[Federal Register Volume 81, Number 10 (Friday, January 15, 2016)]
[Rules and Regulations]
[Pages 2320-2417]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-00025]



[[Page 2319]]

Vol. 81

Friday,

No. 10

January 15, 2016

Part II





Department of Energy





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10 CFR Part 430





Energy Conservation Program: Energy Conservation Standards for 
Residential Boilers; Final Rule

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

[[Page 2320]]


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DEPARTMENT OF ENERGY

10 CFR Part 430

[Docket Number EERE-2012-BT-STD-0047]
RIN 1904-AC88


Energy Conservation Program: Energy Conservation Standards for 
Residential Boilers

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

ACTION: Final rule.

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SUMMARY: The Energy Policy and Conservation Act of 1975 (EPCA), as 
amended, prescribes energy conservation standards for various consumer 
products and certain commercial and industrial equipment, including 
residential boilers. EPCA also requires the U.S. Department of Energy 
(DOE) to periodically determine whether more-stringent, amended 
standards would be technologically feasible and economically justified, 
and would save a significant amount of energy. In this final rule, DOE 
is adopting more-stringent energy conservation standards for 
residential boilers. It has determined that the amended energy 
conservation standards for these products would result in significant 
conservation of energy, and are technologically feasible and 
economically justified.

DATES: The effective date of this rule is March 15, 2016. Compliance 
with the amended standards established for residential boilers in this 
final rule is required on and after January 15, 2021.

ADDRESSES: The docket for this rulemaking, which includes Federal 
Register notices, public meeting attendee lists and transcripts, 
comments, and other supporting documents/materials, is available for 
review at www.regulations.gov. All documents in the docket are listed 
in the www.regulations.gov index. However, not all documents listed in 
the index may be publicly available, such as information that is exempt 
from public disclosure.
    A link to the docket Web page can be found at: http://www.regulations.gov/#!docketDetail;D=EERE-2012-BT-STD-0047. The 
www.regulations.gov Web page contains simple instructions on how to 
access all documents, including public comments, in the docket.
    For further information on how to review the docket, contact Ms. 
Brenda Edwards at (202) 586-2945 or by email: 
[email protected].

FOR FURTHER INFORMATION CONTACT: Mr. John Cymbalsky, U.S. Department of 
Energy, Office of Energy Efficiency and Renewable Energy, Building 
Technologies Office, EE-5B, 1000 Independence Avenue SW., Washington, 
DC 20585-0121. Telephone: (202) 287-1692. Email: 
[email protected].
    Mr. Eric Stas, U.S. Department of Energy, Office of the General 
Counsel, GC-33, 1000 Independence Avenue SW., Washington, DC 20585-
0121. Telephone: (202) 586-9507. Email: [email protected].

SUPPLEMENTARY INFORMATION: 

Table of Contents

I. Synopsis of the Final Rule
    A. Benefits and Costs to Consumers
    B. Impact on Manufacturers
    C. National Benefits
    D. Standby Mode and Off Mode
II. Introduction
    A. Authority
    B. Background
    1. Current Standards
    2. History of Standards Rulemaking for Residential Boilers
III. General Discussion
    A. Product Classes and Scope of Coverage
    B. Test Procedure
    C. Technological Feasibility
    1. General
    2. Maximum Technologically Feasible Levels
    D. Energy Savings
    1. Determination of Savings
    2. Significance of Savings
    E. 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 Products
    e. Impact of Any Lessening of Competition
    f. Need for National Energy Conservation
    g. Other Factors
    2. Rebuttable Presumption
    F. General Comments
    1. Proposed Standard Levels
    2. Simultaneous Changes in Test Procedures and Energy 
Conservation Standards
    3. Safety Issues
    4. Other
IV. Methodology and Discussion of Related Comments
    A. Market and Technology Assessment
    1. Scope of Coverage
    2. Product Classes
    3. Technology Options
    B. Screening Analysis
    1. Screened-Out Technologies
    2. Remaining Technologies
    C. Engineering Analysis
    1. Efficiency Levels
    a. Baseline Efficiency Level and Product Characteristics
    b. Other Energy Efficiency Levels
    2. Cost-Assessment Methodology
    a. Teardown Analysis
    b. Cost Model
    c. Manufacturing Production Costs
    d. Cost-Efficiency Relationship
    e. Manufacturer Markup
    f. Manufacturer Interviews
    D. Markups Analysis
    E. Energy Use Analysis
    1. Building Sample
    2. Space Heating Energy Use
    a. Impact of Return Water Temperature on Efficiency
    b. Impact of Automatic Means for Adjusting Water Temperature on 
Energy Use
    c. Impact of Jacket Losses on Energy Use
    3. Water Heating Energy Use
    a. Idle Loss
    4. Electricity Use
    a. Standby Mode and Off Mode Losses
    b. Air Conditioner Electricity Use
    5. Standby Mode and Off Mode
    F. Life-Cycle Cost and Payback Period Analysis
    1. Product Cost
    2. Installation Cost
    a. Basic Installation Cost
    b. Replacement Installations
    c. New Construction Installations
    d. Total Installation Cost
    3. Annual Energy Consumption
    4. Energy Prices
    5. Maintenance and Repair Costs
    6. Product Lifetime
    7. Discount Rates
    8. Efficiency Distribution in the No-New-Standards Case
    9. Payback Period Analysis
    G. Shipments Analysis
    H. National Impact Analysis
    1. Product Efficiency Trends
    2. National Energy Savings
    3. Net Present Value Analysis
    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. Manufacturer Interviews
    4. Discussion of MIA Comments
    K. Emissions Analysis
    L. Monetizing Carbon Dioxide and Other Emissions Impacts
    1. Social Cost of Carbon
    a. Monetizing Carbon Dioxide Emissions
    b. Development of Social Cost of Carbon Values
    c. Current Approach and Key Assumptions
    2. Social Cost of Other Air Pollutants
    M. Utility Impact Analysis
    N. Employment Impact Analysis
V. Analytical Results and Conclusions
    A. Trial Standard Levels
    1. TSLs for AFUE Standards
    2. TSLs for Standby Mode and Off Mode Standards
    B. Economic Justification and Energy Savings
    1. Economic Impacts on Individual Consumers

[[Page 2321]]

    a. Life-Cycle Cost and Payback Period
    b. Consumer Subgroup Analysis
    c. Rebuttable Presumption Payback Period
    2. Economic Impacts on Manufacturers
    a. Industry Cash-Flow Analysis Results
    b. Impacts on Direct Employment
    c. Impacts on Manufacturing Capacity
    d. Impacts on Subgroups of Manufacturers
    e. Cumulative Regulatory Burden
    3. National Impact Analysis
    a. Significance of Energy Savings
    b. Net Present Value of Consumer Costs and Benefits
    c. Indirect Impacts on Employment
    4. Impact on Utility or Performance of Products
    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 Trial Standard Levels Considered for 
Residential Boilers for AFUE Standards
    2. Benefits and Burdens of Trial Standard Levels Considered for 
Residential Boilers for Standby Mode and Off Mode
    3. Annualized Benefits and Costs of the Adopted Standards
VI. Procedural Issues and Regulatory Review
    A. Review Under Executive Orders 12866 and 13563
    B. Review Under the Regulatory Flexibility Act
    1. Description and Estimated Number of Small Entities Regulated
    2. Description and Estimate of Compliance Requirements
    3. Duplication, Overlap, and Conflict With Other Rules and 
Regulations
    4. Significant Alternatives to the Rule
    C. Review Under the Paperwork Reduction Act of 1995
    D. Review Under the National Environmental Policy Act of 1969
    E. Review Under Executive Order 13132
    F. Review Under Executive Order 12988
    G. Review Under the Unfunded Mandates Reform Act of 1995
    H. Review Under the Treasury and General Government 
Appropriations Act, 1999
    I. Review Under Executive Order 12630
    J. Review Under the Treasury and General Government 
Appropriations Act, 2001
    K. Review Under Executive Order 13211
    L. Review Under the Information Quality Bulletin for Peer Review
    M. Congressional Notification
VII. Approval of the Office of the Secretary

I. Synopsis of the Final Rule

    Title III, Part B \1\ of the Energy Policy and Conservation Act of 
1975 (EPCA or the Act), Public Law 94-163 (42 U.S.C. 6291-6309, as 
codified), established the Energy Conservation Program for Consumer 
Products Other Than Automobiles.\2\ These products include residential 
boilers, the subject of this document.
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    \1\ For editorial reasons, upon codification in the U.S. Code, 
Part B was redesignated Part A.
    \2\ All references to EPCA in this document refer to the statute 
as amended through the Energy Efficiency Improvement Act of 2015 
(EEIA 2015), Public Law 114-11 (April 30, 2015).
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    Pursuant to EPCA, any new or amended energy conservation standard 
must be designed to achieve the maximum improvement in energy 
efficiency that DOE determines is technologically feasible and 
economically justified. (42 U.S.C. 6295(o)(2)(A)) Furthermore, the new 
or amended standard must result in a significant conservation of 
energy. (42 U.S.C. 6295(o)(3)(B)) EPCA specifically provides that DOE 
must conduct a second round of energy conservation standards rulemaking 
for residential boilers. (42 U.S.C. 6295(f)(4)(C)) The statute also 
provides that not later than 6 years after issuance of any final rule 
establishing or amending a standard, DOE must publish either a notice 
of determination that standards for the product do not need to be 
amended, or a notice of proposed rulemaking including new proposed 
energy conservation standards (proceeding to a final rule, as 
appropriate). (42 U.S.C. 6295(m)) DOE initiated this rulemaking as 
required by 42 U.S.C. 6295(f)(4)(C), but once complete, this rulemaking 
will also satisfy the 6-year review provision under 42 U.S.C. 6295(m).
    Furthermore, EISA 2007 amended EPCA to require that any new or 
amended energy conservation standard adopted after July 1, 2010, shall 
address standby mode and off mode energy consumption pursuant to 42 
U.S.C. 6295(o). (42 U.S.C. 6295(gg)(3)) If feasible, the statute 
directs DOE to incorporate standby mode and off mode energy consumption 
into a single standard with the product's active mode energy use. If a 
single standard is not feasible, DOE may consider establishing a 
separate standard to regulate standby mode and off mode energy 
consumption.
    In accordance with these and other statutory provisions discussed 
in this document, DOE is adopting amended annual fuel utilization 
efficiency (AFUE) energy conservation standards and adopting new 
standby mode off mode electrical energy conservation standards for 
residential boilers. The AFUE standards for residential boilers are 
expressed as minimum AFUE, as determined by the DOE test method 
(described in section III.B), and are shown in Table I.1, as are the 
design requirements. Table I.2 shows the standards for standby mode and 
off mode. These standards apply to all residential boilers listed in 
Table I.1 and Table I.2 and manufactured in, or imported into, the 
United States starting on the date five years after January 15, 2021.

  Table I.1--AFUE Energy Conservation Standards for Residential Boilers
                 [Compliance starting January 15, 2021]
------------------------------------------------------------------------
        Product class *            AFUE ** (%)      Design requirement
------------------------------------------------------------------------
Gas-fired hot water boiler.....              84  Constant-burning pilot
                                                  not permitted.
                                                  Automatic means for
                                                  adjusting water
                                                  temperature required
                                                  (except for boilers
                                                  equipped with tankless
                                                  domestic water heating
                                                  coils).
Gas-fired steam boiler.........              82  Constant-burning pilot
                                                  not permitted.
Oil-fired hot water boiler.....              86  Automatic means for
                                                  adjusting temperature
                                                  required (except for
                                                  boilers equipped with
                                                  tankless domestic
                                                  water heating coils).
Oil-fired steam boiler.........              85  None.
Electric hot water boiler......            None  Automatic means for
                                                  adjusting temperature
                                                  required (except for
                                                  boilers equipped with
                                                  tankless domestic
                                                  water heating coils).
Electric steam boiler..........            None  None.
------------------------------------------------------------------------
* Product classes are separated by fuel source--gas, oil, or
  electricity--and heating medium--steam or hot water. See section
  IV.A.2 for a discussion of product classes.
** AFUE is an annualized fuel efficiency metric that fully accounts for
  fossil-fuel energy consumption in active, standby, and off modes. See
  section III.B for a discussion of the AFUE test method.


[[Page 2322]]


  Table I.2--Energy Conservation Standards for Residential Boilers Standby Mode and Off Mode Electrical Energy
                                                   Consumption
----------------------------------------------------------------------------------------------------------------
                                                                                             Standard: PW,OFF
                         Product class                          Standard: PW,SB (watts)          (watts)
----------------------------------------------------------------------------------------------------------------
Gas-fired hot water boiler....................................                        9                        9
Gas-fired steam boiler........................................                        8                        8
Oil-fired hot water boiler....................................                       11                       11
Oil-fired steam boiler........................................                       11                       11
Electric hot water boiler.....................................                        8                        8
Electric steam boiler.........................................                        8                        8
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A. Benefits and Costs to Consumers

    Table I.3 presents DOE's evaluation of the economic impacts of the 
adopted AFUE and standby mode and off mode standards on consumers of 
residential boilers, as measured by the average life-cycle cost (LCC) 
savings and the simple payback period (PBP).\3\ Table I.4 presents the 
same results for standby mode and off mode. The average LCC savings are 
positive for all product classes, and the PBP is less than the average 
boiler lifetime, which is estimated to be 26.6 years for gas-fired hot 
water boilers and electric hot water boilers, 23.6 years for gas-fired 
steam boilers and electric steam boilers, 24.7 for oil-fired hot water 
boilers, and 19.3 years for oil-fired steam boilers.\4\ DOE has not 
conducted an analysis of an AFUE standard level for electric boilers as 
the efficiency of these products already approaches 100 percent AFUE.
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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 efficiency levels, is measured relative to the baseline 
model (see section IV.C.1.a and chapter 5 of the final rule TSD).
    \4\ DOE used a distribution of boiler lifetimes that ranges from 
1 to 60 years. See appendix 8F of the final rule TSD for details of 
the derivation of the average boiler lifetime.

      Table I.3--Impacts of Amended AFUE Energy Conservation Standards on Consumers of Residential Boilers
----------------------------------------------------------------------------------------------------------------
                                                                  Average LCC savings     Simple payback period
                         Product class                                  (2014$)                  (years)
----------------------------------------------------------------------------------------------------------------
Gas-fired Hot Water Boiler....................................                      364                      1.2
Gas-fired Steam Boiler........................................                      333                      2.7
Oil-fired Hot Water Boiler....................................                      626                      5.8
Oil-fired Steam Boiler........................................                      434                      6.7
Electric Hot Water Boiler.....................................                      (*)                      (*)
Electric Steam Boiler.........................................                      (*)                      (*)
----------------------------------------------------------------------------------------------------------------
* N/A (No Standard).


 Table I.4--Impacts of Standby Mode and Off Mode Electrical Energy Consumption Energy Conservation Standards on
                                        Consumers of Residential Boilers
----------------------------------------------------------------------------------------------------------------
                                                                  Average LCC savings     Simple payback period
                         Product class                                  (2014$)                  (years)
----------------------------------------------------------------------------------------------------------------
Gas-fired Hot Water Boiler....................................                       15                      6.7
Gas-fired Steam Boiler........................................                       18                      6.4
Oil-fired Hot Water Boiler....................................                       20                      6.2
Oil-fired Steam Boiler........................................                       13                      6.1
Electric Hot Water Boiler.....................................                        8                      8.9
Electric Steam Boiler.........................................                        6                      8.8
----------------------------------------------------------------------------------------------------------------

    Estimates of the combined impact of the adopted AFUE and standby 
mode and off mode standards on consumers are shown in Table I.5.

   Table I.5--Combined Impacts of Adopted AFUE and Standby Mode and Off Mode Energy Conservation Standards on
                                        Consumers of Residential Boilers
----------------------------------------------------------------------------------------------------------------
                                                                  Average LCC savings     Simple payback period
                         Product class                                  (2014$)                  (years)
----------------------------------------------------------------------------------------------------------------
Gas-Fired Hot Water Boiler....................................                      379                      2.3
Gas-Fired Steam Boiler........................................                      351                      4.2
Oil-Fired Hot Water Boiler....................................                      646                      6.6
Oil-Fired Steam Boiler........................................                      447                      7.4
Electric Hot Water Boiler.....................................                        8                      8.9
Electric Steam Boiler.........................................                        6                      8.8
----------------------------------------------------------------------------------------------------------------


[[Page 2323]]

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

B. Impact on Manufacturers

    The industry net present value (INPV) is the sum of the discounted 
cash flows to the industry from the base year through the end of the 
analysis period (2014 to 2050). Using a real discount rate of 8.0 
percent, DOE estimates that the (INPV) for manufacturers of residential 
boilers in the base case without amended standards is $367.83 million 
in 2014$.
    DOE analyzed the impacts of AFUE energy conservation standards and 
standby/off mode electrical energy consumption energy conservation 
standards on manufacturers separately. Under the adopted AFUE 
standards, DOE expects that the change in INPV will range from -0.71 to 
0.44 percent, which is approximately equivalent to a reduction of -
$2.63 million to an increase of $1.62 million. DOE estimates industry 
conversion costs from the amended AFUE standards to total $2.27 
million.
    Under the adopted standby mode and off mode standards, DOE expects 
the change in INPV will range from -0.46 to 0.12 percent, which is 
approximately equivalent to a decrease of $1.71 million to an increase 
of $0.45 million. DOE estimates industry conversion costs from the 
standby mode and off mode standards to total $0.21 million.
    DOE's analysis of the impacts of the adopted standards on 
manufacturers is described in section IV.J of this final rule.

C. National Benefits \5\
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    \5\ All monetary values in this document are expressed in 2014 
dollars and, where appropriate, are discounted to 2015 unless 
explicitly stated otherwise. Energy savings in this section refer to 
full-fuel-cycle savings (see section IV.H for discussion).
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    DOE's analyses indicate that the adopted AFUE energy conservation 
standards for residential boilers are expected to save a significant 
amount of energy. Relative to the case without amended standards, the 
lifetime energy savings for residential boilers purchased in the 30-
year period that begins in the first full year of compliance with the 
amended standards (2021-2050) amount to 0.16 quadrillion Btu 
(quads).\6\ This represents a savings of 0.6 percent relative to the 
energy use of these products in the case without amended standards 
(referred to as the ``no-new-standards case'').
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    \6\ 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.
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    The cumulative net present value (NPV) of total consumer costs and 
savings for the amended residential boilers AFUE standards ranges from 
$0.35 billion to $1.20 billion at 7-percent and 3-percent discount 
rates, respectively. This NPV expresses the estimated total value of 
future operating-cost savings minus the estimated increased product 
costs for residential boilers purchased in 2021-2050.
    In addition, the amended AFUE standards for residential boilers are 
expected to have significant environmental benefits. DOE estimates that 
the AFUE standards would result in cumulative emission reductions (over 
the same period as for energy savings) of 9.33 million metric tons (Mt) 
\7\ of carbon dioxide (CO2), 2.075 thousand tons of sulfur 
dioxide (SO2), 122.3 tons of nitrogen oxides 
(NOX), 71.9 thousand tons of methane (CH4), 0.09 
thousand tons of nitrous oxide (N2O), and 0.45 pounds of 
mercury (Hg).\8\ The cumulative reduction in CO2 emissions 
through 2030 amounts to 0.77 Mt, which is equivalent to the emissions 
resulting from the annual electricity use of more than 70,000 homes.
---------------------------------------------------------------------------

    \7\ A metric ton is equivalent to 1.1 short tons. Results for 
gases other than CO2 are presented in short tons.
    \8\ 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. DOE 
notes that the amended AFUE standards are estimated to cause a very 
slight increase in mercury emissions due to associated increase in 
boiler electricity use.
---------------------------------------------------------------------------

    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 (IWG).\9\ 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) from 
residential boiler AFUE standards is between $0.053 billion and $0.802 
billion, with a value of $0.263 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 $0.109 
billion at a 7-percent discount rate, and $0.328 billion at a 3-percent 
discount rate.\10\
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    \9\ 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).
    \10\ 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 presenting 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.6 summarizes the national economic benefits and costs 
expected to result from the adopted AFUE standards for residential 
boilers.

[[Page 2324]]



  Table I.6--Summary of National Economic Benefits and Costs of Amended
  AFUE Energy Conservation Standards for Residential Boilers (TSL 3) *
------------------------------------------------------------------------
                                      Present value
             Category                 billion 2014$     Discount rate %
------------------------------------------------------------------------
                                Benefits
------------------------------------------------------------------------
Consumer Operating Cost Savings...              0.500                  7
                                                1.468                  3
CO2 Reduction Value ($12.2/t case)              0.053                  5
 **...............................
CO2 Reduction Value ($40.0/t case)              0.263                  3
 **...............................
CO2 Reduction Value ($62.3/t case)              0.425                2.5
 **...............................
CO2 Reduction Value ($117/t case)               0.802                  3
 **...............................
NOX Reduction Value [dagger]......              0.109                  7
                                                0.328                  3
Total Benefits [dagger][dagger]...              0.872                  7
                                                2.058                  3
------------------------------------------------------------------------
                                  Costs
------------------------------------------------------------------------
Consumer Incremental Installed                  0.150                  7
 Costs............................
                                                0.270                  3
------------------------------------------------------------------------
                           Total Net Benefits
------------------------------------------------------------------------
Including Emissions Reduction                   0.722                  7
 Value [dagger][dagger]...........
                                                1.789                  3
------------------------------------------------------------------------
* This table presents the costs and benefits associated with residential
  boilers shipped in 2021-2050. These results include benefits to
  consumers which accrue after 2050 from the products purchased in 2021-
  2050.
** The CO2 values represent global monetized values of the SCC, in
  2014$, 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 presenting 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).

    For the adopted standby mode and off mode standards, the lifetime 
energy savings for residential boilers purchased in the 30-year period 
that begins in the first full year of compliance with amended standards 
(2021-2050) amount to 0.0026 quads. This is a savings of 1.2 percent 
relative to the standby energy use of these products in the no-new-
standards case.
    The cumulative NPV of total consumer costs and savings for the 
adopted standby mode and off mode standards for residential boilers 
ranges from $0.003 billion to $0.014 billion at 7-percent and 3-percent 
discount rates, respectively. This NPV expresses the estimated total 
value of future operating-cost savings minus the estimated increased 
product costs for residential boilers purchased in 2021-2050.
    In addition, the standby mode and off mode standards are expected 
to have significant environmental benefits. The energy savings are 
expected to result in cumulative emission reductions (over the same 
period as for energy savings) of 0.154 Mt of CO2, 0.087 
thousand tons of SO2, 0.278 thousand tons of NOX, 
0.669 thousand tons of CH4, 0.0018 thousand tons of 
N2O, and 0.642 pounds of Hg. The cumulative reduction in 
CO2 emissions through 2030 amounts to 0.013 Mt, which is 
equivalent to the emissions resulting from the annual electricity use 
of approximately 1,200 homes.
    As noted above, the value of the CO2 reductions is 
calculated using a range of values per metric ton of CO2 
(otherwise known as the SCC) developed by a Federal interagency IWG. 
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 from standby mode and off mode standards for residential 
boilers is between $0.001 billion and $0.013 billion, with a value of 
$0.004 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 $0.0002 billion at a 7-percent 
discount rate, and $0.0007 billion at a 3-percent discount rate.
    Table I.7 summarizes the national economic benefits and costs 
expected to result from the adopted standby mode and off mode standards 
for residential boilers.

[[Page 2325]]



  Table I.7--Summary of National Economic Benefits and Costs of Adopted
 Standby Mode and Off Mode Energy Conservation Standards for Residential
                            Boilers (TSL 3) *
------------------------------------------------------------------------
                                      Present value
             Category                (billion 2014$)   Discount rate (%)
------------------------------------------------------------------------
                                Benefits
------------------------------------------------------------------------
Consumer Operating Cost Savings...              0.007                  7
                                                0.022                  3
CO2 Reduction Value ($12.2/t case)              0.001                  5
 **...............................
CO2 Reduction Value ($40.0/t case)              0.004                  3
 **...............................
CO2 Reduction Value ($62.3/t case)              0.007                2.5
 **...............................
CO2 Reduction Value ($117/t case)               0.013                  3
 **...............................
NOX Reduction Value [dagger]......             0.0002                  7
                                               0.0007                  3
Total Benefits [dagger][dagger]...              0.012                  7
                                                0.027                  3
------------------------------------------------------------------------
                                  Costs
------------------------------------------------------------------------
Consumer Incremental Installed                  0.004                  7
 Costs............................
                                                0.008                  3
------------------------------------------------------------------------
                           Total Net Benefits
------------------------------------------------------------------------
Including Emissions Reduction                   0.008                  7
 Value [dagger][dagger]...........
                                                0.019                  3
------------------------------------------------------------------------
* This table presents the costs and benefits associated with residential
  boilers shipped in 2021-2050. These results include benefits to
  consumers which accrue after 2050 from the products purchased in 2021-
  2050.
** The CO2 values represent global monetized values of the SCC, in
  2014$, 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 presenting 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 energy conservation 
standards, for residential boiler products sold in 2021-2050, can also 
be expressed in terms of annualized values. Benefits and costs for the 
AFUE standards are considered separately from benefits and costs for 
the standby mode and off mode electrical consumption standards, because 
for the reasons explained in section I.D below, it was not technically 
feasible to develop a single, integrated standard. The monetary values 
for the total annualized net benefits are the sum of: (1) The national 
economic value of the benefits in reduced consumer operating cost, 
minus (2) the increases in product purchase price and installation 
costs, plus (3) the value of the benefits of CO2 and 
NOX emission reductions, all annualized.\11\
---------------------------------------------------------------------------

    \11\ 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., 2021 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 a 30-year period, starting 
in the compliance year, that yields the same present value.
---------------------------------------------------------------------------

    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 residential boilers shipped in 2021-2050. Because 
CO2 emissions have a very long residence time in the 
atmosphere,\12\ the SCC values in future years reflect future 
CO2-emissions impacts that continue beyond 2100.
---------------------------------------------------------------------------

    \12\ 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,' '' J. 
Geophys. Res. 110. pp. D14105.
---------------------------------------------------------------------------

    Estimates of annualized benefits and costs of the adopted AFUE 
standards for residential boilers 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),\13\ the estimated cost 
of the AFUE standards in this rule is $17.0 million per year in 
increased equipment costs, while the estimated annual benefits are 
$56.5 million in reduced equipment operating costs, $15.5 million in 
CO2 reductions, and $12.3 million in reduced NOX

[[Page 2326]]

emissions. In this case, the net benefit amounts to $67.4 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 AFUE standards is $15.9 million per year in increased equipment 
costs, while the estimated annual benefits are $86.8 million in reduced 
operating costs, $15.5 million in CO2 reductions, and $19.4 
million in reduced NOX emissions. In this case, the net 
benefit amounts to $105.8 million per year.
---------------------------------------------------------------------------

    \13\ 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 I.8--Annualized Benefits and Costs of Amended AFUE Energy Conservation Standards for Residential Boilers (TSL 3) *
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                    (Million 2014$/year)
                                                                  --------------------------------------------------------------------------------------
                                            Discount rate %                                                                   High net benefits estimate
                                                                        Primary estimate *      Low net benefits estimate *               *
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                        Benefits
--------------------------------------------------------------------------------------------------------------------------------------------------------
Consumer Operating Cost Savings....  7...........................  56.5.......................  53.5.......................  60.1
                                     3...........................  86.8.......................  81.6.......................  92.8
CO2Reduction Value ($12.2/t case)    5...........................  4.4........................  4.3........................  4.5
 **.
CO2Reduction Value ($40.0/t case)    3...........................  15.5.......................  15.3.......................  15.8
 **.
CO2Reduction Value ($62.3/t case)    2.5.........................  23.0.......................  22.7.......................  23.4
 **.
CO2Reduction Value ($117/t case) **  3...........................  47.5.......................  46.8.......................  48.3
NOXReduction Value [dagger]........  7...........................  12.3.......................  12.2.......................  28.0
                                     3...........................  19.4.......................  19.2.......................  43.2
Total Benefits [dagger][dagger]....  7 plus CO2 range............  73 to 116..................  70 to 112..................  93 to 136
                                     7...........................  84.4.......................  81.0.......................  104.0
                                     3 plus CO2 range............  111 to 154.................  105 to 148.................  141 to 184
                                     3...........................  121.7......................  116.1......................  151.9
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                          Costs
--------------------------------------------------------------------------------------------------------------------------------------------------------
Consumer Incremental Installed       7...........................  17.0.......................  19.9.......................  14.7
 Costs.
                                     3...........................  15.9.......................  19.2.......................  13.4
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                      Net Benefits
--------------------------------------------------------------------------------------------------------------------------------------------------------
Total [dagger][dagger].............  7 plus CO2 range............  56 to 99...................  50 to 93...................  78 to 122
                                     7...........................  67.4.......................  61.1.......................  89.3
                                     3 plus CO2 range............  95 to 138..................  86 to 128..................  127 to 171
                                     3...........................  105.8......................  96.9.......................  138.5
--------------------------------------------------------------------------------------------------------------------------------------------------------
This table presents the annualized costs and benefits associated with residential boilers shipped in 2021-2050. These results include benefits to
  consumers which accrue after 2050 from the products purchased in 2021-2050. 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.F.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. 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 is presenting 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 the 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.

    Estimates of annualized benefits and costs of the adopted standby 
mode and off mode standards are shown in Table I.9. 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 residential boiler 
standby mode and off mode standards in this rule is $0.46 million per 
year in increased equipment costs, while the estimated annual benefits 
are $0.84 million in reduced equipment operating costs, $0.25 million 
in CO2 reductions, and $0.03 million in reduced 
NOX emissions. In this case, the net benefit amounts to 
$0.66 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 AFUE standards is $0.46 million per 
year in increased equipment costs, while the estimated annual benefits 
are $1.28 million in reduced operating costs, $0.25 million in 
CO2 reductions, and $0.04 million in reduced NOX 
emissions. In this case, the net benefit amounts to $1.11 million per 
year.

[[Page 2327]]



      Table I.9--Annualized Benefits and Costs of Adopted Standby Mode and Off Mode Energy Conservation Standards for Residential Boilers (TSL 3)*
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                    (Million 2014$/year)
                                                                  --------------------------------------------------------------------------------------
                                          Discount rate  (%)                                                                  High net benefits estimate
                                                                        Primary estimate *      Low net benefits estimate *               *
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                        Benefits
--------------------------------------------------------------------------------------------------------------------------------------------------------
Consumer Operating Cost Savings....  7...........................  0.84.......................  0.81.......................  0.89
                                     3...........................  1.28.......................  1.25.......................  1.38
CO2 Reduction Value ($12.2/t case)   5...........................  0.07.......................  0.07.......................  0.07
 **.
CO2 Reduction Value ($40.0/t case)   3...........................  0.25.......................  0.25.......................  0.26
 **.
CO2 Reduction Value ($62.3/t case)   2.5.........................  0.37.......................  0.36.......................  0.38
 **.
CO2 Reduction Value ($117/t case)    3...........................  0.77.......................  0.75.......................  0.79
 **.
NOX Reduction Value [dagger].......  7...........................  0.03.......................  0.03.......................  0.06
                                      3..........................  0.04.......................  0.04.......................  0.10
Total Benefits [dagger][dagger]....  7 plus CO2 range............  0.94 to 1.63...............  0.91 to 1.59...............  1.02 to 1.74
                                     7...........................  1.12.......................  1.09.......................  1.21
                                     3 plus CO2 range............  1.40 to 2.09...............  1.36 to 2.04...............  1.54 to 2.26
                                     3...........................  1.58.......................  1.54.......................  1.73
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                          Costs
--------------------------------------------------------------------------------------------------------------------------------------------------------
Consumer Incremental Installed       7...........................  0.46.......................  0.45.......................  0.47
 Costs.
                                     3...........................  0.46.......................  0.45.......................  0.47
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                      Net Benefits
--------------------------------------------------------------------------------------------------------------------------------------------------------
Total [dagger][dagger].............  7 plus CO2 range............  0.48 to 1.17...............  0.46 to 1.14...............  0.55 to 1.26
                                     7...........................  0.66.......................  0.63.......................  0.73
                                     3 plus CO2 range............  0.93 to 1.63...............  0.91 to 1.59...............  1.07 to 1.78
                                     3...........................  1.11.......................  1.09.......................  1.25
--------------------------------------------------------------------------------------------------------------------------------------------------------
* This table presents the annualized costs and benefits associated with residential boilers shipped in 2021-2050. These results include benefits to
  consumers which accrue after 2050 from the products purchased in 2021-2050. 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.
** 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. 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 is presenting 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 the 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 notice.
    Based on the analyses culminating in this final rule, DOE found the 
benefits to the Nation of the standards (energy savings, positive NPV 
of consumer benefits, consumer LCC savings, and emission reductions) 
for both AFUE as well as standby mode and off would outweigh the 
burdens (loss of INPV for manufacturers and LCC increases for some 
consumers). DOE has concluded that the standards in this final rule 
represent the maximum improvement in energy efficiency that is 
technologically feasible and economically justified, and would result 
in significant conservation of energy.
    DOE also added the annualized benefits and costs from the 
individual annualized tables to provide a combined benefit and cost 
estimate of the adopted AFUE and standby mode and off mode standards, 
as shown in Table I.10.\14\ 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 residential boiler AFUE and standby 
mode and off mode standards in this rule is $17.4 million per year in 
increased equipment costs, while the estimated annual benefits are 
$57.4 million in reduced equipment operating costs, $15.8 million in 
CO2 reductions, and $12.4 million in reduced NOX 
emissions. In this case, the net benefit amounts to $68.1 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 residential boiler AFUE and standby mode and off mode standards 
in this rule is $16.4 million per year in increased equipment costs, 
while the estimated annual benefits are $88.1 million in reduced 
equipment operating costs, $15.8 million in CO2

[[Page 2328]]

reductions, and $19.4 million in reduced NOX emissions. In 
this case, the net benefit amounts to $106.9 million per year.
---------------------------------------------------------------------------

    \14\ To obtain the combined results, DOE added the results for 
the AFUE standards in Table I.8 with the results for the standby 
standards in Table I.9.

 Table I.10--Annualized Benefits and Costs of Adopted AFUE and Standby Mode and Off Mode Energy Conservation Standards for Residential Boilers (TSL 3) *
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                    (Million 2014$/year)
                                                                  --------------------------------------------------------------------------------------
                                             Discount rate                                                                    High net benefits estimate
                                                                        Primary estimate *      Low net benefits estimate *               *
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                        Benefits
--------------------------------------------------------------------------------------------------------------------------------------------------------
Consumer Operating Cost Savings....  7%..........................  57.4.......................  54.3.......................  61.0.
                                     3%..........................  88.1.......................  82.8.......................  94.2.
CO2 Reduction Value ($12.2/t case)   5%..........................  4.5........................  4.4........................  4.6.
 **.
CO2 Reduction Value ($40.0/t case)   3%..........................  15.8.......................  15.6.......................  16.1.
 **.
CO2 Reduction Value ($62.3/t case)   2.5%........................  23.4.......................  23.0.......................  23.8.
 **.
CO2 Reduction Value ($117/t case)    3%..........................  48.2.......................  47.5.......................  49.1.
 **.
NOX Reduction Value [dagger].......  7%..........................  12.4.......................  12.2.......................  28.0.
                                     3%..........................  19.4.......................  19.2.......................  43.3.
Total Benefits [dagger][dagger]....  7% plus CO2 range...........  74.2 to 117.9..............  70.9 to 114................  93.6 to 138.
                                     7%..........................  85.5.......................  82.1.......................  105.
                                     3% plus CO2 range...........  112 to 156.................  106 to 150.................  142 to 187.
                                     3%..........................  123.3......................  117.6......................  153.6.
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                          Costs
--------------------------------------------------------------------------------------------------------------------------------------------------------
Consumer Incremental Product Costs.  7%..........................  17.4.......................  20.3.......................  15.1.
                                     3%..........................  16.4.......................  19.6.......................  13.9.
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                      Net Benefits
--------------------------------------------------------------------------------------------------------------------------------------------------------
Total [dagger][dagger].............  7% plus CO2 range...........  56.8 to 100................  50.6 to 93.7...............  78.5 to 123.
                                     7%..........................  68.1.......................  61.8.......................  90.0.
                                     3% plus CO2 range...........  95.6 to 139................  86.8 to 130................  128 to 173.
                                     3%..........................  106.9......................  98.0.......................  139.7.
--------------------------------------------------------------------------------------------------------------------------------------------------------
* This table presents the annualized costs and benefits associated with residential boilers shipped in 2021-2050. These results include benefits to
  consumers which accrue after 2050 from the products purchased in 2021-2050. 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.F.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. 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 is presenting 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 the 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. Standby Mode and Off Mode

    As discussed in section II.A of this final rule, any final rule for 
amended or new energy conservation standards that is published on or 
after July 1, 2010 must address standby mode and off mode energy use. 
(42 U.S.C. 6295(gg)(3)) As a result, DOE has analyzed and is adopting 
new energy conservation standards for the standby mode and off mode 
electrical energy consumption of residential boilers.
    AFUE, the statutory metric for residential boilers, does not 
incorporate standby mode or off mode use of electricity, although it 
already fully addresses use in these modes of fossil fuels by gas-fired 
and oil-fired boilers. In the October 2010 test procedure final rule 
for residential furnaces and boilers, DOE determined that incorporating 
standby mode and off mode electricity consumption into a single 
standard for residential furnaces and boilers is not technically 
feasible. 75 FR 64621, 64626-27 (Oct. 20, 2010). DOE concluded that a 
metric that integrates standby mode and off mode electricity 
consumption into AFUE is not technically feasible, because the standby 
mode and off mode energy usage, when measured, is essentially lost in 
practical terms due to rounding conventions for certifying furnace and 
boiler compliance with Federal energy conservation standards. Id. 
Therefore, in this final

[[Page 2329]]

rule, DOE is adopting amended boiler standards that are AFUE levels, 
which exclude standby mode and off mode electricity use; furthermore, 
DOE is adopting separate standards that are maximum wattage (W) levels 
to address the standby mode (PW,SB) and off mode 
(PW,OFF) electrical energy use of boilers. DOE also presents 
corresponding trial standard levels (TSLs) for energy consumption in 
standby mode and off mode. DOE has decided to use a maximum wattage 
requirement to regulate standby mode and off mode for boilers. DOE 
believes using an annualized metric could add unnecessary complexities, 
such as trying to estimate an assumed number of hours that a boiler 
typically spends in standby mode. Instead, DOE believes that a maximum 
wattage standard is the most straightforward metric for regulating 
standby mode and off mode energy consumption of boilers and will result 
in the least amount of industry and consumer confusion.
    DOE is using the metrics just described--AFUE, PW,SB, 
and PW,OFF--in the amended energy conservation standards in 
this rulemaking for residential boilers. This approach satisfies the 
mandate of 42 U.S.C. 6295(gg)(3) that amended standards address standby 
mode and off mode energy use. The various analyses performed by DOE to 
evaluate minimum standards for standby mode and off mode electrical 
energy consumption for boilers are discussed further in section IV.E of 
this final rule.

II. Introduction

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

A. Authority

    Title III, Part B of the Energy Policy and Conservation Act of 1975 
(EPCA or the Act), Pub. L. 94-163 (codified as 42 U.S.C. 6291-6309) 
established the Energy Conservation Program for Consumer Products Other 
Than Automobiles, a program covering most major household appliances 
(collectively referred to as ``covered products''). These products 
include the residential boilers that are the subject of this 
rulemaking. (42 U.S.C. 6292(a)(5)) EPCA, as amended, prescribed energy 
conservation standards for these products (42 U.S.C. 6295(f)(1) and 
(3)), and directed DOE to conduct future rulemakings to determine 
whether to amend these standards (42 U.S.C. 6295(f)(4)). Under 42 
U.S.C. 6295(m), the agency must periodically review its already-
established energy conservation standards for a covered product no 
later than 6 years from the issuance of a final rule establishing or 
amending a standard for a covered product. This rulemaking satisfies 
both statutory provisions (42 U.S.C. 6295(f)(4) and (m)).
    Pursuant to EPCA, DOE's energy conservation program for covered 
products consists essentially of four parts: (1) Testing; (2) labeling; 
(3) establishment of Federal energy conservation standards; and (4) 
certification and enforcement procedures. The Federal Trade Commission 
(FTC) is primarily responsible for labeling, and DOE implements the 
remainder of the program. 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 each 
covered product. (42 U.S.C. 6295(o)(3)(A) and (r)) Manufacturers of 
covered products must use the prescribed DOE test procedure as the 
basis for certifying to DOE that their products comply with the 
applicable energy conservation standards adopted under EPCA and when 
making representations to the public regarding the energy use or 
efficiency of those products. (42 U.S.C. 6293(c) and 6295(s)) 
Similarly, DOE must use these test procedures to determine whether the 
products comply with standards adopted pursuant to EPCA. (42 U.S.C. 
6295(s)) The DOE test procedure for residential boilers appears at 
title 10 of the Code of Federal Regulations (CFR) part 430, subpart B, 
appendix N. In 2012, DOE initiated a rulemaking to review the 
residential furnaces and boilers test procedure. In March 2015, DOE 
published a notice of proposed rulemaking (NOPR) outlining the proposed 
changes to the test procedure. 80 FR 12876 (March 11, 2015). In January 
2016, DOE published a final rule outlining the final changes made to 
the test procedure. (See EERE-2012-BT-TP-0024). Details regarding this 
rulemaking are discussed in section III.B.
    DOE must follow specific statutory criteria for prescribing new or 
amended standards for covered products, including residential boilers. 
Any new or amended standard for a covered product must be designed to 
achieve the maximum improvement in energy efficiency that is 
technologically feasible and economically justified. (42 U.S.C. 
6295(o)(2)(A) and (3)(B)) Furthermore, DOE may not adopt any standard 
that would not result in the significant conservation of energy. (42 
U.S.C. 6295(o)(3)) Moreover, DOE may not prescribe a standard: (1) For 
certain products, including residential boilers, if no test procedure 
has been established for the product, or (2) if DOE determines by rule 
that the standard is not technologically feasible or economically 
justified. (42 U.S.C. 6295(o)(3)(A)-(B)) In deciding whether a proposed 
standard is economically justified, after receiving comments on the 
proposed standard, DOE must determine whether the benefits of the 
standard exceed its burdens. (42 U.S.C. 6295(o)(2)(B)(i)) DOE must make 
this determination by, to the greatest extent practicable, considering 
the following seven statutory factors:
    (1) The economic impact of the standard on manufacturers and 
consumers of the products subject to the standard;
    (2) The savings in operating costs throughout the estimated average 
life of the covered products in the type (or class) compared to any 
increase in the price, initial charges, or maintenance expenses for the 
covered products that are likely to result from the standard;
    (3) The total projected amount of energy (or as applicable, water) 
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 and water conservation; and
    (7) Other factors the Secretary of Energy (Secretary) considers 
relevant. (42 U.S.C. 6295(o)(2)(B)(i)(I)-(VII))
    Further, EPCA, as codified, establishes a rebuttable presumption 
that a standard is economically justified if the Secretary finds that 
the additional cost to the consumer of purchasing a product complying 
with an energy conservation standard level will be less than three 
times the value of the energy savings during the first year that the 
consumer will receive as a result of the standard, as calculated under 
the applicable test procedure. (42 U.S.C. 6295(o)(2)(B)(iii))
    EPCA, as codified, also contains what is known as an ``anti-
backsliding'' provision, which prevents the Secretary from prescribing 
any amended standard that either increases the maximum allowable energy 
use or decreases the minimum required energy efficiency of a covered 
product. (42 U.S.C. 6295(o)(1)) Also, the Secretary may not prescribe 
an amended or new standard if interested persons have established by

[[Page 2330]]

a preponderance of the evidence that the standard is likely to result 
in the unavailability in the United States in 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. 
6295(o)(4))
    Additionally, EPCA specifies requirements when promulgating an 
energy conservation standard for a covered product that has two or more 
subcategories. DOE must specify a different standard level for a type 
or class of product that has the same function or intended use, if DOE 
determines that products within such group: (A) Consume a different 
kind of energy from that consumed by other covered products within such 
type (or class); or (B) have a capacity or other performance-related 
feature that other products within such type (or class) do not have and 
such feature justifies a higher or lower standard. (42 U.S.C. 
6295(q)(1)) In determining whether a performance-related feature 
justifies a different standard for a group of products, DOE must 
consider such factors as the utility to the consumer of such a feature 
and other factors DOE deems appropriate. Id. Any rule prescribing such 
a standard must include an explanation of the basis on which such 
higher or lower level was established. (42 U.S.C. 6295(q)(2))
    Federal energy conservation requirements generally supersede State 
laws or regulations concerning energy conservation testing, labeling, 
and standards. (42 U.S.C. 6297(a)-(c)) DOE may, however, grant waivers 
of Federal preemption for particular State laws or regulations, in 
accordance with the procedures and other provisions set forth under 42 
U.S.C. 6297(d).
    Finally, pursuant to the amendments contained in the Energy 
Independence and Security Act of 2007 (EISA 2007), Pub. L. 110-140, any 
final rule for new or amended energy conservation standards promulgated 
after July 1, 2010, is required to address standby mode and off mode 
energy use. (42 U.S.C. 6295(gg)(3)) Specifically, when DOE adopts a 
standard for a covered product after that date, it must, if justified 
by the criteria for adoption of standards under EPCA (42 U.S.C. 
6295(o)), incorporate standby mode and off mode energy use into a 
single standard, or, if that is not feasible, adopt a separate standard 
for such energy use for that product. (42 U.S.C. 6295(gg)(3)(A)-(B)). 
DOE's current test procedures for residential boilers address standby 
mode and off mode energy use. In this rulemaking, DOE adopts separate 
energy conservation standards to address standby mode and off mode 
energy use.

B. Background

1. Current Standards
    In a final rule published on July 28, 2008 (2008 final rule), DOE 
prescribed energy conservation standards for residential boilers 
manufactured on or after September 1, 2012. 73 FR 43611. These 
standards are set forth in DOE's regulations at 10 CFR 430.32(e)(2)(ii) 
and are repeated in Table II.1 below.

 Table II.1--Federal Energy Efficiency Standards for Residential Boilers
------------------------------------------------------------------------
                                 Minimum annual
                                      fuel
         Product class             utilization     Design requirements
                                   efficiency
                                       (%)
------------------------------------------------------------------------
Gas-fired Hot Water Boiler.....              82  No Constant-Burning
                                                  Pilot, Automatic Means
                                                  for Adjusting Water
                                                  Temperature.*
Gas-fired Steam Boiler.........              80  No Constant-Burning
                                                  Pilot.
Oil-fired Hot Water Boiler.....              84  Automatic Means for
                                                  Adjusting
                                                  Temperature.*
Oil-fired Steam Boiler.........              82  None.
Electric Hot Water Boiler......            None  Automatic Means for
                                                  Adjusting
                                                  Temperature.*
Electric Steam Boiler**........            None  None.
------------------------------------------------------------------------
* Excluding boilers equipped with a tankless domestic water heating
  coil.
** Although the ``Electric steam boiler'' product class is not included
  in the table at 10 CFR 430.32(e)(2)(ii), according to 42 U.S.C.
  6295(f), there are no minimum AFUE or design requirements for these
  products. In order to clarify their status, DOE is including these
  products in both the AFUE and standby/off standards tables as part of
  this final rule.

2. History of Standards Rulemaking for Residential Boilers
    Given the somewhat complicated interplay of recent DOE rulemakings 
and statutory provisions related to residential boilers, DOE provides 
the following regulatory history as background leading to the present 
rulemaking. On November 19, 2007, DOE published a final rule in the 
Federal Register (November 2007 final rule) revising the energy 
conservation standards for furnaces and boilers, which addressed the 
first required review of standards for boilers under 42 U.S.C. 
6295(f)(4)(B). 72 FR 65136. Compliance with the standards in the 
November 2007 final rule would have been required by November 19, 2015. 
However, on December 19, 2007, EISA 2007, Pub. L. 110-140, was signed 
into law, which further revised the energy conservation standards for 
residential boilers. More specifically, EISA 2007 amended EPCA to 
revise the AFUE requirements for residential boilers and set design 
requirements for most product classes. (42 U.S.C. 6295(f)(3)) EISA 2007 
required compliance with the amended energy conservation standards for 
residential boilers beginning on September 1, 2012.
    Only July 15, 2008, DOE issued a final rule technical amendment to 
the 2007 final rule, which was published in the Federal Register on 
July 28, 2008, to codify the energy conservation standard levels, the 
design requirements, and compliance dates for residential boilers 
outlined in EISA 2007. 73 FR 43611. For gas-fired hot water boilers, 
oil-fired hot water boilers, and electric hot water boilers, EISA 2007 
requires that residential boilers manufactured after September 1, 2012 
have an automatic means for adjusting water temperature. (42 U.S.C. 
6295(f)(3)(A)-(C); 10 CFR 430.32(e)(2)(ii)-(iv)) The automatic means 
for adjusting water temperature must ensure that an incremental change 
in the inferred heat load produces a corresponding incremental change 
in the temperature of the water supplied by the boiler. EISA 2007 also 
disallows the use of constant-burning pilot lights in gas-fired hot 
water boilers and gas-fired steam boilers.
    DOE initiated this rulemaking pursuant to 42 U.S.C. 6295(f)(4)(C), 
which requires DOE to conduct a second round of amended standards 
rulemaking for residential boilers. EPCA, as amended by EISA 2007, also

[[Page 2331]]

requires that not later than 6 years after issuance of any final rule 
establishing or amending a standard, DOE must publish either a notice 
of the determination that standards for the product do not need to be 
amended, or a notice of proposed rulemaking including proposed energy 
conservation standards (proceeding to a final rule, as appropriate). 
(42 U.S.C. 6295(m)) This rulemaking will satisfy both statutory 
provisions.
    Furthermore, EISA 2007 amended EPCA to require that any new or 
amended energy conservation standard adopted after July 1, 2010, shall 
address standby mode and off mode energy consumption pursuant to 42 
U.S.C. 6295(o). (42 U.S.C. 6295(gg)(3)) If feasible, the statute 
directs DOE to incorporate standby mode and off mode energy consumption 
into a single standard with the product's active mode energy use. If a 
single standard is not feasible, DOE may consider establishing a 
separate standard to regulate standby mode and off mode energy 
consumption. Consequently, DOE considered standby mode and off mode 
energy use as part of this rulemaking for residential boilers.
    DOE initiated this current rulemaking by issuing an analytical 
Framework Document, ``Rulemaking Framework for Residential Boilers'' 
(February 11, 2013). DOE published the notice of public meeting and 
availability of the Framework Document for residential boilers in the 
Federal Register on February 11, 2013. 78 FR 9631. The residential 
boiler energy conservation standards rulemaking docket is EERE-2012-BT-
STD-0047. See: http://www1.eere.energy.gov/buildings/appliance_standards/rulemaking.aspx?ruleid=112.
    The Framework Document explained the issues, analyses, and process 
that DOE anticipated using to develop energy conservation standards for 
residential boilers. DOE held a public meeting on March 13, 2013, to 
solicit comments from interested parties regarding DOE's analytical 
approach. The comment period for the Framework Document closed on March 
28, 2013.
    To further develop the energy conservation standards for 
residential boilers, DOE gathered additional information and performed 
an initial technical analysis. This process culminated in publication 
in the Federal Register on February 11, 2014, of the notice of data 
availability (NODA), which announced the availability of analytical 
results and modeling tools. 79 FR 8122. In that document, DOE presented 
its initial analysis of potential amended energy conservation standards 
for residential boilers, and requested comment on the following matters 
discussed in the analysis: (1) The product classes and scope of 
coverage; (2) the analytical framework, models, and tools that DOE is 
using to evaluate potential standards; and (3) the results of the 
preliminary analyses performed by DOE. Id. DOE also invited written 
comments on these subjects, as well as any other relevant issues, and 
announced the availability of supporting documentation on its Web site 
at: http://www.regulations.gov/#!documentDetail;D=EERE-2012-BT-STD-
0047-0015.
    A PDF copy of the supporting documentation is available at http://www.regulations.gov/#!documentDetail;D=EERE-2012-BT-STD-0047-0011. The 
comment period closed on March 13, 2014.
    On March 31, 2015, DOE published a notice of proposed rulemaking in 
the Federal Register (March 2015 NOPR). 80 FR 17222. In the March 2015 
NOPR, DOE addressed in detail the comments received in earlier stages 
of the rulemaking, and proposed amended energy conservation standards 
for residential boilers. In conjunction with the March 2015 NOPR, DOE 
also published on its Web site the complete technical support document 
(TSD) for the proposed rule, which incorporated the analysis DOE 
conducted and technical documentation for each analysis. Also published 
on DOE's Web site were the LCC analysis spreadsheet and the national 
impact analysis standard spreadsheet. These materials are available at: 
https://www1.eere.energy.gov/buildings/appliance_standards/product.aspx?productid=89.
    In the March 2015 NOPR, DOE identified twenty four issues on which 
it was particularly interested in receiving comments and views of 
interested parties. 80 FR 17222, 17303-17304 (March 31, 2015). The 
comment period was initially set to end June 1, 2015, but it was 
subsequently extended to July 1, 2015 in a Federal Register notice 
published on May 20, 2015. 80 FR 28852. After the publication of the 
March 2015 NOPR, DOE received written comments on these and other 
issues. DOE also held a public meeting in Washington, DC, on April 30, 
2015 to discuss and receive comments regarding the tools and methods 
DOE used in the NOPR analysis, as well as the results of that analysis. 
DOE also invited written comments and announced the availability of a 
NOPR analysis technical support document (NOPR TSD). The NOPR TSD is 
available at: http://www.regulations.gov/#!documentDetail;D=EERE-2012-
BT-STD-0047-0036.
    The NOPR TSD described in detail DOE's analysis of potential 
standard levels for residential boilers. The document also described 
the analytical framework used in considering standard levels, including 
a description of the methodology, the analytical tools, and the 
relationships between the various analyses. In addition, the NOPR TSD 
presented each analysis that DOE performed to evaluate residential 
boilers, including descriptions of inputs, sources, methodologies, and 
results. DOE included the same analyses that were conducted at the 
preliminary analysis stage, with revisions based on comments received 
and additional research.
    Statements received after publication of the Framework Document, at 
the Framework public meeting, and comments received after the 
publication of the NODA and NOPR have helped identify issues involved 
in this rulemaking and have provided information that has contributed 
to DOE's resolution of these issues. The Department considered these 
statements and comments in developing revised engineering and other 
analyses for this final rule.

III. General Discussion

    DOE developed this final rule after considering verbal and written 
comments, data, and information from interested parties that represent 
a variety of interests. The following discussion addresses issues 
raised by these commenters.
    DOE received 21 comments in response to the March 2015 NOPR. These 
commenters include: A joint comment from the American Council for an 
Energy-Efficient Economy (ACEEE), the Appliance Standards Awareness 
Project (ASAP), the Alliance to Save Energy (ASE), the Consumer 
Federation of America (CFA), the National Consumer Law Center (NCLC), 
the Natural Resources Defense Council (NRDC), and the Northeast Energy 
Efficiency Partnerships (NEEP); four comments from the Air-
Conditioning, Heating, and Refrigeration Institute (AHRI); a comment 
from the Air Conditioning Contractors of America (ACCA); a comment from 
the Plumbing-Heating-Cooling Contractors National Association (PHCC); a 
comment from U.S. Chamber of Commerce; a comment from the Cato 
Institute; a comment from Oilheat Manufacturers Association; a comment 
from Exquisite Heat; and an anonymous comment. Manufacturers submitting 
written comments include: Energy Kinetics, Weil-McLain, Burnham

[[Page 2332]]

Holdings (Burnham), and Lochinvar. Gas utilities and associations who 
submitted written comments include: A joint comment from the American 
Gas Association (AGA) and the American Public Gas Association (APGA); 
Philadelphia Gas Works (PGW); National Propane Gas Association (NPGA); 
the Laclede Group; and the Laclede Gas Company. This final rule 
summarizes and responds to the issues raised in these comments. A 
parenthetical reference \15\ at the end of a comment quotation or 
paraphrase provides the location of the item in the public record.
---------------------------------------------------------------------------

    \15\ The parenthetical reference provides a reference for 
information located in the docket of DOE's rulemaking to develop 
energy conservation standards for residential boilers. (Docket No. 
EERE-2012-BT-0047, which is maintained at http://www.regulations.gov/#!docketDetail;D=EERE-2012-BT-STD-0047). The 
references are arranged as follows: (commenter name, comment docket 
ID number, page of that document).
---------------------------------------------------------------------------

A. Product Classes and Scope of Coverage

    When evaluating and establishing energy conservation standards, DOE 
divides covered products into product classes by the type of energy 
used or by capacity or other performance-related features that justify 
differing standards. In making a determination whether a performance-
related feature justifies a different standard, DOE must consider such 
factors as the utility of the feature to the consumer and other factors 
DOE determines are appropriate. (42 U.S.C. 6295(q))
    Existing energy conservation standards divide residential boilers 
into six product classes based on the fuel type (i.e., gas, oil, or 
electricity) and heating medium of the product (i.e., hot water or 
steam). For this rulemaking, DOE maintains the scope of coverage 
defined by its current regulations for the analysis of standards, so as 
to include six product classes of boilers: (1) Gas-fired hot water 
boilers; (2) gas-fired steam boilers; (3) oil-fired hot water boilers; 
(4) oil-fired steam boilers; (5) electric hot water boilers; and (6) 
electric steam boilers. DOE has not conducted an analysis of an AFUE 
standard level for electric boilers, as the AFUE of these products 
already approaches 100 percent. DOE also did not conduct an analysis of 
a standard level for combination appliances, as the DOE test procedure 
does not include a method with which to test these products. These 
reasons are explained in greater detail in section IV.A.1 of this final 
rule. However, DOE did include electric boilers within the scope of its 
analysis of standby mode and off mode energy conservation standards.
    The scope and product classes analyzed for this final rule are the 
same as those initially set forth in the Framework Document and 
examined in DOE's initial analysis, as well as what was proposed in the 
NOPR. Comments received relating to the scope of coverage are described 
in section IV.A of this final rule.

