[Federal Register Volume 81, Number 10 (Friday, January 15, 2016)]
[Rules and Regulations]
[Pages 2420-2533]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-33067]



[[Page 2419]]

Vol. 81

Friday,

No. 10

January 15, 2016

Part III





 Department of Energy





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10 CFR Part 431





 Energy Conservation Program for Certain Industrial Equipment: Energy 
Conservation Standards for Small, Large, and Very Large Air-Cooled 
Commercial Package Air Conditioning and Heating Equipment and 
Commercial Warm Air Furnaces; Final Rule

  Federal Register / Vol. 81 , No. 10 / Friday, January 15, 2016 / 
Rules and Regulations  

[[Page 2420]]


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DEPARTMENT OF ENERGY

10 CFR Part 431

[Docket Numbers EERE-2013-BT-STD-0007 and EERE-2013-BT-STD-0021]
RIN 1904-AC95 and 1904-AD11


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

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

ACTION: Direct final rule.

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

SUMMARY: The Energy Policy and Conservation Act of 1975, as amended 
(EPCA), prescribes energy conservation standards for various consumer 
products and certain commercial and industrial equipment, including 
small, large, and very large air-cooled commercial package air 
conditioning and heating equipment and commercial warm air furnaces. 
EPCA also requires that the U.S. Department of Energy (DOE) 
periodically review and consider amending its standards for specified 
categories of industrial equipment, including commercial heating and 
air conditioning equipment, in order to determine whether more-
stringent, amended standards would be technologically feasible and 
economically justified, and save a significant additional amount of 
energy. In this direct final rule, DOE is amending the energy 
conservation standards for both small, large, and very large air-cooled 
commercial package air conditioning and heating equipment and 
commercial warm air furnaces after determining that the amended energy 
conservation standards being adopted for these equipment would result 
in the significant conservation of energy and be technologically 
feasible and economically justified.

DATES: The effective date of this rule is May 16, 2016 unless adverse 
comment is received by May 4, 2016. If adverse comments are received 
that DOE determines may provide a reasonable basis for withdrawal of 
the direct final rule, a timely withdrawal of this rule will be 
published in the Federal Register. If no such adverse comments are 
received, compliance with the amended standards in this final rule will 
be required for small, large, and very large air-cooled commercial 
package air conditioning and heating equipment as detailed in the 
SUPPLEMENTARY INFORMATION. Compliance with the amended standards 
established for commercial warm air furnaces in this final rule is 
required starting on January 1, 2023.

ADDRESSES: The dockets, which include Federal Register notices, public 
meeting attendee lists and transcripts, comments, and other supporting 
documents/materials, is available for review at www.regulations.gov. 
All documents in the dockets are listed in the www.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 for small, large, and very large air-
cooled commercial package air conditioning and heating equipment can be 
found at: www.regulations.gov/#!docketDetail;D=EERE-2013-BT-STD-0007. A 
link to the docket Web page for commercial warm air furnaces can be 
found at: www.regulations.gov/#!docketDetail;D=EERE-2013-BT-STD-0021. 
The www.regulations.gov Web page will contain instructions on how to 
access all documents, including public comments, in the docket.
    For further information on how to review the dockets, contact Ms. 
Brenda Edwards at (202) 586-2945 or by email: 
[email protected].

FOR FURTHER INFORMATION CONTACT: Mr. John Cymbalsky, U.S. Department of 
Energy, Office of Energy Efficiency and Renewable Energy, Building 
Technologies, EE-5B, 1000 Independence Avenue SW., Washington, DC 
20585-0121. Telephone: (202) 286-1692. Email: 
[email protected].

SUPPLEMENTARY INFORMATION:

Table of Contents

I. Synopsis of the Direct Final Rule
    A. Benefits and Costs to Commercial Consumers
    B. Impact on Manufacturers
    1. Commercial Unitary Air Conditioners and Heat Pumps
    2. Commercial Warm Air Furnaces
    C. National Benefits and Costs
    1. Small, Large, and Very Large Commercial Package Air 
Conditioning and Heating Equipment
    2. Commercial Warm Air Furnaces
    3. Small, Large, and Very Large Commercial Package Air 
Conditioning and Heating Equipment and Commercial Warm Air Furnaces
    D. Conclusion
II. Introduction
    A. Authority
    B. Background
    1. Current Standards
    2. History of Standards Rulemakings
    a. Commercial Unitary Air Conditioners and Heat Pumps
    b. Commercial Warm Air Furnaces
III. General Discussion
    A. Combined Rulemaking
    B. Consensus Agreement
    1. Background
    2. Recommendations
    C. Compliance Dates
    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 (LCC 
and PBP)
    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. Energy Efficiency Descriptors for Commercial Unitary Air 
Conditioners and Heat Pumps
    1. Cooling Efficiency Metric
    2. Heating Efficiency Metric
    H. Other Issues
    1. Economic Justification of the Proposed Standards
    a. Small, Large, and Very Large Commercial Package Air 
Conditioning and Heating Equipment
    b. Commercial Warm Air Furnaces
    c. Response
    2. ASHRAE 90.1 Process
    3. Other
IV. Methodology and Discussion of Related Comments
    A. Market and Technology Assessment
    1. General
    2. Scope of Coverage and Equipment Classes
    a. Commercial Unitary Air Conditioners and Heat Pumps
    b. Commercial Warm Air Furnaces
    3. Technology Options
    a. Commercial Unitary Air Conditioners and Heat Pumps
    b. Commercial Warm Air Furnaces
    B. Screening Analysis
    1. Commercial Unitary Air Conditioners and Heat Pumps
    2. Commercial Warm Air Furnaces
    C. Engineering Analysis
    1. Methodology
    2. Efficiency Levels
    a. Baseline Efficiency Levels
    b. Incremental and Max-Tech Efficiency Levels
    3. Equipment Testing, Reverse Engineering and Energy Modeling
    a. Commercial Unitary Air Conditioners and Heat Pumps
    b. Commercial Warm Air Furnaces
    4. Cost Estimation Process
    5. Manufacturing Production Costs
    a. Commercial Unitary Air Conditioners and Heat Pumps

[[Page 2421]]

    b. Commercial Warm Air Furnaces
    6. Manufacturer Markup
    7. Shipping Costs
    D. Markups Analysis
    1. Distribution Channels
    2. Markups and Sales Tax
    E. Energy Use Analysis
    1. Small, Large, and Very Large Commercial Package Air 
Conditioning and Heating Equipment
    a. Energy Use Simulations
    b. Generalized Building Sample
    2. Commercial Warm Air Furnaces
    F. Life-Cycle Cost and Payback Period Analysis
    1. Equipment Cost
    2. Installation Cost
    a. Small, Large, and Very Large Commercial Package Air 
Conditioning and Heating Equipment
    b. Commercial Warm Air Furnaces
    3. Annual Energy Consumption
    4. Energy Prices
    5. Maintenance and Repair Costs
    6. Equipment Lifetime
    a. Small, Large, and Very Large Commercial Package Air 
Conditioning and Heating Equipment
    b. Commercial Warm Air Furnaces
    7. Discount Rates
    8. Efficiency Distribution in the No-New-Standards Case
    a. Small, Large, and Very Large Commercial Package Air 
Conditioning and Heating Equipment
    b. Commercial Warm Air Furnaces
    9. Payback Period Analysis
    G. Shipments Analysis
    1. Small, Large, and Very Large Commercial Package Air 
Conditioning and Heating Equipment
    a. Shipments by Market Segment
    b. Shipment Market Shares by Efficiency Level
    2. Commercial Warm Air Furnaces
    a. Impact of Standards on Shipments
    H. National Impact Analysis
    1. Equipment Efficiency Trends
    2. National Energy Savings
    3. Net Present Value
    a. Total Annual Installed Cost
    b. Total Annual Operating Cost Savings
    c. Net Benefit
    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
    3. Discussion of Comments
    a. Employment Impacts on CUAC/CUHP Manufacturers
    b. Conversion Costs related to CUACs/CUHPs
    c. Small Business Impacts on CWAF Manufacturers
    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 and Conclusions
    A. Trial Standard Levels
    B. Economic Justification and Energy Savings
    1. Economic Impacts on Individual 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. 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 Commercial 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. Conclusion
    1. Benefits and Burdens of TSLs Considered for Small, Large, and 
Very Large Air-Cooled Commercial Package Air Conditioning and 
Heating Equipment
    2. Benefits and Burdens of TSLs Considered for Commercial Warm 
Air Furnaces
VI. Procedural Issues and Regulatory Review
    A. Review Under Executive Orders 12866 and 13563
    B. Review Under the Regulatory Flexibility Act
    1. Commercial Unitary Air Conditioners and Heat Pumps
    a. Description of Estimated Number of Small Entities Regulated
    b. Description and Estimate of Compliance Requirements
    2. Commercial Warm Air Furnaces
    a. Description of Estimated Number of Small Entities Regulated
    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. Synopsis of the Direct Final Rule

    Title III, Part C \1\ of the Energy Policy and Conservation Act of 
1975 (EPCA or the Act), Public Law 94-163 (December 22, 1975), coupled 
with Section 441(a) Title IV of the National Energy Conservation Policy 
Act, Public Law 95-619 (November 9, 1978), (collectively codified at 42 
U.S.C. 6311-6317), established the Energy Conservation Program for 
Certain Industrial Equipment, which includes the small, large, and very 
large air-cooled commercial package air conditioning and heating 
equipment and commercial warm air furnaces (``CWAFs'') that are the 
subject of this rulemaking.\2\ The former group of equipment (i.e. air-
cooled commercial package air conditioning and heating equipment) is 
referred to herein as air-cooled commercial unitary air conditioners 
and heat pumps (``CUACs'' and ``CUHPs'').
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    \1\ Part C was codified as Part A-1 of the corresponding portion 
of the U.S. Code.
    \2\ All references to EPCA in this document refer to the statute 
as amended through the Energy Efficiency Improvement Act of 2015, 
Public Law 114-11 (April 30, 2015).
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    DOE received a statement submitted jointly by interested persons 
that are fairly representative of relevant points of view (including 
representatives of manufacturers of the covered equipment at issue, 
States, and efficiency advocates) containing recommendations with 
respect to energy conservation standards for the above equipment (see 
section III.B for description of the jointly-submitted statement). DOE 
has determined that the recommended standards contained in that 
jointly-submitted statement (hereinafter ``Joint Statement'') are in 
accordance with 42 U.S.C. 6313(a)(6)(B), which prescribes the 
conditions for adoption of a uniform national standard more stringent 
than the applicable levels prescribed by ASHRAE/IES Standard 90.1 for 
the above equipment. (The acronym ``ASHRAE/IES'' stands for the 
American Society of Heating, Refrigerating, and Air-Conditioning 
Engineers/Illuminating Engineering Society.) Under the authority 
provided by 42 U.S.C. 6295(p)(4) and 6316(b)(1), DOE is issuing this 
direct final rule establishing amended energy conservation standards 
for CUACs, CUHPs, and CWAFs.
    The amended minimum standards for CUACs and CUHPs are shown in 
Table I-1, with the CUAC and CUHP cooling efficiency standards 
presented in terms of an integrated energy efficiency ratio (``IEER'') 
and the CUHP heating efficiency standards presented as a coefficient of 
performance (``COP''). The

[[Page 2422]]

IEER metric would replace the currently used energy efficiency ratio 
(``EER'') metric on which DOE's standards are currently based. The 
standards will adopt ASHRAE 90.1-2013 efficiency levels in that will 
apply starting on January 1, 2018 and a higher level that will apply 
starting on January 1, 2023 as recommended by the ASRAC Working Group's 
Joint Statement. The standards contained in the recommendations apply 
to all equipment listed in Table I-1 manufactured in, or imported into, 
the United States starting on the dates shown in that table.

    Table I-1--Amended Energy Conservation Standards for Small, Large, and Very Large Commercial Package Air
                                       Conditioning and Heating Equipment
----------------------------------------------------------------------------------------------------------------
                                                              Proposed energy
          Equipment type                 Heating type      conservation standard          Compliance date
----------------------------------------------------------------------------------------------------------------
Small Commercial Packaged AC and
 HP (Air-Cooled)-->=65,000 Btu/h
 and <135,000 Btu/h Cooling
 Capacity:
    AC............................  Electric Resistance    12.9 IEER............  January 1, 2018.
                                     Heating or No         14.8 IEER............  January 1, 2023.
                                     Heating.
                                    All Other Types of     12.7 IEER............  January 1, 2018.
                                     Heating.              14.6 IEER............  January 1, 2023.
    HP............................  Electric Resistance    12.2 IEER, 3.3 COP...  January 1, 2018.
                                     Heating or No         14.1 IEER, 3.4 COP...  January 1, 2023.
                                     Heating.
                                    All Other Types of     12.0 IEER, 3.3 COP...  January 1, 2018.
                                     Heating.              13.9 IEER, 3.4 COP...  January 1, 2023.
Large Commercial Packaged AC and
 HP (Air-Cooled)-->=135,000 Btu/h
 and <240,000 Btu/h Cooling
 Capacity:
    AC............................  Electric Resistance    12.4 IEER............  January 1, 2018.
                                     Heating or No         14.2 IEER............  January 1, 2023.
                                     Heating.
                                    All Other Types of     12.2 IEER............  January 1, 2018.
                                     Heating.              14.0 IEER............  January 1, 2023.
    HP............................  Electric Resistance    11.6 IEER, 3.2 COP...  January 1, 2018.
                                     Heating or No         13.5 IEER, 3.3 COP...  January 1, 2023.
                                     Heating.
                                    All Other Types of     11.4 IEER, 3.2 COP...  January 1, 2018.
                                     Heating.              13.3 IEER, 3.3 COP...  January 1, 2023.
Very Large Commercial Packaged AC
 and HP (Air-Cooled)-->=240,000
 Btu/h and <760,000 Btu/h Cooling
 Capacity:
    AC............................  Electric Resistance    11.6 IEER............  January 1, 2018.
                                     Heating or No         13.2 IEER............  January 1, 2023.
                                     Heating.
                                    All Other Types of     11.4 IEER............  January 1, 2018.
                                     Heating.              13.0 IEER............  January 1, 2023.
    HP............................  Electric Resistance    10.6 IEER, 3.2 COP...  January 1, 2018.
                                     Heating or No         12.5 IEER, 3.2 COP...  January 1, 2023.
                                     Heating.
                                    All Other Types of     10.4 IEER, 3.2 COP...  January 1, 2018.
                                     Heating.              12.3 IEER, 3.2 COP...  January 1, 2023.
----------------------------------------------------------------------------------------------------------------

    For CWAFs, the amended standards, which prescribe the minimum 
allowable thermal efficiency (``TE''), are shown in Table I-2. These 
standards apply to all equipment listed in Table I-2 manufactured in, 
or imported into, the United States starting on January 1, 2023.

    Table I-2--Energy Conservation Standards for Commercial Warm Air
                                Furnaces
------------------------------------------------------------------------
                                               Input          Thermal
             Equipment class                capacity *     efficiency **
                                              (Btu/h)           (%)
------------------------------------------------------------------------
Gas-Fired Furnaces......................       >=225,000              81
Oil-Fired Furnaces......................       >=225,000              82
------------------------------------------------------------------------
* In addition to being defined by input capacity, a CWAF is ``a self-
  contained oil- or gas-fired furnace designed to supply heated air
  through ducts to spaces that require it and includes combination warm
  air furnace/electric air conditioning units but does not include unit
  heaters and duct furnaces.'' CWAFs coverage is further discussed in
  section IV.A.2, ``Scope of Coverage and Equipment Classes.''
** Thermal efficiency is at the maximum rated capacity (rated maximum
  input), and is determined using the DOE test procedure specified at 10
  CFR 431.76.

A. Benefits and Costs to Commercial Consumers

    Table I-3 presents DOE's evaluation of the economic impacts of the 
energy conservation standards on commercial consumers of CUACs and 
CUHPs, as measured by the average life-cycle cost (``LCC'') savings and 
the payback period (``PBP'').\3\ The average LCC savings are positive 
for all equipment classes, and the PBP is less than the average 
lifetime of the equipment, which is estimated to be 22 years (see 
section IV.F.6).
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    \3\ The average LCC savings are measured relative to the 
efficiency distribution in the no-new-standards case, which depicts 
the market in the compliance year in the absence of standards (see 
section IV.F.8). The simple PBP, which is designed to compare 
specific CWAF efficiency levels, is measured relative to the 
baseline model (see section IV.C.2.a).

[[Page 2423]]



     Table I-3--Impacts of Amended Energy Conservation Standards on
 Commercial Consumers of Small, Large, and Very Large Commercial Package
                 Air Conditioning and Heating Equipment
------------------------------------------------------------------------
                                            Average LCC
             Equipment class                  savings         Payback
                                              (2014$)     period (years)
------------------------------------------------------------------------
Small CUACs.............................             104            13.4
Large CUACs.............................           2,336             1.9
Very Large CUACs........................           2,468             6.2
------------------------------------------------------------------------

    Table I-4 presents DOE's evaluation of the economic impacts of the 
energy conservation standards on commercial consumers of CWAFs, as 
measured by the average LCC savings and the PBP. The average LCC 
savings are positive for both equipment classes, and the PBP is less 
than the average lifetime of the equipment, which is estimated to be 23 
years for both gas-fired and oil-fired CWAFs (see section IV.F.6).

     Table I-4--Impacts of Amended Energy Conservation Standards on
          Commercial Consumers of Commercial Warm Air Furnaces
------------------------------------------------------------------------
                                            Average LCC
             Equipment class                  savings     Simple payback
                                              (2014$)     period (years)
------------------------------------------------------------------------
Gas-Fired CWAFs.........................             284             1.4
Oil-Fired CWAFs.........................             400             1.9
------------------------------------------------------------------------

    DOE's analysis of the impacts of the adopted standards on 
commercial consumers of CUACs/CUHPs and CWAFs is described in section 
IV.F of this document.

B. Impact on Manufacturers

1. Commercial Unitary Air Conditioners and Heat Pumps
    The industry net present value (``INPV'') is the sum of the 
discounted cash flows to the industry from the base year through the 
end of the analysis period (2015 to 2048). Using a real discount rate 
of 6.2 percent, DOE estimates that the INPV for CUAC/CUHP manufacturers 
is $1,638.2 million in 2014$. Under the standards adopted in this 
direct final rule, DOE expects INPV may change approximately -26.8 
percent to -2.3 percent, which corresponds to approximately -$440.4 
million and -$38.5 million in 2014$. In order to bring equipment into 
compliance with the standards adopted in this direct final rule, DOE 
expects the industry to incur $520.8 million in total conversion costs.
2. Commercial Warm Air Furnaces
    As indicated above, the INPV is the sum of the discounted cash 
flows to the industry from the base year through the end of the 
analysis period (2015 to 2048). Using a real discount rate of 8.9 
percent, DOE estimates that the INPV for CWAF manufacturers is $96.3 
million in 2014$. Under the standards adopted in this direct final 
rule, DOE expects INPV may be reduced by approximately 13.9 percent to 
6.1 percent, which corresponds to -$13.4 million and -$5.9 million in 
2014$. In order to bring products into compliance with the standards in 
this direct final rule, DOE expects the industry to incur $22.2 million 
in conversion costs.
    DOE's analysis of the impacts of the standards in this direct final 
rule on manufacturers is described in section IV.J of this document.

C. National Benefits and Costs \4\

1. Small, Large, and Very Large Commercial Package Air Conditioning and 
Heating Equipment
    DOE's analyses indicate that energy conservation standards being 
adopted in this direct final rule for CUAC and CUHP equipment would 
save a significant amount of energy. Relative to the case without 
amended standards (referred to as the ``no-new-standards case''), the 
lifetime energy savings for CUAC and CUHP equipment purchased in 2018-
2048 amount to 14.8 quadrillion British thermal units (Btu), or 
``quads.'' \5\ This represents a savings of 24 percent relative to the 
energy use of these products in the no-new-standards case.
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    \4\ All monetary values in this section are expressed in 2014 
dollars and, where appropriate, are discounted to 2015 unless 
explicitly stated otherwise. Energy savings in this section refer to 
the full-fuel-cycle savings (see section IV.H for discussion).
    \5\ A quad is equal to 10\15\ British thermal units (``Btu''). 
The quantity refers to full-fuel-cycle (``FFC'') energy savings. FFC 
energy savings 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. For more information on the 
FFC metric, see section IV.H.2.
---------------------------------------------------------------------------

    The cumulative net present value (``NPV'') of total consumer costs 
and savings of the standards for CUACs and CUHPs ranges from $15.2 
billion (at a 7-percent discount rate) to $50 billion (at a 3-percent 
discount rate). This NPV expresses the estimated total value of future 
operating-cost savings minus the estimated increased product and 
installation costs for CUACs and CUHPs purchased in 2018-2048.
    In addition, the CUAC and CUHP equipment standards that are being 
adopted in this direct final rule are projected to yield significant 
environmental benefits as a result of the improvement in the 
conservation of energy. DOE estimates that the standards would result 
in cumulative greenhouse gas (``GHG'') emission reductions (over the 
same period as for energy savings) of 873 million metric tons (Mt) \6\ 
of carbon dioxide (CO2), 454 thousand tons of sulfur dioxide 
(SO2), 1,634 tons of nitrogen oxides (NOX), 3,917 
thousand tons of methane (CH4), 9.54 thousand tons of 
nitrous oxide (N2O), and 1.68 tons of mercury (Hg).\3\ The 
cumulative reduction in CO2 emissions through 2030 amounts 
to 77 million Mt, which is equivalent to the

[[Page 2424]]

emissions resulting from the annual electricity use of more than 10.6 
million homes.
---------------------------------------------------------------------------

    \6\ A metric ton is equivalent to 1.1 short tons. Results for 
NOX and Hg are presented in short tons.
    \3\ DOE calculated emissions reductions relative to the no-new-
standards-case, which reflects key assumptions in the Annual Energy 
Outlook 2015 (AEO 2015) Reference case, which generally represents 
current legislation and environmental regulations for which 
implementing regulations were available as of October 31, 2014.
---------------------------------------------------------------------------

    The value of the CO2 reductions is calculated using a 
range of values per metric ton of CO2 (otherwise known as 
the ``Social Cost of Carbon,'' or ``SCC'') developed by a Federal 
interagency working group.\7\ The derivation of the SCC values is 
discussed in section IV.L. Using discount rates appropriate for each 
set of SCC values, DOE estimates that the net present monetary value of 
the CO2 emissions reduction (not including CO2-
equivalent emissions of other gases with global warming potential) is 
between $5.0 billion and $75.9 billion, with a value of $24.9 billion 
using the central SCC case represented by $40.0/t in 2015. DOE also 
estimates that the net present monetary value of the NOX 
emissions reduction to be $1.4 billion at a 7-percent discount rate, 
and $4.4 billion at a 3-percent discount rate.\8\
---------------------------------------------------------------------------

    \7\ 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 July 2015) (Available at: https://www.whitehouse.gov/sites/default/files/omb/inforeg/scc-tsd-final-july-2015.pdf).
    \8\ DOE estimated the monetized value of NOX 
emissions reductions using benefit per ton estimates from the 
Regulatory Impact Analysis for the Proposed Carbon Pollution 
Guidelines for Existing Power Plants and Emission Standards for 
Modified and Reconstructed Power Plants, published in June 2014 by 
EPA's Office of Air Quality Planning and Standards. (Available at: 
http://www3.epa.gov/ttnecas1/regdata/RIAs/111dproposalRIAfinal0602.pdf). See section IV.L.2 for further 
discussion. Note that the agency is primarily using a national 
benefit-per-ton estimate for particulate matter emitted from the 
Electricity Generating Unit sector based on an estimate of premature 
mortality derived from the ACS study (Krewski et al., 2009). If the 
benefit-per-ton estimates were based on the Six Cities study 
(Lepuele et al., 2011), the values would be nearly two-and-a-half 
times larger. Because of the sensitivity of the benefit-per-ton 
estimate to the geographical considerations of sources and receptors 
of emissions, DOE intends to investigate refinements to the agency's 
current approach of one national estimate by assessing the regional 
approach taken by EPA's Regulatory Impact Analysis for the Clean 
Power Plan Final Rule. Note that DOE is currently investigating 
valuation of avoided and SO2 and Hg emissions.
---------------------------------------------------------------------------

    Table I-5 summarizes the national economic benefits and costs 
expected to result from the adopted standards for CUACs and CUHPs.

  Table I-5--Summary of National Economic Benefits and Costs of Amended
     Energy Conservation Standards for Small, Large, and Very Large
       Commercial Package Air Conditioning and Heating Equipment *
------------------------------------------------------------------------
                                           Present value
                Category                     (billion      Discount rate
                                              2014$)            (%)
------------------------------------------------------------------------
                                Benefits
------------------------------------------------------------------------
Consumer Operating Cost Savings.........            23.0               7
                                                    64.9               3
CO2 Reduction Value ($12.2/t case) **...             5.0               5
CO2 Reduction Value ($40.0/t case) **...            24.9               3
CO2 Reduction Value ($62.3/t case) **...            40.2             2.5
CO2 Reduction Value ($117/t case) **....            75.9               3
NOX Reduction Value [dagger]............             1.4               7
                                                     4.4               3
    Total Benefits [dagger][dagger].....            49.3               7
                                                    94.1               3
------------------------------------------------------------------------
                                  Costs
------------------------------------------------------------------------
Consumer Incremental Installed Costs....             7.7               7
                                                    14.9               3
------------------------------------------------------------------------
                              Net Benefits
------------------------------------------------------------------------
Including CO2 and NOX Reduction Value               41.6               7
 [dagger][dagger].......................            79.2               3
------------------------------------------------------------------------
* This table presents the costs and benefits associated with equipment
  shipped in 2018-2048. These results include benefits to consumers
  which accrue after 2048 from the products purchased in 2018-2048. The
  costs account for the incremental variable and fixed costs incurred by
  manufacturers due to the standard, some of which may be incurred in
  preparation for the rule.
** The CO2 values represent global monetized values of the SCC, in
  2014$, in 2015 under several scenarios of the updated SCC values. The
  first three cases use the averages of SCC distributions calculated
  using 5%, 3%, and 2.5% discount rates, respectively. The fourth case
  represents the 95th percentile of the SCC distribution calculated
  using a 3% discount rate. The SCC time series incorporate an
  escalation factor.
[dagger] The $/ton values used for NOX are described in section IV.L.2.
  DOE estimated the monetized value of NOX emissions reductions using
  benefit per ton estimates from the Regulatory Impact Analysis for the
  Proposed Carbon Pollution Guidelines for Existing Power Plants and
  Emission Standards for Modified and Reconstructed Power Plants,
  published in June 2014 by EPA's Office of Air Quality Planning and
  Standards. (Available at: http://www3.epa.gov/ttnecas1/regdata/RIAs/111dproposalRIAfinal0602.pdf.) See section IV.L.2 for further
  discussion. Note that the agency is primarily using a national benefit-
  per-ton estimate for particulate matter emitted from the Electricity
  Generating Unit sector based on an estimate of premature mortality
  derived from the ACS study (Krewski et al., 2009). If the benefit-per-
  ton estimates were based on the Six Cities study (Lepuele et al.,
  2011), the values would be nearly two-and-a-half times larger. Because
  of the sensitivity of the benefit-per-ton estimate to the geographical
  considerations of sources and receptors of emissions, DOE intends to
  investigate refinements to the agency's current approach of one
  national estimate by assessing the regional approach taken by EPA's
  Regulatory Impact Analysis for the Clean Power Plan Final Rule.
[dagger][dagger] Total Benefits for both the 3% and 7% cases are derived
  using the series corresponding to average SCC with 3-percent discount
  rate ($40.0/t case).

    The benefits and costs of the adopted CUAC and CUHP standards for 
equipment sold in 2018-2048 can also be expressed in terms of 
annualized values. The monetary values for the total annualized net 
benefits are the sum of (1) the national economic value of the benefits 
in reduced operating costs, minus (2) the increases in product purchase 
prices and installation costs, plus (3) the value of the benefits of 
CO2 and NOX emission reductions, all 
annualized.\9\
---------------------------------------------------------------------------

    \9\ To convert the time-series of costs and benefits into 
annualized values, DOE calculated a present value in 2015, the year 
used for discounting the NPV of total consumer costs and savings. 
For the benefits, DOE calculated a present value associated with 
each year's shipments in the year in which the shipments occur 
(e.g., 2020 or 2030), and then discounted the present value from 
each year to 2015. The calculation uses discount rates of 3 and 7 
percent for all costs and benefits except for the value of 
CO2 reductions, for which DOE used case-specific discount 
rates, as shown in Table I.3. Using the present value, DOE then 
calculated the fixed annual payment over the analysis period, 
starting in the compliance year, that yields the same present value.

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

[[Page 2425]]

    Although the value of operating cost savings and CO2 
emission reductions are both important, two issues are relevant. First, 
the national operating cost savings are domestic U.S. consumer monetary 
savings that occur as a result of market transactions, whereas the 
value of CO2 reductions is based on a global value. Second, 
the assessments of operating cost savings and CO2 savings 
are performed with different methods that use different time frames for 
analysis. The national operating cost savings is measured for the 
lifetime of CUACs and CUHPs shipped in 2018-2048. Because 
CO2 emissions have a very long residence time in the 
atmosphere,\10\ the SCC values in future years reflect future 
CO2-emissions impacts that continue beyond 2100.
---------------------------------------------------------------------------

    \10\ The atmospheric lifetime of CO2 is estimated of 
the order of 30-95 years. Jacobson, MZ (2005), ``Correction to 
`Control of fossil-fuel particulate black carbon and organic matter, 
possibly the most effective method of slowing global warming,' '' 
110 J. Geophys. Res. D14105.
---------------------------------------------------------------------------

    Estimates of annualized benefits and costs of the adopted standards 
are shown in Table I-6. The results under the primary estimate are as 
follows. Using a 7-percent discount rate for benefits and costs other 
than CO2 reduction, (for which DOE used a 3-percent discount 
rate along with the SCC series that has a value of $40.0/t in 
2015),\11\ the estimated cost of the standards in this rule is $708 
million per year in increased equipment costs, while the estimated 
annual benefits are $2,099 million in reduced equipment operating 
costs, $1,320 million in CO2 reductions, and $132.0 million 
in reduced NOX emissions. In this case, the net benefit 
amounts to $2,843 million per year. Using a 3-percent discount rate for 
all benefits and costs and the SCC series that has a value of $40.0/t 
in 2015, the estimated cost of the standards is $792 million per year 
in increased equipment costs, while the estimated annual benefits are 
$3,441 million in reduced operating costs, $1,320 million in 
CO2 reductions, and $231.3 million in reduced NOX 
emissions. In this case, the net benefit amounts to $4,201 million per 
year.
---------------------------------------------------------------------------

    \11\ DOE used a 3% discount rate because the SCC values for the 
series used in the calculation were derived using a 3% discount rate 
(see section IV.L).

Table I-6--Annualized Benefits and Costs of Amended Standards for Small, Large, and Very Large Commercial Package Air Conditioning and Heating Equipment
                                                                            *
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                     Million 2014$/year
                                   ---------------------------------------------------------------------------------------------------------------------
                                            Discount rate (%)              Primary estimate        Low net benefits estimate  High net benefits estimate
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                        Benefits
--------------------------------------------------------------------------------------------------------------------------------------------------------
Consumer Operating Cost Savings...  7...............................  2,099.....................  2,021.....................  2,309
                                    3...............................  3,441.....................  3,287.....................  3,830.
CO2 Reduction Value ($12.2/t case)  5...............................  357.......................  355.......................  361.
 **.
CO2 Reduction Value ($40.0/t case)  3...............................  1,320.....................  1,313.....................  1,337.
 **.
CO2 Reduction Value ($62.3/t case)  2.5.............................  1,973.....................  1,964.....................  1,999.
 **.
CO2 Reduction Value ($117/t case)   3...............................  4,028.....................  4,009.....................  4,080.
 **.
NOX Reduction Value [dagger]......  7...............................  132.0.....................  131.3.....................  299.1.
                                    3...............................  231.3.....................  230.2.....................  516.3.
    Total Benefits                  7 plus CO2 range................  2,588 to 6,259............  2,507 to 6,160............  2,970 to 6,689.
     [dagger][dagger].
                                    7...............................  3,551.....................  3,465.....................  3,946.
                                    3 plus CO2 range................  4,029 to 7,701............  3,872 to 7,525............  4,708 to 8,427.
                                    3...............................  4,992.....................  4,830.....................  5,684.
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                          Costs
--------------------------------------------------------------------------------------------------------------------------------------------------------
Consumer Incremental Product Costs  7...............................  708.......................  888.......................  275
                                    3...............................  792.......................  1028......................  231.
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                      Net Benefits
--------------------------------------------------------------------------------------------------------------------------------------------------------
    Total [dagger][dagger]........  7 plus CO2 range................  1,880 to 5,551............  1,619 to 5,273............  2,695 to 6,414.
                                    7...............................  2,843.....................  2,578.....................  3,671.
                                    3 plus CO2 range................  3,238 to 6,909............  2,843 to 6,497............  4,477 to 8,196.
                                    3...............................  4,201.....................  3,802.....................  5,453.
--------------------------------------------------------------------------------------------------------------------------------------------------------
* This table presents the annualized costs and benefits associated with CUACs and CUHPs shipped in 2018-2048. These results include benefits to
  consumers which accrue after 2048 from the CUACs and CUHPs purchased in 2018-2048. The results account for the incremental variable and fixed costs
  incurred by manufacturers due to the standard, some of which may be incurred in preparation for the rule. The Primary, Low Benefits, and High Benefits
  Estimates utilize projections of energy prices from the AEO 2015 Reference case, Low Economic Growth case, and High Economic Growth case,
  respectively. In addition, incremental product costs reflect a constant price trend in the Primary estimate, a slightly increasing price trend in the
  Low Benefits estimate, and a slightly decreasing price trend in the Low Benefits estimate. The methods used to project price trends are explained in
  section IV.D.1.
** The CO2 values represent global monetized values of the SCC, in 2014$, in 2015 under several scenarios of the updated SCC values. The first three
  cases use the averages of SCC distributions calculated using 5%, 3%, and 2.5% discount rates, respectively. The fourth case represents the 95th
  percentile of the SCC distribution calculated using a 3% discount rate. The SCC time series incorporate an escalation factor.
[dagger] The $/ton values used for NOX are described in section IV.L.2. DOE estimated the monetized value of NOX emissions reductions using benefit per
  ton estimates from the Regulatory Impact Analysis titled, ``Proposed Carbon Pollution Guidelines for Existing Power Plants and Emission Standards for
  Modified and Reconstructed Power Plants,'' published in June 2014 by EPA's Office of Air Quality Planning and Standards. (Available at: http://www3.epa.gov/ttnecas1/regdata/RIAs/111dproposalRIAfinal0602.pdf.) For DOE's Primary Estimate and Low Net Benefits Estimate, the agency used a national
  benefit-per-ton estimate for particulate matter emitted from the Electric Generating Unit sector based on an estimate of premature mortality derived
  from the ACS study (Krewski et al., 2009). For DOE's High Net Benefits Estimate, the benefit-per-ton estimates were based on the Six Cities study
  (Lepuele et al., 2011), which are nearly two-and-a-half times larger than those from the ACS study. Because of the sensitivity of the benefit-per-ton
  estimate to the geographical considerations of sources and receptors of emission, DOE intends to investigate refinements to the agency's current
  approach of one national estimate by assessing the regional approach taken by EPA's Regulatory Impact Analysis for the Clean Power Plan Final Rule.

[[Page 2426]]

 
[dagger][dagger] Total Benefits for both the 3% and 7% cases are derived using the series corresponding to the average SCC with 3-percent discount rate
  ($40.0/t) case. In the rows labeled ``7% plus CO2 range'' and ``3% plus CO2 range,'' the operating cost and NOX benefits are calculated using the
  labeled discount rate, and those values are added to the full range of CO2 values.

    DOE's analysis of the national impacts of the adopted standards is 
described in sections IV.H, IV.K and IV.L of this document.
2. Commercial Warm Air Furnaces
    DOE's analyses indicate that the adopted energy conservation 
standards for CWAFs would save a significant amount of energy. Relative 
to the case without amended standards (referred to as the ``no-new-
standards case''), the lifetime energy savings for CWAFs purchased in 
2023-2048 amount to 0.23 quads. This represents a savings of 0.8 
percent relative to the energy use of these products in the case 
without amended standards (i.e. the no-new-standards case).
    The cumulative NPV of total consumer costs and savings of the 
standards for CWAFs ranges from $0.3 billion (at a 7-percent discount 
rate) to $1.0 billion (at a 3-percent discount rate). This NPV 
expresses the estimated total value of future operating-cost savings 
minus the estimated increased product and installation costs for CWAFs 
purchased in 2023-2048.
    In addition, the CWAF equipment standards that are being adopted in 
this direct final rule are projected to yield significant environmental 
benefits as a result of the improvement in the conservation of energy. 
Specifically, these standards are projected to result in cumulative GHG 
emission reductions (over the same period as for energy savings) of 
12.4 Mt of CO2, 0.40 thousand tons of SO2, 41.2 
tons of NOX, 146 thousand tons of CH4, 0.03 
thousand tons of N2O, and 0.001 tons of mercury. The 
cumulative reduction in CO2 emissions through 2030 amounts 
to 0.9 Mt, which is equivalent to the emissions resulting from the 
annual electricity use of about 79,000 homes.
    The value of the CO2 reductions is calculated using a 
range of values per metric ton of CO2 developed by the 
Federal interagency Working Group. The derivation of the SCC values is 
discussed in section IV.L. Using discount rates appropriate for each 
set of SCC values, DOE estimates that the net present monetary value of 
the CO2 emissions reduction (not including CO2-
equivalent emissions of other gases with global warming potential) 
ranges from $71.4 million to $1,078 million, with a value of $353 
million using the central SCC case represented by $40.0/t in 2015. DOE 
also estimates that the net present monetary value of the 
NOX emissions reduction to be $36.1 million at a 7-percent 
discount rate, and $110 million at a 3-percent discount rate.
    Table I-7 summarizes the national economic benefits and costs 
expected to result from the adopted CWAF standards.

  Table I-7--Summary of National Economic Benefits and Costs of Amended
    Energy Conservation Standards for Commercial Warm Air Furnaces *
------------------------------------------------------------------------
                                           Present value
                Category                     (billion      Discount Rate
                                              2014$)            (%)
------------------------------------------------------------------------
                                Benefits
------------------------------------------------------------------------
Operating Cost Savings..................             0.4               7
                                                     1.0               3
CO2 Reduction Value ($12.2/t case) **...            0.07               5
CO2 Reduction Value ($40.0/t case) **...            0.35               3
CO2 Reduction Value ($62.3/t case) **...            0.57             2.5
CO2 Reduction Value ($117/t case) **....            1.08               3
NOX Reduction Value [dagger]............            0.04               7
                                                    0.11               3
    Total Benefits [dagger][dagger].....            0.75               7
                                                     1.5               3
------------------------------------------------------------------------
                                  Costs
------------------------------------------------------------------------
Consumer Incremental Installed Costs....            0.03               7
                                                    0.06               3
------------------------------------------------------------------------
                              Net Benefits
------------------------------------------------------------------------
Including CO2 and NOX Reduction                     0.72               7
 Monetized Value[dagger][dagger]........             1.4               3
------------------------------------------------------------------------
* This table presents the costs and benefits associated with CWAFs
  shipped in 2023-2048. These results include benefits to commercial
  consumers which accrue after 2048 from the products purchased in 2023-
  2048. The costs account for the incremental variable and fixed costs
  incurred by manufacturers due to the standard, some of which may be
  incurred in preparation for the rule.
** The CO2 values represent global monetized values of the SCC, in
  2014$, in 2015 under several scenarios of the updated SCC values. The
  first three cases use the averages of SCC distributions calculated
  using 5%, 3%, and 2.5% discount rates, respectively. The fourth case
  represents the 95th percentile of the SCC distribution calculated
  using a 3% discount rate. The SCC time series incorporate an
  escalation factor.
[dagger] The $/ton values used for NOX are described in section IV.L.2.
  DOE estimated the monetized value of NOX emissions reductions using
  benefit per ton estimates from the Regulatory Impact Analysis titled,
  ``Proposed Carbon Pollution Guidelines for Existing Power Plants and
  Emission Standards for Modified and Reconstructed Power Plants,''
  published in June 2014 by EPA's Office of Air Quality Planning and
  Standards. (Available at: http://www3.epa.gov/ttnecas1/regdata/RIAs/111dproposalRIAfinal0602.pdf.) See section IV.L.2 for further
  discussion. Note that the agency is primarily using a national benefit-
  per-ton estimate for particulate matter emitted from the Electricity
  Generating Unit sector based on an estimate of premature mortality
  derived from the ACS study (Krewski et al., 2009). If the benefit-per-
  ton estimates were based on the Six Cities study (Lepuele et al.,
  2011), the values would be nearly two-and-a-half times larger. Because
  of the sensitivity of the benefit-per-ton estimate to the geographical
  considerations of sources and receptors of emissions, DOE intends to
  investigate refinements to the agency's current approach of one
  national estimate by assessing the regional approach taken by EPA's
  Regulatory Impact Analysis for the Clean Power Plan Final Rule.
[dagger][dagger] Total Benefits for both the 3% and 7% cases are derived
  using the series corresponding to average SCC with 3-percent discount
  rate ($40.0/t case).


[[Page 2427]]

    The benefits and costs of the adopted standards, for CWAFs sold in 
2023-2048, can also be expressed in terms of annualized values. The 
monetary values for the total annualized net benefits are the sum of 
(1) the national economic value of the benefits in reduced operating 
costs, minus (2) the increases in product purchase prices and 
installation costs, plus (3) the value of the benefits of 
CO2 and NOX emission reductions, all 
annualized.\12\
---------------------------------------------------------------------------

    \12\ To convert the time-series of costs and benefits into 
annualized values, DOE calculated a present value in 2015, the year 
used for discounting the NPV of total consumer costs and savings. 
For the benefits, DOE calculated a present value associated with 
each year's shipments in the year in which the shipments occur 
(e.g., 2020 or 2030), and then discounted the present value from 
each year to 2015. The calculation uses discount rates of 3 and 7 
percent for all costs and benefits except for the value of 
CO2 reductions, for which DOE used case-specific discount 
rates, as shown in Table I.7. Using the present value, DOE then 
calculated the fixed annual payment over the analysis period, 
starting in the compliance year to 2048, that yields the same 
present value.
---------------------------------------------------------------------------

    Estimates of annualized benefits and costs of the adopted standards 
are shown in Table I-8. The results under the primary estimate are as 
follows. Using a 7-percent discount rate for benefits and costs other 
than CO2 reduction, (for which DOE used a 3-percent discount 
rate along with the SCC series that has a value of $40.0/t in 2015), 
the estimated cost of the standards in this rule is $4.31 million per 
year in increased equipment costs, while the estimated annual benefits 
are $49 million in reduced equipment operating costs, $24 million in 
CO2 reductions, and $4.91 million in reduced NOX 
emissions. In this case, the net benefit amounts to $74 million per 
year. Using a 3-percent discount rate for all benefits and costs and 
the SCC series has a value of $40.0/t in 2015, the estimated cost of 
the standards is $4.38 million per year in increased equipment costs, 
while the estimated annual benefits are $71 million in reduced 
operating costs, $24 million in CO2 reductions, and $7.59 
million in reduced NOX emissions. In this case, the net 
benefit amounts to $99 million per year.

                            Table I-8--Annualized Benefits and Costs of Amended Standards for Commercial Warm Air Furnaces *
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                      Million 2014$/year
                                           Discount rate  (%)        -----------------------------------------------------------------------------------
                                                                           Primary estimate              Low estimate                High estimate
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                        Benefits
--------------------------------------------------------------------------------------------------------------------------------------------------------
Operating Cost Savings............  7...............................  49........................  48........................  54.
                                    3...............................  71........................  70........................  81.
CO2 Reduction Value ($12.2/t case)  5...............................  6.99......................  7.08......................  7.37.
 **.
CO2 Reduction Value ($40.0/t case)  3...............................  24........................  25........................  26.
 **.
CO2 Reduction Value ($62.3/t case)  2.50............................  36........................  36........................  38.
 **.
CO2 Reduction Value ($117/t case)   3...............................  74........................  75........................  79.
 **.
NOX Reduction Value [dagger]......  7...............................  4.91......................  4.98......................  11.44.
                                    3...............................  7.59......................  7.70......................  17.61.
    Total Benefits                  7 plus CO2 range................  61 to 128.................  60 to 128.................  73 to 144.
     [dagger][dagger].
                                    7...............................  78........................  78........................  91.
                                    3 plus CO2 range................  86 to 153.................  84 to 152.................  106 to 177.
                                    3...............................  103.......................  102.......................  124.
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                          Costs
--------------------------------------------------------------------------------------------------------------------------------------------------------
Consumer Incremental Product Costs  7...............................  4.31......................  5.04......................  3.92
                                    3...............................  4.38......................  5.22......................  3.94.
                                                                      Net Benefits
--------------------------------------------------------------------------------------------------------------------------------------------------------
    Total [dagger][dagger]........  7 plus CO2 range................  57 to 124.................  55 to 123.................  69 to 140.
                                    7...............................  74........................  72........................  87.
                                    3 plus CO2 range................  82 to 149.................  79 to 147.................  102 to 173.
                                    3...............................  99........................  97........................  120.
--------------------------------------------------------------------------------------------------------------------------------------------------------
* This table presents the annualized costs and benefits associated with CWAFs shipped in 2023-2048. These results include benefits to commercial
  consumers which accrue after 2048 from the CWAFs purchased from 2023-2048. The results account for the incremental variable and fixed costs incurred
  by manufacturers due to the standard, some of which may be incurred in preparation for the rule. The Primary, Low Benefits, and High Benefits
  Estimates utilize projections of energy prices from the AEO 2015 Reference case, Low Economic Growth case, and High Economic Growth case,
  respectively. In addition, incremental product costs reflect a medium decline rate in the Primary Estimate, a low decline rate in the Low Benefits
  Estimate, and a high decline rate in the High Benefits Estimate. The methods used to derive projected price trends are explained in section IV.H.3.
** The CO2 values represent global monetized values of the SCC, in 2014$, in 2015 under several scenarios of the updated SCC values. The first three
  cases use the averages of SCC distributions calculated using 5%, 3%, and 2.5% discount rates, respectively. The fourth case represents the 95th
  percentile of the SCC distribution calculated using a 3% discount rate. The SCC time series incorporate an escalation factor.
[dagger] The $/ton values used for NOX are described in section IV.L.2. DOE estimated the monetized value of NOX emissions reductions using benefit per
  ton estimates from the Regulatory Impact Analysis for the Proposed Carbon Pollution Guidelines for Existing Power Plants and Emission Standards for
  Modified and Reconstructed Power Plants, published in June 2014 by EPA's Office of Air Quality Planning and Standards. (Available at: http://www3.epa.gov/ttnecas1/regdata/RIAs/111dproposalRIAfinal0602.pdf.) For DOE's Primary Estimate and Low Net Benefits Estimate, the agency used a national
  benefit-per-ton estimate for particulate matter emitted from the Electric Generating Unit sector based on an estimate of premature mortality derived
  from the ACS study (Krewski et al., 2009). For DOE's High Net Benefits Estimate, the benefit-per-ton estimates were based on the Six Cities study
  (Lepuele et al., 2011), which are nearly two-and-a-half times larger than those from the ACS study. Because of the sensitivity of the benefit-per-ton
  estimate to the geographical considerations of sources and receptors of emission, DOE intends to investigate refinements to the agency's current
  approach of one national estimate by assessing the regional approach taken by EPA's Regulatory Impact Analysis for the Clean Power Plan Final Rule.
[dagger][dagger] Total Benefits for both the 3% and 7% cases are derived using the series corresponding to the average SCC with 3-percent discount rate
  ($40.0/t) case. In the rows labeled ``7% plus CO2 range'' and ``3% plus CO2 range,'' the operating cost and NOX benefits are calculated using the
  labeled discount rate, and those values are added to the full range of CO2 values.


[[Page 2428]]

    DOE's analysis of the national impacts of the adopted standards is 
described in sections IV.H, IV.K and IV.L of this document.
3. Small, Large, and Very Large Commercial Package Air Conditioning and 
Heating Equipment and Commercial Warm Air Furnaces
    DOE's analyses indicate that energy conservation standards being 
adopted in this direct final rule for CUAC and CUHP equipment and CWAFs 
would save a significant amount of energy. Relative to the no-new-
standards case, the lifetime energy savings for CUAC and CUHP equipment 
purchased in 2018-2048 and CWAFs purchased in 2023-2048 amount to 15.0 
quads. This represents a savings of 24 percent relative to the energy 
use of these products in the no-new-standards case.
    The cumulative NPV of total consumer costs and savings of the 
standards for CUACs and CUHPs and CWAFs ranges from $15.5 billion (at a 
7-percent discount rate) to $51 billion (at a 3-percent discount rate). 
This NPV expresses the estimated total value of future operating-cost 
savings minus the estimated increased product and installation costs 
for CUACs and CUHPs purchased in 2018-2048 and CWAFs purchased in 2023-
2048.
    In addition, the standards that are being adopted in this direct 
final rule are projected to yield significant environmental benefits as 
a result of the improvement in the conservation of energy. DOE 
estimates that the standards would result in cumulative GHG emission 
reductions (over the same period as for energy savings) of 885 million 
Mt of CO2, 454 thousand tons of SO2, 1,675 tons 
of NOX, 4,063 thousand tons of CH4, 10 thousand 
tons of N2O, and 1.68 tons of Hg. The cumulative reduction 
in CO2 emissions through 2030 amounts to 78 million Mt, 
which is equivalent to the emissions resulting from the annual 
electricity use of approximately 10.7 million homes.
    The value of the CO2 reductions is calculated using a 
range of values per metric ton of CO2 developed by a Federal 
interagency working group. The derivation of the SCC values is 
discussed in section IV.L. Using discount rates appropriate for each 
set of SCC values, DOE estimates that the net present monetary value of 
the CO2 emissions reduction (not including CO2-
equivalent emissions of other gases with global warming potential) is 
between $5.1 billion and $77 billion, with a value of $25.3 billion 
using the central SCC case represented by $40.0/t in 2015. DOE also 
estimates that the net present monetary value of the NOX 
emissions reduction to be $1.4 billion at a 7-percent discount rate, 
and $4.5 billion at a 3-percent discount rate.
    Table I-9 summarizes the combined national economic benefits and 
costs expected to result from the adopted standards for CUACs and CUHPs 
and CWAF.

  Table I-9--Summary of National Economic Benefits and Costs of Amended
     Energy Conservation Standards for Small, Large, and Very Large
Commercial Package Air Conditioning and Heating Equipment and Commercial
                           Warm Air Furnaces *
------------------------------------------------------------------------
                                           Present value
                Category                     (billion      Discount rate
                                              2014$)            (%)
------------------------------------------------------------------------
                                Benefits
------------------------------------------------------------------------
Operating Cost Savings..................            23.3               7
                                                    65.9               3
CO2 Reduction Value ($12.2/t case) **...             5.1               5
CO2 Reduction Value ($40.0/t case) **...            25.2               3
CO2 Reduction Value ($62.3/t case) **...            40.8             2.5
CO2 Reduction Value ($117/t case) **....            77.0               3
NOX Reduction Value [dagger]............             1.5               7
                                                     4.5               3
    Total Benefits [dagger][dagger].....            50.1               7
                                                    95.6               3
------------------------------------------------------------------------
                                  Costs
------------------------------------------------------------------------
Consumer Incremental Installed Costs....             7.8               7
                                                    15.0               3
------------------------------------------------------------------------
                              Net Benefits
------------------------------------------------------------------------
Including CO2 and NOX Reduction Value               42.3               7
 [dagger][dagger].......................
                                                    80.6               3
------------------------------------------------------------------------
* This table presents the costs and benefits associated with CUACs and
  CUHPs shipped in 2018-2048 and CWAFs shipped in 2023-2048. These
  results include benefits to commercial consumers which accrue after
  2048. The costs account for the incremental variable and fixed costs
  incurred by manufacturers due to the standard, some of which may be
  incurred in preparation for the rule.
** The CO2 values represent global monetized values of the SCC, in
  2014$, in 2015 under several scenarios of the updated SCC values. The
  first three cases use the averages of SCC distributions calculated
  using 5%, 3%, and 2.5% discount rates, respectively. The fourth case
  represents the 95th percentile of the SCC distribution calculated
  using a 3% discount rate. The SCC time series incorporate an
  escalation factor.
[dagger] The $/ton values used for NOX are described in section IV.L.2.
  DOE estimated the monetized value of NOX emissions reductions using
  benefit per ton estimates from the Regulatory Impact Analysis for the
  Proposed Carbon Pollution Guidelines for Existing Power Plants and
  Emission Standards for Modified and Reconstructed Power Plants,
  published in June 2014 by EPA's Office of Air Quality Planning and
  Standards. (Available at: http://www3.epa.gov/ttnecas1/regdata/RIAs/111dproposalRIAfinal0602.pdf.) See section IV.L.2 for further
  discussion. Note that the agency is primarily using a national benefit-
  per-ton estimate for particulate matter emitted from the Electricity
  Generating Unit sector based on an estimate of premature mortality
  derived from the ACS study (Krewski et al., 2009). If the benefit-per-
  ton estimates were based on the Six Cities study (Lepuele et al.,
  2011), the values would be nearly two-and-a-half times larger. Because
  of the sensitivity of the benefit-per-ton estimate to the geographical
  considerations of sources and receptors of emissions, DOE intends to
  investigate refinements to the agency's current approach of one
  national estimate by assessing the regional approach taken by EPA's
  Regulatory Impact Analysis for the Clean Power Plan Final Rule.
[dagger][dagger] Total Benefits for both the 3% and 7% cases are derived
  using the series corresponding to average SCC with 3-percent discount
  rate ($40.0/t case).


[[Page 2429]]

    The benefits and costs of the adopted standards for CUAC and CUHP 
and CWAFs can also be expressed in terms of annualized values. 
Estimates of annualized benefits and costs of the adopted standards are 
shown in Table I-10. The results under the primary estimate are as 
follows. Using a 7-percent discount rate for benefits and costs other 
than CO2 reduction (for which DOE used a 3-percent discount 
rate along with the SCC series that has a value of $40.0/t in 2015), 
the estimated cost of the standards in this rule is $711 million per 
year in increased equipment costs, while the estimated annual benefits 
are $2,132 million in reduced equipment operating costs, $1,339 million 
in CO2 reductions, and $135 million in reduced 
NOX emissions. In this case, the net benefit amounts to 
$2,895 million per year. Using a 3-percent discount rate for all 
benefits and costs and the SCC series has a value of $40.0/t in 2015, 
the estimated cost of the standards is $795 million per year in 
increased equipment costs, while the estimated annual benefits are 
$3,496 million in reduced operating costs, $1,339 million in 
CO2 reductions, and $237 million in reduced NOX 
emissions. In this case, the net benefit amounts to $4,277 million per 
year.

     Table I-10--Annualized Benefits and Costs of Amended Standards for Small, Large, and Very Large Commercial Package Air Conditioning and Heating
                                                      Equipment and Commercial Warm Air Furnaces *
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                     Million 2014$/year
                                   ---------------------------------------------------------------------------------------------------------------------
                                            Discount rate (%)              Primary estimate              Low estimate                High estimate
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                        Benefits
--------------------------------------------------------------------------------------------------------------------------------------------------------
Operating Cost Savings............  7...............................  2,132.....................  2,053.....................  2,346.
                                    3...............................  3,496.....................  3,340.....................  3,892.
CO2 Reduction Value ($12.2/t case)  5...............................  362.......................  360.......................  367.
 **.
CO2 Reduction Value ($40.0/t case)  3...............................  1,339.....................  1,332.....................  1,357.
 **.
CO2 Reduction Value ($62.3/t case)  2.50............................  2,002.....................  1,992.....................  2,029.
 **.
CO2 Reduction Value ($117/t case)   3...............................  4,085.....................  4,067.....................  4,141.
 **.
NOX Reduction Value [dagger]......  7...............................  135.......................  135.......................  307.
                                    3...............................  237.......................  236.......................  530.
    Total Benefits                  7 plus CO2 range................  2,629 to 6,353............  2,548 to 6,254............  3,019 to 6,794.
     [dagger][dagger].
                                    7...............................  3,606.....................  3,520.....................  4,010.
                                    3 plus CO2 range................  4,095 to 7,819............  3,937 to 7,643............  4,789 to 8,563.
                                    ................................  5,072.....................  4,909.....................  5,779.
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                          Costs
--------------------------------------------------------------------------------------------------------------------------------------------------------
Consumer Incremental Product Costs  7...............................  711.......................  891.......................  277.
                                    3...............................  795.......................  1033......................  234.
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                      Net Benefits
--------------------------------------------------------------------------------------------------------------------------------------------------------
    Total [dagger][dagger]........  7 plus CO2 range................  1,918 to 5,642............  1,657 to 5,363............  2,742 to 6,516.
                                    7...............................  2,895.....................  2,629.....................  3,732.
                                    3 plus CO2 range................  3,300 to 7,024............  2,904 to 6,610............  4,555 to 8,330.
                                    3...............................  4,277.....................  3,876.....................  5,545.
--------------------------------------------------------------------------------------------------------------------------------------------------------
* This table presents the annualized costs and benefits associated with CUACs and CUHPs shipped in 2018-2048 and CWAFs shipped in 2023-2048. These
  results include benefits to commercial consumers which accrue after 2048. The results account for the incremental variable and fixed costs incurred by
  manufacturers due to the standard, some of which may be incurred in preparation for the rule. The Primary, Low Benefits, and High Benefits Estimates
  utilize projections of energy prices from the AEO 2015 Reference case, Low Economic Growth case, and High Economic Growth case, respectively. In
  addition, incremental product costs reflect a medium decline rate in the Primary Estimate, a low decline rate in the Low Benefits Estimate, and a high
  decline rate in the High Benefits Estimate. The methods used to derive projected price trends are explained in section IV.H.3.
** The CO2 values represent global monetized values of the SCC, in 2014$, in 2015 under several scenarios of the updated SCC values. The first three
  cases use the averages of SCC distributions calculated using 5%, 3%, and 2.5% discount rates, respectively. The fourth case represents the 95th
  percentile of the SCC distribution calculated using a 3% discount rate. The SCC time series incorporate an escalation factor.
[dagger] The $/ton values used for NOX are described in section IV.L.2. DOE estimated the monetized value of NOX emissions reductions using benefit per
  ton estimates from the Regulatory Impact Analysis for the Proposed Carbon Pollution Guidelines for Existing Power Plants and Emission Standards for
  Modified and Reconstructed Power Plants, published in June 2014 by EPA's Office of Air Quality Planning and Standards. (Available at: http://www3.epa.gov/ttnecas1/regdata/RIAs/111dproposalRIAfinal0602.pdf.) For DOE's Primary Estimate and Low Net Benefits Estimate, the agency is primarily
  using a national benefit-per-ton estimate for particulate matter emitted from the Electric Generating Unit sector based on an estimate of premature
  mortality derived from the ACS study (Krewski et al., 2009). For DOE's High Net Benefits Estimate, the benefit-per-ton estimates were based on the Six
  Cities study (Lepuele et al., 2011), which are nearly two-and-a-half times larger than those from the ACS study. Because of the sensitivity of the
  benefit-per-ton estimate to the geographical considerations of sources and receptors of emission, DOE intends to investigate refinements to the
  agency's current approach of one national estimate by assessing the regional approach taken by EPA's Regulatory Impact Analysis for the Clean Power
  Plan Final Rule.
[dagger][dagger] Total Benefits for both the 3% and 7% cases are derived using the series corresponding to the average SCC with 3-percent discount rate
  ($40.0/t) case. In the rows labeled ``7% plus CO2 range'' and ``3% plus CO2 range,'' the operating cost and NOX benefits are calculated using the
  labeled discount rate, and those values are added to the full range of CO2 values.

D. Conclusion

    DOE has determined that the statement containing recommendations 
with respect to energy conservation standards for CUACs, CUHPs and 
CWAFs was submitted jointly by interested persons that are fairly 
representative of relevant points of view, in accordance with 42 U.S.C.

[[Page 2430]]

6295(p)(4)(A) and 6313(a)(6)(B).\13\ After considering the analysis and 
weighing the benefits and burdens, DOE has determined that the 
recommended standards are in accordance with 42 U.S.C. 6313(a)(6)(B), 
which contains provisions for adopting a uniform national standard more 
stringent than the amended ASHRAE Standard 90.1 for the equipment 
considered in this document. Specifically, the Secretary has 
determined, supported by clear and convincing evidence, that the 
adoption of the recommended standards would result in significant 
additional conservation of energy and is technologically feasible and 
economically justified. In determining whether the recommended 
standards are economically justified, the Secretary has determined that 
the benefits of the recommended standards exceed the burdens, given 
that, when considering the benefits of energy savings, positive NPV of 
consumer benefits, emission reductions, the estimated monetary value of 
the emissions reductions, and positive average LCC savings would yield 
benefits outweighing the negative impacts on some consumers and on 
manufacturers, including the conversion costs that could result in a 
reduction in INPV for manufacturers.
---------------------------------------------------------------------------

    \13\ See 42 U.S.C. 6313(b) (applying 42 U.S.C. 6295(p)(4) to 
energy conservation standard rulemakings involving a variety of 
industrial equipment, including CUACs, CUHPs, and CWAFs).
---------------------------------------------------------------------------

    Under the authority provided by 42 U.S.C. 6295(p)(4) and 
6316(b)(1), DOE is issuing this direct final rule establishing amended 
energy conservation standards for CUACs/CUHPs and CWAFs. Consistent 
with this authority, DOE is also publishing elsewhere in this Federal 
Register a notice of proposed rulemaking proposing standards that are 
identical to those contained in this direct final rule.\14\ See 42 
U.S.C. 6295(p)(4)(A)(i).
---------------------------------------------------------------------------

    \14\ Because DOE has already published initial notices of 
proposed rulemaking for CUACs, CUHPs, and CWAFs, DOE is publishing a 
supplemental notice of proposed rulemaking that proposes the 
identical energy conservation standards detailed in this direct 
final rule.
---------------------------------------------------------------------------

II. Introduction

    The following section briefly discusses the statutory authority 
underlying this direct final rule, as well as some of the relevant 
historical background related to the establishment of standards for 
small, large, and very large, CUAC/CUHP and CWAF equipment.

A. Authority

    As indicated above, EPCA includes provisions covering the equipment 
addressed by this document.\15\ EPCA addresses, among other things, the 
energy efficiency of certain types of commercial and industrial 
equipment. Relevant provisions of the Act specifically include 
definitions (42 U.S.C. 6311), energy conservation standards (42 U.S.C. 
6313), test procedures (42 U.S.C. 6314), labeling provisions (42 U.S.C. 
6315), and the authority to require information and reports from 
manufacturers (42 U.S.C. 6316).
---------------------------------------------------------------------------

    \15\ All references to EPCA in this document refer to the 
statute as amended through the Energy Efficiency Improvement Act of 
2015, Public Law 114-11 (April 30, 2015).
---------------------------------------------------------------------------

    Section 342(a) of EPCA concerns energy conservation standards for 
small, large, and very large, CUACs and CUHPs. (42 U.S.C. 6313(a)) This 
category of equipment has a rated capacity between 65,000 Btu/h and 
760,000 Btu/h. This equipment is designed to heat and cool commercial 
buildings and is often located on the building's rooftop.
    The initial Federal energy conservation standards for CWAFs were 
added to EPCA by the Energy Policy Act of 1992 (EPACT 1992), Public Law 
No. 102-486 (Oct. 24, 1992). See 42 U.S.C. 6313(a)(4). These types of 
covered equipment have a rated capacity (rated maximum input \16\) 
greater than or equal to 225,000 Btu/h, can be gas-fired or oil-fired, 
and are designed to heat commercial and industrial buildings. Id.
---------------------------------------------------------------------------

    \16\ ``Rated maximum input'' means the maximum gas-burning 
capacity of a CWAF in Btus per hour, as specified by the 
manufacturer.
---------------------------------------------------------------------------

    Pursuant to section 342(a)(6) of EPCA, DOE is to consider amending 
the energy efficiency standards for certain types of commercial and 
industrial equipment whenever ASHRAE amends the standard levels or 
design requirements prescribed in ASHRAE/IES Standard 90.1, and 
whenever more than 6 years had elapsed since the issuance of the most 
recent final rule establishing or amending a standard for the equipment 
as of the date of AEMTCA's enactment, December 18, 2012. (42 U.S.C. 
6313(a)(6)(C)(vi)) Because more than six years had elapsed since DOE 
issued a final rule with standards for CUACs and CUHPs or CWAFs on 
October 18, 2005 (see 70 FR 60407), DOE initiated the process to review 
these standards.
    Pursuant to EPCA, DOE's energy conservation program for covered 
equipment consists essentially of four parts: (1) Testing; (2) 
labeling; (3) the establishment of Federal energy conservation 
standards; and (4) certification and enforcement procedures. Subject to 
certain criteria and conditions, DOE is required to develop test 
procedures to measure the energy efficiency, energy use, or estimated 
annual operating cost of covered equipment. (42 U.S.C. 6314) 
Manufacturers of covered equipment must use the prescribed DOE test 
procedure as the basis for certifying to DOE that their equipment 
comply with the applicable energy conservation standards adopted under 
EPCA and when making representations to the public regarding their 
energy use or efficiency. (42 U.S.C. 6314(d)) Similarly, DOE must use 
these test procedures to determine whether a given manufacturer's 
equipment complies with standards adopted pursuant to EPCA. The DOE 
test procedures for small, large, and very large CUACs/CUHPs and CWAFs 
currently appear at title 10 of the Code of Federal Regulations 
(``CFR'') parts 431.96 and 431.76, respectively.
    When setting standards for the equipment addressed by this 
document, EPCA prescribes specific statutory criteria for DOE to 
consider. See generally 42 U.S.C. 6313(a)(6)(A)-(C). In deciding 
whether a proposed standard is economically justified, DOE must 
determine whether the benefits of the standard exceed its burdens. DOE 
must make this determination after receiving comments on the proposed 
standard, and by considering, to the maximum extent practicable, the 
following seven statutory factors:
    1. The economic impact of the standard on manufacturers and 
consumers of products subject to the standard;
    2. The savings in operating costs throughout the estimated average 
life of the covered products in the type (or class) compared to any 
increase in the price, initial charges, or maintenance expenses for the 
covered products which are likely to result from the 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 covered 
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 of Energy considers relevant. (42 
U.S.C. 6313(a)(6)(B)(ii))
    With respect to the types of equipment at issue in this rule, EPCA 
also contains what is known as an ``anti-backsliding'' provision, which 
prevents the Secretary from prescribing any

[[Page 2431]]

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))(aa)
    With respect to the equipment addressed by this direct final rule, 
DOE notes that EPCA prescribes limits on the Agency's ability to 
promulgate a standard if DOE has made a finding that interested persons 
have established by a preponderance of the evidence that a standard is 
likely to result in the unavailability of any product type (or class) 
of performance characteristics that are substantially the same as those 
generally available in the United States at the time of the finding. 
See 42 U.S.C. 6313(B)(iii)(II).
    With particular regard to direct final rules, the Energy 
Independence and Security Act of 2007 (``EISA 2007''), Public Law 110-
140 (December 19, 2007), amended EPCA, in relevant part, to grant DOE 
authority to issue a type of final rule (i.e., a ``direct final rule'') 
establishing an energy conservation standard for a product on receipt 
of a statement that is submitted jointly by interested persons that are 
fairly representative of relevant points of view (including 
representatives of manufacturers of covered products, States, and 
efficiency advocates), as determined by the Secretary, and that 
contains recommendations with respect to an energy or water 
conservation standard. If the Secretary determines that the recommended 
standard contained in the statement is in accordance with 42 U.S.C. 
6295(o) or 42 U.S.C. 6313(a)(6)(B), as applicable, the Secretary may 
issue a final rule establishing the recommended standard. A notice of 
proposed rulemaking (``NOPR'') that proposes an identical energy 
efficiency standard is published simultaneously with the direct final 
rule. A public comment period of at least 110 days is provided. See 42 
U.S.C. 6295(p)(4). Not later than 120 days after the date on which a 
direct final rule issued under this authority is published in the 
Federal Register, the Secretary shall withdraw the direct final rule if 
the Secretary receives 1 or more adverse public comments relating to 
the direct final rule or any alternative joint recommendation and based 
on the rulemaking record relating to the direct final rule, the 
Secretary determines that such adverse public comments or alternative 
joint recommendation may provide a reasonable basis for withdrawing the 
direct final rule under subsection 42 U.S.C. 6295(o), 6313(a)(6)(B), or 
any other applicable law. On withdrawal of a direct final rule, the 
Secretary shall proceed with the notice of proposed rulemaking 
published simultaneously with the direct final rule and publish in the 
Federal Register the reasons why the direct final rule was withdrawn. 
This direct final rule provision applies to the equipment at issue in 
this direct final rule. See 42 U.S.C. 6316(b)(1).

B. Background

1. Current Standards
    DOE last amended its standards for small, large, and very large, 
CUACs/CUHPs on October 18, 2005. At that time, DOE codified both the 
amended standards for small and large equipment and the then-new 
standards for very large equipment set by the Energy Policy Act of 2005 
(``EPAct 2005''), Pub. L. 109-58. See also 70 FR 60407 (August 8, 
2005). The current standards are set forth in Table II-1.

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

[[Page 2432]]

 
                                                                                          All Other Types of      EER = 9.3 COP = 3.2...        1/1/2010
                                                                                           Heating.
--------------------------------------------------------------------------------------------------------------------------------------------------------

    As noted above, EPACT 1992 amended EPCA to set the current minimum 
energy conservation standards for CWAFs. (42 U.S.C. 6313(a)(4)(A) and 
(B)) These standards, which apply to all CWAFs manufactured on or after 
January 1, 1994, are set forth in Table II-2.

                            Table II-2--Federal Energy Efficiency Standards for CWAFs
----------------------------------------------------------------------------------------------------------------
                                                                       Input          Thermal
                         Equipment type                           capacity  (Btu/  efficiency *     Compliance
                                                                        h)               %             date
----------------------------------------------------------------------------------------------------------------
Gas-Fired Furnaces..............................................       >=225,000              80        1/1/1994
Oil-Fired Furnaces..............................................       >=225,000              81        1/1/1994
----------------------------------------------------------------------------------------------------------------
* At the maximum rated capacity (rated maximum input).

2. History of Standards Rulemakings
a. Commercial Unitary Air Conditioners and Heat Pumps
    On October 29, 1999, the American Society of Heating, 
Refrigerating, and Air-Conditioning Engineers (ASHRAE)/Illuminating 
Engineering Society of North America (IESNA) adopted Standard 90.1-
1999, ``Energy Standard for Buildings Except Low-Rise Residential 
Building,'' which included amended efficiency levels for CUACs and 
CUHPs. On June 12, 2001, the Department published a Framework Document 
that described a series of analytical approaches to evaluate energy 
conservation standards for CUACs and CUHPs with rated capacities 
between 65,000 Btu/h and 240,000 Btu/h, and presented this analytical 
framework to stakeholders at a public workshop. On July 29, 2004, DOE 
issued an Advance Notice of Proposed Rulemaking (``ANOPR'') (hereafter 
referred to as the ``2004 ANOPR'') to solicit public comments on its 
preliminary analyses for this equipment. 69 FR 45460. Subsequently, 
Congress enacted EPAct 2005, which, among other things, established 
amended standards for small and large CUACs and CUHPs and new standards 
for very large CUACs and CUHPs. As a result, EPAct 2005 displaced the 
rulemaking effort that DOE had already begun. DOE codified these new 
statutorily-prescribed standards on October 18, 2005. 70 FR 60407.
    Section 5(b) of AEMTCA amended Section 342(a)(6) of EPCA (42 U.S.C. 
6313(a)(6)) by requiring DOE to initiate a rulemaking to consider 
amending the standards for any covered equipment as to which more than 
6 years has elapsed since the issuance of the most recent final rule 
establishing or amending a standard for the equipment as of the date of 
AEMTCA's enactment, December 18, 2012. (42 U.S.C. 6313(a)(6)(C)(vi)) 
Under this provision, DOE was also obligated to publish a notice of 
proposed rulemaking to amend the applicable standards by December 31, 
2013. See 42 U.S.C. 6313(a)(6)(C)(vi). Consequently, DOE initiated a 
rulemaking effort to determine whether to amend the current standards 
for CUACs and CUHPs.
    On February 1, 2013, DOE published a request for information 
(``RFI'') and notice of document availability for small, large, and 
very large, air cooled CUACs and CUHPs. 78 FR 7296. The document sought 
to solicit information from the public to help DOE determine whether 
national standards more stringent than those already in place would 
result in a significant amount of additional energy savings and whether 
those national standards would be technologically feasible and 
economically justified. Separately, DOE also sought information on the 
merits of adopting the IEER metric as the energy efficiency descriptor 
characterizing cooling-mode efficiency for small, large, and very large 
CUACs and CUHPs, rather than the current EER metric. (See section III.G 
for more details).
    DOE notes that in October 2010, ASHRAE published ASHRAE Standard 
90.1-2010, which amended its requirements for CUACs and CUHPs to 
include, among other things, new requirements for IEER. In October 
2013, ASHRAE published ASHRAE Standard 90.1-2013, which further amended 
those IEER requirements. The provisions relating to EER and COP 
contained in ASHRAE Standard 90.1-2010 and ASHRAE Standard 90.1-2013, 
however, remained the same as the current DOE standards for this 
equipment. As discussed in section IV.C.2, DOE considered efficiency 
levels associated with the IEER requirements in both ASHRAE Standard 
90.1-2010 and ASHRAE Standard 90.1-2013.
    On September 30, 2014, DOE published a NOPR for small, large, and 
very large CUACs and CUHPs. 79 FR 58948. The document solicited 
information from the public to help DOE determine whether more-
stringent energy conservation standards for small, large, and very 
large CUACs and CUHPs would result in a significant additional amount 
of energy savings and whether those standards would be technologically 
feasible and economically justified.
    The September 2014 document also announced that a public meeting 
would be held on November 6, 2014 at DOE headquarters in Washington, DC 
At this meeting, DOE presented the methodologies and results of the 
analyses set forth in the NOPR, and interested parties that 
participated in the public meeting discussed a variety of topics.
    DOE also received a number of written comments from interested 
parties in response to the NOPR. DOE considered these comments, as well 
as comments from the public meeting, in preparing the direct final 
rule. The commenters are summarized in Table II-3. Relevant comments, 
and DOE's responses, are provided in the appropriate sections of this 
document.

