years (2016 through 2020) 
compared to the savings from adopting the levels in ASHRAE Standard 
90.1-2013; however, this loss may be compensated for by increased 
savings in later years. Taken in isolation, the energy savings 
associated with more-stringent standards might be considered 
significant enough to warrant adoption of such standards. However, as 
noted above, energy savings are not the only factor that DOE must 
consider.
    In considering whether potential standards are economically 
justified, DOE also examined the NPV that would result from adopting 
efficiency levels more stringent than those set forth in ASHRAE 
Standard 90.1-2013. With a 7-percent discount rate, EL 1 results in 
positive NPV, and ELs 2 through 5 result in negative NPV. With a 3-
percent discount rate, ELs 1 and 2 create positive NPV, while ELs 3 
through 5 result in negative NPVs. These results indicate that adoption 
of efficiency levels more stringent than those in ASHRAE Standard 90.1-
2013 as Federal energy conservation standards might lead to negative 
economic outcomes for the Nation, except at EL1, which offers very 
little energy savings.
    Furthermore, although DOE based it analyses on the best available 
data when examining the potential energy savings and the economic 
justification of efficiency levels more stringent than those specified 
in ASHRAE Standard 90.1-2013, DOE believes there are several 
limitations regarding that data which should be considered before 
proposing amended energy conservation standards for water-source heat 
pumps.
    First, DOE reexamined the uncertainty in its analysis of water-
source heat pumps. As noted in section VI.D, DOE relied on cooling 
energy use estimates from a 2000 study. While DOE applied a scaling 
factor to attempt to account for changes in buildings since 2000, this 
is only a rough estimate. DOE considered running building simulations 
by applying a water-source heat pump module to reference buildings. 
However, DOE has been unable to obtain reliable information on the 
distribution of water-source heat pump applications. Therefore, it is 
not clear which building types would be most useful to simulate and how 
DOE would weight the results of the simulations. Furthermore, DOE has 
no field data with which to corroborate the results of the simulations. 
The analysis of heating energy use is also very uncertain; DOE relied 
on estimates for air-source heat pumps, but it is unclear whether 
water-source heat pumps would have similar heating usage, as they tend 
to be used in different applications. Any inaccuracy in UEC directly 
impacts the energy savings estimates and consumer impacts.
    Second, in developing its analysis, DOE made refinements to various 
inputs, such as heating UEC and repair cost. DOE observed that the NPV 
results were highly sensitive to small changes in these inputs, with 
NPV for EL 2, for example, changing from positive to negative and back 
over several iterations. This model sensitivity, combined with high 
uncertainty in various inputs, makes it difficult for DOE to determine 
that the results provide clear and convincing evidence that higher 
standards would be economically justified.
    Third, DOE relied on shipments estimates from the U.S. Census. As 
noted in the January 2015 NOPR, these estimates are considerably higher 
than those found in an EIA report. 80 FR 1171, 1206. Furthermore, DOE 
disaggregated the shipments into equipment class using data from over a 
decade ago. Although DOE requested comment, DOE has not received any 
information or data regarding the shipments of this equipment. Any 
inaccuracy in the shipment projection in total or by equipment class 
contributes to the uncertainty of the energy savings results and, thus, 
makes it difficult for DOE to determine that any additional energy 
savings are significant.
    Fourth, due to the limited data on the existing distribution of 
shipments by efficiency level or historical efficiency trends, DOE was 
not able to assess possible future changes in either the available 
efficiencies of equipment in the water-source heat pump market or the 
sales distribution of shipments by efficiency level in the absence of 
setting more-stringent standards. Instead, DOE applied an efficiency 
trend from a commercial air conditioner rulemaking published 10 years 
ago. DOE recognizes that manufacturers may continue to make future 
improvements in water-source heat pump efficiencies even in the absence 
of mandated energy conservation standards. In particular,

[[Page 42659]]

water-source heat pumps tend to be a fairly efficient product, and the 
distribution of model availability indicates that many commercial 
consumers are already purchasing equipment well above the baseline. 
Consequently, it is likely that the true improvements in efficiency in 
the absence of a standard may be higher than estimated. This 
possibility increases the uncertainty of the energy savings estimates. 
To the extent that manufacturers improve equipment efficiency and 
commercial consumers choose to purchase improved products in the 
absence of standards, the energy savings estimates would likely be 
reduced.
    In light of the above, DOE would again restate the statutory test 
for adopting energy conservation standards more stringent than the 
levels in ASHRAE Standard 90.1. DOE must have ``clear and convincing'' 
evidence in order to propose efficiency levels more stringent than 
those specified in ASHRAE Standard 90.1-2013, and for the reasons 
explained in this document, the totality of information does not meet 
the level necessary to support these more-stringent efficiency levels 
for water-source heat pumps. Consequently, although certain 
stakeholders have recommended that DOE adopt higher efficiency levels 
for one water-source heat pump class (as discussed in section III.B), 
DOE has decided to adopt the efficiency levels in ASHRAE Standard 90.1-
2013 as amended energy conservation standards for all three water-
source heat pump equipment classes. Accordingly, Table VIII.37 presents 
the amended energy conservation standards and compliance dates for 
water-source heat pumps.