B. Test Procedure

    DOE's current energy conservation standards for residential boilers 
are expressed in terms of AFUE (see 10 CFR 430.32(e)(2)(ii)). AFUE is 
an annualized fuel efficiency metric that fully accounts for fossil-
fuel energy consumption in active, standby, and off modes. The existing 
DOE test procedure for determining the AFUE of residential boilers is 
located at 10 CFR part 430, subpart B, appendix N. The current DOE test 
procedure for residential boilers was originally established by a May 
12, 1997 final rule, which incorporates by reference the American 
Society of Heating, Refrigerating and Air-Conditioning Engineers 
(ASHRAE)/American National Standards Institute (ANSI) Standard 103-
1993, Method of Testing for Annual Fuel Utilization Efficiency of 
Residential Central Furnaces and Boilers (1993). 62 FR 26140, 26157.
    On October 20, 2010, DOE updated its test procedures for 
residential boilers in a final rule published in the Federal Register 
(October 2010 test procedure final rule). 75 FR 64621. This rule 
amended DOE's test procedure for residential furnaces and boilers to 
establish a separate metric for measuring the electrical energy use in 
standby mode and off mode for gas-fired, oil-fired, and electric 
boilers pursuant to requirements established by EISA 2007. In the final 
rule, DOE determined that due to the magnitude of the electrical 
standby/off mode versus active mode, a single efficiency metric is 
technically infeasible. The test procedure amendments were primarily 
based on and incorporate by reference provisions of the International 
Electrotechnical Commission (IEC) Standard 62301 (First Edition), 
``Household electrical appliances--Measurement of standby power.'' On 
December 31, 2012, DOE published a final rule in the Federal Register 
that updated the incorporation by reference of the standby mode and off 
mode test procedure provisions to refer to the latest edition of IEC 
Standard 62301 (Second Edition). 77 FR 76831.
    On July 10, 2013, DOE published a final rule in the Federal 
Register (July 2013 final rule) that modified the existing testing 
procedures for residential furnaces and boilers. 78 FR 41265. The 
modification addressed the omission of equations needed to calculate 
AFUE for two-stage and modulating condensing furnaces and boilers that 
are tested using an optional procedure provided by section 9.10 of 
ASHRAE 103-1993 (incorporated by reference into DOE's test procedure), 
which allows the test engineer to omit the heat-up and cool-down tests 
if certain conditions are met. Specifically, the DOE test procedure 
allows condensing boilers and furnaces to omit the heat-up and cool-
down tests, provided that the units have no measurable airflow through 
the combustion chamber and heat exchanger (HX) during the burner off 
period and have post-purge period(s) of less than 5 seconds. For two-
stage and modulating condensing furnaces and boilers, ASHRAE 103-1993 
(and by extension the DOE test procedure) does not contain the 
necessary equations to calculate the heating seasonal efficiency (which 
contributes to the ultimate calculation of AFUE) when the option in 
section 9.10 is selected. The July 2013 final rule adopted two new 
equations needed to account for the use of section 9.10 for two-stage 
and modulating condensing furnaces and boilers. Id.
    EPCA, as amended by EISA 2007, requires that DOE must review test 
procedures for all covered products at least once every 7 years. (42 
U.S.C 6293(b)(1)(A)) Accordingly, on March 11, 2015, DOE published a 
NOPR for the test procedure in the Federal Register (March 2015 test 
procedure NOPR), a necessary step toward fulfillment of the requirement 
under 42 U.S.C. 6293(b)(1)(A) for residential furnaces and boilers. 80 
FR 12876. After a stakeholder comment and review period, DOE published 
a final rule for the test procedure in January 2016 (January 2016 test 
procedure final rule). (See EERE-2012-BT-TP-0024). DOE must base the 
analysis of amended energy conservation standards on the most recent 
version of its test procedures, and accordingly, DOE used the amended 
test procedure when considering product efficiencies, energy use, and 
efficiency improvements in its analyses. Major changes adopted in the 
January 2016 test procedure final rule included:
     Clarifying the definition of the electrical power term PE;
     Adopting a smoke stick test for determining the use of 
minimum default draft factors;

[[Page 2333]]

     Allowing for the measurement of condensate under steady-
state conditions;
     Referencing the manufacturer's installation and operations 
(I&O) manual and providing clarification if the I&O manual does not 
specify test set up;
     Specifying ductwork for units installed without a return 
duct;
     Specifying testing requirements for units with 
multiposition configurations; and
     Revising the required reporting precision for AFUE.
     Adopting a verification method for determining whether a 
boiler incorporates an automatic means for adjusting water temperature 
and whether this design requirement functions as required.
    DOE received several comments from stakeholders relating to the 
residential furnace and boiler test procedure. These comments were 
considered and addressed in that rulemaking proceeding.

C. Technological Feasibility

1. General
    In each energy conservation standards rulemaking, DOE conducts a 
screening analysis based on information gathered on all current 
technology options and prototype designs that could improve the 
efficiency of the products or equipment that are the subject of the 
rulemaking. As the first step in such an analysis, DOE develops a list 
of technology options for consideration in consultation with 
manufacturers, design engineers, and other interested parties. DOE then 
determines which of those means for improving efficiency are 
technologically feasible. DOE considers technologies incorporated in 
commercially-available products 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 product 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). Additionally, it is DOE policy not to include in its 
analysis any proprietary technology that is a unique pathway to 
achieving a certain efficiency level. Section IV.B of this notice 
discusses the results of the screening analysis for residential 
boilers, particularly the designs DOE considered, those it screened 
out, and those that are the basis for the standards in this rulemaking. 
For further details on the screening analysis for this rulemaking, see 
chapter 4 of the final rule technical support document (TSD).
2. Maximum Technologically Feasible Levels
    When DOE proposes to adopt an amended standard for a type or class 
of covered product, it must determine the maximum improvement in energy 
efficiency or maximum reduction in energy use that is technologically 
feasible for such product. (42 U.S.C. 6295(p)(1)) Accordingly, in the 
engineering analysis, DOE determined the maximum technologically 
feasible (``max-tech'') improvements in energy efficiency for 
residential boilers, using the design parameters for the most efficient 
products available on the market or in working prototypes. The max-tech 
levels that DOE determined for this rulemaking are described in section 
IV.C of this final rule and in chapter 5 of the final rule TSD.

D. Energy Savings

1. Determination of Savings
    For each trial standard level (TSL), DOE projected energy savings 
from application of the TSL to residential boilers purchased in the 30-
year period that begins in the year of compliance with any amended 
standards (2021-2050).16 17 The savings are measured over 
the entire lifetime of products purchased in the 30-year analysis 
period.\18\ 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 
product would likely evolve in the absence of amended energy 
conservation standards, and it considers market forces and policies 
that affect demand for more-efficient products.
---------------------------------------------------------------------------

    \16\ The expected compliance year at the time of the NOPR was 
2020. For the final rule, the expected compliance year is 2021.
    \17\ DOE also presents a sensitivity analysis that considers 
impacts for products shipped in a 9-year period.
    \18\ In the past, DOE presented energy savings for only the 30-
year period that begins in the year of compliance. In the 
calculation of economic impacts, however, DOE considered operating 
cost savings measured over the entire lifetime of equipment shipped 
in the 30-year period. DOE has chosen to modify its presentation of 
national energy savings to be consistent with the approach used for 
its national economic analysis.
---------------------------------------------------------------------------

    DOE used its national impact analysis (NIA) spreadsheet model to 
estimate national energy savings (NES) from potential amended standards 
for residential boilers. The NIA spreadsheet model (described in 
section IV.H of this final rule) calculates energy savings in terms of 
site energy, which is the energy directly consumed by products at the 
locations where they are used. For electricity, DOE calculates NES on 
an annual basis in terms of primary energy \19\ savings, which is the 
savings in the energy that is used to generate and transmit the site 
electricity. To calculate primary energy savings from site electricity 
savings, DOE derived annual conversion factors from the model used to 
prepare the Energy Information Administration (EIA)'s AEO 2015. For 
natural gas and oil, the primary energy savings are considered equal to 
the site energy savings because they are supplied to the user without 
transformation from another form of energy.
---------------------------------------------------------------------------

    \19\ Primary energy consumption refers to the direct use at 
source, or supply to users without transformation, of crude energy; 
that is, energy that has not been subjected to any conversion or 
transformation process.
---------------------------------------------------------------------------

    In addition to primary energy savings, DOE also calculates full-
fuel-cycle (FFC) energy savings. As discussed in DOE's statement of 
policy and notice of policy amendment, the FFC metric includes the 
energy consumed in extracting, processing, and transporting primary 
fuels (e.g., coal, natural gas, petroleum fuels), and, thus, presents a 
more complete picture of the impacts of energy conservation standards. 
76 FR 51281 (August 18, 2011), as amended at 77 FR 49701 (August 17, 
2012). For FFC energy savings, DOE's approach is based on the 
calculation of an FFC multiplier for each of the energy types used by 
covered equipment. For more information on FFC energy savings, see 
section IV.H.2 of this notice. For natural gas, the primary energy 
savings are considered to be equal to the site energy savings.\20\
---------------------------------------------------------------------------

    \20\ U.S. Energy Information Administration/Annual Energy Review 
2011, Glossary, p.365 (Available at: http://www.eia.gov/totalenergy/data/annual/pdf/sec18.pdf).
---------------------------------------------------------------------------

2. Significance of Savings
    To adopt standards for a covered product, DOE must determine that 
such action would result in ``significant'' energy savings. (42 U.S.C. 
6295(o)(3)(B)) Although the term ``significant'' is not defined in the 
Act, the U.S. Court of Appeals for the District of Columbia Circuit, in 
Natural Resources Defense

[[Page 2334]]

Council v. Herrington, 768 F.2d 1355, 1373 (D.C. Cir. 1985), opined 
that Congress intended ``significant'' energy savings in the context of 
EPCA to be savings that are not ``genuinely trivial.'' The energy 
savings for all the TSLs considered in this rulemaking, including the 
adopted standards, are nontrivial, and, therefore, DOE considers them 
``significant'' within the meaning of section 325 of EPCA.

E. Economic Justification

1. Specific Criteria
    As noted above, EPCA provides seven factors to be evaluated in 
determining whether a potential energy conservation standard is 
economically justified. (42 U.S.C. 6295(o)(2)(B)(i)(I)-(VII)) The 
following sections discuss how DOE has addressed each of those seven 
factors in this rulemaking.
a. Economic Impact on Manufacturers and Consumers
    In determining the impacts of a potential amended standard on 
manufacturers, DOE conducts a manufacturer impact analysis (MIA), as 
discussed in section IV.J. DOE first uses an annual cash-flow approach 
to determine the quantitative impacts. This step includes both a short-
term assessment--based on the cost and capital requirements during the 
period between when a regulation is issued and when entities must 
comply with the regulation--and a long-term assessment over a 30-year 
period. The industry-wide impacts analyzed include: (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 types of 
manufacturers, including impacts on small manufacturers. Third, DOE 
considers the impact of standards on domestic manufacturer employment 
and manufacturing capacity, as well as the potential for standards to 
result in plant closures and loss of capital investment. Finally, DOE 
takes into account cumulative impacts of various DOE regulations and 
other regulatory requirements on manufacturers.
    For individual consumers, measures of economic impact include the 
changes in LCC and 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 product 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. 
6295(o)(2)(B)(i)(II)) DOE conducts this comparison in its LCC and PBP 
analysis.
    The LCC is the sum of the purchase price of a product (including 
its installation) and the operating cost (including energy, 
maintenance, and repair expenditures) discounted over the lifetime of 
the product. The LCC analysis requires a variety of inputs, such as 
product prices, product energy consumption, energy prices, maintenance 
and repair costs, product lifetime, and discount rates appropriate for 
consumers. To account for uncertainty and variability in specific 
inputs, such as product lifetime and discount rate, DOE uses a 
distribution of values, with probabilities attached to each value.
    The PBP is the estimated amount of time (in years) it takes 
consumers to recover the increased purchase cost (including 
installation) of a more-efficient product 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 consumers will 
purchase the covered products 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 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. 6295(o)(2)(B)(i)(III)) As 
discussed in section IV.H, DOE uses the NIA spreadsheet model to 
project national energy savings.
d. Lessening of Utility or Performance of Products
    In establishing product 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 products. (42 U.S.C. 6295(o)(2)(B)(i)(IV)) Based on data 
available to DOE, the standards adopted in this final rule will not 
reduce the utility or performance of the products under consideration 
in this rulemaking.
e. Impact of Any Lessening of Competition
    EPCA directs DOE to consider the impact of any lessening of 
competition, as determined in writing by the Attorney General, that is 
likely to result from a standard. (42 U.S.C. 6295(o)(2)(B)(i)(V)) It 
also directs the Attorney General to determine the impact, if any, of 
any lessening of competition likely to result from a standard and to 
transmit such determination to the Secretary within 60 days of the 
publication of a proposed rule, together with an analysis of the nature 
and extent of the impact. (42 U.S.C. 6295(o)(2)(B)(ii)) To assist the 
Department of Justice (DOJ) in making such a determination, DOE 
transmitted copies of both its proposed rule and NOPR TSD to the 
Attorney General for review, with a request that DOJ provide its 
determination on this issue. In its assessment letter responding to 
DOE, DOJ concluded that the proposed energy conservation standards for 
residential boilers are unlikely to have a significant adverse impact 
on competition. DOE is publishing the Attorney General's assessment at 
the end of this final rule.
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. 6295(o)(2)(B)(i)(VI)) The energy savings from the 
adopted standards are likely to provide improvements to the security 
and reliability of the nation's energy system. Reductions in the demand 
for electricity also may result in reduced costs for maintaining the 
reliability of the nation's electricity system. DOE conducts a utility 
impact analysis to estimate how standards may affect the nation's 
needed power generation capacity, as discussed in section IV.M.

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    The adopted standards also are likely to result in environmental 
benefits in the form of reduced emissions of air pollutants and 
greenhouse gases associated with energy production and use. DOE 
conducts an emissions impacts 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 final rule. DOE 
also estimates the economic value of emissions reductions resulting 
from the considered TSLs, as discussed in section IV.L.
g. Other Factors
    EPCA allows the Secretary of Energy, in determining whether a 
standard is economically justified, to consider any other factors that 
the Secretary deems to be relevant. (42 U.S.C. 6295(o)(2)(B)(i)(VII)) 
To the extent interested parties submit any relevant information 
regarding economic justification that does not fit into the other 
categories described above, DOE could consider such information under 
``other factors.'' For this final rule, DOE did not consider other 
factors.
2. Rebuttable Presumption
    As set forth in 42 U.S.C. 6295(o)(2)(B)(iii), EPCA creates a 
rebuttable presumption that an energy conservation standard is 
economically justified if the additional cost to the consumer of a 
product that meets the standard is less than three times the value of 
the first year's energy savings resulting from the standard, as 
calculated under the applicable DOE test procedure. DOE's LCC and PBP 
analyses generate values used to calculate the 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). The 
results of this analysis serve as the basis for DOE's evaluation of the 
economic justification for a potential standard level (thereby 
supporting or rebutting the results of any preliminary determination of 
economic justification). The rebuttable presumption payback calculation 
is discussed in section V.B.1 of this final rule.

F. General Comments

    During the April 30, 2015 public meeting, and in subsequent written 
comments in response to the March 2015 NOPR, stakeholders provided 
input regarding general issues pertinent to the rulemaking, such as 
issues regarding the proposed standard levels, as well as issues 
related to changes made to the test procedure. These issues are 
discussed in this section.
1. Proposed Standard Levels
    In response to the levels proposed in the NOPR (TSL 3), the joint 
efficiency commenters stated their support for the proposed standard 
levels and encouraged DOE to evaluate condensing levels for hot water 
boilers, noting that the national energy savings at TSL 4 would be more 
than five times greater than the savings at TSL 3. (The joint 
efficiency commenters, No. 62 at pp. 1-2)
    AHRI, Burnham, Lochinvar, Weil-McLain, and PHCC stated their 
opposition to the proposed standards at TSL 3 based on their concerns 
about several areas within the analysis. (AHRI, No. 64 at p. 1; 
Burnham, No. 60 at p. 1; Lochinvar, No. 63 at p. 1; Weil-McLain, No. 55 
at p. 1; PHCC, No. 61 at p. 1) Lochinvar encouraged DOE to consider 
adopting TSL 2, and PHCC suggested that DOE make minimal increases (one 
percentage point) to standards. (Lochinvar, No. 63 at p. 5; PHCC, No. 
61 at p. 1) AHRI and Lochinvar also suggested that the efficiency 
levels presented in the NOPR at TSL 4 are not economically justified as 
minimum standards. (AHRI, No. 64 at p. 1; Lochinvar, No. 63 at p. 5)
    Burnham stated that under the proposed standards, tens of thousands 
of consumers will lose choice, be effectively required to retain and 
repair old, inefficient units, or be forced into costly and even 
dangerous retrofits. (Burnham, No. 60 at p. 1) Burnham stated that 
DOE's proposed standards are based in part on energy use 
characterizations, installation costs, operating costs, and lifecycle 
costs which are flawed and tend to overstate the benefit of the 
proposed standards, and thereby, they do not meet EPCA's requirements 
of maximum improvements in energy efficiency that are technologically 
feasible and economically justified. Burnham stated that after 
correcting for the various technical issues, the LCC savings for 85-
percent AFUE and higher gas-fired hot water boilers decrease 
substantially, even becoming negative. (Burnham, No. 60 at pp. 2, 4) 
Burnham stated that the DOE analysis either needs to be reanalyzed or 
that DOE needs to set standards for gas-fired hot water boilers at a 
level below 85-percent AFUE. (Burnham, No. 60 at p. 20)
    Weil-McLain stated that significant additional costs will be 
imposed on consumers to achieve a hypothetical increase in energy 
savings by installing an 85-percent AFUE gas hot water boiler rather 
than an 82- or 83-percent AFUE boiler that would not entail all of 
these additional costs. (Weil-McLain, No. 55 at p. 3)
    U.S. Boiler stated that a better alternative to the proposed rule 
would be to set a minimum efficiency level of 83 percent AFUE, which 
would allow most existing chimneys to stay in use without alteration. 
U.S. Boiler stated that such a standard gives homeowners choices 
regarding installation of higher-efficiency boilers. (U.S. Boiler, 
Public Meeting Transcript, No. 50 at p. 291)
    ACCA stated that, if not properly addressed, the issues with the 
analysis can lead to unintended consequences, such as driving some 
homeowners to repair and maintain older systems instead of replacing 
their equipment. (ACCA, No. 65 at p. 3)
    The Department appreciates stakeholder comments with regard to the 
TSL selection and notes that DOE is required to set a standard that 
achieves the maximum energy savings that is determined to be 
technologically feasible and economically justified. In making such a 
determination, DOE must consider, to the extent practicable, the 
benefits and burdens based on the seven criteria described in EPCA (see 
42 U.S.C. 6295(o)(2)(B)(i)(I)-(VII)). DOE's weighing of the benefits 
and burdens based on the final rule analysis and rationale for the TSL 
selection is discussed in section V. DOE notes that much of the 
commentary regarding the selection of TSL levels for the standards is 
based on more detailed comments regarding specific portions of the 
final rule analysis. These comments related to specific analyses are 
addressed within the specific analysis section to which they pertain. 
However, as a general matter, DOE notes that in light of the comments 
and data provided by stakeholders, the agency carefully reexamined its 
data and analyses for residential boilers, ultimately reassessing the 
appropriate efficiency levels for some product classes. Specifically, 
DOE determined to adopt a standard level at 84-percent AFUE for gas-
fired hot water boilers and 85-percent AFUE for oil-fired steam 
boilers, which DOE determined meet the criteria for TSL 3 without 
causing harms described by the stakeholders. Regarding safety issues at 
84-percent

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AFUE for gas-fired hot water boilers, DOE determined that at this 
efficiency, there is no difference in terms of their ability to meet 
minimum NFGC safety requirements, as compared to 82-percent and 83-
percent AFUE models. Section III.F.3 further discusses the 84-percent 
efficiency level safety considerations. In regards to 85-percent AFUE 
for oil-fired steam boilers, such efficiency level results in oil-fired 
steam boilers being one AFUE point lower than the oil-fired hot water 
boilers standards, which is at 86-percent AFUE. This addresses 
stakeholder concerns about manufacturing burden associated with having 
separate tooling for oil-fired steam models and for oil-fired hot water 
models, because as AHRI noted, an oil-fired steam boiler will operate 
slightly less efficiently than an oil-fired hot water boiler of the 
same design. (AHRI No. 67, at p. 2) DOE reviewed the oil-fired boiler 
market, and found that a 1-percent AFUE difference between oil-fired 
steam and hot water boilers is typical, so the adopted standards of 86-
percent AFUE for oil-fired hot water boilers and 85-percent AFUE for 
oil-fired steam boilers will allow manufacturers to maintain one design 
for both oil-fired steam and oil-fired hot water boilers. Results are 
discussed further in section V of this document and in the final rule 
TSD.
2. Simultaneous Changes in Test Procedures and Energy Conservation 
Standards
    Several stakeholders expressed legal, procedural, and practical 
concerns regarding the timing of the proposed test procedures and 
energy conservation standards revisions for residential boilers. 
Several stakeholders requested that DOE delay any further work on the 
rulemakings to amend efficiency standards for residential boilers until 
after the finalization of the test procedure. (AHRI, No. 64 at p. 2; 
Lochinvar, No. 63 at p. 1; Burnham, No. 60 at p. 5; AGA/APGA, No. 54 at 
p. 11; ACCA, No. 65 at p. 1) Specifically, AHRI requested that DOE 
reopen the docket for the March 2015 residential boiler standards NOPR 
once the test procedure has been finalized. (AHRI, No. 64 at p. 2) AHRI 
argued that the non-final status of the test procedure inhibits 
stakeholders' fair evaluation of the proposed standards and stressed 
the importance of having a known efficiency test procedure. AHRI 
commented that when a test procedure is in flux, manufacturers must 
spend resources collecting potentially unusable data which undermines 
their ability to effectively provide input on the proposed efficiency 
standards. Similarly, AHRI added that when a test procedure is not 
finalized, a manufacturer has no way of determining whether the test 
procedure will affect its ability to comply with a proposed revised 
standard. (AHRI, No. 64 at p. 2)
    Many of these commenters were concerned about the timing of the 
energy conservation standards and test procedures rulemakings, given 
their expectation that the proposed changes to the test procedures for 
residential boilers would result in changes to the AFUE rating metric. 
Specifically, AHRI, Burnham, and Weil-McLain stated that the changes to 
the test procedure presented in the March 2015 TP NOPR would result in 
significant changes to the AFUE measurement. (AHRI, No. 64 at p. 1; 
Burnham, No. 60 at p. 6; Weil-McLain, No. 55 at p. 7) Burnham noted 
that the fact that the test procedure rulemaking is ongoing makes it 
impossible to gauge the effects of its final rule on proposed energy 
conservation standards. (Burnham, No. 60 at p. 6) AHRI stated that the 
proposed test procedure, if finalized, is not neutral and will require 
an adjustment of the AFUE standard to accommodate for the test effects. 
AHRI disagreed with DOE's tentative determination in the March 2015 TP 
NOPR that the proposed updates to the AFUE test method would not affect 
the AFUE ratings. AHRI stated that test data it is collecting shows 
that the proposed test procedure changes the resulting AFUE 
measurement. AHRI noted that one such change affecting AFUE is the 
proposed change to the procedure for burner set-up. (AHRI, No. 64 at p. 
3)
    Several stakeholders also contended that the timing of the test 
procedures and standards rulemakings violated certain procedural 
requirements, or DOE's own procedural policies. Burnham asserted that 
the simultaneous test procedure and standards rulemaking raises 
concerns under the Data Quality Act, and stated that the law and OMB 
guidelines require agency actions aimed at ``maximizing the quality, 
objectivity, utility, and integrity of information (including 
statistical information) disseminated by the agency.'' Burnham 
commented that DOE has considerable work ahead to comply with this 
requirement, and cited section 515 of the Treasury and General 
Government Appropriations Act for Fiscal Year 2001 (Pub. L. 106-554; HR 
5658) at section 515(b)(2)(a). (Burnham, No. 60 at pp. 3, 6) AHRI, 
ACCA, and Burnham stated that by publishing the March 2015 TP NOPR 
within weeks of the proposed efficiency standards, DOE has failed to 
abide by its codified procedures at 10 CFR part 430, subpart C, 
appendix A(7)(c). (AHRI, No. 64 at p. 2; ACCA, No. 65 at p. 1; Burnham, 
No. 60 at p. 6) AHRI stated that The Administrative Procedure Act (APA) 
requires agencies to abide by their policies and procedures, especially 
where those rules have a substantive effect, and that the non-final 
test procedure has the substantive effect of increasing costs to 
stakeholders and diminishing their ability to comment on the efficiency 
standards. (AHRI, No. 64 at p. 2) AHRI noted that DOE is required to 
give stakeholders the opportunity to provide meaningful comments (see 
42 U.S.C. 6295(p)(2), 6306(a)), and asserted that the close timing of 
the test procedures and standards NOPRs diminishes that opportunity. 
(AHRI, No. 64 at p. 2)
    DOE does not believe that the timing of the test procedure and 
standards rulemakings has negatively impacted stakeholder's ability to 
provide comment. DOE has afforded interested parties an opportunity to 
provide comment on both the residential boiler standards rulemaking and 
the residential furnace and boiler test procedure rulemaking, 
consistent with the requirements of EPCA and all other relevant 
statutory provisions. Further, given the publication of the boilers 
test procedure final rule and the fact that none of the adopted changes 
will impact AFUE, DOE has determined it is not necessary to delay this 
standards rulemaking.
    With regard to the specific concerns raised by stakeholders 
regarding changes to the AFUE metric, DOE determined in the March 2015 
TP NOPR that the proposed test procedure amendments would have a de 
minimis impact on products' measured efficiency. 80 FR 12876, 12878 
(March 11, 2015). However, as discussed above, DOE received comments 
from stakeholders both in response to the March 2015 test procedure 
NOPR and to the March 2015 standards NOPR suggesting that several 
provisions within the March 2015 test procedure NOPR would 
significantly impact AFUE ratings. In the January 2016 test procedure 
final rule, DOE responded to each of these comments and ultimately did 
not adopt those provisions which were suggested to cause changes to the 
AFUE ratings. The specific comments and proposals that were and were 
not adopted are discussed in detail in the January 2016 TP final rule. 
As discussed in the January 2016 TP final rule, because DOE ultimately 
did not adopt the proposed changes that were suggested to impact the 
AFUE ratings, the Department has concluded that all of the recent 
updates to the test

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procedure will have a de minimis impact on AFUE ratings. Furthermore, 
DOE is adopting its amended and new standards for residential boilers 
based upon use of the revised test procedures, so any changes to the 
test procedure that could affect measured energy efficiency were fully 
taken into account in those standards.
    Second, with regard to Burnham's assertion that DOE has not met the 
requirements of the Data Quality Act (DQA), DOE does not believe that 
the timing of the test procedure and standards rulemakings are matters 
within the Department's guidelines implementing the DQA. DOE has 
concluded that the data, analysis, and models it has used in this 
rulemaking adhered to the requirements of the Data Quality Act. 
Further, DOE strived to maximize the quality, objectivity, utility, and 
integrity of the information disseminated in this rulemaking (see 
section VI.J for more information on these requirements and DOE's 
determination). As noted above, the January 2016 test procedure final 
rule removed all of the provisions within the March 2015 test procedure 
NOPR that could significantly impact AFUE ratings.
    Finally, with regard to the comments stating that DOE has failed to 
abide by its codified procedures at 10 CFR 430, subpart C, appendix A 
(7)(c), Appendix A establishes procedures, interpretations, and 
policies to guide DOE in the consideration and promulgation of new or 
revised appliance efficiency standards under EPCA. (See section 1 of 10 
CFR 430 subpart C, appendix A) Those procedures are a general guide to 
the steps DOE typically follows in promulgating energy conservation 
standards. The guidance recognizes that DOE can and will, on occasion, 
deviate from the typical process. Accordingly, DOE has concluded that 
there is no basis to delay the final rule adopting standards for 
residential boilers.
3. Safety Issues
    Lochinvar stated that the DOE analysis does not account for the 
impact of the proposed residential boiler standards on public safety. 
Specifically, Lochinvar stated that if 85-percent AFUE becomes the 
standard for gas-fired hot water boilers, the likelihood that the 
boilers will consistently have proper product installations and venting 
system design diminishes. (Lochinvar, No. 63 at p. 5) AHRI stated that 
the consumer safety impacts should eliminate consideration of a minimum 
efficiency standard appreciably above the current minimum standards for 
gas-fired and oil-fired boilers. (AHRI, No. 64 at pp. 3-4) Burnham 
stated that consumer safety hazards, along with the imposition of 
liability on manufacturers concordant with such safety hazards, alone 
justify the exclusion of Category I gas boilers at the 85-percent and 
84-percent efficiency levels. (Burnham, No. 60 at p. 13)
    Burnham stated that an 85-percent AFUE standard will risk hazards 
associated with old products being left in service long after it should 
be replaced due to higher replacement costs, and old boilers being 
replaced by less safe alternatives such as kerosene heaters. (Burnham, 
No. 60 at p. 3) Burnham stated that for 85-percent AFUE boilers, there 
are too many potential installations which breach acceptable safety 
levels. Furthermore, low-income consumers who do not have the resources 
to afford the necessary venting system upgrades required with 
condensing or near-condensing products will be imperiled. (Burnham, No. 
60 at p. 7)
    Burnham also stated that by selecting an 85-percent AFUE standard 
for gas-fired hot water boilers, DOE is risking carbon monoxide 
poisoning in situations where there are venting approaches used that 
meet building codes but which may not be adequate for full safety. 
(Burnham, No. 60 at pp. 3-4) Lochinvar stated that the condensation of 
flue gasses in venting will corrode conventional venting and may lead 
to spilling carbon monoxide into occupied spaces and death. (Lochinvar, 
No. 63 at p. 3)
    Weil-McLain stated that the issues associated with the proposed 
retrofit venting requirements also create a potential safety hazard 
because positive pressure venting could push flue gases into the 
building. (Weil-McLain, No. 55 at p. 3) ACCA and Weil-McLain stated 
that there will be some less-skilled installers or do-it-yourselfers 
who may install the higher efficiency models incorrectly, resulting in 
safety problems. (ACCA, No. 65 at pp. 2-3; Weil-McLain, No. 55 at p. 3)
    AHRI stated that the results of the analysis done by Gas Technology 
Institute (GTI), as contained in a report prepared for AHRI using a 
Vent-II tool, show that at an 84-percent or 85-percent AFUE level, the 
potential for excessive wetting in the vent system increases. As 
explained in the report, the ``wet time'' limits are values that have 
been used to establish the coverage for properly sized and configured 
vent systems for atmospheric gas-fired boilers in the National Fuel Gas 
Code (NFGC). When the Vent-II analysis shows wet times exceeding these 
limits, it is an indication of excessive condensation which increases 
the potential for condensate-induced corrosion and subsequent vent 
system failure, resulting in safety problems. (AHRI, No. 67 at p. 1)
    In response, DOE has concluded that manufacturers will provide 
adequate guidance for installers to ensure that the venting system is 
safe. Furthermore, DOE assumed that 85-percent AFUE boilers would 
either be Category I or Category III appliances, and DOE accounted for 
a fraction of installations that would require a stainless steel vent 
connector or stainless steel venting to mitigate the dangers of 
potential corrosion issues. In any case, DOE is not adopting a standard 
at 85-percent AFUE for gas-fired boilers, so the potential problems 
raised by the stakeholders will not be an issue.
    Regarding safety issues at to 84-percent AFUE, based on Burnham's 
data, AHRI's contractors' survey, and models available in the AHRI 
directory, DOE determined that the fraction of shipments and model 
availability with mechanical draft for the 82-percent to 84-percent 
AFUE boilers is about the same. In addition, AHRI's Vent-II analysis 
showed that for all 21 different scenario cases, 82-percent to 84-
percent AFUE boilers demonstrated no difference in terms of their 
ability to meet the dryout wet times required to achieve the minimum 
NFGC safety requirements.\21\
---------------------------------------------------------------------------

    \21\ National Fire Protection Association, NFPA 54 (ANSI 
Z223.1): National Fuel Gas Code (2015) (Available at: http://www.nfpa.org/codes-and-standards/document-information-pages?mode=code&code=54).
---------------------------------------------------------------------------

4. Other
    The Laclede group stated that DOE is not adhering to the process 
transparency and scientific integrity policies as set forth in 1996 
``Process Improvement Rule'' and outlined in 10 CFR 430, subpart C, 
appendix A (7)(g). 61 FR 36974 (July 15, 1996). Laclede also asserted 
that through the inconsistent application of the process improvement 
rule, DOE is not adhering to the consistency and transparency 
requirements outlined in the Treasury and General Government 
Appropriations Act of 2001, the Paperwork Reduction Act of 1995 
(primarily Section 515), and the ``Presidential Scientific Integrity 
Memorandum'' issued on March 9, 2009, which was further clarified by 
the Director of the Office of Science and Technology Policy 
``Memorandum to the Heads of Departments and Agencies'' of December 17, 
2010. (Laclede, No. 58 at pp. 7-9)

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    As discussed in sections VI.C, J, and L and illustrated elsewhere 
in this document, DOE has developed analytical processes and data that 
ensure the quality of its information and the transparency of its 
analytical processes. In furtherance of these objectives and 
requirements, DOE has offered several opportunities for public comment 
on multiple documents, including documents made available prior to 
proposing any rule, and addressed stakeholder concerns at the April 30, 
2015 public meeting, providing clarifications in an open and 
transparent fashion.
    The Laclede group also stated that DOE failed to meet the 
requirements of Executive Order 12866, ``Regulatory Planning and 
Review,'' through the refusal to consider the alternative of not 
regulating. (Laclede, No. 58 at p. 7) DOE considered alternatives to 
regulating, including no new regulatory action. A full discussion of 
the non-regulatory alternatives considered by DOE is presented in the 
regulatory impact analysis found in chapter 17 of the final rule TSD.
    As discussed previously, DOE believes it is in compliance with the 
requirements of 515 of the Treasury and Gen. Government Appropriations 
Act for fiscal year 2001 (Public Law 106-554; HR 5658) at section 
515(b)(2)(a). (See section VI.J of this document.) For the final rule 
stage, DOE has incorporated feedback from interested parties, as 
appropriate, related to the energy use characterization, installation 
costs, operating costs, and lifecycle costs, leading to revisions in 
this analysis as compared to the analysis presented for the March 2015 
NOPR. The specific comments and any related revisions are discussed in 
more detail in the applicable subsections of section IV of this 
document.
    AHRI stated that DOE bears the burden, on the basis of substantial 
evidence, to demonstrate that the proposed standards are 
technologically feasible and economically justified. AHRI claimed that 
the DOE has attempted to impermissibly shift its statutory burden of 
data production onto stakeholders by forcing them to disprove several 
unreasonable assumptions including the price elasticity of boilers, as 
well as the lifetime of condensing boilers. AHRI stated that at a 
minimum, DOE has the responsibility to explain the basis for its 
assumptions. (AHRI, No. 64 at p. 4)
    In response to AHRI, DOE notes that it conducts its analyses with 
the best available information that it is aware of, and seeks comment 
from interested parties as a way to ensure analytical robustness and 
verify the accuracy of the assumptions and information used in the 
rulemaking process. DOE then revises its analyses based on comments, 
information, and data collected through additional research and 
presented by stakeholders, as applicable, in later rulemaking stages. 
In some cases, additional relevant but unpublished data may reside with 
the regulated community and can be considered by DOE only if provided 
by those regulated parties. DOE has provided detailed comment responses 
regarding the specific assumptions outlined by AHRI in sections 
IV.F.2.d and IV.G.
    In response to the NOPR, Weil-McLain stated that DOE had changed 
its position outlined in the NODA to not amend energy conservation 
standards for residential boilers. Weil-McLain added that DOE did so 
without explanation for the change in recommendation. (Weil-McLain, No. 
55 at p.8)
    In response, DOE emphasizes that the 2014 NODA was not a 
determination on whether to amend standards for residential boilers. 
Rather, it was a publication of the analysis and results at a 
preliminary stage (i.e., before the NOPR) so that stakeholders could 
review and comment on the analytical output, the underlining 
assumptions, and the calculations that may ultimately be used to 
support amended standards. The DOE statement to which Weil-McLain 
refers is correct in that the 2014 NODA did not propose any amendments 
to the standards because at that early stage, DOE was not prepared to 
do so. It was not a statement that it had determined not to propose 
standards. Therefore, DOE did not change its position from the 
publication of the 2014 NODA to the publication of the 2015 NOPR.

IV. Methodology and Discussion of Related Comments

    This section addresses the analyses DOE has performed for this 
rulemaking with regard to residential boilers. Separate subsections 
address each component of DOE's analyses.
    DOE used several analytical tools to estimate the impact of the 
standards considered in this document. The first tool is a spreadsheet 
that calculates the LCC and PBP of potential amended or new energy 
conservation standards. The national impact 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 this rulemaking at: http://www1.eere.energy.gov/buildings/appliance_standards/rulemaking.aspx?ruleid=112. 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

    DOE develops information in the market and technology assessment 
that provides an overall picture of the market for the products 
concerned, including the purpose of the products, the industry 
structure, manufacturers, market characteristics, and technologies used 
in the products. This activity includes both quantitative and 
qualitative assessments, based primarily on publicly-available 
information. The subjects addressed in the market and technology 
assessment for this rulemaking include: (1) A determination of the 
scope of the rulemaking and product classes; (2) manufacturers and 
industry structure; (3) existing efficiency programs; (4) shipments 
information; (5) market and industry trends; and (6) technologies or 
design options that could improve the energy efficiency of residential 
boilers. The key findings of DOE's market assessment are summarized 
below. See chapter 3 of the final rule TSD for further discussion of 
the market and technology assessment.
1. Scope of Coverage
    In the NOPR, DOE proposed to maintain the scope of coverage as 
defined by its current regulations for this analysis of new and amended 
standards, which includes six product classes of residential boilers: 
(1) Gas-fired hot water boilers, (2) gas-fired steam boilers, (3) oil-
fired hot water boilers, (4) oil-fired steam boilers, (5) electric hot 
water boilers, and (6) electric steam boilers. As discussed in further 
detail in the paragraphs below, DOE excluded several types of 
residential boilers from the analysis in both the March 2015 NOPR and, 
subsequently, in this final rule.
    DOE did not consider combination space and water heating appliances 
for this final rule. Combination appliances provide both space heating 
and domestic hot water to a residence. These products are available on 
the market in two major configurations, including a water heater fan-
coil combination unit and a boiler tankless coil combination unit. 
Currently, manufacturers certify

[[Page 2339]]

combination appliances by rating the efficiency of the unit when 
performing their primary function (i.e., space heating for boiler 
tankless coil combination units or water heating for water heater fan-
coil units). As explained in the March 2015 NOPR, DOE proposed to 
exclude such products from the analysis conducted for this rulemaking. 
80 FR 17222, 17238 (March 31, 2015). DOE did not receive any comments 
related to the coverage of combination appliances, and, thus, has not 
include them in this final rule.
    DOE did not include electric boilers in the analysis of amended 
AFUE standards. (However, DOE has considered standby mode and off mode 
standards for electric boilers.) Electric boilers do not currently have 
an AFUE requirement under 10 CFR 430.32(e)(2)(ii). Electric boilers 
typically use electric resistance coils as their heating elements, 
which are highly efficient. Furthermore, the current DOE test procedure 
for determining AFUE classifies boilers as indoor units and, thus, 
considers jacket losses to be usable heat, because those losses would 
go to the conditioned space. The efficiency of these products already 
approaches 100 percent AFUE. Therefore, there are no options for 
increasing the rated AFUE of this product, and the impact of setting 
AFUE energy conservation standards for these products would be 
negligible. DOE proposed not to analyze amended AFUE standards for 
electric boilers in the March 2015 NOPR and did not receive any 
comments relating to this proposal. 80 FR 17222, 17238 (March 31, 
2015).
    DOE also did not include boilers that are manufactured to operate 
without the need for electricity in the analysis of amended AFUE 
standards. As was noted in the March 2015 NOPR, an exception already 
exists for boilers which are manufactured to operate without any need 
for electricity. (42 U.S.C. 6295(f)(3)(C); 10 CFR 430.32(e)(2)(iv)) 80 
FR 17222, 17238 (March 31, 2015). Thus, DOE did not consider such 
products in the course of this analysis, and such products are not 
covered by the amended standards. DOE did not receive any comments in 
response to its proposal to exclude these products in the March 2015 
NOPR.
    In summary, DOE did not receive any comments in response to the 
NOPR regarding scope of coverage. Therefore, the scope used for the 
analysis of this final rule is the same as the scope used for the NOPR 
analysis.
2. Product Classes
    When evaluating and establishing energy conservation standards, DOE 
divides covered products into product classes by the type of energy 
used or by capacity or other performance-related features that justify 
a different standard. In making a determination whether a performance-
related feature justifies a different standard, DOE must consider such 
factors as the utility to the consumer of the feature and other factors 
DOE determines are appropriate. (42 U.S.C. 6295(q)) For this 
rulemaking, as discussed in the preceding section, DOE proposes to 
maintain the scope of coverage as defined by its current regulations 
for this analysis of standards, which includes six product classes of 
boilers. Table IV.1 lists the six product classes examined in the final 
rule.

           Table IV.1--Product Classes for Residential Boilers
------------------------------------------------------------------------
            Boiler by fuel type                 Heat transfer medium
------------------------------------------------------------------------
Gas-fired Boiler..........................  Steam.
                                            Hot Water.
Oil-fired Boiler..........................  Steam.
                                            Hot Water.
Electric Boiler...........................  Steam.
                                            Hot Water.
------------------------------------------------------------------------

    In response to the proposed product classes included in the March 
2015 NOPR, AGA, APGA, and PGW requested that DOE establish separate 
product classes for residential condensing and non-condensing boilers. 
(AGA, No. 54 at p. 11; PGW, No. 57 at p. 2) AGA stated that non-
condensing boilers provide customers unique performance-related 
characteristics and consumer utility due to distinct venting 
characteristics and building constraints on installations. AGA stated 
that failure to adopt separate product classes would be inconsistent 
with DOE precedent. (AGA, No. 54 at p. 6)
    Burnham stated that loss of the ability to use Category I venting 
(suitable for non-condensing boilers) is a loss in utility because the 
circumstances of many real world installations offer no practical 
alternatives to Category I venting, particularly in urban areas with 
closely-spaced residences. Burnham argued that providing heat and hot 
water are not the only utility functions, features, and performance 
characteristics of boilers, and that designs that allow proper 
installation in a variety of dwellings are a critical aspect of utility 
so that such products can be installed and used safely. Burnham stated 
limited exterior wall space and building or safety code or physical 
restrictions on where exhaust terminals can be located can cause 
venting issues, and that these constraints can be a particular problem 
in urban areas with homes that are either closely spaced or conjoined. 
Burnham gave the example of older ``row homes'' found in Northeastern 
cities, which Burnham asserted represent a large part of the U.S. 
residential boiler market. (Burnham, No. 60 at p. 14) In addition, 
Burnham stated that there is a point at which increasing installation 
costs become large enough to effectively create a ``loss of utility,'' 
and this situation in the real world is as likely to ``result in the 
unavailability'' of appropriate non[hyphen]condensing boilers as a pure 
design issue. Burnham stated that this is a direct violation of the 
``safe harbor rule'' in 42 U.S.C. 6295(o)(4), among other provisions. 
(Burnham, No. 60 at pp. 4-16)
    DOE received similar comments in response to the February 11, 2014 
NODA and preliminary analysis, and addressed the comments in the March 
31, 2015 NOPR. 79 FR 8122; 80 FR 17222. DOE maintains its position from 
the NOPR and reiterates that the utility derived by consumers from 
boilers is in the form of the space heating function that a boiler 
performs, rather than the type of venting the boiler uses. Condensing 
and non-condensing boilers perform equally well in providing this 
heating function. Likewise, a boiler requiring Category I venting and a 
boiler requiring Category IV venting are capable of providing the same 
heating function to the consumer, and, thus, provide virtually the same 
utility with respect to their primary function. DOE does not consider 
reduced costs associated with Category I venting in certain 
installations as a special utility, but rather, as was done in the 
March 2015 NOPR, the costs were considered as an economic impact on 
consumers that is considered in the rulemaking's cost-benefit analysis. 
DOE does not agree with Burnham's assertion that costs can become so 
prohibitively expensive that they should be considered a loss of 
utility of the product. Rather, the larger expense should be considered 
as an economic impact on consumers in the rulemaking's cost-benefit 
analysis and ultimately the analysis will determine if a cost is 
economically prohibitive. DOE considered the additional cost of adding 
vent length required to change the vent location to avoid the code 
limitations outlined by Burnham. Details regarding installation costs 
can be located in section IV.F.2. DOE maintains that this final rule is 
not in violation of the 42 U.S.C. 6295(o)(4), because it does not 
result in the unavailability of any covered product class of 
performance

[[Page 2340]]

characteristics, features, sizes, capacities and volumes. DOE does not 
consider the type of venting to be a ``feature'' that would provide 
utility to consumers, other than the economic benefits of the venting 
type which are properly considered in the economic analysis.
3. Technology Options
    As part of the market and technology assessment, DOE develops a 
comprehensive list of technologies to improve the energy efficiency of 
residential boilers. In the final rule analysis, DOE identified ten 
technology options that would be expected to improve the AFUE of 
residential boilers, as measured by the DOE test procedure: (1) Heat 
exchanger improvements; (2) modulating operation; (3) dampers; (4) 
direct vent; (5) pulse combustion; (6) premix burners; (7) burner 
derating; (8) low-pressure air-atomized oil burner; (9) delayed-action 
oil pump solenoid valve; and (10) electronic ignition.\22\ In addition, 
DOE identified three technologies that would reduce the standby mode 
and off mode energy consumption of residential boilers: (1) Transformer 
improvements; (2) control relay for models with brushless permanent 
magnet motors; and (3) switching mode power supply.
---------------------------------------------------------------------------

    \22\ Although DOE has identified vent dampers and electronic 
ignition as technologies that improve residential boiler efficiency, 
DOE did not consider these technologies further in the analysis as 
options for improving efficiency of baseline units, because they are 
already included in baseline residential boilers.
---------------------------------------------------------------------------

    DOE received no comments suggesting additional technology options 
in response to the NOPR analysis, and thus, DOE has maintained the same 
list of technologies in the final rule analysis. After identifying all 
potential technology options for improving the efficiency of 
residential boilers, DOE performed the screening analysis (see section 
IV.B of this final rule or chapter 4 of the final rule TSD) on these 
technologies to determine which could be considered further in the 
analysis and which should be eliminated.

B. Screening Analysis

    DOE uses the following four screening criteria to determine which 
technology options are suitable for further consideration in an energy 
conservation standards rulemaking:
    1. Technological feasibility. Technologies that are not 
incorporated in commercial products or in working prototypes will not 
be considered further.
    2. Practicability to manufacture, install, and service. If it is 
determined that mass production and reliable installation and servicing 
of a technology in commercial products could not be achieved on the 
scale necessary to serve the relevant market at the time of the 
compliance date of the standard, then that technology will not be 
considered further.
    3. Impacts on product utility or product availability. If it is 
determined that a technology would have significant adverse impact on 
the utility of the product to significant subgroups of consumers or 
would result in the unavailability of any covered product type with 
performance characteristics (including reliability), features, sizes, 
capacities, and volumes that are substantially the same as products 
generally available in the United States at the time, it will not be 
considered further.
    4. Adverse impacts on health or safety. If it is determined that a 
technology would have significant adverse impacts on health or safety, 
it will not be considered further.

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

    In sum, if DOE determines that a technology, or a combination of 
technologies, fails to meet one or more of the above four criteria, it 
will be excluded from further consideration in the engineering 
analysis. Additionally, it is DOE policy not to include in its analysis 
any proprietary technology that is a unique pathway to achieving a 
certain efficiency level. The reasons for eliminating any technology 
are discussed below.
    The subsequent sections include comments from interested parties 
pertinent to the screening criteria, DOE's evaluation of each 
technology option against the screening analysis criteria, and whether 
DOE determined that a technology option should be excluded (``screened 
out'') based on the screening criteria.
1. Screened-Out Technologies
    During the NODA and NOPR phases, DOE screened out pulse combustion 
as a technology option for improving AFUE and screened out control 
relay for boiler models with brushless permanent magnet motors as a 
technology option for reducing standby electric losses. DOE decided to 
screen out pulse combustion based on manufacturer feedback during the 
Framework public meeting indicating that pulse combustion boilers have 
had reliability issues in the past, and therefore, manufacturers do not 
consider this a viable option to improve efficiency. Further, 
manufacturers indicated that similar or greater efficiencies than those 
of pulse combustion boilers can be achieved using alternative 
technologies. DOE did not receive any comments related to screening out 
pulse combustion and maintained this position for the final rule, and 
accordingly, maintained its position from the NOPR to screen out pulse 
combustion as a technology option.
    In the NODA and NOPR analysis, DOE decided to screen out the option 
of using a control relay to depower BPM motors due to feedback received 
during the residential furnace rulemaking (which was reconfirmed during 
manufacturer interviews for the residential boiler rulemaking), which 
indicated that using a control relay to depower brushless permanent 
magnet motors could reduce the lifetime of the motors. The result of 
such a design would likely be excessively frequent repair and 
maintenance of the boiler to replace the motor.
    DOE also screened out burner derating as a technology option in the 
NOPR and final rule analysis. Burner derating reduces the burner firing 
rate while keeping heat exchanger geometry and surface area and the 
fuel-air ratio the same, which increases the ratio of heat transfer 
surface area to energy input, and increases the efficiency. However, 
the lower energy input means that less heat is provided to the user 
than with conventional burner firing rates. As a result of the 
decreased heat output of the boiler with derated burners, DOE has 
screened out burner derating as a technology option, as it could reduce 
consumer utility.
    The efficiency advocates recommended that DOE assess whether the 
de-powering could be done in a manner to minimize the number of power 
cycles to address concerns regarding potential product life impacts, 
for example by only disconnecting when the boiler has been inactive for 
more than 24 hours. The efficiency advocates suggested that this 
approach would achieve the desired results during long periods of 
inactivity, such as during the summer, without cycling on and off 
during periods of regular activity. (Efficiency Advocates, No. 62 at p. 
2)
    DOE has not found any residential boilers which utilize control 
relays to completely depower the BPM motors. The feedback received from 
the residential furnace rulemaking indicated that it was not only the 
number of power cycles which could reduce product utility but the 
potential for large current upon start up. Therefore, DOE has 
maintained its position from the NOPR in this final

[[Page 2341]]

rule and screened out control relays for models with brushless 
permanent magnet motors as a technology option, as it would reduce 
consumer utility. However, DOE will continue to evaluate this 
technology further in future rulemakings if motor technology develops 
that would allow for the inclusion of such a design.
2. Remaining Technologies
    Through a review of each technology, DOE found that all of the 
other identified technologies met all four screening criteria and 
consequently, are suitable for further examination in DOE's analysis. 
In summary, DOE did not screen out the following technology options to 
improve AFUE: (1) heat exchanger improvements; (2) modulating 
operation; (3) direct vent; (4) premix burners; (5) low-pressure air-
atomized oil burner; and (6) delayed-action oil pump solenoid valve. 
DOE also maintained the following technology options to improve standby 
mode and off mode energy consumption: (1) transformer improvements; and 
(2) switching mode power supply. All of these technology options are 
technologically feasible, given that the evaluated technologies are 
being used (or have been used) in commercially-available products or 
working prototypes. Therefore, all of the trial standard levels 
evaluated in this notice are technologically feasible. DOE also finds 
that all of the remaining technology options also meet the other 
screening criteria (i.e., practicable to manufacture, install, and 
service, and do not result in adverse impacts on consumer utility, 
product availability, health, or safety). For additional details, 
please see chapter 4 of the final rule TSD.

C. Engineering Analysis

    In the engineering analysis (corresponding to chapter 5 of the 
final rule TSD), DOE establishes the relationship between the 
manufacturer selling price (MSP) and improved residential boiler energy 
efficiency. This relationship serves as the basis for cost-benefit 
calculations for individual consumers, manufacturers, and the Nation. 
DOE typically structures the engineering analysis using one of three 
approaches: (1) design option; (2) efficiency level; or (3) reverse 
engineering (or cost-assessment). The design-option approach involves 
adding the estimated cost and efficiency of various efficiency-
improving design changes to the baseline to model different levels of 
energy efficiency. The efficiency-level approach uses estimates of cost 
and efficiency at distinct levels of efficiency from publicly-available 
information, and information gathered in manufacturer interviews that 
is supplemented and verified through technology reviews. The reverse-
engineering approach involves testing products for efficiency and 
determining cost from a detailed bill of materials (BOM) derived from 
the reverse-engineering of representative products. The efficiency 
values under consideration range from that of a least-efficient boiler 
sold today (i.e., the baseline) to the maximum technologically feasible 
efficiency level. At each efficiency level examined, DOE determines the 
manufacturer production cost (MPC) and MSP; this relationship is 
referred to as a cost-efficiency curve.
    As noted in section III.B, the AFUE metric fully accounts for the 
fossil-fuel energy consumption in active, standby and off modes, 
whereas the electrical energy consumption in standby mode and off mode 
is accounted for with separate metrics that measure the power drawn 
during standby mode and off mode (PW,SB and 
PW,OFF for standby mode and off mode, respectively). In 
analyzing the technologies that would likely be employed to effect 
changes in these metrics, DOE found that the changes that would be 
implemented to increase AFUE were mostly independent from the changes 
that would be implemented to reduce the electrical standby mode and off 
mode energy consumption (PW,SB and PW,OFF). For 
example, the primary means of improving AFUE is to improve the heat 
exchanger design, which DOE expects would have little or no impact on 
standby mode and off mode electrical energy consumption. Similarly, the 
design options considered likely to be implemented for reducing standby 
mode and off mode electrical energy consumption are not expected to 
impact the AFUE. Therefore, DOE conducted separate engineering and 
cost-benefit analyses for the AFUE metric and the standby mode and off 
mode metrics and their associated systems (fuel and electrical). In 
order to account for the total impacts of both considered standards, 
DOE added the monetized impacts from these two separate analyses in the 
NIA, LCC, and MIA as a means of providing a cumulative impact of both 
residential boilers standards. For the PBP, to estimate the cumulative 
impact for both standards, DOE determined the combined installed cost 
to the consumer and the first-year operating costs for each household.
    For the NOPR analysis of AFUE efficiency levels, DOE conducted the 
engineering analysis for residential boilers using a combination of the 
efficiency level and cost-assessment approaches. More specifically, DOE 
identified the efficiency levels for analysis and then used the cost-
assessment approach to determine the technologies used and the 
associated manufacturing costs at those levels.
    For the standby mode and off mode analyses, DOE adopted a design 
option approach, which allowed for the calculation of incremental costs 
through the addition of specific design options to a baseline model. 
DOE decided on this approach because it did not have sufficient data to 
execute an efficiency-level analysis, as manufacturers typically do not 
rate or publish data on the standby mode and or off mode energy 
consumption of their products.
    DOE continued to use the same analytical approaches for the final 
rule as used in the NOPR. In response to the NOPR, DOE received 
specific comments from interested parties on certain aspects of the 
engineering analysis. A brief overview of the methodology, a discussion 
of the comments DOE received, and DOE's response to those comments, as 
well as any adjustments made to the engineering analysis methodology or 
assumptions as a result of those comments, are presented in the 
sections below. See chapter 5 of the final rule TSD for additional 
details about the engineering analysis.
1. Efficiency Levels
    As noted previously, for analysis of amended AFUE standards, DOE 
used an efficiency-level approach to identify incremental improvements 
in efficiency for each product class. The efficiency-level approach 
enabled DOE to identify incremental improvements in efficiency for 
efficiency-improving technologies that boiler manufacturers already 
incorporate in commercially-available models. After identifying 
efficiency levels for analysis, DOE used a cost-assessment approach 
(section IV.C.2) to determine the MPC at each efficiency level 
identified for analysis. This method estimates the incremental cost of 
increasing product efficiency. For the analysis of amended standby mode 
and off mode energy conservation standards, DOE used a design-option 
approach and identified efficiency levels that would result from 
implementing certain design options for reducing power consumption in 
standby mode and off mode.
a. Baseline Efficiency Level and Product Characteristics
    In its analysis, DOE selected baseline units typical of the least-
efficient commercially-available residential boilers. DOE selected 
baseline units as

[[Page 2342]]

reference points for each product class, against which it measured 
changes resulting from potential amended energy conservation standards. 
The baseline efficiency level in each product class represents the 
basic characteristics of products in that class. A baseline unit is a 
unit that just meets current Federal energy conservation standards and 
provides basic consumer utility.
    DOE uses the baseline unit for comparison in several phases of the 
analyses, including the engineering analysis, LCC analysis, PBP 
analysis, and the NIA. To determine energy savings that will result 
from an amended energy conservation standard, DOE compares energy use 
at each of the higher energy efficiency levels to the energy 
consumption of the baseline unit. Similarly, to determine the changes 
in price to the consumer that will result from an amended energy 
conservation standard, DOE compares the price of a baseline unit to the 
price of a unit at each higher efficiency level.
    DOE received no comments regarding the baseline efficiency levels 
chosen for the NOPR analysis of amended AFUE standards. Thus, DOE has 
maintained these baseline efficiency levels for the final rule 
analysis, which are equal to the current Federal minimum standards for 
each product class in the final rule analysis. Table IV.2 presents the 
baseline AFUE levels identified for each product class. Additional 
details on the selection of baseline AFUE efficiency levels are in 
chapter 5 of the final rule TSD.

               Table IV.2--Baseline AFUE Efficiency Levels
------------------------------------------------------------------------
                      Product class                          AFUE  (%)
------------------------------------------------------------------------
Gas-Fired Hot Water Boilers.............................              82
Gas-Fired Steam Boilers.................................              80
Oil-Fired Hot Water Boilers.............................              84
Oil-Fired Steam Boilers.................................              82
------------------------------------------------------------------------

    The input capacity is a factor that influences the MPC of a 
residential boiler. The impact of efficiency ratings on residential 
boiler prices can be captured by calculating the incremental price for 
each efficiency level higher than the baseline at a given input 
capacity. To provide a singular set of incremental price results for 
the engineering analysis, DOE selected a single input capacity for each 
product class analyzed for AFUE standards. DOE selected these input 
capacities by referencing a number of sources, including information 
obtained during manufacturer interviews, information collected for the 
market and technology assessment, as well as information obtained from 
product literature.
    In response to the representative input capacities selected in the 
engineering analysis from each product class, Burnham presented 
shipment information of their aggregated subsidiaries indicating the 
average input capacity sold in for each product class. Based upon this 
data, Burnham suggested that the representative input capacity for gas-
fired hot water boilers should be changed to 120 kBtu/hr. (Burnham, No. 
60 at p. 20)
    In response, DOE notes that the representative input capacity is 
meant to describe the most typical boiler sold. Therefore, DOE believes 
that although the average of all shipments sold may be 120 kBtu/hr, the 
most often sold would be 100 kBtu/hr. AHRI stated that the analysis 
does not adequately evaluate the effect of revised efficiency standards 
on larger input boilers. AHRI stated that boilers are a very small 
segment of the U.S. residential heating market and commented that 
larger input boilers are the smallest segment of the residential boiler 
market. For these larger input models, AHRI argued that there is no 
economy of scale, and because relatively so few are manufactured, the 
costs of components are higher. The units are physically larger and 
weigh more so their shipping costs are larger. Accordingly, AHRI 
asserted that the information developed by the tear down analysis 
cannot be validly scaled up to these models which have input rates 2 to 
2.5 times higher than the baseline models. (AHRI, No. 64 at p. 14) 
Similarly, Burnham stated that due to the size of the residential 
boiler market, the manufacturing costs for a 250,000 Btu/hr boiler may 
not be a simple linear scale. (Burnham, public meeting transcript, No. 
50 at p. 34)
    In response to these comments, DOE examined the parts catalogs of 
various manufacturers for a variety of boiler types within each product 
class. From this examination, DOE determined that the same materials, 
as well as purchase parts are utilized in the manufacture of both 
representative and larger capacity boilers. For example, a 
representative capacity heat exchanger may be comprised of four cast 
iron sections, including two end sections with two intermediate 
sections. A larger capacity unit would generally be comprised of a 
larger number of the same sections, typically two end sections with six 
intermediate sections for a 250 kBtu/hr boiler. Although the amount of 
material used increases as capacity increases, DOE has not found reason 
to believe that the cost of the material would increase due to a lack 
of economy of scale.
    In addition, DOE found that the large majority of components used 
for larger-capacity boilers were identical to those used in lower 
capacity boilers, although larger quantities of those components may be 
necessary in the manufacturing of higher-capacity boilers. For example, 
a larger-capacity burner may require a larger number of burner tubes. 
In several cases, the cost of the higher-capacity unit could be 
expected to be less than the result of a linear scaling upward of the 
cost, due to the need for only one component per unit regardless of 
capacity. In other words, there are certain fixed production costs that 
are present no matter the size of the boiler and only the variable 
costs increase with boiler size. For instance, a larger boiler would 
utilize the same controls and wiring harness as a smaller boiler, the 
cost of which would remain fixed regardless of the input capacity. DOE 
did find one relevant example, a higher-capacity premix burner, which 
may be purchased at a higher cost due to a lack of economy of scale. 
However, DOE believes that the potential increase in price of this 
purchase part would be offset by the many instances in which the 
production costs remain fixed regardless of capacity.
    DOE notes that shipping costs are considered a sales expense and 
not a production cost. As discussed in section IV.C.2.e, when 
translating MPCs to MSPs, DOE applies a manufacturer mark-up to the 
MPC. This mark-up, based on an analysis of manufacturer SEC 10-K 
reports, includes outbound freight costs. Therefore, any increase in 
MPC would account for larger shipping costs via a higher MSP.
    ``Standby mode'' and ``off mode'' power consumption are defined in 
the DOE test procedure for residential furnaces and boilers. DOE 
defines ``standby mode'' as ``any mode in which the furnace or boiler 
is connected to a mains power source and offers one or more of the 
following space heating functions that may persist: a.) To facilitate 
the activation of other modes (including activation or deactivation of 
active mode) by remote switch (including thermostat or remote control), 
internal or external sensors, or timer; b.) Continuous functions, 
including information or status displays or sensor based functions.'' 
10 CFR part 430, subpart B, appendix N, section 2.12. ``Off mode'' is 
defined as ``a mode in which the furnace or boiler is connected to a 
mains power source and is not providing any active mode or standby mode 
function, and where the mode may persist for an indefinite time.