[[Page 2433]]



Table II-3--Interested Parties Providing Written Comment on the NOPR for
         Small, Large, and Very Large Air-Cooled CUACs and CUHPs
------------------------------------------------------------------------
               Name                      Acronyms             Type
------------------------------------------------------------------------
A2H, Inc..........................  A2H...............  E
Air-Conditioning, Heating and       AHRI..............  TA
 Refrigeration Institute.
Appliance Standards Awareness       Joint Efficiency    EA
 Project (ASAP), Alliance to Save    Advocates.
 Energy (ASE), American Council
 for an Energy-Efficient Economy
 (ACEEE), Natural Resources
 Defense Council (NRDC), Northeast
 Energy Efficiency Partnerships
 (NEEP), and Northwest Energy
 Efficiency Alliance (NEEA).
Applied Engineering of East         Applied             E
 Tennessee, Inc.                     Engineering.
American Society of Heating,        ASHRAE............  TA
 Refrigerating and Air-
 Conditioning Engineers.
Balanced Principles, LLC..........  Balanced            E
                                     Principles.
Pacific Gas and Electric Company    California IOUs...  U
 (PG&E), Southern California Gas
 Company (SCGC), San Diego Gas and
 Electric (SDG&E), and Southern
 California Edison (SCE).
Cato Institute....................  ..................  PP
Coradini, Michael; Doss, Eddie;     ..................  I
 Heinrich; Michael; Huntley, John;
 Long, Robert.
Danfoss...........................  Danfoss...........  CS
Environmental Investigation Agency  EIA Global........  EA
Gardiner Trane, H & H Sales         ..................  D
 Associates, Inc., Havtech, Heat
 Transfer Solutions, HVAC
 Equipment Sales, Inc., MWSK
 Equipment Sales Inc., Slade Ross,
 Inc.
Goodman Manufacturing.............  Goodman...........  M
Sofie Miller (George Washington     Miller............  EI
 University Regulatory Studies
 Center).
I.C. Thomasson Associates, Inc....  IC Thomasson......  E
Ingersoll Rand (Trane)............  Trane.............  M
KJWW..............................  KJWW..............  E
Lennox International Inc..........  Lennox............  M
Merryman-Farr, LLC................  Merryman-Farr.....  C
Nidec Motor Corporation...........  Nidec.............  CS
Nortek Global HVAC LLC............  Nordyne...........  M
Policy Navigation Group...........  ..................  PP
Regal-Beloit Corporation..........  Regal-Beloit......  CS
Rheem Manufacturing Company.......  Rheem.............  M
Smith-Goth Engineers, Inc.........  Smith-Goth........  E
Southern Company..................  Southern Company..  U
Thompson Engineers, Inc...........  Thompson..........  E
United Technologies Corporation...  Carrier...........  M
University of Michigan Plant        UM................  EI
 Operations.
Viridis Engineering...............  Viridis...........  E
------------------------------------------------------------------------
C: Mechanical Contractor; CS: Component Supplier; D: Equipment
  Distributor: E: Engineering Consulting Firm; EA: Efficiency/
  Environmental Advocate; EI: Educational Institution; I: Individual; M:
  Manufacturer; PP: Public Policy Research Organization; TA: Trade
  Association; U: Utility; UR: Utility Representative.

b. Commercial Warm Air Furnaces
    On October 21, 2004, DOE published a final rule in the Federal 
Register that adopted definitions for ``commercial warm air furnace'' 
and ``TE,'' promulgated test procedures for this equipment, and 
recodified the energy conservation standards to place them contiguously 
with the test procedures in the Code of Federal Regulations (``CFR''). 
69 FR 61916, 61917, 61939-41. In the same final rule, DOE incorporated 
by reference (see 10 CFR 431.75) a number of industry test standards 
relevant to commercial warm air furnaces, including: (1) American 
National Standards Institute (``ANSI'') Standard Z21.47-1998, ``Gas-
Fired Central Furnaces,'' for gas-fired CWAFs; (2) Underwriters 
Laboratories (``UL'') Standard 727-1994, ``Standard for Safety Oil-
Fired Central Furnaces,'' for oil-fired CWAFs; (3) provisions from 
Hydronics Institute (HI) Standard BTS-2000, ``Method to Determine 
Efficiency of Commercial Space Heating Boilers,'' to calculate flue 
loss for oil-fired CWAFs, and (4) provisions from the American Society 
of Heating, Refrigerating, and Air-conditioning Engineers (``ASHRAE'') 
Standard 103- 1993, ``Method of Testing for Annual Fuel Utilization 
Efficiency of Residential Central Furnaces and Boilers,'' to determine 
the incremental efficiency of condensing furnaces under steady-state 
conditions. Id. at 61940. DOE later updated the test procedures for 
CWAFs to match the procedures specified in ASHRAE Standard 90.1-2010, 
which referenced ANSI Z21.47-2006, ``Gas-Fired Central Furnaces,'' for 
gas-fired CWAFs, and UL 727-2006, ``Standard for Safety for Oil-Fired 
Central Furnaces,'' for oil-fired furnaces. 77 FR 28928, 28987-88 (May 
16, 2012).
    As with CUACs and CUHPs, DOE was obligated to publish either: (1) A 
notice of determination that the current standards do not need to be 
amended, or (2) a notice of proposed rulemaking containing proposed 
standards for CWAFs by December 31, 2013. (42 U.S.C. 6313(a)(6)(C)(i) 
and (vi)) Consequently, DOE initiated a rulemaking to determine whether 
to amend the current standards for CWAFs.
    In starting this rulemaking process, DOE published an RFI and 
notice of document availability for CWAFs. See 78 FR 25627 (May 2, 
2013). The document solicited information from the public to help DOE 
determine whether more-stringent energy conservation standards for 
CWAFs would result in a significant additional amount of energy savings 
and whether those standards would be technologically feasible and 
economically justified.
    Based on feedback and additional analysis, on February 4, 2015, DOE 
published a NOPR for CWAFs. See 80 FR 6182. The NOPR, in addition to 
announcing a public meeting to discuss the proposal's details, 
solicited information from the public to help DOE determine whether 
more-stringent energy conservation standards for

[[Page 2434]]

CWAFs would result in a significant additional amount of energy savings 
and whether those standards would be technologically feasible and 
economically justified. The public meeting, which took place on March 
2, 2015 at DOE headquarters in Washington, DC, centered on the 
methodologies and results of the analyses set forth in the NOPR. 
Participating interested parties also raised a variety of topics, which 
are discussed throughout this document.
    DOE received a number of written comments from interested parties 
in response to the NOPR. DOE considered these comments, as well as 
comments from the public meeting, in the preparation of this final 
rule. The commenters are identified in Table II-4. Relevant comments, 
and DOE's responses, are provided in the appropriate sections of this 
document.

  Table II-4--Interested Parties Providing Written Comments on the NOPR
                    for Commercial Warm Air Furnaces
------------------------------------------------------------------------
             Name                    Acronyms         Commenter Type *
------------------------------------------------------------------------
Air-Conditioning, Heating and   AHRI.............  TA
 Refrigeration Institute.
American Council for an Energy- ACEEE............  EA
 Efficient Economy.
American Gas Association......  AGA..............  IR
Appliance Standards Awareness   ASAP, ASE, ACEEE,  EA
 Project, Alliance to Save       NRDC (The
 Energy, American Council for    Advocates).
 an Energy-Efficient Economy,
 Natural Resources Defense
 Council.
Gas Technology Institute......  GTI..............  RO
Goodman Global, Inc...........  Goodman..........  M
Ingersoll Rand................  Trane............  M
Lennox International Inc......  Lennox...........  M
Nortek Global HVAC LLC........  Nordyne..........  M
Rheem Manufacturing Company...  Rheem............  M
United Technologies             Carrier..........  M
 Corporation.
The U.S. Chamber of Commerce,   U.S. Chamber of    TA
 the American Chemistry          Commerce.
 Council, the American Coke
 and Coal Chemicals Institute,
 the American Forest & Paper
 Association, the American
 Fuel & Petrochemical
 Manufacturers, the American
 Petroleum Institute, the
 Brick Industry Association,
 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.
U.S. Small Business             SBA..............  GA
 Administration's Office of
 Advocacy.
------------------------------------------------------------------------
* EA: Efficiency Advocate; GA: Government Agency; IR: Industry
  Representative; M: Manufacturer; RO: Research Organization; TA: Trade
  Association.

III. General Discussion

A. Combined Rulemaking

    As discussed in section II.B.2, DOE had been conducting separate 
standards rulemakings for two sets of interrelated equipment: (1) 
Small, large, and very large, CUACs and CUHPs; and (2) CWAFs. In 
response to the CUAC/CUHP NOPR, Lennox and Goodman requested that DOE 
align the rulemakings for these equipment because of their inherent 
impact on each other. The commenters asserted that combining the 
rulemakings would reduce manufacturer burden by allowing manufacturers 
to consider both of these regulatory changes in one design cycle. 
(CUAC: Lennox, No. 60 at p. 8; Goodman, No. 65 at p. 5) \17\
---------------------------------------------------------------------------

    \17\ In this direct final rule, DOE discusses comments received 
in regards to both the CUAC/CHUP and CWAF rulemakings. Comments 
received in regards to the CUAC/CUHP rulemaking and filed in the 
docket for this standards rulemaking (Docket No. EERE-2013-BT-STD-
0007) are identified by ``CUAC'' preceding the comment citation. 
Comments received in regards to the CWAF rulemaking and filed in the 
docket for this standards rulemaking (Docket No. EERE-2013-BT-STD-
0021) are identified by ``CWAF'' preceding the comment citation. 
Comments received in regards to the ASRAC Working Group activities 
(discussed in section III.B), while filed in the dockets for both 
the CUAC/CUHP and CWAF rulemakings, are identified by the equipment 
in regards to which the comment was made.
---------------------------------------------------------------------------

    In light of the broad overlap between these equipment, DOE agreed 
that a combined rulemaking for small, large, and very large, CUACs and 
CUHPs and CWAFs had certain advantages. For example, DOE observed that 
a large fraction of CWAFs are part of combined single-package CUACs/
CWAF equipment, combining both air conditioning and gas-fired heating. 
Combining the rulemakings allowed simultaneous consideration of both 
functions of what is generally a single piece of equipment, thus 
allowing DOE to accurately account for the relations between the 
different systems. This approach also ensured that there would be no 
divergence of equipment development timelines for the separate 
functions, thus reducing costs and manufacturer impacts. As a result, 
DOE is setting standards for these equipment that aligns the effective 
dates of the CUAC/CUHP and CWAF rulemakings. DOE expects that aligning 
the effective dates will reduce total conversion costs and cumulative 
regulatory burden, while also allowing industry to gain clarity on 
potential regulations that could affect refrigerant availability before 
the higher appliance standard takes effect in 2023. Approximately 68.5 
percent of industry equipment listings currently meet the 2018 
standard, while 20.4 percent of current industry equipment listings 
meet the 2023 standard level.

B. Consensus Agreement

1. Background
    In response to the September 2014 CUAC/CUHP NOPR, Lennox suggested 
that DOE adopt the ASHRAE 90.1-2013 standards for the equipment subject 
to this rulemaking but also offered in the alternative that DOE should 
convene a negotiated rulemaking to address potential amendments to the 
current standards, which would enhance stakeholder input into the 
discussion, analysis and outcome of the rulemaking. (CUAC: Lennox, No. 
60 at p. 3) Other manufacturers made similar suggestions. (CUAC: Trane, 
No. 63 at p. 14; Goodman, No. 65 at p. 22) In response to the CWAF 
NOPR, AHRI stated that the best approach to resolve the issues it 
identified, as well as the concerns of other stakeholders on this 
rulemaking and on the CUAC rulemaking, would be for DOE to conduct a 
negotiated rulemaking at

[[Page 2435]]

which stakeholders can work together to develop standards that will 
result in energy savings using technology that is feasible and 
economically justified. (CWAF: AHRI, No. 26 at p. 15) In addition, AHRI 
and ACEEE submitted a joint letter to the Appliance Standards and 
Rulemaking Federal Advisory Committee (``ASRAC'') requesting that it 
consider approving a recommendation that DOE initiate a negotiated 
rulemaking for commercial package air conditioners and commercial 
furnaces. (EERE-2013-BT-STD-0007-0080) ASRAC carefully evaluated this 
request and the Committee voted to charter a working group to support 
the negotiated rulemaking effort requested by these parties.
    Subsequently, after careful consideration, DOE determined that, 
given the complexity of the CUAC/CUHP rulemaking and the logistical 
challenges presented by the related CWAF proposal, a combined effort to 
address these equipment types was appropriate to ensure a comprehensive 
vetting of issues and related analyses that would support any final 
rule settting standards for this equipment. To this end while highly 
unusual to do so after issuing a proposed rule, DOE solicited the 
public for membership nominations to the working group that would be 
formed under the ASRAC charter by issuing a Notice of Intent to 
Establish the Commercial Package Air Conditioners and Commercial Warm 
Air Furnaces Working Group To Negotiate Potential Energy Conservation 
Standards for Commercial Package Air Conditioners and Commercial Warm 
Air Furnaces. 80 FR 17363 (April 1, 2015). The CUAC/CUHP-CWAF Working 
Group (in context, ``the Working Group'') was established under ASRAC 
in accordance with the Federal Advisory Committee Act and the 
Negotiated Rulemaking Act--with the purpose of discussing and, if 
possible, reaching consensus on a set of energy conservation standards 
to propose or finalize for CUACs, CUHPs and CWAFs. The Working Group 
was to consist of fairly representative parties having a defined stake 
in the outcome of the proposed standards, and would consult, as 
appropriate, with a range of experts on technical issues.
    DOE received 17 nominations for membership. Ultimately, the Working 
Group consisted of 17 members, including one member from ASRAC and one 
DOE representative.\18\ The Working Group met six times (five times in-
person and once by teleconference). The meetings were held on April 28, 
May 11-12, May 20-21, June 1-2, June 9-10, and June 15, 2015.\19\ As a 
result of these efforts, the Working Group successfully reached 
consensus on energy conservation standards for CUACs, CUHPs, and CWAFs. 
On June 15, 2015, it submitted a Term Sheet to ASRAC outlining its 
recommendations, which ASRAC subsequently adopted.\20\
---------------------------------------------------------------------------

    \18\ The group members were John Cymbalsky (U.S. Department of 
Energy), Marshall Hunt (Pacific Gas & Electric Company, San Diego 
Gas & Electric Company, Southern California Edison, and Southern 
California Gas Company), Andrew deLaski (Appliance Standards 
Awareness Project), Louis Starr (Northwest Energy Efficiency 
Alliance), Meg Waltner (Natural Resources Defense Council), Jill 
Hootman (Trane), John Hurst (Lennox), Karen Meyers (Rheem 
Manufacturing Company), Charlie McCrudden (Air Conditioning 
Contractors of America), Harvey Sachs (American Council for an 
Energy Efficient Economy), Paul Doppel (Mitsubishi Electric), Robert 
Whitwell (United Technologies Corporation (Carrier)), Michael Shows 
(Underwriters Laboratories), Russell Tharp (Goodman Manufacturing), 
Sami Zendah (Emerson Climate Technologies), Mark Tezigni (Sheet 
Metal and Air Conditioning Contractors National Association, Inc.), 
Nick Mislak (Air-Conditioning, Heating, and Refrigeration 
Institute).
    \19\ In addition, most of the members of the ASRAC Working Group 
held several informal meetings on March 19-20, 2015, March 30, 2015, 
and April 13, 2015. The purpose of these meetings was to initiate 
work on some of the analytical issues raised in stakeholder comments 
on the CUAC NOPR.
    \20\ Available at http://www.regulations.gov/#!documentDetail;D=EERE-2013-BT-STD-0007-0093. The following 
individuals served as members of ASRAC that received and approved 
the Term Sheet: Co-Chair John Mandyck (Carrier/United Technologies 
Corporation), Co-Chair Andrew deLaski (Appliance Standards Awareness 
Project), Ashley Armstrong (U.S. Department of Energy), John Caskey 
(National Electrical Manufacturers Association), Jennifer Cleary 
(Association of Home Appliance Manufacturers), Thomas Eckman 
(Northwest Power and Conservation Council), Charles Hon (True 
Manufacturing Company), Dr. David Hungerford (California Energy 
Commission), Dr. Diane Jakobs (Rheem Manufacturing Company), Kelley 
Kline (General Electric, Appliances), Deborah Miller (National 
Association of State Energy Officials), and Scott Blake Harris 
(Harris, Wiltshire & Grannis, LLP).
---------------------------------------------------------------------------

    DOE carefully considered the consensus recommendations submitted by 
the Working Group in the form of a single Term Sheet, and adopted by 
ASRAC, related to amending the energy conservation standards for CUACs, 
CUHPs, and CWAFs. Based on this consideration, DOE has determined that 
these recommendations comprise a statement submitted by interested 
persons that are fairly representative of relevant points of view, 
consistent with 42 U.S.C. 6295(p)(4). In reaching this determination, 
DOE took into consideration the fact that the Working Group, in 
conjunction with ASRAC members who approved the recommendations, 
consisted of representatives of manufacturers of the covered equipment 
at issue, States, and efficiency advocates. Thus all of the groups 
specifically identified by Congress as potentially relevant parties to 
any consensus recommendation submitted by ASRAC participated in 
approving the recommendations submitted to DOE. (42 U.S.C. 
6295(p)(4)(A)) As delineated above, the Term Sheet was signed and 
submitted by a broad cross-section of interests, including the 
manufacturers of the subject equipment, trade associations representing 
these manufacturers and installation contractors, environmental and 
energy-efficiency advocacy organizations, and electric utility 
companies. The ASRAC Committee approving the Working Group's 
recommendations included at least two members representing States--one 
representing the National Association of State Energy Officials (NASEO) 
and one representing the State of California.\21\ DOE is not aware of a 
relevant point of view that was not represented by one or more of the 
participants in the Working Group or ASRAC.
---------------------------------------------------------------------------

    \21\ These individuals were Deborah E. Miller (NASEO) and David 
Hungerford (California Energy Commission).
---------------------------------------------------------------------------

    By its plain terms, the statute contemplates that the Secretary 
will exercise discetion to determine whether a given statement is 
``submitted jointly by interested persons that are fairly 
representative of relevant points of view (including representatives of 
manufacturers of covered products, States, and efficiency advocates).'' 
In this case, given the broad range of persons participating in the 
process that led to the submission--in the Working Group and in ASRAC--
and given the breadth of perspectives expressed in that process, DOE 
has determined that the statement it received meets this criterion.
    Pursuant to 42 U.S.C. 6295(p)(4), the Secretary must also determine 
whether a jointly-submitted recommendation for an energy or water 
conservation standard satisfies 42 U.S.C. 6295(o) or 42 U.S.C. 
6313(a)(6)(B), as applicable. In making this determination, DOE has 
conducted an analysis to evaluate whether the potential energy 
conservation standards under consideration would meet these 
requirements. This evaluation is similar to the comprehensive approach 
that DOE typically conducts whenever it considers potential energy 
conservation standards for a given type of product or equipment. DOE 
applies these principles to any consensus recommendations it may 
receive to satisfy its statutory obligation to ensure that any energy 
conservation standard that it adopts achieves the maximum improvement 
in energy efficiency that is

[[Page 2436]]

technologically feasible and economically justified and will result in 
the significant conservation of energy. Upon review, the Secretary 
determined that the Term Sheet's recommendations submitted in the 
instant rulemaking comports with the standard-setting criteria set 
forth under 42 U.S.C. 6313(a)(6)(B). Accordingly, the efficiency levels 
recommended to DOE by the Working Group through ASRAC were included as 
the ``recommended trial standard level (TSL)'' for CUACs/CUHPs and as 
TSL 2 for CWAFs in this rule (see section V.A for description of all of 
the considered TSLs). The details regarding how the consensus-
recommended TSLs comply with the standard-setting criteria are 
discussed and demonstrated in the relevant sections throughout this 
document.
    In sum, as the relevant criteria under 42 U.S.C. 6295(p)(4) have 
been satisfied, the Secretary has determined that it is appropriate to 
adopt the amended energy conservation standards recommended in the 
Joint Statement for CUACs, CUHPs, and CWAFs through this direct final 
rule.
    Pursuant to the same statutory provision, DOE is also 
simultaneously publishing a NOPR proposing that the identical standard 
levels contained in this direct final rule be adopted. Consistent with 
the statute, DOE is providing a 110-day public comment period on both 
the direct final rule and the NOPR. Based on the comments received 
during this period, the direct final rule will either become effective 
or DOE will withdraw it if (1) one or more adverse comments is received 
and (2) DOE determines that those comments, when viewed in light of the 
rulemaking record related to the direct final rule, provide a 
reasonable basis for withdrawal of the direct final rule under 42 
U.S.C. 6313(a)(6)(B) and for DOE to continue this rulemaking under the 
NOPR. (Receipt of an alternative joint recommendation may also trigger 
a DOE withdrawal of the direct final rule in the same manner.) See 42 
U.S.C. 6295(p)(4)(C). Typical of other rulemakings, it is the 
substance, rather than the quantity, of comments that will ultimately 
determine whether a direct final rule will be withdrawn. To this end, 
the substance of any adverse comment(s) received will be weighed 
against the anticipated benefits of the jointly-submitted 
recommendations and the likelihood that further consideration of the 
comment(s) would change the results of the rulemaking. DOE notes that, 
to the extent an adverse comment had been previously raised and 
addressed in the rulemaking proceeding, such a submission will not 
typically provide a basis for withdrawal of a direct final rule.
2. Recommendations
    For commercial package air conditioners and heat pumps (i.e. CUACs/
CUHPs), the Working Group recommended two sets of standards along with 
two sets of compliance dates--one would apply starting on January 1, 
2018, and the other would apply on January 1, 2023. The 2018 standards 
for CUACs and CUHPs--excluding double-duct air conditioners and heat 
pumps (see discussion below)--recommended by the Working Group are 
contained in Table III-1 and Table III-2. The 2023 standards for the 
same equipment are contained in Table III-3 and Table III-4.

  Table III-1--Consensus Recommended Minimum Cooling Efficiency Standards for Commercial Package Air-Cooled Air
                      Conditioners and Heat Pumps Manufactured Starting on January 1, 2018
----------------------------------------------------------------------------------------------------------------
                                                                                                 Minimum energy
       Equipment category          Rated cooling       Subcategory          Heating type           efficiency
                                      capacity                                                      standard
----------------------------------------------------------------------------------------------------------------
Small Commercial Split and       >=65,000 Btu/h     AC...............  Electric Resistance     IEER = 12.9.
 Single Package Air-              and <135,000 Btu/                     Heating or No Heating. IEER = 12.7.
 Conditioners and Heat Pumps      h.                                   All Other Types of
 (Air-Cooled).                                                          Heating.
                                                    HP...............  Electric Resistance     IEER = 12.2.
                                                                        Heating or No Heating. IEER = 12.0.
                                                                       ll Other Types of
                                                                        Heating.
Large Commercial Split and       >=135,000 Btu/h    AC...............  Electric Resistance     IEER = 12.4.
 Single Package Air-              and <240,000 Btu/                     Heating or No Heating. IEER = 12.2.
 Conditioners and Heat Pumps      h.                                   All Other Types of
 (Air-Cooled).                                                          Heating.
                                                    HP...............  Electric Resistance     IEER = 11.6.
                                                                        Heating or No Heating. IEER = 11.4.
                                                                       All Other Types of
                                                                        Heating.
Very Large Commercial Split and  >=240,000 Btu/h    AC...............  Electric Resistance     IEER = 11.6.
 Single Package Air-              and <760,000 Btu/                     Heating or No Heating. IEER = 11.4.
 Conditioners and Heat Pumps      h.                                   All Other Types of
 (Air-Cooled).                                                          Heating.
                                                    HP...............  Electric Resistance     IEER = 10.6.
                                                                        Heating or No Heating. IEER = 10.4
                                                                       All Other Types of
                                                                        Heating.
----------------------------------------------------------------------------------------------------------------


 Table III-2--Consensus Recommended Minimum Heating Efficiency Standards for Air-Cooled Heat Pumps Manufactured
                                           Starting on January 1, 2018
----------------------------------------------------------------------------------------------------------------
                                          Rated cooling                                       Minimum energy
         Equipment category                 capacity                 Heating type           efficiency standard
----------------------------------------------------------------------------------------------------------------
Small Commercial Split and Single    >=65,000 Btu/h and      Electric Resistance Heating  COP = 3.3.
 Package Heat Pumps (Air-Cooled).     <135,000 Btu/h.         or No Heating.
                                                             All Other Types of Heating.
Large Commercial Split and Single    >=135,000 Btu/h and     Resistance Heating or No     COP = 3.2.
 Package Heat Pumps (Air-Cooled)      <240,000 Btu/h.         Heating.
 (Air-Cooled).                                               All Other Types of Heating.
Very Large Commercial Split and      >=240,000 Btu/h and     Resistance Heating or No     COP = 3.2
 Single Package Heat Pumps (Air-      <760,000 Btu/h.         Heating.
 Cooled).                                                    All Other Types of Heating.
----------------------------------------------------------------------------------------------------------------


[[Page 2437]]


  Table III-3--Consensus Recommended Minimum Cooling Efficiency Standards for Commercial Package Air-Cooled Air
                      Conditioners and Heat Pumps Manufactured Starting on January 1, 2023
----------------------------------------------------------------------------------------------------------------
                                                                                                 Minimum energy
       Equipment category          Rated cooling       Subcategory          Heating type           efficiency
                                      capacity                                                      standard
----------------------------------------------------------------------------------------------------------------
Small Commercial Split and       >=65,000 Btu/h     AC...............  Electric Resistance     IEER = 14.8.
 Single Package Air-              and <135,000 Btu/                     Heating or No Heating. EER = 14.6.
 Conditioners and Heat Pumps      h.                                   All Other Types of
 (Air-Cooled).                                                          Heating.
                                                    HP...............  Electric Resistance     IEER = 14.1.
                                                                        Heating or No Heating. IEER = 13.9.
                                                                       All Other Types of
                                                                        Heating.
Large Commercial Split and       >=135,000 Btu/h    AC...............  Electric Resistance     IEER = 14.2.
 Single Package Air-              and <240,000 Btu/                     Heating or No Heating. IEER = 14.0.
 Conditioners and Heat Pumps      h.                                   All Other Types of
 (Air-Cooled).                                                          Heating.
                                                    HP...............  Electric Resistance     IEER = 13.5.
                                                                        Heating or No Heating. IEER = 13.3.
                                                                       All Other Types of
                                                                        Heating.
Very Large Commercial Split and  >=240,000 Btu/h    AC...............  Electric Resistance     IEER = 13.2.
 Single Package Air-              and <760,000 Btu/                     Heating or No Heating. IEER = 13.0.
 Conditioners and Heat Pumps      h.                                   All Other Types of
 (Air-Cooled).                                                          Heating.
                                                    HP...............  Electric Resistance     IEER = 12.5.
                                                                        Heating or No Heating. IEER = 12.3
                                                                       All Other Types of
                                                                        Heating.
----------------------------------------------------------------------------------------------------------------


  Table III-4--Consensus Recommended Minimum Cooling Efficiency Standards for Commercial Package Air-Cooled Air
                      Conditioners and Heat Pumps Manufactured Starting on January 1, 2023
----------------------------------------------------------------------------------------------------------------
                                          Rated cooling                                       Minimum energy
         Equipment category                 capacity                 Heating type           efficiency standard
----------------------------------------------------------------------------------------------------------------
Small Commercial Split and Single    >=65,000 Btu/h and      Electric Resistance Heating  COP = 3.4.
 Package Heat Pumps (Air-Cooled).     <135,000 Btu/h.         or No Heating.
                                                             All Other Types of Heating.
Large Commercial Split and Single    >=135,000 Btu/h and     Resistance Heating or No     COP = 3.3.
 Package Heat Pumps (Air-Cooled).     <240,000 Btu/h.         Heating.
                                                             All Other Types of Heating.
Very Large Commercial Split and      >=240,000 Btu/h and     Resistance Heating or No     COP = 3.2
 Single Package Heat Pumps (Air-      <760,000 Btu/h.         Heating.
 Cooled).                                                    All Other Types of Heating.
----------------------------------------------------------------------------------------------------------------

    The ASRAC Working Group also recommended that DOE separately define 
double-duct air conditioners and heat pumps, as discussed further in 
section IV.A.2.a, and that the current energy conservation standards 
continue to apply to these equipment. See 10 CFR 431.97, Table 1.
    For CWAFs, the Working Group recommended that the standards 
provided in Table III-5 apply to equipment manufactured starting on 
January 1, 2023.

Table III-5--Consensus Recommended Minimum Energy Conservation Standards
                    for Commercial Warm Air Furnaces
------------------------------------------------------------------------
                                            Minimum energy efficiency
           Equipment category                     standard  (%)
------------------------------------------------------------------------
Gas-fired Commercial Warm Air Furnaces.  Thermal efficiency * = 81.
Oil-fired Commercial Warm Air Furnaces.  Thermal efficiency * = 82.
------------------------------------------------------------------------
* At the maximum rated capacity (rated maximum input).

C. Compliance Dates

    When DOE amends the standards for CUACs, CUHPs, and CWAFs through 
an ordinary notice-and-comment process, EPCA prescribes a set of 
timelines based on the particular circumstances surrounding that 
amendment. The proposed rule that eventually led to the formation of 
the Working Group was the beginning of DOE's six-year evaluation of the 
standards for these products. Consistent with 42 U.S.C. 
6313(a)(6)(C)(iv), DOE originally proposed a compliance date of 
December 2018.\22\
---------------------------------------------------------------------------

    \22\ For purposes of its analysis, DOE used 2019, which would be 
the first full year of compliance.
---------------------------------------------------------------------------

    Commenting on the CUAC/CUHP NOPR, AHRI, Nordyne and Goodman 
disagreed with DOE's interpretation of the statutory lead time 
requirements for amended standards for CUACs and CUHPs. They argued 
that section 6313(a)(6)(D), which specifies a lead time of four years, 
should apply to any new standard that DOE promulgates. (CUAC: AHRI, No. 
68 at pp. 14-17; Nordyne, No. 61 at pp. 11-15; Goodman, No. 65 at p. 3) 
Lennox added that DOE's proposed 3-year time frame is not feasible and 
stated that at least a 5-year development cycle would be required to 
meet the proposed standard. (CUAC: Lennox, No. 60 at p. 8)
    In resolving these timeline differences, the Working Group gave 
careful consideration to these concerns and recommended to ASRAC, which 
ASRAC then adopted, a set of jointly-submitted recommendations that 
specified a compliance date of January 1, 2018, for the first tier of 
standards, and January 1, 2023 for the second tier. These tiered dates 
were accepted and recommended by the signatories to the Term Sheet, 
which included

[[Page 2438]]

manufacturers who critiqued the initial proposed lead times presented 
by DOE.
    While the January 1, 2018 compliance date is earlier than the 
proposed three-year lead time, DOE has the authority under section 
325(p)(4) to accept recommendations for compliance dates contained in a 
joint submission recommending amended standards. In DOE's view, the 
direct final rule authority provision specifies the finding DOE has to 
make. Specifically, Congress specified that if DOE determines that the 
recommended standard is in accordance with 42 U.S.C. 6295(o) or section 
342(a)(6)(B) of EPCA (i.e. 42 U.S.C. 6313(a)(6)(B)), DOE may issue a 
final rule establishing those standards. See 42 U.S.C. 
6295(p)(4)(A)(i). Applying the direct final rule provision in this 
manner meets Congress's goal to promote consensus agreements that 
reflect broad input from interested parties who can fashion agreements 
that best promote the aims of the statute. In the absence of that kind 
of agreement, DOE notes that the more specific prescriptions of EPCA 
would ordinarily prevail. However, when DOE receives a recommendation 
resulting from the appropriate process--in this case, the detailed 
procedure laid out in the direct final rule provision of EPCA--that 
process provides the necessary fidelity to the statute, along with 
compliance with section 6295(o) (or, in this case, 42 U.S.C. 
6313(a)(6)(B)), that Congress instructed DOE to apply. DOE also notes 
that the January 1, 2018 standard levels are the same as the efficiency 
levels already adopted in ASHRAE Standard 90.1-2013, which has an 
effective date of January 1, 2016. In light of this fact, most 
manufacturers are already developing equipment designs and planning the 
production of equipment that will meet this efficiency level.
    For CWAFs, the consensus agreement specifies a compliance date of 
January 1, 2023. As with the lead time for CUACs and CUHPs, DOE has the 
authority when adopting recommended standards submitted in a consensus 
agreement pursuant to section 325(p)(4), to accept recommendations 
regarding compliance dates. See 42 U.S.C. 6295(p)(4) and 6316(b)(1). 
See also 76 FR at 37426. DOE has made the determination that the 
rulemaking record in this case supports the adoption of this 
recommended lead time for CWAFs.
    In its analysis of the other TSLs considered for the direct final 
rule, DOE used a compliance date that is 3 years after the expected 
publication of the final rule establishing amended standards (see 
discussion at the beginning of this section).

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. See 
chapter 3 of the direct final rule's Technical Support Documents 
(``TSDs'') for a discussion of the list of technology options that were 
identified. 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, particularly the designs DOE considered, 
those it screened out, and those that are the basis for the trial 
standard levels (TSLs) in this rulemaking. For further details on the 
screening analysis for this rulemaking, see chapter 4 of the direct 
final rule TSDs.
    Additionally, DOE notes that these screening criteria do not 
directly address the proprietary status of design options. DOE only 
considers 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 (i.e., if there are other non-
proprietary technologies capable of achieving the same efficiency). DOE 
believes the amended standards for the equipment covered in this 
rulemaking would not mandate the use of any proprietary technologies, 
and that all manufacturers would be able to achieve the amended levels 
through the use of non-proprietary designs. Specifically, the 
efficiency levels considered in the analysis are all represented by 
commercially-available equipment examples. Further, the technologies 
used in these equipment are available to all manufacturers.
2. Maximum Technologically Feasible Levels
    DOE assessed the recommended standards by accounting for the 
elements contained in 42 U.S.C. 6313(a)(6)(B). That provision requires 
DOE to determine in cases where standards more stringent than those 
already prescribed by ASHRAE 90.1 whether those more stringent 
standards will yield a significant amount of additional conservation of 
energy and will be technologically feasible and economically justified. 
In determining whether the ``economically justified'' prong is met, DOE 
must, after receiving views and comments on the standard, determine 
whether the benefits of the standard exceed the burdens that the 
standard would impose by, to the maximum extent practiable, considering 
seven different factors. See generally, 42 U.S.C. 6313(a)(6)(B)(ii)(I)-
(VII). Consistent with this approach, DOE's engineering analysis helped 
identify the maximum technologically feasible (``max-tech'') 
improvements in energy efficiency for CUACs/CUHPs and CWAFs by using 
the design parameters for the most efficient equipment available on the 
market. (See chapter 5 of the direct final rule TSDs.) The max-tech 
levels that DOE determined for this rulemaking are described in section 
IV.C.2.b of this direct final rule.

E. Energy Savings

1. Determination of Savings
    For the adopted standards, DOE projected energy savings over the 
entire lifetime of equipment purchased in 2018-2048 for CUACs/CUHPs and 
2023-2048 for CWAFs. DOE quantified the energy savings attributable to 
each TSL as the difference in energy consumption between each standards 
case and the no-new-standards case. The no-new-standards case 
represents a projection of energy consumption that reflects how the 
market for a type of equipment would likely evolve in the absence of 
amended energy conservation standards.
    DOE used its national impact analysis (``NIA'') spreadsheet model 
to estimate energy savings from potential amended standards for CUACs/
CUHPs and CWAFs. The NIA spreadsheet model (described in section IV.H 
of this document) calculates savings in site energy, which is the 
energy directly consumed by products at the locations where they are 
used. Based on the calculated site energy, DOE calculates

[[Page 2439]]

national energy savings (``NES'') in terms of primary energy savings at 
the site or at power plants, and also in terms of full-fuel-cycle 
(``FFC'') energy savings. 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 conservation standards.\23\ 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 on FFC energy savings, see section IV.H of this document. 
For CWAFs, the energy savings are primarily in the form of natural gas, 
of which the primary energy savings are considered to be equal to the 
site energy savings.\24\
---------------------------------------------------------------------------

    \23\ The FFC metric is discussed in DOE's statement of policy 
and notice of policy amendment. 76 FR 51282 (August 18, 2011), as 
amended at 77 FR 49701 (August 17, 2012).
    \24\ Primary energy consumption refers to the direct use at the 
source, or supply to users without transformation, of crude energy; 
that is, energy that has not been subjected to any conversion or 
transformation process.
---------------------------------------------------------------------------

2. Significance of Savings
    To adopt more-stringent standards for the covered equipment at 
issue, DOE must determine on the basis of clear and convincing evidence 
that such action would result in the significant additional 
conservation of energy over levels that would be achieved through the 
adoption of the relevant ASHRAE standards. (42 U.S.C. 
6313(a)(6)(A)(ii)(II)) Although the term ``significant'' is not defined 
in the Act, the U.S. Court of Appeals, in Natural Resources Defense 
Council v. Herrington, 768 F.2d 1355, 1373 (D.C. Cir. 1985), indicated 
that Congress intended ``significant'' energy savings in the context of 
EPCA to be savings that were not ``genuinely trivial.'' The energy 
savings for all the TSLs considered in the rulemakings for CUACs/CUHPs 
and CWAFs, including the adopted standards, are nontrivial, and, 
therefore, DOE considers them ``significant'' within the meaning of 
section 325 of EPCA. To this end, DOE views the considerable data and 
analysis in support of the standards being adopted as satisfying the 
clear and convincing threshold set out in EPCA for the adoption of 
energy conservation standards more stringent that the relevant ASHRAE 
levels.

F. Economic Justification

1. Specific Criteria
    As noted above, EPCA provides seven factors to be evaluated in 
determining whether a potentially more-stringent energy conservation 
standard for the equipment addressed by this direct final rule is 
economically justified. (42 U.S.C. 6313(a)(6)(B)(ii)(I)-(VII)) The 
following sections discuss how DOE has addressed each of those seven 
factors in this rulemaking.
    Commenting on the CUAC/CUHP NOPR, AHRI stated that DOE is not 
performing the full cost-benefit analysis that EPCA Section 
6313(a)(6)(B)(ii) requires. It stated that DOE performed cost-benefit 
considerations at various points of its analysis yet never fully 
reconciled those analyses or the assumptions and scope of coverage 
underlying them. It added that DOE's cost-benefit analyses to the 
Nation, to manufacturers, and on employment take very different 
geographic scopes, ignore the immediately apparent effects on 
employment, and rely on unsupported analyses for effects on the general 
economy. In its view, DOE must reconcile these various approaches and 
their assumptions and also make available any models or inputs/outputs 
it relies upon. AHRI stated that DOE should remedy these shortcomings 
by performing an integrated, full cost-benefit analysis considering all 
factors including the effects on all directly related domestic 
industries. (CUAC: AHRI, No. 68 at pp. 26-29)
    As noted above, EPCA Section 6313(a)(6)(B)(ii) lays out the factors 
DOE shall, to the maximum extent practicable, consider in determining 
whether the benefits of a given standard exceed the burdens. EPCA does 
not mention or require the type of integrated cost-benefit analysis 
that AHRI envisions. It does not state or imply that all of the 
benefits and burdens need to be quantified in monetary terms. DOE's 
historical practice has been to analyze each of the factors to the 
maximum extent practicable. EPCA does not provide guidance as to the 
relative importance that DOE should attach to the listed factors. 
Therefore, in considering the factors listed in EPCA, DOE has 
historically used data and analysis to determine whether standards that 
satisfy other EPCA requirements are also economically justified.
    DOE also notes that it laid out a process to elaborate on the 
procedures, interpretations and policies that will guide the Department 
in establishing new or revised energy efficiency standards for consumer 
products. 61 FR 36974 (July 15, 1996). That process provides for 
greatly enhanced opportunities for public input, improved analytical 
approaches, and encouragement of consensus-based standards. This 
enhanced approach was developed by the Department on the basis of 
extensive consultations with many stakeholders.
a. Economic Impact on Manufacturers and Consumers
    In determining the impacts of a potential amended standard on 
manufacturers, DOE conducts a manufacturer impact analysis (``MIA''), 
as discussed in section IV.J. (42 U.S.C. 6313(a)(6)(B)(ii)(I)) 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 the analysis period. The 
industry-wide impacts analyzed include: (1) Industry net present value 
(``INPV''), which values the industry on the basis of expected future 
cash flows; (2) cash flows by year; (3) changes in revenue and income; 
and (4) other measures of impact, as appropriate. Second, DOE analyzes 
and reports the impacts on different subgroups 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 commercial consumers, measures of economic impact 
include the changes in LCC and 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 (LCC and 
PBP)
    EPCA requires DOE to consider the savings in operating costs 
throughout the estimated average life of the covered equipment in the 
type (or class) compared to any increase in the price of, or in the 
initial charges for, or maintenance expenses of, the covered product 
that are likely to result from a standard. (42 U.S.C. 
6313(a)(6)(B)(ii)(II))

[[Page 2440]]

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 cost (including energy, 
maintenance, and repair expenditures) discounted over the lifetime of 
the equipment. The LCC analysis requires a variety of inputs, such as 
equipment prices, equipment energy consumption, energy prices, 
maintenance and repair costs, equipment lifetime, and discount rates 
appropriate for commercial consumers. 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.
    The PBP is the estimated amount of time (in years) it takes 
commercial consumers to recover the increased purchase cost (including 
installation) of more-efficient equipment through lower operating 
costs. DOE calculates the PBP by dividing the change in purchase cost 
due to a more-stringent standard by the change in annual operating cost 
for the year that standards are assumed to take effect.
    For its LCC and PBP analysis, DOE assumes that commercial consumers 
will purchase the covered equipment in the first year of compliance 
with amended standards. The LCC savings for the considered efficiency 
levels are calculated relative to the case that reflects projected 
market trends in the absence of amended standards. DOE's LCC and PBP 
analysis is discussed in further detail in section IV.F.
c. Energy Savings
    Although the significant conservation of energy is a separate 
statutory requirement for adopting an energy conservation standard, 
EPCA requires DOE, in determining the economic justification of a 
standard, to consider the total projected energy savings that are 
expected to result directly from the standard. (42 U.S.C. 
6313(a)(6)(B)(ii)(III)) As discussed in section IV.H, DOE uses the NIA 
spreadsheet to project national energy savings.
    Commenting on the CUAC NOPR, AHRI stated that DOE gave energy 
savings disproportionate weight in its analysis, which conflicts with 
42 U.S.C. 6313(a)(6)(A)(ii)(II) and 6313(a)(6)(B)(ii)(I)-(VII). In its 
view, DOE should consider seven different factors in determining 
whether the benefits of a proposed standard exceed its burdens, and 
stated that there is no indication in the statute or otherwise that 
Congress intended this to be anything other than a roughly equal 
weighting of factors where no particular factor is king over all the 
others. (CUAC: AHRI, No. 68 at p. 22)
    Section 6313(a)(6)(A)(ii)(II) concerns DOE's authority to adopt a 
national standard more stringent than the amended ASHRAE/IES Standard 
90.1 if such standard would result in the significant additional 
conservation of energy and is technologically feasible and economically 
justified. Section V.C of this document sets forth in detail the 
reasons why DOE has concluded that the adopted standards for CUACs/
CUHPs would result in the significant additional conservation of energy 
and are technologically feasible and economically justified.
    Section 6313(a)(6)(B)(ii)(I)-(VII) lists the factors that DOE must 
consider in determining whether a standard is economically justified 
for the purposes of subparagraph (A)(ii)(II). Weighing these factors, 
in DOE's view, requires a careful balancing of each factor to help 
ensure the comprehensiveness of the Agency's review of any potential 
standard under consideration. Accordingly, DOE has weighed these 
factors in assessing the energy efficiency levels recommended by the 
Working Group.
d. Lessening of Utility or Performance of Equipment
    In establishing equipment classes, 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. 6313(a)(6)(B)(ii)(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, as determined in writing by the Attorney General, that is 
likely to result from a proposed standard. (42 U.S.C. 
6313(a)(6)(B)(ii)(V)) Specifically, it instructs DOE to consider the 
impact of any lessening of competition, as determined in writing by the 
Attorney General, that is likely to result from the imposition of the 
standard. DOE is simultaneously publishing a NOPR containing proposed 
energy conservation standards identical to those set forth in this 
direct final rule and has transmitted a copy of the rule and the 
accompanying TSD to the Attorney General, requesting that the U.S. 
Department of Justice (``DOJ'') provide its determination on this 
issue. DOE will consider DOJ's comments on the direct final rule in 
determining whether to proceed with finalizing its standards. DOE will 
also publish and respond to the DOJ's comments in the Federal Register 
in a separate notice.
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)) The energy savings from 
the adopted standards for CUACs/CUHPs and CWAFs 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.
    The adopted standards also are likely to result in environmental 
benefits in the form of reduced emissions of air pollutants and GHGs 
associated with energy production and use. DOE conducts an emissions 
analysis to estimate how potential standards may affect these 
emissions, as discussed in section IV.K; the emissions impacts are 
reported in section V.B.6 of this document. DOE also estimates the 
economic value of emissions reductions resulting from the considered 
TSLs, as discussed in section IV.L.
    Commenting on the CUAC/CUHP NOPR, AHRI questioned DOE's inclusion 
of environmental benefits in its consideration since none of the more 
specific factors in section 6313(a)(6)(B)(ii)(I)-(VI) refer to 
environmental matters. (AHRI asserted that DOE must have based its 
inclusion of environmental and SCC benefits on the catch-all ``other 
factors'' provision of 42 U.S.C. 6313(a)(6)(B)(ii)(VII).) AHRI stated 
that DOE must clarify precisely why and how it believes that it has the 
statutory authority under section 6313(a)(6)(B)(ii) to consider SCC 
issues in any fashion, and, if so, under what sub-provision (i.e., 
which of the seven factors) such analysis comes. (CUAC: AHRI, No. 68 at 
p. 28)
    DOE maintains that environmental and public health benefits 
associated with the more efficient use of energy are important to take 
into account when considering the need for national energy and water 
conservation, which is one of the factors to consider under EPCA. (42 
U.S.C. 6295(o)(2)(B)(i)(VI)) Given the threats posed by global climate 
change to the economy, public health,

[[Page 2441]]

ecosystems, and national security,\25\ combined with the well-
recognized potential of well-designed energy conservation measures to 
reduce GHG emissions, DOE believes that evaluation of the potential 
benefits from slowing anthropogenic climate change must be part of the 
consideration of the need for national energy conservation.
---------------------------------------------------------------------------

    \25\ National Climate Assessment 2014. Available at: http://nca2014.globalchange.gov/. The National Security Implications of a 
Changing Climate. May 2015. The White House. Available at: https://www.whitehouse.gov/the-press-office/2015/05/20/white-house-report-national-security-implications-changing-climate.
---------------------------------------------------------------------------

g. Other Factors
    In determining whether an energy conservation standard is 
economically justified, DOE may consider any other factors that the 
Secretary deems to be relevant. (42 U.S.C. 6313(a)(6)(B)(ii)(VII)) In 
developing the direct final rule, DOE has also considered the 
submission of the jointly-submitted Term Sheet from the Working Group 
and approved by ASRAC. In DOE's view, the Term Sheet sets forth a 
statement by interested persons that are fairly representative of 
relevant points of view (including representatives of manufacturers of 
covered equipment, States, and efficiency advocates) and contains 
recommendations with respect to energy conservation standards that are 
in accordance with 42 U.S.C. 6313(a)(6)(B), as required by EPCA's 
direct final rule provision. See 42 U.S.C. 6295(p)(4). DOE has 
encouraged the submission of agreements such as the one developed and 
submitted by the CUAC-CUHP-CWAF Working Group as a way to bring diverse 
stakeholders together, to develop an independent and probative analysis 
useful in DOE standard setting, and to expedite the rulemaking process. 
DOE also believes that standard levels recommended in the Term Sheet 
may increase the likelihood for regulatory compliance, while decreasing 
the risk of litigation.
2. Rebuttable Presumption
    EPCA creates a rebuttable presumption that an energy conservation 
standard is economically justified if the additional cost to the 
commercial consumer of an equipment 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. 42 U.S.C. 6295(o)(2)(B)(iii) Although this rebuttable 
presumption is not specifically mentioned in section 6316(b)(1) as 
applying to CUACs/CUHPs and CWAFs, DOE nonetheless considered the 
rebuttable presumption criteria as part of its analysis. DOE's LCC and 
PBP analyses generate values used to calculate the effect 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, as required under 42 U.S.C. 6295(o)(2)(B)(i), and 42 
U.S.C. 6313(a)(6)(B)(ii). The results of this analysis serve as the 
basis for DOE's evaluation of the economic justification for a 
potential standard level (thereby supporting or rebutting the results 
of any preliminary determination of economic justification). The 
rebuttable presumption payback calculation is discussed in section IV.F 
of this document.

G. Energy Efficiency Descriptors for Commercial Unitary Air 
Conditioners and Heat Pumps

    The current energy conservation standards for CUACs and CUHPs are 
based on the metrics EER for cooling efficiency and COP for CUHP 
heating efficiency. See 10 CFR 431.97(b). In this direct final rule, 
DOE is adopting energy conservation standards based on IEER for cooling 
efficiency and is continuing to use COP for denoting CUHP heating 
efficiency.
1. Cooling Efficiency Metric
    In the CUAC/CUHP RFI, DOE noted that it was considering whether to 
replace the existing cooling efficiency descriptor, EER, with a new 
energy-efficiency descriptor, IEER. 78 FR at 7299. Unlike the EER 
metric, which only uses the efficiency of the equipment operating at 
full-load in high-ambient-temperature conditions (i.e., 95 degrees 
Fahrenheit ([deg]F)), the IEER metric factors in the efficiency of 
equipment operating at part-loads of 75 percent, 50 percent, and 25 
percent of capacity at reduced ambient temperature consistent with 
part-load operation as well as the efficiency at full-load. This is 
accomplished by weighting the full- and part-load efficiencies with a 
representative average amount of time operating at each loading point. 
The IEER metric incorporates part-load efficiencies measured with 
outside temperatures appropriate for the load levels, i.e. at lower 
temperatures for lower load levels. As part of a final rule published 
on May 16, 2012, DOE amended the test procedure for this equipment to 
incorporate by reference AHRI Standard 340/360--2007, ``Performance 
Rating of Commercial and Industrial Unitary Air-Conditioning and Heat 
Pump Equipment'' (``AHRI Standard 340/360-2007''). 77 FR 28928. DOE 
notes that AHRI Standard 340/360-2007 already includes methods and 
procedures for testing and rating equipment with the IEER metric. 
ASHRAE, through its Standard 90.1, includes requirements based on the 
part-load performance metric, IEER. These IEER requirements were first 
established in Addenda to the 2008 Supplement to Standard 90.1-2007, 
and were required for compliance with ASHRAE Standard 90.1 on January 
1, 2010.\26\
---------------------------------------------------------------------------

    \26\ ASHRAE. ASHRAE Addenda. 2008 Supplement. http://www.ashrae.org/File%20Library/docLib/Public/20090317_90_1_2007_supplement.pdf.
---------------------------------------------------------------------------

    EPCA requires that test procedures be reasonably designed to 
produce test results that measure the energy efficiency of covered 
equipment during a representative average use cycle or period of use. 
(42 U.S.C. 6314(a)(2)) As discussed above, the IEER metric weights the 
efficiency of operating at different part-loads and full-load based on 
usage patterns, which collectively provide a more representative 
measure of annual energy use than the EER metric. A manufacturer that 
was involved in the development of the IEER metric indicated that the 
usage pattern weights for the IEER metric were developed by analyzing 
equipment usage patterns of several buildings across the 17 ASHRAE 
Standard 90.1-2010 (appendix B) climate zones. (Docket ID: EERE-2013-
BT-STD-0007-0018, Carrier, at p. 1) These usage patterns and climate 
zones were based on a comprehensive analysis performed by industry in 
assessing the manner in which CUAC and CUHP equipment operate in the 
field, both in terms of actual usage and the climatic conditions in 
which they are used. The weighting factors accounted for the hours of 
operation where mechanical cooling was active--i.e., the associated 
analysis assumed use of economizing (use of cool outdoor air for 
cooling) for appropriate hours in climate zones for which equipment 
would be installed with this feature. Id. As a result, DOE stated in 
the CUAC/CUHP NOPR that the IEER metric, as a whole, provides a more 
accurate representation of the annual energy use for this equipment 
than the EER metric, which only considers full-load energy use. For 
these reasons, DOE proposed to amend its

[[Page 2442]]

energy conservation standards for CUACs/CUHPs to be based on the IEER 
metric. 79 FR at 58959.
    AHRI, Nordyne, Rheem, Trane, the Joint Efficiency Advocates, and 
Southern Company all generally supported using IEER as the proposed 
metric. (CUAC: AHRI, No. 68 at p. 42; Nordyne, No. 61 at p. 35; Rheem, 
No. 70 at p. 2; Trane, No. 63 at p. 6; Joint Efficiency Advocates, No. 
69 at pp. 1-2; Southern Company, Public Meeting Transcript, No. 104 at 
p. 25) The Joint Efficiency Advocates supported DOE's proposal to 
replace EER with IEER. In their view, DOE could retain the EER 
standards while adding IEER. They added that if DOE decided to use a 
single metric, IEER would better reflect annual energy consumption than 
EER since this equipment rarely operates at full-load. (CUAC: Joint 
Efficiency Advocates, No. 69 at pp. 1-2)
    While supporting the use of IEER, AHRI, Nordyne, and Lennox 
recognized that EER will continue to be an important metric for 
utilities when managing peak load electricity usage. (CUAC: AHRI, No. 
68 at p. 42; Nordyne, No. 61 at p. 35; Lennox, No. 60 at p. 14) The 
California IOUs recommended that DOE establish standards using both EER 
and IEER metrics to prevent poor equipment performance at high 
temperature full-load conditions. Given the low weighting (2 percent) 
of the full-load condition for the IEER metric, there is an incentive 
for manufacturers to optimize equipment at the part-load conditions 
with ambient temperatures between 65[emsp14][deg]F and 
82[emsp14][deg]F. The California IOUs indicated that moving to an IEER-
only metric could potentially mean that a new standard could result in 
equipment that is designed with full-load EER values lower than the 
current standards. (CUAC: California IOUs, No. 67 at p. 2; California 
IOUs, ASRAC Public Meeting, No. 102 at p. 99) The California IOUs 
commented that, in the absence of dual metrics using both EER and IEER, 
they supported standards based on EER, or use of IEER accompanied by 
required reporting of each of the IEER test points, including full-load 
EER. (CUAC: California IOUs, No. 67 at pp. 2, 7-8) The Joint Efficiency 
Advocates similarly supported the reporting of each IEER test point. 
(CUAC: Joint Efficiency Advocates, No. 69 at p. 8)
    However, the California IOUs and other members of the ASRAC Working 
Group more recently agreed as Term Sheet signatories to recommend that 
DOE adopt standards for CUACs and CUHPs based on IEER for cooling 
efficiency. (CUAC: ASRAC Term Sheet, No. 93 at pp. 2-4) DOE also notes 
that ASHRAE Standard 90.1 includes requirements and reporting for both 
EER and IEER. As a result, although DOE is setting energy conservation 
standards for CUACs and CUHPs based on the IEER metric, EER ratings of 
equipment would still be available through the AHRI certification 
database. DOE notes that AHRI and manufacturers agreed to continue to 
require verification and reporting of EER for equipment through AHRI's 
certification program. AHRI also agreed to submit a letter to the 
docket for this rulemaking committing to continuing to require 
verification and reporting of EER for it's certification program. 
(CUAC: ASRAC Public Meeting, No. 101 at pp. 9, 55; ASRAC Public 
Meeting, No. 103 at pp. 113-116) Thus, utilities, and others, would 
still be able to consider full-load efficiency in their energy 
efficiency programs. For these reasons, and for the reasons stated 
previously that the IEER metric provides a more accurate representation 
of the annual energy use for this equipment, DOE is adopting standards 
for small, large, and very large, CUACs and CUHPs cooling efficiency 
based on the IEER metric.
    DOE notes that a change in metrics (i.e., from EER to IEER) 
necessitates an initial DOE determination that the new requirement 
would not result in backsliding when compared to the current standards. 
See 42 U.S.C. 6313(a)(6)(B)(iii)(I). As discussed in section IV.A, DOE 
conducted energy modeling by selecting actual models available on the 
market that comply with the current DOE energy conservation standards 
for these equipment based on EER, to evaluate each IEER efficiency 
level (by analyzing the efficiency at each loading condition, including 
full-load EER). Based on this analysis, staged-air volume (``SAV'') and 
variable-air volume (``VAV'') equipment--two types of CUAC/CUHP 
equipment that include design features focused on improved part-load 
performance as opposed to full-load EER performance \27\--that already 
meet the energy conservation standard levels adopted in this direct 
final rule had EER values higher than the current standard levels for 
this equipment--i.e., these equipment were more efficient than what the 
current EER-based standards require. Even with the design changes that 
are focused on improved part-load performance (as with SAV and VAV 
units), the equipment exceeded the current EER standard levels, which 
suggests that the risk of backsliding is low.
---------------------------------------------------------------------------

    \27\ SAV units typically use a multiple-speed indoor fan motor, 
which is achieved by incorporating a variable frequency drive 
(``VFD'') to adjust the motor speed to provide two stages of indoor 
air flow to match staged compressor operation and thus provide 
improved part-load performance. For the first stage of operation, 
the indoor fan motor is controlled to provide two-thirds of the 
total air flow established for the unit. For the second stage, the 
VFD adjusts the indoor fan motor to provide the total air flow 
established for the unit (i.e., 100-percent air flow). VAV units are 
capable of providing more accurate control of supply air temperature 
by varying cooling capacity and air flow rates. VAV units are 
typically equipped with a VFD to control the indoor fan speed based 
on supply air pressure and operate at multiple stages of air flow 
rates to match the variable cooling capacity (either by multiple 
compressor staging or variable-speed compressors). In contrast, 
constant air volume (CAV) CUACs and CUHPs typically use a single 
speed indoor fan motor and operate by controlling cooling capacity 
based on temperature/humidity in the conditioned space and operate 
at a fixed indoor air flow rate supplying variable temperature air.
---------------------------------------------------------------------------

    As discussed in section IV.A.2.a, DOE is establishing separate 
equipment classes for double-duct CUACs and CUHPs and is maintaining 
the current energy conservation standards for this equipment. As a 
result, DOE is maintaining the existing EER metric for the double-duct 
CUAC and CUHP equipment classes.
2. Heating Efficiency Metric
    The current energy conservation standards for small, large, and 
very large air-cooled CUHPs heating efficiency are based on the COP 
metric.\28\ 10 CFR 431.97(b) For the CUAC/CUHP NOPR, DOE proposed 
standards for heating efficiency based on the COP metric. See 79 FR at 
58960.
---------------------------------------------------------------------------

    \28\ COP is defined as the ratio of the produced heating effect 
to its net work input.
---------------------------------------------------------------------------

    AHRI, Nordyne, Goodman and Rheem supported the continued use of COP 
as the heating efficiency metric for CUHPs. (CUAC: AHRI, No. 68 at p. 
42; Nordyne, No. 61 at p. 35; Goodman, No. 65 at p. 12; Rheem, No. 70 
at p. 2) In addition, members of the ASRAC Working Group agreed as 
signatories to the Term Sheet to standards for air-cooled CUHPs based 
on COP for heating efficiency. (CUAC: ASRAC Term Sheet, No. 93 at pp. 
2-4) As discussed in section IV.A, DOE is adopting standards for air-
cooled CUHPs in this direct final rule based on COP for heating 
efficiency.

H. Other Issues

1. Economic Justification of the Proposed Standards
a. Small, Large, and Very Large Commercial Package Air Conditioning and 
Heating Equipment
    In response to the CUAC/CUHP NOPR, AHRI commented that DOE did not 
explain how it concluded that the proposed rulemaking would result in 
the significant additional conservation

[[Page 2443]]

of energy and is technologically feasible and economically justified by 
clear and convincing evidence, as required by 42 U.S.C. 
6313(a)(6)(A)(ii)(II). (CUAC: AHRI, No. 68 at pp. 12-13) Lennox and 
Nordyne made similar comments. (CUAC: Lennox, No. 60 at pp. 4-5; 
Nordyne, No. 61 at pp. 6-8) AHRI stated that DOE's analysis fell short 
of this elevated requirement of proof. AHRI added that instead of 
starting with the max-tech standard level, DOE was obliged by Section 
6313(a)(6)(A)(ii) to first consider the amended ASHRAE standard for 
adoption, and consider a higher level only based on clear and 
convincing evidence. (CUAC: AHRI, No. 68 at p. 13)
    Trane stated that DOE's CUAC/CUHP NOPR analysis grossly 
underestimated the costs at all the TSL levels and, therefore, 
overstated the benefits to the nation. (CUAC: Trane, No. 63 at p. 8)
    AHRI also commented that the proposed minimum efficiency level 
(EL3) represents a significant increase from the ASHRAE 90.1-2013 
levels that will become effective in 2016. It stated that in order to 
achieve EL 3 levels it will be necessary to redesign approximately 80 
percent of all units that are commercially-available today, and as a 
result, many classes of products will be eliminated, causing a 
significant contraction of the market. AHRI stated that the required 
design modifications will come at a significant cost to the consumer, 
and consumers who are unable to afford more efficient units will likely 
continue to repair and not replace units in service. It added that the 
situation could potentially alter the competitive landscape as other 
technologies are favored as alternatives (e.g., water-cooled, 
evaporatively-cooled, and variable refrigerant flow mult-split air 
conditioners and heat pumps). (CUAC: AHRI, Public Meeting Transcript, 
No. 104 at pp. 15-16) Lennox also stated that the proposed standards 
would require over 90 percent of its current products to be redesigned. 
(CUAC: Lennox, No. 60 at p. 8)
b. Commercial Warm Air Furnaces
    Trane stated that the LCC savings for gas-fired CWAFs at the 
proposed standard are hardly measurable, and any slight change in the 
increase in product cost, installation or maintenance costs, and energy 
prices can change these savings to an increase in LCC. Similar results 
would occur in the NPV calculation where a positive NPV could easily 
become an increase in costs to the nation. (CWAF: Trane, No. 27 at p. 
7)
c. Response
    DOE notes that while it is not adopting the proposed standards from 
the CUAC/CUHP and CWAF NOPRs, these comments, along with the intensive 
feedback received during the Working Group discussions contributed to 
the modified approach and revised standards recommended by the ASRAC 
Working Group that DOE is presenting in this direct final rule. As 
discussed in section V.C, DOE has determined that the recommendations 
are in accordance with the provisions of 42 U.S.C. 6313(a)(6)(B), as 
required by 42 U.S.C. 6295(p)(4) and 6316(b)(1). The evidence 
supporting this determination is clearly described in detail in the 
direct final rule TSDs and the accompanying spreadsheets. The evidence 
that the adopted standards would result in the significant additional 
conservation of energy and are technologically feasible is convincing, 
as the projected energy savings exceed the threshold for significance 
by a wide margin (see section III.E.2), and their technological 
feasibility, based on DOE's examination, is well-established (see 
section III.D). The evidence that the adopted standards are 
economically justified is also convincing. In particular, the economic 
impact of the standards on the consumers of CUACs/CUHPs and CWAFs is 
positive by a wide margin, as discussed in section V.C.
2. ASHRAE 90.1 Process
    Commenting on the CUAC/CUHP NOPR, a number of parties stated that 
DOE should rely on the ASHRAE process in setting amended commercial 
equipment efficiency standards.
    ASHRAE urged DOE to rely on the efficiencies established in ASHRAE 
Standard 90.1-2013 for the equipment listed in this rulemaking. It 
noted that: (1) ASHRAE 90.1-2013 underwent the fully open ANSI/ASHRAE 
consensus process with buy-in and consensus from manufacturers, energy 
advocates, representatives from DOE, and other materially affected and 
interested parties; (2) the efficiency levels were established in a 
cost-effective manner using the ASHRAE ``scalar ratio'' economic 
analysis methodology; and (3) many interested parties, including DOE, 
invested a significant amount of time and energy in establishing the 
efficiency levels currently found in ASHRAE 90.1-2013 with ample 
opportunities to provide input. ASHRAE recommended that DOE no longer 
pursue the proposed rulemaking, and approve the ASHRAE 90.1-2013 
efficiency levels for this equipment. (CUAC: ASHRAE, No. 59 at pp. 1-
4). AHRI, Goodman and Lennox made a similar comment. (CUAC: AHRI, No. 
68 at pp. 2, 10-11; Goodman, No. 65 at pp. 2-3; Lennox, No. 60 at pp. 
8-9) A number of other parties made similar comments. (CUAC: Huntley, 
No. 62 at p. 1; Viridis, No. 56 at p. 1; Merryman-Farr, No. 49 at p. 1; 
KJWW, No. 46 at p. 1; Smith-Goth, No. 45 at p. 1; A2H, No. 44 at p. 1)
    Notwithstanding DOE's participation in the development of ASHRAE 
Standard 90.1-2013, which did not impact the EER standards for which 
DOE already incorporated into its regulations, amendments to EPCA 
established by AEMTCA required DOE to initiate the current rulemaking, 
which DOE began in advance of the ASHRAE 90.1-2013 amendments (see 
section II.A). EPCA, as amended, also directs DOE to prescribe 
standards that are designed to achieve the maximum improvement in 
energy efficiency that is technologically feasible and economically 
justified, and would result in the significant additional conservation 
of energy. (42 U.S.C. 6313(a)(6)(A)(ii)(II)) It also provides the 
factors that DOE has considered to select and adopt standards for which 
the benefits exceed the burdens. (42 U.S.C. 6313(a)(6)(B)(ii)) In DOE's 
view, the standards being adopted in this direct final rule satisfy 
these elements. DOE further notes that AHRI, Goodman and Lennox are 
parties to the recommendations that form the basis for this direct 
final rule, pursuant to 42 U.S.C. 6295(p)(4) and 6316(b)(1), indicating 
that the direct final rule's standard levels and supporting analyses 
resolved their concerns related to DOE's initial NOPR.
3. Other
    Referring to section VI.A of the CUAC/CUHP NOPR, AHRI stated that 
DOE did not present evidence to support two of the market failures that 
it identified pursuant to section 1(b)(1) of Executive Order 12866.\29\ 
(CUAC: AHRI, No. 68 at pp. 24-25) AHRI stated that DOE must demonstrate 
that such market failures actually exist in the real world and that 
once quantified, DOE's assessment of costs and benefits for its

[[Page 2444]]

rules in this area align with such an important external validity check 
on its analysis.
---------------------------------------------------------------------------

    \29\ Specifically, in AHRI's view, DOE did not establish that 
the following market failures exist: (1) There is a lack of customer 
information in the commercial space conditioning market, and the 
high costs of gathering and analyzing relevant information leads 
some customers to miss opportunities to make cost-effective 
investments in energy efficiency; and (2) In some cases, the 
benefits of more efficient equipment are not relized due to 
misaligned incentives between purchasers and users. (E.g. where an 
equipment purchase decision is made by a building contractor or 
building owner who does not pay the energy costs.) See CUAC; AHRI, 
No. 68 at 24.
---------------------------------------------------------------------------

    Section 1(b)(1) of Executive Order (E.O.) 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. As discussed in section VI.A of this direct final rule, 
DOE identified two problems that would generally be considered ``market 
barriers'' (numbers 1 and 2 in section VI.A, which are related to 
certain features concerning consumer decision-making), and one problem 
that most economists would consider a ``market failure'' (number 3, 
which concerns environmental externalities).\30\ E.O. 12866 does not 
require any quantification of the problems, which in any case would be 
extremely difficult. Such quantification would unlikely bear any 
relationship to the costs and benefits estimated for energy 
conservation standards. E.O. 12866 does not provide any specific 
guidance regarding how agencies should assess the significance of the 
identified problems. However, DOE's extensive activities in promoting 
energy conservation over several decades have demonstrated that the 
problems of (1) lack of consumer information and/or information 
processing capability about energy efficiency opportunities, and (2) 
and asymmetric information and/or high transactions costs are 
significant enough to warrant policy actions designed to help overcome 
them.
---------------------------------------------------------------------------

    \30\ Note that since the publication of the CUAC/CUHP NOPR, DOE 
has refined the description of the problems identified pursuant to 
E.O. 12866. See section VI.A.
---------------------------------------------------------------------------

    Miller indicated that neither of the potential market failures 
cited by DOE (externalities related to GHG emissions and asymmetric 
information (and related misaligned incentives) regarding high-
efficiency commercial appliances is solved by its proposed energy 
efficiency standards, leaving the proposal economically unjustifiable. 
Miller further stated that DOE does not explain why sophisticated, 
profit-motivated purchasers of CUACs and CUHPs would suffer from either 
informational deficits or cognitive biases that would cause them to 
purchase products with high lifetime costs without demanding higher-
price, higher-efficiency products. Miller added that this asymmetric 
information, if it exists, could be remedied by improved labeling or 
other types of consumer education campaigns rather than banning 
products from the marketplace. (Miller, No. 39 at p. 13)
    The proposed standards, as well as the adopted standards contained 
in this direct final rule, are intended to address the above-cited 
problems, but DOE's action is primarily responsive to the statutes that 
govern the amendment of energy efficiency standards (see section II.A). 
Neither the relevant statutes nor the relevant Executive Order 
(Executive Order 12866, ``Regulatory Planning and Review'') \31\ make 
any mention of solving the problems that DOE has identified. 
Incorporating external costs into energy prices is outside the scope of 
any existing DOE authority. DOE agrees that improved labeling or other 
types of consumer education campaigns could help to ameliorate 
information problems, but DOE is still required to follow the statutory 
obligations concerning amendment of energy efficiency standards.
---------------------------------------------------------------------------

    \31\ 58 FR 51735 (Oct. 4, 1993).
---------------------------------------------------------------------------

    Miller stated that DOE expects only 10 percent of the externality 
benefits of carbon reductions to accrue to Americans, so the costs to 
American citizens outweigh the social benefits of the standard by 
almost 3 to 1, calling into question whether the proposal is 
economically justified. (Miller, No. 39 at p. 13)
    DOE notes that the domestic SCC values were estimated by the 
interagency Working Group as a range from 7 percent to 23 percent of 
the global values. Using the central SCC value, the domestic 
CO2 reduction monetized value from the proposed standards 
amounts to $2.2 to $7.1 billion. The incremental costs range from $4.1 
to $8.8 billion for 7-percent and 3-percent discount rates, 
respectively, but the operating cost savings are far larger, such that 
the NPV of consumer benefit ranges from $16.5 billion to $50.8 billion 
for 7-percent and 3-percent discount rates, respectively.
    Miller stated that DOE's proposal does not maintain flexibility and 
freedom of choice for purchasers of CUAC and CUHP equipment. (Miller, 
No. 39 at p. 13) In contrast to the proposed standards, which DOE is 
not adopting, the standards adopted for CUACs and CUHPs allow a much 
higher share of currently-produced models to remain on the market. The 
models that would be allowed under the standards cover a wide range of 
efficiencies and other attributes, thereby maintaining considerable 
choice for purchasers of CUACs and CUHPs.

IV. Methodology and Discussion of Related Comments

    This section addresses the analyses DOE has performed for this 
rulemaking. Separate subsections address each component of DOE's 
analyses.
    DOE used several analytical tools to estimate the impact of the 
standards considered in support of this direct final rule. The first 
tool is a spreadsheet that calculates the LCC savings 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 
of total consumer costs and savings expected to result 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 spreadsheet tools are available 
on the DOE Web site for the rulemaking for CUACs/CUHPs: http://www1.eere.energy.gov/buildings/appliance_standards/rulemaking.aspx?ruleid=59; and for CWAFs: http://www1.eere.energy.gov/buildings/appliance_standards/rulemaking.aspx/ruleid/70. 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

1. General
    For the market and technology assessment, DOE developed information 
that provided an overall picture of the market for the equipment 
concerned, including the purpose of the equipment, the industry 
structure, market characteristics, and the technologies used in the 
equipment. This activity included both quantitative and qualitative 
assessments, based primarily on publicly-available information. The 
subjects addressed in the market and technology assessment for this 
rulemaking include scope of coverage, equipment classes, types of 
equipment sold and offered for sale, manufacturers, and technology 
options that could improve the energy efficiency of the equipment under 
examination. The key findings of DOE's market and technology assessment 
are summarized below. For additional detail, see chapter 3 of the CUAC/
CUHP and CWAF direct final rule TSDs.

[[Page 2445]]

2. Scope of Coverage and Equipment Classes
a. Commercial Unitary Air Conditioners and Heat Pumps
    The energy conservation standards adopted in this direct final rule 
cover small, large, and very large, CUACs and CUHPs under section 
342(a) of EPCA. (42 U.S.C. 6313(a)) This category of equipment has a 
rated capacity between 65,000 Btu/h and 760,000 Btu/h. It is designed 
to heat and cool commercial buildings. In the case of single-package 
units, which house all of the components (i.e., compressor, condenser 
and evaporator coils and fans, and associated operating and control 
devices) within a single cabinet, these units are typically located on 
the building's rooftop. In the case of split-system units, the 
compressor and condenser coil and fan (or in the case of CUHPs, the 
outdoor coil and fan) are housed in a cabinet typically located on the 
outside of the building, and the evaporator coil and fan (or in the 
case of CUHPs, the indoor coil and fan) are housed in a cabinet 
typically located inside the building.
    When evaluating and establishing energy conservation standards, DOE 
divides covered equipment into equipment classes by the type of energy 
used, capacity, or other performance-related features that would 
justify a different standard. In determining whether a performance-
related feature would justify a different standard, DOE considers such 
factors as the utility to the consumer of the feature and other factors 
DOE determines are appropriate. All of the different air conditioning 
and heat pump equipment addressed by this rule are air-cooled unitary 
air-conditioners and heat pumps.
    The current equipment classes that EPAct 2005 established for 
small, large, and very large CUACs and CUHPs divide this equipment into 
twelve classes characterized by rated cooling capacity, equipment type 
(air conditioner versus heat pump), and heating type. Table IV-1 shows 
the current equipment class structure.

                         Table IV-1--Current Air-Cooled CUAC and CUHP Equipment Classes
----------------------------------------------------------------------------------------------------------------
    Equipment class           Equipment type          Cooling capacity       Subcategory        Heating type
----------------------------------------------------------------------------------------------------------------
1.....................  Small Commercial Packaged   >=65,000 Btu/h and    AC..............  Electric Resistance
                         Air-Conditioning and        <135,000 Btu/h.                         Heating or No
                         Heating Equipment (Air-                                             Heating.
                         Cooled).
2.....................  ..........................  ....................  ................  All Other Types of
                                                                                             Heating.
3.....................  ..........................  ....................  HP..............  Electric Resistance
                                                                                             Heating or No
                                                                                             Heating.
4.....................  ..........................  ....................  ................  All Other Types of
                                                                                             Heating.
5.....................  Large Commercial Packaged   >=135,000 Btu/h and   AC..............  Electric Resistance
                         Air-Conditioning and        <240,000 Btu/h.                         Heating or No
                         Heating Equipment (Air-                                             Heating.
                         Cooled).
6.....................  ..........................  ....................  ................  All Other Types of
                                                                                             Heating.
7.....................  ..........................  ....................  HP..............  Electric Resistance
                                                                                             Heating or No
                                                                                             Heating.
8.....................  ..........................  ....................  ................  All Other Types of
                                                                                             Heating.
9.....................  Very Large Commercial       >=240,000 Btu/h and   AC..............  Electric Resistance
                         Packaged Air-Conditioning   <760,000 Btu/h.                         Heating or No
                         and Heating Equipment                                               Heating.
                         (Air-Cooled).
10....................  ..........................  ....................  ................  All Other Types of
                                                                                             Heating.
11....................  ..........................  ....................  HP..............  Electric Resistance
                                                                                             Heating or No
                                                                                             Heating.
12....................  ..........................  ....................  ................  All Other Types of
                                                                                             Heating.
----------------------------------------------------------------------------------------------------------------
AC = Air conditioner; HP = Heat pump.

