[Federal Register Volume 86, Number 10 (Friday, January 15, 2021)]
[Rules and Regulations]
[Pages 4776-4817]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-28956]
[[Page 4775]]
Vol. 86
Friday,
No. 10
January 15, 2021
Part X
Department of Energy
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10 CFR Parts 430 and 431
Energy Conservation Program for Appliance Standards: Energy
Conservation Standards for Residential Furnaces and Commercial Water
Heaters; Final Rule
Federal Register / Vol. 86, No. 10 / Friday, January 15, 2021 / Rules
and Regulations
[[Page 4776]]
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DEPARTMENT OF ENERGY
10 CFR Parts 430 and 431
RIN 1904-AE39
Energy Conservation Program for Appliance Standards: Energy
Conservation Standards for Residential Furnaces and Commercial Water
Heaters
AGENCY: Office of Energy Efficiency and Renewable Energy, Department of
Energy.
ACTION: Notification of final interpretive rule.
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SUMMARY: In response to a petition for rulemaking submitted on October
18, 2018 (Gas Industry Petition), the Department of Energy (DOE or the
Department) published that petition in the Federal Register on November
1, 2018, for public review and input. DOE subsequently published in the
Federal Register a proposed interpretive rule on July 11, 2019, and a
supplemental notice of proposed interpretive rule on September 24,
2020. After carefully considering the public comments on its proposals,
DOE has decided to issue a final interpretive rule determining that, in
the context of residential furnaces, commercial water heaters, and
similarly-situated products/equipment, use of non-condensing technology
(and associated venting) constitute a performance-related ``feature''
under the Energy Policy and Conservation Act (EPCA) that cannot be
eliminated through adoption of an energy conservation standard. In
light of this final interpretation, published elsewhere in this issue
of the Federal Register, DOE withdraws its March 12, 2015 proposed rule
and September 23, 2016 supplemental proposed rule for energy
conservation standards for non-weatherized gas furnace and mobile home
gas furnaces, as well as its May 31, 2016 proposed rule for energy
conservation standards for commercial water heating equipment.
DATES: This final interpretive rule is effective January 15, 2021.
ADDRESSES: The docket, which includes Federal Register notices, public
comments, and other supporting documents/materials, is available for
review at http://www.regulations.gov. All documents in the docket are
listed in the http://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.
The docket web page can be found at http://www.regulations.gov/docket?D=EERE-2018-BT-STD-0018. The docket web page contains
instructions on how to access all documents, including public comments,
in the docket.
For further information on how to review the docket, contact the
Appliance and Equipment Standards Program staff at (202) 586-6636 or by
email: [email protected].
FOR FURTHER INFORMATION CONTACT:
Ms. Lysia Bowling, Senior Advisor, U.S. Department of Energy,
Office of Energy Efficiency and Renewable Energy, 1000 Independence
Avenue SW, Washington, DC 20585. Telephone: (202) 430-1257. Email:
[email protected].
Mr. Eris Stas, U.S. Department of Energy, Office of the General
Counsel, 1000 Independence Avenue SW, Washington, DC 20585. Telephone:
(202) 586-5827. Email: [email protected].
SUPPLEMENTARY INFORMATION:
Table of Contents
I. Background
II. Summary Description
A. Relevant Statutory Provisions
B. DOE's Historical Interpretation
C. The Gas Industry Petition
D. DOE's Proposed Interpretive Rule
E. DOE's Supplemental Proposed Interpretive Rule
III. Response to Comments
A. Legal Authority
1. Legal Authority To Set Separate Product/Equipment Classes
Based Upon Condensing and Non-Condensing Technologies
a. Comments Supporting the Proposed Interpretation
b. Comments Opposing the Proposed Interpretation
i. Support for DOE's Prior Interpretation
ii. Violation of Legal Standards
iii. Aesthetics
iv. Delay
v. Regulatory Burden/Litigation/Uncertainty/Preemption
vi. Other Negative Effects of a Change in Interpretation
1. Legal Authority To Set ``Small'' Furnace Product Classes
2. Market Trends
3. Requests for Clarification
B. Comments Regarding Economics-Related Issues
1. Consumer Impacts
a. Legal Arguments
b. Factual Arguments
2. Fuel Switching
3. Other Economic Issues
C. Analytical Issues
D. Other Issues
1. AFUE2
2. Environmental and Climate Policy Issues
3. Other Requested Relief
4. Final Agency Action
IV. DOE's Final Interpretation
V. Conclusion
VI. Approval of the Office of the Secretary
I. Background
On October 18, 2018, the Department received a petition for
rulemaking submitted by the American Public Gas Association (APGA),
Spire, Inc., the Natural Gas Supply Association (NGSA), the American
Gas Association (AGA), and the National Propane Gas Association (NPGA),
collectively referred to as the ``Gas Industry Petitioners,'' asking
DOE to: (1) Issue an interpretive rule stating that DOE's proposed
energy conservation standards for residential furnaces \1\ and
commercial water heaters \2\ would result in the unavailability of
``performance characteristics'' within the meaning of the Energy Policy
and Conservation Act \3\ (EPCA; 42 U.S.C. 6291 et seq.), as amended
(i.e., by setting standards which can only be met by products/equipment
using condensing combustion technology and thereby precluding the
distribution in commerce of products/equipment using non-condensing
combustion technology) and (2) withdraw the proposed energy
conservation standards for residential furnaces \4\ and commercial
water heaters \5\ based upon such findings. DOE published the petition
in the Federal Register on November 1, 2018 (83 FR 54883) and requested
public comment, with a comment period scheduled to close on January 30,
2019. DOE received two requests from interested parties seeking an
extension of the comment period in order to develop additional data
relevant to the petition. DOE
[[Page 4777]]
granted those requests through publication in the Federal Register of a
notice extending the comment period on the notice of petition for
rulemaking until March 1, 2019. 84 FR 449 (Jan. 29, 2019).
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\1\ The Gas Industry Petitioners refer to a notice of proposed
rulemaking for residential non-weatherized gas furnaces and mobile
home furnaces published in the Federal Register on March 12, 2015
(80 FR 13120), as well as a supplemental notice of proposed
rulemaking published in the Federal Register on September 23, 2016
(81 FR 65720). These DOE proposals may be found in the docket at
Docket No. EERE-2014-BT-STD-0031-0032 and Docket No. EERE-2014-BT-
STD-0031-0230, respectively.
\2\ The Gas Industry Petitioners refer to a notice of proposed
rulemaking for commercial water heating equipment published in the
Federal Register on May 31, 2016 (81 FR 34440). This DOE proposal
may be found in the docket at Docket No. EERE-2014-BT-STD-0042-0018.
\3\ All references to EPCA in this document refer to the statute
as amended through America's Water Infrastructure Act of 2018,
Public Law 115-270 (Oct. 23, 2018).
\4\ Standards for non-weatherized residential furnaces were
published in a notice of proposed rulemaking at 80 FR 13120 (March
12, 2015) (Docket No. EERE-2014-BT-STD-0031-0032) and in a
supplemental notice of proposed rulemaking at 81 FR 65720 (Sept. 23,
2016) (Docket No. EERE-2014-BT-STD-0031-0230).
\5\ Standards for commercial water heating equipment were
published in a notice of proposed rulemaking at 81 FR 34440 (May 31,
2016) (Docket No. EERE-2014-BT-STD-0042).
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The 90-day public comment period, including the 30-day extension to
submit comments, invited public input in order to better understand
stakeholder perspectives and increase transparency around a complex
issue involving DOE's legal authority. DOE received comments from a
variety of stakeholders, including representatives from gas industry
associations, appliance manufacturers, the manufactured housing
industry, efficiency advocates, consumer advocates, State organizations
and Attorneys General, and individuals (mostly form letter comments).
In general, the gas industry associations and the manufactured housing
industry supported the petition, and the advocates and State officials
opposed it. Furnace and water heater manufacturer reactions to the
petition were generally mixed.
After carefully considering the comments on the petition, DOE
published a notice of proposed interpretive rule in the Federal
Register on July 11, 2019, to provide the public additional information
about DOE's tentative interpretation of EPCA's ``features'' provision
\6\ in the context of condensing vs. non-condensing furnaces and water
heaters, as informed by public comments. 84 FR 22011. The proposed
interpretive rule tentatively determined that, in the context of
residential furnaces, commercial water heaters, and similarly-situated
products/equipment, use of non-condensing technology (and associated
venting) may constitute a performance-related ``feature'' under EPCA
that cannot be eliminated through adoption of an energy conservation
standard. If such interpretation were to be finalized, DOE anticipated
that in future rulemakings for affected products/equipment, it would
suffice to consider setting product/equipment classes based upon the
key distinction of the appliance's utilization of condensing or non-
condensing technology. (The proposed interpretive rule, in which DOE
responded to comments on the notice of petition for rulemaking, is
discussed in further detail in section II.D of this document.) Once
again, DOE received comments from a variety of stakeholders, including
representatives from gas industry associations, the housing industry,
appliance manufacturers, utilities, environmental and efficiency
advocates, consumer advocates, State organizations and Attorneys
General, and individuals. Consistent with the opinions expressed in
response to the petition, in general, the gas industry associations,
the housing industry, and most manufacturers supported the proposed
interpretive rule, and the advocates and State officials opposed it.
Specifically, DOE received comments on the proposed interpretive rule
from:
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\6\ See 42 U.S.C. 6295(o)(4); 42 U.S.C.
6313(a)(6)(B)(iii)(II)(aa); and as applicable in certain cases
through 42 U.S.C. 6316(a)).
Table I.1--Entities Submitting Written Comment on the Proposed
Interpretive Rule
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Commenter Affiliation
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Advocates Joint Comment: Energy Efficiency
and Consumer
Advocates.
[ssquf] Appliance Standards Awareness Project
(ASAP).
[ssquf] Alliance to Save Energy (ASE).
[ssquf] American Council for an Energy-
Efficient Economy (ACEEE).
[ssquf] Consumer Federation of America (CFA).
[ssquf] National Consumer Law Center (NCLC).
Air-Conditioning, Heating & Refrigeration Trade Association.
Institute (AHRI).
A.O. Smith Corporation (A.O. Smith). Industry.
Attorneys General Joint Comment (AGs Joint State/Local
Comment): Governments.
[ssquf] State of New York.
[ssquf] State of California.
[ssquf] State of Colorado.
[ssquf] District of Columbia.
[ssquf] State of Illinois.
[ssquf] State of Maine.
[ssquf] State of Maryland.
[ssquf] Commonwealth of Massachusetts.
[ssquf] State of Minnesota.
[ssquf] State of New Jersey.
[ssquf] State of Oregon.
[ssquf] State of Vermont.
[ssquf] State of Washington.
[ssquf] Corporation Counsel of the City of New
York.
Bradford White Corporation (BWC). Industry.
Burnham Holdings, Inc. (BHI). Industry.
California Energy Commission (CEC). State Government.
California Investor-Owned Utilities (CA IOUs): Utilities.
[ssquf] Pacific Gas and Electric Co. (PG&E).
[ssquf] San Diego Gas and Electric (SDG&E.
[ssquf] Southern California Edison (SCE).
Carrier Corporation (Carrier). Industry.
Ceres BICEP Network (Ceres). Business Coalition.
Consumer Federation of America and National Consumer Advocates.
Consumer Law Center (CFA/NCLC).
Crown Boiler Company (Crown Boiler). Industry.
Environmentalists Joint Comment: Environmental
Advocates.
[ssquf] Natural Resources Defense Council
(NRDC).
[ssquf] Sierra Club.
[ssquf] Earthjustice.
[[Page 4778]]
Lennox International, Inc. (Lennox). Industry.
Weil-McLain. Industry.
Anonymous. Unaffiliated.
Anonymous. Unaffiliated.
Sarah G. Unaffiliated.
Kathy McCardwell. Unaffiliated.
Elizabeth Reed. Unaffiliated.
Suzanne Sorkin. Unaffiliated.
Laura Woods. Unaffiliated.
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In the course of considering the public comments on its proposed
interpretation, comments from U.S. Boiler, BHI, and Crown Boiler
presented DOE with an alternative approach that did not focus on ``non-
condensing'' technology as the performance-related feature. While the
commenters suggesting this alternative were generally supportive of the
proposed interpretation, they expressed concern that unless subsequent
DOE rulemakings implement the interpretation through product/equipment
classes focused on venting compatibility (particularly preservation of
Category I venting), many of the same problems identified in the Gas
Industry Petition may still arise. In order to gather further
information and comment on this specific issue, DOE published a
supplemental notice of proposed interpretation in the Federal Register
on September 24, 2020 (the September 2020 SNOPIR), which proposed
alternative approaches to product/equipment class setting in this
context. 85 FR 60090. (The supplemental proposed interpretive rule is
discussed in further detail in section II.E of this document.)
In response to its supplemental proposed interpretive rule, DOE
received comments from:
Table I.2--Entities Submitting Written Comment on the Supplemental
Proposed Interpretive Rule
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Commenter Affiliation
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Advocates Joint Comment II Energy Efficiency
and Consumer
Advocates.
[ssquf] Appliance Standards Awareness Project
(ASAP)
[ssquf] American Council for an Energy-
Efficient Economy (ACEEE)
[ssquf] Consumer Federation of America (CFA)
[ssquf] National Consumer Law Center (NCLC)
Air-Conditioning, Heating & Refrigeration Trade Association.
Institute (AHRI)
A.O. Smith Corporation (A.O. Smith) Industry.
Attorneys General Joint Comment (AGs Joint Comment State/Local
II) Governments.
[ssquf] State of New York
[ssquf] State of California
[ssquf] State of Colorado
[ssquf] District of Columbia
[ssquf] State of Illinois
[ssquf] State of Maine
[ssquf] State of Maryland
[ssquf] Commonwealth of Massachusetts
[ssquf] State of Minnesota
[ssquf] State of Nevada
[ssquf] State of Oregon
[ssquf] State of Vermont
[ssquf] State of Washington
[ssquf] Corporation Counsel of the City of New
York
Bradford White Corporation (BWC) Industry.
California Investor-Owned Utilities (CA IOUs) Utilities.
[ssquf] Pacific Gas and Electric Co. (PG&E)
[ssquf] San Diego Gas and Electric (SDG&E)
[ssquf] Southern California Edison (SCE)
Carrier Corporation (Carrier) Industry.
Crown Boiler Company (Crown Boiler) Industry.
Electrify Now Energy Efficiency
and Environmental
Advocates.
Lennox International, Inc. (Lennox) Industry.
Mortex Products, Inc. (Mortex) Industry.
[[Page 4779]]
Natural Resources Defense Council (NRDC) Environmental
Advocate.
Nortek Global HVAC (Nortek) Industry.
Northwest Energy Efficiency Alliance (NEEA) Energy Efficiency
Advocates.
Petitioners et al. Joint Comment II Utilities, Trade
Associations.
[ssquf] Spire, Inc.
[ssquf] Spire Missouri, Inc.
[ssquf] American Public Gas Association (APGA)
[ssquf] American Gas Association (AGA)
[ssquf] National Propane Gas Association
(NPGA)
[ssquf] National Gas Supply Association (NGSA)
[ssquf] National Association of Home Builders
(NAHB)
[ssquf] Plumbing-Heating-Cooling Contractors
National Association
U.S. Boiler Company (USB) Industry.
Anonymous Unaffiliated.
Lee Hannah Unaffiliated.
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All comments--on both the proposed interpretive rule and the
supplemental proposed interpretive rule--were carefully and fully
considered by DOE. Informed by these comments and reconsideration of
the substantial evidence in the relevant rulemaking dockets, the
Department is issuing this final interpretive rule to state DOE's
interpretation of EPCA's ``features'' provision in the context of
condensing vs. non-condensing furnaces, water heaters, and similarly-
situated covered products/equipment (and associated venting). The
following sections of this final interpretive rule set forth the
relevant legal authority, describe the Department's historical
interpretation of EPCA's ``features'' provision as applied to
condensing vs. non-condensing products/equipment, provide summary of
and responses to comments received on both the proposed interpretive
rule and supplemental proposed interpretive rule, and recite DOE's
revised interpretation of the relevant statutory provision.
Through this final interpretive rule, DOE is not making any changes
to its existing regulations in the Code of Federal Regulations (CFR) or
policies regarding individual appliance standards rulemakings, and it
cannot and will not take any enforcement action pursuant to its revised
interpretation until after the effective date of a final legislative
rule, published in the Federal Register, amending the applicable
product/equipment classes and energy conservation standards, as
necessary. Consequently, this final interpretive rule does not change
or revise any current policies or legal requirements with respect to
residential furnaces, commercial water heaters, or similarly-situated
covered products/equipment. Decisions about how this interpretation
will apply to existing products/equipment utilizing condensing/non-
condensing technologies will be the subject of subsequent actions.
II. Summary Description
A. Relevant Statutory Provisions
In this final interpretive rule, DOE explains its historical
interpretation regarding the evaluation of what constitutes a product
``feature'' which cannot be eliminated under EPCA, specifically in the
context of residential furnaces and commercial water heaters. For
covered consumer products, the key statutory provision at issue can be
found at 42 U.S.C. 6295(o)(4), which provides that the Secretary may
not prescribe an amended or new standard under this section if the
Secretary finds (and publishes such finding) that interested persons
have established by 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 at the time of the Secretary's finding.
Where the Secretary finds such ``performance characteristics
(including reliability), features, sizes, capacities, and volumes''
(collectively referred to hereafter as ``features'') to exist, the
statute provides a remedy at 42 U.S.C. 6295(q)(1), which states that a
rule prescribing an energy conservation standard for a type (or class)
of covered products shall specify a level of energy use or efficiency
higher or lower than that which applies (or would apply) for such type
(or class) for any group of covered products which have the same
function or intended use, if the Secretary determines that covered
products within such group--(A) consume a different kind of energy from
that consumed by other covered products within such group (or class);
or (B) have a capacity or other performance-related feature which other
products within such type (or class) do not have and such feature
justifies a higher or lower standard from that which applies (or will
apply) to other products within such type (or class). In making a
determination under 42 U.S.C. 6295(q)(1) concerning whether a
performance-related feature justifies the establishment of a higher or
lower standard, the Secretary shall consider such factors as the
utility to the consumer of such a feature, and such other factors as
the Secretary deems appropriate.
These provisions also apply to covered non-ASHRAE \7\ commercial
and industrial equipment through the crosswalk provision at 42 U.S.C.
[[Page 4780]]
6316(a). (Under the statute, ``ASHRAE equipment'' refers to small
commercial package air conditioning and heating equipment, large
commercial package air conditioning and heating equipment, very large
commercial package air conditioning and heating equipment, packaged
terminal air conditioners (PTACs), packaged terminal heat pumps
(PTHPs), warm-air furnaces, packaged boilers, storage water heaters,
instantaneous water heaters, or unfired hot water storage tanks, which
are addressed by ASHRAE in ASHRAE Standard 90.1, Energy Standard for
Buildings Except Low-Rise Residential Buildings.)
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\7\ ``ASHRAE'' refers to the American Society of Heating,
Refrigerating and Air-Conditioning Engineers.
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ASHRAE equipment has its own separate statutory scheme under EPCA,
with the default situation being that DOE must adopt the level set
forth in ASHRAE Standard 90.1 unless the Department has clear and
convincing evidence to adopt a more-stringent standard (see 42 U.S.C.
6313(a)(6)). Under 42 U.S.C. 6313(a)(6)(B)(iii)(II)(aa), there is a
similar ``features'' provision which states, ``The Secretary may not
prescribe an amended standard under this subparagraph if the Secretary
finds (and publishes the finding) that interested persons have
established by a preponderance of the evidence that a standard is
likely to result in the unavailability in the United States in any
product type (or class) of performance characteristics (including
reliability, features, sizes, capacities, and volumes) that are
substantially the same as those generally available in the United
States at the time of the finding of the Secretary.'' However, it is
noted that this provision contains the specific limitation that it
applies to an amended standard prescribed under this subparagraph
(i.e., when DOE is acting under its authority to set a more-stringent
standard). There is no companion ``features'' provision under 42 U.S.C.
6313(a)(6)(A), which is the provision that would apply when DOE is
adopting the levels set by ASHRAE. Congress was clearly aware of the
features issue, and it chose to act in the context of DOE standard
setting, but not ASHRAE standard setting. There is likewise no
companion provision to 42 U.S.C. 6295(q)(1) for ASHRAE equipment.
B. DOE's Historical Interpretation
With this statutory background in mind, in the March 12, 2015
notice of proposed rulemaking (NOPR) for energy conservation standards
for residential furnaces, DOE set forth in detail its rationale for why
it did not considering the venting of non-condensing furnaces to
constitute a product ``feature'' under 42 U.S.C. 6295(o)(4). 80 FR
13120, 13137-13138.
As discussed previously, when evaluating and establishing energy
conservation standards, the statute requires DOE to divide covered
products into product classes by the type of energy used, by capacity,
or by other performance-related features that justify a different
standard. In making a determination regarding whether a performance-
related feature justifies a different standard, DOE must consider
factors such as the utility to the consumer of the feature and other
factors DOE determines are appropriate. (42 U.S.C. 6295(q))
Historically, DOE has viewed utility as an aspect of the product that
is accessible to the layperson and is based on user operation, rather
than performing a theoretical function. This interpretation has been
implemented consistently in DOE's previous rulemakings by determining
utility through the value the item brings to the consumer, rather than
through analyzing more complicated design features, or costs that
anyone, including the consumer, manufacturer, installer, or utility
companies may bear. DOE reasoned that this approach is consistent with
EPCA's requirement for a separate and extensive analysis of economic
justification for the adoption of any new or amended energy
conservation standard (see 42 U.S.C. 6295(o)(2)(A)-(B) and (3)).
Under EPCA, DOE has typically addressed consumer utility by
establishing separate product classes or otherwise taken action when a
consumer may value a product feature based on the consumer's everyday
needs. For instance, DOE determined that it would be impermissible in
light of 42 U.S.C. 6295(o)(4) to include elimination of oven door
windows as a technology option to improve the energy efficiency of
cooking products.\8\ DOE reached this conclusion based upon how
consumers typically use the product: Peering through the oven window to
judge if an item is finished cooking, as opposed to checking the timer
and/or indicator light or simply opening the oven door (which could
waste more energy) to see if the item is finished cooking. DOE has also
determined that consumers may value other qualities such as ability to
self-clean,\9\ size,\10\ and configuration.\11\ This determination,
however, can change depending on technological developments and shifts
in consumer behavior/preferences, and it is conceivable that certain
products may disappear from the market entirely due to shifting
consumer demand. DOE stated that it has determined such value on a
case-by-case basis through its own research, as well as public comments
received.
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\8\ 63 FR 48038, 48041 (Sept. 8, 1998).
\9\ 73 FR 62034, 62048 (Oct. 17, 2008) (separating standard
ovens and self-cleaning ovens into different product classes).
\10\ 77 FR 32307, 32319 (May 31, 2012) (creating a separate
product class for compact front-loading residential clothes
washers).
\11\ 75 FR 59469, 59487 (Sept. 27, 2010) (creating a separate
product class for refrigerators with bottom-mounted freezers).
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DOE offered a cautionary note that disparate products may have very
different consumer utilities, thereby making direct comparisons
difficult and potentially misleading. For instance, in a 2011
rulemaking, DOE created separate product classes for vented and
ventless residential clothes dryers based on DOE's recognition of the
``unique utility'' that ventless clothes dryers offer to consumers. 76
FR 22454, 22485 (April 21, 2011). This utility could be characterized
as the ability to have a clothes dryer in a living area where vents are
impossible to install (e.g., an apartment in a high-rise building). As
explained in that April 2011 direct final rule technical support
document, ventless dryers can be installed in locations where venting
dryers would be precluded due to venting restrictions.
But in another rulemaking regarding water heaters, DOE found that
water heaters that utilize heat pump technology did not need to be put
in a separate product class from conventional types of hot water
heaters that utilize electric resistance technology, even though water
heaters utilizing heat pumps require the additional installation of a
condensate drain that a hot water heater utilizing electric resistance
technology does not require. 74 FR 65852, 65871 (Dec. 11, 2009). DOE
found that regardless of these installation factors, the heat pump
water heater and the conventional water heater still had the same
utility to the consumer: Providing hot water. Id. In both cases, DOE
made its finding based on consumer type and utility type, rather than
technology utilized that impacts product efficiency.
In its March 2015 energy conservation standards rulemaking proposal
for residential furnaces, DOE expressed concern that tying the concept
of ``feature'' to a specific technology would
[[Page 4781]]
effectively lock-in the currently existing technology as the ceiling
for product efficiency and eliminate DOE's ability to address
technological advances that could yield significant consumer benefits
in the form of lower energy costs while providing the same
functionality for the consumer. DOE stated that it was very concerned
that determining features solely on product technology could undermine
the Department's Appliance Standards Program. DOE reasoned that if it
is required to maintain separate product classes to preserve less-
efficient technologies, future advancements in the energy efficiency of
covered products would become largely voluntary, an outcome which seems
inimical to Congress's purposes and goals in enacting EPCA. 80 FR
13120, 13138 (Mar. 12, 2015).
Turning to the product at issue in that 2015 furnaces rulemaking,
DOE noted that residential furnaces are currently divided into several
product classes. For example, furnaces are separated into product
classes based on their fuel source (gas, oil, or electricity), which is
required by statute. In the most recent rulemaking for that covered
product, DOE analyzed only two product classes for residential
furnaces: (1) Non-weatherized gas-fired furnaces (NWGFs) and (2) mobile
home gas-fired furnaces (MHGFs). DOE did not additionally separate
NWGFs and MHGFs into condensing and noncondensing product classes. Id.