[[Page 2343]]

The existence of an off switch in off position (a disconnected circuit) 
is included within the classification of off mode.'' 10 CFR part 430, 
subpart B, appendix N, section 2.9. Finally, an ``off switch'' is 
defined as ``the switch on the furnace or boiler that, when activated, 
results in a measurable change in energy consumption between the 
standby and off modes.'' 10 CFR part 430, subpart B, appendix N, 
section 2.10.
    Through review of product literature and discussions with 
manufacturers, DOE has found that boilers typically do not have an off 
switch. Manufacturers stated that if a switch is included with a 
product, it is primarily used as a service/repair switch, not for 
turning off the product during the off season. However, these switches 
could possibly be used as off switches by the consumer. In cases where 
no off switch is present, no separate measurement for off mode is taken 
during testing, and the DOE test procedure sets off mode power equal to 
standby mode power (PW,OFF = PW,SB). In the case 
where an off switch is present, a measurement for off mode is required. 
10 CFR part 430, subpart B, appendix N, section 8.11.2. Because DOE's 
review of product literature and discussions with manufacturers 
revealed that most boilers do not have seasonal off switches, DOE 
assumed that the standby mode and the off mode power consumption are 
equal for its analysis.
    To determine the baseline standby mode and off mode power 
consumption, DOE identified baseline components as those that consume 
the most electricity during the operation of those modes. Since it 
would not be practical for DOE to test every boiler on the market to 
determine the baseline and since manufacturers do not currently report 
standby mode and off mode energy consumption, DOE ``assembled'' the 
most consumptive baseline components from the models tested to model 
the electrical system of a boiler with the expected maximum system 
standby mode and off mode power consumption observed during testing of 
boilers and similar equipment. The baseline standby mode and off mode 
power consumption levels used in the NOPR and final rule analysis are 
presented in Table IV.3.

                                            Table IV.3--Baseline Standby Mode and Off Mode Power Consumption
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                   Standby mode and off mode power consumption (watts)
                                                               -----------------------------------------------------------------------------------------
                           Component                            Gas-fired hot  Oil-fired hot    Gas-fired      Oil-fired     Electric hot     Electric
                                                                    water          water          steam          steam          water          steam
--------------------------------------------------------------------------------------------------------------------------------------------------------
Transformer...................................................            4              4              4              4              4              4
ECM Burner Motor..............................................            1            N/A            N/A            N/A            N/A            N/A
Controls......................................................            2.5            2.5            2.5            2.5            2.5            2.5
Display.......................................................            4              4              4              4              4              4
Oil Burner....................................................          N/A              3            N/A              3            N/A            N/A
                                                               -----------------------------------------------------------------------------------------
    Total (watts).............................................           11.5           13.5           10.5           13.5           10.5           10.5
--------------------------------------------------------------------------------------------------------------------------------------------------------

    In response to the NOPR standby mode and off mode analysis, 
Lochinvar suggested DOE should not regulate standby electricity 
consumption, because the standby electrical power consumption releases 
useful heat inside the home. Lochinvar highlighted that DOE's test 
method for residential boilers affirms its position by assigning a 
jacket loss factor of 0 for ``boilers intended to be installed 
indoors.'' However, Lochinvar agreed that DOE should regulate off mode 
power consumption. Lochinvar also agreed with DOE's assumption that 
most consumers do not turn off power to their boilers seasonally and 
suggested that DOE should invest effort into promoting turning off 
power to the boiler when there is no need for heating. Lochinvar stated 
that baseline power consumption predicted by DOE is reasonable, but 
that the assumption that the standby mode energy consumption is the 
same as the off mode energy consumption is erroneous. (Lochinvar, No. 
63 at pp. 1-4)
    In response to the suggestion that DOE not regulate standby mode, 
DOE notes that it is statutorily required to consider both standby mode 
and off mode electrical power consumption under EPCA at 42 U.S.C. 
6295(gg)(3). As outlined in section III.B, the DOE test procedure 
references two industry standards, ASHRAE 103-1993, which is used to 
determine the heating efficiency of a residential boiler, and IEC 
62301, which is used to determine the standby mode and off mode energy 
consumption of a residential boiler. As noted by Lochinvar, ASHRAE 103 
considers the jacket losses as usable heat for boilers intended to be 
installed indoors. However, the power consumption as measured by IEC 
Standard 62301 is a consumption metric and not an efficiency metric and 
is considered separately from the AFUE. The DOE test procedure for 
standby mode does not treat those boilers intended to be installed 
indoors any differently than those intended to be installed outdoors or 
in other unconditioned spaces, where the heat produced by the standby 
mode use would be a loss. While the majority of residential boilers may 
be installed indoors (as is assumed by the DOE test procedure), there 
are boilers available on the market that are designed for installation 
in unconditioned spaces or outdoors where any heat released by standby 
electrical power consumption would not be useful. Therefore, DOE has 
concluded it is appropriate to regulate the standby mode power 
consumption.
    In response to the assertion that standby mode and off mode 
consumption are not equal, DOE agrees that standby mode energy 
consumption and off mode energy consumption are not equal in all cases 
(i.e., if there is an off switch present). However, DOE notes that in 
cases where no off switch is present (which based on DOE's review of 
the market and information obtained during manufacturer interviews is 
the most common situation), off mode use is equal to the standby mode 
use when tested according to DOE's test method. 10 CFR part 430, 
subpart B, appendix N, section 8.11.2. DOE notes that Lochinvar agreed 
with DOE's assumption that most consumers do not turn off power to 
their boilers seasonally. As noted, DOE has determined that an off 
switch is generally not present, so DOE has maintained its assumption 
that standby mode and off mode are equivalent under the DOE test 
method.
    In response to the methodology presented in the NOPR for 
determining the efficiency levels by focusing on energy consumptive 
components, AHRI stated the component analysis methodology did not 
include any analysis of the standby mode and off mode energy 
consumptions of current

[[Page 2344]]

boiler models. AHRI stated that information from their members 
indicated that some boiler models have standby mode and off mode energy 
consumptions significantly above the baseline values used in the 
analysis. AHRI added that depending on how they are counted, 
accessories can influence the final standby power consumption which 
might impact the decisions about which accessories are provided with 
the boiler. For example, AHRI commented that outdoor temperature reset 
controls, which are used by many equipment manufacturers to comply with 
DOE design requirements, were not included in the baseline model 
analysis. AHRI recommended that DOE recalibrate this analysis with a 
higher baseline reflective of current models. (AHRI, No. 64 at p. 14) 
Burnham provided standby mode and off mode power measurements in terms 
of Volt-Amps (VA),\23\ rather than watts, for each representative 
product class and indicated that, with the possible exception of the 
gas-fired steam product class, DOE's baseline models for standby/off 
mode power overstate current consumption significantly. (Burnham, No. 
60 at p. 21) Burnham also stated that the availability of data from 
actual control systems, not a hypothetical construct, should be used to 
determine baselines, and suggested that DOE should expend the time and 
resources needed to obtain a reasonable amount of data upon which to 
form a conclusion before proceeding with this rulemaking. (Burnham, No. 
60 at p. 21)
---------------------------------------------------------------------------

    \23\ The voltage and current of an AC circuit constantly change 
over time. Due to this, the following terms are used to describe 
energy flow in a system. Real power performs work and is measured in 
Watts (W). Reactive power does not perform work and is measured in 
VA reactive (VAr). Complex power is the vector sum of real and 
reactive power measurement in volt amps (VA). Apparent power is the 
magnitude of the complex power measured in volt amps (VA).
---------------------------------------------------------------------------

    In response, DOE tested the standby consumption of several boilers, 
including those with outdoor reset controls. However, DOE chose to use 
a component analysis approach in the standby mode and off mode analysis 
in order to take into account the energy use of all possible 
accessories so as to prevent any possible limitation on the use of such 
accessories. For each product class, the baseline selected was greater 
than any model tested by DOE. During manufacturer interviews, no 
manufacturer indicated that any of their models exceeded the baseline 
selected by DOE for each product class. In the absence of any data 
showing that the standby mode and off mode energy consumption is higher 
than the DOE baseline levels, DOE has maintained the same levels for 
the final rule. DOE believes that this approach benefits manufacturers 
by allowing for flexibility of designs and ensuring that the standard 
will be set at a reasonable level that does not restrict the inclusion 
of technologies that could improve energy efficiency or provide 
consumer utility. DOE notes that AHRI's comment regarding higher 
baselines contradicts Burnham's comment which indicate that the standby 
mode and off mode baseline levels are high for most product classes. 
Further, Lochinvar's comment indicated that the baseline power 
consumption predicted by DOE is reasonable.
    Regarding the standby mode data provided by Burnham, DOE notes that 
the DOE test procedure measures standby and off mode electricity 
consumption in terms of real power (watts) rather than apparent power 
(VA). The data provided by Burnham cannot be incorporated into the 
standby mode and off mode analysis without the power factor of the 
units tested. DOE notes that there are hundreds of residential boiler 
models on the market with varying accessories, control systems, and 
power supplies. The assumptions made in the component analysis used for 
the determination for the baseline levels are rooted upon actual test 
data. DOE used a component-focused analysis that considered the most 
energy consumptive individual components in order to prevent setting a 
standard which could limit manufacturers' ability to utilize 
accessories which may consume power in standby mode, but reduce active 
mode energy use, or provide other consumer utility.
b. Other Energy Efficiency Levels
    Table IV.4 through Table IV.7 show the efficiency levels DOE 
selected for the final rule analysis of amended AFUE standards, along 
with a description of the typical technological change at each level. 
These efficiency levels are the same as were presented in the NOPR, and 
following the same rationale, they are based upon the most common 
efficiency levels found on the market or a significant technology 
(e.g., condensing technology). In addition, DOE is statutorily required 
to consider the maximum technologically feasible efficiency level 
(``max-tech'').

   Table IV.4--AFUE Efficiency Levels for Gas-Fired Hot Water Boilers
------------------------------------------------------------------------
         Efficiency level              AFUE  (%)     Technology options
------------------------------------------------------------------------
0-Baseline........................              82  Baseline.
1.................................              83  EL0 + Increased Heat
                                                     Exchanger (HX)
                                                     Area, Baffles.
2.................................              84  EL1 + Increased HX
                                                     Area.
3.................................              85  EL2 + Increased HX
                                                     Area.
4.................................              90  Condensing HX.
5.................................              92  EL4 + Improved HX.
6-Max-Tech........................              96  EL5 + Improved HX.
------------------------------------------------------------------------


     Table IV.5--AFUE Efficiency Levels for Gas-Fired Steam Boilers
------------------------------------------------------------------------
         Efficiency level              AFUE  (%)     Technology options
------------------------------------------------------------------------
0-Baseline........................              80  Baseline.
1.................................              82  EL0 + Increased HX
                                                     Area.
2-Max-Tech........................              83  EL1+ Increased HX
                                                     Area.
------------------------------------------------------------------------


[[Page 2345]]


   Table IV.6--AFUE Efficiency Levels for Oil-Fired Hot Water Boilers
------------------------------------------------------------------------
         Efficiency level              AFUE  (%)     Technology options
------------------------------------------------------------------------
0-Baseline........................              84  Baseline.
1.................................              85  EL0 + Increased HX
                                                     Area.
2.................................              86  EL1 + Increased HX
                                                     Area.
3-Max-Tech........................              91  EL2 + Improved HX,
                                                     Baffles, and
                                                     Secondary
                                                     Condensing HX.
------------------------------------------------------------------------


     Table IV.7--AFUE Efficiency Levels for Oil-Fired Steam Boilers
------------------------------------------------------------------------
         Efficiency level              AFUE  (%)     Technology options
------------------------------------------------------------------------
0-Baseline........................              82  Baseline.
1.................................              84  EL0 + Increased HX
                                                     Area.
2.................................              85  EL1 + Increased HX
                                                     Area.
3-Max-Tech........................              86  EL2 + Improved HX.
------------------------------------------------------------------------

    Several stakeholders raised concerns in response to the 
consideration of efficiency levels 1 through 3 selected for the gas-
fired hot water boiler product class in the NOPR analysis. (Burnham, 
No. 60 at p. 17; Lochinvar, No. 63 at p. 2; AGA, No. 54 at p. 11) 
Lochinvar and Burnham expressed concern that the designs necessary to 
reach these efficiency levels increase the cost of the boiler, as well 
as the risk of condensation and carbon monoxide issues occurring. 
Lochinvar and Burnham argued that more frequent and prolonged exposure 
to condensate as a result of these designs, as well as the automatic 
means requirement, will increase the potential of condensation-related 
problems, such as nuisance faults, blocked heat exchangers, and 
corroding vents. Lochinvar and Burnham further argued that the 
corrosion of conventional venting by condensate may lead to the 
spilling of carbon monoxide into occupied spaces, thereby resulting in 
safety concerns. (Lochinvar, No. 63 at p. 2; Burnham No. 60 at p. 4) 
Lochinvar also stated that the sizing, installation, and operating 
conditions also influence the potential for condensation. (Lochinvar, 
No. 63 at p. 3)
    The Department recognizes that certain efficiency levels could pose 
health or safety concerns under certain conditions if they are not 
installed properly in accordance with manufacturer specifications. 
However, these concerns can be resolved with proper product 
installations and venting system design. This is evidenced by the 
significant shipments of products that are currently commercially 
available at these efficiency levels, as well as the lack of 
restrictions on the installation location of these units in 
installation manuals. In addition, DOE notes that products achieving 
these efficiency levels have been on the market since at least 2002, 
which demonstrates their reliability, safety, and consumer acceptance. 
Given the significant product availability and the amount of time 
products at these efficiency levels have been available on the market, 
DOE continues to believe that products at these efficiency levels are 
safe and reliable when installed correctly. Therefore, DOE has 
maintained the efficiency levels above 82 percent and below 90 percent 
in its final rule analysis. Discussion related to the costs associated 
with the installation of venting systems to prevent condensation and 
corrosion issues are outlined in section IV.F.2 of this final rule.
    In addition, DOE considered whether changes to the residential 
furnaces and boilers test procedure adopted by the January 2016 test 
procedure final rule would necessitate changes to the AFUE levels being 
analyzed. The primary changes adopted in the test procedure are listed 
in section III.B. Adopting these provisions was assessed as having no 
impact on the AFUE for residential boilers. (See EERE-2012-BT-TP-0024) 
In response to the March 2015 NOPR, several stakeholders submitted 
comments suggesting that the proposed changes outlined in the March 
2015 TP NOPR would impact the measured AFUE of products and ultimately 
impact the standards rulemaking. As described in section III.F, the 
January 2016 TP FR did not adopt any provisions impacting AFUE. 
Consequently, DOE used the same AFUE efficiency levels in the final 
rule analysis as were used in the NOPR analysis.
    Table IV.8 through Table IV.13 show the efficiency levels DOE 
selected for the final rule analysis of standby mode and off mode 
standards, along with a description of the typical technological change 
at each level. DOE maintained the efficiency levels used in the NOPR 
stage of the analysis.

  Table IV.8--Standby Mode and Off Mode Efficiency Levels for Gas-Fired
                            Hot Water Boilers
------------------------------------------------------------------------
                                     Standby mode
                                     and off mode
         Efficiency level                power       Technology options
                                      consumption
                                          (W)
------------------------------------------------------------------------
0-Baseline........................            11.5  Linear Power
                                                     Supply.*
1.................................            10.0  Linear Power Supply
                                                     with Low-Loss
                                                     Transformer (LLTX).
2.................................             9.7  Switching Mode Power
                                                     Supply.**
3-Max-Tech........................             9.0  Switching Mode Power
                                                     Supply with LLTX.
------------------------------------------------------------------------
* A linear power supply regulates voltage with a series element.
** A switching mode power supply regulates voltage with power handling
  electronics.


[[Page 2346]]


  Table IV.9--Standby Mode and Off Mode Efficiency Levels for Gas-Fired
                              Steam Boilers
------------------------------------------------------------------------
                                     Standby mode
                                     and off mode
         Efficiency level                power       Technology options
                                      consumption
                                          (W)
------------------------------------------------------------------------
0-Baseline........................            10.5  Linear Power Supply.
1.................................             9.0  Linear Power Supply
                                                     with LLTX.
2.................................             8.7  Switching Mode Power
                                                     Supply.
3-Max-Tech........................             8.0  Switching Mode Power
                                                     Supply with LLTX.
------------------------------------------------------------------------


 Table IV.10--Standby Mode and Off Mode Efficiency Levels for Oil-Fired
                            Hot Water Boilers
------------------------------------------------------------------------
                                     Standby mode
                                     and off mode
         Efficiency level                power       Technology options
                                      consumption
                                          (W)
------------------------------------------------------------------------
0-Baseline........................            13.5  Linear Power Supply.
1.................................            12.0  Linear Power Supply
                                                     with LLTX.
2.................................            11.7  Switching Mode Power
                                                     Supply.
3-Max-Tech........................            11.0  Switching Mode Power
                                                     Supply with LLTX.
------------------------------------------------------------------------


 Table IV.11--Standby Mode and Off Mode Efficiency Levels for Oil-Fired
                              Steam Boilers
------------------------------------------------------------------------
                                     Standby mode
                                     and off mode
         Efficiency level                power       Technology options
                                      consumption
                                          (W)
------------------------------------------------------------------------
0-Baseline........................            13.5  Linear Power Supply.
1.................................            12.0  Linear Power Supply
                                                     with LLTX.
2.................................            11.7  Switching Mode Power
                                                     Supply.
3-Max-Tech........................            11.0  Switching Mode Power
                                                     Supply with LLTX.
------------------------------------------------------------------------


  Table IV.12--Standby Mode and Off Mode Efficiency Levels for Electric
                            Hot Water Boilers
------------------------------------------------------------------------
                                     Standby mode
                                     and off mode
         Efficiency level                power       Technology options
                                      consumption
                                          (W)
------------------------------------------------------------------------
0-Baseline........................            10.5  Linear Power Supply.
1.................................             9.0  Linear Power Supply
                                                     with LLTX.
2.................................             8.7  Switching Mode Power
                                                     Supply.
3-Max-Tech........................             8.0  Switching Mode Power
                                                     Supply with LLTX.
------------------------------------------------------------------------


  Table IV.13--Standby Mode and Off Mode Efficiency Levels for Electric
                              Steam Boilers
------------------------------------------------------------------------
                                     Standby mode
                                     and off mode
         Efficiency level                power       Technology options
                                      consumption
                                          (W)
------------------------------------------------------------------------
0-Baseline........................            10.5  Linear Power Supply.
1.................................             9.0  Linear Power Supply
                                                     with LLTX.
2.................................             8.7  Switching Mode Power
                                                     Supply.
3-Max-Tech........................             8.0  Switching Mode Power
                                                     Supply with LLTX.
------------------------------------------------------------------------

2. Cost-Assessment Methodology
    At the start of the engineering analysis, DOE identified the energy 
efficiency levels associated with residential boilers on the market 
using data gathered in the market assessment. DOE also identified the 
technologies and features that are typically incorporated into products 
at the baseline level and at the various energy efficiency levels 
analyzed above the baseline. Next, DOE selected products for the 
physical teardown analysis having characteristics of typical products 
on the market at the representative input capacity. DOE gathered 
information by performing a physical teardown analysis (see section

[[Page 2347]]

IV.C.2.a) to create detailed BOMs, which included all components and 
processes used to manufacture the products. DOE used the BOMs from the 
teardowns as an input to a cost model, which was then used to calculate 
the MPC for products at various efficiency levels spanning the full 
range of efficiencies from the baseline to the max-tech. DOE reexamined 
and revised its cost assessment performed for the NOPR analysis based 
on response to comments received on the NOPR analysis.
    During the development of the engineering analysis for the NOPR, 
DOE held interviews with manufacturers to gain insight into the 
residential boiler industry, and to request feedback on the engineering 
analysis and assumptions that DOE used. DOE used the information 
gathered from these interviews, along with the information obtained 
through the teardown analysis and public comments, to refine the 
assumptions and data in the cost model. Next, DOE derived manufacturer 
markups using publicly-available residential boiler industry financial 
data in conjunction with manufacturers' feedback. The markups were used 
to convert the MPCs into MSPs. Further information on comments received 
and the analytical methodology is presented in the subsections below. 
For additional detail, see chapter 5 of the final rule TSD.
a. Teardown Analysis
    To assemble BOMs and to calculate the manufacturing costs for the 
different components in residential boilers, DOE disassembled multiple 
units into their base components and estimated the materials, 
processes, and labor required for the manufacture of each individual 
component, a process referred to as a ``physical teardown.'' Using the 
data gathered from the physical teardowns, DOE characterized each 
component according to its weight, dimensions, material, quantity, and 
the manufacturing processes used to fabricate and assemble it.
    DOE also used a supplementary method, called a ``virtual 
teardown,'' which examines published manufacturer catalogs and 
supplementary component data to estimate the major physical differences 
between a product that was physically disassembled and a similar 
product that was not. For supplementary virtual teardowns, DOE gathered 
product data such as dimensions, weight, and design features from 
publicly-available information, such as manufacturer catalogs. The 
initial teardown analysis for the NODA included 6 physical and 5 
virtual teardowns of residential boilers. The NOPR teardown analysis 
included 16 physical and 4 virtual teardowns of residential boilers. 
DOE performed no further teardowns in the final rule analysis, but 
updated the costs data inputs based on the most recent materials and 
purchased part price information available.
    DOE selected the majority of the physical teardown units in the gas 
hot water product class because it has the largest number of shipments. 
DOE conducted physical teardowns of twelve gas hot water boilers, five 
of which were non-condensing cast iron boilers, two of which were non-
condensing copper boilers, and the remaining five of which were 
condensing boilers. DOE performed an additional two virtual teardowns 
of gas hot water boilers.
    DOE also performed physical teardowns on two gas-fired steam 
boilers, as well as two oil-fired hot water boilers. DOE conducted one 
virtual teardown of an oil-fired steam boiler, as well as a virtual 
teardown of an oil-fired hot water boiler.
    The teardown analysis allowed DOE to identify the technologies that 
manufacturers typically incorporate into their products, along with the 
efficiency levels associated with each technology or combination of 
technologies. The end result of each teardown is a structured BOM, 
which DOE developed for each of the physical and virtual teardowns. The 
BOMs incorporate all materials, components, and fasteners (classified 
as either raw materials or purchased parts and assemblies), and 
characterize the materials and components by weight, manufacturing 
processes used, dimensions, material, and quantity. The BOMs from the 
teardown analysis were then used as inputs to the cost model to 
calculate the MPC for each product that was torn down. The MPCs 
resulting from the teardowns were then used to develop an industry 
average MPC for each product class analyzed.
    More information regarding details on the teardown analysis can be 
found in chapter 5 of the final rule TSD.
b. Cost Model
    The cost model is a spreadsheet that converts the materials and 
components in the BOMs into dollar values based on the price of 
materials, average labor rates associated with manufacturing and 
assembling, and the cost of overhead and depreciation, as determined 
based on manufacturer interviews. To convert the information in the 
BOMs to dollar values, DOE collected information on labor rates, 
tooling costs, raw material prices, and other factors. For purchased 
parts, the cost model estimates the purchase price based on volume-
variable price quotations and detailed discussions with manufacturers 
and component suppliers. For fabricated parts, the prices of raw metal 
materials \24\ (e.g., tube, sheet metal) are estimated on the basis of 
5-year averages (from 2009 to 2014). The cost of transforming the 
intermediate materials into finished parts is estimated based on 
current industry pricing.\25\
---------------------------------------------------------------------------

    \24\ American Metals Market (Available at: http://www.amm.com/
)(Last accessed January, 2015).
    \25\ U.S. Department of Labor, Bureau of Labor Statistics, 
Producer Price Indexes (Available at: http://www.bls.gov/ppi/) (Last 
accessed January, 2015).
---------------------------------------------------------------------------

c. Manufacturing Production Costs
    Once the cost estimates for all the components in each teardown 
unit were finalized, DOE totaled the cost of materials, labor, and 
direct overhead used to manufacture a product in order to calculate the 
manufacturer production cost. The total cost of the product was broken 
down into two main costs: (1) The full manufacturer production cost, 
referred to as MPC; and (2) the non-production cost, which includes 
selling, general, and administration (SG&A) expenses; 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 product class, from the baseline through the max-
tech. After incorporating all of the assumptions into the cost model, 
DOE calculated the percentages attributable to each element of total 
production cost (i.e., materials, labor, depreciation, and overhead). 
These percentages are used to validate the assumptions 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 
manufacturer impact analysis (MIA) (see section IV.J).
    DOE considered the draft type (i.e., natural draft or fan-assisted 
draft) and whether the model would have fan-assisted draft at a given 
efficiency level. Some boilers utilize natural draft, in which the 
natural buoyancy of the combustion gases is sufficient to vent those 
gases. Other boilers employ fan-assisted draft to help vent the 
products of combustion. As product efficiency increases, more heat is 
extracted from the flue gases, thereby resulting in less natural 
buoyancy that can be used to vent the flue gases. Through market 
review, DOE determined that the use of fan-assisted draft was based not 
only on efficiency, but also on installation considerations that impact 
draft.

[[Page 2348]]

Therefore, DOE estimated the additional cost of adding an inducer fan 
to a product, and the costs were added to a certain percentage of 
boilers at each efficiency level in the LCC analysis (see section 
IV.F.2 of this final rule).
    In response to the MPC's presented in the NOPR, Weil-McLain stated 
that increasing efficiencies would require not just larger heat 
exchangers, but also different burners and flue dampers, in addition to 
the mechanical venting inducer necessary for fan-assisted draft. Weil-
McLain added that non-product cost increases would be created by 
additional electric power consumption required to run the inducer or 
blower, new electric service installation in some instances, new 
venting and/or chimney lining, re-piping, and higher maintenance costs 
due to inducers/blowers and positive pressure vent systems. (Weil-
McLain, No. 55 at p. 3)
    Similarly, AHRI stated that DOE mischaracterized the design changes 
required to achieve the proposed minimum standards, and, therefore, the 
resulting cost to manufacturers is underestimated. Specifically, AHRI 
stated that DOE assumed that the only design change necessary to 
achieve the proposed revised minimum AFUE levels is to increase the 
heat exchanger area. AHRI argued that this analysis is incomplete 
because it fails to recognize the additional changes. AHRI suggested 
that in some cases models may become bigger to accommodate the larger 
heat exchanger. In those cases, a larger model will require more 
material for the jacket and other design modifications. (AHRI, No. 64 
at p. 12) Burnham stated that DOE did not include the cost of the 
system pump that manufacturers send along with the residential boiler. 
(Burnham, No. 60 at p. 24)
    In response to the commenters' statements, DOE notes that the 
intent of listing the technology option corresponding to each 
efficiency level was to give stakeholders information on the specific 
design change that has been observed as the primary driver of improved 
efficiency; it was not intended to convey every component that will 
change from one efficiency level to the next. The increase in heat 
exchanger surface area was the primary technological driver in 
improving efficiency for many of the efficiency levels, and is, 
therefore, the technology option listed in those cases. The ancillary 
costs associated with increasing efficiency were included in the 
development of the MPC's at all efficiency levels, including those that 
primarily rely on increases in heat exchanger surface area noted by 
AHRI and Weil-McLain. When DOE performed the physical teardown 
analysis, it observed and accounted for any differences in other 
ancillary components at higher efficiency levels. DOE notes that the 
cost of the system pump is included in the manufacturer production 
costs for hot water boilers. The non-product costs highlighted by Weil-
McLain related to installation and energy costs are captured in the 
installation and maintenance cost of the LCC analysis, described in 
section IV.F of this final rule.
    Burnham suggested there would be a significant cost increase for 
oil-fired and steam boilers as a result of a reduction in the 
production of cast iron gas-fired hot water boilers due to standards. 
Burnham stated that the fixed cost associated with foundry operation 
would be spread over a smaller number of castings. (Burnham, No. 60 at 
p. 17)
    DOE notes that the standard level set for gas-fired hot water 
boilers still allows for the use of cast iron heat exchanger designs. 
DOE does not anticipate a reduction in shipments for this product class 
as a result of new standards. Therefore, DOE does not anticipate an 
increase cost for oil-fired and steam product classes.
    In the final rule analysis, DOE revised the cost model assumptions 
it used for the NOPR analysis based on updated pricing information (for 
raw materials and purchased parts). These changes resulted in refined 
MPCs and production cost percentages. Table IV.14 through Table IV.17 
present DOE's estimates of the MPCs by AFUE efficiency level for this 
rulemaking.

                         Table IV.14--Manufacturing Cost for Gas-Fired Hot Water Boilers
----------------------------------------------------------------------------------------------------------------
                                                                    Efficiency
                        Efficiency level                           level (AFUE)      MPC * ($)      Incremental
                                                                        (%)                          cost ($)
----------------------------------------------------------------------------------------------------------------
Baseline........................................................              82             627  ..............
EL1.............................................................              83             635               8
EL2.............................................................              84             642              15
EL3.............................................................              85             677              50
EL4.............................................................              90           1,010             383
EL5.............................................................              92           1,180             553
EL6.............................................................              96           1,516             889
----------------------------------------------------------------------------------------------------------------
* Non-condensing boilers (< 90 percent AFUE) are available with or without an inducer. The costs shown reflect
  the MPC for a boiler without an inducer.


                           Table IV.15--Manufacturing Cost for Gas-Fired Steam Boilers
----------------------------------------------------------------------------------------------------------------
                                                                    Efficiency
                        Efficiency level                           level (AFUE)      MPC * ($)      Incremental
                                                                        (%)                          cost ($)
----------------------------------------------------------------------------------------------------------------
Baseline........................................................              80             778  ..............
EL1.............................................................              82             793              15
EL2.............................................................              83             925             147
----------------------------------------------------------------------------------------------------------------
* Non-condensing boilers (< 90 percent AFUE) are available with or without an inducer. The costs shown reflect
  the MPC for a boiler without an inducer.


[[Page 2349]]


                         Table IV.16--Manufacturing Cost for Oil-Fired Hot Water Boilers
----------------------------------------------------------------------------------------------------------------
                                                                    Efficiency
                        Efficiency level                           level (AFUE)      MPC * ($)      Incremental
                                                                        (%)                          cost ($)
----------------------------------------------------------------------------------------------------------------
Baseline........................................................              84           1,228  ..............
EL1.............................................................              85           1,302              75
EL2.............................................................              86           1,377             149
EL3.............................................................              91           2,314           1,087
----------------------------------------------------------------------------------------------------------------
* Non-condensing boilers (< 90 percent AFUE) are available with or without an inducer. The costs shown reflect
  the MPC for a boiler without an inducer.


                           Table IV.17--Manufacturing Cost for Oil-Fired Steam Boilers
----------------------------------------------------------------------------------------------------------------
                                                                    Efficiency
                        Efficiency level                           level (AFUE)      MPC * ($)      Incremental
                                                                        (%)                          cost ($)
----------------------------------------------------------------------------------------------------------------
Baseline........................................................              82           1,252  ..............
EL1.............................................................              84           1,401             149
EL2.............................................................              85           1,475             224
EL3.............................................................              86           1,625             373
----------------------------------------------------------------------------------------------------------------
* Non-condensing boilers (< 90 percent AFUE) are available with or without an inducer. The costs shown reflect
  the MPC for a boiler without an inducer.

    Table IV.18 through Table IV.23 present DOE's estimates of the MPCs 
at each standby mode and off mode efficiency level for this rulemaking.

            Table IV.18--Manufacturing Cost for Gas-Fired Hot Water Boilers Standby Mode and Off Mode
----------------------------------------------------------------------------------------------------------------
                                                                   Standby mode
                                                                   and off mode
                        Efficiency level                               power         MPC  ($)       Incremental
                                                                    consumption                      cost  ($)
                                                                        (W)
----------------------------------------------------------------------------------------------------------------
Baseline........................................................            11.5            8.55  ..............
EL1.............................................................            10.0           10.40            1.85
EL2.............................................................             9.7           18.53            9.98
EL3.............................................................             9.0           19.02           10.47
----------------------------------------------------------------------------------------------------------------


              Table IV.19--Manufacturing Cost for Gas-Fired Steam Boilers Standby Mode and Off Mode
----------------------------------------------------------------------------------------------------------------
                                                                   Standby mode
                                                                   and off mode
                        Efficiency level                               power          MPC ($)       Incremental
                                                                    consumption                      cost ($)
                                                                        (W)
----------------------------------------------------------------------------------------------------------------
Baseline........................................................            10.5            8.55  ..............
EL1.............................................................             9.0           10.40            1.85
EL2.............................................................             8.7           18.53            9.98
EL3.............................................................             8.0           19.02           10.47
----------------------------------------------------------------------------------------------------------------


            Table IV.20--Manufacturing Cost for Oil-Fired Hot Water Boilers Standby Mode and Off Mode
----------------------------------------------------------------------------------------------------------------
                                                                   Standby mode
                                                                   and off mode
                        Efficiency level                               power          MPC ($)       Incremental
                                                                    consumption                      cost ($)
                                                                        (W)
----------------------------------------------------------------------------------------------------------------
Baseline........................................................            13.5            8.55  ..............
EL1.............................................................            12.0           10.40            1.85
EL2.............................................................            11.7           18.53            9.98
EL3.............................................................            11.0           19.02           10.47
----------------------------------------------------------------------------------------------------------------


[[Page 2350]]


              Table IV.21--Manufacturing Cost for Oil-Fired Steam Boilers Standby Mode and Off Mode
----------------------------------------------------------------------------------------------------------------
                                                                   Standby mode
                                                                   and off mode
                        Efficiency level                               power          MPC ($)       Incremental
                                                                    consumption                      cost ($)
                                                                        (W)
----------------------------------------------------------------------------------------------------------------
Baseline........................................................            13.5            8.55  ..............
EL1.............................................................            12.0           10.40            1.85
EL2.............................................................            11.7           18.53            9.98
EL3.............................................................            11.0           19.02           10.47
----------------------------------------------------------------------------------------------------------------


            Table IV.22--Manufacturing Cost for Electric Hot Water Boilers Standby Mode and Off Mode
----------------------------------------------------------------------------------------------------------------
                                                                   Standby mode
                                                                   and off mode
                        Efficiency level                               power          MPC ($)       Incremental
                                                                    consumption                      cost ($)
                                                                        (W)
----------------------------------------------------------------------------------------------------------------
Baseline........................................................            10.5            8.55  ..............
EL1.............................................................             9.0           10.40            1.85
EL2.............................................................             8.7           18.53            9.98
EL3.............................................................             8.0           19.02           10.47
----------------------------------------------------------------------------------------------------------------


              Table IV.23--Manufacturing Cost for Electric Steam Boilers Standby Mode and Off Mode
----------------------------------------------------------------------------------------------------------------
                                                                   Standby mode
                                                                   and off mode
                        Efficiency level                               power          MPC ($)       Incremental
                                                                    consumption                      cost ($)
                                                                        (W)
----------------------------------------------------------------------------------------------------------------
Baseline........................................................            10.5            8.55  ..............
EL1.............................................................             9.0           10.40            1.85
EL2.............................................................             8.7           18.53            9.98
EL3.............................................................             8.0           19.02           10.47
----------------------------------------------------------------------------------------------------------------

    Chapter 5 of the final rule TSD presents more information regarding 
the development of DOE's estimates of the MPCs for this rulemaking.
d. Cost-Efficiency Relationship
    The result of the engineering analysis is a cost-efficiency 
relationship. DOE created cost-efficiency curves representing the cost-
efficiency relationship for each product class that it examined. To 
develop the cost-efficiency relationships for residential boilers, DOE 
examined the cost differential to move from one efficiency level to the 
next for each manufacturer. DOE used the results of teardowns on a 
market-share-weighted average basis to determine the industry average 
cost increase to move from one efficiency level to the next. Additional 
details on how DOE developed the cost-efficiency relationships and 
related results are available in chapter 5 of the final rule TSD, which 
also presents these cost-efficiency curves in the form of energy 
efficiency versus MPC.
    The results indicate that cost-efficiency relationships are 
nonlinear. In other words, as efficiency increases, manufacturing 
becomes more costly. A large cost increase is evident between non-
condensing and condensing efficiency levels due to the requirement for 
a heat exchanger that can withstand corrosive condensate.
e. Manufacturer Markup
    To account for manufacturers' non-production costs and profit 
margin, DOE applies a non-production cost multiplier (the manufacturer 
markup) to the full MPC. The resulting MSP is generally 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 typically introduce design changes to their 
product lines that increase manufacturer production costs. Depending on 
the competitive environment for these particular products, some or all 
of the increased production costs may be passed from manufacturers to 
retailers and eventually to consumers in the form of higher purchase 
prices. As production costs increase, manufacturers typically incur 
additional overhead. For a profitable business, the MSP should be high 
enough to recover the full cost of the product (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 expenditures) to consumers. A low markup suggests 
that manufacturers will not be able to recover as much of the necessary 
investment in plant and equipment.
    To calculate the manufacturer markups, DOE used 10-K reports \26\ 
submitted to the U.S. Securities and Exchange Commission (SEC) by the 
three publicly-owned residential boiler companies. The financial 
figures necessary for calculating the manufacturer markup are net 
sales, costs of sales, and gross profit. For boilers, DOE averaged the 
financial figures spanning the years 2008 to 2012 in order to calculate 
the markups. DOE used this approach because amended

[[Page 2351]]

standards may transform high-efficiency products (which currently are 
considered premium products) into typical products. DOE acknowledges 
that there are numerous manufacturers of residential boilers that are 
privately-held companies, which do not file SEC 10-K reports. In 
addition, while the publicly-owned companies file SEC 10-K reports, the 
financial information summarized may not be exclusively for the 
residential boiler portion of their business and can also include 
financial information from other product sectors, whose margins could 
be quite different from the residential boiler industries. DOE 
discussed the manufacturer markup with manufacturers during interviews, 
and used the feedback to validate the markup calculated through review 
of SEC 10-K reports. DOE received no comments regarding the 
manufacturer markup used in the NODA and NOPR analysis. See chapter 5 
of the final rule TSD for more details about the manufacturer markup 
calculation.
---------------------------------------------------------------------------

    \26\ U.S. Securities and Exchange Commission, Annual 10-K 
Reports (Various Years) (Available at: http://sec.gov).
---------------------------------------------------------------------------

f. Manufacturer Interviews
    Throughout the rulemaking process, DOE has sought feedback and 
insight from interested parties that would improve the information used 
in its analyses. DOE interviewed manufacturers as a part of the 
manufacturer impact analysis (see section IV.J.3). During the 
interviews, DOE sought feedback on all aspects of its analyses for 
residential boilers. For the engineering analysis, DOE discussed the 
analytical inputs, assumptions, and estimates, and cost-efficiency 
curves with residential boiler manufacturers. DOE considered all the 
information manufacturers provided when refining its analytical inputs 
and assumptions. However, DOE incorporated equipment and manufacturing 
process figures into the analysis as averages in order to avoid 
disclosing sensitive information about individual manufacturers' 
products or manufacturing processes. More details about the 
manufacturer interviews are contained in chapter 12 of the final rule 
TSD.

D. Markups Analysis

    DOE uses appropriate markups (e.g., manufacturer markups, retailer 
markups, distributor markups, contractor markups) and sales taxes to 
convert the manufacturer selling price (MSP) estimates from the 
engineering analysis to consumer prices, which are then used in the LCC 
and PBP analysis and in the manufacturer impact analysis. DOE develops 
baseline and incremental markups based on the product markups at each 
step in the distribution chain. The markups are multipliers that 
represent increases above the MSP for residential boilers. The 
incremental markup relates the change in the manufacturer sales price 
of higher-efficiency models (the incremental cost increase) to the 
change in the consumer price. Before developing markups, DOE defines 
key market participants and identifies distribution channels.
    Commenting on the NOPR, AHRI stated that based on preliminary 
survey feedback, contractors only apply a single markup regardless of 
the product efficiency. (AHRI, Public Meeting Transcript, No. 50 at pp. 
71-72) Burnham further stated that AHRI's comments demonstrate that 
DOE's use of ``incremental'' markups through the distribution channel 
has no foundation either in theory or actual practice. Burnham stated 
that DOE must eliminate the use of incremental markups before it 
promulgates a new rule for boilers. (Burnham, No. 60 at pp. 19-20)
    DOE believes that AHRI's comments on the NOPR referred to more 
extensive comments that it provided in response to the 2014 NOPR for 
small, large, and very large commercial package air conditioning and 
heating equipment. (EERE-2013-BT-STD-0007) In these comments, AHRI 
included a report that laid out three main arguments: (1) The 
incremental markup approach relies on an assumption of perfect 
competition, which is an outdated model of the economy; (2) relatively 
constant percent gross margins observed in aggregated HVAC industry 
data imply the use of fixed-percent markups over time; and (3) 
interview responses from wholesalers and contractors are consistent 
with the use of fixed-percent markups. ([Docket No. EERE-2013-BT-STD-
0007], AHRI, No. 68 at p. 29)
    DOE responds to these points as follows:
    (1) DOE's incremental markup approach is based on the widely 
accepted economic view that prices closely reflect marginal costs in 
competitive markets and in those with a limited degree of 
concentration. Economic theory permits that an incremental cost can 
have a markup on it that is different from the markup on the baseline 
product, and DOE's incremental markup approach follows this assumption. 
AHRI does not provide sufficient proof that such theory should be 
abandoned in the case of the HVAC industry.
    (2) In examining the relatively constant HVAC percent margin trend 
and its underlying prices, DOE found that the average inflation-
adjusted prices of HVAC products are relatively fixed during this 
period as well. This set of historical data has no bearing on firm 
markup behavior under product price increases, such as DOE projects 
would occur when higher-efficiency products are introduced. If prices 
are relatively constant, the incremental markup approach will arrive at 
the same price prediction as applying fixed-percent margin; hence, the 
historically constant percent margins do not necessarily imply a 
constant percent margin in the future, especially in the case of 
increased input prices. DOE evaluated time series margin and price data 
from three industries that experienced rapidly changing input prices--
the LCD television retail market, the U.S. oil and gasoline market, and 
the U.S. housing market. The results indicate that dollar margins vary 
across different markets to reflect changes in input price, but the 
percent margins do not remain fixed over time in any of these 
industries. Appendix 6B in the final rule TSD describes DOE's findings.
    (3) It is not clear whether the interview responses received by 
AHRI reflect an accurate understanding of DOE's incremental markup 
approach. In contrast to the characterization of those responses by 
AHRI, an in-depth interview with an HVAC consultant conducted by DOE 
indicates that while HVAC contractors aim to maintain fixed percent 
markups, market pressures force them to reevaluate and adjust markups 
over time to stay competitive.
    DOE concludes that there is not sufficient evidence to support the 
application of fixed percent markups to the cost increment on efficient 
equipment. Further discussion is found in section 6.4 and appendix 6B 
of the final rule TSD. In spite of their efforts to do so, firms in 
this market generally cannot maintain fixed percent margins in the long 
run under changing cost conditions. DOE's incremental markup approach 
allows the part of the cost that is thought to be affected by the 
standard to scale with the change in manufacturer price.
    For the NOPR, DOE characterized three distribution channels to 
describe how residential boiler products pass from the manufacturer to 
residential and commercial consumers: (1) Replacement market; (2) new 
construction, and (3) national accounts.\27\ 80 FR 17222,

[[Page 2352]]

17249-50 (March 31, 2015). The replacement market distribution channel 
is characterized as follows:
---------------------------------------------------------------------------

    \27\ The national accounts channel is an exception to the usual 
distribution channel that is only applicable to those residential 
boilers installed in the small to mid-size commercial buildings 
where the on-site contractor staff purchase equipment directly from 
the wholesalers at lower prices due to the large volume of equipment 
purchased, and perform the installation themselves.
---------------------------------------------------------------------------

Manufacturer [rarr] Wholesaler [rarr] Mechanical contractor [rarr] 
Consumer

    The new construction distribution channel is characterized as 
follows:

Manufacturer [rarr] Wholesaler [rarr] Mechanical contractor [rarr] 
General contractor [rarr] Consumer

    In the third distribution channel, the manufacturer sells the 
product to a wholesaler and then to the commercial consumer through a 
national account:

Manufacturer [rarr] Wholesaler [rarr] Consumer (National Account)

    DOE did not receive any comments on the distribution channels, and 
used the same distribution channels for the final rule.
    To develop markups for the parties involved in the distribution of 
the product, for the NOPR, DOE utilized several sources, including: (1) 
The Heating, Air-Conditioning & Refrigeration Distributors 
International (HARDI) 2012 Profit Report \28\ to develop wholesaler 
markups; (2) U.S. Census Bureau's 2007 Economic Census data \29\ for 
the commercial and institutional building construction industry to 
develop mechanical and general contractor markups. In addition, DOE 
used the 2005 Air Conditioning Contractors of America's (ACCA) 
Financial Analysis for the Heating, Ventilation, Air-conditioning, and 
Refrigeration (HVACR) Contracting Industry Report \30\ to disaggregate 
the mechanical contractor markups into replacement and new construction 
markets.
---------------------------------------------------------------------------

    \28\ Heating, Air Conditioning & Refrigeration Distributors 
International 2013 Profit Report (Available at: http://hardinet.org/
) (Last accessed April 10, 2014).
    \29\ U.S. Census Bureau, 2012 Economic Census Data (2012) 
(Available at: http://www.census.gov/econ/) (Last accessed March 4, 
2015).
    \30\ Air Conditioning Contractors of America (ACCA), Financial 
Analysis for the HVACR Contracting Industry: 2005 (Available at: 
https://www.acca.org/home) (Last accessed April 10, 2013).
---------------------------------------------------------------------------

    Commenting on the NOPR, ACCA expressed its concern that DOE used 
ACCA's 2005 Financial Analysis for the HVACR Contracting Industry 
Report for its markup analysis because this report is more than a 
decade old and not a relevant resource. (ACCA, No. 65 at p. 2) In 
response, DOE only uses the ACCA 2005 Report to derive the ratios of 
the markup in new construction applications and in replacement 
applications to the markup for all installations. ACCA's 2005 Financial 
Analysis is the only public source available that disaggregates HVAC 
contracting industry into replacement and new construction markets. DOE 
acknowledges that many financial conditions of the HVAC contracting 
industry have changed since 2005, but DOE believes that markups would 
tend to fluctuate in a similar manner for both new construction and 
replacement applications, and, thus, the ratios for 2005 mentioned 
above are not likely to change significantly over time. Therefore, DOE 
continued to use ACCA's 2005 Financial Analysis in the markup analysis 
for the final rule for this limited purpose.
    In addition to the markups, DOE derived State and local taxes from 
data provided by the Sales Tax Clearinghouse.\31\ These data represent 
weighted-average taxes that include county and city rates. DOE derived 
shipment-weighted-average tax values for each region considered in the 
analysis.
---------------------------------------------------------------------------

    \31\ Sales Tax Clearinghouse Inc., State Sales Tax Rates Along 
with Combined Average City and County Rates, 2015 (Available at: 
http://thestc.com/STrates.stm) (Last accessed Sept. 1, 2015).
---------------------------------------------------------------------------

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

E. Energy Use Analysis

    The energy use analysis determines the annual energy consumption of 
residential boilers at different efficiencies in representative U.S. 
single-family homes, multi-family residences, and commercial buildings, 
and assesses the energy savings potential of increased boiler 
efficiency. DOE estimated the annual energy consumption of residential 
boilers at specified energy efficiency levels across a range of climate 
zones, building characteristics, and heating applications. The annual 
energy consumption includes the natural gas, liquid petroleum gas 
(LPG), oil, and/or electricity use by the boiler for space and water 
heating. The annual energy consumption of residential boilers is used 
in subsequent analyses, including the LCC and PBP analysis and the 
national impacts analysis.
1. Building Sample
    For the NOPR, for the residential sector, DOE used the Energy 
Information Administration's (EIA) 2009 Residential Energy Consumption 
Survey (RECS 2009) to establish a sample of households using 
residential boilers for each boiler product class.\32\ The RECS data 
provide information on the vintage of the home, as well as heating and 
water heating energy use in each home. The survey also included 
household characteristics such as the physical characteristics of 
housing units, household demographics, information about other heating 
and cooling products, fuels used, energy consumption and expenditures, 
and other relevant data. DOE used the household samples not only to 
determine boiler annual energy consumption, but also as the basis for 
conducting the LCC and PBP analysis. DOE used data from RECS 2009 
together with AHRI shipment data by State \33\ to project household 
weights and characteristics in 2020, the expected compliance date of 
any amended energy conservation standards for residential boilers at 
the time of the NOPR.
---------------------------------------------------------------------------

    \32\ U.S. Department of Energy: Energy Information 
Administration, Residential Energy Consumption Survey: 2009 RECS 
Survey Data (2013) (Available at: http://www.eia.gov/consumption/residential/data/2009/) (Last accessed October, 2015).
    \33\ Air-Conditioning, Heating, and Refrigeration Institute 
(AHRI), Confidential Shipment data for 2003-2012.
---------------------------------------------------------------------------

    Commenting on the NOPR, AHRI stated that it appears that DOE 
significantly overestimated the number of buildings that use a 
residential boiler for space heating, as RECS 2009 indicates 11 million 
housing units use a gas-fired or oil-fired hydronic heating system, and 
not 16.6 million as shown in the NOPR TSD. (AHRI, No. 64 at p. 10) In 
response, it appears that AHRI is referring to Table 7.2.1 in the NOPR 
TSD, which shows the number of RECS records (and the corresponding 
number of houses represented by those records) used for each boiler 
product class. The total of these records and corresponding number of 
houses is not an estimate of the number of buildings that use a 
residential boiler for space heating. In fact, the total is not 
relevant in any way. Because RECS 2009 does not report the heating 
medium (hot water or steam), DOE used samples for hot water and steam 
boiler product classes that include all houses that might use either 
hot water or steam. For steam boilers in particular, this results in a 
sample size that represents many more houses than actually use steam 
boilers.
    DOE accounted for applications of residential boilers in commercial 
buildings because the intent of the analysis of consumer impacts is to 
capture the full range of usage conditions for these products. DOE 
considers the definition of ``residential boiler'' to be limited only 
by its capacity.\34\ DOE determined that these applications represent 
about 7 percent of the residential boiler market. DOE

[[Page 2353]]

used the EIA's 2003 Commercial Building Energy Consumption Survey \35\ 
(CBECS 2003) to establish a sample of commercial buildings using 
residential boilers for each boiler product class.\36\ Criteria were 
developed to help size these boilers using several variables, including 
building square footage and estimated supply water temperature. For 
boilers used in multi-family housing, DOE used the RECS 2009 sample 
discussed above, accounting for situations where more than one 
residential boiler is used to heat a building.
---------------------------------------------------------------------------

    \34\ 42 U.S.C. 6291(23).
    \35\ U.S. Department of Energy: Energy Information 
Administration, Commercial Buildings Energy Consumption Survey 
(2003) (Available at: http://www.eia.gov/consumption/commercial/data/2003/index.cfm?view=microdata) (Last accessed October, 2015).
    \36\ CBECS 2012 was not available at the time of the analysis. 
The full CBECS 2012 dataset is expected to be available in February 
2016.
---------------------------------------------------------------------------

    AHRI stated that an analysis that uses national data is not 
adequately evaluating the market for residential boilers in the U.S., 
which is concentrated in the Northeast and in older homes, and for 
which national average statistics are not representative. (AHRI, No. 64 
at p. 10) In response, DOE is well aware of the regionality of the 
residential boiler market. The LCC analysis does not select buildings 
across the nation at random, but rather selects the homes and buildings 
reported by RECS 2009 and CBECS 2003 that have residential boilers; the 
RECS 2009- and CBECS 2003-derived sample reflects the actual 
distribution of residential gas-fired or oil-fired boilers in the U.S., 
and the weighting of the samples is adjusted to match the shipments by 
State from 2008-2012 provided by AHRI.\37\ Additionally, DOE did not 
use national average values in its LCC analysis, but rather the 
specific data for each household or building reported by RECS 2009 and 
CBECS 2003 to determine the energy use of each boiler. Most of the data 
used in the LCC analysis are disaggregated by RECS 2009 regions or 
CBECS 2003 Census divisions. See appendix 7A of the final rule TSD for 
more details.
---------------------------------------------------------------------------

    \37\ Air-Conditioning Heating and Refrigeration Institute 
(AHRI), 2003-2012 Residential Boilers Shipments Data (Provided to 
Lawrence Berkeley National Laboratory) (Last accessed November 15, 
2013).
---------------------------------------------------------------------------

2. Space Heating Energy Use
    For the NOPR, to estimate the annual energy consumption of boilers 
meeting higher efficiency levels, DOE first calculated the heating load 
based on the RECS and CBECS estimates of the annual energy consumption 
of the boiler for each household. DOE estimated the house heating load 
by reference to the existing boiler's characteristics, specifically its 
capacity and efficiency (AFUE), as well as by the heat generated from 
the electrical components. DOE used an oversize factor of 0.7 (i.e., 
the boiler is 70 percent larger than it needs to be to fulfil the house 
heating load) from the DOE test procedure to determine the capacity of 
the existing boiler. The AFUE of the existing boilers was determined 
using the boiler vintage (the year of installation of the product) from 
RECS and historical data on the market share of boilers by AFUE. DOE 
then used the house heating load to determine the burner operating 
hours, which are needed to calculate the fossil fuel consumption and 
electricity consumption based on the DOE residential furnace and boiler 
test procedure.
    Commenting on the NOPR, AHRI stated that DOE's average annual 
energy use estimates (95.3 MMBtu/year for gas-fired hot water boilers, 
98.1 MMBtu/year for gas-fired steam boilers, 98.1 MMBtu/year for oil-
fired hot water boilers, 99.9 MMBtu/year for oil-fired steam boilers) 
are almost twice the RECS national average annual space heating energy 
consumption for housing units using natural gas of 51.4 million Btus 
and almost 40 percent higher than the RECS national average annual 
space heating energy consumption for housing units using fuel oil of 
70.3 million Btus. (AHRI, No. 64 at p. 12)
    The primary reasons for the differences between the national RECS 
result and DOE's estimates are: (1) DOE's analysis recognizes that the 
boilers are mostly installed in colder climates, and (2) DOE accounts 
for residential boilers in commercial buildings. Since boilers are 
mostly installed in colder climates, the average energy use of boilers 
is significantly higher than the average space heating national energy 
use. Based on 2008-2012 AHRI shipments data by State and RECS 2009 
households, almost 70 percent of gas-fired boilers and 90 percent of 
oil-fired boilers are installed in the Northeast. In 2009, based on 
RECS 2009 and 2008-2012 AHRI shipments data, the average annual space 
heating energy consumption is 75.8 MMBtu/yr for housing units with gas-
fired hot water boilers. For the NOPR, DOE assumed that 7 percent of 
residential boilers are installed in commercial applications. In 2003, 
based on CBECS 2003 data and 2008-2012 AHRI shipments data, DOE 
estimated that average annual space heating energy consumption is 356.8 
MMBtu/yr for buildings with gas-fired hot water boilers. The resulting 
weighted average results are 95.3 MMBtu/yr for buildings with gas-fired 
hot water boilers. For the NOPR and final rule, these numbers are 
adjusted to take into account: 2008-2012 AHRI shipments data by State, 
typical heating degree days (HDD) for an average year, HDD trends, 
building shell efficiency, number of boilers per household or building, 
automatic means, and secondary heating equipment. Based on these 
adjustments, for the final rule, DOE estimated that the average annual 
shipment-weighted energy use is 56.7 MMBtu/yr for gas-fired hot water 
boilers in residential applications and 205.9 MMBtu/yr in commercial 
applications in 2021 (or 68.6 MMBtu/yr for both residential and 
commercial buildings). For gas-fired hot water boilers, the 2021 
estimates are about 30 percent lower than the estimated values in RECS 
2009 or CBECS 2003. The results for the other boiler product classes 
are similar. See chapter 7 of the final rule TSD for more details about 
the energy use methodology and results.
    Commenting on the NOPR, Energy Kinetics stated that DOE should use 
both the 0.7 oversizing factor and the demonstrated oversizing factors 
between three and four used in the NODA for the installed base of 
equipment. (Energy Kinetics, No. 52 at p. 3) DOE agrees that the 
oversize factor varies for each household. For the final rule, DOE 
revised the equipment sizing criteria to match historical shipments by 
capacity, which accounts for the variability of the oversize factor 
found in the field.
    DOE adjusted the energy use to normalize for weather by using long-
term heating degree-day (HDD) data for each geographical region.\38\ 
For the NOPR, DOE also accounted for change in building shell 
characteristics between 2009 and 2020 by applying the building shell 
efficiency indexes in the National Energy Modeling System (NEMS) based 
on EIA's Annual Energy Outlook 2013 (AEO 2013).\39\ DOE also accounted 
for future heating season climate based on AEO 2013 HDD projections.
---------------------------------------------------------------------------

    \38\ National Oceanic and Atmospheric Administration, NNDC 
Climate Data Online (Available at: http://www7.ncdc.noaa.gov/CDO/CDODivisionalSelect.jsp) (Last accessed October 15, 2013).
    \39\ U.S. Department of Energy-Energy Information 
Administration, Annual Energy Outlook 2013 with Projections to 2040 
(Available at: <http://www.eia.gov/forecasts/aeo/>).
---------------------------------------------------------------------------

    AHRI questioned the applicability of the building shell efficiency 
index to multi-family or row houses with shared walls. (AHRI, Public 
Meeting Transcript, No. 50 at p. 83) In response, the AEO building 
shell efficiency index

[[Page 2354]]

is an average intended to reflect all building types in general. 
Indexes that are specific to building types are not available. In any 
case, if DOE were to assume that the building shell efficiency of 
multi-family or row houses increases less than all buildings in general 
(as is likely to be the case), the projected heating load of such 
buildings would be higher than assumed in DOE's analysis, and the 
energy savings for the higher-efficiency boilers would be greater. DOE 
prefers to be conservative and not over-estimate the savings for this 
building sub-type. For the final rule, DOE used the building shell 
efficiency index from AEO 2015 and a compliance year of 2021.\40\ DOE 
also used the latest HDD projections from AEO 2015 and updated the 
long-term HDD data.\41\
---------------------------------------------------------------------------

    \40\ U.S. Department of Energy-Energy Information 
Administration, Annual Energy Outlook 2015 with Projections to 2040 
(Available at: <http://www.eia.gov/forecasts/aeo/>).
    \41\ National Oceanic and Atmospheric Administration, NNDC 
Climate Data Online (Available at: http://www7.ncdc.noaa.gov/CDO/CDODivisionalSelect.jsp) (Last accessed October 15, 2015).
---------------------------------------------------------------------------

a. Impact of Return Water Temperature on Efficiency
    For the NOPR, DOE accounted for boiler operational efficiency in 
specific installations by adjusting the AFUE of the sampled boiler 
based on an average system return water temperature. The criteria used 
to determine the return water temperature of the boiler system included 
consideration of building vintage, product type (condensing or non-
condensing, single-stage or modulating), and whether the boiler 
employed an automatic means for adjusting water temperature. Using 
product type and system return water temperature, DOE developed and 
applied the AFUE adjustments based on average heating season return 
water temperatures.
    Commenting on the NOPR, Burnham tested a condensing gas boiler and 
a non-condensing oil boiler to determine the impact of return water 
temperature on boiler efficiency. Burnham stated that, based on its 
test results, DOE is overstating the impact of water temperature on 
both gas-fired and oil-fired non-condensing boilers. Burnham 
recommended that the correction factor for non-condensing boilers 
should be about half that estimated by DOE for the NOPR (which was 1 
percent). (Burnham, No. 60 at pp. 21-22) For condensing boilers, 
Burnham stated that DOE's assumed 2.5-percent reduction to adjust for 
return water temperature is low, especially at 92-percent and 96-
percent AFUE, where the reduction is probably more like 4.5 percent and 
6.5 percent, respectively. (Burnham, No. 60 at p. 66)
    For the final rule, for non-condensing boilers, DOE used the data 
provided by Burnham to determine the impact of return water temperature 
on boiler efficiency. To determine the adjustment for condensing 
boilers, DOE collected data on several more model series in addition to 
the data provided by Burnham, which appear to refer to a 91-percent 
AFUE boiler and to show a decrease of approximately 3.3 to 3.5 percent 
in efficiency for boilers operating with return water temperatures 
between 120 and 140 [deg]F. The other sources indicate a lower decrease 
than the data on a single Burnham boiler. Based upon all of the data, 
DOE estimated a reduction in efficiency of about 2.1 percent for 
condensing boilers. Regarding Burnham's comment that the reduction is 
higher at 92-percent and 96-percent AFUE, DOE did not find sufficient 
evidence to justify varying the percent decrease by AFUE. See appendix 
7B of the final rule TSD for additional details.
b. Impact of Automatic Means for Adjusting Water Temperature on Energy 
Use
    For the NOPR, DOE incorporated the impact of automatic temperature 
reset means on boiler energy use by adjusting AFUE based on a reduction 
in average return water temperature (RWT). DOE calculated the reduction 
in average RWT for single-stage boilers based on the duration of burner 
operating hours at reduced RWT. For modulating boilers, DOE used the 
average relationship \42\ between RWT and thermal efficiency to 
establish the magnitude of the efficiency adjustment required for the 
high- and low-temperature applications. DOE maintained the same 
approach for the final rule. See appendix 7B of the final rule TSD for 
details on how DOE calculated the adjustment for automatic means.
---------------------------------------------------------------------------