    In the CUAC/CUHP NOPR, DOE proposed energy conservation standards 
based on this existing equipment class structure, which is also 
provided in Table 1 of 10 CFR 431.97. 79 FR 58964.
    United CoolAir Corporation (``UCA'') submitted a request that DOE 
exempt a specific type of air conditioning equipment (``double-duct 
air-cooled air conditioners''). See UCA, EERE-2013-BT-STD-0007-0020. 
These units are designed for indoor installation in constrained spaces 
using ducting to an outside wall for the supply and discharge of 
condenser air to and from the condensing unit. The sizing of these 
units is constrained both by the space available in the installation 
location and the available openings in the building through which the 
unit's sections must be moved to reach the final installation location. 
These size constraints, coupled with the higher power required by the 
condenser fan to provide sufficient pressure to move the condenser air 
through the supply and return ducts, affect the energy efficiency of 
these types of systems. More conventional designs for which condensers 
are located outdoors can more easily draw in condenser air through the 
condenser (or outdoor coil for heat pumps) and can move the air using 
direct-drive propeller fans. These design differences allow a 
manufacturer to maximize condenser surface area, reduce the pressure 
rise requirement of the fan, significantly reduce condenser (outdoor) 
fan power and improve equipment efficiency.
    Currently, double-duct air conditioners are tested and rated under 
the same test conditions as single-duct air conditioners, without any 
ducting connected to, or an external static pressure applied on, the 
condenser side. UCA has asserted that the double-duct design provides 
customer utility in that it allows interior field installations in 
existing buildings in circumstances where space constraints make an 
outdoor unit impractical to use. Id. DOE noted in the CUAC/CUHP NOPR 
that the design features associated with the described double-duct 
designs may affect energy use while providing justifiable customer 
utility. 79 FR at 58964.
    In response to the CUAC/CUHP NOPR, a number of heating, ventilating 
and air conditioning (``HVAC'') equipment distributors--MWSK Equipment 
Sales Inc. (``MWSK''), H & H Sales Associates, Inc. (``H&H''), Gardiner 
Trane, Heat Transfer Solutions (``HTS''), HVAC Equipment Sales, Inc., 
Havtech, and Slade Ross, Inc.--all supported establishing a new 
equipment class for the indoor horizontal double-duct units. These 
commenters explained that UCA's double-duct units are unique in that 
they are modular and are applied completely inside buildings where 
rooftop air conditioners and split systems are not practical or 
possible. (CUAC: MSWK, No. 72 at pp. 1-2; H&H,

[[Page 2446]]

No. 73 at p. 1; Gardiner Trane, No. 74 at pp. 1-2; HTS, No. 75 at p. 1; 
HVAC Equipment Sales, Inc., No. 76 at p. 1; Havtech, No. 77 at p. 1; 
Slade Ross, Inc., No. 78 at p. 1) MWSK added that the substantial 
increase in cost (unit and installation) imposed by the proposed 
standards that will not be able to be recouped with savings in energy 
expenditures will cause these indoor air conditioners to cease to exist 
and customers will continue to repair units rather than replace them. 
Alternative systems are limited and costly for customers to have the 
application re-engineered. (CUAC: MSWK, No. 72 at pp. 1-2)
    Goodman commented that if DOE creates a separate equipment class 
for double-duct units, the definitions should be very clearly specified 
to prevent gaming. Goodman stated that the definition should include 
(a) physical properties of the equipment (fan type and orientation, 
maximum product height/width/depth, duct connection sizes, or other 
such parameters), (b) application properties (minimum external static 
pressure for condenser airflow, refrigerant line set lengths, maximum 
capacities, etc.), (c) literature requirements (statements within 
installation and operation manuals and specification sheets), and (d) 
certification requirements. (CUAC: Goodman, No. 65 at pp. 12-13)
    Members of the ASRAC Working Group agreed that a separate equipment 
class should be established for double-duct CUACs and CUHPs. The ASRAC 
Term Sheet recommended the following approach with respect to these 
equipment:
     The existing EER standard levels provided in Table 1 of 10 
CFR 431.97 shall continue to apply for double-duct CUACs and CUHPs.
     Double-duct air conditioner or heat pump would be defined 
as meaning air-cooled commercial package air conditioning and heating 
equipment that satisfies the following elements:
    [cir] It is either a horizontal single package or split-system 
unit; or a vertical unit that consists of two components that may be 
shipped or installed either connected or split;
    [cir] It is intended for indoor installation with ducting of 
outdoor air from the building exterior to and from the unit, where the 
unit and/or all of its components are non-weatherized and are not 
marked (or listed) as being in compliance with UL 1995, ``Heating and 
Cooling Equipment,'' or equivalent requirements for outdoor use;
    [cir] (a) If it is a horizontal unit, the complete unit has a 
maximum height of 35 inches or the unit has components that do not 
exceed a maximum height of 35 inches; (b) If it is a vertical unit, the 
complete (split, connected, or assembled) unit has components that do 
not exceed maximum depth of 35 inches; and
    [cir] It has a rated cooling capacity greater than or equal to 
65,000 Btu/h and up to 300,000 Btu/h. (CUAC: ASRAC Term Sheet, No. 93 
at pp. 4-5)
    Based on DOE's review of double-duct CUACs and CUHPs available on 
the market, DOE agrees with the ASRAC Term Sheet recommendations. 
First, DOE agrees that these units have features that justify 
establishing separate equipment classes for them. Double-duct units, as 
evidenced by several commenters, offer a unique utility that may 
otherwise become unavailable if these units were subjected to the more 
rigorous standards required by this direct final rule for other CUAC 
and CUHP equipment. DOE notes that double-duct units, which are 
installed within the building envelope and use ductwork to transfer 
outdoor air to and from the outdoor unit, would have added challenges 
in meeting more stringent energy conservation standards due to space 
constraints and added condenser fan power.
    Second, DOE agrees that the definition for these units recommended 
in the ASRAC Term Sheet, with minor modifications, appropriately 
distinguish them from other classes. Double-duct units must have 
limited width or height to be able to fit through doorways and to fit 
in above-ceiling space (for horizontal units) or in closets (for 
vertical units) for interior installation. DOE's research showed that 
vertical and horizontal double-duct units had a width or height of 34 
inches or less, respectively. As a result, DOE agrees that specifying a 
maximum width or height of 35 inches to include only units that can be 
installed indoors, as presented in the ASRAC Term Sheet 
recommendations, is appropriate. To this end, DOE is adopting this 
approach by clarifying the provision. Specifically, since a complete 
unit cannot be smaller than its largest component, placing the 35-inch 
restriction on the finished equipment itself addresses the dimensional 
restrictions intended by the Working Group while simplifying the text 
of the definition itself. DOE also notes that because these units are 
designed for indoor installation, as noted by UCA, DOE agrees that 
these units would require ducting of outdoor air from the building 
exterior and that units intended for outdoor use should not be 
considered in the same equipment class. As a result, DOE agrees with 
the ASRAC Term Sheet recommendations that double-duct units and/or all 
of their components should be non-weatherized and not marked as being 
in compliance with UL Standard 1995 or equivalent requirements for 
outdoor use. DOE also notes that single package vertical units 
(``SPVUs'') are already covered under separate standards (10 CFR 
431.97(d)). As a result, to ensure that SPVUs are not covered under the 
definition of double-duct CUACs and CUHPs, DOE agrees with the ASRAC 
Term Sheet recommendations that for vertical double-duct units, only 
those with split configurations (that may be installed with the two 
components attached together) should be included as part of this 
separate equipment class. For these reasons, DOE is adopting the 
definition proposed in the ASRAC Term Sheet for double-duct CUACs and 
CUHPs and is maintaining the existing EER standards contained in Table 
1 of 10 CFR 431.97 for this equipment.
b. Commercial Warm Air Furnaces
    The energy conservation standards adopted in this direct final rule 
cover CWAFs, as defined by EPCA and DOE. EPCA defines a ``warm air 
furnace'' as ``a self-contained oil- or gas-fired furnace designed to 
supply heated air through ducts to spaces that require it and includes 
combination warm air furnace/electric air conditioning units but does 
not include unit heaters and duct furnaces.'' (42 U.S.C. 6311(11)(A)) 
DOE defines the term ``commercial warm air furnace'' as meaning ``a 
warm air furnace that is industrial equipment, and that has a capacity 
(rated maximum input) of 225,000 Btu per hour or more.'' 10 CFR 431.72. 
Accordingly, this rulemaking covers equipment in these categories 
having a rated capacity of 225,000 Btu/h or higher and that are 
designed to supply heated air in commercial and industrial buildings 
via ducts (excluding unit heaters and duct furnaces).\32\
---------------------------------------------------------------------------

    \32\ At its most basic level, a CWAF operates by using a burner 
to combust fuel (e.g. natural gas or oil) and then pass the products 
of combustion through a heat exchanger, which is used to warm the 
indoor air stream by transferring heat from the combustion products. 
This warm indoor air is delivered via ducts to e.g.the conditioned 
spaces within the building's interior.
---------------------------------------------------------------------------

    As discussed above for CUACs/CUHPs, DOE divides covered equipment 
into equipment classes based on the type of energy used, capacity, or 
other performance-related features that would justify having a higher 
or lower standard from that which applies to other equipment classes.
    The equipment classes for CWAFs were defined in the EPACT 1992

[[Page 2447]]

amendments to EPCA, and are divided into two classes based on fuel type 
(i.e., one for gas-fired units, and one for oil-fired units). Table IV-
2 shows the equipment class structure for CWAFs and the current federal 
minimum energy efficiency standards.

                   Table IV-2--CWAFs Equipment Classes
------------------------------------------------------------------------
                                                              Federal
                                              Heating         minimum
                Fuel type                 capacity  (Btu/     thermal
                                                h)          efficiency
                                                                (%)
------------------------------------------------------------------------
Gas-fired...............................       >=225,000              80
Oil-fired...............................       >=225,000              81
------------------------------------------------------------------------

    In response to the CWAFs NOPR, Nordyne commented that the CWAF 
definition should include gas-fired ``makeup'' air furnaces.\33\ 
Nordyne stated that gas-fired makeup air furnaces follow the same test 
procedure to determine energy efficiency as do gas-fired CWAFs, and 
noted that the heat exchangers, air burners, and other components of 
gas-fired makeup air furnaces are similar to those in CWAFs. Further, 
Nordyne asserted that there is little difference in functionality 
between these equipment, and there is no sense in performing extra 
analysis to consider separate equipment classes/standards for gas-fired 
makeup air furnaces and gas-fired CWAFs (CWAF: Nordyne, NOPR Public 
Meeting Transcript, No. 17 at p. 35-36). DOE reiterates that the 
definition of a CWAF requires that (among other criteria) a unit be 
able to ``supply heated air through ducts to spaces that require it'' 
(42 U.S.C. 6311(11)(A)). Therefore, if a makeup air furnace is capable 
of operating in this manner, and if it meets all other criteria to be 
classified as a CWAF, then it would be considered as such under DOE's 
regulations.
---------------------------------------------------------------------------

    \33\ ``Makeup'' air furnaces may be used to precondition fresh 
outdoor air for distribution to other air handling units, which then 
provide further conditioning and distribute the air via ducts to the 
conditioned space. Alternatively, makeup air furnaces may also 
condition fresh outdoor air and directly distribute it via ducts to 
the conditioned space.
---------------------------------------------------------------------------

3. Technology Options
    As part of the market and technology assessment, DOE uses 
information about existing and past technology options and prototype 
designs to help identify technologies that manufacturers could use to 
improve CUAC/CUHP and CWAF energy efficiency. Initially, these 
technologies encompass all those that DOE believes are technologically 
feasible. Chapter 3 of the CUAC/CUHP and CWAF direct final rule TSDs 
includes the detailed list and descriptions of all technology options 
identified for this equipment.
a. Commercial Unitary Air Conditioners and Heat Pumps
    For the CUAC/CUHP NOPR, DOE considered the technology options 
presented in Table IV-3. 79 FR at 58969.

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

    In the CUAC/CUHP NOPR, DOE noted that for the majority of the 
identified technology options, the analysis considered designs that are 
generally consistent with existing equipment on the market (e.g., heat 
exchanger sizes, fan and fan motor types, controls, air flow). 79 FR at 
58969.
    Goodman commented that all of the technology options listed by DOE 
are available in the market today and manufacturers can and do use such 
options whenever they are cost effective. All of the proposed 
technology options can be used to provide minor improvements to the 
HVAC system's efficiency, specifically IEER, but have minimal, if any, 
impact on EER. (CUAC: Goodman, No. 65 at p. 13) Goodman stated that the 
majority of the technology options increase physical size of the 
components and/or unit. Face area of indoor/outdoor coils can be held 
constant while improving heat transfer by either additional coil rows 
or increased fin density. However, Goodman noted that both of those 
options also increase the fan power required to move air through the 
coils which at least partially counteracts the gains from more coil 
surface area. Goodman stated that some of the proposed technology 
options such as increased condenser fan diameter, while technologically 
feasible, are not practically feasible. (CUAC: Goodman, No. 65 at p. 
13)
    Rheem commented that a larger diameter forward-curved indoor fan 
performs well at the low static test condition but can be unstable when 
the system is installed with a high static duct system. Rheem also 
stated that the applicability of the backward-inclined blower wheel 
requires a complete redesign of a package unit outside envelope, which 
will add cost to the system. Other options, such as multiple 
compressors or variable frequency drives, are not as disruptive to the 
footprint design. Rheem noted that the footprint of the unit intended 
for the replacement market is restricted to existing roof curbs and 
duct configurations. Rheem added that additional unit height on very 
large equipment may be restricted by internal tractor trailer 
clearances when the equipment is shipped. (CUAC: Rheem, No. 70 at p. 3)
    As discussed in section IV.A, DOE selected and analyzed currently 
available models using their rated efficiency to characterize the 
energy use and manufacturing production costs at each efficiency level. 
As a result, DOE analyzed equipment designs, including unit dimensions, 
expansion devices, and indoor and outdoor coils and fans/

[[Page 2448]]

motors, consistent with currently available models and the design of 
the equipment as a whole. As discussed in section IV.A, DOE also 
considered how changes in the equipment footprint would impact the need 
for roof curb adapters for replacement installations. For these 
reasons, DOE believes that the technology options analyzed in this 
direct final rule accurately reflect the efficiency improvement and 
incremental manufacturing costs associated with these designs.
    Regarding copper rotor motors, DOE noted in the CUAC/CUHP NOPR that 
manufacturing more efficient copper rotor motors requires using copper 
instead of aluminum for critical components of an induction motor's 
rotor (e.g., conductor bars and end rings). DOE noted that in the case 
of motor rotors for similar horsepower motors, copper rotors can reduce 
the electric motor total energy losses by between 15 percent and 23 
percent as compared to aluminum rotors. As a result, DOE considered 
copper rotor motors as a technology option. 79 FR at 58966.
    Nidec commented that the reduction in electric motor total energy 
losses estimated by DOE to be achievable with copper rotors when 
compared to aluminum rotors is not consistent with what has been 
reported as achievable in previous DOE rulemakings for electric motors 
nor is it consistent with Nidec's experience. Nidec noted that the TSD 
for electric motors showed a reduction in total losses of less than 10 
percent when changing from an aluminum rotor to a die-cast copper rotor 
along with additional enhancements to the motor design such as 
increased stack length, increased slot fill, and/or different 
lamination steel material. Nidec added that DOE may also be overstating 
in the electric motors rulemaking the reduction in total losses that 
can typically be achieved, citing comments made by the National 
Electrical Manufacturers Association (``NEMA'') on that rulemaking 
indicating that the full-load loss for a prototype 10-hp motor was only 
5.9 percent less than that for the motor with the aluminum rotor. 
(CUAC: Nidec, No. 55 at pp. 2-5)
    DOE appreciates the additional information regarding the reduction 
in total losses associated with copper rotors. As discussed above, DOE 
considered design options for the engineering analysis consistent with 
equipment currently available on the market and considered the 
efficiency of the equipment as a whole rather than quantifying the 
energy savings associated with individual components. Accordingly, as 
part of its technology options analysis, DOE screened in copper rotors 
as one possible option to improve overall CUAC/CUHP efficiency. 
However, DOE notes that, based on its review of equipment available on 
the market, it did not observe any models that incorporated copper 
rotor motors. Because DOE analyzed the full system design of equipment 
and specific design options consistent with actual equipment available 
on the market, DOE did not specifically analyze copper rotor motors as 
part of the engineering analysis.
    Regal-Beloit commented that DOE should consider electronically 
commutated motors (``ECMs'') as an alternate technology for the indoor 
fan. ECM technology is now a viable alternative to variable frequency 
drives (``VFDs'') for CUACs and CUHPs. Regal-Beloit also commented that 
DOE should consider ECM technology at efficiency levels other than the 
max-tech. (CUAC: Regal-Beloit, No. 66 at p. 1) As noted in Table IV-3, 
DOE considered ECMs as a technology option. As discussed in section 
IV.C.3.a, DOE revised the engineering analysis to be based on rated 
models at each efficiency level so that equipment design and specific 
design options analyzed were consistent with actual equipment at each 
efficiency level. Based on DOE's review of equipment available on the 
market, DOE did not observe any models using ECMs for the indoor fan. 
In addition, Carrier commented as part of the ASRAC Working Group 
meetings that ECMs are not currently used for indoor fan motor above 1 
horsepower. (CUAC: Carrier, ASRAC Public Meeting, No. 94 at p. 186) 
However, DOE notes that manufacturers would not be precluded from 
incorporating ECMs for the indoor fan. Details of the design options at 
each efficiency level are presented in chapter 5 of the CUAC/CUHP 
direct final rule TSD.
b. Commercial Warm Air Furnaces
    In the analyses for this direct final rule, DOE reviewed the market 
for CWAFs, as well as information gathered from interviews with CWAF 
manufacturers during the NOPR analyses, to determine the common 
technologies implemented to improve CWAF efficiency. Based on this 
information, DOE primarily considered the following technology options 
to improve CWAF thermal efficiency:

 Increased heat exchanger (HX) surface area \34\
---------------------------------------------------------------------------

    \34\ This design option includes a larger combustion inducer (to 
overcome the pressure drop of the increased HX area). The larger 
combustion inducer does not directly lead to a higher TE, but would 
allow the implementation of other technologies (i.e., HX 
improvements) that would cause the furnace to operate more 
efficiently.

 HX enhancements (e.g., dimples, turbulators)
 Condensing secondary HX (stainless steel) \35\
---------------------------------------------------------------------------

    \35\ This design option includes a larger combustion inducer 
fan, upgraded housing for combustion blowers, stainless steel 
impellers, condensate heater, and condensate drainage system that 
would be required for condensing operation. Although these design 
changes do not directly lead to a higher TE, they allow the 
implementation of condensing operation, which causes the furnace to 
operate more efficiently.

    DOE notes that a secondary heat exchanger for condensing operation 
is a possible technology option for CWAFs, but also that this 
technology has considerable issues to overcome when used in weatherized 
equipment. These issues relate specifically to the handling of acidic 
condensate produced by a condensing furnace in the secondary heat 
exchanger. Condensate must be drained from the furnace to prevent 
build-up in the secondary heat exchanger, and properly disposed of 
after exiting into the external environment. Some building codes limit 
the disposal of condensate into the municipal sewage system, so the 
condensate must be passed through a neutralizer to reduce its acidity 
to appropriate levels prior to disposal. In weatherized installations, 
it is more difficult to access the municipal sewage system than in non-
weatherized installations. Condensate produced by a weatherized 
condensing furnace must flow naturally or be pumped through pipes to 
the nearest disposal drain, which may not be in close proximity to the 
furnace. In cold environments, there is a risk of the condensate 
freezing as it flows through these pipes, which can cause an eventual 
back-up of condensate into the heat exchanger, resulting in significant 
damage to the furnace.
    Despite these issues, DOE found in its review of the market that 
multiple manufacturers offer weatherized HVAC equipment with a 
condensing furnace heating section. DOE believes that this fact 
indicates that many of the issues related to a condensing secondary 
heat exchanger can be overcome, and thus, DOE considered a condensing 
secondary heat exchanger as a technology option. As discussed in 
section IV.B.1, this technology was ultimately passed through the 
screening analysis and considered in the engineering analysis. 
Regarding condensate disposal, DOE included the cost of condensate 
disposal lines for all condensing installations; for further details on 
the installation costs of a

[[Page 2449]]

condensate disposal system, see section IV.F.1 of this direct final 
rule, and chapter 8 of the CWAF direct final rule TSD.
    DOE also identified the following additional technology options for 
improving CWAF efficiency. Many of these technologies were either 
removed from the analysis because they were screened out or because 
they did not improve the rated TE of CWAFs as measured by the DOE test 
procedure (see section IV.B for further details):

 Pulse combustion
 Low NOX premix burner
 Low pressure, air-atomized burner (oil-fired CWAFs only)
 Burner de-rating
 Two-stage or modulating combustion
 Insulation improvements
 Delayed-action oil pump solenoid valve (oil-fired CWAFs only)
 Off-cycle dampers
 Electronic ignition
 Concentric venting
 High-static flame-retention head oil burner (oil-fired CWAFs 
only)

B. Screening Analysis

    After DOE identified the technologies that might improve CUAC/CUHP 
and CWAF energy efficiency, DOE conducted a screening analysis. The 
purpose of the screening analysis is to determine which options to 
consider further and which to screen out. DOE consulted with industry, 
technical experts, and other interested parties in developing a list of 
design options. DOE then applied the following set of screening 
criteria to determine which design options are unsuitable for further 
consideration in the rulemaking:
     Technological Feasibility: DOE will consider only those 
technologies incorporated in commercial equipment or in working 
prototypes to be technologically feasible.
     Practicability to Manufacture, Install, and Service: If 
mass production of a technology in commercial equipment and reliable 
installation and servicing of the technology could be achieved on the 
scale necessary to serve the relevant market at the time of the 
effective date of the standard, then DOE will consider that technology 
practicable to manufacture, install, and service.
     Adverse Impacts on Equipment Utility or Equipment 
Availability: DOE will not further consider a technology if DOE 
determines it will have a significant adverse impact on the utility of 
the equipment to significant subgroups of customers. DOE will also not 
further consider a technology that will result in the unavailability of 
any covered equipment type with performance characteristics (including 
reliability), features, sizes, capacities, and volumes that are 
substantially the same as equipment generally available in the United 
States at the time.
     Adverse Impacts on Health or Safety: DOE will not further 
consider a technology if DOE determines that the technology will have 
significant adverse impacts on health or safety.
    Additionally, DOE notes that these screening criteria do not 
directly address the proprietary status of technology options. DOE only 
considers 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 (i.e., if there are other non-
proprietary technologies capable of achieving the same efficiency). DOE 
believes the standards for the equipment covered in this rulemaking 
would not require the use of any proprietary technologies, and that all 
manufacturers would be able to achieve the proposed levels through the 
use of non-proprietary designs.
    Technologies that pass through the screening analysis are referred 
to as ``design options'' and are subsequently examined in the 
engineering analysis for consideration in DOE's downstream cost-benefit 
analysis.
1. Commercial Unitary Air Conditioners and Heat Pumps
    For CUACs and CUHPs, DOE screened out the following technology 
options in the CUAC/CUHP NOPR. 79 FR at 58969-58970.

   Table IV-4--Technology Options Screened Out for the CUAC/CUHP NOPR
------------------------------------------------------------------------
           Technology option                Reason for screening out
------------------------------------------------------------------------
Electro-hydrodynamic enhanced heat      Practicability to manufacture,
 transfer.                               install, and service;
                                         technological feasibility.
Alternative refrigerants..............  Technological feasibility.
Sub-coolers...........................  Technological feasibility.
------------------------------------------------------------------------

    Regarding the use of potential refrigerants, in the CUAC/CUHP NOPR, 
DOE considered ammonia, carbon dioxide, and various hydrocarbons (such 
as propane and isobutane) as alternative refrigerants to those that are 
currently in use, such as R-410A. DOE noted that safety concerns need 
to be taken into consideration when using ammonia and hydrocarbons in 
air conditioning systems. The Environmental Protection Agency (``EPA'') 
created the Significant New Alternatives Policy (``SNAP'') Program to 
evaluate alternatives to ozone-depleting substances. Substitutes are 
reviewed on the basis of ozone depletion potential, global warming 
potential, other environmental impacts, toxicity, flammability, and 
exposure potential. DOE noted at the time of the CUAC/CUHP NOPR that 
ammonia used in vapor compression cycles, carbon dioxide, and 
hydrocarbons were approved or were being considered under SNAP for 
certain uses, but these or other low global warming potential (``GWP'') 
alternatives were not listed as acceptable substitutes for this 
equipment.\36\ DOE also stated in the CUAC/CUHP NOPR that it is not 
aware of any other more efficient refrigerant options that are SNAP-
approved. Because these alternative refrigerants that may be more 
efficient had not yet been approved for this equipment at the time of 
its analysis, DOE did not consider alternate refrigerants for further 
consideration. 79 FR at 58970.
---------------------------------------------------------------------------

    \36\ On April 10, 2015, EPA listed certain hydrocarbons and R-32 
for residential self-contained A/C appliances as acceptable subject 
to use conditions to address safety concerns (See 80 FR 19453). EPA 
is also evaluating new refrigerants for other A/C applications, 
including commercial A/C. Additional information regarding EPA's 
SNAP Program is available online at: http://www.epa.gov/ozone/snap/.
---------------------------------------------------------------------------

    Danfoss and the Environmental Investigation Agency (EIA Global) 
commented that the United States is supporting a phasedown of HFC 
refrigerants, including HFC-410A, through the Montreal Protocol. (CUAC: 
Danfoss, No. 53 at p. 2; EIA Global, No. 58 at pp. 3-4) Danfoss added 
that Europe has already mandated a 40-percent reduction in HFC 
production by 2020. Danfoss stated that it is likely that EPA will also 
set limits on the use of HFC-410A in the future, but the timing and 
impact on the use of R-410A is unknown at this time. Danfoss encouraged 
DOE to work closely with EPA and to align standards for CUACs and CUHPs 
with EPA SNAP rules, so that major equipment redesigns can be

[[Page 2450]]

kept to a minimum. (CUAC: Danfoss, No. 53 at p. 2)
    EIA Global expressed its concern that DOE's analysis will be 
incomplete without the inclusion of alternative hydrocarbon 
refrigerants and that the high GWP of current HFC refrigerants for this 
equipment category will further damage the stability of the climate, 
thus offsetting the efficiency gains associated with standards. EIA 
Global commented that DOE should consider currently available systems 
using alternative refrigerants and the effects of the EPA's 
finalization of its proposed rule, ``Protection of Stratospheric Ozone: 
Listing Substitutes for Refrigeration and Air-Conditioning and Revision 
of the Venting Prohibition for Certain Refrigerant Substitutes,'' which 
lists propane (R-290) and hydrocarbon blend R-441A as acceptable 
alternatives under the EPA's SNAP program for end uses including light 
commercial air conditioners and heat pumps. EIA Global commented that 
DOE should consider the energy efficiency savings and the reduction in 
GHG emissions from these alternative low-GWP refrigerants. EIA Global 
also urged DOE to include provisions to enable persons to petition for 
an interim revisiting of the standard in light of the EPA SNAP rule 
approving the use of these alternative refrigerants. (CUAC: EIA Global, 
No. 58 at pp. 1-2, 4-8)
    EIA Global stated that, given the President's recent Executive 
Action, ``Invest in New Technologies to Support Safer Alternatives,'' 
DOE should be using its authority to not only conduct its own research 
and commercialization of HFC-free technologies, but also to incentivize 
U.S. industry to manufacture HFC-free and energy efficient CUACs and 
CUHPs, so they can lead the world in the development and marketing of 
the next generation of this equipment. (CUAC: EIA Global, No. 58 at pp. 
1-4)
    DOE recognizes that EPA published a final rule approving 
alternative refrigerants, subject to use conditions, in specific end-
uses. 80 FR 19454 (Apr. 10, 2015). However, DOE notes that these end-
use applications did not include CUACs and CUHPs that are the subject 
of this rulemaking. DOE notes that hydrocarbon refrigerants have not 
yet been approved by the EPA SNAP program for these types of equipment 
and, hence, cannot be considered as a technology option in DOE's 
analysis. DOE also notes that, while it is possible that HFC 
refrigerants currently used in CUACs and CUHPs may be restricted by 
future rules, DOE cannot speculate on the outcome of a rulemaking in 
progress and can only consider in its rulemakings rules that are 
currently in effect. Therefore, DOE has not included possible outcomes 
of potential EPA SNAP rulemakings. This position is consistent with 
past DOE rulings, such as in the 2014 final rule for commercial 
refrigeration equipment (79 FR 17725, 17753-54 (March 28, 2014)) and 
the 2015 final rule for automatic commercial icemakers (80 FR 4646, 
4670-71 (Jan. 28, 2015)) DOE notes that recent rules by the EPA that 
allow use of hydrocarbon refrigerants or that impose new restrictions 
on the use of HFC refrigerants do not address air-cooled CUACs and 
CUHPs applications. 80 FR 19454 (April 10, 2015) and 80 FR 42879 (July 
20, 2015). DOE acknowledges that there are government-wide efforts to 
reduce emissions of HFCs, and such actions are being pursued both 
through international diplomacy as well as domestic actions. DOE, in 
concert with other relevant agencies, will continue to work with 
industry and other stakeholders to identify safer and more sustainable 
alternatives to HFCs while evaluating energy efficiency standards for 
this equipment.
    DOE also recognizes that while some alternative refrigerants may be 
under consideration as potential future replacements for CUACs and 
CUHPs, including low-GWP blends submitted to EPA's SNAP program, the 
development of safety and other related building code standards that 
will impact decisions regarding the final selected alternatives are 
still under way. DOE cannot consider all of the potential alternatives 
to accurately analyze the efficiency impacts for this equipment. 
Goodman similarly noted as part of the ASRAC Working Group meetings 
that the safety standards for alternative refrigerants are in the 
process of being developed, and the current standards, UL 1995, 
``Heating and Cooling Equipment'' and UL 60335-2-40, ``Safety of 
Household and Similar Electrical Appliances, Part 2-34: Particular 
Requirements for Motor-Compressors,'' specifically ban any flammable 
refrigerant from comfort air conditioning products. (CUAC: Goodman, 
ASRAC Public Meeting, No. 99 at pp. 43-44)
    DOE also notes that performance information regarding all 
alternative refrigerants, such as CUACs and CUHPs with proven test data 
and publicly available compressor performance information, are not 
available at this time to properly evaluate the impacts of alternative 
refrigerants on energy use.
    As mentioned in section VI.B.4, if a manufacturer believes that its 
design is subjected to undue hardship by regulations, the manufacturer 
may petition DOE's Office of Hearing and Appeals (OHA) for exception 
relief or exemption from the standard pursuant to OHA's authority under 
section 504 of the DOE Organization Act (42 U.S.C. 7194), as 
implemented at subpart B of 10 CFR part 1003. OHA has the authority to 
grant such relief on a case-by-case basis if it determines that a 
manufacturer has demonstrated that meeting the standard would cause 
hardship, inequity, or unfair distribution of burdens. DOE also notes 
that any person may petition DOE for an amended standard applicable to 
a variety of consumer products and commercial/industrial equipment. See 
42 U.S.C. 6295(r) and 42 U.S.C. 6313(a). This provision, however, does 
not apply to the equipment addressed by this rulemaking. See 42 U.S.C. 
6316(b).
    In recognition of the issues related to alternative refrigerants, 
members of the ASRAC Working Group agreed as part of the Term Sheet to 
delay implementation of the second phase of increased energy 
conservation standard levels until January 1, 2023, in part to align 
dates with potential refrigerant phase-outs and to provide sufficient 
development lead time after safety requirements for acceptable 
alternatives have been established. (CUAC: ASRAC Term Sheet, No. 93 at 
pp. 3-4; ASRAC Public Meeting, No. 100 at pp. 82; ASRAC Public Meeting, 
No. 101 at pp. 48-49) Delaying the implementation of the second phase 
of standards in the manner recommended and agreed to by the Working 
Group will provide manufacturers with flexibility and additional time 
to comply with both energy conservation standards and potential 
refrigerant changes, allowing manufacturers to better coordinate 
equipment redesign to reduce the cumulative burden. As discussed in 
section III.C, DOE is adopting the proposed two-phased approach 
recommended in the ASRAC Term Sheet.
    With respect to copper rotors, Nidec disagreed with DOE's 
determination not to screen out this option. In its view, copper rotor 
motors do not satisfy either the screening criteria of (a) 
practicability to manufacture, install, and service; or (b) adverse 
impacts on equipment utility or equipment availability. (CUAC: Nidec, 
No. 55 at p. 2-5) Nidec stated that the very short lifespans for the 
end ring dies and casting pistons for copper die-casting presses would 
prevent motor manufacturers from mass producing copper rotors on a 
sufficient scale due to the constant need to replace this tooling. 
(CUAC: Nidec, No. 55 at p. 5) Nidec also noted that there is a lack of 
die-cast copper rotor production

[[Page 2451]]

capability in place today, which, given the dramatic increase in 
production capability that would be required in a very short amount of 
time to satisfy the demand for air conditioning and heating equipment 
impacted by the present rulemaking if such equipment required motors 
with die-cast copper rotors to meet the proposed standards, should 
counsel against the inclusion of this option from DOE's analysis. 
(CUAC: Nidec, No. 55 at pp. 5-6)
    As noted in the electric motors final rule, DOE noted that two 
large motor manufacturers currently offer die-cast copper rotor motors 
up to 30-horsepower. DOE also noted in the electric motors rule that 
full scale deployment of copper would likely require considerable 
capital investment and that such investment could increase the 
production cost of copper rotor motors considerably. 79 FR 30934, 
30963-65 (May 29, 2014). However, increased motor cost alone would not 
be a reason to screen out this technology. For these reasons, DOE did 
not screen out this technology on the basis of practicability to 
manufacture, install, and service, or adverse impacts on equipment 
utility or equipment availability.
    Based on the screening analysis, DOE identified the design options 
listed in Table IV-5 for further consideration in the engineering 
analysis:

 Table IV-5--CUAC/CUHP Design Options Retained for Engineering Analysis
------------------------------------------------------------------------
 
-------------------------------------------------------------------------
Condenser and evaporator fan and fan motor improvements:
     Larger fan diameters
     More efficient fan blades (e.g., air foil centrifugal
     evaporator fans, backward-curved centrifugal evaporator fans, high
     efficiency propeller condenser fans)
     High efficiency motors (e.g., copper rotor motor, high
     efficiency induction, permanent magnet, electronically commutated)
     Variable speed fans/motors
Larger heat exchangers
Microchannel heat exchangers
Compressor Improvements:
     High efficiency compressors
     Multiple compressor staging
     Multiple- or variable-capacity compressors
Thermostatic expansion valves
Electronic expansion valves
Reduced indoor fan belt loss:
     Synchronous (toothed) belts
     Direct-drive fans
------------------------------------------------------------------------

    A full description of each technology option is included in chapter 
3 of the CUAC/CUHP direct final rule TSD, and additional discussion of 
the screening analysis is included in chapter 4 of the CUAC/CUHP direct 
final rule TSD.
2. Commercial Warm Air Furnaces
    For CWAFs, DOE screened out the technology options listed in Table 
IV-6. Each of these technology options failed to meet at least one of 
the four screening criteria: (1) technological feasibility; (2) 
practicability to manufacture, install, and service; (3) impacts on 
equipment utility or equipment availability; and (4) adverse impacts on 
health or safety. See 10 CFR part 430, subpart C, appendix A, 4(a)(4) 
and 5(b).

   Table IV-6--Technology Options Screened Out for Commercial Warm Air
                                Furnaces
------------------------------------------------------------------------
             Technology option                Reason for screening out
------------------------------------------------------------------------
Pulse combustion..........................  Adverse impact on utility;
                                             potential for adverse
                                             impact on safety.
Low NOX premix burner.....................  Technological feasibility.
Burner de-rating..........................  Adverse impact on utility.
Low pressure, air-atomized burner (oil-     Technological Feasibility.
 fired CWAFs only).
------------------------------------------------------------------------

    In addition, the following technology options met all four of the 
screening criteria, but were removed from further consideration in the 
engineering analysis because they do not impact the CWAF efficiency as 
measured by the DOE test procedure:

 Two-stage or modulating combustion
 Insulation improvements
 Off-cycle dampers
 Delayed-action oil pump solenoid valve (oil-fired CWAFs only)
 Electronic ignition
    Based on the screening analysis, DOE identified the following five 
technology options for further consideration in the engineering 
analysis:
 Condensing secondary heat exchanger
 Increased heat exchanger surface area
 Heat exchanger enhancements (e.g., dimples, baffles, and 
turbulators)
 Concentric venting
 High-static flame-retention head oil burner (oil-fired CWAFs 
only)

    A full description of each technology option is included in chapter 
3 of the CWAF direct final rule TSD, and additional discussion of the 
screening analysis is included in chapter 4 of the CWAF direct final 
rule TSD.

C. Engineering Analysis

    The engineering analysis establishes the relationship between an 
increase in energy efficiency of equipment and the increase in 
manufacturer selling price (``MSP'') required to achieve that 
efficiency increase. This relationship serves as the basis for the 
cost-benefit calculations for commercial customers, manufacturers, and 
the Nation. In determining the cost-efficiency relationship, DOE 
estimates the increase in manufacturer cost associated with increasing 
the efficiency of equipment to incrementally higher efficiency levels 
above the baseline efficiency level, up to the maximum technologically 
feasible (``max-tech'') efficiency level for each equipment class.
1. Methodology
    DOE typically structures its engineering analysis using one or more 
of three identified basic methods for generating manufacturing costs: 
(1) The design-option approach, which provides the incremental costs of 
adding individual technology options (as identified in the market and 
technology assessment and passed through the screening analysis) that 
can be added alone or in combination with a baseline model in order to 
improve its efficiency (i.e., lower its energy use); (2) the 
efficiency-level approach, which provides the incremental costs of 
moving to higher energy efficiency levels, without regard to the 
particular design option(s) used to achieve such increases; and (3) the 
reverse-engineering (or cost-assessment) approach, which provides 
``bottom-up'' manufacturing cost assessments for achieving various 
levels of increased efficiency, based on teardown analyses (or physical 
teardowns) providing detailed data on costs for parts and material, 
labor, shipping/packaging, and investment for models that operate at 
particular efficiency levels. A supplementary method called a catalog 
teardown uses published manufacturer catalogs and supplementary 
component data to estimate the major physical differences between a 
piece of equipment that has been physically disassembled and another 
piece of similar equipment for which catalog data are available to 
determine the cost of the latter equipment.
    For CUACs and CUHPs, DOE conducted the engineering analyses using a 
combination of the efficiency-level approach and the reverse-
engineering approach and analyzed three specific capacities, one 
representing each of the three equipment class capacity ranges (i.e., 
small, large, and very large). Based on a review of manufacturer 
equipment offerings, information from the previous standards rulemaking 
regarding cooling

[[Page 2452]]

capacities that represent volume equipment shipment points within the 
equipment class capacity ranges, and information obtained from 
manufacturer interviews, DOE selected representative cooling capacities 
of 90,000 Btu/h (7.5 tons) for the >=65,000 to <135,000 Btu/h capacity 
range, 180,000 Btu/h (15 tons) for the >=135,000 to <240,000 Btu/h 
capacity range, and 360,000 Btu/h (30 tons) for the >=240,000 to 
<760,000 Btu/h capacity range. Where feasible, DOE selected models for 
reverse engineering with low and high efficiencies from a given 
manufacturer that are built on the same platform. DOE also supplemented 
the teardown analysis by conducting catalog teardowns for equipment 
spanning the full range of capacities and efficiencies from all 
manufacturers selling equipment in the United States.
    For CWAFs, DOE conducted the engineering analysis using the 
reverse-engineering approach to estimate the costs of achieving various 
efficiency levels. DOE selected two gas-fired CWAF units in the non-
condensing efficiency range for physical teardowns, both at a heating 
input rating of 250,000 Btu/h, which was considered to be the 
representative heating input rating for the gas-fired equipment class. 
In addition, DOE purchased a condensing, 92-percent TE gas-fired makeup 
air furnace for physical examination. Makeup air furnaces are the only 
type of 92-percent TE gas-fired CWAFs currently available on the 
market. DOE also performed a physical teardown of an oil-fired CWAF at 
81-percent TE at an input rating of 400,000 Btu/h, which was 
subsequently scaled down via cost estimation techniques to represent a 
unit with a 250,000 Btu/h heating input rating. Similar to gas-fired 
CWAFs, 250,000 Btu/h was also considered the representative heating 
input rating for oil-fired CWAFs. GTI commented that at around a 
heating input of 400,000 Btu/h, in gas-fired CWAFs, it may be common 
practice for manufacturers to transition from a single furnace to two 
furnaces in packaged equipment. This would necessitate additional 
components associated with the second furnace including additional gas 
valves and inducer fans, which may contribute to a different price 
regime (CWAF: GTI, NOPR Public Meeting Transcript, No. 17 at pp. 74-
75). DOE agrees that gas-fired CWAFs are generally not manufactured 
with individual combustion modules (i.e., a single gas valve, inducer 
assembly, and heat exchanger assembly) with heating inputs of greater 
than 400,000 Btu/h, usually due to insurance and liability reasons. DOE 
acknowledges that the manufacturing costs for equipment using multiple 
combustion modules will be higher than for equipment using single 
modules. However, DOE believes that at efficiency levels higher than 
baseline for units with multiple combustion modules, the energy savings 
relative to the baseline efficiency level scales proportionally with 
the increased incremental cost (relative to baseline) to manufacture 
equipment with multiple combustion modules. As such, DOE did not 
estimate manufacturing costs for units above 400,000 Btu/h heating 
input, because it does not believe that the relationship between 
incremental equipment cost and incremental energy savings at efficiency 
levels higher than baseline will be significantly different than at the 
representative heating input capacity selected for analysis.
    DOE used catalog data, information from the physical teardown 
examinations, and manufacturer feedback to estimate the manufacturing 
costs for gas-fired CWAFs at the 80-percent, 81-percent, 82-percent and 
92-percent TE levels, as well as the manufacturing costs for oil-fired 
CWAFs at the 81-percent, 82-percent and 92-percent TE levels. 
Additional detail on the teardowns performed is provided in chapter 5 
of the CWAF direct final rule TSD.
2. Efficiency Levels
a. Baseline Efficiency Levels
    The baseline model is used as a reference point for each equipment 
class in the engineering analysis and the life-cycle cost and payback-
period analyses, which provides a starting point for analyzing 
potential technologies that provide energy efficiency improvements. 
Generally, DOE considers ``baseline'' equipment to refer to a model or 
models having features and technologies that just meet, but do not 
exceed, the minimum energy conservation standard.
Commercial Unitary Air Conditioners and Heat Pumps
    As discussed in section III.G, for CUACs and CUHPs, DOE decided to 
replace the current cooling performance energy efficiency descriptor, 
EER, with IEER. With this change in metrics (i.e., from EER to IEER), 
DOE must ensure that a new IEER-based standard would not result in a 
backsliding of energy efficiency levels when compared to the current 
standards (42 U.S.C. 6313(a)(6)(B)(iii)(I)). To this end, DOE must 
first establish a baseline IEER for each CUAC and CUHP equipment class 
to compare that level against the various standards that DOE evaluated 
for this equipment.
    In the CUAC/CUHP NOPR, DOE noted that it is typically obligated 
either to adopt those standards developed by ASHRAE or to adopt levels 
more stringent than the ASHRAE levels if there is clear and convincing 
evidence in support of doing so. (42 U.S.C. 6313(a)(6)(A)) DOE noted 
that ASHRAE Standard 90.1-2010 specifies minimum efficiency 
requirements using both the EER and IEER metrics. As discussed in the 
CUAC/CUHP RFI, DOE evaluated the relationship between EER and IEER by 
considering models that are rated at the current DOE standard levels 
based on the EER metric for each equipment class. DOE then analyzed the 
distribution of corresponding rated IEER values for each equipment 
class, noting that a single EER level can correspond to a range of 
IEERs. DOE also noted that the lowest IEER values associated with the 
current DOE standards for EER generally correspond with the ASHRAE 
Standard 90.1-2010 minimum efficiency requirements. See 78 FR at 7299. 
Based on this evaluation, because DOE is considering energy 
conservation standards based on the IEER metric, DOE proposed in the 
CUAC/CUHP NOPR to use the ASHRAE Standard 90.1-2010 minimum IEER 
requirements to characterize the baseline cooling efficiency for each 
equipment class. Because the baseline efficiency level is intended to 
be representative of the minimum efficiency of equipment, DOE did not 
consider higher IEER levels for the baseline. (79 FR at 58972.)
    For CUHPs, DOE considered heating efficiency standards based on the 
COP metric. As discussed in section II.B.1, EPAct 2005 established 
minimum COP levels for small, large, and very large air-cooled CUHPs, 
which DOE codified in a final rule on October 18, 2005. 70 FR 60407. 
DOE proposed in the CUAC/CUHP NOPR to use these current COP standard 
levels to characterize the baseline heating efficiency for each 
equipment class. (79 FR at 58972.)
    Table IV-7 presents the baseline efficiency levels for each 
equipment class considered in the CUAC/CUHP NOPR.

[[Page 2453]]



                      Table IV-7--Baseline Efficiency Levels Proposed in the CUAC/CUHP NOPR
----------------------------------------------------------------------------------------------------------------
              Equipment type                       Heating type                 Baseline efficiency level
----------------------------------------------------------------------------------------------------------------
Small Commercial Packaged AC and HP (Air-
 Cooled)-->=65,000 Btu/h and <135,000 Btu/
 h Cooling Capacity:
    AC...................................  Electric Resistance Heating   11.4 IEER
                                            or No Heating.
                                           All Other Types of Heating..  11.2 IEER
    HP...................................  Electric Resistance Heating   11.2 IEER 3.3 COP
                                            or No Heating.
                                           All Other Types of Heating..  11.0 IEER 3.3 COP
Large Commercial Packaged AC and HP (Air-
 Cooled)-->=135,000 Btu/h and <240,000
 Btu/h Cooling Capacity:
    AC...................................  Electric Resistance Heating   11.2 IEER
                                            or No Heating.
                                           All Other Types of Heating..  11.0 IEER
    HP...................................  Electric Resistance Heating   10.7 IEER 3.2 COP
                                            or No Heating.
                                           All Other Types of Heating..  10.5 IEER 3.2 COP
Very Large Commercial Packaged AC and HP
 (Air-Cooled)-->=240,000 Btu/h and
 <760,000 Btu/h Cooling Capacity:
    AC...................................  Electric Resistance Heating   10.1 IEER
                                            or No Heating.
                                           All Other Types of Heating..  9.9 IEER
    HP...................................  Electric Resistance Heating   9.6 IEER 3.2 COP
                                            or No Heating.
                                           All Other Types of Heating..  9.4 IEER 3.2 COP
----------------------------------------------------------------------------------------------------------------

    Based on a review of equipment available on the market, DOE notes 
that an IEER of 10.6 is more representative of the baseline cooling 
efficiency for major manufacturers of units falling into the very large 
CUACs with ``electric resistance heating or no heating'' equipment 
class. As a result, DOE revised the baseline cooling efficiency level 
for this equipment class. DOE also revised the baseline cooling 
efficiency levels for the very large equipment classes for (1) all 
other types of heating and (2) heat pumps by using the corresponding 
differences in IEER specifications for these pairs of equipment classes 
prescribed in ASHRAE Standard 90.1-2010. For all other equipment 
classes, DOE maintained the baseline efficiency levels from the CUAC/
CUHP NOPR. The efficiency levels considered in this final rule are 
presented below in Table IV-8.

                            Table IV-8--Direct Final Rule Baseline Efficiency Levels
----------------------------------------------------------------------------------------------------------------
        Equipment type             Heating type                      Baseline efficiency level
----------------------------------------------------------------------------------------------------------------
Small Commercial Packaged AC
 and HP (Air-Cooled)-->=65,000
 Btu/h and <135,000 Btu/h
 Cooling Capacity:
    AC........................  Electric           11.4 IEER
                                 Resistance
                                 Heating or No
                                 Heating.
                                All Other Types    11.2 IEER
                                 of Heating.
    HP........................  Electric           11.2 IEER 3.3 COP
                                 Resistance
                                 Heating or No
                                 Heating.
                                All Other Types    11.0 IEER 3.3 COP
                                 of Heating.
Large Commercial Packaged AC
 and HP (Air-Cooled)--
 >=135,000 Btu/h and <240,000
 Btu/h Cooling Capacity:
    AC........................  Electric           11.2 IEER
                                 Resistance
                                 Heating or No
                                 Heating.
                                All Other Types    11.0 IEER
                                 of Heating.
    HP........................  Electric           10.7 IEER 3.2 COP
                                 Resistance
                                 Heating or No
                                 Heating.
                                All Other Types    10.5 IEER 3.2 COP
                                 of Heating.
Very Large Commercial Packaged
 AC and HP (Air-Cooled)--
 >=240,000 Btu/h and <760,000
 Btu/h Cooling Capacity:
    AC........................  Electric           10.6 IEER
                                 Resistance
                                 Heating or No
                                 Heating.
                                All Other Types    10.4 IEER
                                 of Heating.
    HP........................  Electric           10.1 IEER 3.2 COP
                                 Resistance
                                 Heating or No
                                 Heating.
                                All Other Types    9.9 IEER 3.2 COP
                                 of Heating.
----------------------------------------------------------------------------------------------------------------


[[Page 2454]]

Commercial Warm Air Furnaces
    In establishing the baseline efficiency level for this analysis, 
DOE used the existing minimum energy conservation standards for CWAFs 
to identify baseline units. The baseline TE levels for each equipment 
class are presented in Table IV-9.

        Table IV-9--Baseline Thermal Efficiency Levels for CWAFs
------------------------------------------------------------------------
                                                             Baseline
                     Equipment class                        efficiency
                                                             level (%)
------------------------------------------------------------------------
Gas-fired Commercial Warm Air Furnace...................              80
Oil-fired Commercial Warm Air Furnace...................              81
------------------------------------------------------------------------

b. Incremental and Max-Tech Efficiency Levels
    For each equipment class, DOE analyzes several efficiency levels 
and determines the incremental cost at each of these levels.
Commercial Unitary Air Conditioners and Heat Pumps
    For the CUAC/CUHP NOPR, DOE developed efficiency levels based on a 
review of industry standards and available equipment. For Efficiency 
Level 1, DOE used the IEER levels specified in the draft of addendum CL 
\37\ to ASHRAE Standard 90.1-2010 (Draft Addendum CL).\38\ For the 
higher efficiency levels, DOE initially determined the levels for CUAC 
equipment classes with electric resistance heating or no heating based 
on the range of efficiency levels associated with equipment listed in 
the AHRI certification database and the California Energy Commission's 
(``CEC'') database. DOE noted in the CUAC/CUHP NOPR that the max-tech 
efficiency levels rely on the performance of recently introduced 
models. DOE conducted its analysis for the small, large, and very large 
equipment classes using equipment with 7.5-ton, 15-ton, and 30-ton 
cooling capacities to represent their respective classes. DOE chose 
efficiency levels for CUACs with all other types of heating equal to 
the efficiency levels for equipment with electric resistance heating or 
no heating, minus the differences in the IEER specifications for these 
pairs of equipment classes prescribed in Draft Addendum CL. DOE stated 
in the CUAC/CUHP NOPR that these decreases in IEER appropriately 
reflect the additional power required for gas furnace pressure drop. 79 
FR at 58972-73.
---------------------------------------------------------------------------

    \37\ ASHRAE periodically updates specifications in its Standard 
90.1 through a public review process. Draft Addendum CL, which was 
made available for public review in October 2012, included changes 
in required efficiency levels for CUACCUACsCUACs and CUHPs falling 
into the small, large, and very large capacity ranges. ``CL'' refers 
to the revision number.
    \38\ The Addendum CL to ASHRAE Standard 90.1-2010 included the 
latest revisions to the ASHRAE 90.1 efficiency levels for the 
equipment considered in this rulemaking at the time DOE conducted 
the analyses for the NOPR. ASHRAE later finalized the Addendum CL 
changes in ASHRAE 90.1-2013, with minor changes to the IEER levels 
for large CUACCUACsCUACs and CUHPs (i.e., cooling capacity of 
>=135,000 Btu/h and <240,000 Btu/h).
---------------------------------------------------------------------------

    For the CUHP equipment classes, DOE proposed cooling mode 
efficiency levels equal to the CUAC efficiency levels minus the 
difference in IEER specifications for these two equipment types 
prescribed in Draft Addendum CL. DOE stated that these decreases in 
IEER are representative of the efficiency differences that occur due to 
losses from the reversing valve and the reduced potential for 
optimization of coil circuitry for cooling, since coils in heat pumps 
must work for both heating and cooling operation. Id.
    For the CUHP equipment classes, DOE proposed heating efficiency 
levels in the CUAC/CUHP NOPR based on a variation of COP with IEER. 79 
FR at 58973. In the previous standards rulemaking from 2004 for these 
equipment, DOE proposed to address the energy efficiency of air-cooled 
CUHP by developing functions relating COP to EER. 69 FR at 45468. DOE 
noted that this method was also used by industry to establish minimum 
performance requirements for ASHRAE Standard 90.1-1999. Id. AHRI 
supplied the ASHRAE Standard 90.1-1999 committee with curves relating 
the COP as a function of EER. Using this information, the committee 
then set the minimum COP levels to the COP corresponding to the 
selected minimum EER level. Id. To determine COP efficiency levels for 
the CUAC/CUHP NOPR, DOE evaluated AHRI and CEC data for small, large, 
and very large air-cooled CUHP units with electric resistance heat or 
no heat to analyze the relationship between COP and both IEER and EER. 
DOE's review of data showed that for each cooling capacity range, the 
correlations between COP and IEER using linear regressions are no less 
strong than the correlations between COP and EER, the latter of which 
was used in DOE's prior standards rulemaking for this equipment and in 
developing ASHRAE Standard 90.1-1999's minimum COP levels (69 FR at 
45468). Based on this evaluation, DOE proposed in the CUAC/CUHP NOPR to 
use the functions relating COP to IEER based on AHRI and CEC data to 
select the COP level associated with each of the IEER-based efficiency 
levels. 79 FR at 58973.
    The efficiency levels for each equipment class proposed in the 
CUAC/CUHP NOPR are presented in Table IV-10.

                   Table IV-10--Incremental Efficiency Levels Presented in the CUAC/CUHP NOPR
----------------------------------------------------------------------------------------------------------------
                                                                    Efficiency levels;
                                                 ------------------------------------------------------
        Equipment type            Heating type                                                EL4 (Max-
                                                   Baseline     EL1        EL2        EL3       Tech)
-------------------------------------------------------------------------------------------------------
Small Commercial Packaged AC
 and HP (Air-Cooled)-->=65,000
 Btu/h and <135,000 Btu/h
 Cooling Capacity:
    AC........................  Electric          11.4 IEER  12.9 IEER  14 IEER    14.8 IEER  19.9 IEER
                                 Resistance
                                 Heating or No
                                 Heating.
                                All Other Types   11.2 IEER  12.7 IEER  13.8 IEER  14.6 IEER  19.7 IEER
                                 of Heating.
    HP........................  Electric          11.2       12.2       13.3       14.1       19.2
                                 Resistance        IEER,      IEER,      IEER,      IEER,      IEER,
                                 Heating or No     3.3 COP    3.3 COP    3.4 COP    3.5 COP    3.7 COP
                                 Heating.
                                All Other Types   11.0       12 IEER,   13.1       13.9       19.0
                                 of Heating.       IEER,      3.3 COP    IEER,      IEER,      IEER,
                                                   3.3 COP               3.4 COP    3.4 COP    3.6 COP
----------------------------------------------------------------------------------------------------------------

[[Page 2455]]

 
Large Commercial Packaged AC
 and HP (Air-Cooled)--
 >=135,000 Btu/h and <240,000
 Btu/h Cooling Capacity:
    AC........................  Electric          11.2 IEER  12.2 IEER  13.2 IEER  14.2 IEER  18.4 IEER
                                 Resistance
                                 Heating or No
                                 Heating.
                                All Other Types   11.0 IEER  12.0 IEER  13.0 IEER  14.0 IEER  18.2 IEER
                                 of Heating.
    HP........................  Electric          10.7       11.4       12.4       13.4       17.6
                                 Resistance        IEER,      IEER,      IEER,      IEER,      IEER,
                                 Heating or No     3.2 COP    3.2 COP    3.3 COP    3.3 COP    3.3 COP
                                 Heating.
                                All Other Types   10.5       11.2       12.2       13.2       17.4
                                 of Heating.       IEER,      IEER,      IEER,      IEER,      IEER,
                                                   3.2 COP    3.2 COP    3.3 COP    3.3 COP    3.3 COP
----------------------------------------------------------------------------------------------------------------
Very Large Commercial Packaged
 AC and HP (Air-Cooled)--
 >=240,000 Btu/h and <760,000
 Btu/h Cooling Capacity:
    AC........................  Electric          10.1 IEER  11.6 IEER  12.5 IEER  13.5 IEER  15.5 IEER
                                 Resistance
                                 Heating or No
                                 Heating.
                                All Other Types   9.9 IEER   11.4 IEER  12.3 IEER  13.3 IEER  15.3 IEER
                                 of Heating.
    HP........................  Electric          9.6 IEER,  10.6       11.5       12.5       14.5
                                 Resistance        3.2 COP    IEER,      IEER,      IEER,      IEER,
                                 Heating or No                3.2 COP    3.2 COP    3.2 COP    3.2 COP
                                 Heating.
                                All Other Types   9.4 IEER,  10.4       11.3       12.3       14.3
                                 of Heating.       3.2 COP    IEER,      IEER,      IEER,      IEER,
                                                              3.2 COP    3.2 COP    3.2 COP    3.2 COP
----------------------------------------------------------------------------------------------------------------

    Lennox commented that DOE is required to consider ASHRAE 90.1-2013 
according to 42 U.S.C. 6313(a)(6)(A). Lennox noted that Efficiency 
Level 1 mirrors the values in ASHRAE 90.1-2013 except for large CUAC/
CUHP equipment class. (CUAC: Lennox, No. 60 at p. 7) As discussed 
above, DOE based the CUAC/CUHP NOPR Efficiency Level 1 IEERs on ASHRAE 
90.1-2010 Addendum CL. After the NOPR, DOE reviewed ASHRAE 90.1-2013 
and updated the IEERs for Efficiency Level 1 accordingly for this 
direct final rule.
    The Joint Efficiency Advocates and California IOUs reacted to the 
CUAC/CUHP NOPR by urging DOE to evaluate intermediate efficiency levels 
between Efficiency Level 3 and Efficiency Level 4, noting that the 
presence of gaps between these levels. The Joint Efficiency Advocates 
and California IOUs noted that there are models at various IEER levels 
available between Efficiency Level 3 and Efficiency Level 4 across the 
equipment classes. (CUAC: Joint Efficiency Advocates, No. 69 at p. 2; 
California IOUs, No. 67 at pp. 3-5; ASAP, ASRAC Public Meeting, No. 102 
at pp. 202, 209-210, 211-212, 217-218).
    The Joint Efficiency Advocates and the California IOUs urged DOE to 
reevaluate the max-tech levels and noted that for each equipment class, 
the highest IEERs of commercially-available equipment listed in the 
AHRI directory are higher than the max-tech levels. (CUAC: Joint 
Efficiency Advocates, No. 69 at pp. 2-3; California IOUs, No. 67 at pp. 
6-7)
    Carrier supported DOE's approach for determining the max-tech 
efficiency levels based on recently introduced models. These models 
represent technologies that are both available for all of the capacity 
sizes within a given equipment class and that are economically 
justified for their performance improvement. (CUAC: Carrier, No. 48 at 
p. 3) Goodman commented during the negotiated rulemaking that DOE 
should also consider an additional efficiency level between the CUAC/
CUHP NOPR Efficiency Level 2 and Efficiency Level 3. (CUAC: Goodman, 
ASRAC Public Meeting No. 102 at pp. 208--209)
    Based on DOE's review of equipment listed in the AHRI directory, 
DOE agreed with interested parties that additional efficiency levels 
should be considered in its analysis. For all equipment classes, DOE 
added an efficiency level between Efficiency Level 2 and Efficiency 
Level 3 from the CUAC/CUHP NOPR, identified in this direct final rule 
as Efficiency Level 2.5. DOE also added an efficiency level, identified 
in this direct final rule as efficiency level 5, above CUAC/CUHP NOPR 
Efficiency Level 4, to represent the max-tech models available on the 
market. For small and large equipment, DOE added an efficiency level 
between Efficiency Level 3 and Efficiency Level 4 from the CUAC/CUHP 
NOPR, identified in this direct final rule as Efficiency Level 3.5. As 
part of the ASRAC Working Group meeting, interested parties agreed on 
these additional efficiency levels for the analysis. (CUAC: ASRAC 
Public Meeting, No. 94 at pp. 170--171)
    For this direct final rule, the IEER values for the baseline 
efficiency level and Efficiency Level 1 for the ``all other types of 
heating equipment'' classes are based on the IEER difference of 0.2 as 
compared to the electric resistance heating or no heating equipment 
class specified in ASHRAE 90.1-2010 and ASHRAE 90.1-2013. As discussed 
further in section IV.E.1, DOE chose cooling efficiency levels for 
CUACs coupled with all other types of heating above Efficiency Level 1 
that provided the same energy savings between incremental efficiency 
levels as was determined for the electric resistance or no heating 
equipment classes within each equipment class capacity range (i.e., 
small, large, and very large). Using this approach, the IEER 
differential between these equipment classes ranged from 0.2 to 0.4 at 
the higher efficiency levels and reflect the additional power required 
for gas furnace pressure drop. Therefore, DOE estimated that the energy 
savings for any efficiency level relative to the baseline would be 
identical for both sets of equipment classes.
    Based on DOE's review of equipment available on the market, the 
majority of models with electric resistance heating or no heating 
equipment are designed on the same basic platform and cabinet size as 
the equivalent models with all other types of heating equipment. 
Because these equipment have the same or similar designs, DOE estimates 
that implementing the same design changes

[[Page 2456]]

would result in the same or similar energy savings for both sets of 
equipment classes. For small and large heating equipment classes at 
Efficiency Level 3 and the very large heating equipment class at 
Efficiency Level 2.5, DOE analyzed the cooling efficiency levels based 
on the IEER values included in the ASRAC Working Group recommendations, 
as presented in section III.B.2, which used an IEER differential of 0.2 
compared to the electric resistance heating or no heating equipment 
classs. Table IV-11 shows, as an example, these differences in IEER for 
each CUAC ``all other types of heating equipment'' class relative to 
the electric resistance heating equipment classes.

Table IV-11--CUACs With All Other Types of Heating IEER Differentials Relative to CUACs With Electric Resistance
                                              Heating or No Heating
----------------------------------------------------------------------------------------------------------------
                                                                                IEER differentials
                                                                 -----------------------------------------------
                        Efficiency level                                                            Very Large
                                                                    Small CUACs     Large CUACs        CUACs
----------------------------------------------------------------------------------------------------------------
Baseline........................................................             0.2             0.2             0.2
EL 1............................................................             0.2             0.2             0.2
EL 2............................................................             0.2             0.2             0.2
EL 2.5..........................................................             0.3             0.2           * 0.2
EL 3............................................................           * 0.2           * 0.2             0.3
EL 3.5..........................................................             0.3             0.3  ..............
EL 4............................................................             0.3             0.3             0.3
EL 5............................................................             0.4             0.4             0.3
----------------------------------------------------------------------------------------------------------------
* IEER differential for these levels were based on the recommended efficiency levels in the ASRAC Term Sheet.

    For the CUHP equipment classes, DOE used a similar approach for 
determining the IEER differentials relative to the CUAC equipment 
classes. The IEER values for the baseline efficiency level and 
Efficiency Level 1 for the CUHP equipment classes are based on the IEER 
differences as compared to the CUAC equipment classes specified in 
ASHRAE 90.1-2010 and ASHRAE 90.1-2013. As discussed further in section 
IV.E.1, DOE chose cooling efficiency levels for the CUHP equipment 
classes above Efficiency Level 1 that provided the same energy savings 
between incremental efficiency levels as was determined for the CUAC 
equipment classes within each equipment class capacity range (i.e., 
small, large, and very large). Using this approach, the IEER 
differential between these equipment classes ranged from 0.8 to 1.3 at 
the higher efficiency levels and reflect the efficiency differences 
that occur due to losses from the reversing valve and the reduced 
potential for optimization of coil circuitry for cooling, since coils 
in heat pumps must work for both heating and cooling operation. 
Therefore, DOE estimated that the energy savings for any efficiency 
level relative to the baseline would be identical for both sets of 
equipment classes. Because DOE considered the same design changes at 
each efficiency level for both sets of equipment classes, DOE estimates 
that this would result in the same or similar energy savings for both 
sets of equipment classes. For small and large CUHP equipment classes 
at Efficiency Level 3 and the very large CUHP equipment class at 
Efficiency Level 2.5, DOE analyzed the cooling efficiency levels based 
on the IEER values included in the ASRAC Working Group recommendations, 
as discussed in section III.B.2, which used an IEER differential of 0.7 
compared to the CUAC equipment classes. Table IV-12 shows these 
differences in IEER for the CUHP equipment classes relative to the CUAC 
equipment classes.

                          Table IV-12--CUHP IEER Differentials Relative to CUAC Levels
----------------------------------------------------------------------------------------------------------------
                                                                                IEER differentials
                                                                 -----------------------------------------------
                        Efficiency level                                                            Very Large
                                                                    Small CUACs     Large CUACs        CUACs
----------------------------------------------------------------------------------------------------------------
Baseline........................................................             0.2             0.5             0.5
EL 1............................................................             0.7             0.8             1.0
EL 2............................................................             0.8             0.9             1.1
EL 2.5..........................................................             0.8             0.9           * 0.7
EL 3............................................................           * 0.7           * 0.7             1.2
EL 3.5..........................................................             0.9             1.0  ..............
EL 4............................................................             1.1             1.2             1.3
EL 5............................................................             1.2             1.3             1.3
----------------------------------------------------------------------------------------------------------------
* IEER differential for these levels were based on the recommended efficiency levels in the ASRAC Term Sheet.

    Regarding the incremental COP heating efficiency levels for CUHPs, 
AHRI, Nordyne, Carrier, Goodman and Rheem commented that they did not 
support DOE's approach for determining the COP levels based on a 
correlation with IEER. These commenters stated that there is no 
technical or statistical justification to support that a correlation 
exists between IEER and COP. IEER is a part-load metric while COP is a 
full-load heating metric similar to EER for cooling. (CUAC: AHRI, No. 
68 at p. 32; Nordyne, No. 61 at p. 27; Carrier, No. 48 at pp. 3-4; 
Goodman, No. 65 at p. 14; Rheem, No. 70 at p. 4)
    Members of the ASRAC Working Group were not able to suggest a more 
appropriate approach for assigning COP values to the efficiency levels 
analyzed. Because the use of correlations between

[[Page 2457]]

COP and EER was generally accepted by industry and interested parties 
involved in the development of ASHRAE Standard 90.1-1999 and because 
the correlations between COP and IEER using linear regressions are no 
less strong than the correlations between COP and EER, DOE maintained 
the same approach used in the CUAC/CUHP NOPR for determining the CUHP 
heating mode efficiency levels, using the relationship between COP and 
IEER to select the COP levels corresponding to each incremental IEER 
level. DOE also notes that the COP values analyzed at each incremental 
efficiency level represent modest increases above the current DOE 
standard levels. Members of the ASRAC Working Group also agreed as Term 
Sheet signatories to recommend that DOE adopt standards to increase the 
stringency of the requirements for COP. At Efficiency Level 3 for the 
small and large equipment classes and Efficiency Level 2.5 for the very 
large equipment class, DOE analyzed the heating efficiency levels based 
on the COP values included in the ASRAC Working Group recommendations, 
as discussed in section III.B.2.
    Based on the discussion above, DOE considered the efficiency levels 
presented in Table IV-13 for this direct final rule.

                                                                  Table IV-13--Direct Final Rule Incremental Efficiency Levels
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                            Efficiency levels
                                                                                  ---------------------------------------------------------------------------------------------------
           Equipment type                 Heating type              Metric                                                                                                  EL5  (Max-
                                                                                          Baseline           EL1        EL2       EL2.5       EL3       EL3.5       EL4       Tech)
-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Small Commercial Packaged AC and HP
 (Air-Cooled)-->=65,000 Btu/h and
 <135,000 Btu/h Cooling Capacity:
    AC.............................  Electric Resistance    IEER.................  11.4.................       12.9       14.0       14.5       14.8       15.8       19.9       21.5
                                      Heating or No         IEER.................  11.2.................       12.7       13.8       14.2       14.6       15.5       19.6       21.1
                                      Heating.
                                     All Other Types of
                                      Heating.
    HP.............................  Electric Resistance    IEER.................  11.2.................       12.2       13.2       13.7       14.1       14.9       18.8       20.3
                                      Heating or No         COP..................  3.3..................        3.3        3.4        3.4        3.4        3.5        3.7        3.7
                                      Heating.
                                     All Other Types of     IEER.................  11.0.................       12.0       13.0       13.5       13.9       14.6       18.5       19.9
                                      Heating               COP..................  3.3..................        3.3        3.4        3.4        3.4        3.5        3.6        3.7
Large Commercial Packaged AC and HP
 (Air-Cooled)-->=135,000 Btu/h and
 <240,000 Btu/h Cooling Capacity:
    AC.............................  Electric Resistance    IEER.................  11.2.................       12.4       13.2       13.7       14.2       15.0       18.5       20.1
                                      Heating or No         IEER.................  11.0.................       12.2         13       13.5         14       14.7       18.2       19.7
                                      Heating.
                                     All Other Types of
                                      Heating.
    HP.............................  Electric Resistance    IEER.................  10.7.................       11.6       12.3       12.8       13.5       14.0       17.3       18.8
                                      Heating or No         COP..................  3.2..................        3.2        3.3        3.3        3.3        3.3        3.3        3.3
                                      Heating.
                                     All Other Types of     IEER.................  10.5.................       11.4       12.1       12.6       13.3       13.7       17.0       18.4
                                      Heating               COP..................  3.2..................        3.2        3.3        3.3        3.3        3.3        3.3        3.3
Very Large Commercial Packaged AC    AC...................  Electric Resistance    IEER.................       10.6       11.6       12.5       13.2       13.5       14.9       15.6
 and HP (Air-Cooled)-->=240,000 Btu/                         Heating or No         IEER.................       10.4       11.4       12.3       13.0       13.2       14.6       15.3
 h and <760,000 Btu/h Cooling                                Heating.
 Capacity.                                                  All Other Types of
                                                             Heating.
                                     HP...................  Electric Resistance    IEER.................       10.1       10.6       11.4       12.5       12.3       13.6       14.3
                                                             Heating or No         COP..................        3.2        3.2        3.2        3.2        3.2        3.2        3.2
                                                             Heating.
                                     All Other Types of     IEER.................  9.9..................       10.4       11.2       12.3       12.1       13.3       14.0
                                      Heating               COP..................  3.2..................        3.2        3.2        3.2        3.2        3.2        3.2
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Commercial Warm Air Furnaces
    For CWAFs, DOE developed efficiency levels for analysis higher than 
the baseline efficiency level (i.e., the Federal minimum standard 
level) based on a review of equipment available on the market. DOE 
compiled a database of the CWAF market to determine what types of 
equipment are currently available to commercial customers. At the 
representative capacity for each equipment class, DOE surveyed 
manufacturers' equipment offerings to identify commonly-available 
efficiency levels. By identifying the most prevalent energy 
efficiencies in the range of available equipment, DOE was then able to 
establish a technology path that manufacturers typically use to 
increase the TE of a CWAF to incrementally higher efficiency levels 
above baseline, up to the max-tech efficiency level.
    In its analysis, DOE focused on specific incremental TE levels 
above the baseline for each equipment class. The incremental TE levels 
are representative of efficiency levels along the technology paths that 
CWAF manufacturers commonly use to maintain cost-effective designs 
while increasing the TE of equipment. DOE reviewed its Compliance 
Certification Management

[[Page 2458]]

System (``CCMS'') database,\39\ as well as AHRI's Directory of 
Certified Product Performance,\40\ manufacturer catalogs, and other 
publicly-available literature to determine which TE levels are the most 
prevalent for each equipment class. For gas-fired CWAFs, DOE chose two 
efficiency levels between the baseline and max-tech for analysis (see 
Table IV-14). For oil-fired CWAFs, DOE chose one TE level between the 
baseline and max-tech for analysis (see Table IV-15).
---------------------------------------------------------------------------

    \39\ For more information see: http://www.regulations.doe.gov/certification-data/CCMS-81578122497.html.
    \40\ For more information see: https://www.ahridirectory.org/ahridirectory/pages/cfr/defaultSearch.aspx.
---------------------------------------------------------------------------

    DOE found several manufacturers that offer gas-fired equipment at 
81-percent TE. In the analysis for the direct final rule, DOE found 
only one manufacturer of gas-fired equipment rated at 82-percent TE, 
which is available across a limited range of input capacities. In 
addition, all of the 82-percent TE units offered by this manufacturer 
are non-weatherized, and are thus not representative of the large 
majority of gas-fired CWAF model offerings, which are weatherized. 
Therefore, in its analyses for the direct final rule, DOE did not 
identify any weatherized gas-fired CWAFs at 82-percent TE. However, in 
the analyses for the CWAF NOPR, DOE identified a different manufacturer 
of gas-fired 82-percent TE CWAFs. These particular units were 
weatherized. This manufacturer offered equipment at this efficiency 
level across a wide range of input capacities, indicating that meeting 
the 82-percent TE level is technologically feasible for weatherized 
gas-fired CWAFs at most input capacities. Thus, DOE considered 81-
percent and 82-percent as incrementally higher TE levels for the gas-
fired CWAF analysis.
    DOE also considered the max-tech efficiency level. As discussed in 
section IV.C.1, DOE purchased a 92-percent thermally efficient gas-
fired makeup air furnace for teardown, as makeup air units are 
currently the only type of gas-fired CWAF at a condensing efficiency 
level. There are substantially more non-makeup air CWAFs product 
offerings than makeup air furnace product offerings. However, based on 
manufacturer feedback, physical teardowns and examination of equipment, 
and product literature, DOE observed that gas-fired makeup air furnaces 
are technologically very similar to non-makeup air CWAFs.
    Further, DOE identified a residential-sized (i.e., input rating 
below 225,000 Btu/h) weatherized furnace design that utilizes 
condensing technology. As such, DOE identified the max-tech efficiency 
level for gas-fired CWAFs as 92-percent TE, which is based on the use 
of condensing heat exchanger technology. For oil-fired furnaces, which 
are typically installed indoors, DOE surveyed the market and identified 
the baseline efficiency level as 81-percent TE (which is the current 
federal energy conservation standard for this equipment class). DOE 
also found that the majority of non-condensing equipment had a TE of 
82-percent. One unit with a TE of 92-percent, which is the max-tech 
efficiency level, was identified. As such, DOE selected 81-percent, 82-
percent, and 92-percent TE as the efficiency levels for analysis. The 
efficiency levels DOE analyzed for each equipment class (including the 
baseline levels) are presented in Table IV-14 and Table IV-15.

