[Federal Register Volume 80, Number 139 (Tuesday, July 21, 2015)]
[Rules and Regulations]
[Pages 43162-43213]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-16897]



[[Page 43161]]

Vol. 80

Tuesday,

No. 139

July 21, 2015

Part II





Department of Energy





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10 CFR Part 431





 Energy Conservation Program: Energy Conservation Standards for 
Packaged Terminal Air Conditioners and Packaged Terminal Heat Pumps; 
Final Rule

  Federal Register / Vol. 80 , No. 139 / Tuesday, July 21, 2015 / Rules 
and Regulations  

[[Page 43162]]


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DEPARTMENT OF ENERGY

10 CFR Part 431

[Docket Number EERE-2012-BT-STD-0029]
RIN 1904-AC82


Energy Conservation Program: Energy Conservation Standards for 
Packaged Terminal Air Conditioners and Packaged Terminal Heat Pumps

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

ACTION: Final rule.

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SUMMARY: The Energy Policy and Conservation Act of 1975 (EPCA), as 
amended, prescribes energy conservation standards for various consumer 
products and certain commercial and industrial equipment, including 
packaged terminal air conditioner (PTAC) and packaged terminal heat 
pump (PTHP) equipment. EPCA requires the U.S. Department of Energy 
(DOE) to determine whether more-stringent standards for PTACs and PTHPs 
would be technologically feasible and economically justified, and would 
save a significant amount of energy. In this final rule, DOE is 
adopting amended energy conservation standards for PTACs equivalent to 
the PTAC standards in American National Standards Institute (ANSI)/
American Society of Heating, Refrigerating, and Air-Conditioning 
Engineers (ASHRAE)/Illuminating Engineering Society (IES) Standard 
90.1-2013. DOE is not amending the current energy conservation 
standards for PTHPs, which are already equivalent to the PTHP standards 
in ANSI/ASHRAE/IES Standard 90.1-2013. DOE has determined that adoption 
of PTAC and PTHP standards more stringent than ANSI/ASHRAE/IES Standard 
90.1-2013 is not economically justified.

DATES: The effective date of this rule is September 21, 2015. 
Compliance with the amended standards established for standard-sized 
PTACs in this final rule is required on January 1, 2017.

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 regulations.gov. All 
documents in the docket are listed in the regulations.gov index. 
However, some documents listed in the index, such as those containing 
information that is exempt from public disclosure, may not be publicly 
available.
    A link to the docket Web page can be found at: http://www.regulations.gov/#!docketDetail;D=EERE-2012-BT-STD-0029. This Web 
page contains a link to the docket for this document on the 
www.regulations.gov site. The www.regulations.gov Web page contains 
simple 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: Mr. Ronald Majette, U.S. Department of 
Energy, Office of Energy Efficiency and Renewable Energy, Building 
Technologies Program, EE-5B, 1000 Independence Avenue SW., Washington, 
DC 20585-0121. Telephone: (202) 586-7935. Email: [email protected].
    Ms. Elizabeth Kohl, U.S. Department of Energy, Office of the 
General Counsel, GC-33, 1000 Independence Avenue SW., Washington, DC 
20585-0121. Telephone: (202) 286-7796. Email: 
[email protected].

SUPPLEMENTARY INFORMATION:

Table of Contents

I. Summary of the Final Rule
    A. National Benefits
II. Introduction
    A. Authority
    B. Background
    1. Current Standards
    2. History of Standards Rulemaking for PTACs and PTHPs
III. General Discussion
    A. Compliance Dates
    B. Equipment Classes and Scope of Coverage
    C. Test Procedure
    D. Technological Feasibility
    1. General
    2. Maximum Technologically Feasible Levels
    E. Energy Savings
    1. Determination of Savings
    2. Significance of Savings
    F. Economic Justification
    1. Specific Criteria
    a. Economic Impact on Manufacturers and Consumers
    b. Savings in Operating Costs Compared to Increase in Price
    c. Energy Savings
    d. Lessening of Utility or Performance of Equipment
    e. Impact of Any Lessening of Competition
    f. Need for National Energy Conservation
    g. Other Factors
    2. Rebuttable Presumption
    G. Additional Comments
IV. Methodology and Discussion of Related Comments
    A. Market and Technology Assessment
    B. Screening Analysis
    C. Engineering Analysis
    1. Methodology
    2. Equipment Classes Analyzed
    3. Cost Model
    4. Baseline Efficiency Level
    5. Incremental Efficiency Levels
    6. Equipment Testing and Reverse Engineering
    7. Cost-Efficiency Results
    D. Markups to Determine Equipment Price
    E. Energy Use Analysis
    F. Life Cycle Cost and Payback Period Analyses
    1. Equipment and Installation Costs
    2. Unit Energy Consumption
    3. Electricity Prices and Electricity Price Trends
    4. Repair Costs
    5. Maintenance Costs
    6. Lifetime
    7. Discount Rate
    8. Base Case Efficiency Distribution
    9. Payback Period Inputs
    10. Rebuttable-Presumption Payback Period
    G. Shipments Analysis
    H. National Impact Analysis
    I. Consumer Subgroup Analysis
    J. Manufacturer Impact Analysis
    1. Overview
    2. Government Regulatory Impact Model
    a. Government Regulatory Impact Model Key Inputs
    b. Government Regulatory Impact Model Scenarios
    c. Manufacturer Interviews
    3. Discussion of Comments
    K. Emissions Analysis
    L. 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. Social Cost of Other Air Pollutants
    M. Utility Impact Analysis
    N. Employment Impact Analysis
V. Analytical Results
    A. Trial Standard Levels
    B. Economic Justification and Energy Savings
    1. Economic Impacts on Commercial Consumers
    a. Life-Cycle Cost and Payback Period
    b. Consumer Subgroup Analysis
    c. Rebuttable Presumption Payback
    2. Economic Impacts on Manufacturers
    a. Industry Cash Flow Analysis Results
    b. Direct Impacts on Employment
    c. Impacts on Manufacturing Capacity
    d. Impacts on Subgroups of Manufacturers
    e. Cumulative Regulatory Burden
    3. National Impact Analysis
    a. Significance of Energy Savings
    b. Net Present Value of Consumer Costs and Benefits
    c. Indirect Impacts on Employment
    4. Impact on Utility or Performance of Equipment
    5. Impact of Any Lessening of Competition
    6. Need of the Nation To Conserve Energy
    7. Other Factors
    8. Summary of National Economic Impacts
    C. Conclusions
VI. Procedural Issues and Regulatory Review
    A. Review Under Executive Orders 12866 and 13563

[[Page 43163]]

    B. Review Under the Regulatory Flexibility Act
    1. Description and Estimated Number of Small Entities Regulated
    a. Methodology for Estimating the Number of Small Entities
    b. Manufacturer Participation
    c. PTAC and PTHP Industry Structure and Nature of Competition
    2. Description and Estimate of Compliance Requirements
    3. Duplication, Overlap, and Conflict With Other Rules and 
Regulations
    4. Significant Alternatives to the Rule
    C. Review Under the Paperwork Reduction Act
    D. Review Under the National Environmental Policy Act of 1969
    E. Review Under Executive Order 13132
    F. Review Under Executive Order 12988
    G. Review Under the Unfunded Mandates Reform Act of 1995
    H. Review Under the Treasury and General Government 
Appropriations Act, 1999
    I. Review Under Executive Order 12630
    J. Review Under the Treasury and General Government 
Appropriations Act, 2001
    K. Review Under Executive Order 13211
    L. Review Under the Information Quality Bulletin for Peer Review
    M. Congressional Notification
VII. Approval of the Office of the Secretary

I. Summary of the Final Rule

    Title III, Part C \1\ of the Energy Policy and Conservation Act of 
1975 (EPCA or the Act) (42 U.S.C. 6291, et. seq.) established the 
Energy Conservation Program for Certain Industrial Equipment.\2\ This 
equipment includes packaged terminal air conditioners (PTACs) and 
packaged terminal heat pumps (PTHPs), the subjects of this document. 
The current Federal energy conservation standards for PTAC and PTHP 
equipment were adopted in 2008. 73 FR 58772 (October 7, 2008).
---------------------------------------------------------------------------

    \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 American Energy Manufacturing Technical 
Corrections Act (AEMTCA), Public Law 112-210 (Dec. 18, 2012).
---------------------------------------------------------------------------

    EPCA, as amended, 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, including 
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)) On October 9, 2013, ASHRAE 
Standard 90.1-2013 raised the standards for standard-size PTAC 
equipment EPCA further 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))
    Pursuant to EPCA, DOE must also, every six years, evaluate each 
class of covered equipment and publish either a notice of the 
determination that standards for the product do not need to be amended 
or a notice of proposed rulemaking including new proposed standards. 
(42 U.S.C. 6313(a)(6)(C)(i)) Under the six-year look back requirement, 
DOE must also demonstrate clear and convincing evidence supporting 
adoption of a national standard at a more-stringent efficiency level 
than that in ASHRAE Standard 90.1. (42 U.S.C. 6313(a)(6)(C)) Conduct of 
a rulemaking subsequent to ASHRAE action satisfies this six-year look 
back requirement.
    Based on the analysis supporting this final rule, DOE is not able 
to show with clear and convincing evidence that energy conservation 
standards for PTAC and PTHP equipment at any of the considered 
efficiency levels that are more stringent than the minimum level 
specified in the ANSI/ASHRAE/IES Standard 90.1-2013 are economically 
justified. Therefore, in accordance with these and other statutory 
provisions discussed in this document, DOE is amending energy 
conservation standards for standard-sized PTAC equipment to be 
equivalent to the standards for standard-sized PTAC equipment found in 
ANSI/ASHRAE/IES Standard 90.1-2013.
    The amended standards for PTACs, which are the minimum allowable 
cooling efficiency, are shown in Table I.1. These amended standards 
apply to all standard-sized PTAC equipment manufactured in, or imported 
into, the United States on or after the compliance date indicated in 
Table I.1. The standards for PTHP equipment remain unchanged.

               Table I.1--Amended Energy Conservation Standards for Standard-Sized PTAC Equipment
----------------------------------------------------------------------------------------------------------------
                             Equipment class
-------------------------------------------------------------------------   Minimum cooling     Compliance date
            Equipment                  Category        Cooling capacity      efficiency *             ***
----------------------------------------------------------------------------------------------------------------
PTAC............................  Standard Size **..  <7,000 Btu/h......  EER = 11.9........  January 1, 2017.
                                                      >=7,000 Btu/h and   EER = 14.0 -
                                                       <=15,000 Btu/h.     (0.300 x Cap
                                                                           [dagger][dagger]).
                                                      >15,000 Btu/h.....  EER = 9.5.........
----------------------------------------------------------------------------------------------------------------
* For equipment rated according to the DOE test procedure, Air Conditioning, Heating, and Refrigeration
  Institute (AHRI) Standard 310/380-2014.
** Standard size refers to PTAC equipment with wall sleeve dimensions greater than or equal to 16 inches high,
  or greater than or equal to 42 inches wide.
*** Amended standards shall become effective for equipment manufactured on or after a date which is two years
  after the effective date of the applicable minimum energy efficiency requirement in the amended ASHRAE/IES
  standard. (42 U.S.C. 6313(a)(6)(D)(i))
[dagger][dagger] Cap means cooling capacity in thousand British thermal units per hour (Btu/h) at 95 [deg]F
  outdoor dry-bulb temperature.

II. Introduction

    The following section briefly discusses the statutory authority 
underlying this final rule, as well as some of the relevant historical 
background related to the establishment of standards for PTACs and 
PTHPs.

A. Authority

    Title III, Part C \3\ of EPCA (42 U.S.C. 6291, et. seq.), 
established the Energy Conservation Program for Certain Industrial 
Equipment, which includes the PTAC and PTHP equipment that is the 
subject of this final rule.\4\ In general, this program addresses the 
energy efficiency of certain types of commercial

[[Page 43164]]

and industrial equipment. Relevant provisions of the Act include 
definitions (42 U.S.C. 6311), energy conservation standards (42 U.S.C. 
6313), test procedures (42 U.S.C. 6314), labeling provisions (42 U.S.C. 
6315), and the authority to require information and reports from 
manufacturers (42 U.S.C. 6316).
---------------------------------------------------------------------------

    \3\ For editorial reasons, upon codification in the U.S. Code, 
Part C was re-designated Part A-1.
    \4\ 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).
---------------------------------------------------------------------------

    EPCA contains mandatory energy conservation standards for 
commercial heating, air-conditioning, and water-heating equipment. 
Specifically, EPCA sets standards for small, large, and very large 
commercial package air-conditioning and heating equipment, PTACs and 
PTHPs, warm-air furnaces, packaged boilers, storage water heaters, 
instantaneous water heaters, and unfired hot water storage tanks. (42 
U.S.C. 6313(a)) 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/Illuminating Engineering 
Society of North America (IESNA) Standard 90.1-1989), for each type of 
covered equipment listed in 42 U.S.C. 6313(a).
    EPCA requires that DOE conduct a rulemaking to consider amended 
energy conservation standards for a variety of enumerated types of 
commercial heating, ventilating, and air-conditioning equipment 
(including PTACs and PTHPs) each time ASHRAE Standard 90.1 is amended 
with respect to the standard levels or design requirements applicable 
to such equipment. (42 U.S.C. 6313(a)(6)(A)) Such review is to be 
conducted in accordance with the procedures established for ASHRAE 
equipment under 42 U.S.C. 6313(a)(6). According to 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 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 specified 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)) In addition, 
EPCA requires DOE to review its already-established energy conservation 
standards for ASHRAE equipment every six years. (42 U.S.C. 
6313(a)(6)(C))
    If DOE proposes an amended standard for ASHRAE equipment at levels 
more stringent than those in ASHRAE Standard 90.1, DOE 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))
    Because ASHRAE did not update its efficiency levels for PTACs and 
PTHPs in ANSI/ASHRAE/IES Standard 90.1-2010, DOE began this rulemaking 
by analyzing amended standards consistent with the six-year look back 
procedures defined under 42 U.S.C. 6313(a)(6)(C). However, before DOE 
could finalize this rule, ASHRAE acted on October 9, 2013 to adopt 
ANSI/ASHRAE/IES Standard 90.1-2013. This revision of ASHRAE Standard 
90.1 contained amended standard levels for PTACs, thereby triggering 
DOE's statutory obligation under 42 U.S.C. 6313(a)(6)(A) to promulgate 
an amended uniform national standard at those levels unless DOE 
determines that there is clear and convincing evidence supporting the 
adoption of more-stringent energy conservation standards than the 
ASHRAE levels. Consequently, DOE prepared an analysis of the energy 
savings potential of amended standards at the ANSI/ASHRAE/IES Standard 
90.1-2013 levels (as required by 42 U.S.C. 6313(a)(6)(A)(i)) and 
updated the proposed rule and its accompanying analyses to reflect 
appropriate statutory provisions, timelines, and compliance dates.
    ANSI/ASHRAE/IES Standard 90.1-2013 did not contain amended standard 
levels for PTHPs, and the PTHP standard levels published in ANSI/
ASHRAE/IES Standard 90.1-2013 are equivalent to the current Federal 
minimum standards for PTHPs.
    DOE is adopting amended standards for PTAC equipment equivalent to 
those set forth in ANSI/ASHRAE/IES Standard 90.1-2013. DOE is not 
adopting amended standards for PTHP equipment.
    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 the standard is 
likely to 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. (42 U.S.C. 6313(a)(6)(B)(iii)(II))

B. Background

1. Current Standards
    In a final rule published on October 7, 2008 (73 FR 58772), DOE 
prescribed the current energy conservation standards for all standard 
size PTAC and PTHP equipment manufactured on or after September 30, 
2012, and for all non-standard size PTAC and PTHP equipment 
manufactured on or after September 30, 2010. (42 U.S.C. 6313(a)(3)) The 
current energy conservation standards align with ANSI/ASHRAE/IES 
Standard 90.1-2010. These levels are expressed in energy efficiency 
ratio (EER) for the cooling mode and in coefficient of performance 
(COP) for the heating mode. EER is defined as ``the ratio of the 
produced cooling effect of an air conditioner or heat pump to its net 
work input, expressed in Btu/watt-hour.'' 10 CFR 431.92. COP is defined 
as ``the ratio of produced cooling effect of an air conditioner or heat 
pump (or its produced heating effect, depending on model operation) to 
its net work input, when both the cooling (or heating) effect and the 
net work input are expressed in identical units of measurement.'' 10 
CFR 431.92.
    The current standards for PTACs and PTHPs are set forth in Table 
II.1.

[[Page 43165]]



                       Table II.1--Federal Energy Efficiency Standards for PTACs and PTHPs
----------------------------------------------------------------------------------------------------------------
                                    Equipment class
---------------------------------------------------------------------------------------    Efficiency level *
          Equipment type                  Sub-category            Cooling capacity
----------------------------------------------------------------------------------------------------------------
PTAC.............................  Standard Size **.........  <7,000 Btu/h............  EER = 11.7.
                                                              >=7,000 Btu/h and         EER = 13.8 - (0.300 x
                                                               <=15,000 Btu/h.           Cap [dagger][dagger]).
                                                              >15,000 Btu/h...........  EER = 9.3.
                                   Non-Standard Size          <7,000 Btu/h............  EER = 9.4.
                                    [dagger].
                                                              >=7,000 Btu/h and         EER = 10.9 - (0.213 x
                                                               <=15,000 Btu/h.           Cap [dagger][dagger]).
                                                              >15,000 Btu/h...........  EER = 7.7.
PTHP.............................  Standard Size **.........  <7,000 Btu/h............  EER = 11.9.
                                                                                        COP = 3.3.
                                                              >=7,000 Btu/h and         EER = 14.0 - (0.300 x
                                                               <=15,000 Btu/h.           Cap [dagger][dagger]).
                                                                                        COP = 3.7 - (0.052 x Cap
                                                                                         [dagger][dagger]).
                                                              >15,000 Btu/h...........  EER = 9.5.
                                                                                        COP = 2.9.
                                   Non-Standard Size          <7,000 Btu/h............  EER = 9.3.
                                    [dagger].                                           COP = 2.7.
                                                              >=7,000 Btu/h and         EER = 10.8 - (0.213 x
                                                               <=15,000 Btu/h.           Cap [dagger][dagger]).
                                                                                        COP = 2.9 - (0.026 x Cap
                                                                                         [dagger][dagger]).
                                                              >15,000 Btu/h...........  EER = 7.6.
                                                                                        COP = 2.5.
----------------------------------------------------------------------------------------------------------------
* For equipment rated according to ARI standards, all EER values must be rated at 95 [deg]F outdoor dry-bulb
  temperature for air-cooled products and evaporatively-cooled products and at 85 [deg]F entering water
  temperature for water cooled products. All COP values must be rated at 47 [deg]F outdoor dry-bulb temperature
  for air-cooled products, and at 70 [deg]F entering water temperature for water-source heat pumps.
** Standard size refers to PTAC or PTHP equipment with wall sleeve dimensions greater than or equal to 16 inches
  high, or greater than or equal to 42 inches wide.
[dagger] Non-standard size refers to PTAC or PTHP equipment with wall sleeve dimensions less than 16 inches high
  and less than 42 inches wide. ASHRAE/IESNA Standard 90.1-1999 also includes a factory labeling requirement for
  non-standard size PTAC and PTHP equipment as follows: ``MANUFACTURED FOR REPLACEMENT APPLICATIONS ONLY; NOT TO
  BE INSTALLED IN NEW CONSTRUCTION PROJECTS.''
[dagger][dagger] Cap means cooling capacity in kBtu/h at 95 [deg]F outdoor dry-bulb temperature.

2. History of Standards Rulemaking for PTACs and PTHPs
    On October 29, 1999, ASHRAE adopted ASHRAE/IESNA Standard 90.1-
1999, ``Energy Standard for Buildings Except Low-Rise Residential 
Building,'' which included amended efficiency levels for PTACs and 
PTHPs. In amending the ASHRAE/IESNA Standard 90.1-1989 levels for PTACs 
and PTHPs, ASHRAE acknowledged the physical size constraints among the 
varying sleeve sizes on the market. Specifically, the wall sleeve 
dimensions of the PTAC and PTHP can limit the attainable energy 
efficiency of the equipment. Consequently, ASHRAE/IESNA Standard 90.1-
1999 used the equipment classes defined by EPCA, which are 
distinguished by equipment type (i.e., air conditioner or heat pump) 
and cooling capacity, and further separated these equipment classes by 
wall sleeve dimensions.\5\ Table II.2 shows the efficiency levels in 
ASHRAE/IESNA Standard 90.1-1999 for PTACs and PTHPs.
---------------------------------------------------------------------------

    \5\ Prior to 1999, ASHRAE/IESNA Standard 90.1 provided one 
efficiency standard for all PTAC and PTHP and did not have different 
standards by dimension. ASHRAE/IESNA Standard 90.1-1999 increased 
the standards for all classes and established more stringent 
standards for ``new construction'' than for ``replacements.'' DOE 
energy conservation standards for PTACs and PTHPs did not 
distinguish between wall sleeve dimensions for standard and non-
standard size units until 2010 (for non-standard size) and 2012 (for 
standard size).

            Table II.2--ASHRAE/IESNA Standard 90.1-1999 Energy Efficiency Levels for PTACs and PTHPs
----------------------------------------------------------------------------------------------------------------
                                    Equipment class                                       ASHRAE/IESNA Standard
---------------------------------------------------------------------------------------   90.1-1999 efficiency
            Equipment                       Category              Cooling capacity              levels *
----------------------------------------------------------------------------------------------------------------
PTAC.............................  Standard Size **.........  <7,000 Btu/h............  EER = 11.0.
                                                              >=7,000 Btu/h and         EER = 12.5 - (0.213 x
                                                               <=15,000 Btu/h.           Cap [dagger][dagger]).
                                                              >15,000 Btu/h...........  EER = 9.3.
                                   Non-Standard Size          <7,000 Btu/h............  EER = 9.4.
                                    [dagger].
                                                              >=7,000 Btu/h and         EER = 10.9 - (0.213 x
                                                               <=15,000 Btu/h.           Cap [dagger][dagger]).
                                                              >15,000 Btu/h...........  EER = 7.7.
PTHP.............................  Standard Size **.........  <7,000 Btu/h............  EER = 10.8.
                                                                                        COP = 3.0.
                                                              >=7,000 Btu/h and         EER = 12.3 - (0.213 x
                                                               <=15,000 Btu/h.           Cap [dagger][dagger]).
                                                                                        COP = 3.2 - (0.026 x Cap
                                                                                         [dagger][dagger]).
                                                              >15,000 Btu/h...........  EER = 9.1.
                                                                                        COP = 2.8.
                                   Non-Standard Size          <7,000 Btu/h............  EER = 9.3.
                                    [dagger].                                           COP = 2.7.
                                                              >=7,000 Btu/h and         EER = 10.8 - (0.213 x
                                                               <=15,000 Btu/h.           Cap [dagger][dagger]).
                                                                                        COP = 2.9 - (0.026 x Cap
                                                                                         [dagger][dagger]).

[[Page 43166]]

 
                                                              >15,000 Btu/h...........  EER = 7.6.
                                                                                        COP = 2.5.
----------------------------------------------------------------------------------------------------------------
* For equipment rated according to ARI standards, all EER values must be rated at 95 [deg]F outdoor dry-bulb
  temperature for air-cooled products and evaporatively-cooled products and at 85 [deg]F entering water
  temperature for water cooled products. All COP values must be rated at 47 [deg]F outdoor dry-bulb temperature
  for air-cooled products, and at 70 [deg]F entering water temperature for water-source heat pumps.
** Standard size refers to PTAC or PTHP equipment with wall sleeve dimensions greater than or equal to 16 inches
  high, or greater than or equal to 42 inches wide.
[dagger] Non-standard size refers to PTAC or PTHP equipment with wall sleeve dimensions less than 16 inches high
  and less than 42 inches wide. ASHRAE/IESNA Standard 90.1-1999 also includes a factory labeling requirement for
  non-standard size PTAC and PTHP equipment as follows: ``MANUFACTURED FOR REPLACEMENT APPLICATIONS ONLY; NOT TO
  BE INSTALLED IN NEW CONSTRUCTION PROJECTS.''
[dagger][dagger] Cap means cooling capacity in kBtu/h at 95 [deg]F outdoor dry-bulb temperature.

    Following the publication of ASHRAE/IESNA Standard 90.1-1999, DOE 
analyzed whether more stringent levels would result in significant 
additional energy conservation of energy and be technologically 
feasible and economically justified. The report ``Screening Analysis 
for EPACT-Covered Commercial [Heating, Ventilating and Air-
Conditioning] HVAC and Water-Heating Equipment'' (commonly referred to 
as the 2000 Screening Analysis) \6\ summarizes this analysis. On 
January 12, 2001, DOE published a final rule for commercial HVAC and 
water heating equipment, which concluded that the 2000 Screening 
Analysis indicated a reasonable possibility of finding ``clear and 
convincing evidence'' that more stringent standards for PTACs and PTHPs 
``would be technologically feasible and economically justified and 
would result in significant additional conservation of energy.'' 66 FR 
3336, 3349. Under EPCA, these are the criteria for DOE adoption of 
standards more stringent than those found in ASHRAE/IESNA Standard 
90.1. (42 U.S.C. 6313(a)(6)(A)(ii)(II))
---------------------------------------------------------------------------

    \6\ ``Energy Conservation Program for Consumer Products: 
Screening Analysis for EPACT-Covered Commercial HVAC and Water-
Heating Equipment Screening Analysis,'' U.S. Department of Energy, 
Office of Energy Efficiency and Renewable Energy. April 2000.
---------------------------------------------------------------------------

    In addition, on March 13, 2006, DOE issued a Notice of Availability 
(NOA), in which DOE revised the energy savings analysis from the 2000 
Screening Analysis. 71 FR 12634. DOE stated that, even though the 
revised analysis reduced the potential energy savings for PTACs and 
PTHPs that might result from more stringent standards than the 
efficiency levels specified in ASHRAE/IESNA Standard 90.1-1999, there 
was a possibility that clear and convincing evidence would support more 
stringent standards. Therefore, DOE stated in the NOA that it was 
considering more stringent standard levels than the efficiency levels 
specified in ASHRAE/IESNA Standard 90.1-1999 for PTACs and PTHPs 
through a separate rulemaking. 71 FR 12639. On March 7, 2007, DOE 
issued a final rule stating that DOE had decided to explore more 
stringent efficiency levels than those in ASHRAE/IESNA Standard 90.1-
1999 for PTACs and PTHPs through a separate rulemaking. 72 FR 10038, 
10044.
    In January 2008, ASHRAE published ANSI/ASHRAE/IESNA Standard 90.1-
2007, which reaffirmed the definitions and efficiency levels for PTACs 
and PTHPs in ASHRAE/IESNA Standard 90.1-1999. On October 7, 2008, DOE 
published a final rule amending energy conservation standards for PTACs 
and PTHPs (2008 final rule). 73 FR 58772. The 2008 final rule divided 
PTACs and PTHPs into two equipment classes, standard size and non-
standard size, based on the wall sleeve dimensions of the equipment. 
Prior DOE energy conservation standards for PTACs and PTHPs had not 
distinguished between standard and non-standard size units. Table II.1 
shows the energy conservation standards for PTACs and PTHPs, as amended 
by the 2008 final rule. Compared to ASHRAE/IESNA Standard 90.1-1999, 
the standards in the 2008 final rule were identical for non-standard 
sized PTACs and PTHPs, were more stringent for standard-size PTACs and 
PTHPs (except for standard-size PTACs with capacity greater than 15,000 
Btu/h, for which the standards in ASHRAE/IESNA Standard 90.1-1999 and 
the 2008 final rule were equivalent).
    In October 2010, ASHRAE published ANSI/ASHRAE/IES Standard 90.1-
2010, which reaffirmed the efficiency levels for non-standard size 
PTACs and PTHPs and increased the efficiency levels for standard size 
PTACs and PTHPs to match the DOE standards, effective as of October 8, 
2012. Hence, DOE did not consider revision of PTAC and PTHP standards 
at that time.
    On February 22, 2013, DOE published a notice of public meeting and 
availability of the framework document (``February 2013 Framework 
Document'') regarding energy conservation standards for PTACs and 
PTHPs. 78 FR 12252.
    On October 9, 2013, ASHRAE published ANSI/ASHRAE/IES Standard 90.1-
2013, which reaffirmed the efficiency levels for standard size PTHPs 
and for nonstandard size PTACs and PTHPs, and which increased the 
cooling efficiency levels for standard size PTACs to equal the cooling 
efficiency levels for standard size PTHPs, effective as of January 1, 
2015. The issuance of ANSI/ASHRAE/IES 90.1-2013 triggered DOE's 
statutory obligation under 42 U.S.C. 6313(a)(6)(A) to promulgate an 
amended uniform national standard for PTACs at those levels unless DOE 
determined that there is clear and convincing evidence supporting the 
adoption of more-stringent energy conservation standards than the 
ASHRAE levels.
    On September 16, 2014, DOE published a notice of proposed 
rulemaking (``September 2014 NOPR'') with proposed energy conservation 
standards for PTACs and PTHPs. 79 FR 55538. On October 29, 2014, DOE 
hosted a public meeting to discuss the proposed standards. DOE received 
a number of comments from interested parties; the parties are 
summarized in Table II.3. DOE considered these comments in the 
preparation of the final rule. Relevant comments, and DOE's responses, 
are provided in the appropriate sections of this document.

[[Page 43167]]



            Table II.3--Interested Parties Providing Comments
------------------------------------------------------------------------
              Name                    Abbreviation           Type *
------------------------------------------------------------------------
Air-Conditioning, Heating and     AHRI...............                 IR
 Refrigeration Institute.
The U.S. Chamber of Commerce,     The Associations...                 TA
 the American Chemistry Council,
 the American Forest & Paper
 Association, the American Fuel
 & Petrochemical Manufacturers,
 the American Petroleum
 Institute, the Council of
 Industrial Boiler Owners, the
 National Association of
 Manufacturers, the National
 Mining Association, the
 National Oilseed Processors
 Association, and the Portland
 Cement Association.
Appliance Standards Awareness     ASAP...............                 EA
 Project.
Appliance Standards Awareness     ASAP et al.........                 EA
 Project, Alliance to Save
 Energy, American Council for an
 Energy-Efficient Economy,
 Natural Resources Defense
 Council, Northwest Energy
 Efficiency Alliance.
Edison Electric Institute.......  EEI................                  U
Environmental Defense Fund,       EDF et al..........                 EA
 Institute for Policy Integrity
 at New York University School
 of Law, Natural Resources
 Defense Council, Union of
 Concerned Scientists.
Environmental Investigation       EIAI...............                 EA
 Agency International.
General Electric................  GE.................                  M
Goodman Manufacturing Company,    Goodman............                  M
 L.P.
Pacific Gas and Electric Company  PG&E...............                  U
Pacific Gas and Electric          CA IOUs............                  U
 Company, Southern California
 Gas Company, San Diego Gas and
 Electric, Southern California
 Edison.
Southern Company Services.......  SCS................                  U
------------------------------------------------------------------------
* IR: Industry Representative; M: Manufacturer; EA: Efficiency/
  Environmental Advocate; TA: Trade Association; U: Utility

III. General Discussion

A. Compliance Dates

    ASHRAE adopted a revised ANSI/ASHRAE/IES Standard 90.1-2013, which 
increases minimum efficiency standards for PTACs. The revision of the 
ANSI/ASHRAE/IES standard requires that the Federal standard for PTAC 
equipment become effective on or after a date two years after the 
effective date of the applicable minimum energy efficiency requirement 
in the amended ANSI/ASHRAE/IES standard. (42 U.S.C. 6313(a)(6)(D)(i)) 
The effective date of the amended ANSI/ASHRAE/IES standards for PTACs 
is January 1, 2015. Therefore, PTAC equipment manufactured on or after 
January 1, 2017, will be required to meet the amended ANSI/ASHRAE/IES 
standard adopted as the Federal standard.

B. Equipment Classes and Scope of Coverage

    When evaluating and establishing energy conservation standards, DOE 
divides covered equipment into equipment classes by the type of energy 
used or by capacity or other performance-related features that 
justifies a different standard. In making a determination whether a 
performance-related feature justifies a different standard, DOE must 
consider such factors as the utility to the consumer of the feature and 
other factors DOE determines are appropriate.
    Existing energy conservation standards divide PTACs and PTHPs into 
twelve equipment classes based whether the equipment is an air 
conditioner or heat pump; the equipment's cooling capacity; and the 
equipment's wall sleeve dimensions, which fall into two categories:
     Standard size (PTAC or PTHP equipment with wall sleeve 
dimensions greater than or equal to 16 inches high, or greater than or 
equal to 42 inches wide)
     Non-standard size (PTAC or PTHP equipment with wall sleeve 
dimensions less than 16 inches high and less than 42 inches wide)
    Goodman requested that DOE consider defining PTAC and PTHP 
equipment as ``space-constrained products'' in a manner similar to the 
current definition in 10 CFR 430.2. Goodman stated that the standard 
proposed in the September 2014 NOPR would likely not warrant an 
increase in the size of standard size PTACs and PTHPs. However, Goodman 
stated that if there is a continual increase in the energy conservation 
standard for PTACs and PTHPs, manufacturers likely would need to 
increase the physical size of the equipment, which would significantly 
impact consumer utility and/or the cost of installation. (Goodman, No. 
31 at p. 2-3) \7\ DOE understands that the current definition of PTAC 
and PTHP equipment does not place limits on the physical dimensions of 
PTAC and PTHP equipment. (42 U.S.C. 6311(10)) Over the past 25 years, 
the industry has settled on conventional wall sleeve dimensions for 
PTACs and PTHPs that are 16 inches high by 42 inches wide. The 
installation cost for equipment that exceeds the conventional cross 
section would be high, because installation could require alterations 
to existing wall sleeve openings in building structures. DOE accounts 
for installation costs in the life cycle cost and payback period 
analyses used to evaluate increased standard levels. These analyses 
would account for any increased installation costs resulting from 
manufacturers increasing the cross section of their equipment. 
Therefore, DOE does not define PTACs and PTHPs as space-constrained 
equipment.
---------------------------------------------------------------------------

    \7\ A notation in the form ``Goodman, No. 31 at p. 2-3'' 
identifies a written comment: (1) Made by Goodman Manufacturing 
Company (``Goodman''); (2) recorded in document number 31 that is 
filed in the docket of the PTAC energy conservation standards 
rulemaking (Docket No. EERE-2012-BT-STD-0029) and available for 
review at www.regulations.gov; and (3) which appears on page 2-3 of 
document number 31.
---------------------------------------------------------------------------

    DOE is not amending energy conservation standards for non-standard 
size PTAC and PTHP equipment in this rulemaking because this equipment 
class represents a small and declining portion of the market, and due 
to a lack of adequate information to analyze non-standard size units. 
The shipments analysis conducted for the 2008 final rule projected that 
shipments of non-standard size PTACs and PTHPs would decline from 
approximately 30,000 units in 2012 (6.6% of the entire PTAC and PTHP 
market) to approximately 16,000 units in 2042 (2.4% of the entire PTAC 
and PTHP market).\8\
---------------------------------------------------------------------------

    \8\ See DOE's discussion regarding shipment projections for 
standard and non-standard PTAC and PTHP equipment and the results of 
shipment projections in the PTAC and PTHP energy conservation 
standard technical support document at: http://www1.eere.energy.gov/buildings/appliance_standards/commercial/pdfs/ptac_pthp_tsd/chapter_10.pdf (Chapter 10, Section 10.5).