                Table VIII.37--Amended Energy Conservation Standards for Water-Source Heat Pumps
----------------------------------------------------------------------------------------------------------------
          Equipment type                      Efficiency level                        Compliance date
----------------------------------------------------------------------------------------------------------------
Water-Source (Water-to-Air, Water- 12.2 EER, 4.3 COP.....................  October 9, 2015.
 Loop) HP <17,000 Btu/h.
Water-Source (Water-to-Air, Water- 13.0 EER, 4.3 COP.....................  October 9, 2015.
 Loop) HP >=17,000 to <65,000 Btu/
 h.
Water-Source (Water-to-Air, Water- 13.0 EER, 4.3 COP.....................  October 9, 2015.
 Loop) HP >=65,000 to 135,000 Btu/
 h.
----------------------------------------------------------------------------------------------------------------

3. Commercial Oil-Fired Storage Water Heaters
    EPCA specifies that, for any commercial and industrial equipment 
addressed under 42 U.S.C. 6313(a)(6)(A)(i), DOE may prescribe an energy 
conservation standard more stringent than the level for such equipment 
in ASHRAE Standard 90.1, as amended, only if ``clear and convincing 
evidence'' shows that a more-stringent standard would result in 
significant additional conservation of energy and is technologically 
feasible and economically justified. (42 U.S.C. 6313(a)(6)(A)(ii)(II))
    In evaluating more-stringent efficiency levels for oil-fired 
storage water-heating equipment than those specified by ASHRAE Standard 
90.1-2013, DOE reviewed the results in terms of the significance of 
their additional energy savings. DOE believes that the energy savings 
from increasing national energy conservation standards for oil-fired 
storage water heaters above the levels specified by ASHRAE Standard 
90.1-2013 would be minimal. As noted in the January 2015 NOPR, DOE does 
not have ``clear and convincing evidence'' that significant additional 
conservation of energy would result from adoption of more-stringent 
standard levels. 80 FR 1171, 1226-27. Comments on the NOPR did not 
provide any additional information to alter this conclusion. Therefore, 
DOE did not examine whether the levels are economically justified, and 
DOE is adopting the energy efficiency levels for this equipment type as 
set forth in ASHRAE Standard 90.1-2013. Table VIII.38 presents the 
amended energy conservation standard and compliance date for oil-fired 
storage water heaters.

            Table VIII.38--Amended Energy Conservation Standards for Oil-Fired Storage Water Heaters
----------------------------------------------------------------------------------------------------------------
          Equipment type                    Efficiency level (Et)                     Compliance date
----------------------------------------------------------------------------------------------------------------
Oil-Fired Storage Water Heaters    80%...................................  October 9, 2015.
 >105,000 Btu/h and <4,000 Btu/h/
 gal.
----------------------------------------------------------------------------------------------------------------

IX. Procedural Issues and Regulatory Review

A. Review Under Executive Order 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 problems that the adopted standards for small air-cooled air 
conditioners and heat pumps less than 65,000 Btu/h, water-source heat 
pumps, and oil-fired storage water heaters address are as follows:
    (1) Insufficient information and the high costs of gathering and 
analyzing relevant information leads some consumers 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 small air-cooled air conditioners and heat pumps less 
than 65,000 Btu/h, water-source heat pumps, and oil-fired storage water 
heaters that are not captured by the users of such equipment. These 
benefits include externalities related to public health, environmental 
protection, and national energy 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. DOE 
attempts to quantify some of the external benefits through use of 
social cost of carbon values.
    In addition, DOE has determined that the proposed regulatory action 
is not a ``significant regulatory action'' under section 3(f)(1) of 
Executive Order 12866. Accordingly, DOE has not prepared a regulatory 
impact analysis (RIA) for this rule, and the Office of Information and 
Regulatory Affairs (OIRA) in the Office

[[Page 42660]]

of Management and Budget (OMB) has not reviewed this rule.
    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 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 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, OIRA 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 final rule 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).
    For manufacturers of small air-cooled air conditioners and heat 
pumps less than 65,000 Btu/h, water-source heat pumps, and oil-fired 
storage water heaters, 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 77 FR 
49991, 50000 (August 20, 2012), as 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/sites/default/files/Size_Standards_Table.pdf. The 
ASHRAE equipment covered by this rule are classified under NAICS 
333318, ``Other Commercial and Service Industry Machinery 
Manufacturing'' (oil-fired water heaters) and NAICS 333415, ``Air-
Conditioning and Warm Air Heating Equipment and Commercial and 
Industrial Refrigeration Equipment Manufacturing'' (all other equipment 
addressed by the notice). For an entity to be considered as a small 
business, the SBA sets a threshold of 1,000 employees or fewer for the 
first category including commercial water heaters and 750 employees or 
fewer for the second category.
    DOE examined each of the manufacturers it found during its market 
assessment and used publicly-available information to determine if any 
manufacturers identified qualify as a small business under the SBA 
guidelines discussed previously. (For a list of all manufacturers of 
ASHRAE equipment covered by this rule, see chapter 2 of the final rule 
TSD.) DOE's research involved individual company Web sites and 
marketing research tools (e.g., Hoovers reports \51\) to create a list 
of companies that manufacture the types of ASHRAE equipment affected by 
this rule. DOE screened out companies that do not have domestic 
manufacturing operations for ASHRAE equipment (i.e., manufacturers that 
produce all of their ASHRAE equipment internationally). DOE also did 
not consider manufacturers that are subsidiaries of parent companies 
that exceed the applicable 1000-employee or 750-employee threshold set 
by the SBA to be small businesses. DOE identified 16 companies that 
qualify as small manufacturers: 5 central air conditioner manufacturers 
(of the 23 total identified), 7 water-source heat pump manufacturers 
(of the 18 total identified), and 7 oil-fired storage water heater 
manufacturers (of the 10 total identified). Please note that there are 
3 small manufacturers that produce equipment in more than one of these 
categories.
---------------------------------------------------------------------------