       Table IV-14--Efficiency Levels Analyzed for Gas-Fired CWAFs
------------------------------------------------------------------------
                                                              Thermal
                    Efficiency level                      efficiency (%)
------------------------------------------------------------------------
EL0 (Baseline)..........................................              80
EL1.....................................................              81
EL2.....................................................              82
Max-Tech................................................              92
------------------------------------------------------------------------


       Table IV-15--Efficiency Levels Analyzed for Oil-Fired CWAFs
------------------------------------------------------------------------
                                                              Thermal
                    Efficiency level                      efficiency (%)
------------------------------------------------------------------------
EL0 (Baseline)..........................................              81
EL1.....................................................              82
Max-Tech................................................              92
------------------------------------------------------------------------

3. Equipment Testing, Reverse Engineering and Energy Modeling
a. Commercial Unitary Air Conditioners and Heat Pumps
    As discussed above, for the engineering analysis, DOE specifically 
analyzed representative capacities of 7.5 tons, 15 tons, and 30 tons to 
develop incremental cost-efficiency relationships.
    For the CUAC/CUHP NOPR, DOE selected four 7.5-ton, two 15-ton, and 
one 30-ton CUAC models, and one 7.5-ton CUHP model. The models were 
selected to develop a representative sample of the market at different 
efficiency levels. DOE based the selection of units for testing and 
reverse engineering on the efficiency data available in the AHRI 
certification database and the CEC equipment database. 79 FR at 58974. 
DOE conducted testing on each unit according to the IEER test method 
specified in AHRI Standard 340/360-2007. DOE then conducted physical 
teardowns on each test unit to develop a manufacturing cost estimation 
process and to evaluate key design features (e.g., heat exchangers, 
compressors, fan/fan motors, control strategies, etc.). DOE 
supplemented these data by conducting catalog teardowns on 346 models 
spanning the full range of capacities from all manufacturers selling 
equipment in the United States. DOE based the catalog teardowns on 
information provided in equipment literature and experience from the 
physical teardowns. Id.
    For CUACs, DOE conducted energy modeling using the modeling tools 
developed by the Center for Environmental Energy Engineering from the 
University of Maryland at College Park. The tools include a detailed 
heat exchanger modeling program and a refrigeration cycle modeling 
program. The refrigeration cycle modeling program can integrate the 
heat exchanger and compressor models to perform a refrigeration cycle 
model. Details regarding the energy modeling tools are discussed in 
section 5.5.5 and 5.6.4 of chapter 5 of the CUAC/CUHP direct final rule 
TSD.
    As explained in the CUAC/CUHP NOPR, DOE applied the key design 
features identified during physical equipment teardowns and used the 
energy modeling tool to generate detailed performance data (e.g., 
capacity and EER), validating them against the results obtained from 
laboratory testing at each IEER capacity level (25, 50, 75, and 100 
percent), or with the published performance data. See 79 FR at 58974. 
With the validated energy models, DOE expanded the modeling tasks with 
various system design options and identified the key design features 
(consistent with equipment available on the market) required for 7.5-
ton, 15-ton, and 30-ton CUAC units with electric resistance heating or 
no heating to achieve each efficiency level. Based on these equipment 
designs, DOE also generated energy use profiles for CUACs. These 
profiles included wattage inputs for key components (i.e., compressor, 
indoor and outdoor fan motors, and controls) at each operating load 
level measured using the IEER test method for each efficiency level to 
serve as inputs for the energy use analysis. For the CUAC/CUHP NOPR, 
DOE also used the design details, some for the reverse-engineered 
models and some from DOE's energy modeling work, to determine the 
incremental manufacturing costs for each efficiency

[[Page 2459]]

level for 7.5-ton, 15-ton and 30-ton CUACs units. Id.
    Lennox expressed concern regarding the differences between using 
tested and rated IEER values to validate the energy modeling 
simulations. Lennox noted that Efficiency Level 1 for 7.5 tons (12.9 
IEER) was based on a unit with a rated IEER of 11.4, but which DOE 
tested at 12.9 IEER. Lennox's modeling of this unit predicted an IEER 
of 12.2. Lennox commented that using a single test point to extrapolate 
well above manufacturer ratings to justify the proposed standard levels 
is arbitrary and not a valid approach. (CUAC: Lennox, No. 60 p. 13)
    AHRI, Nordyne and Lennox commented that the design features that 
DOE used to characterize the energy use and costs for the baseline and 
incremental efficiency levels for 7.5 tons are not representative of 
realistic models. (CUAC: AHRI, No. 68 at p. 35; Nordyne, No. 61 at p. 
29; Lennox, No. 60 at p. 13) They added that DOE's approach for the 7.5 
ton analysis of developing a design for the baseline efficiency level 
by decreasing the size of the heat exchangers of the Efficiency Level 1 
design results in a loss of EER performance below the current DOE 
minimum standard levels. (CUAC: AHRI, No. 68 at p. 35; Nordyne, No. 61 
at p. 29; Lennox, No. 60 at p. 13) Goodman commented that 
manufacturers' published performance documents includes data for a 
specific model with specific physical parameters. Goodman stated that 
using these data and attempting to perform energy model modifications 
to these physical parameters could lead to inaccurate predictions of 
the effects of these design changes on performance and energy 
consumption. Goodman also expressed concern that there was no 
confirmation testing of the simulation results for the higher 
efficiency equipment and, based on their assessment, the performance of 
equipment at higher efficiency levels is overstated. (CUAC: Goodman, 
No. 65 at pp. 15, 17)
    To address these concerns with DOE's engineering analysis (i.e., 
limited number of tests and relying on energy-model-based extrapolation 
of design details to represent efficiency levels for which DOE had no 
test data), DOE revised its analysis to use rated IEER data from actual 
models. Using this approach, DOE selected actual models available on 
the market to represent each target efficiency level to conduct the 
energy modeling and to generate component wattage profiles and 
performance correlations. As discussed in section IV.E.1, these 
component wattage profiles and performance correlations developed for 
this direct final rule were then used in the energy use analysis along 
with hourly building cooling loads and generalized building samples to 
estimate the energy savings associated with each efficiency level. As 
discussed in section IV.C.5, instead of developing manufacturing 
production costs based on the specific design parameters used in the 
energy modeling as was done in the CUAC/CUHP NOPR, DOE decoupled the 
energy modeling and cost estimation analyses for this direct final 
rule. In this manner, DOE was able to develop the cost-efficiency 
relationship using models based on a full range of manufacturers and 
equipment offerings. DOE's methodology and analysis for developing and 
conducting the energy modeling and cost-efficiency analysis are 
discussed in detail in section 5.5 and 5.6 of chapter 5 of the CUAC/
CUHP direct final rule TSD.
    The IEER ratings for the units selected for energy modeling match 
the corresponding efficiency level's target IEER within 0.2. In the case where selected unit's IEER rating differs from 
the target IEER, the model was first calibrated to match the unit's 
ratings. The dimensions of the heat exchangers were then slightly 
adjusted such that the adjusted model would produce the target IEER. 
With regards to the comments concerning the modeled full-load EER 
values, because the revised analysis is based on actual models 
available on the market that comply with the current standards for 
these equipment, none of the representative units have EER values that 
would not comply with the currently required EER-based standards. 
Details of the design features, corresponding component wattage 
profiles and performance correlations for each efficiency level and 
equipment class are presented in chapter 5 of the CUAC/CUHP direct 
final rule TSD.
    AHRI and Nordyne commented that the modeling used in the NOPR-phase 
energy analysis of the equipment was extremely complex and very 
dependent upon the precision and accuracy of the parameters entered. 
AHRI, Nordyne, and Goodman commented that DOE did not provide 
sufficient details and data (e.g., refrigerant charge, type of 
expansion device \41\, sensible to latent capacity ratios \42\, 
condenser fan power consumption, evaporator blower motor power, etc.) 
to thoroughly analyze the accuracy of the energy modeling results. 
(CUAC: AHRI, No. 68 at p. 34; Nordyne, No. 61 at pp. 28-29; Goodman, 
No. 65 at pp. 1-16) Goodman stated that, based on their estimates using 
the physical parameters provided by DOE, the performance of the designs 
chosen for Efficiency Level 2, 3, and 4 are overstated, and thus the 
costs of the equipment are incorrect. (CUAC: Goodman, No. 65 at p. 15) 
Trane commented that DOE did not test and analyze a significant sample 
size to develop significant data and validate the energy model given 
the broad range of equipment considered in this rulemaking and the 
variability in design, testing and manufacturing of these components. 
(CUAC: Trane, No. 63 at p. 7)
---------------------------------------------------------------------------

    \41\ Expansion devices (e.g., capillary tubes, thermostatic 
expansion valves, electronic expansion valves) control the amount of 
refrigerant flow into indoor coil.
    \42\ The ``sensible to latent capacity'' ratio provides the 
conditions at the indoor coil that determine how much of the 
system's total cooling capacity is available for handling sensible 
loads (i.e., the dry bulb temperature of the building load) versus 
latent loads (i.e., the thermal load associated with water vapor in 
the air).
---------------------------------------------------------------------------

    For each representative model analyzed at each efficiency level for 
the direct final rule analysis, DOE reviewed details of the assumptions 
for the equipment design parameters and the energy modeling results 
(i.e., component wattage profiles and performance correlations) with 
the manufacturers of models used in the analysis. DOE revised inputs to 
the energy modeling (e.g., component power consumption estimates, 
design feature specifications and operation sequences) based on 
manufacturer feedback. Based on the confirmation provided by the 
specific manufacturers of each unit analyzed regarding the inputs to 
the energy modeling, DOE believes the energy modeling results are 
representative of the operation and energy consumption of models at 
each efficiency level for each equipment class.
    AHRI, Nordyne, Carrier and Goodman also commented that the geometry 
input for the CoilDesigner energy modeling tool that DOE used in 
preparing its NOPR analysis did not accurately model heat exchanger 
performance because it did not include inputs required for modeling the 
internally enhanced (i.e., rifled \43\) tubing that are used in CUAC 
and CUHP heat exchangers. Carrier added that without including these 
internal enhancements, the overall coil performance prediction can be 
impacted as much as 5 to 10 percent. (CUAC: AHRI, No. 68 at p. 34; 
Nordyne, No. 61 at pp. 28-29; Carrier, No. 48 at p. 4; Goodman, No. 65 
at p. 15) DOE notes that the CoilDesigner energy modeling

[[Page 2460]]

tool was updated after the analysis for the CUAC/CUHP NOPR had been 
conducted. These updates included inputs for modeling the internal 
enhancement for tubes for the condenser coils. As a result, DOE updated 
its analysis for this direct final rule using the latest version of 
CoilDesigner to account for the effects of rifled tubes.
---------------------------------------------------------------------------

    \43\ Rifled tubes have grooves on the internal wall of the tube 
to increase the heat transfer surface area.
---------------------------------------------------------------------------

    As noted in chapter 5 of the CUAC/CUHP NOPR TSD, DOE's analysis for 
7.5-ton units assumed that the baseline and Efficiency Level 1 both 
used a single refrigerant circuit design. AHRI and Nordyne disagreed 
with this approach and commented that use of a single-stage compressor 
and a single refrigerant circuit rather than multiple circuits and 
compressor stages is not broadly consistent with the current market 
trends for 7.5-ton units. AHRI and Nordyne added that nearly 90 percent 
of all units sold in this size have multiple compressors, which is 
required by ASHRAE 90.1 standards. (CUAC: AHRI, No. 68 at p. 35; 
Nordyne, No. 61 at p. 29) Lennox also commented that using a single 
compressor design to represent Efficiency Level 1 for the small 
equipment class is not consistent with current industry equipment 
designs. Lennox noted that nearly 90 percent of their current sales of 
7.5 ton units use multiple compressors and that over 95 percent of 7.5 
to 10 ton units use multiple compressors. (CUAC: Lennox, No. 60 at pp. 
12-13) Carrier commented that the split for single- and dual-compressor 
units may be even at 7.5 tons, but that for 10-ton units and up to the 
high end of the capacity range for small equipment, everything uses 
dual-compressor designs. (CUAC: Carrier, ASRAC Public Meeting, No. 102 
at pp. 129, 132-133) ASAP, the California IOUs, NEEA, and ACEEE 
commented that DOE should consider both single- and dual-compressor 
designs for the small equipment classes. (CUAC: ASAP, California IOUs, 
NEEA, ACEEE, ASRAC Public Meeting, No. 102 at pp. 129-140)
    Based on DOE's review of models in the small CUAC and CUHP 
equipment classes, DOE noted that the majority of models at Efficiency 
Level 1 used a dual-compressor design. Based on this review, a dual-
compressor design is more representative of models at Efficiency Level 
1. As a result, DOE revised its analysis to use a dual-compressor 
design to characterize the energy use and manufacturing production cost 
for Efficiency Level 1. DOE noted that single- and dual-compressor 
designs are both available at the baseline efficiency level for the 
small equipment class. As a result, DOE conducted energy modeling to 
develop component wattage profiles and performance for both single- and 
dual-compressor designs for the 7.5-ton baseline efficiency level. As 
discussed in section IV.A, DOE also developed separate manufacturing 
production cost estimates for both single- and dual-compressor designs 
for the 7.5-ton baseline efficiency level.
    AHRI, Nordyne, Carrier and Lennox commented in response to the 
CUAC/CUHP NOPR that a significant number of units at Efficiency Level 1 
and Efficiency Level 2 for all equipment classes already incorporate 
multiple-speed indoor fans based on the requirements in ASHRAE 90.1 and 
California Title 24, and that the percentage of equipment with this 
feature will increase over the next several years. As a result, these 
commenters stated that DOE is overestimating the fan energy savings in 
ventilation mode at higher efficiency levels by considering only 
constant speed indoor fans at the lower efficiency levels. (CUAC: AHRI, 
No. 68 at pp. 33-34; Nordyne, No. 61 at p. 27-28; Carrier, No. 48 at 
pp. 2-3, 11; Lennox, No. 60 at pp. 9-11)
    As discussed in section III.G.1, SAV and VAV CUACs/CUHPs 
incorporate multiple-speed or variable-speed indoor fan motors, as 
commented by interested parties, to stage indoor air flow rates. In 
contrast, constant-air volume (``CAV'') CUACs/CUHPs, which typically 
use a single- or constant-speed indoor fan motor, operate at a fixed 
indoor air flow rate. Based on DOE's review of equipment available on 
the market, CAV, SAV and VAV units are available at different 
efficiency levels for each of the equipment class cooling capacity 
ranges. Based on DOE's review of the indoor fan staging for models on 
the market, DOE notes that CAV units are available at Efficiency Level 
2 and lower for the small and large equipment classes, and at 
Efficiency Level 2.5 and lower for the very large class. DOE notes that 
SAV or VAV units are available at Efficiency Level 1 and higher for all 
equipment classes. As a result, DOE revised the engineering analysis 
for this direct final rule to be based on two design paths for the 
different indoor fan staging options. Table IV-16 shows the design 
paths for each equipment class.

                              Table IV-16--CUAC/CUHP Equipment Air Flow Design Path
----------------------------------------------------------------------------------------------------------------
                                                            Equipment air flow design
        Efficiency level        --------------------------------------------------------------------------------
                                     Small CUACs/CUHPs          Large CUACs/CUHPs        Very large CUACs/CUHPs
----------------------------------------------------------------------------------------------------------------
Baseline.......................  CAV......................  CAV......................  CAV.
EL1............................  Path-1: CAV..............  Path-1: CAV..............  Path-1: CAV.
                                 Path-2: SAV..............  Path-2: SAV..............  Path-2: VAV.
EL2............................  Path-1: CAV..............  Path-1: CAV..............  Path-1: CAV.
                                 Path-2: SAV..............  Path-2: SAV..............  Path-2: VAV.
EL2.5..........................  SAV......................  SAV......................  Path-1: CAV.
                                                                                       Path-2: VAV.
EL3............................  SAV......................  SAV......................  VAV.
EL3.5..........................  SAV......................  SAV......................  VAV.
EL4............................  SAV......................  SAV......................  VAV.
EL5/Max-Tech...................  SAV......................  VAV......................  VAV.
----------------------------------------------------------------------------------------------------------------

    AHRI, Nordyne, and Lennox stated that the power input that DOE used 
for the condenser fans and indoor fan in the CUAC/CUHP NOPR modeling 
analysis does not appear realistic across the efficiency levels. These 
commenters noted that the high-speed indoor fan power on the 7.5-ton 
model at Efficiency Level 3 and Efficiency Level 4, and 15 ton model at 
all efficiency levels is unrealistically low. (CUAC: AHRI, No. 68 at p. 
44; Nordyne, No. 61 at p. 37; Lennox, No. 60 at p. 15) AHRI and Nordyne 
commented with regards to variable-speed fans that the negative impact 
on mechanical efficiency from high load and low fan speed is not 
considered. (CUAC: AHRI, No. 68 at p.

[[Page 2461]]

33; Nordyne, No. 61 at p. 27) Carrier also commented that the fan power 
reductions moving from Efficiency Level 2 to Efficiency Level 3 for the 
7.5- and 15-ton analysis (31 percent and 36 percent, respectively) 
imply the use of very efficient motors at or approaching max-tech 
levels. (CUAC: Carrier, No. 48 at p. 3)
    For this direct final rule, as discussed above, DOE analyzed actual 
models using their rated IEER values to represent each target 
efficiency level. DOE calculated indoor fan power using fan performance 
tables provided in manufacturer equipment literature for these models, 
including for variable-speed fans as noted by AHRI and Nordyne, and 
motor efficiency based on compliance with DOE electric motor standards 
established by EPCA (10 CFR 431.25). The indoor fan motors used in 
equipment are selected to overcome a wide range of external static 
pressures (``ESPs''). The actual horsepower delivered by the motors at 
the rated air flow and minimum ESP required by the test procedure are 
typically less than the nameplate horsepower. For CAV units, the 
calculation for horsepower loss is based on the approach adopted in 
DOE's rulemaking for commercial and industrial fans and blowers.\44\ 
For SAV and VAV units, the calculation for horsepower loss is based on 
equation developed in DOE's rulemaking for commercial and industrial 
pumps test procedure.\45\ The equation accounts for the combined motor 
and variable frequency drive loss during full-load and part-load 
operation. For the outdoor fans, DOE calculated the outdoor fan power 
input based on equipment literature, pressure estimates, typical fan 
efficiency and motor efficiency based on compliance with DOE small 
electric motor standards (10 CFR 431.25). Details of these analyses are 
presented in chapter 5 of the CUAC/CUHP direct final rule TSD.
---------------------------------------------------------------------------

    \44\ DOE Energy Conservation Standards for Commercial and 
Industrial Fans and Blowers, NODA Life-Cycle Cost (LCC) Spreadsheet. 
Available at: http://www.regulations.gov/#!documentDetail;D=EERE-
2013-BT-STD-0006-0034.
    \45\ DOE Test Procedure NOPR for Pumps. 80 FR at 17586, 17622 
(Apr. 1, 2015). Available at: http://www.regulations.gov/#!documentDetail;D=EERE-2013-BT-TP-0055-0001.
---------------------------------------------------------------------------

    ASRAC Working Group participants commented that DOE should further 
investigate the pressure drop associated with conversion curbs and the 
percentage of shipments that will require conversion curbs for each 
efficiency level, including the base case. Carrier and Trane both 
suggested discussing this issue with conversion curb suppliers. (CUAC: 
NEEA, ASAP, SMACNA, Carrier, Trane, ASRAC Public Meeting, No. 94 at pp. 
147-167) Trane and Carrier commented that DOE should look across the 
range of capacities within each equipment class to determine the 
efficiency levels at which curb size changes. (CUAC: Trane, Carrier, 
ASRAC Public Meeting, No. 94 at pp. 193-199)
    DOE collected information from major conversion curb vendors, 
including MicroMetl and Thybar (who were both identified during the 
Working Group's public discussions), regarding pressure drops, costs, 
and the size of the existing market for these products. (CUAC: ASRAC 
Public Meeting, No. 96 at pp. 75-77) DOE developed a distribution of 
efficiency levels at which conversion curbs are required by reviewing 
equipment size trends for key capacities of the equipment classes for 
four major manufacturers with equipment spanning the range of 
efficiencies considered for the analysis. DOE selected the efficiency 
levels that would require cabinet size increases for each manufacturer/
capacity combination. DOE then developed a distribution of the 
percentage of shipments at each efficiency level that would require a 
conversion curb based on equal manufacturer market share. Regarding the 
pressure drop associated with conversion curbs, conversion curb vendors 
provided information regarding typical pressure drops for units 
installed with conversion curbs. Based on DOE's review of these data 
and discussions with conversion curb vendors, DOE determined that a 
pressure drop of 0.2 inch water column (in. wc.) represents the average 
pressure drop associated with CUAC/CUHP installations that include a 
conversion curb. Based on this evaluation, DOE applied a pressure drop 
of 0.2 in. wc. for full air flow across all equipment classes as a 
result of applying a conversion curb. ASRAC Working Group participants 
agreed to using a 0.2 in. wc. pressure drop for conversion curbs. 
(ASRAC Public Meeting, No. 97 at pp. 132-136) Using the 0.2 in. wc. 
conversion curb pressure drop at full air flow, DOE revised the cooling 
capacity and indoor fan power correlations used for the energy use 
analysis.
    In the CUAC/CUHP NOPR, DOE did not conduct similar energy modeling 
for CUHP units since CUHP shipments represent a very small portion of 
industry shipments compared to CUACs shipments (9 percent versus 91 
percent). With these small numbers, in DOE's view, modeling for CUHPs 
was unnecessary because DOE accounted for the difference in efficiency 
as compared to that which occurs with the CUAC equipment classes due to 
losses from the reversing valve and the reduced potential for 
optimization of coil circuitry for cooling, as discussed in section 
IV.C.2.b. In addition, because CUHPs represent a small portion of 
shipments, DOE noted, based on equipment teardowns and an extensive 
review of equipment literature \46\, that manufacturers generally use 
the same basic design/platform for equivalent CUAC and CUHP models. DOE 
also considered the same design changes for the CUHP equipment classes 
that were considered for the CUAC equipment classes within a given 
capacity range. For these reasons, in the CUAC/CUHP NOPR, DOE focused 
energy modeling on CUAC equipment. 79 FR at 58974-58975. DOE maintained 
this approach for this direct final rule. Although not considered in 
the engineering and LCC and PBP analyses, DOE did analyze CUHP 
equipment in the NIA. From this analysis, DOE believes the energy 
modeling conducted for CUAC equipment provides a good estimate of CUHP 
cooling performance and provides the necessary information to estimate 
the magnitude of the national energy savings from increases in CUHP 
equipment efficiency.
---------------------------------------------------------------------------

    \46\ For examples of manufacturer literature used in the 
analysis, see EERE-2013-BT-STD-0007-0110.
---------------------------------------------------------------------------

b. Commercial Warm Air Furnaces
    As discussed above, for the engineering analysis, DOE analyzed a 
representative input capacity of 250,000 Btu/h for both the gas-fired 
and oil-fired CWAF equipment classes to develop incremental cost-
efficiency relationships. CWAF models selected for reverse engineering 
(physical teardown/examination) were used to estimate the costs to 
manufacture CWAFs at each efficiency level available on the market, 
ranging from the baseline 80-percent TE for gas-fired units, and 
baseline 81-percent TE for oil-fired units, up to the max-tech 92-
percent TE for both gas-fired and oil-fired units. Because this reverse 
engineering was first conducted to inform the engineering analyses for 
the CWAF NOPR, the selection of units for testing and reverse 
engineering was based on the efficiency data available in the AHRI 
certification database,\47\ the CEC equipment database, and 
manufacturers' catalogs \48\ at the time of the CWAF

[[Page 2462]]

NOPR.\49\ Details of the key features of the tested and reverse 
engineered units are presented in chapter 5 of the direct final rule 
TSD.
---------------------------------------------------------------------------

    \47\ Available at: https://www.ahridirectory.org/ahridirectory/pages/home.aspx.
    \48\ Available at: http://www.energy.ca.gov/appliances/.
    \49\ At the time of the analyses for the CWAF NOPR, the DOE CCMS 
database did not contain efficiency data for CWAFs. Upon review of 
current efficiency data from the CCMS database and manufacturers' 
catalogs in the analyses for the direct final rule, DOE found the 
current efficiency distribution of CWAF models to still include a 
majority of units at the same efficiency levels that were analyzed 
in the NOPR based on the AHRI database, CEC database, and 
manufacturers' catalogs. An exception to this was at the 82-percent 
TE level for gas-fired CWAFs, where the number of models offered 
significantly decreased between the NOPR and direct final rule 
analyses. As discussed previously in section IV.C.2.b, this was 
because a specific manufacturer of weatherized gas-fired CWAFs units 
listed as 82-percent TE at the time of the NOPR analyses no longer 
listed this equipment at the 82-percent TE level at the time of the 
direct final rule analyses.
---------------------------------------------------------------------------

    DOE conducted physical teardowns on each unit tested to inform 
manufacturing cost estimations and to evaluate key design features 
(e.g., heat exchangers, blower and inducer fans/fan motors, controls).
    For gas-fired CWAFs, DOE performed two teardowns on weatherized 
CWAFs units at non-condensing efficiency levels. Each CWAFs unit was 
part of a packaged CUAC/CWAF rooftop unit. One unit was rated at 80-
percent TE and the other unit was rated at 82-percent TE. Prior to 
teardown, the units were tested by a third-party test lab and both 
tested at approximately 82-percent TE. The units were from the same 
manufacturer and had similarly designed furnace sections with different 
air conditioner sections. DOE determined that the similarity of the 
test results on both units indicated that the furnace designs that were 
torn down are representative of equipment with 82-percent TE. Using the 
cost-assessment methodology, DOE determined the manufacturing cost of 
each CWAFs torn down via reverse engineering.
    Based on the CWAF teardowns, manufacturer feedback, product 
literature, and experience from the residential furnaces rulemaking, 
DOE determined that the primary method manufacturers use to achieve 
efficiency levels above baseline is to increase heat exchanger size. In 
the analyses for the February 2015 CWAF NOPR (80 FR 6181), DOE used 
feedback from manufacturer interviews to estimate that manufacturers 
will typically increase the surface area of the heat exchanger by 10 
percent in order to increase TE by 1 percent.\50\ DOE sought comment 
from stakeholders on the technologies that were identified for 
improving thermal efficiency. 80 FR at 6232. In addition, during the 
March 2, 2015 public meeting to discuss the CWAF NOPR, DOE again made 
clear the technology options that were considered for improving CWAF TE 
(including a 10 precent increase in heat exchanger size to achieve a 1 
percent increase in TE), and sought comment regarding its engineering 
analysis. (CWAF: DOE, NOPR Public Meeting Transcript, No. 17 at pp. 57, 
70-71) During the CWAF NOPR comment period and ASRAC public meetings, 
DOE did not receive any comments objecting to DOE's estimates of the 
heat exchanger size changes with increased efficiency, nor did DOE 
receive any data that would allow for the refinement of this 
approximation. Thus, DOE continued to use this estimate for this direct 
final rule analysis. However, feedback from manufacturers during the 
ASRAC public meetings did allow DOE to determine the specific 
variations in the design of the heat exchanger assembly components 
between units at the 80-percent (baseline), 81-percent, and 82-percent 
TE levels. Specifically, this feedback indicated that heat exchanger 
size is increased by adding tubes to the heat exchanger, rather than 
lengthening heat exchanger tubes, which DOE accounted for in its direct 
final rule analysis. (CWAF: Carrier, ASRAC Public Meeting, No. 94 at 
pp. 62-63; Trane, ASRAC Public Meeting, No. 94 at pp. 63; Rheem, ASRAC 
Public Meeting, No. 94 at pp. 63-64) At the 80-percent and 81-percent 
TE levels, DOE used this information to scale down the size of the heat 
exchanger examined in the units torn down at 82-percent TE as the 
initial step in estimating the costs to manufacture equipment at the 
80-percent and 81-percent TE efficiency levels.
---------------------------------------------------------------------------

    \50\ See chapter 5 of the February 2015 CWAF NOPR TSD for 
further information, located at: http://www.regulations.gov/#!documentDetail;D=EERE-2013-BT-STD-0021-0012.
---------------------------------------------------------------------------

    In response to the costs presented in the NOPR, multiple 
stakeholders commented that the methodology for estimating the 
manufacturing cost of an 82-percent TE gas-fired CWAF did not account 
for significant technological modifications required to maintain 
equipment reliability at that efficiency level. Specifically, DOE's 
cost estimates in the NOPR for the 80-percent through 82-percent TE 
levels incorporated the use of aluminized steel to construct key heat 
exchanger and inducer assembly components. Multiple stakeholders 
commented that the estimated manufacturing cost of an 82-percent TE 
unit was not accurate, and that heat exchanger and inducer assembly 
components would need to be constructed out of more resilient materials 
at 82-percent TE. AHRI commented that to meet an 82-percent TE standard 
without sacrificing safety, reliability, and durability, manufacturers 
would need to significantly modify their CWAFs offerings to account for 
the risk of corrosion in the heat exchanger and venting system as a 
result of condensation formation under certain ambient conditions. In 
its view, accounting for this factor would require that the incremental 
manufacturer production cost (``MPC'') over baseline be higher than 
that presented in the NOPR engineering analysis. (CWAF: AHRI, No. 26 at 
p. 2) The Advocates commented that if it is determined that some 
portion of CWAF sales will necessitate stainless steel heat exchangers 
to accommodate condensate formation during operation, then the 
engineering analysis should be modified to account for the additional 
costs associated with this engineering modification. (CWAF: The 
Advocates, No. 24 at p. 1-2) Lennox commented that at 82-percent TE, 
the combination of higher TE and reduced dilution air decreases the 
safety factor between flue gas temperature and condensation point 
temperature by 40 percent, which greatly increases the risk for 
condensation formation. To overcome this, more expensive corrosion-
resistant heat exchanger materials are needed. As a result, for smaller 
heating input capacity products, Lennox estimates the incremental MPC 
to achieve 82-percent TE over baseline efficiency is 12 times higher 
than the DOE estimate of $10. For larger capacity products, Lennox 
estimates the incremental MPC will be over 20 times higher than the $10 
estimate. Additionally, Lennox noted that at 82-percent TE, the inducer 
motor would need to be constructed out of more corrosion-resistant 
materials. (CWAF: Lennox, No. 22 at p. 7) Rheem commented that at 82-
percent TE, excessive condensation will occur to the point of causing 
heat exchanger or vent system corrosion. As a result, it would need to 
redesign the combustion system, evaluate alternative materials, conduct 
reliability testing, and other field tests--none of which were captured 
in the manufacturer costs presented in the TSD. (CWAF: Rheem, No. 25 at 
p. 2) Rheem added that to increase TE to 82-percent above baseline, the 
estimated $10 incremental MPC is not accurate with regard to Rheem's 
product offerings. In its view, the $10 incremental cost included in 
DOE's analysis would not allow them to add turbulators to their designs 
to enhance furnace efficiency. (CWAF: Rheem, No.

[[Page 2463]]

25 at p. 4) Trane commented that the MPCs presented in the NOPR for the 
81-percent and 82-percent TE levels are understated by about 3-fold, in 
part because they do not account for the needed use of stainless steel 
heat exchangers. CWAFs are designed to operate at the midpoint of 
possible air temperature rise across the heat exchanger (which will be 
at least a 30 degree Fahrenheit range), which means that 82-percent TE 
units will end up operating frequently at 83-percent TE or higher, and 
thus experience condensation. (CWAF: Trane, No. 27 p. 4-6)
    In the engineering analyses for the direct final rule, DOE modified 
its cost estimates for the 82-percent TE level in response to the above 
comments. To account for the use of corrosion-resistant materials in 
both the heat exchanger and inducer assemblies at 82-percent TE, DOE 
estimated the costs of implementing both 409-grade stainless steel 
(SS409) and 316-grade stainless steel (SS316) into these assemblies, 
rather than aluminized steel. In addition, DOE has observed that a 
certain portion of units at 80-percent and 81-percent TE also utilize 
heat exchanger and inducer assemblies that incorporate corrosion-
resistant materials into their designs in order to improve durability. 
As such, for the 80-percent, 81-percent, and 82-percent TE levels, DOE 
estimated individual MPCs for each of the specific material options 
that may be incorporated into the heat exchanger/inducer assembly at 
that efficiency level. For more information on the methodology used to 
estimate the MPCs for the 80-percent, 81-percent, and 82-percent TE 
levels, see chapter 5 of the CWAF direct final rule TSD. In the life-
cycle cost and payback period analysis, DOE assigned a percentage of 
models at each efficiency level that would incorporate each of the 
various material types analyzed. (See chapter 8 of the CWAF direct 
final rule TSD for further details.)
    As discussed in section IV.C.1, to estimate the manufacturing cost 
of a 92-percent TE (max-tech) CWAF, DOE obtained a condensing, 92-
percent TE gas-fired makeup air furnace for physical examination. In 
addition, DOE used information gathered from a teardown of a condensing 
weatherized residential furnace to further inform the cost estimation. 
DOE examined the heat exchanger, inducer fan, condensate management 
system, and other aspects of the gas-fired makeup air furnace to 
develop an estimate of the cost to manufacture these specific sub-
assemblies in a condensing CWAF. DOE then used information from the 
residential condensing weatherized furnace teardown to refine estimates 
of the specific costs of a condensate management system for a 
condensing efficiency level CWAF. Using these sub-assembly cost 
estimates, and additional information provided by the two teardowns of 
82-percent TE gas-fired CWAFs, DOE estimated the MPC for a 92-percent 
TE gas-fired CWAF. For further information on the estimation of the 
manufacturing cost of a 92-percent TE gas-fired CWAF, see chapter 5 of 
the direct final rule TSD.
    For oil-fired CWAFs, DOE performed a teardown of a non-weatherized 
unit at 81-percent TE. DOE used this teardown, along with product 
literature, prior industry experience, manufacturer feedback, and 
analysis previously performed on oil-fired residential furnaces to 
develop estimates of the manufacturing costs of both 82-percent and 92-
percent TE oil-fired CWAFs.
    In a previous analysis of residential non-weatherized oil-fired 
furnaces, DOE developed an estimate of the cost-efficiency relationship 
across a range of efficiency levels. In examining product literature 
for oil-fired CWAFs, DOE found that commercial units are very similar 
to residential units, except with higher input ratings and overall 
larger size. Based on information obtained from the physical teardown 
of the 81-percent TE oil-fired CWAF, in addition to the information 
gained from the residential furnace analysis and product literature, 
DOE was able to conduct a virtual teardown to estimate the 
manufacturing costs for an 82-percent TE unit. Key to this cost 
estimate was the growth in heat exchanger size necessary for a 1-
percent increase in TE, which necessitates a larger cabinet to 
accommodate it. Sheet metal and other components sensitive to size 
changes were scaled in order to match the larger size of the unit, 
while components that are not sensitive to heat exchanger size changes 
remained unchanged.
    Similarly, DOE relied on the physical teardown at the 81-percent TE 
level, as well as prior comparisons of residential oil-fired furnaces 
at condensing and non-condensing efficiency levels, to conduct a 
virtual teardown at the 92-percent TE level. At 92-percent TE, a 
secondary condensing heat exchanger made from a high-grade stainless 
steel was added in order to withstand the formation of condensate from 
the flue gases coupled with increased heat extraction into the building 
airstream (and, thus, higher TE). This additional heat exchanger was 
appropriately-sized based on information gathered from teardowns of 
oil-fired residential furnaces. According to product specification 
sheets, 92-percent TE oil-fired CWAFs use similar heat exchanger 
technology as condensing residential oil-fired furnaces. To accommodate 
the secondary heat exchanger, the cabinet was increased in size, and 
all associated sheet metal, wiring, and other components sensitive to 
cabinet size changes were also scaled as a result. In addition, the 
size of the blower fan blade was increased appropriately to account for 
the additional airflow needed over the secondary heat exchanger 
(however, based on observations in product literature, the rated fan 
power was unchanged). The manufacturing costs obtained from these 
physical and virtual teardowns served as the basis for the cost-
efficiency relationship for this equipment class. The teardown analyses 
for oil-fired CWAFs are described in further detail in chapter 5 of the 
direct final rule TSD.
4. Cost Estimation Process
    DOE developed a systematic process to estimate the MPCs of CUACs/
CUHPs and CWAFs. The process utilizes a spreadsheet that calculates 
costs based on information about the materials and components in the 
bills of materials (``BOMs''), based on the price of materials, average 
labor rates associated with fabrication and assembly, and the costs of 
overhead and depreciation, as determined based on manufacturer 
interviews and DOE expertise. To support cost calculations using the 
information in the BOMs, DOE collected information on labor rates, 
tooling costs, raw material prices, and other factors. For purchased 
parts, DOE 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 estimated based on five-year averages. 
The cost of transforming both raw materials and purchased parts into 
finished assemblies and sub-assemblies is estimated based on current 
industry costs for labor, manufacturing equipment/tooling, space, etc. 
Additional details on the cost estimation process are contained in 
chapter 5 of the CUACs/CUHPs and CWAF direct final rule TSDs.
5. Manufacturing Production Costs
    As discussed previously, for both CUACs/CUHPs and CWAFs, DOE 
calculated manufacturing costs at each efficiency level by totaling the 
costs of materials, labor, depreciation and direct overhead incurred in 
the manufacturing process. The total manufacturing cost of equipment at 
each efficiency level is

[[Page 2464]]

broken down into two main costs: (1) The full MPC; and (2) the non-
production cost, which includes selling, general, and administration 
(``SG&A'') costs; the cost of research and development; and interest 
from borrowing for operations or capital expenditures. DOE estimated 
the MPC at each efficiency level considered for each equipment class, 
from the baseline through the max-tech efficiency levels. DOE 
calculated the percentage of MPC attributable to each individual 
element of total production costs (i.e., materials, labor, 
depreciation, and overhead). These percentages are used to validate the 
inputs to the cost estimation process by comparing them to 
manufacturers' actual financial data published in annual reports, along 
with feedback obtained from manufacturers during interviews. DOE uses 
these production cost percentages in the MIA.
a. Commercial Unitary Air Conditioners and Heat Pumps
    For the CUAC/CUHP NOPR, DOE developed the cost-efficiency results 
using the design information of tested units and design changes 
identified as part of the energy modeling analysis. DOE developed cost-
efficiency relationships for each cooling capacity range. DOE also 
noted in the CUAC/CUHP NOPR that the incremental manufacturing 
production and shipping costs for each efficiency level developed for 
the CUACs with electric resistance heating or no heat equipment class 
would apply to all of the other equipment classes (i.e., CUACs units 
with all other types of heating, CUHPs units with electric resistance 
heating or no heat, CUHPs units with all other types of heating) within 
a given cooling capacity range. 79 FR at 58975. The cost-efficiency 
relationships developed for the CUAC/CUHP NOPR are presented in Table 
IV-17.

                            Table IV-17--CUAC/CUHP NOPR Cost-Efficiency Relationships
----------------------------------------------------------------------------------------------------------------
                                                                     Incremental manufacturing production cost
                                                                 -----------------------------------------------
                        Efficiency level                            Small air-      Large air-    Very large air-
                                                                   cooled CUACs    cooled CUACs    cooled CUACs
                                                                     and CUHPs       and CUHPs       and CUHPs
----------------------------------------------------------------------------------------------------------------
Baseline........................................................               -               -               -
EL1.............................................................         $115.93         $419.16         $542.65
EL2.............................................................          583.47          792.76        1,296.41
EL3.............................................................          788.88        1,236.98        1,834.67
EL4 (Max-Tech)..................................................        1,277.04        1,554.26        2,753.32
----------------------------------------------------------------------------------------------------------------

    AHRI, Nordyne, Rheem, Trane, Lennox and Goodman commented that DOE 
has underestimated the costs of complying with the proposed standards. 
(CUAC: AHRI, No. 68 at pp. 29, 37-38, 44; Nordyne, No. 61 at pp. 24, 
33, 37; Rheem, No. 70 at p. 4; Trane, No. 63 at p. 8; Lennox, No. 60 at 
p. 15; Goodman, No. 65 at pp. 13, 16)
    DOE updated the raw materials and purchased parts costs used in the 
manufacturing cost estimation analysis based on U.S. Bureau of Labor 
Statistics and American Metals Market data. To address manufacturers 
concerns regarding DOE's estimated incremental MPCs, DOE provided 
detailed cost data, broken out by production factors (materials, labor, 
depreciation, and overhead) and also by major subassemblies (e.g., 
indoor/outdoor heat exchangers and fan assemblies, controls, sealed 
system, etc.) and components (e.g., compressors, fan motors, etc.), for 
each model analyzed in its physical and catalog teardowns to the 
manufacturers of the models. DOE refined its analysis based on all data 
and feedback provided by manufacturers.
    For this direct final rule, DOE revised its analysis to be based on 
the physical and catalog teardown models using their IEER ratings at 
each efficiency level. For each equipment class, DOE estimated the 
incremental MPCs using the physical and catalog teardown models 
individually for each manufacturer that included sufficient information 
in their equipment literature to conduct the cost estimation analysis, 
then averaged the results across the manufacturers considered. As 
discussed above, DOE specifically focused its analysis on 7.5-ton, 15-
ton, and 30-ton CUAC units with electric resistance heating or no 
heating. This approach for determining costs, which is different from 
the approach used for the energy modeling analysis discussed above, 
considers the full range of manufacturers and equipment offerings for 
which sufficient data were available to conduct the manufacturing 
estimation analysis using their rated IEER values. As discussed in 
section IV.C.3.a, DOE evaluated air flow design paths separately for 
CUAC and CUHP units with CAV and SAV/VAV air flow designs and also 
developed two separate costs for the baseline efficiency level for 7.5 
tons for single- and dual-compressor designs.
    Where the rated IEER values did not match exactly with the 
efficiency levels being considered, DOE's primary method to determine 
the MPCs for each efficiency level was to interpolate or extrapolate 
results. For example, to determine the costs at 7.5-ton Efficiency 
Level 1 (12.9 IEER), DOE determined the MPC for one manufacturer by 
interpolating the results for models rated at 12.2 IEER and 13.0 IEER. 
For efficiency levels with limited numbers of models, DOE developed 
incremental costs to be representative of the industry average cost to 
achieve those levels. For example, for Efficiency Level 4 for 7.5- and 
15-ton units, DOE applied the relative percentage increase in cost for 
the one manufacturer with commercially-available equipment at that 
level across the other manufacturers to better represent average labor 
and production factors.
    Based on this revised approach of considering the full range of 
manufacturers and equipment offerings using their rated IEER values and 
the consideration of additional feedback from manufacturers, DOE 
believes its revised cost estimates for this direct final rule provide 
a more accurate representation of the incremental manufacturing 
production costs required to achieve each efficiency level. Table IV-18 
through Table IV-20 presents the cost-efficiency results developed for 
this direct final rule.

[[Page 2465]]



          Table IV-18--Direct Final Rule Small Air-Cooled CUACs and CUHPs Cost-Efficiency Relationships
----------------------------------------------------------------------------------------------------------------
                                                                                    Incremental     Incremental
                                                                                   MPC  (single     MPC  (dual
                        Efficiency Level                             Total MPC      compressor      compressor
                                                                                     baseline)       baseline)
----------------------------------------------------------------------------------------------------------------
Baseline Single Compressor......................................       $1,947.33  ..............  ..............
Baseline Dual Compressor........................................        2,110.04  ..............  ..............
EL 1 CAV........................................................        2,394.77         $447.44         $284.74
EL 1 SAV........................................................        2,365.85          418.52          255.82
EL 2 CAV........................................................        2,672.21          724.88          562.18
EL 2 SAV........................................................        2,737.46          790.13          627.43
EL 2.5..........................................................        2,836.11          888.78          726.07
EL 3............................................................        2,924.49          977.16          814.46
EL 3.5..........................................................        3,072.46        1,125.13          962.42
EL 4............................................................        3,452.52        1,505.19        1,342.49
EL 5 (Max-Tech).................................................        4,105.51        2,158.18        1,995.48
----------------------------------------------------------------------------------------------------------------


  Table IV-19--Direct Final Rule Large Air-Cooled CUACs and CUHPs Cost-
                        Efficiency Relationships
------------------------------------------------------------------------
                                                            Incremental
                   EL                        Total MPC          MPC
------------------------------------------------------------------------
Baseline................................       $4,115.95  ..............
EL 1 CAV................................        4,412.72          296.77
EL 1 SAV................................        4,462.10          346.15
EL 2 CAV................................        4,610.56          494.61
EL 2 SAV................................        4,797.55          681.60
EL 2.5..................................        4,974.17          858.22
EL 3....................................        5,169.16        1,053.21
EL 3.5..................................        5,289.84        1,173.89
EL 4....................................        5,545.71        1,429.76
EL 5 Max-Tech (VAV).....................        7,700.47        3,584.52
------------------------------------------------------------------------


  Table IV-20--Direct Final Rule Very Large Air-Cooled CUACs and CUHPs
                      Cost-Efficiency Relationships
------------------------------------------------------------------------
                                                            Incremental
                   EL                        Total MPC          MPC
------------------------------------------------------------------------
Baseline................................       $7,535.78  ..............
EL1 CAV.................................        8,766.75       $1,230.97
EL1 VAV.................................        9,878.35        2,342.56
EL2 CAV.................................       10,250.48        2,714.69
EL2 VAV.................................       10,756.20        3,220.42
EL2.5 CAV...............................       10,403.62        2,867.84
EL2.5 VAV...............................       11,533.72        3,997.93
EL3.....................................       11,866.94        4,331.15
EL4.....................................       11,922.94        4,387.16
EL5 Max-Tech............................       12,743.07        5,207.29
------------------------------------------------------------------------

b. Commercial Warm Air Furnaces
    Based on the analytical methodology discussed in the sections 
above, DOE developed the cost-efficiency results for both gas-fired and 
oil-fired CWAFs shown in Table IV-21 and Table IV-22 for each TE level 
analyzed. As discussed in section IV.A, for each of the 80-percent, 81-
percent, and 82-percent TE levels for gas-fired CWAFs, DOE developed 
multiple MPCs accounting for the use of either aluminized steel, SS409, 
or SS316 as a material type in the heat exchanger and inducer motor 
assemblies. The results shown in Table IV-21 represent the MPCs 
developed for each equipment class and efficiency level. Table IV-22 
shows the incremental MPC increases, relative to the baseline MPC, 
needed to produce equipment at each specific efficiency level above 
baseline. Details of the cost-efficiency analysis, including 
descriptions of the technologies DOE analyzed at each efficiency level 
to develop the incremental manufacturing costs, are presented in 
chapter 5 of the CWAF direct final rule TSD.

                                  Table IV-21--Manufacturing Production Costs *
----------------------------------------------------------------------------------------------------------------
                                                                                  EL2 (oil-fired  EL3 (gas-fired
                 Equipment type                   EL0 (baseline)        EL1          Max-Tech)       Max-Tech)
----------------------------------------------------------------------------------------------------------------
Gas-fired CWAFs with aluminized steel HX/inducer            $337            $350            $357          $1,074
 assemblies at EL0 through EL2..................

[[Page 2466]]

 
Gas-fired CWAFs with SS409 HX/inducer assemblies             447             469             486           1,074
 at EL0 through EL2.............................
Gas-fired CWAFs with SS316 HX/inducer assemblies             599             635             664           1,074
 at EL0 through EL2.............................
Oil-fired CWAFs.................................           1,613           1,638           2,304  ..............
----------------------------------------------------------------------------------------------------------------
* DOE structures potential standards in terms of TSLs and examined five TSLs in the analysis for this direct
  final rule. TSL 1 includes EL1 for gas-fired CWAFs and EL0 for oil-fired CWAFs, TSL 2 includes EL1 for both
  equipment classes, TSL 3 includes EL2 for gas-fired CWAFs and EL0 for oil-fired CWAFs, TSL 4 includes EL2 for
  gas-fired CWAFs and EL1 for oil-fired CWAFs, and TSL 5 includes EL3 for gas-fired CWAFs and EL2 for oil-fired
  CWAFs. For more information on the TSL structure for CWAFs, see section V.A of this direct final rule.


                        Table IV-22--Incremental Manufacturing Production Cost Increases
----------------------------------------------------------------------------------------------------------------
                                                        EL0                       EL2 (oil-fired  EL3 (gas-fired
                 Equipment type                     (baseline)          EL1          Max-Tech)       Max-Tech)
----------------------------------------------------------------------------------------------------------------
Gas-fired CWAFs with aluminized steel HX/inducer  ..............             $13             $20            $737
 assemblies at EL0 through EL2..................
Gas-fired CWAFs with SS409 HX/inducer assemblies  ..............              22              39             627
 at EL0 through EL2.............................
Gas-fired CWAFs with SS316 HX/inducer assemblies  ..............              35              65             474
 at EL0 through EL2.............................
Oil-fired CWAFs.................................  ..............              25             691  ..............
----------------------------------------------------------------------------------------------------------------

6. Manufacturer Markup
    To account for manufacturers' non-production costs and profit 
margin, DOE applies a non-production cost multiplier (the manufacturer 
markup) to the MPC. The resulting manufacturer selling price (``MSP'') 
is the price at which the manufacturer can recover all production and 
non-production costs and earn a profit. To meet new or amended energy 
conservation standards, manufacturers often introduce design changes to 
their equipment lines that result in increased MPCs. Depending on 
competitive pressures, some or all of the increased production costs 
may be passed from manufacturers to retailers and eventually to 
customers in the form of higher purchase prices. As production costs 
increase, manufacturers typically incur additional overhead. The MSP 
should be high enough to recover the full cost of the equipment (i.e., 
full production and non-production costs) and yield a profit. The 
manufacturer markup has an important bearing on profitability. A high 
markup under a standards scenario suggests manufacturers can readily 
pass along the increased variable costs and some of the capital and 
product conversion costs (the one-time expenditure) to customers. A low 
markup suggests that manufacturers will not be able to recover as much 
of the necessary investment in plant and equipment. DOE developed the 
manufacturer markup through an examination of corporate annual reports 
and Securities and Exchange Commission (``SEC'') 10-K reports,\51\ as 
well as comments from manufacturer interviews. Additional information 
is contained in chapter 6 of the CUACs/CUHPs and CWAF direct final rule 
TSDs.
---------------------------------------------------------------------------

    \51\ U.S. Securities and Exchange Commission, Annual 10-K 
Reports (Various Years) (Available at: http://www.sec.gov/edgar/searchedgar/companysearch.html) (Last Accessed Dec. 13, 2013).
---------------------------------------------------------------------------

7. Shipping Costs
    HVAC equipment manufacturers typically pay for shipping during the 
first step in the distribution chain. Freight is not a manufacturing 
cost, but because it is a substantial cost incurred by the 
manufacturer, DOE is accounting for the shipping costs of CUACs/CUHPs 
and CWAFs separately from other non-production costs that comprise the 
manufacturer markup. To calculate the MSP at each efficiency level for 
CUACs/CUHPs and CWAFs, DOE multiplied the MPC at each efficiency level 
by the manufacturer markup and added shipping costs for equipment at 
the given efficiency level.
    DOE calculated shipping costs at each efficiency level based on the 
average outer dimensions of equipment at the given efficiency and the 
use of a typical flat-bed, step-deck, or double-drop trailer to ship 
the equipment.
    For CUACs and CUHPs, DOE's estimated shipping costs for each 
efficiency level are presented in Table IV-23 through Table IV-25. DOE 
notes that the shipping costs differ between CAV CUACs/CUHPs and SAV/
VAV CUACs/CUHPs because of the design changes used in each type of unit 
to reach the higher efficiency levels. CAV CUACs/CUHPs generally rely 
on increasing the size of the heat exchangers to achieve higher 
efficiencies. As a result, CAV CUACs/CUHPs may require a larger overall 
cabinet size and thus a higher shipping cost compared to SAV or VAV 
CUACs/CUHPs at the same efficiency level, which generally rely on 
implementing airflow and compressor staging to achieve higher 
efficiencies that may not require an increase in cabinet size. DOE also 
notes that for the very large equipment class, the cabinet size 
increases associated with the higher efficiency levels did not change 
the number of units that fit on the trailer.

Table IV-23--Direct Final Rule Small Air-Cooled CUACs and CUHPs Shipping
                                  Cost
------------------------------------------------------------------------
                    Efficiency level                       Shipping cost
------------------------------------------------------------------------
Baseline Single Compressor..............................         $278.57
Baseline Dual Compressor................................         $278.57
EL 1 CAV................................................          278.57
EL 1 SAV................................................          278.57
EL 2 CAV................................................          278.57
EL 2 SAV................................................          278.57
EL 2.5..................................................          278.57
EL 3....................................................          278.57
EL 3.5..................................................          278.57
EL 4....................................................          360.00
EL 5 (Max-Tech).........................................          360.00
------------------------------------------------------------------------


Table IV-24--Direct Final Rule Large Air-Cooled CUACs and CUHPs Shipping
                                  Cost
------------------------------------------------------------------------
                    Efficiency level                       Shipping cost
------------------------------------------------------------------------
Baseline................................................         $360.00
EL 1 CAV................................................          360.00

[[Page 2467]]

 
EL 1 SAV................................................          360.00
EL 2 CAV................................................          405.00
EL 2 SAV................................................          360.00
EL 2.5..................................................          405.00
EL 3....................................................          405.00
EL 3.5..................................................          405.00
EL 4....................................................          450.00
EL 5 Max-Tech (VAV).....................................          450.00
------------------------------------------------------------------------


  Table IV-25--Direct Final Rule Very Large Air-Cooled CUACs and CUHPs
                              Shipping Cost
------------------------------------------------------------------------
                    Efficiency level                       Shipping cost
------------------------------------------------------------------------
Baseline................................................         $900.00
EL1 CAV.................................................          900.00
EL1 VAV.................................................          900.00
EL2 CAV.................................................          900.00
EL2 VAV.................................................          900.00
EL2.5 CAV...............................................          900.00
EL2.5 VAV...............................................          900.00
EL3.....................................................          900.00
EL4.....................................................          900.00
EL5 Max-Tech............................................          900.00
------------------------------------------------------------------------

    Gas-fired CWAF equipment is typically enclosed within a cabinet 
that also contains a CUAC.\52\ Thus, the CUAC components are a 
significant factor in driving the overall cabinet dimensions. DOE found 
that the changes in CWAF component sizes necessary to achieve the 81-
percent and 82-percent TE levels are not large enough to add any size 
to the cabinet, which is driven primarily by the size of the CUAC 
components. The shipping costs calculated for each CWAF efficiency 
level are shown in Table IV-26. Due to the noted impact of CUAC 
components on the overall shipping cost for gas-fired CWAFs, DOE 
presents only the incremental increase in shipping cost relative to the 
baseline efficiency level at each efficiency level analyzed for gas-
fired CWAFs. For oil-fired CWAFs, DOE presents the cost of shipping the 
entire unit, since this equipment is not packaged with CUAC components, 
and thus, the shipping cost represents the cost to ship only the oil-
fired CWAFs. Chapter 5 of the CWAF direct final rule TSD contains 
additional information pertaining to DOE's shipping cost estimates.
---------------------------------------------------------------------------

    \52\ Based on shipments data provided by AHRI (see section 3.9.2 
of chapter 3 of the CUAC/CUHP direct final rule TSD), DOE has 
determined that there are little to no shipments of combined CUHP/
CWAF units.

               Table IV-26--CWAFs Shipping Cost Estimates
------------------------------------------------------------------------
                                              Thermal     Shipping costs
          CWAFs equipment class           efficiency (%)     * (2014$)
------------------------------------------------------------------------
Gas-Fired CWAFs.........................              80               0
                                                      81               0
                                                      82               0
                                                      92           43.15
Oil-Fired CWAFs.........................              81           69.43
                                                      82           75.76
                                                      92           83.31
------------------------------------------------------------------------
* Because gas-fired CWAFs are typically included in a cabinet with
  CUACs, which influence the shipping cost, the shipping costs for gas-
  fired CWAFs at each efficiency level are shown as the incremental
  increase in shipping cost above the baseline efficiency level. Since
  oil-fired CWAFs are normally self-contained units, the shipping costs
  for oil-fired CWAFs are representative of the entire cost to ship the
  unit.

D. Markups Analysis

    At each step in the distribution channel, companies mark up the 
price of their equipment to cover business costs and profit margin. The 
markups analysis develops appropriate markups (e.g., manufacturer 
markups, retailer markups, distributor markups, contractor markups) in 
the distribution chain and sales taxes to convert the MPC estimates 
derived in the engineering analysis to consumer prices, which are then 
used in the LCC and PBP analysis and other analyses.
1. Distribution Channels
    In both the CUAC/CUHP and CWAF NOPRs, DOE characterized three 
distribution channels to describe how the equipment passes from the 
manufacturer to the commercial consumer. The first of these channels, 
the replacement distribution channel, was characterized as follows:

Manufacturer [rarr] Wholesaler [rarr] Small or Large Mechanical 
Contractor [rarr] Consumer

    The second distribution channel--new construction--was 
characterized as follows:

Manufacturer [rarr] Wholesaler [rarr] Small or Large Mechanical 
Contractor [rarr] General Contractor [rarr] Consumer

    In the third distribution channel, which applies to both the 
replacement and new construction markets, the manufacturer sells the 
equipment directly to the customer through a national account:

Manufacturer [rarr] Consumer (National Account)

    In response to the CWAF NOPR, Lennox and Trane stated that the 
national account channel still requires a contractor to perform the 
installation, who has a markup on labor and materials as well. (CWAF: 
Lennox, Public Meeting Transcript, No. 17 at pp. 80-81; Trane, Public 
Meeting Transcript, No. 17 at pp. 82-83) In contrast, ACEEE stated that 
the markup refers to the value added by someone who takes ownership of 
the equipment. ACEEE questioned whether the installing contractor marks 
up the equipment itself. (CWAF: ACEEE, Public Meeting Transcript, No. 
17 at pp. 83-84)
    DOE notes that the markups analysis develops markups that are 
applied to the cost of purchasing only the equipment. Therefore, if the 
installing contractor only performs the installation, but does not 
purchase the equipment, the contractor is not part of the distribution 
channel. The installation, maintenance, and repair costs, including 
labor and material costs, are marked up separately using markups from 
RS Means data (see section IV.F).

[[Page 2468]]

    DOE used the same distribution channels for the direct final rule 
analysis.
2. Markups and Sales Tax
    The manufacturer markup converts MPC to MSP. DOE developed an 
average manufacturer markup by examining the annual SEC 10-K reports 
filed by publicly-traded manufacturers primarily engaged in appliance 
manufacturing and whose combined product range includes CUACs/CUHPs and 
CWAFs.
    For all parties except for the manufacturer, DOE developed separate 
markups for baseline products (baseline markups) and for the 
incremental cost of more-efficient products (incremental markups). 
Incremental markups are coefficients that relate the change in the MSP 
of higher-efficiency models to the change in the retailer sales price.
    AHRI stated in its response to the CUAC/CUHP NOPR that DOE 
unreasonably utilized incremental, rather than average markups, which 
significantly understates the cost of equipment meeting the proposed 
standards. (CUAC: AHRI, No. 68 at p. 3) It stated that DOE's analysis 
does not comport with empirical observations of markups in the air 
conditioning or heating equipment industries. (CUAC: AHRI, No. 68 at p. 
29) According to AHRI, in using this technique, DOE is stating what 
should be happening in the market, which does not accurately reflect 
what is actually occurring. AHRI attached a report from Shorey 
Consulting to its comment to help explain what it perceives as 
fundamental flaws in using incremental markups as opposed to average 
markups. AHRI stated that average markups should be used in the DOE 
analysis, as these markups are, in its view, representative of the 
real-world HVAC marketplace. (CUAC: AHRI, No. 68 at p. 35)
    DOE is not aware of any representative empirical observations of 
markups in the air conditioning or heating equipment industries, except 
at an aggregate level. The Shorey Consulting Report describes a survey 
of HVAC distributor/wholesalers and HVAC contractors that Shorey 
Consulting conducted in November 2014 to determine the actual pricing 
practices of both groups. The report states that (1) both distributor/
wholesalers and HVAC contractors manage to target constant margin 
percentages across their whole businesses and do not vary margins for 
individual products; and (2) these entities respond to manufacturer 
price increases (or rare decreases) by passing these price changes 
through with their traditional markups. (CUAC: AHRI, No. 68, markups 
attachment at pp. 17-20)
    To investigate the claims in the Shorey Consulting Report, DOE held 
discussions with Construction Programs & Results, Inc. (``CPR''), a 
company with long experience in the HVAC contracting field. Laying out 
a scenario that resembles what it expects to occur after amended 
standards take effect, DOE asked CPR whether HVAC contractors would be 
able to retain the same markup that they currently use if equipment 
prices increase while other relevant costs (e.g., labor, material, and 
operation) remain constant. CPR stated that the contractors would 
likely attempt to use the same markup over time, but, assuming no 
increase in other costs, they will eventually either have to lower 
their markup based on market pressures, or choose to lower their markup 
after it has been reviewed and recalculated. The company further stated 
that the real-world situation is more complex than DOE's scenario, 
noting that the markup change will happen when the company's finances 
are reviewed, and the equipment cost increase will be only one factor 
in the adjustment. (DOE's questions and CPR's responses are provided in 
an appendix to chapter 6 in the CUAC/CUHP direct final rule TSD.)
    The above characterization of contractor behavior is consistent 
with DOE's markup approach, which assumes that the markup changes for 
standards-compliant equipment that have a higher cost than non-
compliant equipment. DOE also believes its approach is not entirely 
inconsistent with the information provided by the survey described in 
the Shorey Consulting Report. DOE does not mean to suggest that HVAC 
distributor/wholesalers and contractors will directly adjust their 
markups on equipment if the price they pay goes up as a result of 
appliance standards. Rather, the approach assumes that such adjustment 
will occur over a (relatively short) period of time as part of a 
business management process. This approach embodies the same 
perspective as the ``preservation of per-unit operating profit markup 
scenario'' used in the MIA (see section IV.J of this document).\53\ DOE 
asked CPR if an increase in profitability, which is implied by keeping 
a fixed markup when the equipment price goes up, would be viable over 
time. The company indicated that, given the many pressures on 
contractors to lower their prices for various reasons, such an increase 
was unlikely to occur. DOE further notes that if increases in the cost 
of goods sold consistently lead to a sustainable increase in 
profitability, one would expect distributor/wholesalers and contractors 
to welcome such increases. DOE does not expect that such behavior is 
common in the HVAC market, or in any markets characterized by a 
reasonable degree of competition.
---------------------------------------------------------------------------

    \53\ In the preservation of per unit operating profit scenario, 
manufacturer markups are set so that operating profit one year after 
the compliance date of the amended energy conservation standards is 
the same as in the base case on a per-unit basis. Under this 
scenario, as the production costs and sales price increase with more 
stringent efficiency standards, 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.
---------------------------------------------------------------------------

    In summary, DOE acknowledges that its approach to estimating 
distributor and contractor markup practices after amended standards 
become required is necessarily an approximation of real-world practices 
that are both complex and varying with business conditions. However, 
given the supportive remarks from CPR, and the lack of any evidence 
that standards facilitate a sustainable increase in profitability for 
distributors and contractors (as would be implied by AHRI's 
recommendation), DOE continues to maintain that its use of incremental 
markups is reasonable. DOE welcomes information that could support 
improvement in its methodology.
    To develop markups for the parties involved in the distribution of 
CUAC/CUHP and CWAF equipment, DOE utilized several sources, including: 
(1) The Heating, Air-Conditioning & Refrigeration Distributors 
International (``HARDI'') 2012 Profit Report \54\ to develop wholesaler 
markups; (2) the 2005 Air Conditioning Contractors of America's 
(``ACCA'') financial analysis for the heating, ventilation, air 
conditioning, and refrigeration (``HVACR'') contracting industry \55\ 
to develop mechanical contractor markups, and (3) the U.S. Census 
Bureau's 2007 Economic Census data \56\ for the commercial and 
institutional building construction industry to develop general 
contractor markups. For mechanical contractors, DOE derived

[[Page 2469]]

separate markups for small and large contractors.
---------------------------------------------------------------------------

    \54\ Heating, Air Conditioning & Refrigeration Distributors 
International 2012 Profit Report (Available at: http://www.hardinet.org) (Last accessed April 10, 2015).
    \55\ Air Conditioning Contractors of America (ACCA), Financial 
Analysis for the HVACR Contracting Industry: 2005 (Available at: 
https://www.acca.org) (Last accessed April 10, 2013).
    \56\ U.S. Census Bureau, 2007 Economic Census Data (2007) 
(Available at: http://www.census.gov/econ/) (Last accessed April 10, 
2013).
---------------------------------------------------------------------------

    Trane questioned how the overall markup of CWAFs compared to that 
of CUACs/CUHPs. (CWAF: Trane, No. 17 p. 89-90) DOE notes that the 
overall markups for gas-fired CWAFs and CUACs/CUHPs are almost 
identical to each other.\57\ DOE used the same general methodology and 
data sources for CWAFs as for CUACs/CUHPs.
---------------------------------------------------------------------------

    \57\ There are slight differences in the overall markups due to 
small differences in manufacturer markups and in the distribution 
channel shares.
---------------------------------------------------------------------------

    In addition to the markups, DOE derived State and local taxes from 
data provided by the Sales Tax Clearinghouse.\58\ These data represent 
weighted average taxes that include county and city rates. DOE derived 
shipment-weighted average tax values for each of the regions from the 
Energy Information Administration's 2003 Commercial Building Energy 
Consumption Survey (CBECS 2003) \59\ considered in the analysis.\60\
---------------------------------------------------------------------------

    \58\ Sales Tax Clearinghouse Inc., State Sales Tax Rates Along 
with Combined Average City and County Rates, 2013 (Available at: 
http://thestc.com/STrates.stm) (Last accessed Sept. 11, 2013).
    \59\ Energy Information Administration (EIA), 2003 Commercial 
Building Energy Consumption Survey (Available at: http://www.eia.gov/consumption/commercial/) (Last accessed April 10, 2013). 
Note: CBECS 2012 is currently in development but was not available 
in time for this rulemaking.
    \60\ CBECS 2012 is currently in development but will not be 
available in time for this rulemaking.
---------------------------------------------------------------------------

    Chapter 6 of the direct final rule TSDs for CUACs/CUHPs and CWAFs 
provides details on DOE's development of markups.

E. Energy Use Analysis

    The purpose of the energy use analysis is to determine the annual 
energy consumption of CUACs and CWAFs at different efficiencies in 
representative U.S. commercial buildings and (in the case of CWAFs) 
multi-family buildings, and to assess the energy savings potential of 
increased equipment efficiency. DOE did not analyze CUHP energy use 
because, for the reasons explained in section IV.C.4, the energy 
modeling in the engineering analysis was performed only for CUAC 
equipment.
    The energy use analysis estimates the range of energy use of the 
equipment in the field (i.e., as they are actually used by commercial 
consumers). The energy use analysis provides the basis for other 
analyses DOE performed, particularly assessments of the energy savings 
and the savings in consumer operating costs that could result from 
adoption of amended standards.
    Chapter 7 of the direct final rule TSDs provides details on DOE's 
energy use analysis for CUACs and CWAFs.
1. Small, Large, and Very Large Commercial Package Air Conditioning and 
Heating Equipment
    DOE developed energy consumption estimates only for the CUAC 
equipment classes that have electric resistance heating or no heating. 
As described in section IV.C.2.b, for equipment classes with all other 
types of heating, the incremental change in IEER for each efficiency 
level increases to maintain the same energy savings as was determined 
for the equipment classes with electric resistance heating or no 
heating within each equipment class capacity range (i.e., small, large, 
and very large). Using this approach, the IEER differential between 
these equipment classes ranged from 0.2 to 0.4 at the higher efficiency 
levels. Therefore, DOE estimated that the energy savings for any 
efficiency level relative to the baseline would be identical for both 
sets of equipment classes. In turn, the energy savings estimates for 
the efficiency levels associated with the equipment classes that have 
electric resistance heating or no heating were used by DOE in the LCC 
and PBP analysis and the NIA to represent both sets of equipment 
classes.
    In its analysis of the recommended TSL, DOE applied Efficiency 
Level 3 to the small and large ``all other types of heating equipment'' 
classes and Efficiency Level 2.5 to the very large ``all other types of 
heating equipment'' class. These were the IEER values recommended by 
the ASRAC Working Group, using an IEER differential of 0.2 compared to 
the ``electric resistance heating or no heating equipment'' classes. 
See supra, section IV.C.2.b. At Efficiency Level 3, based on an 
approach of maintaining a constant energy savings differential with the 
electric resistance heating or no heating equipment classes, the IEER 
differential should be 0.3 for both the small and large ``all other 
types of heating equipment'' classes. Since reducing the differential 
increases the efficiency of the equipment, additional energy savings 
are realized from reducing the IEER differential to 0.2 for the small 
and large ``all other types of heating equipment'' classes. The method 
for determinining the additional energy savings benefit is described in 
section IV.H.2.
    The energy use analysis consists of two related parts. In the first 
part, DOE calculated energy savings for small, large, and very large 
CUACs at the considered efficiency levels based on modifications to the 
energy use simulations conducted for the 2004 ANOPR. These building 
simulation data are based on the 1995 CBECS. Because the simulation 
data reflect the building stock in 1995 that uses CUAC equipment, in 
the second part of the analysis, DOE developed a ``generalized building 
sample'' to represent the current installation conditions for CUACs. 
This part of DOE's analysis involved making adjustments to update the 
building simulation data to reflect the current building stock that 
uses CUAC equipment.
a. Energy Use Simulations
    DOE's simulation database includes hourly profiles for more than 
1,000 commercial buildings, which were based on building 
characteristics from the 1995 CBECS for the subset of buildings that 
uses CUAC equipment. Each building was assigned to a specific location 
along with a typical meteorological year (``TMY'') hourly weather file 
(referred to as ``TMY2'') to represent local weather. The simulations 
capture variability in cooling loads due to factors such as building 
activity, schedule, occupancy, local weather, and shell 
characteristics.
    For the NOPR, DOE modified the energy use simulations conducted for 
the 2004 ANOPR to improve the modeling of equipment performance. The 
modifications that DOE performed included changes to the ventilation 
rates and economizer usage assumptions, the default part-load 
performance curve, and the minimum saturated condensing temperature 
limit. A more detailed description of the simulation model 
modifications can be found in appendix 7A of the direct final rule TSD.
    Neither fan operation during ventilation nor economizer usage are 
accounted for in the DOE test procedure and, therefore, do not impact 
the rated efficiency of a CUAC. Although ventilation rates and 
economizer usage do not directly affect the rated equipment 
performance, they do impact how often the equipment needs to operate, 
whether at full or part-load. The building simulations for the 2004 
ANOPR used ventilation rates based on ASHRAE Standard 62-1999.\61\ 
Because a report prepared by the National Institute for Standards and 
Testing (``NIST'') on field measurements indicated that these 
ventilation rates were too high,\62\ DOE reduced the rates

[[Page 2470]]

as part of the modified energy use simulations. In the case of 
economizer usage, the building simulations for the 2004 ANOPR assumed 
all economizers operated without fault. Various field studies have 
demonstrated that economizer usage is far from perfect, so in the 
modified simulations DOE assigned a 30-percent probability to each 
building modeled that the economizer would be non-operational.\63\ With 
regard to changes made to how the equipment was modeled, DOE developed 
a modified part-load performance curve for the direct-expansion 
condenser unit model so that the overall performance would be more 
representative of a multi-compressor system. In addition, DOE lowered a 
user-input parameter representing the minimum saturated condensing 
temperature (``MSCT'') allowed for the refrigerant used in a CUAC--
specifically, DOE dropped the MSCT from 100 [deg]F to 80 [deg]F.\64\ 
Both of these parameters would affect system performance under part-
load and off-design conditions.
---------------------------------------------------------------------------

    \61\ American Society of Heating, Refrigerating and Air-
Conditioning Engineers, Inc. ANSI/ASHRAE Standard 62-1999 
Ventilation for Acceptable Indoor Air Quality, 1999. Atlanta, 
Georgia.
    \62\ Persily, A. and J. Gorfain. 2004. ``Analysis of Ventilation 
Data from the U.S. Environmental Protection Agency Building 
Assessment Survey and Evaluation (BASE) Study''. NISTIR 7145.
    \63\ As described in appendix 7-A of the TSD, field studies 
indicate that at least a third of installed economizers do not 
function properly and that economizer controls often are 
disconnected from the HVAC system.
    \64\ The default value in the simulation model for the minimum 
saturated condensing temperature (``MSCT'') allowed the refrigerant 
in a CUAC to reach 100 [deg]F. DOE lowered the user-input parameter 
representing the allowed MSCT to the minimum condensing temperature 
of 80 [deg]F to reflect compressor performance literature.
---------------------------------------------------------------------------

    The issue of economizer usage was first discussed in the Working 
Group meeting on May 11, 2015. (ASRAC Public Meeting, No. 94 at pp. 82-
135) One concern was whether the model used in the simulations properly 
modelled the performace of economizers. Another was the market share of 
units that use economizers. The third concern was the fraction of 
economizers that are operating properly. DOE presented a sensitivity 
analysis that showed that even if it assumed that all economizers are 
operating properly below an outdoor ambient temperature of 60 
[deg]F,\65\ the reduction in cooling load--and the accompanying 
potential for energy savings--would be very small. (ASRAC Public 
Meeting, No. 96 at pp. 164-174). The Working Group recommended that DOE 
maintain the assumptions regarding economizer usage applied in the NOPR 
for the direct final rule analysis. (ASRAC Public Meeting, No. 96 at 
pp. 177-182), and DOE did so. A description of the sensitivity analysis 
for economizers can be found in appendix 7B of the direct final rule 
TSD.
---------------------------------------------------------------------------

    \65\ The Working Group considered 60[emsp14][deg]F as a 
reasonable estimate as to when economizier use would be allowed to 
cool the building.
---------------------------------------------------------------------------

    DOE used a two-step process to represent the performance of 
equipment at baseline and higher efficiency levels. For the NOPR, DOE 
first calculated the hourly cooling loads and hourly fan operation for 
each building from the compressor and fan energy consumption results 
that were generated from the modified building simulations based on 
equipment with an efficiency level of 11 EER. It was estimated that 
these simulated cooling loads had to be met by the CUACs equipment for 
every hour of the year that the equipment operates. Refer to chapter 7 
of the CUAC/CUHP direct final rule TSD for more details.
    The number of units serving a given building was based on the 
cooling load of the building and the cooling capacity of the 
representative CUAC unit at an outdoor ambient temperature of 
95[emsp14][deg]F--the specific ambient temperature at which 
manufacturers report a given unit's cooling capacity. In its informal 
meetings, the Working Group determined that the cooling capacity of the 
representative CUAC unit should instead be based on the 1-percent 
design temperature corresponding to the climate where the building is 
located. The 1-percent design temperature would generally be less than 
95[emsp14][deg]F, which means that the cooling capacity increases and 
the number of units needed to serve the building decreases. (ASRAC 
Public Meeting, No. 94 at pp. 80-82) As part of implementing the 
suggested approach, DOE allowed a fractional number of units, 
equivalent to system size increments of 2.5 tons, to be installed in a 
building as part of DOE's model. (ASRAC Public Meeting, No. 96 at p. 
143)
    In the second step, DOE coupled the hourly cooling loads and fan 
operation with equipment performance data, developed from laboratory 
and modeled IEER testing conducted according to AHRI Standard 340/360-
2007, to generate the hourly energy consumption of baseline and more 
efficient CUAC equipment. DOE's use of the laboratory and modeled IEER 
test data allowed it to specifically address how capacity and control 
strategies vary with outdoor temperature and building load. The 
laboratory and modeled IEER test data were used to calculate the 
compressor efficiency (COP) and capacity at varying outdoor 
temperatures. The IEER rating test consists of measuring the net 
capacity, compressor power, condenser fan power, indoor fan power, and 
control power at three to five different rating conditions. The number 
of rated conditions the equipment is tested at is determined by the 
equipment's capabilities and control strategies. For the NOPR, the net 
capacity and compressor(s) power were determined as a linear function 
of outdoor temperature from the test results. If the indoor or outdoor 
fan was staged, its power consumption was also calculated as a linear 
function of outdoor temperature. The power for controls is a constant, 
but may vary by staging.
    As described in section IV.C.3.a, DOE updated its approach by 
replacing the linear function described above with new correlations 
between outdoor temperature and the net capacity and compressor(s) 
power based on the design of the equipment. The considered designs 
included CAV, SAV, and VAV designs. Indoor and outdoor fan(s) power as 
well as control power were determined based on equipment staging. Based 
on informal Working Group meetings, the indoor fan power in heating 
mode assumes that the fan operates at its highest (i.e., most energy 
consumptive) stage. (ASRAC Public Meeting, No. 94 at pp. 80-82)
    For the NOPR, the determination of fan power was based on ESP 
values found in AHRI Standard 340/360-2007, which are also used in the 
DOE test procedure. The Working Group discussed the appropriate ESP to 
use in the analysis and agreed that DOE should use higher ESPs than 
those found in the DOE test procedure to help better simulate actual 
field conditions. For the direct final rule, the values used (0.75 and 
1.25 in.w.c.) correspond to the ESPs used in the modified building 
simulations of the cooling load. (ASRAC Public Meeting, No. 94 at pp. 
80-82; ASRAC Public Meeting, No. 95 at pp. 28-31; ASRAC Public Meeting, 
No. 96 at pp. 145-164) In addition, as described earlier in section 
IV.C.3.a, DOE accounted for the fraction of the market at each 
efficiency level that would require the installation of a conversion 
curb. The determination of fan power accounted for an increase in the 
ESP (0.2 in.w.c.) associated with a conversion curb. (ASRAC Public 
Meeting, No. 95 at pp. 28-52; ASRAC Public Meeting, No. 98 at pp. 10-
15) The new correlations between outdoor temperature and the net 
capacity and compressor(s) power were based on the new ESPs as well as 
the impact of a conversion curb.
    The compressor(s) power and capacity of the equipment for each hour 
of the year was calculated based on the outdoor temperature for the 
simulated buildings. The cooling capacity was calculated such that it 
met the simulated building cooling load for each hour. For multi-stage 
equipment, the

[[Page 2471]]

staging for each hour was selected to ensure the equipment could meet 
the simulated building cooling load. When the cooling capacity exceeded 
the simulated building cooling load, the efficiency was adjusted for 
cyclic performance using the degradation coefficient and load factor as 
calculated according to section 6.2, Part-Load Rating, of AHRI 340/360, 
using the new correlations between outdoor temperature and the net 
capacity and compressor(s) power described above. The analysis 
accounted for the fact that the building cooling load includes the heat 
generated by the fan. The total amount of cooling the compressor must 
provide varies as the fan efficiency improves with different efficiency 
levels.
    Members of the ASRAC Working Group discussed the load factor in 
informal meetings and, after closely examining DOE's calculation 
methods, the group shared its finding that DOE misinterpreted the 
determination of the load factor and degradation coefficient. The 
equation that DOE was using to determine the compressor load factor did 
not properly account for the way loads are distributed on multi-stage 
equipment when more than one stage is operating. As a result, DOE 
corrected the calculation for compressor power to ensure that the load 
factor and degradation coefficient were based only on the highest stage 
of operation. In addition, the same load factor and degradation 
coefficient were used to determine the indoor fan power at its upper 
stage. (ASRAC Public Meeting, No. 94 at pp. 80-82)
    The NOPR analysis assumed that when there are multiple units in a 
building, all units serve the same share of the total cooling load. The 
validity of this assumption was discussed with the Working Group, and 
DOE conducted a sensitivity analysis with alternative assumptions. 
Assuming that the units serve different shares of the load, the total 
annual energy use of the units changes by approximately 1 percent. 
(ASRAC Public Meeting, No. 96 at pp. 174-176) Given this outcome, the 
Working Group recommended that DOE maintain the assumption applied in 
the NOPR for the direct final rule analysis (ASRAC Public Meeting, No. 
96 at pp. 177-182). DOE followed this recommendation and a description 
of the sensitivity analysis of equipment loading can be found in 
appendix 7B of the direct final rule TSD.
    Each building simulation determines the indoor fan run-time for 
each hour of the year. Energy use was calculated separately for the 
compressor, condenser fan, indoor fan, and controls for each hour of 
the year for the simulated building. Compressor and condenser fan 
energy were summed to reflect cooling energy use. Indoor fan and 
control energy were combined into a single category to represent indoor 
fan energy use during all modes of operation.
    A number of stakeholders stated that it is inappropriate to 
incorporate energy savings attributed to fan operation (for 
ventilation) during modes of operation other than cooling. (AHRI, No. 
68 at p. 33; Carrier, No. 48 at p. 5; Lennox, No. 60 at p. 14) ASAP 
agreed with the inclusion of supply fan power in the energy use 
analysis. (ASAP, No. 69 at p. 5)
    This issue was discussed in informal meetings by a number of 
members of the Working Group. The outcome of these discussions was 
presented at the May 11, 2015 meeting of the Working Group. (ASRAC 
Public Meeting, No. 94 at p. 82) The Working Group agreed to include 
fan operation energy during all modes of operation in the energy use 
calculations, so DOE maintained the approach used in the NOPR for the 
direct final rule.\66\
---------------------------------------------------------------------------

    \66\ The Working Group recommended that DOE initiate a 
rulemaking to amend the test procedure for this equipment to better 
represent the total fan energy use, including considering: (a) 
Alternative external static pressures and (b) operation for other 
than mechanical cooling and heating. It also recommended that the 
energy consumption from the supply air fan during hours of operation 
when it is used to provide ventilation air, and the energy use with 
the supply fan operation when the unit is in heating mode, should be 
included in an energy efficiency metric as a result of this test 
procedure modification. Appliance Standards and Rulemaking Federal 
Advisory Committee, Commercial Package Air Conditioners and 
Commercial Warm Air Furnaces Working Group. Term Sheet. June 15, 
2015. Recommendation #2.
---------------------------------------------------------------------------

    The calculations provided the annual hourly cooling and fan energy 
use profiles for each building. The incremental energy savings between 
the baseline equipment and the equipment at higher efficiency levels 
was calculated for every hour for each of the 1,033 simulated 
buildings.
    The building simulations were initially performed to analyze the 
energy use of small and large CUAC equipment, but the building cooling 
loads that were modeled are representative of CUACs irrespective of 
equipment cooling capacity. Therefore, DOE believes that its method of 
using these simulations provides a good representation of very large 
equipment performance as well as small and large equipment performance.
b. Generalized Building Sample
    The NOPR analysis used a ``generalized building sample'' (GBS) to 
represent the installation conditions for the equipment covered in this 
rulemaking. The GBS was developed using data from the 2003 CBECS and 
from the Commercial Demand Module of the National Energy Modeling 
System version distributed with AEO 2013.
    Only floor space cooled by the covered equipment was included in 
the sample. Conceptually, the main difference between the GBS and the 
sample of specific commercial buildings compiled in CBECS is that the 
GBS aggregates all building floor space associated with a particular 
set of building characteristics into a single category. The set of 
characteristics that is used to define a category includes all building 
features that are expected to influence either (1) the cooling load and 
energy use or (2) the energy costs. As an outcome of the Working Group 
meetings, it was decided that the building ventilation system type 
should be included as a feature because it affects energy use. Thus, 
for the direct final rule, a category was added, defining whether the 
building ventilation system is CAV or VAV. The primary motivation for 
specifying the building ventilation system was twofold: (1) To only 
assign CAV designs to CAV buildings and (2) to prevent CAV designs from 
being assigned to VAV buildings. The first issue addressed current 
equipment selection practices, i.e., purchasers will continue to 
specify CAV designs if the building type allows for it. The second 
issue acknowledges that CAV designs are never applied to VAV buildings. 
As a result, CAV buildings received CAV, SAV or VAV designs, depending 
on the efficiency level analyzed. (ASRAC Public Meeting, No. 95, at pp. 
33-52) And since CAV designs would not be appropriate for VAV 
buildings, these buildings received either SAV or VAV designs. The set 
of building characteristics, and the specific values these 
characteristics can take, are listed in Table IV-27.