In that 2015 furnaces rulemaking, DOE tentatively concluded that
the methods by which a furnace is vented did not provide any separate
performance-related impacts, and, therefore, that DOE had no statutory
basis for defining a separate class based on venting and drainage
characteristics. DOE reasoned that NWGF and MHGF venting methods did
not provide unique utility to consumers beyond the basic function of
providing heat, which all furnaces perform. Using this logic, the
possibility that installing a non-condensing furnace may be less costly
than a condensing furnace due to the difference in venting methods did
not justify separating the two types of NWGFs into different product
classes. Unlike the consumers of ventless dryers, which DOE had
determined to be a performance-related feature based on the
impossibility of venting in certain circumstances (e.g., high-rise
apartments), DOE reasoned that consumers of condensing NWGFs are
homeowners that may either use their existing venting or have a
feasible alternative to obtain heat. In other words, homeowners would
still be able to obtain heat regardless of the venting. In contrast,
DOE reasoned that a resident of a high-rise apartment or condominium
building that is not architecturally designed to accommodate vented
clothes dryers would have no option in terms of installing and enjoying
the utility of a dryer in their home unless he or she used a ventless
dryer. Id.
As explained previously, DOE's conclusion in the March 12, 2015
NOPR was that the utility of a furnace involves providing heat to a
consumer. DOE reasoned that such utility is provided by any type of
furnace, but to the extent that a consumer has a preference for a
particular fuel type (e.g., gas), improvements in venting technology
may eventually allow a consumer to obtain the efficiency of a
condensing furnace using the existing venting in a residence by sharing
venting space with water heaters. DOE postulated that this update in
technology would significantly reduce the cost burden associated with
installing condensing furnaces and reduce potential instances of
``orphaned'' water heaters, where the furnace and water heater can no
longer share the same venting (due to the furnace being a Category IV,
condensing product and the water heater being a Category I,
noncondensing product). In other words, when mature, this technology
could allow consumers to switch from a non-condensing furnace to a
condensing furnace in a greater variety of applications, such as urban
row houses. For more information, interested parties were asked to
consult appendix 8L of the NOPR TSD. Id.
C. The Gas Industry Petition
As noted previously, on October 18, 2018, DOE received a petition
from the Gas Industry Petitioners asking DOE to: (1) Issue an
interpretive rule stating that DOE's proposed energy conservation
standards for residential furnaces and commercial water heaters would
result in the unavailability of ``performance characteristics'' within
the meaning of the Energy Policy and Conservation Act, as amended
(i.e., by setting standards which can only be met by products/equipment
using condensing combustion technology) and (2) withdraw the proposed
energy conservation standards for residential furnaces and commercial
water heaters based upon such findings. In their petition, the Gas
Industry Petitioners argue that DOE misinterpreted its mandate under
section 325(o)(4) of EPCA by failing to consider as a ``feature'' of
the subject residential furnaces and commercial water heating equipment
the compatibility of a product/equipment with conventional atmospheric
venting systems, the ability to operate without generating liquid
condensate requiring disposal via a plumbing connection, and the
ability to operate with other commonly vented appliances. Consequently,
the Gas Industry Petitioners assert that DOE's proposals would make
unavailable non-condensing products/equipment with such features, which
currently exist in the marketplace, in contravention of the statute.
The petition makes a number of technical, legal, and economic arguments
in favor of its suggested interpretation, and it points to DOE's past
precedent related to space constraints and differences in available
electrical power supply (and associated installation costs) as
supporting its call to find that non-condensing technology amounts to a
performance-related ``feature.'' Based upon these arguments, the Gas
Industry Petitioners concluded that DOE should issue an interpretive
rule treating non-condensing technology as a ``feature'' under EPCA,
withdraw its rulemaking proposals for both residential furnaces and
commercial water heaters, and proceed on the basis of this revised
interpretation.
D. DOE's Proposed Interpretive Rule
As discussed in section I of this document, DOE published a notice
of proposed interpretive rule in the Federal Register on July 11, 2019.
84 FR 33011. The substance of that proposed interpretation (summarized
in the following paragraphs) was presented in that document. 84 FR
33011, 33020-33021 (July 11, 2019).
In its proposed interpretive rule, the Department noted that in
consideration of public comments and other information received on the
Gas Industry Petition, DOE proposed to revise its interpretation of
EPCA's ``features'' provision in the context of condensing and non-
condensing technology used in furnaces, water heating equipment, and
similarly-situated appliances (where permitted by EPCA). Based on those
comments and for the reasons set forth fully in that document, DOE
proposed to interpret prospectively the statute to provide that
adoption of energy conservation standards that would limit the market
to natural gas, propane gas and/or oil-fired furnaces, water heaters,
or similarly-situated products/equipment (where permitted by EPCA) that
use condensing combustion technology would result in the unavailability
of a performance related feature within the meaning of 42 U.S.C.
6295(o)(4) and 42 U.S.C. 6313(a)(6)(B)(iii)(II)(aa) (and as
[[Page 4782]]
applicable in certain cases through 42 U.S.C. 6316(a)).
As explained in the proposed interpretive rule, the statute accords
the Secretary of Energy considerable discretion in terms of determining
whether a performance characteristic of a covered product/equipment
amounts to a performance-related feature which cannot be eliminated
through adoption of an energy conservation standard. DOE stated that it
has taken the opportunity presented by the Gas Industry Petition to
reconsider its historical interpretation of EPCA's ``features''
provision in the context of condensing and non-condensing technologies
used by certain gas appliances. A number of factors convinced DOE to
propose a revision to its interpretation.
First, DOE acknowledged that it has, in the past, taken space
constraints and similar limitations into account when setting product
classes (e.g., PTACs, ventless clothes dryers). For example, DOE was
sensitive to the costs associated with requiring expensive building
modifications when it decided to set separate equipment classes for
standard size PTACs and non-standard size PTACs. 73 FR 58772, 58782
(Oct. 7, 2008). DOE stated that it expects that similar expenses would
occur here, if DOE were to hold to its historical interpretation, at
least for some subset of installations. Although limited data were
provided to address the actual costs that consumers and commercial
customers would face to modify their existing category I venting, there
is little doubt that some number of such installations would be quite
costly. These more complicated/costly installations are documented as
part of DOE's analysis of the venting costs for residential furnaces,
which considered potential venting modifications that could be required
when replacing an existing category I furnace with a condensing
(category IV) furnace (see appendix 8D of the 2016 SNOPR TSD for
further details).
Second, DOE stated that it has in the past focused on the
consumer's interaction with the product/equipment in deciding whether a
performance feature is at issue. In the context of residential furnaces
and commercial water heaters, DOE has focused on the primary function
of the appliance (e.g., providing heat to a home or potable hot water)
in establishing the nexus to the consumer. In the past, DOE opined that
consumers were only interested in obtaining heat or hot water from the
appliance, so they would not care about the mechanism for generating
that end product. However, commenters have made clear that in at least
some cases, the physical changes associated with a condensing appliance
may change a home's aesthetics (e.g., by adding new venting into the
living space or decreasing closet or other storage space), thereby
impacting consumer utility even under DOE's prior approach.
Third, DOE noted that it has been the Department's policy to remain
neutral regarding competing energy sources in the marketplace. As
certain commenters have pointed out, and as DOE's own analyses have
shown, some enhanced level of fuel switching is likely to accompany
standard setting using DOE's prior interpretation. Many consumers who
are currently gas customers may show a preference for that fuel type
and would be negatively impacted by a standard that requires the
purchase of a condensing unit to the extent they feel compelled to
change to a different fuel type. DOE explained that it seeks neither to
determine winners and losers in the marketplace nor to limit consumer
choice.
Finally, DOE stated that it is very concerned about ensuring energy
affordability, particularly for persons with low incomes. Although
energy efficiency improvements may pay for themselves over time, there
is typically a significant increase in upfront costs associated with
furnaces and water heaters using condensing technology. For consumers
with difficult installation situations (e.g., inner-city row houses),
there would be the added cost of potentially extensive venting
modifications. In certain cases, commenters have argued that
accommodating condensing products may not even be possible. Although
DOE continues to believe that costs are properly addressed in the
economic analysis portion of its rulemakings, it stated that it remains
cognizant of such issues. DOE stated that it has tentatively concluded
that the other reasons discussed immediately above are sufficient in
and of themselves to justify the Department's proposed change in
interpretation, but it acknowledged these cost impacts in order to be
fully transparent in terms of the agency's thinking.
The agency reasoned that creating separate product classes for
condensing and non-condensing furnaces, water heaters, and similarly-
situated products/equipment (where permitted by EPCA) would prevent
many of these potential problems. Although DOE's proposed revised
approach may have some impact on overall energy saving potential as a
result of establishing separate product/equipment classes, the
Department noted that that is not the touchstone of EPCA's ``features''
provision; through that provision, Congress expressed its will that
certain product utilities will take priority over additional energy-
saving measures. (For example, DOE did not eliminate the oven window
which consumers found useful.) With that said, DOE expressed its belief
that any potentially negative programmatic impacts of its revised
interpretation are likely to be limited. DOE reasoned that the proposed
interpretation would be likely to impact only a limited set of
appliances, and DOE noted that market trends have favored the growing
reach of condensing furnaces, even as non-condensing alternatives have
remained available. DOE stated that it has every reason to believe that
such trends will continue.
DOE sought to clarify the limitations of its proposed revised
interpretation, based upon the existing statutory provisions. As noted,
additional, subsequent DOE action would be required before the
interpretation in the proposed interpretive rule could be implemented.
The proposed interpretive rule, even once finalized, would not alter
the Department's current regulations. DOE anticipates continued
engagement and productive involvement of members of the public and the
regulated community in subsequent activities that may follow this
interpretation.
As discussed in the proposed interpretive rule, DOE decided to
grant the Gas Industry Petition to the extent that it proposed to
prospectively interpret the statute to provide that adoption of energy
conservation standards that would limit the market of natural gas and/
or propane gas furnaces, water heaters, or similarly-situated products/
equipment (where permitted by EPCA) to appliances that use condensing
combustion technology would result in the unavailability of a
performance related feature within the meaning of 42 U.S.C. 6295(o)(4)
and 42 U.S.C. 6313(a)(6)(B)(iii)(II)(aa) (and as applicable in certain
cases through 42 U.S.C. 6316(a)). The proposal clarified that such
interpretation would apply to all applicable residential products, non-
ASHRAE commercial equipment, and ASHRAE equipment where DOE adopts a
level more stringent than the ASHRAE level.
DOE stated in the 2019 proposed interpretive rule that it is
denying the Gas Industry Petition as it pertains to those rulemakings
where ASHRAE sets standard levels that trigger DOE to consider and
adopt those level (unless DOE finds clear and convincing evidence to
adopt more-stringent levels), due to lack of authority. DOE
[[Page 4783]]
also denied the Gas Industry Petition's request for DOE to withdraw the
proposed rules for residential furnaces and commercial water heaters as
unnecessary. DOE stated that if the interpretive rule were to be
finalized, it would anticipate developing supplemental notices of
proposed rulemaking (SNOPRs) that would implement the new legal
interpretation for those two rulemakings that were the subject of the
petition for rulemaking.
E. DOE's Supplemental Proposed Interpretive Rule
As noted in section I of this document, DOE published a notice of
supplemental proposed interpretive rule in the Federal Register on
September 24, 2020. 85 FR 60090. DOE's supplemental proposal was
designed to gather further information in response to comments from
U.S. Boiler, BHI, and Crown Boiler, suggesting an alternative approach
that did not focus on ``non-condensing'' technology as the performance-
related feature. While the commenters suggesting this alternative were
generally supportive of the proposed revised interpretation, they
expressed concern that unless subsequent DOE rulemakings implement the
interpretation through product/equipment classes focused on venting
compatibility (particularly preservation of Category I venting), many
of the same problems identified in the Gas Industry Petition may still
arise. (USB, No. 78 at pp. 1-2; BHI, No. 83 at pp. 1-2; Crown Boiler,
No. 79 at pp. 1-2) In order to gather further information and comment
on this issue, DOE proposed alternative approaches to product/equipment
class setting in this context, as explained in the September 24, 2020
notice of supplemental proposed interpretation at 85 FR 60090, 60094-
60095, and as summarized in the following paragraphs.
In the supplemental proposed interpretive rule, DOE initially
responded to these comments from USB, BHI, and Crown Boiler by noting
that, while separate from the product/equipment, the venting system is
inextricably linked to the design of the appliance. Because the venting
system is a separate component from the product, DOE initially sought
to focus on non-condensing operation as the performance-related
characteristic of the appliance itself. However, after further
considering these commenters' concerns, DOE stated its intention to
explore whether interpreting non-condensing operation to be a feature
might still result in a reduction of utility for certain consumers,
because some non-condensing appliances require connection to venting
systems other than Category I and may result in many of the
installation issues that DOE seeks to address through this interpretive
rulemaking.
As a result, in the supplemental proposed interpretation, DOE
further considered what constitutes a ``feature'' or ``performance-
related characteristic'' under EPCA, and in particular, whether such
feature might be based on venting system compatibility of the
appliance. Because the most significant concerns regarding venting
system compatibility involve use of gas appliances that are not
compatible with Category I venting in place of gas appliances that are
compatible with Category I venting, DOE considered whether
compatibility with Category I venting should be a protected feature
under EPCA. Moreover, DOE also considered whether any impact to venting
system compatibility resulting from increasing product or equipment
efficiency standards would cause the aforementioned issues. For
example, it is conceivable that if a more-stringent standard results in
an appliance compatible with Category III venting systems being
replaced with an appliance that is only compatible with Category IV
venting systems, many of the same issues might arise as have been
identified for the replacement of appliances compatible with Category I
venting systems. Thus, compatibility with venting systems of any type
could conceivably be a feature that consumers desire and which DOE must
consider when evaluating more-stringent standards. Under such an
interpretation, compatibility with each existing venting technology
would be a feature under EPCA that could require separate classes based
on compatibility with venting systems for each venting category, and
uncategorized venting systems could also require separate classes.
DOE noted that the first approach (i.e., considering only Category
I venting compatibility as a performance-related feature) has the
benefit of potentially simplifying the regulatory scheme in comparison
to the latter approach, which could require classification of
appliances in each venting category separately. The first approach
would result in more streamlined regulations and product/equipment
classes for gas appliances, as compared to the latter approach, while
resolving the most significant issues involved with venting system
compatibility. The latter approach potentially would address more
comprehensively possible issues related to the compatibility of an
appliance with venting systems, but it would make the regulatory scheme
more complex and could result in elevated compliance burdens, as the
number of product/equipment classes for vented appliances could
increase greatly (e.g., each current class of gas appliance could
require further segmentation by each of the four categories of venting
and also could need to account for gas appliances that are compatible
with uncategorized venting systems). DOE stated that both approaches
would have the benefit of not limiting the Department to consideration
of the combustion technology that provides the function of the
appliance (e.g., condensing, non-condensing), about which some
commenters have expressed concerns. Instead, DOE's focus would be to
ensure compatibility with existing venting, thereby allowing DOE to be
responsive to potential future technological advances in venting system
compatibility.
Based on these considerations, DOE stated that it was considering
an alternative interpretation (with two potential variations), in
addition to the interpretation proposed in the July 2019 notice of
proposed interpretive rule. As discussed previously, the July 2019
notice of proposed interpretive rule proposed that adoption of energy
conservation standards that would limit the market to natural gas and/
or propane gas furnaces, water heaters, or similarly-situated products/
equipment (where permitted by EPCA) that use condensing combustion
technology would result in the unavailability of a performance-related
feature within the meaning of 42 U.S.C. 6295(o)(4) and 42 U.S.C.
6313(a)(6)(B)(iii)(II)(aa) (and as applicable in certain cases through
42 U.S.C. 6316(a)). In the notice of supplemental proposed
interpretation, DOE also proposed an interpretation that an appliance's
compatibility with a venting system is a performance-related
characteristic of that appliance under EPCA. Specifically, DOE stated
that it is also considering an interpretation that, based on current
appliance/venting system compatibility limitations, the adoption of
energy conservation standards that would limit the market to natural
gas and/or propane gas furnaces, water heaters, or similarly-situated
products/equipment (where permitted by EPCA) that are incompatible with
any existing venting systems available on the market would result in
the unavailability of a performance related feature within the meaning
of 42 U.S.C. 6295(o)(4) and 42 U.S.C. 6313(a)(6)(B)(iii)(II)(aa) (and
as applicable in certain cases through 42 U.S.C. 6316(a)). DOE stated
that it considered limiting its proposal to
[[Page 4784]]
include only that compatibility with Category I venting systems is a
feature, as suggested by the commenters, and seeks comment on doing so.
In addition, DOE indicated that it is considering a broader approach
taking into consideration all venting categories since concerns similar
to those that gave rise to the petition could conceivably occur for
appliances that are compatible with venting systems other than Category
I. The Department noted that after examining the totality of public
comments on this issue and the potential approaches, it will consider
adopting either of these alternative or the original proposed approach,
as appropriate, in its final interpretation.
The comment period on the September 24, 2020 supplemental proposed
interpretive rule was originally scheduled to end on October 26, 2020.
However, on September 25, 2020 and October 6, 2020, DOE received two
requests for extension of the comment period (from A.O. Smith and
Lennox, respectively), asserting that additional time is needed because
the supplemental proposed interpretive rule addresses multiple product
types and raises complex issues. On September 29, 2020, DOE received a
comment from the submitters of the Gas Industry Petition seeking prompt
action on their petition. Balancing these competing requests, DOE
determined it appropriate to extend the public comment period on the
supplemental proposed interpretive rule until November 9, 2020.
Notification of the extension of the public comment period was
published in the Federal Register on October 22, 2020. 85 FR 67312.
III. Response to Comments
DOE received a number of comments with divergent views on the
Department's proposed interpretive rule and supplemental proposed
interpretive rule related to the Gas Industry Petition, with some
supporting the proposal and others in opposition.\12\ Comments from gas
industry associations, certain trade associations, and some individual
manufacturers generally expressed support for the proposed interpretive
rule. Comments from environmental and efficiency advocacy
organizations, consumer advocacy organizations, other manufacturers,
certain States and Attorneys General, and a few members of the public
generally opposed it. The following sections of this final interpretive
rule summarize the comments received on the proposed interpretive rule
and supplemental proposed interpretive rule and provide DOE's responses
to those comments. Then, consistent with its statutory authority and
after considering the comments received along with all other available
information, DOE sets forth its final interpretation. To aid in
organizing the comments, this section categorizes public comments on
the proposed interpretive rule and supplemental proposed interpretive
rule in terms of legal authority, economic issues, analytical matters,
and other related issues.
---------------------------------------------------------------------------
\12\ DOE notes that it received two comments which appear to
relate to a separate DOE rulemaking for revisions to the
Department's waiver/interim waiver process for test procedures
(Docket No. EERE-2019-BT-NOA-0011). Apparently, these comments were
either submitted or posted to the wrong docket. DOE has referred
these comments to staff of the Appliance Standards Program for
placement in the correct docket.
---------------------------------------------------------------------------
A. Legal Authority
As DOE explained in section II.B of this document, for the purposes
of EPCA, DOE has in prior instances considered product/equipment
``features'' in the context of a consumer's interaction with the
appliance in question. With the submission of the Gas Industry
Petition, DOE had the opportunity to re-evaluate its prior
interpretation and to seek public input to further inform the agency's
consideration, particularly in regards to its technical implications,
as well as the needs of consumers (including those with low incomes).
While DOE continues to embrace the concept of a ``feature'' being tied
to a consumer's interaction with an appliance, the Department has come
to see that it has been too narrow in its focus on what constitutes
such consumer interaction with residential furnaces, commercial water
heaters, and similarly-situated products/equipment that utilize non-
condensing technology (and associated Category I venting). For the
reasons explained subsequently, in future rulemakings, DOE will
carefully examine the range of consumer impacts (based upon the record
evidence in a given rulemaking) and may establish separate product/
equipment classes for appliances using non-condensing technology (and
associated venting), consistent with this final interpretive rule.
DOE is issuing this interpretation as an interpretive rule within
the meaning of the Administrative Procedure Act. 5 U.S.C. 551(4); 5
U.S.C. 553(b)(A). In issuing its proposed interpretation, DOE solicited
public comment regarding the Department's views on a specific legal
question: Whether non-condensing technology (and associated venting)
constitutes a performance-related ``feature'' under 42 U.S.C.
6295(o)(4),\13\ as could support a separate product/equipment class
under 42 U.S.C. 6295(q)(1),\14\ including the authority that Congress
conferred on DOE through those provisions.
---------------------------------------------------------------------------
\13\ For non-ASHRAE equipment, the ``features'' provision at 42
U.S.C. 6295(o)(4) is applicable through 42 U.S.C. 6316(a); for
ASHRAE equipment where DOE is setting more-stringent standards, the
``features'' provision at 42 U.S.C. 6313(a)(6)(B)(iii)(II)(aa)
applies.
\14\ For non-ASHRAE equipment, the class provision at 42 U.S.C.
6295(q)(1) is applicable through 42 U.S.C. 6316(a).
---------------------------------------------------------------------------
1. Legal Authority To Set Separate Product/Equipment Classes Based Upon
Condensing and Non-Condensing Technologies
As discussed, the Gas Industry Petition raised the issue of whether
non-condensing technology, including associated venting, constitutes a
``performance characteristic'' or ``feature'' under 42 U.S.C.
6295(o)(4), and if it is, whether it justifies a separate product/
equipment class under 42 U.S.C. 6295(q)(1). Not unlike the submissions
on the notice of petition, commenters on the proposed interpretive rule
expressed strongly held but conflicting views regarding DOE's legal
authority to determine non-condensing technology used in furnaces and
water heaters, including the associated venting, to be a ``performance
characteristic'' or ``feature'' within the meaning of the statute, and
whether as a ``performance characteristic'' or ``feature'' it would
justify a separate product/equipment class and energy conservation
standard.
a. Comments Supporting the Proposed Interpretation
A number of commenters expressed support for DOE's proposed
interpretive rule and recommended that the Department take action to
finalize its interpretation along the lines proposed. (Petitioners et
al. Joint Comment, No. 80 at p. 2; Weil-McLain, No. 86 at p. 1; AHRI,
No. 91 at p. 1; Carrier, No. 92 at p. 1; BHI, No. 83 at pp. 1-2; USB,
No. 78 at p. 1; BWC, No. 77 at pp. 1-2; Nortek, No. 71 at p. 1; Mortex,
No. 72 at p. 1) Crown Boiler and USB stated that adoption of an energy
conservation standard at levels requiring the use of condensing
technology would result in the unavailability of a performance-related
feature under EPCA. (Crown Boiler, No. 79 at p. 1; USB, No. 78 at p. 1)
Several commenters argued that DOE's proposed interpretive rule
would enhance consumer choice. (Mortex, No. 72 at p. 1; Carrier, No. 92
at p. 1; Nortek,
[[Page 4785]]
No. 71 at p. 1) Other commenters found that DOE's proposed
interpretation offers greater consumer utility, particularly in those
applications where venting represents a significant challenge. (AHRI,
No. 91 at p. 1) Regarding residential furnaces, AHRI argued that in
some applications, conversion to use of venting compatible with
condensing systems would create problems that cannot be
``simplistically rolled into an economic analysis.'' More specifically,
the trade association argued that a separate product class would assist
consumers who require like-for-like replacement of their existing
furnace due to size or drainage constraints or water heater co-venting
(a point echoed by Nortek, No. 71 at pp. 1-2, and Carrier, No. 92 at p.
1). According to AHRI, ``EPCA prohibits eliminating product utility
precisely to prevent the disproportionate harm to a subset of unlucky
consumers.'' (AHRI, No. 91 at p. 2) Making the same point, Nortek
reasoned that because consumers are already moving in the direction of
condensing furnaces, banning non-condensing furnaces is not necessary
and would only serve to disproportionately harm those consumers for
whom venting changes would be difficult or impossible. (Nortek, No. 71
at pp. 1-2)
Regarding commercial water heaters, AHRI argued that Commercial
Buildings Energy Consumption Survey (CBECS) data suggest that over half
of commercial buildings were constructed prior to the introduction of
condensing venting requirements, which means that many of these
commercial buildings face the same venting challenges as some
residences. AHRI pointed to examples where mechanical rooms are built
into the core of the building (thereby preventing the side-wall venting
sometimes required by condensing equipment), so such building owners
would be forced to either switch fuels or to use up valuable retail,
restaurant, or office space for an enlarged or relocated mechanical
room to accommodate new drainage or different venting configurations.