    \51\ For more information see: http://www.hoovers.com/.
---------------------------------------------------------------------------

    Based on reviews of product listing data in the AHRI Directory for 
commercial equipment, DOE estimates that small manufacturers account 
for less than 1 percent of the market for covered three-phase central 
air conditioner equipment and less than 5 percent of the market for 
covered water-source heat pump equipment. In the oil-fired storage 
water heat market, DOE understands that one of the small manufacturers 
is a significant player in the market. That manufacturer accounts for 
34 percent of product listings. DOE believes that the remaining oil-
fired storage water heater manufacturers account for less than 5 
percent of the market.
    DOE has reviewed this rule under the provisions of the Regulatory 
Flexibility Act and the policies and procedures published on February 
19, 2003. 68 FR 7990. As part of this rulemaking, DOE examined the 
potential impacts of amended standard levels on manufacturers, as well 
as the potential implications of the proposed revisions to the 
commercial warm air furnace test procedures on compliance burdens.
    DOE examined the impact of raising the standards to the amended 
levels by examining the distribution of efficiencies of commercially-
available models in the AHRI Directory. For water-source heat pumps and 
oil-fired storage water heaters, DOE found that all manufacturers in 
the directory, including the small manufacturers, already offer 
equipment at and above the amended standards. While these small 
manufacturers would have to discontinue a fraction of their models in 
order to comply with the standards adopted in this rulemaking, DOE does 
not believe that there would be a significant burden placed on 
industry,

[[Page 42661]]

as the market would shift to the new baseline levels when compliance 
with the new standards is required.
    For small commercial air-cooled air conditioners and heat pumps, 
DOE found one small manufacturer of single-package units in the 
directory with no models that could meet the adopted ASHRAE levels.
    To estimate the impacts of the amended standard, DOE researched 
prior energy conservation standard analyses of the covered equipment, 
as well as any analyses of comparable single-phase products. The 2011 
direct final rule for residential furnaces, central air conditioners, 
and heat pumps included analysis for a 14 SEER efficiency level for 
split-system as well as single-package air conditioners and heat pumps. 
76 FR 37408 (June 27, 2011). The 2011 analysis indicated that 
manufacturers would need to include additional heat exchanger surface 
area and to include modulating components to reach the 14 SEER level 
from a 13 SEER baseline. The 2011 analyses further concluded that these 
improvements could be made without significant investments in equipment 
and production assets. The amended levels for oil-fired storage water 
heaters or water-source heat pumps have not been analyzed as a part of 
any prior energy conservation standard rulemakings.
    However, DOE understands that the ASHRAE standards were developed 
through an industry consensus process, which included consideration of 
manufacturer input, including the impacts to small manufacturers, when 
increasing the efficiency of equipment. Because EPCA requires DOE to 
adopt the ASHRAE levels or to propose higher standards, DOE is limited 
in terms of the steps it can take to mitigate impacts to small 
businesses, but DOE reasons that such mitigation has already occurred 
since small manufacturers had input into the development of the 
industry consensus standard that DOE is statutorily required to adopt.
    As for the specific changes being adopted for the commercial warm 
air furnace test procedure, the test procedures (ANSI Z21.47-2012 and 
ASHRAE 103-2007) that DOE is incorporating by reference do not include 
any updates to the methodology in those sections utilized in the DOE 
test procedure. Thus, DOE has concluded that this test procedure 
rulemaking would keep the DOE test procedure current with the latest 
version of the applicable industry testing standards, but it will not 
change the methodology used to generate ratings of commercial warm air 
furnaces. Consequently, the test procedure amendments would not be 
expected to have a substantive impact on manufacturers, either large or 
small.
    For the reasons stated previously, DOE did not prepare an initial 
regulatory flexibility analysis for the final rule. DOE will transmit 
its certification and a supporting statement of factual basis to the 
Chief Counsel for Advocacy of the SBA for review pursuant to 5 U.S.C. 
605(b).

C. Review Under the Paperwork Reduction Act of 1995

    Manufacturers of the ASHRAE equipment subject to this final rule 
must certify to DOE that their equipment complies with any applicable 
energy conservation standards. In certifying compliance, manufacturers 
must test their equipment according to the applicable DOE test 
procedures for the relevant ASHRAE 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 commercial equipment, including the ASHRAE 
equipment in this final rule. 76 FR 12422 (March 7, 2011); 80 FR 5099 
(Jan. 30, 2015). 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 30 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 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 rule fits within the 
category of actions 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 rule. DOE's CX determination for this 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. DOE has examined this 
rule and has determined that it would not have a substantial direct 
effect on the States, on the relationship between the national 
government and the States, or on the distribution of power and 
responsibilities among the various levels of government. EPCA governs 
and prescribes Federal preemption of State regulations as to energy 
conservation for the products that are the subject of this final 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) 
Therefore, 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; (3) 
provide a clear legal standard for affected conduct rather than a 
general standard; and (4) promote simplification

[[Page 42662]]

and burden reduction. 61 FR 4729 (Feb. 7, 1996). Regarding the review 
required by section 3(a), 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 final 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 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 ``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 them. 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/sites/prod/files/gcprod/documents/umra_97.pdf.
    DOE has concluded that this final rule contains neither an 
intergovernmental mandate nor a mandate that may result in the 
expenditure by State, local, and Tribal governments, in the aggregate, 
or by the private sector, of $100 million or more in any year. 
Accordingly, no assessment or analysis is required under the UMRA.