[[Page 2472]]



 Table IV-27--List of Characteristics and the Associated Values Used To
                 Define the Generalized Building Sample
------------------------------------------------------------------------
                                       Number of
          Characteristic                values         Range of values
------------------------------------------------------------------------
Region............................              10  9 census divisions
                                                     with Pacific
                                                     subdivided into
                                                     north and south.
Building Activity.................               7  assembly, education,
                                                     food service, small
                                                     office, large
                                                     office, mercantile,
                                                     warehouse.
Size (based on annual energy                     3  small: < 100,000
 consumption).                                       kWh;
                                                    medium: 100,000 to
                                                     1,000,000 kWh;
                                                    large: > 1,000,000
                                                     kWh.
Vintage...........................               3  category 1: before
                                                     1950;
                                                    category 2: 1950-
                                                     1979;
                                                    category 3: 1980 and
                                                     later.
Ventilation System Type...........               2  Constant Air Volume
                                                     (CAV);
                                                    Variable Air Volume
                                                     (VAV).
------------------------------------------------------------------------

    The region in which the building is located affects both the 
cooling loads (through the weather) and the cost of electricity. The 
building activity affects building schedules and occupancy, which in 
turn influence the demand for cooling. The building size influences the 
cost of electricity, because larger facilities tend to have lower 
marginal prices. The building vintage may influence shell 
characteristics that can affect the cooling loads. The building 
ventilation system type dictates the type of equipment design assigned 
to a building.
    As discussed with the Working Group, for the direct final rule, the 
amount of floor space allocated to each category for buildings built in 
or before 2012 was updated using the 2012 CBECS. The GBS was projected 
to 2019 (the year of the LCC analysis) using the AEO 2015 projections 
of commercial building floor space by region and building type. (ASRAC 
Public Meeting, No. 95 at pp. 10-28)
    Load profiles for each category in the GBS were developed from the 
simulation data just described. For each equipment class, a subset of 
the 1,033 buildings was used to develop the cooling energy use 
profiles. The subset included all buildings with a capacity requirement 
equal to or greater than 90 percent of the capacity of the particular 
representative unit. For each GBS type, a weighted average energy use 
profile, along with energy savings from the considered efficiency 
levels, was compiled from the simulated building subset. The average 
was taken over all buildings in the subset that have the same region, 
building type, size, and vintage category as the GBS category (load 
profiles were assumed to be independent of the building ventilation 
system type). This average was weighted by the number of units required 
to meet each building's cooling load. For some of the GBS categories, 
no simulation data were available. In these cases, the weighted-average 
energy use profile for the same building type and a nearby region or 
vintage were used.
    Updating the sample to 2019 required some additional adjustments to 
the energy use data. The 1,033 building simulations used TMY2 weather 
data that were based on 1961-1990 data. The TMY2 weather data files 
were updated to TMY3, which also incorporates 1991-2005 data, in 2008. 
A comparison of the two datasets showed that total annual cooling 
degree-days (``CDD'') increased by 5 percent at all locations used in 
this analysis. This is accounted for by increasing the energy use (for 
all efficiency levels) by 5 percent at all locations. The TMY3 dataset 
is representative of calendar year 2005. To account for changes in CDD 
(and energy use) between 2005 and 2019, DOE used the projected AEO 2015 
CDD trend, which shows an increase of approximately 0.6% per year.
    Changes to building shell characteristics and internal loads can 
lead to a change in the energy required to meet a given cooling load. 
The National Energy Modeling System (``NEMS'') commercial demand module 
accounts for these trends by adjusting the cooling energy use with a 
factor that is a function of region and building activity. These 
factors assume 100 percent compliance with existing building codes. In 
the GBS, these same factors were used to adjust the cooling energy use 
for floor space constructed after 1999. To account for more realistic 
levels of code compliance, the factors were multiplied by 0.35.
    For the Working Group's analysis, DOE removed buildings with a 
cooling load of under five tons from the original sample because these 
buildings would be more likely to be served by smaller equipment than 
the CUACs covered in this rulemaking. DOE also screened out buildings 
with more than four stories for the 7.5-ton equipment class, since such 
equipment would likely be too small to meet the cooling load. (ASRAC 
Public Meeting, No. 95 at pp. 27-28) For the 15-ton and 30-ton 
equipment classes, DOE removed buildings from consideration that have 
cooling loads low enough that multiple smaller units would likely be 
used instead of a single 15-ton or 30-ton unit. The Working Group did 
not object to these changes, and DOE incorporated them in the direct 
final rule analysis.
    Commenting on the NOPR, Rheem stated that the 1,033 simulated 
samples have limited applicability when predicting energy consumption 
in commercial buildings. Rheem questioned whether unoccupied or 
underutilized buildings were included. (Rheem, No. 70 at p. 5) AHRI and 
Nordyne commented that a generalized building sample may not accurately 
represent the energy consumption of equipment in the commercial 
building stock. They stated that benchmarked buildings are more 
effective in estimating actual energy use. (AHRI, No. 68 at p. 44; 
Nordyne, No. 61 at p. 37) Goodman commented that the ASHRAE 90.1 
committee utilized a broad spectrum of buildings from the existing 
building stock, not a generalized building sample, which Goodman 
contends is less accurate. (Goodman, No. 65 at pp. 17-18)
    The GBS includes only buildings that use covered equipment and are 
occupied with the equipment in use. Benchmarking may provide better 
estimates of energy use in individual buildings, but DOE requires a 
representation of the entire building stock, for which the only 
available data source is CBECS combined with information from building 
simulations. The ASHRAE 90.1 committee evaluated the cost-effectiveness 
of ASHRAE 90.1-2010 for new construction based on simulations of six 
building types in five

[[Page 2473]]

climate locations, a more restricted sample than what is incorporated 
in the GBS.
2. Commercial Warm Air Furnaces
    For CWAFs, DOE calculated the energy use associated with providing 
space heating in a representative sample of U.S commercial buildings 
and multi-family residential buildings. The CWAF annual energy 
consumption includes the gas and oil fuel used for space heating and 
the auxiliary electrical use associated with the furnace electrical 
components.
    DOE estimated the heating load of CWAFs in commercial buildings and 
multi-family buildings by developing building samples for each of the 
two equipment classes covered by the standards based on CBECS 2003 and 
2009 Residential Energy Consumption Survey (RECS 2009).\67\ DOE used 
the heating energy consumption reported in CBECS 2003 or RECS 2009, 
which is based on the existing heating system, to calculate the space 
heating load of each building. The heating load represents the amount 
of heating required to keep a building comfortable throughout an 
average year. This approach captures the variability in heating loads 
due to factors such as building activity, schedule, occupancy, local 
weather, and shell characteristics. The heating load estimates from 
CBECS 2003 and RECS 2009 were adjusted for average weather conditions, 
existing CWAF equipment efficiency, and for projected improvements to 
the building shell efficiency.
---------------------------------------------------------------------------

    \67\ EIA, 2009 Residential Energy Consumption Survey (Available 
at: http://www.eia.gov/consumption/residential/) (Last accessed 
April 10, 2013).
---------------------------------------------------------------------------

    Commenting on the NOPR, Goodman, Rheem, and AHRI stated that CBECS 
2003 is outdated. (CWAF: Goodman, No. 23 at p. 4; Rheem, No. 23 at p. 
6; AHRI, No. 26 at pp. 5-6) Goodman and AHRI further stated that DOE 
should use CBECS 2012 data when it is released in May 2015. (CWAF: 
Goodman, No. 23 at p. 4; AHRI, No. 26 at pp. 5-6) For the direct final 
rule, DOE used CBECS 2012 building sample characteristics to determine 
the CWAFs sample; \68\ however, DOE continued to use CBECS 2003 data 
for all other portions of its analysis because the energy use data for 
CBECS 2012 was not available at the time of the analysis.\69\
---------------------------------------------------------------------------

    \68\ Energy Information Administration (EIA), 2003 Commercial 
Building Energy Consumption Survey (Available at: http://www.eia.gov/consumption/commercial/) (Last accessed April 10, 2013). 
Note: CBECS 2012 is currently in development but not all of the 
necessary data was available in time for this rulemaking.
    \69\ The full CBECS 2012 dataset is expected to be available in 
February 2016.
---------------------------------------------------------------------------

    In addition, Goodman and AHRI stated that DOE should not consider 
RECS data as part of the CWAF rulemaking. (CWAF: Goodman, No. 23 at p. 
4; AHRI, No. 26 at pp. 5-6) Goodman stated that CWAFs installed in 
residential homes comprise a negligible percentage of CWAF 
installations. (CWAF: Goodman, No. 23 at p. 4) DOE believes that 
including CWAFs used in residential buildings provides a more complete 
picture of CWAF energy use, and that RECS provides data that reasonably 
represent multi-family buildings that use CWAFs. Based on RECS 2009 
data, DOE estimates that about two percent of commercial furnaces are 
used in multi-family residential applications.\70\
---------------------------------------------------------------------------

    \70\ EIA, 2009 Residential Energy Consumption Survey (Available 
at: http://www.eia.gov/consumption/residential/) (Last accessed 
April 10, 2013).
---------------------------------------------------------------------------

    To calculate CWAF energy consumption at each considered efficiency 
level, DOE determined the burner operating hours and equipment input 
capacity for each building. DOE used the equipment output capacity 
(determined using the TE rating) and the heating load in each building 
to determine the burner operating hours. DOE assigned the 
representative 250 kBtu/h input capacity for all CWAF efficiency 
levels.
    Commenting on the CWAF NOPR, Rheem stated that it is unreasonable 
to assume that the burner and blower run-time will vary to the extent 
that DOE estimated (nearly 0-percent on-time to 100-percent on-time in 
any range of applications). Rheem stated that the unreasonable burner 
and blower on-time assumption inflates the energy consumption at the 
baseline efficiency level and proportionately inflates the savings from 
higher efficiency. (CWAF: Rheem, No. 26 at p. 6) On the other hand, GTI 
stated that on any given building there is significant diversity in 
unit run-times. (GTI, Public Meeting Transcript, No. 17 at p. 105) In 
response, DOE did not arbitrarily assume burner operating hours would 
apply to each CWAF sample. Rather, the burner operating hours are based 
on the annual heating energy use reported for sample buildings in CBECS 
2003 and RECS 2009, as well as the assumed representative equipment 
input capacity. A wide range of burner operating hours is reflective of 
actual CWAF operation because some CWAFs in buildings with multiple 
furnaces may have limited use, while other CWAFs may serve very large 
building heating loads.
    Trane stated that many local building codes require major building 
renovations to meet new building standards, affecting the energy 
efficiency of the building stock and in turn, the calculation of energy 
use. (CWAF: Trane, No. 27 at p. 8) Goodman made a similar comment. 
(CWAF: Goodman, No. 23 at p. 4)
    DOE accounted for changes in building shell efficiency using the 
building shell efficiency index derived from the NEMS simulation 
performed for EIA's Annual Energy Outlook 2015 (AEO 2015),\71\ which 
projects changes in average building shell performance in the future. 
On average, this decreases the projected heating load for 2019 by 13 
percent compared with the CBECS or RECS-derived values.
---------------------------------------------------------------------------

    \71\ Energy Information Administration (EIA), Annual Energy 
Outlook 2015 (AEO 2015) Full Version (Available at: http://www.eia.gov/forecasts/aeo/) (Last accessed May 15, 2015).
---------------------------------------------------------------------------

    For the NOPR, DOE assumed that all CWAFs use single-stage permanent 
split capacitor motors. Lennox suggested that the analysis should take 
into account the impact of variable frequency drives that are called 
for under ASHRAE 90.1. Lennox stated that variable frequency drives 
will adjust the speed of the fans and reduce the energy use in certain 
applications. (CWAF: Lennox, Public Meeting Transcript, No. 17 at p. 
101)
    For the direct final rule, DOE used the average fan power values 
from the CUAC analysis. These fan power values include variable 
frequency drives for the very large CUAC equipment class.
    For condensing CWAFs, DOE's NOPR analysis accounted for the 
increased blower fan electricity use in the field in both heating and 
cooling mode due to the presence of the secondary heat exchanger. DOE 
also accounted for condensate line freeze protection or a condensate 
pump electricity use for a fraction of installations. Condensing CWAFs 
installed outdoors that are located in regions with an outdoor design 
temperature of <=32[emsp14][deg]F, which constitute roughly 90 percent 
of gas-fired CWAFs based on location data from CBECS 2003 and RECS 
2009, were assumed to require condensate freeze protection. All oil-
fired CWAFs are assumed to be installed indoors so condensate line 
freeze protection was assumed to not be needed.
    Lennox stated that condensing CWAFs designs require secondary heat 
exchangers, which increase static pressure in the airstream and 
pressure drop within the heat exchanger. This additional resistance 
must be overcome

[[Page 2474]]

with increased electrical power at all operating conditions, including 
in cooling and ventilation mode. (CWAF: Lennox, No. 22 at p. 6) 
Additionally, Lennox stated that enhancements that increase internal 
heat exchanger pressure drop will be needed to improve heat transfer, 
resulting in an increase in combustion air blower energy use. Further 
improvements to air-side heat transfer are needed through the use of 
baffles or increased airflow levels, which increase blower pressure 
drop and increase fan power. (CWAF: Lennox, No. 22 at p. 6) For the 
direct final rule analysis, DOE refined its approach to include the 
impact of condensing design on ventilation fan power. DOE's updated 
methodology resulted in 25 percent greater electricity use for 
condensing gas-fired CWAFs compared to non-condensing designs.
    GTI, Goodman, AHRI, and Rheem stated that an 82-percent TE minimum 
standard will require a larger heat exchanger or other design changes 
that will restrict the airflow through the unit, which will increase 
the electricity use of the blower motor. (CWAF: GTI, Public Meeting 
Transcript, No. 17 at p. 104; Goodman, No. 23 at p. 2; Rheem, No. 25 at 
pp. 4-5; AHRI, No. 26 at p. 6) DOE concluded that the static pressure 
difference for 82-percent TE compared to baseline equipment is very 
small in terms of increased electricity use, because the increase in 
heat exchanger size in going from baseline equipment to 82-percent TE 
is not large enough to cause an increase in static pressure that would 
be relevant in terms of DOE's analysis. Therefore, DOE did not include 
higher electricity use for this efficiency level.

F. Life-Cycle Cost and Payback Period Analysis

    DOE conducted LCC and PBP analyses to evaluate the economic impacts 
on representative commercial consumers of potential energy conservation 
standards for CUACs \72\ and CWAFs. The effect of new or amended energy 
conservation standards on commercial consumers usually involves a 
reduction in operating cost and an increase in purchase cost. DOE uses 
the following two metrics to measure commercial consumer impacts:
---------------------------------------------------------------------------

    \72\ As indicated previously, DOE did not conduct LCC and PBP 
analyses for CUHPs because an energy use analysis was not performed 
for this equipment.
---------------------------------------------------------------------------

     The LCC (life-cycle cost) is the total commercial consumer 
expense of an equipment over the life of that equipment, consisting of 
total installed cost (manufacturer selling price, distribution chain 
markups, sales tax, and installation costs) plus operating costs 
(expenses for energy use, maintenance, and repair). To compute the 
operating costs, DOE discounts future operating costs to the time of 
purchase and sums them over the lifetime of the equipment.
     The PBP (payback period) is the estimated amount of time 
(in years) it takes commercial consumers to recover the increased 
purchase cost (including installation) of more-efficient equipment 
through lower operating costs. DOE calculates the PBP by dividing the 
change in purchase cost at higher efficiency levels by the change in 
annual operating cost for the year that amended or new standards are 
assumed to take effect.
    For any given efficiency level, DOE measures the change in LCC 
relative to the LCC in the no-new-standards case, which reflects the 
estimated efficiency distribution of CUACs or CWAFs in the absence of 
new or amended energy conservation standards. In contrast, the PBP for 
a given efficiency level is measured relative to the baseline 
equipment.
    For each considered efficiency level in each equipment class, DOE 
calculated the LCC and PBP for the nationally representative sets of 
commercial consumers described in the preceding section. For each 
sample building, DOE determined the energy consumption for the covered 
equipment and the appropriate energy prices, thereby capturing 
variability in energy consumption and energy prices.
    Inputs to the calculation of total installed cost include the cost 
of the equipment--which includes MPCs, manufacturer, wholesaler, and 
contractor markups, and sales taxes--and installation costs. Inputs to 
the calculation of operating expenses include annual energy 
consumption, energy prices and price projections, repair and 
maintenance costs, equipment lifetimes, and discount rates. DOE created 
distributions of values for equipment lifetime, discount rates, and 
sales taxes to account for their uncertainty and variability.
    The computer model DOE uses to calculate the LCC and PBP, which 
incorporates Crystal Ball\TM\ (a commercially-available software 
program), relies on a Monte Carlo simulation to incorporate uncertainty 
and variability into the analysis. The Monte Carlo simulations randomly 
sample input values from the probability distributions and the consumer 
samples. The model calculated the LCC and PBP for products at each 
efficiency level for 10,000 buildings per simulation run.
    DOE calculates the LCC and PBP for commercial consumers as if each 
were to purchase new equipment in the expected year of compliance with 
amended standards. As discussed in section III.C, for the TSLs that 
represent the recommended standards, the compliance dates for CUACs are 
January 1, 2018, for the first tier of standards, and January 1, 2023 
for the second tier of standards, For CWAFs, the compliance date for 
the new standards is January 1, 2023. For all other TSLs examined by 
DOE, the compliance January 1, 2019 compliance date would apply. For 
purposes of the LCC and PBP analysis, DOE used 2019 as the first full 
year of compliance for all TSLs.
    For CUACs, the energy savings estimates for the efficiency levels 
associated with the equipment classes that have electric resistance 
heating or no heating were used in the LCC and PBP analysis to 
represent the equipment classes with all other types of heating.
    Table IV-28 and Table IV-29 summarize the approach and data DOE 
used to derive inputs to the LCC and PBP calculations. The subsections 
that follow provide further discussion. Details of the spreadsheet 
models, and of all the inputs to the LCC and PBP analyses, are 
contained in chapter 8 of the direct final rule TSDs and their 
appendices.

[[Page 2475]]



Table IV.28--Summary of Inputs and Methods for the LCC and PBP Analysis:
  Small, Large, and Very Large Commercial Package Air Conditioning and
                           Heating Equipment *
------------------------------------------------------------------------
              Inputs                            Method/source
------------------------------------------------------------------------
Equipment Cost....................  Derived by multiplying MPCs by
                                     manufacturer, wholesaler, and
                                     contractor markups and sales tax,
                                     as appropriate. No change over
                                     time.
Installation Costs................  Baseline installation cost
                                     determined with data from RS Means.
                                     Estimated increase in cost with
                                     increased efficiency as a function
                                     of equipment weight.
Annual Energy Use.................  See section IV.E.1.
Energy Prices.....................  Marginal and average electricity
                                     prices for each member of the GBS
                                     based on utility electricity tariff
                                     data.
Energy Price Trends...............  Based on AEO 2015 price forecasts.
Repair and Maintenance Costs......  Based on RS Means data. Cost varies
                                     by efficiency level.
Product Lifetime..................  Derived from shipments model.
Discount Rates....................  Caclulated as the weighted average
                                     cost of capital for businesses
                                     purchasing CUACs. Primary data
                                     source was Damodaran Online.
Compliance Date...................  2019 (for purpose of analysis).
------------------------------------------------------------------------
* References for the data sources mentioned in this table are provided
  in the sections following the table or in chapter 8 of the direct
  final rule TSD.


Table IV.29--Summary of Inputs and Methods for the LCC and PBP Analysis:
                      Commercial WarmAir Furnaces *
------------------------------------------------------------------------
              Inputs                            Method/Source
------------------------------------------------------------------------
Equipment Cost....................  Derived by multiplying MPCs by
                                     manufacturer, wholesaler, and
                                     contractor markups and sales tax,
                                     as appropriate. Used historical
                                     data to derive a price scaling
                                     index to forecast product costs.
Installation Costs................  Cost determined with data from RS
                                     Means. Cost increases with
                                     efficiency.
Annual Energy Use.................  The total fuel use plus electricity
                                     use per year. Number of operating
                                     hours and energy use based on the
                                     2003 CBECS and 2009 RECS.
Energy Prices.....................  Natural Gas: Based on EIA's Natural
                                     Gas Navigator data for 2012. Fuel
                                     Oil and LPG: Based on EIA's State
                                     Energy Consumption, Price, and
                                     Expenditures Estimates (SEDS) for
                                     2012.
                                    Electricity: Based on EIA's Form 826
                                     data for 2012.
Energy Price Trends...............  Based on AEO 2015 price forecasts.
Repair and Maintenance Costs......  Based on RS Means data. Assumed
                                     variation in cost by efficiency.
Product Lifetime..................  Gas-fired CWAF: Based on the 2014
                                     NOPR for CUAC equipment.
                                    Oil-fired CWAF: Based on the
                                     residential oil-fired furnace
                                     lifetime distribution in the 2009
                                     residential furnaces direct final
                                     rule.
Discount Rates....................  Caclulated as the weighted average
                                     cost of capital for businesses
                                     purchasing CWAFs. Primary data
                                     source was Damodaran Online.
Compliance Date...................  2019 (2023 for TSL 2).
------------------------------------------------------------------------
* References for the data sources mentioned in this table are provided
  in the sections following the table or in chapter 8 of the direct
  final rule TSD.

1. Equipment Cost
    To calculate commercial consumer equipment costs, DOE multiplied 
the MPCs developed in the engineering analysis by the markups described 
in section IV.D (along with sales taxes). DOE used different markups 
for baseline equipment and higher-efficiency equipment, because DOE 
applies an incremental markup to the increase in MSP associated with 
higher-efficiency equipment.
    The equipment costs estimated in the engineering analysis refer to 
costs when the analysis was conducted. To project the costs in the 
compliance years, DOE developed cost trends based on historical trends.
    For CUACs, DOE derived an inflation-adjusted index of the producer 
price index (PPI) for ``unitary air-conditioners, except air source 
heat pumps'' from 1978 to 2014.\73\ Although the inflation-adjusted PPI 
index shows a long-term declining trend, data for the last decade have 
shown a flat-to-slightly rising trend. Given the uncertainty as to 
which of the trends will prevail in coming years, DOE chose to apply a 
constant price trend (2013 levels) for the LCC and PBP analysis.
---------------------------------------------------------------------------

    \73\ Product series ID: PCU333&415333415E: Unitary air-
conditioners, except air source heat pumps. (Available at: 
www.bls.gov/ppi/).
---------------------------------------------------------------------------

    Commenting on the CUAC/CUHP NOPR, ASAP encouraged DOE to attempt to 
capture price trends of technologies that can improve efficiency of air 
conditioners and heat pumps. In its view, the prices of technologies 
used in high-efficiency equipment are likely to decline much faster 
than the total price of the equipment. With respect to CUACs and CUHPs, 
ASAP expects the prices of brushless permanent magnet fan motors and 
variable-speed supply fans to decline faster than the total price of 
the equipment. ASAP recommended that DOE use a component-based price 
trend. (ASAP, No. 69 at p. 8)
    DOE acknowledges that the price of more recently introduced 
components may decline faster than the total price of the equipment. 
However, it is not aware of data that would allow estimation of a trend 
for such components and ASAP provided none. Accordingly, DOE did not 
use a separate price trend for technologies used in high-efficiency 
equipment.
    For CWAFs, DOE used the historic trend in the PPI for ``Warm air 
furnaces'' \74\ to estimate the change in price between the present and 
the compliance years. The inflation-

[[Page 2476]]

adjusted PPI for ``Warm air furnaces'' shows a small rate of annual 
price decline.
---------------------------------------------------------------------------

    \74\ Product series ID: PCU333415333415C: Warm air furnaces 
including duct furnaces, humidifiers and electric comfort heating. 
(Available at: http://www.bls.gov/ppi/).
---------------------------------------------------------------------------

2. Installation Cost
    Installation cost includes labor, overhead, and any miscellaneous 
materials and parts needed to install the equipment.
a. Small, Large, and Very Large Commercial Package Air Conditioning and 
Heating Equipment
    For the CUAC/CUHP NOPR, DOE derived installation costs for CUACs 
equipment from current RS Means data.\75\ Based on these data, DOE 
concluded that data for 7.5-ton, 15-ton, and 30-ton rooftop air 
conditioners would be sufficiently representative of the installation 
costs for the >=65,000 Btu/h to <135,000 Btu/h, >=135,000 Btu/h to 
<240,000 Btu/h, and >=240,000 Btu/h to <760,000 Btu/h air conditioning 
equipment classes, respectively. Within a given capacity (equipment 
class), DOE chose to vary installation costs in direct proportion to 
the physical weight of the equipment. The weight of the equipment in 
each class and efficiency level was determined through the engineering 
analysis. Because labor rates vary significantly in each region of the 
country, DOE used RS Means data to identify how installation costs vary 
among regions and incorporated these costs into the analysis.
---------------------------------------------------------------------------

    \75\ http://www.rsmeansonline.com; Accessed March 27, 2013.
---------------------------------------------------------------------------

    Commenting on the CUAC/CUHP NOPR, Carrier stated that RS Means 
should be used for installation cost based on unit tonnage, not weight 
or physical characteristics. (Carrier, No. 48 at p. 6) Trane and 
Goodman commented that RS Means underestimates installation costs. 
(Trane, No. 63 at p. 9; Goodman, No. 65 at p. 19) Rheem stated that the 
costs should include regional adjustments and demolition costs for 
removal of existing equipment. (Rheem, No. 70 at p. 5)
    The Working Group debated the validity of DOE's method to vary 
installation costs in direct proportion to the physical weight of the 
equipment, and also discussed the cost of using a crane and whether the 
cost varies with efficiency. (ASRAC Public Meeting, No. 95 at pp. 103-
126) DOE found that crane costs do not vary except past a threshold 
that is not relevant for this equipment. Because the Working Group did 
not find a compelling basis to recommend changes to DOE's method, DOE 
retained the approach used in the NOPR for the direct final rule (ASRAC 
Public Meeting, No. 96 at pp. 202-235). However, for a certain fraction 
of the market, DOE included additional costs for installing a 
conversion curb to accommodate equipment designs with large footprints. 
The cost was based on several factors, including equipment class, 
weight, and brand. As discussed by the Working Group, the fraction of 
the market that would require a conversion curb increases with 
efficiency. (ASRAC Public Meeting, No. 98 at pp. 17-20) The conversion 
curb costs for the small, large and very large CUAC equipment classes 
are $1,000, $1,750, and $4,000, respectively. (ASRAC Public Meeting, 
No. 96 at pp. 235-237) The installation costs used for the direct final 
rule include removal of existing equipment.
    Carrier expressed concern that the variable-speed fan technology 
applied to supply fans at higher efficiency levels may have an 
additional cost increase to customers who are replacing equipment. It 
noted that many of these older building designs may need either the 
ductwork and/or the diffusers to be modified or replaced, as their 
designs may not be capable of managing the lower velocities that will 
occur with variable-speed supply fans. It added that if the ductwork/
diffuser designs are not capable of these reduced velocities, then 
significant thermal discomfort can result and may actually cause 
increased equipment run-time due to poor air distribution within the 
occupied space. (Carrier, No. 48 at p. 2)
    Based on the Working Group discussions, DOE included additional 
installed costs for adding controls (e.g., thermostats) in CAV 
buildings to accommodate SAV and VAV equipment designs. (ASRAC Public 
Meeting, No. 95 at pp. 126-134) However, DOE did not include additional 
costs for replacing diffusers based on research commissioned by 
ASHRAE.\76\ The research found that diffusers used in CAV buildings can 
also be used to accommodate single-zone SAV and VAV equipment. 
Specifically, CAV diffusers can provide proper air distribution for air 
volumes as low as 10-percent of full volume. (ASRAC Public Meeting, No. 
96 at pp. 238-247)
---------------------------------------------------------------------------

    \76\ Arens, et al. Thermal and air quality acceptability in 
buildings that reduce energy by reducing minimum airflow from 
overhead diffusers. ASHRAE RP-1515: Final Report, Center for the 
Built Environment--University of California, Berkeley (2012).
---------------------------------------------------------------------------

b. Commercial Warm Air Furnaces
    For the CWAF NOPR, DOE used data from the 2013 RS Means Mechanical 
Cost Data \77\ to estimate the baseline installation cost. For CWAFs 
with condensing designs, DOE accounted for additional installation 
costs for condensate removal, which includes condensate drainage, 
freeze protection, and treatment. DOE also accounted for meeting the 
venting requirements for oil-fired commercial warm air furnaces, as 
well as for the small fraction of gas commercial warm air furnaces 
installed indoors.
---------------------------------------------------------------------------

    \77\ RS Means, 2013 Mechanical Cost Data (Available at: http://rsmeans.reedconstructiondata.com/60023.aspx) (Last accessed April 
10, 2013).
---------------------------------------------------------------------------

    Commenting on the CWAF NOPR, AGA stated that if the revised 
standard mandates condensing technology, installing condensing furnaces 
in many existing buildings would require additional installation 
requirements and costs to properly address condensate disposal issues, 
including the freezing of the condensate for commercial furnaces in 
outdoor installations that are typical for commercial buildings. AGA 
stated that DOE has not fully considered these added installation costs 
in its analysis. (CWAF: AGA, No. 20 at p. 2)
    In the NOPR (as well as for the direct final rule), DOE included 
the cost of condensate disposal in the installation cost for condensing 
CWAFs in indoor and outdoor installations. It included the cost of a 
condensate pipe, condensate pump, use of heat tape for outdoor 
installations, additional electrical outlet for heat tape and 
condensate pump, and condensate neutralizer, when applicable, based on 
the installation location of the CWAFs and building characteristics 
reported in CBECS 2003 and RECS 2009. The use of heat tape was 
determined based on weather data from NOAA. DOE notes that the adopted 
standards do not require condensing technology. The details of the 
condensate removal costs are provided in appendix 8D of the direct 
final rule TSD.
    AHRI stated that the standards may increase the size of the unit, 
which would potentially require rework of the installation platform. 
(CWAF: AHRI, No. 17 at pp. 185-186) Similarly, Lennox stated that DOE 
should consider the cost involved in converting existing building stock 
to accept larger footprint products and the renovation needed to accept 
a larger roof curb or an adapter curb. (CWAF: Lennox, No. 22 at p. 10)
    DOE assumed in the engineering analysis that the increase in 
condensing CWAF unit size from the use of larger heat exchangers would 
only impact the height, and no change in the cabinet size of higher 
efficiency non-condensing CWAFs would be needed. Furthermore, the CUAC 
analysis already accounted for additional costs for installing a

[[Page 2477]]

conversion curb to accommodate equipment designs with larger 
footprints, making it unnecessary to consider such costs for CWAFs, 
most of which are packaged with CUACs.
    AHRI stated that although 82-percent TE CWAFs are not designed for 
condensing, there will be conditions that make condensate production a 
much greater concern than for indoor furnaces. (CWAF: AHRI, No. 26 at 
p. 2) Goodman stated that in field installations, the likelihood of 
condensate production in 82-percent TE weatherized CWAFs is much higher 
than in the lab, particularly in cold climates and at higher altitudes. 
Goodman stated that prolonged exposure to condensate in 82-percent TE 
CWAFs will corrode major components within the CWAFs and will lead to 
reliability issues. (CWAF: Goodman, No. 23 at pp. 2-3) Similarly, Trane 
stated that there are condensate issues for both 82-percent TE and 
condensing CWAFs that will need to be addressed by the installer. Trane 
stated that to have a redundant protection against roof membrane 
failure, builders or installers may need to upgrade the roof around the 
CWAFs, which was not taken into account in DOE's analysis. Trane added 
that 82-percent TE CWAFs still need heat tape to be energized 
continuously in the winter months for the condensate not to freeze, 
which DOE's analysis did not take into account. (CWAF: Trane, No. 27 at 
p. 7) Lennox stated that due to the introduction of condensate at 82-
percent TE and above, many components will be susceptible to corrosion. 
(CWAF: Lennox, No. 22 at p. 10)
    As discussed with the Working Group, for the direct final rule 
analysis, DOE did not apply a cost of a condensate withdrawal system or 
heat tape for non-condensing CWAFs (i.e., 82-percent TE) because these 
models do not produce enough condensate to require withdrawal from the 
unit, as is shown by the lack of equipment at this efficiency that 
require the use a condensate withdrawal system in the installation and 
operation manual. DOE did not apply redundant protection against roof 
membrane failure for condensing CWAFs, because it assumed that roof 
changes would already be done to accommodate the condensate from the 
CUAC unit (see section IV.F.2.a). See appendix 8D of the CWAF direct 
final rule TSD for more details.
    Trane stated that calculating the total installed cost for the 
furnace separately from the entire rooftop unit (``RTU'') is not 
realistic, as replacing a failed CWAF would incur the full cost of the 
RTU even if the cooling side was still operating. (CWAF: Trane, Public 
Meeting Transcript, No. 17 at p. 128) Lennox agreed with this view. 
(CWAF: Lennox, Public Meeting Transcript, No. 17 at p. 130)
    DOE's analyses for CWAFs and CUACs accounted for the likelihood 
that failure of either the CWAF or the CUAC would lead to replacement 
of the entire RTU. In calculating installation costs for CWAFs, DOE 
took into account only the additional costs that would be required for 
the furnace component, since all other installation components are 
already accounted for in the CUAC analysis.
3. Annual Energy Consumption
    The calculation of annual per-unit energy consumption at each 
considered efficiency level is described above in section IV.E.
    DOE typically considers the potential for a rebound effect, which 
occurs when a piece of equipment that is made more efficient is used 
more intensively, such that the expected energy savings from the 
efficiency improvement may not fully materialize.
    Commenting on the CUAC/CUHP NOPR, Rheem agreed that it is 
appropriate to not include a rebound effect. (CUAC: Rheem, No. 70 at p. 
7) Commenting on the CWAF NOPR, Rheem stated generally that no rebound 
effect exists for a commercial furnace because the person who pays the 
energy bill is usually not the building occupant, but such an effect 
could exist where the person who pays the energy bill is also the 
building occupant. (CWAF: Rheem, No. 25 at p. 7) AHRI agreed that there 
is minimum rebound effect associated with a higher efficiency standard 
for commercial furnaces. (CWAF: AHRI, No. 26 at p. 6) In contrast, 
Trane commented that DOE had previously included a rebound effect for 
residential air conditioners and furnaces, and it noted that EIA 
includes a rebound effect for CWAFs in the AEO. It recommended that 
this effect be included in DOE's analyses until data are developed 
proving it is not warranted or until EIA drops it from the AEO. (CWAF: 
Trane, No. 27 at p. 7)
    DOE conducted a literature review on the direct rebound effect in 
commercial buildings, and found very few studies, especially with 
regard to space heating and cooling. In a paper from 1993, Nadel 
describes several studies on takeback in the wake of utility lighting 
efficiency programs in the commercial and industrial sectors.\78\ The 
findings suggest that in general the rebound associated with lighting 
efficiency programs in the commercial and industrial sectors is very 
small. In a 1995 paper, Eto et al.\79\ state that changes in energy 
service levels after efficiency programs have not been studied 
systematically for the commercial sector. They state that while pre-/
post-billing analyses can implicitly pick up the energy use impacts of 
amenity changes resulting from program participation, the effect is 
usually impossible to isolate. A number of programs attempted to 
identify changes in energy service levels through customer surveys. 
Five concluded that there was no evidence of takeback, while two 
estimated small amounts of takeback for specific end uses, usually less 
than 10-percent. A recent paper by Qiu,\80\ which describes a model of 
technology adoption and subsequent energy demand in the commercial 
building sector, does not present specific rebound percentages, but the 
author notes that compared with the residential sector, rebound effects 
are smaller in the commercial building sector. An important reason for 
this is that in contrast to residential heating and cooling, HVAC 
operation adjustment in commercial buildings is driven primarily by 
building managers or owners. The comfort conditions are already 
established in order to satisfy the occupants, and they are unlikely to 
change due to installation of higher-efficiency equipment. While it is 
possible that a small degree of rebound could occur for higher-
efficiency CUACs/CUHPs and CWAFs, there is no basis to select a 
specific value. Because the available information suggests that any 
rebound would be small to negligible, DOE did not include a rebound 
effect for the direct final rule.
---------------------------------------------------------------------------

    \78\ S. Nadel (1993). The Takeback Effect: Fact or Fiction? 
Conference paper: American Council for an Energy-Efficient Economy.
    \79\ Eto et al. (1995). Where Did the Money Go? The Cost and 
Performance of the Largest Commercial Sector DSM Programs. LBL-3820. 
Lawrence Berkeley National Laboratory, Berkeley, CA.
    \80\ Qui, Y. (2014). Energy Efficiency and Rebound Effects: An 
Econometric Analysis of Energy Demand in the Commercial Building 
Sector. Environmental and Resource Economics, 59(2): 295-335.
---------------------------------------------------------------------------

    Regarding Trane's comment, DOE has confirmed that EIA includes a 
rebound effect for several end-uses in the commercial sector, including 
heating and cooling, as well as improvements in building shell 
efficiency in its AEO reports.\81\ The DOE analysis presented

[[Page 2478]]

here does not include either the rebound effect for building shell 
efficiency or the rebound effect for equipment efficiency as is 
included in the AEO, and therefore cannot definitively assess what the 
impact of including the rebound effect would have on this analysis. For 
example, if the building shell efficiency improvements included in the 
AEO reduced heating and cooling load by 10 percent and the rebound 
effect on building shell efficiency was assumed to be 10 percent, the 
total impact would be to reduce heating and cooling loads by 9 percent. 
The DOE analysis presented here includes only the building shell 
improvements from the AEO but not the rebound effect on the building 
shell efficiency improvements. DOE estimates that a rebound effect of 
10 percent on CUAC/CUHP/CWAF efficiency for heating and cooling 
improvements could reduce the energy savings by 1.5 quads (10 percent) 
over the analysis period. However, this ignores that the rule would 
have saved more than 15 quads had the building shell efficiency rebound 
effect included in the AEO was also included in DOE's analysis.
---------------------------------------------------------------------------

    \81\ Energy Information Administration, Commercial Demand Module 
of the National Energy Modeling System: Model Documentation 2013, 
Washington, DC, November 2013, page 57. The building shell 
efficiency improvement index in the AEO accounts for reductions in 
heating and cooling load due to building code enhancements and other 
improvements that could reduce the buildings need for heating and 
cooling.
---------------------------------------------------------------------------

4. Energy Prices
    For the CUAC/CUHP NOPR, DOE used the electricity tariff data 
developed for the 2004 ANOPR, which were based on tariffs from a 
representative sample of electric utilities, to derive marginal and 
average electricity prices for each member of the GBS. The approach 
uses tariff data that have been processed into commercial building 
marginal and average electricity prices.\82\
---------------------------------------------------------------------------

    \82\ Coughlin, K., C. Bolduc, R. Van Buskirk, G. Rosenquist and 
J.E. McMahon. Tariff-based Analysis of Commercial Building 
Electricity Prices. 2008. Lawrence Berkeley National Laboratory: 
Berkeley, CA. Report No. LBNL-55551.
---------------------------------------------------------------------------

    The CBECS 1992 and CBECS 1995 surveys provide monthly electricity 
consumption and demand for a large sample of buildings. DOE used these 
values to help develop usage patterns associated with various building 
types. Using these monthly values in conjunction with the tariff data, 
DOE calculated monthly electricity bills for each building. The average 
price of electricity is defined as the total electricity bill divided 
by total electricity consumption. Two marginal prices are defined, one 
for electricity demand (in $/kW) and one for electricity consumption 
(in $/kWh). These marginal prices are calculated by applying a five-
percent decrement to the CBECS demand or consumption data and 
recalculating the electricity bill.
    Using the prices derived from the above method, an average price 
and a marginal price were assigned to each building in the GBS. For 
each member of the GBS, these prices were calculated as the average, 
weighted by floor space and survey sample weight, of all buildings in 
the CBECS 1992 and 1995 data meeting the set of characteristics 
defining the generalized building (i.e., region, vintage, building 
activity, and building energy consumption). As most tariffs are 
seasonal, average and marginal prices are calculated separately for 
summer (May-September) and winter.
    The average summer or winter electricity price multiplied by the 
baseline summer or winter electricity consumption for equipment of a 
given capacity defines the baseline LCC. For each efficiency level, the 
operating cost savings are calculated by multiplying the electricity 
consumption savings (relative to the baseline) by the marginal 
consumption price and the electricity demand reduction by the marginal 
demand price. The consumer's electricity bill is only affected by the 
electricity demand reduction that is coincident with the building's 
monthly peak load. Air-conditioning loads are strongly, but not 
perfectly, peak-coincident. Divergences between the building peak and 
the air conditioning peak were accounted for by multiplying the 
electricity demand reduction by a random factor drawn from a triangular 
distribution centered at 0.9 +/- 0.1.
    The tariff-based prices were updated to 2013 using the commercial 
electricity price index published in the AEO (editions 2009 through 
2012). An examination of data published by the Edison Electric 
Institute \83\ 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.
---------------------------------------------------------------------------

    \83\ Edison Electric Institute. EEI Typical Bills and Average 
Rates Report (bi-annual, 2007-2012). Washington, DC.
---------------------------------------------------------------------------

    There were no comments on the NOPR methodology, and DOE retained 
the approach used for NOPR for the direct final rule.
    For CWAFs, DOE derived average and marginal monthly energy prices 
for a number of geographic areas in the United States using the latest 
data from EIA (Form 861 data \84\ to calculate commercial electricity 
prices, Natural Gas Navigator \85\ to calculate commercial natural gas 
prices, and State Energy Data System (SEDS) \86\ to calculate LPG and 
fuel oil prices) and monthly energy price factors that it developed. 
Average energy prices are applied to the no-new-standards case energy 
use, while marginal prices are applied to the differential energy use 
from the higher efficiency options. This process assigns an appropriate 
energy price to each commercial building and household in the sample, 
depending on its sector (commercial or residential) and location.
---------------------------------------------------------------------------

    \84\ Energy Information Administration (EIA), Survey form EIA-
861--Annual Electric Power Industry Report (Available at: http://www.eia.gov/electricity/data/eia861/index.html) (Last accessed July 
15, 2015).
    \85\ Energy Information Administration (EIA), Natural Gas 
Navigator (Available at: http://tonto.eia.doe.gov/dnav/ng/ng_pri_sum_dcu_nus_m.htm) (Last accessed July 15, 2015).
    \86\ Energy Information Administration (EIA), State Energy Data 
System (SEDS) (Available at: http://www.eia.gov/state/seds/) (Last 
accessed July 15, 2015).
---------------------------------------------------------------------------

    AGA stated that DOE's methodology for calculating marginal natural 
gas prices results in higher prices than using individual natural gas 
utility tariffs, thus overstating the energy cost savings. (CWAF: AGA, 
No. 20 at p. 2) However, AGA did not provide data on natural gas 
utility tariffs that would enable DOE to modify its method. As a 
result, DOE could not evaluate whether AGA's claim is based on a sample 
that is representative of CWAFs users. Thus, DOE retained the approach 
used in the NOPR for the direct final rule.
    For CUACs and CWAFs, to estimate energy prices in future years, DOE 
multiplied the recent energy prices by the forecast of annual change in 
national-average commercial energy prices in the Reference case from 
AEO 2015, which has an end year of 2040. To estimate price trends after 
2040, DOE used the average annual rate of change in prices from 2030 to 
2040.
    For further discussion of energy prices, see chapter 8 of the 
direct final rule TSDs.
5. Maintenance and Repair Costs
    Maintenance costs are expenses associated with ensuring continued 
operation of the covered equipment over time. DOE developed maintenance 
costs for its analysis using 2013 RS Means Facilities Maintenance & 
Repair Cost Data.\87\ These data provide estimates of person-hours, 
labor rates, and materials required to maintain commercial air 
conditioning equipment and furnaces.
---------------------------------------------------------------------------

    \87\ RS Means, 2013 Facilities Maintenance & Repair Cost Data 
(Available at: http://rsmeans.reedconstructiondata.com/60303.aspx) 
(Last accessed April 10, 2013).
---------------------------------------------------------------------------

    In response to the CUAC/CUHP NOPR, AHRI and Nordyne commented that 
RS Means maintenance costs do not reflect the normal amounts incurred 
by customers, which is double RS Means. (AHRI, No. 68 at p. 44; 
Nordyne, No. 61

[[Page 2479]]

at p. 38) Lennox, Goodman and Trane commented that RS Means 
significantly underestimates preventative maintenance costs. (Lennox, 
No. 60 at p. 15; Goodman, No. 65 at pp. 19-20; Trane, No. 63 at p. 9) 
Carrier and Goodman stated that maintenence costs are likely to 
increase with efficiency. (Carrier, No. 48 at pp. 5-6; Goodman, No. 65 
at p. 20)
    The Working Group discussed maintenence costs and generally agreed 
with DOE's approach. (ASRAC Public Meeting, No. 95 at pp. 139-143). 
Accordingly, DOE retained this approach for the direct final rule.
    For the CWAF NOPR, DOE included increased maintenance costs for 
condensing equipment. For condensing gas-fired commercial warm air 
furnaces, DOE added labor and material costs to account for checking 
the condensate withdrawal system, including: Inspecting, cleaning, and 
flushing the condensate trap and drain tubes; inspecting the grounding 
and power connection of heat tape; checking condensate neutralizer; and 
checking condensate pump for corrosion and proper operation. For 
condensing oil-fired commercial warm air furnaces, DOE added additional 
maintenance for installations in non-low-sulfur regions to account for 
extra cleaning of the heat exchanger for condensing designs, as well as 
checking of the condensate withdrawal system. DOE did not receive any 
comments on this issue, and retained the same approach for the direct 
final rule.
    Repair costs are expenses associated with repairing or replacing 
components of the covered equipment that have failed.
    For the CUAC/CUHP NOPR, DOE assumed that any routine or minor 
repairs are included in the maintenance costs. As a result, repair 
costs were not explicitly modeled in the LCC and PBP analysis. Instead, 
DOE incorporated a one-time cost for major repair (compressor 
replacement) as a primary input to the repair/replace consumer choice 
model in the shipments analysis, which models the decision between 
repairing a broken unit and replacing it.
    DOE proposed to the Working Group to include compressor repairs in 
the LCC and PBP analysis because such repair work would occur 
regardless of whether new standards are set (ASRAC Public Meeting, No. 
96 at pp. 247-248) The Working Group agreed with this proposal, and, 
because the Working Group estimated that compressor repairs occur later 
in a CUAC's life, suggested that this type of repair be assumed to take 
place in the 13th year. For the direct final rule, compressor repair 
costs are based on material costs from Grainger (a provider of 
commercial and industrial supplies) and labor costs from RS Means, and 
are assumed to scale with equipment price. The cost is applied to 20 
percent of consumers, representing the portion of the population that 
chooses to repair rather than replace in the no-standards case. DOE 
also included non-compressor repairs, conducted in the 7th year, for 
all consumers (ASRAC Public Meeting, No. 96 at pp. 247-248).
    For CWAFs, DOE developed repair costs for its analysis using 2013 
RS Means Facilities Maintenance & Repair Cost Data.\88\ DOE included 
additional repair costs for higher efficiency levels (i.e., condensing 
furnaces).
---------------------------------------------------------------------------

    \88\ RS Means, 2013 Mechanical Cost Data (Available at: http://rsmeans.reedconstructiondata.com/60023.aspx) (Last accessed April 
10, 2013).
---------------------------------------------------------------------------

    Lennox stated that due to the introduction of condensate at a TE 
level of 82-percent and above, many components will be susceptible to 
corrosion, thus requiring components to be replaced more frequently. 
(CWAF: Lennox, No. 22 at p. 10) For the direct final rule, DOE assumed 
that all 82-percent TE CWAFs use stainless steel heat exchangers to 
resist corrosion; therefore, DOE did not assume any difference in 
repair frequency for 82-percent TE CWAFs.
    See chapter 8 of the direct final rule TSDs for more details on 
maintenance and repair costs.
6. Equipment Lifetime
    Equipment lifetime is the age at which a unit of covered equipment 
is retired from service. For the LCC and PBP analysis, DOE develops a 
distribution of lifetimes to reflect variability in equipment lifetimes 
in the field.
a. Small, Large, and Very Large Commercial Package Air Conditioning and 
Heating Equipment
    For the CUAC/CUHP NOPR, DOE used lifetime distributions based on 
calibration of the shipments model (see section IV.G.1). The mean 
lifetimes were 18.4 years for CUACs and 15.2 years for CUHPs. AHRI and 
Nordyne commented that the equipment lifetime assumptions are incorrect 
and that a lifetime range of 12-15 years is more appropriate for 
equipment in this rulemaking. (AHRI, No. 68 at p. 45; Nordyne, No. 61 
at p. 35) Goodman commented that the lifetimes should be different for 
each equipment class. (Goodman, No. 65 at pp. 20-21)
    The Working Group accepted DOE's approach of using the shipments 
model to determine equipment lifetime, along with extension of the 
equipment lifetime due to inclusion of compressor repairs. The group 
asked DOE to use more recent shipments data. AHRI provided recent data, 
but it was not representative of entire industry shipments, so DOE 
continued to use the shipments data from the NOPR analysis (ASRAC 
Public Meeting, No. 98 at pp. 125-133). Also, as discussed later in 
section IV.F.8.a, DOE also incorporated AHRI's more recent data into 
its analysis. For the direct final rule, the LCC analysis used lifetime 
distributions based on the revised shipments model (see section 
IV.G.1), which makes distinct estimates for each of the CUAC equipment 
classes.
b. Commercial Warm Air Furnaces
    In addressing gas-fired CWAFs, DOE's CWAF NOPR used the same 
lifetime probability distribution that was developed in the NOPR 
analysis for small, large, and very large air-cooled commercial package 
air conditioning and heating equipment.\89\ For oil-fired CWAFs, DOE 
used a lifetime Weibull probability distribution based on a method that 
utilizes national survey data,\90\ which resulted in a 26-year average 
lifetime. DOE expects the lifetime of the equipment to not change due 
to any new energy efficiency standards.
---------------------------------------------------------------------------

    \89\ Technical Support Document for Small, Large, and Very Large 
Commercial Package Air Conditioners and Heat Pumps Notice of 
Proposed Rulemaking (Available at: http://www.regulations.gov/#!documentDetail;D=EERE-2013-BT-STD-0007-0027).
    \90\ Lutz, J., A. Hopkins, V. Letschert, V. Franco, and A. 
Sturges. Using national survey data to estimate lifetimes of 
residential appliances. HVAC&R Research (2011) 17(5): pp. 28 
(Available at: http://www.tandfonline.com/doi/abs/10.1080/10789669.2011.558166).
---------------------------------------------------------------------------

    Commenting on the CWAF NOPR, AHRI stated that the analysis 
overestimates the average lifetime of a commercial furnace, and that 
the proposed standard of 82-percent TE will reduce the life of the 
equipment. (CWAF: AHRI, No. 26 at pp. 2, 6)
    As discussed with the Working Group, for the direct final rule 
analysis, DOE based the lifetime estimate for both gas-fired and oil-
fired CWAFs on the revised CUAC lifetime. (ASRAC Public Meeting, No. 43 
at p. 8) DOE does not believe a standard at 82-percent TE would reduce 
the life of equipment that use stainless steel heat exchangers for 
installations where such material would prevent corrosion issues. 
Therefore, as described in section IV.C.3.b, DOE assumed in its 
analysis that all 82-percent TE CWAFs would use stainless steel heat 
exchangers. In any case, DOE

[[Page 2480]]

notes that the standard adopted for gas-fired CWAFs does not require 
82-percent TE.
7. Discount Rates
    The discount rate is the rate at which future expenditures or 
savings are discounted to estimate their present value. The weighted 
average cost of capital is commonly 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 their cost of capital is the weighted average of the 
cost to the firm of equity and debt financing. DOE estimated the cost 
of equity using the capital asset pricing model, which assumes that the 
cost of equity for a particular company is proportional to the 
systematic risk faced by that company.
    The primary source of data for this analysis was Damodaran Online, 
a widely used source of information about company debt and equity 
financing for most types of firms.\91\ In analyzing these data, DOE 
estimated a separate weighted average cost of capital for each business 
sector that purchases CUACs and CWAFs. More details regarding DOE's 
estimates of consumer discount rates are provided in chapter 8 of the 
direct final rule TSDs.
---------------------------------------------------------------------------

    \91\ Damodaran Online, The Data Page: Cost of Capital by 
Industry Sector, 2001-2013. (Last accessed March, 2014.) See: http:/
/pages.stern.nyu.edu/~adamodar/.
---------------------------------------------------------------------------

8. Efficiency Distribution in the No-New-Standards Case
    To accurately estimate the share of commercial consumers that would 
be affected by a potential energy conservation standard at a particular 
efficiency level, DOE's LCC analysis considered the distribution 
(market shares) of equipment efficiencies projected for the compliance 
years in the no-new-standards case (i.e., the case without amended or 
new energy conservation standards).
a. Small, Large, and Very Large Commercial Package Air Conditioning and 
Heating Equipment
    For the CUAC/CUHP NOPR, DOE used a consumer choice model to 
estimate efficiency market shares in the expected compliance year. The 
consumer choice model considers customer sensitivity to total 
installation cost and annual operating cost. DOE used efficiency market 
share data for 1999-2001, based on model availability data from the 
AHRI-certified directory, to develop the parameters of the consumer 
choice model in the shipments analysis. Using these parameters, the 
model estimated the shipments at each IEER level based on the installed 
cost and operating cost at each efficiency level.
    During the Working Group meetings, DOE requested data that might 
improve the efficiency distribution in the no-new-standards case. AHRI 
provided recent market share data by efficiency based on shipments. 
Using these data in preparing the analysis for the direct final rule, 
DOE extended the AHRI data to 2019 to estimate efficiency market shares 
for each equipment class in the no-new-standards case.\92\ These shares 
are presented in chapter 8 of the direct final rule TSD.
---------------------------------------------------------------------------

    \92\ DOE used the 2019 efficiency distribution for all of the 
TSLs analyzed, including the Recommended TSL.
---------------------------------------------------------------------------

    As discussed in section IV.E.1, DOE assigned CAV designs to CAV 
buildings and SAV and VAV designs to VAV buildings. Therefore, DOE 
needed to develop separate efficiency distributions for CAV, SAV, and 
VAV designs for each equipment class. AHRI provided market share data 
based on shipments of each design, which DOE used for the direct final 
rule analysis. (ASRAC Public Meeting, No. 98 at pp. 22-37). These data 
were incorporated into the NIA spreadsheet model that DOE developed. 
The distributions used are presented in chapter 8 of the direct final 
rule TSD.
b. Commercial Warm Air Furnaces
    For the CWAF NOPR, DOE developed the current distribution of 
equipment shipments by efficiency level for the CWAF equipment classes 
for 2013 based on the number of models at different efficiency levels 
from AHRI's Certification Directory for Commercial Furnaces.\93\ These 
data show no market share for condensing CWAFs. For condensing gas-
fired CWAFs, however, DOE found that models from non-AHRI member 
manufacturers are just now becoming available, so DOE estimated a 
market share of one percent by 2018 based on the fraction of condensing 
models available in 2013.
---------------------------------------------------------------------------

    \93\ AHRI, 2013 AHRI Certification Directory for Commercial 
Furnaces (Available at: http://www.ahridirectory.org/ahridirectory/pages/home.aspx) Last accessed Oct. 15, 2013).
---------------------------------------------------------------------------

    Commenting on the NOPR, Lennox stated that its CWAFs are expected 
to remain at 80-percent TE for the foreseeable future, as there is 
little market demand for higher-efficiency furnaces in the commercial 
sector. (CWAF: Lennox, No. 22 at pp. 10-11) As discussed with the 
Working Group, to estimate the efficiency distribution of CWAFs for the 
direct final rule, DOE updated its analysis using the most recent AHRI 
Certification Directory for Commercial Furnaces.\94\ (ASRAC Public 
Meeting, No. 43 at pp. 7-8) These data include most manufacturers of 
CWAFs. DOE agrees with Lennox that the majority of gas-fired CWAFs are 
expected to remain at 80-percent TE for the foreseeable future because 
the fraction of non-condensing models sold has remained fairly constant 
over the last 20 years. In addition, there is a limited number of 
condensing CWAF models and lack of incentives (e.g. rebates, tax 
credits or similar consumer-focused approaches) to increase the 
condensing CWAF market share. Therefore, DOE did not include any 
increase in the efficiency of non-condensing CWAFs between 2014 and 
2019. Similar to the NOPR analysis, based on the limited availability 
condensing gas-fired CWAF models, DOE estimated a market share of one 
percent by 2019. The estimated efficiency market shares for CWAFs in 
the no-new-standards case in 2019 are presented in chapter 8 of the 
CWAF direct final rule TSD.
---------------------------------------------------------------------------

    \94\ AHRI, 2015 AHRI Certification Directory for Commercial 
Furnaces (Available at: http://www.ahridirectory.org/ahridirectory/pages/home.aspx) Last accessed July 1, 2015).
---------------------------------------------------------------------------

    See chapter 8 of the direct final rule TSDs for further information 
on the derivation of the efficiency distributions.
9. Payback Period Analysis
    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 for each efficiency level are the 
change in total installed cost of the equipment and the change in the 
first-year annual operating expenditures relative to the baseline 
efficiency level. The PBP calculation uses the same inputs as the LCC 
analysis, except that discount rates are not needed.
    As noted above, EPCA establishes a rebuttable presumption that a 
standard is economically justified if the Secretary finds that the 
additional cost to the consumer of purchasing equipment complying with 
an energy conservation standard level will be less than three times the 
value of the first year's energy savings resulting from the standard, 
as

[[Page 2481]]

calculated under the applicable test procedure. (42 U.S.C. 
6295(o)(2)(B)(iii)) For CUACs/CUHPs, the DOE test procedure prescribes 
how to calculate equipment efficiency, but not annual energy use. For 
the rebuttable presumption PBP, DOE used the same energy use calculated 
for the regular PBP calculation at each efficiency level. For CWAFs, 
DOE calculated energy consumption using the DOE test procedure.

G. Shipments Analysis

    DOE uses projections of annual equipment shipments to calculate the 
national impacts of potential amended energy conservation standards on 
energy use, NPV, and future manufacturer cash flows.\95\
---------------------------------------------------------------------------

    \95\ DOE uses data on manufacturer shipments as a proxy for 
national sales, as aggregate data on sales are lacking. In general, 
one would expect a close correspondence between shipments and sales.
---------------------------------------------------------------------------

1. Small, Large, and Very Large Commercial Package Air Conditioning and 
Heating Equipment
    The shipments model for CUACs and CUHPs uses a stock accounting 
approach, tracking the number of units and vintage for each equipment 
class. The vintage (or age) distribution of in-service equipment is a 
key input to calculations of both the NES and NPV, because equipment 
efficiency varies with vintage, and this in turn affects the energy use 
and operating costs.
    The primary inputs to the shipments model are time series of total 
commercial floor space, market share by equipment class, new 
construction market saturations, and equipment lifetimes. Floor space 
estimates are based on historic CBECS surveys and projections from AEO 
2015. The fraction of cooled floor space assigned to each equipment 
class is based on the percentage of total capacity in each class for 
historic shipments. The market saturation (i.e., percentage of new 
floor space that is cooled by the covered equipment) is a function of 
time. Using CBECS estimates of stock saturations and historic shipments 
data for each equipment class, DOE calibrated the shipments model by 
jointly varying both equipment lifetime and fits to the CBECS stock 
saturation. The resulting lifetime representations were Weibull 
distributions with mean lifetimes of 21.1 years, 22.6 years, and 33.7 
years for small, large and very large equipment classes, respectively.
a. Shipments by Market Segment
    The shipments model includes three market segments: (1) New 
commercial buildings acquiring new equipment, (2) existing buildings 
acquiring new equipment for the first time, and (3) existing buildings 
replacing broken equipment.
    DOE estimated new equipment shipments to new buildings by 
multiplying the market saturation values by the total new floor space 
in each year. DOE estimated new shipments to existing buildings as the 
total floor space multiplied by the change in saturation with time. 
This market segment is approximately zero for the analysis period, as 
saturations are no longer changing significantly.
    Replacement shipments are those that go into existing buildings to 
replace broken equipment. The number of units that break each year is 
equal to the total equipment stock minus the number of units that 
survive. The number of units that survive is calculated by multiplying 
the equipment stock as a function of age by the survival function. The 
survival function is the integral of the lifetime function used in the 
LCC. If all units that break are replaced, then the number of 
replacement shipments in each year is equal to the total number of 
broken units. However, in general, some fraction of broken units will 
be replaced, which reduces the number of replacement shipments.
    For CUACs and CUHPs, the end of lifetime is generally associated 
with compressor failure. Installing a new compressor is costly, so 
customers typically replace the entire unit rather than simply replace 
the compressor. If standards significantly increase the cost of new 
equipment, however, one would expect that the repair option would 
become more attractive.
    For the CUAC/CUHP NOPR, DOE modeled the repair rates for the small 
and large CUACs and CUHP equipment classes using a consumer choice 
model.\96\ This model was based on an estimated sensitivity to cost and 
a comparison of total installation costs for new equipment compared to 
repair costs. The price sensitivity was estimated by calibrating the 
model to historic data on total shipments, and market share by 
efficiency for 1999-2001. Actual repair costs were not known, so DOE 
estimated repair costs based on labor costs and the cost of a new 
compressor. DOE assumed that repair costs increase in direct proportion 
to the price of the equipment. Given the price sensitivity, and an 
estimate of the cost of repairing vs. replacing a new unit, a drop in 
shipments was estimated for each standard level.
---------------------------------------------------------------------------

    \96\ For the very large CUACs and CUHP equipment classes, in the 
NOPR DOE did not use the consumer choice model and simply assumed 
that, in the standards cases, 100% of broken units would be repaired 
at the first failure, and replaced at the second failure.
---------------------------------------------------------------------------

    ASAP commented that DOE's model overestimated the impact of higher 
efficiency levels on shipments. It stated that there are only 3 years 
of data on market share and cost (which are 15 years old), and a 
customer's repair/replace decision is more complex than the decision to 
purchase a baseline or higher efficiency unit. ASAP commented that the 
DOE model fails to capture a number of complex factors affecting 
purchase and repair decisions, such as the fact that some manufacturers 
offer leases that include no upfront costs. It noted that many units 
use R-22 as a refrigerant and since it is being phased out those units 
will be more expensive to service and repair. (CUAC: ASAP, No. 69 at 
pp. 6-7) The California IOUs, through PG&E, stated that the decision 
model should include factors such as the need for immediate resumption 
of operation to avoid placing too much weight on the first cost of more 
efficient equipment. (CUAC: California IOUs, No. 67 at p. 6) Rheem 
commented that the repair/replace decision depends on the commercial 
use of the building, how extensive the repair is, whether a warranty 
covers the repair, the cost of removal, purchase cost and installation 
cost. (CUAC: Rheem, No. 70 at p. 7)
    For the direct final rule, DOE examined a variety of potential 
modifications to the modeling approach used for the NOPR. The primary 
difficulty is that there are multiple parameters that need to be 
simultaneously estimated, including the actual repair costs, consumer 
price sensitivity, the fraction of consumers whose repair/replace 
decision is not driven solely by price, and the mean lifetime of a 
repaired unit. As very little additional data were available for the 
direct final rule, DOE adopted a simpler and more transparent modeling 
approach.
    The simplified approach still uses logistic regression to estimate 
the rate of purchase of new equipment by owners of broken equipment, 
but does not attempt to explicitly model repair costs.\97\ Instead the 
model assumes that the change in purchases of new equipment is equal to 
the price elasticity multiplied by a change in the utility function. 
The utility function for

[[Page 2482]]

this logit model is defined as the total installed cost of the 
equipment plus the average discounted lifetime operating costs. DOE 
based the discount rate on commercial sector time preference premium 
parameters used in the NEMS Commercial Demand Module. For the price 
elasticity parameter, DOE presented an estimate of -0.68 to the Working 
Group. (ASRAC Public Meeting, No. 97 at p. 56; see also id at pp. 23-26 
(background discussion)) This value is twice the value DOE has used for 
the residential sector, based on the assumption that commercial sector 
purchasers are more price sensitive. The Working Group did not object 
to this value, and DOE used it for the direct final rule analysis. For 
the standards cases, this approach predicts a drop in shipments 
relative to the base case due to the price increases associated with 
the higher IEER levels. DOE assumed that this drop in shipments 
represents the number of units that are repaired, so that the total 
number of units in the stock remains constant at all IEER levels. DOE 
applied this approach to all equipment capacities.
---------------------------------------------------------------------------

    \97\ In statistics, logistic regression, or logit regression, or 
logit model is a regression model where the dependent variable is 
categorical. Logistic regression measures the relationship between 
the categorical dependent variable and one or more independent 
variables by estimating probabilities using a logistic function.
---------------------------------------------------------------------------

    For the CUAC/CUHP NOPR, DOE assumed that if the unit is repaired 
(i.e., with a new compressor), its life is extended by another lifetime 
using the same retirement function as for new equipment. If a unit 
encounters a second failure within the analysis period, it is replaced.
    Carrier commented that while replacing a failed part with a new 
part returns a unit to service, it does not believe that the lifetime 
is reset after a repair, and therefore does not expect repaired units 
to last as long as new equipment. (Carrier, No. 48 at p. 7) The 
California IOUs, through PG&E, made a similar comment. (California 
IOUs, No. 67 at p. 6) Trane commented that assuming a compressor repair 
results in a new lifetime for the equipment is flawed--in its view, the 
lifetime is more likely cut in half. (Trane, No. 63 at p. 10) ASAP does 
not believe that a compressor repair will extend the life of the 
equipment by one whole lifetime, as there are also other components 
that could fail before the new compressor fails. (ASAP, No. 69 at p. 6)
    Based on stakeholder comments, for the direct final rule, DOE 
assumed that the mean lifetime for repaired equipment is equal to one 
half the mean lifetime of new equipment.
b. Shipment Market Shares by Efficiency Level
    The approach described in the preceding section provides total 
shipments in each equipment class for each year. To estimate the market 
shares of the considered efficiency levels in future shipments, DOE 
developed a customer choice model. The model was calibrated by 
estimating values for two parameters, representing customer sensitivity 
to total installation cost and annual operating cost.
    To estimate values for the parameters, for the direct final rule 
the calibration method was changed to better fit the historic market 
shares. DOE used a maximum log likelihood approach that optimized the 
customer choice model fit to historical market shares at each 
efficiency level for the small and large CUAC equipment classes. To 
calibrate the model, DOE used IEER market share data for each CUAC 
equipment class provided by AHRI for the Working Group. These market 
shares are for 2011 and 2014. Starting in 2015, application of the 
parameters, along with data on the installed cost and operating cost at 
each efficiency level for each year in the analysis period, determines 
the market shares of each efficiency level in each year. Different sets 
of parameters were used to estimate market shares for CUACs and CUHP 
equipment classes. The details of the data and the method used can be 
found in chapter 9 of the CUAC/CUHP direct final rule TSD.
2. Commercial Warm Air Furnaces
    For the CWAF NOPR, DOE developed shipment projections based on 
historical data and an analysis of key market drivers for each product. 
Historical shipments data were used to build up an equipment stock and 
also to calibrate the shipments model. Historical shipments data for 
CWAF equipment are very limited. DOE used 1994 shipments data from AHRI 
(previously the Gas Appliance Manufacturers Association, or ``GAMA'') 
that were presented in a report from PNNL,\98\ and the historical 
shipments of non-heat pump commercial unitary air conditioners (CUACs 
and CUHPs),\99\ which are usually packaged together with CWAFs. The 
ratio of the shipments of non-heat pump CUACs and CUHPs and the 
shipments of gas-fired CWAFs in 1994 was calculated.\100\ DOE believes 
that this ratio should be reasonably stable over time, so DOE 
determined the historical shipments of gas-fired CWAFs by multiplying 
this ratio with the historical shipments of non-heat pump CUACs.
---------------------------------------------------------------------------

    \98\ Pacific Northwest National Laboratory (PNNL), Screening 
Analysis for EPACT-Covered Commercial HVAC and Water-Heating 
Equipment, April 2000. (Available at: http://www.pnl.gov/main/publications/external/technical_reports/PNNL-13232.pdf) (Last 
accessed April 10, 2013).
    \99\ Air-Conditioning and Refrigeration Institute, Commercial 
Unitary Air Conditioner and Heat Pump Unit Shipments for 1980-2001 
(Jan. 2005) (Prepared for Lawrence Berkeley National Laboratory).
    \100\ The fraction of non-heat pump CUACs equipment that is 
packaged with commercial furnaces is 80 percent.
---------------------------------------------------------------------------

    For the NOPR, since shipments data for oil-fired CWAFs were not 
publicly available, DOE used the ratio of oil-fired versus gas-fired 
residential furnace shipments from AHRI \101\ and the historical 
shipments of gas-fired commercial furnaces to calculate the historical 
shipment of oil-fired commercial furnaces. DOE estimated from these 
data that oil-fired CWAFs account for about 1 percent of total CWAFs 
shipments.
---------------------------------------------------------------------------

    \101\ Air-Conditioning Heating and Refrigeration Institute, 
Furnaces Historical Data (1994-2013). 2015. (Available at: http://www.ahrinet.org/site/497/Resources/Statistics/Historical-Data/Furnaces-Historical-Data). (Last accessed January 7, 2015).
---------------------------------------------------------------------------

    Commenting on the CWAF NOPR, Lennox stated that most weatherized 
CWAFs are integrated into rooftop equipment that also provide cooling, 
so it is not logical that the CWAF NOPR has much different shipment 
projections than the projections for CUACs and CUHPs. (CWAF: Lennox, 
No. 22 at p. 11) As discussed with the Working Group, for the direct 
final rule, DOE modified the projection for CWAF shipments, with the 
results indicating that the magnitude is similar to the projected 
shipments for CUACs and CUHPs. (ASRAC Public Meeting, No. 41 at p. 28) 
Chapter 9 of the direct final rule TSD described the modifications.
a. Impact of Standards on Shipments
    For the CWAF NOPR, for cases with potential CWAFs standards, DOE 
considered whether the increase in price would cause some commercial 
consumers to choose to repair rather than replace their CWAF equipment. 
The shipments model used a relative price elasticity to account for the 
combined effects of changes in purchase price and annual operating cost 
on the purchase versus repair decision. Because data for commercial 
consumers were lacking, DOE used a relative price elasticity that has 
been derived for residential consumers.
    Commenting on the CWAF NOPR, AHRI stated that DOE's reliance on 
residential purchases to establish commercial product price elasticity 
and on car purchases to extend the elasticity over time is not 
appropriate. (CWAF: AHRI, No. 26 at p. 5) Lennox stated that the CUAC/
CUHP NOPR projects a severe decline in shipments with amended 
standards, so CWAF shipment impacts should reflect a similar decline, 
since the two product categories are usually combined in one piece of

[[Page 2483]]

equipment. (CWAF: Lennox, No. 22 at p. 11) DOE notes that decreasing 
price elasticity over time is a common effect observed across numerous 
products and industries, including appliances. The automobile study 
used to develop the price elasticity for the NOPR contains greater 
detail on this effect than other studies. For the direct final rule, 
DOE used the same product price elasticity for CWAFs as it developed 
for CUACs and CUHPs. This value is twice the value DOE has used for the 
residential sector, based on the assumption that commercial sector 
purchasers are more price sensitive.
    AHRI stated that the proposed standard of 82 percent TE for gas-
fired CWAFs may cause some equipment switching because of installation 
complications resulting from larger units and modifications to handle 
condensate disposal. (CWAF: AHRI, No. 26 at p. 6) Trane argued that 
some businesses will elect to switch to less expensive electric heating 
options in response to a standard, and it is concerned that DOE has not 
modeled the possibility of fuel switching. While the effects of fuel 
switching would be greatest at the condensing level, Trane stated that 
there could be fuel switching at the lower levels as well. (CWAF: 
Trane, No. 27 at pp. 7-8) AGA stated that DOE did not account for fuel/
product switching that will occur as a result of the proposed standard 
if manufacturers eliminate the manufacturing of non-condensing 
commercial furnaces because the 82 percent TE minimum level is no 
longer practical from a safety and durability point of view. (CWAF: 
AGA, No. 20 at p. 2)
    DOE believes that a standard at 82 percent TE would cause minimal 
switching to electricity because of the very high operating costs of an 
electric furnace and significant additional electrical installation 
costs. DOE did not analyze such switching for the direct final rule 
because it is adopting a standard at 81 percent TE, a level where 
consumers would have no incentive to switch away from gas.
    The details of the shipments analysis can be found in chapter 9 of 
the direct final rule TSDs.

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.\102\ 
(``Consumer'' in this context refers to commercial consumers of the 
equipment being regulated.) DOE calculates the NES and NPV based on 
projections of annual product shipments, along with the annual energy 
consumption and total installed cost data from the energy use and LCC 
analyses.\103\ For most of the TSLs considered in this direct final 
rule, DOE forecasted the energy savings, operating cost savings, and 
equipment costs over the lifetime of CUACs/CUHPs and CWAFs sold from 
2019 through 2048. For the TSLs that represent the Working Group 
recommendations, DOE accounted for the lifetime impacts of CUACs and 
CUHPs sold from 2018 through 2048 and CWAFs sold from 2023 through 
2048.
---------------------------------------------------------------------------

    \102\ The NIA accounts for impacts in the 50 States and the U.S. 
territories.
    \103\ 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 case without such standards with standards-case projections. The no-
new-standards case characterizes energy use and consumer costs for each 
equipment class in the absence of new or amended energy conservation 
standards. For this projection, DOE considers historical trends in 
efficiency and various forces that are likely to affect the mix of 
efficiencies over time. DOE compares the no-new-standards case 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.
    Table IV-30 summarizes the inputs and methods DOE used for the NIA 
analyses for the direct final rule. Discussion of these inputs and 
methods follows the table. See chapter 10 of the direct final rule TSDs 
for further details.

   Table IV.30--Summary of Inputs and Methods for the National Impact
      Analysis: Small, Large, and Very Large Commercial Package Air
   Conditioning and Heating Equipment and Commercial Warm Air Furnaces
------------------------------------------------------------------------
              Inputs                               Method
------------------------------------------------------------------------
Shipments.........................  See section IV.G.
Compliance Date of Standard.......  CUACs and CUHPs: Recommended TSL,
                                     2018 for initial standards and 2023
                                     for second-phase standards; Other
                                     TSLs: 2019.
                                    CWAF: Recommended TSL, 2023; Other
                                     TSLs, 2019.
Efficiency Trends.................  CUAC: Based on consumer choice
                                     model.
                                    CWAF:
                                    -- No-New-Standards case: Based on
                                     likely trend.
                                    --Standard cases: ``roll-up''
                                     scenario is used.
Annual Energy Consumption per Unit  Annual weighted-average values are a
                                     function of energy use at each
                                     efficiency level.
Total Installed Cost per Unit.....  Annual weighted-average values are a
                                     function of cost at each efficiency
                                     level.
                                    Incorporates projection of future
                                     product prices based on historical
                                     data.
Annual Energy Cost per Unit.......  Annual weighted-average values are a
                                     function of the annual energy
                                     consumption per unit and energy
                                     prices.
Repair and Maintenance Cost per     Annual values are a function of
 Unit.                               efficiency level.