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

[[Page 43168]]

C. Test Procedure

    DOE's current energy conservation standards for PTACs and PTHPs are 
expressed in terms of the energy efficiency ratio (EER, in Btu/Watt-
hour) for cooling efficiency and coefficient of performance (COP, 
unitless) for heating efficiency.
    DOE's test procedures for PTACs and PTHPs is codified at Title 10 
of the Code of Federal Regulations (CFR), Sec.  431.96. The test 
procedures were established on December 8, 2006 in a final rule that 
incorporated by reference the American National Standards Institute's 
(ANSI) and AHRI Standard 310/380-2004, ``Standard for Packaged Terminal 
Air-Conditioners and Heat Pumps'' (ANSI/AHRI Standard 310/380). 71 FR 
71340, 71371. DOE amended the test procedures for PTACs and PTHPs on 
June 30, 2015 (80 FR 37136).
    The test procedures applicable to PTAC and/or PTHP equipment are 
incorporated by reference at 10 CFR 431.95(a)(3). They include (1) AHRI 
Standard 310/380-2014, (2) ANSI/ASHRAE Standard 16-1983 (RA 2014), 
``Method of Testing for Rating Room Air Conditioners and Packaged 
Terminal Air Conditioners'' (``ANSI/ASHRAE 16''); (2) ANSI/ASHRAE 
Standard 58-1986 (RA 2014), ``Method of Testing for Rating Room Air 
Conditioner and Packaged Terminal Air Conditioner Heating Capacity'' 
(``ANSI/ASHRAE 58''); and (3) ANSI/ASHRAE Standard 37-2009, ``Methods 
of Testing for Rating Electrically Driven Unitary Air-Conditioning and 
Heat Pump Equipment'' (``ANSI/ASHRAE 37'').
    The California Utilities requested that the test procedure standard 
for PTAC and PTHP include testing of equipment in operation modes 
required by ASHRAE 90.1-2013. (CA IOUs, No. 33 at p. 5) The California 
Utilities also commented that that PTHP equipment listing a COP should 
certify that it meets the requirements of ASHRAE 90.1-2013 regarding 
control of the electric resistance strip heater during the ``quick 
heating'' mode. (CA IOUs, No. 33 at p. 4-5) Goodman commented regarding 
the test procedure NOPR for PTACs and PTHPs and requested that DOE 
maintain psychrometric testing as an option within the federal test 
procedures. (Goodman, No. 31 at p. 4). DOE responded to these comments 
in the rulemaking to amend the PTAC and PTHP test procedures. The 
docket Web page for the PTAC and PTHP test procedure rulemaking can be 
found at: http://www.regulations.gov/#!docketDetail;D=EERE-2012-BT-TP-
0032.

D. Technological Feasibility

1. General
    In each energy conservation standards rulemaking, DOE conducts a 
screening analysis based on information gathered on all current 
technology options and prototype designs that could improve the 
efficiency of the products or equipment that are the subject of the 
rulemaking. As the first step in such an analysis, DOE develops a list 
of technology options for consideration in consultation with 
manufacturers, design engineers, and other interested parties. DOE then 
determines which of those means for improving efficiency are 
technologically feasible. DOE considers technologies incorporated in 
commercially available equipment or in working prototypes to be 
technologically feasible. 10 CFR part 430, subpart C, appendix A, 
section 4(a)(4)(i).
    After DOE has determined that particular technology options are 
technologically feasible, it further evaluates each technology option 
in light of the following additional screening criteria: (1) 
Practicability to manufacture, install, and service; (2) adverse 
impacts on equipment utility or availability; and (3) adverse impacts 
on health or safety. 10 CFR part 430, subpart C, appendix A, section 
4(a)(4)(ii)-(iv). Section IV.B of this document discusses the results 
of the screening analysis for PTACs and PTHPs, particularly the designs 
DOE considered, those it screened out, and those that are the basis for 
the TSLs in this rulemaking. For further details on the screening 
analysis for this rulemaking, see chapter 4 of the final rule Technical 
Support Document (TSD).
2. Maximum Technologically Feasible Levels
    When DOE adopts (or does not adopt) an amended energy conservation 
standard for a type or class of covered equipment, it must determine 
the maximum improvement in energy efficiency or maximum reduction in 
energy use that is technologically feasible for such equipment. DOE 
determined the maximum technologically feasible (``max-tech'') 
improvements in energy efficiency for PTACs and PTHPs in the 
engineering analysis using the design parameters that passed the 
screening analysis. The max-tech levels that DOE determined for this 
rulemaking are described in section IV.C.5 of this final rule and in 
chapter 5 of the final rule TSD.

E. Energy Savings

1. Determination of Savings
    For each TSL, DOE projected energy savings from the equipment that 
is the subject of this rulemaking purchased in the 30-year period that 
begins in the year of compliance with any amended standards. The 
specific compliance years used in this analysis are discussed in 
section III.A of this final rule.\9\ The savings are measured over the 
entire lifetime of equipment purchased in the 30-year analysis period. 
DOE quantified the energy savings attributable to each TSL as the 
difference in energy consumption between each standards case and the 
base case. The base case represents a projection of energy consumption 
in the absence of amended efficiency standards, and it considers market 
forces and policies that affect demand for more efficient equipment.
---------------------------------------------------------------------------

    \9\ DOE also presents a sensitivity analysis that considers 
impacts for equipment shipped in a 9-year period.
---------------------------------------------------------------------------

    DOE uses its national impact analysis (NIA) spreadsheet models to 
estimate energy savings from amended standards for the equipment that 
is the subject of this rulemaking. The NIA spreadsheet model (described 
in section IV.H of this document) calculates energy savings in site 
energy, which is the energy directly consumed by equipment at the 
locations where they are used. For electricity, DOE calculates national 
energy savings in terms of primary energy savings, which is the savings 
in the energy that is used to generate and transmit the site 
electricity. For electricity and natural gas and oil, DOE also 
calculates full-fuel-cycle (FFC) energy savings. As discussed in DOE's 
statement of policy and notice of policy amendment, the FFC metric 
includes the energy consumed in extracting, processing, and 
transporting primary fuels (i.e., coal, natural gas, petroleum fuels), 
and thus presents a more complete picture of the impacts of energy 
efficiency standards. 76 FR 51281 (August 18, 2011), as amended at 77 
FR 49701 (August 17, 2012).
    To calculate primary energy savings, DOE derives annual conversion 
factors from the model used to prepare the Energy Information 
Administration's (EIA) most recent Annual Energy Outlook (AEO). For FFC 
energy savings, DOE's approach is based on the calculation of an FFC 
multiplier for each of the energy types used by covered products or 
equipment. For more information, see section IV.H.

[[Page 43169]]

2. Significance of Savings
    To adopt standards more stringent standards for PTACs and PTHPs 
than the amended levels in ASHRAE Standard 90.1, clear and convincing 
evidence must support a determination that the standards would result 
in significant additional energy savings. (42 U.S.C. 
6313(a)(6)(A)(ii)(II)) This final rule does not adopt more stringent 
standards than the levels in ASHRAE Standard 90.1.

F. Economic Justification

1. Specific Criteria
    EPCA provides seven factors to be evaluated in determining whether 
a more stringent standard for PTACs and PTHPs is economically 
justified. (42 U.S.C. 6313(a)(6)(B)(ii)) The following sections discuss 
how DOE has addressed each of those seven factors in this rulemaking.
a. Economic Impact on Manufacturers and Consumers
    In determining the impacts of an amended standard on manufacturers, 
DOE conducts a manufacturer impact analysis (MIA), as discussed in 
section IV.J. DOE first uses an annual cash-flow approach to determine 
the quantitative impacts. This step includes both a short-term 
assessment--based on the cost and capital requirements during the 
period between when a regulation is issued and when entities must 
comply with the regulation--and a long-term assessment over a 30-year 
period. The industry-wide impacts analyzed include industry net present 
value (INPV), which values the industry on the basis of expected future 
cash flows; cash flows by year; changes in revenue and income; and 
other measures of impact, as appropriate. Second, DOE analyzes and 
reports the impacts on different types of manufacturers, including 
impacts on small manufacturers. Third, DOE considers the impact of 
standards on domestic manufacturer employment and manufacturing 
capacity, as well as the potential for standards to result in plant 
closures and loss of capital investment. Finally, DOE takes into 
account cumulative impacts of various DOE regulations and other 
regulatory requirements on manufacturers.
    For individual consumers, measures of economic impact include the 
changes in LCC and payback period (PBP) associated with new or amended 
standards. These measures are discussed further in the following 
section. For consumers in the aggregate, DOE also calculates the 
national net present value of the economic impacts applicable to a 
particular rulemaking. DOE also evaluates the LCC impacts of potential 
standards on identifiable subgroups of consumers that may be affected 
disproportionately by a national standard.
b. Savings in Operating Costs Compared to Increase in Price
    EPCA requires DOE to consider the savings in operating costs 
throughout the estimated average life of the covered equipment compared 
to any increase in the price of the covered product that are likely to 
result from a standard. (42 U.S.C. 6313(a)(6)(B)(ii)(II)) DOE conducts 
this comparison in its LCC and PBP analysis.
    The LCC is the sum of the purchase price of a product (including 
its installation) and the operating expense (including energy, 
maintenance, and repair expenditures) discounted over the lifetime of 
the equipment. To account for uncertainty and variability in specific 
inputs, such as equipment lifetime and discount rate, DOE uses a 
distribution of values, with probabilities attached to each value. For 
its analysis, DOE assumes that consumers will purchase the covered 
equipment in the first year of compliance with amended standards.
    The LCC savings and the PBP for the considered efficiency levels 
are calculated relative to a base case that reflects projected market 
trends in the absence of amended standards. DOE identifies the 
percentage of consumers estimated to receive LCC savings or experience 
an LCC increase, in addition to the average LCC savings associated with 
a particular standard level. DOE's LCC analysis is discussed in further 
detail in section IV.F.
c. Energy Savings
    Although significant conservation of energy is a separate statutory 
requirement for imposing an energy conservation standard, EPCA requires 
DOE, in determining the economic justification of a standard, to 
consider the total projected energy savings that are expected to result 
directly from the standard. (42 U.S.C. 6313(a)(6)(B)(ii)(III)) As 
discussed in section IV.H, DOE uses the spreadsheet models to project 
national energy savings.
d. Lessening of Utility or Performance of Equipment
    In establishing classes of equipment, and in evaluating design 
options and the impact of potential standard levels, DOE evaluates 
potential standards that would not lessen the utility or performance of 
the considered equipment. (42 U.S.C. 6295(o)(2)(B)(i)(IV)) Based on 
data available to DOE, the standards adopted in this final rule would 
not reduce the utility or performance of the equipment under 
consideration in this rulemaking.
e. Impact of Any Lessening of Competition
    EPCA directs DOE to consider the impact of any lessening of 
competition that is likely to result from energy conservation 
standards. It also directs the Attorney General of the United States 
(Attorney General) to determine the impact, if any, of any lessening of 
competition likely to result from a standard and to transmit such 
determination to the Secretary within 60 days of the publication of a 
proposed rule, together with an analysis of the nature and extent of 
the impact. (42 U.S.C. 6313(a)(6)(B)(ii)(IV)) DOE transmitted a copy of 
its proposed rule to the Attorney General with a request that the 
Department of Justice (DOJ) provide its determination on this issue. 
DOE received no adverse comments from DOJ regarding the proposed rule.
f. Need for National Energy Conservation
    DOE also considers the need for national energy conservation in 
determining whether a new or amended standard is economically 
justified. (42 U.S.C. 6313(a)(6)(B)(ii)(VI)) DOE expects that the 
energy savings from the amended standards are likely to provide 
improvements to the security and reliability of the nation's energy 
system. Reductions in the demand for electricity also may result in 
reduced costs for maintaining the reliability of the nation's 
electricity system. DOE conducts a utility impact analysis to estimate 
how standards may affect the nation's needed power generation capacity, 
as discussed in section IV.M.
    Amended standards are also likely to result in environmental 
benefits in the form of reduced emissions of air pollutants and 
greenhouse gases associated with energy production and use. DOE 
conducts an emissions analysis to estimate how standards may affect 
these emissions, as discussed in section IV.K. DOE reports the 
emissions impacts from each TSL it considered, in section V.B.6 of this 
document. DOE also reports estimates of the economic value of emissions 
reductions resulting from the considered TSLs, in section IV.L of this 
document.
g. Other Factors
    EPCA allows the Secretary of Energy, in determining whether a 
standard is economically justified, to consider any other factors that 
the Secretary deems to

[[Page 43170]]

be relevant. (42 U.S.C. 6295(o)(2)(B)(ii)(VII)) To the extent 
interested parties submit any relevant information regarding economic 
justification that does not fit into the other categories described 
above, DOE could consider such information under ``other factors.'' No 
other factors were considered in this rule.
2. Rebuttable Presumption
    EPCA creates a rebuttable presumption that an energy conservation 
standard is economically justified if the additional cost to the 
consumer of a product that meets the standard is less than three times 
the value of the first year's energy savings resulting from the 
standard, as calculated under the applicable DOE test procedure. DOE's 
LCC and PBP analyses generate values used to calculate the effects that 
potential amended energy conservation standards would have on the 
payback period for consumers. These analyses include, but are not 
limited to, the 3-year payback period contemplated under the 
rebuttable-presumption test. In addition, DOE routinely conducts an 
economic analysis that considers the full range of impacts to 
consumers, manufacturers, the nation, and the environment. The results 
of this analysis serve as the basis for DOE's evaluation of the 
economic justification for a potential standard level (thereby 
supporting or rebutting the results of any preliminary determination of 
economic justification). The rebuttable presumption payback calculation 
is discussed in section V.B.1.c of this final rule.

G. Additional Comments

    DOE received additional comments that are not classified in the 
discussion sections above. Responses to these additional comments are 
provided below.
    AHRI commented that, by proposing energy conservation standards for 
PTACs and PTHPs above the levels presented in ANSI/ASHRAE/IES 90.1-
2013, DOE failed to recognize the Congressional intent for commercial 
standards-making to rely on the ASHRAE process. (AHRI, No. 35 at p. 2) 
EPCA authorizes the adoption of an energy conservation standard above 
the levels adopted by ASHRAE if clear and convincing evidence shows 
that adoption of such a more stringent standard would result in 
significant additional conservation of energy and be technologically 
feasible and economically justified. 42 U.S.C. 6313(a)(6)(A)(ii)(II) 
AHRI commented that DOE's economic justification in the NOPR falls 
short of the elevated ``clear and convincing'' requirement of proof. 
AHRI further commented that DOE failed to show with clear and 
convincing evidence that significant energy savings will result 
directly from the more stringent levels. (AHRI, No. 35 at p. 2-4) 
Following the publication of the September 2014 NOPR, DOE revised its 
analysis to incorporate feedback received through stakeholder comments. 
Based on results of its revised analysis, DOE concludes that the trial 
standard levels above ASHRAE 90.1-2013 would not be economically 
justified. This final rule amends the energy conservation standards for 
PTACs to be equal to PTAC standard levels in ANSI/ASHRAE/IES 90.1-2013. 
(42 U.S.C. 6313(a)(6)(A)(ii)(I))
    SCS commented that stakeholders should have an additional 
opportunity to comment on the analysis after DOE completes the 
analytical changes that SCS requested. SCS requested that DOE issue an 
SNOPR if ECS levels above the ASHRAE 90.1-2013 levels are selected. 
(SCS, No. 29 at p. 3) This final rule amends the energy conservation 
standards for PTACs to be equal to PTAC standard levels in ANSI/ASHRAE/
IES 90.1-2013. (42 U.S.C. 6313(a)(6)(A)(ii)(I))
    AHRI objects to the use by DOE of proprietary software such as 
Crystal Ball to conduct its analysis in a public notice and comment 
rulemaking with concerns that small businesses and consumer advocacy 
groups would find the software cost prohibitive and unable to evaluate 
the models DOE used for its analysis and assumptions. AHRI states that 
all of DOE's models, process and software used in rulemaking under the 
Administrative Procedure Act should be fully and reasonably accessible. 
(AHRI, No. 35 at p. 4) The documentation in the TSD concerning the 
methods, data inputs, and assumptions used to generate LCC and PBP 
results provides stakeholders with sufficient information to adequately 
review DOE's analysis. To make its analyses accessible, DOE will run 
Monte Carlo simulations with its LCC spreadsheets utilizing Crystal 
Ball and provide the results to any stakeholder interested in 
researching specific scenarios.

IV. Methodology and Discussion of Related Comments

    This section addresses the analyses DOE has performed for this 
rulemaking with regard to PTAC and PTHP. Separate subsections address 
each component of DOE's analyses.
    DOE used several analytical tools to estimate the impact of the 
standards considered in this document. The first tool is a spreadsheet 
that calculates the LCC and PBP of potential amended or new energy 
conservation standards. The national impacts analysis uses a second 
spreadsheet set that provides shipments forecasts and calculates 
national energy savings and net present value resulting from potential 
energy conservation standards. DOE uses the third spreadsheet tool, the 
Government Regulatory Impact Model (GRIM), to assess manufacturer 
impacts of potential standards. These three spreadsheet tools are 
available on the DOE docket Web page for this rulemaking: http://www.regulations.gov/#!docketDetail;D=EERE-2012-BT-STD-0029. 
Additionally, DOE used output from the latest version of EIA's Annual 
Energy Outlook (AEO), a widely known energy forecast for the United 
States, for the emissions and utility impact analyses.

A. Market and Technology Assessment

    When beginning an energy conservation standards rulemaking, DOE 
develops information that provides an overall picture of the market for 
the equipment concerned, including the purpose of the equipment, the 
industry structure, and market characteristics. This activity includes 
both quantitative and qualitative assessments based primarily on 
publicly available information (e.g., manufacturer specification 
sheets, industry publications) and data submitted by manufacturers, 
trade associations, and other stakeholders. The market and technology 
assessment presented in the September 2014 NOPR discussed scope of 
coverage, equipment classes, types of equipment sold and offered for 
sale, and technology options that could improve the energy efficiency 
of the equipment under examination. See chapter 3 of the final rule TSD 
for further discussion of the market and technology assessment. AHRI 
commented that it planned to provide PTAC and PTHP shipments by 
capacity level for 2008 through 2013. (AHRI, No. 35 at p. 8) DOE did 
not receive further comments or information regarding the equipment 
definitions or market assessments for PTACs and PTHP equipment.
    GE commented that there are now PTACs on the market that 
incorporate a ventilation system attachment that takes in make-up air 
and provides supplemental conditioning for this make-up air: 
Dehumidification when outdoor humidity levels are high and also 
electric resistance heating when outdoor temperature is low. Admitting 
makeup air and provision of supplemental conditioning increases PTAC/
PTHP energy use that is not

[[Page 43171]]

captured in the current test procedures for PTACs and PTHPs. GE 
suggested that DOE address PTACs with add-on dehumidifiers as a 
separate equipment class. (GE, No. 34 at p. 1) DOE acknowledges that 
models with add-on or integrated dehumidification systems exist in the 
current market. DOE believes that PTAC and PTHP units with add-on or 
integrated dehumidification systems currently meet the definition of 
PTACs and PTHPs, respectively. Thus, models with add-on or integrated 
dehumidification systems should be tested using the current test 
procedure and should meet the current energy conservation standards. 
Currently, the DOE test procedure does not require that the 
dehumidification module on such models be energized during testing, so 
the energy use of the dehumidification system would not be measured or 
accounted for in the EER metric. If DOE considers future amendments to 
the test procedure to account for energy consumed by the 
dehumidification systems, then DOE could consider designating a 
separate equipment class for such equipment at that time.
    The September 2014 NOPR listed all of the potential technology 
options that DOE considered for improving energy efficiency of PTACs 
and PTHPs. 79 FR at 55553 (September 16, 2014). These technology 
options are listed in Table IV.1.

Table IV.1--Potential Technology Options for Improving Energy Efficiency
                           of PTACs and PTHPs
------------------------------------------------------------------------
 
---------------------------------------------------------------------------
Compressor Improvements
     Scroll Compressors
     Variable-speed Compressors
     Higher Efficiency Compressors.
Complex Control Boards.
Condenser and evaporator fan and fan motor improvements:
     Higher Efficiency Fan Motors
     Clutched Motor Fans.
Microchannel Heat Exchangers.
Rifled Interior Heat Exchanger Tube Walls.
Increased Heat Exchanger Area.
Hydrophobic Material Treatment of Heat Exchangers.
Re-circuiting Heat Exchanger Coils.
Improved Air Flow and Fan Design.
Heat Pipes.
Corrosion Protection.
Thermostatic Expansion Valve.
Alternate Refrigerants (such as HCFC-32).
------------------------------------------------------------------------

    DOE received several comments regarding the technology options 
listed in Table IV.1, and these comments are addressed in the relevant 
sections of the screening analysis in section IV.B. DOE did not receive 
any comments regarding technology options not listed in Table IV.1.

B. Screening Analysis

    After DOE identified the technologies that might improve the energy 
efficiency of PTACs and PTHPs, DOE conducted a screening analysis. The 
purpose of the screening analysis is to evaluate the technologies that 
improve equipment efficiency to determine which technologies to 
consider further and which to screen out. DOE uses four screening 
criteria to determine which design options are suitable for further 
consideration in a standards rulemaking. Namely, design options will be 
removed from consideration if they are not technologically feasible; 
are not practicable to manufacture, install, or service; have adverse 
impacts on product utility or product availability; or have adverse 
impacts on health or safety. (10 CFR part 430, subpart C, appendix A at 
4(a)(4) and 5(b)) Details of the screening analysis are in chapter 4 of 
the final rule TSD.
    Technologies that pass through the screening analysis are referred 
to as ``design options'' in the engineering analysis. These four 
screening criteria do not include the propriety status of design 
options. DOE will only consider efficiency levels achieved through the 
use of proprietary designs in the engineering analysis if they are not 
part of a unique path to achieve that efficiency level.
    In view of the above factors, DOE screened out the following design 
options in the September 2014 NOPR: Scroll compressors, heat pipes, and 
alternate refrigerants. 79 FR at 55554 (September 16, 2014). DOE 
received comments regarding alternative refrigerants, but did not 
receive comments regarding scroll compressors or heat pipes.
Alternate Refrigerants
    Nearly all PTAC and PTHP equipment is designed with R-410A as the 
refrigerant. The Environmental Protection Agency's (EPA's) Significant 
New Alternatives Policy (SNAP) Program evaluates and regulates 
substitutes for the ozone-depleting chemicals (such as air conditioning 
refrigerants) that are being phased out under the stratospheric ozone 
protection provisions of the Clean Air Act (CAA). (42 U.S.C. 7401 et 
seq.) \10\
---------------------------------------------------------------------------

    \10\ Additional information regarding EPA's SNAP Program is 
available online at: http://www.epa.gov/ozone/snap/.
---------------------------------------------------------------------------

    On July 9, 2014, the EPA issued a notice of proposed rulemaking 
proposing to list three flammable refrigerants (HFC-32 (R-32), Propane 
(R-290), and R-441A) as new acceptable substitutes, subject to use 
conditions, for refrigerant in the Household and Light Commercial Air 
Conditioning class of equipment. 79 FR 38811 (July 9, 2014). EIAI 
commented to suggest that DOE delay this PTAC/PTHP standards rulemaking 
until the EPA finalizes its proposed rule. (EIAI, No. 32 at p. 1) On 
April 10, 2015, the EPA published its final rule that allows the use of 
R-32, R-290, and R-441A in limited amounts in PTAC and PTHP 
applications. 80 FR 19454 (April 10, 2015) EEI commented that the EPA's 
proposed rule would allow flammable refrigerants to be used in PTACs in 
a limited amount. (EEI, NOPR Public Meeting Transcript, No. 37 at p. 
47-8) \11\ EIAI commented citing several reports that favorably compare 
HC-290 to R-410A. (EIAI, No. 32 at p. 4) EIAI requested that DOE fully 
analyze the direct mitigation impacts and the energy efficiency savings 
that can be achieved by using R-290 and R-441A. (EIAI, No. 32 at p. 1) 
EIAI commented that the amended standards for PTACs and PTHPs will not 
be as effective as possible if they exclude the alternative 
refrigerants under consideration for SNAP approval. (EIAI, No. 32 at p. 
5) DOE considered the possibility of using the alternative refrigerants 
that EPA approved for limited use in PTAC and PTHP applications. The 
EPA's final rule limits the maximum design charge amount of the 
alternative refrigerants in PTAC and PTHP applications. For instance, 
for a PTAC or PTHP with cooling capacity of 9,000 Btu/h, the EPA rule 
imposes a maximum design charge of 140 grams of R-290 or 160 grams of 
R-441A. 80 FR at 19500 (April 10, 2015) In comparison, DOE reverse 
engineered eleven units with cooling capacities around 9,000 Btu/h and 
found that these units had refrigerant charges ranging from 600 grams 
to 950 grams and all units used refrigerant R-410A. The refrigerant 
charges currently used in current PTAC and PTHP designs far exceed the 
maximum charges that are allowed for alternative refrigerants under 
EPA's final rule. DOE

[[Page 43172]]

acknowledges that it might be possible to incorporate the new 
refrigerants under consideration into PTAC designs through the use of 
microchannel heat exchangers or tube and fin heat exchangers with 
smaller tube diameters than what is currently on the market. However, 
DOE has not seen evidence that such designs are technologically 
feasible. Therefore, DOE did not further consider the R-290 and R-441A 
substitutes proposed by EPA.
---------------------------------------------------------------------------

    \11\ A notation in the form ``EEI, NOPR Public Meeting 
Transcript, No. 37 at p. 47-8'' identifies an oral comment that DOE 
received during the October 29, 2014, PTAC energy conservation 
standards NOPR public meeting, that was recorded in the public 
meeting transcript in the docket for the PTAC energy conservation 
standards rulemaking (Docket No. EERE-2012-BT-STD-0029), and is 
maintained in the Resource Room of the Building Technologies 
Program. This particular notation refers to a comment (1) made by 
EEI during the public meeting; (2) recorded in document number 37, 
which is the NOPR public meeting transcript that is filed in the 
docket of this energy conservation standards rulemaking; and (3) 
which appears on pages 47-8 of document number 37.
---------------------------------------------------------------------------

    EIAI commented that DOE should include provisions in the rule that 
incentivize the use of HFC-free technologies that receive SNAP 
approval. (EIAI, No. 32 at p. 3) EPCA authorizes DOE to regulate the 
energy efficiency of certain equipment such as PTACs and PTHPs. (42 
U.S.C. 6311-6317) EPCA does not authorize DOE to regulate or 
incentivize the use or substitution of alternative refrigerants.
    The California Utilities stated that DOE should research potential 
efficiency improvements, for future years, that can be achieved through 
the use of alternative refrigerants. (CA IOUs, No. 33 at p. 4) EIAI 
commented that the proposed rule does not address the executive action 
announced on September 16, 2014, that encourages research and 
development of next generation cooling technologies, including 
alternatives to hydrofluorocarbon (HFC) refrigerants.\12\ (EIAI, No. 32 
at p. 1) DOE responds that the engineering analysis considers 
technology options that are technologically feasible. DOE considers 
technologies incorporated in commercially available equipment or in 
working prototypes to be technologically feasible. 10 CFR part 430, 
subpart C, appendix A, section 4(a)(4)(i). The research and development 
activities described by the California Utilities and EIAI do not 
include options that are technologically feasible at this time.
---------------------------------------------------------------------------

    \12\ EIAI's comment referenced a White House fact sheet 
describing the Executive Action at: http://www.whitehouse.gov/the-press-office/2014/09/16/fact-sheet-obama-administration-partners-private-sector-new-commitments.
---------------------------------------------------------------------------

    EIAI suggested that DOE evaluate the commercialized PTACs and PTHPs 
using alternative refrigerants currently available in international 
markets. (EIAI, No. 32 at p. 6) ASAP et al. commented that 
manufacturers may have the option of utilizing alternative refrigerants 
to improve efficiency, even though the engineering analysis does not 
include alternative refrigerants as a technology option. (ASAP et al., 
No. 30 at p. 3) DOE is not aware of any PTAC or PTHP model that uses 
alternative refrigerants approved by the EPA SNAP Program and achieves 
higher efficiency than equipment using R-410A.
    DOE is not aware of any SNAP-approved refrigerants, or any 
refrigerants that have been proposed for SNAP approval, that are known 
to enable better efficiency than R-410A for PTAC and PTHP equipment. 
Hence, DOE did not consider alternate refrigerants for further 
analysis.
Other Technologies Not Considered in the Engineering Analysis
    Typically, energy-saving technologies that pass the screening 
analysis are evaluated in the engineering analysis. However, some 
technologies are not included in the analysis for other reasons, 
including: (1) Available data suggest that the efficiency benefits of 
the technology are negligible; or (2) data are not available to 
evaluate the energy efficiency characteristics of the technology. 
Accordingly, in the September 2014 NOPR, DOE eliminated the following 
technologies from consideration in the engineering analysis based upon 
these three additional considerations: re-circuiting heat exchanger 
coils, rifled interior tube walls, microchannel heat exchangers, 
variable speed compressors, complex control boards, corrosion 
protection, hydrophobic material treatment of heat exchangers, clutched 
motor fans, and thermostatic expansion valves. 79 FR at 55555 
(September 16, 2014). DOE received a comment on variable speed 
compressors.
Variable Speed Compressors
    SCS commented that variable speed operation would enable PTACs and 
PTHPs to provide better humidity control, and that the current 
efficiency measurement of EER does not provide incentive to go to 
variable speed operation. (SCS, NOPR Public Meeting Transcript, No. 37 
at p. 164) While the efficiency measurement of EER would not capture 
the benefits of variable speed operation, the existing EER (full load) 
metric accurately reflects equipment efficiency during the year because 
PTACs and PTHPs are believed to more often operate at full load rather 
than part load conditions. Thus, DOE did not consider variable speed 
compressors further in this analysis.
    The technologies that DOE identified for consideration in the 
engineering analysis are listed in Table IV.2 and described briefly 
below.

      Table IV.2--Design Options Retained for Engineering Analysis
------------------------------------------------------------------------
 
-------------------------------------------------------------------------
Compressor Improvements.
     Higher Efficiency Compressors.\13\
Condenser and evaporator fan and fan motor improvements:
     Higher Efficiency Fan Motors.
Increased Heat Exchanger Area.
Improved Air Flow and Fan Design.
------------------------------------------------------------------------

Higher Efficiency Compressors
    Manufacturers can improve the energy efficiency of PTAC and PTHP 
units by incorporating more efficient components, such as high 
efficiency compressors, into their designs. Goodman commented to ask 
whether DOE included predictions of efficiency increases over time for 
compressors. (Goodman, NOPR Public Meeting Transcript, No. 37 at p. 28) 
DOE did not include predictions of compressor efficiency changes over 
time. DOE observed in reverse engineering analysis that PTAC and PTHP 
manufacturers use several different compressor models with a wide range 
of efficiency ratings. The capacities and efficiencies of the different 
compressors observed in the reverse engineering analysis are presented 
in the revised Tables 5.6.1 and 5.6.2 published in document 26 of the 
rulemaking docket at http://www.regulations.gov/#!documentDetail;D=EERE-2012-BT-STD-0029-0026. Manufacturers of PTACs 
and PTHPs may improve the unit efficiency of baseline models by 
selecting high efficiency compressors currently available in the 
market.
---------------------------------------------------------------------------

    \13\ Currently, all PTAC and PTHP manufacturers incorporate 
rotary compressors into their equipment designs. DOE is referring to 
rotary compressors throughout this document unless specifically 
noted.
---------------------------------------------------------------------------

Higher Efficiency Fan Motors
    Manufacturers of baseline PTACs and PTHPs use permanent split 
capacitor (PSC) fan motors due to their modest cost, compact design, 
and durability. DOE believes any further gains in PSC fan motor 
efficiency will be difficult to achieve, and has thus eliminated 
improvement of PSC fan motors as a potential avenue for efficiency 
improvement. PTAC and PTHP original equipment manufacturers (OEMs) can, 
however, use permanent magnet (PM) motors. Such motors typically offer 
higher efficiencies than PSC-based fan motors, but these improvements 
come with increased costs for the motor unit and control hardware. 
Several manufacturers use PM motors in their higher-efficiency PTAC and 
PTHP models.