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

    Pursuant to Executive Order 12630, ``Governmental Actions and 
Interference with Constitutionally Protected Property Rights'' 53 FR 
8859 (March 18, 1988), DOE has determined that this rule 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 
information quality 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 final rule 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 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 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 concluded that this regulatory action, which sets forth 
amended energy conservation standards for certain types of ASHRAE 
equipment, is not a significant energy action because the standards are 
not a significant regulatory action under Executive Order 12866 and 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 final 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.'' Id at 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

[[Page 42663]]

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: 
www1.eere.energy.gov/buildings/appliance_standards/peer_review.html.

M. Congressional Notification

    As required by 5 U.S.C. 801, DOE will report to Congress on the 
promulgation of this rule prior to its effective date. The report will 
state that it has been determined that the rule is not a ``major rule'' 
as defined by 5 U.S.C. 804(2).

N. Description of Materials Incorporated by Reference

    In this final rule, DOE updates its incorporations by reference to 
two industry standards related to the test procedure for commercial 
warm-air furnaces in 10 CFR 431.76. These standards include ANSI 
Z21.47-2012, ``Standards for Gas-Fired Central Furnaces,'' and ASHRAE 
Standard 103-2007, ``Method of Testing for Annual Fuel Utilization 
Efficiency of Residential Central Furnaces and Boilers.'' sections 
7.2.2.4, 7.8, 9.2, and 11.3.7. These are the most up-to-date industry-
accepted standards used by manufacturers when testing furnaces in the 
United States. DOE previously referenced earlier versions of these same 
industry standards.

X. Approval of the Office of the Secretary

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

List of Subjects in 10 CFR Part 431

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

    Issued in Washington, DC, on June 30, 2015.
David T. Danielson,
Assistant Secretary of Energy, Energy Efficiency and Renewable Energy.

    For the reasons set forth in the preamble, DOE amends 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 431.75 is amended by revising paragraphs (b) and (c) to read 
as follows:


Sec.  431.75  Materials incorporated by reference.

* * * * *
    (b) ANSI. American National Standards Institute. 25 W. 43rd Street, 
4th Floor, New York, NY 10036. (212) 642-4900 or go to http://www.ansi.org.
    (1) ANSI Z21.47-2012, (``ANSI Z21.47'') ``Standard for Gas-fired 
Central Furnaces,'' approved March 27, 2012, IBR approved for Sec.  
431.76.
    (2) [Reserved]
    (c) ASHRAE. American Society of Heating, Refrigerating and Air-
Conditioning Engineers Inc., 1791 Tullie Circle NE., Atlanta, Georgia 
30329, (404) 636-8400, or go to: http://www.ashrae.org.
    (1) ANSI/ASHRAE Standard 103-2007, (``ASHRAE 103''), ``Method of 
Testing for Annual Fuel Utilization Efficiency of Residential Central 
Furnaces and Boilers,'' sections 7.2.2.4, 7.8, 9.2, and 11.3.7, 
approved June 27, 2007, IBR approved for Sec.  431.76.
    (2) [Reserved]
* * * * *

0
3. Section 431.76 is revised to read as follows:


Sec.  431.76  Uniform test method for the measurement of energy 
efficiency of commercial warm air furnaces.

    (a) Scope. This section covers the test requirements used to 
measure the energy efficiency of commercial warm air furnaces with a 
rated maximum input of 225,000 Btu per hour or more. On and after July 
11, 2016, any representations made with respect to the energy use or 
efficiency of commercial warm air furnaces must be made in accordance 
with the results of testing pursuant to this section. At that time, you 
must use the relevant procedures in ANSI Z21.47 or UL 727-2006 
(incorporated by reference, see Sec.  431.75). On and after August 17, 
2015 and prior to July 11, 2016, manufacturers must test commercial 
warm air furnaces in accordance with this amended section or the 
section as it appeared at 10 CFR part 430, subpart B in the 10 CFR 
parts 200 to 499 edition revised January 1, 2014. DOE notes that, 
because testing under this section is required as of July 11, 2016, 
manufacturers may wish to begin using this amended test procedure 
immediately. Any representations made with respect to the energy use or 
efficiency of such commercial warm air furnaces must be made in 
accordance with whichever version is selected.
    (b) Testing. Where this section prescribes use of ANSI Z21.47 or UL 
727-2006 (incorporated by reference, see Sec.  431.75), perform only 
the procedures pertinent to the measurement of the steady-state 
efficiency, as specified in paragraph (c) of this section.
    (c) Test set-up. (1) Test set-up for gas-fired commercial warm air 
furnaces. The test set-up, including flue requirement, instrumentation, 
test conditions, and measurements for determining thermal efficiency is 
as specified in sections 1.1 (Scope), 2.1 (General), 2.2 (Basic Test 
Arrangements), 2.3 (Test Ducts and Plenums), 2.4 (Test Gases), 2.5 
(Test Pressures and Burner Adjustments), 2.6 (Static Pressure and Air 
Flow Adjustments), 2.39 (Thermal Efficiency), and 4.2.1 (Basic Test 
Arrangements for Direct Vent Central Furnaces) of ANSI Z21.47 
(incorporated by reference, see Sec.  431.75). The thermal efficiency 
test must be conducted only at the normal inlet test pressure, as 
specified in section 2.5.1 of ANSI Z21.47, and at the maximum hourly 
Btu input rating specified by the manufacturer for the product being 
tested.
    (2) Test setup for oil-fired commercial warm air furnaces. The test 
setup, including flue requirement, instrumentation, test conditions, 
and measurement for measuring thermal efficiency is as specified in 
sections 1 (Scope), 2 (Units of Measurement), 3 (Glossary), 37 
(General), 38 and 39 (Test Installation), 40 (Instrumentation, except 
40.4 and 40.6.2 through 40.6.7, which are not required for the thermal 
efficiency test), 41 (Initial Test Conditions), 42 (Combustion Test--
Burner and Furnace), 43.2 (Operation Tests), 44 (Limit Control Cutout 
Test), 45 (Continuity of Operation Test), and 46 (Air Flow, Downflow or 
Horizontal Furnace Test), of UL 727-2006 (incorporated by reference, 
see Sec.  431.75). You must conduct a fuel oil analysis for heating 
value, hydrogen content, carbon content, pounds per gallon, and 
American Petroleum Institute (API) gravity as specified in section 
8.2.2 of HI BTS-2000 (incorporated by reference, see Sec.  431.75). The 
steady-state combustion conditions, specified in Section 42.1 of UL 
727-2006, are attained when variations of not more than 5[emsp14][deg]F 
in the