[[Page 2484]]

 
Energy Prices.....................  AEO 2015 forecasts (to 2040) and
                                     extrapolation thereafter.
Energy Site-to-Primary Conversion.  A time-series conversion factor
                                     based on AEO 2015.
Discount Rate.....................  Three and seven percent.
Present Year......................  2015.
------------------------------------------------------------------------

1. Equipment Efficiency Trends
    A key component of the NIA is the trend in energy efficiency 
projected for the no-new-standards case. Section IV.F.8 describes how 
DOE developed an energy efficiency distribution for the no-new-
standards case for each of the considered equipment classes for the 
first year of the forecast period.
    For CUACs and CUHPs, DOE used the consumer choice model described 
in section IV.G to estimate efficiency market shares in each year of 
the shipments projection period. For each standards case, the 
efficiency levels that are below the standard are removed from the 
possible choices available to customers. The no-new-standards case 
shows a slight increasing trend in efficiency for small CUACs and 
CUHPs, but the shares were fairly constant for large and very large 
CUACs and CUHPs.
    For the CWAF NOPR, DOE assumed no change in efficiency for non-
condensing CWAFs over the shipments projection period in the no-new-
standards case. For condensing gas-fired CWAFs, however, it estimated 
that market interest in efficiency would lead to a modest growth in 
market share.
    Trane stated that the equipment minimum energy efficiency 
requirements (including CWAFs) in ASHRAE 90.1 have been updated a 
number of times and there is every reason to believe they will continue 
to be updated without further DOE equipment standards (i.e., no-new-
standards case). (Trane, No. 27 at p. 8) DOE agrees that ASHRAE 90.1 
will continue to be updated; however, for CWAFs, the ASHRAE 90.1 
requirements have not changed since 1992, so any future changes to CWAF 
requirements, within DOE's analysis period, are uncertain. Thus, DOE 
believes that its projected efficiency trend for the no-new-standards 
case is reasonable.
    For the CWAFs standards cases, DOE used a ``roll-up'' scenario to 
establish the shipment-weighted efficiency for the compliance year. In 
this scenario, the market of products in the no-new-standards case that 
do not meet the standard under consideration would ``roll up'' to meet 
the new standard level, and the market share of products above the 
standard would remain unchanged. After the compliance year, DOE assumed 
no change in efficiency over time.
    The projections of efficiency trends for CUACs/CUHPs and CWAFs are 
further described in chapter 10 of the direct final rule TSDs.
2. National Energy Savings
    The NES analysis involves a comparison of national energy 
consumption of the considered products in each potential standards case 
(TSL) with consumption in the case without amended energy conservation 
standards. DOE calculated the national energy consumption by 
multiplying the number of units (stock) of each product (by vintage or 
age) by the unit energy consumption (also by vintage). Annual NES is 
based on the difference in national energy consumption for the no-new-
standards case and for each standard case. Part of the reduction in 
energy consumption in a standards case may be due to decreasing 
shipments resulting from customers choosing to repair than replace 
broken equipment. Therefore, the NES calculation includes the estimated 
energy use of units that are repaired rather than replaced.
    For CUACs, the per-unit annual site energy savings for each 
considered efficiency level come from the energy use analysis, which 
estimated energy consumption for the compliance year. For later years, 
DOE adjusted the per-unit annual site energy savings to account for 
changes in climate (cooling degree-days) and building shell efficiency 
based on projections in AEO 2015.
    For CUHPs, DOE did not conduct an energy use analysis. Because the 
cooling-side performance of CUHPs is nearly identical to that of CUACs, 
DOE used the energy consumption estimates developed for CUACs to 
characterize the cooling-side performance of CUHPs of the same size. To 
characterize the heating-side performance, DOE analyzed CBECS 2003 data 
to develop a national-average annual energy use per square foot for 
buildings that use CUHPs. DOE assumed that the average COP of the CUHPs 
was 2.9.\104\ DOE converted the energy use per square foot value to 
annual energy use per ton using a ton per square foot relationship 
derived from the energy use analysis for CUACs. This value is different 
for each equipment class. Because equipment energy use is a function of 
efficiency, DOE assumed that the annual heating energy consumption of a 
unit scales proportionally with its heating COP efficiency level. 
Finally, to determine the COPs of units with given IEERs, DOE 
correlated COP to IEER based on the AHRI Certified Equipment 
Database.\105\ Thus, for any given cooling efficiency of a CUHP unit, 
DOE was able to establish the corresponding heating efficiency, and, in 
turn, the associated annual heating energy consumption.
---------------------------------------------------------------------------

    \104\ A heating efficiency of 2.9 COP corresponds to the 
existing minimum heating efficiency standard for CUHPs, a value 
which the Department believes is representative of the heat pump 
stock characterized by CBECS.
    \105\ http://www.ahridirectory.org/ahridirectory/pages/homeM.aspx.
---------------------------------------------------------------------------

    DOE converted site electricity consumption and savings to primary 
energy (i.e., the energy consumed by power plants to generate site 
electricity) using annual marginal conversion factors derived from AEO 
2015. Cumulative energy savings are the sum of the NES for each year 
over the timeframe of the analysis. As explained in section IV.E, DOE 
did not incorporate a rebound effect for CUACs and CUHPs or CWAFs.
    As noted in section IV.C.2.b and section IV.E.1, for Efficiency 
Level 3 for the small and large ``all other types of heating 
equipment'' classes and Efficiency Level 2.5 for the very large ``all 
other types of heating equipment'' class, the IEER values included in 
the ASRAC Working Group recommendations (discussed in section III.B.2) 
were based on an IEER differential of 0.2 compared to the ``electric 
resistance heating or no heating'' equipment classes. At Efficiency 
Level 3, based on an approach of maintaining a constant energy savings 
differential with the ``electric resistance heating or no heating'' 
equipment classes, the IEER

[[Page 2485]]

differential would be 0.3 for both the small and large ``all other 
types of heating equipment'' classes. Additional energy savings are 
realized from reducing the IEER differential to 0.2 for the small and 
large ``all other types of heating equipment'' classes. To calculate 
the additional energy savings realized from reducing the IEER 
differential to 0.2, DOE utilized a ``top-down'' approach by 
determining the national energy savings per IEER for the small and 
large equipment classes. DOE then multiplied the national energy 
savings per IEER by the IEER reduction of 0.1 to determine the 
additional energy savings associated with reducing the IEER 
differential.
    For the CUHP equipment classes, DOE used the same ``top-down'' 
method for determining the additional energy savings realized from 
reducing the IEER differentials to the IEER values included in the 
ASRAC Working Group recommendations, as discussed in section III.B.2. 
As described in Section IV.C.2.b, the ASRAC Working Group 
recommendation included IEER values for the CUHP equipment classes 
based on IEER diffentials of 0.7 for all three CUHP equipment classes 
with electric resistance or no heating. At Efficiency Level 3, based on 
an approach of maintaining a constant energy savings differential with 
the CUAC equipment classes including electric resistance heating or no 
heating, the IEER differential would be 0.8, 0.9, and 1.1 for the 
small, large, and very large CUHP equipment classes with electric 
resistance or no heating, respectively. As a result, additional energy 
savings are realized from reducing the IEER differential to 0.7 for the 
CUHP equipment classes.
    A more detailed description of the method and results for 
determining the additional energy associated with reducing the IEER 
differentials for both the CUAC equipment classes with all other types 
of heating and the CUHP equipment classes with electric resistance or 
no heating is given in appendix 10D of the direct final rule TSD.
    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 GHGs 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 notice, 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 \106\ 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 10B of the direct final rule 
TSDs.
---------------------------------------------------------------------------

    \106\ For more information on NEMS, refer to The National Energy 
Modeling System: An Overview, DOE/EIA-0581 (2009) (Oct. 2009) 
(Available at: http://www.eia.gov/oiaf/aeo/overview/).
---------------------------------------------------------------------------

3. Net Present Value
    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 in each year as the difference between the no-new-standards 
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 the equipment shipped 
during the forecast period.
a. Total Annual Installed Cost
    The total installed cost includes both the equipment price and the 
installation cost. DOE calculated equipment prices by efficiency level 
using manufacturer selling prices and weighted-average overall markup 
values (weights based on shares of the distribution channels used). 
Installation costs come from the LCC and PBP analysis.
    For CUHPs, to estimate the cost at higher efficiency levels, DOE 
applied the same incremental equipment costs that were developed for 
the comparable CUAC efficiency levels for each equipment class).
    As noted in section IV.F.1, DOE assumed no change in CUACs and 
CUHPs prices over the analysis period. For CWAFs, DOE derived a trend 
based on the PPI for ``Warm air furnaces,'' which shows a small rate of 
annual price decline. DOE applied the same trends to project prices for 
each CWAF equipment class at each considered efficiency level. DOE's 
projection of product prices is described in appendix 10C of the direct 
final rule TSDs.
    To evaluate the effect of uncertainty regarding the price trend 
estimates, DOE investigated the impact of different equipment price 
trends on the consumer NPV for the considered TSLs. For CUACs and 
CUHPs, DOE conducted sensitivity analyses using one trend in which 
prices decline, and one in which prices rise. For CWAFs, DOE considered 
a high price decline case and a low price decline. The derivation of 
these price trends and the results of the sensitivity cases are 
described in appendix 10C of the direct final rule TSDs.
    The NPV calculation includes the repair cost for units that are 
repaired rather than replaced.
b. Total Annual Operating Cost Savings
    Operating cost savings are estimated by comparing total energy 
expenditures and repair and maintenance costs for the base case and the 
standards cases. DOE calculates annual energy expenditures from annual 
energy consumption by incorporating forecasted energy prices. To 
calculate future energy prices, DOE applied the projected trend in 
national-average commercial energy prices from the AEO 2015 Reference 
case (which extends to 2040) to the recent prices derived in the LCC 
and PBP analysis. DOE used the trend from 2030 to 2040 to extrapolate 
beyond 2040. As part of the NIA, DOE also analyzed scenarios that used 
inputs from the AEO 2015 Low Economic Growth and High Economic Growth 
cases. Those cases have higher and lower energy price trends compared 
to the Reference case.
c. Net Benefit
    The aggregate difference each year between operating cost savings 
and increased equipment expenditures is the net savings or net costs. 
In calculating the NPV, DOE multiplies the net savings in future years 
by a discount factor to determine their present value. DOE estimates 
the NPV using both a 3-percent and a 7-percent real discount rate, in 
accordance with guidance provided by the Office of Management and 
Budget (``OMB'') to Federal agencies on the development of regulatory 
analysis.\107\ The discount rates for the determination of NPV are in 
contrast to the discount rates used in the LCC analysis, which are 
designed to reflect a consumer's perspective. The 7-percent real value 
is an estimate of the average before-tax rate of return to private 
capital in the U.S. economy. The 3-percent real value represents the 
``social rate of time preference,'' which is the rate at which society 
discounts

[[Page 2486]]

future consumption flows to their present value.
---------------------------------------------------------------------------

    \107\ OMB Circular A-4, section E (Sept. 17, 2003) (Available 
at: http://www.whitehouse.gov/omb/circulars_a004_a-4).
---------------------------------------------------------------------------

I. Consumer Subgroup Analysis

    In analyzing the potential impact of new or amended standards on 
commercial consumers, DOE evaluates the impact on identifiable 
subgroups of consumers that may be disproportionately affected by a new 
or amended national standard. DOE evaluates impacts on particular 
subgroups of consumers by analyzing the LCC impacts and PBP for those 
particular consumers from alternative standard levels. For CUACs/CUHPs 
and CWAFs, DOE evaluated impacts on a small business subgroup using the 
LCC spreadsheet model. Chapter 11 in the direct final rule TSDs 
describes the consumer subgroup analysis.

J. Manufacturer Impact Analysis

1. Overview
    DOE analyzed manufacturer impacts (i.e., MIAs) to calculate the 
potential financial impact of amended energy conservation standards on 
CUAC/CUHP and CWAF manufacturers to estimate the potential impact of 
such standards on employment and manufacturing capacity. The MIA has 
both quantitative and qualitative aspects. The quantitative part of the 
MIA primarily relies on the 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 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 industry, market, and equipment trends. The complete MIA 
is outlined in chapter 12 of the CUACs/CUHPs and CWAFs direct final 
rule TSDs.
    DOE conducted the MIA for this rulemaking in three phases. In Phase 
1 of the MIA, DOE prepared profiles of the CUAC/CUHP and CWAF 
manufacturers that included top-down analyses that DOE used to derive 
preliminary financial inputs for the GRIM (e.g., sales, general, and 
administration (i.e., SG&A) expenses; research and development 
(``R&D'') expenses; and tax rates). DOE used public sources of 
information, including company SEC 10-K filings, corporate annual 
reports, the U.S. Census Bureau's Economic Census,\108\ and Hoover's 
reports.\109\
---------------------------------------------------------------------------

    \108\ U.S. Census Bureau, Annual Survey of Manufacturers: 
General Statistics: Statistics for Industry Groups and Industries 
(Available at: http://factfinder2.census.gov/faces/nav/jsf/pages/searchresults.xhtml?refresh=t).
    \109\ Hoovers Inc., Company Profiles, Various Companies 
(Available at: http://www.hoovers.com). Last Accessed December 13, 
2013.
---------------------------------------------------------------------------

    In Phase 2 of the MIA, DOE prepared industry cash-flow analyses to 
quantify the potential impacts of an amended energy conservation 
standard. In general, new or more-stringent energy conservation 
standards can affect manufacturer cash flows in three distinct ways: 
(1) Create a need for increased investment; (2) raise production costs 
per unit; and (3) alter revenue due to higher per-unit prices and 
possible changes in sales volumes.
    In Phase 3 of the MIA, DOE conducted structured, detailed 
interviews with a representative cross-section of manufacturers. During 
these interviews, DOE discussed engineering, manufacturing, 
procurement, and financial topics to validate assumptions used in the 
GRIM and to identify key issues or concerns. See sections IV.J.2.c in 
79 FR 58948 (CUAC/CUHP NOPR) and 80 FR 6181 (CWAF NOPR) for a 
description of the key issues manufacturers raised during their 
respective interviews.
    Additionally, in Phase 3, DOE evaluated subgroups of manufacturers 
that may be disproportionately impacted by new standards or that may 
not be accurately represented by the average cost assumptions used to 
develop the industry cash-flow analysis. For example, small 
manufacturers, niche players, or manufacturers exhibiting a cost 
structure that largely differs from the industry average could be more 
negatively affected. DOE identified one subgroup (i.e., small 
manufacturers) for a separate impact analysis.
    DOE applied the small business size standards published by the 
Small Business Administration (``SBA'') to determine whether a company 
is considered a small business. 65 FR 30836, 30848 (May 15, 2000), as 
amended by 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 CUAC/CUHP or CWAF 
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 subsidiaries. Based on this classification, DOE 
identified three CUAC/CUHP manufacturers that qualify as small 
businesses under the SBA definition, and two CWAF manufacturers that 
qualify as small businesses. CUAC/CUHP and CWAF small manufacturer 
subgroups are discussed in sections V.B.2.d and VI.B of this document.
2. Government Regulatory Impact Model
    DOE uses the GRIM to quantify the changes in cash flow due to new 
standards that result in a higher or lower industry value. The GRIM 
analysis uses a standard annual, discounted cash-flow methodology 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 to 
2048. DOE calculated INPVs by summing the stream of annual discounted 
cash flows during this period. For CUAC/CUHP manufacturers, DOE used a 
real discount rate of 6.2 percent, which was derived from industry 
financials and then modified according to feedback received during 
manufacturer interviews. Similarly, using this approach, DOE estimated 
a real discount rate of 8.9 percent for CWAF manufacturers. The 
variance in discount rate is due to a different mix of manufacturers, 
as not all CUAC/CUHP manufacturers also produce CWAFs (and vice-versa), 
and resulting variances in manufacturer feedback.
    The GRIM calculates cash flows using standard accounting principles 
and compares changes in INPV between a no-new-standards case and each 
standards case. The difference in INPV between the no-new-standards 
case and a standards case represents the financial impact of the 
amended energy conservation standard on manufacturers. As discussed 
previously, DOE collected this information on the critical GRIM inputs 
from a number of sources, including publicly-available data and 
interviews with a number of manufacturers. 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 CUACs/
CUHPs and CWAFs direct final rule TSDs.

[[Page 2487]]

a. Government Regulatory Impact Model Key Inputs
Manufacturer Production Costs
    Manufacturing higher-efficiency equipment is typically more 
expensive than manufacturing baseline equipment due to the use of more 
complex components, which are typically more costly than baseline 
components. The changes in the MPC 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 direct final rule TSD. In 
addition, DOE used information from its teardown analysis, described in 
chapter 5 of the TSD, to disaggregate the MPCs into material, labor, 
and overhead costs. To calculate the MPCs for equipment above the 
baseline, DOE added the incremental material, labor, and overhead costs 
from the engineering cost-efficiency curves to the baseline MPCs. These 
cost breakdowns and equipment markups were validated and revised based 
on manufacturer comments received during MIA interviews.
Shipments Forecasts
    The GRIM estimates manufacturer revenues based on total unit 
shipment forecasts and the distribution of these values by equipment 
class and efficiency level. Changes in sales volumes and efficiency mix 
over time can significantly affect manufacturer finances. For the CUAC/
CUHP and CWAF analyses, the GRIM used the Shipments Analysis to 
estimate shipments from 2015 to 2048. See chapter 9 of the CUACs/CUHPs 
and CWAFs direct final rule TSDs for additional details.
Conversion Costs
    An amended energy conservation standard would cause manufacturers 
to incur one-time 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 one-time investments in research, development, 
testing, marketing, and other non-capitalized costs necessary to make 
product designs comply with the amended energy conservation standard. 
Capital conversion costs are one-time investments in property, plant, 
and equipment necessary to adapt or change existing production 
facilities such that equipment with new, compliant designs can be 
fabricated and assembled.
i. Commercial Unitary Air Conditioners and Heat Pumps
    To evaluate the level of capital conversion expenditures 
manufacturers would likely incur to comply with amended energy 
conservation standards for CUACs/CUHPs, DOE used manufacturer 
interviews to gather data on the anticipated level of capital 
investment that would be required at each efficiency level. DOE 
supplemented manufacturer comments with estimates of capital 
expenditure requirements derived from the product teardown analysis and 
engineering analysis.
    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 cost 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.a of this document. For additional 
information on the estimated product and capital conversion costs, see 
chapter 12 of the CUACs/CUHPs direct final rule TSD.
ii. Commercial Warm Air Furnaces
    To evaluate the level of capital conversion expenditures 
manufacturers would likely incur to comply with amended energy 
conservation standards for CWAFs, two methodologies were used to 
develop conversion cost estimates: (1) A Top-Down approach using 
feedback from manufacturer interviews to gather data on the level of 
costs expected at each efficiency level, and (2) a Bottom-Up approach 
using engineering analysis inputs derived from the equipment teardown 
analysis and engineering model described in chapter 5 of the CWAF 
direct final rule TSD to evaluate the investment required to design, 
manufacture, and sell equipment that meets a higher energy conservation 
standard.
    For estimating capital conversion costs, the Top-Down approach took 
available feedback from manufacturers and marketshare-weighted the 
responses to arrive at an approximation representative of the industry 
as a whole. Responses from manufacturers with the greatest market share 
were given the greatest weight, while responses from manufacturers with 
the lowest market share were given the lowest weight. The Bottom-Up 
approach took capital conversion costs from the engineering analysis on 
a per-manufacturer basis to develop an industry-wide cost estimate. 
This analysis included the expected equipment, tooling, conveyor, and 
plant costs associated with CWAF production, as estimated by DOE based 
on product tear-downs and on manufacturer interviews. The results of 
the two methodologies were integrated to create high and low capital 
conversion cost scenarios.
    Product conversion costs for CWAFs are primarily driven by re-
development and testing expenses. As the standard increases, increasing 
levels of re-development effort would be required to meet the 
efficiency requirements, as more equipment models would require 
redesign. Additionally, expected product conversion costs would ramp up 
significantly where DOE expects condensing technology to be necessary 
to meet a revised energy conservation standard.
    To estimate product R&D costs, the Top-Down approach developed 
average costs per product platform based on manufacturer feedback. This 
feedback focused on the human capital investments, such as engineering 
and lab technician time necessary to update designs. In the Bottom-Up 
approach, DOE used vendor quotes, industry product information, and 
engineering cost estimation analysis data to estimate the expenses 
associated with TE testing, heat limit testing, product safety testing, 
reliability testing, and engineering effort.
    In general, because manufacturer expenses related to meeting the 
new standards must occur prior to the production of compliant 
equipment, DOE assumes that all conversion-related investments occur 
between the year of publication of the direct final rule and the year 
by which manufacturers must comply with the amended 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 CWAFs direct final 
rule TSD.

[[Page 2488]]

b. Government Regulatory Impact Model Scenarios
Manufacturer Markup Scenarios
    To calculate the MSPs in the GRIM, DOE applied manufacturer markups 
to the MPCs estimated in the engineering analysis for each equipment 
class and efficiency level. Modifying these manufacturer markups in the 
standards case yields different sets of manufacturer impacts. For the 
MIA, DOE modeled two standards-case manufacturer 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 
manufacturer 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 CUAC/CUHP and CWAF 
equipment, as well as comments from manufacturer interviews, DOE 
assumed the average non-production cost markup--which includes SG&A 
expenses, R&D expenses, interest, and profit--to be the following for 
each equipment class. The results are presented in Table IV-31 and 
Table IV-32.

  Table IV.31--Preservation of Gross Margin Percentage Markup for CUAC/
               CUHP Equipment in the No-New-Standards Case
------------------------------------------------------------------------
                        Equipment                             Markup
------------------------------------------------------------------------
Small Commercial Packaged Air-Conditioners >=65,000 Btu/             1.3
 h and <135,000 Btu/h...................................
Small Commercial Packaged Heat Pumps >=65,000 Btu/h and              1.3
 <135,000 Btu/h.........................................
Large Commercial Packaged Air-Conditioners >=135,000 Btu/           1.34
 h and <240,000 Btu/h...................................
Large Commercial Packaged Heat Pumps >=135,000 Btu/h and            1.34
 <240,000 Btu/h.........................................
Very Large Commercial Packaged Air-Conditioners                     1.41
 >=240,000 Btu/h and <760,000 Btu/h.....................
Very Large Commercial Packaged Heat Pumps >=240,000 Btu/            1.41
 h and <760,000 Btu/h...................................
------------------------------------------------------------------------


  Table IV.32--Preservation of Gross Margin Percentage Markup for CWAF
                 Equipment in the No-New-Standards Case
------------------------------------------------------------------------
                        Equipment                             Markup
------------------------------------------------------------------------
Gas-fired Commercial Warm Air Furnaces >=225,000 Btu/h..            1.31
Oil-fired Commercial Warm Air Furnaces >=225,000 Btu/h..            1.28
------------------------------------------------------------------------

    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. 
Manufacturers stated that this scenario is optimistic and represents a 
high bound to industry profitability.
    In the preservation of operating profit scenario, manufacturer 
markups are set so that operating profit one year after the compliance 
date of the amended energy conservation standard is the same as in the 
no-new-standards case. Under this scenario, as the costs of production 
increase under a standards case, manufacturers are generally required 
to reduce their markups to a level that maintains the no-new-standards 
case's operating profit. The implicit assumption behind this markup 
scenario is that the industry can only maintain its operating profit in 
absolute dollars after compliance with the new or amended standard is 
required. Therefore, operating margin in percentage terms is reduced 
between the no-new-standards case and standards case. DOE adjusted 
(i.e., lowered) 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 no-new-standards case. This markup scenario 
represents a low bound to industry profitability under an amended 
energy conservation standard, as shown in Table IV-33 and Table IV-34 
for CUAC/CUHP and CWAF equipment classes respectively. Table IV-33 
includes markups for both the 2019 standard level and the 2023 standard 
level for CUAC/CUHP equipment adopted in this document.

   Table IV.33--Preservation of Operating Profit Markups for CUAC/CUHP
                Equipment at the Adopted Standard Levels
------------------------------------------------------------------------
                                                          Markups (2019/
                        Equipment                              2023)
------------------------------------------------------------------------
Small Commercial Packaged Air-Conditioners >=65,000 Btu/       1.29/1.26
 h and <135,000 Btu/h...................................
Small Commercial Packaged Heat Pumps >=65,000 Btu/h and        1.29/1.27
 <135,000 Btu/h.........................................
Large Commercial Packaged Air-Conditioners >=135,000 Btu/      1.33/1.31
 h and <240,000 Btu/h...................................
Large Commercial Packaged Heat Pumps >=135,000 Btu/h and       1.33/1.31
 <240,000 Btu/h.........................................
Very Large Commercial Packaged Air-Conditioners                1.37/1.33
 >=240,000 Btu/h and <760,000 Btu/h.....................
Very Large Commercial Packaged Heat Pumps >=240,000 Btu/       1.39/1.35
 h and <760,000 Btu/h...................................
------------------------------------------------------------------------


[[Page 2489]]


     Table IV.34--Preservation of Operating Profit Markups for CWAFs
                Equipment at the Adopted Standard Levels
------------------------------------------------------------------------
                        Equipment                             Markup
------------------------------------------------------------------------
Gas-fired Commercial Warm Air Furnaces >=225,000 Btu/h..            1.31
Oil-fired Commercial Warm Air Furnaces >=225,000 Btu/h..            1.28
------------------------------------------------------------------------

3. Discussion of Comments
    During the NOPR public meeting, interested parties commented on the 
assumptions and results of the NOPR analysis TSD. Oral and written 
comments addressed several topics, including employment impacts, 
conversion costs, and impacts on small businesses.
a. Employment Impacts on CUAC/CUHP Manufacturers
    Nordyne expressed concern that DOE's NOPR CUAC/CUHP analysis 
indicates an increase in employment as a result of the rulemaking. 
(CUAC: Nordyne, No. 61 at p. 25) In response, DOE notes that the NOPR 
and Final Rule analyses present a range of potential employment 
impacts. These impacts are a function of the shipment forecasts and 
changes in production labor required to produce compliant products. At 
the NOPR stage, DOE presented direct employment impacts that ranged 
from a net loss of 94 production jobs to no change in production jobs 
at the proposed level.
    For the final rule, DOE updated its employment analysis and 
continued to follow the same approach in light of the fact that, when 
presented with the details of DOE's analysis, manufacturers could not 
identify specific errors for DOE to correct. While manufacturers were 
unable to provide specific data regarding production employment 
numbers, either individually or for the industry as a whole, DOE 
accounted for the concerns that were raised regarding the initial 
projected employment impacts by incorporating the most recent data from 
the U.S. Census Bureau's 2013 Annual Survery of Manufacturers (ASM) and 
industry feedback from both written comments and the ASRAC Working 
Group meetings. The direct final rule analysis presents an updated set 
of direct employment impacts that range from a net loss of 829 jobs to 
no change in jobs at the adopted level.
    In written comments, Lennox noted that DOE's direct employment 
estimates are too low. (CUAC: Lennox, No. 60 at pp. 5-6) Additionally, 
AHRI asked DOE to recalculate its employment forecast and methods to 
include all jobs associated within the equipment channel and not only 
the manufacturing portion. (CUAC: AHRI, No. 68 at p.41)
    At the NOPR stage, DOE estimated production employment to be 1,085 
workers in the no-new-standards case in 2019. For the final rule, DOE 
updated its analysis based on 2013 U.S. Census data, the updated 
engineering analysis, and the updated shipments analysis. DOE also 
revisited its assumption given the general feedback from industry that 
the initial employment figures were too low. DOE's revised direct final 
rule analysis forecasts that the industry will employ 2,643 production 
workers in the no-new-standards case in 2019.
    DOE's employment analysis is based on three primary inputs: CUACs 
shipments in 2019, average labor content of the covered products, and 
an average production worker wage level. In the final rule analysis, 
DOE estimates there are 290,600 unit shipments in 2019. The engineering 
analysis shows that labor content can range from 8.2 percent to 17.5 
percent of the MPC, depending on product class and model. The shipment-
weighted average labor content of a unit is $342 per unit. Combining 
unit shipments and labor content, DOE estimates industry expenditures 
of $99.3 million on production labor. Using data from the ASM for NAICS 
code 333415, the average production worker's fully-burdened wage is 
$37,700 per year in the ``Air-Conditioning and Warm Air Heating 
Equipment and Commercial and Industrial Refrigeration Equipment 
Manufacturing'' industry. This value translates to 2,643 production 
workers supporting the industry in 2019.
    When this figure was presented in ASRAC Working Group discussions, 
manufacturers stated that this figure was still too low. However, DOE 
did not receive any specific comments or suggestions on how it might 
modify this methodology to account for this issue. Furthermore, no 
manufacturer offered alternative estimates of company or industry 
employment data despite repeated requests in the NOPR and at the ASRAC 
Working Group meetings. The estimated number of production workers in 
DOE's analysis (i.e. 2,643) only accounts for the labor required to 
manufacture the most basic product that meets the applicable standard--
it does not take into account additional features that manufacturers 
use to differentiate premium products, add-ons, or component in the 
cabinet that do not contribute to the cooling function. It also does 
not account for variations in worker salary for production performed in 
lower wage countries. These items could account for greater actual 
employment in the industry. Additional detail on the direct employment 
analysis can be found in Chapter 12 of the direct final rule TSD.
    DOE notes that there were discrepancies between the NOPR Notice and 
NOPR TSD for CUAC/CUHP equipment with regard to the percentage of 
production labor that is domestically-based. For the final rule, DOE 
does not attempt to estimate the portion of foreign production of 
CUACs/CUHPs and CWAFs. Rather, the direct employment number captures 
the maximum number of domestic production workers based on the 
available data and DOE's methodology.
    In response to AHRI's comments, DOE's manufacturer impact analysis 
focuses on the impacts to the regulated entities--the CUAC/CUHP 
manufacturers. The employment of component suppliers who manufacture 
components that may be used in a completed CUAC/CUHP system falls 
beyond the scope of the analysis. However, DOE does present the total 
employment impacts on the economy at large in the Indirect Employments 
Analysis in section IV.N of this document.
b. Conversion Costs Related to CUACs/CUHPs
    Responding to the CUAC/CUHP NOPR, stakeholders pointed out that 
high capital costs and intensive redesign efforts would be required by 
the proposed standards. Manufacturers noted that they are currently 
redesigning equipment to meet ASHRAE 90.1-2013 minimum efficiency 
levels. Adopting a standard above ASHRAE 90.1-2013 would require the 
redesign of most product offerings in a short time frame. (CUAC: 
Nordyne, No. 61 at p. 32; Trane, No. 95 at p. 11; AHRI, No. 107 at p. 
46)
    DOE acknowledges manufacturers' concerns regarding the product 
redesign process. To lessen the product redesign

[[Page 2490]]

burden on manufacturers to comply with ASHRAE 90.1-2013 and an amended 
CUACs energy conservation standard, the direct final rule adopts a two-
tiered approach that applies the ASHRAE 90.1-2013 levels for compliance 
in 2018 (though this occurs at the end of the year and is modeled as a 
2019 effective date for the purposes of the MIA) and then applies a 
higher standard starting in 2023, as recommended by the ASRAC Working 
Group.
    Additionally, manufacturers stated that conversion costs of $12.7 
million would not adequately cover all product conversion costs. (CUAC: 
Nordyne, No. 61 at p. 32; Trane, No. 95 at p. 11; AHRI, No. 107 at p. 
45)
    To clarify, in the CUAC/CUHP NOPR, DOE included an estimate of 
$12.7 million as a testing cost attributable to compliance, 
certification, and enforcement efforts that manufacturers would likely 
incur to re-rate all basic models using the IEER metric. However, this 
cost is only a small portion of the total conversion costs that DOE 
estimates that manufacturers are likely to incur. In the CUAC/CUHP 
NOPR, DOE expected the industry to incur $226.4 million in conversion 
costs at the proposed TSL. After evaluating further information 
gathered during additional interviews, as well as applying data from 
DOE's revised engineering analysis and shipments forecast, DOE 
estimates the industry would likely incur $520.8 million in conversion 
costs to comply with the CUAC/CUHP standard adopted in this direct 
final rule. This figure does not account for any cost savings that may 
result from aligning the CUACs/CUHPs and CWAFs standards' effective 
years. Conversion costs are discussed in detail in section V.B.2 of 
this document and in chapter 12 of the CUACs/CUHPs direct final rule 
TSD.
c. Small Business Impacts on CWAF Manufacturers
    The SBA expressed concern about the impacts of the rulemaking on 
the one small manufacturer of CWAF equipment. Based on conversations 
with that small manufacturer, the SBA stated that the proposed 
standards are not economically feasible within the three-year period 
prescribed by DOE. (CWAF: SBA, No. 7 at p. 2)
    For the direct final rule, DOE has adopted a later compliance date 
from the 2018 date proposed in the CWAF NOPR. For the direct final 
rule, DOE has extended the compliance year to 2023. This change will 
provide the small manufacturer with additional lead-time to comply with 
the amended standard level. In DOE's view, this additional lead-time, 
coupled with the more accommodating revised standards that are being 
adopted, will help this small manufacturer comply with the new 
efficiency levels in a timely manner.

K. Emissions Analysis

    The emissions analysis consists of two components. The first 
component estimates the effect of potential energy conservation 
standards on power sector and site (where applicable) combustion 
emissions of carbon dioxide (CO2), nitrogen oxides 
(NOX), sulfur dioxide (SO2), and mercury (Hg). 
The second component estimates the impacts of potential standards on 
emissions of two additional greenhouse gases, methane (CH4) 
and nitrous oxide (N2O), as well as the reductions to 
emissions of all species due to ``upstream'' activities in the fuel 
production chain. These upstream activities comprise extraction, 
processing, and transporting fuels to the site of combustion. The 
associated emissions are referred to as upstream emissions.
    For CWAFs, the adopted standards would reduce use of fuel at the 
site and slightly reduce electricity use, thereby reducing power sector 
emissions. However, the highest efficiency levels (i.e., the max-tech 
levels) considered for CWAFs would increase the use of electricity by 
the furnace and increase emissions accordingly.
    For the CUACs/CUHPs and CWAF NOPRs, DOE used marginal emissions 
factors for CO2 and most of the other gases that were 
derived from data in AEO 2013.
    Commenting on the CUAC/CUHP NOPR and the CWAF NOPR, AHRI stated 
that DOE should use the most recent AEO data available, which would 
significantly reduce the environmental benefits resulting from 
reductions of CO2, SO2, and Hg, among other 
emissions. (CUAC: AHRI, No. 68 at p. 18; CWAF: AHRI, No. 26 at pp. 7-8) 
Nordyne and Lennox made a similar comment. (CUAC: Nordyne, No. 61 at p. 
16; Lennox, No. 60 at p. 17)
    For the direct final rule analysis, DOE used marginal emissions 
factors that were derived from data in AEO 2015, as described in 
section IV.K. The methodology is described in the appendices to chapter 
13 and chapter 15 of the direct final rule TSDs.
    Combustion emissions of CH4 and N2O are 
estimated using emissions intensity factors published by the EPA, GHG 
Emissions Factors Hub.\110\ The FFC upstream emissions are estimated 
based on the methodology described in chapter 15 of the direct final 
rule TSDs. The upstream emissions include both emissions from fuel 
combustion during extraction, processing, and transportation of fuel, 
and ``fugitive'' emissions (direct leakage to the atmosphere) of 
CH4 and CO2.
---------------------------------------------------------------------------

    \110\ Available at: http://www.epa.gov/climateleadership/inventory/ghg-emissions.html.
---------------------------------------------------------------------------

    The emissions intensity factors are expressed in terms of physical 
units per MWh or MMBtu of site energy savings. Total emissions 
reductions are estimated using the energy savings calculated in the 
national impact analysis.
    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,\111\ DOE used 
GWP values of 28 for CH4 and 265 for N2O.
---------------------------------------------------------------------------

    \111\ 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.
---------------------------------------------------------------------------

    Because the on-site operation of CWAFs requires use of fossil fuels 
and results in emissions of CO2, NOX, and 
SO2 at the sites where these appliances are used, DOE also 
accounted for the reduction in these site emissions and the associated 
upstream emissions due to potential standards. Site emissions were 
estimated using emissions intensity factors from an EPA 
publication.\112\
---------------------------------------------------------------------------

    \112\ U.S. Environmental Protection Agency, Compilation of Air 
Pollutant Emission Factors, AP-42, Fifth Edition, Volume I: 
Stationary Point and Area Sources (1998) (Available at: http://www.epa.gov/ttn/chief/ap42/index.html).
---------------------------------------------------------------------------

    The AEO incorporates the projected impacts of existing air quality 
regulations on emissions. AEO 2015 generally represents current 
legislation and environmental regulations, including recent government 
actions, for which implementing regulations were available as of 
October 31, 2014. DOE's estimation of impacts accounts for the presence 
of the emissions control programs discussed in the following 
paragraphs.
    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.)

[[Page 2491]]

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.\113\ 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 DC Circuit issued a decision to 
vacate CSAPR,\114\ and the court ordered EPA to continue administering 
CAIR. On April 29, 2014, the U.S. Supreme Court reversed the judgment 
of the DC Circuit and remanded the case for further proceedings 
consistent with the Supreme Court's opinion.\115\ On October 23, 2014, 
the DC Circuit lifted the stay of CSAPR.\116\ Pursuant to this action, 
CSAPR went into effect (and CAIR ceased to be in effect) as of January 
1, 2015.
---------------------------------------------------------------------------

    \113\ 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).
    \114\ 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).
    \115\ See EPA v. EME Homer City Generation, 134 S.Ct. 1584, 1610 
(U.S. 2014).
    \116\ See Georgia v. EPA, Order (D.C. Cir. filed October 23, 
2014) (No. 11-1302).
---------------------------------------------------------------------------

    EIA was not able to incorporate CSAPR into AEO 2015, so it assumes 
implementation of CAIR. Although DOE's analysis used emissions factors 
that assume that CAIR, not CSAPR, is the regulation in force, the 
difference between CAIR and CSAPR is not relevant for the purpose of 
DOE's analysis of 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 
2015 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.\117\ Therefore, DOE believes that energy conservation standards 
will generally reduce SO2 emissions in 2016 and beyond.
---------------------------------------------------------------------------

    \117\ DOE notes that the Supreme Court recently remanded EPA's 
2012 rule regarding national emission standards for hazardous air 
pollutants from certain electric utility steam generating units. See 
Michigan v. EPA (Case No. 14-46, 2015). DOE has tentatively 
determined that the remand of the MATS rule does not change the 
assumptions regarding the impact of energy efficiency standards on 
SO2 emissions. Further, while the remand of the MATS rule 
may have an impact on the overall amount of mercury emitted by power 
plants, it does not change the impact of the energy efficiency 
standards on mercury emissions. DOE will continue to monitor 
developments related to this case and respond to them as 
appropriate.
---------------------------------------------------------------------------

    CAIR established a cap on NOX emissions in 28 eastern 
States and the District of Columbia.\118\ 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 from other 
facilities. 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.
---------------------------------------------------------------------------

    \118\ 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 2015, which 
incorporates the MATS.

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. 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 products 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 direct 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 direct final rule TSDs.
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) climate-change-related 
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

[[Page 2492]]

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 \119\ 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.
---------------------------------------------------------------------------

    \119\ 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 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,\120\ although preference is given to consideration of the 
global benefits of reducing CO2 emissions. Table IV-35 
presents the values in the 2010 interagency group report,\121\ which is 
reproduced in appendix 14A of the direct final rule TSD.
---------------------------------------------------------------------------

    \120\ 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.
    \121\ 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).

[[Page 2493]]



                     Table IV-35--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, as described in the 
2013 update from the interagency Working Group (revised July 
2015).\122\ Table IV-36 shows the updated sets of SCC estimates from 
the latest interagency update in 5-year increments from 2010 to 2050. 
The full set of annual SCC values between 2010 and 2050 is reported in 
appendix 14B of the direct 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.
---------------------------------------------------------------------------

    \122\ 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 July 2015) (Available at: http://www.whitehouse.gov/sites/default/files/omb/inforeg/scc-tsd-final-july-2015.pdf).

           Table IV-36--Annual SCC Values From 2013 Interagency Update (Revised July 2015), 2010-2050
                                           [2007$ per metric ton CO2]
----------------------------------------------------------------------------------------------------------------
                                                                     Discount rate
                                     ---------------------------------------------------------------------------
                Year                          5%                 3%                2.5%                3%
                                     ---------------------------------------------------------------------------
                                           Average            Average            Average        95th percentile
----------------------------------------------------------------------------------------------------------------
2010................................                 10                 31                 50                 86
2015................................                 11                 36                 56                105
2020................................                 12                 42                 62                123
2025................................                 14                 46                 68                138
2030................................                 16                 50                 73                152
2035................................                 18                 55                 78                168
2040................................                 21                 60                 84                183
2045................................                 23                 64                 89                197
2050................................                 26                 69                 95                212
----------------------------------------------------------------------------------------------------------------

    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 (revised July 2015), 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, $40.0, $62.3, 
and $117 per metric ton avoided (values expressed in 2014$). DOE 
derived SCC 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.
    In response to the CUAC/CUHP NOPR and the CWAF NOPR, DOE received a 
number of comments that were critical

[[Page 2494]]

of DOE's use of the SCC values developed by the interagency group.
    A group of trade associations led by the U.S. Chamber of Commerce 
objected to DOE's continued use of the SCC in the cost-benefit analysis 
and stated that the SCC calculation should not be used in any 
rulemaking until it undergoes a more rigorous notice, review and 
comment process. (CUAC: U.S. Chamber of Commerce, No. 40 at pp. 3-4; 
CWAF: U.S. Chamber of Commerce, No. 21 at pp. 3-4) AHRI, Lennox and 
Nordyne criticized DOE's use of SCC estimates that are subject to 
considerable uncertainty. (CUAC: AHRI, No. 68 at p. 21; Lennox, No. 60 
at p. 17; Nordyne, No. 61 at p. 18; CWAF: AHRI, No. 26 at p. 9) AHRI 
stated that the emissions reductions and global social cost of carbon 
do not meet the requirement of clear and convincing evidence that a 
standard more stringent than ASHRAE is justified. (CWAF: AHRI, No. 26 
at p. 7) AHRI stated that the interagency process was not transparent 
and the estimates were not subjected to peer review. (CWAF: AHRI, No. 
26 at p. 12)
    In response, 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 direct 
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 direct 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. 78 FR 
70586. In July 2015, OMB published a detailed summary and formal 
response to the many comments that were received.\123\ 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.
---------------------------------------------------------------------------

    \123\ https://www.whitehouse.gov/blog/2015/07/02/estimating-benefits-carbon-dioxide-emissions-reductions. OMB also stated its 
intention to seek independent expert advice on opportunities to 
improve the estimates, including many of the approaches suggested by 
commenters.
---------------------------------------------------------------------------

    AHRI stated that the use of SCC as determined on a global basis for 
the world population is outside of DOE's regulatory authority under 
EPCA. AHRI stated that EPCA authorizes DOE to conduct a national 
analysis of energy savings, but there are no references to global 
environmental impacts in the statute. (CUAC: AHRI, No. 68 at p. 21; 
CWAF: AHRI, No. 26 at pp. 9-11) Nordyne made similar comments. (CUAC: 
Nordyne, No. 61 at p. 18)
    In response, DOE's analysis estimates both global and domestic 
benefits of CO2 emissions reductions. Following the 
recommendation of the interagency Working Group, DOE places more focus 
on a global measure of SCC. As discussed in appendix 14A of the direct 
final rule TSD, the climate change problem is highly unusual in at 
least two respects. First, it involves a global externality: Emissions 
of most greenhouse gases contribute to damages around the world even 
when they are emitted in the United States. Consequently, to address 
the global nature of the problem, the SCC must incorporate the full 
(global) damages caused by GHG emissions. Second, climate change 
presents a problem that the United States alone cannot solve. Even if 
the United States were to reduce its greenhouse gas emissions to zero, 
that step would be far from enough to avoid substantial climate change. 
Other countries would also need to take action to reduce emissions if 
significant changes in the global climate are to be avoided. 
Emphasizing the need for a global solution to a global problem, the 
United States has been actively involved in seeking international 
agreements to reduce emissions and in encouraging other nations, 
including emerging major economies, to take significant steps to reduce 
emissions. When these considerations are taken as a whole, the 
interagency group concluded that a global measure of the benefits from 
reducing U.S. emissions is preferable. DOE's approach is not in 
contradiction of the requirement to weigh the need for national energy 
conservation, as one of the main reasons for national energy 
conservation is to contribute to efforts to mitigate the effects of 
global climate change.
    AHRI and Nordyne criticized DOE's inclusion of CO2 
emissions impacts over a time period greatly exceeding that used to 
measure the economic costs. (CUAC: AHRI, No. 68 at p. 22; Nordyne, No. 
61 at p. 18) For the analysis of national impacts of standards, DOE 
considers the lifetime impacts of equipment shipped in the analysis 
period. With respect to energy cost savings, impacts continue until all 
of the equipment shipped in the analysis period is retired. Emissions 
impacts occur over the same period. 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 
reductions occurring in a given year. For example, CO2 
emissions in 2050 have a long residence time in the atmosphere, and 
thus contribute to radiative forcing, which affects global climate, for 
a long time. In the case of both consumer economic costs and benefits 
and the value of CO2 emissions reductions, DOE is accounting 
for the lifetime impacts of equipment shipped in the same analysis 
period.
    AHRI and Nordyne stated that DOE wrongly assumes that SCC values 
will increase over time, contrary to historical experience and to 
economic development science. (CUACs and CUHPs: AHRI, No. 68 at p. 22; 
Nordyne, No. 61 at p. 19; CWAF: AHRI, No. 26 at p. 11) In response, the 
SCC increases over time because future emissions are expected to 
produce larger incremental damages as physical and economic systems 
become more stressed in response to greater climatic change (see 
appendix 14A of the direct final rule TSDs). The approach used by the 
interagency Working Group allowed estimation of the growth rate of the 
SCC directly using the three IAMs, which helps to ensure that the 
estimates are internally consistent with other modeling assumptions.
2. Social Cost of Other Air Pollutants
    As noted previously, DOE has estimated how the 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.

[[Page 2495]]

    DOE estimated the monetized value of NOX emissions 
reductions using benefit per ton estimates from Regulatory Impact 
Analysis titled, Proposed Carbon Pollution Guidelines for Existing 
Power Plants and Emission Standards for Modified and Reconstructed 
Power Plants, published in June 2014 by EPA's Office of Air Quality 
Planning and Standards.\124\ The report includes high and low values 
for NOX (as PM2.5) for 2020, 2025, and 2030 
discounted at 3 percent and 7 percent,\125\ which are presented in 
chapter 14 of the direct final rule TSD. DOE assigned values for 2021-
2024 and 2026-2029 using, respectively, the values for 2020 and 2025. 
DOE assigned values after 2030 using the value for 2030.
---------------------------------------------------------------------------

    \124\ http://www3.epa.gov/ttnecas1/regdata/RIAs/111dproposalRIAfinal0602.pdf. See Tables 4-7, 4-8, and 4-9 in the 
report.
    \125\ For the monetized NOX benefits associated with 
PM2.5, the related benefits (derived from benefit-per-ton 
values) are based on an estimate of premature mortality derived from 
the ACS study (Krewski et al., 2009), which is the lower of the two 
EPA central tendencies. Using the lower value is more conservative 
when making the policy decision concerning whether a particular 
standard level is economically justified so using the higher value 
would also be justified. If the benefit-per-ton estimates were based 
on the Six Cities study (Lepuele et al., 2012), the values would be 
nearly two-and-a-half times larger. (See chapter 14 of the direct 
final rule TSD for further description of the studies mentioned 
above.)
---------------------------------------------------------------------------

    DOE multiplied the emissions reduction (tons) in each year by the 
associated $/ton values, and then discounted each series using discount 
rates of 3 percent and 7 percent as appropriate. DOE will continue to 
evaluate the monetization of avoided NOX emissions and will 
make any appropriate updates in energy conservation standards 
rulemakings.
    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.

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. The utility impact analysis 
estimates the changes in installed electrical capacity and generation 
that would result for each TSL. The analysis for the direct final rule 
is based on published output from the NEMS associated with AEO 2015. 
NEMS produces the AEO Reference case, as well as a number of side cases 
to estimate the marginal impacts of reduced energy demand on the 
utility sector. These marginal factors are estimated based on the 
changes to electricity sector generation, installed capacity, fuel 
consumption and emissions in the AEO Reference case and various side 
cases. Details of the methodology are provided in the appendices to 
Chapters 13 and 15 of the direct final rule TSDs.
    The output of this analysis is a set of time-dependent coefficients 
capturing 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 use calculated in the NIA to 
provide estimates of selected utility impacts of new or amended energy 
conservation standards.

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 products 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 products 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'').\126\ 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.\127\ 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, the BLS 
data shows that the net national employment may increase due to shifts 
in economic activity resulting from energy conservation standards.
---------------------------------------------------------------------------

    \126\ 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].
    \127\ 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 direct final rule using an input/output model 
of the U.S. economy called Impact of Sector Energy Technologies version 
3.1.1 (``ImSET'').\128\ 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.
---------------------------------------------------------------------------

    \128\ 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 direct final rule TSDs.

[[Page 2496]]

V. Analytical Results and Conclusions

    The following section addresses the results from DOE's analyses 
with respect to the considered energy conservation standards for CUACs/
CUHPs and CWAFs. It addresses the TSLs examined by DOE, the projected 
impacts of each of these levels if adopted as energy conservation 
standards for CUACs/CUHPs and CWAFs, and the standard levels that DOE 
is adopting in the direct final rule. Additional details regarding 
DOE's analyses are contained in the direct final rule TSDs supporting 
this document.

A. Trial Standard Levels

    DOE analyzed the benefits and burdens of eight TSLs for CUACs and 
CUHPs that consisted of combinations of efficiency levels for each 
equipment class. Table V-1 presents the TSLs and the corresponding 
efficiency levels for CUACs and CUHPs. TSL 5 represents the maximum 
technologically feasible (``max-tech'') efficiency. The Recommended TSL 
corresponds to the standard levels recommended by the Working Group.

         Table V-1--Trial Standard Levels for Small, Large, and Very Large Air-Cooled Commercial Package Air Conditioning and Heating Equipment
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                              Commercial packaged air conditioners *             Commercial packaged heat pumps *
                           TSL                           -----------------------------------------------------------------------------------------------
                                                               Small           Large        Very large         Small           Large        Very large
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                   Efficiency Level **
--------------------------------------------------------------------------------------------------------------------------------------------------------
1.......................................................               1               1               1               1               1               1
2.......................................................               2               2               2               2               2               2
2.5.....................................................             2.5             2.5             2.5             2.5             2.5             2.5
Recommended.............................................               3               3             2.5               3               3             2.5
3.......................................................               3               3               3               3               3               3
3.5.....................................................             3.5             3.5               3             3.5             3.5               3
4.......................................................               4               4               4               4               4               4
5.......................................................               5               5               5               5               5               5
--------------------------------------------------------------------------------------------------------------------------------------------------------
* Small = >=65,000 Btu/h and <135,000 Btu/h Cooling Capacity; Large = >=135,000 Btu/h and <240,000 Btu/h Cooling Capacity; Very Large = >=240,000 Btu/h
  and <760,000 Btu/h Cooling Capacity.
** For the IEERs that correspond to the efficiency levels, see Table IV-6.

    DOE also analyzed the benefits and burdens of five TSLs for CWAFs, 
which were developed by combining specific efficiency levels for each 
of the equipment classes analyzed. Table V-2 presents the TSLs and the 
corresponding efficiency levels for CWAFs. The results for all 
efficiency levels that DOE analyzed are in the direct final rule TSD. 
TSL 5 represents the max-tech efficiency levels, which rely on 
condensing technology. TSL 2 corresponds to the standard levels 
recommended by the Working Group.

                        Table V-2--Trial Standard Levels for Commercial Warm Air Furnaces
----------------------------------------------------------------------------------------------------------------
                                                              Thermal efficiency (TE)
         Equipment class         -------------------------------------------------------------------------------
                                     TSL 1 (%)       TSL 2 (%)       TSL 3 (%)       TSL 4 (%)       TSL 5 (%)
----------------------------------------------------------------------------------------------------------------
Gas-fired Furnaces..............              81              81              82              82              92
Oil-fired Furnaces..............              81              82              81              82              92
----------------------------------------------------------------------------------------------------------------

B. Economic Justification and Energy Savings

1. Economic Impacts on Individual Commercial Consumers
    DOE analyzed the economic impacts on CUAC and CWAF consumers by 
looking at the effects potential amended standards at each TSL would 
have on the LCC and PBP. DOE also examined the impacts of potential 
standards on commercial consumer subgroups. These analyses are 
discussed below.
a. Life-Cycle Cost and Payback Period
    In general, higher-efficiency products affect consumers in two 
ways: (1) Purchase prices increase, and (2) annual operating costs 
decrease. Inputs used for calculating the LCC and PBP include total 
installed costs (i.e., product 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 product lifetime and a discount rate. Chapter 8 of the direct 
final rule TSD provides detailed information on the LCC and PBP 
analyses.
Small, Large, and Very Large Air-Cooled Commercial Package Air 
Conditioning and Heating Equipment
    Table V-3 through Table V-12 show the key LCC and PBP results for 
the TSL efficiency levels considered for each CUAC equipment class. DOE 
did not conduct LCC and PBP analyses for the CUHP equipment classes 
because energy modeling was performed only for CUAC equipment. However, 
the LCC and PBP results for CUACs are a close proxy for the likely 
consumer impacts for CUHPs because: (1) Over 98 percent of the energy 
savings for CUHP comes from the cooling side; (2) the per-unit savings 
for CUAC equipment and the cooling side of CUHP equipment are about the 
same; and (3) the cost of increasing efficiency for CUHPs is 
approximately the same as for CUACs.
    In the first of each pair of tables, the simple payback is measured 
relative to the baseline product. In the second table, the impacts are 
measured relative to the efficiency distribution in the no-new-
standards case in the compliance year (see section IV.F.8 of this 
document). The average savings reflect the fact that some consumers 
purchase products with higher efficiency in the no-new-standards case, 
and the savings

[[Page 2497]]

refer only to the other consumers who are affected by a standard at a 
given TSL. Consumers for whom the LCC increases at a given TSL 
experience a net cost.

 Table V.3--Average LCC and PBP Results by Efficiency Level for Small Air-Cooled Commercial Package Air Conditioners (>=65,000 Btu/h and <135,000 Btu/h
                                                                   Cooling Capacity) *
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                               Average costs (2014$)
                                                         ---------------------------------------------------------------- Simple payback      Average
                   TSL                          EL                          First year       Lifetime                         (years)        lifetime
                                                          Installed cost  operating cost  operating cost        LCC                           (years)
--------------------------------------------------------------------------------------------------------------------------------------------------------
1 **....................................               1          10,024           2,142          31,342          41,366            14.9            20.9
2.......................................               2          10,865           1,992          29,354          40,219             8.5            20.9
2.5.....................................             2.5          11,263           1,748          25,983          37,246             4.9            20.9
Recommended [dagger]....................               3          11,564           1,691          25,216          36,780             4.9            20.9
3.......................................               3          11,564           1,691          25,216          36,780             4.9            20.9
3.5.....................................             3.5          12,002           1,706          25,499          37,501             5.9            20.9
4.......................................               4          13,384           1,626          24,599          37,984             7.5            20.9
5.......................................               5          14,848           1,342          20,845          35,692             6.7            20.9
--------------------------------------------------------------------------------------------------------------------------------------------------------
* The analysis is for equipment purchased in 2019 for all TSLs. The results for each TSL are calculated assuming that all commercial consumers use
  equipment at that efficiency level. The PBP is measured relative to the baseline equipment.
** TSL 1 also corresponds to the recommended standards for compliance in 2018.
[dagger] For compliance in 2023.


Table V.4--Average LCC Savings Relative to the No-New-Standards Case for Small Air-Cooled Commercial Package Air
                       Conditioners (>=65,000 Btu/h and <135,000 Btu/h Cooling Capacity) *
----------------------------------------------------------------------------------------------------------------
                                                                                                   Percent of
                                                                               Average LCC       consumers that
                            TSL                                   EL         savings (2014$)     experience net
                                                                                                    cost (%)
----------------------------------------------------------------------------------------------------------------
1 **......................................................               1               -210                 48
2.........................................................               2                870                 25
2.5.......................................................             2.5              3,777                  5
Recommended [dagger]......................................               3              4,233                  5
3.........................................................               3              4,233                  5
3.5.......................................................             3.5              3,517                 13
4.........................................................               4              3,035                 25
5.........................................................               5              5,326                 16
----------------------------------------------------------------------------------------------------------------
* The analysis is for equipment purchased in 2019 for all TSLs. The savings represent the average LCC for
  affected consumers.
** TSL 1 also corresponds to the recommended standards for compliance in 2018.
[dagger] For compliance in 2023.


 Table V.5--Average LCC and PBP Results by Efficiency Level for Large Air-Cooled Commercial Package Air Conditioners (>=135,000 Btu/h and <240,000 Btu/h
                                                                   Cooling Capacity) *
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                               Average costs (2014$)
                                                         ---------------------------------------------------------------- Simple payback      Average
                   TSL                          EL                          First year       Lifetime                         (years)        lifetime
                                                          Installed cost  operating cost  operating cost        LCC                           (years)
--------------------------------------------------------------------------------------------------------------------------------------------------------
1 **....................................               1          17,011           3,932          60,455          77,466             1.3            22.6
2.......................................               2          17,892           3,864          59,597          77,488             2.4            22.6
2.5.....................................             2.5          18,667           3,528          54,655          73,322             2.4            22.6
Recommended [dagger]....................               3          19,410           3,320          51,633          71,044             2.6            22.6
3.......................................               3          19,410           3,320          51,633          71,044             2.6            22.6
3.5.....................................             3.5          19,809           3,144          49,047          68,856             2.6            22.6
4.......................................               4          20,707           2,768          43,581          64,288             2.5            22.6
5.......................................               5          24,741           2,700          43,449          68,190             4.6            22.6
--------------------------------------------------------------------------------------------------------------------------------------------------------
* The analysis is for equipment purchased in 2019 for all TSLs. The results for each TSL are calculated assuming that all commercial consumers use
  equipment at that efficiency level. The PBP is measured relative to the baseline equipment.
** TSL 1 also corresponds to the recommended standards for compliance in 2018.
[dagger] For compliance in 2023.


[[Page 2498]]


Table V.6--Average LCC Savings Relative to the No-New-Standards Case for Large Air-Cooled Commercial Package Air
                      Conditioners (>=135,000 Btu/h and <240,000 Btu/h Cooling Capacity) *
----------------------------------------------------------------------------------------------------------------
                                                                                                   Percent of
                                                                               Average LCC       consumers that
                            TSL                                   EL         savings (2014$)     experience net
                                                                                                    cost (%)
----------------------------------------------------------------------------------------------------------------
1 **......................................................               1              3,997                  0
2.........................................................               2              3,728                 10
2.5.......................................................             2.5              7,991                  5
Recommended [dagger]......................................               3             10,135                  2
3.........................................................               3             10,135                  2
3.5.......................................................             3.5             12,266                  1
4.........................................................               4             16,803                  1
5.........................................................               5             12,900                 11
----------------------------------------------------------------------------------------------------------------
* The analysis is for equipment purchased in 2019 for all TSLs. The savings represent the average LCC for
  affected consumers.
** TSL 1 also corresponds to the recommended standards for compliance in 2018.
[dagger] For compliance in 2023.


 Table V.7--Average LCC and PBP Results by Efficiency Level for Very Large Air-Cooled Commercial Package Air Conditioners (>=240,000 Btu/h and <760,000
                                                                Btu/h Cooling Capacity) *
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                               Average costs (2014$)
                                                         ---------------------------------------------------------------- Simple payback      Average
                   TSL                          EL                          First year       Lifetime                         (years)        lifetime
                                                          Installed cost  operating cost  operating cost        LCC                           (years)
--------------------------------------------------------------------------------------------------------------------------------------------------------
1 **....................................               1          34,582           6,661         130,022         164,605             5.8            33.9
2.......................................               2          38,075           6,262         122,919         160,993             7.0            33.9
2.5.....................................             2.5          39,107           5,974         117,513         156,620             6.2            33.9
Recommended [dagger]....................             2.5          39,107           5,974         117,513         156,620             6.2            33.9
3.......................................               3          41,510           5,809         114,885         156,396             7.2            33.9
3.5.....................................               3          41,510           5,809         114,885         156,396             7.2            33.9
4.......................................               4          42,406           5,256         104,351         146,758             5.6            33.9
5.......................................               5          44,556           5,131         102,237         146,793             6.3            33.9
--------------------------------------------------------------------------------------------------------------------------------------------------------
 The analysis is for equipment purchased in 2019 for all TSLs. The results for each TSL are calculated assuming that all commercial consumers use
  equipment at that efficiency level. The PBP is measured relative to the baseline equipment.
** TSL 1 also corresponds to the recommended standards for compliance in 2018.
[dagger] For compliance in 2023.


    Table V.8--Average LCC Savings Relative to the No-New-Standards Case for Very Large Air-Cooled Commercial
                Package Air Conditioners (>=240,000 Btu/h and <760,000 Btu/h Cooling Capacity) *
----------------------------------------------------------------------------------------------------------------
                                                                                                   Percent of
                                                                               Average LCC      consumers  that
                            TSL                                   EL         savings (2014$)     experience net
                                                                                                    cost (%)
----------------------------------------------------------------------------------------------------------------
1 **......................................................               1              1,547                  7
2.........................................................               2              4,777                 13
2.5.......................................................             2.5              8,610                  7
Recommended [dagger]......................................             2.5              8,610                  7
3.........................................................               3              8,881                 23
3.5.......................................................               3              8,881                 23
4.........................................................               4             18,386                  3
5.........................................................               5             18,338                  6
----------------------------------------------------------------------------------------------------------------
* The analysis is for equipment purchased in 2019 for all TSLs. The savings represent the average LCC for
  affected consumers.
 TSL 1 also corresponds to the recommended standards for compliance in 2018.
[dagger] For compliance in 2023.

Commercial Warm Air Furnaces
    Table V-9 through Table V-12 show the key LCC and PBP results for 
the TSL efficiency levels considered for each CWAF equipment class. In 
Table V-9, the simple payback is measured relative to the baseline 
product. In Table V-10, the LCC savings are measured relative to the 
efficiency distribution in the no-new-standards case in the compliance 
year (see section IV.F.8 of this document).

[[Page 2499]]



                          Table V-9--Average LCC and PBP Results by Efficiency Level for Gas-Fired Commercial Warm Air Furnaces
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                               Average costs (2014$)
                                                         ---------------------------------------------------------------- Simple payback      Average
                   TSL                          EL                         First year's      Lifetime                         (years)        lifetime
                                                          Installed cost  operating cost  operating cost        LCC                           (years)
--------------------------------------------------------------------------------------------------------------------------------------------------------
1.......................................               1           2,114           1,770          28,610          30,725             1.4              23
2.......................................               1           2,114           1,770          28,610          30,725             1.4              23
3.......................................               2           2,543           1,752          28,311          30,854            12.3              23
4.......................................               2           2,543           1,752          28,311          30,854            12.3              23
5.......................................               3           3,840           1,634          26,319          30,159            11.3              23
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note: The analysis is for equipment purchased in 2019 for all TSLs. The results for each TSL are calculated assuming that all commercial consumers use
  equipment at that efficiency level. The PBP is measured relative to the baseline equipment.


Table V-10--Average LCC Savings Relative to the No-New-Standards Case for Gas-Fired Commercial Warm Air Furnaces
----------------------------------------------------------------------------------------------------------------
                                                                                                   Percent of
                                                                               Average LCC       consumers that
                            TSL                                   EL        savings * (2014$)    experience net
                                                                                                      cost
----------------------------------------------------------------------------------------------------------------
1.........................................................               1                284                  6
2.........................................................               1                284                  6
3.........................................................               2                 75                 58
4.........................................................               2                 75                 58
5.........................................................               3                766                 58
----------------------------------------------------------------------------------------------------------------
Note:The analysis is for equipment purchased in 2019 for all TSLs.
* The savings represent the average LCC for affected consumers.


                         Table V-11--Average LCC and PBP Results by Efficiency Level for Oil-Fired Commercial Warm Air Furnaces
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                               Average costs (2014$)
                                                         ---------------------------------------------------------------- Simple payback      Average
                   TSL                          EL                         First year's      Lifetime                         (years)        lifetime
                                                          Installed cost  operating cost  operating cost        LCC                           (years)
--------------------------------------------------------------------------------------------------------------------------------------------------------
1.......................................               0           6,357           3,031          49,243          55,601              NA              23
2.......................................               1           6,410           3,004          48,782          55,192             1.9              23
3.......................................               0           6,357           3,031          49,243          55,601              NA              23
4.......................................               1           6,410           3,004          48,782          55,192             1.9              23
5.......................................               2           7,861           2,829          45,673          53,534             7.5              23
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note: The analysis is for equipment purchased in 2019 for all TSLs. The results for each TSL are calculated assuming that all commercial consumers use
  equipment at that efficiency level. The PBP is measured relative to the baseline equipment.


Table V-12--Average LCC Savings Relative to the No-New-Standards Case for Oil-Fired Commercial Warm Air Furnaces
----------------------------------------------------------------------------------------------------------------
                                                                                                   Percent of
                                                                                                 consumers that
                    TSL                           EL          Average LCC savings * (2014$)      experience net
                                                                                                      cost
----------------------------------------------------------------------------------------------------------------
1.........................................               0  NA...............................                  0
2.........................................               1  400..............................                 11
3.........................................               0  NA...............................                  0
4.........................................               1  400..............................                 11
5.........................................               2  1,817............................                 54
----------------------------------------------------------------------------------------------------------------
Note: The analysis is for equipment purchased in 2019 for all TSLs.
* The savings represent the average LCC for affected consumers.

b. Consumer Subgroup Analysis
    In the consumer subgroup analysis, DOE estimated the impact of the 
considered TSLs on small businesses. Table V-13 and Table V-14 compare 
the average LCC savings and PBP at each efficiency level for the 
commercial consumer subgroup, along with the average LCC savings for 
the entire sample, for small and large CUACs, while Table V-15 shows 
similar results for gas-fired CWAFs. DOE did not conduct a consumer 
subgroup analysis for very large CUACs or for oil-fired CWAFs because 
the sample sizes available to DOE were very small.
    In most cases, the average LCC savings and PBP for small businesses 
at the considered efficiency levels are not substantially different 
from the average

[[Page 2500]]

for all commercial consumers. However, for TSLs 3 and 4 for CWAFs, the 
average LCC savings for small businesses are slightly negative while 
the average LCC savings for all commercial consumers is slightly 
positive. Chapter 11 of the direct final rule TSDs presents the 
complete LCC and PBP results for the subgroups.

 Table V-13--Comparison of LCC Savings and PBP for Small Business Consumers and All Consumers: Small Air-Cooled
                                  Commercial Package Air Conditioning Equipment
----------------------------------------------------------------------------------------------------------------
                                                      Average life-cycle cost         Payback period (years)
                                                          savings (2014$)        -------------------------------
                       TSL                       --------------------------------
                                                       Small                           Small       All buildings
                                                    businesses     All buildings    businesses
----------------------------------------------------------------------------------------------------------------
1 *.............................................            -262            -210            15.4            14.9
2...............................................             522             870             8.6             8.5
2.5.............................................           2,675           3,777             5.3             4.9
Recommended **..................................           3,003           4,233             5.3             4.9
3...............................................           3,003           4,233             5.3             4.9
3.5.............................................           2,325           3,517             6.4             5.9
4...............................................           1,756           3,035             7.7             7.5
5...............................................           3,386           5,326             7.0             6.7
----------------------------------------------------------------------------------------------------------------
* TSL 1 also corresponds to the recommended standards for compliance in 2018.
** For compliance in 2023.


 Table V-14--Comparison of LCC Savings and PBP for Small Business Consumers and All Consumers: Large Air-Cooled
                                  Commercial Package Air Conditioning Equipment
----------------------------------------------------------------------------------------------------------------
                                                      Average life-cycle cost         Payback period (years)
                                                          savings (2014$)        -------------------------------
                       TSL                       --------------------------------
                                                       Small                           Small       All buildings
                                                    businesses     All buildings    businesses
----------------------------------------------------------------------------------------------------------------
1 *.............................................           3,298           3,997             1.4             1.3
2...............................................           3,008           3,728             2.7             2.4
2.5.............................................           6,082           7,991             2.7             2.4
Recommended **..................................           7,759          10,135             2.9             2.6
3...............................................           7,759          10,135             2.9             2.6
3.5.............................................           9,449          12,266             2.8             2.6
4...............................................          12,919          16,803             2.7             2.5
5...............................................           8,990          12,900             5.0             4.6
----------------------------------------------------------------------------------------------------------------
* TSL 1 also corresponds to the recommended standards for compliance in 2018.
** For compliance in 2023.


     Table V-15--Comparison of LCC Savings and PBP for Small Business Consumers and All Consumers: Gas-Fired
                                          Commercial Warm Air Furnaces
----------------------------------------------------------------------------------------------------------------
                                         Average life-cycle cost savings           Payback period  (years)
                                                     (2014$)               -------------------------------------
                 TSL                 --------------------------------------
                                       Small businesses    All buildings     Small businesses    All buildings
----------------------------------------------------------------------------------------------------------------
1...................................                223                284                1.6                1.4
2...................................                223                284                1.6                1.4
3...................................                -28                 75               13.8               12.3
4...................................                -28                 75               13.8               12.3
5...................................                377                766               12.1               11.3
----------------------------------------------------------------------------------------------------------------

c. Rebuttable Presumption Payback
    As discussed in section III.F.2, EPCA establishes a rebuttable 
presumption that an energy conservation standard is economically 
justified if the increased purchase cost for equipment that meets the 
standard is less than three times the value of the first-year energy 
savings resulting from the standard. Section IV.F describes the 
approach used to calculate the PBP for the rebuttable presumption. 
Table V-16 and Table V-17 shows the rebuttable presumption PBPs for the 
considered TSLs for CUACs/CUHPs and CWAFs, respectively. While DOE 
examined the rebuttable-presumption criterion, it also 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. 6313(a)(6)(B)(ii). The results of 
that analysis serve as the basis for DOE to definitively evaluate the 
economic justification of a potential standard level, thereby 
supporting or rebutting the results of any preliminary determination of 
economic justification.

[[Page 2501]]



Table V-16--Rebuttable-Presumption Payback Period (Years) for Small, Large, and Very Large Air-Cooled Commercial
                                 Package Air Conditioning and Heating Equipment
----------------------------------------------------------------------------------------------------------------
                                                          Small air-cooled   Large air-cooled   Very large air-
                                                             commercial         commercial     cooled commercial
                  Trial Standard Level                      package air        package air        package air
                                                            conditioning       conditioning       conditioning
                                                             equipment          equipment          equipment
----------------------------------------------------------------------------------------------------------------
1 *....................................................               30.0                1.5               10.1
2......................................................               10.0                3.2               12.7
2.5....................................................                5.4                3.5                9.3
Recommended **.........................................                5.4                3.4                9.3
3......................................................                5.4                3.4               11.9
3.5....................................................                6.6                3.2               11.9
4......................................................                8.9                3.0                6.5
5......................................................                7.3                5.6                7.6
----------------------------------------------------------------------------------------------------------------
* TSL 1 also corresponds to the recommended standards for compliance in 2018.
** For compliance in 2023.


Table V-17--Rebuttable-Presumption Payback Period (Years) for Commercial
                            Warm Air Furnace
------------------------------------------------------------------------
                                                 Gas-fired    Oil-fired
             Trial Standard Level                  CWAFs        CWAFs
------------------------------------------------------------------------
1.............................................          1.0  ...........
2.............................................          1.0          1.3
3.............................................          8.1  ...........
4.............................................          8.1          1.3
5.............................................          5.9          3.8
------------------------------------------------------------------------

2. Economic Impacts on Manufacturers
    As noted above, DOE performed an MIA to estimate the impact of new 
energy conservation standards on CUAC/CUHP and CWAF manufacturers. The 
following section describes the expected impacts on manufacturers at 
each considered TSL. Chapter 12 of the CUACs/CUHPs direct final rule 
TSD and chapter 12 of the CWAFs direct final rule TSD explains the 
analysis in further detail.
a. Industry Cash-Flow Analysis Results
    Table V-18 through Table V-21 depict the financial impacts 
(represented by changes in INPV) of new energy standards on CUAC/CUHP 
and CWAF manufacturers, as well as the conversion costs that DOE 
expects manufacturers would incur for all product classes at each TSL. 
To evaluate the range of cash flow impacts on the CUAC/CUHP and CWAF 
industries, DOE modeled two different markup scenarios using different 
assumptions that correspond to the range of anticipated market 
responses to potential new energy conservation standards: (1) The 
preservation of gross margin percentage; and (2) the preservation of 
per-unit operating profit. Each of these scenarios is discussed 
immediately below.
    To assess the lower (less severe) end of the range of potential 
impacts, DOE modeled a preservation of gross margin percentage markup 
scenario, in which a uniform ``gross margin percentage'' markup is 
applied across all potential efficiency levels. In this scenario, DOE 
assumed that a manufacturer's absolute dollar markup would increase as 
production costs increase in the standards case.
    To assess the higher (more severe) end of the range of potential 
impacts, DOE modeled the preservation of per-unit operating profit 
markup scenario, which assumes that manufacturers would be able to earn 
the same operating margin in absolute dollars per-unit in the standards 
case as in the no-new-standards case. In this scenario, while 
manufacturers make the necessary investments required to convert their 
facilities to produce new standards-compliant products, operating 
profit does not change in absolute dollars per unit and decreases as a 
percentage of revenue.
    The results below show potential INPV impacts for CUAC/CUHP and 
CWAF manufacturers; Table V-18 and Table V-20 reflect the lower bound 
of impacts, and Table V-19 and Table V-21 represents the upper bound, 
respectively.
    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 no-new-standards case and each standards case that results 
from the sum of discounted cash flows from the base year 2015 through 
2048, the end of the analysis period for CUACs/CUHPs and CWAFs. To 
provide perspective on the short-run cash flow impact, DOE includes in 
the discussion of the results below a comparison of free cash flow 
between the no-new-standards case and the standards case at each TSL in 
the year before new standards would take effect. This figure provides 
an understanding of the magnitude of the required conversion costs 
relative to the cash flow generated by the industry in the no-new-
standards case.
Commercial Unitary Air Conditioners and Heat Pumps

                    Table V-18--Manufacturer Impact Analysis for CUACs/CUHPs--Preservation of Gross Margin Percentage Markup Scenario
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                   No new                                       Trial Standard Level
                                        Units    standards ---------------------------------------------------------------------------------------------
                                                    case        1          2         2.5       Recommended        3         3.5         4          5
--------------------------------------------------------------------------------------------------------------------------------------------------------
INPV................................     2014$M      1,645      1,706      1,759      1,721          1,606.1      1,697      1,670      1,660      1,738
Change in INPV......................     2014$M  .........         61        114         77           (38.5)         53         26         16         91
                                              %  .........        3.7        6.9        4.7            (2.3)        3.2        1.6        1.0        5.7
Product Conversion Costs............     2014$M  .........       64.8      112.1      173.1            294.0      234.0      296.6      342.0      390.0
Capital Conversion Costs............     2014$M  .........       42.7       74.7      129.4            226.8      184.1      192.6      196.8      201.0
Total Conversion Costs..............     2014$M  .........      107.5      186.8      302.5            520.8      418.1      489.2      538.8      591.0
Free Cash Flow (2019)...............     2014$M       81.8       41.5       11.7     (32.8)           (76.5)     (77.2)    (105.3)    (127.2)    (150.3)
Change in Free Cash Flow............          %  .........       49.3       85.7      140.1            188.8      194.4      228.8      255.5      283.8
--------------------------------------------------------------------------------------------------------------------------------------------------------
* Values in parentheses are negative values. All values have been rounded to the nearest tenth.

[[Page 2502]]

 
M = millions.