[[Page 43173]]

Increased Heat Exchanger Area
    Manufacturers of PTACs and PTHPs increase unit efficiency by 
increasing heat exchanger size, either through elongating the face of 
the heat exchanger or increasing the number of heat exchanger tube 
rows. Standard size PTACs are dimensionally constrained by the standard 
16'' x 48'' wall opening in which they fit. This constraint limits the 
size of heat exchanger that can fit in the unit and thus limits the 
efficiency gains that may be achieved by increasing heat exchanger 
size. At least one manufacturer has incorporated bent heat exchanger 
coils to increase the heat exchanger face area while remaining inside 
the standard size unit constraints. AHRI commented that DOE did not 
account for the additional pressure drop from bent heat exchangers in 
the analysis. (AHRI, No. 35 at p. 12) DOE interprets this comment to 
mean that AHRI expects bent heat exchangers to increase the airside 
pressure drop across the heat exchangers leading to increased fan power 
consumption and lower unit efficiency. DOE considered any pressure drop 
impacts associated with bent heat exchangers. In its analysis, DOE 
considered at least three units that contained a bent heat exchanger. 
DOE based its analysis on the measured performance of these units (one 
of which performed at the max-tech efficiency level). The measured 
performance of these units includes the impact of additional pressure 
drop associated with the bent heat exchangers.
    AHRI asked what the DOE analysis showed as the efficiency 
improvement from implementing improved air flow design and increased 
heat exchanger area. (AHRI, NOPR Public Meeting Transcript, No. 37 at 
p. 38) The combined efficiency level and cost assessment method used in 
this analysis does not separately evaluate the efficiency effects of 
individual design options. Among the units that DOE reverse engineered 
in the engineering analysis, the most efficient units had injection 
molded fan blades and volutes and achieved greater heat exchanger area 
within the constrained unit dimensions by incorporating a bent outdoor 
heat exchanger coil.
Improved Air Flow and Fan Design
    Manufacturers of PTACs and PTHPs currently use several techniques 
to shape and direct airflow inside PTAC and PTHP units. Different 
equipment designs may have higher or lower resistance to air flow. 
Equipment designs with lower resistance to air flow will require lower 
fan power input, which would improve unit efficiency. Among the units 
that DOE reverse engineered in the engineering analysis, the most 
efficient units had injection molded fan blades and volutes to direct 
airflow. Manufacturers may improve unit efficiency improving fan blade 
designs, optimizing air paths, and optimizing fan selection.
    Goodman commented that utilizing design features such as improved 
airflow and fan design would lead to redesigned products larger than 
the wall footprints for standard size PTACs and PTHPs. (Goodman, No. 31 
at p. 3) In contrast, Ebm-papst commented in the framework phase that 
efficiency gains may result in existing units from optimizing the fan 
selection and design so that the fan's operational efficiency in the 
unit matches the fan's peak efficiency exactly. (Ebm-papst, No. 8 at p. 
1) DOE's analysis did not consider any such larger PTAC/PTHP designs. 
Any improvement associated with improved airflow and fan design 
represented in the analysis is associated with the existing designs 
evaluated in the analysis, which conform to size of currently available 
PTACs and PTHPs.
    Goodman commented that the technology options of bent heat 
exchangers [to increase heat exchanger area] and improved air flow are 
contradictory because bent heat exchangers will restrict air flow. 
(Goodman, NOPR Public Meeting Transcript, No. 37 at p. 82) DOE notes 
that, among the units that DOE reverse engineered in the engineering 
analysis, the most efficient units at both representative capacities of 
9,000 Btu/h and 15,000 Btu/h incorporated a bent outdoor heat exchanger 
coil.
    Based on all available information, DOE did not change the 
screening analysis between the September 2014 NOPR and this final rule. 
Additional detail on the screening analysis is contained in chapter 4 
of the final rule TSD.

C. Engineering Analysis

    The engineering analysis establishes the relationship between an 
increase in energy efficiency of the equipment and the increase in 
manufacturer selling price (MSP) associated with that efficiency 
increase. This relationship serves as the basis for cost-benefit 
calculations for individual consumers, manufacturers, and the nation. 
In determining the cost-efficiency relationship, DOE estimates the 
increase in manufacturer cost associated with increasing the efficiency 
of equipment above the baseline up to the max-tech efficiency level for 
each equipment class.
1. Methodology
    DOE has identified three basic methods for developing cost-
efficiency curves: (1) The design-option approach, which provides the 
incremental costs of adding design options to a baseline model that 
will improve its efficiency (i.e., lower its energy use); (2) the 
efficiency-level approach, which provides the incremental costs of 
moving to higher energy efficiency levels, without regard to the 
particular design option(s) used to achieve such increases; and (3) the 
reverse-engineering (or cost-assessment) approach, which provides 
``bottom-up'' manufacturing cost assessments for achieving various 
levels of increased efficiency, based on teardown analyses (or physical 
teardowns) providing detailed data on costs for parts and material, 
labor, shipping/packaging, and investment for models that operate at 
particular efficiency levels.
    In the February 2013 Framework Document and the September 2014 
NOPR, DOE described the approach for this engineering analysis that 
combines an efficiency-level approach with a cost-assessment approach 
to determine the relationship between cost and efficiency. 78 FR 12252 
(February 22, 2013) and 79 FR at 55556-9 (September 14, 2014). The 
range of efficiency levels and costs considered were represented by the 
test data and/or ratings of specific PTAC and PTHP models available in 
the market that included different groups of design options.
    DOE identified the efficiency levels for the analysis based on the 
range of rated efficiencies of PTAC and PTHP equipment in the AHRI 
database. DOE selected PTAC and PTHP equipment that was representative 
of the market at different efficiency levels, then purchased, tested, 
and reverse engineered the selected equipment. DOE used the cost-
assessment approach to determine the manufacturing production costs 
(MPCs) for PTAC and PTHP equipment across a range of efficiencies from 
the baseline to max-tech efficiency levels. DOE observed that 
manufacturers used different approaches to improve unit energy 
efficiency. AHRI commented that it is not clear what efficiency gains 
the equipment will achieve based on implementing the technology options 
that DOE has considered. (AHRI, NOPR Public Meeting Transcript, No. 37 
at p. 10) DOE notes that the combined efficiency level and cost-
assessment approach does not separately evaluate the effects of 
individual design options and does not prescribe a particular set of 
design options for manufacturers to

[[Page 43174]]

improve unit efficiency. Instead, it selects units spanning a range of 
efficiency levels, estimates MPCs for those units, and constructs a 
cost curve to define the relationship between energy efficiency and 
MPC.
    Where feasible, DOE selected models for reverse engineering with 
low and high efficiencies from a given manufacturer, at both 
representative cooling capacity levels and for both PTACs and PTHPs. 
The methodology used to perform reverse engineering analysis and derive 
the cost-efficiency relationship is described in chapter 5 of the final 
rule TSD. ASAP et al. commented to express their support for DOE's 
approach to the engineering analysis. (ASAP et al., No. 30 at p. 3)
2. Equipment Classes Analyzed
    DOE developed its engineering analysis for the six equipment 
classes associated with standard-size PTACs and PTHPs. As discussed in 
section III.B of this final rule, DOE did not amend energy efficiency 
standards for non-standard size equipment classes because of their low 
and declining market share and because of a lack of adequate 
information to analyze these units.
    For the PTAC and PTHP equipment classes with a cooling capacity 
greater than or equal to 7,000 Btu/h and less than or equal to 15,000 
Btu/h, the energy efficiency equation characterizes the relationship 
between the EER of the equipment and cooling capacity (i.e., EER is a 
function of the cooling capacity of the equipment) in which EER 
decreases as capacity increases. For all cooling capacities less than 
7,000 Btu/h and all cooling capacities greater than 15,000 Btu/h, the 
EER is calculated based on the energy efficiency equation for 7,000 
Btu/h or 15,000 Btu/h, respectively.
    For PTACs and PTHPs, DOE focused its analysis on high-shipment-
volume cooling capacities spanning the range of available equipment. 
Based on manufacturer interviews,\14\ DOE found that the majority of 
shipments are in the classes with cooling capacity between 7,000 Btu/h 
to 15,000 Btu/h (see chapter 9 of the final rule TSD for more details 
on the shipments data). As described in the September 2014 NOPR, DOE 
selected two cooling capacities for analysis: 9,000 Btu/h and 15,000 
Btu/h. 79 FR at 55557. DOE selected 9,000 Btu/h as a representative 
capacity because the AHRI Directory lists more PTAC models around the 
9,000 Btu/h capacity level than any other capacity level. DOE selected 
15,000 Btu/h as a representative capacity in response to manufacturer 
comments stating that it is technically challenging to achieve high 
efficiency in 15,000 Btu/h models and the analysis should explicitly 
analyze the 15,000 Btu/h capacity. AHRI commented that the two 
equipment sizes that DOE selected for testing and teardowns may not 
accurately represent the full capacity range of the product category. 
AHRI observed that a greater number of high-efficiency models are 
available at the 9,000 Btu/h capacity compared with other unit 
capacities. (AHRI, NOPR Public Meeting Transcript, No. 37 at p. 10) 
AHRI observation does not indicate that a cost/efficiency relationship 
determined based on the 9,000 Btu/h and 15,000 Btu/h capacities would 
not be representative of the full range of cooling capacities. The 
design changes that DOE observed in units at the representative 
capacities of 9,000 Btu/h and 15,000 Btu/h can be interpolated and 
extrapolated to include other common capacities (such as 7,000 Btu/h 
and 12,000 Btu/h) that were not directly analyzed in the reverse 
engineering analysis. It would not be feasible to conduct teardown 
analysis for every cooling capacity available in the market. DOE 
selected the representative cooling capacities of 9,000 and 15,000 Btu/
h in response to comments from the framework stage of this rulemaking; 
available information indicates that these capacities accurately 
represent the markets for PTAC and PTHP equipment.
---------------------------------------------------------------------------

    \14\ DOE conducted interviews with high- and low-volume PTAC and 
PTHP manufacturers, and collected information regarding shipments of 
PTACs and PTHPs at different cooling capacity levels.
---------------------------------------------------------------------------

    Using its analysis of two cooling capacities, DOE investigated the 
slope of the energy efficiency-capacity relationship. Further details 
on this relationship are provided in chapter 5 of the final rule TSD.
3. Cost Model
    DOE developed a manufacturing cost model to estimate the MPCs of 
PTAC and PTHP units over a range of cooling efficiencies. The cost 
model is a spreadsheet model that converts the materials and components 
in the bills of materials for PTAC and PTHP equipment into dollar 
values based on the price of materials, average labor rates associated 
with fabrication and assembling, and the cost of overhead and 
depreciation, as determined based on manufacturer interviews and 
equipment cost information compiled by DOE. To convert the information 
in the bills of materials into dollar values, DOE collected information 
on labor rates, tooling costs, raw material prices, and other factors. 
For purchased parts, the cost model estimates the purchase price based 
on volume-variable price quotations and detailed discussions with 
manufacturers and component suppliers. For fabricated parts, the prices 
of raw metal materials (e.g., tube, sheet metal) are estimates on the 
basis of five-year averages (from 2009 to 2014). DOE estimated the cost 
of transforming the raw materials into finished parts based on current 
industry pricing. Further details on the manufacturing cost analysis 
are provided in chapter 5 of the final rule TSD.
    Developing the cost model involved disassembling PTACs and PTHPs at 
various efficiencies, analyzing the materials and manufacturing 
processes, and estimating the costs of purchased components. DOE also 
collected supplemental component cost data from manufacturers of PTAC 
and PTHP equipment. DOE reports the MPCs in aggregated form to maintain 
confidentiality of sensitive component data. DOE obtained input from 
stakeholders on the MPC estimates and assumptions to confirm accuracy. 
DOE used the cost model for all of the representative cooling 
capacities within the PTAC and PTHP equipment classes. Chapter 5 of the 
final rule TSD provides details and assumptions of the cost model.
4. Baseline Efficiency Level
    The engineering analysis estimates the incremental costs for 
equipment with efficiency levels above the baseline in each equipment 
class. For the purpose of the engineering analysis, DOE used the 
engineering baseline EER as the starting point to build the cost 
efficiency curves. As discussed in section III.A, ANSI/ASHRAE/IES 
Standard 90.1-2013 was issued in the course of this rulemaking, and 
this revised standard amended minimum efficiency levels for PTACs, 
raising standards by 1.8% above the Federal minimum energy conservation 
standards for PTACs. DOE is obligated either to adopt those standards 
developed by ASHRAE or to adopt levels more stringent than the ASHRAE 
levels if there is clear and convincing evidence in support of doing 
so. (42 U.S.C. 6313(a)(6)(A)). For the purposes of calculating energy 
savings over the ANSI/ASHRAE/IES Standard 90.1-2013, DOE identified the 
ANSI/ASHRAE/IES Standard 90.1-2013 as the baseline efficiency 
level.\15\ SCS agreed that it is correct to use ASHRAE 90.1-

[[Page 43175]]

2013 as the baseline for analysis. (SCS, NOPR Public Meeting 
Transcript, No. 37 at p. 26-27)
---------------------------------------------------------------------------

    \15\ DOE's estimates of potential energy savings from an amended 
energy conservation standard are further discussed in section IV.H.
---------------------------------------------------------------------------

    The baseline efficiency levels for each equipment class are 
presented in Table IV.3.

                                     Table IV.3--Baseline Efficiency Levels
----------------------------------------------------------------------------------------------------------------
                                                          Baseline
         Equipment type            Equipment class       efficiency       Cooling capacity   Baseline efficiency
                                                          equation                                  level
----------------------------------------------------------------------------------------------------------------
PTAC...........................  Standard Size.....  EER = 14.0 -        9,000 Btu/h......  11.3 EER.
                                                      (0.300 x Cap       15,000 Btu/h.....  9.5 EER.
                                                      [dagger]/1000).
PTHP...........................  Standard Size.....  EER = 14.0 -        9,000 Btu/h......  11.3 EER.
                                                      (0.300 x Cap       15,000 Btu/h.....  9.5 EER.
                                                      [dagger]/1000).
----------------------------------------------------------------------------------------------------------------
[dagger] Cap means cooling capacity in Btu/h at 95 [deg]F outdoor dry-bulb temperature.

5. Incremental Efficiency Levels
    DOE examined performance data of standard size PTACs and PTHPs 
published in the AHRI Directory and on manufacturers' Web sites to 
select efficiency levels for consideration in the rulemaking. DOE used 
Web site-published data as an initial screening mechanism to select 
units for reverse engineering; a third party test facility verified the 
actual performance of the units selected for analysis.
    DOE analyzed the baseline efficiency level and efficiency levels 
that are 2.2%, 6.2%, 10.2%, 14.2%, and 16.2% more efficient than the 
ANSI/ASHRAE/IES Standard 90.1-2013 baseline.\16\ The rated efficiencies 
of PTACs listed in the AHRI Directory extend up to 17.5% above the 
ANSI/ASHRAE/IES Standard 90.1-2013 baseline efficiency level. However, 
based on testing of individual units conducted for this rulemaking, DOE 
considered efficiencies up to only 16.2% above the baseline level. DOE 
expects that PTAC equipment without a reversing valve should be able to 
attain the cooling mode efficiencies as least as high as PTHPs. This is 
because the reversing valve of a PTHP, which allows for reverse cycle 
(heat pump) operation and is not required in a PTAC, imposes pressure 
drop which would reduce PTHP efficiency.
---------------------------------------------------------------------------

    \16\ DOE notes that these efficiency levels are 4%, 8%, 12%, 
16%, and 18% more efficient than the amended PTAC standards that 
became effective on October 8, 2012.
---------------------------------------------------------------------------

    For the heating efficiency of PTHPs, DOE correlated the COP 
associated with each efficiency level with the efficiency level's EER 
based on COP and EER ratings from the AHRI database. DOE established a 
representative curve based on this data to obtain a relationship for 
COP in terms of EER. DOE used this relationship to select COP values 
corresponding to each efficiency level. This approach considers the 
fact that a PTHP's EER and COP are related and cannot be independently 
analyzed, while basing the analysis on a representative average 
relationship between the two efficiency metrics. To determine the 
typical relationship between EER and COP, DOE examined the entire 
database of rated equipment and determined a relationship based on the 
EER and COP ratings of the collective body of certified PTAC and PTHP 
equipment.
    The efficiency levels for each equipment class that DOE considered 
are presented in Table IV.4. The percentages associated with efficiency 
levels (ELs) indicate the percentage above the baseline level for PTACs 
and PTHPs. In the September 2014 NOPR, DOE presented efficiency levels 
using percentages relative to the current Federal standard for PTACs. 
79 FR at 55559. This method of presentation caused confusion among 
stakeholders. AHRI and SCS commented presenting efficiency increases as 
a percentage above current Federal minimum standards for PTACs was 
confusing. (AHRI, NOPR Public Meeting Transcript, No. 37 at p. 77; SCS, 
NOPR Public Meeting Transcript, No. 37 at p. 78) In response to these 
comments, DOE has changed the base value used in determining the 
percentage increase of EER so that the percentages represents increases 
above the ASHRAE 90.1-2013 efficiency level rather than increases above 
the current DOE standard. The EER values for this baseline are equal to 
those for the DOE PTHP standards and the ASHRAE 90.1-2013 PTHP 
standards. Table IV.4 presents percentages relative to the new baseline 
level, which is the same for PTACs and PTHPs.

                                                           Table IV.4--Incremental Efficiency Levels for Standard Size PTACs and PTHPs
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                 Efficiency levels (percentages relative to baseline)
                                                     -------------------------------------------------------------------------------------------------------------------------------------------
         Equipment type            Cooling  capacity    Current Federal                                                                                                           EL6, 16.2%
                                                          PTAC ECS *       EL1,  Baseline **       EL2, 2.2%           EL3, 6.2%          EL4, 10.2%          EL5, 14.2%           (MaxTech)
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
PTAC............................  All, EER..........  13.8 - (0.300 x     14.0 - (0.300 x     14.4 - (0.312 x     14.9 - (0.324 x     15.5 - (0.336 x     16.0 - (0.348 x     16.3 - (0.354 x
                                                       Cap [dagger]).      Cap [dagger]).      Cap [dagger]).      Cap [dagger]).      Cap [dagger]).      Cap [dagger]).      Cap [dagger])
                                  9,000 Btu/h.......  11.1 EER..........  11.3 EER..........  11.5 EER..........  12.0 EER..........  12.4 EER..........  12.9 EER..........  13.1 EER
                                  15,000 Btu/h......  9.3 EER...........  9.5 EER...........  9.7 EER...........  10.0 EER..........  10.4 EER..........  10.8 EER..........  11.0 EER
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
         Equipment type            Cooling capacity           N/A             Baseline **          EL1, 2.2%           EL2, 6.2%          EL3, 10.2%          EL4, 14.2%          EL5, 16.2%
                                                                                                                                                                              (MaxTech)
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
PTHP............................  All, EER..........  N/A...............  14.0 - (0.300 x     14.4 - (0.312 x     14.9 - (0.324 x     15.5 - (0.336 x     16.0 - (0.348 x     16.3 - (0.354 x
                                                                           Cap [dagger]).      Cap [dagger]).      Cap [dagger]).      Cap [dagger]).      Cap [dagger]).      Cap [dagger])
                                  All, COP..........  N/A...............  3.7 - (0.052 x Cap  3.8 - (0.058 x Cap  4.0 - (0.064 x Cap  4.1 - (0.068 x Cap  4.2 - (0.070 x Cap  4.3 - (0.073 x Cap
                                                                           [dagger]).          [dagger]).          [dagger]).          [dagger]).          [dagger]).          [dagger])
                                  9,000 Btu/h.......  N/A...............  11.3 EER..........  11.5 EER..........  12.0 EER..........  12.4 EER..........  12.9 EER..........  13.1 EER
                                                                          3.2 COP...........  3.3 COP...........  3.4 COP...........  3.5 COP...........  3.6 COP...........  3.6 COP

[[Page 43176]]

 
                                  15,000 Btu/h......  N/A...............  9.5 EER...........  9.7 EER...........  10.0 EER..........  10.4 EER..........  10.8 EER..........  11.0 EER
                                                                          2.9 COP...........  2.9 COP...........  3.0 COP...........  3.1 COP...........  3.2 COP...........  3.2 COP
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
* This level represents the current Federal minimum for PTAC equipment.
** This level represents the ANSI/ASHRAE/IES Standard 90.1-2013 minimum for PTAC and PTHP equipment. This level is used as the Baseline for PTAC and PTHP equipment since DOE is required to, at
  a minimum, adopt the ASHRAE levels as the Federal standard. (42 U.S.C. 6313(a)(6)(A)(ii)(I)). DOE notes that the Baseline level is 1.8% higher than current Federal ECS for PTAC equipment,
  but is equivalent to current Federal ECS for PTHP equipment. For PTAC equipment, the Baseline level is also termed EL1, and is compared to current Federal ECS in the energy savings analysis
  in section V.B.3.a.
[dagger] Cap means cooling capacity in thousand Btu/h at 95[deg]F outdoor dry-bulb temperature.

6. Equipment Testing and Reverse Engineering
    As discussed above, for the engineering analysis, DOE specifically 
analyzed representative capacities of 9,000 Btu/h and 15,000 Btu/h to 
develop incremental cost-efficiency relationships. DOE selected twenty 
different models representing PTAC and PTHP equipment types at 9,000 
Btu/h and 15,000 Btu/h capacities. DOE selected the models as a 
representative sample of the market at different efficiency levels. DOE 
based the selection of units for testing and reverse engineering on the 
efficiency data available in the AHRI certification database. Details 
of the key features of the tested units are presented in chapter 5 of 
the final rule TSD.
    DOE conducted testing on each unit according to the DOE test 
procedure outlined at 10 CFR 431.96. At the time of testing, the DOE 
test procedure incorporated by reference AHRI Standard 310/380-2004, 
which itself incorporates ANSI/ASHRAE 16, ANSI/ASHRAE 37, and ANSI/
ASHRAE 58. In June, 2015, DOE revised the test procedure to incorporate 
by reference AHRI Standard 310/380-2014. The amendments adopted in the 
revised test procedure do not affect measured energy use. DOE then 
conducted physical teardowns on each test unit to develop a 
manufacturing cost model and to evaluate key design features (e.g., 
improved heat exchangers, compressors, fans/fan motors).
7. Cost-Efficiency Results
    The results of the engineering analysis are reported as a set of 
cost-efficiency data (or ``curves'') in the form of MPC (in dollars) 
versus EER, which form the basis for other analyses in the final rule. 
DOE created cost-efficiency curves for the two representative cooling 
capacities within the two standard-size equipment classes of PTACs and 
PTHPs, as discussed in section IV.C.3. DOE developed the incremental 
cost-efficiency results shown in Table IV.5 for each representative 
cooling capacity. These cost results are incremented from a baseline 
efficiency level equivalent to the ANSI/ASHRAE/IES Standard 90.1-2013. 
Details of the cost-efficiency analysis are presented in chapter 5 of 
the final rule TSD.

                             Table IV.5--Incremental Manufacturing Production Costs (MPC) for Standard Size PTACs and PTHPs
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                 Efficiency levels
                                                         -----------------------------------------------------------------------------------------------
          Equipment type              Cooling capacity     EL1, baseline
                                                                 *              EL2             EL3             EL4             EL5             EL6
--------------------------------------------------------------------------------------------------------------------------------------------------------
PTAC..............................  9,000 Btu/h.........           $0.00           $4.44          $13.08          $22.41          $32.45          $37.73
                                    15,000 Btu/h........            0.00            4.26           15.93           30.97           49.38           59.86
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                            Baseline *          EL1             EL2             EL3             EL4             EL5
--------------------------------------------------------------------------------------------------------------------------------------------------------
PTHP..............................  9,000 Btu/h.........           $0.00           $4.44          $13.08          $22.41          $32.45          $37.73
                                    15,000 Btu/h........            0.00            4.26           15.93           30.97           49.38           59.86
--------------------------------------------------------------------------------------------------------------------------------------------------------
* This level represents the ANSI/ASHRAE/IES Standard 90.1-2013 minimum for PTAC and PTHP equipment. This level is used as the Baseline since DOE is
  required to, at a minimum, adopt the ASHRAE levels as the Federal standard. (42 U.S.C. 6313(a)(6)(A)(ii)(I)). DOE notes that the Baseline level is
  1.8% higher than current Federal ECS for PTAC equipment, but is equivalent to current Federal ECS for PTHP equipment. For PTAC equipment, the Baseline
  level is also termed EL1.

    AHRI commented that DOE should publish the design options 
associated with different energy efficiency levels. (AHRI, NOPR Public 
Meeting Transcript, No. 37 at p. 85) Goodman requested that DOE clarify 
exactly what designs can help achieve the energy savings associated 
with higher efficiency levels. (Goodman, NOPR Public Meeting 
Transcript, No. 37 at p. 82) Goodman also commented that DOE should 
publish the efficiency improvements associated with individual design 
options, as DOE has done for previous rulemakings. (Goodman, NOPR 
Public Meeting Transcript, No. 37 at p. 86-87) For this rulemaking, DOE 
used a combined efficiency level and reverse engineering approach. This 
approach is unlike the design option approach in that it does not 
specify the options that manufacturers may use to achieve different 
efficiency levels. During the teardown analysis, DOE observed that 
different manufacturers use different design options to improve unit 
efficiency, and there is no single path to improved efficiency. 
Stakeholders interested in the specific design options used in 
different units should refer to chapter 5 of the final rule TSD, where 
DOE published the design options for each unit observed in the teardown 
analysis in Tables 5.6.1 and 5.6.2.
    Goodman commented that the analysis did not capture the design 
changes that manufacturers made to increase from the current Federal 
minimum to the minimum level in ANSI/ASHRAE/IES Standard 90.1-2013, 
which for PTAC equipment is 1.8% more stringent than the current 
Federal minimum. (Goodman NOPR Public Meeting Transcript, No. 37 at p. 
28) The efficiency level approach used in this analysis does capture 
the design changes that manufacturers used to

[[Page 43177]]

increase equipment efficiency from the current Federal minimum up to 
the ANSI/ASHRAE/IES Standard 90.1 level. Because DOE used an efficiency 
level approach rather than a design option approach, however, the 
design options used to attain the initial efficiency improvement are 
not specified in the analysis. DOE did examine units with efficiency 
levels above and below the ANSI/ASHRAE/IES Standard 90.1 level. DOE 
based its cost analysis on the observed differences in designs between 
these units. The engineering analysis does not account for the 
incremental manufacturing costs associated with an increase from the 
current Federal minimum up to the ANSI/ASHRAE/IES Standard 90.1-level. 
The analysis did not intend to capture these costs because DOE is 
required to, at a minimum, adopt the ANSI/ASHRAE/IES Standard 90.1 
level as the Federal standard. (42 U.S.C. 6313(a)(6)(A)(ii)(I)) DOE 
investigated what efficiency levels higher than the ASHRAE 90.1 level 
are cost effective, rather than evaluating whether the ASHRAE 90.1 
level is cost effective as a step above the current DOE PTAC standard. 
DOE revised the MIA analysis in section IV.J to include an additional 
set of product conversion costs intended to capture the R&D and testing 
and certification burden of meeting amended ASHRAE standards in 2015. 
The results of the MIA analysis can be found in chapter 12 of the final 
rule TSD.
    To convert the MPCs into manufacturer selling prices (MSPs), DOE 
applied non-production cost markups to the MPCs estimated in the 
engineering analysis for each equipment class and efficiency level. 
Based on publicly-available financial information for manufacturers of 
PTACs and PTHPs as well as feedback received from manufacturers during 
interviews, DOE assumed the average non-production cost baseline 
markup--which includes SG&A expenses, R&D expenses, interest, and 
profit--to be 1.27 for all PTAC and PTHP equipment classes. As part of 
its manufacturer impact analysis, DOE then modeled multiple markup 
scenarios to capture a range of potential impacts on manufacturers 
following implementation of amended energy conservation standards. 
These scenarios lead to different markup values, which, when applied to 
MPCs, result in varying revenue and cash flow impacts. Further details 
on manufacturer markups can be found in section IV.J.2 and in chapter 
12 of the final rule TSD.

D. Markups To Determine Equipment Price

    The markups analysis develops appropriate markups in the 
distribution chain to convert the estimates of manufacturer selling 
price to consumer prices. (``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 consumer price.
    DOE developed supply chain markups in the form of multipliers that 
represent increases above MSP and include distribution costs. DOE 
applied these markups to the MSPs it developed in the engineering 
analysis, and then added sales taxes to arrive at the equipment prices 
for baseline and higher efficiency equipment. See chapter 6 of the 
final rule TSD for additional details on markups.
    DOE identified and used four distribution channels for PTACs and 
PTHPs to describe how the equipment passes from the manufacturer to the 
consumer. Equipment is distributed to two end-use applications: New 
construction and replacement. In the new construction market, the 
manufacturer sells the equipment directly to the consumer through a 
national account. In the replacement market, the manufacturer sells to 
a wholesaler, who sells to a mechanical contractor, who in turn sells 
the equipment to the consumer or end user. In the third distribution 
channel, used in both the new construction and replacement markets, 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 consumer or end 
user. In the fourth distribution channel, also used in both the new 
construction and replacement markets, the manufacturer sells the 
equipment to a wholesaler, who directly sells to the purchaser.

                          Table IV.6--Distribution Channels for PTAC and PTHP Equipment
----------------------------------------------------------------------------------------------------------------
              Channel 1                       Channel 2                Channel 3                Channel 4
----------------------------------------------------------------------------------------------------------------
Manufacturer (through national         Manufacturer...........  Manufacturer...........  Manufacturer.
 accounts).                            Wholesaler.............  Wholesaler.............  Wholesaler.
                                                                Mechanical Contractor..  Mechanical Contractor.
                                                                                         General Contractor.
Consumer.............................  Consumer...............  Consumer...............  Consumer.
----------------------------------------------------------------------------------------------------------------

    DOE also estimated percentages of the total sales in the new 
construction and replacement markets for each of the four distribution 
channels, as shown in Table IV.7.

  Table IV.7--Share of Market by Distribution Channel for PTAC and PTHP
                                Equipment
------------------------------------------------------------------------
                                  New construction
     Distribution channel               (%)            Replacement (%)
------------------------------------------------------------------------
Wholesaler-Consumer...........                   30                   15
Wholesaler-Mech Contractor-                       0                   25
 Consumer.....................
Wholesaler-Mech Contractor-                      38                   60
 General Contractor-Consumer..
National Account..............                   32                    0
                               -----------------------------------------
    Total.....................                  100                  100
------------------------------------------------------------------------


[[Page 43178]]

    For each of the steps in the distribution channels presented above, 
DOE estimated a baseline markup and an incremental markup. DOE defines 
a baseline markup as a multiplier that converts the MSP of equipment 
with baseline efficiency to the consumer purchase price for that 
equipment. An incremental markup is defined as the multiplier to 
convert the incremental increase in MSP of higher efficiency equipment 
to the incremental consumer purchase price for that equipment. Both 
baseline and incremental markups are independent of the efficiency 
levels of the PTACs and PTHPs.
    DOE developed the markups for each step of the distribution 
channels based on available financial data. DOE utilized updated 
versions of the following data sources: (1) The Heating, Air 
Conditioning & Refrigeration Distributors International 2012 Profit 
Report \17\ to develop wholesaler markups; (2) the Air Conditioning 
Contractors of America's (ACCA) 2005 Financial Analysis for the HVACR 
Contracting Industry \18\ and U.S. Census Bureau economic data \19\ 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.\20\ DOE 
estimated an average markup for sales through national accounts to be 
one-half of the markup for the wholesaler-to-consumer distribution 
channel. DOE determined this markup for national accounts on an 
assumption that the resulting national account equipment price must 
fall somewhere between the MSP (i.e., a markup of 1.0) and the consumer 
price under a typical chain of distribution (i.e., a markup of 
wholesaler, mechanical contractor, or general contractor).
---------------------------------------------------------------------------

    \17\ ``2012 Profit Report,'' Heating Air Conditioning & 
Refrigeration Distributors International. February 2012. Available 
online at: www.hardinet.org/Profit-Report.
    \18\ ``2005 Financial Analysis for the HVACR Contracting 
Industry,'' Air Conditioning Contractors of America. 2005.
    \19\ ``Plumbing, Heating, and Air-Conditioning Contractors. 
Sector 23: 238220. Construction: Industry Series, Preliminary 
Detailed Statistics for Establishments, 2007,'' U.S. Census Bureau. 
2007.
    \20\ ``2007 Economic Census, Construction Industry Series and 
Wholesale Trade Subject Series,'' U.S. Census Bureau. Available 
online at https://www.census.gov/newsroom/releases/archives/construction_industries/2009-07-27_economic_census.html.
---------------------------------------------------------------------------

    The overall markup is the product of all the markups (baseline or 
incremental markups) for the different steps within a distribution 
channel. Replacement channels include sales taxes, which were 
calculated based on State sales tax data reported by the Sales Tax 
Clearinghouse.
    DOE requested comment regarding the selected channels and 
distribution of shipments through the channels in the NOPR. AHRI stated 
that some national accounts purchase replacements through direct sales. 
(AHRI, No. 35 at p. 14) DOE did not find any data to indicate the 
magnitude of PTAC/PTHP replacement sales through national accounts. 
However, DOE understands that in general replacement purchases of PTACs 
and PTHPs are not in large volume as one would expect in national 
accounts. Thus, DOE believes that this channel is likely to be a 
minimal part of the market. DOE therefore retained the set of markups 
used in the September 2014 NOPR.

E. Energy Use Analysis

    The energy use analysis provides estimates of the annual unit 
energy consumption (UEC) of PTAC and PTHP equipment at the considered 
efficiency levels. The annual UECs are used in subsequent analyses.
    DOE adjusted the UECs for each equipment class of PTAC and PTHP 
from the 2008 standards rulemaking. 73 FR 58772. DOE began with the 
cooling UECs for PTACs and the combined cooling and heating UECs for 
PTHPs utilized in the 2008 standards rulemaking. 73 FR 58772. The 
cooling and heating UECs for PTHPs were split, assuming equal cooling 
energy use for PTACs and PTHPs. In addition, DOE adjusted the base-year 
UECs to account for changes in climate (i.e., heating degree-days and 
cooling degree-days) between 2008 and 2013, based on a typical 
meteorological year (TMY) hourly weather data set (referred to as TMY2) 
and an updated TMY3 data set.
    Where identical efficiency levels and cooling capacities were 
available, DOE used the cooling or heating UEC directly from the 
previous rulemaking. For additional efficiency levels, DOE scaled the 
cooling UECs based on interpolations between EERs and scaled the 
heating UECs based on interpolations between COPs, both at a constant 
cooling capacity. Likewise, for additional cooling capacities, DOE 
scaled the UECs based on interpolations between cooling capacities at a 
constant EER.
    SCS expressed concern that DOE's adjustments to UEC estimates for 
higher efficiency levels are based on sensible heat only. SCS 
recommended that the energy modeling be based on compliance with ASHRAE 
62.1-2010 ventilation standard. (SCS, No. 29 at p. 2) DOE notes that 
UEC estimates for higher efficiency levels include latent heat because 
the UECs upon which estimates are based include latent heat. DOE 
appreciates SCS's recommendation to comply with ventilation 
requirements in the simulation to ASHRAE 62.1-2010. As the simulations 
exceed the ventilation requirements of ASHRAE 62.1-2010, DOE does not 
intend to make modifications. SCS also suggested that DOE examine the 
occupancy rates for buildings where PTACs and PTHPs would be installed, 
since that would affect their operating hours. (SCS, NOPR Public 
Meeting Transcript, No. 37 at p. 103) The simulations account for 
variations in occupancy rates.
    AHRI asked why DOE included the space conditioning load of lobby 
and lounge spaces, which are typically not conditioned by PTACs and 
PTHPs, in the building load of the energy simulations, suggesting that 
this is something that DOE should correct. (AHRI, No. 35 at p. 8) While 
DOE's whole-building simulations did include the energy consumption 
from the equipment conditioning the lobby and lounge zones, the per-
unit energy consumption excluded from its total energy use the energy 
of such spaces prior to dividing by the number of PTAC or PTHP 
equipment conditioning the guest rooms.
    AHRI suggested that DOE account for changes to ASHRAE 90.1 in its 
energy use analysis, incorporating at a minimum the following control-
related provisions from ASHRAE 90.1-2013: manual changeover or dual 
setpoint thermostat; controls that prevent supplemental electric 
resistance strip heating when the heating load can be met; and zone 
thermostatic controls for off-hour, automatic shutdown, and setback. 
(AHRI, No. 35 at p. 7; AHRI, NOPR Public Meeting Transcript, No. 37 at 
p. 102) Similarly, SCS and Goodman stated that DOE did not include the 
control requirements from ASHRAE Standard 90.1-2013 and thus 
modifications to the simulations would ultimately reduce the UEC of 
PTACs and PTHPs. (SCS, No. 29 at p. 1; Goodman, No. 31 at p. 5) The 
control provisions of ASHRAE Standard 90.1-2013 would in certain 
situations save energy and were included in the energy use simulations 
performed for the 2008 PTAC and PTHP final rule, which were in turn the 
basis for this analysis. PG&E also asked whether energy from defrost 
and from electric resistance heating below 40 [deg]F was included in 
the simulations. (PG&E, NOPR Public Meeting Transcript, No. 37 at pp. 
103-105) DOE notes that energy from defrost and from electric 
resistance heating below 40 [deg]F were included in the energy use 
analysis.