Especially since there is already a market trend toward condensing
commercial water heaters, AHRI argued that it is neither necessary nor
advisable to require condensing equipment in all applications. Instead,
the commenter stated that establishment of a separate class for non-
condensing equipment would preserve the ability of commercial consumers
facing difficult installation situations to make like-for-like
replacements and to avert the need to reconstruct a mechanical room,
add unsightly piping, or switch to an electric water heater, all
without impacting the overall trend toward installation of more-
efficient condensing water heaters. (AHRI, No. 91 at p. 3)
Regarding residential and commercial boilers, AHRI noted that DOE's
proposed interpretation provides an important safety measure for gas-
fired products/equipment that assures safer use and installation. More
specifically, AHRI commented that gas-fired boilers are not simply
divided into condensing and non-condensing models but are split into
four different categories based on venting type (Category I-IV). AHRI
stated that Category I venting is at the crux of DOE's proposed
interpretation, because that is the type of venting which is difficult
to substitute for another type once installed. The commenter added that
a minimum energy conservation standard that ``pushes the efficiency
envelope'' may cause nominally non-condensing equipment to become
incompatible with Category I venting and could result in the unsafe
installation or use of misapplied equipment. AHRI stressed that safety
of venting is unquestionably a performance-related feature. Once again,
AHRI stated that the boilers market in new construction is trending
toward condensing equipment and venting, so the performance feature of
Category I venting is most necessary for the replacement market. The
commenter also suggested that further increases in the minimum energy
conservation standards for boilers should be examined carefully,
because those standards are already near the level where venting
challenges similar to those for condensing equipment could arise.
(AHRI, No. 91 at pp. 4-5) Mortex made similar arguments in the context
of furnaces, suggesting that DOE's proposed interpretation would
promote flexibility and safety by not forcing an upgrade to a
condensing furnaces in some applications where non-condensing venting
remains the best choice. (Mortex, No. 72 at p. 1)
The Petitioners et al. Joint Comment asserted that energy
conservation standards that would make atmospherically-vented products
unavailable to consumers would do more to promote electrification
(i.e., a shift to electric appliances) than to promote the efficiency
of gas products, because many consumers would feel that they have no
choice but to give up their gas appliances in favor of electric
alternatives. These commenters characterized the situation as one where
the imposition of a standard that effectively bans atmospherically-
vented gas appliances would result not in the sale of an increased
number of more efficient gas products, but in the sale of fewer gas
products overall. The Gas Industry Petitioners argued that they are not
opposed to condensing technology generally or market trends favoring
such technology, nor are they seeking to create missed opportunities
for consumers, businesses, and governments, as some of their opponents
have claimed. Instead, these commenters stated that they are simply
making the case that condensing products are not suitable for all
installations and that it is the opponents of the petition who are the
ones seeking to deny consumers the products which best serve their
needs. (Petitioners et al. Joint Comment, No. 80 at pp. 3-4)
Regarding the consumer utility of atmospherically-vented
appliances, the Petitioners et al. Joint Comment stated that for some
consumers, the consumer utility provided by the proposed interpretive
rule would be the same utility as DOE found with ventless clothes
dryers (i.e., the ability to have the product installed at all). The
comment argued that for other consumers, the utility may be similar to
that found for ``space-constrained'' appliances (i.e., the ability to
have the product fit without the need for building modifications). For
yet other consumers, the comment stated that the utility may be
preventing the need to scrap another perfectly good appliance (e.g., an
orphaned water heater). The Petitioners et al. Joint Comment added that
other consumers may find utility in an appliance which obviates the
need for undesirable building modifications (e.g., sacrifice of an
existing interior living space, balcony, or window--concerns which can
also arise in the context of new construction.\15\) These commenters
concluded that there is no basis for characterizing these losses of
utility as a mere matter of cost, rather than performance-related
characteristics under EPCA's ``features'' provision. (Petitioners et
al. Joint Comment, No. 80 at pp. 10-11)
---------------------------------------------------------------------------
\15\ The Petitioners et al. Joint Comment provided a figure
depicting multi-family housing and stated that a building design
using atmospherically-vented products eliminates the need for vent-
studded columns of vertically-stacked utility spaces along the
outside wall of the building, as well as the resulting loss of
available window or balcony space.
---------------------------------------------------------------------------
Pointing to EPCA's statutory standards for direct heating equipment
which are differentiated ``principally in their manner of
installation,'' the Petitioners et al. Joint Comment argued that ``it
is absurd to suggest that Congress intended to ensure the continued
availability of products with sizes--but not products with venting or
[[Page 4786]]
other performance characteristics--needed to `fit in standard building
spaces' without the need for building modifications.'' (Petitioners et
al. Joint Comment, No. 80 at p. 12) Applying this principle in the
present context, the Petitioners et al. Joint Comment stated that
condensing products are at least typically larger than comparable
atmospherically-vented products, and that even small differences can
have significant practical impacts, such as cases where a furnace and
air handler must fit inside a confined space with required clearance on
all sides. (Petitioners et al. Joint Comment, No. 80 at p. 13) Along
these same lines, BWC opined that because condensing technology
generally requires greater surface area, the size of the product/
equipment is likely to increase, and this can cause issues related to
size and aesthetics within the home or business. The commenter
suggested that this could pose real world problems, such as with
mechanical rooms that are no longer large enough to house an appliance
using condensing technology. BWC added that the issue of aesthetic
impacts also extends to commercial applications, not just residential
ones, with the commenter arguing that venting running through the
finished space of a school, office building, or hospital could likewise
be a significant detriment to their usable space. (BWC, No. 77 at pp.
1-2)
Although USB generally agreed with DOE's revised interpretation,
the commenter argued that DOE has erred in focusing on ``non-
condensing'' technology as the performance-related feature, suggesting
that the agency should instead focus on Category I venting. According
to USB, Category II, III, and IV (as well as non-categorized direct
vent furnaces and boilers) are currently available using non-condensing
technology, but many of the same problems may arise. USB stated that
non-condensing Category II, III, and IV appliances generally share the
same venting consumer utility issues as condensing appliances and
equipment, and that they can theoretically operate at higher
efficiencies than Category I. However, the commenter argued that
elimination of models using Category I venting (under a standard level
that could only be met by products/equipment using Category II, III, or
IV venting) would create the same problems which DOE has sought to
address through its revised interpretation. USB commented that vent
categorization has been recognized for over 20 years by manufacturers,
utilities, and code enforcement officials as the best way to determine
how to safely vent appliances. (USB, No. 78 at pp. 1-2) BHI made
essentially identical arguments to those raised by USB, and Crown
Boiler offered a similar comment that DOE should focus product classes
based upon type of venting used, rather than the use of condensing or
non-condensing technology. (BHI, No. 83 at pp. 1-2; Crown Boiler, No.
79 at pp. 1-2)
AHRI also made the point that DOE has already established product
classes which are differentiated based upon the features of condensing
and non-condensing products--specifically in the context of furnace fan
standards (i.e., fan efficiency rating (FER); see 10 CFR 430.32(y)).
The furnace fan product classes are distinguished by: (1) Fuel type;
(2) whether the furnace is weatherized, and (3) whether its heat
exchanger condenses the flue gases to water (i.e., condensing/non-
condensing). (AHRI, No. 91 at p. 2; similar point made by Carrier, No.
92 at p. 2 and Nortek, No. 71 at p. 2)
In response, DOE would start by reiterating that it is the
Department's position to remain neutral in terms of the available fuel
sources. Obviously, whenever the agency takes regulatory action, there
is the potential for market shifts based upon consumer reaction, but
DOE acts in keeping with the statute, which is at the core of this
market neutrality principle. In other words, following the statute
where it leads is not only the proper approach from a legal standpoint,
but it helps ensure fair and unbiased treatment to all market
participants, with impacts deemed as favorable or unfavorable arguably
balancing out over time. Thus, in line with this principle, DOE rejects
the arguments of certain commenters (e.g., Lennox, No. 87 at p. 1;
Ceres, No. 69 at p. 2 (discussed respectively at sections III.A.1.b.v
and III.B.1.b of this document)) that the Department is favoring the
gas industry through its revised interpretation. DOE is making an
informed determination applying the law to the facts presented and in
light of the competing, well-argued comments from interested parties.
As stated previously, DOE has decided to revise its prior
interpretation of whether non-condensing technology (and associated
venting) constitutes a ``feature'' under EPCA, concluding that
products/equipment with such characteristics can be deemed as having a
protected feature where supported by available evidence in the context
of individual standards rulemakings. The reasons for the Department's
change in position largely arise from a reevaluation of the arguments
made in these comments and new information presented by the
Petitioners, as well as evidence already contained in existing
rulemaking dockets (e.g., residential furnaces, commercial water
heaters). As explained in the paragraphs that follow, DOE has come to
understand that such models offer distinct consumer utility beyond
their primary function of providing warm air or hot water, particularly
in difficult installation situations. Their continued availability
would also be expected to maintain a robust level of consumer choice.
DOE will touch upon each of these topics in turn.
First, DOE has come to see that a consumer's interaction with a
furnace or water heaters can go beyond the appliance's primary function
of providing warm air or water. If the replacement of an appliance
necessitates additional piping or venting in the usable space of a home
or business, major modifications to a utility room, or encroachment
upon an existing window or patio, the consumer will assuredly be aware
of such interaction with the appliance. Even in new construction, if a
builder has to modify designs to accommodate a condensing furnace,
thereby losing usable space, that builder and potential customers will
perceive this difference. Thus, a consumer may reasonably prefer to
retain this residential or commercial space and pay the costs
associated with a less-efficient, non-condensing appliance. DOE
similarly acknowledges the difficulties faced by consumers who require
like-for-like replacement of their existing furnace due to size or
drainage constraints or water heater co-venting. The Department also
takes AHRI's point (focused on commercial water heaters), that based
upon CBECS data, over half of commercial buildings were constructed
prior to the introduction of condensing venting requirements, which
means that many of these commercial buildings face the same venting
challenges as some residences. DOE further takes note of AHRI's
examples where mechanical rooms are built into the core of the building
(thereby preventing the side-wall venting sometimes required by
condensing equipment), so such building owners could be forced to use
up valuable retail, restaurant, or office space for an enlarged or
relocated mechanical room to accommodate new drainage or different
venting configurations.
Although DOE does not have precise numbers in terms of the
frequency of these difficult installation situations, commenters have
previously provided examples of older, inner-city row
[[Page 4787]]
houses presenting significant re-venting issues, such as those in
Philadelphia, Newark and Baltimore, of which there are many. DOE also
has data in its existing rulemaking dockets related to fuel switching
that may result from adoption of a standard that can only be met
through use of condensing technology; DOE reasons that such estimates
could serve as a proxy for those difficult installations, although
other explanations are also expected to be included in that total
(e.g., decisions made for purely economic reasons). For example, as the
CEC pointed out, the September 2016 residential furnaces SNOPR reported
that at the proposed level, 7.9 percent of consumers would switch from
gas furnaces to heat pumps or electric furnaces under a condensing
standard (a number which could reach 16 percent at the max-tech level).
81 FR 65720, 65813 (Sept. 23, 2016). The precise number of difficult
installation situations is not required for DOE to reasonably conclude
that the magnitude of such occurrences would not be de minimis. DOE
agrees with AHRI's comment that in some applications, conversion to use
of venting compatible with condensing systems would create problems
that cannot be ``simplistically rolled into an economic analysis'' and
that ``EPCA prohibits eliminating product utility precisely to prevent
the disproportionate harm to a subset of unlucky consumers.'' (AHRI,
No. 91 at pp. 1-2)
DOE acknowledges that some portion of difficult installations
referenced in the Petitioners et al. Joint Comment may involve size
constraints, because as the commenters point out, condensing technology
generally requires greater surface area, so the size of the product/
equipment in some cases could increase. Data referenced by the
Petitioners et al. Joint comment demonstrate that such constraints
could negatively impact a home or business, such as where a mechanical
room is no longer large enough to house an appliance using condensing
technology, or where the running of venting lines through the finished
space of a school, office building, or hospital could detrimentally
impact their usable space. In this regard, this situation is analogous
to that which DOE faced when setting separate classes and standards for
space-constrained air conditioners and heat pumps (see 10 CFR
430.32(c)) and standard-size packaged terminal air conditioners and
heat pumps (see 10 CFR 431.97(c)). A consumer's expectation to be able
to obtain a replacement appliance that is compatible with existing
venting is to some extent an issue of size as well. ``Size'' is also
one of the bases for making a ``features'' determination under 42
U.S.C. 6295(o)(4).
As to AHRI's point that the proposed interpretation would further
safety in the context of installing gas-fired residential and
commercial boilers, DOE presumes that boilers (and other types of
products/equipment for which both condensing and non-condensing
technologies are available) can be and are being installed safely in
the field by contractors and other service professionals. DOE
acknowledges the safety concerns that AHRI points out, namely that
boilers are generally split into four different categories based on
venting type (Category I-IV), and a minimum energy conservation
standard that ``pushes the efficiency envelope'' may cause nominally
non-condensing equipment to become incompatible with Category I venting
and could result in the unsafe installation or use of misapplied
equipment. Deterioration of venting due to corrosive condensate could
allow carbon monoxide to enter the inhabited space, thereby presenting
a safety risk. However, the Department is aware of no substantial
evidence to suggest that installers are improperly installing
condensing appliances and thereby triggering associated safety
concerns. However, DOE agrees with AHRI and Mortex that DOE's proposed
interpretation might prevent rare cases of contractor error.
In response to AHRI, DOE acknowledges that existing furnace fan
standards already establish product classes which are differentiated
based, in part, upon the use of condensing or non-condensing technology
(i.e., fan efficiency rating (FER); see 10 CFR 430.32(y)).
Specifically, the furnace fan product classes are distinguished by: (1)
Fuel type; (2) whether the furnace is weatherized, and (3) whether its
heat exchanger condenses the flue gases to water (i.e., condensing/non-
condensing). There was no objection among public commenters about the
inclusion of a condensing/non-condensing criteria in the furnace fans
class designations at the time of the furnace fans final rule.\16\
---------------------------------------------------------------------------
\16\ As DOE explained in the final rule, ``DOE did not receive
comment or additional information on the proposed product classes,
[and] thus, DOE is not making changes to the product classes in this
Final Rule.'' 79 FR 38130, 38150 (July 3, 2014).
---------------------------------------------------------------------------
As discussed previously, the comments submitted by USB, BHI, and
Crown Boiler on the July 2019 proposed interpretive rule, while
generally supportive, raised questions as to whether DOE's proposed
approach could be successfully implemented as initially drafted. These
commenters argued that because DOE's proposed interpretation focused on
the distinction between an appliance's use of condensing versus non-
condensing technology, the same installation challenges may still arise
unless DOE took steps to maintain compatibility with a product's
intended venting (particularly Category I venting). DOE was interested
in the views of other interested parties on the thoughts expressed by
USB, BHI, and Crown Boiler, because the Department does not wish to
adopt an interpretation that would not be workable in practice and that
would ultimately leave the problem raised in the Gas Industry Petition
unresolved. Consequently, DOE proceeded to issue the September 2020
SNOPIR, which is more fully discussed in section II.E of this document,
in order to receive public input on this topic. In short, in the
September 2020 SNOPIR, DOE presented two alternative approaches to
implementing its proposed interpretation (i.e., regarding how to set
product/equipment classes for the appliances impacted by this
interpretation). One alternative was to maintain compatibility with all
existing venting types intended for the covered appliance. The other
alternative was to ensure compatibility with Category I venting, the
type most commonly associated with non-condensing products/equipment.
DOE also noted that, depending upon the input received, the Department
might also move to adopt the approach originally presented in its July
2019 proposed interpretive rule.
DOE received 18 sets of comments in response to the September 2020
SNOPIR (see section I, Table I.2 of this document for a complete list
of commenters on the September 2020 SNOPIR). Stakeholders that opposed
DOE's July 2019 proposal tended to object to the September 2020 SNOPIR
for many of the same reasons recited in their earlier comments, and any
such broader, overarching objections are addressed elsewhere in this
final interpretive rule. The balance of the arguments raised in
comments directly addressed the issues presented in the September 2020
SNOPIR and are set forth in the paragraphs that follow. DOE appreciates
the valuable insights provided by all commenters on the matter of
venting compatibility initially raised by USB, BHI, and Crown Boiler.
In broad overview of the comments received on the SNOPIR, there was
virtually no support for the proposed approach to maintain
compatibility with all existing venting types (although one commenter
did express some support as a secondary preference). There was
[[Page 4788]]
limited support for the proposed approach to maintain compatibility
with Category I venting, with two commenters favoring that approach and
another naming it a secondary preference. DOE's initial proposal to
establish product/equipment classes based upon the use of condensing or
non-condensing technology had the broadest support of the three
alternatives presented, with five commenters preferring that approach.
One group of commenters (which included many of the entities filing the
original Gas Industry Petition) did not express a preference for any of
the three approaches presented, arguing that a proper course should be
determined in the context of individual product/equipment rulemakings.
Finally, as noted, there were also ten commenters who opposed DOE's
July 2019 proposed interpretive rule, and that opposition extended to
the September 2020 SNOPIR as well.
DOE will first address the proposed approach of establishing
product/equipment classes so as to maintain appliance compatibility
with all existing venting types intended for that appliance.
Crown Boiler and USB explained their rationale for why they do not
support a class structure based upon ensuring compatibility with all
existing venting categories (e.g., Categories II and III). The
commenters stated that Category II venting systems are extremely rare,
mostly because of the problems associated with relying on the buoyancy
of low-temperature flue gases and/or a draft inducer located at the
vent system terminal for proper venting. Crown Boiler and USB added
that because there is no upper efficiency limit for Category II
venting, any effort to protect a class of Category II vented appliances
would create a problem for DOE in determining whether a proposed
standard would preclude the use of this vent system. As to Category III
venting systems, Crown Boiler and USB questioned the need to explicitly
act to preserve this venting option, despite its more widespread use.
More specifically, the commenters argued that Category III venting
systems can, in some cases, utilize Category IV venting. Also, because
most Category III venting is used to vent an appliance through a side
wall, Crown Boiler and USB asserted that the most problematic
installation situations would not arise. Furthermore, Crown Boiler and
USB argued that because Category III vent systems operate with positive
pressure, they are rarely, if ever, used to vent multiple appliances
(due to the risk of flue products entering the interior space from the
pressurized vent system through an off-cycle appliance), so the issue
of ``orphaned'' appliances should not be applicable to Category III
appliances. Crown Boiler and USB acknowledged that their comments about
Category III appliances are generalizations and that there may be a few
instances where such appliances are difficult or impossible to reuse or
replace, but they reasoned that those rare instances would not merit
the additional regulatory complexity associated with guaranteeing
Category III venting compatibility. (Crown Boiler, No. 103 at pp. 2-3;
USB, No. 105 at pp. 1-2)
Crown Boiler and USB further argued that addressing appliances with
uncategorized venting would be even more problematic. Examples include
direct vent appliances and uncertified gas appliances (such as a boiler
designed primarily to use fuel oil which is installed with a gas
conversion burner). Crown Boiler and USB argued that because these
unusual vent systems are generally replaced along with the appliance,
there would be no need to preserve or reuse them, thereby making it
preferable to leave them unaddressed in favor of regulatory simplicity.
(Crown Boiler, No. 103 at p. 3; USB, No. 105 at p. 2)
For these reasons, Crown Boiler and USB concluded that DOE should
not pursue further the proposed approach of establishing product/
equipment classes so as to maintain appliance compatibility with all
existing venting types intended for that appliance. (DOE notes that
other commenters also provided input as to why this alternative
approach should be abandoned, but their reasoning likewise extended to
DOE's other alternative proposal to establish product/equipment classes
so as to maintain appliance compatibility with Category I venting.
Those arguments will be presented following discussion of Crown
Boiler's and USB's arguments in favor of an approach to maintain
Category I venting compatibility.)
Crown Boiler and USB then went on to explain why they support the
proposed approach of establishing product/equipment classes to maintain
appliance compatibility with Category I venting as the performance-
related feature, for the reasons (largely identical) that follow.\17\
These commenters stated that this approach would address their
previously raised concerns regarding the matter of venting
compatibility, while simplifying the interpretive rule by not advancing
the more complex option of trying to ensure compatibility with all
existing venting category applications. (Crown Boiler, No. 103 at p. 1;
USB, No. 105 at p. 1) Crown Boiler reasoned that because American
National Standards Institute (ANSI) safety standards provide a test
method to ascertain the appropriate type of venting so as to ensure
that the appliance in question can be vented safely, the vent category
is both an essential design requirement and ``an objective performance
characteristic of the above appliance and not just of the vent system
to which it is connected.'' The commenter further noted that the vent
category is found on the appliance's rating plate and in the third-
party certification report. (Crown Boiler, No. 103 at p. 2 (emphasis in
original))
---------------------------------------------------------------------------
\17\ As discussed further in section III.A.4 of this document,
DOE notes that in seeking clarification on the July 2019 proposed
interpretive rule, Weil-McLain also suggested that the Department
should make class distinctions based on an appliance's venting
category (as defined in the National Fuel Gas Code NFPA 54), rather
than using the terms ``condensing'' and ``non-condensing.'' The
commenter pointed to what the National Fuel Gas Code refers to as
Category I vented appliances, which operate with a non-positive vent
static pressure and with a vent temperature which avoids excessive
condensate production in the vent. Thus, Weil-McLain suggested that
going forward, DOE should tie the performance-related feature to the
term ``Category I Vented Appliance'' in its interpretation. (Weil-
McLain, No. 86 at pp. 1-2) However, DOE points out that although
Weil-McLain expressed this opinion in response to the July 2019
proposed interpretive rule, the company did not comment on the
September 2020 SNOPIR where this matter was discussed in further
detail. Consequently, DOE can only presume that Weil-McLain
continues to maintain this position.
---------------------------------------------------------------------------
Crown Boiler and USB added that DOE should define any gas appliance
venting performance characteristics in terms of the test procedure in
the appropriate ANSI safety standard, rather than the definitions in
the National Fuel Gas Code, because the latter source uses vague terms
such as ``excessive condensate'' and vague conditions under which such
condensation might occur. Thus, as an example, Crown Boiler and USB
recommended defining a Category I class of residential boilers as ``
`those boilers which have been determined to be Category I using the
test method in ANSI Z21.13.' '' (Crown Boiler, No. 103 at p. 3; USB,
No. 105 at p. 2)
Other commenters (who also support DOE's revised interpretation as
a general matter) disagreed with Crown Boiler's and USB's position,
arguing that even an approach limiting venting compatibility to
Category I is too complicated and fraught with potential problems.
Consequently, the commenters expressed support for DOE to adopt the
approach in its original proposal, which would define the
[[Page 4789]]
performance-related feature (and subsequent class setting) in terms of
condensing or non-condensing operation of the subject appliance. This
viewpoint was expressed by Nortek, BWC, AHRI, Mortex,\18\ and Carrier.
(Nortek, No. 107 at p. 1; BWC, No. 108 at p. 2; AHRI, No. 109 at pp. 1,
5; Mortex, No. 111 at p. 2; Carrier, No. 110 at p. 1) The following
discussion explains these commenters' rationale for opposing a venting
compatibility-based approach to defining a performance-related feature
under EPCA, as well as their rationale for supporting DOE's original
proposal. Commenters who generally oppose DOE's revised interpretation
(e.g., NRDC, A.O. Smith, Lennox, CA IOUs, Advocates Joint Comment II,
and NEEA) also provided reasoning as to why it would be inadvisable to
adopt the alternative approaches presented in the September 2020
SNOPIR, and these comments are summarized in the paragraphs that follow
as well.
---------------------------------------------------------------------------
\18\ If DOE's original proposed interpretation is not adopted,
Mortex then expressed support for either of the two alternative
interpretations presented in the September 2020 SNOPIR based on
venting compatibility. Mortex stated that any of these approaches
would preserve the performance-related features of its mobile home
gas furnaces, which are designed for use with Category I venting
systems. (Mortex, No. 111 at p. 2)
---------------------------------------------------------------------------
One line of argument surrounded the complexity of a regulatory
framework based upon venting compatibility. Nortek, AHRI, and Lennox
argued that categorization of appliances by venting system is a complex
matter, and in application, it can vary for different product/equipment
types, as determined according to the applicable ANSI safety standards.
According to these three commenters, venting, condensate generation,
and efficiency are among several factors that determine how a boiler,
water heater, or furnace is designed, safety-certified, and installed.
Thus, Nortek, AHRI, and Lennox stated that they do not find venting to
be an inherent product feature, but rather an installation requirement
that may vary depending upon the design and application of the product.
(Nortek, No. 107 at p. 2; AHRI, No. 109 at p. 2; Lennox, No. 114 at p.
5)
Another line of argument involved the potential for appliances to
be certified for use with multiple venting categories or ones that do
not have a designated venting category. Relatedly, BWC argued that if
DOE were to adopt a highly segmented class structure based upon venting
compatibility, further complications would be likely to arise in terms
of setting efficiency regulations for gas-fired products. For example,
the commenter pointed to certain water heaters that are listed with
multiple venting categories, which leaves it to a plumbing contractor's
discretion to determine the most appropriate venting for a given
installation situation. Because more than one efficiency requirement
could apply in such cases, BWC stated that the alternative approaches
presented in the September 2020 SNOPIR would not be practical, either
generally or from a technical perspective. Similarly, BWC added that
operational conditions for a type of appliance may affect the selection
of venting category, so the installing contractor will need to be aware
of and take appropriate action regarding the sizing and selection of
proper vent materials. BWC also stated that the alternative approaches
presented in the September 2020 SNOPIR failed to address products that
do not have a venting category (i.e., non-categorized products), such
as ones that are direct vent or installed outdoors. (BWC, No. 108 at p.