                       Table V-19--Manufacturer Impact Analysis for CUACs/CUHPs--Preservation of Operating Profit Markup Scenario
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                   No new                                       Trial Standard Level
                                        Units    standards ---------------------------------------------------------------------------------------------
                                                    case        1          2         2.5       Recommended        3         3.5         4          5
--------------------------------------------------------------------------------------------------------------------------------------------------------
INPV................................     2014$M      1,645      1,538      1,422      1,301          1,204.1      1,197      1,138      1,025        763
Change in INPV......................     2014$M  .........      (107)      (223)      (344)          (440.4)      (447)      (506)      (620)      (882)
                                              %  .........      (6.5)     (13.5)     (20.9)           (26.5)     (27.2)     (30.8)     (37.7)     (53.6)
Product Conversion Costs............     2014$M  .........       64.8      112.1      173.1            294.0      234.0      296.6      342.0      390.0
Capital Conversion Costs............     2014$M  .........       42.7       74.7      129.4            226.8      184.1      192.6      196.8      201.0
Total Conversion Costs..............     2014$M  .........      107.5      186.8      302.5            520.8      418.1      489.2      538.8      591.0
Free Cash Flow (2019)...............     2014$M       81.8       41.5       11.7     (32.8)           (76.5)     (77.2)    (105.3)    (127.2)    (150.3)
Change in Free Cash Flow............          %  .........       49.3       85.7      140.1            188.8      194.4      228.8      255.5      283.8
--------------------------------------------------------------------------------------------------------------------------------------------------------
* Values in parentheses are negative values. All values have been rounded to the nearest tenth.
M = millions.

    TSL 1 represents the most common efficiency levels in the current 
market for all product classes. At TSL 1, DOE estimates impacts on INPV 
for CUAC/CUHP manufacturers to range from -$107.0 million to $60.9 
million, or a change in INPV of -6.5 percent to 3.7 percent. At this 
potential standard level, industry free cash flow is estimated to 
decrease by as much as 49.3 percent to $41.5 million, compared to the 
no-new-standards case value of $81.8 million in 2018, the year before 
the modeled compliance year. DOE anticipates that 31.5 percent of 
industry platforms would require redesign at a total industry 
conversion cost of $107.5 million at TSL 1.
    TSL 2 represents EL 2 for all product classes. At TSL 2, DOE 
estimates impacts on INPV for CUAC/CUHP manufacturers to range from -
$222.7 million to $114.0 million, or a change in INPV of -13.5 percent 
to 6.9 percent. At this potential standard level, industry free cash 
flow is estimated to decrease by as much as 85.7 percent to $11.7 
million, compared to the no-new-standards case value of $81.8 million 
in 2018. DOE anticipates that 59.2 percent of industry platforms would 
require redesign at a total industry conversion cost of $186.8 million 
at TSL 2.
    TSL 2.5 represents EL 2.5 for all product classes. At TSL 2.5, DOE 
estimates impacts on INPV for CUAC/CUHP manufacturers to range from -
$344.0 million to $76.6 million, or a change in INPV of -20.9 percent 
to 4.7 percent. At this potential standard level, industry free cash 
flow is estimated to decrease by as much as 140.1 percent to -$32.8 
million, compared to the no-new-standards case value of $81.8 million 
in 2018. DOE anticipates that 73.8 percent of industry platforms would 
require redesign at a total industry conversion cost of $302.5 million 
at TSL 2.5.
    The recommended TSL represents adopting EL 1 for small, large and 
very large CUAC/CUHP equipment in 2018; and adopting EL 3 for small and 
large CUAC/CUHP equipment and EL 2.5 for very large CUAC/CUHP equipment 
in 2023. At the recommended TSL, DOE estimates impacts on INPV for 
CUAC/CUHP manufacturers to range from -$440.4 million to -$38.5 
million, or a change in INPV of -26.8 percent to -2.3 percent. At this 
potential standard level, industry free cash flow is estimated to 
decrease by as much as 193.5 percent to -$76.5 million by 2022, 
compared to the no-new-standards case value of $81.8 million in 2018; 
and decrease by as much as 188.8 percent to -$76.5 million compared to 
the no-new-standards case value of $86.2 millon in 2022. DOE 
anticipates that 79.6 percent of industry platforms would require 
redesign at a total industry conversion cost of $520.8 million at the 
recommended TSL.
    TSL 3 represents EL 3 for all product classes. At TSL 3, DOE 
estimates impacts on INPV for CUAC/CUHP manufacturers to range from -
$447.2 million to $52.4 million, or a change in INPV of -27.2 percent 
to 3.2 percent. At this potential standard level, industry free cash 
flow is estimated to decrease by as much as 194.4 percent to -$77.2 
million, compared to the no-new-standards case value of $81.8 million 
in the year before the compliance date (2019). DOE anticipates that 
81.6 percent of industry platforms would require redesign at a total 
industry conversion cost of $418.1 million at TSL 3.
    TSL 3.5 represents EL 3.5 for all product classes. At TSL 3, DOE 
estimates impacts on INPV for CUAC/CUHP manufacturers to range from -
$506.4 million to $25.7 million, or a change in INPV of -30.8 percent 
to 1.6 percent. At this potential standard level, industry free cash 
flow is estimated to decrease by as much as 228.8 percent to -$105.3 
million, compared to the no-new-standards case value of $81.8 million 
in 2018. DOE anticipates that 93.5 percent of industry platforms would 
require redesign at a total industry conversion cost of $489.2 million 
at TSL 3.5.
    TSL 4 represents EL 4 for all product classes. At TSL 4, DOE 
estimates impacts on INPV for CUAC/CUHP manufacturers to range from -
$619.6 million to $16.3 million, or a change in INPV of -37.7 percent 
to 1.0 percent. At this potential standard level, industry free cash 
flow is estimated to decrease by as much as 255.5 percent to -$127.2 
million, compared to the no-new-standards case value of $81.8 million 
in 2018. DOE anticipates 96.0 percent of industry platforms would 
require redesign at a total industry conversion cost of $538.8 million 
at TSL 4.
    TSL 5 represents max-tech across all equipment classes. At TSL 5, 
DOE estimates impacts on INPV CUAC/CUHP manufacturers to range from -
$881.9 million to $93.1 million, or a change in INPV of -53.6 percent 
to 5.7 percent. At this potential standard level, industry free cash 
flow is estimated to decrease by as much as 283.8 percent to -$150.3 
million, compared to the no-new-standards case value of $81.8 million 
in 2018. DOE anticipates that 98.7 percent of industry platforms would 
require redesign at a total industry conversion cost of $591.0 million 
at TSL 5.
Commercial Warm Air Furnaces
    Table V-20 and Table V-21 depict the estimated financial impacts 
(represented by changes in INPV) of amended energy standards on CWAFs, 
as well as conversion costs that DOE expects manufacturers would incur 
for all equipment classes at each TSL. To evaluate the range of cash 
flow impacts on the CWAF industry associated with potential amended 
energy conservation standards, DOE modeled two different markup 
scenarios and two different

[[Page 2503]]

conversion cost scenarios, as described in section IV.J.2.b (Government 
Regulatory Impact Model Scenarios). The combination of markup scenarios 
and conversion cost scenarios created four sets of results: (1) 
Preservation of Gross Margin Percentage and Low Conversion Cost 
scenario; (2) Preservation of Gross Margin Percentage and High 
Conversion Cost scenario; (3) Preservation of Operating Profit and Low 
Conversion Costs scenario; (4) Preservation of Operating Profit and 
High Conversion Costs scenario. Each of the modeled scenarios results 
in a unique set of cash flows and corresponding industry values at each 
TSL. DOE presents the highest and lowest INPV results from the combined 
scenarios to portray the range of potential impacts on industry. The 
low end of the range of impacts in the Preservation of Gross Margin 
Percentage and Low Conversion Costs scenario. The high end of the range 
of impacts is the Preservation of Operating Profit and High Conversion 
Costs scenario.
    In the following discussion, the INPV results refer to the 
difference in industry value between the no-new-standards case and each 
standards case that results from the sum of discounted cash flows from 
the base year 2015 through 2048, the end of the analysis period. To 
provide perspective on the short-run cash flow impact, DOE includes in 
the discussion of the results below a comparison of free cash flow 
between the no-new-standards case and the standards case at each TSL in 
the year before the standard takes 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 no-new-
standards case. The set of results below shows potential INPV impacts 
for CWAF manufacturers; Table V-20 represents the lower bound of 
impacts, and Table V-21 represents the upper bound.

 Table V-20--Manufacturer Impact Analysis for CWAFs--Preservation of Gross Margin Percentage/Low Conversion Cost
                                                   Scenario *
----------------------------------------------------------------------------------------------------------------
                                                  No new                    Trial Standard Level
                                       Units    standards ------------------------------------------------------
                                                   case        1          2          3          4          5
----------------------------------------------------------------------------------------------------------------
INPV...............................     2014$M       96.3       92.6       90.5      125.2      124.8      143.5
Change in INPV.....................     2014$M  .........      (3.8)      (5.9)       28.8       28.4       47.2
                                             %  .........      (3.9)      (6.1)       29.9       29.5       49.0
Product Conversion Costs...........     2014$M  .........        6.3        6.6       12.6       12.9       18.3
Capital Conversion Costs...........     2014$M  .........        0.6        0.9        1.2        1.5       64.0
Total Conversion Costs.............     2014$M  .........        6.9        7.5       13.8       14.4       82.3
Free Cash Flow (2018)..............     2014$M        7.8        5.5        3.8        3.2        3.0     (26.9)
Free Cash Flow (change from No-new-          %  .........       29.7       51.2       59.3       62.1      444.5
 standards case) (2018)............
----------------------------------------------------------------------------------------------------------------
* Values in parentheses are negative values. All values have been rounded to the nearest tenth.
M = millions.


                  Table V-21--Manufacturer Impact Analysis for CWAFs--Preservation of Operating Profit/High Conversion Cost Scenario *
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                               No new                          Trial Standard Level
                                                                  Units      standards  ----------------------------------------------------------------
                                                                                case          1            2            3            4            5
--------------------------------------------------------------------------------------------------------------------------------------------------------
INPV.........................................................       2014$M         96.3         86.5         83.5        106.2        101.2         85.5
Change in INPV...............................................       2014$M  ...........       (10.6)       (13.4)         10.3          5.0       (11.3)
                                                                         %  ...........       (11.0)       (13.9)       (32.0)       (37.3)      (120.1)
Product Conversion Costs.....................................       2014$M  ...........         11.3         17.1         36.6         42.4         83.6
Capital Conversion Costs.....................................       2014$M  ...........          4.4          5.1          4.5          5.2         73.8
Total Conversion Costs.......................................       2014$M  ...........         15.7         22.2         41.0         47.6        157.4
Free Cash Flow (2018)........................................       2014$M          7.8          2.2        (1.5)        (7.5)       (10.4)       (59.5)
Free Cash Flow (change from No-new-standards case) (2018)....            %  ...........         72.3        119.3        196.5        233.4        861.3
--------------------------------------------------------------------------------------------------------------------------------------------------------
* Values in parentheses are negative values. All values have been rounded to the nearest tenth.
M = millions.

    In its analysis, DOE ran four scenarios based on combinations from 
two markup scenarios and two conversion cost scenarios. The results 
presented below represent the upper-bound and lower-bound of results 
from those scenarios only. Chapter 12 of the CWAF direct final rule TSD 
presents results for each markup and conversion cost scenario in 
further detail.
    TSL 1 represents EL 1 (81 percent) for gas-fired CWAFs and baseline 
(81 percent) for oil-fired CWAFs. At this level, DOE estimates 55 
percent of the industry platforms would require redesign at a total 
industry conversion cost of $6.9 million to $15.7 million. DOE 
estimates impacts on INPV for CWAF manufacturers to range from a change 
in INPV of -11.0 percent to -3.9 percent, or -$10.6 million to -$3.8 
million. At this potential standard level, industry free cash flow is 
estimated to decrease by as much as 72.3 percent to $2.2 million, 
compared to the no-new-standards case value of $7.3 million in 2018, 
the year before the 2019 compliance year.
    The recommended TSL represents an EL (81 percent for gas-fired and 
82 percent for oil-fired) applicable across all equipment classes. At 
this level, DOE estimates 57.0 percent of the industry platforms would 
require redesign at at total industry conversion cost of $7.5 to $22.2 
million. DOE estimates impacts on INPV for CWAF manufacturers to range 
from a change in INPV of -13.9 percent to -6.1 percent, or a change of 
-$13.4 million to -$5.9 million. At this potential standard level, 
industry free cash flow is estimated to decrease

[[Page 2504]]

by much as 119.3 percent to -$1.5 million, compared to the no-new-
standards case value of $7.3 million in 2022, the year before the 2023 
compliance year. Much of this drop in free cash flow is due to 
conversion cost expenses manufacturers must make before the compliance 
year. However, industry noted that the alignment of the compliance 
dates for the CUAC/CUHP and CWAF standards would allow for coordination 
of redesign and testing expenses. If this occurs, there would be a 
reduction in the total conversion costs associated with this direct 
final rule. These synergies resulting from the alignment of the 
compliance dates for these standards would result in INPV impacts and 
free cash flow impacts that are less severe than forecasted by the GRIM 
model.
    TSL 3 represents EL 2 (82 percent) for gas-fired equipment and 
baseline (81 percent) for oil-fired equipment. At this level, DOE 
estimates 91 percent of the industry platforms would require redesign 
at a total industry conversion cost of $13.8 million to $41.0 million. 
DOE estimates impacts on INPV for CWAF manufacturers to range from a 
change in INPV of -32.0 percent to 29.9 percent, or -$30.9 million to 
$28.8 million. At this potential standard level, industry free cash 
flow is estimated to decrease by as much as 196.5 percent to -$7.5 
million, compared to the no-new-standards case value of $7.3 million in 
2018.
    TSL 4 represents EL 2 (82 percent) for gas-fired equipment and EL 1 
(82 percent) for oil-fired equipment. At this level, DOE estimates 94 
percent of the industry platforms would require redesign at a total 
industry conversion cost of $14.4 million to $47.6 million. DOE 
estimates impacts on INPV for CWAF manufacturers to range from a change 
in INPV of -37.3 percent to 29.5 percent, or -$35.9 million to $28.4 
million. At this potential standard level, industry free cash flow is 
estimated to decrease by as much as 233.4 percent to -$10.4 million, 
compared to the no-new-standards case value of $7.3 million in 2018.
    TSL 5 represents max-tech across all equipment classes (i.e., EL 3 
(92 percent) for gas-fired equipment and EL 2 (92 percent) for oil-
fired equipment). At this level, DOE estimates 99 percent of the 
industry platforms would require redesign at a total industry 
conversion cost of $82.3 million to $157.4 million. Conversion costs 
more than triple from TSL 4 to TSL 5. The vast majority of the industry 
does not offer condensing commercial furnaces today and would need to 
develop condensing technology for commercial applications. Implementing 
a condensing commercial furnace would likely have design implications 
for the cooling side of the HVAC product and for the chassis that 
houses both the cooling and heating components. DOE estimates impacts 
on INPV for CWAF manufacturers to range from a change in INPV of -120.1 
percent to 49.0 percent, or -$115.7 million to $47.2 million. At this 
potential standard level, industry free cash flow is estimated to 
decrease by as much as 861.3 percent to -$59.5 million relative to the 
no-new-standards case value of $7.3 million in 2018.
b. Impacts on Employment
    To quantitatively assess the impacts of energy conservation 
standards on direct employment in the collective CUAC/CUHP and CWAF 
industry, DOE used the GRIM to estimate the domestic labor expenditures 
and number of employees in the no-new-standards case and at each TSL 
from 2015 through 2048, the end of the analysis period. DOE used 
statistical data from the U.S. Census Bureau's 2013 Annual Survey of 
Manufacturers (ASM),\1\ the results of the engineering analysis, and 
interviews with manufacturers to determine the inputs necessary to 
calculate industry-wide labor expenditures and domestic employment 
levels. Labor expenditures related to manufacturing of the product are 
a function of the labor intensity of the product, the sales volume, and 
an assumption that wages remain fixed in real terms over time. The 
total labor expenditures in each year are calculated by multiplying the 
MPCs by the labor percentage of MPCs.
---------------------------------------------------------------------------

    \1\ ``Annual Survey of Manufactures (ASM),'' U.S. Census Bureau 
(2013) (Available at: http://www.census.gov/manufacturing/asm/).
---------------------------------------------------------------------------

    The total labor expenditures in the GRIM were then converted to 
domestic production employment levels by dividing production labor 
expenditures by the annual payment per production worker (production 
worker hours multiplied by the labor rate found in the U.S. Census 
Bureau's 2013 ASM). The estimates of production workers in this section 
cover workers, including line-supervisors who are directly involved in 
fabricating and assembling a product within the manufacturing facility. 
Workers performing services that are closely associated with production 
operations, such as materials handling tasks using forklifts, are also 
included as production labor. DOE's estimates only account for 
production workers who manufacture the specific products covered by 
this rulemaking.
    The employment impacts shown in Table V-22 and Table V-23 represent 
the potential production employment changes that could result in 2019 
for the collective CUAC/CUHP and CWAF industry, respectively. The upper 
end of the results in the table estimates the maximum increase in the 
number of production workers after the implementation of new energy 
conservation standards, and it assumes that manufacturers would 
continue to produce the same scope of covered products within the 
United States. The total direct employment impacts calculated in the 
GRIM are the changes in the number of production workers resulting from 
the amended energy conservation standards. In general, more efficient 
equipment is larger, more complex, and more labor intensive to build. 
Per unit labor requirements and production time requirements increase 
with a higher energy conservation standard. As a result, if shipments 
remain relatively steady, the model forecasts job growth at the upper 
bound on impact.
    The lower bound assumes that, as the standard increases, 
manufacturers choose to retire sub-standard product lines rather than 
invest in manufacturing facility conversions and product redesigns. In 
this scenario, there is a loss of employment because manufacturers 
consolidate and operate fewer production lines. Since this is intended 
to be a worst-case scenario for employment, there is no consideration 
given to the fact that there may be employment growth in higher-
efficiency lines. Additional detail can be found in chapter 12 of the 
TSDs.
    DOE estimates that in the absence of amended energy conservation 
standards, there would be 2,643 domestic production workers for CUAC/
CUHP equipment and 232 domestic production workers for CWAF equipment. 
For the final rule, DOE does not attempt to estimate the portion of 
production that occurs in other countries. Rather, as noted in section 
IV.J.3, the direct employment figure captures the maximum number of 
domestic production workers based on the available data and DOE's 
methodology. One noted constraint is that the production worker 
calculation methodology only takes into account the labor required for 
the most basic product that meets the appliance standard--it does not 
account for

[[Page 2505]]

additional features that manufacturers use to differentiate premium 
products, optional features and add-ons, or components in the cabinet 
that do not contribute to the cooling and heating functions.

                                            Table V-22--Potential Changes in the Number of CUACs/CUHPs Industry Production Worker Employment in 2019
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                     Trial Standard Level *
                               -----------------------------------------------------------------------------------------------------------------------------------------------------------------
                                  No-new-
                                 standards           1                  2                 2.5          Recommended TSL           3                 3.5                4                 5
                                    case
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Total Number of Domestic              2,643  2,954 to 1,810...  3,341 to 1,078...  3,577 to 692.....  3,410 to 1,810...  4,005 to 486.....  4,051 to 172....  3,825 to 106....  5,352 to 34.
 Production Workers in 2019.
Potential Changes in Domestic   ...........  311 to (833).....  698 to (1,565)...  934 to (1,951)...  777 to (833).....  1,362 to (2,157).  1,408 to (2,471)  1,182 to (2,537)  2,709 to
 Production Workers in 2019.                                                                                                                                                     (2,609).
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
* Numbers in parentheses represent negative values.


                           Table V-23--Potential Changes in the Number of CWAFs Industry Production Worker Employment in 2019
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                   Trial Standard Level *
                                  ----------------------------------------------------------------------------------------------------------------------
                                     No-new-
                                    standards             1                    2                    3                    4                    5
                                       case
--------------------------------------------------------------------------------------------------------------------------------------------------------
Total Number of Domestic                   232  231 to 104..........  232 to 100.........  320 to 21..........  320 to 14..........  228 to 2.
 Production Workers in 2019.
Potential Changes in Domestic      ...........  (1) to (128)........  0 to (132).........  88 to (211)........  88 to (218)........  (4) to (230).
 Production Workers in 2019.
--------------------------------------------------------------------------------------------------------------------------------------------------------
* Numbers in parentheses represent negative values.

    DOE notes that the employment impacts discussed here are 
independent of the indirect employment impacts to the broader U.S. 
economy, which are documented in chapter 15 of the CUACs/CUHPs and 
CWAFs direct final rule TSDs.
c. Impacts on Manufacturing Capacity
Commercial Unitary Air Conditioners and Heat Pumps
    CUAC/CUHP manufacturers noted during interviews that amended energy 
conservation standards could lead to higher fabrication labor hours. 
However, they also noted that industry shipments were down 40 percent 
from their peak in the 2007-2008 timeframe. Excess capacity in the 
industry today and any drop in shipments that result from higher prices 
could offset the additional production times. In the long-term, no 
manufacturers interviewed expected to have capacity constraints.
    Manufacturers did, however, note concerns that engineering and 
testing capacity during the time period between the final rule's 
anticipated publication date and the 2019 compliance date initially 
proposed by DOE. Manufacturers were worried about the level of 
technical resources required to redesign and test all products at 
higher TSLs. The engineering analysis released with the NOPR showed 
that increasingly complex components and control strategies would be 
required as standards levels increase. Manufacturers noted in 
interviews that the industry would need to add electrical engineering 
and control systems, as well as engineering talent beyond current 
staffing, to meet the redesign requirements of higher TSLs. They also 
noted that additional training might be needed for manufacturing 
engineers, laboratory technicians, and service personnel if variable-
speed components are broadly adopted. Furthermore, manufacturers 
indicated that as the stringency of standards increase, units tend to 
grow in size, requiring more lab resources and time to test. Some 
manufacturers were concerned that an amended standard would trigger the 
need for new test lab facilities, which would require significantly 
more lead time than what DOE had proposed to provide in its NOPR.
Commercial Warm Air Furnaces
    According to the CWAF manufacturers interviewed, amended energy 
conservation standards could lead to decreased production capacity. 
Most manufacturers indicated there would be little to no production 
capacity decrease at 81 percent and 82 percent efficiency levels, but 
at 91 percent and 92 percent, there would be significant capacity 
shortfalls. This feedback is consistent with the engineering analysis, 
which found there would be sufficient capacity at current levels to 
meet slightly higher efficiency standards, but that significant

[[Page 2506]]

investment would be required to support production of higher 
efficiency, condensing furnace standards. For additional information on 
the engineering analysis, see chapter 5 of the CWAF direct final rule 
TSD.
d. Impacts on Subgroups of Manufacturers
    Small manufacturers, niche equipment manufacturers, and 
manufacturers exhibiting a cost structure substantially different from 
the industry average could be affected disproportionately. As discussed 
in section IV.J, using average cost assumptions developed for an 
industry cash-flow estimate is inadequate to assess differential 
impacts among manufacturer subgroups.
    For the collective CUAC/CUHP and CWAF industry, DOE identified and 
evaluated the impact of new energy conservation standards on one 
subgroup--small manufacturers. The SBA defines a ``small business'' as 
having 750 employees or less for NAICS 333415, ``Air-Conditioning and 
Warm Air Heating Equipment and Commercial and Industrial Refrigeration 
Equipment Manufacturing.'' Based on this definition, DOE identified 
three CUAC/CUHP manufacturers and two CWAF manufacturers that qualify 
as small businesses. For a discussion of the impacts on the small 
manufacturer subgroup, see the regulatory flexibility analysis in 
section VI.B of this document.
e. Cumulative Regulatory Burden
    While any one regulation may not impose a significant burden on 
manufacturers, the combined effects of recent or impending regulations 
may have serious consequences for some manufacturers, groups of 
manufacturers, or an entire industry. Assessing the impact of a single 
regulation may overlook this cumulative regulatory burden. In addition 
to energy conservation standards, other regulations can significantly 
affect manufacturers' financial operations. Multiple regulations 
affecting the same manufacturer can strain profits and lead companies 
to abandon product lines or markets with lower expected future returns 
than competing products. For these reasons, DOE conducts an analysis of 
cumulative regulatory burden as part of its rulemakings pertaining to 
appliance efficiency.
    During previous stages of this rulemaking, DOE identified a number 
of requirements in addition to new energy conservation standards for 
CUAC/CUHP and CWAF equipment. The following section briefly summarizes 
those identified regulatory requirements and addresses comments DOE 
received with respect to cumulative regulatory burden, as well as other 
key related concerns that manufacturers raised during interviews.
DOE Energy Conservation Standards
    Companies that produce a wide range of regulated products and 
equipment may face more capital and product development expenditures 
than competitors with a narrower scope of products and equipment. Many 
CUAC/CUHP and CWAF manufacturers also produce other residential and 
commercial equipment. In addition to the amended energy conservation 
standard for CUAC/CUHP and CWAF equipment, these manufacturers contend 
with several other Federal regulations and pending regulations that 
apply to other products and equipment. DOE recognizes that each 
regulation can significantly affect a manufacturer's financial 
operations. Multiple regulations affecting the same manufacturer can 
quickly strain manufacturer profits and possibly cause an exit from the 
market. Table V-24 lists the other DOE energy conservation standards 
that could also affect CUAC/CUHP and CWAF manufacturers in the three 
years leading up to and after the compliance date of the new energy 
conservation standards for this equipment. Additionally, at the request 
of stakeholders, DOE has listed several pending DOE rulemakings in the 
table below.

     Table V-24--Other DOE Regulations Impacting CUAC/CUHP and CWAF
                              Manufacturers
------------------------------------------------------------------------
                                                             Estimated
                                            Approximate   total industry
  Federal energy conservation standards     compliance      conversion
                                               date           expense
------------------------------------------------------------------------
2007 Residential Furnaces & Boilers,* 72            2015    $88M (2006$)
 FR 65136 (Nov. 19, 2007)...............
2010 Gas Fired and Electric Storage                 2015   95.4M (2009$)
 Water Heaters, 75 FR 20112 (April 16,
 2010)..................................
2011 Residential Furnaces ** 76 FR 37408            2015    2.5M (2009$)
 (June 27, 2011); 76 FR 67037 (Oct. 31,
 2011)..................................
2011 Residential Central Air                        2015   26.0M (2009$)
 Conditioners and Heat Pumps,** 76 FR
 37408 (June 27, 2011); 76 FR 67037
 (Oct. 31, 2011)........................
Walk-in Coolers and Freezers, 79 FR                 2017   35.2M (2012$)
 32049 (June 3, 2014)...................
Commercial and Industrial Fans and                  2018             TBD
 Blowers [dagger].......................
Furnace Fans, 79 FR 38129 (July 3, 2014)            2019   40.6M (2012$)
Packaged Terminal Air Conditioners and              2019    7.6M (2013$)
 Heat Pumps, 80 FR 43162 (July 21,
 2015); 80 FR 56894 (Sept. 21, 2015)....
Residential Boilers [dagger]............            2019             TBD
Commercial Packaged Boilers [dagger]....            2019             TBD
Single Package Vertical Units, 80 FR                2019    9.2M (2014$)
 57438 (Sept. 23, 2015).................
Residential Non-Weatherized Gas Furnaces            2019             TBD
 [dagger]...............................
Residential Central Air Conditioners and            2021             TBD
 Heat Pumps [dagger]....................
Residential Water Heaters [dagger]......            2021             TBD
------------------------------------------------------------------------
* Conversion expenses for manufacturers of oil-fired furnaces and for
  manufacturers of gas-fired and oil-fired boilers associated with the
  November 2007 final rule for residential furnaces and boilers are
  excluded from this figure. With regard to oil-fired furnaces, 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 design to the 2011
  direct final rule standard. The conversion costs associated with the
  2011 direct final rule are listed separately in this table. With
  regard to gas-fired and oil-fired boilers, EISA 2007 legislated higher
  standards and earlier compliance dates for residential boilers than
  were in the November 2007 final rule. As a result, gas-fired and oil-
  fired boiler manufacturers were required to design to the EISA 2007
  standard beginning in 2012.
** Estimated industry conversion expense and approximate compliance date
  reflect a court-ordered May 1, 2013 stay of the residential non-
  weatherized and mobile home gas furnaces standards set in the 2011
  Energy Conservation Standards for Residential Furnaces and Residential
  Central Air Conditioners and Heat Pumps.

[[Page 2507]]

 
[dagger] The final rule for this energy conservation standard has not
  been published. For energy conservation standards with a published
  NOPR, DOE lists the compliance date and conversion costs for the
  proposed standard level. However, standard level and analytical
  results are not finalized until the publication of the final rule. For
  energy conservation standards that have not yet reached the NOPR
  publication phase of the rulemaking, information is not yet available.

    In addition to Federal energy conservation standards, DOE 
identified other Federal regulatory burdens that would affect CUAC/CUHP 
and CWAF manufacturers:
EPA Phase-Out of Hydrochlorofluorocarbons (HCFCs)
    The U.S. is obligated under the Montreal Protocol to limit the 
production and consumption of HCFCs through incremental reductions, 
culminating in a complete phase-out of HCFCs by 2030. On October 28, 
2015, EPA published the ``2015 HCFC Allocation Rule,'' which allocates 
production and consumption allowances for HCFC-22, HCFC-123, and HCFC-
124 for each year between 2015 and 2019. 79 FR 64253. Production and 
import of virgin HCFC-22 for servicing appliances will cease at the end 
of 2019, however reclaimed material and stocks of refrigerant produced 
prior to 2020 will be available to service existing appliances.
    HCFC-22, which is also known as R-22, is a popular refrigerant that 
is commonly used in air-conditioning products. As of January 1, 2010, 
EPA effectively prohibited the installation in the field of new 
appliances containing virgin R-22. 74 FR 66412. Additionally, there is 
a prohibition on the manufacture of new appliances and appliance 
components pre-charged with R-22 as of the same date. However, 
manufacturers can still manufacture components for servicing existing 
appliances. 74 FR 66450. Under the Clean Air Act and EPA's implementing 
regulations at 40 CFR part 82, subpart A, starting January 1, 2020, it 
will be illegal to manufacture any appliance containing virgin HCFCs. 
Manufacturers of CUAC/CUHP and CWAF equipment must comply with the 
these prohibitions and the allowances established by the allocation 
rule, thereby facing a cumulative regulatory burden. As such, no 
covered manufacturers offer R-22 products today. The MPCs used for the 
baseline and higher efficiency design options account for the move away 
from R-22 and the changes in production costs that resulted from the 
shift to HFC refrigerants.
DOE Certification, Compliance, and Enforcement (CC&E) Rule
    Any amended standard that DOE adopts would also require 
manufacturers to follow accompanying CC&E requirements. DOE conducted a 
rulemaking to expand the coverage of DOE's alternative efficiency 
determination method (``AEDM'') regulations to commercial HVAC, 
including the equipment covered by this rulemaking. See 78 FR 79579 
(December 31, 2013). An AEDM is a computer modeling or mathematical 
tool that predicts the performance of non-tested basic models of a type 
of covered equipment or product. In that final rule, DOE permits 
manufacturers of small, large, and very large air-cooled commercial 
package air conditioning equipment to rate basic models using AEDMs for 
compliance certification purposes, reducing the need for sample units 
and the overall burden on manufacturers. The AEDM final rule 
established revised verification tolerances for small, large, and very 
large air-cooled commercial package air conditioning equipment 
manufacturers. More information can be found at http://www1.eere.energy.gov/buildings/appliance_standards/implement_cert_and_enforce.html.
EPA ENERGY STAR
    During interviews, some manufacturers stated that ENERGY STAR 
specifications for CUACs/CUHPs and CWAFs would be a source of 
cumulative regulatory burden.
    DOE realizes that the cumulative effect of several regulations on 
an industry may significantly increase the burden faced by 
manufacturers that need to comply with multiple regulations and 
certification programs from different organizations and levels of 
government.
    However, DOE notes that certain programs, such as ENERGY STAR, are 
optional for manufacturers. As these programs are voluntary in nature, 
they are not considered by DOE to be part of the manufacturers' 
cumulative regulatory burden since manufacturers are not legally 
required to meet the specifications prescribed by these voluntary 
programs.
    DOE discusses these and other requirements (e.g., Canadian Energy 
Efficiency Regulations, California Title 24, Low NOX 
requirements), and includes the full details of the cumulative 
regulatory burden analysis, in chapter 12 of the direct final rule 
TSDs. DOE also discusses the impacts on the small manufacturer subgroup 
in the regulatory flexibility analysis in section VI.B of this direct 
final rule.
3. National Impact Analysis
    DOE's analysis of the various national impacts flowing from 
amending the energy conservation standards for CUACs/CUHPs and CWAFs 
are summarized below and include a discussion of the energy savings and 
the related economic impacts that are projected to occur.
a. Significance of Energy Savings
    To estimate the energy savings attributable to potential standards 
for CUACs/CUHPs and CWAFs, DOE compared their energy consumption under 
the no-new-standards case to their anticipated energy consumption under 
each TSL. For most of the TSLs considered in this direct final rule, 
DOE forecasted the energy savings, operating cost savings, and 
equipment costs over the lifetime of CUACs/CUHPs and CWAFs sold from 
2019 through 2048. For the TSLs that represent the consensus 
recommendations, DOE accounted for the lifetime impacts of CUACs and 
CUHPs sold from 2018 through 2047 and CWAFs sold from 2023 through 
2048. Table V-25 and Table V-26 present DOE's projections of the 
national energy savings for each TSL considered for CUACs/CUHPs and 
CWAFs, respectively. The savings were calculated using the approach 
described in section IV.H of this document. Separate savings for each 
equipment class are presented in chapter 10 of the direct final rule 
TSDs.

[[Page 2508]]



  Table V-25--Cumulative National Energy Savings for Small, Large, and Very Large Air-Cooled Commercial Package Air Conditioning and Heating Equipment
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                     Trial Standard Level * (projected quad savings)
                        Energy savings                         -----------------------------------------------------------------------------------------
                                                                    1          2         2.5     Recommended      3         3.5         4          5
--------------------------------------------------------------------------------------------------------------------------------------------------------
Primary energy................................................        5.1        9.3       13.3        14.1        15.2       15.7       18.9       22.4
FFC energy....................................................        5.3        9.8       13.9        14.8        15.9       16.4       19.7       23.4
--------------------------------------------------------------------------------------------------------------------------------------------------------
* For the Recommended TSL, the NES is forecasted over the lifetime of equipment sold from 2018-2048. For the other TSLs, the NES is forecasted over the
  lifetime of equipment sold from 2019-2048.


                 Table V-26--Cumulative National Energy Savings for Commercial Warm Air Furnaces
----------------------------------------------------------------------------------------------------------------
                                                  Trial Standard Level * (projected quad savings)
         Energy savings          -------------------------------------------------------------------------------
                                         1               2               3               4               5
----------------------------------------------------------------------------------------------------------------
Primary energy..................             0.2             0.2             0.4             0.4             2.1
FFC energy......................             0.2             0.2             0.4             0.4             2.4
----------------------------------------------------------------------------------------------------------------
* For TSL 2, the NES is forecasted over the lifetime of equipment sold from 2023-2048. For the other TSLs, the
  NES is forecasted over the lifetime of equipment sold from 2019-2048.

    OMB Circular A-4 \2\ 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 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.\3\ The review timeframe established in EPCA is generally not 
synchronized with the equipment lifetime, equipment manufacturing 
cycles, or other factors specific to CUACs/CUHPs and CWAFs. Thus, such 
results are presented for informational purposes only and are not 
indicative of any change in DOE's analytical methodology. The NES 
sensitivity analysis results based on a nine-year analytical period are 
presented in Table V-27 and Table V-28 for CUACs/CUHPs and CWAFs, 
respectively.
---------------------------------------------------------------------------

    \2\ U.S. Office of Management and Budget, ``Circular A-4: 
Regulatory Analysis'' (Sept. 17, 2003) (Available at: http://www.whitehouse.gov/omb/circulars_a004_a-4/).
    \3\ Section 342(a)(6)(C) of EPCA--like its consumer product-
related counterpart in Section 325(m)--requires DOE to review its 
standards at least once every 6 years, and requires, for certain 
products, a 3-year period after any new standard is promulgated 
before compliance is required, except that in no case may any new 
standards be required within 6 years of the compliance date of the 
previous standards. While adding a 6-year review to the 3-year 
compliance period adds up to 9 years, DOE notes that it may 
undertake reviews at any time within the 6 year period and that the 
3-year compliance date may yield to the 6-year backstop. A 9-year 
analysis period may not be appropriate given the variability that 
occurs in the timing of standards reviews and the fact that for some 
consumer products, the compliance period is 5 years rather than 3 
years.

  Table V-27--Cumulative National Energy Savings for Small, Large, and Very Large Air-Cooled Commercial Package Air Conditioning and Heating Equipment;
                                                                 Nine Years of Shipments
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                     Trial Standard Level * (projected quad savings)
                        Energy savings                         -----------------------------------------------------------------------------------------
                                                                    1          2         2.5     Recommended      3         3.5         4          5
--------------------------------------------------------------------------------------------------------------------------------------------------------
Primary energy................................................        1.2        2.1        3.1         2.0         3.5        3.5        4.2        4.7
FFC energy....................................................        1.2        2.2        3.2         2.1         3.6        3.7        4.4        4.9
--------------------------------------------------------------------------------------------------------------------------------------------------------
* For the Recommended TSL, the NES is forecasted over the lifetime of equipment sold from 2018-2026. For the other TSLs, the NES is forecasted over the
  lifetime of equipment sold from 2019-2027.


     Table V-28--Cumulative National Energy Savings for Commercial Warm Air Furnace; Nine Years of Shipments
----------------------------------------------------------------------------------------------------------------
                                                  Trial Standard Level * (projected quad savings)
         Energy savings          -------------------------------------------------------------------------------
                                         1               2               3               4               5
----------------------------------------------------------------------------------------------------------------
Primary energy..................             0.1             0.1             0.3             0.3             1.3

[[Page 2509]]

 
FFC energy......................             0.1             0.1             0.3             0.3             1.3
----------------------------------------------------------------------------------------------------------------
* For TSL 2, the NES is forecasted over the lifetime of equipment sold from 2023-2031. For the other TSLs, the
  NES is forecasted over the lifetime of equipment sold from 2019-2027.

b. Net Present Value of Commercial Consumer Costs and Benefits
    DOE estimated the cumulative NPV of the total costs and savings for 
commercial consumers that would result from the TSLs considered for 
CUACs/CUHPs and CWAFs. In accordance with OMB's guidelines on 
regulatory analysis,\4\ DOE calculated NPV using both a 7-percent and a 
3-percent real discount rate.
---------------------------------------------------------------------------

    \4\ U.S. Office of Management and Budget, ``Circular A-4: 
Regulatory Analysis,'' section E (Sept. 17, 2003) (Available at: 
http://www.whitehouse.gov/omb/circulars_a004_a-4).
---------------------------------------------------------------------------

    Table V-29 and Table V-30 show the commercial consumer NPV results 
with impacts counted over the lifetime of equipment purchased in the 
relevant analysis period for each TSL.

    Table V-29--Cumulative Net Present Value of Consumer Benefits for Small, Large, and Very Large Air-Cooled Commercial Package Air Conditioning and
                                                                    Heating Equipment
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                Trial Standard Level * (Billion 2014$)
              Discount rate (%)              -----------------------------------------------------------------------------------------------------------
                                                   1            2           2.5        Recommended         3           3.5           4            5
--------------------------------------------------------------------------------------------------------------------------------------------------------
3...........................................         18.0         32.8         47.5             50.0         53.7         55.3         64.1         68.2
7...........................................          5.4         10.1         15.1             15.2         16.8         17.1         19.2         18.8
--------------------------------------------------------------------------------------------------------------------------------------------------------
* For the Recommended TSL, the NES is forecasted over the lifetime of equipment sold from 2018-2048. For the other TSLs, the NES is forecasted over the
  lifetime of equipment sold from 2019-2048.


         Table V-30--Cumulative Net Present Value of Consumer Benefits for Commercial Warm Air Furnaces
----------------------------------------------------------------------------------------------------------------
                                                              Trial Standard Level * (Billion 2014$)
               Discount rate (%)                ----------------------------------------------------------------
                                                      1            2            3            4            5
----------------------------------------------------------------------------------------------------------------
3..............................................          1.1          1.0         -0.1         -0.1          2.6
7..............................................          0.4          0.3         -0.4         -0.4         -0.4
----------------------------------------------------------------------------------------------------------------
* For TSL 2, the NES is forecasted over the lifetime of equipment sold from 2023-2048. For the other TSLs, the
  NES is forecasted over the lifetime of equipment sold from 2019-2048.

    The results in Table V-29 reflect the use of a constant price trend 
for CUACs and CUHPs over the analysis period (see section IV.F.1). DOE 
also conducted a sensitivity analysis that considered one scenario with 
a lower rate of price decline than the reference case and one scenario 
with a higher rate of price decline than the reference case. The 
results of these alternative cases are presented in appendix 10C of the 
CUAC/CUHP direct final rule TSD.
    The results in Table V-30 reflect the use of the historic trend in 
the inflation-adjusted PPI for ``Warm air furnaces'' to estimate the 
change in price for CWAFs over the analysis period (see section 
IV.F.1). The trend shows a small rate of annual price decline. DOE also 
conducted a sensitivity analysis that considered one scenario with a 
lower rate of price decline than the reference case and one scenario 
with a higher rate of price decline than the reference case. The 
results of these alternative cases are presented in appendix 10C of the 
CWAF direct final rule TSD.
    The NPV results based on the aforementioned 9-year analytical 
period are presented in Table V-31 and Table V-32 for CUACs/CUHPs and 
CWAFs, respectively. As mentioned previously, such results are 
presented for informational purposes only and are not indicative of any 
change in DOE's analytical methodology or decision criteria.

    Table V-31--Cumulative Net Present Value of Consumer Benefits for Small, Large, and Very Large Air-Cooled Commercial Package Air Conditioning and
                                                       Heating Equipment; Nine Years of Shipments
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                Trial Standard Level * (billion 2014$)
              Discount rate (%)              -----------------------------------------------------------------------------------------------------------
                                                   1            2           2.5        Recommended         3           3.5           4            5
--------------------------------------------------------------------------------------------------------------------------------------------------------
3...........................................          4.6          8.0         12.4              7.2         13.6         13.6         15.1         13.4

[[Page 2510]]

 
7...........................................          2.0          3.7          5.8              3.6          6.4          6.3          6.8          5.6
--------------------------------------------------------------------------------------------------------------------------------------------------------
* For the Recommended TSL, the NES is forecasted over the lifetime of equipment sold from 2018-2026. For the other TSLs, the NES is forecasted over the
  lifetime of equipment sold from 2019-2027.


  Table V-32--Cumulative Net Present Value of Consumer Benefits for Commercial Warm Air Furnaces; Nine Years of
                                                    Shipments
----------------------------------------------------------------------------------------------------------------
                                                      Trial Standard Level * (billion 2014$)
        Discount rate (%)        -------------------------------------------------------------------------------
                                         1               2               3               4               5
----------------------------------------------------------------------------------------------------------------
3...............................             0.4             0.4             0.9             0.9             4.4
7...............................             0.2             0.2             0.2             0.2             1.2
----------------------------------------------------------------------------------------------------------------
* For TSL 2, the NES is forecasted over the lifetime of equipment sold from 2023-2031. For the other TSLs, the
  NES is forecasted over the lifetime of equipment sold from 2019-2027.

c. Indirect Impacts on Employment
    DOE expects energy conservation standards for CUACs/CUHPs and CWAFs 
to reduce energy bills for consumers of those equipment, with the 
resulting net savings being redirected to other forms of economic 
activity. These expected shifts in spending and economic activity could 
affect the demand for labor. 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 timeframes within five years of the compliance date, where 
these uncertainties are reduced.
    The results suggest that the adopted standards are likely to have a 
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 direct final rule TSDs presents detailed 
results regarding anticipated indirect employment impacts.
4. Impact on Utility or Performance of Equipment
    DOE has concluded that the standards adopted in this final rule 
would not reduce the utility or performance of the CUACs/CUHPs and 
CWAFs under consideration in this rulemaking. Manufacturers of these 
equipment types currently offer units that meet or exceed the adopted 
standards.
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 this determination, DOE 
provided the Department of Justice (DOJ) with copies of the NOPR and 
the TSD for review. In its assessment letter responding to DOE, DOJ 
concluded that the proposed energy conservation standards for CUACs/
CUHPs and CWAFs are unlikely to have a significant adverse impact on 
competition. DOE is publishing the Attorney General's assessments for 
both proposals at the end of this direct 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 (costs) of energy production. Reduced electricity 
demand due to energy conservation standards is also likely to reduce 
the cost of maintaining the reliability of the electricity system, 
particularly during peak-load periods. As a measure of this reduced 
demand, chapter 15 in the direct final rule TSDs presents the estimated 
reduction in generating capacity, relative to the no-new-standards 
case, for the TSLs that DOE considered in this rulemaking.
    Energy conservation resulting from amended standards for CUACs/
CUHPs and CWAFs are expected to yield environmental benefits in the 
form of reduced emissions of air pollutants and GHGs. Table V-33 and 
Table V-34 provide DOE's estimate of cumulative emissions reductions 
expected to result from the TSLs considered for CUACs/CUHPs and CWAFs, 
respectively. 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 direct final rule TSDs.

[[Page 2511]]



    Table V-33--Cumulative Emissions Reduction for Small, Large, and Very Large Air-Cooled Commercial Package Air Conditioning and Heating Equipment
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                          Trial Standard Level *
                                                 -------------------------------------------------------------------------------------------------------
                                                       1            2           2.5      Recommended       3           3.5           4            5
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                 Power Sector Emissions
--------------------------------------------------------------------------------------------------------------------------------------------------------
CO2 (million metric tons).......................       297          546          778          824          890          919        1,103        1,307
SO2 (thousand tons).............................       161          297          423          445          483          498          598          708
NOX (thousand tons).............................       336          620          883          937        1,010        1,042        1,252        1,483
Hg (tons).......................................         0.60         1.10         1.57         1.66         1.80         1.85         2.22         2.63
CH4 (thousand tons).............................        23.3         43.0         61.3         64.7         70.1         72.3         86.7        102.7
N2O (thousand tons).............................         3.29         6.06         8.63         9.10         9.87        10.18        12.21        14.46
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                   Upstream Emissions
--------------------------------------------------------------------------------------------------------------------------------------------------------
CO2 (million metric tons).......................        17           32           46           49           52           54           65           77
SO2 (thousand tons).............................         3.2          5.9          8.4          9.0          9.6          9.9         11.9         14.2
NOX (thousand tons).............................       249          459          654          697          749          773          928        1,101
Hg (tons).......................................         0.01         0.01         0.02         0.02         0.02         0.02         0.03         0.03
CH4 (thousand tons).............................     1,378        2,539        3,616        3,852        4,137        4,270        5,128        6,083
N2O (thousand tons).............................         0.16         0.29         0.42         0.44         0.48         0.49         0.59         0.70
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                     Total Emissions
--------------------------------------------------------------------------------------------------------------------------------------------------------
CO2 (million metric tons).......................       314          578          824          873          943          973        1,167        1,383
SO2 (thousand tons).............................       164          303          431          454          493          508          610          722
NOX (thousand tons).............................       586        1,080        1,538        1,634        1,759        1,815        2,180        2,584
Hg (tons).......................................         0.61         1.12         1.59         1.68         1.82         1.88         2.25         2.66
CH4 (thousand tons).............................     1,401        2,582        3,677        3,917        4,208        4,342        5,215        6,185
N2O (thousand tons).............................         3.45         6.35         9.05         9.54        10.34        10.67        12.80        15.16
CH4 (million tons CO2eq) **.....................        39.2         72.3        103.0        109.7        117.8        121.6        146.0        173.2
N2O (thousand tons CO2eq) **....................       913        1,682        2,397        2,528        2,741        2,828        3,392        4,017
--------------------------------------------------------------------------------------------------------------------------------------------------------
* For the Recommended TSL, the NES is forecasted over the lifetime of equipment sold from 2018-2048. For the other TSLs, the NES is forecasted over the
  lifetime of equipment sold from 2019-2048.


                   Table V-34--Cumulative Emissions Reduction for Commercial Warm Air Furnaces
----------------------------------------------------------------------------------------------------------------
                                                              Trial Standard Level *
                                 -------------------------------------------------------------------------------
                                         1               2               3               4               5
----------------------------------------------------------------------------------------------------------------
                                       Site and Power Sector Emissions **
----------------------------------------------------------------------------------------------------------------
CO2 (million metric tons).......           11.8            10.9            19.3            19.3           109
SO2 (thousand tons).............            0.4             0.4             0.6             0.6           -10.1
NOX (thousand tons).............           16.5            16.8            27.1            28.8           194
Hg (tons).......................            0.00            0.00            0.00            0.00           -0.04
CH4 (thousand tons).............            0.3             0.3             0.5             0.5             1.0
N2O (thousand tons).............            0.03            0.03            0.05            0.05            0.06
----------------------------------------------------------------------------------------------------------------
                                               Upstream Emissions
----------------------------------------------------------------------------------------------------------------
CO2 (million metric tons).......            1.7             1.5             2.7             2.7            17.4
SO2 (thousand tons).............            0.0             0.0             0.0             0.0            -0.1
NOX (thousand tons).............           26.4            24.4            43.3            43.5           279
Hg (tons).......................            0.00            0.00            0.00            0.00            0.00
CH4 (thousand tons).............          158             146             260             260           1,672
N2O (thousand tons).............            0.00            0.00            0.01            0.01            0.02
----------------------------------------------------------------------------------------------------------------
                                               Total FFC Emissions
----------------------------------------------------------------------------------------------------------------
CO2 (million metric tons).......           13.4            12.4            22.             22.            126
SO2 (thousand tons).............            0.4             0.4             0.6             0.7           -10.2
NOX (thousand tons).............           43.             41.2            70.5            72.2           473
Hg (tons).......................            0.00            0.00            0.00            0.00           -0.04
CH4 (thousand tons).............          159             146             260             260           1,673
CH4 (thousand tons CO2eq)               4,440           4,096           7,289           7,292          46,831
 [dagger].......................
N2O (thousand tons).............            0.03            0.03            0.05            0.06            0.08

[[Page 2512]]

 
N2O (thousand tons CO2eq)                   8.8             8.4            14.3            14.6            21.2
 [dagger].......................
----------------------------------------------------------------------------------------------------------------
* For TSL 2, the NES is forecasted over the lifetime of equipment sold from 2023-2048. For the other TSLs, the
  NES is forecasted over the lifetime of equipment sold from 2019-2048.
** Primarily site emissions.
[dagger] CO2eq is the quantity of CO2 that would have the same global warming potential (GWP).

    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 CUACs/CUHPs and CWAFs. 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), 
$40.0/metric ton (the average value from a distribution that uses a 3-
percent discount rate), $62.3/metric ton (the average value from a 
distribution that uses a 2.5-percent discount rate), and $117/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-35 and Table V-36 present the global value of 
CO2 emissions reductions at each TSL for CUACs/CUHPs and 
CWAFs, respectively. 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; these results are presented in chapter 
14 of the direct final rule TSD.

 Table V-35--Estimates of Global Present Value of CO2 Emissions Reduction for Small, Large, and Very Large Air-
                        Cooled Commercial Package Air Conditioning and Heating Equipment
----------------------------------------------------------------------------------------------------------------
                                                                    SCC Case * (million 2014$)
                                                 ---------------------------------------------------------------
                     TSL **                                                                         3% discount
                                                    5% discount     3% discount    2.5% discount    rate, 95th
                                                   rate, average   rate, average   rate, average    percentile
----------------------------------------------------------------------------------------------------------------
                                         Site and Power Sector Emissions
----------------------------------------------------------------------------------------------------------------
1...............................................           1,745           8,531          13,755          26,019
2...............................................           3,223          15,745          25,382          48,025
2.5.............................................           4,604          22,470          36,214          68,538
Recommended.....................................           4,769          23,508          37,966          71,745
3...............................................           5,253          25,663          41,369          78,279
3.5.............................................           5,417          26,470          42,672          80,744
4...............................................           6,485          31,728          51,160          96,788
5...............................................           7,682          37,602          60,633         114,725
----------------------------------------------------------------------------------------------------------------
                                               Upstream Emissions
----------------------------------------------------------------------------------------------------------------
1...............................................             101             496             800           1,512
2...............................................             186             915           1,477           2,791
2.5.............................................             265           1,305           2,106           3,982
Recommended.....................................             277           1,374           2,223           4,196
3...............................................             303           1,491           2,407           4,550
3.5.............................................             312           1,538           2,484           4,695
4...............................................             374           1,845           2,980           5,632
5...............................................             444           2,189           3,535           6,683
----------------------------------------------------------------------------------------------------------------
                                                 Total Emissions
----------------------------------------------------------------------------------------------------------------
1...............................................           1,845           9,026          14,555          27,531
2...............................................           3,409          16,660          26,859          50,816
2.5.............................................           4,870          23,775          38,320          72,520
Recommended.....................................           5,046          24,883          40,189          75,941
3...............................................           5,556          27,154          43,777          82,830
3.5.............................................           5,729          28,009          45,156          85,439
4...............................................           6,860          33,573          54,140         102,420
5...............................................           8,127          39,791          64,169         121,407
----------------------------------------------------------------------------------------------------------------
* For each of the four cases, the corresponding SCC value for emissions in 2015 is $12.2, $40.0, $62.3, and $117
  per metric ton (2014$). The values are for CO2 only (i.e., not CO2eq of other greenhouse gases).
** For the Recommended TSL, the NES is forecasted over the lifetime of equipment sold from 2018-2048. For the
  other TSLs, the NES is forecasted over the lifetime of equipment sold from 2019-2048.


[[Page 2513]]


    Table V-36--Estimates of Global Present Value of CO2 Emissions Reduction for Commercial Warm Air Furnaces
----------------------------------------------------------------------------------------------------------------
                                                              SCC Case * (million 2014$)
                                     ---------------------------------------------------------------------------
               TSL **                 5% discount rate,  3% discount rate,    2.5% discount    3% discount rate,
                                           average            average         rate, average     95th percentile
----------------------------------------------------------------------------------------------------------------
                                 Site and Power Sector Energy Emissions [dagger]
----------------------------------------------------------------------------------------------------------------
1...................................               70.0                341                549              1,039
2...................................               62.6                310                500                946
3...................................                110                544                879              1,658
4...................................                110                546                882              1,663
5...................................                614              3,053              4,940              9,314
----------------------------------------------------------------------------------------------------------------
                                               Upstream Emissions
----------------------------------------------------------------------------------------------------------------
1...................................                9.8               47.9               77.1                146
2...................................                8.8               43.5               70.3                133
3...................................               15.5               76.5                124                233
4...................................               15.5               76.8                124                234
5...................................               99.0                490                793              1,495
----------------------------------------------------------------------------------------------------------------
                                                 Total Emissions
----------------------------------------------------------------------------------------------------------------
1...................................               79.8                388                626              1,185
2...................................               71.4                353                571              1,078
3...................................                126                620              1,003              1,891
4...................................                126                622              1,006              1,897
5...................................                713              3,543              5,733             10,809
----------------------------------------------------------------------------------------------------------------
* For each of the four cases, the corresponding SCC value for emissions in 2015 is $12.2, $40.0, $62.3, and $117
  per metric ton (2014$). The values are for CO2 only (i.e., not CO2eq of other greenhouse gases).
** For TSL 2, the NES is forecasted over the lifetime of equipment sold from 2023-2048. For the other TSLs, the
  NES is forecasted over the lifetime of equipment sold from 2019-2048.

    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 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 the considered TSLs for CUACs/CUHPs and 
CWAFs. The dollar-per-ton values that DOE used are discussed in section 
IV.L of this document. Table V-37 and Table V-38 present the cumulative 
present values for NOX emissions for each TSL calculated 
using 7-percent and 3-percent discount rates, respectively, for the 
equipment addressed in this direct final rule. This table presents 
values that use the low dollar-per-ton values, which reflect DOE's 
primary estimate. Results that reflect the range of NOX 
dollar-per-ton values are presented in Table V-41 and Table V-45.

  Table V-37--Estimates of Present Value of NOX Emissions Reduction for
     Small, Large, and Very Large Air-Cooled Commercial Package Air
                  Conditioning and Heating Equipment *
------------------------------------------------------------------------
                                                       Million 2014$
                                                 -----------------------
                     TSL **                           3%          7%
                                                   Discount    Discount
                                                     rate        rate
------------------------------------------------------------------------
                     Site and Power Sector Emissions
------------------------------------------------------------------------
1...............................................       1,055         353
2...............................................       1,947         653
2.5.............................................       2,780         935
Recommended.....................................       2,899         937
3...............................................       3,174       1,064
3.5.............................................       3,274       1,095
4...............................................       3,923       1,307
5...............................................       4,649       1,543
------------------------------------------------------------------------
                           Upstream Emissions
------------------------------------------------------------------------
1...............................................         774         253
2...............................................       1,429         468
2.5.............................................       2,040         670
Recommended.....................................       2,139         677
3...............................................       2,329         763
3.5.............................................       2,403         786
4...............................................       2,881         938
5...............................................       3,418       1,109
------------------------------------------------------------------------
                             Total Emissions
------------------------------------------------------------------------
1...............................................       1,828         606
2...............................................       3,376       1,121
2.5.............................................       4,820       1,604
Recommended.....................................       5,038       1,614
3...............................................       5,503       1,826
3.5.............................................       5,677       1,881
4...............................................       6,804       2,245
5...............................................       8,067       2,652
------------------------------------------------------------------------
* The results reflect use of the low benefits per ton values.

[[Page 2514]]

 
** For the Recommended TSL, the impacts are over the lifetime of
  equipment sold from 2018-2048. For the other TSLs, the NES is
  forecasted over the lifetime of equipment sold from 2019-2048.


  Table V-38--Estimates of Present Value of NOX Emissions Reduction for
                     Commercial Warm Air Furnaces *
------------------------------------------------------------------------
                                                       Million 2014$
                                                 -----------------------
                     TSL **                           3%          7%
                                                   discount    discount
                                                     rate        rate
------------------------------------------------------------------------
                   Site and Power Sector Emissions **
------------------------------------------------------------------------
1...............................................        46.1        16.3
2...............................................        44.9        14.7
3...............................................        72.2        24.7
4...............................................        76.8        26.3
5...............................................         516         174
------------------------------------------------------------------------
                           Upstream Emissions
------------------------------------------------------------------------
1...............................................        73.6        26.0
2...............................................        65.4        21.4
3...............................................         115        39.5
4...............................................         116        39.6
5...............................................         741         249
------------------------------------------------------------------------
                             Total Emissions
------------------------------------------------------------------------
1...............................................         120        42.3
2...............................................         110        36.1
3...............................................         188        64.2
4...............................................         192        65.9
5...............................................       1,258         423
------------------------------------------------------------------------
* The results reflect use of the low benefits per ton values.
** For TSL 2, the NES is forecasted over the lifetime of equipment sold
  from 2023-2048. For the other TSLs, the NES is forecasted over the
  lifetime of equipment sold from 2019-2048.

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 commercial 
consumer savings calculated for each TSL considered in this rulemaking. 
Table V-39 and Table V-40 present 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 commercial consumer savings 
calculated for each TSL considered in this rulemaking, at both a 7-
percent and 3-percent discount rate for CUACs/CUHPs and CWAFs, 
respectively. The CO2 values used in the columns of each 
table correspond to the four sets of SCC values discussed above.

Table V-39--Net Present Value of Consumer Savings Combined With Present Value of Monetized Benefits From CO2 and
  NOX Emissions Reductions for Small, Large, and Very Large Air-Cooled Commercial Package Air Conditioning and
                                                Heating Equipment
----------------------------------------------------------------------------------------------------------------
                                             Consumer NPV at 3% discount rate added with:  (billion 2014$)
                                     ---------------------------------------------------------------------------
                                       SCC case $12.2/    SCC case $40.0/    SCC case $62.3/     SCC case $117/
                TSL *                   metric ton CO2     metric ton CO2     metric ton CO2     metric ton CO2
                                        and 3% low NOX     and 3% low NOX     and 3% low NOX     and 3% low NOX
                                            value              value              value              value
----------------------------------------------------------------------------------------------------------------
1...................................               21.4               28.6               34.2               47.1
2...................................               39.2               52.5               62.6               86.6
2.5.................................               56.6               75.5               90.1              124.3
Recommended.........................               59.4               79.2               94.5              130.3
3...................................               64.0               85.6              102.2              141.3
3.5.................................               66.0               88.2              105.4              145.7
4...................................               76.9              103.6              124.2              172.5
5...................................               83.4              115.0              139.4              196.7
----------------------------------------------------------------------------------------------------------------
                                                     Consumer NPV at 7% discount rate added with:
----------------------------------------------------------------------------------------------------------------
                                        SCC case $12.2/    SCC case $40.0/    SCC case $62.3/     SCC case $117/
                                         metric ton CO2     metric ton CO2     metric ton CO2     metric ton CO2
                                         and 7% low NOX     and 7% low NOX     and 7% low NOX     and 7% low NOX
                                                  value              value              value              value
----------------------------------------------------------------------------------------------------------------
1...................................                7.8               15.0               20.6               33.5
2...................................               14.5               27.7               37.9               61.9
2.5.................................               21.4               40.3               54.8               89.0
Recommended.........................               21.7               41.6               56.9               92.6
3...................................               24.0               45.6               62.3              101.3
3.5.................................               24.5               46.8               63.9              104.2
4...................................               28.1               54.8               75.4              123.7
5...................................               29.3               61.0               85.4              142.6
----------------------------------------------------------------------------------------------------------------
* For the Recommended TSL, the NES is forecasted over the lifetime of equipment sold from 2018-2048. For the
  other TSLs, the NES is forecasted over the lifetime of equipment sold from 2019-2048.


[[Page 2515]]


Table V-40--Net Present Value of Consumer Savings Combined With Present Value of Monetized Benefits From CO2 and
                            NOX Emissions Reductions for Commercial Warm Air Furnaces
----------------------------------------------------------------------------------------------------------------
                                             Consumer NPV at 3% discount rate added with: (billion 2014$)
                                     ---------------------------------------------------------------------------
                 TSL                   SCC case $12.2/    SCC case $41.2/    SCC case $63.4/     SCC case $121/
                                        metric ton and     metric ton and     metric ton and     metric ton and
                                       medium NOX value   medium NOX value   medium NOX value   medium NOX value
----------------------------------------------------------------------------------------------------------------
1...................................                1.3                1.6                1.8                2.4
2...................................                1.2                1.4                1.7                2.2
3...................................                0.3                0.7                1.1                2.0
4...................................                0.3                0.8                1.1                2.0
5...................................                4.6                7.4                9.6               14.7
----------------------------------------------------------------------------------------------------------------
                                                     Consumer NPV at 7% discount rate added with:
----------------------------------------------------------------------------------------------------------------
                                        SCC case $12.0/    SCC case $40.5/    SCC case $62.4/     SCC case $119/
                                         metric ton and     metric ton and     metric ton and     metric ton and
                                       medium NOX value   medium NOX value   medium NOX value   medium NOX value
----------------------------------------------------------------------------------------------------------------
1...................................                0.5                0.8                1.1                1.6
2...................................                0.4                0.7                0.9                1.4
3...................................              (0.2)                0.3                0.7                1.6
4...................................              (0.2)                0.3                0.7                1.6
5...................................                0.8                3.6                5.8               10.9
----------------------------------------------------------------------------------------------------------------
* For TSL 2, the NES is forecasted over the lifetime of equipment sold from 2023-2048. For the other TSLs, the
  NES is forecasted over the lifetime of equipment sold from 2019-2048.

    In considering the above results, two issues are relevant. 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 the applicable analysis period. Because 
CO2 emissions have a very long residence time in the 
atmosphere,\5\ the SCC values in future years reflect future climate-
related impacts that continue beyond 2100.
---------------------------------------------------------------------------

    \5\ 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,''' 110 J. 
Geophys. Res. D14105 (2005).
---------------------------------------------------------------------------

C. Conclusion

    When considering new or amended energy conservation standards, the 
standards that DOE adopts for any type (or class) of covered product or 
equipment must be designed to achieve significant additional 
conservation of energy that the Secretary determines is technologically 
feasible and economically justified. (42 U.S.C. 6313(a)(6)(A)(ii)(II)) 
In determining whether a standard is economically justified, the 
Secretary must determine whether the benefits of the standard exceed 
its burdens by, to the greatest extent practicable, considering the 
seven statutory factors discussed previously. (42 U.S.C. 
6313(a)(6)(B)(ii)(I)-(VII))
    For this direct final rule, DOE considered the impacts from amended 
standards for CUACs/CUHPs and CWAFs at each TSL, beginning with the 
maximum technologically feasible level, to determine whether that level 
was economically justified. Where 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 and saves a 
significant amount of energy.
    To aid the reader as DOE discusses the benefits and/or burdens of 
each TSL, tables in this section present a summary of the results of 
DOE's quantitative analysis for each TSL. In addition to the 
quantitative results presented in the tables, DOE also considers other 
burdens and benefits that affect economic justification.
1. Benefits and Burdens of TSLs Considered for Small, Large, and Very 
Large Air-Cooled Commercial Package Air Conditioning and Heating 
Equipment
    Table V-41 and Table V-42 summarize the quantitative impacts 
estimated for each TSL for CUACs and CUHPs. The national impacts are 
measured over the lifetime of CUACs and CUHPs purchased in the 2018-
2048 period. The energy savings, emissions reductions, and value of 
emissions reductions refer to FFC results. The efficiency levels 
contained in each TSL are described in section V.A.

                Table V-41--Summary of Analytical Results for Small, Large, and Very Large Air-Cooled Commercial Package Air Conditioning and Heating Equipment: National Impacts
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
            Category                     TSL 1               TSL 2              TSL 2.5       Recommended  TSL *         TSL 3              TSL 3.5              TSL 4               TSL 5
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                               National FFC Energy Savings (quads)
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                  5.3...............  9.8...............  13.9..............  14.8..............  15.9..............  16.4..............  19.7..............  23.4
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

[[Page 2516]]

 
                                                                            NPV of Consumer Benefits (2014$ billion)
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
3% discount rate................  18.0..............  32.8..............  47.5..............  50.0..............  53.7..............  55.3..............  64.1..............  68.2
7% discount rate................  5.4...............  10.1..............  15.1..............  15.2..............  16.8..............  17.1..............  19.2..............  18.8
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                      Cumulative Emissions Reduction (Total FFC Emissions)
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
CO2 (million metric tons).......  314...............  578...............  824...............  873...............  943...............  973...............  1,167.............  1,383
SO2 (thousand tons).............  164...............  303...............  431...............  454...............  493...............  508...............  610...............  722
NOX (thousand tons).............  586...............  1,080.............  1,538.............  1,634.............  1,759.............  1,815.............  2,180.............  2,584
Hg (tons).......................  0.61..............  1.12..............  1.59..............  1.68..............  1.82..............  1.88..............  2.25..............  2.66
CH4 (thousand tons).............  1,401.............  2,582.............  3,677.............  3,917.............  4,208.............  4,342.............  5,215.............  6,185
N2O (thousand tons).............  3.45..............  6.35..............  9.05..............  9.54..............  10.34.............  10.67.............  12.80.............  15.16
CH4 (million tons CO2eq **).....  39.2..............  72.3..............  103.0.............  109.7.............  117.8.............  121.6.............  146.0.............  173.2
N2O (thousand tons CO2eq **)....  913...............  1,682.............  2,397.............  2,528.............  2,741.............  2,828.............  3,392.............  4,017
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                       Value of Emissions Reduction (Total FFC Emissions)
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
CO2 (2014$ billion) [dagger]....  1.845 to 27.53....  3.409 to 50.82....  4.870 to 72.52....  5.046 to 75.94....  5.556 to 82.83....  5.729 to 85.44....  6.860 to 102.4....  8.127 to 121.4
NOX--3% discount rate (2014$      1,592 to 3,514....  2,941 to 6,492....  4,203 to 9,276....  4,361 to 9,610....  4,795 to 10,583...  4,945 to 10,913...  5,922 to 13,066...  7,020 to 15,483
 million).
NOX--7% discount rate (2014$      547 to 1,221......  1,011 to 2,259....  1,448 to 3,235....  1,445 to 3,231....  1,647 to 3,680....  1,696 to 3,789....  2,022 to 4,520....  2,386 to 5,334
 million).
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
* For the Recommended TSL, the NES is forecasted over the lifetime of equipment sold from 2018-2048. For the other TSLs, the NES is forecasted over the lifetime of equipment sold from 2019-
  2048.
** CO2eq is the quantity of CO2 that would have the same global warming potential (GWP).
[dagger] Range of the economic value of CO2 reductions is based on estimates of the global benefit of reduced CO2 emissions.


      Table V-42--Summary of Analytical Results for Small, Large, and Very Large Air-Cooled Commercial Package Air Conditioning and Heating Equipment: Manufacturer and Consumer Impacts *
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
            Category                     TSL 1               TSL 2              TSL 2.5        Recommended  TSL          TSL 3              TSL 3.5              TSL 4               TSL 5
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                      Manufacturer Impacts
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Industry NPV (2014$ million) (No- 1,431.0 to 1,705.5  1,421.9 to 1,758.6  1,300.5 to 1,721.1  1,204.1 to 1,606.1  1,197.4 to 1,697.0  1,138.2 to 1,670.3  1,025.0 to 1,660.9  762.7 to 1,737.6
 new-standards case INPV =
 1,638.2).
Industry NPV (% change).........  (6.5) to 3.7......  (13.5) to 6.9.....  (20.9) to 4.7.....  (26.8) to (2.3)...  (27.2) to 3.2.....  (30.8) to 1.6.....  (37.7) to 1.0.....  (53.6) to 5.7
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                         Commercial Consumer Average LCC Savings (2014)
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Small CUACs.....................  (210).............  870...............  3,777.............  4,233.............  4,233.............  3,517.............  3,035.............  5,326
Large CUACs.....................  3,997.............  3,728.............  7,991.............  10,135............  10,135............  12,266............  16,803............  12,900
Very Large CUACs................  1,547.............  4,777.............  8,610.............  8,610.............  8,881.............  8,881.............  18,386............  18,338
Average *.......................  1,045.............  1,971.............  5,340.............  6,220.............  6,238.............  6,396.............  8,370.............  8,697
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                 Commercial Consumer PBP (years)
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Small CUACs.....................  14.9..............  8.5...............  4.9...............  4.9...............  4.9...............  2.6...............  2.5...............  4.6
Large CUACs.....................  1.3...............  2.4...............  2.4...............  2.6...............  2.6...............  2.6...............  2.5...............  4.6
Very Large CUACs................  5.8...............  7.0...............  6.2...............  6.2...............  7.2...............  7.2...............  5.6...............  6.3
Average *.......................  10.6..............  6.7...............  4.3...............  4.4...............  4.5...............  3.0...............  2.8...............  4.8
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

[[Page 2517]]

 
                                                                             % of Consumers that Experience Net Cost
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Small CUACs.....................  48%...............  25%...............  5%................  5%................  5%................  13%...............  25%...............  16%
Large CUACs.....................  0%................  10%...............  5%................  2%................  2%................  1%................  1%................  11%
Very Large CUACs................  7%................  13%...............  7%................  7%................  23%...............  23%...............  3%................  6%
Average *.......................  32%...............  20%...............  5%................  4%................  6%................  11%...............  16%...............  14%
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Parentheses indicate negative (-) values.
* Weighted by shares of each equipment class in total projected shipments in the year of compliance.