[[Page 43179]]

    For the LCC and PBP analyses, UECs were determined for the 
representative cooling capacities of 9,000 Btu/h and 15,000 Btu/h for 
which cost-efficiency curves were developed, as discussed in section 
IV.C.7. For the NIA, UECs were determined for the cooling capacities of 
7,000 Btu/h, 9,000 Btu/h, and 15,000 Btu/h for which aggregate 
shipments were provided by AHRI, as highlighted in section IV.G. 
National UEC estimates for PTACs and PTHPs for the above analyses are 
described in detail in chapter 8 of the final rule TSD.
    AHRI asked why national UEC estimates for PTACs are lower in the 
ASHRAE Standard 90.1-2013 notice of data availability and request for 
public comment (ASHRAE Standard 90.1-2013 NODA) (79 FR 20114) than in 
the September 2014 NOPR. (AHRI, No. 35 at p. 9) For the analysis in the 
ASHRAE Standard 90.1-2013 NODA, DOE did not use a multiplier to account 
for the weather as the data were not finalized at the time. Taking 
these multipliers into account, energy use increased in the UECs 
submitted for the September 2014 NOPR.
    In the framework stage of this rulemaking, AHRI and Goodman 
commented that new requirements for minimum air filter effectiveness 
finalized in 2013 for ASHRAE Standard 62.1 would increase pressure drop 
and increase fan power. (AHRI, No. 11 at p. 4; Goodman, No. 13 at p. 6) 
In the September 2014 NOPR, DOE cited a study \21\ that found the 
extent of the impact on energy consumption due to the change in filter 
effectiveness at the levels finalized in ASHRAE Standard 62.1 is less 
than 1%. Based on this finding, DOE concluded that the change in ASHRAE 
Standard 62.1 minimum air filter effectiveness requirements would not 
significantly impact the energy use outputs. 79 FR at 55561 (September 
16, 2014). AHRI commented that the study cited by DOE was for 
residential products and stated that the results showing negligible 
impact cannot be extrapolated to commercial equipment. As such, AHRI 
stated that DOE must consider the energy and monetary implications for 
manufacturers to comply with the increased filtration requirement. 
(AHRI, No. 35 at p. 14) DOE understands that manufacturers have thus 
far not used filters rated with a Minimum Efficiency Reporting Value 
(MERV) filters in their PTAC equipment, and there is no reason to 
believe that they will begin using MERV-rated filters in the near term. 
Thus, the shift in ASHRAE 62.1 from requiring MERV 6 filter to 
requiring MERV 8 filters would not impact the operation or energy use 
of PTAC equipment. The change in ASHRAE 62.1 filtration requirements 
would also not affect the certification of PTAC equipment, since the 
PTAC and PTHP test procedures specify that equipment is to be tested 
using the filter that ships with it (or using a MERV 1 filter, if the 
equipment is shipped without a filter).
---------------------------------------------------------------------------

    \21\ Walker, I.S., et al., ``System Effects of High Efficiency 
Filters in Homes,'' Lawrence Berkeley National Laboratory, LBNL-
6144E, 2013.
---------------------------------------------------------------------------

F. Life Cycle Cost and Payback Period Analyses

    The purpose of the LCC and PBP analysis is to analyze the effects 
of potential amended energy conservation standards on consumers of PTAC 
and PTHP equipment by determining how a potential amended standard 
affects their operating expenses (usually decreased) and their total 
installed costs (usually increased).
    The LCC is the total consumer expense over the life of the 
equipment, consisting of equipment and installation costs plus 
operating costs over the lifetime of the equipment (expenses for energy 
use, maintenance, and repair). DOE discounts future operating costs to 
the time of purchase using consumer discount rates. The PBP is the 
estimated amount of time (in years) it takes 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 standard.
    For any given efficiency level, DOE analyzed these impacts for PTAC 
and PTHP equipment starting in the compliance years as set forth in 
section V.B.1.a by calculating the change in consumer LCCs likely to 
result from higher efficiency levels compared with the ASHRAE baseline 
efficiency levels for the PTAC and PTHP equipment classes discussed in 
the engineering analysis.
    DOE conducted the LCC and PBP analyses for the PTAC and PTHP 
equipment classes using a spreadsheet model developed in Microsoft 
Excel. 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. Results of the LCC and PBP analyses 
were applied to other equipment classes through linear scaling of the 
results by the cooling capacity of the equipment class.
    The following sections contain brief discussions of comments on the 
inputs and key assumptions of DOE's LCC and PBP analysis. They are also 
described in detail in chapter 8 of the final rule TSD.
1. Equipment and Installation Costs
    The equipment costs faced by purchasers of PTAC and PTHP equipment 
are derived from the MSPs estimated in the engineering analysis and the 
markups estimated in the markups analysis.
    To develop an equipment price trend for the September 2014 NOPR, 
DOE derived an inflation-adjusted index of the producer price index 
(PPI) for ``all other miscellaneous refrigeration and air-conditioning 
equipment'' from 1990-2014.\22\ Although the inflation-adjusted index 
shows a declining trend from 1990 to 2004, and a rising trend from 
2004-2008, 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 applied a constant price trend (2014 levels) for each 
efficiency level in each equipment class for the September 2014 NOPR.
---------------------------------------------------------------------------

    \22\ ``Producer Price Indexes,'' Bureau of Labor Statistics 
(BLS). 2014. Available online at www.bls.gov/ppi/.
---------------------------------------------------------------------------

    AHRI stated that DOE should utilize a trend based on the steady and 
significant price increase since 2004, a trend that has not been 
affected by the slowdown in activity since 2008. (AHRI, No. 35 at p. 5) 
While the historical data show an increasing price from 2004-2008, the 
data show a decreasing price trend from 1990 to 2004 and several years 
of constant prices after the economic slowdown. It is not clear if a 
new upward trend has been established. Given such uncertainty, DOE 
maintained its approach in the September 2014 NOPR to use a constant 
price assumption to project future PTAC and PTHP equipment prices.
    For installation costs, DOE used a specific cost from RS Means \23\ 
for PTACs and PTHPs and linearly scaled the cost according to the 
cooling capacities of the equipment classes.
---------------------------------------------------------------------------

    \23\ RS Means Company, Inc. RS Means Mechanical Cost Data 2013. 
2013. Kingston, MA.
---------------------------------------------------------------------------

2. Unit Energy Consumption
    The calculation of annual per-unit energy consumption at each 
considered

[[Page 43180]]

efficiency level and capacity is described in section IV.E.
3. Electricity Prices and Electricity Price Trends
    DOE determined electricity prices for PTAC and PTHP users based on 
tariffs from a representative sample of electric utilities. Since air-
conditioning loads are strongly peak-coincident, regional marginal 
prices were developed from the tariff data and then scaled to 
approximate 2014 prices. This approach calculates energy expenses based 
on actual commercial building marginal electricity prices that 
consumers are paying.\24\
---------------------------------------------------------------------------

    \24\ Coughlin, K., C. Bolduc, R. Van Buskirk, G. Rosenquist and 
J. E. McMahon, ``Tariff-based Analysis of Commercial Building 
Electricity Prices.'' Lawrence Berkeley National Laboratory. LBNL-
55551. 2008.
---------------------------------------------------------------------------

    The Commercial Buildings Energy Consumption Survey completed in 
1992 (CBECS 1992) and in 1995 (CBECS 1995) provides 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, a marginal price was determined 
for each region of the U.S.
    The tariff-based prices were updated to 2013 using the commercial 
electricity price index published in the AEO and then adjusted to 
2014$. An examination of data published by the Edison Electric 
Institute \25\ indicates that the rate of increase of marginal and 
average prices is not significantly different, so the same factor was 
used for both pricing estimates. DOE projected future electricity 
prices using trends in average U.S. commercial electricity price from 
AEO 2014.\26\ More information can be found in chapter 8 of the final 
rule TSD.
---------------------------------------------------------------------------

    \25\ ``EEI Typical Bills and Average Rates Report (bi-annual, 
2007-2012),'' Edison Electric Institute, Washington, DC. 2012.
    \26\ ``Annual Energy Outlook 2014,'' U.S. Energy Information 
Administration. May, 2014. Available online at http://www.eia.gov/forecasts/aeo/.
---------------------------------------------------------------------------

4. Repair Costs
    Repair costs are associated with repairing or replacing components 
that have failed. In the September 2014 NOPR, DOE determined the cost 
of repair costs by annualizing warranty contract's prices and linearly 
scaling by cooling capacity and MSP to cover the equipment classes and 
considered efficiency levels.
    DOE received comments regarding repair costs. AHRI stated that 
repair costs are significantly more expensive after the warranty has 
expired and that DOE should account for repair costs after five years. 
(AHRI, No. 35 at p. 13; AHRI, NOPR Public Meeting Transcript, No. 37 at 
p. 154) Goodman recommended that DOE reevaluate the repair cost amounts 
specified in the NOPR TSD, adding that equipment lifetime can be 
substantially longer than the typical equipment warranty and that using 
warranty costs as a proxy for lifetime repair prices understates 
average annual repair costs. Goodman also recommended that DOE survey 
contractors to determine average labor costs associated with repair 
work. (Goodman, No. 31 at pp. 3-4)
    In response to these comments, DOE reevaluated the repair costs it 
had proposed in the September 2014 NOPR. For the final rule, DOE used 
the material and labor costs associated with repair of equipment 
components covered and not covered by a standard manufacturer warranty. 
Based on a report of component failure probability and warranty terms, 
and on component material and labor costs from RS Means data,\27\ DOE 
determined the expected value of the total cost of a repair and 
annualized it to determine the annual repair cost. Similar to the 
approach used in the September 2014 NOPR, DOE scaled by cooling 
capacity and MSP to determine repair costs for the equipment classes 
and considered efficiency levels.
---------------------------------------------------------------------------

    \27\ RS Means Company, Inc. ``RSMeans Facilities Maintenance & 
Repair Cost Data,'' 2013.
---------------------------------------------------------------------------

5. Maintenance Costs
    Maintenance costs are costs associated with general maintenance of 
the equipment (e.g., checking and maintaining refrigerant charge levels 
and cleaning heat-exchanger coils). In the September 2014 NOPR, DOE 
utilized estimates of annual maintenance cost from the previous 
rulemaking with the values adjusted to current material and labor rates 
to estimate maintenance cost for PTACs. For PTHPs, DOE scaled the 
adjusted estimate of PTAC maintenance costs with the ratio of PTHP to 
PTAC annualized maintenance costs from RS Means data.\28\ Since 
maintenance tasks do not change with efficiency level, DOE does not 
expect maintenance costs to scale with efficiency level. Maintenance 
costs were linearly scaled by cooling capacity to all equipment 
classes. For the final rule, DOE adopted the approach used in the 
September 2014 NOPR to determine maintenance costs for PTAC and PTHP 
equipment.
---------------------------------------------------------------------------

    \28\ RS Means Company, Inc. RSMeans Online. (Last accessed March 
26, 2013.) http://www.rsmeansonline.com.
---------------------------------------------------------------------------

6. Lifetime
    Equipment lifetime is the age at which the equipment is retired 
from service. In the September 2014 NOPR, DOE used a median equipment 
lifetime of 10 years with a maximum lifetime of 20 years. AHRI reminded 
DOE that ASHRAE had recommended the 15-year service life estimate based 
on a survey conducted in 1976 be used with caution. (AHRI, No. 35 at p. 
7) AHRI questioned DOE's use of ``time-to-failure'' instead of 
``service life'' and thereby urged DOE to recalibrate the Weibull 
distribution to have a mean of 5 years and a maximum of 12 years. 
(AHRI, No. 35 at p. 7) SCS commented that many hotel chains remodel 
their rooms and replace PTAC/PTHP equipment every seven to ten years. 
SCS believes that DOE is using a longer equipment lifetime than is 
applicable in real world use. (SCS, NOPR Public Meeting Transcript, No. 
37 at pp. 123-124)
    The comments of manufacturers, prevalent practice of lodging 
business operators, observations of lenders to hotel real estate, and 
expert insight have led DOE to recognize that major renovations of 
lodging businesses occur on a seven to ten year cycle and consist of 
replacing, adding, removing, or altering fixed assets. As capital 
investments ultimately shorten equipment lifetime, the distribution of 
businesses that renovate within a cycle form the basis for the mean 
lifetime. The distribution of businesses that do not renovate within 
one cycle, performing belated renovations or observing eventual 
equipment failure at the actual maximum lifetime of the equipment, form 
the basis of the maximum lifetime. Based on these distributions, DOE 
used a mean of 8 years and a maximum of 15 years in its analyses for 
the final rule. See chapter 8 of the final rule TSD for further 
discussion.
7. Discount Rate
    The discount rate is the rate at which future expenditures are 
discounted to estimate their present value. The cost of

[[Page 43181]]

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 estimated the cost of capital of companies that purchase PTAC 
and PTHP equipment. The types of companies that DOE used are large 
hotel/motel chains, independent hotel/motel, assisted living/health 
care, and small office. More details regarding DOE's estimates of 
consumer discount rates are provided in chapter 8 of the final rule 
TSD.
8. Base Case Efficiency Distribution
    For the LCC analysis, DOE analyzes the considered efficiency levels 
relative to a base case (i.e., the case without amended energy 
efficiency standards). This analysis requires an estimate of the 
distribution of equipment efficiencies in the base case (i.e., what 
consumers would have purchased in the compliance year in the absence of 
amended standards). DOE refers to this distribution of equipment energy 
efficiencies as the base case efficiency distribution.
    In the September 2014 NOPR, DOE reviewed the AHRI certified 
products directory \29\ for relevant equipment classes to determine the 
distribution of efficiency levels for commercially-available models 
within each equipment class analyzed. DOE bundled the efficiency levels 
into efficiency ranges and determined the percentage of models within 
each range. To estimate the change between the present and the 
compliance year, DOE applied a slightly increasing efficiency trend, as 
explained in section IV.H. For the final rule, DOE adopted the approach 
used in the September 2014 NOPR to determine the base case efficiency 
distribution for PTAC and PTHP equipment.
---------------------------------------------------------------------------

    \29\ See www.ahridirectory.org/ahriDirectory/pages/home.aspx.
---------------------------------------------------------------------------

    The distribution of efficiencies in the base case for each 
equipment class can be found in Table IV.8 and Table IV.9.

 Table IV.8--Compliance Year Base Case Efficiency Market Shares for Packaged Terminal Air Conditioning Equipment
----------------------------------------------------------------------------------------------------------------
           PTAC <12,000 Btu/h cooling capacity                     PTAC >=12,000 Btu/h cooling capacity
----------------------------------------------------------------------------------------------------------------
            EER                   Market share  (%)                   EER                  Market share  (%)
----------------------------------------------------------------------------------------------------------------
            11.1-11.29                          0.0                    9.3-9.49                         0.0
            11.3-11.49                         43.6                    9.5-9.69                        25.8
            11.5-11.99                         24.3                    9.7-9.99                        34.8
            12.0-12.39                         29.5                  10.0-10.39                        34.7
            12.4-12.89                          2.1                  10.4-10.79                         2.7
            12.9-13.09                          0.5                  10.8-10.99                         1.4
                >=13.1                          0.0                      >=11.0                         0.7
----------------------------------------------------------------------------------------------------------------


    Table IV.9--Compliance Year Base Case Efficiency Market Shares for Packaged Terminal Heat Pump Equipment
----------------------------------------------------------------------------------------------------------------
           PTHP <12,000 Btu/h cooling capacity                     PTHP >=12,000 Btu/h cooling capacity
----------------------------------------------------------------------------------------------------------------
            EER                    Market share (%)                   EER                  Market share (%)
----------------------------------------------------------------------------------------------------------------
            11.3-11.49                         52.5                    9.5-9.69                        63.1
            11.5-11.99                          8.9                    9.7-9.99                         0.0
            12.0-12.39                         26.1                  10.0-10.39                        28.4
            12.4-12.89                         12.4                  10.4-10.79                         7.2
            12.9-13.09                          0.0                  10.8-10.99                         1.4
                >=13.1                          0.0                      >=11.0                         0.0
----------------------------------------------------------------------------------------------------------------

9. Payback Period Inputs
    The payback period is the amount of time it takes the consumer to 
recover the additional installed cost of more efficient equipment, 
compared to baseline equipment, through energy cost savings. Payback 
periods are expressed in years. Payback periods that exceed the life of 
the equipment mean that the increased total installed cost is not 
recovered in reduced operating expenses.
    The inputs to the PBP calculation are the increase in the total 
installed cost of the equipment to the consumer for each efficiency 
level and the annual operating cost savings for each efficiency level. 
The PBP calculation uses the same inputs as the LCC analysis, except 
that discount rates are not needed.
10. Rebuttable-Presumption Payback Period
    EPCA establishes a rebuttable presumption that a standard is 
economically justified if the Secretary finds that the additional cost 
to the consumer of purchasing a product complying with an energy 
conservation standard level will be less than three times the value of 
the energy (and, as applicable, water) savings during the first year 
that the consumer will receive as a result of the standard, as 
calculated under the test procedure in place for that standard. (42 
U.S.C. 6295(o)(2)(B)(iii) and 42 U.S.C. 6316(a)) For each considered 
efficiency level, DOE determines the value of the first year's energy 
savings by calculating the quantity of those savings in accordance with 
the applicable DOE test procedure, and multiplying that amount by the

[[Page 43182]]

average energy price forecast for the year in which compliance with the 
amended standards would be required.

G. Shipments Analysis

    DOE uses projections of shipments for PTACs and PTHPs together to 
calculate equipment stock over the course of the analysis period, which 
in turn is used to determine the impacts of potential amended standards 
on national energy savings, net present value, and future manufacturer 
cash flows. DOE developed shipment projections based on historical data 
and an analysis of key market drivers for this equipment. Historical 
shipments data are used to build up an equipment stock and also to 
calibrate the shipments model. DOE separately calculated shipments 
intended for new construction and replacement applications. The sum of 
new construction and replacement shipments is the total shipments.
    New construction shipments were calculated using projected new 
construction floor space of healthcare, lodging, and small office 
buildings from AEO 2014 and historical PTAC and PTHP saturation in new 
buildings, which was estimated by dividing historical shipments by 
historical new construction floor space. Due to unrepresentative market 
conditions during the recession of 2008-2010, DOE used historical data 
from the analysis of the 2008 final rule to determine the value for the 
PTAC and PTHP saturation, which was used for each year of the analysis 
period. DOE then projected shipments based on the product of the 
saturation and AEO's projected new floor space.
    Replacement shipments equal the number of units that fail in a 
given year. DOE used a retirement function in the form of a Weibull 
distribution with inputs based on lifetime values from the LCC analysis 
to estimate the number of units of a given age that fail in each year. 
When a unit fails, it is removed from the stock and a new unit is 
introduced in its stead. Replacement shipments account for the largest 
portion of total shipments.
    DOE determined the distribution of total shipments among the 
equipment classes using shipments data by equipment class provided by 
AHRI for the previous PTAC and PTHP rulemaking. 73 FR 58772. For the 
NIA, DOE considered the following equipment classes for which it 
received shipments data:

 PTAC: <7,000 Btu/h cooling capacity, >=7000 and <=15000 Btu/h 
cooling capacity, and >=15000 Btu/h cooling capacity; and
 PTHP: <7,000 Btu/h cooling capacity, >=7000 and <=15000 Btu/h 
cooling capacity, and >=15000 Btu/h cooling capacity.

    For further information on the shipments analysis, see chapter 9 of 
the final rule TSD.

H. National Impact Analysis

    The NIA assesses the national energy savings (NES) and the national 
net present value (NPV) from a national perspective of total consumer 
costs and savings that would be expected to result from new or amended 
standards at specific efficiency levels. (``Consumer'' in this context 
refers to consumers of the equipment being regulated.) DOE calculates 
the NES and NPV based on projections of annual equipment shipments, 
along with the annual energy consumption and total installed cost data 
from the energy use and LCC analyses.\30\
---------------------------------------------------------------------------

    \30\ For the NIA, DOE adjusts the installed cost data from the 
LCC analysis to exclude sales tax, which is a transfer.
---------------------------------------------------------------------------

    DOE evaluates the impacts of new and amended standards by comparing 
a base-case projection with standards-case projections. The base-case 
projection characterizes energy use and consumer costs for each 
equipment class in the absence of new or amended energy conservation 
standards. For the base-case projection, DOE considers historical 
trends in efficiency and various forces that are likely to affect the 
mix of efficiencies over time. DOE compares the base-case projection 
with projections characterizing the market for each equipment class if 
DOE adopted new or amended standards at specific energy efficiency 
levels (i.e., the TSLs or standards cases) for that class. For the 
standards cases, DOE considers how a given standard would likely affect 
the market shares of equipment with efficiencies greater than the 
standard.
    DOE uses a spreadsheet model to calculate the energy savings and 
the national consumer costs and savings from each TSL. Interested 
parties can review DOE's analyses by changing various input quantities 
within the spreadsheet. The NIA spreadsheet model uses typical values 
(as opposed to probability distributions) as inputs.
    To develop the NES, DOE calculates annual energy consumption for 
the base case and the standards cases. DOE calculates the annual energy 
consumption using per-unit annual energy use data multiplied by 
projected shipments. DOE calculated energy savings for TSLs more 
stringent than the levels specified by ANSI/ASHRAE/IES Standard 90.1-
2013 in each year relative to a base case, defined as DOE adoption of 
the efficiency levels specified by ANSI/ASHRAE/IES Standard 90.1-2013.
    The inputs for determining the NPV of the total costs and benefits 
experienced by consumers are: (1) Total annual installed cost; (2) 
total annual savings in operating costs; and (3) a discount factor to 
calculate the present value of costs and savings. DOE calculates net 
savings each year as the difference between the base case and each 
standards case in terms of total savings in operating costs versus 
total increases in installed costs. DOE calculates operating cost 
savings over the lifetime of each product shipped during the forecast 
period. DOE used a discount factor based on real discount rates of 3 
percent and 7 percent to discount future costs and savings to present 
values.
    As discussed in section IV.F.1, DOE applied a constant price trend 
(2014 levels) for each efficiency level in each equipment class.
    A key component of the NIA is the equipment energy efficiency 
forecasted over time for the base case and for each of the standards 
cases. To estimate a base-case efficiency trend, DOE started with the 
base-case efficiency distribution described in section IV.F.8. For the 
equipment classes that were not covered in the LCC analysis, DOE used 
the same source (i.e., the AHRI Directory) to estimate the base-case 
efficiency distribution.
    The base case efficiency distributions are set forth in Table IV.10 
and Table IV.11.

[[Page 43183]]



    Table IV.10--Base Case Efficiency Market Shares in Compliance Year for Packaged Terminal Air Conditioning
                                                    Equipment
----------------------------------------------------------------------------------------------------------------
  PTAC <7000 Btu/h cooling capacity   PTAC >=7000 to <=15000 Btu/h cooling   PTAC >=15000 Btu/h cooling capacity
-------------------------------------               capacity               -------------------------------------
                                     --------------------------------------
       EER          Market share (%)         EER          Market share (%)         EER          Market share (%)
----------------------------------------------------------------------------------------------------------------
           11.7                  0               11.1                  0                9.3                  0
           11.9                  0               11.3                 38                9.5                 65
           12.2                 63               11.5                 29                9.7                 17
           12.6                 37               12.0                 29               10.0                 18
           13.1                  0               12.4                  3               10.4                  0
           13.6                  0               12.9                  1               10.8                  0
           13.8                  0               13.1                  0               11.0                  0
----------------------------------------------------------------------------------------------------------------


  Table IV.11--Base Case Efficiency Market Shares in Compliance Year for Packaged Terminal Heat Pump Equipment
----------------------------------------------------------------------------------------------------------------
  PTHP <7000 Btu/h cooling capacity   PTHP >=7000 to <=15000 Btu/h cooling   PTHP >=15000 Btu/h cooling capacity
-------------------------------------               capacity               -------------------------------------
                                     --------------------------------------
       EER          Market share (%)         EER          Market share (%)         EER          Market share (%)
----------------------------------------------------------------------------------------------------------------
           11.9                 72               11.3                 56                9.5                 72
           12.2                 14               11.5                  8                9.7                  3
           12.6                 14               12.0                 26               10.0                 25
           13.1                  0               12.4                  9               10.4                  0
           13.6                  0               12.9                  1               10.8                  0
           13.8                  0               13.1                  0               11.0                  0
----------------------------------------------------------------------------------------------------------------

    For years after the compliance year, DOE applied a trend largely 
based on the trend from 2012 to 2035 that was used in the 2004 
commercial unitary air conditioner Advance Notice of Proposed 
Rulemaking (ANOPR), which estimated an increase of approximately 1 EER 
every 35 years.\31\ 69 FR 45460 (July 29, 2004). DOE adjusted this 
trend for PTACs by assuming that a gradual replacement of equipment at 
the Federal minimum with equipment at the ASHRAE standard occurs over 
10 years after the first year of expected compliance.
---------------------------------------------------------------------------

    \31\ See DOE's technical support document underlying DOE's July 
29, 2004 ANOPR. (Available at: http://www.regulations.gov/#!documentDetail;D=EERE-2006-STD-0103-0078).
---------------------------------------------------------------------------

    To estimate the impact that amended energy conservation standards 
may have in the first year of compliance, DOE typically uses a ``roll-
up'' scenario in its standards rulemakings. Under the ``roll-up'' 
scenario, DOE assumes equipment efficiencies in the base case that do 
not meet the new or amended standard level under consideration would 
``roll up'' to meet that standard level, and equipment shipments at 
efficiencies above the standard level under consideration would not be 
affected. AHRI asked how roll-up was possible if 100% of the market was 
already above a certain TSL, citing the example of the PTACs <7,000 
Btu/h equipment class that was already above TSL 3, as noted in the 
ASHRAE Standard 90.1-2013 NODA. (AHRI, No. 35 at p. 8) For those cases 
where the market share is entirely at or above a given potential 
standard level, DOE did not perform a roll-up operation.
    After the compliance year, DOE applied the same rate of efficiency 
growth in the standards cases as in the base case.
    Using the distribution of efficiencies in the base case and in the 
standards cases for each equipment class analyzed, DOE calculated 
market-weighted average efficiency values for each year. The market-
weighted average efficiency value represents the average efficiency of 
the total units shipped at a specified potential standard level. The 
market-weighted average efficiency values for the base case and the 
standards cases for each efficiency level analyzed for each equipment 
class is provided in chapter 10 of the final rule TSD.
    DOE converted the site electricity consumption and savings to 
primary energy (power sector energy consumption) using annual 
conversion factors derived from the AEO 2014 version of the National 
Energy Modeling System (NEMS). Cumulative energy savings are the sum of 
the NES for each year in which equipment shipped during the analysis 
period continues to operate.
    In 2011, 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 full-fuel-cycle (FFC) measures of 
energy use and greenhouse gas and other emissions in the national 
impact analyses and emissions analyses included in future energy 
conservation standards rulemakings. 76 FR 51281 (August 18, 2011). 
After evaluating the approaches discussed in the August 18, 2011 
document, DOE published a statement of amended policy in which DOE 
explained its determination that EIA's NEMS is the most appropriate 
tool for its FFC analysis and its intention to use NEMS for that 
purpose. 77 FR 49701 (August 17, 2012). NEMS is a public domain, multi-
sector, partial equilibrium model of the U.S. energy sector \32\ that 
EIA uses to prepare its Annual Energy Outlook. The approach used for 
deriving FFC measures of energy use and emissions is described in 
appendix 10-B of the final rule TSD.
---------------------------------------------------------------------------

    \32\ For more information on NEMS, refer to The National Energy 
Modeling System: An Overview, DOE/EIA-0581 (98) (Feb.1998) 
(Available at: http://www.eia.gov/oiaf/aeo/overview/).
---------------------------------------------------------------------------

I. Consumer Subgroup Analysis

    In analyzing the potential impacts of new or amended standards on 
commercial consumers, DOE evaluates impacts on identifiable groups 
(i.e., subgroups) of consumers that may be disproportionately affected 
by a national standard. For the September 2014

[[Page 43184]]

NOPR, DOE evaluated impacts on a subgroup consisting of independently-
operating lodging businesses using the LCC and PBP spreadsheet model. 
To the extent possible, it utilized inputs appropriate for this 
subgroup.
    SCS stated that consumers in the northern region of the U.S. should 
be considered as a separate subgroup because they may be 
disproportionally impacted by the proposed standard. SCS reasoned that 
the proportion of consumers using heat pumps is much less than in the 
southern U.S. (SCS, No. 29 at p. 3) DOE does not have sufficient 
information for PTAC and PTHP equipment to define a separate subgroup 
for consumers in the northern region. However, the distribution of LCC 
and PBP results reflects the impacts for consumers located in different 
regions.
    The commercial consumer subgroup analysis is discussed in chapter 
11 of the final rule TSD.