    \42\ Appendix 7B includes a list of references used to derive 
the relationship. No information is available about the relationship 
between AFUE and RWT, while manufacturers publish data on the 
relationship between boiler thermal efficiency and the RWT. DOE 
assumed that AFUE scales according to the relationship reported for 
the thermal efficiency.
---------------------------------------------------------------------------

    AHRI stated that DOE's underestimated the benefit of the 
``automatic means'' that is now provided with residential boilers. AHRI 
acknowledged that the TSD provides the calculation for adjusting the 
AFUE to account for the benefit of the automatic means; however, the 
adjustment for single-stage non-condensing boilers results in only a 
0.05-percent AFUE improvement, which is based on the improvement of 
steady-state efficiency with a 2 [deg]F reduction of the return water 
temperature. According to AHRI, studies have shown that this device or 
control feature does reduce the energy consumption of boilers in the 
field. A conservative estimate of the savings from automatic means 
would be 5 percent, but a more realistic range is 5 to 8 percent. 
(AHRI, No. 64 at p. 12)
    DOE found that the majority of single-stage products sampled 
utilized a pre-purge control function that allows the purging of 
residual heat within the boiler prior to ignition of the burner. DOE 
also found that the majority of boiler models sampled incorporate a 
time limit and a low temperature limit function within the control 
strategy. The time limits range from two to three minutes (by default), 
with some boilers allowing for user-defined durations. DOE's research 
has shown that there is limited field and test data on the 
effectiveness of the pre-purge technology, which is the primary 
technology in single-stage non-condensing boilers to implement the 
automatic means design requirement. Based on the logic described in 
appendix 7B of the final rule TSD, the impact on boiler steady-state 
efficiency appears to be small. In its analysis, DOE accounts for the 
variability of idle losses during the non-heating season, which already 
takes into account for some automatic means improvements from different 
technologies (e.g., outdoor reset). For the rule, because of limited 
availability of field and test data, DOE kept its NOPR approach for 
determining the impact of the automatic means on residential boiler 
efficiency.
c. Impact of Jacket Losses on Energy Use
    For the NOPR, DOE also accounted for jacket losses when the boiler 
is located in a non-conditioned space (i.e., unconditioned basement or 
garage). For boilers located in conditioned spaces, DOE assumed that 
jacket losses contribute to space heating as useful heat. See appendix 
8C of the final rule TSD for details about how DOE determined the 
installation location of boilers.
    AHRI stated that DOE assumes that 35 percent of residential gas-
fired boilers and 53 percent of residential oil-fired boilers are 
installed in unconditioned spaces. AHRI questioned the validity of 
these estimates, since most boilers in homes in the Northeast Census 
region are installed in unconditioned basements that are part of the 
home, which still adds heat to the interior of

[[Page 2355]]

the structure, such that it is not totally wasted energy. According to 
AHRI, the analysis should recognize that. Furthermore, AHRI argued that 
the jacket losses assumed in DOE's analysis randomly favor condensing 
boilers. According to AHRI, DOE assumes that jacket losses for high-
mass boilers are equal to the jacket loss factor, CJ, for boilers 
installed as isolated combustion systems (ICS), but decides to assume 
that CJ for low-mass boilers is a tenth of this value (i.e., 0.24), 
instead of using the value provided in ASHRAE 103-2007 for finned-tube 
boilers (i.e., 0.5). This assumes that condensing boilers, which 
account for a greater proportion of low-mass boilers, will have lower 
jacket loss values than those assumed in the test procedure. 
Additionally, these jacket loss factors are only one portion of the 
total jacket loss, which is the jacket loss factor multiplied by the 
jacket loss measured during steady-state operation. Assuming these 
factors, DOE has made a determination that the jacket loss is equal to 
1.0 percent, which is the default jacket loss used if this value is not 
measured by test. According to AHRI, the 1.0 percent value is a 
conservative estimate, and DOE should evaluate the total jacket losses 
with a more representative jacket loss value, suggesting that a value 
closer to 0.5 percent would be more appropriate. (AHRI, No. 64 at p. 
14)
    DOE estimates the location of the boiler based on the household 
characteristics in the RECS 2009 housing sample.\43\ This takes into 
account that the majority of the boilers are installed in Northeast or 
Midwest, where basements are a commonly used to install boilers. RECS 
2009 reports both if the household has a basement and whether the 
basement is conditioned or unconditioned. For the final rule, DOE used 
the same approach for determining the installation location of boilers. 
In regards to the jacket loss values, since there are very limited test 
data and because some of the jacket losses could contribute to heating 
the conditioned space, for the final rule, DOE revised its jacket loss 
factor value for condensing boilers so that it is equal to on average 
0.5 (ASHRAE 103-2007 for finned-tube boilers), which would more closely 
approximate condensing boiler designs, and assumed 0.5 percent for the 
jacket loss fraction.
---------------------------------------------------------------------------

    \43\ DOE assumed that all residential boilers in commercial 
buildings are installed in a conditioned space.
---------------------------------------------------------------------------

3. Water Heating Energy Use
    DOE is aware that some residential boilers have the ability to 
provide both space heating and domestic water heating, and that these 
products are widely available and may vary greatly in design. For these 
applications, DOE accounted for the boiler energy used for domestic 
water heating, which is part of the total annual boiler energy use. For 
the NOPR, DOE used the RECS 2009 and/or CBECS 2003 data to identify 
households or buildings with boilers that use the same fuel type for 
space and water heating, and then assumed that a fraction of these 
identified households/buildings use the boiler for both applications.
    Burnham stated that gas-fired steam boilers are seldom used to make 
domestic hot water due to technological challenges, and gas-fired steam 
boilers that can produce domestic hot water are not readily available 
in the market. Burnham believes that the fraction of gas-fired steam 
boilers used to make domestic hot water is less than 10 percent of all 
such boilers. Burnham stated that there is greater incentive to use 
oil-fired steam boilers to also make domestic hot water, in order to 
eliminate the additional maintenance and potential fuel piping 
complexities of a second oil burner. (Burnham, No. 60 at pp. 22-24, 66) 
For the final rule, based on AHRI's contractor survey, DOE assumed that 
5 percent of gas-fired steam boilers and 10 percent of oil-fired steam 
boilers are used to make domestic hot water.
    For the NOPR, to calculate the annual water-heating energy use for 
each boiler efficiency level, DOE first calculated the water-heating 
load by multiplying the annual fuel consumption for water heating 
(derived from RECS or CBECS) by the recovery efficiency for water 
heating of the existing boiler, which was calculated based on an 
adjustment to AFUE. DOE then calculated the boiler energy use for each 
efficiency level by multiplying the water-heating load by the recovery 
efficiency of the selected efficiency level.
    Commenting on the NOPR, AHRI stated that the average water heating 
energy use values seem high. (AHRI, Public Meeting Transcript, No. 50 
at p. 114) In response, the water heating energy use is higher for the 
boiler sample than the national average because boilers are primarily 
located in the northeast, with colder inlet water and colder ambient 
temperature. In addition, the NOPR-reported value included idle losses 
and commercial applications, which comprise seven percent of the entire 
boiler sample and use significantly more hot water than residential 
households.
a. Idle Loss
    Idle loss, as the term applies to residential heating boilers, is 
heat wasted when the burner is not firing. The idle losses are the heat 
from combustion that is not transferred to the heating of water, 
including the products of combustion up the flue, the loss out of the 
heat exchanger walls and boiler's jacket (in the form of radiant, 
conductive, or convective transfer), and the loss down the drain as a 
condensate. Because no fuel is being consumed in the off-cycle, off-
cycle losses are important only to the extent that they must be 
replaced during the on-cycle by the burning of extra fuel (i.e., longer 
burner on times or higher firing rates). The DOE test procedure 
accounts for idle losses associated with space heating in the heating 
season efficiency value, but the idle losses during non-space heating 
operation (i.e., domestic water heating) are not captured in the 
existing DOE test procedure.
    For the NOPR analysis, DOE accounted for idle losses during non-
space heating operation based on the installation location of the 
boiler (conditioned or unconditioned space), type of boiler (high mass 
or low mass), and whether or not the boiler served domestic hot water 
loads. For boilers that serve only space heating loads, the idle losses 
are accounted for in the heating season efficiency. For boilers that 
provided domestic hot water heating, idle losses occur in both heating 
and non-heating seasons. These idle losses were accounted for by 
applying heat loss values to the boiler and storage tank (when 
necessary) for a fraction of the off-cycle time. DOE also accounted for 
the losses for boilers that are installed with indirect tanks or 
tankless coils.
    Energy Kinetics and PHCC stated that for non-condensing boilers, 
increasing the heat exchanger area to increase efficiency will add mass 
to the boiler, thereby increasing the idle loss of the system. Energy 
Kinetics stated that this significantly impacts the actual annual 
efficiency, and PHCC further elaborated that the increased losses could 
offset the operating efficiency gains. (Energy Kinetics, Public Meeting 
Transcript, No. 50 at p. 286; PHCC, No. 61 at p. 1)
    For non-condensing boilers, DOE assumes that the idle loss does not 
necessarily increase with increased efficiency, based upon DOE's models 
series at different efficiency and available test data.\44\ In addition 
to

[[Page 2356]]

increasing heat exchanger area, manufacturers have a number of ways 
they can achieve higher efficiency for non-condensing boilers, 
including applying improved heat transfer measures or adding mechanical 
draft. For the final rule, DOE's approach accounts for the idle losses 
varying significantly regardless of AFUE or mass based on the test 
data. See appendix 7B of the final rule TSD for additional details on 
the consideration of idle losses.
---------------------------------------------------------------------------

    \44\ Butcher, Thomas A., Performance of Integrated Hydronic 
Heating Systems, Brookhaven National Laboratory (December 2007) 
(Available at: <https://www.bnl.gov/isd/documents/41399.pdf).
---------------------------------------------------------------------------

4. Electricity Use
    For the NOPR, DOE calculated boiler electricity consumption for the 
circulating pump, the draft inducer,\45\ and the ignition system. In 
addition, DOE included the electricity use for a condensate pump or 
heat tape, which is sometimes installed with higher-efficiency 
products. For single-stage boilers, DOE calculated the electricity 
consumption as the sum of the electrical energy used during boiler 
operation for space heating, water heating, and standby energy 
consumption. For two-stage and modulating products, this formula 
includes parameters for the operation at full, modulating, and reduced 
load.
---------------------------------------------------------------------------

    \45\ In the case of modulating condensing boilers, to 
accommodate lower firing rates, the inducer will provide lower 
combustion airflow to regulate the excess air in the combustion 
process. DOE assumed that modulating condensing boilers are equipped 
with inducer fans with permanent split capacitor (PSC) motors and 
two-stage controls. The inducers are assumed to run at a 70-percent 
airflow rate when the modulating unit operates at low-fire.
---------------------------------------------------------------------------

    Commenting on the NOPR, Weil-McLain and Burnham stated that boilers 
at 85-percent AFUE are likely to require mechanical draft assistance, 
which would increase electricity use. (Weil-McLain, No. 55 at pp. 2-3; 
Burnham, No. 60 at p. 25) As stated in section IV.F.2, for the final 
rule, DOE revised the mechanical draft fractions for 85-percent AFUE 
gas-fired hot water boilers based on shipments data from Burnham, 
AHRI's contractor survey, and the updated reduced set of residential 
boiler models (hereinafter referred to as the ``reduced set''; see 
appendix 7D of the final rule TSD for details). (See Burnham, No. 60 at 
p. 18, 25; AHRI, No. 66 at p. 10-11)
    Burnham stated that natural draft burner systems generally use a 
40VA transformer to power the burner and controls, rendering DOE's 
estimate of 40W for non-condensing gas-fired hot water boilers and gas-
fired steam boilers very conservative. (Burnham, No. 60 at p. 66) For 
the final rule, DOE revised the boiler power use estimates based on the 
updated reduced set of residential boiler models, which resulted in an 
estimate of 92 W for non-condensing gas-fired hot water boilers and 84 
W for non-condensing gas-fired steam boilers.
    Burnham stated that all oil-fired boilers are equipped with a fan 
as part of burner, so it is unclear what model DOE would consider an 
oil-fired boiler without an induced/forced draft. (Burnham, No. 60 at 
p. 24) For the final rule, DOE agrees that all oil-fired boilers are 
equipped with burner fans and revised the boiler power use estimates to 
include the burner fan electricity.
    Burnham stated that DOE's analysis failed to recognize that 
condensing boilers typically have a separate pump to circulate water 
through the boiler's heat exchanger in addition to the pump used to 
circulate water through the heating system. (Burnham, No. 60 at p. 24, 
66) In addition, Burnham stated that the power consumption for the 
boiler pump should be at least 160W. (Burnham, No. 60 at p. 24) For the 
final rule, for condensing boilers, DOE included the electricity use of 
both a boiler pump and circulating pump. DOE maintained the NOPR 
assumption that the circulating pump uses 80W. The engineering analysis 
determined that the most commonly used boiler pumps (i.e., pumps that 
circulate water through the hot water boiler heat exchanger) are the 
Taco 0015 or Grundfos UPS 15, which use 120W. DOE utilized this value 
for all boiler pumps used in condensing boiler installations.
a. Standby Mode and Off Mode Losses
    Lochinvar stated that the DOE erroneously presumes that standby 
power consumption is lost energy, but because boilers are typically 
installed inside homes, standby power consumption is converted into 
heat that is transmitted into the home. In contrast, Lochinvar stated 
that off mode power consumption should be considered a loss because 
there is likely no need for heating when the boiler is in off mode. 
(Lochinvar, No. 63 at pp. 2-3) For the final rule, DOE assumed that a 
fraction of standby power used by boilers installed indoors contributes 
to heating the home during the heating season. DOE agrees that off mode 
energy use does not contribute to heating the home.
b. Air Conditioner Electricity Use
    For the NOPR, DOE accounted for the impact of water heating energy 
use during the non-heating season on air conditioner (AC) electricity 
use for boilers installed in conditioned spaces. DOE assumed that only 
boilers installed in indoor spaces impact the cooling load and that a 
fraction of this electricity use impacts the cooling load. EEI stated 
that if the boiler is not located near the thermostat, it will not have 
an impact on the cooling load, especially because the heat losses of 
the boiler are miniscule compared to the cooling load. (EEI, Public 
Meeting Transcript, No. 50 at p. 120) In NOPR and in the final rule, 
DOE assumed that about half of the energy use losses related water 
heating by the boiler as impacting cooling load to account boiler 
installation location, distance from thermostat, and non-coincidental 
loads.
5. Standby Mode and Off Mode
    DOE calculated boiler standby mode and off mode electricity 
consumption for times when the boiler is not in use for each efficiency 
level identified in the engineering analysis for standby mode and off 
mode standards. DOE calculated boiler standby mode and off mode 
electricity consumption by multiplying the power consumption at each 
efficiency level by the number of standby mode and off mode hours. To 
calculate the annual number of standby mode and off mode hours for each 
sample household, DOE subtracted the estimated total burner operating 
hours (for both space heating and water heating) from the total hours 
in a year (8,760). Details of the method are provided in chapter 7 of 
the final rule TSD.

F. Life-Cycle Cost and Payback Period Analysis

    DOE conducted LCC and PBP analyses to evaluate the economic impacts 
on individual consumers of potential energy conservation standards for 
residential boilers. The effect of new or amended energy conservation 
standards on individual consumers usually involves a reduction in 
operating cost and an increase in purchase cost. DOE used the following 
two metrics to measure consumer impacts:
     The LCC (life-cycle cost) is the total consumer expense of 
an appliance or product over the life of that product, 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 product.
     The PBP (payback period) is the estimated amount of time 
(in years) it takes consumers to recover the increased purchase cost 
(including installation) of a more-efficient product

[[Page 2357]]

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 residential boilers 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 
product.
    For each considered efficiency level in each product class, DOE 
calculated the LCC and PBP for a nationally representative set of 
housing units and commercial buildings. As stated previously, DOE 
developed household and building samples from the RECS 2009 and CBECS 
2003. For each sample building, DOE determined the energy consumption 
for the residential boilers and the appropriate energy prices. By 
developing a representative sample of buildings, the analysis captured 
the variability in energy consumption and energy prices associated with 
the use of residential boilers.
    Inputs to the calculation of total installed cost include the cost 
of the product--which includes MPCs, manufacturer markups, retailer and 
distributor markups, and sales taxes--and installation costs. Inputs to 
the calculation of operating expenses include annual energy 
consumption, energy prices and price projections, repair and 
maintenance costs, product lifetimes, and discount rates. DOE created 
distributions of values for product lifetime, discount rates, and sales 
taxes, with probabilities attached to each value, to account for their 
uncertainty and variability.
    DOE conducts a stochastic analysis that employs a computer 
spreadsheet model to calculate the LCC and PBP, which incorporates 
Crystal BallTM (a commercially-available software program) 
and relies on a Monte Carlo simulation to incorporate uncertainty and 
variability (e.g., energy prices, installation costs, and repair and 
maintenance costs) into the analysis. The Monte Carlo simulations 
randomly sample input values from the probability distributions and 
residential boiler user samples. It uses weighting factors to account 
for distributions of shipments to different building types and States 
to generate LCC savings by efficiency level. The model calculated the 
LCC and PBP for products at each efficiency level for 10,000 buildings 
per simulation run.
    Commenting on the NOPR, AHRI stated that information from a 
recently completed study conducted by the Gas Technology Institute 
(GTI) \46\ indicates that the random-choice Monte Carlo methodology 
used in the LCC fails to acknowledge the rational, economic factors 
involved in purchasing heating equipment, including boilers. AHRI 
stated that these factors may vary, but the ultimate decision on what 
unit is purchased is based on some logic underscored by the consumer's 
economic situation. (AHRI, No. 64 at p. 10) Burnham supported AHRI's 
position. (Burnham, No. 60 at p. 19)
---------------------------------------------------------------------------

    \46\ Available at: http://www.gastechnology.org/reports_software/Documents/21693-Furnace-NOPR-Analysis-FinalReport_2015-07-15.pdf.
---------------------------------------------------------------------------

    In response, the method used to estimate the boiler efficiency that 
a given sample household would choose in the no-new-standards case is 
not entirely random. For gas boilers, DOE assigned a higher fraction of 
condensing boilers to regions with a higher fraction of condensing 
shipments, as reported in the shipments data. That is, the method 
assumes that the factors that currently cause consumers to choose 
condensing boilers in specific areas will continue to operate in the 
future. Development of a complete consumer choice model for boiler 
efficiency would require data that are not currently available, as well 
as recognition of the various factors that impact the purchasing 
decision, such as incentives, the value that some consumers place on 
efficiency apart from economics (i.e., ``green behavior''), and whether 
the purchaser is a homeowner, landlord, or builder. For the final rule, 
DOE used the same general method to assign boiler efficiency in the no-
new-standards case, but made use of updated shipments data.
    DOE calculated the LCC and PBP for all consumers of residential 
boilers as if each were to purchase a new product in the expected year 
of required compliance with amended standards. Any amended standards 
would apply to residential boilers manufactured 5 years after the date 
on which any amended standard is published.\47\ At this time, DOE 
estimates publication of a final rule in 2016. Therefore, for purposes 
of its final rule analysis, DOE used 2021 as the first year of 
compliance with any amended standards for residential boilers.
---------------------------------------------------------------------------

    \47\ DOE is conducting this rulemaking pursuant to 42 U.S.C. 
6295(f)(4)(C), which provides a 5-year lead time for compliance with 
amended standards. This rulemaking also satisfies DOE's 6-year-
lookback review requirement under 42 U.S.C. 6295(m), which provides 
the same 5-year lead time.
---------------------------------------------------------------------------

    As noted above, DOE's LCC and PBP analyses generate values that 
calculate the payback period for consumers under potential energy 
conservation standards, which includes, but is not limited to, the 
three-year payback period contemplated under the rebuttable presumption 
test. However, DOE routinely conducts a full economic analysis that 
considers the full range of impacts, including those to the consumer, 
manufacturer, Nation, and environment, as required under 42 U.S.C. 
6295(o)(2)(B)(i). The results of this analysis serve as the basis for 
DOE to definitively evaluate the economic justification for a potential 
standard level (thereby supporting or rebutting the results of any 
preliminary determination of economic justification).
    Table IV.24 summarizes 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 model, and of 
all the inputs to the LCC and PBP analyses, are contained in chapter 8 
of the final rule TSD and its appendices.

  Table IV.24--Summary of Inputs and Methods for the Final Rule LCC and
                              PBP Analysis*
------------------------------------------------------------------------
                Inputs                           Source/method
------------------------------------------------------------------------
Product Cost.........................  Derived by multiplying MPCs by
                                        manufacturer, wholesaler, and
                                        contractor markups and sales
                                        tax, as appropriate. Used a
                                        constant product price trend to
                                        forecast product costs.
Installation Costs...................  Baseline installation cost
                                        determined with data from RS
                                        Means. Assumed cost changes with
                                        efficiency level.
Annual Energy Use....................  The total space heating and water
                                        heating fuel use plus
                                        electricity use per year. Number
                                        of operating hours and energy
                                        use based on RECS 2009 and CBECS
                                        2003.

[[Page 2358]]

 
Energy Prices........................  Natural Gas: Based on EIA's
                                        Natural Gas Navigator data for
                                        2013. Fuel Oil and LPG: Based on
                                        EIA's State Energy Consumption,
                                        Price, and Expenditures
                                        Estimates (SEDS) for 2013.
                                        Electricity: Based on EIA's Form
                                        861 data for 2013. Variability:
                                        Regional energy prices
                                        determined for 30 regions for
                                        RECS 2009 sample and 9 Census
                                        divisions for the CBECS 2003
                                        sample.
Energy Price Trends..................  Based on AEO 2015 price
                                        forecasts.
Repair and Maintenance Costs.........  Based on RS Means data and other
                                        sources. Assumed variation in
                                        cost by efficiency.
Product Lifetime.....................  Based on shipments data, multi-
                                        year RECS and American Housing
                                        Survey data, and AHRI contractor
                                        survey.
Discount Rates.......................  Approach involves identifying all
                                        possible debt or asset classes
                                        that might be used to purchase
                                        the considered appliances, or
                                        might be affected indirectly.
                                        Primary data source was the
                                        Federal Reserve Board's Survey
                                        of Consumer Finances.
Compliance Date......................  2021.
------------------------------------------------------------------------
* References for the data sources mentioned in this table are provided
  in the sections following the table or in chapter 8 of the final rule
  TSD.

1. Product Cost
    To calculate consumer product 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 products and higher-efficiency products, because DOE applies 
an incremental markup to the increase in MSP associated with higher-
efficiency products.
    To project future product prices, DOE considered the historic trend 
in the Producer Price Index (PPI) for cast iron heating boilers and 
steel heating boilers \48\ to estimate the change in price between the 
present and the compliance years. Due to the variability in the 
historical price trends, DOE assumed a constant product price trend.
---------------------------------------------------------------------------

    \48\ Cast iron heating boiler PPI series ID: PCU 3334143334141; 
Steel heating boiler PPI series ID: PCU 3334143334145 (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 product, such as venting and 
piping modifications and condensate disposal that might be required 
when installing products at various efficiency levels. DOE estimated 
the costs associated with installing a boiler in a new housing unit or 
as a replacement for an existing boiler.
a. Basic Installation Cost
    For the NOPR, DOE calculated the basic installation cost, which is 
applicable to both replacement and new construction boiler 
installations and includes the cost of putting in place and setting up 
the boiler, permitting, and removal or disposal fees.
b. Replacement Installations
    For the NOPR, DOE considered additional costs (``adders'') for a 
fraction of replacement installations of non-condensing and condensing 
boilers. These additional costs may account for chimney relining, 
updating of flue vent connectors, vent resizing, and the costs for a 
stainless steel vent, if required. Each of these cost adders is 
discussed in further detail below.
(1) Chimney Relining
    To determine the installations that would require chimney relining 
upon boiler replacement, DOE assumed for the NOPR that all boilers that 
were installed before 1995, the year that the National Fuel Gas Code 
(the first building code to require chimney lining) was established for 
all buildings built before 1995, would require relining upon boiler 
replacement in 2020.
    Commenting on the NOPR, for the replacement of a non-condensing 
boiler with another non-condensing boiler, Crown Boiler stated that the 
National Fuel Gas Code (NFGC) does not always require relining indoor 
terracotta chimneys for all efficiency levels, and assuming that all 
boilers installed in homes built before 1995 or replaced before 1995 
require relining upon replacement is incorrect and overstates the cost 
of a non-condensing boiler replacement. (Crown Boiler, Public Meeting 
Transcript, No. 50 at pp. 163-164, 197) Weil-McLain and AHRI stated 
that section 12.6.4.2 of the NFGC does not require chimneys to be 
relined when an appliance is replaced by an appliance of similar type. 
Therefore, the majority of boiler replacements involving a non-
condensing cast iron boiler being replaced with the same type of 
equipment would not have included chimney relining, regardless of 
whether such replacement occurred prior to or after 1995. (Weil-McLain, 
No. 55 at p. 5; AHRI, No. 64 at p. 11)
    For the final rule, DOE did not change its methodology to determine 
the fraction of unlined chimneys that would require relining applied in 
the NOPR analysis. Similar to the NOPR, DOE estimated that only 6 
percent of all replacement boiler installations in 2021 would require 
relining of unlined chimneys, which overall seems to coincide with 
stakeholder input regarding the fraction of non-condensing replacement 
installations requiring venting modifications. Regarding the comments 
by Weil-McLain and AHRI, DOE notes that the exception in section 
12.6.4.2 of the NFGC states that existing chimneys shall be permitted 
to have their use continued when an appliance is replaced by an 
appliance of similar type, input rating, and efficiency. However, DOE 
has concluded that many of the current non-condensing boiler designs 
(82-percent to 83-percent AFUE) cannot be considered to be of similar 
input rating and efficiency compared to old boilers below 80-percent 
AFUE that were primarily installed before 1992. Furthermore, DOE notes 
that section 12.6.4.4 of the NFGC states that ``When inspection revels 
that an existing chimney is not safe for the intended application, it 
shall be repaired, rebuilt, relined, or replaced with a vent or chimney 
to conform to National Fire Protection Association (NFPA) 211.'' \49\ 
Because the amended standard will be effective in 2021, many boilers 
installed before 1995 will be close to the end of their lifetime and 
they may be vented in chimneys that would require the relining of the 
existing chimney to meet safety requirements. Thus, for the final rule, 
DOE maintained the assumption that boilers that replace boilers 
installed before 1995, or first-time boilers installed in homes built 
before 1995, would require relining of the chimney.
---------------------------------------------------------------------------

    \49\ National Fire Protection Association, NFPA 211: Standard 
for Chimneys, Fireplaces, Vents, and Solid Fuel-Burning Appliances 
(2013) (Available at: http://www.nfpa.org/codes-and-standards/document-information-pages?mode=code&code=211).

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[[Page 2359]]

    Weil-McLain stated that DOE used incorrect assumptions to calculate 
the percentage of households with an unlined chimney and the percentage 
of masonry chimneys that would need to be relined in 2021, because DOE 
incorrectly applied the NFGC in determining the number of relined 
chimneys. Weil-McLain also stated that there are significantly more 
households with a boiler in the north than in the south; therefore, 
using a midpoint between the percentages assigned to the north and to 
the south significantly underestimates the actual percentage of 
households with unlined chimneys. (Weil-McLain, No. 55 at p. 5)
    DOE did not apply a national average fraction to determine the 
number of chimneys that would need to be relined in 2021. Rather, DOE 
used regional fractions of the number of masonry chimneys and the age 
of each individual boiler to determine whether a chimney would need to 
be relined in 2021. For both the NOPR and the final rule, DOE assumed 
that 73 percent of buildings in the Northeast, 53 percent of buildings 
in the Midwest, 10 percent of buildings in the South, and 27 percent of 
buildings in the West have masonry chimneys.
    For the NOPR, DOE assumed that any chimney relining would require 
an aluminum liner. Burnham questioned whether the unit costs DOE used 
for double wall kit ``aluminum liners'' are actually for ``all fuel'' 
stainless steel liner kits (which are appropriate for oil-fired 
boilers). (Burnham, No. 60 at p. 26) For the NOPR, DOE used an average 
cost of different liners, including double wall kit ``aluminum liners'' 
that are actually for ``all fuel'' stainless steel liner kits. Burnham 
also stated that DOE does not need to extrapolate costs for 5'' and 6'' 
liners, as costs that better reflect true market costs are provided by 
DOE's data source.\50\ (Burnham, No. 60 at p. 26) Furthermore, Weil-
McLain stated that the fact that a chimney was re-lined for a non-
condensing boiler does not necessarily mean that it was relined with 
stainless steel to meet the requirements for a condensing unit. (Weil-
McLain, No. 55 at p. 5)
---------------------------------------------------------------------------

    \50\ Available at: http://www.ventingpipe.com/gas-fuel-chimney-liners/c1650.
---------------------------------------------------------------------------

    For the final rule, DOE updated its liner prices for different 
liner types and sizes (including 5'' and 6'') from the mentioned data 
source. It also applied the ``aluminum liner'' kit costs to Category I 
non-condensing gas-fired boilers and AL29-4C stainless steel liner kit 
costs to Category III non-condensing gas-fired boilers to meet the 
requirements of each venting category.
    Burnham stated that DOE erroneously assumed that aluminum would be 
used as the liner material for oil-fired boilers, when it should be 
stainless steel. Burnham provided the cost for stainless steel liner 
systems for use with fuel oil from DOE's online vent source.\51\ 
(Burnham, No. 60 at p. 26) For the final rule, DOE assumed that oil-
fired boilers require stainless steel chimney liners, and used the cost 
from the online vent source.
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    \51\ Available at: http://www.ventingpipe.com/gas-fuel-chimney-liners/c1650?f3378=oil.
---------------------------------------------------------------------------

    (2) Venting Characterization
    For the NOPR, to determine the venting installation costs, DOE 
considered vent categories as defined in the National Fuel Gas Code. 
DOE determined that all natural draft boilers and a fraction of 
mechanical draft boilers would be vented as a Category I appliance 
(negative pressure vent system with high temperature flue gases). DOE 
determined that the remaining fraction of mechanical draft boilers 
would be vented as a Category III appliance (positive pressure vent 
system with high temperature flue gases). DOE determined that very few 
non-condensing would be installed as a Category II appliance (negative 
pressure vent system with low temperature flue gases) or a Category IV 
appliance (positive pressure vent system with low flue gases 
temperatures). However, DOE determined that all condensing 
installations would be vented as a Category IV appliance.
    DOE included additional venting cost associated with Category III 
stainless steel venting for a fraction of non-condensing installations 
that require such venting. Such inclusion addresses potential safety 
concerns by preventing the corrosive impacts of condensation in the 
venting system. Because use of an inducer or forced draft fan is 
associated with conditions under which stainless steel venting is 
necessary to avoid condensation in some cases, DOE based the fraction 
of boilers requiring stainless steel venting on the percentage of 
models with inducer or forced draft fans in the AHRI directory \52\ and 
manufacturer literature. The fraction of stainless steel venting 
installations ranged from 11 percent for the baseline efficiency models 
to 32 percent for the 85-percent AFUE models.
---------------------------------------------------------------------------

    \52\ Air Conditioning, Heating, and Refrigeration Institute, 
Consumer's Directory of Certified Efficiency Ratings for Heating and 
Water Heating Equipment (AHRI Directory) (September 2013) (Available 
at: http://www.ahridirectory.org/ahridirectory/pages/home.aspx) 
(Last accessed September 2013).
---------------------------------------------------------------------------

    Commenting on the NOPR, Weil-McLain, Burnham, AGA/APGA and PGW 
stated that replacement of existing non-condensing boilers (installed 
with current venting systems) with near-condensing boilers that do not 
use an inducer or forced draft fan requires Category II venting, 
because such units operate with a non-positive vent static pressure and 
with vent gas temperature that may cause excessive condensate 
production in the vent. Such venting uses materials (such as stainless 
steel alloy, AL29-4C) that can resist the corrosive nature of the 
condensate. (Weil-McLain, No. 55 at pp. 1-2, 4; Burnham, No. 60 at p. 
9; AGA and APGA, No. 54 at p. 2; PGW, No. 57 at p. 1)
    For the final rule, DOE estimated that in cases of replacement with 
near-condensing gas-fired boilers (85-89 percent AFUE), instead of 
using Category II stainless steel venting, installers would use 
Category III stainless steel venting with mechanical draft.\53\ 
Category II venting presents reliability issues, even with stainless 
steel venting, because of the variety of operating conditions 
encountered in the field. For this analysis, DOE assumed that such 
installations (that otherwise would require Category II venting) would 
have less safety and reliability issues by installing a mechanical 
draft boiler with Category III venting, which requires stainless steel 
venting. DOE included the cost of AL29-4C stainless steel venting for 
all Category III installations. DOE also determined that the 
installation costs associated with Category III vent installations 
would be equal to or higher than Category II vent installations in most 
cases.
---------------------------------------------------------------------------

    \53\ For replacement with an 84-percent AFUE boiler, DOE found 
that that it is necessary to use special venting in a small fraction 
of cases based on shipments data provided by Burnham.
---------------------------------------------------------------------------

    Burnham stated that the ANSI Z223.1 code defers to the 
manufacturer's installation and operation manual for Category II, III, 
and IV boilers. If the boiler has ANSI Z21.13 certification, the boiler 
manufacturer must either supply or specify venting materials meeting 
certain requirements for corrosion resistance and/or gas tightness in 
its manual. For Category II, III, and IV non-condensing boilers, the 
most common method of meeting this requirement is to specify the AL29-
4C stainless steel special gas vent. (Burnham, No. 60 at p. 10) Burnham 
found from its review of 61 models in the AHRI directory that almost 
all non-condensing, non-Category I boilers are vented with an AL29-4C 
special gas vent, which increases the installation cost of these 
products. (Burnham, No. 60 at p. 27) For the NOPR and final rule, as 
stated

[[Page 2360]]

above, DOE did not consider Category II or IV venting for non-
condensing boilers, but instead for all category III non-condensing 
boilers, DOE included the cost for AL29-4C stainless steel venting.
    Burnham stated that horizontal venting of a Category III or IV gas-
fired boiler at 85-percent AFUE is limited by safety codes, building 
codes, I&O manuals, location of surrounding buildings, and limited 
access to an eligible exterior wall. It noted that this is particularly 
a problem in urban areas with homes that are closely spaced. Burnham 
stated that in cases where horizontal venting is impossible, it may be 
unreasonably expensive to use the old chimney as a chase for a special 
gas vent system. (Burnham, No. 60 at pp. 14-15) PGW stated that the 
installation of Category II and IV venting systems presents particular 
problems in Philadelphia's 400,000 row houses because replacing a 
boiler will require a new venting system, including abandonment of the 
existing venting system, structural changes to accommodate a new 
venting system path, and relocation of the boiler to meet the code and 
installation requirements of a new condensing boiler system. (PGW, No. 
57 at p. 2) In addition, Burnham stated that conversion from a non-
condensing Category I boiler to a non-condensing or condensing Category 
II, III, or IV boiler can result in an orphaned water heater. Burnham 
stated that if there is no way to horizontally vent the new boiler, and 
if the old chimney is used as a chase for the special vent system, the 
water heater and any other appliances vented into that chimney will 
need to be removed. Burnham stated that DOE needs to include the 
additional installation costs associated with complete replacement of 
``orphaned water heaters'' for a fraction of installations. (Burnham, 
No. 60 at p. 28)
    DOE acknowledges that a small fraction of replacement installations 
may be difficult, but DOE does not believe that the difficulties are 
insurmountable. DOE's analysis accounts for additional costs for those 
installations that would require re-routing of the vent system for 
Category III non-condensing boilers and Category IV condensing boilers 
to account for the limitations described by Burnham and PGW. The 
analysis does not include installations that would require the use of 
existing chimneys in lieu of horizontal venting, but rather included 
the cost for longer vent runs. DOE notes that in response to the NOPR 
for the current residential furnaces rulemaking, the American Council 
for an Energy-Efficient Economy (ACEEE) stated that the Energy 
Coordinating Agency, a major weatherization program in Philadelphia 
that has installed many condensing furnaces in row houses, has 
developed moderate cost solutions (at most $350) to common problems 
such as having no place to horizontally vent directly from the 
basement. ([Docket No. EERE-2014-BT-STD-0031], ACEEE, No. 113 at p. 7) 
Both in the NOPR and final rule, DOE accounted for a fraction of 
installations that would require chimney relining or vent resizing for 
the orphaned water heater. DOE did not consider the complete 
replacement of the orphaned water heater, but instead added additional 
installation costs associated with venting of the Category III or IV 
boiler, so that the orphaned water heater could be vented through the 
chimney.
    Boilers that use mechanical draft (Category I) are required to meet 
the NFGC venting requirements, while Category III systems require 
mechanical draft and stainless steel venting. Burnham and Weil-McLain 
stated that DOE overstated the market share of units that use 
mechanical draft (Category I or III) because DOE used number of models 
instead of shipments. (Burnham, No. 60 at pp. 24-25; Weil-McLain, No. 
55 at p. 5) In addition to data on models from the AHRI directory, for 
the final rule, DOE also used shipments data from Burnham and AHRI's 
contractor survey to estimate the share of installations that would use 
mechanical draft. (AHRI, No. 67) For the final rule, DOE also took into 
account a fraction of mechanical draft (Category I) gas-fired boilers 
that would need the vents to be resized to meet the NFGC venting 
requirements.
    Weil-McLain stated that the vast majority of near-condensing gas-
fired boilers \54\ sold would have an inducer or fan (i.e., mechanical 
draft). Weil-McLain stated that because boilers at 85 percent AFUE 
produce flue gases that have a low enough temperature that they do not 
have enough buoyancy to naturally be removed, they are more likely to 
require mechanical draft to vent the flue gases. Weil-McLain stated 
that in addition, the mandated use of an automatic means for adjusting 
water temperature also reduces the buoyancy of the flue gases, thereby 
necessitating mechanical draft. Weil-McLain also stated that the 
addition of a draft inducer or blower motor would increase the 
installation costs associated with new electric service installation 
(in some instances), new venting and/or chimney lining, and re-piping. 
(Weil-McLain, No. 55 at pp. 2-3)
---------------------------------------------------------------------------

    \54\ Weil-McLain considers near-condensing gas-fired boilers to 
be those with AFUE from 84 percent to 89 percent.
---------------------------------------------------------------------------

    For the final rule, DOE used shipments data from Burnham \55\ and 
the AHRI contractor survey, which resulted in about half of 85-percent 
AFUE gas-fired hot water boilers shipped in 2021 being mechanical 
draft. Using this data, DOE also estimated that 5 percent of gas-fired 
hot water boilers at efficiency levels below 85-percent AFUE use 
mechanical draft in 2021. For the NOPR and final rule, DOE assumed that 
adding mechanical draft would significantly increase the venting costs 
due to new flue venting and/or chimney lining. For the final rule, DOE 
updated its installation costs for mechanical draft as mentioned above. 
DOE did not assume additional cost for new electric service, since all 
new gas-fired boilers utilize electronic ignition, which already 
requires an electrical outlet. In addition, DOE did not assume 
additional re-piping (to change the installation location of the 
boiler), but instead assumed that the boiler would remain in the same 
installation location, which might require additional vent length to 
address restrictions on horizontal venting.
---------------------------------------------------------------------------

    \55\ Burnham shipments data from 2014 showed that 38.7 percent 
of its 85-percent AFUE gas-fired hot water boilers shipped in 2014 
were mechanical draft.
---------------------------------------------------------------------------

    Commenting on the NOPR, Burnham stated that in addition to straight 
pipes, the installation manuals of the models in the AHRI directory 
require at least one other fitting (90 degree elbow) in almost all 
Category III/IV installations. (Burnham, No. 60 at p. 28) For the NOPR 
and the final rule, DOE accounted for other fittings, such as a 90 
degree elbow, for all venting installations.
    For the NOPR, the additional installation costs for condensing 
boilers in replacement installations included new either 2-inch or 3-
inch polyvinyl chloride (PVC), polypropylene (PP), or chlorinated 
polyvinyl chloride (CPVC) combustion air venting for direct vent 
installations (PVC); concealing vent pipes for indoor installations, 
addressing an orphaned water heater (by updating flue vent connectors, 
vent resizing, or chimney relining), and condensate removal.
    Weil-McLain stated that with a Category IV boiler, the venting 
system must be able to handle positive pressure. This often eliminates 
the ability for the boiler to continue to use the same chimney as other 
appliances, which makes a retrofit with such an appliance all the more 
costly to the

[[Page 2361]]

consumer because alternative venting and piping configurations would be 
necessary. It stated that the additional costs for installing a boiler 
as a Category IV appliance are at least $1,000 to over $1,400, if there 
are no further complications. (Weil-McLain, No. 55 at p. 3) For the 
NOPR and the final rule, DOE accounted for the additional installation 
cost of adding a category IV vent for condensing boiler designs, 
including eliminating the ability of the boiler to continue to use the 
same chimney when it is also being used by water heater, resizing of 
orphaned water heater, and all necessary installation costs for adding 
a new flue vent.
    Commenting on the NOPR, Burnham reviewed 44 condensing boiler 
models in the AHRI directory and found that most of the units with an 
input capacity of 100 MBH use 3-inch venting. Burnham stated that if 
DOE uses a representative gas-fired hot water boiler input capacity of 
120 MBH as it recommends, the use of 3-inch venting is almost 
universal. (Burnham, No. 60 at p. 28) AHRI stated that after a certain 
input level, the standard PVC pipe in the vent system will be 3 inches. 
(AHRI, Public Meeting Transcript, No. 50 at p. 168) Crown Boiler added 
that with input rates at the upper limit of the residential range, some 
condensing boilers may need 4-inch vents. (Crown Boiler, Public Meeting 
Transcript, No. 50 at p. 169) For the final rule, DOE assumed that most 
condensing boilers use 3-inch PVC, PP, or CPVC pipes, and those at the 
highest capacities use 4-inch vents.
    The Advocates encouraged DOE to incorporate the lower-cost DuraVent 
technologies in the analysis, and more broadly to consider innovative 
installation technology that would likely emerge with increasing 
experience and learning. The Advocates stated that the DuraVent 
technology can help address difficult installation situations with 
condensing boilers by allowing for venting both a new condensing boiler 
and an existing atmospheric water heater through the existing chimney. 
(The Advocates, No. 62 at p. 2) DOE did not include lower-cost venting 
solutions for condensing boilers because these technologies are still 
immature.\56\ However, DOE agrees that if the new venting technologies 
are successful in the market, they could decrease the installation cost 
of condensing boilers in replacement situations.
---------------------------------------------------------------------------

    \56\ The chimney vent option, which would be most applicable to 
residential boilers, is still under development. The non-condensing 
(Category I) Type B vent + condensing (Category IV) venting option 
is currently available in the market: http://duravent.com/Product.aspx?hProduct=49.
---------------------------------------------------------------------------

(3) Other Issues
    In the NOPR and final rule, DOE added condensate withdrawal costs 
for condensing boilers. Burnham stated that according to the I&O 
manuals of the boilers it examined, the vast majority of Category II, 
III, and IV vent systems require a means of disposing of condensate for 
non-condensing boilers, which DOE did not account for in its 
installation cost calculations. (Burnham, No. 60 at p. 28) Lochinvar 
stated that even non-condensing boilers will condense when the heat 
exchanger is cold. Lochinvar also stated that automatic means measures 
extend the time that heat exchangers are exposed to condensate, and 
increases the potential for condensate-related problems. (Lochinvar, 
No. 63 at pp. 2-3)
    For the final rule, based on a review of installation manuals, DOE 
assumed that 75 percent of non-condensing mechanical draft category III 
boilers require condensate collection. DOE accounted for condensate 
issues in the venting by including a condensate trap and piping to 
either a collector or drain. DOE has determined that these measures 
also address the impact of automatic means as part of the overall 
condensate collection process.
    For the NOPR, DOE assumed that the circulating pump and boiler pump 
are provided by the manufacturer, and, therefore, included the cost of 
both pumps as part of the product cost. Commenting on the NOPR, Burnham 
stated that in some cases, neither the circulation pump nor the boiler 
pump are supplied with the boiler, thereby increasing the installation 
cost. Burnham added that a second ramification of the need for two 
pumps are the associated piping requirements. In most cases, this 
piping is not supplied with the boiler and must be fabricated by the 
installer, which results in an additional cost. Burnham estimated that 
the contractor's cost associated with the second (boiler) pump and the 
piping is $239. (Burnham, No. 60 at pp. 29-31) For the final rule, DOE 
assumed that neither the circulation pump nor the boiler pump is 
supplied with the boiler. DOE included the installation of the 
secondary and primary piping 75 percent of the time for condensing 
boiler installations.
    Burnham stated that 35 percent of the condensing gas-fired hot 
water boiler models it investigated requires a Y strainer. Burnham 
estimated that the contractor's cost of a 1-inch Y strainer is $45. 
(Burnham, No. 60 at pp. 29-31) For the final rule, DOE included the 
cost of a Y-strainer for one-third of condensing boiler installations 
based on a review of condensing model installation manuals, with an 
average installed cost of $48 (including labor and parts) from RS Means 
2015.
c. New Construction Installations
    DOE also included installation adders for new construction, as well 
as for new owner installations for hot water gas-fired boilers. For 
non-condensing boilers, the only adder is a new metal flue vent 
(including a fraction with stainless steel venting) and condensate 
withdrawal for a fraction of category III models. For condensing gas 
boilers, the additional costs for new construction installations 
related to potential amended standards include a new flue vent, 
combustion air venting for direct vent installations and accounting for 
a commonly-vented water heater, and condensate withdrawal.
d. Total Installation Cost
    ACCA stated that its members found the installation cost for gas-
fired hot water boilers, regardless of efficiency level or existing 
venting options, to be nearly twice as high as the average basic 
installation cost assumed by DOE of $2,741. ACCA stated that, for gas-
fired steam boilers, the DOE analysis produced an average basic 
installation cost of $2,917, but feedback from ACCA's contractors 
suggest the real costs are twice that amount. ACCA also stated that the 
same discrepancy applies to both the oil-fired hot water boilers and 
the oil-fired steam boilers. (ACCA, No. 65 at p. 2)
    In response, DOE notes that the basic installation cost, which 
consists of the installation costs that are common to all boilers, is 
only part of the total installation cost. In addition to the basic 
installation cost, the total installation cost includes venting costs 
and additional costs for condensing boiler installations. For the final 
rule, DOE's updated installation cost analysis, based on updated RS 
Means 2015 and stakeholder comments discussed above, resulted in an 
average total installation cost of $4,288 for a baseline (82-percent 
AFUE) gas-fired hot water boiler, which is close to the value suggested 
by ACCA. DOE's value is also close to the $4,500 installation cost for 
gas-fired hot water boilers (natural draft) from 82.0 to 83.9 percent 
AFUE in AHRI's contractor survey.
3. Annual Energy Consumption
    For each sampled building, DOE determined the energy consumption 
for a residential boiler at different efficiency levels using the 
approach

[[Page 2362]]

described above in section IV.E of this document. The product energy 
consumption is the site energy use associated with providing space 
heating (and water heating in some cases) to the building.
    DOE considered whether boiler energy use would likely be impacted 
by a direct rebound effect, which occurs when a product that is made 
more efficient is used more intensively, such that the expected energy 
savings from the efficiency improvement may not fully materialize. Such 
change in behavior when operating costs decline is known as a (direct) 
rebound effect. The take-back in energy consumption associated with the 
rebound effect provides consumers with increased value (e.g., more 
comfortable indoor temperature). DOE believes that, if it were able to 
monetize the increased value to consumers of the rebound effect, this 
value would be similar in value to the foregone energy savings. 
Therefore, the economic impacts on consumers with or without the 
rebound effect, as measured in the LCC analysis, are the same.
4. Energy Prices
    For the NOPR, DOE derived 2012 average and marginal monthly 
residential and commercial natural gas, fuel oil, LPG, and electricity 
prices using monthly data by State from Energy Information 
Administration. DOE assigned an appropriate energy price to each 
household or commercial building in the sample, depending on its 
location. To do this, DOE used the average 2008-2012 fraction of boiler 
shipments by State \57\ to assign average and marginal prices for 30 
geographical regions and 9 Census divisions to match the residential 
boiler samples derived from RECS 2009 sample and CBECS 2003. For the 
final rule, DOE derived 2013 average and marginal monthly residential 
and commercial natural gas, fuel oil, LPG, and electricity prices using 
updated data for 2013.58 59 60
---------------------------------------------------------------------------

    \57\ Air-Conditioning Heating and Refrigeration Institute 
(AHRI), 2003-2012 Residential Boilers Shipments Data (Provided to 
Lawrence Berkeley National Laboratory) (November 15, 2013).
    \58\ U.S. Department of Energy-Energy Information 
Administration, Form EIA-826 Database Monthly Electric Utility Sales 
and Revenue Data: Data from 1994-2013 (Available at: http://www.eia.doe.gov/cneaf/electricity/page/eia826.html) (Last accessed 
October 15, 2015).
    \59\ U.S. Department of Energy-Energy Information 
Administration, Natural Gas Navigator: Data from1994-2013 (Available 
at: http://tonto.eia.doe.gov/dnav/ng/ng_pri_sum_dcu_nus_m.htm) (Last 
accessed October 15, 2015).
    \60\ U.S. Department of Energy-Energy Information 
Administration, 2013 State Energy Consumption, Price, and 
Expenditure Estimates (SEDS) (Available at: http://www.eia.doe.gov/emeu/states/_seds.html) (Last accessed October 15, 2015).
---------------------------------------------------------------------------

    Commenting on the NOPR, AGA and APGA argued that DOE's method of 
calculating marginal energy prices overstates the operating cost 
savings of higher-efficiency boilers. AGA and APGA stated that the 
marginal prices that AGA derived by deducting the fixed charge portion 
of the bill from the total bill range from 7 percent to 16 percent 
lower than the prices developed by DOE. (AGA and APGA, No. 54 at p. 2) 
Laclede stated that DOE's estimates for what is called ``marginal 
monthly natural gas prices'' are much higher than actual marginal 
prices that customers pay as reflected by impacts in energy consumption 
changes in their utility bills. (Laclede, No. 58 at p. 3)
    In response to similar comments provided on the Residential Furnace 
notice of proposed rulemaking,\61\ DOE developed seasonal marginal 
price factors for 23 gas tariffs provided by the Gas Technology 
Institute.\62\ These marginal price factors can be compared to those 
developed by DOE from the EIA data. The winter price factors used by 
DOE are generally comparable to those computed from the tariff data, 
indicating that DOE's marginal price estimates are reasonable at 
average usage levels. The summer price factors, which are less relevant 
for analysis of boilers, are also generally comparable. Of the 23 
tariffs analyzed, eight have multiple tiers, and of these eight, six 
have ascending rates and two have descending rates. Because this 
analysis uses an average of the two tiers as the commodity price, it 
will generally underestimate the marginal prices for consumers subject 
to the second tier. A full tariff-based analysis would require 
information about the household's total baseline gas usage (to 
establish which tier the consumer is in), and a weight factor for each 
tariff that determines how many customers are served by that utility on 
that tariff. These data are generally not available in the public 
domain. DOE's use of EIA State-level data effectively averages overall 
consumer sales in each State, and so incorporates information about all 
utilities. DOE's approach is, therefore, more likely to provide prices 
representative of a typical consumer than any individual tariff. For 
more details on this comparative analysis, refer to Appendix 8D of the 
final rule TSD.
---------------------------------------------------------------------------

    \61\ Federal Register: U.S. Department of Energy--Office of 
Energy Efficiency and Renewable Energy. Energy Conservation Program 
for Consumer Products: Energy Conservation Standards for Residential 
Furnaces; Notice of Proposed Rulemaking. Federal Register. March 12, 
2015. vol. 80, no. 48.
    \62\ GTI provides a reference located in the docket of DOE's 
rulemaking to develop energy conservation standards for residential 
furnaces. (Docket No. EERE-2014-BT-STD-0031-0118) (Available at 
http://www.regulations.gov/#!documentDetail;D=EERE-2014-BT-STD-0031-
0118). DOE is also including this information in the docket for the 
present rulemaking at http://www.regulations.gov/#!documentDetail;D=EERE-2012-BT-STD-0047-0068.
---------------------------------------------------------------------------

    For the NOPR, to estimate energy prices in future years, DOE 
multiplied the average regional energy prices by the forecast of annual 
change in national-average residential energy prices in the Reference 
case from AEO 2013, which has an end year of 2040. To estimate price 
trends after 2040, DOE used the average annual rate of change in prices 
from 2020 to 2040.
    AHRI and Laclede stated that DOE should use AEO 2015 rather than 
AEO 2013. (AHRI, No. 64 at p. 9; Laclede, No. 58 at p. 4) AHRI stated 
that it is incumbent on DOE to issue a supplemental notice of proposed 
rulemaking that revises the analysis based on AEO 2015 data so that 
stakeholders may comment upon the analysis done using the most up-to-
date inputs. (AHRI, No. 64 at p. 9) For the final rule, DOE has updated 
its analysis using AEO 2015. DOE has concluded that the differences 
between AEO 2013 and AEO 2015 are not large enough to warrant a 
supplemental notice of proposed rulemaking.
    For a detailed discussion of the development of energy prices, see 
appendix 8D of the final rule TSD.
5. Maintenance and Repair Costs
    Maintenance costs are associated with maintaining the operation of 
the product. For the NOPR, DOE estimated maintenance costs at each 
considered efficiency level using a variety of sources, including 2013 
RS Means Facility Repair and Maintenance Data \63\ and manufacturer 
product literature. For AFUE standards analysis, DOE accounted for 
additional maintenance costs for condensing boilers associated with 
checking the condensate withdrawal system, replacing the neutralizer 
filter, and flushing the secondary heat exchanger for condensing oil 
boilers in high-sulfur oil-fuel regions. For standby and off mode 
standards, DOE assumed no additional maintenance costs for the baseline 
or higher-efficiency design options. The frequency with which the 
maintenance occurs was derived from RECS 2009 and CBECS 2003, as well 
as a 2008

[[Page 2363]]

consumer survey \64\ that provided the frequency with which owners of 
different types of boilers perform maintenance. For oil-fired boilers, 
the high quantity of sulfur in the fuel in States without regulation of 
sulfur content results in frequent cleaning of the heat exchanger, 
which DOE included in its analysis.
---------------------------------------------------------------------------

    \63\ RS Means Company Inc., RS Means Facilities Maintenance & 
Repair Cost Data (2013) (Available at: http://www.rsmeans.com).
    \64\ Decision Analysts, 2008 American Home Comfort Study: Online 
Database Tool (2009) (Available at: http://www.decisionanalyst.com/Syndicated/HomeComfort.dai).
---------------------------------------------------------------------------

    For the final rule, DOE update the maintenance cost using the 
latest 2015 RS Means Facility Repair and Maintenance Data.\65\ In 
addition, DOE updated the list of States that require low-sulfur oil 
(15 PPM or less) for space heating to reflect regulations that will 
take effect by the compliance date of amended boiler standards (2021) 
based on data provided by Energy Kinetics. (Energy Kinetics, No. 52 at 
pp. 2-3)
---------------------------------------------------------------------------

    \65\ RS Means Company Inc., RS Means Facilities Maintenance & 
Repair Cost Data (2015) (Available at http://www.rsmeans.com).
---------------------------------------------------------------------------

    The repair cost is the cost to the consumer for replacing or 
repairing components in the boiler that have failed (such as ignition, 
controls, gas valve, and inducer fan). For the NOPR, DOE estimated 
repair costs at each considered efficiency level using a variety of 
sources, including 2013 RS Means Facility Repair and Maintenance Data 
and manufacturer literature. Higher repair costs for ignition, 
controls, gas valve, and inducer fan were included for condensing 
boilers. To determine components service lifetime, DOE used a Gas 
Research Institute (GRI) study.\66\
---------------------------------------------------------------------------

    \66\ Jakob, F.E., J.J. Crisafulli, J.R. Menkedick, R.D. Fischer, 
D.B. Philips, R.L. Osbone, J.C. Cross, G.R. Whitacre, J.G. Murray, 
W.J. Sheppard, D.W. DeWirth, and W.H. Thrasher, Assessment of 
Technology for Improving the Efficiency of Residential Gas Furnaces 
and Boilers, Volume I and II--Appendices (September 1994) Gas 
Research Institute. Report No. GRI-94/0175 (Available at http://www.gastechnology.org/reports_software/Pages/default.aspx).
---------------------------------------------------------------------------

    Crown Boiler questioned the applicability of the GRI data from the 
1990s on the lifetimes of boiler parts because at that time, there were 
far fewer condensing boilers. (Crown Boiler, Public Meeting Transcript, 
No. 50 at p. 207) DOE understands that data from the GRI survey are 
still representative of the major furnace and boiler components. 
Further, due to improvements in the components of condensing boilers 
since the 1990s, the estimated service lifetime applied in DOE's 
analysis is likely conservative.
    Based on typical contractor prices that Burnham collected from 
wholesalers for six non-condensing models and six condensing models, 
Burnham found that the cost to repair non-condensing boiler parts 
(e.g., gas valve, blower, and controls) is significantly less than for 
condensing boilers. Furthermore, integrated controls for non-condensing 
boilers are on average significantly cheaper than a condensing boiler 
control. (Burnham, No. 60 at pp. 32-33) Weil-McLain stated that 
mechanical draft boilers would have higher repair costs due to the 
addition of draft inducers or blower motors, since there are more 
devices that will need adjustment, repair, and replacement, and the 
devices will need more frequent work. (Weil-McLain, No. 55 at p. 3) For 
the final rule, DOE updated its cost with the data provided by Burnham. 
For both the NOPR and final rule, DOE accounted for the additional 
repair cost associated with the draft inducers in boilers with 
mechanical draft.
    For more details on DOE's methodology for calculating maintenance 
and repair costs, see appendix 8E of the final rule TSD.
6. Product Lifetime
    Product lifetime is the age at which an appliance is retired from 
service. For the NOPR, DOE conducted an analysis of boiler lifetimes 
using a combination of historical boiler shipments (see section IV.G), 
American Housing Survey data on historical stock of boilers,\67\ and 
RECS data \68\ on the age of the boilers in homes. The data allowed DOE 
to develop a Weibull lifetime distribution function, which results in 
average and median lifetimes for the NOPR analysis of 25 years for all 
boiler product classes. In addition, DOE reviewed a number of sources 
to validate the derived boiler lifetime, including research studies 
(from the U.S. and Europe) and field data reports.\69\
---------------------------------------------------------------------------

    \67\ U.S. Census Bureau: Housing and Household Economic 
Statistics Division, American Housing Survey, Multiple Years (1974, 
1975, 1976, 1977, 1978, 1979, 1980, 1981, 1983, 1985, 1987, 1989, 
1991, 1993, 1995, 1997, 1999, 2001, 2003, 2005, 2007, 2009, and 
2011) (Available at: http://www.census.gov/programs-surveys/ahs/) 
(Last accessed October, 2015).
    \68\ U.S. Department of Energy: Energy Information 
Administration, Residential Energy Consumption Survey Data, Multiple 
Years (1987, 1990, 1993, 1997, 2002, 2005, and 2009) (Available at: 
http://www.eia.gov/consumption/residential) (Last accessed October, 
2015).
    \69\ The sources used are listed in appendix 8F of the final 
rule TSD.
---------------------------------------------------------------------------

    U.S. Boiler, Crown Boiler, Energy Kinetic, Burnham, Lochinvar, and 
AHRI stated that condensing boilers generally have a shorter lifetime 
than non-condensing boilers. Lochinvar, Burnham, Energy Kinetics, and 
Crown Boiler stated that various sources cite condensing boilers as 
having a lifetime of 15 years or less. (US Boiler, Public Meeting 
Transcript, No. 50 at pp. 210-211; Crown Boiler, Public Meeting 
Transcript, No. 50 at p. 212; Energy Kinetic, No. 52 at p. 2; Burnham, 
No. 60 at pp. 33-36, pp. 54-55; Lochinvar, No. 63 at p. 4; AHRI, No. 64 
at p. 4). Both Burnham and AHRI commented that their contractor surveys 
show a clear difference between condensing and non-condensing boiler 
lifetimes. (Burnham, No. 60 at pp. 35-36; AHRI, No. 66 at pp. 17-18) 
Burnham added that DOE's sources that are specific to condensing 
boilers 70 71 indicate the life expectancy of condensing 
boilers is approximately 15 years, which is significantly shorter than 
the life of non-condensing boilers (at least 23 years). Burnham stated 
that sources listed by DOE that pre-date 2003 (i.e., around the time 
that the number of condensing boilers started to increase in the U.S.) 
cannot be used to estimate the life expectancy of condensing boilers. 
Burnham stated that references after 2003 should not be used either 
because statistically significant condensing boiler life expectancy 
data will take years to accumulate after these boilers were introduced 
into the U.S. market. Burnham also stated that a sample of 
manufacturers' warranties shows that condensing boilers have much 
shorter warranties than non-condensing boilers. (Burnham, No. 60 at pp. 
33-36)
---------------------------------------------------------------------------

    \70\ Wohlfarth, R. Boiler choices (October 1, 2012) (Available 
at: http://www.pmengineer.com/articles/90545-boiler-choices?v=preview) (Last accessed October, 2015).
    \71\ Keman, R., M. van Elburg, W. Li, and R. van Holsteijn, 
Preparatory Study on Eco-design of Boilers, Task 2 (Final) Market 
Analysis (2007) (Available at: http://www.ebpg.bam.de/de/ebpg_medien/001_studyf_07-11_part2.pdf) (Last accessed October, 
2015).
---------------------------------------------------------------------------

    After carefully considering these comments, DOE has concluded that 
there is not enough data available to accurately distinguish the 
lifetime of condensing boilers because, as Burnham stated, they have 
not been prevalent in the U.S. market long enough to demonstrate 
whether their average lifetime is less than or greater than 15 years. 
In addition, condensing boiler technologies have been improving since 
their introduction to the U.S. market; therefore, the lifetime of the 
earliest condensing boilers may not be representative of current or 
future condensing boiler designs. Therefore, condensing lifetime 
results from the Burnham's and AHRI's contractor survey might be biased 
towards earliest condensing boiler designs and lack the number of 
condensing boilers installed 15 years or older. Based on the lack of 
clear and convincing information that condensing boilers have a shorter 
lifetime, DOE maintained the same

[[Page 2364]]

lifetime for condensing and non-condensing boilers. However, DOE did 
include additional repair costs for condensing boilers that would 
likely allow a similar lifetime as non-condensing boilers by assuming 
different service lifetimes for heat exchangers for condensing boilers 
and non-condensing boilers based on warranty data from product 
literature and survey data provided by stakeholders. DOE also conducted 
a sensitivity analysis using a different heat exchanger and boilers 
lifetime scenarios.
For the final rule, DOE updated its estimate of boiler lifetime by 
adding 2013 AHS data. In addition, DOE used the AHRI contractor survey 
data to derive separate lifetime estimates for different product 
classes. The data allowed DOE to develop a Weibull lifetime 
distribution function, which results in an average lifetimes of 26.5 
for hot water gas-fired boilers, 23.6 for steam gas-fired boilers, 24.7 
for hot water oil-fired boilers, and 19.2 for steam oil-fired boilers. 
For electric boilers, DOE assumed the same lifetime as gas-fired 
boilers. For more details on how DOE derived the boiler lifetime and on 
the lifetime sensitivity analysis, see appendix 8F of the final rule 
TSD.