    DOE first considered TSL 5, which represents the max-tech 
efficiency levels. TSL 5 would save 23.4 quads of energy, an amount DOE 
considers significant. Under TSL 5, the NPV of consumer benefit would 
be $18.8 billion using a 7-percent discount rate, and $68.2 billion 
using a 3-percent discount rate.
    The cumulative emissions reductions at TSL 5 are 1,383 million Mt 
of CO2, 722 thousand tons of SO2, 2,584 thousand 
tons of NOX, 2.66 ton of Hg, 6,185 thousand tons of 
CH4, and 15.16 thousand tons of N2O. The 
estimated monetary value of the CO2 emissions reduction at 
TSL 5 ranges from $8.127 billion to $121.4 billion.
    At TSL 5, the average LCC impact is a savings of $5,326 for small 
CUACs, $12,900 for large CUACs, and $18,338 for very large CUACs. The 
simple payback period is 4.6 years for small CUACs, 4.6 years for large 
CUACs, and 6.3 years for very large CUACs. The fraction of consumers 
experiencing a net LCC cost is 16 percent for small CUACs, 11 percent 
for large CUACs, and 6 percent for very large CUACs. Although DOE did 
not estimate consumer impacts for CUHPs, the results would be very 
similar to those for CUACs for the reasons stated in section V.B.1.
    At TSL 5, the projected change in INPV ranges from a decrease of 
$881.9 million to an increase of $93.1 million, which correspond to a 
change of -53.7 percent and 5.7 percent, respectively. The industry is 
expected to incur $591.0 million in total conversion costs at this 
level. DOE projects that 98.7 percent of current equipment listings 
would require redesign at this level to meet this standard level today. 
At this level, DOE recognizes that manufacturers could face technical 
resource constraints. Manufacturers stated they would require 
additional engineering expertise and additional test laboratory 
capacity. It is unclear whether manufacturers could complete the hiring 
of the necessary technical expertise and construction of the necessary 
test facilities in time to allow for the redesign of all equipment to 
meet max-tech by 2019. Furthermore, DOE recognizes that a standard set 
at max-tech could greatly limit equipment differentiation in the small, 
large, and very large CUAC/CUHP market. By commoditizing a key 
differentiating feature, a standard set at max-tech would likely 
accelerate consolidaton in the industry.
    The Secretary concludes that at TSL 5 for CUACs and CUHPs, the 
benefits of energy savings, positive NPV of consumer benefits, emission 
reductions, and the estimated monetary value of the emissions 
reductions would be outweighed by the 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 5 is not 
economically justified.
    DOE then considered TSL 4. TSL 4 would save 19.7 quads of energy, 
an amount DOE considers significant. Under TSL 4, the NPV of consumer 
benefit would be $19.2 billion using a 7-percent discount rate, and 
$64.1 billion using a 3-percent discount rate.
    The cumulative emissions reductions at TSL 4 are 1,167 million Mt 
of CO2, 610 thousand tons of SO2, 2,180 thousand 
tons of NOX, 2.25 ton of Hg, 5,215 thousand tons of 
CH4, and 12.80 thousand tons of N2O. The 
estimated monetary value of the CO2 emissions reduction at 
TSL 4 ranges from $6.860 billion to $102.4 billion.
    At TSL 4, the average LCC impact is a savings of $3,035 for small 
CUACs, $16,803 for large CUACs, and $18,386 for very large CUACs. The 
simple payback period is 2.5 years for small CUACs, 2.5 years for large 
CUACs, and 5.6 years for very large CUACs. The fraction of consumers 
experiencing a net LCC cost is 25 percent for small CUACs, 1 percent 
for large CUACs, and 3 percent for very large CUACs. Although DOE did 
not estimate consumer impacts for CUHPs, the results would be very 
similar to those for CUACs for the reasons stated in section V.B.1.
    At TSL 4, the projected change in INPV ranges from a decrease of 
$619.6 million to an increase of $16.3 million, which corresponds to a 
change of -37.7 percent and 1.0 percent, respectively. The industry is 
expected to incur $538.8 million in total conversion costs at this 
level. DOE projects that 96.0 percent of current equipment listings 
would require redesign at this level to meet this standard level today.
    The Secretary concludes that at TSL 4 for CUACs and CUHPs, the 
benefits of energy savings, positive NPV of consumer benefits, emission 
reductions, and the estimated monetary value of the emissions 
reductions would be outweighed by the economic burden on some 
consumers, and the impacts on manufacturers, including the conversion 
costs and profit margin impacts that could result in a reduction in 
INPV. Consequently, the Secretary has concluded that TSL 4 is not 
economically justified.
    DOE then considered TSL 3.5. TSL 3.5 would save 16.4 quads of 
energy, an amount DOE considers significant. Under TSL 3.5, the NPV of 
consumer benefit would be $17.1 billion using a 7-percent discount 
rate, and $55.3 billion using a 3-percent discount rate.
    The cumulative emissions reductions at TSL 3.5 are 973 million Mt 
of CO2, 508 thousand tons of SO2, 1,815 thousand 
tons of NOX, 1.88 ton of Hg, 4,342 thousand tons of 
CH4, and 10.67 thousand tons of N2O. The 
estimated monetary value of the CO2 emissions reduction at 
TSL 3.5 ranges from $5.729 billion to $85.44 billion.
    At TSL 3.5, the average LCC impact is a savings of $3,517 for small 
CUACs, $12,266 for large CUACs, and $8,881 for very large CUACs. The 
simple payback period is 2.6 years for small CUACs, 2.6 years for large 
CUACs, and 7.2 years for very large CUACs. The fraction of consumers 
experiencing a net LCC cost is 13 percent for small CUACs, 1 percent

[[Page 2518]]

for large CUACs, and 23 percent for very large CUACs. Although DOE did 
not estimate consumer impacts for CUHPs, the results would be very 
similar to those for CUACs for the reasons stated in section V.B.1.
    At TSL 3.5, the projected change in INPV ranges from a decrease of 
$506.4 million to an increase of $25.7 million, which corresponds to a 
change of -30.8 percent and 1.6 percent, respectively. The industry is 
expected to incur $489.2 million in total conversion costs at this 
level. DOE projects that 93.5 percent of current equipment listings 
would require redesign at this level to meet this standard level today.
    The Secretary concludes that at TSL 3.5 for CUACs and CUHPs, the 
benefits of energy savings, positive NPV of consumer benefits, emission 
reductions, and the estimated monetary value of the emissions 
reductions would be outweighed by the economic burden on some 
consumers, and the impacts on manufacturers, including the conversion 
costs and profit margin impacts that could result in a reduction in 
INPV. Consequently, the Secretary has concluded that TSL 3.5 is not 
economically justified.
    DOE then considered TSL 3. TSL 3 would save 15.9 quads of energy, 
an amount DOE considers significant. Under TSL 3, the NPV of consumer 
benefit would be $16.8 billion using a 7-percent discount rate, and 
$53.7 billion using a 3-percent discount rate.
    The cumulative emissions reductions at TSL 3 are 943 million Mt of 
CO2, 493 thousand tons of SO2, 1,759 thousand 
tons of NOX, 1.82 ton of Hg, 4,208 thousand tons of 
CH4, and 10.34 thousand tons of N2O. The 
estimated monetary value of the CO2 emissions reduction at 
TSL 3 ranges from $5.556 billion to $82.83 billion.
    At TSL 3, the average LCC impact is a savings of $4,233 for small 
CUACs, $10,135 for large CUACs, and $8,881 for very large CUACs. The 
simple payback period is 4.9 years for small CUACs, 2.6 years for large 
CUACs, and 7.2 years for very large CUACs. The fraction of consumers 
experiencing a net LCC cost is 5 percent for small CUACs, 2 percent for 
large CUACs, and 23 percent for very large CUACs. Although DOE did not 
estimate consumer impacts for CUHPs, the results would be very similar 
to those for CUACs for the reasons stated in section V.B.1.
    At TSL 3, the projected change in INPV ranges from a decrease of 
$447.2 million to an increase of $52.4 million, which corresponds to a 
change of -27.2 percent and 3.2 percent, respectively. DOE projects 
that 81.6 percent of current equipment listings would require redesign 
at this level to meet this standard level today.
    The Secretary concludes that at TSL 3 for CUACs and CUHPs, the 
benefits of energy savings, positive NPV of consumer benefits, emission 
reductions, and the estimated monetary value of the emissions 
reductions would be outweighed by the 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 3 is not 
economically justified.
    DOE then considered the Recommended TSL, which reflects the 
standard levels recommended by the ASRAC Working Group. The Recommended 
TSL would save 14.8 quads of energy, an amount DOE considers 
significant. Under the Recommended TSL, the NPV of consumer benefit 
would be $15.2 billion using a 7-percent discount rate, and $50.0 
billion using a 3-percent discount rate.
    The cumulative emissions reductions at the Recommended TSL are 873 
million Mt of CO2, 454 thousand tons of SO2, 
1,634 thousand tons of NOX, 1.68 ton of Hg, 3,917 thousand 
tons of CH4, and 9.54 thousand tons of N2O. The 
estimated monetary value of the CO2 emissions reduction at 
the Recommended TSL ranges from $5.046 billion to $75.94 billion.
    At the Recommended TSL, the average LCC impact is a savings of 
$4,233 for small CUACs, $10,135 for large CUACs, and $8,610 for very 
large CUACs. The simple payback period is 4.9 years for small CUACs, 
2.6 years for large CUACs, and 6.2 years for very large CUACs. The 
fraction of consumers experiencing a net LCC cost is 5 percent for 
small CUACs, 2 percent for large CUACs, and 7 percent for very large 
CUACs. Although DOE did not estimate consumer impacts for CUHPs, the 
results would be very similar to those for CUACs for the reasons stated 
in section V.B.1.
    The Recommended TSL as developed by the Working Group and submitted 
to DOE by ASRAC, aligns the effective dates of the CUAC/CUHP and CWAF 
rulemakings. That recommended approach adopts the ASHRAE 90.1-2013 
efficiency levels for this equipment for compliance starting in 2018 
and will phase into a higher level starting in 2023 as recommended to 
ASRAC by the Working Group. DOE expects that aligning the effective 
dates reduces total conversion costs and cumulative regulatory burden, 
while also allowing industry to gain clarity on potential regulations 
that could affect refrigerant availability before the higher appliance 
standard takes effect in 2023. DOE projects that 31.5 percent of 
current equipment listings would require redesign at this level to meet 
the 2018 standard level, while 79.6 percent of current equipment 
listings would require redesign at this level to meet the 2023 standard 
level.
    At the Recommended TSL, the projected change in INPV ranges from a 
decrease of $440.4 million to a decrease of $38.5 million, which 
corresponds to a change of -26.8 percent and -2.3 percent, 
respectively. The industry is expected to incur $520.8 million in total 
conversion costs at this level. However, the industry members of the 
Working Group noted that aligning the compliance dates for the CUAC/
CUHP and CWAF standards in the manner recommended would allow 
manufacturers to coordinate their redesign and testing expenses for 
these equipment (CUAC: AHRI and ACEEE, No. 80 at p. 1). With this 
coordination, manufacturers explained that there would be a reduction 
in the total conversion costs associated with this direct final rule. 
These synergies resulting from the alignment of the CUAC/CUHP and CWAF 
compliance dates would yield INPV impacts that are less severe than the 
forecasted INPV range of -26.8 percent to -2.3 percent.
    After considering the analysis and weighing the benefits and 
burdens, DOE has determined that the recommended standards are in 
accordance with 42 U.S.C. 6313(a)(6)(B), which contains provisions for 
adopting a uniform national standard more stringent than the amended 
ASHRAE Standard 90.1 for the equipment considered in this document. 
Specifically, the Secretary has determined, supported by clear and 
convincing evidence as described in this direct final rule and 
accompanying TSDs, that such adoption would result in the significant 
additional conservation of energy and is technologically feasible and 
economically justified. In determining whether the recommended 
standards are economically justified, the Secretary has determined that 
the benefits of the recommended standards exceed the burdens. Namely, 
the Secretary has concluded that under the recommended standards for 
CUACs and CUHPs, the benefits of energy savings, positive NPV of 
consumer benefits, emission reductions, the estimated monetary value of 
the emissions reductions, and positive average LCC savings would 
outweigh the negative impacts on some consumers and on manufacturers, 
including the conversion costs that

[[Page 2519]]

could result in a reduction in INPV for manufacturers.
    Under the authority provided by 42 U.S.C. 6295(p)(4) and 
6316(b)(1), DOE is issuing this direct final rule that establishes 
amended energy conservation standards for CUACs and CUHPs at the 
Recommended TSL. The amended energy conservation standards for CUACs 
and CUHPs, which prescribe the minimum allowable IEER and, for 
commercial unitary heat pumps, COP, are shown in Table V-43.

Table V-43--Amended Energy Conservation Standards for Small, Large, and Very Large Air-Cooled Commercial Package
                                     Air Conditioning and Heating Equipment
----------------------------------------------------------------------------------------------------------------
                                                                    Proposed energy
            Equipment type                   Heating type        conservation standard       Compliance date
----------------------------------------------------------------------------------------------------------------
Small Commercial Packaged AC and HP
 (Air-Cooled)-->=65,000 Btu/h and
 <135,000 Btu/h Cooling Capacity
    AC...............................  Electric Resistance      12.9 IEER..............  January 1, 2018.
                                        Heating or No Heating.  14.8 IEER..............  January 1, 2023.
                                       All Other Types of       12.7 IEER..............  January 1, 2018.
                                        Heating.                14.6 IEER..............  January 1, 2023.
    HP...............................  Electric Resistance      12.2 IEER..............  January 1, 2018.
                                        Heating or No Heating.  3.3 COP................
                                                                14.1 IEER..............  January 1, 2023.
                                                                3.4 COP................
                                       All Other Types of       12.0 IEER..............  January 1, 2018.
                                        Heating.                3.3 COP................
                                                                13.9 IEER..............  January 1, 2023.
                                                                3.4 COP................
Large Commercial Packaged AC and HP
 (Air-Cooled)-->=135,000 Btu/h and
 <240,000 Btu/h Cooling Capacity
    AC...............................  Electric Resistance      12.4 IEER..............  January 1, 2018.
                                        Heating or No Heating.  14.2 IEER..............  January 1, 2023.
                                       All Other Types of       12.2 IEER..............  January 1, 2018.
                                        Heating.                14.0 IEER..............  January 1, 2023.
    HP...............................  Electric Resistance      11.6 IEER..............  January 1, 2018.
                                        Heating or No Heating.  3.2 COP................
                                                                13.5 IEER..............  January 1, 2023.
                                                                3.3 COP................
                                       All Other Types of       11.4 IEER..............  January 1, 2018.
                                        Heating.                3.2 COP................
                                                                13.3 IEER..............  January 1, 2023.
                                                                3.3 COP................
Very Large Commercial Packaged AC and
 HP (Air-Cooled)-->=240,000 Btu/h and
 <760,000 Btu/h Cooling Capacity
    AC...............................  Electric Resistance      11.6 IEER..............  January 1, 2018.
                                        Heating or No Heating.  13.2 IEER..............  January 1, 2023.
                                       All Other Types of       11.4 IEER..............  January 1, 2018.
                                        Heating.                13.0 IEER..............  January 1, 2023.
    HP...............................  Electric Resistance      10.6 IEER..............  January 1, 2018.
                                        Heating or No Heating.  3.2 COP................
                                                                12.5 IEER..............  January 1, 2023.
                                                                3.2 COP................
                                       All Other Types of       10.4 IEER..............  January 1, 2018.
                                        Heating.                3.2 COP................
                                                                12.3 IEER..............  January 1, 2023.
                                                                3.2 COP................
----------------------------------------------------------------------------------------------------------------

    The benefits and costs of the adopted standards can also be 
expressed in terms of annualized values. The annualized net benefit is 
the sum of: (1) The annualized national economic value (expressed in 
2014$) of the benefits from operating equipment that meet the adopted 
standards (consisting primarily of operating cost savings from using 
less energy, minus increases in product purchase costs, and (2) the 
annualized monetary value of the benefits of CO2 and 
NOX emission reductions.\6\
---------------------------------------------------------------------------

    \6\ To convert the time-series of costs and benefits into 
annualized values, DOE calculated a present value in 2014, the year 
used for discounting the NPV of total consumer costs and savings. 
For the benefits, DOE calculated a present value associated with 
each year's shipments in the year in which the shipments occur 
(2020, 2030, etc.), and then discounted the present value from each 
year to 2015. The calculation uses discount rates of 3 and 7 percent 
for all costs and benefits except for the value of CO2 
reductions, for which DOE used case-specific discount rates. Using 
the present value, DOE then calculated the fixed annual payment over 
the analysis period, starting in the compliance year that yields the 
same present value.
---------------------------------------------------------------------------

    Table V-44 shows the annualized values for CUACs and CUHPs under 
the Recommended TSL, expressed in 2014$. The results under the primary 
estimate are as follows. Using a 7-percent discount rate for benefits 
and costs other than CO2 reduction, (for which DOE used a 3-
percent discount rate along with the SCC series that has a value of 
$40.0/t in 2015),\7\ the estimated cost of the standards in this rule 
is $708 million per year in increased equipment costs, while the 
estimated annual benefits are $2,099 million in reduced equipment 
operating costs, $1,320

[[Page 2520]]

million in CO2 reductions, and $132.0 million in reduced 
NOX emissions. In this case, the net benefit amounts to 
$2,843 million per year. Using a 3-percent discount rate for all 
benefits and costs and the SCC series has a value of $40.0/t in 2015, 
the estimated cost of the standards is $792 million per year in 
increased equipment costs, while the estimated annual benefits are 
$3,441 million in reduced operating costs, $1,320 million in 
CO2 reductions, and $231.3 million in reduced NOX 
emissions. In this case, the net benefit amounts to $4,201 million per 
year.
---------------------------------------------------------------------------

    \7\ DOE used a 3-percent discount rate because the SCC values 
for the series used in the calculation were derived using a 3-
percent discount rate (see section IV.L).

   Table V-44--Annualized Benefits and Costs of Adopted Standards for Small, Large, and Very Large Air-Cooled Commercial Package Air Conditioning and
                                                                    Heating Equipment
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                      Million 2014$/year
                                              Discount rate          -----------------------------------------------------------------------------------
                                                                          Primary estimate *       Low net benefits estimate  High net benefits estimate
--------------------------------------------------------------------------------------------------------------------------------------------------------
Benefits
    Consumer Operating Cost         7%..............................  2,099.....................  2,021.....................  2,309
     Savings.
                                    3%..............................  3,441.....................  3,287.....................  3,830
    CO2 Reduction Value ($12.2/t    5%..............................  357.......................  355.......................  361
     case) **.
    CO2 Reduction Value ($40.0/t    3%..............................  1,320.....................  1,313.....................  1,337
     case) **.
    CO2 Reduction Value ($62.3/t    2.5%............................  1,973.....................  1,964.....................  1,999
     case) **.
    CO2 Reduction Value ($117/t     3%..............................  4,028.....................  4,009.....................  4,080
     case) **.
    NOX Reduction Value [dagger]..  7%..............................  132.0.....................  131.3.....................  299.1
                                    3%..............................  231.3.....................  230.2.....................  516.3
    Total Benefits                  7% plus CO2 range...............  2,588 to 6,259............  2,507 to 6,160............  2,970 to 6,689
     [dagger][dagger].
                                    7%                                3,551.....................  3,465.....................  3,946
                                    3% plus CO2 range                 4,029 to 7,701............  3,872 to 7,525............  4,708 to 8,427
                                    3%                                4,992.....................  4,830.....................  5,684
Costs
    Consumer Incremental Product    7%..............................  708.......................  888.......................  275
     Costs.                         3%..............................  792.......................  1028......................  231
Net Benefits
    Total [dagger][dagger]........  7% plus CO2 range...............  1,880 to 5,551............  1,619 to 5,273............  2,695 to 6,414
                                    7%                                2,843.....................  2,578.....................  3,671
                                    3% plus CO2 range                 3,238 to 6,909............  2,843 to 6,497............  4,477 to 8,196
                                    3%                                4,201.....................  3,802.....................  5,453
--------------------------------------------------------------------------------------------------------------------------------------------------------
* This table presents the annualized costs and benefits associated with CUACs and CUHPs shipped in 2018-2048. These results include benefits to
  consumers which accrue after 2048 from the CUACs and CUHPs purchased in 2018-2048. The results account for the incremental variable and fixed costs
  incurred by manufacturers due to the standard, some of which may be incurred in preparation for the rule. The Primary, Low Benefits, and High Benefits
  estimates utilize projections of energy prices from the AEO 2015 Reference case, Low Economic Growth case, and High Economic Growth case,
  respectively. In addition, incremental product costs reflect a constant price trend in the Primary estimate, a slightly increasing price trend in the
  Low Benefits estimate, and a slightly decreasing price trend in the Low Benefits estimate. The methods used to project price trends are explained in
  section IV.D.1.
** The CO2 values represent global monetized values of the SCC, in 2014$, in 2015 under several scenarios of the updated SCC values. The first three
  cases use the averages of SCC distributions calculated using 5%, 3%, and 2.5% discount rates, respectively. The fourth case represents the 95th
  percentile of the SCC distribution calculated using a 3% discount rate. The SCC time series incorporate an escalation factor.
[dagger] The $/ton values used for NOX are described in section IV.L.2. DOE estimated the monetized value of NOx emissions reductions using benefit per
  ton estimates from the Regulatory Impact Analysis for the Proposed Carbon Pollution Guidelines for Existing Power Plants and Emission Standards for
  Modified and Reconstructed Power Plants, published in June 2014 by EPA's Office of Air Quality Planning and Standards. (Available at: http://www3.epa.gov/ttnecas1/regdata/RIAs/111dproposalRIAfinal0602.pdf.) For DOE's Primary Estimate and Low Net Benefits Estimate, the agency is primarily
  using a national benefit-per-ton estimate for particulate matter emitted from the Electric Generating Unit sector based on an estimate of premature
  mortality derived from the ACS study (Krewski et al., 2009). For DOE's High Net Benefits Estimate, the benefit-per-ton estimates were based on the Six
  Cities study (Lepuele et al., 2011), which are nearly two-and-a-half times larger than those from the ACS study. Because of the sensitivity of the
  benefit-per-ton estimate to the geographical considerations of sources and receptors of emission, DOE intends to investigate refinements to the
  agency's current approach of one national estimate by assessing the regional approach taken by EPA's Regulatory Impact Analysis for the Clean Power
  Plan Final Rule.
[dagger][dagger] Total Benefits for both the 3% and 7% cases are derived using the series corresponding to the average SCC with 3-percent discount rate
  ($40.0/t) case. In the rows labeled ``7% plus CO2 range'' and ``3% plus CO2 range,'' the operating cost and NOX benefits are calculated using the
  labeled discount rate, and those values are added to the full range of CO2 values.

2. Benefits and Burdens of TSLs Considered for Commercial Warm Air 
Furnaces
    Table V-45 and Table V-46 summarize the quantitative impacts 
estimated for each TSL for CWAFs. For TSL 2, the national impacts are 
projected over the lifetime of equipment sold in 2023-2048. For the 
other TSLs, the impacts are projected over the lifetime of equipment 
sold in 2019-2048. The energy savings, emissions reductions, and value 
of emissions reductions refer to FFC results. The efficiency levels 
contained in each TSL are described in section V.A.

                              Table V-45--Summary of Analytical Results for Commercial Warm Air Furnaces: National Impacts
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                  Trial standard level
                               -------------------------------------------------------------------------------------------------------------------------
                                           1                        2                        3                       4                       5
--------------------------------------------------------------------------------------------------------------------------------------------------------
Cumulative FFC Energy Savings   0.25...................  0.23...................  0.41..................  0.41..................  2.4.
 quads.
--------------------------------------------------------------------------------------------------------------------------------------------------------

[[Page 2521]]

 
                                                   NPV of Consumer Costs and Benefits (2014$ billion)
--------------------------------------------------------------------------------------------------------------------------------------------------------
3% discount rate..............  1.1....................  1.0....................  -0.1..................  -0.1..................  2.6.
7% discount rate..............  0.4....................  0.3....................  -0.4..................  -0.4..................  -0.4.
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                           Cumulative FFC Emissions Reduction
--------------------------------------------------------------------------------------------------------------------------------------------------------
CO2 million metric tons.......  13.4...................  12.4...................  22.0..................  22.0..................  126.
SO2 thousand tons.............  0.40...................  0.40...................  0.63..................  0.67..................  -10.2.
NOX thousand tons.............  43.0...................  41.2...................  70.5..................  72.2..................  473.
Hg tons.......................  0.001..................  0.001..................  0.002.................  0.002.................  -0.04.
CH4 thousand tons.............  159....................  146....................  260...................  260...................  1,673.
CH4 thousand tons CO2eq*......  4,440..................  4,096..................  7,289.................  7,292.................  46,831.
N2O thousand tons.............  0.03...................  0.03...................  0.05..................  0.06..................  0.08.
N2O thousand tons CO2eq*......  8.8....................  8.4....................  14.3..................  14.6..................  21.2.
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                              Value of Emissions Reduction
--------------------------------------------------------------------------------------------------------------------------------------------------------
CO2 2014$ million**...........  79.8 to 1,185..........  71.4 to 1,078..........  126 to 1,891..........  126 to 1,897..........  713 to 10,809.
NOX--3% discount rate 2014$     120 to 264.............  110 to 243.............  188 to 414............  192 to 424............  1258 to 2772.
 million.
NOX--7% discount rate 2014$     42.3 to 94.4...........  36.1 to 80.9...........  64.2 to 144...........  65.9 to 147...........  423 to 945.
 million.
--------------------------------------------------------------------------------------------------------------------------------------------------------
For TSL 2, the impacts are projected over the lifetime of equipment sold in 2023-2048. For the other TSLs, the impacts are projected over the lifetime
  of equipment sold in 2019-2048.
* CO2eq is the quantity of CO2 that would have the same global warming potential (GWP).
** Range of the economic value of CO2 reductions is based on estimates of the global benefit of reduced CO2 emissions.


                      Table V-46--Summary of Analytical Results for Commercial Warm Air Furnaces: Manufacturer and Consumer Impacts
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                  Trial standard level
           Category            -------------------------------------------------------------------------------------------------------------------------
                                           1                        2                        3                       4                       5
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                  Manufacturer Impacts
--------------------------------------------------------------------------------------------------------------------------------------------------------
Industry NPV (2014$ million)    85.8 to 92.6...........  83.0 to 90.5...........  65.5 to 125.2.........  60.4 to 124.8.........  (19.3) to 143.5.
 (No-New-Standards Case INPV =
 96.3).
Industry NPV (% change).......  (11.0) to (3.9)........  (13.9) to (6.1)........  (32.0) to 29.9........  (37.3) to 29.5........  (120.1)[dagger] to
                                                                                                                                   49.0.
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                          Consumer Average LCC Savings (2014$)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Gas-Fired Commercial Warm Air   $284...................  $284...................  $75...................  $75...................  $766.
 Furnaces.
Oil-Fired Commercial Warm Air   NA.....................  $400...................  NA....................  $400..................  $1,817.
 Furnaces.
Average*......................  $284...................  $285...................  $75...................  $79...................  $781.
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                               Consumer Simple PBP (years)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Gas-Fired Commercial Warm Air   1.4....................  1.4....................  12.3..................  12.3..................  11.3.
 Furnaces.
Oil-Fired Commercial Warm Air   NA.....................  1.9....................  NA....................  1.9...................  7.5.
 Furnaces.
Average*......................  1.4....................  1.4....................  12.3..................  12.1..................  11.3.
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                         % of Consumers That Experience Net Cost
--------------------------------------------------------------------------------------------------------------------------------------------------------
Gas-Fired Commercial Warm Air   6%.....................  6%.....................  58%...................  58%...................  58%.
 Furnaces.
Oil-Fired Commercial Warm Air   0%.....................  11%....................  0%....................  11%...................  54%.
 Furnaces.
--------------------------------------------------------------------------------------------------------------------------------------------------------
* Weighted by shares of each equipment class in total projected shipments in 2019.
[dagger] At max tech, the standard will likely require CWAF manufacturers to make design changes to the cooling components of commercial HVAC products
  and to the chassis that houses the heating and cooling components. Because these cooling system changes are triggered by the CWAFs standard, they are
  taken into account in the MIA's estimate of conversion costs. The additional expense of updating the commercial cooling product contributes to an INPV
  loss that is greater than 100%.

    DOE first considered TSL 5, which represents the max-tech 
efficiency levels. TSL 5 would save 2.4 quads of energy, an amount DOE 
considers significant. Under TSL 5, the NPV of consumer cost would be 
$0.4 billion using a 7-percent discount rate, and the NPV of consumer 
benefit would be $2.6 billion using a 3-percent discount rate.
    The cumulative emissions reductions at TSL 5 are 126 Mt of 
CO2, 473 thousand tons of NOX, 1,673 thousand 
tons of CH4, and 0.08 thousand tons of N2O. 
Projected emissions show an increase of 10.2 thousand tons of 
SO2 and 0.04 ton of Hg, The estimated

[[Page 2522]]

monetary value of the CO2 emissions reduction at TSL 5 
ranges from $713 million to $10,809 million.
    At TSL 5, the average LCC impact is a savings of $766 for gas-fired 
CWAFs and $1,817 for oil-fired CWAFs. The simple payback period is 11.3 
years for gas-fired CWAFs and 7.5 years for oil-fired CWAFs. The 
fraction of consumers experiencing a net LCC cost is 58 percent for 
gas-fired CWAFs and 54 percent for oil-fired CWAFs.
    At TSL 5, the projected change in INPV ranges from a decrease of 
$115.7 million to an increase of $47.2 million, which corresponds to a 
change of -120.1 percent and 49.0 percent, respectively. The industry 
is expected to incur $157.5 million in total conversion costs at this 
level. DOE projects that 99 percent of current equipment listings would 
require redesign at this level.
    The Secretary concludes that at TSL 5 for CWAFs, the benefits of 
energy savings, positive NPV of consumer benefits using a discount rate 
of 3-percent, emission reductions, and the estimated monetary value of 
the emissions reductions would be outweighed by the economic burden on 
most consumers, the negative NPV of consumer benefits using a 7-percent 
discount rate, 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. TSL 4 would save 0.41 quads of energy, 
an amount DOE considers significant. Under TSL 4, the NPV of consumer 
cost would be $0.4 billion using a 7-percent discount rate, and $0.1 
billion using a 3-percent discount rate.
    The cumulative emissions reductions at TSL 4 are 22 Mt of 
CO2, 0.67 thousand tons of SO2, 72.2 thousand 
tons of NOX, 0.002 ton of Hg, 260 thousand tons of 
CH4, and 0.06 thousand tons of N2O. The estimated 
monetary value of the CO2 emissions reduction at TSL 4 
ranges from $126 million to $1,897 million.
    At TSL 4, the average LCC impact is a savings of $75 for gas-fired 
CWAFs and $400 for oil-fired CWAFs. The simple payback period is 12.3 
years for gas-fired CWAFs and 1.9 years for oil-fired CWAFs. The 
fraction of consumers experiencing a net LCC cost is 58 percent for 
gas-fired CWAFs, and 11 percent for oil-fired CWAFs.
    At TSL 4, the projected change in INPV ranges from a decrease of 
$35.9 million to an increase of $28.4 million, which corresponds to a 
change of -37.3 percent and 29.5 percent, respectively. The industry is 
expected to incur $47.6 million in total conversion costs at this 
level; DOE projects that 94 percent of current product listings would 
require redesign at this level.
    The Secretary concludes that at TSL 4 for CWAFs, the benefits of 
energy savings, emission reductions, and the estimated monetary value 
of the emissions reductions would be outweighed by the economic burden 
on many consumers, negative NPV of consumer benefits, 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. TSL 3 would save 0.41 quads of energy, 
an amount DOE considers significant. Under TSL 3, the NPV of consumer 
cost would be $0.4 billion using a 7-percent discount rate, and $0.1 
billion using a 3-percent discount rate.
    The cumulative emissions reductions at TSL 3 are 22 Mt of 
CO2, 0.63 thousand tons of SO2, 70.5 thousand 
tons of NOX, 0.002 ton of Hg, 260 thousand tons of 
CH4, and 0.05 thousand tons of N2O. The estimated 
monetary value of the CO2 emissions reduction at TSL 3 
ranges from $126 million to $1,891 million.
    At TSL 3, the average LCC impact is a savings of $75 for gas-fired 
CWAFs. The simple payback period is 12.3 years for gas-fired CWAFs. The 
fraction of consumers experiencing a net LCC cost is 58 percent for 
gas-fired CWAFs. The EL at TSL 3 for oil-fired CWAFs is the baseline, 
so there are no LCC impacts for oil-fired CWAFs at TSL 3.
    At TSL 3, the projected change in INPV ranges from a decrease of 
$30.9 million to an increase of $28.8 million, which corresponds to a 
change of -32.0 percent and 29.9 percent, respectively. The industry is 
expected to incur $41.0 million in total conversion costs at this 
level; DOE projects that 91 percent of current equipment listings would 
require redesign at this level.
    The Secretary concludes that at TSL 3 for CWAFs, the benefits of 
energy savings, emission reductions, and the estimated monetary value 
of the emissions reductions would be outweighed by the economic burden 
on many consumers, negative NPV of consumer benefits, 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. TSL 2 would save 0.23 quads of energy, 
an amount DOE considers significant. Under TSL 2, the NPV of consumer 
benefit would be $0.3 billion using a 7-percent discount rate, and $1.0 
billion using a 3-percent discount rate.
    The cumulative emissions reductions at TSL 2 are 12.4 Mt of 
CO2, 0.40 thousand tons of SO2, 41.2 thousand 
tons of NOX, 0.001 ton of Hg, 146 thousand tons of 
CH4, and 0.03 thousand tons of N2O. The estimated 
monetary value of the CO2 emissions reduction at TSL 2 
ranges from $71.4 million to $1,078 million.
    At TSL 2, the average LCC impact is a savings of $284 for gas-fired 
CWAFs and $400 for oil-fired CWAFs. The simple payback period is 1.4 
years for gas-fired CWAFs and 1.9 years for oil-fired CWAFs. The 
fraction of consumers experiencing a net LCC cost is 6 percent for gas-
fired CWAFs and 11 percent for oil-fired CWAFs.
    At TSL 2, 57 percent of current equipment listings would require 
redesign at this level. The projected change in INPV ranges from a 
decrease of $13.4 million to a decrease of $5.9 million, which 
corresponds to a decrease of 13.9 percent and 6.1 percent, 
respectively. The CWAF industry is expected to incur $22.2 million in 
total conversion costs. However, the industry noted that aligning the 
compliance dates for the CUAC/CUHP and CWAF standards, as recommended 
by the Working Group, would allow manufacturers to coordinate their 
redesign and testing expenses for this equipment. If this occurs, there 
could be a reduction in the total conversion costs associated with this 
direct final rule. These synergies resulting from aligning the 
compliance dates of the CUAC/CUHP and CWAF standards would result in 
INPV impacts that are less severe than the forecasted INPV range of -
13.9 percent to -6.1 percent.
    After considering the analysis and weighing the benefits and 
burdens, DOE has determined that the recommended standards are in 
accordance with 42 U.S.C. 6313(a)(6)(B), which contains provisions for 
adopting a uniform national standard more stringent than the amended 
ASHRAE/IES Standard 90.1 for the equipment considered in this document. 
Specifically, the Secretary has determined, supported by clear and 
convincing evidence, that such adoption would result in significant 
additional conservation of energy and is technologically feasible and 
economically justified. In determining whether the recommended 
standards are economically justified, the

[[Page 2523]]

Secretary has determined that the benefits of the recommended standards 
exceed the burdens. Namely, the Secretary has concluded that under the 
recommended standards for CWAFs, the benefits of energy savings, 
positive NPV of consumer benefits, emission reductions, the estimated 
monetary value of the emissions reductions, and positive average LCC 
savings would outweigh the negative impacts on some consumers and on 
manufacturers, including the conversion costs that could result in a 
reduction in INPV for manufacturers.
    Under the authority provided by 42 U.S.C. 6295(p)(4) and 
6316(b)(1), DOE is issuing this direct final rule that establishes 
amended energy conservation standards for CWAFs at TSL 2. The amended 
energy conservation standards for CWAFs, which are expressed in terms 
of TE, are shown in Table V-47.

  Table V-47--Amended Energy Conservation Standards for Commercial Warm
                              Air Furnaces
------------------------------------------------------------------------
                                    Input capacity (Btu/      Thermal
          Equipment type                     h)           efficiency (%)
------------------------------------------------------------------------
Gas-fired CWAFs...................  >=225,000 Btu/h.....              81
Oil-fired CWAFs...................  >=225,000 Btu/h.....              82
------------------------------------------------------------------------

    The benefits and costs of the adopted standards can also be 
expressed in terms of annualized values. The annualized net benefit is 
the sum of: (1) The annualized national economic value (expressed in 
2014$) of the benefits from operating equipment that meet the adopted 
standards (consisting primarily of operating cost savings from using 
less energy, minus increases in equipment purchase costs), and (2) the 
annualized monetary value of the benefits of CO2 and 
NOX emission reductions.
    Table V-48 shows the annualized values for CWAFs under TSL 2, 
expressed in 2014$. The results under the primary estimate are as 
follows. Using a 7-percent discount rate for benefits and costs other 
than CO2 reductions, (for which DOE used a 3-percent 
discount rate along with the average SCC series corresponding to a 
value of $40.0/ton in 2015 (2014$)), the estimated cost of the adopted 
standards for CWAFs is $4.31 million per year in increased equipment 
costs, while the estimated benefits are $49 million per year in reduced 
equipment operating costs, $24 million per year in CO2 
reductions, and $4.91 million per year in reduced NOX 
emissions. In this case, the net benefit amounts to $74 million per 
year.
    Using a 3-percent discount rate for all benefits and costs and the 
average SCC series corresponding to a value of $40.0/ton in 2015 (in 
2014$), the estimated cost of the adopted standards for CWAFs is $4.38 
million per year in increased equipment costs, while the estimated 
benefits are $71 million per year in reduced operating costs, $24 
million per year in CO2 reductions, and $7.59 million per 
year in reduced NOX emissions. In this case, the net benefit 
amounts to $99 million per year.

     Table V-48--Annualized Benefits and Costs of Adopted Standards (TSL 2) for Commercial Warm Air Furnaces
----------------------------------------------------------------------------------------------------------------
                                                                         (Million 2014$/year)
                                                    ------------------------------------------------------------
                                   Discount rate %                         Low net benefits    High net benefits
                                                      Primary estimate*        estimate*           estimate*
----------------------------------------------------------------------------------------------------------------
                                                    Benefits
----------------------------------------------------------------------------------------------------------------
    Consumer Operating Cost      7.................  49.................  48................  54
     Savings.
                                 3.................  71.................  70................  81
    CO2 Reduction Value ($12.2/  5.................  6.99...............  7.08..............  7.37
     t case)**.
    CO2 Reduction Value ($40.0/  3.................  24.................  25................  26
     t case)**.
    CO2 Reduction Value ($62.3/  2.5...............  36.................  36................  38
     t case)**.
    CO2 Reduction Value ($117/t  3.................  74.................  75................  79
     case)**.
    NOX Reduction Value          7.................  4.91...............  4.98..............  11.44
     [dagger].
                                 3.................  7.59...............  7.70..............  17.61
    Total Benefits               7 plus CO2 range..  61 to 128..........  60 to 128.........  73 to 144
     [dagger][dagger].
                                 7.................  78.................  78................  91
                                 3 plus CO2 range..  86 to 153..........  84 to 152.........  106 to 177
                                 3.................  103................  102...............  124
----------------------------------------------------------------------------------------------------------------
                                                      Costs
----------------------------------------------------------------------------------------------------------------
    Consumer Incremental         7.................  4.31...............  5.04..............  3.92
     Installed Costs.
                                 3.................  4.38...............  5.22..............  3.94
----------------------------------------------------------------------------------------------------------------
                                                  Net Benefits
----------------------------------------------------------------------------------------------------------------
    Total [dagger][dagger].....  7 plus CO2 range..  57 to 124..........  55 to 123.........  69 to 140
                                 7.................  74.................  72................  87
                                 3 plus CO2 range..  82 to 149..........  79 to 147.........  102 to 173

[[Page 2524]]

 
                                 3.................  99.................  97................  120
----------------------------------------------------------------------------------------------------------------
* This table presents the annualized costs and benefits associated with CWAFs shipped in 2023-2048. These
  results include benefits to consumers which accrue after 2048 from the CWAFs purchased from 2023-2048. The
  results account for the incremental variable and fixed costs incurred by manufacturers due to the standard,
  some of which may be incurred in preparation for the rule. The Primary, Low Benefits, and High Benefits
  Estimates utilize projections of energy prices from the AEO 2015 Reference case, Low Economic Growth case, and
  High Economic Growth case, respectively. In addition, incremental equipment costs reflect a medium decline
  rate in the Primary Estimate, a low decline rate in the Low Benefits Estimate, and a high decline rate in the
  High Benefits Estimate. The methods used to derive projected price trends are explained in section IV.H.3.
** The CO2 values represent global monetized values of the SCC, in 2014$, in 2015 under several scenarios of the
  updated SCC values. The first three cases use the averages of SCC distributions calculated using 5%, 3%, and
  2.5% discount rates, respectively. The fourth case represents the 95th percentile of the SCC distribution
  calculated using a 3% discount rate. The SCC time series incorporate an escalation factor.
[dagger] The $/ton values used for NOX are described in section IV.L.2. DOE estimated the monetized value of NOX
  emissions reductions using benefit per ton estimates from the Regulatory Impact Analysis for the Proposed
  Carbon Pollution Guidelines for Existing Power Plants and Emission Standards for Modified and Reconstructed
  Power Plants, published in June 2014 by EPA's Office of Air Quality Planning and Standards. (Available at:
  http://www3.epa.gov/ttnecas1/regdata/RIAs/111dproposalRIAfinal0602.pdf.) For DOE's Primary Estimate and Low
  Net Benefits Estimate, the agency is primarily using a national benefit-per-ton estimate for particulate
  matter emitted from the Electric Generating Unit sector based on an estimate of premature mortality derived
  from the ACS study (Krewski et al., 2009). For DOE's High Net Benefits Estimate, the benefit-per-ton estimates
  were based on the Six Cities study (Lepuele et al., 2011), which are nearly two-and-a-half times larger than
  those from the ACS study. Because of the sensitivity of the benefit-per-ton estimate to the geographical
  considerations of sources and receptors of emission, DOE intends to investigate refinements to the agency's
  current approach of one national estimate by assessing the regional approach taken by EPA's Regulatory Impact
  Analysis for the Clean Power Plan Final Rule.
[dagger][dagger] Total Benefits for both the 3% and 7% cases are derived using the series corresponding to the
  average SCC with 3-percent discount rate ($40.0/t case. In the rows labeled ``7% plus CO2 range'' and ``3%
  plus CO2 range,'' the operating cost and NOX benefits are calculated using the labeled discount rate, and
  those values are added to the full range of CO2 values.

VI. Procedural Issues and Regulatory Review

A. Review Under Executive Orders 12866 and 13563

    Section 1(b)(1) of Executive Order 12866, ``Regulatory Planning and 
Review,'' 58 FR 51735 (Oct. 4, 1993), requires each agency to identify 
the problem that it intends to address, including, where applicable, 
the failures of private markets or public institutions that warrant new 
agency action, as well as to assess the significance of that problem. 
The problems that the adopted standards for CUACs/CUHPs and CWAFs are 
intended to address are as follows:
    (1) Insufficient information and the high costs of gathering and 
analyzing relevant information lead 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 to operate that equipment.
    (3) There are external benefits resulting from the improved energy 
efficiency of CWAFs 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.
    The Administrator of the Office of Information and Regulatory 
Affairs (``OIRA'') in the OMB has determined that the proposed 
regulatory action is a significant regulatory action under section 
(3)(f) of Executive Order 12866. Accordingly, pursuant to section 
6(a)(3)(B) of the Order, DOE has provided to OIRA: (i) The text of the 
draft regulatory action, together with a reasonably detailed 
description of the need for the regulatory action and an explanation of 
how the regulatory action will meet that need; and (ii) An assessment 
of the potential costs and benefits of the regulatory action, including 
an explanation of the manner in which the regulatory action is 
consistent with a statutory mandate. DOE has included these documents 
in the rulemaking record.
    In addition, the Administrator of OIRA has determined that the 
proposed regulatory action is an ``economically'' significant 
regulatory action under section (3)(f)(1) of Executive Order 12866. 
Accordingly, pursuant to section 6(a)(3)(C) of the Order, DOE has 
provided to OIRA an assessment, including the underlying analysis, of 
benefits and costs anticipated from the regulatory action, together 
with, to the extent feasible, a quantification of those costs; and an 
assessment, including the underlying analysis, of costs and benefits of 
potentially effective and reasonably feasible alternatives to the 
planned regulation, and an explanation why the planned regulatory 
action is preferable to the identified potential alternatives. These 
assessments can be found in the technical support documents for this 
rulemaking.
    DOE has also reviewed this regulation pursuant to Executive Order 
13563, issued on January 18, 2011. (76 FR 3281, Jan. 21, 2011) EO 13563 
is supplemental to and explicitly reaffirms the principles, structures, 
and definitions governing regulatory review established in Executive 
Order 12866. To the extent permitted by law, agencies are required by 
Executive Order 13563 to: (1) Propose or adopt a regulation only upon a 
reasoned determination that its benefits justify its costs (recognizing 
that some benefits and costs are difficult to quantify); (2) tailor 
regulations to impose the least burden on society, consistent with 
obtaining regulatory objectives, taking into account, among other 
things, and to the extent practicable, the costs of cumulative 
regulations; (3) select, in choosing among alternative regulatory 
approaches, those approaches that maximize net benefits (including

[[Page 2525]]

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 direct 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 final regulatory flexibility analysis (``FRFA'') for 
any rule that by law must be proposed for public comment, unless the 
agency certifies that the rule, if promulgated, will not have a 
significant economic impact on a substantial number of small entities. 
As required by Executive Order 13272, ``Proper Consideration of Small 
Entities in Agency Rulemaking,'' 67 FR 53461 (August 16, 2002), DOE 
published procedures and policies on February 19, 2003, to ensure that 
the potential impacts of its rules on small entities are properly 
considered during the rulemaking process. 68 FR 7990. DOE has made its 
procedures and policies available on the Office of the General 
Counsel's Web site (http://energy.gov/gc/office-general-counsel). DOE 
has prepared the following FRFA for the products that are the subject 
of this rulemaking.
    For manufacturers of CUAC/CUHP and CWAF equipment, 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/category/navigation-structure/contracting/contracting-officials/small-business-size-standards. Manufacturing of CUACs/CUHPs and CWAFs is 
classified under NAICS 333415, ``Air-Conditioning and Warm Air Heating 
Equipment and Commercial and Industrial Refrigeration Equipment 
Manufacturing.'' The SBA sets a threshold of 750 employees or less for 
an entity to be considered as a small business for this category.
1. Commercial Unitary Air Conditioners and Heat Pumps
a. Description of Estimated Number of Small Entities Regulated
    To better assess the potential impacts of this rulemaking on small 
entities, DOE conducted a focused inquiry of the companies that could 
be small business manufacturers of equipment covered by this 
rulemaking. DOE conducted a market survey using available public 
information to identify potential small manufacturers. DOE's research 
involved industry trade association membership directories (including 
AHRI \8\), individual company Web sites, and market research tools 
(e.g., Hoovers reports \9\) to create a list of companies that 
manufacture or sell CUAC/CUHP equipment covered by this rulemaking. DOE 
also asked industry representatives if they were aware of any other 
small manufacturers during manufacturer interviews. DOE reviewed 
publicly-available data and contacted companies on its list, 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 covered by this rulemaking, do not meet the definition 
of a ``small business,'' or are foreign-owned and operated.
---------------------------------------------------------------------------

    \8\ Based on listings in the AHRI directory accessed on August 
2, 2013 (Available at: https://www.ahridirectory.org/ahridirectory/pages/home.aspx).
    \9\ Hoovers [verbar] Company Information [verbar] Industry 
Information [verbar] Lists, D&B (2013) (Available at: http://www.hoovers.com/) (Last accessed April 3, 2013).
---------------------------------------------------------------------------

    DOE identified 12 CUAC/CUHP manufacturers who sell covered 
equipment in the U.S market. DOE determined that nine of these 
manufacturers were large and three met the SBA's ``small business'' 
definition.
b. Description and Estimate of Compliance Requirements
    The first small manufacturer specialized in double-duct products. A 
review of its product literature and Web site showed that its only 
covered equipment were double-duct systems. Since this direct final 
rule does not amend the standards for double-duct equipment, this rule 
will not have an impact on this small manufacturer.
    The second small manufacturer did not own any production assets for 
the covered equipment. The company outsourced the design and 
manufacture to a supplier. Thus, the small business would not face any 
capital conversion costs and very limited equipment conversion costs.
    The third small manufacturer produced covered equipment that are 
subject to this direct final rule. Before issuing this final rule, DOE 
attempted to contact this small business manufacturer. However, the 
business chose not to participate in an MIA interview. Based on DOE's 
research, this third small manufacturer has three platforms with 11 
models covered by the CUAC/CUHP rulemaking. However, it is difficult 
for DOE to discern the potential conversion costs required to comply 
with the direct final rule's standard since no IEER ratings were 
provided for these units.
    Based on literature reviews, DOE believes this third small 
manufacturer specializes in custom and semi-custom products. This would 
suggest the manufacturer has less hard-tooling than their large 
competitors and their capital requirements would vary dramatically from 
the industy average. The company's capital conversion costs would 
likely be smaller in absolute dollars relative to large competitors. 
However, the small manufacturer would likely need to recover those 
costs over a lower volume of shipments.
2. Commercial Warm Air Furnaces
a. Description of Estimated Number of Small Entities Regulated
    To better assess the potential impacts of this rulemaking on small 
entities, DOE conducted a focused inquiry of the companies that could 
be small business manufacturers of equipment covered by this 
rulemaking. DOE conducted a market survey using available public 
information to identify potential small manufacturers. DOE's research 
involved industry trade association membership directories (including 
AHRI \10\),

[[Page 2526]]

individual company Web sites, and market research tools (e.g., Hoovers 
reports \11\) to create a list of companies that manufacture or sell 
CWAF equipment covered by this rulemaking. DOE also asked industry 
representatives if they were aware of any other small manufacturers 
during manufacturer interviews. DOE reviewed publicly-available data 
and contacted companies on its list, 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 covered by this 
rulemaking, do not meet the definition of a ``small business,'' or are 
foreign-owned and operated.
---------------------------------------------------------------------------

    \10\ Based on listings in the AHRI directory accessed on August 
2, 2013 (Available at: https://www.ahridirectory.org/ahridirectory/pages/home.aspx).
    \11\ Hoovers [verbar] Company Information [verbar] Industry 
Information [verbar] Lists, D&B (2013) (Available at: http://www.hoovers.com/) (Last accessed April 3, 2013).
---------------------------------------------------------------------------

    DOE identified 14 manufacturers of CWAFs sold in the U.S. market. 
DOE determined that eleven manufacturers were large and three 
manufacturers met the SBA's definition of a ``small business''.
    Before issuing this document, DOE attempted to contact each small 
business CWAF equipment manufacturer it had identified. None of them, 
however, consented to formal interviews. DOE also attempted to obtain 
information about small business impacts while interviewing large 
manufacturers.
    DOE identified one small gas-fired CWAF manufacturer and two small 
oil-fired CWAF manufacturers. The gas-fired CWAF manufacturer accounts 
for 17 of the 250 gas-fired CWAFs listings in the AHRI Directory,\12\ 
or approximately 7 percent of the listings. This small manufacturer 
offers product exclusively at 80-percent TE, and at the recommended 
TSL, would need to update all equipment offerings to meet a standard of 
82-percent TE. However, this position is not unique. There are also 
some large gas-fired CWAF manufacturers that would need to update all 
equipment offerings to meet the direct final rule's standard. From a 
design perspective, DOE believes that most gas-fired equipment lines on 
the market today can be upgraded to achieve the standard with increases 
in heat exchange surface area.
---------------------------------------------------------------------------

    \12\ The AHRI directory lists approximately 1,000 units. Many of 
these units are from the same model line, share the same chassis, 
and have the same level of performance, but have different heating 
capacities or installed product options. DOE consolidated the AHRI 
listing of CWAFs such that all units from the same model line and 
chassis are listed together as a single unit.
---------------------------------------------------------------------------

    With respect to oil-fired small business CWAF manufacturers, the 
first of these entities DOE examined accounts for 11 of the 16 oil-
fired CWAFs listings in the AHRI Directory. This manufacturer produces 
some of the most efficient products on the market at 92-percent TE. 
Similarly, the second small oil-fired manufacturer produces the most 
efficient non-condensing equipment on the market at 84-percent TE. 
These two small oil-fired manufacturers would unlikely be at a 
technological disadvantage relative to its competitors at the 
recommended TSL. It is possible the small manufacturers would have a 
competitive advantage given its technological lead and experience in 
the niche market of high-efficiency commercial oil-fired warm air 
furnaces.
    Since CWAFs have relatively low sales volumes, and because the 
industry as a whole generally produces equipment at the baseline, DOE 
believes the average impacts will be similar for large and small 
business manufacturers. DOE was unable to identify any publicly 
available information that would lead to a conclusion that small 
manufacturers would be differentially impacted by this direct final 
rule. Therefore, DOE assumed that small business manufacturers would 
face similar conversion costs as larger businesses. However, the small 
CWAF manufacturers may need to allocate a greater portion of their 
technical resources or may need to access outside capital to support 
the transition to the direct final rule's 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 the rule being considered today.
4. Significant Alternatives to the Rule
    The discussion above analyzes impacts on small businesses that 
would result from the direct final rule. In addition to the other TSLs 
being considered, the direct final rule TSDs analyzing the potential 
impacts from standards for CUACs/CUHPs and CWAFs include an analysis of 
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 are expected to result from 
adoption of the standards (0.2 percent to 2.4 percent of the energy 
savings from the adopted standards for CUACs/CUHPs, and less than 0.1 
percent to 46 percent for CWAFs).\13\ Accordingly, DOE is declining to 
adopt any of these alternatives and is adopting the standards set forth 
in this document. (See chapter 17 of the direct final rule TSDs for 
further detail on the policy alternatives DOE considered.)
---------------------------------------------------------------------------

    \13\ Bulk government purchase have a small impact on CWAF energy 
use in the nation, while commercial consumer rebates could 
significantly impact energy use.
---------------------------------------------------------------------------

    Further, 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, authorizes 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. See 10 
CFR part 430, subpart E, and part 1003 for additional details.

C. Review Under the Paperwork Reduction Act

    Manufacturers of CUACs/CUHPs and CWAFs 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 CUACs/CUHPs and 
CWAFs, 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 CUACs/CUHPs and CWAFs. 76 FR 12422 (March 7, 
2011); 80 FR 5099 (Jan. 30, 2015). The collection-of-information 
requirement for 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. The public

[[Page 2527]]

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 of 1969 
(``NEPA''), DOE has determined that the rule fits within the category 
of actions included in Categorical Exclusion (``CX'') B5.1 and 
otherwise meets the requirements for application of a CX. See 10 CFR 
part 1021, app. B, B5.1(b); Sec.  1021.410(b) and app. 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://energy.gov/nepa/categorical-exclusion-cx-determinations-cx.

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 
direct final 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 subject to this direct 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 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 direct 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. Pub. L. 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 direct final rule may require 
expenditures of $100 million or more in any one year on the private 
sector. Such expenditures may include: (1) Investment in research and 
development and in capital expenditures by CUAC/CUHP and CWAF 
manufacturers in the years between the direct final rule and the 
compliance date for the new standards, and (2) incremental additional 
expenditures by consumers to purchase higher-efficiency CUACs/CUHPs and 
CWAFs.
    Section 202 of UMRA authorizes a Federal agency to respond to the 
content requirements of UMRA in any other statement or analysis that 
accompanies the direct final rule. (2 U.S.C. 1532(c)) The content 
requirements of section 202(b) of UMRA relevant to a private sector 
mandate substantially overlap the economic analysis requirements that 
apply under section 325(o) of EPCA and Executive Order 12866. The 
SUPPLEMENTARY INFORMATION section of this document and the ``Regulatory 
Impact Analysis'' section of the TSD for this direct final rule respond 
to those requirements.
    Under section 205 of UMRA, the Department is obligated to identify 
and consider a reasonable number of regulatory alternatives before 
promulgating a rule for which a written statement under section 202 is 
required. (2 U.S.C. 1535(a)) DOE is required to select from those 
alternatives the most cost-effective and least burdensome

[[Page 2528]]

alternative that achieves the objectives of the rule unless DOE 
publishes an explanation for doing otherwise, or the selection of such 
an alternative is inconsistent with law. This direct final rule would 
establish amended energy conservation standards for CUACs/CUHPs and 
CWAFs that are designed to achieve the maximum improvement in energy 
efficiency that DOE has determined to be both technologically feasible 
and economically justified. A full discussion of the alternatives 
considered by DOE is presented in chapter 17 of the CUACs/CUHPs and 
CWAFs TSDs for this direct final rule.

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

    Section 654 of the Treasury and General Government Appropriations 
Act, 1999 (Pub. L. 105-277) requires Federal agencies to issue a Family 
Policymaking Assessment for any rule that may affect family well-being. 
This direct final 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 direct final rule 
would not result in any takings that might require compensation under 
the Fifth Amendment to the U.S. Constitution.

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

    Section 515 of the Treasury and General Government Appropriations 
Act, 2001 (44 U.S.C. 3516, note) provides for Federal agencies to 
review most disseminations of information to the public under 
information quality guidelines established by each agency pursuant to 
general guidelines issued by OMB. OMB's guidelines were published at 67 
FR 8452 (Feb. 22, 2002), and DOE's guidelines were published at 67 FR 
62446 (Oct. 7, 2002). DOE has reviewed this direct 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 CUACs/CUHPs and CWAFs, 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 direct final rule.

L. Review Under the Information Quality Bulletin for Peer Review

    On December 16, 2004, OMB, in consultation with the Office of 
Science and Technology Policy (OSTP), issued its Final Information 
Quality Bulletin for Peer Review (the Bulletin). 70 FR 2664 (Jan. 14, 
2005). The Bulletin establishes that certain scientific information 
shall be peer reviewed by qualified specialists before it is 
disseminated by the Federal Government, including influential 
scientific information related to agency regulatory actions. The 
purpose of the bulletin is to enhance the quality and credibility of 
the Government's scientific information. Under the Bulletin, the energy 
conservation standards rulemaking analyses are ``influential scientific 
information,'' which the Bulletin defines as ``scientific information 
the agency reasonably can determine will have, or does have, a clear 
and substantial impact on important public policies or private sector 
decisions.'' Id. at FR 2667.
    In response to OMB's Bulletin, DOE conducted formal in-progress 
peer reviews of the energy conservation standards development process 
and analyses and has prepared a Peer Review Report pertaining to the 
energy conservation standards rulemaking analyses. Generation of this 
report involved a rigorous, formal, and documented evaluation using 
objective criteria and qualified and independent reviewers to make a 
judgment as to the technical/scientific/business merit, the actual or 
anticipated results, and the productivity and management effectiveness 
of programs and/or projects. The ``Energy Conservation Standards 
Rulemaking Peer Review Report'' dated February 2007 has been 
disseminated and is available at the following Web site: 
www1.eere.energy.gov/buildings/appliance_standards/peer_review.html.

M. Congressional Notification

    As required by 5 U.S.C. 801, DOE will report to Congress on the 
promulgation of this direct final rule prior to its effective date. The 
report will state that it has been determined that the rule is a 
``major rule'' as defined by 5 U.S.C. 804(2). DOE also will submit the 
supporting analyses to the Comproller General in the U.S. Government 
Accountability Office (``GAO'') and make them available to each House 
of Congress.

VII. Approval of the Office of the Secretary

    The Secretary of Energy has approved publication of this direct 
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 December 17, 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. Section 431.77 is revised to read as follows:

[[Page 2529]]

Sec.  431.77  Energy conservation standards and their effective dates.

    (a) Gas-fired commercial warm air furnaces. Each gas-fired 
commercial warm air furnace must meet the following energy efficiency 
standard levels:
    (1) For gas-fired commercial warm air furnaces manufactured 
starting on January 1, 1994, until January 1, 2023, the TE at the 
maximum rated capacity (rated maximum input) must be not less than 80 
percent; and
    (2) For gas-fired commercial warm air furnaces manufactured 
starting on January 1, 2023, the TE at the maximum rated capacity 
(rated maximum input) must be not less than 81 percent.
    (b) Oil-fired commercial warm air furnaces. Each oil-fired 
commercial warm air furnace must meet the following energy efficiency 
standard levels:
    (1) For oil-fired commercial warm air furnaces manufactured 
starting on January 1, 1994, until January 1, 2023, the TE at the 
maximum rated capacity (rated maximum input) must be not less than 81 
percent; and
    (2) For oil-fired commercial warm air furnaces manufactured 
starting on January 1, 2023, the TE at the maximum rated capacity 
(rated maximum input) must be not less than 82 percent.

0
3. Section 431.92 is amended by adding the definition of ``Double-duct 
air conditioner or heat pump means air-cooled commercial package air 
conditioning and heating equipment'' in alphabetical order to read as 
follows:


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

* * * * *
    Double-duct air conditioner or heat pump means air-cooled 
commercial package air conditioning and heating equipment that--
    (1) Is either a horizontal single package or split-system unit; or 
a vertical unit that consists of two components that may be shipped or 
installed either connected or split;
    (2) Is intended for indoor installation with ducting of outdoor air 
from the building exterior to and from the unit, as evidenced by the 
unit and/or all of its components being non-weatherized, including the 
absence of any marking (or listing) indicating compliance with UL 1995, 
``Heating and Cooling Equipment,'' or any other equivalent requirements 
for outdoor use;
    (3)(i) If it is a horizontal unit, a complete unit has a maximum 
height of 35 inches; (ii) If it is a vertical unit, a complete unit has 
a maximum depth of 35 inches; and
    (4) Has a rated cooling capacity greater than or equal to 65,000 
Btu/h and up to 300,000 Btu/h.
* * * * *

0
4. Section 431.97 is amended by:
0
a. Redesignating Tables 5 through 11 as Tables 7 through 13;
0
b. Revising paragraph (b) and the introductory text of paragraph (c);
0
c. In paragraph (d)(1) introductory text, removing ``Table 7'' and 
adding in its place ``Table 9'';
0
d. In paragraph (d)(2) introductory text, removing ``Table 8'' and 
adding in its place ``Table 10''; and
0
e. In paragraph (d)(3) introductory text, removing ``Table 9'' and 
adding in its place ``Table 11''.
    The revisions read as follows:


Sec.  431.97  Energy efficiency standards and their compliance dates.

* * * * *
    (b) Each commercial air conditioner or heat pump (not including 
single package vertical air conditioners and single package vertical 
heat pumps, packaged terminal air conditioners and packaged terminal 
heat pumps, computer room air conditioners, and variable refrigerant 
flow systems) manufactured starting on the compliance date listed in 
the corresponding table must meet the applicable minimum energy 
efficiency standard level(s) set forth in Tables 1 through 6 of this 
section.

                        Table 1 to Sec.   431.97--Minimum Cooling Efficiency Standards for Air Conditioning and Heating Equipment
[Not including single package vertical air conditioners and single package vertical heat pumps, packaged terminal air conditioners and packaged terminal
                 heat pumps, computer room air conditioners, and variable refrigerant flow multi-split air conditioners and heat pumps]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                             Compliance date: Equipment
         Equipment type           Cooling capacity        Subcategory             Heating type          Efficiency level    manufactured starting on . .
                                                                                                                                          .
--------------------------------------------------------------------------------------------------------------------------------------------------------
Small Commercial Package Air     <65,000 Btu/h.....  AC                     All....................  SEER = 13............  June 16, 2008.
 Conditioning and Heating
 Equipment (Air-Cooled, 3-
 Phase, Split-System).
                                                     HP                     All....................  SEER = 13............  June 16, 2008.\1\
Small Commercial Package Air     <65,000 Btu/h.....  AC                     All....................  SEER = 13............  June 16, 2008.\1\
 Conditioning and Heating
 Equipment (Air-Cooled, 3-
 Phase, Single-Package).
                                                     HP                     All....................  SEER = 13............  June 16, 2008.\1\
Small Commercial Package Air     >=65,000 Btu/h and  AC                     No Heating or Electric   EER = 11.2...........  January 1, 2010.\2\
 Conditioning and Heating         <135,000 Btu/h.                            Resistance Heating.
 Equipment (Air-Cooled).
                                                                            All Other Types of       EER = 11.0...........  January 1, 2010.\2\
                                                                             Heating.
                                                     HP                     No Heating or Electric   EER = 11.0...........  January 1, 2010.\2\
                                                                             Resistance Heating.
                                                                            All Other Types of       EER = 10.8...........  January 1, 2010.\2\
                                                                             Heating.
Large Commercial Package Air     >=135,000 Btu/h     AC                     No Heating or Electric   EER = 11.0...........  January 1, 2010.\2\
 Conditioning and Heating         and <240,000 Btu/                          Resistance Heating.
 Equipment (Air-Cooled).          h.
                                                                            All Other Types of       EER = 10.8...........  January 1, 2010.\2\
                                                                             Heating.
                                                     HP                     No Heating or Electric   EER = 10.6...........  January 1, 2010.\2\
                                                                             Resistance Heating.
                                                                            All Other Types of       EER = 10.4...........  January 1, 2010.\2\
                                                                             Heating.

[[Page 2530]]

 
Very Large Commercial Package    >=240,000 Btu/h     AC                     No Heating or Electric   EER = 10.0...........  January 1, 2010.\2\
 Air Conditioning and Heating     and <760,000 Btu/                          Resistance Heating.
 Equipment (Air-Cooled).          h.
                                                                            All Other Types of       EER = 9.8............  January 1, 2010.\2\
                                                                             Heating.
                                                     HP                     No Heating or Electric   EER = 9.5............  January 1, 2010.\2\
                                                                             Resistance Heating.
                                                                            All Other Types of       EER = 9.3............  January 1, 2010.\2\
                                                                             Heating.
Small Commercial Package Air     <65,000 Btu/h.....  AC                     All....................  EER = 12.1...........  October 29, 2003.
 Conditioning and Heating
 Equipment (Water-Cooled).
                                 >=65,000 Btu/h and  AC                     No Heating or Electric   EER = 12.1...........  June 1, 2013.
                                  <135,000 Btu/h.                            Resistance Heating.
                                                                            All Other Types of       EER = 11.9...........  June 1, 2013.
                                                                             Heating.
Large Commercial Package Air-    >=135,000 Btu/h     AC                     No Heating or Electric   EER = 12.5...........  June 1, 2014.
 Conditioning and Heating         and <240,000 Btu/                          Resistance Heating.
 Equipment (Water-Cooled).        h.
                                                                            All Other Types of       EER = 12.3...........  June 1, 2014.
                                                                             Heating.
Very Large Commercial Package    >=240,000 Btu/h     AC                     No Heating or Electric   EER = 12.4...........  June 1, 2014.
 Air-Conditioning and Heating     and <760,000 Btu/                          Resistance Heating.
 Equipment (Water-Cooled).        h.
                                                                            All Other Types of       EER = 12.2...........  June 1, 2014.
                                                                             Heating.
Small Commercial Package Air-    <65,000 Btu/h.....  AC                     All....................  EER = 12.1...........  October 29, 2003.
 Conditioning and Heating
 Equipment (Evaporatively-
 Cooled).
                                 >=65,000 Btu/h and  AC                     No Heating or Electric   EER = 12.1...........  June 1, 2013.
                                  <135,000 Btu/h.                            Resistance Heating.
                                                                            All Other Types of       EER = 11.9...........  June 1, 2013.
                                                                             Heating.
Large Commercial Package Air-    >=135,000 Btu/h     AC                     No Heating or Electric   EER = 12.0...........  June 1, 2014.
 Conditioning and Heating         and <240,000 Btu/                          Resistance Heating.
 Equipment (Evaporatively-        h.
 Cooled).
                                                                            All Other Types of       EER = 11.8...........  June 1, 2014.
                                                                             Heating.
Very Large Commercial Package    >=240,000 Btu/h     AC                     No Heating or Electric   EER = 11.9...........  June 1, 2014.
 Air Conditioning and Heating     and <760,000 Btu/                          Resistance Heating.
 Equipment (Evaporatively-        h.
 Cooled).
                                                                            All Other Types of       EER = 11.7...........  June 1, 2014.
                                                                             Heating.
Small Commercial Package Air-    <17,000 Btu/h.....  HP                     All....................  EER = 11.2...........  October 29, 2003.\3\
 Conditioning and Heating
 Equipment (Water-Source: Water-
 to-Air, Water-Loop).
                                 >=17,000 Btu/h and  HP                     All....................  EER = 12.0...........  October 29, 2003.\3\
                                  <65,000 Btu/h.
                                 >=65,000 Btu/h and  HP                     All....................  EER = 12.0...........  October 29, 2003.\3\
                                  <135,000 Btu/h.
--------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ And manufactured before January 1, 2017. See Table 3 of this section for updated efficiency standards.
\2\ And manufactured before January 1, 2018. See Table 3 of this section for updated efficiency standards.
\3\ And manufactured before October 9, 2015. See Table 3 of this section for updated efficiency standards.


[[Page 2531]]


 Table 2 to Sec.   431.97--Minimum Heating Efficiency Standards for Air Conditioning and Heating Equipment [Heat
                                                     Pumps]
    [Not including single package vertical air conditioners and single package vertical heat pumps, packaged
terminal air conditioners and packaged terminal heat pumps, computer room air conditioners, variable refrigerant
flow multi-split air conditioners and heat pumps, and double-duct air-cooled commercial package air conditioning
                                             and heating equipment]
----------------------------------------------------------------------------------------------------------------
                                                                                    Compliance date: Equipment
          Equipment type               Cooling capacity      Efficiency level     manufactured starting on . . .
----------------------------------------------------------------------------------------------------------------
Small Commercial Package Air        <65,000 Btu/h........  HSPF = 7.7..........  June 16, 2008.\1\
 Conditioning and Heating
 Equipment (Air-Cooled, 3-Phase,
 Split-System).
Small Commercial Pacakage Air-      <65,000 Btu/h........  HSPF = 7.7..........  June 16, 2008.\1\
 Conditioning and Heating
 Equipment (Air-Cooled, 3-Phase,
 Single-Package).
Small Commercial Package Air        >=65,000 Btu/h and     COP = 3.3...........  January 1, 2010.\2\
 Conditioning and Heating            <135,000 Btu/h.
 Equipment (Air-Cooled).
Large Commercial Packaged Air       >=135,000 Btu/h and    COP = 3.2...........  January 1, 2010.\2\
 Conditioning and Heating            <240,000 Btu/h.
 Equipment (Air-Cooled).
Very Large Commercial Packaged Air  >=240,000 Btu/h and    COP = 3.2...........  January 1, 2010.\2\
 Conditioning and Heating            <760,000 Btu/h.
 Equipment (Air-Cooled).
Small Commercial Packaged Air       <135,000 Btu/h.......  COP = 4.2...........  October 29, 2003.
 Conditioning and Heating
 Equipment (Water-Source: Water-to-
 Air, Water-Loop).
----------------------------------------------------------------------------------------------------------------
\1\ And manufactured before January 1, 2017. See Table 4 of this section for updated heating efficiency
  standards.
\2\ And manufactured before January 1, 2018. See Table 4 of this section for updated heating efficiency
  standards.


                Table 3 to Sec.   431.97--Updates to the Minimum Cooling Efficiency Standards for Air Conditioning and Heating Equipment
[Not including single package vertical air conditioners and single package vertical heat pumps, packaged terminal air conditioners and packaged terminal
heat pumps, computer room air conditioners, variable refrigerant flow multi-split air conditioners and heat pumps, and double-duct air-cooled commercial
                                                     package air conditioning and heating equipment]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                             Compliance date: Equipment
         Equipment type           Cooling capacity        Subcategory             Heating type          Efficiency level    manufactured starting on . .
                                                                                                                                          .
--------------------------------------------------------------------------------------------------------------------------------------------------------
Small Commercial Packaged Air    >=65,000 Btu/h and  AC...................  Electric Resistance      IEER = 12.9..........  January 1, 2018.\1\
 Conditioning and Heating         <135,000 Btu/h.                            Heating or No Heating.  IEER = 14.8..........  January 1, 2023.
 Equipment (Air-Cooled).
                                                                            All Other Types of       IEER = 12.7..........  January 1, 2018.\1\
                                                                             Heating.                IEER = 14.6..........  January 1, 2023.
                                                     HP...................  Electric Resistance      IEER = 12.2..........  January 1, 2018.\1\
                                                                             Heating or No Heating.  IEER = 14.1..........  January 1, 2023.
                                                                            All Other Types of       IEER = 12.0..........  January 1, 2018.\1\
                                                                             Heating.                IEER = 13.9..........  January 1, 2023.
Large Commercial Packaged Air    >=135,000 Btu/h     AC...................  Electric Resistance      IEER = 12.4..........  January 1, 2018.\1\
 Conditioning and Heating         and <240,000 Btu/                          Heating or No Heating.  IEER = 14.2..........  January 1, 2023.
 Equipment (Air-Cooled).          h.
                                                     .....................  All Other Types of       IEER = 12.2..........  January 1, 2018.\1\
                                                                             Heating.                IEER = 14.0..........  January 1, 2023.
                                                     HP...................  Electric Resistance      IEER = 11.6..........  January 1, 2018.\1\
                                                                             Heating or No Heating.  IEER = 13.5..........  January 1, 2023.
                                                                            All Other Types of       IEER = 11.4..........  January 1, 2018.\1\
                                                                             Heating.                IEER = 13.3..........  January 1, 2023.
Very Large Commercial Packaged   >=240,000 Btu/h     AC...................  Electric Resistance      IEER = 11.6..........  January 1, 2018.\1\
 Air Conditioning and Heating     and <760,000 Btu/                          Heating or No Heating.  IEER = 13.2..........  January 1, 2023.
 Equipment (Air-Cooled).          h.
                                                                            All Other Types of       IEER = 11.4..........  January 1, 2018.\1\
                                                                             Heating.                IEER = 13.0..........  January 1, 2023.
                                                     HP...................  Electric Resistance      IEER = 10.6..........  January 1, 2018.\1\
                                                                             Heating or No Heating.  IEER = 12.5..........  January 1, 2023.
                                                                            All Other Types of       IEER = 10.4..........  January 1, 2018.\1\
                                                                             Heating.                IEER = 12.3..........  January 1, 2023.
Small Commercial Package Air-    <65,000 Btu/h.....  AC...................  All....................  SEER = 13.0..........  June 16, 2008.
 Conditioning and Heating
 Equipment (Air-Cooled, 3-
 Phase, Split-System).
                                                     HP...................  All....................  SEER = 14.0..........  January 1, 2017.
Small Commercial Package Air-    <65,000Btu/h......  AC...................  All....................  SEER = 14.0..........  January 1, 2017.
 Conditioning and Heating
 Equipment (Air-Cooled, 3-
 Phase, Single-Package).
                                                     HP...................  All....................  SEER = 14.0..........  January 1, 2017.

[[Page 2532]]

 
Small Commercial Packaged Air-   <17,000 Btu/h.....  HP...................  All....................  EER = 12.2...........  October 9, 2015.
 Conditioning and Heating
 Equipment (Water Source: Water-
 to-Air, Water-Loop).
                                 >=17,000 Btu/h and  HP...................  All....................  EER = 13.0...........  October 9, 2015.
                                  <65,000 Btu/h.
                                 >=65,000 Btu/h and  HP...................  All....................  EER = 13.0...........  October 9, 2015.
                                  <135,000Btu/h.
--------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ And manufactured before January 1, 2023.


  Table 4 to Sec.   431.97--Updates to the Minimum Heating Efficiency Standards for Air-Cooled Air Conditioning
                                       and Heating Equipment [Heat Pumps]
    [Not including single package vertical air conditioners and single package vertical heat pumps, packaged
terminal air conditioners and packaged terminal heat pumps, computer room air conditioners, variable refrigerant
flow multi-split air conditioners and heat pumps, and double-duct air-cooled commercial package air conditioning
                                             and heating equipment]
----------------------------------------------------------------------------------------------------------------
                                                                                    Compliance date: Equipment
          Equipment type               Cooling capacity    Efficiency level.\1\   manufactured starting on . . .
----------------------------------------------------------------------------------------------------------------
Small Commercial Package Air        <65,000 Btu/h........  HSPF = 8.2..........  January 1, 2017.
 Conditioning and Heating
 Equipment (Air-Cooled, 3-Phase,
 Split-Sytem).
Small Commercial Package Air        <65,000 Btu/h........  HSPF = 8.0..........  January 1, 2017.
 Conditioning and Heating
 Equipment (Air-Cooled, 3-Phase,
 Single Package).
Small Commercial Package Air        <135,000 Btu/h.......  COP = 4.3...........  October 9, 2015.
 Conditioning and Heating
 Equipment (Water-Source: Water-to-
 Air, Water-Loop).
Small Commercial Packaged Air       >=65,000 Btu/h and     COP = 3.3...........  January 1, 2018.\2\
 Conditioning and Heating           <135,000 Btu/h.......  COP = 3.4...........  January 1, 2023.
 Equipment (Air-Cooled).
Large Commercial Packaged Air       >=135,000 Btu/h and    COP = 3.2...........  January 1, 2018.\2\
 Conditioning and Heating           <240,000 Btu/h.......  COP = 3.3...........  January 1, 2023.
 Equipment (Air-Cooled).
Very Large Commercial Packaged Air  >=240,000 Btu/h and    COP = 3.2...........  January 1, 2018.
 Conditioning and Heating           <760,000 Btu/h.......
 Equipment (Air-Cooled).
----------------------------------------------------------------------------------------------------------------
\1\ For units tested using the relevant AHRI Standards, all COP values must be rated at 47 [deg]F outdoor dry-
  bulb temperature for air-cooled equipment.
\2\ And manufactured before January 1, 2023.


                  Table 5 to Sec.   431.97--Minimum Cooling Efficiency Standards for Double-Duct Air-Conditioning and Heating Equipment
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                             Compliance date: Equipment
         Equipment type           Cooling capacity        Subcategory             Heating type          Efficiency level    manufactured starting on . .
                                                                                                                                          .
--------------------------------------------------------------------------------------------------------------------------------------------------------
Small Double-Duct Commercial     >=65,000 Btu/h and  AC...................  Electric Resistance      EER = 11.2...........  January 1, 2010.
 Packaged Air Conditioning and    <135,000 Btu/h.                            Heating or No Heating.
 Heating Equipment (Air-Cooled).
                                                                            All Other Types of       EER = 11.0...........  January 1, 2010.
                                                                             Heating
                                                     HP...................  Electric Resistance      EER = 11.0...........  January 1, 2010.
                                                                             Heating or No Heating.
                                                                            All Other Types of       EER = 10.8...........  January 1, 2010.
                                                                             Heating.
Large Commercial Double-Duct     >=135,000 Btu/h     AC...................  Electric Resistance      EER = 11.0...........  January 1, 2010.
 Packaged Air Conditioning and    and <240,000 Btu/                          Heating or No Heating.
 Heating Equipment (Air-Cooled).  h.
                                                                            All Other Types of       EER = 10.8...........  January 1, 2010.
                                                                             Heating.
                                                     HP...................  Electric Resistance      EER = 10.6...........  January 1, 2010.
                                                                             Heating or No Heating.
                                                                            All Other Types of       EER = 10.4...........  January 1, 2010.
                                                                             Heating.
Very Large Double-Duct           >=240,000 Btu/h     AC...................  Electric Resistance      EER = 10.0...........  January 1, 2010.
 Commercial Packaged Air          and <300,000 Btu/                          Heating or No Heating.
 Conditioning and Heating         h.
 Equipment (Air-Cooled).

[[Page 2533]]

 
                                                                            All Other Types of       EER = 9.8............  January 1, 2010.
                                                                             Heating.
                                                     HP...................  Electric Resistance      EER = 9.5............  January 1, 2010.
                                                                             Heating or No Heating.
                                                                            All Other Types of       EER = 9.3............  January 1, 2010.
                                                                             Heating.
--------------------------------------------------------------------------------------------------------------------------------------------------------


            Table 6 to Sec.   431.97--Minimum Heating Efficiency Standards for Double-Duct Air-Cooled Air Conditioning and Heating Equipment
                                                                      [Heat pumps]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                           Compliance date: Equipment
           Equipment type                 Cooling capacity             Heating type            Efficiency level \1\      manufactured starting on . . .
--------------------------------------------------------------------------------------------------------------------------------------------------------
Small Commercial Packaged Air         >=65,000 Btu/h and       Electric Resistance Heating  COP = 3.3................  January 1, 2010.
 Conditioning and Heating Equipment    <135,000 Btu/h.          or No Heating.
 (Air-Cooled).
                                                               All Other Types of Heating.  COP = 3.3................  January 1, 2010.
Large Commercial Packaged Air-        >=135,000 Btu/h and      Electric Resistance Heating  COP = 3.2................  January 1, 2010.
 Conditioning and Heating Equipment    <240,000 Btu/h.          or No Heating.
 (Air-Cooled).
                                                               All Other Types of Heating.  COP = 3.2................  January 1, 2010.
Very Large Commercial Packaged Air    >=240,000 Btu/h and      Electric Resistance Heating  COP = 3.2................  January 1, 2010.
 Conditioning and Heating Equipment    <300,000 Btu/h.          or No Heating.
 (Air-Cooled).
                                                               All Other Types of Heating.  COP = 3.2................  January 1, 2010.
--------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ For units tested using the relevant AHRI Standards, all COP values must be rated at 47 [deg]F outdoor dry-bulb temperature for air-cooled equipment.

    (c) Each packaged terminal air conditioner (PTAC) and packaged 
terminal heat pump (PTHP) manufactured starting on January 1, 1994, but 
before October 8, 2012 (for standard size PTACs and PTHPs) and before 
October 7, 2010 (for non-standard size PTACs and PTHPs) must meet the 
applicable minimum energy efficiency standard level(s) set forth in 
Table 7 of this section. Each standard size PTAC and PTHP manufactured 
starting on October 8, 2012, and each non-standard size PTAC and PTHP 
manufactured starting on October 7, 2010, must meet the applicable 
minimum energy efficiency standard level(s) set forth in Table 6 of 
this section.
* * * * *
[FR Doc. 2015-33067 Filed 1-14-16; 8:45 am]
BILLING CODE 6450-01-P