J. Manufacturer Impact Analysis

1. Overview
    DOE performed an MIA to estimate the financial impact of amended 
energy conservation standards on manufacturers of PTACs and PTHPs, and 
to calculate the potential impact of such standards on employment and 
manufacturing capacity. The MIA has both quantitative and qualitative 
aspects. The quantitative part of the MIA primarily relies on the 
Government Regulatory Impact Model (GRIM), an industry cash-flow model 
with inputs specific to this rulemaking. The key GRIM inputs are data 
on the industry cost structure, equipment costs, shipments, and 
assumptions about markups and conversion expenditures. The key output 
is the industry net present value (INPV). Different sets of assumptions 
(markup scenarios) will produce different results. The qualitative part 
of the MIA addresses factors such as equipment characteristics, impacts 
on particular subgroups of firms, and important market and equipment 
trends. The complete MIA is outlined in chapter 12 of the final rule 
TSD.
    DOE conducted the MIA for this rulemaking in three phases. In Phase 
1 of the MIA, DOE conducted interviews with a representative cross-
section of manufacturers and prepared a profile of the PTAC and PTHP 
industry. During manufacturer interviews, DOE discussed engineering, 
manufacturing, procurement, and financial topics to identify key issues 
or concerns and to inform and validate assumptions used in the GRIM. 
See section IV.J.2 for a description of the key issues manufacturers 
raised during the interviews.
    DOE used information obtained during these interviews to prepare a 
profile of the PTAC and PTHP industry, including a manufacturer cost 
analysis. Drawing on financial analysis performed as part of the 2008 
energy conservation standard for PTACs and PTHPs as well as feedback 
obtained from manufacturers, DOE derived financial inputs for the GRIM 
(e.g., sales, general, and administration (SG&A) expenses; research and 
development (R&D) expenses; and tax rates). DOE also used public 
sources of information, including company SEC 10-K filings,\33\ 
corporate annual reports, the U.S. Census Bureau's Economic Census,\34\ 
and Hoover's reports,\35\ to develop the industry profile.
---------------------------------------------------------------------------

    \33\ U.S. Securities and Exchange Commission. Annual 10-K 
Reports. Various Years. <http://www.sec.gov>.
    \34\ ``Annual Survey of Manufacturers: General Statistics: 
Statistics for Industry Groups and Industries.'' U.S. Census Bureau. 
2014. Available at: http://factfinder2.census.gov/faces/nav/jsf/pages/searchresults.xhtml?refresh=t.
    \35\ Hoovers, Inc. Company Profiles. Various Companies. <http://www.hoovers.com>.
---------------------------------------------------------------------------

    In Phase 2 of the MIA, DOE prepared an industry cash-flow analysis 
to quantify the potential impacts of an amended energy conservation 
standard on manufacturers of PTACs and PTHPs. In general, energy 
conservation standards can affect manufacturer cash flow in three 
distinct ways: (1) Create a need for increased investment; (2) raise 
production costs per unit; and (3) alter revenue due to higher per-unit 
prices and possible changes in sales volumes. To quantify these 
impacts, DOE used the GRIM to perform a cash-flow analysis for the PTAC 
and PTHP industry using financial values derived during Phase 1.
    In Phase 3 of the MIA, DOE evaluated subgroups of manufacturers 
that may be disproportionately impacted by amended energy conservation 
standards or that may not be represented accurately by the average cost 
assumptions used to develop the industry cash-flow analysis. For 
example, small manufacturers, niche players, or manufacturers 
exhibiting a cost structure that largely differs from the industry 
average could be more negatively affected. DOE identified two subgroups 
for separate impact analyses: (1) Manufacturers with production assets; 
and (2) small businesses.
    DOE initially identified 22 companies that sell PTAC and PTHP 
equipment in the U.S. However, most companies selling in the U.S. 
market do not own production assets; rather, they import and distribute 
PTACs and PTHPs manufactured overseas, primarily in China. DOE 
identified a subgroup of three U.S. manufacturers that own production 
assets. Together, these three manufacturers account for approximately 
80 percent of the domestic PTAC and PTHP market. Because manufacturers 
with production assets will incur different costs to comply with 
amended energy conservation standards compared to their competitors who 
do not own production assets, DOE conducted a separate subgroup 
analysis to evaluate the potential impacts of amended energy 
conservation standards on manufacturers with production assets. The 
subgroup analysis of PTAC and PTHP manufacturers with production assets 
is discussed in chapter 12 of the final rule TSD and in section V.B.2 
of this document.
    For the small businesses subgroup analysis, DOE applied the small 
business size standards published by the Small Business Administration 
(SBA) to determine whether a company is considered a small business. 
See 13 CFR part 121. To be categorized as a small business under North 
American Industry Classification System (NAICS) code 333415, ``Air-
Conditioning and Warm Air Heating Equipment and Commercial and 
Industrial Refrigeration Equipment Manufacturing,'' a PTAC and PTHP 
manufacturer and its affiliates may employ a maximum of 750 employees. 
The 750-employee threshold includes all employees in a business's 
parent company and any other subsidiaries. Based on this 
classification, DOE identified 12 manufacturers that qualify as small 
businesses. The PTAC and PTHP small manufacturer subgroup is discussed 
in chapter 12 of the final rule TSD and in section VI.B of this 
document.
2. Government Regulatory Impact Model
    DOE uses the GRIM to quantify the changes in cash flow due to 
amended standards that result in a higher or lower industry value. The 
GRIM analysis uses a standard, annual cash-flow analysis that 
incorporates manufacturer costs, markups, shipments, and industry 
financial information as inputs. The GRIM models changes in costs, 
distribution of shipments, investments, and manufacturer margins that 
could result from an amended energy conservation standard. The GRIM 
spreadsheet uses the inputs to arrive at a series of annual cash flows, 
beginning in 2015 (the base year of the analysis) and continuing for a 
30-year period that begins in the compliance year for each equipment

[[Page 43185]]

class. DOE calculated INPVs by summing the stream of annual discounted 
cash flows during this period. DOE used a real discount rate of 8.5 
percent, which was derived from industry financials and then modified 
according to feedback received during manufacturer interviews.
    The GRIM calculates cash flows using standard accounting principles 
and compares changes in INPV between a base case and each standards 
case. The difference in INPV between the base case and a standards case 
represents the financial impact of the amended energy conservation 
standard on manufacturers.
    DOE collected information on critical GRIM inputs from a number of 
sources, including publicly available data and interviews with 
manufacturers (described in the next section). The GRIM results are 
shown in section V.B.2. Additional details about the GRIM, the discount 
rate, and other financial parameters can be found in chapter 12 of the 
final rule TSD.
a. Government Regulatory Impact Model Key Inputs
Manufacturer Production Costs
    Manufacturing more efficient equipment is typically more expensive 
than manufacturing baseline equipment due to the use of more complex 
components, which are typically more costly than baseline components. 
The changes in the MPCs of the analyzed equipment can affect the 
revenues, gross margins, and cash flow of the industry, making these 
equipment cost data key GRIM inputs for DOE's analysis.
    In the MIA, DOE used the MPCs for each considered efficiency level 
calculated in the engineering analysis, as described in section IV.C 
and further detailed in chapter 5 of the final rule TSD. In addition, 
DOE used information from its teardown analysis, described in chapter 5 
of the final rule TSD, to disaggregate the MPCs into material, labor, 
and overhead costs. To calculate the MPCs for equipment above the 
baseline, DOE added the incremental material, labor, and overhead costs 
from the engineering cost-efficiency curves to the baseline MPCs. These 
cost breakdowns and equipment markups were validated and revised with 
manufacturers during manufacturer interviews.
Shipments Forecasts
    The GRIM estimates manufacturer revenues based on total unit 
shipment forecasts and the distribution of these values by efficiency 
level. Changes in sales volumes and efficiency mix over time can 
significantly affect manufacturer finances. For this analysis, the GRIM 
uses the NIA's annual shipment forecasts derived from the shipments 
analysis. See section IV.G above and chapter 10 of the final rule TSD 
for additional details.
Product and Capital Conversion Costs
    An amended energy conservation standard would cause manufacturers 
to incur conversion costs to bring their production facilities and 
equipment designs into compliance. DOE evaluated the level of 
conversion-related expenditures that would be needed to comply with 
each considered efficiency level in each equipment class. For the MIA, 
DOE classified these conversion costs into two major groups: (1) 
Product conversion costs; and (2) capital conversion costs. Product 
conversion costs are investments in research, development, testing, 
marketing, and other non-capitalized costs necessary to make equipment 
designs comply with the amended energy conservation standard. Capital 
conversion costs are investments in property, plant, and equipment 
necessary to adapt or change existing production facilities such that 
new compliant equipment designs can be fabricated and assembled.
    To evaluate the level of capital conversion expenditures 
manufacturers would likely incur to comply with amended energy 
conservation standards, DOE used manufacturer interviews to gather data 
on the anticipated level of capital investment that would be required 
at each efficiency level. DOE validated manufacturer comments through 
estimates of capital expenditure requirements derived from the 
equipment teardown analysis and engineering analysis described in 
chapter 5 of the final rule TSD.
    DOE assessed the product conversion costs at each considered 
efficiency level by integrating data from quantitative and qualitative 
sources. DOE considered market-share-weighted feedback regarding the 
potential costs of each efficiency level from multiple manufacturers to 
estimate product conversion costs and validated those numbers against 
engineering estimates of redesign efforts.
    In general, DOE assumes that all conversion-related investments 
occur between the year of publication of the final rule and the year by 
which manufacturers must comply with the new standard. The conversion 
cost figures used in the GRIM can be found in section V.B.2 of this 
document. For additional information on the estimated product and 
capital conversion costs, see chapter 12 of the final rule TSD.
b. Government Regulatory Impact Model Scenarios
Markup Scenarios
    Manufacturer selling prices (MSPs) include direct manufacturing 
production costs (i.e., labor, materials, and overhead estimated in 
DOE's MPCs) and all non-production costs (i.e., SG&A, R&D, and 
interest), along with profit. To calculate the MSPs in the GRIM, DOE 
applied non-production cost markups to the MPCs estimated in the 
engineering analysis for each equipment class and efficiency level. 
Modifying these markups in the standards case yields different sets of 
impacts on manufacturers. For the MIA, DOE modeled two standards-case 
markup scenarios to represent the uncertainty regarding the potential 
impacts on prices and profitability for manufacturers following the 
implementation of amended energy conservation standards: (1) A 
preservation of gross margin percentage markup scenario; and (2) a 
preservation of per unit operating profit markup scenario. These 
scenarios lead to different markup values that, when applied to the 
inputted MPCs, result in varying revenue and cash flow impacts.
    Under the preservation of gross margin percentage scenario, DOE 
applied a single uniform ``gross margin percentage'' markup across all 
efficiency levels, which assumes that manufacturers would be able to 
maintain the same amount of profit as a percentage of revenues at all 
efficiency levels within an equipment class. As production costs 
increase with efficiency, this scenario implies that the absolute 
dollar markup will increase as well. Based on publicly-available 
financial information for manufacturers of PTACs and PTHPs as well as 
comments from manufacturer interviews, DOE assumed the average non-
production cost markup--which includes SG&A expenses, R&D expenses, 
interest, and profit--to be 1.27 for all PTAC and PTHP equipment 
classes.
    Because this markup scenario assumes that manufacturers would be 
able to maintain their gross margin percentage markups as production 
costs increase in response to an amended energy conservation standard, 
it represents a high bound to industry profitability.
    In the preservation of per unit operating profit scenario, 
manufacturer markups are set so that operating profit one year after 
the compliance date of the

[[Page 43186]]

amended energy conservation standard is the same as in the base case on 
a per unit basis. Under this scenario, as the costs of production 
increase under an amended standards case, manufacturers are generally 
required to reduce their markups to a level that maintains base-case 
operating profit per unit. The implicit assumption behind this markup 
scenario is that the industry can only maintain its operating profit in 
absolute dollars per unit after compliance with the new standard is 
required. Therefore, operating margin in percentage terms is reduced 
between the base case and standards case. DOE adjusted the manufacturer 
markups in the GRIM at each TSL to yield approximately the same 
earnings before interest and taxes in the standards case as in the base 
case. This markup scenario represents a low bound to industry 
profitability under an amended energy conservation standard.
c. Manufacturer Interviews
    As part of the MIA, DOE discussed the potential impacts of amended 
energy conservation standards with manufacturers of PTACs and PTHPs. 
DOE interviewed manufacturers representing approximately 90 percent of 
the market by revenue. Information gathered during these interviews 
enabled DOE to tailor the GRIM to reflect the unique financial 
characteristics of the industry.
3. Discussion of Comments
    During the NOPR public comment period, interested parties commented 
on assumptions and results described in the September 2014 NOPR and 
accompanying TSD. Comments address several topics related to 
manufacturer impacts. These include: Multiple redesign cycles due to 
ASHRAE; conversion costs; impacts on the subgroup of manufacturers with 
production assets; and cumulative regulatory burden.
a. Multiple Redesign Cycles
    AHRI and Goodman commented that DOE's EPCA baseline analysis should 
account for the financial impacts on manufacturers of multiple redesign 
cycles, the first to comply with amended ASHRAE standards (2015) and 
the second to comply with amended federal energy conservation standards 
(2019). (AHRI, No. 35 at pp. 6 and 11; Goodman, No. 31 at pp. 1-2) 
Southern Company Services (SCS) also commented that the proposed level 
would entail an undue burden on manufacturers by requiring them to 
undertake multiple redesign cycles. (SCS, No. 29 at p. 2) To better 
account for the impacts of multiple redesign cycles on manufacturers, 
DOE revised its EPCA baseline analysis to include an additional set of 
product conversion costs intended to capture the R&D and testing and 
certification burden of meeting amended ASHRAE standards in 2015. See 
chapter 12 of the final rule TSD for more information on the EPCA 
baseline analysis.
b. Conversion Costs
    AHRI commented that DOE underestimated the product conversion costs 
industry would incur to comply with amended standards. AHRI stated that 
DOE underestimated the number of PTAC and PTHP models that would 
require redesign and suggested that DOE should not assign one set of 
R&D costs to similar models of PTACs and PTHPs. (AHRI, No. 35 at pp. 9-
11) DOE clarifies that it assigned separate product conversion costs 
for PTACs and PTHPs. DOE also based its product conversion cost model 
on the number of equipment platforms that would require redesign as 
opposed to the number of individual equipment listings, where equipment 
platforms were defined based on cooling capacity within a given 
equipment class. DOE assumed R&D costs ranging from $50,000 to $200,000 
per platform based on the complexity of the redesign anticipated at 
each TSL. DOE further clarifies that it validated its conversion cost 
estimates against feedback received from manufacturers during 
interviews.
c. Impacts on the Subgroup of Manufacturers With Production Assets
    EEI and AHRI expressed concern that the subgroup of three 
manufacturers with production assets would bear a disproportionate 
share of the costs associated with the proposed rule. (EEI, No. 37 at 
pp. 180-181; AHRI, NOPR Public Meeting Transcript, No. 37 at pp. 183) 
Goodman also commented that this subgroup appears to be at a 
significant competitive disadvantage and further stated that this 
subgroup would have to absorb 90 percent of the industry's conversion 
costs while producing only 40 percent of equipment. Goodman referred to 
Chapter 16 of the NOPR TSD for the 40 percent figure. (Goodman, No. 31 
at pp. 4-5)
    To clarify, the subgroup of manufacturers with production assets 
evaluated as part of the MIA encompasses three U.S.-headquartered 
manufacturers that own PTAC and PTHP production facilities and tooling. 
These three companies' production assets may be located within the U.S. 
or in other countries. At standard levels more stringent than ASHRAE, 
these manufacturers would be expected to incur capital conversion costs 
that their competitors who strictly import and/or private label would 
not. As described in section V.B.2.d of this document and Chapter 12 of 
the final rule TSD, DOE estimates that these three manufacturers 
account for 80 percent of PTAC and PTHP production. Under the standard 
proposed in the September 2014 NOPR, this subgroup would have incurred 
an estimated 89 percent of total industry conversion costs and 
experienced more severe INPV impacts than the industry as a whole, as 
commenters noted; this discrepancy in conversion costs and related INPV 
impacts was DOE's reason for analyzing the subgroup as distinct from 
the industry as a whole. However, in this final rule, DOE is adopting 
standards for PTACs and PTHPs equivalent to those set forth in ANSI/
ASHRAE/IES Standard 90.1-2013. DOE is required to adopt minimum 
efficiency standards either equivalent to or more stringent than those 
set forth by ASHRAE. Because this rule adopts the baseline as the 
standards level, DOE's modeling does not show any negative financial 
impacts on industry, including manufacturers with production assets, as 
a direct result of the standard.
d. Cumulative Regulatory Burden
    Goodman stated that EPA's refrigerant regulations contribute to 
manufacturers' cumulative regulatory burden and urged DOE to account 
for refrigerant regulations in both its INPV analysis and its 
discussion of cumulative regulatory burden. (Goodman, No. 37 at pp. 46-
47) SCS also stated that this rule combined with other pending 
rulemakings would pose an undue burden on manufacturers and could 
constrain capacity at testing and certification facilities. (SCS, No. 
29 at p. 2) DOE is required to adopt PTAC and PTHP standards as set 
forth in ASHRAE 90.1-2013. DOE has added a discussion of EPA's SNAP 
Program to its analysis of cumulative regulatory burden found in 
section V.B.2.e of this document.

K. Emissions Analysis

    In the emissions analysis, DOE estimated the change in power sector 
emissions of carbon dioxide (CO2), nitrogen oxides 
(NOX), sulfur dioxide (SO2), and mercury (Hg) 
from potential energy conservation standards for PTAC and PTHP 
equipment. In addition, DOE estimated 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

[[Page 43187]]

(August 18, 2011), as amended at 77 FR 49701 (August 17, 2012)), the 
FFC analysis includes impacts on emissions of methane (CH4) 
and nitrous oxide (N2O), both of which are recognized as 
greenhouse gases.
    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 Environmental Protection Agency (EPA) in its GHG 
Emissions Factors Hub.\36\ DOE developed separate emissions factors for 
power sector emissions and upstream emissions. The method that DOE used 
to derive emissions factors is described in chapter 13 of the final 
rule TSD.
---------------------------------------------------------------------------

    \36\ See http://www.epa.gov/climateleadership/inventory/ghg-emissions.html.
---------------------------------------------------------------------------

    For CH4 and N2O, DOE calculated emissions 
reduction in tons and also in terms of units of carbon dioxide 
equivalent (CO2eq). Gases are converted to CO2eq 
by multiplying each ton of gas by the gas' global warming potential 
(GWP) over a 100-year time horizon. Based on the Fifth Assessment 
Report of the Intergovernmental Panel on Climate Change,\37\ DOE used 
GWP values of 28 for CH4 and 265 for N2O.
---------------------------------------------------------------------------

    \37\ IPCC, 2013: Climate Change 2013: The Physical Science 
Basis. Contribution of Working Group I to the Fifth Assessment 
Report of the Intergovernmental Panel on Climate Change [Stocker, 
T.F., D. Qin, G.-K. Plattner, M. Tignor, S.K. Allen, J. Boschung, A. 
Nauels, Y. Xia, V. Bex and P.M. Midgley (eds.)]. Cambridge 
University Press, Cambridge, United Kingdom and New York, NY, USA. 
Chapter 8.
---------------------------------------------------------------------------

    Each Annual Energy Outlook 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. Key regulations are discussed below.
    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 
created an allowance-based trading program that operates along with the 
Title IV program. In 2008, CAIR was remanded to EPA by the U.S. Court 
of Appeals for the District of Columbia Circuit, but it remained in 
effect.\38\ In 2011, EPA issued a replacement for CAIR, the Cross-State 
Air Pollution Rule (CSAPR). 76 FR 48208 (August 8, 2011). On August 21, 
2012, the D.C. Circuit issued a decision to vacate CSAPR,\39\ and the 
court ordered EPA to continue administering CAIR. 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.\40\ On October 23, 2014, the D.C. Circuit lifted the 
stay of CSAPR.\41\ Pursuant to this action, CSAPR went into effect (and 
CAIR ceased to be in effect) as of January 1, 2015.
---------------------------------------------------------------------------

    \38\ 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).
    \39\ 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).
    \40\ See EPA v. EME Homer City Generation, 134 S.Ct. 1584, 1610 
(U.S. 2014). 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.
    \41\ See Georgia v. EPA, Order (D.C. Cir. filed October 23, 
2014) (No. 11-1302).
---------------------------------------------------------------------------

    Because AEO 2014 was prepared prior to the Supreme Court's opinion, 
it assumed that CAIR remains a binding regulation through 2040. Thus, 
DOE's analysis used emissions factors that assume that CAIR, not CSAPR, 
is the regulation in force. However, the difference between CAIR and 
CSAPR is not relevant for the purpose of DOE's analysis of emissions 
impacts from energy conservation standards.
    The attainment of emissions caps is typically flexible among EGUs 
and is enforced through the use of emissions allowances and tradable 
permits. Under existing EPA regulations, any excess SO2 
emissions allowances resulting from the lower electricity demand caused 
by the adoption of an efficiency standard could be used to permit 
offsetting increases in SO2 emissions by any regulated EGU. 
In past rulemakings, DOE recognized that there was uncertainty about 
the effects of efficiency standards on SO2 emissions covered 
by the existing cap-and-trade system, but it concluded that negligible 
reductions in power sector SO2 emissions would occur as a 
result of standards.
    Beginning in 2016, however, SO2 emissions will fall as a 
result of the Mercury and Air Toxics Standards (MATS) for power plants. 
77 FR 9304 (Feb. 16, 2012). In the 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 desulfurization or dry sorbent injection systems 
installed by 2016. Both technologies, which are used to reduce acid gas 
emissions, 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 conservation standards will 
generally reduce SO2 emissions in 2016 and beyond.
    CAIR established a cap on NOX emissions in 28 eastern 
States and the District of Columbia.\42\ 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.
---------------------------------------------------------------------------

    \42\ 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 emissions is slight.
---------------------------------------------------------------------------

    The MATS limit mercury emissions from power plants, but they do not 
include emissions caps and, as such, DOE's energy conservation 
standards would likely reduce Hg emissions. DOE estimated mercury 
emissions reduction using emissions factors based on AEO 2014, which 
incorporates the MATS.
    EEI commented that things are changing dramatically in the power 
sector; new rules are changing the amount of emissions that power 
producers are allowed to emit, and DOE should include these changes in 
its analysis. (EEI, NOPR Public Meeting Transcript, No. 37 at pp. 196-
197) SCS commented that DOE is likely overestimating the amount of 
emissions

[[Page 43188]]

reductions by not accounting for the anticipated effects of new 
emissions rules that are currently under consideration. (SCS, NOPR 
Public Meeting Transcript, No. 37 at pp. 197-198) It would not be 
appropriate for DOE to account for regulations that are under 
consideration, because whether they will be adopted and their final 
form are matters of speculation at this time.

L. Monetizing Carbon Dioxide and Other Emissions Impacts

    As part of the development of this rule, DOE considered the 
estimated monetary benefits from the reduced emissions of 
CO2 and NOX that are expected to result from each 
of the TSLs considered. In order to make this calculation 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 TSL. 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 14 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 \43\ 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.
---------------------------------------------------------------------------

    \43\ 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, $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. 
Specially, 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

[[Page 43189]]

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,\44\ although preference is given to consideration of the 
global benefits of reducing CO2 emissions. Table IV.12 
presents the values in the 2010 interagency group report,\45\ which is 
reproduced in appendix 14A of the final rule TSD.
---------------------------------------------------------------------------

    \44\ 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.
    \45\ 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 IV.12--Annual SCC Values From 2010 Interagency Report, 2010-2050
                                           [2007$ per metric ton CO2]
----------------------------------------------------------------------------------------------------------------
                                                                     Discount rate
                                     ---------------------------------------------------------------------------
                Year                          5%                 3%                2.5%                3%
                                     ---------------------------------------------------------------------------
                                           Average            Average            Average        95th percentile
----------------------------------------------------------------------------------------------------------------
2010................................                4.7               21.4               35.1               64.9
2015................................                5.7               23.8               38.4               72.8
2020................................                6.8               26.3               41.7               80.7
2025................................                8.2               29.6               45.9               90.4
2030................................                9.7               32.8               50.0              100.0
2035................................               11.2               36.0               54.2              109.7
2040................................               12.7               39.2               58.4              119.3
2045................................               14.2               42.1               61.7              127.8
2050................................               15.7               44.9               65.0              136.2
----------------------------------------------------------------------------------------------------------------

    The SCC values used for this document were generated using the most 
recent versions of the three integrated assessment models that have 
been published in the peer-reviewed literature.\46\
---------------------------------------------------------------------------

    \46\ 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 IV.13 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 
14B 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.

                     Table IV.13--Annual SCC Values from 2013 Interagency Report, 2010-2050
                                           [2007$ per metric ton CO2]
----------------------------------------------------------------------------------------------------------------
                                                                     Discount rate
                                     ---------------------------------------------------------------------------
                Year                          5%                 3%                2.5%                3%
                                     ---------------------------------------------------------------------------
                                           Average            Average            Average        95th percentile
----------------------------------------------------------------------------------------------------------------
2010................................                 11                 32                 51                 89
2015................................                 11                 37                 57                109
2020................................                 12                 43                 64                128
2025................................                 14                 47                 69                143
2030................................                 16                 52                 75                159
2035................................                 19                 56                 80                175
2040................................                 21                 61                 86                191
2045................................                 24                 66                 92                206
2050................................                 26                 71                 97                220
----------------------------------------------------------------------------------------------------------------


[[Page 43190]]

    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 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 had been used to obtain the SCC values in each case.
2. Social Cost of Other Air Pollutants
    As noted previously, DOE has taken into account how considered 
energy conservation standards would reduce site NOX 
emissions nationwide and decrease 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 TSLs considered for this final rule based on estimates 
found in the an OMB report to Congress.\47\ DOE calculated monetary 
benefits using an average value for reducing NOX from 
stationary sources of $2,727 per ton (in 2014$), and real discount 
rates of 3 percent and 7 percent.
---------------------------------------------------------------------------

    \47\ 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.
    In responding to the September 2014 NOPR, AHRI, Goodman, and the 
Associations stated that DOE should refrain from using SCC values to 
establish monetary figures for emissions reductions until the SCC 
undergoes a more rigorous notice, review, and comment process. (AHRI, 
No. 35 at p. 14; Goodman, No. 31 at p. 6; The Associations, No. 28 at 
p. 3) AHRI and Goodman cited several reasons why the SCC estimates 
should be withdrawn and not used in any rulemaking: (1) The SCC 
estimates fail in terms of process and transparency; (2) the modeling 
systems used for the SCC estimates and the subsequent analyses were not 
subject to peer review as appropriate; (3) the modeling conducted in 
this effort does not offer a reasonably acceptable range of accuracy 
for use in policymaking; (4) the Federal interagency working group has 
failed to disclose and quantify key uncertainties; and (5) by 
presenting only global SCC estimates and downplaying domestic SCC 
estimates, the interagency working group has severely limited the 
utility of the SCC for use in benefit-cost analysis and policymaking. 
(AHRI, No. 35 at pp. 14-15; Goodman, No. 31 at p. 6)
    In contrast, EDF et al. stated that the current SCC values are 
sufficiently robust and accurate to continue to be the basis for 
regulatory analysis going forward. They contended that current values 
are likely significant underestimates of the SCC. They stated that the 
interagency working group's analytic process was science-based, open, 
and transparent, and that the SCC is an important and accepted tool for 
regulatory policy-making, based on well-established law and fundamental 
economics. (EDF et al., No. 22 at pp. 1-12)
    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 14A and 14B of the final rule TSD, as 
are the major assumptions. Specifically, uncertainties in the 
assumptions regarding climate sensitivity, as well as other model 
inputs such as economic growth and emissions trajectories, are 
discussed and the reasons for the specific input assumptions chosen are 
explained. However, the three integrated assessment models used to 
estimate the SCC are frequently cited in the peer-reviewed literature 
and were used in the last assessment of the IPCC. In addition, new 
versions of the models that were used in 2013 to estimate revised SCC 
values were published in the peer-reviewed literature (see appendix 14B 
of the final rule TSD for discussion). Although uncertainties remain, 
the revised estimates that were issued in November, 2013 are based on 
the best available scientific information on the impacts of climate 
change. The current estimates of the SCC have been developed over many 
years, using the best science available, and with input from the 
public. In November 2013, OMB announced a new opportunity for public 
comment on the interagency technical support document underlying the 
revised SCC estimates. See 78 FR 70586. The comment period for the OMB 
announcement closed on February 26, 2014. 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.
    AHRI and Goodman also stated that DOE does not conduct the cost-
benefit analysis for NPV and SCC values over the same time frame and 
within the same scope, an important principle of cost-benefit analysis. 
They criticized DOE's use of global rather than domestic SCC values. 
(AHRI, No. 35 at p. 15; Goodman, No. 31 at p. 6)
    For the analysis of national impacts of standards, DOE considers 
the lifetime impacts of equipment shipped in a 30-year period. With 
respect to energy and energy cost savings, impacts continue past 30 
years until all of the equipment shipped in the 30-year period is 
retired. With respect to the valuation of CO2 emissions 
reductions, the SCC estimates developed by the interagency working 
group are meant to represent the full discounted value (using an 
appropriate range of discount rates) of emissions

[[Page 43191]]

reductions occurring in a given year. DOE is thus comparing the costs 
of achieving the emissions reductions in each year of the analysis, 
with the carbon reduction value of the emissions reductions in those 
same years. DOE's analysis estimates both global and domestic benefits 
of CO2 emissions reductions. The September 2014 NOPR and 
this final rule focus on a global measure of SCC. The issue of global 
versus domestic measures of the SCC is discussed in appendix 14A of the 
final rule TSD.
    AHRI and Goodman also stated that DOE fails to take into 
consideration EPA regulations on greenhouse gas emissions from power 
plants, which would affect the SCC values. (AHRI, No. 35 at pp. 15-16; 
Goodman, No. 31 at p. 7)
    The SCC values are based on projections of global GHG emissions 
over many decades. Such projections are influenced by many factors, 
particularly economic growth rates and prices of different energy 
sources. In the context of these projections, the proposed EPA 
regulations of greenhouse gas emissions from new power plants are a 
minor factor. In any case, it would not be appropriate for DOE to 
account for regulations that are not currently in effect, because 
whether such regulations will be adopted and their final form are 
matters of speculation at this time.

M. Utility Impact Analysis

    The utility impact analysis estimates several effects on the 
electric power industry that would result from the adoption of new or 
amended energy conservation standards. In the utility impact analysis, 
DOE analyzes the changes in installed electrical capacity and 
generation that would result for each trial standard level. The 
analysis is based on published output from NEMS, which is updated 
annually to produce the AEO Reference case, as well as a number of side 
cases that estimate the economy-wide impacts of changes to energy 
supply and demand. DOE uses published side cases that incorporate 
efficiency-related policies to estimate the marginal impacts of reduced 
energy demand on the utility sector. The output of this analysis is a 
set of time-dependent coefficients that capture the change in 
electricity generation, primary fuel consumption, installed capacity 
and power sector emissions due to a unit reduction in demand for a 
given end use. These coefficients are multiplied by the stream of 
electricity savings calculated in the NIA to provide estimates of 
selected utility impacts of new or amended energy conservation 
standards. Chapter 15 of the final rule TSD describes the utility 
impact analysis in further detail.

N. Employment Impact Analysis

    DOE considers employment impacts in the domestic economy as one 
factor in selecting a standard. Employment impacts from new or amended 
energy conservation standards include both direct and indirect impacts. 
Direct employment impacts are any changes in the number of employees of 
manufacturers of the equipment subject to standards, their suppliers, 
and related service firms. The MIA addresses those impacts. Indirect 
employment impacts are changes in national employment that occur due to 
the shift in expenditures and capital investment caused by the purchase 
and operation of more-efficient appliances. Indirect employment impacts 
from standards consist of the net jobs created or eliminated in the 
national economy, other than in the manufacturing sector being 
regulated, caused by: (1) Reduced spending by end users on energy; (2) 
reduced spending on new energy supply by the utility industry; (3) 
increased consumer spending on new equipment to which the new standards 
apply; and (4) the effects of those three factors throughout the 
economy.
    One method for assessing the possible effects on the demand for 
labor of such shifts in economic activity is to compare sector 
employment statistics developed by the Labor Department's Bureau of 
Labor Statistics (BLS).\48\ BLS regularly publishes its estimates of 
the number of jobs per million dollars of economic activity in 
different sectors of the economy, as well as the jobs created elsewhere 
in the economy by this same economic activity. Data from BLS indicate 
that expenditures in the utility sector generally create fewer jobs 
(both directly and indirectly) than expenditures in other sectors of 
the economy.\49\ There are many reasons for these differences, 
including wage differences and the fact that the utility sector is more 
capital-intensive and less labor-intensive than other sectors. Energy 
conservation standards have the effect of reducing consumer utility 
bills. Because reduced consumer expenditures for energy likely lead to 
increased expenditures in other sectors of the economy, the general 
effect of efficiency standards is to shift economic activity from a 
less labor-intensive sector (i.e., the utility sector) to more labor-
intensive sectors (e.g., the retail and service sectors). Thus, based 
on the BLS data alone, DOE believes net national employment may 
increase due to shifts in economic activity resulting from energy 
conservation standards.
---------------------------------------------------------------------------

    \48\ Data on industry employment, hours, labor compensation, 
value of production, and the implicit price deflator for output for 
these industries are available upon request by calling the Division 
of Industry Productivity Studies (202-691-5618) or by sending a 
request by email to [email protected].
    \49\ See Bureau of Economic Analysis, Regional Multipliers: A 
User Handbook for the Regional Input-Output Modeling System (RIMS 
II), U.S. Department of Commerce (1992).
---------------------------------------------------------------------------

    DOE estimated indirect national employment impacts for the standard 
levels considered in this final rule using an input/output model of the 
U.S. economy called Impact of Sector Energy Technologies version 3.1.1 
(ImSET).\50\ ImSET is a special-purpose version of the ``U.S. Benchmark 
National Input-Output'' (I-O) model, which was designed to estimate the 
national employment and income effects of energy-saving technologies. 
The ImSET software includes a computer-based I-O model having 
structural coefficients that characterize economic flows among 187 
sectors most relevant to industrial, commercial, and residential 
building energy use.
---------------------------------------------------------------------------

    \50\ J.M. Roop, M.J. Scott, and R.W. Schultz, ImSET 3.1: Impact 
of Sector Energy Technologies, PNNL-18412, Pacific Northwest 
National Laboratory (2009) (Available at: www.pnl.gov/main/publications/external/technical_reports/PNNL-18412.pdf).
---------------------------------------------------------------------------

    DOE notes that ImSET is not a general equilibrium forecasting 
model, and understands the uncertainties involved in projecting 
employment impacts, especially changes in the later years of the 
analysis. Because ImSET does not incorporate price changes, the 
employment effects predicted by ImSET may over-estimate actual job 
impacts over the long run for this rule. Therefore, DOE generated 
results for near-term timeframes, where these uncertainties are 
reduced. For more details on the employment impact analysis, see 
chapter 16 of the final rule TSD.

V. Analytical Results

    The following section addresses the results from DOE's analyses 
with respect to the considered energy conservation standards for PTAC 
and PTHP equipment. It addresses the TSLs examined by DOE and the 
projected impacts of each of these levels if adopted as energy 
conservation standards for PTAC and PTHP equipment. Additional details 
regarding DOE's analyses are contained in the final rule TSD supporting 
this document.

A. Trial Standard Levels

    In the September 2014 NOPR, DOE selected five TSLs above the 
baseline level for the PTAC and PTHP equipment

[[Page 43192]]

classes. 79 FR at 55573-73 The baseline level in this final rule 
corresponds to the energy efficiency equations in ANSI/ASHRAE/IES 
Standard 90.1-2013 for PTACs and PTHPs. The TSL 1, 2, 3, 4 efficiency 
levels represent matched pairs of efficiency levels at 2.2%, 6.2%, 
10.2%, and 14.2% above the baseline level. TSL 5, at 16.2% above the 
baseline level, represents the maximum technologically feasible (``max 
tech'') level for each class of equipment in DOE's analysis, as 
discussed in section IV.C.5.
    In developing the TSLs, DOE used the same EERs for PTAC and PTHP. 
EEI supported setting PTAC and PTHP standards at the same level, and 
said that approach will lead to economies of scale and will align with 
the approach taken by ASHRAE and other DOE standards. (EEI, NOPR Public 
Meeting Transcript, No. 37 at p. 206-7) AHRI commented that certain 
PTACs and PTHPs may have unequal efficiency levels because the suction 
gas reheat provided by the reversing valve for PTHPs enables gain of 
evaporating capacity without added input power. (AHRI, No. 35 at p. 12) 
On the other hand, the California IOUs commented that PTACs should be 
held to higher standards than PTHPs for cooling efficiency, due to 
inherent mechanical advantages resulting from not having a reverse 
cycle valve. (CA IOUs, No. 33 at p. 3)
    DOE notes that the pressure drop associated with the reversing 
valve in a PTHP (and the associated lost energy that could have been 
used for space conditioning), a component not present in a PTAC, makes 
achieving high efficiency levels more challenging for a heat pump than 
for an air conditioner. The AHRI comment indicates that suction heating 
achieved in the reversing valve of a PTHP will improve efficiency; 
however, in cooling mode, the refrigerant flows passing through the 
reversing valve are the compressor discharge, which flows to the 
outdoor coil, and the suction gas, which approaches the valve from the 
indoor coil and passes to the compressor suction. AHRI's comment does 
not explain how thermal exchange between compressor discharge and 
suction flows can improve efficiency. The additional pressure drop of 
the reversing valve reduces heat pump efficiency, and the potential 
thermal exchange between the refrigerant flows passing through the 
valve would also reduce efficiency. However, the operation of a heat 
pump both in summer for cooling and in winter for heating leads to a 
far greater number of operating hours for heat pumps as compared to air 
conditioners. The greater operating hours mean that both energy use and 
potential savings are higher for heat pumps. Consequently, higher 
efficiency levels can often be more cost effective in heat pumps than 
in air conditioners, since the higher purchase cost can be recovered 
more rapidly in a heat pump. DOE considered both the technical and 
economic factors in selecting the efficiency level differential between 
PTACs and PTHPs, one which would suggest higher EER for PTHPs, the 
other lower EER. Based on the selection of equal EERs for the different 
equipment in addendum BK to ASHRAE 90.1-2010, much of which was adopted 
in ASHRAE 90.1-2013, DOE considered equal EERs for these equipment 
classes in the framework document. DOE sought comments on this issue, 
and AHRI commented that if DOE raises the standards for PTACs, then 
they should be equal to the efficiency level of PTHPs. (AHRI, Framework 
Public Meeting Transcript, No. 7 at p. 50)
    Table V.1 shows the mapping between TSLs and efficiency levels in 
each TSL. DOE notes that the baseline level is 1.8 percent higher than 
current Federal standards for PTAC equipment, but is equivalent to 
current Federal standards for PTHP equipment.