7. Discount Rates
    In the calculation of LCC, DOE applies discount rates appropriate 
to households to estimate the present value of future operating costs. 
DOE estimated a distribution of residential and commercial discount 
rates for residential boilers based on consumer financing costs and 
opportunity cost of funds related to appliance energy cost savings and 
maintenance costs.
    To establish residential discount rates for the LCC analysis, DOE 
identified all relevant household debt or asset classes in order to 
approximate a consumer's opportunity cost of funds related to appliance 
energy cost savings. For the NOPR, it estimated the average percentage 
shares of the various types of debt and equity by household income 
group using data from the Federal Reserve Board's Survey of Consumer 
Finances \72\ (SCF) for 1995, 1998, 2001, 2004, 2007, and 2010. Using 
the SCF and other sources, DOE developed a distribution of rates for 
each type of debt and asset by income group to represent the rates that 
may apply in the year in which amended standards would take effect. DOE 
assigned each sample household a specific discount rate drawn from one 
of the distributions. The average rate across all types of household 
debt and equity and income groups, weighted by the shares of each type 
that was used in the NOPR, was 4.5 percent.
---------------------------------------------------------------------------

    \72\ The Federal Reserve Board, Survey of Consumer Finances, 
Multiple Years: 1989, 1992, 1995, 1998, 2001, 2004, 2007, 2010 
(Available at: http://www.federalreserve.gov/pubs/oss/oss2/scfindex.html) (Last accessed October, 2015).
---------------------------------------------------------------------------

    To establish commercial discount rates for the LCC analysis, DOE 
estimated the weighted-average cost of capital using data from 
Damodaran Online.\73\ 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.
---------------------------------------------------------------------------

    \73\ Damodaran Online, Data Page: Costs of Capital by Industry 
Sector (2012) (Available at: http://pages.stern.nyu.edu/~adamodar/) 
(Last accessed October, 2015).
---------------------------------------------------------------------------

    EEI stated that it seems counterintuitive that the lowest income 
group has a lower discount rate than the higher income groups. (EEI, 
Public Meeting Transcript, No. 50 at p. 214) EEI stated that usually 
the lower income groups pay the highest interest rates for any sort of 
credit. (EEI, Public Meeting Transcript, No. 50 at p. 216) In DOE's 
analysis, the consumer discount rate is used to evaluate the present 
value of energy cost savings over the lifetime of the boiler. The 
interest rate on credit alone is not appropriate for this calculation. 
DOE instead calculates the residential discount rates by estimating the 
consumer's opportunity cost via a process analogous to the CAPM model 
used in the commercial sector, in which the discount rate is a weighted 
average of rates on debt and equity holdings. While consumers in the 
lowest income group are likely to face somewhat higher interest rates 
on credit than other income groups, this is balanced by the fact that 
they also tend to have assets with low interest rates (e.g., larger 
share of assets in savings accounts or CDs, rather than stocks and 
mutual funds).
    For the final rule, DOE included data from the 2013 SCF \74\ to 
update the residential discount rates and updated Damodaran Online data 
\75\ for commercial discount rates. See chapter 8 of the final rule TSD 
for further details on the development of consumer discount rates.
---------------------------------------------------------------------------

    \74\ The Federal Reserve Board, Survey of Consumer Finances 
(2013) (Available at: http://www.federalreserve.gov/pubs/oss/oss2/scfindex.html) (Last accessed October, 2015).
    \75\ Damodaran Online, Data Page: Costs of Capital by Industry 
Sector (2015) (Available at: http://pages.stern.nyu.edu/~adamodar/) 
(Last accessed October, 2015).
---------------------------------------------------------------------------

8. Efficiency Distribution in the No-New-Standards Case
    To accurately estimate the share of consumers that would be 
affected by a potential energy conservation standard at a particular 
efficiency level, DOE's LCC analysis considered the projected 
distribution (market shares) of product efficiencies that consumers 
will purchase in the first compliance year under the no-new-standards 
case (i.e., the case without amended or new energy conservation 
standards).
    For the NOPR, DOE first developed data on the current share of 
residential boiler models in each product class that are of the 
different efficiencies based on the September 2013 AHRI certification 
directory,\76\ ENERGY STAR shipments data,\77\ and historical shipments 
data by efficiency from AHRI.\78\ To estimate shares in 2020, DOE took 
into account the potential impacts of the ENERGY STAR program, which 
updated its performance criteria: 90-percent AFUE for gas-fired boilers 
and 87-percent AFUE for oil-fired boilers.\79\ In addition, for gas-
fired hot water boilers, DOE accounted for the regional differences in 
the market shares for condensing boilers using the historical shipments 
data by efficiency from AHRI.
---------------------------------------------------------------------------

    \76\ Air Conditioning, Heating, and Refrigeration Institute, 
Consumer's Directory of Certified Efficiency Ratings for Heating and 
Water Heating Equipment (AHRI Directory) (September 2013) (Available 
at: http://www.ahridirectory.org/ahridirectory/pages/home.aspx) 
(Last accessed September 2013).
    \77\ ENERGY STAR, Unit Shipments Data (2003-2012) (Available at: 
http://www.energystar.gov/index.cfm?c=partners.unit_shipment_data) 
(Last accessed October 2015).
    \78\ Air-Conditioning Heating and Refrigeration Institute 
(AHRI), 2003-2012 Residential Boilers Shipments Data (Provided to 
Lawrence Berkeley National Laboratory) (November 15, 2013).
    \79\ ENERGY STAR, Boiler Specification Version 3.0. (Available 
at: https://www.energystar.gov/products/specs/boilers_specification_version_3_0_pd) (Last accessed September 
2013).
---------------------------------------------------------------------------

    Commenting on the NOPR, Burnham stated that over the past 12 years, 
since condensing boilers started to gain significant market share, the 
sales of gas-fired hot water boiler models with efficiencies between 85 
percent and 90 percent have virtually disappeared, even though some 
models remain in the AHRI directory. (Burnham, No. 60 at p. 17) For the 
final rule, DOE modified its efficiency distribution in the no-new-

[[Page 2365]]

standards case in 2021 based on shipments data from Burnham (Burnham, 
No. 60 at pp. 18, 25), data from the AHRI contractor survey (AHRI, No. 
66 at pp. 10-11), updated 2013 and 2014 ENERGY STAR unit shipment data 
for residential boilers,\80\ and a dataset of models based on the 2015 
AHRI certification directory.\81\
---------------------------------------------------------------------------

    \80\ ENERGY STAR, Unit Shipments (2013-2014) (Available at: 
http://www.energystar.gov/index.cfm?c=partners.unit_shipment_data) 
(Last accessed October 2015).
    \81\ Air Conditioning, Heating, and Refrigeration Institute, 
Consumer's Directory of Certified Efficiency Ratings for Heating and 
Water Heating Equipment (AHRI Directory) (August 2015) (Available 
at: http://www.ahridirectory.org/ahridirectory/pages/home.aspx) 
(Last accessed October 19, 2015).
---------------------------------------------------------------------------

    For the NOPR boiler standby mode and off mode standards analysis, 
DOE assumed that 50 percent of shipments would be at the baseline 
efficiency level and 50 percent would be at the max-tech efficiency 
level (EL 3) for all product classes, based on characteristics of 
available models.\82\ For the final rule, DOE updated its estimated 
efficiency distribution in the no-new-standards case in 2021 based on 
DOE's test data and data provided by Burnham. (Burnham, No. 60 at p. 
21)
---------------------------------------------------------------------------

    \82\ Air Conditioning, Heating, and Refrigeration Institute, 
Consumer's Directory of Certified Efficiency Ratings for Heating and 
Water Heating Equipment (AHRI Directory) (September 2013) (Available 
at: http://www.ahridirectory.org/ahridirectory/pages/home.aspx) 
(Last accessed September 2013).
---------------------------------------------------------------------------

    The estimated AFUE market shares for the no-new-standards case for 
residential boilers are shown in Table IV.25, and estimated standby 
mode and off mode market shares for the no-new-standards case are shown 
in Table IV.26.\83\ See chapter 8 of the final rule TSD for further 
information on the derivation of the efficiency distributions.
---------------------------------------------------------------------------

    \83\ As discussed in section IV.C.1, because DOE's review of 
product literature and discussions with manufacturers revealed that 
most boilers do not have seasonal off switches, DOE assumed that the 
standby mode and the off mode power consumption are equal for its 
analysis.

  Table IV.25--Efficiency Distribution in the No-New-Standards Case for
                 Residential Boilers for AFUE Standards
------------------------------------------------------------------------
                                                            2021 market
             EL                      Design option           share (%)
------------------------------------------------------------------------
                       Gas-fired Hot Water Boiler
------------------------------------------------------------------------
0...........................  82% AFUE--Baseline........            22.8
1...........................  83% AFUE--Increased HX                 7.6
                               Area.
2...........................  84% AFUE--Increased HX                11.3
                               Area.
3...........................  85% AFUE--Increased HX                 4.6
                               Area.
4...........................  90% AFUE--Condensing                  11.2
                               Baseline.
5...........................  92% AFUE--Increased HX                41.3
                               Area.
6...........................  96% AFUE--Max-Tech........             1.2
------------------------------------------------------------------------
                         Gas-fired Steam Boiler
------------------------------------------------------------------------
0...........................  80% AFUE--Baseline........            16.8
1...........................  82% AFUE--Increased HX                71.6
                               Area.
2...........................  83% AFUE--Max-Tech........            11.6
------------------------------------------------------------------------
                       Oil-fired Hot Water Boiler
------------------------------------------------------------------------
0...........................  84% AFUE--Baseline........            44.5
1...........................  85% AFUE--Increased HX                18.4
                               Area.
2...........................  86% AFUE--Increased HX                33.2
                               Area.
3...........................  91% AFUE--Max-Tech........             3.9
------------------------------------------------------------------------
                         Oil-fired Steam Boiler
------------------------------------------------------------------------
0...........................  82% AFUE--Baseline........            44.9
1...........................  84% AFUE--Increased HX                28.7
                               Area.
2...........................  85% AFUE--Increased HX                18.9
                               Area.
3...........................  86% AFUE--Max-Tech........             7.6
------------------------------------------------------------------------


  Table IV.26--Efficiency Distribution in the No-New-Standards Case for
           Residential Boilers for Standby/Off Mode Standards
------------------------------------------------------------------------
                                                            2021 market
         EL              Power (W)       Design option       share (%)
------------------------------------------------------------------------
                       Gas-fired Hot Water Boiler
------------------------------------------------------------------------
0...................            11.5  Linear Power                   3.0
                                       Supply *.
1...................            10.0  Linear Power                   3.0
                                       Supply with Low-
                                       Loss Transformer
                                       (LLTX).
2...................             9.7  Switching Mode                 3.0
                                       Power Supply **.
3...................             9.0  Max-Tech--                    91.0
                                       Switching Mode
                                       Power Supply with
                                       LLTX.
------------------------------------------------------------------------
                         Gas-fired Steam Boiler
------------------------------------------------------------------------
0...................            10.5  Linear Power                   1.0
                                       Supply *.

[[Page 2366]]

 
1...................             9.0  Linear Power                   1.0
                                       Supply with Low-
                                       Loss Transformer
                                       (LLTX).
3...................             8.7  Switching Mode                 1.0
                                       Power Supply **.
3...................             8.0  Max-Tech--                    97.0
                                       Switching Mode
                                       Power Supply with
                                       LLTX.
------------------------------------------------------------------------
                       Oil-fired Hot Water Boiler
------------------------------------------------------------------------
0...................            13.5  Linear Power                   3.0
                                       Supply *.
1...................            12.0  Linear Power                   3.0
                                       Supply with Low-
                                       Loss Transformer
                                       (LLTX).
2...................            11.7  Switching Mode                 3.0
                                       Power Supply **.
3...................            11.0  Max-Tech--                    91.0
                                       Switching Mode
                                       Power Supply with
                                       LLTX.
------------------------------------------------------------------------
                         Oil-fired Steam Boiler
------------------------------------------------------------------------
0...................            13.5  Linear Power                   1.0
                                       Supply *.
1...................            12.0  Linear Power                   1.0
                                       Supply with Low-
                                       Loss Transformer
                                       (LLTX).
2...................            11.7  Switching Mode                 1.0
                                       Power Supply **.
3...................            11.0  Max-Tech--                    97.0
                                       Switching Mode
                                       Power Supply with
                                       LLTX.
------------------------------------------------------------------------
                        Electric Hot Water Boiler
------------------------------------------------------------------------
0...................            10.5  Linear Power                   1.0
                                       Supply *.
1...................             9.0  Linear Power                   1.0
                                       Supply with Low-
                                       Loss Transformer
                                       (LLTX).
2...................             8.7  Switching Mode                 1.0
                                       Power Supply **.
3...................             8.0  Max-Tech--                    97.0
                                       Switching Mode
                                       Power Supply with
                                       LLTX.
------------------------------------------------------------------------
                          Electric Steam Boiler
------------------------------------------------------------------------
0...................            10.5  Linear Power                   1.0
                                       Supply *.
1...................             9.0  Linear Power                   1.0
                                       Supply with Low-
                                       Loss Transformer
                                       (LLTX).
2...................             8.7  Switching Mode                 1.0
                                       Power Supply **.
3...................             8.0  Max-Tech--                    97.0
                                       Switching Mode
                                       Power Supply with
                                       LLTX.
------------------------------------------------------------------------
* A linear power supply regulates voltage with a series element.
** A switching mode power supply regulates voltage with power handling
  electronics.

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 products, 
compared to baseline products, through energy cost savings. Payback 
periods are expressed in years. Payback periods that exceed the life of 
the product mean that the increased total installed cost is not 
recovered in reduced operating expenses.\84\
---------------------------------------------------------------------------

    \84\ The ENERGY STAR specification for residential boilers was 
revised in October 2015 to 90-percent AFUE for gas boilers and 87-
percent AFUE for oil boilers.
---------------------------------------------------------------------------

    The inputs to the PBP calculation for each efficiency level are the 
change in total installed cost of the product and the change in the 
first-year annual operating expenditures relative to the baseline 
product. The PBP calculation uses the same inputs as the LCC analysis, 
except that discount rates are not needed.
    As noted above, EPCA, as amended, establishes a rebuttable 
presumption that a standard is economically justified if the Secretary 
finds that the additional cost to the consumer of purchasing a product 
complying with an energy conservation standard level will be less than 
three times the value of the first year's energy savings resulting from 
the standard, as calculated under the applicable test procedure. (42 
U.S.C. 6295(o)(2)(B)(iii)) For each considered efficiency level, DOE 
determined the value of the first year's energy savings by calculating 
the energy savings in accordance with the applicable DOE test 
procedure, and multiplying those savings by the average energy price 
forecast for the year in which compliance with the amended standards 
would be required. However, DOE's LCC and PBP analyses generate values 
that calculate the payback period for consumers under potential energy 
conservation standards, which includes, but is not limited to, the 
three-year payback period contemplated under the rebuttable presumption 
test. DOE routinely conducts a full economic analysis that considers 
the full range of impacts, including those to the consumer, 
manufacturer, Nation, and environment, as required under 42 U.S.C. 
6295(o)(2)(B)(i). The results of this analysis serve as the basis for 
DOE to definitively evaluate the economic justification for a potential 
standard level (thereby supporting or rebutting the results of any 
preliminary determination of economic justification).

G. Shipments Analysis

    DOE uses forecasts of annual product shipments to calculate the 
national impacts of potential amended energy conservation standards on 
energy use, NPV, and future manufacturer cash flows.\85\ DOE develops 
shipment projections based on historical data and an analysis of key 
market drivers for each product. DOE estimated boiler shipments by 
projecting shipments in three market segments: (1) Replacements; (2) 
new housing/buildings; and (3) new owners in buildings that did not 
previously have a boiler.\86\ DOE also considered the

[[Page 2367]]

impact of standards that require more-efficient boilers on boiler 
shipments.
---------------------------------------------------------------------------

    \85\ 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.
    \86\ The new owners consists of both households that during a 
major remodel add or switch to hydronic heating, as well as, 
households switching between different boiler product classes.
---------------------------------------------------------------------------

    For the NOPR, to project boiler replacement shipments, DOE 
developed retirement functions based on the boiler lifetime estimates 
used in the LCC analysis and applied them to the existing products in 
the building stock. The existing stock of products is tracked by 
vintage and developed from historical shipments data.87 88 
The shipments model for replacements uses a distribution of residential 
boiler lifetimes to estimate boiler replacement shipments, and it also 
accounts for the fraction of residential boiler units that were 
installed in demolished buildings. As the demolished units do not need 
to be replaced, they are deducted when calculating the required 
replacements.
---------------------------------------------------------------------------

    \87\ Appliance Magazine, U.S. Appliance Industry Statistical 
Review, Multiple years: 1970, 1979, 1987, 2000, 2009.
    \88\ Air-Conditioning Heating and Refrigeration Institute 
(AHRI), 2003-2012 Residential Boilers Shipments Data (Provided to 
Lawrence Berkeley National Laboratory) (November 15, 2013).
---------------------------------------------------------------------------

    For the NOPR, to project shipments to the new housing market, DOE 
utilized a forecast of new housing or building construction and 
historic saturation rates of various boiler product types in new 
housing or building construction. DOE used AEO 2013 for forecasts of 
new housing. Boiler saturation rates in new housing were estimated 
based on a weighted-average of values in 1990-2013 presented in the 
U.S. Census Bureau's Characteristics of New Housing,\89\ as well as 
RECS 2009 and CBECS 2003 data.
---------------------------------------------------------------------------

    \89\ U. S. Department of Commerce--Bureau of the Census, 
Characteristics of New Housing (1990-2013) (Available at: http://www.census.gov/const/www/charindex.html) (Last accessed March 15, 
2013).
---------------------------------------------------------------------------

    For the NOPR, to estimate future shipments to new owners, DOE based 
its estimates on market trends and historical shipment data from 2008 
to 2012. The new owners primarily consist of households that during a 
major remodel add hydronic heating using a gas-fired hot water boiler 
and households that choose to install a boiler with a hydronic air 
handler to replace a gas furnace. New owners also include households 
switching between different boiler product classes (i.e., from the 
steam to hot water boiler product classes and from the oil-fired to 
gas-fired boiler product classes).
    Commenting on the NOPR, ACCA stated that, based on feedback from a 
select number of ACCA members, the percentage of gas-fired boiler 
installations associated with new construction falls within DOE's range 
(i.e., 90 percent replacements and 10 percent new construction). For 
oil-fired hot water boilers, the breakdown of 98 percent replacements 
and 2 percent new construction is also in line with ACCA's field 
experience. (ACCA, No. 65 at p. 2) Weil-McLain stated that 
approximately 90 percent of boiler sales in the U.S. are to the 
replacement market. (Weil-McLain, No. 55 at pp. 1-2) These comments 
align with the fractions of boiler shipments both for the NOPR and 
final rule analysis. For the final rule, DOE refined its analysis by 
including updated historical shipment data \90\ and data from AEO 2015.
---------------------------------------------------------------------------

    \90\ Appliance Magazine, Appliance Historical Statistical 
Review: 1954-2012 (2014).
---------------------------------------------------------------------------

    The NOPR analysis accounted for the impact of increased product 
price for the considered efficiency levels on shipments by 
incorporating relative price elasticity in the shipments model. This 
approach gives some weight to the operating cost savings from higher-
efficiency products. In general, price elasticity reflects the 
expectation that demand will decrease when prices increase. The price 
elasticity value is derived from data on refrigerators, clothes 
washers, and dishwashers.\91\ To model the impact of the increase in 
relative price from a particular standard level on residential boiler 
shipments, DOE assumed that the shipments that do not occur represent 
consumers that would repair their product rather than replace it, 
extending the life of the product by 6 years.
---------------------------------------------------------------------------

    \91\ Dale, L. and S. K. Fujita, An Analysis of the Price 
Elasticity of Demand of Household Appliances (2008) Lawrence 
Berkeley National Laboratory (Report No. LBNL-326E) (Available at: 
http://eetd.lbl.gov/sites/all/files/lbnl-326e.pdf) (Last accessed: 
October 2015).
---------------------------------------------------------------------------

    AHRI stated that the price elasticity data used for DOE's analysis 
is not a good match for boilers because consumers look for different 
attributes, such as appearance or special functions, when buying 
refrigerators and clothes washers, whereas with boilers, the same 
considerations do not apply. (AHRI, Public Meeting Transcript, No. 50 
at pp. 239-240) AHRI stated that DOE has a responsibility to explain 
why a price analysis for washing machines and refrigerators is an 
acceptable substitute for residential boilers. (AHRI, No. 64 at p. 5)
    In response, DOE first notes that there are very few estimates of 
consumer demand elasticity for durable goods. For the final rule, DOE 
updated its price elasticity to a value calculated from price, 
shipments, and efficiency data over 1989-2009 for five common 
residential appliances (clothes washers, refrigerators, freezers, 
dishwashers, and room air conditioners).\92\ DOE reasons that this 
cross-section of residential appliances provides a representative price 
elasticity and response of shipments to efficiency for residential 
consumers. The one study of price elasticity for a residential HVAC 
product, found in an extensive literature review, provides an estimated 
value (-0.24) that is less elastic than the value used by DOE in the 
final rule analysis (-0.45). DOE did not apply this value, however, 
because the long-run elasticity estimate of -0.24 is consistent with 
DOE's residential price elasticity and elasticity time trend, which 
starts with an elasticity of -0.45 in the first year following a price 
increase, decreasing to approximately -0.2 by the fifth year following 
a price increase.
---------------------------------------------------------------------------

    \92\ Fujita, S. K., Estimating Price Elasticity using Market-
Level Appliance Data (2015) Lawrence Berkeley National Laboratory 
(Report No. LBNL-188289) (Available at: https://eaei.lbl.gov/sites/all/files/lbnl-188289.pdf) (Last accessed: October 2015).
---------------------------------------------------------------------------

    Weil-McLain stated that a homeowner will often decide to repair 
their existing boiler and delay replacement if the total installed cost 
is too great. (Weil-McLain, No. 55 at p. 6) Burnham stated that de 
facto outlawing of Category I replacement cast iron boilers will result 
in some (particularly low-income) homeowners delaying the replacement 
of existing low-efficiency, decades-old boilers with newer and higher 
efficiency models. (Burnham, No. 60 at p. 17) PGW stated that the 
additional costs associated with the installation of near-condensing 
boilers in row houses are likely to delay the installation of higher-
efficiency boilers, extend the use of existing boilers beyond their 
safe operating life, drive switching to alternative heating systems 
that may well be less safe and/or economical than currently installed 
boilers, or some combination of all these outcomes. (PGW, No. 57 at p. 
2)
    In response, at the higher efficiency levels where installed cost 
is much higher than the boiler in the no-new-standards case, DOE 
accounts for repair of old boilers to extend their lifetime through the 
price elasticity parameters described above. This parameter relates the 
repair decision to the incremental installed cost and the operating 
cost savings of higher-efficiency boilers, both of which have some 
weight in the consumer decision. DOE estimated that the average 
extension of life of the repaired unit would be six years, and then 
that unit is replaced with a new boiler. In the NIA, the cost of the 
repair and the energy costs of the repaired unit are accounted for.

[[Page 2368]]

    For the NOPR and final rule, DOE evaluated the potential for 
switching from gas-fired and oil-fired hot water boilers to other 
heating systems in response to amended standards. The main alternative 
to hot water boilers would be installation of an electric boiler, a 
forced-air furnace, heat pump, or a mini-split heat pump. These 
alternatives would require significant installation costs such as 
adding ductwork or an electrical upgrade, and an electric boiler would 
have very high relative energy costs. Given that the increase in 
installed cost of boilers meeting the amended standards, relative to 
the no-new-standards case, is small, DOE has concluded that consumer 
switching from hot water boilers would be rare.
    The details and results of the shipments analysis can be found in 
chapter 9 of the final rule TSD.

H. National Impact Analysis

    The NIA assesses the national energy savings (NES) and the national 
net present value (NPV) from a national perspective of total consumer 
costs and savings expected to result from new or amended energy 
conservation standards at specific efficiency levels. (``Consumer'' in 
this context refers to consumers of the product being regulated.) DOE 
calculates the NES and NPV for the potential standard levels considered 
for the residential boiler product classes analyzed 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. For the NOPR analysis, DOE forecasted the energy savings, 
operating cost savings, product costs, and NPV of consumer benefits 
over the lifetime of residential boilers sold from 2020 through 2049. 
For the final rule analysis, DOE performed the same analyses over the 
lifetime of residential boilers sold from 2021 through 2050.
    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 
product 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 product 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 products with efficiencies greater than the standard.
    DOE uses a spreadsheet model to calculate the energy savings and 
the national consumer costs and savings from each TSL. Interested 
parties can review DOE's analyses by changing various input quantities 
within the spreadsheet. The NIA spreadsheet model uses typical values 
(as opposed to probability distributions) as inputs. To assess the 
effect of input uncertainty on NES and NPV results, DOE developed its 
spreadsheet model to conduct sensitivity analyses by scenarios on 
specific input variables. In the NIA, DOE forecasted the lifetime 
energy savings, energy cost savings, product costs, and NPV of consumer 
benefit for each product class over the lifetime of products sold from 
2021 through 2050.
    Table IV.27 summarizes the inputs and methods DOE used for the NIA 
analysis for the final rule. Discussion of these inputs and methods 
follows the table. See chapter 10 of the final rule TSD for further 
details.

 Table IV.27--Summary of Inputs and Methods for the Final Rule National
                             Impact Analysis
------------------------------------------------------------------------
              Inputs                               Method
------------------------------------------------------------------------
Shipments.........................  Annual shipments from shipments
                                     model.
Compliance Date of Standard.......  2021.
Efficiency Trends.................  Based on historical trends of
                                     shipments by efficiency and updated
                                     ENERGY STAR criteria.
Annual Energy Consumption per Unit  Annual weighted-average values are a
                                     function of energy use at each TSL.
Total Installed Cost per Unit.....  Annual weighted-average values are a
                                     function of cost at each TSL.
                                    Projects constant future product
                                     prices based on historical data.
Annual Energy Cost per Unit.......  Annual weighted-average values as a
                                     function of the annual energy
                                     consumption per unit and energy
                                     prices.
Rebound Effect....................  Applied a rebound effect value
                                     dependent on application and
                                     sector.
Repair and Maintenance Cost per     Annual values do not change with
 Unit.                               efficiency level.
Energy Prices.....................  AEO 2015 forecasts (to 2040) and
                                     extrapolation through 2050.
Energy Site-to-Primary and FFC      A time-series conversion factor
 Conversion.                         based on AEO 2015.
Discount Rate.....................  Three and seven percent.
Present Year......................  2015.
------------------------------------------------------------------------

1. Product Efficiency Trends
    A key component of the NIA is the trend in energy efficiency 
projected for the no-new-standards case and each of the standards 
cases. Section IV.F of this notice describes how DOE developed an 
energy efficiency distribution for the no-new-standards case (which 
yields a shipment-weighted average efficiency) for each of the 
considered residential boiler product classes for the first year of the 
forecast period (i.e., the year of anticipated compliance with an 
amended standard).
    For the NOPR, regarding the efficiency trend in the years after 
compliance, for the no-new-standards case, DOE estimated that the 
overall market share of condensing gas-fired hot water boilers would 
grow from 44 percent to 63 percent by 2049, and the overall market 
share of condensing oil-fired hot water boilers would grow from 7 
percent to 13 percent. DOE estimated that the no-new-standards case 
market shares of condensing gas-fired and oil-fired steam boilers will 
be negligible during the period of analysis. DOE assumed similar trends 
for the standards cases (albeit starting from a higher point).
    For the final rule, DOE modified its efficiency trend in the no-
new-standards case in 2021, as described in section IV.F. Based on this 
updated data, DOE estimated that the overall market share of condensing 
gas-fired hot water boilers would grow from 54 percent in 2021 to 74 
percent by 2050, and the overall market share of condensing oil-fired 
hot water boilers would grow from 4 percent to 8 percent. The no-new-
standards case market shares of condensing gas-fired and oil-fired 
steam boilers remain negligible. Details on

[[Page 2369]]

how these efficiency trends were developed are provided in appendix 8H 
of the final rule TSD.
    For the NOPR and final rule boiler standby mode and off mode 
standard analysis, DOE assumed that the efficiency level distributions 
would remain constant over the analysis period.
    For the NOPR and final rule, for the standards cases, DOE used a 
``roll-up'' scenario to establish the shipment-weighted efficiency for 
the year that standards are assumed to become effective. 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.
    Burnham stated that if DOE were to adopt the 85-percent level for 
gas-fired hot water boilers, most of the gas-fired hot water boiler 
sales would move to the condensing level due to the very limited 
ability to use Category I venting, combined with the cost of 
AL29[hyphen]4C stainless steel generally required at near-condensing 
(85 to 89 percent) efficiencies. (Burnham, No. 60 at p. 16) AGA agreed 
that a certain percentage of the market will be forced to the 
condensing level with an 85-percent standard, which could incur a net 
cost for consumers. (AGA, Public Meeting Transcript, No. 50 at pp. 289-
290)
    In the current analysis, on average, going to 85-percent AFUE has a 
lower total installed cost than going to the condensing level (i.e., 
90-percent AFUE and above). DOE agrees there might be some switching 
for a small fraction of consumers that have high installation costs at 
85-percent AFUE, but since DOE is not adopting an 85-percent AFUE 
standard, DOE did not assess this for the final rule. DOE notes that 
this final rule adopts an 84-percent AFUE level for gas-fired hot water 
boilers. From 82- to 84-percent AFUE, the installation cost is the 
same, and the equipment cost is similar, whereas at 85-percent AFUE, 
there is a large increase in installation costs for a fraction of 
replacement installations requiring new stainless steel venting for 
households replacing an 82- to 84- percent AFUE boiler with an 85-
percent AFUE boiler. Therefore, DOE has determined that a consumer 
would be more likely to choose to switch to a condensing boiler if the 
standard were at 85-percent AFUE (as proposed in the NOPR) than at 84-
percent (as is being adopted by this final rule). Thus, DOE has 
substantially lessened the likelihood of consumers being forced to 
install condensing equipment by adopting an 84-percent AFUE standard 
for gas-fired hot water boilers.
2. National Energy Savings
    The national energy savings analysis involves a comparison of 
national energy consumption of the considered products between each 
potential standards case (TSL) and the case with no new or 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). 
Vintage represents the age of the product. DOE calculated annual NES 
based on the difference in national energy consumption for the case 
without amended efficiency standards and for each higher efficiency 
standard. For the NOPR, DOE estimated energy consumption and savings 
based on site energy and converted the electricity consumption and 
savings to primary energy using annual conversion factors derived from 
the AEO 2013 version of NEMS. For the final rule, DOE used conversion 
factors derived from AEO 2015. Cumulative energy savings are the sum of 
the NES for each year over the timeframe of the analysis.
    DOE considered whether boiler energy use would likely be impacted 
by a direct rebound effect, which occurs when a product that is made 
more efficient is used more intensively, such that the expected energy 
savings from the efficiency improvement may not fully materialize. For 
the NOPR, after reviewing several studies on the direct rebound effect, 
DOE included a 15-percent rebound effect for residential boilers due to 
an AFUE standard. For the final rule, DOE updated the rebound effect 
value to range from 9 to 11 percent depending on the product class, 
taking into account differences in the rebound effect associated with 
space heating and water heating energy use, as well as residential and 
commercial applications based on a review of the studies on the direct 
rebound effect. In both the NOPR and final rule, DOE did not consider a 
rebound effect for standby mode and off mode standards, because 
consumers typically have no awareness of any efficiency change in 
standby mode and off mode. See chapter 10 of the final rule TSD for 
DOE's assessments of rebound effect literature.
    In 2011, in response to the recommendations of a committee on 
``Point-of-Use and Full-Fuel-Cycle Measurement Approaches to Energy 
Efficiency Standards'' appointed by the National Academy of Sciences, 
DOE announced its intention to use full-fuel-cycle (FFC) measures of 
energy use and greenhouse gas and other emissions in the national 
impact analyses and emissions analyses included in future energy 
conservation standards rulemakings. 76 FR 51281 (August 18, 2011). 
After evaluating the approaches discussed in the August 18, 2011 
notice, DOE published a statement of amended policy in the Federal 
Register in which DOE explained its determination that EIA's National 
Energy Modeling System (NEMS) is the most appropriate tool for its 
full-fuel-cycle (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 \93\ that 
EIA uses to prepare its Annual Energy Outlook.
---------------------------------------------------------------------------

    \93\ For more information on NEMS, refer to The National Energy 
Modeling System: An Overview, DOE/EIA-0581 (October 2009) (Available 
at: http://www.eia.gov/).
---------------------------------------------------------------------------

    NPGA stated that it is not clear in the NOPR that DOE applied the 
FFC evaluation to the entire energy path of electric-powered 
residential boilers. NPGA requested that the agency apply to electric-
powered residential boilers the same FFC analysis utilized to assess 
primary fuels. NPGA requested that DOE clarify the extent to which 
electric-powered residential boilers were evaluated through the FFC 
analysis. (NPGA, No. 53, pp. 1-3)
    In response, DOE did not analyze electric boilers for AFUE 
standards because their efficiency is close to 100-percent AFUE. 
However, DOE did analyze electric boilers for the standby mode and off 
mode standards, and applied the FFC analysis, including power plant and 
upstream energy use, to electric boilers as well as gas-fired and oil-
fired boilers.
    The approach used for deriving FFC measures of energy use and 
emissions is described in appendix 10B of the final rule TSD.
3. Net Present Value Analysis
    The inputs for determining NPV are: (1) Total annual installed 
cost; (2) total annual savings in operating costs; (3) a discount 
factor to calculate the present value of costs and savings; (4) present 
value of costs; and (5) present value of savings. DOE calculated net 
savings 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 calculated savings over 
the lifetime of products shipped in the forecast period. DOE calculated 
NPV as the difference between the present value of operating cost 
savings and the present value of total installed costs.

[[Page 2370]]

a. Total Annual Installed Cost
    For the NPV analysis, DOE calculates increases in total installed 
costs as the difference in total installed cost between the no-new-
standards case and standards cases (i.e., once the new or amended 
standards take effect). For the NOPR and final rule, as discussed in 
section IV.F.1of this notice, DOE assumed a constant residential boiler 
price trend. DOE applied the same trend to forecast prices for each 
product class at each considered efficiency level. DOE's projection of 
product prices is described in appendix 10C of the final rule TSD.
    To evaluate the effect of uncertainty regarding the price trend 
estimates, DOE investigated the impact of different product price 
forecasts on the consumer NPV for the considered TSLs for residential 
boilers. In addition to the default price trend, DOE considered two 
product price sensitivity cases: (1) A high price decline case based on 
1980-1998 PPI data; and (2) a low price decline case based on AEO 2015 
data. The derivation of these price trends and the results of these 
sensitivity cases are described in appendix 10C of the final rule TSD.
b. Total Annual Operating Cost Savings
    Operating cost savings are estimated by comparing total energy 
expenditures and repair and maintenance costs for the no-new-standards 
case and the standards cases. Total savings in operating costs are the 
product of savings per unit and the number of units of each vintage 
that survive in a given year. 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. NIA results based on these 
cases are presented in appendix 10C of the final rule TSD.
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. For this final 
rule, DOE estimated the NPV of consumer benefits using both a 3-percent 
and a 7-percent real discount rate. DOE uses these discount rates in 
accordance with guidance provided by the Office of Management and 
Budget (OMB) to Federal agencies on the development of regulatory 
analysis.\94\ The discount rates for the determination of NPV are in 
contrast to the discount rates used in the LCC analysis, which are 
designed to reflect a consumer's perspective. The 7-percent real value 
is an estimate of the average before-tax rate of return to private 
capital in the U.S. economy. The 3-percent real value represents the 
``social rate of time preference,'' which is the rate at which society 
discounts future consumption flows to their present value.
---------------------------------------------------------------------------

    \94\ United States Office of Management and Budget, OMB Circular 
A-4: Regulatory Analysis (Sept. 17, 2003) section E, ``Identifying 
and Measuring Benefits and Costs'' (Available at: http://www.whitehouse.gov/omb/memoranda/m03-21.html).
---------------------------------------------------------------------------

I. Consumer Subgroup Analysis

    In analyzing the potential impact of new or amended energy 
conservation standards on consumers, DOE evaluates the impact on 
identifiable subgroups of consumers that comprise a subset of the 
population that may be disproportionately affected by a new or amended 
national standard (e.g., low-income consumers, seniors). The purpose of 
a subgroup analysis is to determine the extent of any such 
disproportional impacts. DOE evaluates impacts on particular subgroups 
of consumers by analyzing the LCC impacts and PBP for those particular 
consumers from alternative standard levels.
    For the NOPR and final rule, DOE analyzed the impacts of the 
considered standard levels on two subgroups: (1) Low-income households 
and (2) senior-only households. DOE identified these households in the 
RECS 2009 sample and used the LCC and PBP spreadsheet model to estimate 
the impacts of the considered efficiency levels on these subgroups. To 
the extent possible, it utilized inputs appropriate for these 
subgroups.
    The consumer subgroup results for the residential boilers TSLs are 
presented in section V.B.1.b of this notice and chapter 11 of the final 
rule TSD.

J. Manufacturer Impact Analysis

1. Overview
    DOE performed an MIA to estimate the financial impacts of amended 
energy conservation standards on manufacturers of residential boilers 
and to estimate the potential impacts of such standards on employment 
and manufacturing capacity. The MIA has both quantitative and 
qualitative aspects and includes analyses of forecasted industry cash 
flows, the industry net present value (INPV), investments in research 
and development (R&D) and manufacturing capital, and domestic 
manufacturing employment. Additionally, the MIA seeks to determine how 
amended energy conservation standards might affect manufacturing 
employment, capacity, and competition, as well as how standards 
contribute to overall regulatory burden. Finally, the MIA serves to 
identify any disproportionate impacts on manufacturer subgroups, 
including small business manufacturers.
    The quantitative part of the MIA primarily relies on the Government 
Regulatory Impact Model (GRIM), an industry cash-flow model with inputs 
specific to this rulemaking. The key GRIM inputs include data on the 
industry cost structure, unit production costs, product shipments, 
manufacturer markups, and investments in R&D and manufacturing capital 
required to produce compliant products (conversion costs). The key GRIM 
outputs are the INPV, which is the sum of industry annual cash flows 
over the analysis period, discounted using the industry-weighted 
average cost of capital, and the impact to domestic manufacturing 
employment. The model uses standard accounting principles to estimate 
the impacts of more-stringent energy conservation standards on a given 
industry by comparing changes in INPV and domestic manufacturing 
employment between a no-new-standards case and the various TSLs (the 
standards cases). To capture the uncertainty relating to manufacturer 
pricing strategies and profitability following amended standards, the 
GRIM estimates a range of possible impacts under different markup 
scenarios.
    The qualitative part of the MIA addresses manufacturer 
characteristics and market/product trends. Specifically, the MIA 
considers such factors as a potential standard's impact on 
manufacturing capacity, competition within the industry, the cumulative 
impact of other DOE and non-DOE regulations, and impacts on 
manufacturer subgroups. The complete MIA is outlined in chapter 12 of 
the final rule TSD.
    DOE conducted the MIA for this rulemaking in three phases. In the 
first phase of the MIA, DOE prepared a profile of the residential 
boiler

[[Page 2371]]

manufacturing industry based on the market and technology assessment, 
preliminary manufacturer interviews, and publicly-available 
information. As part of its profile of the residential boilers 
industry, DOE also conducted a top-down cost analysis of residential 
boiler manufacturers that DOE used to derive preliminary financial 
inputs for the GRIM (e.g., revenues; materials, labor, overhead, and 
depreciation expenses; selling, general, and administrative expenses 
(SG&A); tax rates, and R&D expenses). DOE also used public sources of 
information to further calibrate its initial characterization of the 
residential boiler manufacturing industry, including company filings of 
form 10-K from the SEC,\95\ corporate annual reports, the U.S. Census 
Bureau's Economic Census,\96\ and reports from Hoover's.\97\
---------------------------------------------------------------------------

    \95\ U.S. Securities and Exchange Commission, Annual 10-K 
Reports (Various Years) (Available at: http://www.sec.gov/edgar/searchedgar/companysearch.html).
    \96\ U.S. Census Bureau, Annual Survey of Manufacturers: General 
Statistics: Statistics for Industry Groups and Industries (2011) 
(Available at: http://factfinder2.census.gov/faces/nav/jsf/pages/searchresults.xhtml?refresh=t).
    \97\ Hoovers Inc. Company Profiles, Various Companies (Available 
at: http://www.hoovers.com).
---------------------------------------------------------------------------

    In second phase of the MIA, DOE prepared an industry cash-flow 
analysis to quantify the potential impacts of new and amended energy 
conservation standards. The GRIM uses several factors to determine a 
series of annual cash flows starting with the announcement of the 
standard and extending over a 30-year period following the compliance 
date of the standard. These factors include annual expected revenues, 
costs of sales, SG&A and R&D expenses, taxes, and capital expenditures. 
In general, energy conservation standards can affect manufacturer cash 
flow in three distinct ways: (1) Creating a need for increased 
investment; (2) raising production costs per unit; and (3) altering 
revenue due to higher per-unit prices and changes in sales volumes. DOE 
estimated industry cash flows in the GRIM at various potential standard 
levels using industry financial parameters derived in the first phase 
and the shipment scenario used in the NIA. The GRIM modeled both 
impacts from the AFUE energy conservation standards and impacts from 
standby mode and off mode energy conservation standards (i.e., 
standards based on standby mode and off mode wattage). The GRIM results 
from the two standards were evaluated independent of one another.
    In addition, during the second phase of the MIA, DOE developed 
interview guides to distribute to manufacturers of residential boilers 
in order to develop other key GRIM inputs, including product and 
capital conversion costs, and to gather additional information on the 
anticipated effects of energy conservation standards on revenues, 
direct employment, capital assets, industry competitiveness, and 
subgroup impacts.
    In the third phase of the MIA, DOE conducted structured, detailed 
interviews with a variety of manufacturers that represent approximately 
46 percent of domestic residential boiler sales covered by this 
rulemaking. During these interviews, DOE discussed engineering, 
manufacturing, procurement, and financial topics to validate 
assumptions used in the GRIM and to identify key issues or concerns. 
See section IV.J.4 for a description of the key issues raised by 
manufacturers during the interviews.
    Additionally, in the third phase, DOE also evaluated subgroups of 
manufacturers that may be disproportionately impacted by amended 
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 by amended energy 
conservation standards. DOE identified one subgroup (small 
manufacturers) for a separate impact analysis.
    To identify small businesses for this analysis, DOE applied the 
small business size standards published by the Small Business 
Administration (SBA) to determine whether a company is considered a 
small business. 65 FR 30836, 30848 (May 15, 2000), as amended at 65 FR 
53533, 53544 (Sept. 5, 2000) and codified at 13 CFR part 121. To be 
categorized as a small business under North American Industry 
Classification System (NAICS) code 333414, ``Heating Equipment (except 
Warm Air Furnaces) Manufacturing,'' a residential boiler manufacturer 
and its affiliates may employ a maximum of 500 employees. The 500-
employee threshold includes all employees in a business's parent 
company and any other subsidiaries. Based on this classification, DOE 
identified at least 13 residential boiler companies that qualify as 
small businesses.
    The residential boiler small manufacturer subgroup is discussed in 
section VI.B of this final rule and in chapter 12 of the final rule 
TSD.
2. Government Regulatory Impact Model
    DOE uses the GRIM to quantify the potential changes in cash flow 
due to amended standards that result in a higher or lower industry 
value. The GRIM was designed to conduct an annual cash-flow analysis 
using standard accounting principles that incorporates manufacturer 
costs, markups, shipments, and industry financial information as 
inputs. DOE thereby calculated a series of annual cash flows, beginning 
in 2014 (the base year of the analysis) and continuing to 2050. DOE 
summed the stream of annual discounted cash flows during this period to 
calculate INPVs at each TSL. For residential boiler manufacturers, DOE 
used a real discount rate of 8.0 percent, which was derived from 
industry financial information and then modified according to feedback 
received during manufacturer interviews. DOE also used the GRIM to 
model changes in costs, shipments, investments, and manufacturer 
margins that could result from amended energy conservation standards.
    After calculating industry cash flows and INPV, DOE compared 
changes in INPV between the 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 at a particular TSL. As 
discussed previously, DOE collected this information on GRIM inputs 
from a number of sources, including publicly-available data and 
confidential interviews with a number of manufacturers. GRIM inputs are 
discussed in more detail in the next section. The GRIM results are 
discussed in section V.B.2. Additional details about the GRIM, the 
discount rate, and other financial parameters can be found in chapter 
12 of the final rule TSD.
    For consideration of standby mode and off mode regulations, DOE 
modeled the impacts of the technology options for reducing electricity 
usage discussed in the engineering analysis (chapter 5 of the final 
rule TSD). The GRIM analysis incorporates the incremental additions to 
the MPC of standby mode and off mode features and the resulting impacts 
on markups.
    Due to the small cost of standby mode and off mode components 
relative to the overall cost of a residential boiler, DOE assumes that 
standards regarding standby mode and off mode features alone would not 
impact product shipment numbers. Additionally, DOE has concluded that 
the incremental cost

[[Page 2372]]

of standby mode and off mode features would not have a differentiated 
impact on manufacturers of different product classes. Consequently, DOE 
models the impact of standby mode and off mode for the industry as a 
whole.
    The electric boiler product classes were not analyzed in the GRIM 
for AFUE energy conservation standards. As a result, quantitative 
numbers for those product classes are not available in the GRIM 
analyzing standby mode and off mode standards. However, the standby 
mode and off mode technology options considered for electric boilers 
are identical to the technology options for all other residential 
boiler product classes. As a result, DOE expects the standby mode and 
off mode impacts on electric boilers to be of the same order of 
magnitude as the impacts on all other residential boiler product 
classes.
a. Government Regulatory Impact Model Key Inputs
Manufacturer Production Costs
    Manufacturing a higher-efficiency product is typically more 
expensive than manufacturing a baseline product due to the use of more 
complex components, which are typically more costly than baseline 
components. The changes in the MPCs of the analyzed products can affect 
the revenues, gross margins, and cash flow of the industry, making 
these product cost data key GRIM inputs for DOE's analysis.
    In the MIA, DOE used the MPCs for each considered efficiency level 
calculated in the engineering analysis, as described in section IV.C 
and further detailed in chapter 5 of the final rule TSD. In addition, 
DOE used information from its teardown analysis (described in chapter 5 
of the final rule TSD) to disaggregate the MPCs into material, labor, 
and overhead costs. To calculate the MPCs for products at and above the 
baseline, DOE performed teardowns and cost modeling that allowed DOE to 
estimate the incremental material, labor, and overhead costs for 
products above the baseline. These cost breakdowns and product markups 
were validated and revised with input from manufacturers during 
manufacturer interviews.
Shipments Forecast
    The GRIM estimates manufacturer revenues based on total unit 
shipment forecasts and the distribution of these values by efficiency 
level. Changes in sales volumes and efficiency mix over time can 
significantly affect manufacturer finances. For this analysis, the GRIM 
uses the NIA's annual shipment forecasts derived from the shipments 
analysis from 2014 (the base year) to 2050 (the end year of the 
analysis period). The shipments model divides the shipments of 
residential boilers into specific market segments. The model starts 
from a historical base year and calculates retirements and shipments by 
market segment for each year of the analysis period. This approach 
produces an estimate of the total product stock, broken down by age or 
vintage, in each year of the analysis period. In addition, the product 
stock efficiency distribution is calculated for the base case and for 
each standards case for each product class. The NIA shipments forecasts 
are, in part, based on a roll-up scenario. The forecast assumes that a 
product in the base case that does not meet the standard under 
consideration would ``roll up'' to meet the amended standard beginning 
in the compliance year of 2021. See section IV.G and chapter 9 of the 
final rule TSD for additional details.
Product and Capital Conversion Costs
    Amended energy conservation standards would cause manufacturers to 
incur one-time conversion costs to bring their production facilities 
and product designs into compliance. DOE evaluated the level of 
conversion-related expenditures that would be needed to comply with 
each considered efficiency level in each product class. For the MIA, 
DOE classified these conversion costs into two major groups: (1) 
Capital conversion costs; and (2) product conversion costs. Capital 
conversion costs are one-time investments in property, plant, and 
equipment necessary to adapt or change existing production facilities 
such that new compliant product designs can be fabricated and 
assembled. Product conversion costs are one-time investments in 
research, development, testing, marketing, and other non-capitalized 
costs necessary to make product designs comply with amended energy 
conservation standards.
    To evaluate the level of capital conversion expenditures 
manufacturers would likely incur to comply with amended energy 
conservation standards, DOE used manufacturer interviews to gather data 
on the anticipated level of capital investment that would be required 
at each efficiency level. Based on manufacturer feedback, DOE developed 
a market-share-weighted manufacturer average capital expenditure which 
it then applied to the entire industry. DOE also made assumptions about 
which manufacturers would develop their own condensing heat exchanger 
production lines, in the event that efficiency levels using condensing 
technology were proposed. DOE supplemented manufacturer comments and 
tailored its analyses with estimates of capital expenditure 
requirements derived from the product teardown analysis and engineering 
analysis described in chapter 5 of the final rule TSD.
    DOE assessed the product conversion costs at each considered 
efficiency level by integrating data from quantitative and qualitative 
sources. DOE considered market-share-weighted feedback regarding the 
potential costs of each efficiency level from multiple manufacturers to 
estimate product conversion costs (e.g., R&D expenditures, 
certification costs) and validated those numbers against engineering 
estimates of redesign efforts. DOE combined this information with 
product listings to estimate how much manufacturers would have to spend 
on product development and product testing at each efficiency level. 
Manufacturer data were aggregated to better reflect the industry as a 
whole and to protect confidential information.
    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 amended standards. The 
conversion cost figures used in the GRIM can be found in section 
V.B.2.a of this notice. For additional information on the estimated 
product and capital conversion costs, see chapter 12 of the final rule 
TSD.
b. Government Regulatory Impact Model Scenarios
Markup Scenarios
    As discussed in the previous section, MSPs include direct 
manufacturing production costs (i.e., labor, materials, and overhead 
estimated in DOE's MPCs) and all non-production costs (i.e., SG&A, R&D, 
and interest), along with profit. To calculate the MSPs in the GRIM, 
DOE applied non-production cost markups to the MPCs estimated in the 
engineering analysis for each product class and efficiency level. 
Modifying these markups in the standards case yields different sets of 
impacts on manufacturers. For the MIA, DOE modeled two standards-case 
markup scenarios to represent the uncertainty regarding the potential 
impacts on prices and profitability for manufacturers following the 
implementation of amended energy conservation standards: (1) A 
preservation of gross margin percentage markup scenario; and (2) a 
preservation of per-unit operating profit markup

[[Page 2373]]

scenario. These scenarios lead to different markup values that, when 
applied to the inputted MPCs, result in varying revenue and cash-flow 
impacts.
    Under the preservation of gross margin percentage markup scenario, 
DOE applied a single uniform ``gross margin percentage'' markup across 
all efficiency levels, which assumes that following amended standards, 
manufacturers would be able to maintain the same amount of profit as a 
percentage of revenue at all efficiency levels within a product 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 
residential boilers, as well as comments from manufacturer interviews, 
DOE assumed the average non-production cost markup--which includes SG&A 
expenses, R&D expenses, interest, and profit--to be 1.41 for all 
product classes. This markup scenario represents the upper bound of the 
residential boiler industry's profitability in the standards case 
because manufacturers are able to fully pass through additional costs 
due to standards to consumers.
    DOE decided to include the preservation of per-unit operating 
profit scenario in its analysis because manufacturers stated that they 
do not expect to be able to mark up the full cost of production in the 
standards case, given the highly competitive nature of the residential 
boiler market. In this scenario, manufacturer markups are set so that 
operating profit one year after the compliance date of amended energy 
conservation standards is the same as in the base case on a per-unit 
basis. In other words, manufacturers are not able to garner additional 
operating profit from the higher production costs and the investments 
that are required to comply with the amended standards; however, they 
are able to maintain the same operating profit in the standards case 
that was earned in the base case. Therefore, operating margin in 
percentage terms is reduced between the base case and standards case. 
DOE adjusted the manufacturer markups in the GRIM at each TSL to yield 
approximately the same earnings before interest and taxes in the 
standards case as in the base case. The preservation of per-unit 
operating profit markup scenario represents the lower bound of industry 
profitability in the standards case. This is because manufacturers are 
not able to fully pass through to consumers the additional costs 
necessitated by residential boiler standards, as they are able to do in 
the preservation of gross margin percentage markup scenario.
3. Manufacturer Interviews
    DOE interviewed manufacturers representing approximately 55 percent 
of the residential boiler market by revenue. DOE contractors endeavor 
to conduct interviews with a representative cross-section of 
manufacturers (including large and small manufacturers, covering all 
equipment classes and product offerings). DOE contractors reached out 
to all the small business manufacturers that were identified as part of 
the analysis, as well as larger manufacturers that have significant 
market share in the residential boilers market. These interviews were 
in addition to those DOE conducted as part of the engineering analysis. 
The information gathered during these interviews enabled DOE to tailor 
the GRIM to reflect the unique financial characteristics of the 
residential boiler industry. The information gathered during these 
interviews enabled DOE to tailor the GRIM to reflect the unique 
financial characteristics of the residential boiler industry. All 
interviews provided information that DOE used to evaluate the impacts 
of potential amended energy conservation standards on manufacturer cash 
flows, manufacturing capacities, and employment levels.
    In interviews, DOE asked manufacturers to describe their major 
concerns with potential standards arising from a rulemaking involving 
residential boilers. Manufacturer interviews are conducted under non-
disclosure agreements (NDAs), so DOE does not document these 
discussions in the same way that it does public comments in the comment 
summaries and DOE's responses throughout the rest of this notice. The 
following sections highlight the most significant of manufacturers' 
statements that helped shape DOE's understanding of potential impacts 
of an amended standard on the industry. Manufacturers raised a range of 
general issues for DOE to consider, including a diminished ability to 
serve the replacement market, concerns that condensing boilers may not 
perform as rated without heating system modifications, and concerns 
about reduced product durability. (DOE also considered all other 
concerns expressed by manufacturers in this analysis.) Below, DOE 
summarizes these issues, which were raised in manufacturer interviews, 
in order to obtain public comment and related data.
Diminished Ability To Serve the Replacement Market
    In interviews, several manufacturers pointed out that over 90 
percent of residential boiler sales are transacted in the replacement 
channel, rather than the new construction channel. They stated that the 
current residential boiler market is structured around the legacy 
venting infrastructures that exist in the vast majority of homes and 
that any regulation that eliminated 82 to 83-percent efficient products 
would be very disruptive to the market. Manufacturers argued that under 
this scenario, consumers would face much higher installation costs, as 
well as complex challenges in changing the layout of the boiler room 
and upgrading their venting and heat distribution systems. 
Manufacturers argued that these considerations may induce consumers to 
explore other HVAC options and may cause them to leave the boiler 
market entirely. Manufacturers also asserted that the elimination of 82 
to 83-percent efficient products could be disruptive to the market 
because several manufacturers would have to eliminate commodity 
products that generate a majority of their sales and be forced to sell 
products for which they are less vertically integrated, which may cause 
them to exit the market entirely. Some manufacturers speculated that if 
this scenario were to play out, it could result in the loss of a 
substantial number of American manufacturing jobs.
    Accordingly, DOE has considered this feedback when developing its 
analysis of installation costs (see section IV.F.2), shipments analysis 
(see section IV.G), and employment impacts analysis (see section IV.N).
Condensing Boilers May Not Perform As Rated Without System Improvements
    Several manufacturers argued that condensing boilers may have 
overstated efficiencies in terms of actual results in the field if they 
are installed as replacements in legacy distribution systems that were 
designed to maintain hot water supply temperatures of 180-
200[emsp14][deg]F. Manufacturers stated that in these systems, return 
water temperatures will often be too high for condensing boilers to 
operate in condensing mode, thereby causing the boiler to be less 
efficient than its express rating. Manufacturers also stated that 
because condensing boilers are designed for lower maximum supply water 
temperatures, the heat distribution output of the heating system as a 
whole is often reduced, and the boiler may not be able to meet heat 
distribution requirements. This may require the

[[Page 2374]]

implementation of additional heat distribution equipment within a 
particular system. Some manufacturers pointed out that reducing the 
supply water temperature also reduces the radiation component of some 
heat distribution units, which is essential for comfort and allows 
consumers to maintain a lower thermostat setting. Reducing the 
radiation component may require a higher thermostat setting to maintain 
comfort, thereby reducing overall system efficiency.
    DOE recognizes this issue and considered it in the energy use 
analysis for residential boilers. See chapter 7 of the final rule TSD 
for additional details.
Reduced Product Durability and Reliability
    Several manufacturers commented that higher-efficiency condensing 
boilers on the market have not demonstrated the same level of 
durability and reliability as lower-efficiency products. Manufacturers 
stated that condensing products require more upkeep and maintenance and 
generally do not last as long as non-condensing products. Several 
manufacturers pointed out that they generally incur large after-sale 
costs with their condensing products because of additional warranty 
claims. Maintenance calls for these boilers require more skilled 
technicians and occur more frequently than they do with non-condensing 
boilers.
    DOE considered these comments when developing its estimates of 
repair and maintenance costs for residential boilers (see section 
IV.F.2.c) and product lifetime (IV.F.2.d).
4. Discussion of MIA Comments
    During the NOPR public comment period, interested parties commented 
on assumptions and results described in the NOPR document and 
accompanying TSD, addressing several topics related to manufacturer 
impacts. These include: small business impacts and industry direct 
employment.
Small Business Impacts
    Energy Kinetics commented that the introduction of new products in 
response to the proposed standard will put significant burden on small 
manufacturers due to the product development costs, carrying costs, 
distribution costs, and warehousing costs that will be incurred. 
Further, Energy Kinetics argued that the standard may result in 
consumers switching to high-mass cast iron products which would also 
put small manufacturers at a market disadvantage. (Energy Kinetics, No. 
52 at p. 2) Consistent with the requirements of the Regulatory 
Flexibility Act (5 U.S.C. 601, et seq.), as amended, the Department 
analyzes the expected impacts of an energy conservation standard on 
small business residential boiler manufacturers directly regulated by 
DOE's standards. DOE understands that small manufacturers may be 
disproportionately affected by an energy conservation standard, and 
these impacts are discussed in section VI.B.
Direct Employment
    Burnham commented that a standard requiring condensing units would 
have significant impacts on direct employment due to the elimination of 
cast iron products. (Burnham, No. 60 at pp. 1 & 4) In the manufacturer 
impact analysis, DOE analyzes the impacts on regulated residential 
boiler manufacturers. In this analysis, DOE estimates the decrease in 
direct employment due to an energy conservation standard in section 
V.B.2.b. Burnham also raised concerns about the impact of a standard 
requiring condensing efficiency levels on their cast iron foundries. 
(Burnham, No. 60 at p. 38) However, this rule does not adopt a 
condensing level for any equipment classes. A full explanation of the 
efficiency requirements by product class is provided in section 
V.B.2.a.