1)
A.O. Smith stated that venting category definitions vary by
appliance type, and it commented that some models can carry
certification with multiple venting categories. A.O. Smith also stated
that the non-condensing characterization is broader than the Category I
venting certification. (A.O. Smith, No. 113 at p. 4) The CA IOUs made a
similar point about gas appliances capable of being configured to work
with more than one category of venting system, and they reasoned that
this would make it impossible for compatibility of a product category
with a specific venting system to be designated as a protected feature
under EPCA. (CA IOUs, No. 117 at p. 5)
Similar to the points raised by Crown Boiler and USB, AHRI also
noted that complexities that could arise from seeking to maintain
venting compatibility for water heaters using Category II or Category
III venting, and similar to BWC, AHRI commented as to the difficulty in
classifying water heater models that can have multiple categorizations
depending upon design. AHRI added that similar to water heaters,
boilers may be subject to more than one venting characterization,
depending upon how they are installed in the field. According to the
commenter, some non-condensing boilers operate at positive vent
pressure, which requires Category III venting. The trade association
suggested that these concerns could lead to a regulatory structure that
is not easy to understand and implement at the point of manufacture.
(AHRI, No. 109 at p. 4) Carrier also stated that some boilers and water
heaters can use multiple vent categories, although it noted that this
is a small subset of products. (Carrier, No. 110 at p. 2)
For the reasons stated, Nortek and AHRI concluded that dividing
product/equipment classes by venting categories would unnecessarily
complicate the approach to class setting, and AHRI expressed concern
that such an approach could have unintended consequences. (Nortek, No.
107 at p. 2; AHRI, No. 109 at pp. 2, 5) Other commenters also remarked
as to the complexity surrounding a regulatory structure based on
venting categories. (Carrier, No. 110 at p. 2; Lennox, No. 114 at p. 5)
Carrier added that such an approach may not achieve a result different
from DOE's original proposal. (Carrier, No. 110 at p. 2) Consequently,
Nortek and AHRI opined that a blanket rule encompassing all gas
appliances that turns on venting categories may not capture detailed
technical nuances, or it may overly complicate the product classes,
thereby resulting in unintended regulatory burden or market impacts.
(Nortek, No. 107 at p. 2; AHRI, No. 109 at p. 2) Lennox also argued
that such an approach would further segment the already unduly
complicated residential furnaces product class structure in DOE's
original proposal, thereby compounding the problem, and significantly
increase regulatory burden without any apparent benefit to consumers or
manufacturers. (Lennox, No. 114 at pp. 1, 5)
BWC advised that if DOE ultimately decides to pursue one of the
alternate paths to defining the performance-related feature, as set
forth in its September 2020 SNOPIR, the Department should convene a
stakeholder meeting to parse out the implementation issues that may
arise in the context of different types of products and to discuss how
to proceed. (Nortek, No. 108 at p. 2)
A.O. Smith disagreed with the alternate approaches to the feature
determination focused on venting compatibility as presented in the
September 2020 SNOPIR, because venting is not applied at the point of
manufacture, nor is it known what the installation circumstances may be
for a given residence or commercial building. The commenter argued that
EPCA grants DOE authority to regulate covered products and equipment at
the point of manufacture, which does not extend to the point of
installation. Thus, A.O. Smith questioned whether DOE has authority to
differentiate product/equipment classes based upon categories of
venting materials. (A.O. Smith, No. 113 at p. 4)
[[Page 4790]]
Another line of arguments suggested that the alternative approaches
based upon venting compatibility set forth in the September 2020 SNOPIR
may encounter problems with changing building safety codes. NRDC argued
that such approaches are not feasible, practical, or necessary, stating
that even current standards are not universally consistent with every
type of ventilation system found in every building because of different
codes and standards put in place over time. (NRDC, No. 112 at pp. 2-3)
To this point, the CA IOUs argued that in many cases, safety codes may
have changed by the time a gas-fired appliance needs to be replaced, so
the existing venting would need to be changed, regardless of the type
of venting with which the appliance may be compatible. (CA IOUs, No.
117 at p. 4)
The Advocates Joint Comment II also argued that DOE's professed
intent in the September 2020 SNOPIR about maintaining venting
compatibility is not achievable. These commenters stated that there are
currently many situations where there are no products on the market
compatible with the existing venting system due to current safety
requirements. For example, the Advocates Joint Comment II pointed to
DOE's own past rulemakings in explaining that the National Fuel Gas
Code has lining requirements that effectively require all chimneys to
be lined in order to install a new gas furnace or boiler; however,
prior to 1995, building codes did not require such lining of chimneys,
so homes built before 1995 would need to have their chimneys lined in
order to install a new non-condensing furnace that is compatible with
Category I venting. Similarly, the Advocates Joint Comment II stated
that DOE's past rulemakings have found that with Type B vents, when a
new non-condensing furnace or boiler that is compatible with Category I
venting replaces an existing natural draft non-condensing product, in
almost all cases, the vent connectors need to be replaced or the entire
venting system needs to be resized. These commenters noted that DOE has
traditionally accounted for such changes in its analysis of
installation costs and suggested that that was the correct approach.
However, the Advocates Joint Comment II argued that even if venting
compatibility were to be considered a performance-related feature, the
availability of products compatible with Category I venting would not
necessarily ensure compatibility with existing venting systems, for the
reasons explained above. (Advocates Joint Comment II, No. 118 at pp. 3-
4)
Furthermore, the CA IOUs added that the concept of discrete classes
of gas appliances which can be defined by compatibility with specific
venting systems does not match what is occurring in the field. The CA
IOUs explained that in the commercial sector, there are already venting
systems that are compatible with gas-fired appliances designed for
Category I-IV venting systems, and there is an ongoing trend to upgrade
all commercial venting systems to those that comply with Underwriters
Laboratory (UL) 1738, Special Gas Vents, for condensing appliances.
Accordingly, the CA IOUs opined that as universal venting systems
become more widespread, concerns about the compatibility of gas
appliances with different venting systems will continue to become less
relevant. (CA IOUs, No. 117 at p. 4)
NRDC stated that instead of pursuing the proposed approaches, DOE
should consider and evaluate alternative venting technologies to solve
difficult installation scenarios, both those on the market and under
development. (NRDC, No. 112 at pp. 2-3) NRDC and NEEA criticized the
approach in the September 2020 SNOPIR as potentially freezing venting
technologies in place and limiting innovation in both venting
strategies and equipment design, thereby harming consumers through
higher energy costs and reduced product features. (NRDC, No. 112 at p.
3; NEEA, No. 119 at p. 3)
Beyond these technical comments focused on the merits of DOE's
alternative proposals tying the performance-related feature to
maintaining venting compatibility, the commenters essentially fell into
three camps in terms of their recommendations for how DOE should move
forward. Several commenters recommended that DOE adopt its original
proposal to establish product/equipment classes on the basis of the
subject gas appliance's utilization of condensing/non-condensing
technology for purposes of 42 U.S.C. 6295(o)(4). This approach was
favored by Nortek, BWC, AHRI, Carrier, and Mortex. (Nortek, No. 107 at
p. 1; BWC, No. 108 at p. 2; AHRI, No. 109 at pp. 1, 5; Carrier, No. 110
at p. 1; Mortex, No. 111 at p. 2) Another group recommended that DOE
abandon not only the approaches presented in the September 2020 SNOPIR,
but the approach in the July 2019 proposed interpretive rule as well,
largely based upon the legal, technical, and policy arguments raised in
their earlier comments. This pathway was favored by NRDC, A.O. Smith,
Lennox, the AGs Joint Comment, the CA IOUs, the Advocates Joint Comment
II, and NEEA. (NRDC, No. 112 at p. 2; A.O. Smith, No. 113 at p. 2;
Lennox, No. 114 at p. 1; AGs Joint Comment II, No. 115 at p. 1; CA
IOUs, No. 117 at p. 1; Advocates Joint Comment II, No. 118 at p. 1;
NEEA, No. 119 at p. 1) Finally, the organizations submitting the
Petitioners et al. Joint Comment II argued that the issues of venting
compatibility raised in the September 2020 SNOPIR do not need to be
addressed at the present time in order to resolve the core issue of
applying the ``unavailability'' provision of EPCA to the specific
proposed standards for residential furnaces and commercial water
heaters, as requested by the Gas Industry Petition. Instead, these
commenters argued that these important issues are more appropriately
addressed in the context of the development of new standards for
residential furnaces, commercial water heaters, and other gas or
propane-fueled products/equipment. (Petitioners et al. Joint Comment
II, No. 116 at pp. 4, 6) The residual comments of these three groups
are summarized in the paragraphs that follow.
Commenters supporting adoption of DOE's original proposal to
establish product/equipment classes on the basis of the subject gas
appliance's utilization of condensing/non-condensing technology made
the following additional points. For furnaces currently on the market,
Nortek, AHRI, and Carrier stated that they are all already divided into
non-condensing/Category I and condensing/Category IV, so there is no
substantive distinction between the two. Of the two, these commenters
prefer categorization based upon a ``condensing/non-condensing''
distinction, because furnaces are already divided in that manner for
purposes of DOE's energy conservation standards for furnace fans.
(Nortek, No. 107 at pp. 2-3; AHRI, No. 109 at p. 3; Carrier, No. 110 at
p. 2) Carrier also stated that it continues to believe that non-
condensing operation is the key performance-related feature at issue.
(Carrier, No. 110 at p. 2) AHRI opined that a ``non-condensing''
product class should be sufficient to capture all boilers requiring
Category I venting, but it nonetheless encouraged DOE to explicitly
incorporate the ability to use existing venting categories associated
with atmospheric venting. (AHRI, No. 109 at p. 5)
Nortek and AHRI added that finalizing DOE's interpretation based
upon a ``condensing/non-condensing'' distinction, as originally
proposed, would not preclude the Department from considering and
analyzing venting
[[Page 4791]]
applications when creating product/equipment classes during the course
of individual energy conservation standards rulemakings, as necessary.
These commenters argued that a thorough, product-specific definition
and technology-focused characteristics should be evaluated to create
functional product/equipment classes that might vary for different
types of appliances. (Nortek, No. 107 at p. 2; AHRI, No. 109 at p. 2)
Finally, AHRI stated that tolerances and operational characteristics of
the product-specific test procedure must be considered in future
rulemakings to ensure that any energy conservation standards are safe,
functional, and cost-effective. (AHRI, No. 109 at p. 2)
Mortex cautioned that in moving forward with standard setting for
revised energy conservation standards for residential gas furnaces,
including mobile home gas furnaces, DOE must take into account the
product class structure established for residential furnace fans
manufactured on or after July 3, 2019 (codified at 10 CFR 430.32(y)).
Mortex argued that pursuant to 42 U.S.C. 6295(m)(4)(B), any revised
energy conservation standards for non-condensing, non-weatherized
mobile home gas furnaces must not preclude the continued sale of mobile
home gas furnaces containing furnace fans that comply with the new
furnace fan standards, because under that provision, EPCA prohibits DOE
from subjecting manufacturers to a new standard for a product with
respect to which other new standards have been required during the
prior 6-year period. The commenter argued that this requirement can
only be met by ensuring that any revised energy conservation standards
applicable to non-weatherized mobile home gas furnaces permit the
continued sale of non-condensing mobile home gas furnaces. (Mortex, No.
111 at p. 2)
Commenters supporting withdrawal of DOE's July 2019 proposed
interpretive rule and September 2020 SNOPIR made the following
additional points. NRDC opposes and urged DOE to withdraw both the July
2019 proposed interpretive rule and the September 2020 SNOPIR, because
the commenter argued that both suffer from technical and legal issues
which the Department has failed to address. NRDC and Lennox renewed and
reiterated many of the arguments raised in their earlier comments to
this docket, because the commenters stated that those same objections
apply regardless of whether the performance characteristics at issue
involve the use of condensing technologies or venting compatibility.
(NRDC, No. 112 at p. 2; Lennox, No. 114 at pp. 7-8) Other commenters
did the same, and as mentioned previously, such arguments are addressed
elsewhere in this document.
Lennox criticized DOE's September 2020 SNOPIR as being ``overtly
vague and unsupported,'' and in particular, the commenter faulted the
alternate approach which would consider the creation of separate
product classes for any existing venting system available on the market
as ambiguous and ill-defined, such that it deprives stakeholders the
opportunity to comment. For example, Lennox questioned whether DOE's
proposal would include specialty or unique ventilation types. (Lennox,
No. 114 at pp. 1, 3, 6) Lennox also faulted DOE's proposals for making
what it calls ``speculative and unsupported statements,'' such as the
number and cost of problematic installations and DOE's expectation
regarding limited negative programmatic impacts resulting from its
proposed interpretation. Accordingly, the commenter argued that DOE's
lack of analysis and supporting data once again deny stakeholders the
opportunity to comment on the September 2020 SNOPIR. (Lennox, No. 114
at p. 3) Lennox added that the September 2020 SNOPIR offers no
meaningful cost analysis or quantification of installation issues, so
it argued that DOE has no record basis to move forward with its
proposed interpretive rule. (Lennox, No. 114 at p. 4) Similarly, the CA
IOUs requested that DOE quantify the potential negative impacts of its
proposal in the September 2020 SNOPIR for residential furnaces,
commercial water heaters, and other similarly-situated products/
equipment. (CA IOUs, No. 117 at p. 4)
In addition, A.O. Smith alleged that DOE is improperly attempting
to use venting categorization in the features provision as a proxy for
how to consider increased installation cost in its rulemakings.
Instead, the commenter argued that such installation cost
considerations belong in DOE's economic analysis. (A.O. Smith, No. 113
at p. 3) Furthermore, A.O. Smith argued that DOE's proposed
interpretation, if applied to maintain Category I venting, would
eliminate more-efficient non-condensing products from the market, which
would restrict the opportunity for incremental gains in efficiency for
non-condensing appliances through Federal regulation. (A.O. Smith, No.
113 at pp. 4-5)
Commenters supporting finalization of the core ``features''
determination under EPCA and deferral of implementation issues (e.g.,
class setting) to individual product/equipment rulemakings made the
following additional points. The Petitioners et al. Joint Comment II
argued that the issues of venting compatibility raised in the September
2020 SNOPIR do not need to be addressed at the present time in order to
resolve the core issue of applying the ``unavailability'' provision of
EPCA to the specific proposed standards, as requested by the Gas
Industry Petition. Instead, these commenters argued that these
important issues are more appropriately addressed in the context of the
development of new standards for residential furnaces, commercial water
heaters, and other gas or propane-fueled products/equipment.
(Petitioners et al. Joint Comment II, No. 116 at pp. 4, 6) The
Advocates Joint Comment II also stated that venting considerations for
each product potentially covered by DOE's interpretation are different,
so such impacts must be considered in the context of individual
rulemakings, which can consider the specific circumstances of each
product (although the advocates still consider venting to be a matter
for DOE's economic analysis). (Advocates Joint Comment II, No. 118 at
p. 5)
In conducting inquiries in these individual rulemakings, the
Petitioners et al. Joint Comment II stated that the Department should
consider product class definitions for residential products which
reflect venting requirements that are established and codified under
national consensus standards, and then DOE should assess the need for
separate minimum efficiency standards for these classes. These
commenters stated that for the subject residential furnaces and
commercial water heaters, these appliances are design-certified for
safety based on the venting characteristics. According to these
commenters, there are four venting criteria specified in the applicable
industry consensus standards for residential furnaces and commercial
water heaters, as identified in ANSI Z21.47, Gas-Fired Central
Furnaces, and ANSI Z21.10.3, Gas-Fired Water Heaters, respectively. The
Petitioners et al. Joint Comment II added that the installation codes
for gas furnaces--ANSI Z223.1/NFPA 54, National Fuel Gas Code, and the
International Fuel Gas Code--include requirements for proper
installation (e.g., vent sizing, termination, and clearance
requirements). The commenters surmised that these product categories
would provide an appropriate starting point for DOE's technical and
economic analysis to determine whether separate minimum efficiency
standards are
[[Page 4792]]
appropriate for each equipment class. The Petitioners et al. Joint
Comment II recommended that these issues should be addressed in
individual product rulemakings under DOE's Process Rule \19\ and using
the most current information available. (Petitioners et al. Joint
Comment II, No. 116 at pp. 7-8)
---------------------------------------------------------------------------
\19\ See 10 CFR part 430, subpart C, appendix A, Procedures,
Interpretations, and Policies for Consideration of New or Revised
Energy Conservation Standards and Test Procedures for Consumer
Products and Certain Commercial/Industrial Equipment.
---------------------------------------------------------------------------
The Petitioners et al. Joint Comment II stressed that action on the
Gas Industry Petition is a matter of some urgency, because litigation
has been filed seeking to compel final action in a number of energy
conservation standards rulemaking proceedings, including the
proceedings in which proposals were issued that are the subject of the
Gas Industry Petition. As a result, the Petitioners et al. Joint
Comment II argued that DOE should clarify the situation by withdrawing
its prior rulemaking proposals for residential furnace and commercial
water heater energy conservation standards, because those proposals
cannot not be legally finalized as proposed if the Department
promulgates a final interpretive rule along the lines of that set forth
in the July 2019 proposed interpretive rule. (Petitioners et al. Joint
Comment II, No. 116 at p. 5)
In light of the above arguments, it has become apparent to DOE that
its alternative proposals to establish product/equipment classes based
upon maintaining venting compatibility drew little public support, and
problems may arise from adopting them as an overarching approach.
Support for maintaining compatibility with Category I venting was
limited to only Crown Boiler and USB, and no commenter spoke in favor
of an approach to maintain compatibility with all existing venting
types. However, a broad cross-section of industry stakeholders with
considerable technical expertise confirmed their understanding that
DOE's original proposal to define the subject performance-related
feature as the appliance's condensing or non-condensing operation would
represent a workable approach to implementing DOE's revised
interpretation.
Based upon DOE's careful review of the comments received, the
Department has decided it is not appropriate to move forward with
either of the two alternative approaches based upon venting
compatibility presented in the September 2020 SNOPIR, but to instead
adopt its original proposal presented in the July 2019 proposed
interpretive rule, which focused on an appliance's condensing or non-
condensing operation. Comments on the September 2020 SNOPIR have
convinced the agency that its alternative proposals would have
increased the complexity and regulatory burden of its regulatory
framework with little benefit. Because DOE is no longer pursuing these
alternative approaches, the Department finds it unnecessary to address
all of the technical arguments and other contentions against making
maintenance of venting compatibility a touchstone of its ``features''
determination. DOE is also persuaded by the stakeholder comments that
have positively assessed the implementation potential of DOE's revised
interpretation along the lines of its original proposal.
DOE agrees with the commenters who suggested that DOE should move
to resolve the ``core issue'' at the heart of the Gas Industry Petition
in this final interpretive rule, while reserving appliance-specific
implementation issues (including class setting) for review and analysis
in the context of individual product rulemakings. DOE has concluded
that such an approach would best serve all parties, including
manufacturers and consumers. Individual product rulemakings will have
the requisite mix of interested stakeholders, technical experts, a
comprehensive record with product-specific data (including a review of
relevant industry consensus standards), and the full suite of analyses
for class and standard setting. In that venue, DOE and interested
stakeholders will be better able to address any relevant technical
matters or product-specific nuances, including the tolerances and
operational characteristics of test procedures mentioned by AHRI, and
any lingering concerns related to the issue initially raised by USB,
BHI, and Crown Boiler.
Because the approach in DOE's earlier proposals for residential
furnaces and commercial water heaters are inconsistent with this final
interpretation and, therefore, will require revision, DOE has decided
to grant the request in the Petitioners et al. Joint Comment II for the
withdrawal of those proposals. Published elsewhere in this issue of the
Federal Register, DOE withdraws its March 12, 2015 proposed rule and
September 23, 2016 supplemental proposed rule for energy conservation
standards for non-weatherized gas furnace and mobile home gas furnaces,
as well as its May 31, 2016 proposed rule for energy conservation
standards for commercial water heating equipment. DOE's decision to
withdraw its earlier proposals is discussed in further detail in
section III.D.3 of this document.
Regarding arguments challenging the technical/legal/policy bases
for the September 2020 SNOPIR, DOE found many of these comments to
essentially be re-statements of their comments submitted in response to
the July 2019 proposed interpretive rule, rather than specifically
focused on the particulars of DOE's supplemental proposed
interpretation. Accordingly, those concerns are cited and addressed
elsewhere in this document.
As to Mortex's concern about the statutory prohibition on applying
new standards to a covered product for which other new standards have
been required within the prior six-year period (42 U.S.C.
6295(m)(4)(B)), DOE would point out that, given that requirements for
furnace fans came into effect on July 3, 2019, and given the
anticipated five-year lead time for amended standards for residential
furnaces (including mobile home gas furnaces), it is anticipated that
more than six years will have passed by the time any new furnaces
standards would come into effect.
b. Comments Opposing the Proposed Interpretation
Other commenters strongly opposed and urged withdrawal of DOE's
proposed revised interpretation regarding whether non-condensing
technology and associated venting constitutes a ``feature'' under EPCA.
(CA IOUs, No. 85 at p. 1; CFA/NCLC, No. 93 at p. 1; AGs Joint Comment,
No. 82 at p. 2; NRDC, No. 94 at p. 1; Advocates Joint Comment, No. 95
at p. 1; Environmentalists Joint Comment, No. 90 at p.1: AGs Joint
Comment II, No. 115 at p. 2) These commenters raised a number of
arguments which are set forth and addressed in the paragraphs that
follow.
i. Support for DOE's Prior Interpretation
Several commenters expressed support for DOE's prior position, as
presented in past rulemaking documents published in the Federal
Register, which concluded that non-condensing technology (and
associated venting capabilities) do not merit a ``feature'' designation
and the establishment of a separate product class with a different
energy conservation standard. (Ceres, No. 69 at p. 3; Lennox, No. 87 at
p. 4; A.O. Smith, No. 88 at p. 2; NRDC, No. 94 at pp. 4-5; CA IOUs, No.
85 at p. 3; A.O. Smith, No. 113 at p. 2; Lennox, No. 114 at pp. 6-7;
AGs Joint Comment II, No. 115 at p. 2; CA IOUs, No. 117 at p. 1; NEEA,
No. 119 at p. 1) In making that point, the
[[Page 4793]]
AGs Joint Comment argued that DOE's proposed interpretive rule would
effectively grandfather inefficient designs. (AGs Joint Comment, No. 82
at p. 3) The AGs Joint Comment pointed to and even quoted from a number
of DOE's past rulemakings which articulated the rationale for finding
that venting capabilities (and any related costs) are not a
performance-related feature under EPCA. Specifically, these commenters
cited to language contained in the [March 12,] 2015 NOPR and [September
23,] 2016 SNOPR for residential furnaces, the 2009 final rule for
residential water heaters,\20\ and the 2015 final rule for residential
clothes dryers.\21\ In short, the AGs Joint Comment (and other
commenters) agreed with DOE's historic view that a furnace's or water
heater's manner of venting does not provide consumers unique utility
separate and apart from its basic function of providing heat or hot
water. (AGs Joint Comment, No. 82 at pp. 3, 8-10; A.O. Smith, No. 88 at
pp. 2, 4; NRDC, No. 94 at pp. 4-5; CA IOUs, No. 85 at pp. 2-3; NRDC,
No. 112 at p. 2) NRDC added that when DOE acts to reverse a long-held
interpretation, as it seeks to do with the proposed interpretation for
condensing/non-condensing products/equipment, DOE has the burden of
proof to clearly explain and justify its rationale. (NRDC, No. 94 at p.
3)
---------------------------------------------------------------------------
\20\ DOE notes that this final rule was actually published in
the Federal Register on April 16, 2010.
\21\ DOE notes that this final rule was actually published in
the Federal Register on April 21, 2011.
---------------------------------------------------------------------------
In response, DOE disagrees with these commenters' view that the
Department's revised interpretation is inappropriate or lacking in
evidentiary basis, and DOE notes that numerous other commenters on the
proposed interpretive rule held a contrary opinion. As explained
elsewhere in this document, the Gas Industry Petition gave DOE the
opportunity to revisit its prior interpretation, and the information
provided in that petition and in subsequent comments thereon caused DOE
to reevaluate prior data and, ultimately, its position. These
commenters cannot reasonably claim that the rulemaking dockets for
residential furnaces, commercial water heaters, and other similarly-
situated products/equipment are lacking in data. Because data is always
subject to interpretation, it is not reasonable for these commenters to
demand that a revised interpretation must rely solely upon new data.
Here, the petitioners did present the Department with new arguments,
perspectives, and information that were useful to DOE in reexamining
its position. More specifically, the petitioners explained how the
shift to energy conservation standards set at a condensing level could
necessitate significant modifications to both new and existing
buildings, such that interior residential or commercial space may need
to be sacrificed, additional unattractive venting would need to be
added, or desirable window or patio space could be lost. These new
arguments demonstrate ongoing impacts that would be noticed and likely
perceived negatively by consumers, and this reasoning is in addition to
the other arguments and data previously submitted by the petitioners
and considered by DOE during the course of various rulemakings. As
noted, DOE also relied upon the significant data already in these
rulemaking dockets to assess its prior interpretation as to whether
non-condensing technology (and associated venting) constitutes a
performance-related ``feature'' for purposes of EPCA. Based upon the
totality of the information, DOE has determined that the change in
interpretation reflected in this final interpretive rule is appropriate
under the statute.