                                                  Table V.1--Mapping Between TSLs and Efficiency Levels
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                 Baseline (ANSI/
                       Equipment class                         ASHRAE/IES Standard      TSL 1         TSL 2         TSL 3         TSL 4      TSL 5 Max-
                                                                  90.1-2013) *                                                                  Tech
--------------------------------------------------------------------------------------------------------------------------------------------------------
PTAC Efficiency Level.......................................                  EL1           EL2           EL3           EL4           EL5           EL6
PTHP Efficiency Level.......................................                     Current FedEL1l          EL2           EL3           EL4           EL5
                                                                                ECS
--------------------------------------------------------------------------------------------------------------------------------------------------------
* This level represents the ANSI/ASHRAE/IES Standard 90.1-2013 minimum for PTAC and PTHP equipment. This level is used as the Baseline since DOE is
  required to, at a minimum, adopt the ASHRAE levels as the Federal standard. (42 U.S.C. 6313(a)(6)(A)(ii)(I)) DOE notes that the Baseline level is 1.8%
  higher than current Federal ECS for PTAC equipment, but is equivalent to current Federal ECS for PTHP equipment. For PTAC equipment, the Baseline
  level is also termed EL1.

    Current Federal energy conservation standards and the efficiency 
levels specified by ANSI/ASHRAE/IES Standard 90.1-2013 for PTACs and 
PTHPs are a function of the equipment's cooling capacity. Both the 
Federal energy conservation standards and the efficiency standards in 
ANSI/ASHRAE/IES Standard 90.1-2013 are based on equations to calculate 
the efficiency levels for PTACs and PTHPs with a cooling capacity 
greater than or equal to 7,000 Btu/h and less than or equal to 15,000 
Btu/h for each equipment class. To derive the standards (i.e., 
efficiency level as a function of cooling capacity), DOE plotted the 
representative cooling capacities and the corresponding efficiency 
levels for each TSL. DOE then calculated the equation of the line 
passing through the EER values for 9,000 Btu/h and 15,000 Btu/h for 
standard size PTACs and PTHPs. Table V.2 and Table V.3 identify the 
energy efficiency equations for each TSL for standard size PTACs and 
PTHPs.

  Table V.2--Energy-Efficiency Equations (EER as a Function of Cooling
                Capacity) by TSL for Standard Size PTACs
------------------------------------------------------------------------
         Standard size ** PTACs            Energy efficiency equation *
------------------------------------------------------------------------
Baseline *** (ANSI/ASHRAE/IES Standard   EER = 14.0 - (0.300 x Cap
 90.1-2013).                              [dagger]/1000).
TSL 1..................................  EER = 14.4 - (0.312 x Cap
                                          [dagger]/1000).
TSL 2..................................  EER = 14.9 - (0.324 x Cap
                                          [dagger]/1000).
TSL 3..................................  EER = 15.5 - (0.336 x Cap
                                          [dagger]/1000).

[[Page 43193]]

 
TSL 4..................................  EER = 16.0 - (0.348 x Cap
                                          [dagger]/1000).
TSL 5--MaxTech.........................  EER = 16.3 - (0.354 x Cap
                                          [dagger]/1000).
------------------------------------------------------------------------
* For equipment rated according to the DOE test procedure, all EER
  values must be rated at 95 [deg]F outdoor dry-bulb temperature for air-
  cooled products and evaporatively-cooled products and at 85 [deg]F
  entering water temperature for water cooled products.
** Standard size refers to PTAC or PTHP equipment with wall sleeve
  dimensions greater than or equal to 16 inches high, or greater than or
  equal to 42 inches wide.
*** This level represents the ANSI/ASHRAE/IES Standard 90.1-2013 minimum
  for PTAC and PTHP equipment. This level is used as the Baseline since
  DOE is required to, at a minimum, adopt the ASHRAE levels as the
  Federal standard. (42 U.S.C. 6313(a)(6)(A)(ii)(I)).
[dagger] Cap means cooling capacity in Btu/h at 95 [deg]F outdoor dry-
  bulb temperature.


  Table V.3--Energy-Efficiency Equations (EER and COP as a Function of
            Cooling Capacity) by TSL for Standard Size PTHPs
------------------------------------------------------------------------
         Standard size ** PTHPs            Energy efficiency equation *
------------------------------------------------------------------------
Baseline *** (ANSI/ASHRAE/IES Standard   EER = 14.0 - (0.300 x Cap
 90.1-2013).                              [dagger]/1000).
                                         COP = 3.7 - (0.052 x Cap
                                          [dagger]/1000).
TSL 1..................................  EER = 14.4 - (0.312 x Cap
                                          [dagger]/1000).
                                         COP = 3.8 - (0.058 x Cap
                                          [dagger]/1000).
TSL 2..................................  EER = 14.9 - (0.324 x Cap
                                          [dagger]/1000).
                                         COP = 4.0 - (0.064 x Cap
                                          [dagger]/1000).
TSL 3..................................  EER = 15.5 - (0.336 x Cap
                                          [dagger]/1000).
                                         COP = 4.1 - (0.068 x Cap
                                          [dagger]/1000).
TSL 4..................................  EER = 16.0 - (0.348 x Cap
                                          [dagger]/1000).
                                         COP = 4.2 - (0.070 x Cap
                                          [dagger]/1000).
TSL 5--MaxTech.........................  EER = 16.3 - (0.354 x Cap
                                          [dagger]/1000).
                                         COP = 4.3 - (0.073 x Cap
                                          [dagger]/1000).
------------------------------------------------------------------------
* For equipment rated according to the DOE test procedure, all EER
  values must be rated at 95 [deg]F outdoor dry-bulb temperature for air-
  cooled products and evaporatively-cooled products and at 85 [deg]F
  entering water temperature for water cooled products. All COP values
  must be rated at 47 [deg]F outdoor dry-bulb temperature for air-cooled
  products, and at 70 [deg]F entering water temperature for water-source
  heat pumps.
** Standard size refers to PTAC or PTHP equipment with wall sleeve
  dimensions greater than or equal to 16 inches high, or greater than or
  equal to 42 inches wide.
*** This level represents the ANSI/ASHRAE/IES Standard 90.1-2013 minimum
  for PTAC and PTHP equipment. This level is used as the Baseline since
  DOE is required to, at a minimum, adopt the ASHRAE levels as the
  Federal standard. (42 U.S.C. 6313(a)(6)(A)(ii)(I))
[dagger] Cap means cooling capacity in Btu/h at 95 [deg]F outdoor dry-
  bulb temperature.

    For PTACs and PTHPs with cooling capacity less than 7,000 Btu/h, 
DOE determined the EERs using a cooling capacity of 7,000 Btu/h in the 
efficiency-capacity equations. For PTACs and PTHPs with a cooling 
capacity greater than 15,000 Btu/h cooling capacity, DOE determined the 
EERs using a cooling capacity of 15,000 Btu/h in the efficiency-
capacity equations. This is the same method established in the Energy 
Policy Act of 1992 and provided in ANSI/ASHRAE/IES Standard 90.1-2013 
for calculating the EER and COP of equipment with cooling capacities 
smaller than 7,000 Btu/h and larger than 15,000 Btu/h. (42 U.S.C. 
6313(a)(3)(A))
    In the September 2014 NOPR, DOE proposed the adoption of TSL 2, 
which would have raised efficiency levels for PTAC and PTHP equipment 
6.2% above the ANSI/ASHRAE/IES Standard 90.1-2013 baseline levels. 79 
FR at 55589-90. Stakeholders had mixed comments regarding the 
availability of models that meet the proposed TSL 2 across the range of 
cooling capacities. ASAP et al. commented to state their support for 
proposed standards and indicate that there are PTACs and PTHPs 
available today across the range of cooling capacities with efficiency 
levels that significantly exceed the proposed standard. (ASAP et al., 
No. 30 at p. 1-2) The CA IOUs commented that several products from a 
variety of manufacturers and across the range of capacities (at 
capacities of 7, 9, 12, and 14 kBtu/h) meet or comfortably exceed the 
proposed standard levels. (CA IOUs, No. 33 at p. 1-2) Goodman commented 
that some cooling capacities, such as 12,000 Btu/h, do not have product 
offerings that meet TSL 2. (Goodman, NOPR Public Meeting Transcript, 
No. 37 at p.55) AHRI commented that the cooling capacities of 9 kBtu/h 
and 15 kBtu/h are the only PTAC capacities with models available now 
that meet the proposed TSL 2, based on data from the AHRI Directory. 
(AHRI, NOPR Public Meeting Transcript, No. 37 at p. 14) In this final 
rule, DOE adopts the less stringent baseline level for PTAC and PTHP 
equipment. DOE determined that 82% of the standard size PTAC models 
listed in the AHRI Directory will meet the baseline efficiency level 
for PTACs adopted in this rule.

B. Economic Justification and Energy Savings

    As discussed in section II.A, EPCA provides seven factors to be 
evaluated in determining whether a more stringent standard for PTACs 
and PTHPs is economically justified. (42 U.S.C. 6313(a)(6)(B)(ii)) The 
following sections generally discuss how DOE has addressed each of 
those factors in this rulemaking.
1. Economic Impacts on Commercial Consumers
    DOE analyzed the economic impacts on PTAC and PTHP equipment 
consumers by looking at the effects that amended standards would have 
on the LCC and PBP. DOE also examined the impacts of potential 
standards on consumer subgroups. These analyses are discussed below.
a. Life-Cycle Cost and Payback Period
    In general, higher-efficiency equipment affects consumers in two 
ways: (1) Purchase price increases, and (2) annual operating costs 
decrease. Inputs used for calculating the LCC and PBP include total 
installed costs (i.e.,

[[Page 43194]]

equipment price plus installation costs), and operating costs (i.e., 
annual energy use, energy prices, energy price trends, repair costs, 
and maintenance costs). The LCC calculation also uses equipment 
lifetime and a discount rate. Chapter 8 of the final rule TSD provides 
detailed information on the LCC and PBP analyses.
    Table V.4 through Table V.7 show the LCC and PBP results for the 
TSL efficiency levels considered for each PTAC and PTHP equipment 
class. In the first of each pair of tables, the simple payback is 
measured relative to the baseline equipment. In the second table, the 
LCC savings are measured relative to the base-case efficiency 
distribution in the compliance year (see section IV.F.8 of this 
document).

                            Table V.4--Average LCC and PBP Results for Standard Size Equipment <12,000 Btu/h Cooling Capacity
                                                             [9,000 Btu/h cooling capacity]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                     Average costs (2014$)
                                        Efficiency  Efficiency ----------------------------------------------------------------    Simple      Average
                  TSL                      level       level                     First year's      Lifetime                       payback      lifetime
                                          (PTAC)      (PTHP)    Installed cost  operating cost  operating cost        LCC         (years)      (years)
--------------------------------------------------------------------------------------------------------------------------------------------------------
1.....................................           2           1          $1,492            $253          $1,546          $3,038          5.0            8
2.....................................           3           2           1,509             251           1,534           3,043          5.6
3.....................................           4           3           1,528             249           1,523           3,050          6.0
4.....................................           5           4           1,548             247           1,511           3,059          6.3
5.....................................           6           5           1,558             246           1,506           3,064          6.4
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note: The results for each TSL are calculated assuming that all consumers use equipment with that efficiency level. The PBP is measured relative to the
  baseline equipment.


Table V.5--LCC Savings Relative to the Base Case Efficiency Distribution for Standard Size Equipment <12,000 Btu/
                                               h Cooling Capacity
                                         [9,000 Btu/h cooling capacity]
----------------------------------------------------------------------------------------------------------------
                                                                                  Life-cycle cost savings
                                                                          --------------------------------------
                                      Efficiency level   Efficiency level    Percentage of
                TSL                        (PTAC)             (PTHP)         consumers that     Average savings
                                                                             experience net        (2014$) *
                                                                                cost **
----------------------------------------------------------------------------------------------------------------
1..................................                  2                  1                 27              $0.17
2..................................                  3                  2                 50             ($3.26)
3..................................                  4                  3                 78             ($9.85)
4..................................                  5                  4                 87            ($18.50)
5..................................                  6                  5                 88            ($23.50)
----------------------------------------------------------------------------------------------------------------
* Parentheses indicate negative values.
** The calculation includes consumers with zero LCC savings (no impact).


                           Table V.6--Average LCC and PBP Results for Standard Size Equipment >=12,000 Btu/h Cooling Capacity
                                                             [9,000 Btu/h cooling capacity]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                     Average costs (2014$)
                                        Efficiency  Efficiency ----------------------------------------------------------------    Simple      Average
                  TSL                      level       level                     First year's      Lifetime                       payback      lifetime
                                          (PTAC)      (PTHP)    Installed cost  operating cost  operating cost        LCC         (years)      (years)
--------------------------------------------------------------------------------------------------------------------------------------------------------
1.....................................           2           1          $1,747            $316          $1,931          $3,678          6.0            8
2.....................................           3           2           1,770             314           1,915           3,685          6.6
3.....................................           4           3           1,800             311           1,899           3,700          7.5
4.....................................           5           4           1,837             309           1,884           3,721          8.5
5.....................................           6           5           1,858             307           1,877           3,735          9.0
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note: The results for each TSL are calculated assuming that all consumers use equipment with that efficiency level. The PBP is measured relative to the
  baseline equipment.


 Table V.7--Savings Relative to the Base Case Efficiency Distribution for Standard Size Equipment >=12,000 Btu/h
                                                Cooling Capacity
                                         [15,000 Btu/h cooling capacity]
----------------------------------------------------------------------------------------------------------------
                                                                                   Life-cycle cost savings
                                                                           -------------------------------------
                                       Efficiency level   Efficiency level    Percentage of
                 TSL                        (PTAC)             (PTHP)         consumers that    Average savings
                                                                              experience net       (2014$) *
                                                                                 cost **
----------------------------------------------------------------------------------------------------------------
1...................................                  2                  1                 34            ($0.95)
2...................................                  3                  2                 51            ($5.51)
3...................................                  4                  3                 85           ($19.24)
4...................................                  5                  4                 93           ($40.53)
5...................................                  6                  5                 95           ($54.01)
----------------------------------------------------------------------------------------------------------------
* Parentheses indicate negative values.
** The calculation includes consumers with zero LCC savings (no impact).


[[Page 43195]]

    For PTACs and PTHPs with a cooling capacity less than 7,000 Btu/h, 
DOE established the proposed energy conservation standards using a 
cooling capacity of 7,000 Btu/h in the proposed efficiency-capacity 
equation. DOE believes the LCC and PBP impacts for equipment in this 
category will be similar to the impacts of the 9,000 Btu/h units 
because the MSP and usage characteristics are in a similar range. 
Similarly, for PTACs and PTHPs with a cooling capacity greater than 
15,000 Btu/h, DOE established the proposed energy conservation 
standards using a cooling capacity of 15,000 Btu/h in the proposed 
efficiency-capacity equation. DOE believes the impacts for equipment in 
this category will be similar to units with a cooling capacity of 
15,000 Btu/h.
b. Consumer Subgroup Analysis
    As described in section IV.I of this document, DOE estimated the 
impact of the considered TSLs on independently-operating lodging 
businesses. Table V.8 shows the average LCC savings from potential 
energy conservation standards, and Table V.9 shows the simple payback 
period for this subgroup. In most cases, the average LCC savings and 
PBP for the subgroup at the considered efficiency levels are not 
substantially different from the average for all businesses. Chapter 11 
of the final rule TSD presents the complete LCC and PBP results for the 
subgroup.

                        Table V.8--Mean Life-Cycle Cost Savings for PTAC and PTHP Equipment Purchased by the Considered Subgroup
                                                                         [2014$]
--------------------------------------------------------------------------------------------------------------------------------------------------------
            Equipment class (cooling capacity)                   TSL 1              TSL 2              TSL 3              TSL 4              TSL 5
--------------------------------------------------------------------------------------------------------------------------------------------------------
Standard Size Equipment <12,000 Btu/h Cooling Capacity               ($0.14)            ($4.12)           ($11.46)           ($20.89)           ($26.28)
 (9,000 Btu/h Cooling Capacity)..........................
Standard Size Equipment >=12,000 Btu/h Cooling Capacity              ($1.14)            ($6.38)           ($21.10)           ($43.42)           ($57.41)
 (15,000 Btu/h Cooling Capacity).........................
--------------------------------------------------------------------------------------------------------------------------------------------------------
* Parentheses indicate negative values.
Note: The LCC savings for each TSL are calculated relative to the base case efficiency distribution. The calculation includes consumers with zero LCC
  savings (no impact).


                            Table V.9--Simple Payback Period for PTAC and PTHP Equipment Purchased by the Considered Subgroup
                                                                         [Years]
--------------------------------------------------------------------------------------------------------------------------------------------------------
            Equipment class (cooling capacity)                   TSL 1              TSL 2              TSL 3              TSL 4              TSL 5
--------------------------------------------------------------------------------------------------------------------------------------------------------
Standard Size Equipment <12,000 Btu/h Cooling Capacity                   5.0                5.6                6.0                6.3                6.4
 (9,000 Btu/h Cooling Capacity)..........................
Standard Size Equipment >=12,000 Btu/h Cooling Capacity                  6.0                6.6                7.5                8.5                9.0
 (15,000 Btu/h Cooling Capacity).........................
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note: The simple payback period is calculated only for affected establishments. Establishments with no impact have an undefined payback period, and are
  therefore not included in calculating the median PBP.

    For PTACs and PTHPs with a cooling capacity less than 7,000 Btu/h, 
DOE believes that the subgroup LCC and PBP impacts will be similar to 
the impacts of the 9,000 Btu/h units because the MSP and usage 
characteristics are in a similar range. Similarly, for PTACs and PTHPs 
with a cooling capacity greater than 15,000 Btu/h, DOE believes the 
impacts will be similar to units with a cooling capacity of 15,000 Btu/
h.
c. Rebuttable Presumption Payback
    As discussed above, EPCA establishes a rebuttable presumption that 
an energy conservation standard is economically justified if the 
increased purchase cost for equipment that meets the standard is less 
than three times the value of the first-year energy savings resulting 
from the standard. In calculating a rebuttable presumption payback 
period for each of the considered TSLs, DOE used discrete values rather 
than distributions for input values, and, as required by EPCA, based 
the energy use calculation on the DOE test procedures for PTAC and PTHP 
equipment. As a result, DOE calculated a single rebuttable presumption 
payback value, and not a distribution of payback periods, for each 
efficiency level. Table V.10 presents the rebuttable-presumption 
payback periods for the considered TSLs. While DOE examined the 
rebuttable-presumption criterion, it considered whether the standard 
levels considered for this rule are economically justified through a 
more detailed analysis of the economic impacts of those levels, 
pursuant to 42 U.S.C. 6295(o)(2)(B)(i), that considers the full range 
of impacts to the consumer, manufacturer, nation, and environment. The 
results of that analysis serve as the basis for DOE to evaluate the 
economic justification for a potential standard level, thereby 
supporting or rebutting the results of any preliminary determination of 
economic justification. Table V.10 shows the rebuttable presumption 
PBPs for the considered TSLs for PTAC and PTHP equipment.

[[Page 43196]]



              Table V.10--Rebuttable-Presumption Payback Period (Years) for PTAC and PTHP Equipment
----------------------------------------------------------------------------------------------------------------
                                                               Trial standard level
                                 -------------------------------------------------------------------------------
                                         1               2               3               4               5
----------------------------------------------------------------------------------------------------------------
Standard Size Equipment (9,000               5.0             5.6             6.0             6.3             6.4
 Btu/h).........................
Standard Size Equipment (15,000              6.0             6.6             7.5             8.5             9.0
 Btu/h).........................
----------------------------------------------------------------------------------------------------------------

2. Economic Impacts on Manufacturers
    DOE performed a manufacturer impact analysis (MIA) to estimate the 
impact of amended energy conservation standards on PTAC and PTHP 
manufacturers. The following section describes the expected impacts on 
manufacturers at each considered TSL. Chapter 12 of the final rule TSD 
explains the analysis in further detail.
a. Industry Cash Flow Analysis Results
    Table V.11 depicts the estimated financial impacts (represented by 
changes in industry net present value, or INPV) of amended energy 
conservation standards on manufacturers of PTACs and PTHPs, as well as 
the conversion costs that DOE expects manufacturers would incur for all 
equipment classes at each TSL.
    As discussed in section IV.J.2, DOE modeled two different markup 
scenarios to evaluate the range of cash flow impacts on the PTAC and 
PTHP industry: (1) The preservation of gross margin percentage markup 
scenario; and (2) the preservation of per unit operating profit markup 
scenario.
    To assess the less severe end of the range of potential impacts, 
DOE modeled a preservation of gross margin percentage markup scenario, 
in which a uniform ``gross margin percentage'' markup is applied across 
all potential efficiency levels. In this scenario, DOE assumed that a 
manufacturer's absolute dollar markup would increase as production 
costs increase in the standards case.
    To assess the more severe end of the range of potential impacts, 
DOE modeled the preservation of per unit operating profit markup 
scenario, which reflects manufacturer concerns surrounding their 
inability to maintain margins as manufacturing production costs 
increase to meet more stringent efficiency levels. In this scenario, as 
manufacturers make the necessary investments required to convert their 
facilities to produce new standards-compliant equipment and incur 
higher costs of goods sold, their percentage markup decreases. 
Operating profit does not change in absolute dollars but decreases as a 
percentage of revenue.
    Each of the modeled scenarios results in a unique set of cash flows 
and corresponding industry values at each TSL. In the following 
discussion, the INPV results refer to the difference in industry value 
between the base case and each standards case that result from the sum 
of discounted cash flows from the base year (2015) through the end of 
the analysis period, which varies by equipment class and standard 
level. To provide perspective on the short-run cash flow impact, DOE 
includes in the discussion of results a comparison of free cash flow 
between the base case and the standards case at each TSL in the year 
before amended standards would take effect. This figure provides an 
understanding of the magnitude of the required conversion costs 
relative to the cash flow generated by the industry in the base case.
    The tables below present results for both the preservation of gross 
margin percentage markup scenario and the preservation of per-unit 
operating profit markup scenario. As noted, the preservation of 
operating profit scenario accounts for the more severe impacts 
presented.

                      Table V.11--Manufacturer Impact Analysis Results for PTACs and PTHPs, Gross Margin Percentage Markup Scenario
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                              Trial standard level *
                                                         Units               Base case  ----------------------------------------------------------------
                                                                                              1            2            3            4            5
--------------------------------------------------------------------------------------------------------------------------------------------------------
INPV.......................................  2014$M.......................         62.2        61.1         63.1         61.9         63.1         60.3
Change in INPV.............................  2014$M.......................  ...........        (1.1)         0.8         (0.3)         0.8         (1.9)
                                             % Change.....................  ...........        (1.8)         1.3         (0.5)         1.4         (3.1)
Product Conversion Costs...................  2014$M.......................  ...........         2.2          4.8          7.3          8.6         13.7
Capital Conversion Costs...................  2014$M.......................  ...........         2.3          2.9          7.2          7.2          7.5
Total Conversion Costs.....................  2014$M.......................  ...........         4.5          7.7         14.5         15.8         21.2
Free Cash Flow **..........................  2014$M.......................          3.9         2.3          1.4         (1.3)        (1.7)        (3.4)
                                             % Change.....................  ...........       (40.6)       (64.9)      (133.2)      (144.5)      (188.5)
--------------------------------------------------------------------------------------------------------------------------------------------------------
* Parentheses indicate negative values.
** DOE presents free cash flow impacts in 2018, the year before the 2019 compliance date for PTACs in the standards case. DOE estimates free cash flow
  impacts in the standards case will be most severe in 2018 and therefore presents those impacts here.


                 Table V.12--Manufacturer Impact Analysis Results for PTACs and PTHPs, Preservation of Operating Profit Markup Scenario
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                              Trial standard level *
                                                         Units               Base case  ----------------------------------------------------------------
                                                                                              1            2            3            4            5
--------------------------------------------------------------------------------------------------------------------------------------------------------
INPV.......................................  2014$M.......................         62.2        60.7         61.8         59.3         58.9         55.6
Change in INPV.............................  2014$M.......................  ...........        (1.5)        (0.5)        (3.0)        (3.4)        (6.7)
                                             % Change.....................  ...........        (2.4)        (0.8)        (4.8)        (5.4)       (10.7)
Product Conversion Costs...................  2014$M.......................  ...........         2.2          4.8          7.3          8.6         13.7

[[Page 43197]]

 
Capital Conversion Costs...................  2014$M.......................  ...........         2.3          2.9          7.2          7.2          7.5
Total Conversion Costs.....................  2014$M.......................  ...........         4.5          7.7         14.5         15.8         21.2
Free Cash Flow.............................  2014$M.......................          3.9         2.3          1.3         (1.4)        (1.9)        (3.6)
                                             % Change.....................  ...........       (41.1)       (66.2)      (135.6)      (148.3)      (192.8)
--------------------------------------------------------------------------------------------------------------------------------------------------------
* Parentheses indicate negative values.
** DOE presents free cash flow impacts in 2018, the year before the 2019 compliance date for PTACs in the standards case. DOE estimates free cash flow
  impacts in the standards case will be most severe in 2018 and therefore presents those impacts here.

    At TSL 1, DOE estimates the impacts on INPV to range from -$1.5 
million to -$1.1 million, or a change of -2.4 percent to -1.8 percent. 
Industry free cash flow is estimated to decrease by as much as $1.6 
million, or a change of 41.1 percent compared to the base-case value of 
$3.9 million in the year before the compliance date (2018). At TSL 1, 
DOE estimates industry conversion costs of $4.5 million.
    At TSL 2, DOE estimates impacts on INPV to range from -$0.5 million 
to $0.8 million, or a change in INPV of -0.8 percent to 1.3 percent. At 
this level, industry free cash flow is estimated to decrease by as much 
as $2.6 million, or a change of 66.2 percent compared to the base-case 
value of $3.9 million in the year before the compliance date (2018). 
DOE expects conversion costs at this level to increase to $7.7 million, 
reflecting the need for additional motor and control changes as well as 
a more significant R&D and testing burden. The INPV impacts at TSL 2 
are slightly less severe than those at TSL 1 due to the interplay of 
conversion costs, manufacturer selling prices, and shipments. 
Specifically, the anticipated increase in per-unit purchase price at 
this level combined with steady shipments is expected to dampen the 
effects of conversion costs on INPV.
    At TSL 3, DOE estimates impacts on INPV to range from -$3.0 million 
to -$0.3 million, or a change in INPV of -4.8 percent to -0.5 percent. 
At this level, industry free cash flow is estimated to decrease by as 
much as $5.2 million, or a change of 135.6 percent compared to the 
base-case value of $3.9 million in the year before the compliance date 
(2018). DOE estimates conversion costs at TSL 3 would increase to $14.5 
million, nearly double the expected conversion costs at TSL 2. 
Anticipated conversion costs at this level include investing in new 
tooling and redesigning equipment to incorporate additional coils and/
or formed coils.
    At TSL 4, DOE estimates impacts on INPV to range from -$3.4 million 
to $0.8 million, or a change in INPV of -5.4 percent to 1.4 percent. At 
this level, industry free cash flow is estimated to decrease by as much 
as $5.7 million, or a change of 148.3 percent compared to the base-case 
value of $3.9 million in the year before the compliance date (2018). 
DOE estimates conversion costs at TSL 4 would increase to $15.8 
million. At this level, however, DOE does not anticipate capital 
conversion costs beyond those required at TSL 3. Rather, product 
conversion costs account for the full increase. Similar to TSL 2, the 
INPV impacts at TSL 4 are slightly less severe than those at TSL 3 due 
to the interplay of conversion costs, manufacturer selling prices, and 
shipments. The anticipated increase in per-unit purchase price at this 
level combined with steady shipments is expected to dampen the effects 
of conversion costs on INPV.
    TSL 5 represents the use of max-tech design options for each 
equipment class. At this level, DOE estimates impacts on INPV to range 
from -$6.7 million to -$1.9 million, or a change in INPV of -10.7 
percent to -3.1 percent. Industry free cash flow is estimated to 
decrease by $7.5 million, or a change of 192.8 percent compared to the 
base-case value of $3.9 million in the year before the compliance date 
(2018). At this level, DOE estimates conversion costs would increase to 
a $21.2 million.
b. Direct Impacts on Employment
    To quantitatively assess the potential impacts of amended energy 
conservation standards on direct employment, DOE used the GRIM to 
estimate the domestic labor expenditures and number of direct employees 
in the base case and at each TSL from 2015 through 2048. DOE used 
statistical data from the U.S. Census Bureau's 2011 Annual Survey of 
Manufacturers,\51\ the results of the engineering analysis, and 
interviews with manufacturers to determine the inputs necessary to 
calculate industry-wide labor expenditures and domestic direct 
employment levels. Labor expenditures related to producing the 
equipment are a function of the labor intensity of producing the 
equipment, the sales volume, and an assumption that wages remain fixed 
in real terms over time. The total labor expenditures in each year are 
calculated by multiplying the MPCs by the labor percentage of MPCs. DOE 
estimates that 50 percent of PTAC and PTHP units are produced 
domestically.
---------------------------------------------------------------------------

    \51\ ``Annual Survey of Manufacturers: General Statistics: 
Statistics for Industry Groups and Industries,'' U.S. Census Bureau, 
2011. Available at www.census.gov/manufacturing/asm/index.html.
---------------------------------------------------------------------------

    The total labor expenditures in the GRIM were then converted to 
domestic production employment levels by dividing production labor 
expenditures by the annual payment per production worker (production 
worker hours times the labor rate found in the U.S. Census Bureau's 
2011 Annual Survey of Manufacturers). The production worker estimates 
in this section only cover workers up to the line-supervisor level who 
are directly involved in fabricating and assembling a product within an 
OEM facility. Workers performing services that are closely associated 
with production operations, such as materials handling tasks using 
forklifts, are also included as production labor. DOE's estimates only 
account for production workers who manufacture the specific equipment 
covered by this rulemaking.
    To estimate an upper bound to employment change, DOE assumes all 
domestic manufacturers would choose to continue producing equipment in 
the U.S. and would not move production to foreign countries. To 
estimate a lower bound to employment, DOE estimates the maximum portion 
of the industry that would choose to leave the industry or relocate 
production overseas rather than make the necessary conversions at

[[Page 43198]]

domestic production facilities. A complete description of the 
assumptions used to generate these upper and lower bounds can be found 
in chapter 12 of the final rule TSD.
    As noted above, DOE estimates that 50 percent of PTAC and PTHP 
units sold in the United States are manufactured domestically. In the 
absence of amended energy conservation standards, DOE estimates that 
the PTAC and PTHP industry would employ 175 domestic production workers 
in 2019.
    Table V.13 shows the range of impacts of potential amended energy 
conservation standards on U.S. production workers of PTACs and PTHPs. 
The potential changes to direct employment in the standards case 
suggest that the PTAC and PTHP industry could experience anything from 
a slight gain in domestic direct employment to a loss of all domestic 
direct employment. However, since this rule maintains the standard at 
baseline (i.e., ASHRAE), DOE does not expect any loss in domestic 
direct employment.

                       Table V.13--Potential Changes in the Total Number of Standard Size PTAC and PTHP Production Workers in 2019
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                              Trial standard level *
                                                         -----------------------------------------------------------------------------------------------
                                                             Base case
                                                             [dagger]            1               2               3               4               5
--------------------------------------------------------------------------------------------------------------------------------------------------------
Potential Changes in Domestic Production Workers in 2019  ..............      (175) to 4     (175) to 10     (175) to 17     (175) to 22     (175) to 24
--------------------------------------------------------------------------------------------------------------------------------------------------------
* Parentheses indicate negative values.
[dagger] Base case assumes 175 domestic production workers in the PTAC and PTHP industry in 2019.

    The upper end of the range estimates the maximum increase in the 
number of production workers in the PTAC and PTHP industry after 
implementation of an amended energy conservation standard. It assumes 
manufacturers would continue to produce the same scope of covered 
equipment within the United States and would require some additional 
labor to produce more efficient equipment.
    The lower end of the range represents the maximum decrease in total 
number of U.S. production workers that could result from an amended 
energy conservation standard. Throughout interviews, manufacturers 
stated their concerns about increasing offshore competition entering 
the market. If the cost of complying with amended standards 
significantly erodes the profitability of domestic manufacturers 
relative to their competitors who manufacture and/or import PTACs and 
PTHPs from overseas, manufacturers with domestic production could 
decide to exit the PTAC and PTHP market and/or shift their production 
facilities offshore. The lower bound of direct employment impacts 
therefore assumes domestic production of PTACs and PTHPs ceases, as 
domestic manufacturers either exit the market or shift production 
overseas in search of reduced manufacturing costs.
    This conclusion is independent of any conclusions regarding 
indirect employment impacts in the broader United States economy, which 
are documented in chapter 15 of the final rule TSD.
c. Impacts on Manufacturing Capacity
    According to PTAC and PTHP manufacturers interviewed, amended 
energy conservation standards would not significantly constrain 
manufacturing production capacity. Among manufacturers with production 
assets, some indicated that more stringent energy conservation 
standards could reduce sales volumes, thereby resulting in excess 
capacity. Among importers and distributors, amended energy conservation 
standards would not likely impact capacity. Since this rule maintains 
the standard at baseline (i.e., ASHRAE), DOE does not expect any change 
in production capacity as a result of this rule.
d. Impacts on Subgroups of Manufacturers
    As discussed above, using average cost assumptions to develop an 
industry cash flow estimate is not adequate for assessing differential 
impacts among subgroups of manufacturers. Small manufacturers, niche 
players, or manufacturers exhibiting a cost structure that differs 
largely from the industry average could be affected differently. DOE 
used the results of the industry characterization to group 
manufacturers exhibiting similar characteristics. Specifically, DOE 
identified two subgroups of manufacturers for separate impact analyses: 
Manufacturers with production assets and small business manufacturers.
    DOE initially identified 22 companies that sell PTAC and PTHP 
equipment in the U.S. Among U.S. companies, few own production assets; 
rather, they import and distribute PTACs and PTHPs manufactured 
overseas, primarily in China. DOE identified a subgroup of three U.S.-
headquartered manufacturers that own production assets. These 
manufacturers own tooling or manufacturing assets either in the U.S. or 
in foreign countries. Together, these three manufacturers account for 
approximately 80 percent of the domestic PTAC and PTHP market. Because 
manufacturers with production assets will incur different conversion 
costs to comply with amended energy conservation standards compared to 
their competitors who do not own production assets, DOE conducted a 
separate analysis to evaluate the potential impacts of an amended 
standard on this subgroup.
    As with the overall industry analysis, DOE modeled two different 
markup scenarios to evaluate the range of cash flow impacts on 
manufacturers with production assets: (1) The preservation of gross 
margin percentage markup scenario; and (2) the preservation of per unit 
operating profit markup scenario. See section IV.J.2 for a complete 
description of markup scenarios.
    Each of the modeled scenarios results in a unique set of cash flows 
and corresponding INPV values at each TSL. In the following discussion, 
the INPV results refer to the difference in value of manufacturers with 
production assets between the base case and standards cases as 
represented by the sum of discounted cash flows from the base year 
(2015) through, the end of the analysis period, which varies by 
equipment class and standard level. To provide perspective on the 
short-run cash flow impact, DOE includes in the discussion of results a 
comparison of free cash flow between the base case and the standards 
case at each TSL in the year before amended standards would take 
effect. This figure provides an understanding of the magnitude of the 
required conversion costs relative to

[[Page 43199]]

the cash flow generated by manufacturers with production assets in the 
base case.
    The tables below present a range of results reflecting both the 
preservation of gross margin percentage markup scenario and the 
preservation of per unit operating profit markup scenario. As discussed 
in section IV.J.B, the preservation of operating profit scenario 
accounts for the more severe impacts presented. Estimated conversion 
costs do not vary with the markup scenario.