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 CO2, NOX, SO2, and Hg. 
The second component estimates the impacts of potential standards on 
emissions of two additional greenhouse gases, CH4 and 
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 the final rule, the analysis of power sector emissions used 
marginal emissions factors that were derived from data in AEO 2015, as 
described in section IV.M. The methodology used in the final rule is 
described in chapters 13 and 15 of the final rule TSD.
    Combustion emissions of CH4 and N2O are 
estimated using emissions intensity factors published by the EPA, 
Greenhouse Gas (GHG) Emissions Factors Hub.\98\ The FFC upstream 
emissions are estimated based on the methodology described in chapter 
15 of the final rule TSD. 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.
---------------------------------------------------------------------------

    \98\ 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,\99\ DOE used 
GWP values of 28 for CH4 and 265 for N2O.
---------------------------------------------------------------------------

    \99\ 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 residential boilers 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.\100\
---------------------------------------------------------------------------

    \100\ 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 amended standards will 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 residential boilers would increase the use of 
electricity by the boiler. For the considered TSLs, DOE estimated the 
change in power sector and upstream emissions of CO2, 
NOX, SO2, and Hg.\101\
---------------------------------------------------------------------------

    \101\ Note that in these cases, the reduction in site emissions 
of CO2, NOX, and SO2 is larger than 
the increase in power sector emissions.
---------------------------------------------------------------------------

    The AEO incorporates the projected impacts of existing air quality 
regulations on emissions. AEO 2015

[[Page 2375]]

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. The estimated CO2 emissions 
reductions do not account for the effects of the Clean Power Plan (CPP) 
final rule, which was announced by EPA on August 3, 2015. 80 FR 64662 
(Oct. 23, 2015). The CPP establishes guidelines for States to follow in 
developing plans to reduce CO2 emissions from existing 
fossil fuel-fired electric generating units. Under the CPP, marginal 
emissions factors for CO2 from the power sector would be 
significantly lower than the values that DOE derived from AEO 2015. The 
CPP would have a negligible effect on the CO2 emissions 
reduction estimated to result from the adopted AFUE and standby/off 
mode standards for residential boilers, however, as the power sector 
accounts for only 2.7 percent of the total CO2 emissions 
reduction. The bulk of the emissions reduction comes from site 
emissions. See section V.B.6 for further discussion.
    SO2 emissions from affected electric generating units 
(EGUs) are subject to nationwide and regional emissions cap-and-trade 
programs. Title IV of the Clean Air Act sets an annual emissions cap on 
SO2 for affected EGUs in the 48 contiguous States and the 
District of Columbia (DC). (42 U.S.C. 7651 et seq.) SO2 
emissions from 28 eastern States and DC were also limited under the 
Clean Air Interstate Rule (CAIR). 70 FR 25162 (May 12, 2005). CAIR 
created an allowance-based trading program that operates along with the 
Title IV program. In 2008, CAIR was remanded to EPA by the U.S. Court 
of Appeals for the District of Columbia Circuit, but it remained in 
effect.\102\ 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,\103\ 
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.\104\ On October 23, 2014, the DC Circuit 
lifted the stay of CSAPR.\105\ Pursuant to this action, CSAPR went into 
effect (and CAIR ceased to be in effect) as of January 1, 2015.
---------------------------------------------------------------------------

    \102\ 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).
    \103\ 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).
    \104\ See EPA v. EME Homer City Generation, 134 S.Ct. 1584, 1610 
(U.S. 2014). The Supreme Court held in part that EPA's methodology 
for quantifying emissions that must be eliminated in certain States 
due to their impacts in other downwind States was based on a 
permissible, workable, and equitable interpretation of the Clean Air 
Act provision that provides statutory authority for CSAPR.
    \105\ 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 significant 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. 
Therefore, DOE believes that energy conservation standards will 
generally reduce SO2 emissions in 2016 and beyond.\106\
---------------------------------------------------------------------------

    \106\ DOE notes that the Supreme Court recently determined that 
EPA erred by not considering costs in the finding that regulation of 
hazardous air pollutants from coal-fired and oil-fired electric 
utility steam generating units is appropriate. See Michigan v. EPA 
(Case No. 14-46, 2015). The Supreme Court did not vacate the MATS 
rule, and DOE has tentatively determined that the Court's decision 
on the MATS rule does not change the assumptions regarding the 
impact of energy efficiency standards on SO2 emissions 
(see chapter 13 of the final rule TSD for further discussion). 
Further, the Court's decision 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.\107\ 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.
---------------------------------------------------------------------------

    \107\ CSAPR also applies to NOX, and it supersedes 
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.
    AHRI criticized DOE's inclusion of CO2 emissions impact 
over a time period greatly exceeding that used to measure the economic 
costs. (AHRI, No. 64 at pp. 6-7) In response, DOE considers the impacts 
over the lifetime of the residential boiler products shipped in the 30-
year analysis period. With respect to energy cost savings, impacts 
continue until all of the equipment shipped in the 30-year analysis 
period are retired. Likewise, emissions impacts from purchased

[[Page 2376]]

products continue until all of the emissions produced by the boilers 
shipped during the analysis period are eliminated from the atmosphere. 
CO2 that is emitted during the lifetime of the products has 
a long residence time in the atmosphere, and, thus, contributes to 
radiative forcing, which affects global climate, for a long time. In 
the case of both manufacturer economic costs and benefits and the value 
of CO2 emissions reductions, DOE is accounting for the 
lifetime impacts of products shipped in the same analysis period.
    EEI stated that the analysis and AEO 2015 do not include the impact 
of the EPA power plant rule on coal power generation. (EEI, Public 
Meeting Transcript, No. 50 at pp. 270-272) AEO 2015 is the only source 
that provides a comprehensive projection of Reference case emissions. 
The final rule for the Clean Power Plan was issued well after AEO 2015 
was finalized. DOE acknowledges that presuming the Clean Power Plan 
survives court challenges, projected emissions of CO2 would 
be below those projected in AEO 2015. However, DOE notes that the 
adopted standards for residential boilers would be economically 
justified even if DOE did not account for any emissions benefits.

L. Monetizing Carbon Dioxide and Other Emissions Impacts

    As part of the development of this rule, DOE considered the 
estimated monetary benefits from the reduced emissions of 
CO2 and NOX that are expected to result from each 
of the TSLs considered. In order to make this calculation analogous to 
the calculation of the NPV of consumer benefit, DOE considered the 
reduced emissions expected to result over the lifetime of products 
shipped in the forecast period for each TSL. This section summarizes 
the basis for the monetary values used for CO2 and 
NOX emissions and presents the values considered in this 
final rule.
    For this final rule, DOE relied on a set of values for the social 
cost of carbon (SCC) that was developed by a Federal interagency 
process. The basis for these values is summarized in the next section, 
and a more detailed description of the methodologies used is provided 
as an appendix to chapter 14 of the final rule TSD.
1. Social Cost of Carbon
    The SCC is an estimate of the monetized damages associated with an 
incremental increase in carbon emissions in a given year. It is 
intended to include (but is not limited to) 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)(6) of Executive Order 12866, ``Regulatory 
Planning and Review,'' 58 FR 51735 (Oct. 4, 1993), agencies must, to 
the extent permitted by law, assess both the costs and the benefits of 
the intended regulation and, recognizing that some costs and benefits 
are difficult to quantify, propose or adopt a regulation only upon a 
reasoned determination that the benefits of the intended regulation 
justify its costs. The purpose of the SCC estimates presented here is 
to allow agencies to incorporate the monetized social benefits of 
reducing CO2 emissions into cost-benefit analyses of 
regulatory actions. The estimates are presented with an acknowledgement 
of the many uncertainties involved and with a clear understanding that 
they should be updated over time to reflect increasing knowledge of the 
science and economics of climate impacts.
    As part of the interagency process that developed 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 \108\ 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.
---------------------------------------------------------------------------

    \108\ 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.

[[Page 2377]]

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 percent, 3 percent, and 5 percent. The fourth set, which 
represents the 95th-percentile SCC estimate across all three models at 
a 3-percent discount rate, 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,\109\ although preference is given to 
consideration of the global benefits of reducing CO2 
emissions. Table IV.28 presents the values in the 2010 interagency 
group report,\110\ which is reproduced in appendix 14A of the final 
rule TSD.
---------------------------------------------------------------------------

    \109\ 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.
    \110\ 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: 
https://www.whitehouse.gov/sites/default/files/omb/inforeg/for-agencies/Social-Cost-of-Carbon-for-RIA.pdf).

                     Table IV.28--Annual SCC Values From 2010 Interagency Report, 2010-2050
                                          [In 2007$ per metric ton CO2]
----------------------------------------------------------------------------------------------------------------
                                                                           Discount rate
                                                 ---------------------------------------------------------------
                                                        5%              3%             2.5%             3%
                      Year                       ---------------------------------------------------------------
                                                                                                       95th-
                                                      Average         Average         Average       percentile
----------------------------------------------------------------------------------------------------------------
2010............................................             4.7            21.4            35.1            64.9
2015............................................             5.7            23.8            38.4            72.8
2020............................................             6.8            26.3            41.7            80.7
2025............................................             8.2            29.6            45.9            90.4
2030............................................             9.7            32.8            50.0           100.0
2035............................................            11.2            36.0            54.2           109.7
2040............................................            12.7            39.2            58.4           119.3
2045............................................            14.2            42.1            61.7           127.8
2050............................................            15.7            44.9            65.0           136.2
----------------------------------------------------------------------------------------------------------------

    The SCC values used for this document were generated using the most 
recent versions of the three integrated assessment models that have 
been published in the peer-reviewed literature, as described in the 
2013 update from the interagency working group (revised July 
2015).\111\ Table IV.29 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 estimates between 2010 and 2050 is reported 
in appendix 14B of the final rule TSD. The central value that emerges 
is the average SCC across models at the 3-percent discount rate. 
However, for purposes of capturing the uncertainties involved in 
regulatory impact analysis, the interagency group emphasizes the 
importance of including all four sets of SCC values.
---------------------------------------------------------------------------

    \111\ 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.29--Annual SCC Values From 2013 Interagency Update (Revised July 2015), 2010-2050
                                          [In 2007$ per metric ton CO2]
----------------------------------------------------------------------------------------------------------------
                                                                           Discount rate
                                                 ---------------------------------------------------------------
                                                        5%              3%             2.5%             3%
                      Year                       ---------------------------------------------------------------
                                                                                                       95th-
                                                      Average         Average         Average       percentile
----------------------------------------------------------------------------------------------------------------
2010............................................              10              31              50              86
2015............................................              11              36              56             105
2020............................................              12              42              62             123

[[Page 2378]]

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

    Commenting on the NOPR, The Associations objected to DOE's 
continued use of the Social Cost of Carbon (``SCC'') and stated that 
the SCC calculation should not be used in any rulemaking or 
policymaking until it undergoes a more rigorous notice, review, and 
comment process. (The Associations, No. 56 at p. 4) Both The 
Associations \112\ and AHRI stated that the interagency process was not 
transparent, that the SCC estimates were not subjected to peer review, 
and that the information generated violates the Information Quality Act 
(IAQ \113\). (AHRI, No. 64 at p. 8) In addition, AHRI stated that the 
SCC estimates relied on arbitrary damage functions. (AHRI, No. 64 at p. 
8)
---------------------------------------------------------------------------

    \112\ Comments submitted to the Commercial Refrigeration 
Equipment which the Associations incorporated by reference (Comments 
of the U.S. Chamber of Commerce, American Forest & Paper 
Association, American Fuel & Petrochemical Manufacturers, American 
Petroleum Institute, Council of Industrial Boiler Owners, National 
Association of Manufacturers, National Mining Association, and 
Portland Cement Association; Docket No. EERE-2010-BT-STD-0003-0079; 
http://www.regulations.gov/#!documentDetail;D=EERE-2010-BT-STD-0003-
0079).
    \113\ Public Law 106-554, Sec.  515, 114 Stat. 2763 (Dec. 21, 
2000). The IAQ is also set forth at 44 U.S.C. 3516, note.
---------------------------------------------------------------------------

    In response, DOE notes that the General Accounting Office (GAO) 
reviewed the Interagency Working Group's (IWG) development of SCC 
estimates and found that OMB and EPA participants reported that the IWG 
documented all major issues consistent with Federal standards for 
internal control. The GAO also found, according to its document review 
and interviews, that the IWG's development process followed three 
principles: (1) it used consensus-based decision making; (2) it relied 
on existing academic literature and models; and (3) it took steps to 
disclose limitations and incorporate new information.\114\ DOE has also 
determined that this energy conservation standards rulemaking process 
has complied with the requirements of the Information Quality Act (see 
section VI.J).
---------------------------------------------------------------------------

    \114\ U.S. Government Accountability Office, Regulatory Impact 
Analysis: Development of Social Cost of Carbon Estimates GAO-14-663 
(July 24, 2014) (Available at: http://www.gao.gov/products/GAO-14-663).
---------------------------------------------------------------------------

    AHRI and the Cato Institute criticized DOE's use of SCC estimates 
that DOE has acknowledged are subject to considerable uncertainty. 
(AHRI, No. 64 at pp. 5-6; Cato Institute, No. 51 at p. 3) The Cato 
Institute stated that until the integrated assessment models (IAMs) are 
made consistent with mainstream climate science, the SCC should be 
barred from use in this and all other Federal rulemakings. The Cato 
Institute criticized several aspects of the determination of the SCC 
values by the IWG as being discordant with the best climate science and 
not reflective of climate change impacts. (Cato Institute, No. 51 at p. 
1-2, 4-22) AHRI also criticized the determination of the SCC values. 
(AHRI, No. 64 at p. 8)
    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 appendices 14A and 14B of the final rule TSD, 
as are the major assumptions. Specifically, uncertainties in the 
assumptions regarding climate sensitivity, as well as other model 
inputs such as economic growth and emissions trajectories, are 
discussed and the reasons for the specific input assumptions chosen are 
explained. However, the three integrated assessment models used to 
estimate the SCC are frequently cited in the peer-reviewed literature 
and were used in the last assessment of the IPCC. In addition, new 
versions of the models that were used in 2013 to estimate revised SCC 
values were published in the peer-reviewed literature (see appendix 14B 
of the final rule TSD for discussion). Although uncertainties remain, 
the revised estimates that were issued in November 2013 are based on 
the best available scientific information on the impacts of climate 
change. The current estimates of the SCC have been developed over many 
years, using the best science available, and with input from the 
public. In November 2013, OMB announced a new opportunity for public 
comment on the interagency technical support document underlying the 
revised SCC estimates. 78 FR 70586 (Nov. 26, 2013). In July 2015, OMB 
published a detailed summary and formal response to the many comments 
that were received.\115\ OMB also stated its intention to seek 
independent expert advice on opportunities to improve the estimates, 
including many of the approaches suggested by commenters. 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.
---------------------------------------------------------------------------

    \115\ The White House, Estimating the Benefits from Carbon 
Dioxide Emissions Reductions (July 2, 2015) (Available at: https://www.whitehouse.gov/blog/2015/07/02/estimating-benefits-carbon-dioxide-emissions-reductions).
---------------------------------------------------------------------------

    AHRI, the Cato Institute, and Laclede criticized DOE's use of 
global rather than domestic SCC values, pointing out that EPCA 
references weighing of the need for national energy conservation. The 
Cato Institute recommended reporting the results of the domestic SCC 
calculation in the main body of the proposed regulation. (AHRI, No. 64 
at p. 6; Cato Institute, No. 51 at pp. 2-3; Laclede, No. 58 at p. 9)
    In response, DOE's analysis estimates both global and domestic 
benefits of CO2 emissions reductions. The domestic benefits 
are reported in chapter 14 of the

[[Page 2379]]

final rule TSD. 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 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. Therefore, 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 disputed DOE's assumption that SCC values will increase over 
time, because AHRI reasons that the more economic development that 
occurs, the more adaptation and mitigation efforts that will be 
undertaken. (AHRI, No. 64 at p. 7) 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 final rule TSD). 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. Adaptation and mitigation 
efforts, while necessary and important, are not without cost, 
particularly if their implementation is delayed.
    Laclede recommended using market prices to value carbon reduction 
benefits to U.S. residents. Laclede provided a chart of DOE's SCC 
values compared to three market prices from 2008 to 2015, which shows 
that the market prices are as low as or lower than the SCC value at a 
5-percent discount rate ($12). (Laclede, No. 58 at pp. 9-10) In 
response, DOE notes that market prices are simply a reflection of the 
conditions in specific emissions markets in which emissions caps have 
been set. Neither the caps nor the resulting prices of traded emissions 
are intended to reflect the full range of domestic and global impacts 
from anthropogenic climate change over the appropriate time scales.
    Even though the SCC embodies the best data currently available, it 
is important to recognize that a number of key uncertainties remain, 
and that current SCC estimates should be treated as provisional and 
revisable because they will evolve with improved scientific and 
economic understanding. The interagency group also recognizes that the 
existing models are imperfect and incomplete. The National Research 
Council report mentioned previously points out that there is tension 
between the goal of producing quantified estimates of the economic 
damages from an incremental ton of carbon and the limits of existing 
efforts to model these effects. There are a number of analytical 
challenges that are being addressed by the research community, 
including research programs housed in many of the Federal agencies 
participating in the interagency process to estimate the SCC. The 
interagency group intends to periodically review and reconsider those 
estimates to reflect increasing knowledge of the science and economics 
of climate impacts, as well as improvements in modeling.
    In summary, in considering the potential global benefits resulting 
from reduced CO2 emissions, DOE used the values from the 
2013 interagency report (revised July 2015), adjusted to 2014$ 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 values after 2050 using the relevant growth rates for the 2040-
2050 period in the interagency update.
    DOE multiplied the CO2 emissions reduction estimated for 
each year by the SCC value for that year in each of the four cases. To 
calculate a present value of the stream of monetary values, DOE 
discounted the values in each of the four cases using the specific 
discount rate that had been used to obtain the SCC values in each case.
2. Social Cost of Other Air Pollutants
    As noted previously, DOE has 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.
    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. The report includes high and low values for 
NOX (as PM2.5) for 2020, 2025, and 2030 
discounted at 3 percent and 7 percent, 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.
    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 generation 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 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 that estimate 
the economy-wide impacts of changes to energy supply and demand. DOE 
uses published 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

[[Page 2380]]

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 final rule TSD.
    The output of this analysis is a set of time-dependent coefficients 
that capture the change in electricity generation, primary fuel 
consumption, installed capacity and power sector emissions due to a 
unit reduction in demand for a given end use. These coefficients are 
multiplied by the stream of electricity savings calculated in the NIA 
to provide estimates of selected utility impacts of new or amended 
energy conservation standards.

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. 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).\116\ 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.\117\ There are many reasons for these differences, 
including wage differences and the fact that the utility sector is more 
capital-intensive and less labor-intensive than other sectors. Energy 
conservation standards have the effect of reducing consumer utility 
bills. Because reduced consumer expenditures for energy likely lead to 
increased expenditures in other sectors of the economy, the general 
effect of efficiency standards is to shift economic activity from a 
less labor-intensive sector (i.e., the utility sector) to more labor-
intensive sectors (e.g., the retail and service sectors). Thus, based 
on the BLS data alone, DOE believes net national employment may 
increase due to shifts in economic activity resulting from amended 
energy conservation standards for residential boilers.
---------------------------------------------------------------------------

    \116\ 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].
    \117\ See Bureau of Economic Analysis, Regional Multipliers: A 
User Handbook for the Regional Input-Output Modeling System (RIMS 
II), U.S. Department of Commerce (1992).
---------------------------------------------------------------------------

    DOE estimated indirect national employment impacts for the standard 
levels considered in this final rule using an input/output model of the 
U.S. economy called Impact of Sector Energy Technologies version 3.1.1 
(ImSET).\118\ 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.
---------------------------------------------------------------------------

    \118\ 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: http://www.pnl.gov/main/publications/exbleternal/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 (through 2023), where these 
uncertainties are reduced. For more details on the employment impact 
analysis, see chapter 16 of the final rule TSD.

V. Analytical Results and Conclusions

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

A. Trial Standard Levels

    DOE analyzed the benefits and burdens of five TSLs for residential 
boilers for AFUE standards and three TSLs for standby mode and off mode 
standards. These TSLs were developed by combining specific efficiency 
levels for each of the product classes analyzed by DOE. DOE presents 
the results for the TSLs in this document, while the results for all 
efficiency levels that DOE analyzed are in the final rule TSD.
1. TSLs for AFUE Standards
    Table V.1 and Table V.2 present the TSLs and the corresponding 
product classes that DOE considered for residential boilers by 
efficiency levels and AFUE levels, respectively TSL 5 consists of the 
max-tech efficiency levels. TSL 4 consists of intermediate efficiency 
levels between the max-tech and TSL3, including the minimum condensing 
efficiency levels for hot water boiler product classes. TSL 3 consists 
of the efficiency levels that provide the highest NPV using a 7-percent 
discount rate (see section V.B.3 for NPV results)., and that also 
result in a higher percentage of consumers that receive an LCC benefit 
than experience an LCC loss (see section V.B.1 for LCC results). TSL 2 
consists of the intermediate efficiency levels. TSL 1 consists of the 
most common efficiency levels in the current market.

[[Page 2381]]



                  Table V.1--Trial Standard Levels for Residential Boilers by Efficiency Level
----------------------------------------------------------------------------------------------------------------
                                                               Trial Standard Levels
         Product class *         -------------------------------------------------------------------------------
                                         1               2               3               4               5
----------------------------------------------------------------------------------------------------------------
Gas-Fired Hot Water Boiler......               1               1               2               4               6
Gas-Fired Steam Boiler..........               1               1               1               1               2
Oil-Fired Hot Water Boiler......               1               2               2               3               3
Oil-Fired Steam Boiler..........               1               1               2               3               3
----------------------------------------------------------------------------------------------------------------
*As discussed in section IV.A.1, although electric hot water and electric steam boilers are in the scope of this
  rulemaking, these products were not analyzed for AFUE energy conservation standards and accordingly are not
  shown in this table.


                        Table V.2--Trial Standard Levels for Residential Boilers by AFUE
----------------------------------------------------------------------------------------------------------------
                                                               Trial Standard Levels
         Product class *         -------------------------------------------------------------------------------
                                       1 (%)           2 (%)           3 (%)           4 (%)           5 (%)
----------------------------------------------------------------------------------------------------------------
Gas-Fired Hot Water Boiler......              83              83              84              90              96
Gas-Fired Steam Boiler..........              82              82              82              82              83
Oil-Fired Hot Water Boiler......              85              86              86              91              91
Oil-Fired Steam Boiler..........              84              84              85              86              86
----------------------------------------------------------------------------------------------------------------
*As discussed in section IV.A.1, electric hot water and electric steam boilers were not analyzed for AFUE energy
  conservation standards and accordingly are not shown in this table.

2. TSLs for Standby Mode and Off Mode Standards
    Table V.3 presents the TSLs and the corresponding product class 
efficiency levels (by efficiency level) that DOE considered for boiler 
standby mode and off mode power consumption. Table V.4 presents the 
three TSLs and the corresponding product class efficiency levels 
(expressed in watts) that DOE considered for boiler standby mode and 
off mode power consumption. TSL 3 consists of efficiency levels that 
utilize the technology option Switching Mode Power Supply with Low-Loss 
Transformer (LLTX). TSL 2 consists of efficiency levels that utilize 
the technology option Switching Mode Power Supply. TSL 1 consists of 
efficiency levels that utilize the technology option Linear Power 
Supply with LLTX.

     Table V.3--Standby Mode and Off Mode Trial Standard Levels for Residential Boilers by Efficiency Level
----------------------------------------------------------------------------------------------------------------
                                                                               Trial Standard Levels
                          Product class                          -----------------------------------------------
                                                                         1               2               3
----------------------------------------------------------------------------------------------------------------
Gas-Fired Hot Water Boiler......................................               1               2               3
Gas-Fired Steam Boiler..........................................               1               2               3
Oil-Fired Hot Water Boiler......................................               1               2               3
Oil-Fired Steam Boiler..........................................               1               2               3
Electric Hot Water Boiler.......................................               1               2               3
Electric Steam Boiler...........................................               1               2               3
----------------------------------------------------------------------------------------------------------------


           Table V.4--Standby Mode and Off Mode Trial Standard Levels for Residential Boilers by Watts
----------------------------------------------------------------------------------------------------------------
                                                                               Trial Standard Levels
                          Product class                          -----------------------------------------------
                                                                         1               2               3
----------------------------------------------------------------------------------------------------------------
Gas-Fired Hot Water Boiler......................................            10.0             9.7             9.0
Gas-Fired Steam Boiler..........................................             9.0             8.7             8.0
Oil-Fired Hot Water Boiler......................................            12.0            11.7            11.0
Oil-Fired Steam Boiler..........................................            12.0            11.7            11.0
Electric Hot Water Boiler.......................................             9.0             8.7             8.0
Electric Steam Boiler...........................................             9.0             8.7             8.0
----------------------------------------------------------------------------------------------------------------

B. Economic Justification and Energy Savings

1. Economic Impacts on Individual Consumers
    DOE analyzed the economic impacts on residential boilers 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 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 price increases and (2) annual operating costs 
decrease. Inputs used for calculating the LCC and PBP include total 
installed costs (i.e., product price

[[Page 2382]]

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 final rule TSD provides detailed information on 
the LCC and PBP analyses.
    Table V.5 through Table V.12 show the LCC and PBP results for the 
AFUE TSLs considered for each product class. 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 notice). Because some consumers 
purchase products with higher efficiency in the no-new-standards case, 
the average savings are less than the difference between the average 
LCC of the baseline product and the average LCC at each TSL. The 
savings refer only to consumers who are affected by a standard at a 
given TSL. Those who already purchase a product with efficiency at or 
above a given TSL are not affected. Consumers for whom the LCC 
increases at a given TSL experience a net cost.

                                 Table V.5--Average LCC and PBP Results for Gas-Fired Hot Water Boilers: AFUE Standards
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                              Average costs  (2014$)
                                                         ----------------------------------------------------------------     Simple          Average
                   TSL                       AFUE  (%)         Total       First year's      Lifetime                         payback        lifetime
                                                          installed cost  operating cost  operating cost        LCC           (years)         (years)
--------------------------------------------------------------------------------------------------------------------------------------------------------
1.......................................              83          $6,387          $1,211         $22,468         $28,854             1.2            26.6
2.......................................              83           6,387           1,211          22,468          28,854             1.2            26.6
3.......................................              84           6,402           1,198          22,235          28,638             1.2            26.6
4.......................................              90           7,255           1,119          20,761          28,016             8.4            26.6
5.......................................              96           8,295           1,061          19,700          27,995            11.8            26.6
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note: The results for each TSL are calculated assuming that all consumers use products at that efficiency level. The PBP is measured relative to the
  baseline (EL 0) product.


   Table V.6--Average LCC Savings Relative to the No-New-Standards Case for Gas-Fired Hot Water Boilers: AFUE
                                                    Standards
----------------------------------------------------------------------------------------------------------------
                                                                                    Life-cycle cost savings
                                                                             -----------------------------------
                            TSL                                 AFUE  (%)      % of consumers
                                                                               that experience   Average savings
                                                                                  net cost         *  (2014$)
----------------------------------------------------------------------------------------------------------------
1.........................................................                83               0.3              $210
2.........................................................                83               0.3               210
3.........................................................                84               0.4               364
4.........................................................                90              21.9               632
5.........................................................                96              55.5               303
----------------------------------------------------------------------------------------------------------------
* The savings represent the average LCC for affected consumers.


                                   Table V.7--Average LCC and PBP Results for Gas-Fired Steam Boilers: AFUE Standards
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                               Average costs (2014$)
                                                         ---------------------------------------------------------------- Simple payback      Average
                   TSL                       AFUE  (%)         Total       First year's      Lifetime                         (years)        lifetime
                                                          installed cost  operating cost  operating cost        LCC                           (years)
--------------------------------------------------------------------------------------------------------------------------------------------------------
1.......................................              82          $6,376          $1,063         $17,857         $24,234             2.7            23.6
2.......................................              82           6,376           1,063          17,857          24,234             2.7            23.6
3.......................................              82           6,376           1,063          17,857          24,234             2.7            23.6
4.......................................              82           6,376           1,063          17,857          24,234             2.7            23.6
5.......................................              83           6,682           1,052          17,672          24,355            10.7            23.6
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note: The results for each TSL are calculated assuming that all consumers use products at that efficiency level. The PBP is measured relative to the
  baseline (EL 0) product.


Table V.8--Average LCC Savings Relative to the No-New-Standards Case for Gas-Fired Steam Boilers: AFUE Standards
----------------------------------------------------------------------------------------------------------------
                                                                                    Life-cycle cost savings
                                                                             -----------------------------------
                            TSL                                 AFUE  (%)      % of consumers
                                                                               that experience   Average savings
                                                                                  net cost         *  (2014$)
----------------------------------------------------------------------------------------------------------------
1.........................................................                82               0.9              $333
2.........................................................                82               0.9               333
3.........................................................                82               0.9               333
4.........................................................                82               0.9               333

[[Page 2383]]

 
5.........................................................                83              30.8               207
----------------------------------------------------------------------------------------------------------------
* The savings represent the average LCC for affected consumers.


                                 Table V.9--Average LCC and PBP Results for Oil-Fired Hot Water Boilers: AFUE Standards
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                               Average costs (2014$)
                                                         ---------------------------------------------------------------- Simple payback      Average
                   TSL                       AFUE (%)          Total       First year's      Lifetime                         (years)        lifetime
                                                          installed cost  operating cost  operating cost        LCC                           (years)
--------------------------------------------------------------------------------------------------------------------------------------------------------
1.......................................              85          $8,200          $1,999         $38,553         $46,753             6.9            24.7
2.......................................              86           8,351           1,969          37,962          46,313             5.8            24.7
3.......................................              86           8,351           1,969          37,962          46,313             5.8            24.7
4.......................................              91          10,691           1,861          35,842          46,534            16.5            24.7
5.......................................              91          10,691           1,861          35,842          46,534            16.5            24.7
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note: The results for each TSL are calculated assuming that all consumers use products at that efficiency level. The PBP is measured relative to the
  baseline (EL 0) product.


   Table V.10--Average LCC Savings Relative to the No-New-Standards Case for Oil-Fired Hot Water Boilers: AFUE
                                                    Standards
----------------------------------------------------------------------------------------------------------------
                                                                                    Life-cycle cost savings
                                                                             -----------------------------------
                            TSL                                 AFUE  (%)      % of consumers
                                                                               that experience   Average savings
                                                                                  net cost          * (2014$)
----------------------------------------------------------------------------------------------------------------
1.........................................................                85              10.4              $260
2.........................................................                86               8.8               626
3.........................................................                86               8.8               626
4.........................................................                91              58.9               192
5.........................................................                91              58.9               192
----------------------------------------------------------------------------------------------------------------
* The savings represent the average LCC for affected consumers.


                                   Table V.11--Average LCC and PBP Results for Oil-Fired Steam Boilers: AFUE Standards
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                               Average costs (2014$)
                                                         ---------------------------------------------------------------- Simple payback      Average
                   TSL                       AFUE (%)          Total       First year's      Lifetime                         (years)        lifetime
                                                          installed cost  operating cost  operating cost        LCC                           (years)
--------------------------------------------------------------------------------------------------------------------------------------------------------
1.......................................              84          $8,189          $1,928         $29,558         $37,747             6.6            19.3
2.......................................              84           8,189           1,928          29,558          37,747             6.6            19.3
3.......................................              85           8,341           1,906          29,219          37,560             6.7            19.3
4.......................................              86           8,644           1,876          28,760          37,404             7.8            19.3
5.......................................              86           8,644           1,876          28,760          37,404             7.8            19.3
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note: The results for each TSL are calculated assuming that all consumers use products at that efficiency level. The PBP is measured relative to the
  baseline (EL 0) product.


     Table V.12--Average LCC Savings Relative to the No-New-Standards Case for Oil-Fired Steam Boilers: AFUE
                                                    Standards
----------------------------------------------------------------------------------------------------------------
                                                                                    Life-cycle cost savings
                                                                             -----------------------------------
                                                                                 Percent of
                            TSL                                 AFUE (%)       consumers that    Average savings
                                                                               experience net       * (2014$)
                                                                                    cost
----------------------------------------------------------------------------------------------------------------
1.........................................................                84              11.9              $400
2.........................................................                84              11.9               400
3.........................................................                85              19.7               434
4.........................................................                86              34.2               505

[[Page 2384]]

 
5.........................................................                86              34.2               505
----------------------------------------------------------------------------------------------------------------
* The savings represent the average LCC for affected consumers.

    Table V.13 through Table V.24 show the key LCC and PBP results for 
each product class for standby mode and off mode.

                      Table V.13--Average LCC and PBP Results for Gas-Fired Hot Water Boilers: Standby Mode and Off Mode Standards
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                               Average costs (2014$)
                                                         ---------------------------------------------------------------- Simple payback      Average
                           TSL                                             First year's      Lifetime                         (years)        lifetime
                                                          Installed cost  operating cost  operating cost        LCC                           (years)
--------------------------------------------------------------------------------------------------------------------------------------------------------
1.......................................................             $32             $12            $225            $257             2.0            26.6
2.......................................................              49              12             218             267             8.9            26.6
3.......................................................              50              11             202             251             6.7            26.6
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note: The results for each TSL are calculated assuming that all consumers use products at that efficiency level. The PBP is measured relative to the
  baseline (EL 0) product.


  Table V.14--Average LCC Savings Relative to the No-New-Standards Case
  for Gas-Fired Hot Water Boilers: Standby Mode and Off Mode Standards
------------------------------------------------------------------------
                                            Life-cycle cost savings
                                     -----------------------------------
                                         Percent of
                 TSL                   consumers that    Average savings
                                       experience net      *  (2014$)
                                            cost
------------------------------------------------------------------------
1...................................               0.0               $26
2...................................               3.7                 2
3...................................               1.8                15
------------------------------------------------------------------------
* The savings represent the average LCC for affected consumers.


                        Table V.15--Average LCC and PBP Results for Gas-Fired Steam Boilers: Standby Mode and Off Mode Standards
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                               Average costs (2014$)
                                                         ---------------------------------------------------------------- Simple payback      Average
                           TSL                                             First year's      Lifetime                         (years)        lifetime
                                                          Installed cost  operating cost  operating cost        LCC                           (years)
--------------------------------------------------------------------------------------------------------------------------------------------------------
1.......................................................             $31             $12            $194            $226             1.9            23.6
2.......................................................              48              11             188             236             8.5            23.6
3.......................................................              49              10             172             221             6.4            23.6
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note: The results for each TSL are calculated assuming that all consumers use products at that efficiency level. The PBP is measured relative to the
  baseline (EL 0) product.


  Table V.16--Average LCC Savings Relative to the No-New-Standards Case
    for Gas-Fired Steam Boilers: Standby Mode and Off Mode Standards
------------------------------------------------------------------------
                                            Life-cycle cost savings
                                     -----------------------------------
                                         Percent of
                 TSL                   consumers that    Average savings
                                       experience net       * (2014$)
                                            cost
------------------------------------------------------------------------
1...................................               0.0               $31
2...................................               1.3                 4

[[Page 2385]]

 
3...................................               0.5                18
------------------------------------------------------------------------
* The savings represent the average LCC for affected consumers.


                      Table V.17--Average LCC and PBP Results for Oil-Fired Hot Water Boilers: Standby Mode and Off Mode Standards
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                               Average costs (2014$)
                                                         ---------------------------------------------------------------- Simple payback      Average
                           TSL                                             First year's      Lifetime                         (years)        lifetime
                                                          Installed cost  operating cost  operating cost        LCC                           (years)
--------------------------------------------------------------------------------------------------------------------------------------------------------
1.......................................................             $31             $16            $281            $313             1.8            24.7
2.......................................................              48              16             274             322             8.2            24.7
3.......................................................              49              15             258             307             6.2            24.7
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note: The results for each TSL are calculated assuming that all consumers use products at that efficiency level. The PBP is measured relative to the
  baseline (EL 0) product.


  Table V.18--Average LCC Savings Relative to the No-New-Standards Case
  for Oil-Fired Hot Water Boilers: Standby Mode and Off Mode Standards
------------------------------------------------------------------------
                                            Life-cycle cost savings
                                     -----------------------------------
                                         Percent of
                 TSL                   consumers that    Average savings
                                       experience net       * (2014$)
                                            cost
------------------------------------------------------------------------
1...................................               0.0               $32
2...................................               3.5                 6
3...................................               1.4                20
------------------------------------------------------------------------
* The savings represent the average LCC for affected consumers.


                        Table V.19--Average LCC and PBP Results for Oil-Fired Steam Boilers: Standby Mode and Off Mode Standards
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                               Average costs (2014)
                                                         ---------------------------------------------------------------- Simple payback      Average
                           TSL                                             First year's      Lifetime                         (years)        lifetime
                                                          Installed cost  operating cost  operating cost        LCC                           (years)
--------------------------------------------------------------------------------------------------------------------------------------------------------
1.......................................................             $31             $17            $236            $268             1.8            19.3
2.......................................................              48              16             230             278             8.0            19.3
3.......................................................              49              15             216             265             6.1            19.3
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note: The results for each TSL are calculated assuming that all consumers use products at that efficiency level. The PBP is measured relative to the
  baseline (EL 0) product.


  Table V.20--Average LCC Savings Relative to the No-New-Standards Case
               for Oil-Fired Steam Boilers: AFUE Standards
------------------------------------------------------------------------
                                            Life-cycle cost savings
                                     -----------------------------------
                                         Percent of
                 TSL                   consumers that    Average savings
                                       experience net       * (2014$)
                                            cost
------------------------------------------------------------------------
1...................................               0.0               $26
2...................................               1.3               0.4
3...................................               0.6                13
------------------------------------------------------------------------
* The savings represent the average LCC for affected consumers.


[[Page 2386]]


                       Table V.21--Average LCC and PBP Results for Electric Hot Water Boilers: Standby Mode and Off Mode Standards
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                               Average costs (2014$)
                                                         ---------------------------------------------------------------- Simple payback      Average
                           TSL                                             First year's      Lifetime                         (years)        lifetime
                                                          Installed cost  operating cost  operating cost        LCC                           (years)
--------------------------------------------------------------------------------------------------------------------------------------------------------
1.......................................................             $31              $8            $145            $176             2.6            26.6
2.......................................................              47               8             141             188            11.7            26.6
3.......................................................              48               7             129             177             8.9            26.6
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note:The results for each TSL are calculated assuming that all consumers use products at that efficiency level. The PBP is measured relative to the
  baseline (EL 0) product.


  Table V.22--Average LCC Savings Relative to the No-New-Standards Case
   for Electric Hot Water Boilers: Standby Mode and Off Mode Standards
------------------------------------------------------------------------
                                            Life-cycle cost savings
                                     -----------------------------------
                                         Percent of
                 TSL                   consumers that    Average savings
                                       experience net       * (2014$)
                                            cost
------------------------------------------------------------------------
1...................................               0.0               $19
2...................................               1.5               (3)
3...................................               1.0                 8
------------------------------------------------------------------------
* The savings represent the average LCC for affected consumers.
Note: Parentheses indicate negative values.


                         Table V.23--Average LCC and PBP Results for Electric Steam Boilers: Standby Mode and Off Mode Standards
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                               Average costs (2014$)
                                                         ---------------------------------------------------------------- Simple payback      Average
                           TSL                                             First year's      Lifetime                         (years)        lifetime
                                                          Installed cost  operating cost  operating cost        LCC                           (years)
--------------------------------------------------------------------------------------------------------------------------------------------------------
1.......................................................             $31              $9            $133            $164             2.6            23.6
2.......................................................              47               8             129             176            11.7            23.6
3.......................................................              48               8             118             166             8.8            23.6
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note: The results for each TSL are calculated assuming that all consumers use products at that efficiency level. The PBP is measured relative to the
  baseline (EL 0) product.


  Table V.24--Average LCC Savings Relative to the No-New-Standards Case
     for Electric Steam Boilers: Standby Mode and Off Mode Standards
------------------------------------------------------------------------
                                            Life-cycle cost savings
                                     -----------------------------------
                                         Percent of
                 TSL                   consumers that    Average savings
                                       experience net       * (2014$)
                                            cost
------------------------------------------------------------------------
1...................................                 0               $17
2...................................               1.5               (5)
3...................................               1.0                 6
------------------------------------------------------------------------
* The savings represent the average LCC for affected consumers.
Note: Parentheses indicate negative values.

b. Consumer Subgroup Analysis
    In the consumer subgroup analysis, DOE estimated the impact of the 
considered AFUE TSLs on low-income households and senior-only 
households. Table V.25 through Table V.28 compare the average LCC 
savings and simple PBPs at each efficiency level for the two consumer 
subgroups, along with the average LCC savings for the entire sample. 
Chapter 11 of the final rule TSD presents the complete LCC and PBP 
results for the subgroups, as well as the standby mode and off mode 
standards results.

[[Page 2387]]



                Table V.25.--Comparison of Impacts for Consumer Subgroups with All Consumers, Gas-Fired Hot Water Boilers: AFUE Standards
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                 Average life-                                Simple payback period  (years)
                                                  cycle cost   --------------------------------------------------------------------------------------------
                      TSL                           savings                                                                                         All
                                                    (2014$)       Senior-only     Low-income    All households    Senior-only     Low-income    households
---------------------------------------------------------------------------------------------------------------------------------------------- ------------
1.............................................            $172            $161            $210             1.3             1.5             1.2
2.............................................             172             161             210             1.3             1.5             1.2
3.............................................             292             275             364             1.3             1.5             1.2
4.............................................             345            (89)             632             8.6            15.6             8.4
5.............................................              67           (200)             303            12.4            18.2            11.8
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note: Parentheses indicate negative values.


                  Table V.26--Comparison of Impacts for Consumer Subgroups With All Consumers, Gas-Fired Steam Boilers: AFUE Standards
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                             Average life-cycle cost savings  (2014$)             Simple payback period  (years)
                           TSL                           -----------------------------------------------------------------------------------------------
                                                            Senior-only     Low-income    All households    Senior-only     Low-income    All households
--------------------------------------------------------------------------------------------------------------------------------------------------------
1.......................................................            $306            $265            $333             3.2             2.9             2.7
2.......................................................             306             265             333             3.2             2.9             2.7
3.......................................................             306             265             333             3.2             2.9             2.7
4.......................................................             306             265             333             3.2             2.9             2.7
5.......................................................             124             116             207            12.0            12.7            10.7
--------------------------------------------------------------------------------------------------------------------------------------------------------


                Table V.27--Comparison of Impacts for Consumer Subgroups With All Consumers, Oil-Fired Hot Water Boilers: AFUE Standards
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                              Average life-cycle cost savings (2014$)              Simple payback period (years)
                           TSL                           -----------------------------------------------------------------------------------------------
                                                            Senior-only     Low-income    All households    Senior-only     Low-income    All households
--------------------------------------------------------------------------------------------------------------------------------------------------------
1.......................................................            $282             $82            $260             6.5            10.6             6.9
2.......................................................             690             292             626             5.4             8.6             5.8
3.......................................................             690             292             626             5.4             8.6             5.8
4.......................................................             144         (1,260)             192            16.4            30.6            16.5
5.......................................................             144         (1,260)             192            16.4            30.6            16.5
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note: Parentheses indicate negative values.


                  Table V.28--Comparison of Impacts for Consumer Subgroups With All Consumers, Oil-Fired Steam Boilers: AFUE Standards
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                              Average life-cycle cost savings (2014$)              Simple payback period (years)
                           TSL                           -----------------------------------------------------------------------------------------------
                                                            Senior-only     Low-income    All households    Senior-only     Low-income    All households
--------------------------------------------------------------------------------------------------------------------------------------------------------
1.......................................................            $425            $138            $400             6.3            10.4             6.6
2.......................................................             425             138             400             6.3            10.4             6.6
3.......................................................             465             141             434             6.4            10.5             6.7
4.......................................................             543              96             505             7.4            12.2             7.8
5.......................................................             543              96             505             7.4            12.2             7.8
--------------------------------------------------------------------------------------------------------------------------------------------------------

c. Rebuttable Presumption Payback Period
    As discussed in section III.E.2, EPCA establishes a rebuttable 
presumption that an energy conservation standard is economically 
justified if the increased purchase cost for a product that meets the 
standard is less than three times the value of the first-year energy 
savings resulting from the standard. In calculating a rebuttable 
presumption payback period for each of the considered TSLs, DOE used 
discrete values, and, as required by EPCA, based the energy use 
calculation on the DOE test procedures for residential boilers. In 
contrast, the PBPs presented in section V.B.1.a were calculated using 
distributions that reflect the range of energy use in the field.
    Table V.29 presents the rebuttable-presumption PBPs for the 
considered AFUE TSLs for the residential boilers product classes. Table 
V.30 shows the rebuttable-presumption PBPs for the considered standby 
mode and off mode TSLs for the residential boilers product classes. 
While DOE examined the rebuttable-presumption criterion, it considered 
whether the standard levels considered for this rule are economically 
justified through a more detailed analysis of the economic impacts of 
those levels, pursuant to 42 U.S.C. 6295(o)(2)(B)(i), that considers 
the full range of impacts to the

[[Page 2388]]

consumer, manufacturer, Nation, and environment. The results of that 
analysis serve as the basis for DOE to definitively evaluate the 
economic justification for a potential standard level, thereby 
supporting or rebutting the results of any preliminary determination of 
economic justification.

           Table V.29--Rebuttable-Presumption Payback Periods for Residential Boilers: AFUE Standards
----------------------------------------------------------------------------------------------------------------
                                                   Gas-fired hot     Gas-fired     Oil-fired hot     Oil-fired
                       TSL                         water boiler    steam boiler    water boiler    steam boiler
----------------------------------------------------------------------------------------------------------------
1...............................................             1.6             2.7             7.9             6.0
2...............................................             1.6             2.7             7.0             6.0
3...............................................             1.7             2.7             7.0             6.7
4...............................................            11.3             2.7            16.7             8.3
5...............................................            15.5            11.5            16.7             8.3
----------------------------------------------------------------------------------------------------------------


        Table V.30--Standby Mode and Off Mode Rebuttable-Presumption Payback Periods for Residential Boilers: Standby Mode and Off Mode Standards
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                           Gas-fired hot     Gas-fired     Oil-fired hot     Oil-fired     Electric hot   Electric steam
                           TSL                             water boiler    steam boiler    water boiler    steam boiler    water boiler       boiler
--------------------------------------------------------------------------------------------------------------------------------------------------------
1.......................................................             3.5             3.5             3.4             3.5             3.0             2.7
2.......................................................            15.7            15.7            15.4            15.5            13.6            13.5
3.......................................................            11.9            11.9            11.7            11.7            10.3            10.2
--------------------------------------------------------------------------------------------------------------------------------------------------------

2. Economic Impacts on Manufacturers
    DOE performed an MIA to estimate the impact of amended energy 
conservation standards on manufacturers of residential boilers. The 
section below describes the expected impacts on manufacturers at each 
considered TSL. DOE first discusses the impacts of potential AFUE 
standards and then turns to the impacts of potential standby mode and 
off mode standards. Chapter 12 of the final rule TSD explains the 
analysis in further detail.
a. Industry Cash-Flow Analysis Results
Cash-Flow Analysis Results for Residential Boilers AFUE Standards
    Table V.31 and Table V.32 depict the estimated financial impacts 
(represented by changes in INPV) of amended energy conservation 
standards on manufacturers of residential boilers, 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 residential boiler industry, DOE modeled two different markup 
scenarios using different assumptions that correspond to the range of 
anticipated market responses to amended energy conservation standards: 
(1) The preservation of gross margin percentage scenario; and (2) the 
preservation of per-unit operating profit scenario. Each of these 
scenarios is discussed immediately below.
    To assess the lower (less severe) end of the range of potential 
impacts, DOE modeled a preservation of gross margin percentage markup 
scenario, in which a uniform ``gross margin percentage'' markup is 
applied across all potential efficiency levels. In this scenario, DOE 
assumed that a manufacturer's absolute dollar markup would increase as 
production costs increase in the standards case.
    To assess the higher (more severe) end of the range of potential 
impacts, DOE modeled the preservation of per-unit operating profit 
markup scenario, which assumes that manufacturers would not be able to 
generate greater operating profit on a per-unit basis in the standards 
case as compared to the no-new-standards case. Rather, as manufacturers 
make the necessary investments required to convert their facilities to 
produce new standards-compliant products and incur higher costs of 
goods sold, their percentage markup decreases. Operating profit does 
not change in absolute dollars and decreases as a percentage of 
revenue.
    As noted in the MIA methodology discussion (see IV.J.2), in 
addition to markup scenarios, the MPC, shipments, and conversion cost 
assumptions also affect INPV results.
    The results in Table V.31 and Table V.32 show potential INPV 
impacts for residential boiler manufacturers; Table V.31 reflects the 
lower bound of impacts, and Table V.32 represents the upper bound of 
impacts.
    Each of the modeled scenarios in the AFUE standards analysis 
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 2014 through 2050, the end of the analysis period.
    To provide perspective on the short-run cash-flow impact, DOE 
discusses the change in 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. These figures provide an understanding of 
the magnitude of the required conversion costs at each TSL relative to 
the cash flow generated by the industry in the no-new-standards case.

     Table V.31--Manufacturer Impact Analysis for Residential Boilers for AFUE Standards--Preservation of Gross Margin Percentage Markup Scenario *
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                       Trial Standard Level
                                               Units          No-new-    -------------------------------------------------------------------------------
                                                          standards case         1               2               3               4               5
--------------------------------------------------------------------------------------------------------------------------------------------------------
INPV....................................  2014$ millions          367.83          367.50          368.69          369.45          349.47          366.71

[[Page 2389]]

 
Change in INPV..........................  2014$ millions  ..............          (0.33)            0.86            1.62         (18.35)          (1.12)
                                                       %  ..............          (0.09)            0.24            0.44          (4.99)          (0.30)
Product Conversion Costs................  2014$ millions  ..............            1.34            1.60            1.66           24.53           37.19
Capital Conversion Costs................  2014$ millions  ..............  ..............            0.43            0.61           61.10           69.52
Total Conversion Costs..................  2014$ millions  ..............            1.34            2.03            2.27           85.63          106.71
Free Cash Flow (no-new-standards case =   2014$ millions           26.42           26.01           25.74           25.64          (8.43)         (16.02)
 2019)..................................
Change in Free Cash Flow (change from no- 2014$ millions  ..............           (0.4)           (0.7)           (0.8)          (34.9)          (42.4)
 new-standards case)....................               %  ..............          (1.52)          (2.55)          (2.92)        (131.93)        (160.65)
--------------------------------------------------------------------------------------------------------------------------------------------------------
* Parentheses indicate negative values.


    Table V.32--Manufacturer Impact Analysis for Residential Boilers for AFUE Standards--Preservation of Per-Unit Operating Profit Markup Scenario *
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                       Trial Standard Level
                                               Units          No-new-    -------------------------------------------------------------------------------
                                                          standards case         1               2               3               4               5
--------------------------------------------------------------------------------------------------------------------------------------------------------
INPV....................................  2014$ millions          367.83          365.70          364.94          365.20          284.21          225.88
Change in INPV..........................  2014$ millions  ..............          (2.12)          (2.89)          (2.63)         (83.61)        (141.95)
                                                       %  ..............          (0.58)          (0.79)          (0.71)         (22.73)         (38.59)
Product Conversion Costs................  2014$ millions  ..............            1.34            1.60            1.66           24.53           37.19
Capital Conversion Costs................  2014$ millions  ..............  ..............            0.43            0.61           61.10           69.52
Total Conversion Costs..................  2014$ millions  ..............            1.34            2.03            2.27           85.63          106.71
Free Cash Flow (no-new-standards case =   2014$ millions           26.42           26.01           25.74           25.64          (8.43)         (16.02)
 2019)..................................
Change in Free Cash Flow (change from     2014$ millions  ..............           (0.4)           (0.7)           (0.8)          (34.9)          (42.4)
 the no-new-standards case).............               %  ..............          (1.52)          (2.55)          (2.92)        (131.93)        (160.65)
--------------------------------------------------------------------------------------------------------------------------------------------------------
* Parentheses indicate negative values.