[[Page 42664]]

measured flue gas temperature occur for three consecutive readings 
taken 15 minutes apart.
    (d) Additional test measurements--(1) Measurement of flue 
CO2 (carbon dioxide) for oil-fired commercial warm air 
furnaces. In addition to the flue temperature measurement specified in 
section 40.6.8 of UL 727-2006 (incorporated by reference, see Sec.  
431.75), you must locate one or two sampling tubes within six inches 
downstream from the flue temperature probe (as indicated on Figure 40.3 
of UL 727-2006). If you use an open end tube, it must project into the 
flue one-third of the chimney connector diameter. If you use other 
methods of sampling CO2, you must place the sampling tube so 
as to obtain an average sample. There must be no air leak between the 
temperature probe and the sampling tube location. You must collect the 
flue gas sample at the same time the flue gas temperature is recorded. 
The CO2 concentration of the flue gas must be as specified 
by the manufacturer for the product being tested, with a tolerance of 
0.1 percent. You must determine the flue CO2 
using an instrument with a reading error no greater than 0.1 percent.
    (2) Procedure for the measurement of condensate for a gas-fired 
condensing commercial warm air furnace. The test procedure for the 
measurement of the condensate from the flue gas under steady-state 
operation must be conducted as specified in sections 7.2.2.4, 7.8, and 
9.2 of ASHRAE 103 (incorporated by reference, see Sec.  431.75) under 
the maximum rated input conditions. You must conduct this condensate 
measurement for an additional 30 minutes of steady-state operation 
after completion of the steady-state thermal efficiency test specified 
in paragraph (c) of this section.
    (e) Calculation of thermal efficiency --(1) Gas-fired commercial 
warm air furnaces. You must use the calculation procedure specified in 
section 2.39, Thermal Efficiency, of ANSI Z21.47 (incorporated by 
reference, see Sec.  431.75).
    (2) Oil-fired commercial warm air furnaces. You must calculate the 
percent flue loss (in percent of heat input rate) by following the 
procedure specified in sections 11.1.4, 11.1.5, and 11.1.6.2 of the HI 
BTS-2000 (incorporated by reference, see Sec.  431.75). The thermal 
efficiency must be calculated as: Thermal Efficiency (percent) = 100 
percent - flue loss (in percent).
    (f) Procedure for the calculation of the additional heat gain and 
heat loss, and adjustment to the thermal efficiency, for a condensing 
commercial warm air furnace. (1) You must calculate the latent heat 
gain from the condensation of the water vapor in the flue gas, and 
calculate heat loss due to the flue condensate down the drain, as 
specified in sections 11.3.7.1 and 11.3.7.2 of ASHRAE 103 (incorporated 
by reference, see Sec.  431.75), with the exception that in the 
equation for the heat loss due to hot condensate flowing down the drain 
in section 11.3.7.2, the assumed indoor temperature of 70[emsp14][deg]F 
and the temperature term TOA must be replaced by the 
measured room temperature as specified in section 2.2.8 of ANSI Z21.47 
(incorporated by reference, see Sec.  431.75).
    (2) Adjustment to the thermal efficiency for condensing furnaces. 
You must adjust the thermal efficiency as calculated in paragraph 
(e)(1) of this section by adding the latent gain, expressed in percent, 
from the condensation of the water vapor in the flue gas, and 
subtracting the heat loss (due to the flue condensate down the drain), 
also expressed in percent, both as calculated in paragraph (f)(1) of 
this section, to obtain the thermal efficiency of a condensing furnace.

0
4. Section 431.92 is amended by adding in alphabetical order the 
definition of ``water-source heat pump'' to read as follows:


Sec.  431.92  Definitions concerning commercial air conditioners and 
heat pumps.