Regarding the assertion in the AGs Joint Comment that the revised
interpretation would grandfather inefficient designs, that same
argument could be ventured virtually every time a determination is made
under EPCA's ``features'' provision. An oven without a window in the
door would be more efficient than one that retains that feature.\22\
However, the statute, by the very nature of its ``features'' provision,
makes clear that efficiency will not be paramount in all situations. In
fact, the words of the statute make clear that is the precise purpose
of the ``features'' provision. In that provision, EPCA prohibits the
Secretary from prescribing a new or amended standard (i.e., imposing a
standard for a product where a standard did not previously exist or
increasing the stringency of an existing standard) if doing so is
likely to result in the unavailability of a performance characteristic,
feature, etc. substantially the same as those generally available in
the absence of the Secretary prescribing a new or amended standard. See
42 U.S.C. 6295(o)(4). Thus, DOE finds this argument in the AGs Joint
Comment to be contrary to the statute.
---------------------------------------------------------------------------
\22\ In its energy conservation standards rulemaking for cooking
products that culminated in the September 8, 1998 final rule (63 FR
48038), DOE explained its rationale for initially considering a
design option to eliminate oven door windows as a means to improve
energy efficiency in the technical support document (TSD) for that
rulemaking. (See Volume E, Chapter 1, Engineering Analysis, section
1.4.1, Design Options for Ovens, pp. I-22 to I-23. (Available at:
https://beta.regulations.gov/document/EERE-2006-STD-0048-0027;
(select EE-RM-90-201 COMMENT OOA2-4).
---------------------------------------------------------------------------
ii. Violations of Legal Standards
Related to their support of DOE's prior interpretation, a number of
commenters challenged DOE's proposed interpretation on a variety of
legal grounds. For example, these commenters faulted the Department's
proposal as being arbitrary and capricious; contrary to law; and
contrary to precedent and factually unsupported. DOE recognizes that
such topics are often intertwined. However, given the rather voluminous
nature of these submitted arguments, DOE has segmented the discussion
into these broad categories for response in the subsections that
follow.
Arbitrary & Capricious
A number of commenters characterized DOE's proposed reversal of its
prior interpretation and dismissal of its prior concerns as arbitrary
and capricious and an abuse of discretion, despite DOE's stated
expectation that the programmatic impacts of its revised interpretation
are likely to be limited (which was characterized as a claim alleged to
be lacking in data and analysis). (AGs Joint Comment, No. 82 at pp. 2,
7-10; CEC, No. 89 at p. 3; AGs Joint Comment II, No. 115 at p. 2; CA
IOUs, No. 117 at p. 3) The CEC predicted that without sufficient record
evidence to support its decision (i.e., changed interpretation), a
court would overturn such agency action as arbitrary and capricious.
Overall, the commenter expressed its belief that DOE's proposed
interpretation is contrary to the preponderance of evidence in the
record, particularly since DOE improperly conflates economic and
performance characteristics. Accordingly, the CEC concluded that DOE's
historical interpretation on this matter is both consistent with the
evidence and reflects congressional intent to improve energy efficiency
and protect human health. (CEC, No. 89 at p. 7)
DOE disagrees with these commenters' notion that the Department
lacks sufficient evidence to support a revised interpretation, thereby
rendering the agency vulnerable to a legal challenge claiming arbitrary
and capricious action. As noted previously, the petitioners presented
new information and arguments explaining how the shift to energy
conservation standards set at a condensing level
[[Page 4794]]
could necessitate significant modifications to both new and existing
buildings, such that interior residential or commercial space may need
to be sacrificed, additional unattractive venting would need to be
added, or desirable window or patio space could be lost. These new
arguments demonstrate ongoing impacts that would be noticed and likely
perceived negatively by consumers, and this reasoning is in addition to
the other arguments and data previously submitted by the petitioners
and considered by DOE during the course of various rulemakings. In sum,
DOE's existing rulemaking dockets are replete with evidence bearing on
this matter. DOE appropriately reassessed that information in response
to the submitted petition for rulemaking and, based upon the totality
of the available information, came to the reasoned conclusion that its
revised interpretation better comports with the statute, as explained
in this document.
Contrary to Law
Other commenters characterized DOE's proposed interpretation as
contrary to law. (Lennox, No. 87 at p. 4; AGs Joint Comment, No. 82 at
pp. 2-3; A.O. Smith, No. 88 at p. 2; CEC, No. 89 at p. 3; NRDC, No. 94
at p. 4; A.O. Smith, No. 113 at p. 2; AGs Joint Comment II, No. 115 at
p. 1) The AGs Joint Comment asserted that DOE's proposed interpretation
is contrary to law under 5 U.S.C. 706(2), and that a plain reading of
EPCA and review of public comments make clear that venting technology
is not a performance-related feature under the statute. Consequently,
these commenters reasoned that DOE cannot create a separate product
class for non-condensing products on that basis which would be subject
to lower efficiency requirements. (AGs Joint Comment, No. 82 at p. 7;
AGs Joint Comment II, No. 115 at p. 2) Lennox added that Congress set
initial energy conservation standards for residential furnaces with
product classes based on capacity and fuel source, but it did not
segment classes by condensing and non-condensing technology, so the
commenter argued that DOE should not do so now. (Lennox, No. 87 at p.
3)
In response, DOE's proposed interpretive rule is in accordance with
the pertinent statutory provisions of EPCA. As commenters acknowledged,
the statute does not define the terms ``feature'' or ``performance-
related feature,'' so resolution of this ambiguity is left to the
agency's discretion as a matter of statutory interpretation. Over the
more than 30-year life of the Appliance Standards Program, DOE has made
numerous ``features'' determinations, so the Department has expertise
in weighing issues of consumer utility. Size constraints and building
modifications to a dwelling or business seem clearly within the bounds
of product characteristics that would matter to an average consumer,
and have mattered in the past to DOE without objection (see e.g., 76 FR
22454, 22485 (April 21, 2011) (discussing ventless and compact clothes
dryers); 76 FR 37408, 37446 (June 27, 2011) (discussing space-
constrained residential central air conditioners and heat pumps)). DOE
also rejects Lennox's argument that just because Congress based initial
furnace standards on capacity and fuel source that modifications to
that existing class structure would be forever off limits. Such
argument would render the ``features'' provisions at 42 U.S.C.
6295(o)(4) and 42 U.S.C. 6313(a)(6)(B)(iii)(II)(aa) superfluous, so DOE
declines to adopt Lennox's suggested approach. Although DOE has found
the Gas Industry Petition to encompass a number of complex issues, DOE
has concluded that its revised interpretation set forth in this final
interpretive rule is well grounded in current law.
Lennox opined that DOE would be violating the legal standard
pronounced by the Supreme Court that for an agency to change a
regulatory interpretation, it must articulate a `` `rational connection
between the facts found and the choices made' '' (citing Motor Vehicle
Mfrs. Ass'n v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 52 (1983)).
(Lennox, No. 87 at p. 4) Similarly, A.O. Smith's comments claim that
DOE's proposed interpretation deviates from the Department's past
precedent without sufficient justification, administrative record
support, or reasoned explanation. The commenter stated that DOE must
provide a reasonable basis for its new interpretation, but it concluded
that none of the Department's justifications are reasonable. (A.O.
Smith, No. 88 at p. 6) First, A.O. Smith challenged the Department's
tentative findings in the proposed interpretation related to space
constraints, distinguishing DOE's past regulatory actions related to
PTACs and ventless clothes dryers. The commenter acknowledged that the
statute does expressly recognize ``size'' as a relevant factor under
EPCA's ``features'' provision (see 42 U.S.C. 6295(o)(4); 42 U.S.C.
6313(a)(6)(B)(iii)(II)(aa)), but it argued that DOE's proposed
interpretation, as it relates to commercial water heaters and similarly
situated products, does not turn on size (given the wide availability
of water heaters in a wide variety of diameters, heights, and
footprints), but rather on condensing technology itself. (A.O. Smith,
No. 88 at pp. 6-7) A.O. Smith also distinguished DOE's creation of
distinct product classes for vented and ventless clothes dryers, noting
that the presence or absence of vents in the residential space was a
proxy for moisture removal designs (necessary to prevent mold growth
and other health concerns). The commenter argued that without adequate
venting or a ventless dryer option, some consumers would be unable to
have a dryer at all (e.g., high-rise condo residents), but that
situation would not apply to commercial water heaters, because
commercial settings can accommodate condensing technology. Furthermore,
A.O. Smith argued that DOE has proffered no new facts or changed
circumstances to support its new conclusion, but instead, the company
asserted that the Department has failed to acknowledge the wide variety
of vent and intake air pipes that exist and that may accommodate
differing condensing water heater installations, all of which should be
properly considered in DOE's economic analyses. (A.O. Smith, No. 88 at
pp. 7-8, 10)
In response, DOE has articulated a rational and reasonable basis
for its proposed change of interpretation. As mentioned previously,
DOE's prior interpretation did not adequately account for the consumer
utility of non-condensing appliances (and associated venting) in
difficult installation situations. Commenters have also identified
benefits related to expanded consumer choice. DOE disputes A.O. Smith's
statements that the difficult installation situations examined do not
pertain to size constraints, as well as its attempt to imply that
alternate venting and piping would offer a panacea for the larger
problem identified. Gas industry commenters provided considerable
information in these regards to the residential furnaces, commercial
water heaters, and other dockets, and DOE's own analyses showed that
difficult installation situations exist, with many cases reflected in
the Department's investigation of fuel switching. The Gas Industry
Petition provided occasion for DOE to revisit its prior interpretation,
and the agency has concluded that it erred in failing to consider
consumer utility more broadly in this context. The Department would
argue that there already was and is extensive evidence in the record
bearing on this issue as would support DOE's change of course.
[[Page 4795]]
While DOE outlines the general factual basis and legal principles in
this final interpretive rule, the Department will make a more explicit
statement of the evidentiary basis for separate product/equipment
classes and standards for non-condensing products/equipment in the
context of a specific energy conservation standards rulemaking for each
appliance impacted by this revised interpretation. Such detailed
information resides in those individual rulemaking dockets and cannot
be comprehensively addressed here. However, an expanded statement of
the basis for regulatory action is appropriate before such rulemakings
alter existing regulatory requirements.
According to A.O. Smith, DOE's proposed interpretation conflicts
with the Department's statutory obligations pursuant to EPCA and would
undermine the Appliance Standards Program. It argued that although EPCA
does not define the term ``feature,'' DOE cannot adopt a definition
that conflicts with its statutory obligations to improve energy
efficiency and the statutorily-mandated process for setting new and
amended standards. A.O. Smith alleged that such reinterpretation would
have profound negative consequences for energy efficiency and consumer
choice. More specifically, the commenter asserted that it would impose
an artificial ceiling on efficiency and create a loophole by locking in
an outdated and inefficient technology with no consumer benefit.
According to A.O. Smith, the logical consequence of DOE's
reinterpretation would be the establishment of separate standards, but
because non-condensing commercial water heaters can only be made
minimally more efficient than the levels in the current energy
conservation standards, the commenter concluded that no further
standard would likely be cost-effective, thereby leaving these products
``effectively unregulated.'' The commenter predicted that in its next
commercial water heaters rulemaking, DOE would set a condensing
standard of no less than 95 percent thermal efficiency, and as a
result, manufacturers who are unable to meet the more-stringent
standards for condensing commercial water heaters would revert to
producing non-condensing models which enjoy a lower standard, all of
which would have the effect of increasing condensing appliance costs
and shrinking the market for high-efficiency products. (A.O. Smith, No.
88 at pp. 10-11; A.O. Smith, No. 113 at p. 5)
DOE cannot agree with the interpretation of EPCA that A.O. Smith
seeks to advance, because it is inconsistent with the legal obligations
set forth under the statute's ``features'' provision. The ``features''
provision was enacted by Congress to maintain important aspects of
appliances' utility to consumers even if some measure of energy savings
would be lost. To apply a litmus test of ``no lost energy savings'' or
some vague ``fidelity to the statute'' standard would render EPCA's
``features'' provision rarely used, if not impossible to use--the very
definition of ``superfluous.'' Whereas A.O. Smith accuses DOE's
proposed interpretive rule of undermining the Appliance Standards
Program, the commenter's suggested approach would undermine the statute
by giving DOE unlimited authority to override one of the checks-and-
balances Congress explicitly enacted. A.O. Smith mischaracterizes
Congress's judgment to put elimination of ``performance-related
features'' beyond the Department's regulatory reach as DOE's effort to
create an artificial ceiling on standards or to create a loophole for
inefficient technology. That is simply not the case; rather, DOE is
following clear statutory direction to protect consumer utility, even
if that means foregoing the potential opportunity for increased energy
efficiency, and is applying facts to those words in a specific
circumstance. Also, contrary to what A.O. Smith suggests, DOE's
proposal would enhance consumer choice by maintaining a greater variety
of appliances on the market. Nothing about creating separate product
classes for condensing and non-condensing products in any way requires
a consumer to purchase any particular product. As A.O. Smith
recognizes, the market today consists of both condensing and non-
condensing products, and consumers are perfectly free to make the
choice to purchase the more efficient product when doing so fits their
needs. This interpretation does nothing to change that purchasing
decision.
DOE also takes issue with other of A.O. Smith's assertions. First,
A.O. Smith argues that because non-condensing commercial water heaters
are near the limits of their energy efficiency, they would be
``effectively unregulated.'' This is untrue both factually and in terms
of what the statute requires. Non-condensing water heaters would still
be subject to standards at the current levels (or higher if a
subsequent rulemaking periodically reviewing existing standards
determines that further technical improvements can be made to non-
condensing technology as would justify an amended standard). In
addition, nowhere does the statute require or establish an expectation
that there shall be a never-ending cycle of increasingly more-stringent
standards. Such a reading of the statute is belied by the fact that the
statute expressly provides for notices of determination that standards
for a product do not need to be amended where such standards would not
result in significant energy savings, would not be technologically
feasible, and/or would not be cost-effective. (42 U.S.C. 6295(m)(1)(A))
In addition, DOE does not agree with A.O. Smith's prediction that
manufacturers who are unable to meet a more-stringent standard for
condensing commercial water heaters would revert to producing non-
condensing models which are subject to a lower standard, thereby
shrinking the market for high-efficiency products. As discussed in
greater detail in section III.A.3 of this document, current market
trends show consumers moving strongly towards condensing products based
upon their substantial demonstrated energy savings. Manufacturers have
every incentive to adjust their product lines and processes in response
to this market demand, even if the condensing appliances come to have
their own higher standard. In the current market, consumers are already
choosing to pay a premium for condensing appliances to achieve greater
energy savings, and A.O. Smith has offered no rational basis supported
by evidence to show this trend would reverse or that other
manufacturers would rush to forego prior investment in condensing
products to chase a declining market for non-condensing products. For
those same reasons, A.O. Smith has failed to provide evidence
demonstrating that any price increases for condensing appliances under
a separate energy conservation standard would appreciably differ from
price increases under a unified energy conservation standard set at a
condensing level.
The Environmentalists Joint Comment argued that the Department has
failed to demonstrate that a violation of EPCA would occur by adoption
of an energy conservation standard that can only be met by use of
condensing technology. (Environmentalists Joint Comment, No. 90 at p.
1) Along these lines, the Environmentalists Joint Comment stated that
energy conservation standards that can only be met by use of condensing
technology would not lead to minimal demand for gas appliances, which
they assert is the legal test for DOE to take action under EPCA's
``features'' provisions at 42 U.S.C. 6295(o)(4) and 42 U.S.C.
6313(a)(6)(B)(iii)(II). These commenters asserted that in order for
[[Page 4796]]
the features provision to come into play, a DOE standard would need to
leave the market with no alternative performance characteristics,
features, sizes, capacities, or volumes that are ``substantially the
same'' as those that would be eliminated from the market. They opined
that Congress intended DOE to balance the preservation of product
utility with the energy-saving objectives of the statute. In explaining
their position, the Environmentalists Joint Comment quoted from the
legislative history accompanying those statutory provisions: `` `A
valid standard may entail some minor loss of characteristics, features,
sizes, etc.; for this reason, the Act requires that `substantially the
same,' though not necessarily identical, characteristics or features
should continue to be available.' H. Rep. 100-11 at 23 (1987).''
``[T]he Senate Energy and Natural Resources Committee explained that,
in the context of residential gas furnaces, section 325(o)(4) [42
U.S.C. 6295(o)(4)] would forbid a standard from `being set at a level
that would increase the price to the point that the product would be
noncompetitive and that would result in minimal demand for the
product.' S. Rpt. 100-6 at 8-9 (Jan. 30, 1987), reprinted in 1987
U.S.C.C.A.N. 52, 59.'' Relying on this language, the Environmentalists
Joint Comment concluded that DOE's proposed interpretation is
impermissible because it does not meet this test, arguing not only that
the Department has failed to demonstrate that condensing standards for
both residential furnaces and commercial water heaters would result in
minimal demand for these types of gas appliances, but also that the
record in those rulemakings establish that fuel switching would be less
than 10 percent. (Environmentalists Joint Comment, No. 90 at p. 2)
The Petitioners et al. Joint Comment sought to refute comments
suggesting that EPCA's ``features'' provision would only apply if the
unavailability of the performance characteristic or feature at issue
would completely destroy the market for the covered product/equipment.
The Petitioners et al. Joint Comment argued that opponents of the Gas
Industry Petition have misinterpreted the legislative history and that
standards for residential furnaces which result in the unavailability
of a performance characteristic would still be precluded under the
statute, even if it would not fully eliminate the market for gas
furnaces. (Petitioners et al. Joint Comment, No. 80 at pp. 18-19)
Likewise, the Petitioners et al. Joint Comment disputed the arguments
of NRDC and Earthjustice that the placement of parentheses marks in
EPCA's two ``features'' provisions (42 U.S.C. 6295(o)(4) and 42 U.S.C.
6313(a)(6)(B)(iii)(II)) indicate a substantive or material difference
between those two provisions. These commenters argued that those
opponents of the petition--lacking any explicit language or legislative
history to show a difference between these two provisions--rely on
improper, extra-statutory qualifications in an attempt to exclude
atmospherically vented products from the ``features'' provisions'
applicability. (Petitioners et al. Joint Comment, No. 80 at p. 19)
In response, DOE agrees with the Petitioners et al. Joint Comment
that these commenters have misconstrued the application of EPCA's
``features'' provision and the relevant legislative history. While DOE
agrees that adoption of an energy conservation standard may compel
minor changes and modifications to an appliance without triggering the
protections of the statute's ``features'' provisions, it does not seem
to be a reasonable reading to bar application of the ``features''
provision and its protections, except in an extreme case where a
regulation would vitiate demand for a gas-fired appliance entirely.
Here, the loss of feature would not be minor, because elimination of
non-condensing appliances (and the introduction of associated venting
requirements) would have the significant negative consequences
previously discussed for those consumers facing difficult installation
situations, a subgroup which could be upwards of 10 percent of
households with gas-fired furnaces (based upon fuel switching data), as
one example. (81 FR 65720; Sept. 23, 2016) Furthermore, a Draconian
reading requiring the potential elimination of all gas-fired appliances
would once again threaten to read the ``features'' provision out of
existence, as a practical matter. This cannot be what Congress
intended, so DOE declines to follow this path.
The Environmentalists Joint Comment echoed the rationale in past
DOE rulemakings that the consumer utility of a residential furnace is
to provide heat to a dwelling and that the consumer utility of a
commercial water heater is to provide hot water, functional outputs
which do not change with type of venting. Along these lines, they
sought to link the function of these appliances to the statutory
definitions of ``furnace'' at 42 U.S.C. 6291(23) and ``storage water
heater'' at 42 U.S.C. 6311(12)(A). According to the Environmentalists
Joint Comment, properly installed condensing gas appliances exhibit the
same or substantially the same attributes as non-condensing appliances.
(Environmentalists Joint Comment, No. 90 at p. 3) Consequently, the
Environmentalists Joint Comment concluded that DOE's proposed
determination failed to demonstrate any performance-related features of
non-condensing gas appliances that require protection from standards.
(Environmentalists Joint Comment, No. 90 at p. 2)
As discussed in section III.A.1.a of this document, DOE has
determined that a consumer's interaction with and utility from a non-
condensing appliance can go beyond such unit's ability to provide hot
air or water, particularly in difficult installation situations where
eventual replacement of the appliance would necessitate structural
modifications to a dwelling or business (e.g., loss of usable living/
retail/storage space, addition of unsightly piping or venting to the
finished space, or loss of a window(s)). The Environmentalists Joint
Comment seeks to tie the statutory ``features'' determination to the
appliance's primary function by focusing on the statutory definitions
at 42 U.S.C. 6291 and 42 U.S.C. 6311. However, DOE finds that to be an
improper reading of statute. The commenters' theory ignores the fact
that pursuant to 42 U.S.C. 6295(q), DOE is bound to focus on the
performance-related feature, rather than the overall function of the
appliance. For example, DOE has determined an oven window to be a
feature, although it does nothing to actually bake the cake placed
inside the oven. Similarly, DOE has determined the angle of access of a
residential clothes washer to be a feature, although it does nothing to
make one's clothes cleaner. Under the Environmentalists Joint Comment's
theory, such features offering distinct utility to consumers would no
longer deserve protection because they are not directly mentioned in a
statutory definition. Such reading would render EPCA's ``features'' and
class-setting provisions significantly and improperly diminished,
because a feature is unlikely to ever be mentioned in such definition.
If the performance-related characteristic were so uniform and
ubiquitous as to be part of the general product definition, it would
arguably come ``standard'' rather than being a ``feature.''
Accordingly, DOE declines to adopt this suggested reading of the
statute.
Contrary to Precedent & Factually Unsupported
A number of commenters stated that DOE's proposed interpretation is
[[Page 4797]]
contrary to DOE precedent and factually unsupported. (Lennox, No. 87 at
p. 4; AGs Joint Comment, No. 82 at p. 3; CEC, No. 89 at p. 3) NRDC
asserted that DOE's justification in its proposed interpretive rule is
insufficient and not supported by data or research, arguing that
neither the Gas Industry Petitioners nor any other commenter provided
new arguments, data, or evidence sufficient to justify a reversal of
DOE's existing policy. (NRDC, No. 94 at pp. 3, 5) The AGs Joint Comment
characterized DOE's proposed interpretive rule as a radical departure
from DOE's historical interpretation of EPCA's ``features'' provision.
They stated that DOE has already specifically addressed and rejected
the arguments raised in the Gas Industry Petition in a number of
rulemakings, and they added that the Department has failed to identify
any valid reasons for it proposed change of position (e.g., dismissing
as insufficient DOE's rationales related to aesthetics, compatibility
of co-vented appliances, and economic factors). (AGs Joint Comment, No.
82 at p. 7) The CEC faulted DOE for not offering any new relevant
evidence, reasoning, or facts to support its proposed change of
interpretation. (CEC, No. 89 at p. 5) Lennox added that DOE's proposal
is not factually supported and relies on speculation, particularly with
regards to the Department's tentative conclusions that new venting may
change a home's aesthetics or that some consumers may have a preference
for gas heating. The commenter similarly faulted DOE's cost analysis as
lacking in data and speculative, even as it attacked costs as an
inappropriate consideration for product class setting. (Lennox, No. 87
at p. 4; Lennox, No. 114 at p. 3)
As stated previously, DOE disagrees with these commenters' view
that the Department's revised interpretation is inappropriate because
it diverges from past precedent or that it is lacking in evidentiary
basis. The Gas Industry Petition gave DOE the opportunity to revisit
its prior interpretation, and the information provided in that petition
and in subsequent comments thereon caused DOE to reevaluate prior data
and, ultimately, its position. These commenters cannot reasonably claim
that the rulemaking dockets for residential furnaces, commercial water
heaters, and other similarly-situated products/equipment are lacking in
data. Here, however, the petitioners presented the Department with new
arguments, perspectives, and information that were useful to DOE in
reexamining its position. However, DOE also relied upon the significant
data already in these rulemaking dockets to assess its prior
interpretation as to whether non-condensing technology (and associated
venting) constitutes a performance-related ``feature'' for purposes of
EPCA. Based upon the totality of the information, DOE has determined
that the change in interpretation reflected in this final interpretive
rule is appropriate under the statute.
The CA IOUs commented that product classification and performance
standards should never be inoperative or superfluous, but argued that
that is precisely what DOE's proposed classifications for residential
furnaces and commercial water heaters would do, because a performance
standard with separate levels for both condensing and non-condensing
products would represent no new standards or savings, but would instead
simply codify the status quo. (CA IOUs, No. 85 at p. 5) Reciting the
statutory objectives of EPCA, the CA IOUs stated that DOE's performance
standards should promote innovation and embrace new technologies and
opportunities as they become cost-effective for consumers. In order to
ensure that DOE does not set a precedent here regarding ``features''
that weakens the Department's ability to set effective efficiency
standards, the CA IOUs urged DOE to clearly distinguish between
differences that are aspects of inherent technical product design and
differences that materially impact the way users interact with the
products. To this end, the commenters urged DOE to establish a
consistent definition of ``performance-related feature'' to guide
future inquiries as to whether a given aspect of a product is a
performance-related feature under EPCA. The CA IOUs supported DOE's
prior interpretation that such feature would be ``accessible to the
layperson and is based on user operation,'' and they further argued
that the agency should limit itself to consideration of product classes
currently available on the market, based upon input from industry and
other stakeholders. These commenters stated that DOE should not
establish new product classes based upon its own original
interpretations or a determination that certain product classes should
theoretically exist. (CA IOUs, No. 85 at p. 3)
In response, DOE agrees with the CA IOUs that statutory provisions
should never be made inoperative or superfluous, yet that is precisely
the action the CA IOUs would ask the agency to take vis-[agrave]-vis
EPCA's ``features'' provision. Where DOE has determined the existence
of a performance-related feature under EPCA, setting a separate
product/equipment class and standard to protect such feature is
precisely what the statute envisions. Such action is only ``codifying
the status quo'' in the sense that it is protecting the feature from
elimination as the statute directs. As noted elsewhere in this
document, although EPCA seeks to promote energy savings, energy
efficiency, and related product innovation, Congress also made a
decision to protect important ``features'' by enacting the ``features''
provision, even at the expense of potential energy savings.