    TSL 1 represents EL 1 for all product classes. At TSL 1, DOE 
estimates impacts on INPV for residential boiler manufacturers to range 
from -0.58 percent to -0.09 percent, or a change in INPV of -$2.12 
million to -$0.33 million. At this potential standard level, industry 
free cash flow would be estimated to decrease by approximately 1.52 
percent to $26.01 million, compared to the no-new-standards case value 
of $26.42 million in 2020, the year before the compliance date.
    At TSL 1, DOE does not anticipate manufacturers would lose a 
significant portion of their INPV. This is largely due to the fact that 
the vast majority of shipments would already meet or exceed the 
efficiency levels prescribed at TSL 1. Today, approximately 85 percent 
of residential boiler product listings would meet or exceed the 
efficiency levels at TSL 1. DOE expects residential boiler 
manufacturers to incur $1.34 million in product conversion costs for 
boiler redesign and testing. DOE does not expect the modest efficiency 
gains at this TSL to require any major product upgrades or capital 
investments.
    At TSL 1, under the preservation of gross margin percentage 
scenario, the shipment-weighted average MPC increases by approximately 
1 percent relative to the no-new-standards case MPC. Manufacturers are 
able to fully pass on this cost increase to consumers by design in this 
markup scenario. This slight price increase would not mitigate the 
$1.34 million in conversion costs estimated at TSL 1, resulting in 
slightly negative INPV impacts at TSL 1 under the this scenario.
    Under the preservation of per-unit operating profit markup 
scenario, manufacturers earn the same operating profit as would be 
earned in the no-new-standards case, but do not earn additional profit 
from their investments. The 1-percent MPC increase is outweighed by a 
slightly lower average markup and $1.34 million in conversion costs, 
resulting in small negative impacts at TSL 1.
    TSL 2 sets the efficiency level at EL 1 for three product classes 
(gas-fired steam boilers, gas-fired hot water boilers, and oil-fired 
steam boilers) and EL 2 for one product classes (oil-fired hot water 
boilers). At TSL 2, DOE estimates impacts on INPV for residential 
boiler manufacturers to range

[[Page 2390]]

from -0.79 percent to 0.24 percent, or a change in INPV of -$2.89 
million to $0.86 million. At this potential standard level, industry 
free cash flow would be estimated to decrease by approximately 2.55 
percent to $25.74 million, compared to the no-new-standards case value 
of $26.42 million in 2020, the year before the compliance date.
    DOE does not anticipate manufacturers would lose a substantial 
portion of their INPV, because a large percentage of shipments would 
still meet or exceed the efficiency levels prescribed at this TSL. At 
TSL 2, DOE estimates that today, 74 percent of residential boiler 
product listings would meet or exceed the efficiency levels analyzed. 
The drop in the percentage of compliant products is due to the fact 
that the oil-fired hot water product class would move to EL 2. The non-
compliant products would not have a large impact on INPV because oil-
fired boilers would only comprise approximately 30 percent of 
residential boiler shipments in 2021 according to DOE projections, 
while gas-fired boilers would comprise over 70 percent of shipments.
    DOE expects conversion costs would increase, but would still remain 
small compared to total industry value, as most manufacturers have gas-
fired boilers at the prescribed efficiency levels on the market and 
would only have to make minor changes to their production processes. 
While the percentage of oil-fired boilers at these efficiency levels on 
the market is lower, manufacturers did not cite any major investments 
that would have to be made to reach the efficiency levels at EL 2 for 
oil-fired hot water products. Manufacturers also pointed out that gas-
fired boiler shipments vastly out-pace oil-fired boiler shipments and 
that the market is continuing to trend towards gas-fired products. 
Overall, DOE estimates manufacturers would incur $1.60 million in 
product conversion costs for product redesign and testing and $0.43 
million in capital conversion costs to make minor changes to their 
production lines.
    At TSL 2, under the preservation of gross margin percentage 
scenario, the shipment-weighted average MPC increases by 2 percent 
relative to the no-new-standards case MPC. In this scenario, INPV 
impacts are slightly positive because of manufacturers' ability to pass 
the higher production costs to consumers outweighs the $2.03 million in 
total conversion costs. Under the preservation of per-unit operating 
profit markup scenario, the 2-percent MPC increase is outweighed by a 
slightly lower average markup and $2.03 million in total conversion 
costs, resulting in minimally negative impacts at TSL 2.
    TSL 3 represents EL 1 for one product class (gas-fired steam 
boilers) and EL 2 for three product classes (oil-fired hot water 
boilers, gas-fired hot water boilers, and oil-fired steam boilers). At 
TSL 3, DOE estimates impacts on INPV for residential boiler 
manufacturers to range from -0.71 percent to 0.44 percent, or a change 
in INPV of -$2.63 million to $1.62 million. At this potential standard 
level, industry free cash flow would be estimated to decrease by 
approximately 2.92 percent in 2020, the year before compliance, to 
$25.64 million compared to the no-new-standards case value of $26.42 
million.
    While more significant than the impacts at TSL 2, the impacts on 
INPV at TSL 3 would still be relatively minor compared to the total 
industry value. Percentage impacts on INPV would be slightly positive 
to slightly negative at TSL 3. DOE does not anticipate that 
manufacturers would lose a significant portion of their INPV at this 
TSL. While less than the previous TSLs, today, 63 percent of product 
listings already meet or exceed the efficiency levels prescribed at TSL 
3. DOE expects conversion costs to remain small at TSL 3 compared to 
the total industry value. DOE estimates that product conversion costs 
would increase as manufacturers would have to redesign a larger 
percentage of their offerings and may have to design new products to 
replace lower-efficiency commodity products. At this TSL, DOE estimates 
that residential boiler manufacturers would incur $1.66 million in 
product conversion costs. Manufacturers, however, did not cite any 
major changes that would need to be made to production equipment to 
achieve the efficiency levels at this TSL. DOE, therefore, estimates 
that capital conversion costs would remain relatively low at $0.61 
million for the industry.
    At TSL 3, under the preservation of gross margin percentage markup 
scenario, the shipment-weighted average MPC increases by 2 percent 
relative to the no-new-standards case MPC. In this scenario, INPV 
impacts are slightly positive because manufacturers' ability to pass 
the higher production costs to consumers outweighs the $2.27 million in 
total conversion costs. Under the preservation of per-unit operating 
profit markup scenario, the 2 percent MPC increase is slightly 
outweighed by a slightly lower average markup and $2.27 million in 
total conversion costs, resulting in minimally negative to minimally 
positive impacts at TSL 3.
    TSL 4 represents EL 1 for one product class (gas-fired steam 
boilers), EL 3 for two product classes (oil-fired hot water boilers and 
oil-fired steam boilers), and EL 4 for one product class (gas-fired hot 
water boilers). At TSL 4, DOE estimates impacts on INPV for residential 
boiler manufacturers to range from -22.73 percent to -4.99 percent, or 
a change in INPV of -$83.61 million to -$18.35 million. At this 
potential standard level, industry free cash flow would be estimated to 
decrease by approximately 131.93 percent in the year before compliance 
(2020) to -$8.43 million relative to the no-new-standards case value of 
$26.42 million.
    Percentage impacts on INPV are moderately to significantly negative 
at TSL 4. Today, only 27 percent of residential boiler product listings 
would meet or exceed the efficiency levels at TSL 4. DOE expects that 
conversion costs would increase significantly at this TSL due to the 
fact that manufacturers would meet these efficiency levels by using 
condensing heat exchangers in their gas-fired and oil-fired hot water 
boiler products.\119\ Currently, the majority of gas-fired hot water 
boilers on the market is made from cast iron, carbon steel, or copper 
and contains noncondensing heat exchangers, because if these boilers 
were designed to condense, the acidic condensate from the flue gas 
would corrode these metals and cause the boiler to fail prematurely. If 
standards were set where manufacturers of gas-fired hot water boiler 
products could only meet the efficiency levels with condensing 
technology, companies that produce their own cast iron sections or 
their own carbon steel or copper heat exchangers would have to 
eliminate many of their commodity products, close foundries and casting 
facilities, and restructure their businesses. Domestic manufacturers 
who currently offer condensing products import their condensing heat 
exchangers (constructed from either stainless steel or aluminum) from 
Europe. DOE believes that if standards were set where manufacturers of 
gas-fired hot water boiler products could only meet the efficiency 
levels with condensing technology, some manufacturers may choose to 
develop their own condensing heat exchanger production capacity in 
order to gain a cost advantage and remain vertically integrated. This 
would

[[Page 2391]]

require large capital investments in higher-tech, more-automated 
production lines and new equipment to handle the different metals that 
are required. Companies that are currently heavily invested in lower-
efficiency products may not be able to make these investments and may 
choose to exit the market. As noted above, these companies also may 
choose to source condensing heat exchangers and assemble a product 
designed around the sourced part, rather than invest in their own heat 
exchanger production capacity. This strategy would remove a significant 
piece of the value chain for these companies.
---------------------------------------------------------------------------

    \119\ At these efficiency levels, manufacturers would also use a 
condensing heat exchanger for oil-fired hot water boiler products; 
however, these models are much less common, and DOE believes that 
the majority of the conversion costs at this TSL would be driven by 
gas-fired hot water boiler products.
---------------------------------------------------------------------------

    While condensing products and condensing technology are not 
entirely unfamiliar to the companies that already make condensing 
products domestically, most manufacturers in the residential boiler 
industry have relatively little experience in manufacturing the heat 
exchanger itself. If manufacturers choose to develop their own heat 
exchanger production capacity, a great deal of testing, prototyping, 
design, and manufacturing engineering resources will be required to 
design the heat exchanger and the more advanced control systems found 
in more-efficient products.
    These capital and production conversion expenses lead to the large 
reduction in cash flow in the years preceding the standard. DOE 
believes that only a few domestic manufacturers have the resources for 
this undertaking and believes that some large manufacturers and many 
smaller manufacturers would continue to source their heat exchangers. 
Ultimately, DOE estimates that manufacturers would incur $24.53 million 
in product conversion costs, as some manufacturers would be expected to 
attempt to add production capacity for condensing heat exchangers and 
others would have to design baseline products around a sourced 
condensing heat exchanger. In addition, DOE estimates that 
manufacturers would incur $61.10 million in capital conversion costs, 
which would be driven by capital investments in heat exchanger 
production lines.
    At TSL 4, under the preservation of gross margin percentage markup 
scenario, the shipment-weighted average MPC increases by approximately 
30 percent relative to the no-new-standards case MPC. In this scenario, 
INPV impacts are slightly negative because manufacturers' ability to 
pass the higher production costs to consumers is slightly outweighed by 
the $85.63 million in total conversion costs. Under the preservation of 
per-unit operating profit markup scenario, the 30-percent MPC increase 
is outweighed by a lower average markup of 1.39 (compared to 1.41 in 
the preservation of gross margin percentage markup scenario) and $85.63 
million in total conversion costs, resulting in significantly negative 
impacts at TSL 4.
    TSL 5 represents EL 2 for one product class (gas-fired steam 
boilers), EL 3 for two product classes (oil-fired hot water boilers and 
oil-fired steam boilers), and EL 6 for one product class (gas-fired hot 
water boilers). TSL 5 represents max-tech for all product classes. At 
TSL 5, DOE estimates impacts on INPV for residential boiler 
manufacturers to range from -38.59 percent to -0.30 percent, or a 
change in INPV of -$141.95 million to -$1.12 million. At this potential 
standard level, industry free cash flow would be estimated to decrease 
by approximately 160.65 percent in the year before compliance (2020) to 
-$16.02 million relative to the no-new-standards case value of $26.42 
million.
    At TSL 5, percentage impacts on INPV range from slightly negative 
to significantly negative. Today, only 4 percent of residential boiler 
product listings would already meet or exceed the efficiency levels 
prescribed at TSL 5. DOE expects conversion costs to continue to 
increase at TSL 5, as almost all products on the market would have to 
be redesigned and new products would have to be developed. As with TSL 
4, DOE believes that at these efficiency levels, some manufacturers 
would choose to develop their own condensing heat exchanger production, 
rather than continuing to source these components. DOE estimates that 
product conversion costs would increase to $37.19 million, as 
manufacturers would have to redesign a larger percentage of their 
offerings, implement complex control systems, and meet max-tech for all 
product classes. DOE estimates that manufacturers would incur $69.52 
million in capital conversion costs due to some manufacturers choosing 
to develop their own heat exchanger production and others having to 
increase the throughput of their existing condensing boiler production 
lines.
    At TSL 5, under the preservation of gross margin percentage markup 
scenario, the shipment-weighted average MPC increases by approximately 
61 percent relative to the no-new-standards case MPC. In this scenario, 
INPV impacts are negative because manufacturers' ability to pass the 
higher production costs to consumers is outweighed by the $106.71 
million in total conversion costs. Under the preservation of per-unit 
operating profit markup scenario, the 61-percent MPC increase is 
outweighed by a lower average markup of 1.36 and $106.71 million in 
total conversion costs, resulting in significantly negative impacts at 
TSL 5.
Cash-Flow Analysis Results for Residential Boilers Standby Mode and Off 
Mode Standards
    Standby mode and off mode standards results are presented in Table 
V.33 and Table V.34. The impacts of standby mode and off mode features 
were analyzed for the same product classes as the amended AFUE 
standards, but at different efficiency levels, which correspond to a 
different set of technology options for reducing standby mode and off 
mode energy consumption. Therefore, the TSLs in the standby mode and 
off mode analysis do not correspond to the TSLs in the AFUE analysis. 
Also, the electric boiler product classes were not analyzed in the GRIM 
for AFUE standards. As a result, quantitative numbers are also not 
available for the GRIM analyzing standby mode and off mode standards. 
However, the standby mode and off mode technology options considered 
for electric boilers are identical to the technology options for all 
other residential boiler product classes. Consequently, DOE expects the 
standby mode and off mode impacts on electric boilers to be of the same 
order of magnitude as the impacts on all other boiler product classes.
    The impacts of standby mode and off mode features were analyzed for 
the same two markup scenarios to represent the upper and lower bounds 
of industry impacts for residential boilers that were used in the AFUE 
analysis: (1) A preservation of gross margin percentage scenario; and 
(2) a preservation of per-unit operating profit scenario. As with the 
AFUE analysis, the preservation of gross margin percentage represents 
the lower bound of impacts, while the preservation of per-unit 
operating profit scenario represents the upper bound of impacts.
    Each of the modeled scenarios in the standby mode and off mode 
analyses 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 2014 through 2050, the end of 
the analysis period.
    To provide perspective on the short-run cash flow impact, DOE 
discusses

[[Page 2392]]

the change in 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. These figures provide an understanding of the magnitude of the 
required conversion costs at each TSL relative to the cash flow 
generated by the industry in the no-new-standards case.

   Table V.33--Manufacturer Impact Analysis for Residential Boilers for Standby Mode and Off Mode Standards--
                            Preservation of Gross Margin Percentage Markup Scenario *
----------------------------------------------------------------------------------------------------------------
                                                                               Trial Standard Level
                                      Units           No-new-    -----------------------------------------------
                                                  standards case         1               2               3
----------------------------------------------------------------------------------------------------------------
INPV..........................  2014$ millions..          367.83          367.73          367.74          368.28
Change in INPV................  2014$ millions..  ..............          (0.10)          (0.09)            0.45
                                %...............  ..............          (0.03)          (0.02)            0.12
Product Conversion Costs......  2014$ millions..  ..............            0.21            0.21            0.21
Capital Conversion Costs......  2014$ millions..
Total Conversion Costs........  2014$ millions..  ..............            0.21            0.21            0.21
Free Cash Flow (no-new-         2014$ millions..           26.42           26.35           26.35           26.35
 standards case = 2019).
Change in Free Cash Flow        2014$ millions..  ..............          (0.06)          (0.06)          (0.06)
 (change from no-new-standards
 case).
                                %...............  ..............          (0.24)          (0.24)          (0.24)
----------------------------------------------------------------------------------------------------------------
* Parentheses indicate negative values.


   Table V.34--Manufacturer Impact Analysis for Residential Boilers for Standby Mode and Off Mode Standards--
                           Preservation of Per-Unit Operating Profit Markup Scenario *
----------------------------------------------------------------------------------------------------------------
                                                                               Trial Standard Level
                                      Units           No-new-    -----------------------------------------------
                                                  standards case         1               2               3
----------------------------------------------------------------------------------------------------------------
INPV..........................  2014$ millions..          367.83          367.61          367.78          366.12
Change in INPV................  2014$ millions..  ..............          (0.22)          (0.04)          (1.71)
                                %...............  ..............          (0.06)          (0.01)          (0.46)
Product Conversion Costs......  2014$ millions..  ..............            0.21            0.21            0.21
Capital Conversion Costs......  2014$ millions..
Total Conversion Costs........  2014$ millions..  ..............            0.21            0.21            0.21
Free Cash Flow (no-new-         2014$ millions..           26.42           26.35           26.35           26.35
 standards case = 2019).
Decrease in Free Cash Flow      2014$ millions..  ..............          (0.06)          (0.06)          (0.06)
 (change from no-new-standards
 case).
                                %...............  ..............          (0.24)          (0.24)          (0.24)
----------------------------------------------------------------------------------------------------------------
* Parentheses indicate negative values.

    TSL 1 represents EL 1 for all product classes. At TSL 1, DOE 
estimates impacts on INPV for residential boiler manufacturers to 
decrease by less than one tenth of a percent in both markup scenarios, 
which corresponds to a change in INPV of -$0.22 million to -$0.10 
million. At this potential standard level, industry free cash flow is 
estimated to decrease by approximately 0.24 percent to $26.35 million, 
compared to the no-new-standards case value of $26.42 million in 2020, 
the year before the compliance date.
    At TSL 1, DOE does not anticipate that manufacturers would lose a 
significant portion of their INPV. This is largely due to the small 
incremental costs of standby mode and off mode components relative to 
the overall costs of residential boiler products. DOE expects 
residential boiler manufacturers to incur $0.21 million in product 
conversion costs at TSL 1, primarily for testing. DOE does not expect 
that manufacturers would incur any capital conversion costs, as the 
product upgrades will only involve integrating a purchase part.
    TSL 2 sets the efficiency level at EL 2 for all product classes. At 
TSL 2, DOE estimates impacts on INPV for residential boilers 
manufacturers to range from -0.02 percent to -0.01 percent, or a change 
in INPV of -$0.09 million to -$0.04 million. At this potential standard 
level, industry free cash flow is estimated to decrease by 
approximately 0.24 percent to $26.35 million, compared to the no-new-
standards case value of $26.42 million in 2020, the year before the 
compliance date.
    At TSL 2, DOE does not anticipate that manufacturers would lose a 
significant portion of their INPV. This is largely due to the small 
incremental costs of standby mode and off mode components relative to 
the overall costs of residential boiler products. DOE expects 
residential boiler manufacturers to incur $0.21 million in product 
conversion costs at TSL 2, primarily for testing. DOE does not expect 
that manufacturers would incur any capital conversion costs, as the 
product upgrades will only involve integrating a purchase part.
    TSL 3 represents EL 3 for all product classes. At TSL 3, DOE 
estimates impacts on INPV for residential boiler manufacturers to range 
from -0.46 percent to 0.12 percent, or a change in INPV of -$1.71 
million to $0.45 million. At this potential standard level, industry 
free cash flow is estimated to decrease by approximately 0.24 percent 
in the year before compliance to $26.35 million compared to the no-new-
standards case value of $26.42 million in 2020, the year before the 
compliance date.
    At TSL 3, DOE does not anticipate that manufacturers would lose a

[[Page 2393]]

significant portion of their INPV. As with TSLs 1 and 2, this is 
largely due to the small incremental costs of standby mode and off mode 
components relative to the overall costs of residential boiler 
products. DOE expects residential boiler manufacturers to incur $0.21 
million in product conversion costs at TSL 3, primarily for testing. 
DOE does not expect that manufacturers would incur any capital 
conversion costs, as the product upgrades will only involve integrating 
a purchase part.
Combining Cash-Flow Analysis Results for Residential Boilers (AFUE 
Standard and Standby Mode and Off Mode Standard)
    As noted in section III.B, DOE analyzed the AFUE standard and the 
standby mode and off mode standard independently. The AFUE metric 
accounts for the fossil fuel consumption, whereas the standby mode and 
off mode metric accounts for the electrical energy use in standby mode 
and off mode. There are five trial standard levels under consideration 
for the AFUE standard and three trial stand levels under consideration 
for the standby mode and off mode standard.
    Both the AFUE standard and the standby mode and off mode standard 
could necessitate changes in manufacturer production costs, as well as 
conversion cost investments. The assumed design changes for the two 
standards in the engineering analysis are independent; therefore, 
changes in manufacturing production costs and the conversion costs are 
additive. DOE expects that the costs to manufacturers would be 
mathematically the same regardless of whether or not the standby mode 
and off mode standards were combined or analyzed separately.
    Using the current approach that considers AFUE and standby mode and 
off mode standards separately, the range of potential impacts of 
combined standards on INPV is determined by summing the range of 
potential changes in INPV from the AFUE standard and from the standby 
mode and off mode standard. Similarly, to estimate the combined 
conversion costs, DOE sums the estimated conversion costs from the two 
standards. DOE does not present the combined impacts of all possible 
combinations of AFUE and standby mode and off mode TSLs in this notice. 
However, DOE expects the combined impact of the TSLs proposed for AFUE 
and standby mode and off mode electrical consumption in this final rule 
to range from -1.18 to 0.56 percent, which is approximately equivalent 
to a reduction of $4.34 million to an increase of $2.08 million.
b. Impacts on Direct Employment
    To quantitatively assess the impacts of energy conservation 
standards on direct employment in the residential boiler 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 in 2021. DOE 
used statistical data from the U.S. Census Bureau's 2011 Annual Survey 
of Manufacturers (ASM),\120\ 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.
---------------------------------------------------------------------------

    \120\ U.S. Census Bureau, Annual Survey of Manufacturers: 
General Statistics: Statistics for Industry Groups and Industries 
(2011) (Available at: http://factfinder2.census.gov/faces/nav/jsf/pages/searchresults.xhtml?refresh=t).
---------------------------------------------------------------------------

    The total labor expenditures in the GRIM are converted to domestic 
production employment levels by dividing production labor expenditures 
by the annual payment per production worker (production worker hours 
times the labor rate found in the U.S. Census Bureau's 2011 ASM). The 
estimates of production workers in this section cover workers, 
including line-supervisors who are directly involved in fabricating and 
assembling a product within the manufacturing facility. Workers 
performing services that are closely associated with production 
operations, such as materials handling tasks using forklifts, are also 
included as production labor. DOE's estimates only account for 
production workers who manufacture the specific products covered by 
this rulemaking. The total direct employment impacts calculated in the 
GRIM are the sum of the changes in the number of production workers 
resulting from the amended energy conservation standards for 
residential boilers, as compared to the no-new-standards case. In 
general, more-efficient boilers are more complex and more labor 
intensive and require specialized knowledge about control systems, 
electronics, and the different metals needed for the heat exchanger. 
Per-unit labor requirements and production time requirements increase 
with higher energy conservation standards. As a result, the total labor 
calculations described in this paragraph (which are generated by the 
GRIM) are considered an upper bound to direct employment forecasts.
    On the other hand, some manufacturers may choose not to make the 
necessary investments to meet the amended standards for all product 
classes. Alternatively, they may choose to relocate production 
facilities where conversion costs and production costs are lower. To 
establish a lower bound to negative employment impacts, DOE estimated 
the maximum potential job loss due to manufacturers either leaving the 
industry or moving production to foreign locations as a result of 
amended standards. In the case of residential boilers, most 
manufacturers agreed that higher standards would probably not push 
their production overseas due to shipping considerations. Rather, high 
enough standards could force manufacturers to rethink their business 
models. Instead of vertically integrated manufacturers, they would 
become assemblers and would source most of their components from 
overseas. This would mean any workers involved in casting metals that 
would be corroded in a condensing product would likely lose their jobs. 
These lower bound estimates were based on GRIM results, conversion cost 
estimates, and content from manufacturers interviews. The lower bound 
of employment is presented in Table V.35 below.
    DOE estimates that in the absence of amended energy conservation 
standards, there would be 761 domestic production workers in the 
residential boiler industry in 2021, the year of compliance. DOE 
estimates that 90 percent of residential boilers sold in the United 
States are manufactured domestically. Table V.35 shows the range of the 
impacts of potential amended energy conservation standards on U.S. 
production workers of residential boilers.

[[Page 2394]]



                           Table V.35--Potential Changes in the Total Number of Residential Boilers Production Workers in 2021
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                   Trial Standard Level *
                                  ----------------------------------------------------------------------------------------------------------------------
                                    No-new- standards
                                           case                  1                    2                    3                    4                 5
--------------------------------------------------------------------------------------------------------------------------------------------------------
Total Number of Domestic           761................  761 to 770.........  753 to 773.........  745 to 775.........  381 to 898.........  190 to 958
 Production Workers in 2021
 (without changes in production
 locations).
Potential Changes in Domestic      ...................  0 to 9.............  (8) to 12..........  (16) to 14.........  (380) to 137.......  (571) to 197
 Production Workers in 2021 *.
--------------------------------------------------------------------------------------------------------------------------------------------------------
* DOE presents a range of potential employment impacts. Numbers in parentheses indicate negative values.

    At the upper end of the range, all examined TSLs show positive 
impacts on domestic employment levels. Producing more-efficient boilers 
tends to require more labor, and DOE estimates that if residential 
boiler manufacturers chose to keep their current production in the 
U.S., domestic employment could increase at each TSL. In interviews, 
several manufacturers who produce high-efficiency boiler products 
stated that a standard that went to condensing levels could cause them 
to hire more employees to increase their production capacity. Others 
stated that a condensing standard would require additional engineers to 
redesign production processes, as well as metallurgy experts and other 
workers with experience working with higher-efficiency products. DOE, 
however, acknowledges that particularly at higher standard levels, 
manufacturers may not keep their production in the U.S. and also may 
choose to restructure their businesses or exit the market entirely.
    DOE does not expect any significant changes in domestic employment 
at TSL 1 or TSL 2. Most manufactures agreed that these efficiency 
levels would require minimal changes to their production processes and 
that most employees would be retained. DOE estimates that there could 
be a small loss of domestic employment at TSL 3 due to the fact that 
some manufacturers would have to drop their 82-percent-efficient 
products, except for their gas-fired steam boiler products. Several 
manufacturers commented that those products were their commodity 
products and drove a high percentage of their sales. Several 
manufacturers expressed that they could lose a significant number of 
employees at TSL 4 and TSL 5, due to the fact that these TSLs contain 
condensing efficiency levels for the gas-fired hot water boiler product 
class. These manufacturers have employees who work on production lines 
that produce cast iron sections and carbon steel or copper heat 
exchangers for lower to mid-efficiency products. If amended energy 
conservation standards were to require condensing efficiency levels, 
these employees would no longer be needed for that function, and 
manufacturers would have to decide whether to develop their own 
condensing heat exchanger production, source heat exchangers from Asia 
or Europe and assemble higher-efficiency products, or leave the market 
entirely.
    DOE notes that its estimates of the impacts on direct employment 
are based on the analysis of amended AFUE energy efficiency standards 
only. Standby mode and off mode technology options considered in the 
engineering analysis would result in component swaps, which would not 
make the product significantly more complex and would not be difficult 
to implement. While some product development effort would be required, 
DOE does not expect the standby mode and off mode standard to 
meaningfully affect the amount of labor required in production. 
Consequently, DOE does not anticipate that the proposed standby mode 
and off mode standards will have a significant impact on direct 
employment.
    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 final rule TSD.
c. Impacts on Manufacturing Capacity
    Most residential boiler manufacturers stated that their current 
production is only running at 50-percent to 70-percent capacity and 
that any standard that does not propose efficiency levels where 
manufacturers would use condensing technology for hot water boilers 
would not have a large effect on capacity. The impacts of a potential 
condensing standard on manufacturer capacity are difficult to quantify. 
Some manufacturers who are already making condensing products with a 
sourced heat exchanger said they would likely be able to increase 
production using the equipment they already have by utilizing a second 
shift. Others said a condensing standard would idle a large portion of 
their business, causing stranded assets and decreased capacity. These 
manufactures would have to determine how to best increase their 
condensing boiler production capacity. DOE believes that some larger 
domestic manufacturers may choose to add production capacity for a 
condensing heat exchanger production line.
    Manufacturers stated that in a scenario where a potential standard 
would require efficiency levels at which manufacturers would use 
condensing technology, there is concern about the level of technical 
resources required to redesign and test all products. The engineering 
analysis shows that increasingly complex components and control 
strategies are required as standard levels increase. Manufacturers 
commented in interviews that the industry would need to add electrical 
engineering and control systems engineering talent beyond current 
staffing to meet the redesign requirements of higher TSLs. Additional 
training might be needed for manufacturing engineers, laboratory 
technicians, and service personnel if condensing products were broadly 
adopted. However, because TSL 3 (the adopted level) would not require 
condensing standards, DOE does not expect manufacturers to face long-
term capacity constraints due to the standard levels proposed in this 
notice.
d. Impacts on Subgroups of Manufacturers
    Small manufacturers, niche equipment manufacturers, and 
manufacturers exhibiting a cost structure substantially different from 
the industry average could be affected disproportionately. Using 
average cost assumptions developed for an industry cash-flow estimate 
is inadequate to assess differential impacts among manufacturer 
subgroups.
    For the residential boiler industry, DOE identified and evaluated 
the impact of amended energy conservation

[[Page 2395]]

standards on one subgroup--small manufacturers. The SBA defines a 
``small business'' as having 500 employees or less for NAICS 333414, 
``Heating Equipment (except Warm Air Furnaces) Manufacturing.'' Based 
on this definition, DOE identified 13 manufacturers in the residential 
boiler industry that qualify as small businesses. For a discussion of 
the impacts on the small manufacturer subgroup, see the Regulatory 
Flexibility Act analysis in section VI.B of this notice and chapter 12 
of the final rule TSD.
e. Cumulative Regulatory Burden
    While any one regulation may not impose a significant burden on 
manufacturers, the combined effects of recent or impending regulations 
may have serious consequences for some manufacturers, groups of 
manufacturers, or an entire industry. Assessing the impact of a single 
regulation may overlook this cumulative regulatory burden. In addition 
to energy conservation standards, other regulations can significantly 
affect manufacturers' financial operations. Multiple regulations 
affecting the same manufacturer can strain profits and lead companies 
to abandon product lines or markets with lower expected future returns 
than competing products. For these reasons, DOE conducts an analysis of 
cumulative regulatory burden as part of its rulemakings pertaining to 
appliance efficiency.
    For the cumulative regulatory burden analysis, DOE looks at other 
regulations that could affect residential boiler manufacturers that 
will take effect approximately three years before or after the 2021 
compliance date of amended energy conservation standards for these 
products. In interviews, manufacturers cited Federal regulations on 
equipment other than residential boilers that contribute to their 
cumulative regulatory burden. The compliance years and expected 
industry conversion costs of relevant amended energy conservation 
standards are indicated in the Table V.36. DOE has included certain 
Federal regulations in the Table V.36 that have compliance dates beyond 
the three-year range of DOE's analysis, because those regulations were 
cited multiple times by manufacturers in interviews and written 
comments; they are included here for reference.

Table V.36--Compliance Dates and Expected Conversion Expenses of Federal
       Energy Conservation Standards Affecting Residential Boilers
                              Manufacturers
------------------------------------------------------------------------
                                      Approximate      Estimated total
    Federal energy conservation       compliance     industry conversion
             standards                   date              expense
------------------------------------------------------------------------
2007 Residential Furnaces &                   2015  $88M (2006$).*
 Boilers 72 FR 65136 (Nov. 19,
 2007).
2011 Residential Furnaces 76 FR               2015  $2.5M (2009$).**
 37408 (June 27, 2011); 76 FR
 67037 (Oct. 31, 2011).
Commercial Refrigeration Equipment            2017  $184.0M (2012$).
 79 FR 17726 (March 28, 2014).
Commercial Packaged Air                       2018  TBD.
 Conditioners and Heat Pumps.***.
Commercial Warm-Air Furnaces 80 FR            2018  $19.9 Million
 6182 (Feb. 4, 2015).                                (2013$).
Furnace Fans 79 FR 38130 (July 3,             2019  $40.6M (2014$).
 2014).
Single Package Vertical Air                   2019  $9.2M (2014$).
 Conditioners and Heat Pumps 80 FR
 57438 (Sept. 23, 2015).
Commercial Water Heaters.***......            2019  TBD.
Packaged Terminal Air Conditioners            2019  N/A.
 and Heat Pumps [dagger] 80 FR
 43162 (July 21, 2015).
Commercial Packaged Boilers.***...            2021  TBD.
Non-weatherized Gas-fired Furnaces            2021  TBD.
 and Mobile Home Furnaces.***.
Direct Heating Equipment/Pool                 2021  TBD.
 Heaters.***.
Residential Water Heaters.***.....            2021  TBD.
Central Air Conditioners.***......            2022  TBD.
Room Air Conditioners.***.........            2022  TBD.
Commercial Packaged Air                       2023  TBD.
 Conditioning and Heating
 Equipment (Evaporatively and
 Water Cooled).***.
------------------------------------------------------------------------
* Conversion expenses for manufacturers of oil-fired furnaces and gas-
  fired and oil-fired boilers associated with the November 2007 final
  rule for residential furnaces and boilers are excluded from this
  figure. The 2011 direct final rule for residential furnaces sets a
  higher standard and earlier compliance date for oil furnaces than the
  2007 final rule. As a result, manufacturers will be required design to
  the 2011 direct final rule standard. The conversion costs associated
  with the 2011 direct final rule are listed separately in this table.
  EISA 2007 legislated higher standards and earlier compliance dates for
  residential boilers than were in the November 2007 final rule. As a
  result, gas-fired and oil-fired boiler manufacturers were required to
  design to the EISA 2007 standard beginning in 2012. The conversion
  costs listed for residential gas-fired and oil-fired boilers in the
  November 2007 residential furnaces and boilers final rule analysis are
  not included in this figure.
** Estimated industry conversion expenses and approximate compliance
  date reflect a court-ordered April 24, 2014 remand of the residential
  non-weatherized and mobile home gas furnaces standards set in the 2011
  Energy Conservation Standards for Residential Furnaces and Residential
  Central Air Conditioners and Heat Pumps. The costs associated with
  this rule reflect implementation of the amended standards for the
  remaining furnace product classes (i.e., oil-fired furnaces).
*** The NOPR and final rule for this energy conservation standard have
  not been published. The compliance date and analysis of conversion
  costs are estimates and have not been finalized at this time.
[dagger] No conversion costs are expected for packaged terminal air
  conditioners and heat pumps, as the entire market already meets the
  standard levels adopted.

Revised DOE Test Procedure for Residential Boilers
    In addition to Federal energy conservation standards, DOE 
identified revisions to the DOE test procedure as another regulatory 
burdens that would affect manufacturers of residential boilers. On July 
28, 2008, DOE published a technical amendment to the 2007 furnaces and 
boilers final rule, whose purpose was to add design requirements 
established in the Energy Independence and Security Act of 2007 (EISA 
2007). 73 FR 43611. In relevant part, these design requirements mandate 
the use of an automatic means for adjusting the water temperature for 
gas-fired hot water boilers, oil-fired hot water boilers, and electric 
hot water boilers. DOE recently published revisions to its test 
procedure for

[[Page 2396]]

residential furnaces and boilers, which in part adopted test methods 
for verifying the presence of an automatic means for adjusting the 
water temperature in boilers. (See EERE-2012-BT-TP-0024). Specifically, 
the January 2016 test procedure includes two test methods to verify the 
functionality of the automatic means of adjusting the water 
temperature, which would increase the testing burden for residential 
boiler manufacturers and thereby the cumulative regulatory burden.
3. National Impact Analysis
a. Significance of Energy Savings
    To estimate the energy savings attributable to potential standards 
for residential boilers, DOE compared their energy consumption under 
the no-new-standards case to their anticipated energy consumption under 
each TSL. The savings are measured over the entire lifetime of products 
purchased in the 30-year period that begins in the year of anticipated 
compliance with amended standards (2021-2050). Table V.37 presents 
DOE's projections of the national energy savings for each TSL 
considered for residential boilers AFUE standards.
    Table V.38 present DOE's projections of the national energy savings 
for each TSL considered for residential boilers standby mode and off 
mode standards. The savings were calculated using the approach 
described in section IV.H of this notice.

   Table V.37--Cumulative National Energy Savings for Residential Boilers Shipped in 2021-2050: AFUE Standards
----------------------------------------------------------------------------------------------------------------
                                                                       Quads
                                 -------------------------------------------------------------------------------
         Energy savings                                        Trial Standard Level
                                 -------------------------------------------------------------------------------
                                         1               2               3               4               5
----------------------------------------------------------------------------------------------------------------
Primary energy..................            0.06            0.09            0.14            0.67            1.38
FFC energy......................            0.07            0.10            0.16            0.77            1.56
----------------------------------------------------------------------------------------------------------------


  Table V.38--Cumulative National Energy Savings for Residential Boilers Shipped in 2021-2050: Standby Mode and
                                               Off Mode Standards
----------------------------------------------------------------------------------------------------------------
                                                                                       Quads
                                                                 -----------------------------------------------
                         Energy savings                                        Trial Standard Level
                                                                 -----------------------------------------------
                                                                         1               2               3
----------------------------------------------------------------------------------------------------------------
Primary energy..................................................          0.0009          0.0012          0.0025
FFC energy......................................................          0.0009          0.0013          0.0026
----------------------------------------------------------------------------------------------------------------

    OMB Circular A-4 \121\ 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 product 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.\122\ The review timeframe established in EPCA is generally 
not synchronized with the product lifetime, product manufacturing 
cycles, or other factors specific to residential boilers. 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 for the AFUE standards in Table V.39.\123\ The impacts are 
counted over the lifetime of residential boilers purchased in 2021-
2029.
---------------------------------------------------------------------------

    \121\ 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/).
    \122\ Section 325(m) of EPCA requires DOE to review its 
standards at least once every 6 years, and requires, for certain 
products, a 3-year period after any new standard is promulgated 
before compliance is required, except that in no case may any new 
standards be required within 6 years of the compliance date of the 
previous standards. While adding a 6-year review to the 3-year 
compliance period adds up to 9 years, DOE notes that it may 
undertake reviews at any time within the 6 year period and that the 
3-year compliance date may yield to the 6-year backstop. A 9-year 
analysis period may not be appropriate given the variability that 
occurs in the timing of standards reviews and the fact that for some 
consumer products, the compliance period is 5 years rather than 3 
years.
    \123\ DOE presents results based on a nine-year analytical 
period only for the AFUE standards because the corresponding impacts 
for the standby mode and off mode TSLs are very small.

  Table V.39--Cumulative National Energy Savings for Residential Boilers; Nine Years of Shipments (2021-2029)--
                                                 AFUE Standards
----------------------------------------------------------------------------------------------------------------
                                                                       Quads
                                 -------------------------------------------------------------------------------
         Energy savings                                        Trial Standard Level
                                 -------------------------------------------------------------------------------
                                         1               2               3               4               5
----------------------------------------------------------------------------------------------------------------
Primary energy..................            0.02            0.03            0.05            0.21            0.41
FFC energy......................            0.02            0.04            0.06            0.25            0.47
----------------------------------------------------------------------------------------------------------------


[[Page 2397]]

b. Net Present Value of Consumer Costs and Benefits
    DOE estimated the cumulative NPV of the total costs and savings for 
consumers that would result from the TSLs considered for residential 
boilers. In accordance with OMB's guidelines on regulatory 
analysis,\124\ DOE calculated NPV using both a 7-percent and a 3-
percent real discount rate. Table V.40 shows the consumer NPV results 
for each TSL considered for AFUE standards for residential boilers. In 
each case, the impacts are counted over the lifetime of products 
purchased in 2021-2050.
---------------------------------------------------------------------------

    \124\ 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.40--Cumulative Net Present Value of Consumer Benefits for Residential Boilers Shipped in 2021-2050--AFUE
                                                    Standards
----------------------------------------------------------------------------------------------------------------
                                                                   Billion 2014$
                                 -------------------------------------------------------------------------------
        Discount rate (%)                                      Trial Standard Level
                                 -------------------------------------------------------------------------------
                                         1               2               3               4               5
----------------------------------------------------------------------------------------------------------------
3...............................           0.471           0.852           1.198           0.082           0.597
7...............................           0.134           0.237           0.350         (1.349)         (2.127)
----------------------------------------------------------------------------------------------------------------
Note: Parentheses indicate negative values.

    Table V.41 shows the consumer NPV results for each standby mode and 
off mode TSL considered for residential boilers. In each case, the 
impacts cover the lifetime of products purchased in 2021-2050.

  Table V.41--Cumulative Net Present Value of Consumer Benefits for Residential Boilers Shipped in 2021-2050--
                                       Standby Mode and Off Mode Standards
----------------------------------------------------------------------------------------------------------------
                                                                                   Billion 2014$
                                                                 -----------------------------------------------
                        Discount rate (%)                                      Trial Standard Level
                                                                 -----------------------------------------------
                                                                         1               2               3
----------------------------------------------------------------------------------------------------------------
3...............................................................           0.007        0.004              0.014
7...............................................................           0.002       (0.00005)           0.003
----------------------------------------------------------------------------------------------------------------
Note: Parentheses indicate negative values.

    The NPV results based on the aforementioned 9-year analytical 
period are presented in Table V.42 for AFUE standards. The impacts are 
counted over the lifetime of products purchased in 2021-2029. 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.42--Cumulative Net Present Value of Consumer Benefits for Residential Boilers; Nine Years of Shipments
                                           (2021-2029): AFUE Standards
----------------------------------------------------------------------------------------------------------------
                                                                   Billion 2014$
                                 -------------------------------------------------------------------------------
        Discount rate (%)                                      Trial Standard Level
                                 -------------------------------------------------------------------------------
                                         1               2               3               4               5
----------------------------------------------------------------------------------------------------------------
3...............................           0.179           0.325           0.462         (0.613)         (0.731)
7...............................           0.065           0.114           0.173         (1.028)         (1.537)
----------------------------------------------------------------------------------------------------------------
Note: Parentheses indicate negative values.

    The above results reflect the use of a constant price trend 
(reference case) to estimate the future prices for residential boilers 
over the analysis period (see section IV.H of this document). DOE also 
conducted a sensitivity analysis that considered one scenario with an 
increasing price trend than the reference case and one scenario with a 
decreasing price trend. The results of these alternative cases are 
presented in appendix 10C of the final rule TSD. In the increasing 
price trend case, the NPV of consumer benefits is lower than in the 
reference case. In the decreasing price trend case, the NPV of consumer 
benefits is higher than in the reference case.
c. Indirect Impacts on Employment
    DOE expects energy conservation standards for residential boilers 
to reduce energy bills for consumers of those products, 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. As described in section IV.N, DOE used an 
input/output model of the U.S. economy to estimate indirect employment 
impacts of the TSLs that DOE considered in this rulemaking. DOE 
understands that there are uncertainties involved in projecting 
employment impacts, especially changes in the later

[[Page 2398]]

years of the analysis. Therefore, DOE generated results for near-term 
time frames (2021 to 2026), 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 final rule TSD presents detailed results 
regarding anticipated indirect employment impacts.
4. Impact on Utility or Performance of Products
    DOE has concluded that the amended standards adopted in this final 
rule would not reduce the utility or performance of the residential 
boilers under consideration in this rulemaking. Manufacturers of these 
products currently offer units that meet or exceed the adopted 
standards.
5. Impact of Any Lessening of Competition
    As discussed in section III.E.1.e, DOE considered any lessening of 
competition that is likely to result from new or amended standards. The 
Attorney General of the United States (Attorney General) determines the 
impact, if any, of any lessening of competition likely to result from a 
proposed standard and transmits such determination in writing to the 
Secretary, together with an analysis of the nature and extent of such 
impact. To assist the Attorney General in making such determination, 
DOE 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 
residential boilers are unlikely to have a significant adverse impact 
on competition. DOE is publishing the Attorney General's assessment at 
the end of this final rule.
6. Need of the Nation To Conserve Energy
    Enhanced energy efficiency, where economically justified, improves 
the Nation's energy security, strengthens the economy, and reduces the 
environmental impacts (costs) of energy production. Energy conservation 
resulting from amended AFUE and new standby mode and off mode standards 
for residential boilers is expected to yield environmental benefits in 
the form of reduced emissions of air pollutants and greenhouse gases. 
As a measure of this reduced demand, chapter 15 in the final rule TSD 
presents the estimated reduction in generating capacity, relative to 
the no-new-standards case, for the TSLs that DOE considered in this 
rulemaking.
    Table V.43 and Table V.44 provide DOE's estimate of cumulative 
emissions reductions expected to result from the TSLs considered in 
this rulemaking for AFUE standards and standby mode and off mode 
standards, respectively. The tables include site and power sector 
emissions and upstream emissions. The emissions were calculated using 
the multipliers discussed in section IV.K. DOE reports annual emissions 
reductions for each TSL in chapter 13 of the final rule TSD.
    As noted in section IV.K, the estimated CO2 emissions 
reductions do not account for the effects of the Clean Power Plan 
(CPP). Including the CPP would have a negligible effect on the 
CO2 emissions reduction estimated to result from the adopted 
AFUE standards for residential boilers, however, as the power sector 
accounts for only 0.9 percent of the CO2 emissions 
reduction. The impact on the CO2 emissions reduction 
estimated to result from the adopted standards for standby mode and off 
mode would be much larger, as the reduction is nearly all from power 
sector emissions. Under the CPP, the value of CO2 emissions 
reductions for the adopted standby mode and off mode standards would be 
considerably lower--perhaps by as much as one third. Such reduction 
would not affect the decision to adopt TSL 3 for standby mode and off 
mode standards, however.

     Table V.43--Cumulative Emissions Reduction for Residential Boilers Shipped in 2021-2050: AFUE Standards
----------------------------------------------------------------------------------------------------------------
                                                               Trial Standard Level
                                 -------------------------------------------------------------------------------
                                         1               2               3               4               5
----------------------------------------------------------------------------------------------------------------
                                        Site and Power Sector Emissions *
----------------------------------------------------------------------------------------------------------------
CO2 (million metric tons).......            3.38            5.53            8.14           37.70           75.50
SO2 (thousand tons).............           0.672            1.84            1.94            2.40            3.45
NOX (thousand tons).............            37.9            98.4             105             355             408
Hg (lbs)........................        (0.0312)           0.125           0.342          (28.1)          (21.8)
CH4 (thousand tons).............           0.084           0.157           0.216           0.502           1.382
N2O (thousand tons).............           0.031           0.076           0.084           0.228           0.321
----------------------------------------------------------------------------------------------------------------
                                               Upstream Emissions
----------------------------------------------------------------------------------------------------------------
CO2 (million metric tons).......           0.497           0.821            1.19            6.06           11.41
SO2 (thousand tons).............           0.046           0.125           0.131           0.362           0.402
NOX (thousand tons).............            7.37            11.5            17.4            92.2             178
Hg (lbs)........................          0.0368           0.103           0.108          0.0512           0.115
CH4 (thousand tons).............            32.6            37.2            71.7             452             964
N2O (thousand tons).............           0.002           0.006           0.006           0.022           0.032
----------------------------------------------------------------------------------------------------------------
                                               Total FFC Emissions
----------------------------------------------------------------------------------------------------------------
CO2 (million metric tons).......            3.88            6.35            9.33           43.76           86.90
SO2 (thousand tons).............           0.718            1.97            2.07            2.76            3.85
NOX (thousand tons).............            45.3             110             122             447             586
Hg (lbs)........................         0.00561           0.227           0.450          (28.1)          (21.7)
CH4 (thousand tons).............            32.7            37.4            71.9             452             965
CH4 (thousand tons CO2eq) **....             914           1,046           2,013          12,662          27,023
N2O (thousand tons).............           0.033           0.082           0.091           0.249           0.352

[[Page 2399]]

 
N2O (thousand tons CO2eq) **....            8.73            21.7            24.0            66.0            93.3
----------------------------------------------------------------------------------------------------------------
* Primarily site emissions. Values include the increase in power sector emissions from higher electricity use at
  TSLs 4 and 5.
** CO2eq is the quantity of CO2 that would have the same global warming potential (GWP). Negative values refer
  to an increase in emissions.
Note: Parentheses indicate negative values.


  Table V.44--Cumulative Emissions Reduction for Residential Boilers Shipped in 2021-2050: Standby Mode and Off
                                                 Mode Standards
----------------------------------------------------------------------------------------------------------------
                                                                               Trial Standard Level
                                                                 -----------------------------------------------
                                                                         1               2               3
----------------------------------------------------------------------------------------------------------------
                                         Site and Power Sector Emissions
----------------------------------------------------------------------------------------------------------------
CO2 (million metric tons).......................................           0.052           0.072           0.144
SO2 (thousand tons).............................................           0.031           0.043           0.085
NOX (thousand tons).............................................           0.057           0.080           0.160
Hg (lbs)........................................................           0.227           0.318           0.636
CH4 (thousand tons).............................................           0.004           0.006           0.012
N2O (thousand tons).............................................           0.001           0.001           0.002
----------------------------------------------------------------------------------------------------------------
                                               Upstream Emissions
----------------------------------------------------------------------------------------------------------------
CO2 (million metric tons).......................................           0.003           0.004           0.008
SO2 (thousand tons).............................................           0.001           0.001           0.002
NOX (thousand tons).............................................           0.042           0.059           0.119
Hg (lbs)........................................................         0.00236         0.00331         0.00662
CH4 (thousand tons).............................................           0.234           0.328           0.656
N2O (thousand tons).............................................           0.000           0.000           0.000
----------------------------------------------------------------------------------------------------------------
                                               Total FFC Emissions
----------------------------------------------------------------------------------------------------------------
CO2 (million metric tons).......................................           0.055           0.076           0.153
SO2 (thousand tons).............................................           0.031           0.043           0.087
NOX (thousand tons).............................................           0.099           0.139           0.278
Hg (lbs)........................................................           0.229           0.321           0.642
CH4 (thousand tons).............................................           0.239           0.334           0.669
CH4 (thousand tons CO2eq) *.....................................            6.69            9.36            18.7
N2O (thousand tons).............................................           0.001           0.001           0.002
N2O (thousand tons CO2eq) *.....................................           0.172           0.240           0.481
----------------------------------------------------------------------------------------------------------------
* CO2eq is the quantity of CO2 that would have the same global warming potential (GWP).

    As part of the analysis for this final 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 residential boilers. 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.45 presents the global value of CO2 emissions 
reductions at each TSL for AFUE standards. Table V.46 presents the 
global value of CO2 emissions reductions at each TSL for 
standby mode and off mode standards. 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 final rule TSD.

[[Page 2400]]



Table V.45--Estimates of Global Present Value of CO2 Emissions Reduction for Residential Boilers Shipped in 2021-
                                              2050: AFUE Standards
----------------------------------------------------------------------------------------------------------------
                                                                    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...............................................            19.1            95.1             154             290
2...............................................            31.5             156             253             477
3...............................................            46.2             229             371             700
4...............................................             198           1,018           1,659           3,113
5...............................................             399           2,041           3,325           6,235
----------------------------------------------------------------------------------------------------------------
                                               Upstream Emissions
----------------------------------------------------------------------------------------------------------------
1...............................................            2.82            14.0            22.7            42.7
2...............................................            4.68            23.2            37.5            70.8
3...............................................            6.78            33.6            54.4             103
4...............................................            32.2             165             268             503
5...............................................            60.5             309             503             944
----------------------------------------------------------------------------------------------------------------
                                               Total FFC Emissions
----------------------------------------------------------------------------------------------------------------
1...............................................            22.0             109             176             333
2...............................................            36.2             179             290             548
3...............................................            53.0             263             425             802
4...............................................             230           1,183           1,927           3,616
5...............................................             459           2,350           3,828           7,180
----------------------------------------------------------------------------------------------------------------
* 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).
** Includes the increase in power sector emissions from higher electricity use at TSLs 4 and 5.


Table V.46--Estimates of Global Present Value of CO2 Emissions Reduction for Residential Boilers Shipped in 2021-
                                    2050: Standby Mode and Off Mode Standards
----------------------------------------------------------------------------------------------------------------
                                                                    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...............................................           0.287            1.43            2.32            4.37
2...............................................           0.401            2.01            3.25            6.12
3...............................................           0.803            4.01            6.50            12.2
----------------------------------------------------------------------------------------------------------------
                                               Upstream Emissions
----------------------------------------------------------------------------------------------------------------
1...............................................           0.016           0.081           0.132           0.249
2...............................................           0.023           0.114           0.185           0.348
3...............................................           0.045           0.228           0.370           0.696
----------------------------------------------------------------------------------------------------------------
                                               Total FFC Emissions
----------------------------------------------------------------------------------------------------------------
1...............................................           0.303            1.51            2.46            4.62
2...............................................           0.424            2.12            3.44            6.47
3...............................................           0.848            4.24            6.87            12.9
----------------------------------------------------------------------------------------------------------------
* 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).

    DOE is well aware that scientific and economic knowledge about the 
contribution of CO2 and other GHG emissions to changes in 
the future global climate and the potential resulting damages to the 
world economy continues to evolve rapidly. Thus, any value placed on 
reduced CO2 emissions in this rulemaking is subject to 
change. DOE, together with other Federal agencies, will continue to 
review various methodologies for estimating the monetary value of 
reductions in CO2 and other GHG emissions. This ongoing 
review will consider the comments on this subject that are part of the 
public record for this and other rulemakings, as well as other 
methodological

[[Page 2401]]

assumptions and issues. However, consistent with DOE's legal 
obligations, and taking into account the uncertainty involved with this 
particular issue, DOE has included in this final rule the most recent 
values and analyses resulting from the interagency review process.
    DOE also estimated the cumulative monetary value of the economic 
benefits associated with NOX emissions reductions 
anticipated to result from the considered TSLs for residential boilers. 
The dollar-per-ton values that DOE used is discussed in section IV.L of 
this document. Table V.47 presents the cumulative present values for 
NOX emissions for each AFUE TSL calculated using seven-
percent and three-percent discount rates. Table V.48 presents the 
cumulative present values for NOX emissions for each standby 
mode and off mode TSL calculated using seven-percent and three-percent 
discount rates.

  Table V.47--Estimates of Present Value of NOX Emissions Reduction for
       Residential Boilers Shipped in 2021-2050: AFUE Standards *
------------------------------------------------------------------------
                                                   Million 2014$
                                         -------------------------------
                   TSL                      3% discount     7% discount
                                               rate            rate
------------------------------------------------------------------------
                   Site and Power Sector Emissions **
------------------------------------------------------------------------
1.......................................             101            33.3
2.......................................             264            87.6
3.......................................             282            93.8
4.......................................             801             184
5.......................................             932             224
------------------------------------------------------------------------
                   Upstream Emissions
------------------------------------------------------------------------
1.......................................            19.5             6.5
2.......................................            30.6            10.2
3.......................................            46.1            15.4
4.......................................             228            67.5
5.......................................             437             131
------------------------------------------------------------------------
              Total FFC Emissions [dagger]
------------------------------------------------------------------------
1.......................................             121            39.8
2.......................................             294            97.8
3.......................................             328             109
4.......................................           1,029             251
5.......................................           1,369             354
------------------------------------------------------------------------
* The results reflect use of the low benefits per ton values.
** Includes the increase in power sector emissions from higher
  electricity use at TSLs 4 and 5.
[dagger] Components may not sum to total due to rounding.


  Table V.48--Estimates of Present Value of NOX Emissions Reduction for
   Residential Boilers Shipped in 2021-2050: Standby Mode and Off Mode
                               Standards *
------------------------------------------------------------------------
                                                   Million 2014$
                                         -------------------------------
                   TSL                      3% discount     7% discount
                                               rate            rate
------------------------------------------------------------------------
                     Site and Power Sector Emissions
------------------------------------------------------------------------
1.......................................           0.147           0.048
2.......................................           0.206           0.067
3.......................................           0.411           0.134
------------------------------------------------------------------------
                           Upstream Emissions
------------------------------------------------------------------------
1.......................................           0.108           0.034
2.......................................           0.151           0.048
3.......................................           0.302           0.096
------------------------------------------------------------------------
                         Total FFC Emissions **
------------------------------------------------------------------------
1.......................................           0.255           0.082
2.......................................           0.357           0.115
3.......................................           0.713           0.231
------------------------------------------------------------------------
* The results reflect use of the low benefits per ton values.
** Components may not sum to total due to rounding.


[[Page 2402]]

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. 6295(o)(2)(B)(i)(VII)) No 
other factors were considered in this analysis.
8. Summary of National Economic Impacts
    The NPV of the monetized benefits associated with emissions 
reductions can be viewed as a complement to the NPV of the consumer 
savings calculated for each TSL considered in this rulemaking. Table 
V.49 presents the NPV values that result from adding the estimates of 
the potential economic benefits resulting from reduced CO2 
and NOX emissions in each of four valuation scenarios to the 
NPV of consumer savings calculated for each AFUE TSL considered in this 
rulemaking, at both a seven-percent and three-percent discount rate.
    Table V.50 presents the NPV values that result from adding the 
estimates of the potential economic benefits resulting from reduced 
CO2 and NOX emissions in each of four valuation 
scenarios to the NPV of consumer savings calculated for each standby 
mode and off mode TSL considered in this rulemaking, at both a seven-
percent and three-percent discount rate. The CO2 values used 
in the columns of each table correspond to the four sets of SCC values 
discussed above.

Table V.49--Net Present Value of Consumer Savings Combined With Present Value of Monetized Benefits From CO2 and
                                    NOX Emissions Reductions: AFUE Standards
----------------------------------------------------------------------------------------------------------------
                                                           Consumer NPV at 3% discount rate added with:
                                                 ---------------------------------------------------------------
                                                    SCC Case *      SCC Case *      SCC Case *      SCC Case *
                       TSL                         $12.2/metric    $40.0/metric    $62.3/metric     $117/metric
                                                    ton and NOX     ton and NOX     ton and NOX     ton and NOX
                                                    value at 3%     value at 3%     value at 3%     Value at 3%
                                                   discount rate   discount rate   discount rate   discount rate
----------------------------------------------------------------------------------------------------------------
                                                                           Billion 2014$
----------------------------------------------------------------------------------------------------------------
1...............................................           0.614           0.701           0.768           0.925
2...............................................           1.183           1.326           1.437           1.694
3...............................................           1.579           1.789           1.951           2.328
4...............................................           1.341           2.294           3.038           4.726
5...............................................           2.425           4.316           5.794           9.145
----------------------------------------------------------------------------------------------------------------
                                                           Consumer NPV at 7% Discount Rate added with:
                                                 ---------------------------------------------------------------
                       TSL                          SCC Case *      SCC Case *      SCC Case *      SCC Case *
                                                   $12.2/metric    $40.0/metric    $62.3/metric     $117/metric
                                                    ton and NOX     ton and NOX     ton and NOX     ton and NOX
                                                    Value at 7%     Value at 7%     Value at 7%     Value at 7%
                                                   discount rate   discount rate   discount rate   discount rate
----------------------------------------------------------------------------------------------------------------
                                                                           Billion 2014$
----------------------------------------------------------------------------------------------------------------
1...............................................           0.196           0.283           0.350           0.506
2...............................................           0.371           0.515           0.625           0.883
3...............................................           0.512           0.722           0.884           1.261
4...............................................         (0.867)           0.086           0.830           2.519
5...............................................         (1.314)           0.577           2.055           5.407
----------------------------------------------------------------------------------------------------------------
* These label values represent the global SCC in 2015, in 2014$. For NOX emissions, to calculate present value
  of the total monetary sum from reduced NOX emissions, DOE applied real discount rates of 3 percent and 7
  percent to the appropriate $/ton value listed in chapter 14 of the final rule TSD.
Note: Parentheses indicate negative values.


Table V.50--Net Present Value of Consumer Savings Combined With Present Value of Monetized Benefits From CO2 and
                          NOX Emissions Reductions: Standby Mode and Off Mode Standards
----------------------------------------------------------------------------------------------------------------
 
----------------------------------------------------------------------------------------------------------------
                                                           Consumer NPV at 3% Discount Rate added with:
                                                 ---------------------------------------------------------------
                       TSL                          SCC Case *      SCC Case *      SCC Case *      SCC Case *
                                                   $12.2/metric    $40.0/metric    $62.3/metric     $117/metric
                                                    ton and NOX     ton and NOX     ton and NOX     ton and NOX
                                                    Value at 3%     Value at 3%     Value at 3%     Value at 3%
                                                   discount rate   discount rate   discount rate   discount rate
----------------------------------------------------------------------------------------------------------------
                                                                           Billion 2014$
----------------------------------------------------------------------------------------------------------------
1...............................................           0.008           0.009           0.010           0.012
2...............................................           0.004           0.006           0.007           0.010
3...............................................           0.015           0.019           0.021           0.028
----------------------------------------------------------------------------------------------------------------

[[Page 2403]]

 
                                                           Consumer NPV at 7% Discount Rate added with:
                                                 ---------------------------------------------------------------
                       TSL                          SCC Case *      SCC Case *      SCC Case *      SCC Case *
                                                   $12.2/metric    $40.0/metric    $62.3/metric     $117/metric
                                                    ton and NOX     ton and NOX     ton and NOX     ton and NOX
                                                    Value at 7%     Value at 7%     Value at 7%     Value at 7%
                                                   discount rate   discount rate   discount rate   discount rate
----------------------------------------------------------------------------------------------------------------
                                                                           Billion 2014$
----------------------------------------------------------------------------------------------------------------
1...............................................           0.003           0.004           0.005           0.007
2...............................................           0.000           0.002           0.004           0.007
3...............................................           0.004           0.008           0.010           0.017
----------------------------------------------------------------------------------------------------------------
* These label values represent the global SCC in 2015, in 2014$. For NOX emissions, to calculate present value
  of the total monetary sum from reduced NOX emissions, DOE applied real discount rates of 3 percent and 7
  percent to the appropriate $/ton value listed in chapter 14 of the final rule TSD.

    In considering the above results, 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, 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 
products shipped in 2021-2050. Because CO2 emissions have a 
very long residence time in the atmosphere,\125\ the SCC values in 
future years reflect the present value of future climate-related 
impacts that continue beyond 2100.
---------------------------------------------------------------------------

    \125\ The atmospheric lifetime of CO2 is estimated of 
the order of 30-95 years. Jacobson, MZ, ``Correction to `Control of 
fossil-fuel particulate black carbon and organic matter, possibly 
the most effective method of slowing global warming,' '' J. Geophys. 
Res. 110. pp. D14105 (2005).
---------------------------------------------------------------------------

C. Conclusion

    When considering standards, the new or amended energy conservation 
standards that DOE adopts for any type (or class) of covered product, 
including residential boilers, must be designed to achieve the maximum 
improvement in energy efficiency that the Secretary determines is 
technologically feasible and economically justified. (42 U.S.C. 
6295(o)(2)(A)) 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. 6295(o)(2)(B)(i)) The new or amended standard must also result 
in significant conservation of energy. (42 U.S.C. 6295(o)(3)(B))
    For this final rule, DOE considered the impacts of amended 
standards for residential boilers 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. These include 
the impacts on identifiable subgroups of consumers who may be 
disproportionately affected by a national standard and impacts on 
employment.
    DOE also notes that the economics literature provides a wide-
ranging discussion of how consumers trade off upfront costs and energy 
savings in the absence of government intervention. Much of this 
literature attempts to explain why consumers appear to undervalue 
energy efficiency improvements. There is evidence that consumers 
undervalue future energy savings as a result of: (1) A lack of 
information; (2) a lack of sufficient salience of the long-term or 
aggregate benefits; (3) a lack of sufficient savings to warrant 
delaying or altering purchases; (4) excessive focus on the short term, 
in the form of inconsistent weighting of future energy cost savings 
relative to available returns on other investments; (5) computational 
or other difficulties associated with the evaluation of relevant 
tradeoffs; and (6) a divergence in incentives (for example, between 
renters and owners, or builders and purchasers). Having less than 
perfect foresight and a high degree of uncertainty about the future, 
consumers may trade off these types of investments at a higher than 
expected rate between current consumption and uncertain future energy 
cost savings. This undervaluation suggests that regulation that 
promotes energy efficiency can produce significant net private gains 
(as well as producing social gains by, for example, reducing 
pollution).
    In DOE's current regulatory analysis, potential changes in the 
benefits and costs of a regulation due to changes in consumer purchase 
decisions are included in two ways. First, if consumers forego the 
purchase of a product in the standards case, this decreases sales for 
product manufacturers, and the impact on manufacturers attributed to 
lost revenue is included in the MIA. Second, DOE accounts for energy 
savings attributable only to products actually used by consumers in the 
standards case; if a regulatory option decreases the number of products 
purchased by consumers, this decreases the potential energy savings 
from an energy conservation standard. DOE provides estimates of 
shipments and changes in the volume of product purchases in chapter 9 
of the final rule TSD. However, DOE's current analysis does not 
explicitly control for

[[Page 2404]]

heterogeneity in consumer preferences, preferences across subcategories 
of products or specific features, or consumer price sensitivity 
variation according to household income.\126\
---------------------------------------------------------------------------

    \126\ P.C. Reiss and M.W. White, Household Electricity Demand, 
Revisited, Review of Economic Studies (2005) 72, 853-883.
---------------------------------------------------------------------------

    While DOE is not prepared at present to provide a fuller 
quantifiable framework for estimating the benefits and costs of changes 
in consumer purchase decisions due to an energy conservation standard, 
DOE is committed to developing a framework that can support empirical 
quantitative tools for improved assessment of the consumer welfare 
impacts of appliance standards. DOE has posted a paper that discusses 
the issue of consumer welfare impacts of appliance energy conservation 
standards, and potential enhancements to the methodology by which these 
impacts are defined and estimated in the regulatory process.\127\ DOE 
welcomes comments on how to more fully assess the potential impact of 
energy conservation standards on consumer choice and how to quantify 
this impact in its regulatory analysis in future rulemakings.
---------------------------------------------------------------------------

    \127\ Alan Sanstad, Notes on the Economics of Household Energy 
Consumption and Technology Choice, Lawrence Berkeley National 
Laboratory (2010) (Available at: http://www1.eere.energy.gov/buildings/appliance_standards/pdfs/consumer_ee_theory.pdf).
---------------------------------------------------------------------------

1. Benefits and Burdens of Trial Standard Levels Considered for 
Residential Boilers for AFUE Standards
    Table V.51 and Table V.52 summarize the quantitative impacts 
estimated for each AFUE TSL for residential boilers. The national 
impacts are measured over the lifetime of residential boilers purchased 
in the 30-year period that begins in the anticipated year of compliance 
with amended standards (2021-2050). The energy savings, emissions 
reductions, and value of emissions reductions refer to full-fuel-cycle 
results. The efficiency levels contained in each TSL are described in 
section V.A of this notice.