* * * * *
    Water-source heat pump means a single-phase or three-phase reverse-
cycle heat pump that uses a circulating water loop as the heat source 
for heating and as the heat sink for cooling. The main components are a 
compressor, refrigerant-to-water heat exchanger, refrigerant-to-air 
heat exchanger, refrigerant expansion devices, refrigerant reversing 
valve, and indoor fan. Such equipment includes, but is not limited to, 
water-to-air water-loop heat pumps.

0
5. Section 431.97 is amended by:
0
a. Revising paragraph (b);
0
b. Redesignating Tables 4 through 8 in paragraphs (c), (d), (e) and 
(f), as Tables 5 through 9 respectively; and
0
c. Revising the introductory text of paragraph (c).
    The revisions 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 on or after 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.

  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:
         Equipment category             Cooling capacity      Sub-category           Heating type            Efficiency level     equipment manufactured
                                                                                                                                     on and after. . .
--------------------------------------------------------------------------------------------------------------------------------------------------------
Small Commercial Packaged Air-       <65,000 Btu/h.........              AC  All........................  SEER = 13.............  June 16, 2008.
 Conditioning and Heating Equipment
 (Air-Cooled, 3-Phase, Split-
 System).
                                                                         HP  All........................  SEER = 13.............  June 16, 2008 \1\.
Small Commercial Packaged Air-       <65,000 Btu/h.........              AC  All........................  SEER = 13.............  June 16, 2008 \1\.
 Conditioning and Heating Equipment
 (Air-Cooled, 3-Phase, Single-
 Package).

[[Page 42665]]

 
                                                                         HP  All........................  SEER = 13.............  June 16, 2008 \1\.
Small Commercial Packaged Air-       >=65,000 Btu/h and                  AC  No Heating or Electric       EER = 11.2............  January 1, 2010.
 Conditioning and Heating Equipment   <135,000 Btu/h.                         Resistance Heating.
 (Air-Cooled).
                                                                             All Other Types of Heating.  EER = 11.0............  January 1, 2010.
                                                                         HP  No Heating or Electric       EER = 11.0............  January 1, 2010.
                                                                              Resistance Heating.
                                                                             All Other Types of Heating.  EER = 10.8............  January 1, 2010.
Large Commercial Packaged Air-       >=135,000 Btu/h and                 AC  No Heating or Electric       EER = 11.0............  January 1, 2010.
 Conditioning and Heating Equipment   <240,000 Btu/h.                         Resistance Heating.
 (Air-Cooled).
                                                                             All Other Types of Heating.  EER = 10.8............  January 1, 2010.
                                                                         HP  No Heating or Electric       EER = 10.6............  January 1, 2010.
                                                                              Resistance Heating.
                                                                             All Other Types of Heating.  EER = 10.4............  January 1, 2010.
Very Large Commercial Packaged Air-  >=240,000 Btu/h and                 AC  No Heating or Electric       EER = 10.0............  January 1, 2010.
 Conditioning and Heating Equipment   <760,000 Btu/h.                         Resistance Heating.
 (Air-Cooled).
                                                                             All Other Types of Heating.  EER = 9.8.............  January 1, 2010.
                                                                         HP  No Heating or Electric       EER = 9.5.............  January 1, 2010.
                                                                              Resistance Heating.
                                                                             All Other Types of Heating.  EER = 9.3.............  January 1, 2010.
Small Commercial Package Air-        <65,000 Btu/h.........              AC  All........................  EER = 12.1............  October 29, 2003.
 Conditioning and Heating Equipment
 (Water-Cooled).
                                     >=65,000 Btu/h and                  AC  No Heating or Electric       EER = 12.1............  June 1, 2013.
                                      <135,000 Btu/h.                         Resistance Heating.
                                                                             All Other Types of Heating.  EER = 11.9............  June 1, 2013.
Large Commercial Package Air-        >=135,000 and <240,000              AC  No Heating or Electric       EER = 12.5............  June 1, 2014.
 Conditioning and Heating Equipment   Btu/h.                                  Resistance Heating.
 (Water-Cooled).
                                                                             All Other Types of Heating.  EER = 12.3............  June 1, 2014.
Very Large Commercial Package Air-   >=240,000 and <760,000              AC  No Heating or Electric       EER = 12.4............  June 1, 2014.
 Conditioning and Heating Equipment   Btu/h.                                  Resistance Heating.
 (Water-Cooled).
                                                                             All Other Types of Heating.  EER = 12.2............  June 1, 2014.
Small Commercial Package Air-        <65,000 Btu/h.........              AC  All........................  EER = 12.1............  October 29, 2003.
 Conditioning and Heating Equipment
 (Evaporatively-Cooled).
                                     >=65,000 and <135,000               AC  No Heating or Electric       EER = 12.1............  June 1, 2013.
                                      Btu/h.                                  Resistance Heating.
                                                                             All Other Types of Heating.  EER = 11.9............  June 1, 2013.
Large Commercial Package Air-        >=135,000 and <240,000              AC  No Heating or Electric       EER = 12.0............  June 1, 2014.
 Conditioning and Heating Equipment   Btu/h.                                  Resistance Heating.
 (Evaporatively-Cooled).
                                                                             All Other Types of Heating.  EER = 11.8............  June 1, 2014.
Very Large Commercial Package Air-   >=240,000 and <760,000              AC  No Heating or Electric       EER = 11.9............  June 1, 2014.
 Conditioning and Heating Equipment   Btu/h.                                  Resistance Heating.
 (Evaporatively-Cooled).
                                                                             All Other Types of Heating.  EER = 11.7............  June 1, 2014.
Small Commercial Packaged Air-       <17,000 Btu/h.........              HP  All........................  EER = 11.2............  October 29, 2003 \2\.
 Conditioning and Heating Equipment
 (Water-Source: Water-to-Air, Water-
 Loop).
                                     >=17,000 Btu/h and                  HP  All........................  EER = 12.0............  October 29, 2003 \2\.
                                      <65,000 Btu/h.