Regarding the CA IOUs' suggestion that DOE develop a definition for
``performance-related feature,'' DOE has concluded that it would not be
feasible to do so. Given the multitude of covered products and
equipment for which DOE is responsible, the Department has found the
concept of ``feature'' to be very case-specific. No single definition
could effectively capture the potential for features across such a
broad array of consumer products and commercial equipment. That is why
when assessing ``features,'' DOE developed the concept of consumer
utility and how the consumer interacts with the product/equipment. DOE
continues to apply that approach here in the context of non-condensing
appliances (and associated venting), having determined that in cases of
difficult installation requiring reconfiguration and/or loss of usable
living space of a home or retail space of a business, the consumer
would become very conscious of and appreciate the ability to purchase
appliances with non-condensing operation. This determination is akin to
DOE's prior determinations with regard to finding as features windows
in oven doors and top-loading access to clothes washers. DOE has found
that expanded choice would be important to such consumers, and
accordingly, the Department has determined this to be a ``feature''
under the statute which may not be eliminated.
A.O. Smith opined that condensing water heaters could replace non-
condensing ones in every commercial setting (i.e., technically
feasible); however, A.O. Smith does admit that ``there are certain
circumstances where installing a condensing model may be cost-
prohibitive due to significant installation costs.'' Rather than making
an overly broad features determination, the commenter suggested that
such costs should be addressed by ``examining subgroups of
installations in DOE's economic models'' and that DOE might ``decline
to set a standard for a particular subclass [of consumers], where
supported by the facts and
[[Page 4798]]
economic analysis.'' (A.O. Smith, No. 88 at p. 3; A.O. Smith, No. 113
at p. 3)
Although DOE appreciates A.O. Smith's acknowledgment of the
difficult installation situations at issue, the commenter offered no
data to support its assertion that it would be technically feasible to
substitute a condensing commercial water heater in all commercial
applications, nor would that conclusion, if found to be true,
necessarily resolve other concerns raised in the Gas Industry Petition
about undesired modifications to the residential or commercial space.
Moreover, the Department does not find the commenter's suggested
solution to be a workable one. As those familiar with the Appliance
Standards Program are aware, DOE has authority to set energy
conservation standards for covered products and equipment which must be
met by manufacturers before an appliance may be distributed in
commerce. The Department does not regulate product use, absent specific
congressional direction (e.g., grid-enabled water heaters). Thus, while
DOE may have the ability to analyze impacts of standards on subclasses
of consumers, and may use disproportionate impacts on a subclass of
individuals as a basis for determining a standard is not economically
justified, DOE has no authority to set standards by subclasses of
consumers. Moreover, A.O. Smith's suggestion is a false choice because
DOE has no ability to ensure that products of a certain standard level
are purchased by only those consumers in an intended subgroup.
The CEC stated that DOE discussed its analysis of venting costs for
residential furnaces, but it ignored the significant data provided by
energy efficiency advocates and others supporting DOE's prior
interpretation related to features. Specifically, the CEC pointed to
what it described as multiple data points demonstrating that only 1% to
5% of homes would present difficult or costly installation issues.
Consequently, the CEC concluded that DOE has insufficient information
to outweigh the data provided by proponents of DOE's historical
interpretation. (CEC, No. 89 at p. 3)
Once again, the Petitioners et al. Joint Comment sought to respond
to certain criticisms of opponents of the proposed interpretation. In
this area, the Petitioners et al. Joint Comment argued that opponents
of the petition seek to dismiss the substantial difference in
performance characteristics offered by atmospherically vented products
by making the assertion that such differences amount to nothing more
than installation characteristics, a distinction which the joint
comment stated is without basis. Instead, the Petitioners et al. Joint
Comment charged that it is the opponents of the petition who are
ignoring the data, adding that a study commissioned by opponents of the
petition repeatedly acknowledged that installation of condensing
appliances frequently presents non-economic problems for purchasers,
although the report seeks to characterize them as only aesthetic
concerns. Instead, the Petitioners et al. Joint Comment countered that
a condensing standard would leave many consumers facing the need to
sacrifice interior living space, a balcony, or a window simply to
replace an existing gas appliance. The Petitioners et al. Joint Comment
also faulted opponents' study for only classifying a building
modification as ``significant'' if it more than doubles the total
system cost of a retrofit, an unreasonable approach which masks the
extent of the disruptive impacts which the Gas Industry Petition seeks
to prevent. (Petitioners et al. Joint Comment, No. 80 at pp. 20-21)
The Petitioners et al. Joint Comment challenged DOE's prior
rationale (to which other commenters continue to adhere) suggesting
that it is possible to install condensing systems in virtually all
cases, arguing that such assertions may only be true in a significant
number of cases from a technical or theoretical standpoint. However,
these commenters stressed that in many cases (as discussed in the
petitioners' own competing experts study), such installations may not
be possible from a practical perspective, raising the example where the
owner of a condominium unit could not install a condensing unit without
violating applicable restrictive covenants or compromising a common
venting system serving other units. In other cases, the Petitioners et
al. Joint Comment stated that a condensing standard would leave
consumers with no practical gas appliance replacement option without
having to accept substantial and often undesirable building
modifications. According to the Petitioners et al. Joint Comment, this
is the same logic and meaning of ``impossibility'' that DOE used in its
final rule for ventless clothes dryers, so they argued that the
Department should make clear a similar understanding in the context of
condensing technology. (Petitioners et al. Joint Comment, No. 80 at pp.
21-23)
According to the Petitioners et al. Joint Comment, nearly half of
all residential furnaces in the northern part of the country are
located in finished basements; over ten percent nationwide are in
apartments; many more are in townhomes, and all such installations are
ones where replacement of atmospherically vented products would
routinely require significant building modifications. (Petitioners et
al. Joint Comment, No. 80 at p. 23) The Petitioners et al. Joint
Comment reasoned that EPCA's ``features'' provisions were intended,
among other things, to preserve availability of product characteristics
which consumers need in order to be able to use those products without
having to make significant building modifications. These commenters
argued that when Congress acted through the ``features'' provisions to
protect ``sizes,'' as exemplified by statutory standards set for
different type of installation of direct heating equipment, it sought
to ensure that products fit within `` `standard building spaces' ''
(quoting H.R. Rep. No. 100-11 at p. 23 (1987)). According to the
Petitioners et al. Joint Comment, changes to existing venting to
replace an atmospherically vented furnace with a condensing one would
require much more significant building modifications than most other
appliances, so they stated that there is no reason to believe that
Congress intended to spare purchasers from the lesser types of
modifications but not the greater. Based upon this overall statutory
logic, the Petitioners et al. Joint Comment concluded that there is no
basis to conclude that Congress, through inadvertent drafting or
otherwise, intended to reach a contrary result. The Petitioners et al.
Joint Comment strongly stated that arguments to the contrary are based
upon abstract qualifications that are without statutory basis, have not
been consistently applied, and serve only to confound an otherwise
straight-forward issue of statutory interpretation. (Petitioners et al.
Joint Comment, No. 80 at p. 24)
In response, DOE notes that the CEC points to 1% to 5% of dwellings
facing difficult furnace installation situations. However, DOE differs
with the commenter in terms of its assessment of the magnitude and
importance of such impacts. While the CEC may regard such percentages
to be de minimis, DOE would point out that housing units that could be
potentially impacted may number in the millions.\23\ Thus, DOE has
found the potential for a significant loss of consumer utility were
non-
[[Page 4799]]
condensing appliances (and associated venting) to be eliminated. The
parties submitting the Petitioners et al. Joint Comment also provided
their own study, and the dockets for the residential furnaces,
commercial water heaters, and other rulemakings with similarly-situated
products/equipment contain a large amount of relevant data. DOE also
acknowledges the arguments made by the Petitioners et al. Joint Comment
in the preceding three paragraphs. In short, DOE reviewed all of the
arguments and available information. That the agency adopted the
recommendations of one set of proponents on this issue does not mean
that the Department failed to consider the viewpoints and data
presented in opposition to that view. Rather, in response to the
petition re-raising the issue, the Department reviewed all the
available data it had previously considered, assessed the new data
submitted with the petition, read carefully the arguments made by all
parties, and made a decision. Consequently, DOE has concluded that it
has more than adequate evidentiary basis to support its changed
understanding as to the consumer utility of non-condensing appliances
(and associated venting).
---------------------------------------------------------------------------
\23\ According to the U.S. Census Bureau, housing units in the
U.S. as of July 1, 2018 numbered 138,537,078. (Available at: https://www.census.gov/quickfacts/fact/table/US/VET605218) (Last accessed
May 6, 2020).
---------------------------------------------------------------------------
iii. Aesthetics
A number of commenters objected to DOE's recitation of aesthetic
impacts as a factor that impacts consumer utility and that supports its
proposed interpretive rule. (AGs Joint Comment, No. 82 at p. 10; A.O.
Smith, No. 88 at p. 9; CEC, No. 89 at p. 4; Environmentalists Joint
Comment, No. 90 at p. 4; NRDC, No. 94 at pp. 7-8; Advocates Joint
Comment, No. 95 at pp. 3-5) Several commenters suggested that such
aesthetic concerns are theoretical, anecdotal, and unsubstantiated.
(CEC, No. 89 at p. 4; A.O. Smith, No. 88 at p. 9; Environmentalists
Joint Comment, No. 90 at p. 4; NRDC, No. 94 at p. 7) For example, A.O.
Smith argued that there is no evidence in the record to suggest that
condensing water heaters are less aesthetically pleasing or that
consumers would value such consideration over the energy and cost
savings associated with more-efficient products/equipment, so the
commenter concluded that DOE lacks the rational basis and supporting
data for such a change. (A.O. Smith, No. 88 at p. 9)
One argument presented was that Congress did not intend aesthetics
to be a consideration under EPCA's ``features'' provision. The CEC
argued that aesthetics are beyond DOE's statutory authority, which
refers to ``performance,'' ``performance characteristics,'' or
``performance-related features.'' According to the commenter, there is
no evidence that Congress deemed subjective aesthetic concerns to be
relevant to product utility or that limited, vague, and unsubstantiated
anecdotal evidence and theoretical concerns should be allowed to
overcome DOE's well-documented evidence in the record supporting its
longstanding interpretation of performance characteristics. (CEC, No.
89 at p. 4) Furthermore, the Environmentalists Joint Comment asserted
that such limited aesthetic concerns would not have the broad adverse
impacts on consumer utility that Congress envisioned and intended to
address by drafting the ``features'' provisions at 42 U.S.C. 6295(o)(4)
and 42 U.S.C. 6313(a)(6)(B)(iii)(II). (Environmentalists Joint Comment,
No. 90 at p. 4)
Other commenters stated that aesthetics are a highly subjective
matter and, therefore, ill-suited to serve as the basis for regulatory
decision making. (CEC, No. 89 at p. 4; AGs Joint Comment, No. 82 at p.
10; A.O. Smith, No. 88 at p. 9; NRDC, No. 94 at p. 8) NRDC argued that
many modern appliances can and do impact how a building looks, although
that does not mean they have different performance-related features. To
proceed otherwise, the commenter reasoned, would cause the Appliance
Standards Program to implode under a proliferation of ``features'' and
separate classes. NRDC suggested that changes in aesthetics are
sometimes a necessary trade-off for the benefits of new technology, as
reflected in DOE's historical approach which limited the focus to the
appliance's primary function when considering ``utility to the
consumer,'' thereby providing an appropriate bound. (NRDC, No. 94 at
pp. 7-8) A.O. Smith made a similar point, arguing that DOE's proposed
aesthetic considerations are well beyond past precedent, which focused
on the consumer's interaction with the appliance, and the commenter
expressed the view that basing a decision on an expansive view of
consumer utility related to aesthetics would have no bounds. (A.O.
Smith, No. 88 at p. 9)
The CEC expressed concern that relying on subjective aesthetic
concerns would weaken DOE's ability to improve energy efficiency
through standards that are technologically feasible and economically
justified. (CEC, No. 89 at p. 4) The AGs Joint Comment argued that
DOE's consideration of aesthetics as a matter of consumer utility
threatens to undermine the statutory goal of maximizing energy
efficiency by creating the potential for unlimited product classes
subject to lower efficiency limits in violation of EPCA. These
commenters charged that DOE's proposed interpretation would effectively
prioritize consumer aesthetics and the gas industry's financial
interests in selling more gas over Congress's desire for national
energy savings. (AGs Joint Comment, No. 82 at p. 10)
Finally, some commenters urged DOE to consider the potential for
use of alternative technologies or other types of products to resolve
aesthetic concerns, rather than resorting to creation of separate
product/equipment classes under EPCA's ``features'' provision. The
Advocates Joint Comment argued that DOE's concerns expressed in the
proposed interpretation about space constraints of installing a
condensing appliance (e.g., by adding new venting into the living space
or decreasing closet or other storage space and other limitations
related to installation), aesthetics, and consumer preference for gas
heating are all, at their core, economic rationales. These commenters
argued that solutions exist for difficult venting situations, and that
DOE has accounted for them in past rulemaking documents in the course
of analyzing potential standards levels. The Advocates Joint Comment
further argued that homeowners could avoid unwanted aesthetic impacts
by purchasing a different (although perhaps more expensive) type of
venting, using new common venting technology (e.g., FasNSeal 80/90), or
switching to an electric product (e.g., ones using heat pump
technology) which does not raise aesthetic concerns. (The commenters
added that unbounded consideration of aesthetics could render standard-
setting all but impossible.) (Advocates Joint Comment, No. 95 at pp. 3-
4) The Environmentalists Joint Comment raised similar points.
(Environmentalists Joint Comment, No. 90 at p. 4)
In response, DOE would start by clarifying that in using the term
``aesthetics'' in the proposed interpretive rule, it did not intend to
imply that purely subjective considerations (e.g., even the slightest
change in color or shape) would justify the establishment of separate
product/equipment classes. The creation of a proliferation of classes
is neither desired nor expected. Instead, DOE used the term in the
context of describing physical modifications to a dwelling or business
that would result to a substantial degree from prescription by a
standard and that physical modification would be appreciably
[[Page 4800]]
noticed by the consumer and impact the use of living or commercial
space. For example, the Petitioners et al. Joint Comment provided
evidence that a performance standard that can only be met by a
condensing appliance could require, particularly in older row-houses,
the sacrifice of a window or balcony space. The Petitioners et al.
Joint Comment provided evidence that these design implications can
arise in both replacement applications as well as new construction
design. (Petitioners et al. Joint Comment, No. 80 at pp. 10-11) That
comment also pointed to a June 2015 experts study by Shorey Consulting,
Inc. (included as part of the AHRI comment to the residential furnaces
docket at Docket No. EERE-2014-BT-STD-0031-0159) which provided further
evidence that there are applications where it is not possible to
install a condensing furnace due to existing building constraints and
code limitations. Only after reviewing the Gas Industry Petition and
related comments did DOE come to fully appreciate the extent of these
consumer impacts and how they can transcend cost. Consequently, a
reconsideration of the available evidence caused DOE to act to change
its long-standing interpretation.
Contrary to the views expressed in the CEC's and environmentalists'
comments, Congress included the ``features'' provision in EPCA to
protect consumer utility, even at the expense of some measure of energy
savings. To the extent that ``aesthetics'' equate to a substantial
degree in significant alteration of a dwelling's or business's
structure and that physical modification would be appreciably noticed
by the consumer and impact the use of living or commercial space, DOE's
review of the available evidence and information has led it to conclude
that a standard level requiring such changes could eliminate a
``feature'' under EPCA. Based upon that understanding, DOE has
determined that non-condensing technology (and associated venting) are
one such feature, and by keeping the focus on what the agency
determines to be significant potential building modifications, it would
expect to keep such ``aesthetic'' considerations within appropriate
bounds. DOE also reasons that this final interpretation will have the
added benefit of promoting consumer choice, rather than requiring fuel
switching or extensive retrofits to resolve difficult installation
situations.
iv. Delay
The AGs Joint Comment \24\ argued that DOE's proposed interpretive
rule would unlawfully delay the adoption of efficiency standards
required by EPCA, as well as delay the benefits of such mandatory
energy conservation standards. (AGs Joint Comment, No. 82 at pp. 2-3;
AGs Joint Comment II, No. 115 at p. 2) A.O. Smith similarly asserted
that DOE's proposed interpretation would result in delay in setting
standards (including for products subject to statutory deadlines).
(A.O. Smith, No. 88 at p. 12) More specifically, the AGs Joint Comment
argued that DOE action on the Gas Industry Petition impermissibly
delays DOE's publication of final rules as required under 42 U.S.C.
6295(m)(3)(A) and 42 U.S.C. 6313(a)(6)(C)(iii)(I). The AGs commented
that DOE's statutory deadlines for promulgating final residential
furnace and commercial water heater standards expired in March 2017 and
May 2018, respectively. According to the AGs Joint Comment, DOE's
proposed interpretive rule impermissibly compounds that delay, and
since those dates have already passed and the comment periods for those
rulemakings have already closed, these commenters opined that DOE
should have rejected the Gas Industry Petition as duplicative or
untimely. The AGs Joint Comment stated that DOE cannot further delay
its statutory obligations by revisiting previously rejected arguments,
issuing arbitrary and capricious interpretive rulings, and engaging in
supplemental rulemaking to implement an unfounded interpretation of
EPCA. (AGs Joint Comment, No. 82 at pp. 5-7)
---------------------------------------------------------------------------
\24\ The AGs Joint Comment renewed all of the objections raised
in their March 1, 2019 comments on the Gas Industry Petition. DOE
notes that these comments were fully addressed in the proposed
interpretive rule published in the Federal Register on July 11,
2019. 84 FR 33011. DOE commends the reader to consult that document
for further details on both those comments and the Department's
responses.
---------------------------------------------------------------------------
The Petitioners et al. Joint Comment offered several responses to
the arguments of opponents of the Gas Industry Petition. On this
particular point, these commenters argued that neither DOE's
proceedings for residential furnaces and commercial water heaters, nor
the issues presented therein, can be lawfully concluded without
consideration of and response to the considerable adverse comment
raised in those rulemakings. The Petitioners et al. Joint Comment also
made the point that DOE's obligation to comply with statutory deadlines
does not obviate its responsibility to consider comments and to make
sure that any new standards are lawful on the merits. (Petitioners et
al. Joint Comment, No. 80 at p. 18)
In response, DOE recognizes the statutory deadlines associated with
residential furnaces, commercial water heaters, and other energy
conservation standards rulemakings. Given the complex issues at play,
as evidenced by the public comments in this proceeding, DOE is working
diligently to bring those rulemakings to a conclusion. However, DOE
agrees with the Petitioners et al. Joint Comment that the agency also
has a legal obligation to address public comments filed in those
rulemakings, as well as to consider the petition for rulemaking
properly filed under 5 U.S.C. 553(e). DOE is not at liberty to pick and
choose among these legal obligations. (DOE addresses elsewhere in this
document the allegations in the AGs Joint Comment that the Department's
proposed interpretive rule is arbitrary and capricious and based upon
an improper reading of EPCA.)
v. Regulatory Burdens/Litigation/Uncertainty/Preemption
Some commenters argued that DOE's proposed interpretation would
increase regulatory burdens on manufacturers. (Lennox, No. 87 at p. 1;
A.O. Smith, No. 88 at pp. 11-12) Along these lines, Lennox argued that
creation of separate product classes for condensing and non-condensing
products would increase the regulatory burden for manufacturers,
distributors, contractors, and their customers, all to appease a narrow
group of gas industry interests. (Lennox, No. 87 at p. 1; Lennox, No.
114 at p. 1, 4, 7) Doing so, Lennox asserted, would add yet another
rulemaking process, and it suggested that the timing of condensing and
non-condensing product rulemakings could become ``split into untenably
mis-aligned rulemaking cycles.'' The commenter argued that furnace
regulation is already overly complicated, with separate metrics for
annual fuel utilization efficiency (AFUE), standby mode and off mode
power, and furnace fan efficiency. Lennox argued that the additional
regulatory costs associated with a condensing/non-condensing class
split would ultimately be pushed through the supply chain to the
consumer, and that such action would also increase consumers' confusion
as they seek to purchase an appropriate furnace product. (Lennox, No.
87 at p. 3; Lennox, No. 114 at pp. 6-7) Similarly, A.O. Smith stated
that manufacturers will bear the burden of complying with multiple
standards for a single covered product, thereby increasing compliance
[[Page 4801]]
costs and regulatory burden on the industry. (A.O. Smith, No. 88 at p.
11)
A few commenters predicted that adoption of DOE's proposed
interpretation would have additional negative consequences. For
example, Lennox argued that DOE's proposed interpretive rule, if
finalized, would trigger additional litigation, thereby creating more
uncertainty for industry. (Lennox, No. 87 at p. 2; Lennox, No. 114 at
p. 7) A.O. Smith also asserted that DOE's proposed interpretation would
result in regulatory uncertainty for manufacturers. (A.O. Smith, No. 88
at p. 12) The CA IOUs also expressed concern about the potential for
DOE's proposed interpretations to create market uncertainty for the
subject appliances. (CA IOUs, No. 117 at p. 3)
A.O. Smith speculated that the proposed interpretation would result
in DOE's failure to adopt energy conservation standards that
appropriately reflect the maximum improvement in energy efficiency
called for under the statute, and that in turn would jeopardize the
preemptive effect of those standards by encouraging States to seek
waivers of preemption under 42 U.S.C. 6297(d). The commenter expressed
concern that manufacturers could face a burdensome and costly patchwork
of State regulations, if such petitions were to be granted. (A.O.
Smith, No. 88 at p. 13) In contrast, the AGs Joint Comment also
expressed concern about the potential preemptive effects under 42
U.S.C. 6297, if DOE does not fulfill its statutory duty when developing
and adopting energy conservation standards, particularly as regards
States' renewable energy and climate policy goals. (AGs Joint Comment,
No. 82 at p. 13)
After considering these comments, DOE would point out that any
regulatory proceeding entails the potential for litigation and,
therefore, some degree of regulatory uncertainty. If the potential for
litigation (and related uncertainty) were to be a basis for DOE to not
undertake regulatory action (including relevant statutory
interpretations), it could completely stall the Department's rulemaking
process, because cross-cutting stakeholder interests render most agency
actions subject to potential legal challenge. On the other hand,
failure to take regulatory action for fear of litigation would itself
lead to litigation for not having completed legally required regulatory
actions. At bottom, the potential for litigation is inherently part of
the regulatory process.
Lennox mischaracterizes DOE's interpretive rulemaking as an effort
to ``appease'' members of the gas industry. The agency is obligated to
consider the merits of petitions for rulemaking properly brought before
it under the statute and to take appropriate action. Further, the
issues addressed in this petition for rulemaking have been presented in
numerous regulatory actions DOE has conducted and continues to conduct.
DOE suspects that if Lennox were to submit its own petition for
rulemaking, it would view the matter very differently, and that the
company would expect DOE to give the substance of its petition due
consideration under the statute. The Department has acted responsibly
to present the issue for public comment and to consider that comment in
determining how to proceed.
DOE likewise finds Lennox's and A.O. Smith's claims of regulatory
burden to be overstated. To start, this final interpretive rule does
nothing to change the current regulatory landscape, even though
subsequent rulemakings may establish separate product/equipment classes
and energy conservation standards for non-condensing technology (and
associated venting) in appropriate cases. Appliance manufacturers
routinely encounter multiple performance, capacity and other technical
distinctions between appliance models that could impact energy
efficiency, thereby justifying different classes and standards. For
example, there are currently 7 product classes for consumer furnaces
(see 10 CFR 430.32(e)), 21 equipment classes for commercial water
heaters (see 10 CFR 431.110), and 36 product classes for consumer water
heaters (see 10 CFR 430.32(d)). Accounting for a limited number of
additional product/equipment classes associated with condensing and
non-condensing technology represents a reasonable regulatory burden.
The statute does not foreclose all regulatory burden, but instead it
requires the agency to properly analyze whether a given test procedure
or energy conservation standards would be unduly burdensome. DOE
further notes that neither AHRI nor any of the other manufacturer
commenters cited regulatory burden as a significant concern in response
to the proposed interpretive rule.
In response to Lennox's specific concern about regulatory burdens
associated with split rulemaking cycles for the same product type, DOE
notes that in its energy conservation standards rulemakings, the
Department typically addresses product types in a holistic fashion for
a given covered product. Having splintered rulemakings which deal with
only certain product classes would likewise increase burdens on the
agency, so DOE agrees that such scenarios should be avoided to the
maximum extent possible. Lennox has not explained in any detail why it
believes that DOE's proposed interpretation would lead to misaligned
rulemaking cycles, so DOE does not find this to be a reason to alter
its proposed interpretation. DOE would add here that if the Department
decides to grant AHRI's October 2018 AFUE2 petition, that could
potentially consolidate furnace and furnace fans rulemakings, thereby
reducing regulatory burdens and the ``overcomplicated'' regulatory
structure for these products mentioned by Lennox (see section III.D.1
of this document for further discussion).