 Table V.14--Manufacturer Impact Analysis Results for the Subgroup of PTAC and PTHP Manufacturers With Production Assets, Gross Margin Percentage Markup
                                                                        Scenario
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                              Trial standard level *
                                                         Units               Base case  ----------------------------------------------------------------
                                                                                              1            2            3            4            5
--------------------------------------------------------------------------------------------------------------------------------------------------------
INPV.......................................  2014$M.......................         49.8        48.7         49.9         48.1         48.9         46.0
Change in INPV.............................  2014$M.......................  ...........        (1.1)         0.1         (1.7)        (0.9)        (3.8)
                                             % Change.....................  ...........        (2.1)         0.3         (3.4)        (1.8)        (7.5)
Product Conversion Costs...................  2014$M.......................  ...........         1.4          4.0          6.5          7.8         12.8
Capital Conversion Costs...................  2014$M.......................  ...........         2.3          2.9          7.2          7.2          7.5
Total Conversion Costs.....................  2014$M.......................  ...........         3.7          6.9         13.7         15.0         20.4
Free Cash Flow **..........................  2014$M.......................          3.1         1.7          0.8         (1.9)        (2.3)        (4.0)
                                             % Change.....................  ...........       (43.7)       (74.7)      (160.1)      (173.8)      (228.3)
--------------------------------------------------------------------------------------------------------------------------------------------------------
* Parentheses indicate negative values.
** DOE presents free cash flow impacts in 2018, the year before the 2019 compliance date for PTACs in the standards case. As described in section
  IV.J.2, the base case (i.e., ASHRAE) compliance date for PTACs is 2017, and the compliance date for PTHPs in both the base case and the standards case
  is 2018. DOE estimates free cash flow impacts in the standards case will be most severe in 2018 and therefore presents those impacts here.


   Table V.15--Manufacturer Impact Analysis Results for the Subgroup of PTAC and PTHP Manufacturers With Production Assets, Preservation of Operating
                                                                 Profit Markup Scenario
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                              Trial standard level *
                                                         Units               Base case  ----------------------------------------------------------------
                                                                                              1            2            3            4            5
--------------------------------------------------------------------------------------------------------------------------------------------------------
INPV.......................................  2014$M.......................         49.8        48.5         48.9         46.0         45.5         42.3
Change in INPV.............................  2014$M.......................  ...........        (1.3)        (0.9)        (3.8)        (4.3)        (7.5)
                                             % Change.....................  ...........        (2.7)        (1.8)        (7.7)        (8.6)       (15.1)
Product Conversion Costs...................  2014$M.......................  ...........         1.4          4.0          6.5          7.8         12.8
Capital Conversion Costs...................  2014$M.......................  ...........         2.3          2.9          7.2          7.2          7.5
Total Conversion Costs.....................  2014$M.......................  ...........         3.7          6.9         13.7         15.0         20.4
Free Cash Flow **..........................  2014$M.......................          3.1         1.7          0.7         (1.9)        (2.4)        (4.1)
                                             % Change.....................  ...........       (44.2)       (76.0)      (162.6)      (177.7)      (232.6)
--------------------------------------------------------------------------------------------------------------------------------------------------------
* Parentheses indicate negative values.
** DOE presents free cash flow impacts in 2018, the year before the 2019 compliance date for PTACs in the standards case. As described in section
  IV.J.2, the base case (i.e., ASHRAE) compliance date for PTACs is 2017, and the compliance date for PTHPs in both the base case and the standards case
  is 2018. DOE estimates free cash flow impacts in the standards case will be most severe in 2018 and therefore presents those impacts here.

    In the standards case, manufacturers with production assets 
experience financial impacts more negative than those facing the 
industry as a whole, discussed in section V.B.2.a. These impacts derive 
primarily from the conversion costs manufacturers with production 
assets would incur to comply with an amended standard. In particular, 
manufacturers with production assets would face capital conversion 
costs not shared by their competitors who import and distribute PTACs 
and PTHPs and do not require tooling investments. In interviews, 
manufacturers with production assets indicated that more stringent 
standards could require significant investment in new tooling to 
support new coil designs. In addition, manufacturers with production 
assets would face product conversion costs in the form of design 
engineering, product development, testing, certification, marketing, 
and related costs. Because this rule maintains the standard at baseline 
(i.e., ASHRAE), DOE's modeling does not show any negative financial 
impacts on industry, including manufacturers with production assets, as 
a direct result of the standard.
    For the small business subgroup analysis, DOE applied the small 
business size standards published by the Small Business Administration 
(SBA) to determine whether a company is considered a small business. 65 
FR 30836, 30848 (May 15, 2000), as amended at 65 FR 53533, 53544 
(September 5, 2000) and codified at 13 CFR part 121. To be categorized 
as a small business under North American Industry Classification System 
(NAICS) code 333415, ``Air-Conditioning and Warm Air Heating Equipment 
and Commercial and Industrial Refrigeration Equipment Manufacturing,'' 
a PTAC and PTHP manufacturer and its affiliates may employ a maximum of 
750 employees. The 750-employee threshold includes all employees in a 
business's parent company and any other subsidiaries. Based on this 
classification, DOE identified 12 manufacturers that qualify as small 
businesses. The PTAC and PTHP small business subgroup analysis is 
discussed in chapter 12 of the final rule TSD and in section VI.B of 
this document.
e. Cumulative Regulatory Burden
    While any one regulation may not impose a significant burden on 
manufacturers, the combined effects of several impending regulations 
may have serious consequences for some manufacturers, groups of 
manufacturers, or an entire industry. Assessing the impact of a single 
regulation may

[[Page 43200]]

overlook this cumulative regulatory burden. Multiple regulations 
affecting the same manufacturer can strain profits and can lead 
companies to abandon product lines or markets with lower expected 
future returns than competing products. For these reasons, DOE conducts 
an analysis of cumulative regulatory burden as part of its rulemakings 
pertaining to appliance efficiency.
    For the cumulative regulatory burden analysis, DOE looks at other 
regulations that could affect PTAC and PTHP manufacturers that will 
take effect approximately three years before or after the 2017 
compliance date of this final rule. In interviews, manufacturers cited 
federal regulations on equipment other than PTACs and PTHPs that 
contribute to their cumulative regulatory burden. The compliance years 
and expected industry conversion costs of relevant amended energy 
conservation standards are indicated in the table below:

Table V.16--Compliance Dates and Expected Conversion Expenses of Federal
   Energy Conservation Standards Affecting PTAC and PTHP Manufacturers
------------------------------------------------------------------------
                                     Approximate      Estimated total
   Federal energy conservation       compliance     industry conversion
            standards                   date              expense
------------------------------------------------------------------------
2011 Room Air Conditioners:
    76 FR 22454 (April 21, 2011);            2014  $171M (2009$)
     76 FR 52854 (August 24,
     2011).
2007 Residential Furnaces &
 Boilers:
    72 FR 65136 (November 19,                2015  $88M (2006$) *
     2007).
2011 Residential Furnaces:
    76 FR 37408 (June 27, 2011);             2015  $2.5M (2009$) **
     76 FR 67037 (October 31,
     2011).
2011 Residential Central Air
 Conditioners and Heat Pumps:
    76 FR 37408 (June 27, 2011);             2015  $26.0M (2009$) **
     76 FR 67037 (October 31,
     2011).
2010 Gas Fired and Electric
 Storage Water Heaters:
    75 FR 20112 (April 16, 2010).            2015  $95.4M (2009$)
Dishwashers ***..................            2018  TBD
Commercial Packaged Air-
 Conditioning and Heating
 Equipment: ***
    79 FR 58948 (September 30,               2018  $226.4M (2013$)
     2014).
Commercial Warm-Air Furnaces ***.            2018  $19.9M (2013$)
Furnace Fans:
    79 FR 38129 (July 3, 2014)...            2019  $40.6M (2013$)
Miscellaneous Residential                    2019  TBD
 Refrigeration ***.
Single Packaged Vertical Units:
    79 FR 78614 (December 30,                2019  $16.1M (2013$)
     2014).
Commercial Water Heaters ***.....            2019  TBD
Commercial Packaged Boilers ***..            2020  TBD
------------------------------------------------------------------------
* Conversion expenses for manufacturers of oil-fired furnaces and gas-
  fired and oil-fired boilers associated with the November 2007 final
  rule for residential furnaces and boilers are excluded from this
  figure. The 2011 direct final rule for residential furnaces sets a
  higher standard and earlier compliance date for oil-fired furnaces
  than the 2007 final rule. As a result, manufacturers will be required
  to design to the 2011 direct final rule standard. The conversion costs
  associated with the 2011 direct final rule are listed separately in
  this table. EISA 2007 legislated more stringent standards and earlier
  compliance dates for residential boilers than were required by the
  November 2007 final rule. As a result, gas-fired and oil-fired boiler
  manufacturers were required to design to the EISA 2007 standard
  beginning in 2012. The conversion costs listed for residential gas-
  fired and oil-fired boilers in the November 2007 residential furnaces
  and boilers final rule analysis are not included in this figure.
** Estimated industry conversion expense and approximate compliance date
  reflect a court-ordered April 24, 2014 remand of the residential non-
  weatherized and mobile home gas furnaces standards set in the 2011
  Energy Conservation Standards for Residential Furnaces and Residential
  Central Air Conditioners and Heat Pumps. The costs associated with
  this rule reflect implementation of the amended standards for the
  remaining furnace product classes (i.e., oil-fired furnaces).
*** The final rule for this energy conservation standard has not been
  published. The compliance date and analysis of conversion costs have
  not been finalized at this time. (If a value is provided for total
  industry conversion expense, this value represents an estimate from
  the September 2014 NOPR.)

    Additionally, manufacturers cited increasing ENERGY STAR \52\ 
standards for room air conditioners and ductless heating and cooling 
systems as a source of regulatory burden. However, DOE does not 
consider ENERGY STAR in its presentation of cumulative regulatory 
burden, because ENERGY STAR is a voluntary program and is not federally 
mandated.
---------------------------------------------------------------------------

    \52\ ENERGY STAR is a U.S. EPA voluntary program designed to 
identify and promote energy-efficient products to reduce greenhouse 
gas emissions. For more information on the ENERGY STAR program, 
please visit www.energystar.gov.
---------------------------------------------------------------------------

    Manufacturers also cited the U.S. EPA SNAP Program as a source of 
regulatory burden. The SNAP Program evaluates and regulates substitutes 
for ozone-depleting chemicals (such as air conditioning refrigerants) 
that are being phased out under the stratospheric ozone protection 
provisions of the CAA. On July 9, 2014, the EPA issued a notice of 
proposed rulemaking proposing to list three flammable refrigerants 
(HFC-32 (R-32), Propane (R-290), and R-441A) as new acceptable 
substitutes, subject to use conditions, for refrigerant in the 
Household and Light Commercial Air Conditioning class of equipment. 79 
FR 38811 (July 9, 2014). On April 10, 2015, the EPA published its final 
rule that allows the use of R-32, R-290, and R-441A in limited amounts 
in PTAC and PTHP applications. 80 FR 19454 (April 10, 2015) EIAI 
commented that R-410A is a candidate for delisting in some sectors 
under the EPA's SNAP program. (EIAI, No. 32 at p. 3) SCS commented 
that, with the anti-backsliding rule, it is critical to not set a 
standard level so high that it may not be technically possible to meet 
the standard in the future with a change such as delisting 
refrigerants. (SCS, NOPR Public Meeting Transcript, No. 37 at p. 42) 
DOE notes that the EPA did not delist R-410A for use in new production 
in the Household and Light Commercial Air Conditioning class of 
equipment (which includes PTAC and PTHP equipment). DOE also notes that 
the use of alternate refrigerants by manufacturers of PTACs and PTHPs 
would not be required as a direct result of this rule. As a result, 
alternate

[[Page 43201]]

refrigerants were not considered in this analysis.
3. National Impact Analysis
a. Significance of Energy Savings
    For each TSL, DOE projected energy savings for PTAC and PTHP 
equipment purchased in the respective 30-year period that begins in the 
year of anticipated compliance with amended standards. The savings are 
measured over the entire lifetime of equipment purchased in the 30-year 
period. DOE quantified the energy savings attributable to each TSL as 
the difference in energy consumption between each standards case and 
the base case represented by ANSI/ASHRAE/IES Standard 90.1-2013. DOE 
also determined energy savings for PTAC equipment with the ANSI/ASHRAE/
IES Standard 90.1-2013 minimum efficiency level by comparing with the 
energy consumption of PTAC equipment meeting the Federal minimum 
efficiency level. Table V.17 shows the estimated primary energy savings 
for PTACs and PTHPs at each of the TSLs, and Table V.18 presents the 
estimated full-fuel-cycle energy savings for each TSL. The approach for 
estimating national energy savings is further described in section 
IV.H.

                      Table V.17--Cumulative Primary Energy Savings for PTAC Sold From 2019 to 2048 and PTHP Sold From 2018 to 2047
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                              ASHRAE                                   Trial standard level
                                                          Standard 90.1- -------------------------------------------------------------------------------
                                                              2013 *             1               2               3               4               5
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                      (quads)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Standard Size Equipment, 7,000 Btu/h....................           0.000           0.000           0.002           0.004           0.006           0.006
Standard Size Equipment, 9,000 Btu/h....................           0.000           0.012           0.044           0.087           0.110           0.113
Standard Size Equipment, 15,000 Btu/h...................           0.001           0.001           0.005           0.009           0.011           0.011
                                                         -----------------------------------------------------------------------------------------------
    Total All Classes...................................           0.001           0.013           0.052           0.100           0.127           0.130
--------------------------------------------------------------------------------------------------------------------------------------------------------
* Energy savings determined from comparing PTAC energy consumption at the ANSI/ASHRAE/IES Standard 90.1-2013 efficiency level to that at the Federal
  minimum efficiency level.
Note: Values of 0.000 represent non-zero energy savings but is as appears due to rounding.


                  Table V.18--Cumulative Full-Fuel-Cycle Energy Savings for PTAC Sold From 2019 to 2048 and PTHP Sold From 2018 to 2047
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                              ASHRAE                                   Trial standard level
                                                          Standard 90.1- -------------------------------------------------------------------------------
                                                              2013 *             1               2               3               4               5
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                      (quads)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Standard Size Equipment, 7,000 Btu/h....................           0.000           0.000           0.002           0.005           0.006           0.006
Standard Size Equipment, 9,000 Btu/h....................           0.000           0.012           0.045           0.088           0.112           0.115
Standard Size Equipment, 15,000 Btu/h...................           0.001           0.001           0.005           0.009           0.011           0.011
                                                         -----------------------------------------------------------------------------------------------
    Total All Classes...................................           0.001           0.014           0.052           0.102           0.129           0.133
--------------------------------------------------------------------------------------------------------------------------------------------------------
* Energy savings determined from comparing PTAC energy consumption at the ANSI/ASHRAE/IES Standard 90.1-2013 efficiency level to that at the Federal
  minimum efficiency level.
Note: Values of 0.000 represent non-zero energy savings but is as appears due to rounding.

    Each TSL that is more stringent than the corresponding levels in 
ANSI/ASHRAE/IES Standard 90.1-2013 results in additional energy 
savings.
    OMB Circular A-4 \53\ requires agencies to present analytical 
results, including separate schedules of the monetized benefits and 
costs that show the type and timing of benefits and costs. Circular A-4 
also directs agencies to consider the variability of key elements 
underlying the estimates of benefits and costs. For this rulemaking, 
DOE also undertook a sensitivity analysis using nine rather than 30 
years of equipment shipments. The choice of a nine-year period is a 
proxy for the timeline in EPCA for the review of certain energy 
conservation standards and potential revision of and compliance with 
such revised standards.\54\ The review timeframe established in EPCA is 
generally not synchronized with the equipment lifetime, equipment 
manufacturing cycles, or other factors specific to PTACs and PTHPs. 
Thus, such results are presented for informational purposes only and 
are not indicative of any change in DOE's analytical methodology. The 
NES results based on a 9-year analytical period are presented in Table 
V.19.
---------------------------------------------------------------------------

    \53\ ``Circular A-4: Regulatory Analysis,'' U.S. Office of 
Management and Budget, September, 2003. Available at: 
www.whitehouse.gov/omb/circulars_a004_a-4/.
    \54\ EPCA requires DOE to review its standards at least once 
every 6 years, and requires, for certain equipment, a 3-year period 
after any new standard is promulgated before compliance is required, 
except that in no case may any new standards be required within 6 
years of the compliance date of the previous standards. (42 U.S.C. 
6313(a)(6)(C)(i)) While adding a 6-year review to the 3-year 
compliance period adds up to 9 years, DOE notes that it may 
undertake reviews at any time within the 6 year period and that the 
3-year compliance date may yield to the 6-year backstop.

[[Page 43202]]



                           Table V.19--Cumulative Primary Energy Savings for PTAC Sold in 2019-2027 and PTHP Sold in 2018-2026
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                              ASHRAE                                   Trial standard level
                                                          Standard 90.1- -------------------------------------------------------------------------------
                                                              2013 *             1               2               3               4               5
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                      (quads)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Standard Size Equipment, 7,000 Btu/h....................           0.000           0.000           0.001           0.001           0.002           0.002
Standard Size Equipment, 9,000 Btu/h....................           0.000           0.004           0.013           0.026           0.040           0.043
Standard Size Equipment, 15,000 Btu/h...................           0.000           0.000           0.001           0.003           0.004           0.004
                                                         -----------------------------------------------------------------------------------------------
    Total All Classes...................................           0.000           0.004           0.015           0.030           0.046           0.049
--------------------------------------------------------------------------------------------------------------------------------------------------------
* Energy savings determined from comparing PTAC energy consumption at the ANSI/ASHRAE/IES Standard 90.1-2013 efficiency level to that at the Federal
  minimum efficiency level.
Note: Values of 0.000 represent non-zero energy savings but is as appears due to rounding.

b. Net Present Value of Consumer Costs and Benefits
    DOE estimated the cumulative NPV of the total costs and savings for 
consumers that would result from the TSLs considered for PTAC and PTHP 
equipment. In accordance with OMB's guidelines on regulatory 
analysis,\55\ DOE calculated the NPV using both a 7-percent and a 3-
percent real discount rate.
---------------------------------------------------------------------------

    \55\ ``OMB Circular A-4, section E,'' U.S. Office of Management 
and Budget, September, 2003. Available online at http://www.whitehouse.gov/omb/circulars_a004_a-4.
---------------------------------------------------------------------------

    Table V.20 shows the NPV results for each TSL considered for PTAC 
and PTHP equipment.

    Table V.20--Net Present Value of Consumer Benefits for PTAC Sold in 2019-2048 and PTHP Sold in 2018-2047
----------------------------------------------------------------------------------------------------------------
                                                             Trial standard level * (millions 2014$)
          Equipment class             Discount  ----------------------------------------------------------------
                                        rate          1            2            3            4            5
----------------------------------------------------------------------------------------------------------------
<7,000 Btu/h......................           3%          0.1        (1.7)        (5.4)        (8.3)        (8.8)
7,000-15,000 Btu/h                                       6.4          0.9       (20.6)       (43.0)       (47.6)
>15,000 Btu/h                                          (0.6)        (5.2)       (13.7)       (20.2)       (21.4)
                                   -----------------------------------------------------------------------------
    Total--All Classes............  ...........          5.9        (6.0)       (39.7)       (71.5)       (77.7)
----------------------------------------------------------------------------------------------------------------
<7,000 Btu/h......................           7%        (0.1)        (1.5)        (4.1)        (6.4)        (6.9)
7,000-15,000 Btu/h                                       0.6       (12.0)       (36.3)       (60.1)       (65.3)
>15,000 Btu/h                                          (0.6)        (3.9)        (9.7)       (14.9)       (16.0)
                                   -----------------------------------------------------------------------------
    Total--All Classes............  ...........        (0.1)       (17.3)       (50.2)       (81.4)       (88.1)
----------------------------------------------------------------------------------------------------------------
* Parentheses indicate negative values.
Note: Values of 0.0 represent a non-zero NPV that cannot be displayed due to rounding. Numbers may not sum to
  total due to rounding.

    The NPV results based on the aforementioned nine-year analytical 
period are presented in Table V.21. As mentioned previously, this 
information is presented for informational purposes only and is not 
indicative of any change in DOE's analytical methodology or decision 
criteria.

     Table V.21--Net Present Value of Consumer Benefits for PTAC Sold in 2019-2027and PTHP Sold in 2018-2026
----------------------------------------------------------------------------------------------------------------
                                                             Trial standard level * (millions 2013$)
          Equipment class             Discount  ----------------------------------------------------------------
                                        rate          1            2            3            4            5
----------------------------------------------------------------------------------------------------------------
<7,000 Btu/h......................           3%          0.1        (0.3)        (1.5)        (3.0)        (3.5)
7,000-15,000 Btu/h                                       6.1          6.8          1.8        (9.2)       (13.7)
>15,000 Btu/h                                            0.1        (0.4)        (2.6)        (6.7)        (7.8)
                                   -----------------------------------------------------------------------------
    Total-All Classes.............  ...........          6.3          6.2        (2.4)       (18.9)       (25.1)
----------------------------------------------------------------------------------------------------------------
<7,000 Btu/h......................           7%          0.0        (0.5)        (1.8)        (3.2)        (3.6)
7,000-15,000 Btu/h                                       2.3        (2.2)       (12.4)       (27.2)       (32.4)
>15,000 Btu/h                                          (0.1)        (1.0)        (3.4)        (7.0)        (8.1)
                                   -----------------------------------------------------------------------------
Total--All Classes................  ...........          2.2        (3.7)       (17.6)       (37.4)       (44.1)
----------------------------------------------------------------------------------------------------------------
* Parentheses indicate negative values.
Note: Values of 0.0 represent a non-zero NPV that cannot be displayed due to rounding. Numbers may not sum to
  total due to rounding.


[[Page 43203]]

c. Indirect Impacts on Employment
    As described in section IV.N, DOE used an input/output model of the 
U.S. economy to estimate indirect employment impacts of the TSLs that 
DOE considered in this rulemaking. DOE understands that there are 
uncertainties involved in projecting employment impacts, especially 
changes in the later years of the analysis. Therefore, DOE generated 
results for near-term time frames (2019-2024), where these 
uncertainties are reduced.
    The results suggest that the adopted standards are likely to have 
negligible impact on the net demand for labor in the economy. The net 
change in jobs is so small that it would be imperceptible in national 
labor statistics and might be offset by other, unanticipated effects on 
employment. Chapter 16 of the final rule TSD presents detailed results 
regarding anticipated indirect employment impacts.
4. Impact on Utility or Performance of Equipment
    In performing the engineering analysis, DOE considered efficiency 
levels that may be achieved using design options that would not lessen 
the utility or performance of the individual classes of equipment. (42 
U.S.C. 6313(a)(6)(B)(ii)(IV)) As presented in section III.C of this 
document, DOE concluded that the efficiency levels proposed for 
standard size equipment in this document are technologically feasible 
and would not reduce the utility or performance of PTACs and PTHPs. 
PTAC and PTHP manufacturers currently offer equipment that meet or 
exceed the amended standard levels.
5. Impact of Any Lessening of Competition
    EPCA directs DOE to consider any lessening of competition that is 
likely to result from standards. It also directs the Attorney General 
of the United States (Attorney General) to determine the impact, if 
any, of any lessening of competition likely to result from a proposed 
standard and to transmit such determination in writing to the Secretary 
within 60 days of the publication of a proposed rule, together with an 
analysis of the nature and extent of the impact.
    To assist the Attorney General in making such determination, DOE 
provided the Department of Justice (DOJ) with copies of the September 
2014 NOPR and the accompanying TSD for review. In its assessment letter 
responding to DOE, DOJ concluded that the proposed energy conservation 
standards for PTAC and PTHP equipment are unlikely to have a 
significant adverse impact on competition. DOE is publishing the 
Attorney General's assessment at the end of this final rule.
6. Need of the Nation To Conserve Energy
    Enhanced energy efficiency, where economically justified, improves 
the nation's energy security, strengthens the economy, and reduces the 
environmental impacts or costs of energy production. Reduced 
electricity demand due to energy conservation standards is also likely 
to reduce the cost of maintaining the reliability of the electricity 
system, particularly during peak-load periods. As a measure of this 
reduced demand, chapter 15 of the final rule TSD presents the estimated 
reduction in generating capacity for the TSLs that DOE considered in 
this rulemaking.
    Energy savings from amended standards for PTAC and PTHP equipment 
may yield environmental benefits in the form of reduced emissions of 
air pollutants and greenhouse gases. Table V.22 provides DOE's estimate 
of cumulative emissions reductions expected to result from the TSLs 
considered in this rulemaking. The table includes both power sector 
emissions and upstream emissions. The emissions were calculated using 
the multipliers discussed in section IV.K. DOE reports annual emissions 
reductions for each TSL in chapter 13 of the final rule TSD.

                       Table V.22--Summary of Emissions Reductions for PTAC Sold From 2019 to 2048 and PTHP Sold From 2018 to 2047
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                               Trial standard level
                                                         -----------------------------------------------------------------------------------------------
                                                             ASHRAE **           1               2               3               4               5
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                 Power Sector Emissions
--------------------------------------------------------------------------------------------------------------------------------------------------------
CO2 (million metric tons)...............................            0.05            0.79            3.04            5.90            7.57            7.80
SO2 (thousand tons).....................................            0.04            0.65            2.50            4.85            6.28            6.50
NOX (thousand tons).....................................            0.04            0.61            2.34            4.53            5.84            6.03
Hg (tons)...............................................            0.00            0.00            0.01            0.01            0.02            0.02
N2O (thousand tons).....................................            0.00            0.01            0.04            0.08            0.10            0.11
CH4 (thousand tons).....................................            0.00            0.08            0.30            0.58            0.73            0.75
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                   Upstream Emissions
--------------------------------------------------------------------------------------------------------------------------------------------------------
CO2 (million metric tons)...............................            0.00            0.04            0.17            0.34            0.42            0.44
SO2 (thousand tons).....................................            0.00            0.01            0.03            0.06            0.08            0.08
NOX (thousand tons).....................................            0.04            0.64            2.47            4.79            6.04            6.20
Hg (tons)...............................................            0.00            0.00            0.00            0.00            0.00            0.00
N2O (thousand tons).....................................            0.00            0.00            0.00            0.00            0.00            0.00
CH4 (thousand tons).....................................            0.22            3.70           14.39           27.88           35.17           36.09
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                   Total FFC Emissions
--------------------------------------------------------------------------------------------------------------------------------------------------------
CO2 (million metric tons)...............................            0.05            0.83            3.21            6.24            7.99            8.24
SO2 (thousand tons).....................................            0.04            0.66            2.53            4.91            6.36            6.58
NOX (thousand tons).....................................            0.08            1.24            4.81            9.32           11.87           12.23
Hg (tons)...............................................            0.00            0.00            0.01            0.02            0.02            0.02

[[Page 43204]]

 
N2O (thousand tons).....................................            0.00            0.01            0.04            0.09            0.11            0.11
N2O (thousand tons CO2eq) *.............................            0.18            3.01           11.66           22.61           28.71           29.52
CH4 (thousand tons).....................................            0.23            3.78           14.69           28.46           35.90           36.84
CH4 (million tons CO2eq) *..............................            6.42          105.87          411.21          796.84         1005.20         1031.56
--------------------------------------------------------------------------------------------------------------------------------------------------------
* CO2eq is the quantity of CO2 that would have the same global warming potential (GWP) as the subject emission.
** Emissions reductions determined from comparing PTAC emissions at the ANSI/ASHRAE/IES Standard 90.1-2013 efficiency level to that at the Federal
  minimum efficiency level.
Note: Values of 0.00 represent non-zero emissions savings but is as appears due to rounding.

    As part of the analysis for this rule, DOE estimated monetary 
benefits likely to result from the reduced emissions of CO2 
and NOX that DOE estimated for each of the considered TSLs 
for PTAC and PTHP equipment. As discussed in section IV.L of this 
document, for CO2, DOE used the most recent values for the 
SCC developed by an interagency process. The four sets of SCC values 
for CO2 emissions reductions in 2015 resulting from that 
process (expressed in 2014$) are represented by $12.2/metric ton (the 
average value from a distribution that uses a 5-percent discount rate), 
$41.2/metric ton (the average value from a distribution that uses a 3-
percent discount rate), $63.4/metric ton (the average value from a 
distribution that uses a 2.5-percent discount rate), and $121/metric 
ton (the 95th-percentile value from a distribution that uses a 3-
percent discount rate). The values for later years are higher due to 
increasing damages (public health, economic and environmental) as the 
projected magnitude of climate change increases.
    Table V.23 presents the global value of CO2 emissions 
reductions at each TSL. For each of the four cases, DOE calculated a 
present value of the stream of annual values using the same discount 
rate as was used in the studies upon which the dollar-per-ton values 
are based. DOE calculated domestic values as a range from 7 percent to 
23 percent of the global values, and these results are presented in 
chapter 14 of the final rule TSD.

   Table V.23--Estimates of Global Present Value of CO2 Emissions Reduction Under PTAC and PTHP Trial Standard
                                                     Levels
----------------------------------------------------------------------------------------------------------------
                                                              SCC Case * (million 2014$)
                                     ---------------------------------------------------------------------------
                 TSL                  5% Discount rate,  3% Discount rate,    2.5% Discount    3% Discount rate,
                                          average *          average *       rate, average *   95th percentile *
----------------------------------------------------------------------------------------------------------------
                                             Power Sector Emissions
----------------------------------------------------------------------------------------------------------------
1...................................               5.60              25.65              40.71              79.28
2...................................              21.36              98.34             156.20             304.08
3...................................              41.70             191.50             304.04             592.22
4...................................              55.18             249.89             395.67             771.97
5...................................              57.33             258.78             409.48             799.04
----------------------------------------------------------------------------------------------------------------
                                               Upstream Emissions
----------------------------------------------------------------------------------------------------------------
1...................................               0.31               1.43               2.28               4.44
2...................................               1.19               5.54               8.81              17.14
3...................................               2.32              10.77              17.13              33.34
4...................................               3.02              13.84              21.95              42.80
5...................................               3.12              14.25              22.60              44.08
----------------------------------------------------------------------------------------------------------------
                                               Total FFC Emissions
----------------------------------------------------------------------------------------------------------------
1...................................               5.91              27.09              42.99              83.71
2...................................              22.55             103.87             165.01             321.22
3...................................              44.02             202.27             321.17             625.56
4...................................              58.20             263.72             417.62             814.77
5...................................              60.46             273.03             432.09             843.12
----------------------------------------------------------------------------------------------------------------
* For each of the four cases, the corresponding SCC value for emissions in 2015 is $12.2, $41.2, $63.4, and $121
  per metric ton (2014$). The values are for CO2 only (i.e., not CO2eq of other greenhouse gases).

    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 continues to evolve rapidly. Thus, any value placed on 
reduced CO2 emissions in this rulemaking is subject to 
change. DOE, together with other Federal agencies, will continue to 
review various methodologies for estimating the monetary value of 
reductions in CO2 and other GHG emissions. This ongoing 
review will consider the comments on this subject that are part of the 
public record for this and other rulemakings, as well as other 
methodological

[[Page 43205]]

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 rule the most recent values 
and analyses resulting from the interagency review process.
    DOE also estimated the cumulative monetary value of the economic 
benefits associated with NOX emissions reductions 
anticipated to result from amended standards for PTACs and PTHPs. The 
dollar-per-ton values that DOE used are discussed in section IV.L.1. 
Table V.24 presents the cumulative present values for NOX 
emissions for each TSL calculated using the average dollar-per-ton 
value and 7-percent and 3-percent discount rates.

  Table V.24--Estimates of Present Value of NOX Emissions Reduction for
       PTAC Sold From 2019 to 2048 and PTHP Sold From 2018 to 2047
------------------------------------------------------------------------
                                                     (Million 2014$)
                                               -------------------------
                      TSL                       3% Discount  7% Discount
                                                    rate         rate
------------------------------------------------------------------------
                         Power Sector Emissions
------------------------------------------------------------------------
1                                                      0.87         0.43
2                                                      3.30         1.58
3                                                      6.45         3.11
4                                                      8.63         4.34
5                                                      9.01         4.60
------------------------------------------------------------------------
                           Upstream Emissions
------------------------------------------------------------------------
1                                                      0.87         0.40
2                                                      3.34         1.51
3                                                      6.53         2.97
4                                                      8.56         4.07
5                                                      8.87         4.27
------------------------------------------------------------------------
                           Total FFC Emissions
------------------------------------------------------------------------
1                                                      1.74         0.83
2                                                      6.64         3.10
3                                                     12.97         6.08
4                                                     17.20         8.42
5                                                     17.88         8.87
------------------------------------------------------------------------

7. Other Factors
    The Secretary of Energy, in determining whether a standard is 
economically justified, may consider any other factors that the 
Secretary deems to be relevant. (42 U.S.C. 6313(a)(6)(B)(ii)(VII)) No 
other factors were considered in this analysis.
8. Summary of National Economic Impacts
    The NPV of the monetized benefits associated with emissions 
reductions can be viewed as a complement to the NPV of the consumer 
savings calculated for each TSL considered in this rulemaking. Table 
V.25 presents the NPV values that result from adding the estimates of 
the potential economic benefits resulting from reduced CO2 
and NOX emissions in each of four valuation scenarios to the 
NPV of consumer savings calculated for each TSL considered in this 
rulemaking, at both a 7-percent and 3-percent discount rate. The 
CO2 values used in the columns of each table correspond to 
the four sets of SCC values discussed above.