[[Page 42666]]

 
                                     >=65,000 Btu/h and                  HP  All........................  EER = 12.0............  October 29, 2003 \2\.
                                      <135,000 Btu/h.
--------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ And manufactured before January 1, 2017. See Table 3 of this section for updated efficiency standards.
\2\ And manufactured before October 9, 2015. See Table 3 of this section for updated efficiency standards.


 Table 2 to Sec.   431.97--Minimum Heating Efficiency Standards for Air-Conditioning and Heating Equipment (Heat
                                                     Pumps)
----------------------------------------------------------------------------------------------------------------
                                                                                             Compliance date:
          Equipment category               Cooling capacity         Efficiency level      equipment manufactured
                                                                                            on and after. . .
----------------------------------------------------------------------------------------------------------------
Small Commercial Packaged Air-         <65,000 Btu/h..........  HSPF = 7.7.............  June 16, 2008.\1\
 Conditioning and Heating Equipment
 (Air-Cooled, 3-Phase, Split-System).
Small Commercial Packaged Air-         <65,000 Btu/h..........  HSPF = 7.7.............  June 16, 2008.\1\
 Conditioning and Heating Equipment
 (Air-Cooled, 3-Phase, Single-
 Package).
Small Commercial Packaged Air-         >=65,000 Btu/h and       COP = 3.3..............  January 1, 2010.
 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.
 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.
 Conditioning and Heating Equipment     <760,000 Btu/h.
 (Air-Cooled).
Small Commercial Packaged Air-         <135,000 Btu/h.........  COP = 4.2..............  October 29, 2003.\2\
 Conditioning and Heating Equipment
 (Water-Source: Water-to-Air, Water-
 Loop).
----------------------------------------------------------------------------------------------------------------
\1\ And manufactured before January 1, 2017. See Table 3 of this section for updated efficiency standards.
\2\ And manufactured before October 9, 2015. See Table 3 of this section for updated efficiency standards.


 Table 3 to Sec.   431.97--Updates to the Minimum Cooling Efficiency Standards for Certain Air-Conditioning and
                                                Heating Equipment
----------------------------------------------------------------------------------------------------------------
                                                                                                    Compliance
                                   Cooling                                         Efficiency    date: equipment
      Equipment category           capacity      Sub-category    Heating type        level       manufactured on
                                                                                                    and after
----------------------------------------------------------------------------------------------------------------
Small Commercial Packaged Air- <65,000 Btu/h..              AC             All  SEER = 13.0....  June 16, 2008.
 Conditioning and Heating
 Equipment (Air-Cooled, 3-
 Phase, Split-System).
                               ...............              HP             All  SEER = 14.0....  January 1,
                                                                                                  2017.
Small Commercial Packaged Air- <65,000 Btu/h..              AC             All  SEER = 14.0....  January 1,
 Conditioning and Heating                                                                         2017.
 Equipment (Air-Cooled, 3-
 Phase, Single-Package).
                               ...............              HP             All  SEER = 14.0....  January 1,
                                                                                                  2017.
Small Commercial Packaged Air- <17,000 Btu/h..              HP             All  EER = 12.2.....  October 9,
 Conditioning and Heating                                                                         2015.
 Equipment (Water-Source:
 Water-to-Air, Water-Loop).
                               >=17,000 Btu/h               HP             All  EER = 13.0.....  October 9,
                                and <65,000                                                       2015.
                                Btu/h.
                               >=65,000 Btu/h               HP             All  EER = 13.0.....  October 9,
                                and <135,000                                                      2015.
                                Btu/h.
----------------------------------------------------------------------------------------------------------------


[[Page 42667]]


 Table 4 to Sec.   431.97--Updates to the Minimum Heating Efficiency Standards for Certain Air-Conditioning and
                                         Heating Equipment (Heat Pumps)
----------------------------------------------------------------------------------------------------------------
                                                                                             Compliance date:
          Equipment category               Cooling capacity         Efficiency level      equipment manufactured
                                                                                            on and after . . .
----------------------------------------------------------------------------------------------------------------
Small Commercial Packaged Air-         <65,000 Btu/h..........  HSPF = 8.2.............  January 1, 2017.
 Conditioning and Heating Equipment
 (Air-Cooled, 3-Phase, Split-System).
Small Commercial Packaged Air-         <65,000 Btu/h..........  HSPF = 8.0.............  January 1, 2017.
 Conditioning and Heating Equipment
 (Air-Cooled, 3-Phase, Single-
 Package).
Small Commercial Packaged Air-         <135,000 Btu/h.........  COP = 4.3..............  October 9, 2015.
 Conditioning and Heating Equipment
 (Water-Source: Water-to-Air, Water-
 Loop).
----------------------------------------------------------------------------------------------------------------

    (c) Each packaged terminal air conditioner (PTAC) and packaged 
terminal heat pump (PTHP) manufactured on or after January 1, 1994, and 
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 PTAC and PTHP manufactured on or after 
October 8, 2012 (for standard size PTACs and PTHPs) and on or after 
October 7, 2010 (for non-standard size PTACs and PTHPs) must meet the 
applicable minimum energy efficiency standard level(s) set forth in 
Table 6 of this section.
* * * * *

0
6. Section 431.110 is amended by revising the table to read as follows:


Sec.  431.110  Energy conservation standards and their effective dates.