Finally, DOE does not agree with A.O. Smith's speculation that
adoption of the Department's proposed interpretation would impact the
normal preemptive effects of the statute or lead to favorable
consideration of a significant number of petitions for waiver of
preemption under 42 U.S.C. 6297(d), potentially resulting in a
patchwork of State regulations. Similarly, DOE does not agree with the
AGs Joint Comment's objections to the preemptive effects of subsequent
final rules adopted pursuant to a final interpretive rule. DOE will
conduct future energy conservation standards rulemakings in conformity
with this final interpretation and all other statutory requirements,
and as such, standards resulting from those rulemakings will be
entitled to their full preemptive effect under the law. EPCA does
permit States to seek a waiver of Federal preemption under 42 U.S.C.
6297(d), but to obtain such a waiver, a State must show by a
preponderance of the evidence that a separate State regulation is
needed to meet unusual and compelling State or local energy and water
interests (which must be substantially different in nature or magnitude
than those prevailing in the United States generally). (42 U.S.C.
6297(d)(1)) Moreover, the statute explicitly provides that DOE may not
prescribe a waiver of preemption if the Secretary finds (and publishes
such finding) that interested parties have established by a
preponderance of the evidence, that the State regulation is likely to
result in the unavailability in the State of any covered product type
(or class) of performance characteristics (including reliability),
features, sizes, capacities, and volumes that are substantially the
same as those generally available in the State at the time of the
Secretary's finding. (42 U.S.C. 6297(d)(4)) While DOE is not prejudging
the outcome of a request not yet before
[[Page 4802]]
it, because this final interpretive rule is in essence a ``features''
determination under the statute, it is difficult to see how such
waivers of preemption to which A.O. Smith alludes could be granted, so
the threat of a related patchwork of State regulations seems remote, at
best.
vi. Other Negative Effects of a Change in Interpretation
Several commenters raised concerns about deleterious effects that
they envision would arise from DOE's proposed interpretation. For
example, Ceres stated that reversing DOE's long-held position now would
``create confusion to the furnace and water heater markets, increase
energy use and decrease efficiency, negate significant financial
savings opportunities for consumers, and slow the transition to a more
energy efficient future.'' (Ceres, No. 69 at p. 3) A.O. Smith objected
to and urged rejection of DOE's proposed interpretation as contrary to
sound public policy, arguing that taking a contrary position would
deter innovation, limit choice in the marketplace, and deprive
consumers of the benefits of reduced energy consumption and lower
utility bills. (A.O. Smith, No. 88 at p. 2; A.O. Smith, No. 113 at p.
2) In comments on the September 2020 SNOPIR, the CA IOUs argued that if
DOE continues to advance its current approach, it would lock in
inefficient technologies that waste energy, increase consumer costs,
and inhibit energy efficiency innovation. (CA IOUs, No. 117 at p. 2)
NRDC's comments \25\ faulted DOE's proposed revised interpretation
as unnecessary and damaging to the effectiveness of the Appliance
Standards Program, arguing that it would set the stage for weaker
standards that would harm consumers; similar comments were made by the
CA IOUs and the Advocates Joint Comment II. (NRDC, No. 94 at p. 4; CA
IOUs, No. 117 at p. 3; Advocates Joint Comment II, No. 118 at pp. 1, 2)
Along these lines, the CEC argued that because the proposed
interpretive rule would put a cap on energy efficiency, it would lock
in additional energy costs that would disproportionately affect low-
income populations. The CEC argued that these outcomes would be
inconsistent with DOE's statutory mandate and the purposes of the
Energy Conservation Program. (CEC, No. 89 at pp. 1-2) The AGs Joint
Comment added that DOE's proposed interpretation would also undermine
State and local energy policy and conservation goals. (AGs Joint
Comment, No. 82 at pp. 2-3) In commenting on the September 24, 2020
supplemental proposed interpretive rule, Lee Hannah suggested generally
that DOE's energy conservation standards activities have not done
enough to promote energy and economic savings. (Lee Hannah, No. 99 at
p. 1)
---------------------------------------------------------------------------
\25\ NRDC renewed all of the objections raised in its March 1,
2019 comments on the Notice of the Gas Industry Petition, as well as
all of the objections raised by the joint NRDC and Earthjustice
comments filed on that same date. DOE notes that these comments were
fully addressed in the proposed interpretive rule published in the
Federal Register on July 11, 2019. 84 FR 33011. DOE commends the
reader to consult that document for further details on both those
comments and the Department's responses.
---------------------------------------------------------------------------
Commenters such as A.O. Smith and the Advocates Joint Comment
sought to refute DOE's suggestion that its proposed interpretation
would only have a limited impact and its focus on a subset of consumers
(i.e., low-income residential consumers), instead arguing that it would
have broad and lasting effect. (A.O. Smith, No. 88 at p. 12; Advocates
Joint Comment, No. 95 at p. 6) A.O. Smith emphasized that the proposal
was not limited to just residential furnaces and commercial water
heaters but was instead deemed applicable to ``similarly situated
products/equipment.'' (A.O. Smith, No. 88 at p. 12) The Advocates Joint
Comment II argued that DOE has not clearly defined the products to
which the interpretive rule would apply, specifically faulting the
language about ``similarly-situated products/equipment'' in DOE's
proposals. The Advocates Joint Comment II stated that DOE's proposed
interpretations have not explained whether such interpretations would
apply to both residential and commercial gas furnaces and gas water
heaters, or whether the interpretation would apply to both weatherized
and non-weatherized furnaces. Therefore, these commenters claimed that
it is not possible to fully evaluate the potential impacts of DOE's
proposal. (Advocates Joint Comment II, No. 118 at p. 2) However, these
same commenters correctly pointed out that condensing technology is
available for (and thereby suggesting that DOE's interpretation would
be potentially applicable to) eight categories of products/equipment
regulated by DOE: Residential furnaces, commercial furnaces,
residential boilers, commercial boilers, residential water heaters,
commercial water heaters, direct heating equipment, and unit heaters.
(Advocates Joint Comment, No. 95 at p. 6)
The Advocates Joint Comment went on to analyze what they perceived
to be the potential impacts of DOE's proposed interpretation and
stressed that the number of impacted products is not as important as
the total potential energy savings at issue, citing the evidence of
DOE's own analyses which have shown, even when accounting for market
trends, that energy conservation standards set at condensing levels
could save about 13 quads of energy over a 30-year analysis period and
lower utility bills by more than $100 billion over the same period.
(Advocates Joint Comment, No. 95 at p. 6) The Advocates Joint Comment
and A.O. Smith argued that DOE's proposed interpretive rule would
improperly eliminate DOE's ability to even consider future standards
based upon condensing technology that would have the potential for very
large energy and cost savings, thereby allowing non-condensing
products/equipment to remain on the market in perpetuity. (Advocates
Joint Comment, No. 95 at p. 6; A.O. Smith, No. 88 at p. 12) The
Advocates Joint Comment II argued that the factors discussed in DOE's
proposed interpretations appear to relate specifically to residential
furnaces, and these commenters alleged that the Department has not even
attempted to provide a rationale for its proposed interpretation with
respect to other products, in particular commercial equipment. The
Advocates Joint Comment II contended that DOE's arguments about changes
to a home's aesthetics, a preference for gas appliances, and concerns
about energy affordability are ``irrelevant for any commercial
equipment.'' (Advocates Joint Comment II, No. 118 at pp. 2-3)
DOE must act within its statutory authority (as discussed in
further detail in section II.A of this document), and DOE recognizes
that Congress was mindful of achieving energy conservation while also
protecting consumer utility when enacting EPCA, as evidenced by the
statute's ``features'' provisions. Congress is the ultimate arbiter of
sound public policy, and through EPCA's ``features'' provision, it made
clear that the goal of energy savings should not trump all competing
concerns. If the statute which Congress has drafted takes some
potential actions off the table, DOE must operate within the parameters
that Congress established, even if significant additional energy and
cost savings, as suggested by the Advocates Joint Comment, could arise
from ignoring those parameters. For the reasons articulated in this
document, DOE's final interpretive rule has determined non-condensing
technology (and associated venting) to be a ``feature'' under the
statute which cannot be eliminated through adoption of energy
[[Page 4803]]
conservation standards. Even so, DOE has concluded that such action
would not have any major detrimental effect on the Appliance Standards
Program, stakeholders, or the public. With that said, DOE does not
agree with the litany of negative consequences about which these
commenters speculate.
As discussed in section III.A.3 of this document, market trends are
moving increasingly in the direction of condensing technology, despite
the fact that non-condensing appliances remain available on the market.
With the potential for substantial savings on utility bills, consumers
have been availing themselves of more-efficient options when doing so
makes sense for them, and DOE has every reason to believe that such
trends will continue. However, for difficult installation situations,
consumers can make the choice for a like-for-like replacement using
non-condensing technology. Since the same issues would arise for the
similarly-situated appliance recited by the Advocates Joint Comment, it
only makes sense for the Department to also address them at this time.
Although DOE arguably could have been more explicit in reciting the
types of covered products and equipment subject to its interpretation,
the Department notes that submitters of the Advocates Joint Comment and
others did not have difficulty in practice in homing in on the impacted
appliances in framing their arguments. Furthermore, DOE finds that its
interpretation (as explained more fully in the balance of this
document) adequately provides a rationale for applying its
interpretation to both covered consumer products and commercial
equipment, although the specifics of the impacts justifying the
interpretation may vary depending upon the appliance in question.
Contrary to A.O. Smith, DOE views this final interpretation as
maintaining consumer choice, rather than diminishing it. DOE fully
expects market trends towards higher-efficiency products will continue
as consumers are able to take full advantage of the range of choices
available to them.
DOE does not agree with Ceres's contention that DOE's revised
interpretation would create confusion in the marketplace, given that
the DOE's statement is clear and that this is a mature market with
sophisticated and knowledgeable actors. Furthermore, since non-
condensing and condensing appliances are currently sold side-by-side on
the existing market, DOE fails to see how such confusion would arise,
presuming that it does not already exist. Likewise, DOE does not find
credible A.O. Smith's conjecture that DOE's revised interpretation
would decrease innovation. Manufacturers have every incentive to
continue to innovate in this competitive market, especially given the
market trend toward purchase of more-efficient appliances. Finally, DOE
would note that, as always, State and local governments are welcome to
pursue their own initiatives that fill any regulatory and policy space
that is not preempted by Federal law.
1. Legal Authority to Set ``Small'' Furnace Product Classes
Some commenters continued to advocate for the approach proposed in
DOE's September 2016 SNOPR for residential furnaces as a preferable way
to resolve the concerns raised in the proposed interpretive rule (i.e.,
by setting a differentiated standard based on capacity). Lennox argued
that DOE should not move forward on its current path, but instead, the
commenter stated that the Department should achieve its energy
conservation goals through more tailored, alternative regulatory
approaches, such as capacity-based standards to preserve non-condensing
furnaces for smaller residential furnaces. (Lennox, No. 87 at pp. 1, 3,
6-7; Lennox, No. 114 at pp. 2-3, 5) Lennox recommended that DOE adopt
the approach previously supported by industry to preserve non-
condensing furnaces below certain kBtu/h thresholds, which would
address smaller applications, including mobile homes, impacting middle-
and low-income consumers. (However, the commenter clarified that the
level of 55 kBtu/h specified in the September 23, 2016 SNOPR would need
to be raised so as to be sufficient to preserve non-condensing furnaces
in mobile home applications and other difficult installation
situations.) (Lennox, No. 87 at p. 6) The CA IOUs also urged DOE to
finalize the September 2016 SNOPR for residential furnaces. (CA IOUs,
No. 117 at p. 2) According to the CFA/NCLC, if DOE were to adopt a two-
tiered standard of 80 percent AFUE for smaller furnaces (used in
smaller dwellings and warmer climates) and 92 percent AFUE for larger
furnaces (used in colder climates), 89 percent of low-income consumers
would benefit. Conversely, CFA/NCLC stated that millions of low-income
households would face significantly higher energy bills for the useful
life of the furnace if DOE were to move forward with its proposed
revised interpretation. (CFA/NCLC, No. 93 at p. 2)
The AGs Joint Comment stated that DOE's recent concerns about costs
are unwarranted, and in the context of the residential furnaces
rulemaking, these commenters appeared to support DOE's prior efforts to
establish a separate, small furnace product class and mentioned AHRI's
past statement that that would be a ``reasonable solution.'' (AGs Joint
Comment, No. 82 at pp. 10-11) Electrify Now also supported that prior
rulemaking approach for the subject residential furnaces, as previously
proposed by DOE. (Electrify Now, No. 106 at p. 1)
In response, DOE acknowledges that it has authority to create
product classes for consumer products based upon capacity under 42
U.S.C. 6295(q)(1)(B), and this authority extends to non-ASHRAE
commercial equipment through application of 42 U.S.C. 6316(a). DOE
further recognizes that it previously proposed capacity-based standards
in the September 2016 furnaces SNOPR, an approach which garnered some
measure of public support. However, that proposal was opposed by the
gas industry, because those commenters argued that it failed to fully
and adequately resolve the problems that they had identified. After
careful consideration of the Gas Industry Petition and comments
thereon, DOE has come to the conclusion that a capacity-based approach
is not the proper tool to address the issues raised in the petition
because they would not provide a comprehensive solution in all
instances where consumer utility may be impacted due to difficult
installation situations. The following explains how the Department's
understanding has evolved in this area.
In essence, the problem identified in the Gas Industry Petition is
not one of capacity. Difficult installation situations with the
potential to impact consumer utility are not cleanly separated by
capacity, so seeking to advance a proposed solution based upon capacity
as the distinguishing factor would be at best an indirect and imperfect
way to address the problem. In that sense, the gas industry's continued
opposition would be expected and understandable. Furthermore, DOE does
not believe that commenters currently expressing support would likely
remain in agreement were the Department to move forward with a
capacity-based approach. Illustrative of this point, Lennox's comment
supported DOE's previously proposed capacity-based approach for
residential furnaces but also suggested that the capacity threshold of
55 kBtu/h proposed in the September 2016 SNOPR would need to be raised,
an opinion expressed by other industry commenters on that SNOPR. 81 FR
65720, 65754 (Sept. 23, 2016). In contrast, environmental and advocacy
[[Page 4804]]
groups likewise supported the capacity-based approach but pushed for a
lower threshold. Id. DOE would also note that these commenters
supporting a capacity-based approach would simply be recreating the
same protections for non-condensing appliances at the lower end of the
capacity range to which they so strenuously objected for the reasons
stated in response to the proposed interpretation (e.g., locking in
less-efficient technology, depriving savings to renters). Moreover,
DOE's prior capacity-based proposal assumed (without explicitly
stating) that small capacity furnaces would be non-condensing and large
capacity furnaces would be condensing. As such, the capacity-based
proposal these comments support made in the past the very distinction
these same commenters so vehemently oppose now. Consequently, DOE no
longer views a capacity-based approach to standards for the products/
equipment at issue in this proceeding to be a viable alternative to the
``features'' determination being made in this final interpretive rule.
2. Market Trends
A number of commenters speculated as to the effect that DOE's
revised interpretive rule would have on the market for residential
furnaces, commercial water heaters, and similarly situated equipment.
One group of commenters predicted that DOE's proposed interpretive rule
would lead to significant market-related impacts with negative
consequences. For example, Lennox alleged that DOE's proposed
interpretation would disrupt market trends towards more-efficient
condensing furnaces by creating a separate product class for non-
condensing furnaces. (Lennox, No. 87 at p. 3; Lennox, No. 114 at pp. 4,
5) A.O. Smith challenged the proposed interpretation's suggestion that
it would adhere to the principle of market neutrality vis-[agrave]-vis
competing energy sources, arguing that by insulating non-condensing
water heaters from more-stringent standards, the Department is picking
winners and losers in the water heaters market at the expense of
consumer benefits and savings from higher-efficiency appliances. (A.O.
Smith, No. 88 at p. 9) Ceres likewise argued that by encouraging a
market for non-condensing equipment, DOE's proposed interpretive rule
would waste energy and resources, a result which Ceres characterized as
inefficient and costly. (Ceres, No. 69 at p. 2) Lennox and A.O. Smith
characterized the Gas Industry Petition (and any separate product/
equipment classes arising therefrom) as a mechanism that would disrupt
the market for more-efficient condensing furnaces, drive up the cost of
condensing products, and potentially push many consumers out of the
market for more-efficient products. (Lennox, No. 87 at p. 2; A.O.
Smith, No. 88 at p. 11; Lennox, No. 114 at pp. 4, 5) More specifically,
Lennox reasoned that if condensing furnaces were placed in a separate
product class, ``EPCA would almost certainly mandate maximizing
condensing furnace energy conservation standards to even higher levels,
thereby pricing many consumers out of a more energy efficient
furnace.'' (Lennox, No. 87 at p. 3; Lennox, No. 114 at p. 5)
Other commenters opined that DOE's proposed interpretive rule would
have negligible impacts upon existing market trends for the appliances
at issue. For example, AHRI pointed out that the market is already
trending towards condensing furnaces in applications where such
venting/installation constraints do not exist. According to AHRI, even
with non-condensing furnaces on the market right now, this trend toward
condensing furnaces currently exists, and there is no reason to think
that establishment of a separate product class would hinder the
existing movement of this well-functioning market. (AHRI, No. 91 at p.
2; similar points were made by Nortek, No. 71 at pp. 1-2, and Mortex,
No. 72 at p. 1) Likewise, especially since there is already a market
trend toward condensing commercial water heaters, AHRI argued that it
is neither necessary nor advisable to require condensing equipment in
all applications. Instead, the commenter stated that establishment of a
separate product class for non-condensing equipment would preserve the
ability of commercial consumers facing difficult installation
situations to make like-for-like replacements and to avoid the need to
reconstruct a mechanical room, add unsightly piping, or switch to an
electric water heater, all without impacting the overall trend toward
installation of more-efficient condensing water heaters. (AHRI, No. 91
at p. 3) Similarly, Carrier and Nortek reasoned that because consumers
are already moving in the direction of condensing furnaces, regulatory
intervention banning non-condensing furnaces is not necessary and would
only serve to disproportionately harm those consumers for whom venting
changes would be difficult or impossible. (Carrier, No. 92 at p. 1;
Nortek, No. 71 at pp. 1-2)
BWC sought to allay DOE's concerns about the potential for locking
in a less-efficient technology which could act as a ceiling on product
efficiency. In BWC's experience, especially in commercial applications,
it stated that the market will choose higher-efficiency products/
equipment where it makes sense (i.e., taking into account not only
economics but other factors, such as change in utility, loss of usable
space, etc.). (BWC, No. 77 at p. 2) Carrier largely echoed these
comments that creation of separate product classes for condensing and
non-condensing equipment would not hinder the market trend toward
condensing products, arguing that consumers and residential new
construction home builders continue to move in the direction of
condensing technology, despite the availability of non-condensing
appliances in the current market. (Carrier, No. 92 at p. 1)
As a third perspective, the Petitioners et al. Joint Comment
asserted that energy conservation standards that would make
atmospherically vented products unavailable to consumers would alter
the market by promoting electrification (i.e., a shift to electric
appliances), rather than by promoting the efficiency of gas products,
because it would force many consumers to feel that they have no choice
but to give up their gas appliances in favor of electric alternatives.
These commenters characterized the situation as one where the
imposition of a standard that effectively bans atmospherically vented
gas appliances would result not in the sale of an increased number of
more efficient gas products, but in the sale of fewer gas products
overall. The Gas Industry Petitioners argued that they are not opposed
to condensing technology generally or market trends favoring such
technology. Instead, these commenters stated that they are simply
making the case that condensing products are not suitable for all
installations and that it is the opponents of the petition who are the
ones seeking to deny consumers the products which best serve their
needs. (Petitioners et al. Joint Comment, No. 80 at pp. 3-4)
In response, DOE would first note that EPCA directs DOE to consider
the potential unavailability of a ``performance characteristic'' or
``feature'' as a matter separate and apart from economic impacts or
market trends. Stated simply, EPCA's ``features'' provisions make clear
that while improved energy efficiency may be the overarching goal, it
is not the only decisional factor in standard-setting. It is often the
case that elimination of a feature would allow for a more energy-
efficient product (e.g., an oven window), but in drafting the statute,
Congress made clear its intention to preserve consumer utility, which
in some cases may necessitate the
[[Page 4805]]
sacrifice of potential additional energy savings. Through this final
interpretation, DOE has determined that in certain cases, non-
condensing technology (and associated venting) is one such feature.
A.O. Smith mischaracterizes this decision as abandonment of the
principle of market neutrality, when in fact it simply reflects
implementation of the statutory provisions enacted by Congress.
Setting these matters aside, DOE still does not find the market
trend impact envisioned by Lennox, Ceres, and A.O. Smith to be
credible, but instead, the Department agrees with the assessment of
AHRI, BWC, Nortek, Mortex, and Carrier as to the likely market impacts
of DOE's proposed interpretive rule. While Lennox, Ceres, and A.O.
Smith posit what they think might happen in the market, AHRI, BWC,
Nortek, Mortex, and Carrier are pointing out what is actually happening
in the market. That is, non-condensing and condensing products are
competing in the market currently under DOE's existing regulations, yet
the market trend towards condensing products/equipment exists
nonetheless. As establishment of separate product/equipment classes for
non-condensing appliances would in general reflect the status quo, DOE
fails to see how the deleterious market trends of which Lennox, Ceres,
and A.O. Smith complain would manifest, given that they have not arisen
already. Instead, as AHRI, BWC, Nortek, Mortex, and Carrier suggest,
consumers (both residential and commercial) make decisions based upon
their own weighing of economics and other relevant factors (e.g., space
constraints, loss of utility). Thus, the trend toward higher-efficiency
condensing appliances (even where non-condensing ones are available)
suggests that the markets are working efficiently, and DOE can discern
no reason why that current market trends towards condensing appliances
would not continue, regardless of DOE's final interpretation. Thus, DOE
expects further energy savings gains over time as the market share of
condensing appliance continues to increase.
Although Lennox and A.O. Smith speculate as to the outcomes of the
ongoing DOE residential furnaces rulemaking under the Department's
proposed interpretation, such outcomes cannot be predicted now; the
outcomes can be properly determined only after completion of the full
suite of the agency's rulemaking analyses, as applied in each
individual rulemaking. However, even in the abstract, DOE does not
agree with the logic of Lennox and A.O. Smith. Specifically, Lennox
alleges that if DOE were to establish separate product/equipment
classes for condensing and non-condensing appliances, the levels for
condensing models would be higher than they otherwise might be if there
were to be single product/equipment class. However, amended energy
conservation standards would ultimately be set at a level that results
in significant conservation of energy, is technologically feasible, and
is economically justified. Any determination of those future standards
would be based on sound economic and technical analyses.
3. Requests for Clarification
Among the commenters supporting DOE's proposed interpretive rule, a
few requested clarification (sometimes with recommendations) on
specific points. For example, Weil-McLain argued that DOE would be more
technically accurate to make class distinctions based on the
appliance's venting category (as defined in the National Fuel Gas Code
NFPA 54), rather than using the terms ``condensing'' and ``non-
condensing.'' The commenter pointed to what the National Fuel Gas Code
refers to as Category I vented appliances, which operate with a non-
positive vent static pressure and with a vent temperature which avoids
excessive condensate production in the vent. Weil-McLain argued that
such venting is the type used by non-condensing appliances. Thus, Weil-
McLain suggested that going forward, DOE should use the term ``Category
I Vented Appliance'' in its interpretation. (Weil-McLain, No. 86 at pp.
1-2)
In response, DOE notes that this comment is similar to ones by USB,
BHI, and Crown Boiler, which prompted the Department to issue its
September 2020 SNOPIR to consider two alternative approaches that would
have defined a performance-related feature for the subject gas
appliances based upon venting compatibility (see section II.E of this
document for further details). However, after reviewing public comments
in response to its supplemental proposal, DOE ultimately decided not to
adopt those alternative proposals and to instead proceed with its
original proposal to define the performance-related feature as the
subject appliances' condensing or non-condensing operation, for the
reasons explained in section III.A.1.a of this document. Consequently,
DOE declines to adopt the clarification suggested by Weil-McLain for
the reasons previously discussed.
The Petitioners et al. Joint Comment requested that DOE clarify the
language used in its proposed interpretation by concluding that
standards limiting the market to products that use condensing
combustion technology ``would result in the unavailability of a
performance characteristic or feature,'' language which they argued
would more closely track that of the statute. The Petitioners et al.
Joint Comment also asked DOE to clarify the proposed interpretation's
parenthetical ``(where permitted by EPCA)'' and its reference to 42
U.S.C. 6316(a) to make clear that it relates to the situations to which
the ``features'' provisions apply under the statute, rather than being
a ``features'' provision itself. (Petitioners et al. Joint Comment, No.
80 at p. 7)
In response, although DOE does not perceive the language in
question to be unclear, the Department is restating its position so as
to dispel any confusion. Through this final interpretation, DOE has
concluded that a careful examination of anticipated consumer impacts
and a preponderance of the record evidence show that a standard
limiting the market to products/equipment that use condensing
combustion technology (and associated venting) would impermissibly
result in the unavailability in the United States of a performance
characteristic or feature under EPCA. In future rulemakings to consider
energy conservation standards regarding products/equipment for which
this determination is relevant, DOE will consider establishing separate
product/equipment classes for condensing and non-condensing product
types and may set different standards for such classes.