                              Table V.51--Summary of Analytical Results for Residential Boilers AFUE TSLs: National Impacts
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                  Trial Standard Level
           Category            -------------------------------------------------------------------------------------------------------------------------
                                           1                        2                        3                       4                       5
--------------------------------------------------------------------------------------------------------------------------------------------------------
Cumulative FFC Energy Savings   0.07...................  0.10...................  0.16..................  0.77..................  1.56.
 (quads).
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                   NPV of Consumer Costs and Benefits (2014$ billion)
--------------------------------------------------------------------------------------------------------------------------------------------------------
3% discount rate..............  0.471..................  0.852..................  1.198.................  0.082.................  0.597.
7% discount rate..............  0.134..................  0.237..................  0.350.................  (1.349)...............  (2.127).
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                          Cumulative FFC Emissions Reduction *
--------------------------------------------------------------------------------------------------------------------------------------------------------
CO2 (million metric tons).....  3.88...................  6.35...................  9.33..................  43.76.................  86.90.
SO2 (thousand tons)...........  0.718..................  1.97...................  2.07..................  2.76..................  3.85.
NOX (thousand tons)...........  45.3...................  110....................  122...................  447...................  586.
Hg (lbs)......................  0.00561................  0.227..................  0.450.................  (28.1)................  (21.7).
CH4 (thousand tons)...........  32.7...................  37.4...................  71.9..................  452...................  965.
CH4 (thousand tons COeq) **...  914....................  1,046..................  2,013.................  12,662................  27,023.
N2O (thousand tons)...........  0.033..................  0.082..................  0.091.................  0.249.................  0.352.
N2O (thousand tons COeq) **...  8.73...................  21.7...................  24.0..................  66.0..................  93.3.
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                 Value of Emissions Reduction (Cumulative FFC Emissions)
--------------------------------------------------------------------------------------------------------------------------------------------------------
CO2 (2014$ million) [dagger]..  22.0 to 333............  36.2 to 548............  53.0 to 802...........  230 to 3,616..........  459 to 7,180.
NOX--3% discount rate (2014$    121 to 266.............  294 to 648.............  328 to 722............  1029 to 2235..........  1369 to 2982.
 million).
NOX--7% discount rate (2014$    39.8 to 89.1...........  97.8 to 219............  109 to 244............  251 to 566............  354 to 796.
 million).
--------------------------------------------------------------------------------------------------------------------------------------------------------
* Includes the increase in power sector emissions from higher electricity use at TSLs 4 and 5.
** 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.
Note: Parentheses indicate negative values.


                     Table V.52--Summary of Analytical Results for Residential Boilers AFUE TSLs: Manufacturer and Consumer Impacts
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                     Trial Standard Level
              Category              --------------------------------------------------------------------------------------------------------------------
                                                1                       2                      3                      4                      5
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                  Manufacturer Impacts
--------------------------------------------------------------------------------------------------------------------------------------------------------
Industry NPV (2014$ million) (Base   365.70 to 367.50......  364.94 to 368.69......  365.20 to 369.45.....  284.21 to 349.47.....  225.88 to 366.71.
 Case INPV = 367.83).
Industry NPV ($ change)............  (2.12) to (0.33)......  (2.89) to 0.86........  (2.63) to 1.62.......  (83.61) to (18.35)...  (141.95) to (1.12).
Industry NPV (% change)............  (0.58) to (0.09)......  (0.79) to 0.24........  (0.71) to 0.44.......  (22.73) to (4.99)....  (38.59) to (0.30).
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                          Consumer Average LCC Savings (2014$)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Gas-fired Hot Water Boiler.........  210...................  210...................  364..................  632..................  303.
Gas-fired Steam Boiler.............  333...................  333...................  333..................  333..................  207.

[[Page 2405]]

 
Oil-fired Hot Water Boiler.........  260...................  626...................  626..................  192..................  192.
Oil-fired Steam Boiler.............  400...................  400...................  434..................  505..................  505.
Shipment-Weighted Average *........  235...................  315...................  420..................  510..................  276.
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                               Consumer Simple PBP (years)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Gas-fired Hot Water Boiler.........  1.2...................  1.2...................  1.2..................  8.4..................  11.8.
Gas-fired Steam Boiler.............  2.7...................  2.7...................  2.7..................  2.7..................  10.7.
Oil-fired Hot Water Boiler.........  6.9...................  5.8...................  5.8..................  16.5.................  16.5.
Oil-fired Steam Boiler.............  6.6...................  6.6...................  6.7..................  7.8..................  7.8.
Shipment-Weighted Average *........  2.7...................  2.4...................  2.4..................  9.7..................  12.7.
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                   Percentage of Consumers that Experience a Net Cost
--------------------------------------------------------------------------------------------------------------------------------------------------------
Gas-fired Hot Water Boiler.........  0.3%..................  0.3%..................  0.4%.................  21.9%................  55.5%.
Gas-fired Steam Boiler.............  0.9%..................  0.9%..................  0.9%.................  0.9%.................  30.8%.
Oil-fired Hot Water Boiler.........  10.4%.................  8.8%..................  8.8%.................  58.9%................  58.9%.
Oil-fired Steam Boiler.............  11.9%.................  11.9%.................  19.7%................  34.2%................  34.2%.
Shipment-Weighted Average *........  2.8%..................  2.5%..................  2.7%.................  28.5%................  53.8%.
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note: Parentheses indicate negative values.
* Weighted by shares of each product class in total projected shipments in 2021.

    DOE first considered TSL 5, which represents the max-tech 
efficiency levels. TSL 5 would save an estimated 1.6 quads of energy, 
an amount DOE considers significant. Under TSL 5, the NPV of consumer 
benefit would be $-2.127 billion using a discount rate of 7 percent, 
and $0.597 billion using a discount rate of 3 percent.
    The cumulative emissions reductions at TSL 5 are 86.90 Mt of 
CO2, 3.85 thousand tons of SO2, 586 thousand tons 
of NOX, -21.7 lbs of Hg, 965 thousand tons of 
CH4, and 0.352 thousand tons of N2O. The 
estimated monetary value of the CO2 emissions reduction at 
TSL 5 ranges from $459 million to $7,180 million.
    At TSL 5, the average LCC impact is a savings of $303 for gas-fired 
hot water boilers, $207 for gas-fired steam boilers, $192 for oil-fired 
hot water boilers, and $505 for oil-fired steam boilers. The simple 
payback period is 11.8 years for gas-fired hot water boilers, 10.7 
years for gas-fired steam boilers, 16.5 years for oil-fired hot water 
boilers, and 7.8 years for oil-fired steam boilers. The share of 
consumers experiencing a net LCC cost is 55.5 percent for gas-fired hot 
water boilers, 30.8 percent for gas-fired steam boilers, 58.9 percent 
for oil-fired hot water boilers, and 34.2 percent for oil-fired steam 
boilers.
    At TSL 5, the projected change in INPV ranges from a decrease of 
$141.95 million to a decrease of $1.12 million. If the decrease of 
$141.95 million were to occur, TSL 5 could result in a net loss of 
38.59 percent in INPV to manufacturers of covered residential boilers.
    The Secretary concludes that at TSL 5 for residential boilers, the 
benefits of energy savings, positive NPV of consumer benefits at a 3-
percent discount rate, emission reductions, and the estimated monetary 
value of the emissions reductions would be outweighed by the negative 
NPV of consumer benefits at a 7-percent discount rate, 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 an estimated 0.77 quads 
of energy, an amount DOE considers significant. Under TSL 4, the NPV of 
consumer benefit would be $-1.349 billion using a discount rate of 7 
percent, and $0.082 billion using a discount rate of 3 percent.
    The cumulative emissions reductions at TSL 4 are 43.76 Mt of 
CO2, 2.76 thousand tons of SO2, 447 thousand tons 
of NOX, -28.1 lbs of Hg, 452 thousand tons of 
CH4, and 0.249 thousand tons of N2O. The 
estimated monetary value of the CO2 emissions reduction at 
TSL 4 ranges from $230 million to $3,616 million.
    At TSL 4, the average LCC impact is a savings of $632 for gas-fired 
hot water boilers, $333 for gas-fired steam boilers, $192 for oil-fired 
hot water boilers, and $505 for oil-fired steam boilers. The simple 
payback period is 8.4 years for gas-fired hot water boilers, 2.7 years 
for gas-fired steam boilers, 16.5 years for oil-fired hot water 
boilers, and 7.8 years for oil-fired steam boilers. The share of 
consumers experiencing a net LCC cost is 21.9 percent for gas-fired hot 
water boilers, 0.9 percent for gas-fired steam boilers, 58.9 percent 
for oil-fired hot water boilers, and 34.2 percent for oil-fired steam 
boilers.
    At TSL 4, the projected change in INPV ranges from a decrease of 
$83.61 million to a decrease of $18.35 million. If the decrease of 
$83.61 million were to occur, TSL 4 could result in a net loss of 22.73 
percent in INPV to manufacturers of covered residential boilers.
    The Secretary concludes that at TSL 4 for residential boilers, the 
benefits of energy savings, positive NPV of consumer benefits at a 3-
percent discount rate, emission reductions, and the estimated monetary 
value of the emissions reductions would be outweighed by the negative 
NPV of consumer benefits at a 7-percent discount rate, 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 4 is not economically justified.
    DOE then considered TSL 3. TSL 3 would save an estimated 0.16 quads 
of energy, an amount DOE considers significant. Under TSL 3, the NPV of 
consumer benefit would be $0.350

[[Page 2406]]

billion using a discount rate of 7 percent, and $1.198 billion using a 
discount rate of 3 percent.
    The cumulative emissions reductions at TSL 3 are 9.33 Mt of 
CO2, 2.07 thousand tons of SO2, 122 thousand tons 
of NOX, 0.450 lbs of Hg, 71.9 thousand tons of 
CH4, and 0.091 thousand tons of N2O. The 
estimated monetary value of the CO2 emissions reduction at 
TSL 3 ranges from $53.0 million to $802 million.
    At TSL 3, the average LCC impact is a savings of $364 for gas-fired 
hot water boilers, $333 for gas-fired steam boilers, $626 for oil-fired 
hot water boilers, and $434 for oil-fired steam boilers. The simple 
payback period is 1.2 years for gas-fired hot water boilers, 2.7 years 
for gas-fired steam boilers, 5.8 years for oil-fired hot water boilers, 
and 6.7 years for oil-fired steam boilers. The share of consumers 
experiencing a net LCC cost is 0.4 percent for gas-fired hot water 
boilers, 0.9 percent for gas-fired steam boilers, 8.8 percent for oil-
fired hot water boilers, and 19.7 percent for oil-fired steam boilers.
    At TSL 3, the projected change in INPV ranges from a decrease of 
$2.63 million to an increase of $1.62 million. If the decrease of $2.63 
million were to occur, TSL 3 could result in a net loss of 0.71 percent 
in INPV to manufacturers of covered residential boilers.
    After considering the analysis and weighing the benefits and the 
burdens, the Secretary has concluded that at TSL 3 for residential 
boilers, the benefits of energy savings, positive NPV of consumer 
benefit at both 3-percent and 7-percent discount rates, 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. 
Accordingly, the Secretary of Energy has concluded that TSL 3 offers 
the maximum improvement in efficiency that is technologically feasible 
and economically justified, and would result in the significant 
conservation of energy.
    Therefore, based on the above considerations, DOE is adopting the 
AFUE energy conservation standards for residential boilers at TSL 3. 
The amended energy conservation standards for residential boilers, 
which are expressed as AFUE, are shown in Table V.53.

                 Table V.53--Amended AFUE Energy Conservation Standards for Residential Boilers
----------------------------------------------------------------------------------------------------------------
                                                 Standard: AFUE
                Product class                         (%)                       Design requirement
----------------------------------------------------------------------------------------------------------------
Gas-fired hot water boiler...................                 84  Constant-burning pilot not permitted.
                                                                   Automatic means for adjusting water
                                                                   temperature required (except for boilers
                                                                   equipped with tankless domestic water heating
                                                                   coils).
Gas-fired steam boiler.......................                 82  Constant-burning pilot not permitted.
Oil-fired hot water boiler...................                 86  Automatic means for adjusting temperature
                                                                   required (except for boilers equipped with
                                                                   tankless domestic water heating coils).
Oil-fired steam boiler.......................                 85  None.
Electric hot water boiler....................               None  Automatic means for adjusting temperature
                                                                   required (except for boilers equipped with
                                                                   tankless domestic water heating coils).
Electric steam boiler........................               None  None.
----------------------------------------------------------------------------------------------------------------

2. Benefits and Burdens of Trial Standard Levels Considered for 
Residential Boilers for Standby Mode and Off Mode
    Table V.54 and Table V.55 summarize the quantitative impacts 
estimated for each TSL considered for residential boiler standby mode 
and off mode power standards. The national impacts are measured over 
the lifetime of residential boilers purchased in the 30-year period 
that begins in the year of anticipated compliance with new standards 
(2021-2050). The energy savings, emissions reductions, and value of 
emissions reductions refer to full-fuel-cycle results. The efficiency 
levels contained in each TSL are described in section V.A of this 
notice.

    Table V.54--Summary of Analytical Results for Residential Boiler Standby Mode and Off Mode TSLs: National
                                                     Impacts
----------------------------------------------------------------------------------------------------------------
                                                               Trial Standard Level
            Category             -------------------------------------------------------------------------------
                                              1                          2                          3
----------------------------------------------------------------------------------------------------------------
Cumulative FFC Energy Savings     0.0009...................  0.0013...................  0.0026.
 (quads).
----------------------------------------------------------------------------------------------------------------
                               NPV of Consumer Costs and Benefits (2014$ billion)
----------------------------------------------------------------------------------------------------------------
3% discount rate................  0.007....................  0.004....................  0.014.
7% discount rate................  0.002....................  (0.00005)................  0.003.
----------------------------------------------------------------------------------------------------------------
                                       Cumulative FFC Emissions Reduction
----------------------------------------------------------------------------------------------------------------
CO2 (million metric tons).......  0.055....................  0.076....................  0.153.
SO2 (thousand tons).............  0.031....................  0.043....................  0.087.
NOX (thousand tons).............  0.099....................  0.139....................  0.278.
Hg (lbs)........................  0.229....................  0.321....................  0.642.
CH4 (thousand tons).............  0.239....................  0.334....................  0.669.
CH4 (thousand tons CO2eq) *.....  6.69.....................  9.36.....................  18.7.
N2O (thousand tons).............  0.001....................  0.001....................  0.002.

[[Page 2407]]

 
N2O (thousand tons CO2eq) *.....  0.172....................  0.240....................  0.481.
----------------------------------------------------------------------------------------------------------------
                             Value of Emissions Reduction (Cumulative FFC Emissions)
----------------------------------------------------------------------------------------------------------------
CO2 (2014$ million) **..........  0.303 to 4.62............  0.424 to 6.47............  0.848 to 12.9.
NOX--3% discount rate (2014$      0.255 to 0.561...........  0.357 to 0.786...........  0.713 to 1.571.
 million).
NOX--7% discount rate (2014$      0.082 to 0.184...........  0.115 to 0.258...........  0.231 to 0.516.
 million).
----------------------------------------------------------------------------------------------------------------
* CO2eq is the quantity of CO2 that would have the same global warming potential (GWP).
** Range of the economic value of CO2 reductions is based on estimates of the global benefit of reduced CO2
  emissions.
Note: Parentheses indicate negative values.


  Table V.55--Summary of Analytical Results for Residential Boiler Standby Mode and Off Mode TSLs: Manufacturer
                                              and Consumer Impacts
----------------------------------------------------------------------------------------------------------------
                                                               Trial Standard Level
            Category             -------------------------------------------------------------------------------
                                              1                          2                          3
----------------------------------------------------------------------------------------------------------------
                                              Manufacturer Impacts
----------------------------------------------------------------------------------------------------------------
Industry NPV (2014$ million)      367.61 to 367.73.........  367.74 to 367.78.........  366.12 to 368. 28.
 (Base Case INPV = 367.83.
Industry NPV ($ change).........  (0.22) to (0.10).........  (0.09) to (0.04).........  (1.71) to 0.45.
Industry NPV (% change).........  (0.06) to (0.03).........  (0.02) to (0.01).........  (0.46) to 0.12.
----------------------------------------------------------------------------------------------------------------
                                      Consumer Average LCC Savings (2014$)
----------------------------------------------------------------------------------------------------------------
Gas-fired Hot Water Boiler......  26.......................  2........................  15.
Gas-fired Steam Boiler..........  31.......................  4........................  18.
Oil-fired Hot Water Boiler......  32.......................  6........................  20.
Oil-fired Steam Boiler..........  26.......................  0.4......................  13.
Electric Hot Water Boiler.......  19.......................  (3)......................  8.
Electric Steam Boiler...........  17.......................  (5)......................  6.
Shipment-Weighted Average *.....  27.......................  3........................  16.
----------------------------------------------------------------------------------------------------------------
                                           Consumer Simple PBP (years)
----------------------------------------------------------------------------------------------------------------
Gas-fired Hot Water Boiler......  2.0......................  8.9......................  6.7.
Gas-fired Steam Boiler..........  1.9......................  8.5......................  6.4.
Oil-fired Hot Water Boiler......  1.8......................  8.2......................  6.2.
Oil-fired Steam Boiler..........  1.8......................  8.0......................  6.1.
Electric Hot Water Boiler.......  2.6......................  11.7.....................  8.9.
Electric Steam Boiler...........  2.6......................  11.7.....................  8.8.
Shipment-Weighted Average *.....  2.0......................  8.8......................  6.7.
----------------------------------------------------------------------------------------------------------------
                               Percentage of Consumers that Experience a Net Cost
----------------------------------------------------------------------------------------------------------------
Gas-fired Hot Water Boiler......  0.0%.....................  3.7%.....................  1.8%.
Gas-fired Steam Boiler..........  0.0%.....................  1.3%.....................  0.5%.
Oil-fired Hot Water Boiler......  0.0%.....................  3.5%.....................  1.4%.
Oil-fired Steam Boiler..........  0.0%.....................  1.3%.....................  0.6%.
Electric Hot Water Boiler.......  0.0%.....................  1.5%.....................  1.0%.
Electric Steam Boiler...........  0.0%.....................  1.5%.....................  1.0%.
Shipment-Weighted Average *.....  0.0%.....................  3.3%.....................  1.5%.
----------------------------------------------------------------------------------------------------------------
* Weighted by shares of each product class in total projected shipments in 2021.
Note: Parentheses indicate negative (-) values.

    DOE first considered TSL 3, which represents the max-tech 
efficiency levels. TSL 3 would save an estimated 0.0026 quads of 
energy. Under TSL 3, the NPV of consumer benefit would be $0.003 
billion using a discount rate of 7 percent, and $0.014 billion using a 
discount rate of 3 percent.
    The cumulative emissions reductions at TSL 3 are 0.153 Mt of 
CO2, 0.087 thousand tons of SO2, 0.278 thousand 
tons of NOX, 0.642 lbs of Hg, 0.669 thousand tons of 
CH4, and 0.002 thousand tons of N2O. The 
estimated monetary value of the CO2 emissions reduction at 
TSL 3 ranges from $0.848 million to $12.9 million.
    At TSL 3, the average LCC impact is a savings of $15 for gas-fired 
hot water boilers, $18 for gas-fired steam boilers, $20 for oil-fired 
hot water boilers, $13 for oil-fired steam boilers, $8 for electric hot 
water boilers, and $6 for electric steam boilers. The simple payback 
period is 6.7 years for gas-fired hot water boilers, 6.4 years for gas-
fired

[[Page 2408]]

steam boilers, 6.2 years for oil-fired hot water boilers, 6.1 years for 
oil-fired steam boilers, 8.9 for electric hot water boilers, and 8.8 
for electric steam boilers. The share of consumers experiencing a net 
LCC cost is 1.8 percent for gas-fired hot water boilers, 0.5 percent 
for gas-fired steam boilers, 1.4 percent for oil-fired hot water 
boilers, and 0.6 percent for oil-fired steam boilers, 1.0 percent for 
electric hot water boilers, and 1.0 percent for electric steam boilers.
    At TSL 3, the projected change in INPV ranges from a decrease of 
$1.71 million to an increase of $0.45 million, depending on the 
manufacturer markup scenario. If the larger decrease is realized, TSL 3 
could result in a net loss of 0.46 percent in INPV to manufacturers of 
covered residential boilers.
    Accordingly, the Secretary concludes that at TSL 3 for residential 
boiler standby mode and off mode power, the benefits of energy savings, 
positive NPV of consumer benefits at both 7-percent and 3-percent 
discount rates, 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. Accordingly, the Secretary has concluded that TSL 3 
would offer the maximum improvement in efficiency that is 
technologically feasible and economically justified, and would result 
in the significant conservation of energy.
    Therefore, based on the above considerations, DOE is adopting the 
standby mode and off mode energy conservation standards for residential 
boilers at TSL 3. The new energy conservation standards for standby 
mode and off mode, which are expressed as maximum power in watts, are 
shown in Table V.56.

 Table V.56--Standby Mode and Off Mode Energy Conservation Standards for
                           Residential Boilers
------------------------------------------------------------------------
                                                              PW,OFF
              Product class               PW,SB  (watts)      (watts)
------------------------------------------------------------------------
Gas-fired hot water boiler..............               9               9
Gas-fired steam boiler..................               8               8
Oil-fired hot water boiler..............              11              11
Oil-fired steam boiler..................              11              11
Electric hot water boiler...............               8               8
Electric steam boiler...................               8               8
------------------------------------------------------------------------

3. Annualized Benefits and Costs of the Adopted Standards
    The benefits and costs of the adopted standards can also be 
expressed in terms of annualized values. The annualized monetary value 
of net benefits is the sum of: (1) The annualized national economic 
value (expressed in 2014$) of the benefits from operating products that 
meet the adopted standards (consisting primarily of operating cost 
savings from using less energy, minus increases in product purchase 
costs), which is another way of representing consumer NPV, and (2) the 
annualized monetary value of the benefits of CO2 and 
NOX emission reductions.\128\
---------------------------------------------------------------------------

    \128\ 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 
(2021, 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 
a 30-year period, starting in the compliance year that yields the 
same present value.
---------------------------------------------------------------------------

    Table V.57 shows the annualized benefit and cost values for 
residential boilers under TSL 3 for AFUE standards, 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 
average SCC series that has a value of $40.0/t in 2015),\129\ the 
estimated cost of the AFUE standards in this rule is $17.0 million per 
year in increased equipment costs, while the estimated benefits are 
$56.5 million per year in reduced equipment operating costs, $15.5 
million per year in CO2 reductions, and $12.3 million per 
year in reduced NOX emissions. In this case, the net benefit 
amounts to $67.4 million per year.
---------------------------------------------------------------------------

    \129\ 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).
---------------------------------------------------------------------------

    Using a 3-percent discount rate for all benefits and costs and the 
average SCC series that has a value of $40.0/t in 2015, the estimated 
cost of the AFUE standards is $15.9 million per year in increased 
equipment costs, while the estimated benefits are $86.8 million per 
year in reduced operating costs, $15.5 million per year in 
CO2 reductions, and $19.4 million per year in reduced 
NOX emissions. In this case, the net benefit amounts to 
$105.8.

                          Table V.57--Annualized Benefits and Costs of Adopted AFUE Standards (TSL 3) for Residential Boilers *
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                     Million 2014$/year
                                   ---------------------------------------------------------------------------------------------------------------------
                                                                                                   Low-net-benefits estimate  High-net-benefits estimate
                                            Discount rate (%)             Primary estimate *                   *                           *
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                        Benefits
--------------------------------------------------------------------------------------------------------------------------------------------------------
Consumer Operating Cost Savings...  7...............................  56.5......................  53.5......................  60.1.
                                    3...............................  86.8......................  81.6......................  92.8.
CO2 Reduction Monetized Value       5...............................  4.4.......................  4.3.......................  4.5.
 ($12.2/t case) **.
CO2 Reduction Monetized Value       3...............................  15.5......................  15.3......................  15.8.
 ($40.0/t case) **.
CO2 Reduction Monetized Value       2.5.............................  23.0......................  22.7......................  23.4.
 ($62.3/t case) **.
CO2 Reduction Monetized Value       3...............................  47.5......................  46.8......................  48.3.
 ($117/t case) **.

[[Page 2409]]

 
NOX Reduction Monetized Value       7...............................  12.3......................  12.2......................  28.0
 [dagger].                          3...............................  19.4......................  19.2......................  43.2.
                                   ---------------------------------------------------------------------------------------------------------------------
    Total Benefits[dagger][dagger]  7 plus CO2 range................  73 to 116.................  70 to 112.................  93 to 136.
                                    7...............................  84.4......................  81.0......................  104.0.
                                    3 plus CO2 range................  111 to 154................  105 to 148................  141 to 184.
                                    3...............................  121.7.....................  116.1.....................  151.9.
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                          Costs
--------------------------------------------------------------------------------------------------------------------------------------------------------
Consumer Incremental Installed      7...............................  17.0......................  19.9......................  14.7
 Costs.                             3...............................  15.9......................  19.2......................  13.4.
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                   Net benefits/costs
--------------------------------------------------------------------------------------------------------------------------------------------------------
Total [dagger][dagger]............  7 plus CO2 range................  56 to 99..................  50 to 93..................  78 to 122.
                                    7...............................  67.4......................  61.1......................  89.3.
                                    3 plus CO2 range................  95 to 138.................  86 to 128.................  127 to 171.
                                    3...............................  105.8.....................  96.9......................  138.5.
--------------------------------------------------------------------------------------------------------------------------------------------------------
* This table presents the annualized costs and benefits associated with residential boilers shipped in 2021-2050. These results include benefits to
  consumers which accrue after 2050 from the products purchased in 2021-2050. 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.F.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 the 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. 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 is presenting 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 the 3-percent discount
  rate ($40.0/t in 2015) 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.

    Table V.58 shows the annualized benefit and cost values for 
residential boilers under TSL 3 for standby mode and off mode 
standards, 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 average SCC series that has a value of 
$40.0/t in 2015), the estimated cost of the residential boiler standby 
mode and off mode standards in this rule is $0.46 million per year in 
increased equipment costs, while the estimated benefits are $0.84 
million per year in reduced equipment operating costs, $0.25 million 
per year in CO2 reductions, and $0.03 million per year in 
reduced NOX emissions. In this case, the net benefit amounts 
to $0.66 million per year.
    Using a 3-percent discount rate for all benefits and costs and the 
average SCC series that has a value of $40.0/t in 2015, the estimated 
cost of the AFUE standards is $0.46 million per year in increased 
equipment costs, while the estimated benefits are $1.28 million per 
year in reduced operating costs, $0.25 million per year in 
CO2 reductions, and $0.04 million per year in reduced 
NOX emissions. In this case, the net benefit amounts to 
$1.11 million per year.

               Table V.58--Annualized Benefits and Costs of Adopted Standby Mode and Off Mode Standards (TSL 3) for Residential Boilers *
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                     Million 2014$/year
                                   ---------------------------------------------------------------------------------------------------------------------
                                                                                                   Low-net-benefits estimate  High-net-benefits estimate
                                            Discount rate (%)             Primary estimate *                   *                           *
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                        Benefits
--------------------------------------------------------------------------------------------------------------------------------------------------------
Consumer Operating Cost Savings...  7...............................  0.84......................  0.81......................  0.89.
                                    3...............................  1.28......................  1.25......................  1.38.
CO2 Reduction Monetized Value       5...............................  0.07......................  0.07......................  0.07.
 ($12.2/t case) **.

[[Page 2410]]

 
CO2 Reduction Monetized Value       3...............................  0.25......................  0.25......................  0.26.
 ($40.0/t case) **.
CO2 Reduction Monetized Value       2.5.............................  0.37......................  0.36......................  0.38.
 ($62.3/t case) **.
CO2 Reduction Monetized Value       3...............................  0.77......................  0.75......................  0.79.
 ($117/t case) **.
NOX Reduction Monetized Value       7...............................  0.03......................  0.03......................  0.06.
 [dagger].                          3...............................  0.04......................  0.04......................  0.10.
                                   ---------------------------------------------------------------------------------------------------------------------
    Total Benefits                  7 plus CO2 range................  0.94 to 1.63..............  0.91 to 1.59..............  1.02 to 1.74.
     [dagger][dagger].
                                    7...............................  1.12......................  1.09......................  1.21.
                                    3 plus CO2 range................  1.40 to 2.09..............  1.36 to 2.04..............  1.54 to 2.26.
                                    3...............................  1.58......................  1.54......................  1.73.
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                          Costs
--------------------------------------------------------------------------------------------------------------------------------------------------------
Consumer Incremental Installed      7...............................  0.46......................  0.45......................  0.47.
 Costs.                             3...............................  0.46......................  0.45......................  0.47.
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                   Net benefits/costs
--------------------------------------------------------------------------------------------------------------------------------------------------------
    Total [dagger][dagger]........  7 plus..........................  0.48 to 1.17..............  0.46 to 1.14..............  0.55 to 1.26.
                                    CO2 range.......................
                                    7...............................  0.66......................  0.63......................  0.73.
                                    3 plus CO2 range................  0.93 to 1.63..............  0.91 to 1.59..............  1.07 to 1.78.
                                    3...............................  1.11......................  1.09......................  1.25.
--------------------------------------------------------------------------------------------------------------------------------------------------------
* This table presents the annualized costs and benefits associated with residential boilers shipped in 2021-2050. These results include benefits to
  consumers which accrue after 2050 from the products purchased in 2021-2050. 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.
** 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 the 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. 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 is presenting 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 the 3-percent discount
  rate ($40.0/t in 2015) 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.

    In order to provide a complete picture of the overall impacts of 
this final rule, the following combines and summarizes the benefits and 
costs for both the amended AFUE standards and the new standby mode and 
off mode standards for residential boilers. Table V.59 shows the 
combined annualized benefit and cost values for the AFUE standards and 
the standby mode and off mode standards for residential boilers. The 
results under the primary estimate are as follows. Using a 7-percent 
discount rate for benefits and costs other than CO2 
reduction (for which DOE used a 3-percent discount rate along with the 
average SCC series that has a value of $40.0/t in 2015), the estimated 
cost of the residential boiler AFUE, standby mode, and off mode 
standards in this rule is $17.4 million per year in increased equipment 
costs, while the estimated benefits are $57.4 million per year in 
reduced equipment operating costs, $15.8 million per year in 
CO2 reductions, and $12.4 million per year in reduced 
NOX emissions. In this case, the net benefit amounts to 
$68.1 million per year.
    Using a 3-percent discount rate for all benefits and costs and the 
average SCC series that has a value of $40.0/t in 2015, the estimated 
cost of the residential boiler AFUE, standby mode, and off mode 
standards in this rule is $16.4 million per year in increased equipment 
costs, while the estimated benefits are $88.1 million per year in 
reduced equipment operating costs, $15.8 million per year in 
CO2 reductions, and $19.4 million per year in reduced 
NOX emissions. In this case, the net benefit amounts to 
$106.9 million per year.

[[Page 2411]]



   Table V.59--Annualized Benefits and Costs of Adopted AFUE and Standby Mode and Off Mode Energy Conservation
                                   Standards (TSL 3) for Residential Boilers *
----------------------------------------------------------------------------------------------------------------
                                                                           Million 2014$/year
                                                      ----------------------------------------------------------
                                                                                                        High-net-
                                 Discount rate (%)                                 Low-net-benefits     benefits
                                                          Primary estimate *          estimate *        estimate
                                                                                                            *
----------------------------------------------------------------------------------------------------------------
                                                    Benefits
----------------------------------------------------------------------------------------------------------------
Consumer Operating Cost       7......................  57.4...................  54.3..................  61.0.
 Savings.                     3......................  88.1...................  82.8..................  94.2.
CO2 Reduction Value ($12.2/t  5......................  4.5....................  4.4...................  4.6.
 case) **.
CO2 Reduction Value ($40.0/t  3......................  15.8...................  15.6..................  16.1.
 case) **.
CO2 Reduction Value ($62.3/t  2.5....................  23.4...................  23.0..................  23.8.
 case) **.
CO2 Reduction Value ($117/t   3......................  48.2...................  47.5..................  49.1.
 case) **.
NOX Reduction Value [dagger]  7......................  12.4...................  12.2..................  28.0.
                              3......................  19.4...................  19.2..................  43.3.
    Total Benefits            7 plus CO2 range.......  74.2 to 117.9..........  70.9 to 114...........  93.6 to
     [dagger][dagger].                                                                                  138.
                              7......................  85.5...................  82.1..................  105.
                              3 plus CO2 range.......  112 to 156.............  106 to 150............  142 to
                                                                                                        187.
                              3......................  123.3..................  117.6.................  153.6.
----------------------------------------------------------------------------------------------------------------
                                                      Costs
----------------------------------------------------------------------------------------------------------------
Consumer Incremental          7......................  17.4...................  20.3..................  15.1.
 Installed Costs.             3......................  16.4...................  19.6..................  13.9.
----------------------------------------------------------------------------------------------------------------
                                               Net Benefits/Costs
----------------------------------------------------------------------------------------------------------------
    Total [dagger][dagger]..  7 plus CO2 range.......  56.8 to 100............  50.6 to 93.7..........  78.5 to
                                                                                                        123.
                              7......................  68.1...................  61.8..................  90.0.
                              3 plus CO2 range.......  95.6 to 139............  86.8 to 130...........  128 to
                                                                                                        173.
                              3......................  106.9..................  98.0..................  139.7.
----------------------------------------------------------------------------------------------------------------
* This table presents the annualized costs and benefits associated with residential boilers shipped in 2021-
  2050. These results include benefits to consumers which accrue after 2050 from the products purchased in 2021-
  2050. 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.F.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 the 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. 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 is presenting 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 the 3-percent discount rate ($40.0/t in 2015) 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 residential boilers 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 of operating the equipment.
    (3) There are external benefits resulting from improved energy 
efficiency of appliances 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

[[Page 2412]]

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 regulatory action in 
this document is a ``significant regulatory action'' under section 
(3)(f) of Executive Order 12866. Accordingly, pursuant to section 
6(a)(3)(B) of the Executive 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 Executive Order, DOE has provided 
to OIRA a regulatory impact analysis (RIA), 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 prepared pursuant to Executive Order 
12866 can be found in the technical support document for this 
rulemaking. These documents have also been included in the rulemaking 
record.
    DOE has also reviewed this regulation pursuant to Executive Order 
13563, issued on January 18, 2011. 76 FR 3281 (Jan. 21, 2011). 
Executive Order 13563 is supplemental to and explicitly reaffirms the 
principles, structures, and definitions governing regulatory review 
established in Executive Order 12866. To the extent permitted by law, 
agencies are required by Executive Order 13563 to: (1) Propose or adopt 
a regulation only upon a reasoned determination that its benefits 
justify its costs (recognizing that some benefits and costs are 
difficult to quantify); (2) tailor regulations to impose the least 
burden on society, consistent with obtaining regulatory objectives, 
taking into account, among other things, and to the extent practicable, 
the costs of cumulative regulations; (3) select, in choosing among 
alternative regulatory approaches, those approaches that maximize net 
benefits (including potential economic, environmental, public health 
and safety, and other advantages; distributive impacts; and equity); 
(4) to the extent feasible, specify performance objectives, rather than 
specifying the behavior or manner of compliance that regulated entities 
must adopt; and (5) identify and assess available alternatives to 
direct regulation, including providing economic incentives to encourage 
the desired behavior, such as user fees or marketable permits, or 
providing information upon which choices can be made by the public.
    DOE emphasizes as well that Executive Order 13563 requires agencies 
to use the best available techniques to quantify anticipated present 
and future benefits and costs as accurately as possible. In its 
guidance, OIRA has emphasized that such techniques may include 
identifying changing future compliance costs that might result from 
technological innovation or anticipated behavioral changes. For the 
reasons stated in the preamble, DOE believes that this final rule is 
consistent with these principles, including the requirement that, to 
the extent permitted by law, benefits justify costs and that net 
benefits are maximized.

B. Review Under the Regulatory Flexibility Act

    The Regulatory Flexibility Act (5 U.S.C. 601 et seq.) requires 
preparation of a final regulatory flexibility analysis (FRFA) for any 
final rule unless the agency certifies that the rule 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 residential boilers, 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 residential boilers is classified 
under NAICS 333414, ``Heating Equipment (except Warm Air Furnaces) 
Manufacturing.'' The SBA sets a threshold of 500 employees or less for 
an entity to be considered as a small business for this category.
1. Description and Estimated Number of Small Entities Regulated
    To estimate the number of companies that could be small business 
manufacturers of products covered by this rulemaking, DOE conducted a 
market survey using publically-available information to identify 
potential small manufacturers. DOE's research involved industry trade 
association membership directories (including AHRI), public databases 
(e.g., AHRI Directory,\130\ the California Energy Commission Appliance 
Efficiency Database \131\), individual company Web sites, and market 
research tools (e.g., Hoovers reports \132\) to create a list of 
companies that manufacture or sell products covered by this rulemaking. 
DOE also asked stakeholders and industry representatives if they were 
aware of any other small manufacturers during manufacturer interviews 
and at DOE public meetings. DOE reviewed publicly-available data and 
contacted select companies on its list, as necessary, to determine 
whether they met the SBA's definition of a small business manufacturer 
of covered residential boilers. DOE screened out companies that do not 
offer products covered by this rulemaking, do not meet the definition 
of a ``small business,'' or are foreign owned and operated.
---------------------------------------------------------------------------

    \130\ See www.ahridirectory.org/ahriDirectory/pages/home.aspx.
    \131\ See http://www.energy.ca.gov/appliances/.
    \132\ See http://www.hoovers.com.
---------------------------------------------------------------------------

    DOE identified 36 manufacturers of residential boilers sold in the 
U.S. DOE then determined that 23 are large manufacturers or 
manufacturers that are foreign owned and operated. The remaining 13 
domestic manufacturers meet the SBA's definition of a ``small 
business.'' Of these 13 small businesses, nine manufacture the boilers 
covered by this rulemaking, while the other four manufacturers rebrand 
imported

[[Page 2413]]

products or products manufactured by other small companies.
    Before issuing this final rule, DOE attempted to contact all the 
small business manufacturers of residential boilers it had identified. 
Two of the small businesses agreed to take part in an MIA interview. 
DOE also obtained information about small business impacts while 
interviewing large manufacturers.
    DOE estimates that small manufacturers control approximately 15 
percent of the residential boiler market. Based on DOE's research, 
three small businesses manufacture all four product classes of boilers 
domestically; four small businesses primarily produce condensing boiler 
products (and rely heat exchangers sourced from other manufacturers); 
and two manufacturers primarily produce oil-fired hot water boiler 
products. The remaining four small businesses wholesale or rebrand 
products that are imported from Europe or Asia, or design products and 
source manufacturing to a domestic firm.
2. Description and Estimate of Compliance Requirements
    When confronted with new or amended energy conservation standards, 
small businesses must make investments in research and development to 
redesign their products, but because they have lower sales volumes, 
they must spread these costs across fewer units. Moreover, smaller 
manufacturers may experience higher per-model testing costs relative to 
larger manufacturers, as they may not possess their own test facilities 
and, therefore, must outsource all testing at a higher per-unit cost.
    These considerations could affect the three small manufacturers 
that offer all four product classes, the two manufacturers that only 
produce one or two product classes, and the four small businesses that 
rebrand boilers that do their own design work could see negative 
impacts. Being small businesses, it is likely that these manufacturers 
have fewer engineers and product development resources and may have 
greater difficulty bringing their portfolio of products into compliance 
with the new and amended energy conservation standards within the 
allotted timeframe. Also, these small manufacturers may have to divert 
engineering resources from customer and new product initiatives for a 
longer period of time.
    Smaller manufacturers often lack the purchasing power of larger 
manufacturers. For example, suppliers of bulk purchase parts and 
components (such as gas valves) give boiler manufacturers discounts 
based on the quantities purchased. Therefore, larger manufacturers may 
have a pricing advantage because they have higher volume purchases. 
This purchasing power differential between high-volume and low-volume 
orders applies to other residential boiler components as well, such as 
ignition systems and inducer fan assemblies.
    To meet the new and amended standards, manufacturers may have to 
seek outside capital to cover expenses related to testing and product 
design equipment. Smaller firms typically have a higher cost of 
borrowing due to higher perceived risk on the part of investors, 
largely attributed to lower cash flows and lower per-unit 
profitability. In these cases, small manufacturers may observe higher 
costs of debt than larger manufacturers.
    While DOE does not expect high capital conversion costs at TSL 3, 
DOE does expect smaller businesses would have to make significant 
product conversion investments relative to larger manufacturers. As 
previously noted, some of these smaller manufacturers are heavily 
weighted toward baseline products and other products below the 
efficiency levels adopted in this notice. As Table VI.1 illustrates, 
smaller manufacturers would have to increase their R&D spending to 
bring products into compliance and to develop new products at TSL 3, 
the adopted level.

                         Table VI.1--Impacts of Conversion Costs on a Small Manufacturer
----------------------------------------------------------------------------------------------------------------
                                  Capital conversion
                                       cost as a      Product conversion   Total conversion    Total conversion
                                     percentage of         cost as a           cost as a           cost as a
                                    annual capital       percentage of       percentage of       percentage of
                                     expenditures     annual R&D expense    annual revenue       annual EBIT *
----------------------------------------------------------------------------------------------------------------
Average Large Manufacturer......                   3                  10                   0                   3
Average Small Manufacturer......                  17                  79                   2                  22
----------------------------------------------------------------------------------------------------------------
* EBIT means ``earnings before interest and taxes.''

    At TSL 3, the level adopted in this notice, DOE estimates capital 
conversion costs of $0.01 million and product conversion costs of $0.05 
million for an average small manufacturer. DOE estimates that an 
average large manufacturer will incur capital conversion costs of $0.02 
million and product conversion costs of $0.05 million. Based on the 
results in Table VI.1, DOE recognizes that small manufacturers will 
generally face a relatively higher conversion cost burden than larger 
competitors.
    Manufacturers that have the majority of their products and sales at 
efficiency levels above the adopted standards may have lower conversion 
costs than those listed in Table VI.1. In particular, the four small 
manufacturers that primarily sell condensing products are unlikely to 
be affected by the efficiency levels at TSL 3, as all of their products 
are already above the efficiency levels being adopted.
    Furthermore, DOE recognizes that small manufacturers that primarily 
sell low-efficiency products today will face a greater burden relative 
to the small manufacturers that primarily sell high-efficiency 
products. At TSL 3, the level adopted in this notice, DOE believes that 
the three manufacturers that manufacture across all four product 
classes would have higher conversion costs because many of their 
products do not meet the standard adopted in this notice and would 
require redesign. Consequently, these manufacturers would have to 
expend funds to redesign their commodity products, or develop a new, 
higher-efficiency baseline product.
    The two companies that primarily produce oil-fired hot water 
boilers could also be impacted, as they are generally much smaller than 
the small businesses that produce all product classes, have fewer 
shipments and smaller revenues, and are likely to have limited R&D 
resources. Both of these companies, however, do have oil-fired hot 
water boiler product listings that meet the efficiency standards 
adopted in this notice.
    DOE estimates that one of the four companies that rebrands imported 
or sourced products does its own design work, while the other three 
import high-efficiency products from Europe or Asia. It is possible 
that the company that

[[Page 2414]]

designs its own products could be affected by product conversion costs 
at TSL 3, while it is unlikely that the other three would be greatly 
impacted.
    Based on this analysis, DOE notes that on average, small businesses 
will experience total conversion costs on the order of $60,000. 
However, some companies will fall below and above the average. In 
particular, DOE has identified two small manufacturers that could 
experience greater conversion costs burdens than indicated by the 
average due to not having any products meeting the standard in one or 
two product classes.
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 final rule being adopted.
4. Significant Alternatives to the Rule
    The discussion in the previous section analyzes impacts on small 
businesses that would result from DOE's final rule, represented by TSL 
3. In reviewing alternatives to the final rule, DOE examined energy 
conservation standards set at lower efficiency levels. While TSL 1 and 
TSL 2 would reduce the impacts on small business manufacturers, it 
would come at the expense of a reduction in energy savings. TSL 1 for 
the AFUE standards achieves 57 percent lower energy savings compared to 
the energy savings at TSL 3. TSL 2 for the AFUE standards achieves 36 
percent lower energy savings compared to the energy savings at TSL 3.
    DOE believes that establishing standards at TSL 3 balances the 
benefits of the energy savings at TSL 3 with the potential burdens 
placed on residential boiler manufacturers, including small business 
manufacturers. Accordingly, DOE is not adopting one of the other TSLs 
considered in the analysis, or the other policy alternatives examined 
as part of the regulatory impacts analysis and included in chapter 17 
of the NOPR TSD.
    Additional compliance flexibilities may be available through other 
means. For example, individual manufacturers may petition for a waiver 
of the applicable test procedure. (See 10 CFR 431.401) Further, EPCA 
provides that a manufacturer whose annual gross revenue from all of its 
operations does not exceed $8 million may apply for an exemption from 
all or part of an energy conservation standard for a period not longer 
than 24 months after the effective date of a final rule establishing 
the standard. Additionally, section 504 of the Department of Energy 
Organization Act, 42 U.S.C. 7194, provides authority for the Secretary 
to adjust a rule issued under EPCA in order to prevent ``special 
hardship, inequity, or unfair distribution of burdens'' that may be 
imposed on that manufacturer as a result of such rule. Manufacturers 
should refer to 10 CFR part 430, subpart E, and part 1003 for 
additional details.

C. Review Under the Paperwork Reduction Act of 1995

    Manufacturers of residential boilers must certify to DOE that their 
products comply with any applicable energy conservation standards. In 
certifying compliance, manufacturers must test their products according 
to the DOE test procedure for residential boilers, 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 
residential boilers. 76 FR 12422 (March 7, 2011); 80 FR 5099 (Jan. 30, 
2015). The collection-of-information requirement for the certification 
and recordkeeping is subject to review and approval by OMB under the 
Paperwork Reduction Act (PRA). This requirement has been approved by 
OMB under OMB control number 1910-1400. Public reporting burden for the 
certification is estimated to average 30 hours per response, including 
the time for reviewing instructions, searching existing data sources, 
gathering and maintaining the data needed, and completing and reviewing 
the collection of information.
    Notwithstanding any other provision of the law, no person is 
required to respond to, nor shall any person be subject to a penalty 
for failure to comply with, a collection of information subject to the 
requirements of the PRA, unless that collection of information displays 
a currently valid OMB Control Number.

D. Review Under the National Environmental Policy Act of 1969

    Pursuant to the National Environmental Policy Act (NEPA) of 1969, 
DOE has determined that this rule fits within the category of actions 
included in Categorical Exclusion (CX) B5.1 and otherwise meets the 
requirements for application of a CX. See 10 CFR part 1021, App. B, 
B5.1(b); 1021.410(b) and App. B, B(1)-(5). The rule fits within this 
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 (Aug. 10, 1999), 
imposes certain requirements on Federal agencies formulating and 
implementing policies or regulations that preempt State law or that 
have Federalism implications. The Executive Order requires agencies to 
examine the constitutional and statutory authority supporting any 
action that would limit the policymaking discretion of the States and 
to carefully assess the necessity for such actions. The Executive Order 
also requires agencies to have an accountable process to ensure 
meaningful and timely input by State and local officials in the 
development of regulatory policies that have Federalism implications. 
On March 14, 2000, DOE published a statement of policy describing the 
intergovernmental consultation process it will follow in the 
development of such regulations. 65 FR 13735. DOE has examined this 
rule and has determined that it would not have a substantial direct 
effect on the States, on the relationship between the national 
government and the States, or on the distribution of power and 
responsibilities among the various levels of government. EPCA governs 
and prescribes Federal preemption of State regulations as to energy 
conservation for the products that are the subject of this final rule. 
States can petition DOE for exemption from such preemption to the 
extent, and based on criteria, set forth in EPCA. (42 U.S.C. 6297) 
Therefore, no further action is required by Executive Order 13132.

F. Review Under Executive Order 12988

    With respect to the review of existing regulations and the 
promulgation of new regulations, section 3(a) of Executive Order 12988, 
``Civil Justice Reform,'' imposes on Federal agencies the general duty 
to adhere to the following requirements: (1) Eliminate drafting errors 
and ambiguity; (2) write regulations to minimize litigation; (3) 
provide a clear legal standard for affected conduct rather than a 
general standard; and (4) promote simplification and burden reduction. 
61 FR 4729 (Feb. 7, 1996). Regarding the review required by section 
3(a), section 3(b) of Executive

[[Page 2415]]

Order 12988 specifically requires that Executive agencies make every 
reasonable effort to ensure that the regulation: (1) Clearly specifies 
the preemptive effect, if any; (2) clearly specifies any effect on 
existing Federal law or regulation; (3) provides a clear legal standard 
for affected conduct while promoting simplification and burden 
reduction; (4) specifies the retroactive effect, if any; (5) adequately 
defines key terms; and (6) addresses other important issues affecting 
clarity and general draftsmanship under any guidelines issued by the 
Attorney General. Section 3(c) of Executive Order 12988 requires 
Executive agencies to review regulations in light of applicable 
standards in section 3(a) and section 3(b) to determine whether they 
are met or it is unreasonable to meet one or more of them. DOE has 
completed the required review and determined that, to the extent 
permitted by law, this final rule meets the relevant standards of 
Executive Order 12988.

G. Review Under the Unfunded Mandates Reform Act of 1995

    Title II of the Unfunded Mandates Reform Act of 1995 (UMRA) 
requires each Federal agency to assess the effects of Federal 
regulatory actions on State, local, and Tribal governments and the 
private sector. Public Law 104-4, sec. 201 (codified at 2 U.S.C. 1531). 
For a regulatory action likely to result in a rule that may cause the 
expenditure by State, local, and Tribal governments, in the aggregate, 
or by the private sector of $100 million or more in any one year 
(adjusted annually for inflation), section 202 of UMRA requires a 
Federal agency to publish a written statement that estimates the 
resulting costs, benefits, and other effects on the national economy. 
(2 U.S.C. 1532(a), (b)) The UMRA also requires a Federal agency to 
develop an effective process to permit timely input by elected officers 
of State, local, and Tribal governments on a ``significant 
intergovernmental mandate,'' and requires an agency plan for giving 
notice and opportunity for timely input to potentially affected small 
governments before establishing any requirements that might 
significantly or uniquely affect them. On March 18, 1997, DOE published 
a statement of policy on its process for intergovernmental consultation 
under UMRA. 62 FR 12820. DOE's policy statement is also available at 
http://energy.gov/sites/prod/files/gcprod/documents/umra_97.pdf.
    Although it does not contain a Federal intergovernmental mandate, 
DOE has concluded that this final rule adopting amended and new energy 
conservation standards for residential boilers may require annual 
expenditures of $100 million or more in any one year by the private 
sector. Such expenditures may include: (1) Investment in research and 
development and in capital expenditures by residential boiler 
manufacturers in the years between the final rule and the compliance 
date for the new standards, and (2) incremental additional expenditures 
by consumers to purchase higher-efficiency residential boilers, 
starting at the compliance date for the applicable standard.
    Section 202 of UMRA authorizes a Federal agency to respond to the 
content requirements of UMRA in any other statement or analysis that 
accompanies the 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 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 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. As required by 42 U.S.C. 6295(f) 
and (o), this final rule establishes amended and new energy 
conservation standards for residential boilers that are designed to 
achieve the maximum improvement in energy efficiency that DOE has 
determined to be both technologically feasible and economically 
justified. A full discussion of the alternatives considered by DOE is 
presented in the ``Regulatory Impact Analysis'' section of the TSD 
(chapter 17) for this 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 rule would not have any impact on the autonomy or integrity of the 
family as an institution. Accordingly, DOE has concluded that it is not 
necessary to prepare a Family Policymaking Assessment.

I. Review Under Executive Order 12630

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

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

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

K. Review Under Executive Order 13211

    Executive Order 13211, ``Actions Concerning Regulations That 
Significantly Affect Energy Supply, Distribution, or Use,'' 66 FR 28355 
(May 22, 2001), requires Federal agencies to prepare and submit to OIRA 
at OMB, a Statement of Energy Effects for any significant energy 
action. A ``significant energy action'' is defined as any action by an 
agency that promulgates or is expected to lead to promulgation of a 
final rule, and that: (1) Is a significant regulatory action under 
Executive Order 12866, or any successor order; and (2) is likely to 
have a significant adverse effect on the supply, distribution, or use 
of energy, or (3) is designated by the Administrator of OIRA as a 
significant energy action. For any significant energy action, the 
agency must give a detailed statement of any adverse effects on energy 
supply, distribution, or use should the proposal be implemented, and of 
reasonable alternatives to the action and their expected benefits on 
energy supply, distribution, and use.
    DOE has concluded that this regulatory action, which sets forth 
amended and new energy conservation standards for residential boilers, 
is not a significant energy action because the standards are not likely 
to have a significant adverse effect on the supply,

[[Page 2416]]

distribution, or use of energy, nor has it been designated as such by 
the Administrator at OIRA. Accordingly, DOE has not prepared a 
Statement of Energy Effects on this final rule.

L. Review Under the Information Quality Bulletin for Peer Review

    On December 16, 2004, OMB, in consultation with the Office of 
Science and Technology Policy (OSTP), issued its Final Information 
Quality Bulletin for Peer Review (the Bulletin). 70 FR 2664 (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 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).

VII. Approval of the Office of the Secretary

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

List of Subjects in 10 CFR Part 430

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

    Issued in Washington, DC, on December 30, 2015.
David J. Friedman,
Principal Deputy Assistant Secretary, Energy Efficiency and Renewable 
Energy.

    For the reasons set forth in the preamble, DOE amends part 430 of 
chapter II, subchapter D, of title 10 of the Code of Federal 
Regulations, as set forth below:

PART 430--ENERGY CONSERVATION PROGRAM FOR CONSUMER PRODUCTS

0
1. The authority citation for part 430 continues to read as follows:

    Authority: 42 U.S.C. 6291-6309; 28 U.S.C. 2461 note.


0
2. Section 430.32 is amended by:
0
a. Adding in paragraph (e)(2)(ii) introductory text, the words ``and 
before January 15, 2021,'' after ``2012,'';
0
b. Redesignating paragraphs (e)(2)(iii) and (iv) as paragraphs 
(e)(2)(iv) and (v), respectively; and
0
c. Adding new paragraph (e)(2)(iii).
    The addition reads as follows:


Sec.  430.32  Energy and water conservation standards and their 
compliance dates.

* * * * *
    (e) * * *
    (2) * * *
    (iii)(A) Except as provided in paragraph (e)(2)(v) of this section, 
the AFUE of residential boilers, manufactured on and after January 15, 
2021, shall not be less than the following and must comply with the 
design requirements as follows:

------------------------------------------------------------------------
                                    AFUE \1\
         Product class              (percent)      Design requirements
------------------------------------------------------------------------
(1) Gas-fired hot water boiler.              84  Constant-burning pilot
                                                  not permitted.
                                                  Automatic means for
                                                  adjusting water
                                                  temperature required
                                                  (except for boilers
                                                  equipped with tankless
                                                  domestic water heating
                                                  coils).
(2) Gas-fired steam boiler.....              82  Constant-burning pilot
                                                  not permitted.
(3) Oil-fired hot water boiler.              86  Automatic means for
                                                  adjusting temperature
                                                  required (except for
                                                  boilers equipped with
                                                  tankless domestic
                                                  water heating coils).
(4) Oil-fired steam boiler.....              85  None.
(5) Electric hot water boiler..            None  Automatic means for
                                                  adjusting temperature
                                                  required (except for
                                                  boilers equipped with
                                                  tankless domestic
                                                  water heating coils).
(6) Electric steam boiler......            None  None.
------------------------------------------------------------------------
\1\ Annual Fuel Utilization Efficiency, as determined in Sec.
  430.23(n)(2) of this part.

    (B) Except as provided in paragraph (e)(2)(v) of this section, the 
standby mode power consumption (PW,SB) and off mode power 
consumption (PW,OFF) of residential boilers, manufactured on 
and after January 15, 2021, shall not be more than the following:

------------------------------------------------------------------------
                                        PW,SB (watts)    PW,OFF (watts)
            Product class
------------------------------------------------------------------------
(1) Gas-fired hot water boiler......                 9                 9
(2) Gas-fired steam boiler..........                 8                 8
(3) Oil-fired hot water boiler......                11                11
(4) Oil-fired steam boiler..........                11                11
(5) Electric hot water boiler.......                 8                 8

[[Page 2417]]

 
(6) Electric steam boiler...........                 8                 8
------------------------------------------------------------------------

* * * * *

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

U.S. Department of Justice
Antitrust Division
William J. Baer
Assistant Attorney General
RFK Main Justice Building
950 Pennsylvania Ave., NW
Washington, DC 20530-0001
(202)514-2401/(202)616-2645 (Fax)

July 1, 2015

Anne Harkavy
Deputy General Counsel for Litigation, Regulation and Enforcement
U.S. Department of Energy
1000 Independence Ave, SW.
Washington, DC 20585

Dear Deputy General Counsel Harkavy:

    I am responding to your March 13, 2015 letters seeking the views 
of the Attorney General about the potential impact on competition of 
proposed energy conservation standards for residential boilers. Your 
request was submitted under Section 325(o)(2)(B)(i)(V) of the Energy 
Policy and Conservation Act, as amended (ECPA), 42 U.S.C. 
6295(o)(2)(B)(i)(V), which requires the Attorney General to make a 
determination of the impact of any lessening of competition that is 
likely to result from the imposition of proposed energy conservation 
standards. The Attorney General's responsibility for responding to 
requests from other departments about the effect of a program on 
competition has been delegated to the Assistant Attorney General for 
the Antitrust Division in 28 CFR 0.40(g).
    In conducting its analysis, the Antitrust Division examines 
whether a proposed standard may lessen competition, for example, by 
substantially limiting consumer choice or increasing industry 
concentration. A lessening of competition could result in higher 
prices to manufacturers and consumers.
    We have reviewed the proposed energy conservation standards 
contained in the Notice of Proposed Rulemaking (80 FR 17222, March 
31, 2015) (NOPR) and the related Technical Support Documents. We 
have also reviewed supplementary information submitted to the 
Attorney General by the Department of Energy, as well as material 
presented at the public meeting held on the proposed standards on 
April 30, 2015. Based on this review, our conclusion is that the 
proposed energy conservation standards for residential boilers are 
unlikely to have a significant adverse impact on competition.

Sincerely,

William J. Baer

[FR Doc. 2016-00025 Filed 1-14-16; 8:45 am]
BILLING CODE 6450-01-P