* * * * *

----------------------------------------------------------------------------------------------------------------
                                                                      Energy conservation standard \a\
                                                          ------------------------------------------------------
                                                                                      Minimum
                                                                                      thermal         Minimum
                                                                                    efficiency        thermal
                                                            Maximum standby loss    (equipment      efficiency
        Equipment category                   Size              \c\ (equipment      manufactured     (equipment
                                                            manufactured on and    on and after    manufactured
                                                             after October 29,      October 29,    on and after
                                                                 2003) \b\           2003 and       October 9,
                                                                                  before October     2015) \b\
                                                                                   9, 2015) \b\
----------------------------------------------------------------------------------------------------------------
Electric storage water heaters....  All..................  0.30 + 27/Vm (%/hr)..             N/A             N/A
Gas-fired storage water heaters...  <=155,000 Btu/hr.....  Q/800 +                           80%             80%
                                                            110(Vr)[frac12] (Btu/
                                                            hr).
                                    >155,000 Btu/hr......  Q/800 +                           80%             80%
                                                            110(Vr)[frac12] (Btu/
                                                            hr).
Oil-fired storage water heaters...  <=155,000 Btu/hr.....  Q/800 +                           78%             80%
                                                            110(Vr)[frac12] (Btu/
                                                            hr).
                                    >155,000 Btu/hr......  Q/800 +                           78%             80%
                                                            110(Vr)[frac12] (Btu/
                                                            hr).
Gas-fired instantaneous water       <10 gal..............  N/A..................             80%             80%
 heaters and hot water supply
 boilers.
                                    >=10 gal.............  Q/800 +                           80%             80%
                                                            110(Vr)[frac12] (Btu/
                                                            hr).
Oil-fired instantaneous water       <10 gal..............  N/A..................             80%             80%
 heaters and hot water supply
 boilers.
                                    >=10 gal.............  Q/800 +                           78%             78%
                                                            110(Vr)[frac12] (Btu/
                                                            hr).
----------------------------------------------------------------------------------------------------------------


 
                                                        Minimum thermal
       Equipment Category                Size             insulation
------------------------------------------------------------------------
Unfired hot water storage tank..  All...............  R-12.5
------------------------------------------------------------------------
\a\Vm is the measured storage volume, and Vr is the rated volume, both
  in gallons. Q is the nameplate input rate in Btu/hr.
\b\ For hot water supply boilers with a capacity of less than 10
  gallons: (1) The standards are mandatory for products manufactured on
  and after October 21, 2005, and (2) products manufactured prior to
  that date, and on or after October 23, 2003, must meet either the
  standards listed in this table or the applicable standards in subpart
  E of this part for a ``commercial packaged boiler.''
\c\ Water heaters and hot water supply boilers having more than 140
  gallons of storage capacity need not meet the standby loss requirement
  if: (1) The tank surface area is thermally insulated to R-12.5 or
  more; (2) a standing pilot light is not used; and (3) for gas or oil-
  fired storage water heaters, they have a fire damper or fan assisted
  combustion.


    Note:  The following letter will not appear in the Code of 
Federal Regulations.


March 24, 2015


Anne Harkavy

Deputy General Counsel for Litigation, Regulation and Enforcement

U.S. Department of Energy Washington, DC

    Dear Deputy General Counsel Harkavy: I am responding to your 
January 2, 2015 letter seeking the views of the Attorney General about 
the potential impact on competition of proposed energy conservation 
standards for certain types of commercial heating, air-conditioning, 
and water-heating equipment. Your request was submitted under Section 
325(o)(2)(B)(i)(V) of the Energy Policy and Conservation Act, as 
amended 42 U.S.C. 6295(o)(2)(B)(i)(V), which requires the Attorney 
General to make a determination of the impact of any lessening of 
competition that is likely to result from the imposition of proposed 
energy conservation standards. The Attorney General's responsibility 
for responding to requests from other departments about the effect

[[Page 42668]]

of a program on competition has been delegated to the Assistant 
Attorney General for the Antitrust Division in 28 CFR 0.40(g).
    In conducting its analysis, the Antitrust Division examines whether 
a proposed standard may lessen competition, for example, by 
substantially limiting consumer choice, by placing certain 
manufacturers at an unjustified competitive disadvantage, or by 
inducing avoidable inefficiencies in production or distribution of 
particular products. A lessening of competition could result in higher 
prices to manufacturers and consumers, and perhaps thwart the intent of 
the revised standards by inducing substitution to less efficient 
products.
    We have reviewed the proposed standards contained in the Notice of 
Proposed Rulemaking (80 FR January 8, 2015) (NOPR). We have also 
reviewed supplementary information submitted to the Attorney General by 
the Department of Energy, including a transcript of the public meeting 
held on the proposed standards on February 6, 2015 Based on this 
review, our conclusion is that the proposed energy conservation 
standards for commercial heating, air-conditioning, and water-heating 
equipment are unlikely to have a significant adverse impact on 
competition.
    Sincerely,
    William J. Baer

[FR Doc. 2015-16927 Filed 7-16-15; 8:45 am]
BILLING CODE 6450-01-P