Table V.25--Net Present Value of Consumer Savings Combined With Present Value of Monetized Benefits From CO2 and
                                            NOX Emissions Reductions
----------------------------------------------------------------------------------------------------------------
                                                                         million 2014$
                                           ------------------------------------------------------------------------
                                                                                                              SCC
                                                                                                             Case
                                                                                                             $121/
                    TSL                     SCC Case $12.2/ SCC Case $41.2/ SCC Case $63.4/ SCC Case $121/  metric
                                            metric ton and  metric ton and  metric ton and  metric ton and    ton
                                              medium NOX      medium NOX      medium NOX      medium NOX      and
                                                 value           value           value           value      medium
                                                                                                              NOX
                                                                                                             value
---------------------------------------------------------------------------------------------------------- --------
Consumer NPV at 3% Discount Rate added
 with:
    1.....................................            13.5            34.7            50.6            91.4
    2.....................................            23.2           104.5           165.7           321.9
    3.....................................            17.3           175.6           294.5           598.8
    4.....................................             3.9           209.4           363.3           760.4
    5.....................................             0.6           213.2           372.2           783.3
Consumer NPV at 7% Discount Rate added
 with:
    1.....................................             6.7            27.8            43.7            84.5
    2.....................................             8.3            89.6           150.8           307.0
    3.....................................           (0.1)           158.2           277.1           581.5
    4.....................................          (14.8)           190.7           344.6           741.8
    5.....................................          (18.8)           193.8           352.8           763.9
----------------------------------------------------------------------------------------------------------------
* These label values represent the global SCC in 2015, in 2014$.

    Although adding the value of consumer savings to the values of 
emission reductions provides a valuable perspective, two issues should 
be considered. First, the national operating cost savings are domestic 
U.S. monetary savings that occur as a result of market transactions, 
while the value of CO2 reductions is based on a global 
value. Second, the assessments of operating cost savings and the SCC 
are performed with different methods that use different time frames for 
analysis. The national operating cost savings is measured for the 
lifetime of equipment shipped in 2019 to 2048. Because CO2 
emissions have a very long residence time in the atmosphere,\56\ the 
SCC values in future years reflect future climate-related impacts 
resulting from the emission of CO2 that continue beyond 
2100.
---------------------------------------------------------------------------

    \56\ The atmospheric lifetime of CO2 is estimated of 
the order of 30-95 years. Jacobson, MZ, ``Correction to `Control of 
fossil-fuel particulate black carbon and organic matter, possibly 
the most effective method of slowing global warming,''' J. Geophys. 
Res. 110. pp. D14105 (2005).
---------------------------------------------------------------------------

C. Conclusions

    Any new or amended energy conservation standard for any class of 
PTAC and PTHP equipment must demonstrate that adoption of a uniform 
national standard more stringent than the amended ASHRAE/IES Standard 
90.1 for PTAC and PTHP equipment

[[Page 43206]]

would result in significant additional conservation of energy, is 
technologically feasible and economically justified, and is supported 
by clear and convincing evidence. (42 U.S.C. 6313(a)(6)(A)(i)(II)) In 
determining whether a standard is economically justified, the Secretary 
must determine whether the benefits of the standard exceed its burdens, 
considering, to the greatest extent practicable, the seven statutory 
factors discussed previously. (42 U.S.C. 6313(a)(6)(B)(ii))
    DOE considered the impacts of potential standards at each TSL, 
beginning with the maximum technologically feasible level, to determine 
whether that level met the evaluation criteria. If the max-tech level 
was not justified, DOE then considered the next most-efficient level 
and undertook the same evaluation until it reached the highest 
efficiency level that is both technologically feasible and economically 
justified, results in significant additional conservation of energy, 
and is supported by clear and convincing evidence.
    To aid the reader in understanding the benefits and/or burdens of 
each TSL, Table V.26 and Table V.27 summarize the quantitative impacts 
estimated for each TSL for PTAC and PTHP equipment, based on the 
assumptions and methodology discussed herein. The national impacts are 
measured over the lifetime of PTAC and PTHP equipment purchased in the 
30-year period that begins in the anticipated year of compliance with 
amended standards. The energy savings, emissions reductions, and value 
of emissions reductions refer to full-fuel-cycle results. The 
efficiency levels contained in each TSL are described in section V.A. 
In addition to the quantitative results presented in the tables, DOE 
also considers other burdens and benefits that affect economic 
justification. These include the impacts on identifiable subgroups of 
consumers that may be disproportionately affected by a national 
standard (see section V.B.1.b), and impacts on employment. DOE 
discusses the impacts on employment in PTAC and PTHP manufacturing in 
section V.B.2, and discusses the indirect employment impacts in section 
V.B.3.c.

                                 Table V.26--Summary of Analytical Results for PTAC and PTHP Equipment: National Impacts
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                              ASHRAE
                        Category                             [dagger]          TSL 1           TSL 2           TSL 3           TSL 4           TSL 5
--------------------------------------------------------------------------------------------------------------------------------------------------------
Cumulative National FFC Energy Savings (quads)..........           0.001           0.014           0.052           0.102           0.129           0.133
NPV of Consumer Costs and Benefits *** (2014$ million):
    3% discount rate....................................  ..............             5.9           (6.0)          (39.7)          (71.5)          (77.7)
    7% discount rate....................................  ..............           (0.1)          (17.3)          (50.2)          (81.4)          (88.1)
Cumulative Emissions Reduction (Total FFC Emissions):
    CO2 million metric tons.............................            0.05            0.83            3.21            6.24            7.99            8.24
    SO2 thousand tons...................................            0.04            0.66            2.53            4.91            6.36            6.58
    NOX thousand tons...................................            0.08            1.24            4.81            9.32           11.87           12.23
    Hg tons.............................................            0.00            0.00            0.01            0.02            0.02            0.02
    N2O thousand tons...................................            0.00            0.01            0.04            0.09            0.11            0.11
    N2O thousand tons CO2eq *...........................            0.18            3.01           11.66           22.61           28.71           29.52
    CH4 thousand tons...................................            0.23            3.78           14.69           28.46           35.90           36.84
    CH4 thousand tons CO2eq *...........................            6.42          105.87          411.21          796.84         1005.20         1031.56
Value of Emissions Reduction (Total FFC Emissions):
    CO2 2014$ million **................................  ..............     5.9 to 83.7   22.5 to 321.2   44.0 to 625.6   58.2 to 814.8   60.5 to 843.1
    NOX--3% discount rate 2014$ million.................  ..............            1.74            6.64           12.97           17.20           17.88
    NOX--7% discount rate 2014$ million.................  ..............            0.83            3.10            6.08            8.42            8.87
--------------------------------------------------------------------------------------------------------------------------------------------------------
* CO2eq is the quantity of CO2 that would have the same global warming potential (GWP) as the subject emission.
** Range of the economic value of CO2 reductions is based on estimates of the global benefit of reduced CO2 emissions.
*** Parentheses indicate negative values.
[dagger] Energy and emissions savings determined from comparing PTAC energy consumption and emissions at the ANSI/ASHRAE/IES Standard 90.1-2013
  efficiency level to that at the Federal minimum efficiency level.
Note: Values of 0.00 represent non-zero emissions savings but is as appears due to rounding.


    Table V.27--Summary of Analytical Results for PTAC and PTHP Equipment: Manufacturer and Consumer Impacts
----------------------------------------------------------------------------------------------------------------
            Category                   TSL 1           TSL 2           TSL 3           TSL 4           TSL 5
----------------------------------------------------------------------------------------------------------------
Industry Impacts ***
    Change in Industry NPV        (1.5) to (1.1)    (0.5) to 0.8  (3.0) to (0.3)    (3.4) to 0.8  (6.7) to (1.9)
     (2013$M)...................
    Industry NPV (% Change).....  (2.4) to (1.8)    (0.8) to 1.3  (4.8) to (0.5)    (5.4) to 1.4       (10.7) to
                                                                                                           (3.1)
Consumer Mean LCC Savings ***
 (2014$)
    Standard Size Equipment,                0.17          (3.26)          (9.85)         (18.50)         (23.50)
     9,000 Btu/h................
    Standard Size Equipment,              (0.95)          (5.51)         (19.24)         (40.53)         (54.02)
     15,000 Btu/h...............
    Weighted Average *..........            0.09          (3.43)         (10.52)         (20.08)         (25.69)
Consumer Median PBP (years)
    Standard Size Equipment,                7.67            8.84            9.84           10.53           10.87
     9,000 Btu/h................
    Standard Size Equipment,                9.69           10.49           12.30           14.07           14.98
     15,000 Btu/h...............
    Weighted Average *..........            7.62            8.65            9.19            0.00            0.00
Standard Size Equipment 9,000
 Btu/h **
    Consumers with Net Cost %...              27              50              78              87              88

[[Page 43207]]

 
    Consumers with No Impact %..              52              34               7               0               0
    Consumers with Net Benefit %              21              16              15              13              12
Standard Size Equipment 15,000
 Btu/h **
    Consumers with Net Cost %...              34              51              85              93              95
    Consumers with No Impact %..              58              39               7               2               0
    Consumers with Net Benefit %               8              10               9               5               4
Weighted Average **
    Consumers with Net Cost %...              28              50              79              87              89
    Consumers with No Impact %..               9               2               1               1               1
    Consumers with Net Benefit %              17              21              37              46              65
----------------------------------------------------------------------------------------------------------------
* Weighted by shares of each equipment class in total projected shipments in 2019 for PTAC and 2018 for PTHP.
** Rounding may cause some items to not total 100 percent.
*** Parentheses indicate negative values.

    DOE first considered TSL 5, which represents the max-tech 
efficiency levels. TSL 5 would save 0.13 quads of energy, an amount DOE 
considers significant. Under TSL 5, the NPV of consumer benefit would 
be negative $88.1 million using a discount rate of 7 percent, and 
negative $77.7 million using a discount rate of 3 percent.
    The cumulative emissions reductions at TSL 5 are 8.2 Mt of 
CO2, 6.6 thousand tons of SO2, 12.2 thousand tons 
of NOX, 36.8 thousand tons of CH4, and 0.1 
thousand tons of N2O. The estimated monetary value of the 
CO2 emissions reduction at TSL 5 ranges from $61 million to 
$843 million.
    At TSL 5, the weighted-average LCC impact is an expenditure (i.e., 
negative savings) of $25.68 for purchasers of PTAC and PTHP equipment. 
For these purchasers, the simple payback period is 6.6 years. The 
fraction of consumers experiencing a net LCC cost is 89 percent.
    At TSL 5, the projected change in INPV ranges from a decrease of 
$6.7 million to a decrease of $1.9 million, which correspond to 
decreases of 10.7 percent and 3.1 percent, respectively. Currently, 
there is only one PTHP equipment line being manufactured at TSL 5 
efficiency levels. Available information indicates that PTAC and PTHP 
manufacturers would be able to design and produce equipment at TSL 5, 
based on the existence of a unit that achieves TSL 5 levels without the 
use of proprietary technologies.
    The Secretary concluded that at TSL 5 for PTAC and PTHP equipment, 
the benefits of energy savings, emission reductions, and the estimated 
monetary value of the emissions reductions would be outweighed by the 
negative NPV of consumer benefits, the economic burden on many 
consumers, and the impacts on manufacturers, including the conversion 
costs and profit margin impacts that could result in a large reduction 
in INPV. Consequently, the Secretary has concluded that TSL 5 is not 
economically justified.
    DOE then considered TSL 4, which would save an estimated 0.13 quads 
of energy, an amount DOE considers significant. Under TSL 4, the NPV of 
consumer benefit would be negative $81.4 million using a discount rate 
of 7 percent, and negative $71.5 million using a discount rate of 3 
percent.
    The cumulative emissions reductions at TSL 4 are 8.0 Mt of 
CO2, 6.4 thousand tons of SO2, 11.9 thousand tons 
of NOX, 35.9 thousand tons of CH4, and 0.1 
thousand tons of N2O. The estimated monetary value of the 
CO2 emissions reduction at TSL 4 ranges from $58 million to 
$815 million.
    At TSL 4, the weighted-average LCC impact is an expenditure of 
$20.07 for purchasers of PTAC and PTHP equipment. For these purchasers, 
the simple payback period is 6.4 years. The fraction of consumers 
experiencing a net LCC cost is 87 percent.
    At TSL 4, the projected change in INPV ranges from a decrease of 
$3.4 million to an increase of $0.8 million, which represent a decrease 
of 5.4 percent and an increase of 1.4 percent, respectively.
    The Secretary concluded that at TSL 4 for PTAC and PTHP equipment, 
the benefits of energy savings, emission reductions, and the estimated 
monetary value of the emissions reductions would be outweighed by the 
negative NPV of consumer benefits, economic burden on many consumers, 
and the impacts on manufacturers, including the conversion costs and 
profit margin impacts that could result in a large reduction in INPV. 
Consequently, the Secretary has concluded that TSL 4 is not 
economically justified.
    DOE then considered TSL 3, which would save an estimated 0.10 quads 
of energy, an amount DOE considers significant. Under TSL 3, the NPV of 
consumer benefit would be negative $50.2 million using a discount rate 
of 7 percent, and negative $39.7 million using a discount rate of 3 
percent.
    The cumulative emissions reductions at TSL 3 are 6.2 Mt of 
CO2, 4.9 thousand tons of SO2, 9.3 thousand tons 
of NOX, 28.5 thousand tons of CH4, and 0.1 
thousand tons of N2O. The estimated monetary value of the 
CO2 emissions reduction at TSL 3 ranges from $44 million to 
$626 million.
    At TSL 3, the weighted-average LCC impact is an expenditure of 
$10.52 for purchasers of PTAC and PTHP equipment. For these purchasers, 
the simple payback period is 6.1 years. The fraction of consumers 
experiencing a net LCC cost is 79 percent.
    At TSL 3, the projected change in INPV ranges from a decrease of 
$3.0 million to a decrease of $0.3 million, which represent decreases 
of 4.8 percent and 0.5 percent, respectively.
    The Secretary concluded that at TSL 3 for PTAC and PTHP equipment, 
the benefits of energy savings, emission reductions, and the estimated 
monetary value of the emissions reductions would be outweighed by the 
negative NPV of consumer benefits, economic burden on many consumers, 
and the impacts on manufacturers, including the conversion costs and 
profit margin impacts that could result in a large reduction in INPV. 
Consequently, the Secretary has concluded that TSL 3 is not 
economically justified.
    DOE then considered TSL 2, which would save an estimated 0.05 quads 
of energy, an amount DOE considers significant. Under TSL 2, the NPV of 
consumer benefit would be negative $17.3 million using a discount rate 
of 7 percent, and negative $6.0 million using a discount rate of 3 
percent.
    The cumulative emissions reductions at TSL 2 are 3.2 Mt of 
CO2, 2.5 thousand tons of SO2, 4.8 thousand tons 
of NOX, and 14.7 thousand tons of CH4. The

[[Page 43208]]

estimated monetary value of the CO2 emissions reduction at 
TSL 2 ranges from $23 million to $321 million.
    At TSL 2, the weighted-average LCC impact is an expenditure of 
$3.43 for purchasers of PTAC and PTHP equipment. For these purchasers, 
the simple payback period is 5.7 years. The fraction of consumers 
experiencing a net LCC cost is 50 percent.
    At TSL 2, the projected change in INPV ranges from a decrease of 
$0.5 million to an increase of $0.8 million, which represent a decrease 
of 0.8 percent and an increase of 1.3 percent, respectively.
    The Secretary concluded that at TSL 2 for PTAC and PTHP equipment, 
the benefits of energy savings, emission reductions, and the estimated 
monetary value of the emissions reductions would be outweighed by the 
negative NPV of consumer benefits, economic burden on some consumers, 
and the impacts on manufacturers, including the conversion costs and 
profit margin impacts that could result in a large reduction in INPV. 
Consequently, the Secretary has concluded that TSL 2 is not 
economically justified.
    DOE then considered TSL 1, which would save an estimated 0.01 quads 
of energy, an amount DOE considers significant. Under TSL 1, the NPV of 
consumer benefit would be negative $0.1 million using a discount rate 
of 7 percent, and $5.9 million using a discount rate of 3 percent.
    The cumulative emissions reductions at TSL 1 are 0.8 Mt of 
CO2, 0.7 thousand tons of SO2, 1.2 thousand tons 
of NOX, and 3.8 thousand tons of CH4. The 
estimated monetary value of the CO2 emissions reduction at 
TSL 1 ranges from $6 million to $84 million.
    At TSL 1, the weighted-average LCC impact is a savings of $0.09 for 
purchasers of PTAC and PTHP equipment. For these purchasers, the simple 
payback period is 5.1 years. The fraction of consumers experiencing a 
net LCC cost is 28 percent.
    At TSL 1, the projected change in INPV ranges from a decrease of 
$1.1 million to a decrease of $1.5 million, which represent decreases 
of 1.8 percent and 2.4 percent, respectively.
    The Secretary concluded that at TSL 1 for PTAC and PTHP equipment, 
the benefits of energy savings, emission reductions, estimated monetary 
value of the emissions reductions, and the economic benefit for some 
consumers would be outweighed by the negative NPV of consumer benefits 
at 7-percent discount rate, the negative average LCC savings for 
standard size equipment, 15,000 Btu/h, and the negative impacts on 
manufacturers, including the conversion costs and profit margin impacts 
that could result in a large reduction in INPV. Consequently, the 
Secretary has concluded that TSL 1 is not economically justified.
    Therefore, based on the above considerations, DOE is not able to 
show with clear and convincing evidence that energy conservation 
standards for PTAC and PTHP equipment based on any of the considered 
TSLs are economically justified. Therefore, pursuant to 42 U.S.C. 
6313(6)(A)(ii)(I), which states that unless adoption of a uniform 
national standard more stringent than the amended ASHRAE/IES Standard 
90.1 for the equipment would result in significant additional 
conservation of energy and is technologically feasible and economically 
justified and is supported by clear and convincing evidence, DOE is 
establishing amended energy efficiency standards for PTAC equipment at 
the minimum efficiency level specified in the ANSI/ASHRAE/IES Standard 
90.1-2013 for PTAC equipment. The amended energy conservation standards 
for PTAC equipment are shown in Table V.28. The standards for PTHP 
equipment remain unchanged.

               Table V.28--Amended Energy Conservation Standards for Standard Size PTAC Equipment
----------------------------------------------------------------------------------------------------------------
                                                                                             Compliance date:
            Equipment type                 Cooling capacity         Efficiency level      Products manufactured
                                                                                            on and after . . .
----------------------------------------------------------------------------------------------------------------
PTAC.................................  <7,000 Btu/h...........  EER = 11.9.............  January 1, 2017.
                                       >=7,000 Btu/h and        EER = 14.0 - (0.3 x Cap
                                        <=15,000 Btu/h.          \1\).
                                       >15,000 Btu/h..........  EER = 9.5
----------------------------------------------------------------------------------------------------------------
\1\ Cap means cooling capacity in thousand British thermal units per hour (Btu/h) at 95 [deg]F outdoor dry-bulb
  temperature.

VI. Procedural Issues and Regulatory Review

A. Review Under Executive Orders 12866 and 13563

    Section 1(b)(1) of Executive Order 12866, ``Regulatory Planning and 
Review,'' 58 FR 51735 (Oct. 4, 1993), requires each agency to identify 
the problem that it intends to address, including, where applicable, 
the failures of private markets or public institutions that warrant new 
agency action, as well as to assess the significance of that problem. 
This final rule addresses the following problems:
    (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 equipment 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 qualify some of the external benefits through 
use of social cost of carbon values.
    In addition, DOE has determined that this regulatory action is not 
a ``significant regulatory action'' under section 3(f) of Executive 
Order 12866. Section 6(a)(3)(A) of the Executive Order states that 
absent a material change in the development of the planned regulatory 
action, regulatory action not designated as significant will not be 
subject to review under the aforementioned section unless, within 10 
working days of receipt of DOE's list of planned regulatory actions, 
the Administrator of OIRA notifies the agency that OIRA has determined 
that a planned regulation is a significant regulatory action within the 
meaning of the Executive order.
    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

[[Page 43209]]

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 a regulatory flexibility analysis for any rule that by 
law must be proposed for public comment, unless the agency certifies 
that the rule, if promulgated, will not have a significant economic 
impact on a substantial number of small entities. As required by 
Executive Order 13272, ``Proper Consideration of Small Entities in 
Agency Rulemaking,'' 67 FR 53461 (August 16, 2002), DOE published 
procedures and policies on February 19, 2003, to ensure that the 
potential impacts of its rules on small entities are properly 
considered during the rulemaking process. 68 FR 7990. DOE has made its 
procedures and policies available on the Office of the General 
Counsel's Web site (http://energy.gov/gc/office-general-counsel).
1. Description and Estimated Number of Small Entities Regulated
a. Methodology for Estimating the Number of Small Entities
    For manufacturers of PTACs and PTHPs, 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. See 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/files/Size_Standards_Table.pdf. PTAC and PTHP manufacturing is 
classified under NAICS 333415, ``Air-Conditioning and Warm Air Heating 
Equipment and Commercial and Industrial Refrigeration Equipment 
Manufacturing.'' The SBA sets a threshold of 750 employees or less for 
an entity to be considered as a small business for this category.
    DOE reviewed the potential standard levels considered in this final 
rule under the provisions of the Regulatory Flexibility Act and the 
procedures and policies published on February 19, 2003. DOE conducted a 
market survey to determine whether any companies could be small 
business manufacturers of equipment covered by this rulemaking. DOE 
used available public information to identify potential small 
manufacturers. DOE's research involved industry trade association 
membership directories (e.g., AHRI), information from previous 
rulemakings, individual company Web sites, and market research tools 
(e.g., Hoover's reports) to create a list of companies that manufacture 
or sell PTAC and PTHP equipment covered by this rulemaking. DOE also 
asked stakeholders and industry representatives if they were aware of 
any additional small manufacturers during manufacturer interviews and 
at DOE public meetings. DOE reviewed publicly available data and 
contacted various companies on its list of manufacturers, as necessary, 
to determine whether they met the SBA's definition of a small business 
manufacturer. DOE screened out companies that do not offer equipment 
impacted by this rulemaking, do not meet the definition of a ``small 
business,'' or are foreign owned and operated.
    DOE initially identified 22 companies that sell PTAC and PTHP 
equipment that would be affected by this proposal. Of these 22 
companies, DOE identified 12 as small businesses.
b. Manufacturer Participation
    DOE contacted the identified small businesses to invite them to 
take part in a manufacturer impact analysis interview. Of the 12 small 
businesses contacted, DOE was able to reach and discuss potential 
standards with two. DOE also obtained information about small 
businesses and potential impacts on small businesses while interviewing 
large manufacturers.
c. PTAC and PTHP Industry Structure and Nature of Competition
    Three major manufacturers supply approximately 80 percent of the 
U.S. market for standard-size PTACs and PTHPs. DOE estimates that the 
remaining 20 percent of the market is served by a combination of small 
businesses and large businesses that are foreign owned and operated. 
None of the major manufacturers of PTACs and PTHPs affected by this 
rulemaking is a domestic small business.
    Further, the small businesses identified are not original equipment 
manufacturers of standard-size PTACs and PTHPs affected by this 
rulemaking. Rather, they import, rebrand, and distribute PTACs and 
PTHPs manufactured overseas by foreign companies. Some small businesses 
identified are original equipment manufacturers of non-standard size 
PTACs and PTHPs. However, energy conservation standards for non-
standard units are not being amended by this rulemaking. As a result, 
manufacturers of non-standard equipment are not considered in this 
small business analysis.
2. Description and Estimate of Compliance Requirements
    In this rule, DOE is adopting amended energy conservation standards 
for PTAC equipment that are equivalent to the standards set forth in 
ANSI/ASHRAE/IES Standard 90.1-2013. In line with ANSI/ASHRAE/IES 
Standard 90.1-2013, DOE is not amending energy conservation standards 
for PTHP equipment. DOE is required to adopt minimum efficiency 
standards either equivalent to or more stringent than those set forth 
by ASHRAE.
    Since this rule adopts the baseline as the standards level, DOE's 
modeling does not show any negative financial impacts on industry, 
including small

[[Page 43210]]

manufacturers, as a direct result of the standard.
3. Duplication, Overlap, and Conflict With Other Rules and Regulations
    DOE is not aware of any rules or regulations that duplicate, 
overlap, or conflict with this final rule.
4. Significant Alternatives to the Rule
    The discussion above analyzes impacts on small businesses that 
would result from DOE's rule adopting the ASHRAE levels. EPCA requires 
DOE to adopt the levels adopted by ASHRAE unless clear and convincing 
evidence supports adopting a higher standard. Therefore, in reviewing 
alternatives to the proposed rule, DOE considered the ASHRAE levels and 
levels above those adopted by ASHRAE. After considering comments on the 
proposal, DOE determined that it did not have clear and convincing 
evidence that levels above those adopted by ASHRAE were economically 
justified, and so DOE is adopting the ASHRAE levels in this final rule.
    In addition to the other TSLs being considered, the final rule TSD 
includes a regulatory impact analysis (RIA). For PTAC and PTHP 
equipment, the RIA discusses the following policy alternatives: (1) No 
change in standard; (2) consumer rebates; (3) consumer tax credits; (4) 
manufacturer tax credits; (5) voluntary energy efficiency targets; and 
(6) bulk government purchases. While these alternatives may mitigate to 
some varying extent the economic impacts on small entities compared to 
the adopted standards, DOE does not intend to consider these 
alternatives further because in several cases, they would not be 
feasible to implement without authority and funding from Congress, and 
in all cases, DOE has determined that the energy savings of these 
alternatives are significantly smaller than those that would be 
expected to result from adoption of the standards (ranging from 
approximately 1 percent to 22 percent of the energy savings from the 
adopted standards). Accordingly, DOE is declining to adopt any of these 
alternatives and is adopting the standards set forth in this 
rulemaking. (See chapter 17 of the final rule TSD for further detail on 
the policy alternatives DOE considered.)
    Additional compliance flexibilities may be available through other 
means. EPCA provides that a manufacturer whose annual gross revenue 
from all of its operations does not exceed $8,000,000 may apply for an 
exemption from all or part of an energy conservation standard for a 
period not longer than 24 months after the effective date of a final 
rule establishing the standard. Additionally, Section 504 of the 
Department of Energy Organization Act, 42 U.S.C. 7194, provides 
authority for the Secretary to adjust a rule issued under EPCA in order 
to prevent ``special hardship, inequity, or unfair distribution of 
burdens'' that may be imposed on that manufacturer as a result of such 
rule.

C. Review Under the Paperwork Reduction Act

    Manufacturers of PTACs and PTHPs 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 DOE test procedures for PTACs and PTHPs, 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 PTACs 
and PTHPs. See generally 10 CFR part 429. 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, appendix 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 (August 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 equipment 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 and burden reduction. 
61 FR 4729 (Feb. 7, 1996). Regarding the review required by section 
3(a), section 3(b) of Executive

[[Page 43211]]

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 is not expected to require 
expenditures of $100 million or more on the private sector. As a 
result, the analytical requirements of UMRA described above are not 
applicable.

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 (February 22, 2002), and DOE's guidelines were published at 67 
FR 62446 (October 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 PTAC and PTHP equipment, is 
not a significant energy action because the standards are not likely to 
have a significant adverse effect on the supply, distribution, or use 
of energy, nor has it been designated as such by the Administrator at 
OIRA. Accordingly, DOE has not prepared a Statement of Energy Effects 
on this 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 (January 
14, 2005). The Bulletin establishes that certain scientific information 
shall be peer reviewed by qualified specialists before it is 
disseminated by the Federal Government, including influential 
scientific information related to agency regulatory actions. The 
purpose of the bulletin is to enhance the quality and credibility of 
the Government's scientific information. Under the Bulletin, the energy 
conservation standards rulemaking analyses are ``influential scientific 
information,'' 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 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:

[[Page 43212]]

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).

VII. 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, Household appliances, Imports, 
Intergovernmental relations, Reporting and recordkeeping requirements, 
Small businesses.

    Issued in Washington, DC, on June 30, 2015.
David T. Danielson,
Assistant Secretary, 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. Amend Sec.  431.97 by revising paragraph (c) to read as follows:


Sec.  431.97  Energy efficiency standards and their compliance dates.

* * * * *
    (c) Each non-standard size packaged terminal air conditioner (PTAC) 
and packaged terminal heat pump (PTHP) manufactured on or after October 
7, 2010 must meet the applicable minimum energy efficiency standard 
level(s) set forth in Table 4 of this section. Each standard size PTAC 
manufactured on or after October 8, 2012, and before January 1, 2017 
must meet the applicable minimum energy efficiency standard level(s) 
set forth in Table 4 of this section. Each standard size PTHP 
manufactured on or after October 8, 2012 must meet the applicable 
minimum energy efficiency standard level(s) set forth in Table 4 of 
this section. Each standard size PTAC manufactured on or after January 
1, 2017 must meet the applicable minimum energy efficiency standard 
level(s) set forth in Table 5 of this section.

                    Table 4 to Sec.   431.97--Minimum Efficiency Standards for PTAC and PTHP
----------------------------------------------------------------------------------------------------------------
                                                                                               Compliance date:
                                                                                                   products
         Equipment type                Category        Cooling capacity    Efficiency level     manufactured on
                                                                                                and after . . .
----------------------------------------------------------------------------------------------------------------
PTAC............................  Standard Size.....  <7,000 Btu/h......  EER = 11.7........  October 8,
                                                                                               2012.\2\
                                                      >=7,000 Btu/h and   EER = 13.8 - (0.3   October 8,
                                                       <=15,000 Btu/h.     x Cap \1\).         2012.\2\
                                                      >15,000 Btu/h.....  EER = 9.3.........  October 8,
                                                                                               2012.\2\
                                  Non-Standard Size.  <7,000 Btu/h......  EER = 9.4.........  October 7, 2010.
                                                      >=7,000 Btu/h and   EER = 10.9 -        October 7, 2010.
                                                       <=15,000 Btu/h.     (0.213 x Cap \1\).
                                                      >15,000 Btu/h.....  EER = 7.7.........  October 7, 2010.
PTHP............................  Standard Size.....  <7,000 Btu/h......  EER = 11.9........  October 8, 2012.
                                                                          COP = 3.3.........
                                                      >=7,000 Btu/h and   EER = 14.0 - (0.3   October 8, 2012.
                                                       <=15,000 Btu/h.     x Cap \1\).
                                                                          COP = 3.7 - (0.052
                                                                           x Cap \1\).
                                                      >15,000 Btu/h.....  EER = 9.5.........  October 8, 2012.
                                                                          COP = 2.9.........
                                  Non-Standard Size.  <7,000 Btu/h......  EER = 9.3.........  October 7, 2010.
                                                                          COP = 2.7.........
                                                      >=7,000 Btu/h and   EER = 10.8 -        October 7, 2010.
                                                       <=15,000 Btu/h.     (0.213 x Cap \1\).
                                                                          COP = 2.9 - (0.026
                                                                           x Cap \1\).
                                                      >15,000 Btu/h.....  EER = 7.6.........  October 7, 2010.
                                                                          COP = 2.5.........
----------------------------------------------------------------------------------------------------------------
\1\ ``Cap'' means cooling capacity in thousand Btu/h at 95[emsp14][deg]F outdoor dry-bulb temperature.
\2\ And manufactured before January 1, 2017. See Table 5 of this section for updated efficiency standards that
  apply to this category of equipment manufactured on and after January 1, 2017.


                     Table 5 to Sec.   431.97--Updated Minimum Efficiency Standards for PTAC
----------------------------------------------------------------------------------------------------------------
                                                                                               Compliance date:
                                                                                                   products
         Equipment type                Category        Cooling capacity    Efficiency level     manufactured on
                                                                                                and after . . .
----------------------------------------------------------------------------------------------------------------
PTAC............................  Standard Size.....  <7,000 Btu/h......  EER = 11.9........  January 1, 2017.
                                                      >=7,000 Btu/h and   EER = 14.0 - (0.3   January 1, 2017.
                                                       <=15,000 Btu/h.     x Cap \1\).
                                                      >15,000 Btu/h.....  EER = 9.5.........  January 1, 2017.
----------------------------------------------------------------------------------------------------------------
\1\ ``Cap'' means cooling capacity in thousand Btu/h at 95 [deg]F outdoor dry-bulb temperature.

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

May 15, 2015
Anne Harkavy
Deputy General Counsel

[[Page 43213]]

For Litigation, Regulation and Enforcement Department of Energy
Washington, DC 20585

Dear Deputy General Counsel Harkavy:

    I am responding to your letter of March seeking the views of the 
Attorney General about the potential impact on competition of 
proposed amended energy conservation standards for standard-size 
packaged terminal air conditioners and standard-size packaged 
terminal heat pumps. Your request was submitted under Section 
(o)(2)(B)(i)(V) of the Energy Policy and Conservation Act, as 
amended (EPCA), 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 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 or increasing industry 
concentration. A lessening of competition could result in higher 
Prices to manufacturers and consumers.
    We have reviewed the proposed standards contained in the Notice 
of Proposed Rulemaking published in the Federal Register (79 FR at 
55538-55601, September 2014) (NOPR). We have also reviewed 
supplementary information submitted to the Attorney General by the 
Department of Energy, including the Technical Support Document, and 
reviewed industry source material. Based on this review, our 
conclusion is that the proposed amended energy conservation 
standards set forth in the NOPR for standard-size packaged terminal 
air conditioners and standard-size packaged terminal heat pumps are 
unlikely to have a significant adverse impact on competition.

Sincerely,

William J. Baer

[FR Doc. 2015-16897 Filed 7-20-15; 8:45 am]
 BILLING CODE 6450-01-P