Regarding the language in the proposed interpretive rule about
``(where permitted by EPCA),'' DOE was referring to the situation where
DOE is triggered by ASHRAE action in amending ASHRAE Standard 90.1 and
where DOE does not have clear and convincing evidence to adopt standard
levels more stringent than those set by ASHRAE. Regarding DOE's
reference to 42 U.S.C. 6316(a), the Petitioners et al. Joint Comment is
correct that that is not a ``features'' provision itself, but it is
instead the statutory crosswalk provision which makes the ``features''
provision at 42 U.S.C. 6295(o)(4) applicable to covered non-ASHRAE
equipment.
BWC expressed concern about how ASHRAE equipment would be affected
by DOE's proposed interpretation impacting EPCA's ``features''
provision. Specifically, BWC stated that DOE has not addressed the
situations where DOE does not act to adopt a level more stringent than
the level adopted by ASHRAE or where DOE cannot adopt
[[Page 4806]]
the ASHRAE level (e.g., if such standards were differentiated based on
new construction versus replacement installations; or if the levels
were set based on the system's efficiency, rather than a single product
within the system). In those cases, BWC recommended adopting a similar
interpretation of the ``features'' provision as if the product were not
covered by ASHRAE. (BWC, No. 77 at p. 1) Similarly, AHRI requested
further clarification on how DOE's proposed interpretive rule applies
to commercial equipment, particularly ASHRAE equipment rulemakings
conducted pursuant to EPCA's 6-year-lookback review requirements that
are not prompted by amendments to ASHRAE Standards 90.1. (AHRI, No. 91
at pp. 3-4) For water heaters, AHRI agreed with DOE that its
condensing/non-condensing interpretation would not apply in situations
where the Department, after being triggered by ASHRAE action amending
ASHRAE Standard 90.1, adopts the same standard level set by ASHRAE.
(AHRI, No. 109 at p. 3)
EPCA includes a ``features'' provision applicable to ASHRAE
equipment at 42 U.S.C. 6313(a)(6)(B)(iii)(II)(aa), but that provision
applies only to instances where DOE is adopting more-stringent
standards either under the statute's trigger provision or 6-year-
lookback provision. In those cases where DOE adopts the ASHRAE Standard
90.1 levels under 42 U.S.C. 6313(a)(6)(A)(ii)(I), there is no
applicable ``features'' provision, so DOE's authority limits it to
adopting the levels and classes set by ASHRAE.
B. Comments Regarding Economics-Related Issues
A number of commenters disagreed with DOE's proposed interpretive
rule, because they argued that it improperly injects economic
considerations into the concept of consumer utility used in the
``features'' determination. These commenters, such as A.O. Smith,
argued instead that installation and other costs are to be considered
as part of the economic analysis required by the statute. (A.O. Smith,
No. 88 at p. 4) In responses to the September 2020 SNOPIR, NRDC and
A.O. Smith added that any issues related to venting are likewise an
issue of cost, not a performance-related feature, and any costs
associated with upgrading venting can and should be addressed when DOE
analyzes installation costs in its economic analysis. (NRDC, No. 112 at
pp. 2-3; A.O. Smith, No. 113 at p. 3) The CA IOUs stated that DOE
should not inappropriately conflate rulemaking analyses (e.g., economic
justification analyses) with a petition to create a new class of
products, arguing that such approach would undermine the rulemaking
process and inappropriately define economic impacts or incremental
costs as performance-related features. (CA IOUs, No. 85 at pp. 3-4)
However, while maintaining the position that economic considerations
are inappropriate in a ``features'' determination, such commenters also
sought to refute, arguendo, DOE's economic concerns and to show that
even under the agency's proposed approach, declaring non-condensing
technology (and associated venting) to be a ``feature'' is neither
necessary nor justified. The following discussion first summarizes and
addresses the relevant statutory arguments, followed by the specific
economic arguments, along with DOE's responses.
1. Consumer Impacts
a. Legal Arguments
Several commenters objected to DOE's proposed interpretation,
arguing that the Department violated the statute by improperly
considering economic factors in making its ``features'' determination.
For example, A.O. Smith argued that DOE's ``unprecedented''
interpretation that would tie the concept of a ``feature'' to
condensing technology largely turns on installation costs. (A.O. Smith,
No. 88 at p. 6) Lennox (and other commenters) stated that DOE's cost
analysis is unsupported and inconsistent with EPCA's statutory mandate,
because the ``features'' provision at 42 U.S.C. 6295(o)(4) focuses on
unavailability and does not mention costs as an appropriate
consideration. (Lennox, No. 87 at pp. 5-6; CEC, No. 89 at p. 3;
Advocates Joint Comment, No. 95 at pp. 1-3; Lennox, No. 114 at p. 4)
The CEC made a similar comment and also pointed out that costs are
likewise not relevant under 42 U.S.C. 6295(q)(1) (the product class
provision). (CEC, No. 89 at p. 3) The AGs Joint Comment (and other
commenters) stated that under 42 U.S.C. 6295(o)(2)(B), the statute
directs DOE to consider costs as part of its analysis of economic
justification. (AGs Joint Comment, No. 82 at pp. 10-12; A.O. Smith, No.
88 at p. 12; CEC, No. 89 at p. 3; Environmentalists Joint Comment, No.
90 at p. 3; Advocates Joint Comment, No. 95 at p. 3)
A.O. Smith also asserted that consideration of costs under the
statute's ``features'' provision would predetermine the outcome of
economic justification without performing that full analysis as
required by the statute. (A.O. Smith, No. 88 at p. 12) A similar
argument was made in the Advocates Joint Comment II. (Advocates Joint
Comment II, No. 118 at pp. 1, 2, 5) The Environmentalists Joint Comment
reasoned that if installed cost concerns could block consideration of a
standard level, it would result in an ``end-run'' around the other
statutory factors which DOE must consider in assessing economic
justification. (Environmentalists Joint Comment, No. 90 at p. 3) The
Advocates Joint Comment added that delineating product classes based
upon cost considerations would subvert the statute's central purpose of
energy conservation. (Advocates Joint Comment, No. 95 at pp. 1-2)
Commenters identified specific, economics-related concerns raised
in the proposed interpretive rule which they believe should only be
considered in DOE's economic analyses. For example, the
Environmentalists Joint Comment argued that low-income consumers'
ability to absorb the first-cost impacts of installing a condensing gas
appliance should properly be addressed in the economic justification of
a standards rulemaking. (Environmentalists Joint Comment, No. 90 at p.
5) The Advocates Joint Comment argued that affordability and other cost
impacts should also be addressed as part of the economic analysis,
rather than by establishing unjustified product classes which would
preclude such analysis. Furthermore, the Advocates Joint Comment stated
that topics such as housing affordability, higher up-front costs
crowding out consumer spending on other necessities, and long payback
periods that do little to ameliorate short-term up-front costs are
economic matters relevant to whether a potential standard level is
appropriate, after conducting the requisite economic and financial
analysis called for under the statute; they argued that DOE has not
shown that the difference between condensing and non-condensing
products is more than a matter of cost. (Advocates Joint Comment, No.
95 at pp. 1-3)
The Advocates Joint Comment asserted that since each of DOE's
attempted rationales for characterizing non-condensing products as a
``performance-related feature'' (i.e., space constraints (and other
limitations related to installation), aesthetics, and consumer
preference for gas heating) are fundamentally cost considerations, the
Department has failed to provide justification for establishing
separate product classes along those lines. (Advocates Joint Comment,
No. 95 at pp. 1-2, 3-5) Similarly, the CEC stated
[[Page 4807]]
that three out of four of DOE's justifications in its proposed
interpretation rely on economic considerations and are, therefore,
inappropriate for purposes of setting product classes. (CEC, No. 89 at
p. 3) The Advocates Joint Comment expressed the view that DOE is
seeking to solve ``hypothesized'' harmful economic impacts by
establishing product classes, but that the statute allows for the
mitigation of any such harms by setting an appropriate standard level
or leaving the existing standard unchanged. (Advocates Joint Comment,
No. 95 at p. 3) According to the Advocates Joint Comment, cost impacts,
including those with respect to low-income consumers, are a central
concern for DOE's standard level selection process, and the Department
routinely performs consumer subgroup analyses, which examine impacts on
subsets of consumers such as those with low incomes. (Advocates Joint
Comment, No. 95 at pp. 1-2)
In contrast, several commenters supported DOE's tentative decision
to interpret the use of non-condensing technology (and associated
venting) to be a ``feature'' under the statute based upon the findings
related to consumer utility. The Petitioners et al. Joint Comment
responded to other commenters' suggestions that the difference in
characteristics between condensing products and atmospherically vented
product being simply a matter of cost as factually incorrect; instead,
these commenters stated that an energy conservation standard set at a
condensing level would leave consumers with no residential gas furnaces
capable of operating with existing atmospheric venting systems, with
other commonly-vented appliances, or without a condensate disposal
system. The Petitioners et al. Joint Comment argued that critics of
DOE's proposed interpretive rule mischaracterize these material
differences which have significant utility to consumers, separate and
apart from the substantial costs that a ban of such systems would
generate. (Petitioners et al. Joint Comment, No. 80 at p. 10)
DOE agrees with commenters that costs are to be properly addressed
in a rulemaking's economic analysis, and it said as much in the
proposed interpretive rule. 84 FR 33011, 33020 (July 11, 2019). On this
topic, the Department clearly stated, ``DOE has tentatively concluded
that the other [i.e., non-economic] reasons discussed immediately above
are sufficient in and of themselves to justify the Department's
proposed change in interpretation, but it acknowledges these cost
impacts to be fully transparent in terms of the agency's thinking.''
Id. (DOE does not concur with certain commenters' attempts to classify
all of the agency's stated reasons as economic, thereby better suiting
their own arguments.) Even though economics is not an appropriate
consideration in making a ``features'' determination under the statute,
there is no question that economic effects will need to be considered
in whatever decision is made with regard to establishing or revising
standards. Discussing the potential economic effects of a decision is
not equivalent to making them the basis for the ``features'' decision
itself. This is no different than stakeholder comments on the proposed
interpretation which raised the economic implications of an affirmative
``features'' determination and its impact on the energy conservation
standards which could subsequently be set for products/equipment where
both condensing and non-condensing models exist. Those economic
concerns are similarly unsuitable for consideration in making a
``features'' determination under the statute. Accordingly, DOE would
reiterate that it based neither its proposed interpretive rule nor this
final interpretive rule upon economic considerations.
DOE notes that many of the environmental and efficiency advocacy
groups raised no similar objections to DOE's September 2016 furnaces
SNOPR, in which the agency proposed to set a separate product class and
energy conservation standard at a non-condensing level for furnaces
with a capacity less than 55 kBtu/h.\26\ Essentially, this would have
created a non-condensing standard to address, in large part, the
economic concerns of many low-income consumers. 81 FR 65720, 65795,
65852 (Sept. 23, 2016). Arguably, this product class distinction was
not required to protect the capacity from elimination, pursuant to 42
U.S.C. 6295(o)(4). Since the effect would have been comparable, it is
difficult to reconcile these groups' differing positions regarding the
propriety of taking economic considerations into account.
---------------------------------------------------------------------------
\26\ See e.g. the joint comment of the Appliance Standards
Awareness Project, the Alliance to Save Energy, the Natural
Resources Defense Council, the Northeast Energy Efficiency
Partnerships, and Northwest Energy Efficiency Alliance. (EERE-2014-
BT-STD-0031-0285) In relevant part, the joint comment states at page
3, ``The DOE proposal is based on a breakpoint of 55,000 Btu/hour
and not the 50,000 Btu/hour we had recommended in our NOPR comments.
While we can live with 55,000 for now, we recommend that prior to
the next rulemaking that DOE conduct additional analysis on the
heating loads of homes in the south and in new construction so that
the next rulemaking can consider whether 55,000 Btu/hour remains a
reasonable breakpoint, or whether another value is more
appropriate.''
---------------------------------------------------------------------------
b. Factual Arguments
While maintaining their legal arguments in opposition, a number of
commenters also directly challenged what they characterized as economic
aspects of the proposed interpretive rule (i.e., installation costs,
changes impacting aesthetics, fuel switching, and energy
affordability). For example, the AGs Joint Comment argued that while
DOE's proposed interpretive rule expressly endorsed the approach that
economic considerations should be addressed as part of a rulemaking's
economic justification analyses, the agency nevertheless used and gave
undue weight to economic considerations in its ``features'' analysis.
Furthermore, the AGs Joint Comment emphasized that DOE's own rulemaking
record found the Gas Industry Petitioners' claims regarding increased
consumer costs and challenging installation scenarios to be overstated,
and they further argued that the Gas Industry Petitioners had proffered
no new evidence to support their claims, including ones about excessive
installation costs and consumer preference for gas as a fuel type. (AGs
Joint Comment, No 82 at pp. 10-12; similar comment from NRDC, No. 94 at
pp. 6-7) The CA IOUs and NRDC stated that DOE has already shown the
technological feasibility and economic justification for condensing
furnaces and water heaters through analyses supporting the relevant
rulemakings and that such findings should not be allowed to be
undermined in a separate action to assess new product classifications.
(CA IOUs, No. 85 at pp. 3-4; NRDC, No. 94 at pp. 2, 6-7) The Joint
Advocates Comment added that solutions exist for difficult venting
situations (a point echoed by Electrify Now), and that DOE has
accounted for them in past rulemaking documents analyzing potential
standards levels. (Advocates Joint Comment, No. 95 at pp. 3-5;
Electrify Now, No. 106 at p. 1) Lennox commented that DOE has not
explained when cost issues may become so extreme as to render certain
furnace installations impossible or impracticable, and it argued that
the lack of data in this regard causes the proposed interpretation to
fail the preponderance of the evidence standard for designating a
product ``feature.'' (Lennox, No. 87 at p. 6)
Lennox alleged that DOE has failed to consider various studies,
analysis, and other work to address the extent of, and
[[Page 4808]]
solutions to, difficult installation issues (e.g., a May 2019 study
conducted by Oak Ridge National Laboratory (ORNL) and UT-Battelle, a
document prepared by Pacific Gas and Electric (PGE)/NEEA). (Lennox, No.
114 at p. 4) Along a similar vein, the Advocates Joint Comment II
recited numerous technological solutions which they suggest are
available to address installation barriers related to venting systems
for gas-fired products, such as DuraVent's FasNSeal product. These
commenters also claim that additional venting solutions are under
development, such as the ORNL EntrainVent and DuraVent's vent retrofit
design, although they acknowledge that neither of these products is
commercially available today. (Advocates Joint Comment II, No. 118 at
pp. 4-5) NEEA also cited DuraVent products as a potential solution to
the problems DOE seeks to address. (NEEA, No. 119 at pp. 2-3)
The CA IOUs stated that DOE's proposal put the U.S. ``out-of-sync''
with other jurisdictions, such as Canada, which regulate the energy
efficiency of similar products. These commenters pointed out that
Canada has regulations in place resulting in 98 percent of its annual
furnace shipments being condensing models (in 2017), and of these, 85
percent had an AFUE rating of at least 95 percent. According to the CA
IOUs, Canada expanded on these regulations in 2019 to require all
residential housing units (with a few relatively narrow exceptions)
sold in Canada with input rates less than or equal to 65.92 kilowatts
(or 225,000 Btu/h) that use single-phase electricity to achieve an AFUE
of 95 percent. The CA IOUs added that the European Union's Ecodesign
minimums for gas instantaneous and gas storage water heaters with
higher draw patters (XL, XXL, and above) also require condensing
technology levels of performance. (CA IOUs, No. 117 at pp. 2, 3-4)
Lennox also commented as to DOE's failure to address the widespread
installation of condensing furnaces in Canada. (Lennox, No. 114 at p.
4)
Commenters opposing DOE's proposed interpretation sought to
highlight data suggesting that cost impacts associated with
installation of condensing appliances, in most cases, would not have an
excessively negative impact on consumers. For example, the AGs Joint
Comment stated that recent market research (submitted to the present
rulemaking docket) contradicts petitioners' claims regarding the
impracticality or impossibility of condensing appliance retrofit
installations. According to the AGs Joint Comment, a report by 2050
Partners, Inc. was based upon in-depth interviews with installers,
distributors, and subject matter experts from around the U.S. in both
residential and commercial settings, and it found that less than 5
percent of retrofit installations required significant modifications
(i.e., building or site modifications where installation costs would be
more than double the total system cost of a typical retrofit).
According to the AGs Joint Comment, that report indicates that
condensing equipment can typically be incorporated with only minor
changes into venting and plumbing infrastructure, and that condensate
management, orphaned water heaters, and chimney relining were not
identified as significant concerns, and that even in difficult cases,
technical solutions were always available. The AGs Joint Comment also
cited the earlier comment of Mitsubishi Electric on the petition, which
stated that the percentage of homes with challenging retrofit
situations is probably less than 1 percent of the total housing stock.
(AGs Joint Comment, No. 82 at pp. 10-12) In its comments on the
September 2020, NEEA pointed to the same study and made similar
arguments. (NEEA, No. 119 at p. 2)
Along similar lines, the CA IOUs argued that their research has
shown that installing a condensate drain is not a barrier to
installation of condensing appliances. These commenters added that they
only found approximately five percent of retrofit installations (going
from atmospheric combustion natural gas appliances to condensing
equivalents) to be `` `challenging,' '' and even these always had
technical solutions that allowed installation of the condensing
appliance. The CA IOUs concluded that these technical solutions have
associated costs, but cost is not a product feature. (CA IOUs, No. 117
at pp. 2-3)
The AGs Joint Comment also challenged DOE's concern expressed in
the proposed interpretation that energy conservation standards set at a
condensing level could price some low-income consumers out of the
manufactured housing market or create other financial hardship, such
that these concerns could sufficiently raise non-condensing appliances
(and associated venting) in the consciousness of the consumer so as to
be deemed a ``feature'' under EPCA. These commenters argued that DOE's
rulemaking record shows that the costs for condensing and non-
condensing mobile home furnaces are comparable due to lower
installation costs for condensing furnaces in most of those
installations, so these commenters reasoned that a condensing furnace
standard would not have any effect on the affordability of single-
section mobile homes. (AGs Joint Comment, No. 82 at p. 12)
The CEC stated that monthly savings from more-stringent standards
would benefit low-income consumers more than the average consumer
because, the commenter argued, they spend more than twice as much (as a
percentage of income) on energy than median income consumers. The CEC
did not directly respond to the first-cost concerns raised in DOE's
proposed interpretation, but instead quoted from an ACEEE paper which
linked high energy costs to the cycle of poverty. The commenter added
that at least in California, a substantial number of low-income
consumers are tenants, so they have no control over the appliance
choice, but they pay the utility bills, a situation which runs counter
to DOE's energy affordability concerns. (CEC, No. 89 at pp. 6-7)
Other commenters also raised the same issue about split incentives
between landlords and renters. The CFA/NCLC argued that it is owners,
rather than renters, who purchase central heating furnaces, and that
most owners (particularly those who rent apartments to lower-income
tenants) will choose less expensive, less efficient non-condensing
furnaces that will result in tenants paying significantly more to heat
their homes. According to these commenters, depending upon the non-
condensing and condensing units under consideration, low-income tenants
would pay at least 10 percent more and a much as 20 percent more for
their heat. (CFA/NCLC, No. 93 at p. 2) The CFA/NCLC argued that DOE's
proposed interpretation would harm many more low-income and moderate-
income households than it would help, particularly since these
households are disproportionately renters (not homeowners) and,
therefore, must pay the associated energy bills. (CFA/NCLC, No. 93 at
pp. 1-2) These commenters offered the following evidence to support
their position. Citing U.S. Census Bureau data from 2017 through the
second quarter of 2019, the CFA/NCLC stated that 78 percent of
households with income greater than the median family income were
homeowners, as compared to 50 percent homeownership for households
below the median family income. Because the poverty line is
significantly below the median and because homeownership rates decline
as income declines, these commenting organizations reasoned that such
low-income households would have homeownership rates well below 50
percent. The CFA/NCLC added that
[[Page 4809]]
homeownership rates are significantly lower for non-white families, in
large part because they are also lower-income families; in the past two
years, the commenters noted that homeownership rates for ``Black
alone'' households were approximately 42 percent, and approximately 47
percent for ``Hispanic (of any race)'' households. (CFA/NCLC, No. 93 at
p. 2)
CFA/NCLC challenged DOE's reasoning that an energy conservation
standard that would require a condensing furnace would lead to higher
rents to cover the landlord/owner's first cost of the more expensive
appliance, arguing that it is both unsubstantiated and unlikely to
occur. According to these commenters, the incremental cost (including
equipment and installation) for a condensing furnace (beyond the cost
of a non-condensing furnace) is likely to be in the range of several
hundred dollars, but given a useful furnace lifetime of over 20 years,
they estimate that a landlord would only need to raise rent by $3 per
month to recoup these incremental costs over that period. The
commenters noted that in an earlier filing with DOE, NCLC submitted an
affidavit from a non-profit housing developer who stated that: (1) The
incremental costs of a more-efficient furnace are so small compared to
the owner's overall operating costs so as to not be directly and
immediately reflected in rent, and (2) rents are generally set in
accordance with governing regulations (in rent-regulated, low-income
housing) or by external market conditions (for unregulated properties).
Accordingly, CFA/NCLC concluded that small changes in the cost of one
appliance would not lead to a rent increase. (CFA/NCLC, No. 93 at p. 3)
CFA/NCLC acknowledged that there are many low-income homeowners who
directly bear the cost of a replacement furnace, but they did not
address the issue of first-cost for these homeowners, instead focusing
on the fact that such increased costs would be paid back in terms of
lower energy operating costs over the more than 20-year lifetime of the
furnace (citing section 8.2.2.5 of the technical support document for
DOE's residential furnaces rulemaking (August 30, 2016)). These
commenters added that low-income homeowners frequently face termination
of utility services due to non-payment, a risk that could increase with
inefficient, non-condensing furnaces. (CFA/NCLC, No. 93 at p. 3)
CFA/NCLC and Electrify Now faulted DOE's proposed interpretation
for focusing on unquantified burdens that might fall on a very small
percentage of residential households that would be required to install
condensing furnaces, while ignoring the vast majority of households
that would benefit--as clearly demonstrated under the Department's own
earlier analysis--from adoption of a condensing furnace standard. (CFA/
NCLC, No. 93 at p. 4; Electrify Now, No. 106 at p. 2) According to CFA/
NCLC, the upshot of DOE's proposed interpretation would be that the
agency would fail to carry out congressional intent, saddle consumers
with potentially billions of dollars of excess energy costs, and impede
efforts to help consumers use less energy. (CFA/NCLC, No. 93 at p. 4)
Lennox argued that DOE did not provide any support to show that
failure to separate condensing and non-condensing product/equipment
classes would lead to ``widespread, long-term homelessness,'' further
arguing that furnace costs are a comparatively small fraction of
overall housing costs. The commenter countered that a more factual
analysis would show that overly-stringent efficiency standards would
price some consumers out of a new furnace and would cause them to
either continue to repair older, less-efficient units or purchase
other, less-efficient heating options (e.g., kerosene heaters, electric
space heaters, using a stove or oven). Lennox stated that the lack of
data and support deprives commenters of the ability to fully comment on
DOE's proposal. (Lennox, No. 87 at p. 5)
Contrary to the concerns about energy affordability raised in DOE's
proposed interpretive rule, certain commenters stated that such
approach would harm the very groups most affected by high energy bills
by allowing less-efficient equipment to remain on the market and
locking in higher energy costs. NRDC pointed to research showing that
space heating represents the largest energy expense for the average
U.S. home at 45 percent of energy bills, and it similarly stated that
about 50 percent of U.S. commercial building floor space gets hot water
from gas-fired or propane-fired equipment. (NRDC, No. 94 at p. 2) NRDC
agreed with DOE that energy affordability is a critical issue, stating
that nearly one-third of U.S. households face challenges (often because
their energy bills are unaffordable) and that energy burden is
significantly higher for low-income households (3.5% for median income
households but 7.2% for low-income households). The organization added
that low-income households, renters, African-American households, and
Latino households all have a higher than average energy burden (i.e.,
paying more for utilities per square foot than the average household),
which indicates that their homes are less efficient. NRDC stated that
heating and cooling are the largest contributors to household energy
use and that inefficient heating systems are one of the biggest drivers
of household energy burden. The commenter argued that improving the
efficiency of heating appliances offers a great opportunity to reduce
energy burdens, but that DOE's proposed interpretation would move
things in the wrong direction. Under DOE's proposed interpretation,
NRDC argued, energy burdens would be perpetuated because lower-income
customers and landlords may be inclined to purchase lower-first-cost
appliances, even if those products have net higher operational costs
over the product's lifetime. Citing an ACEEE study, NRDC made the case
that strong energy efficiency standards help transform the market by
making high-efficiency products readily available to all customers,
with products becoming less expensive over time as installation costs
drop and as manufacturers innovate. NRDC concluded that cost-effective
condensing products have the potential to lower both energy bills and
energy burden. (NRDC, No. 94 at pp. 9-10)
Furthermore, the Advocates Joint Comment argued that the proposed
interpretation's recitation of harmful economic effects, at least in
the case of mobile home furnaces, is specious. These commenters cited
DOE's 2016 furnaces SNOPR (81 FR 65720 (Sept. 23, 2016)), which
proposed a 92-percent AFUE standard for mobile home furnaces and was
estimated to increase installed costs by $152. Using this example, the
Advocates Joint Comment disputed DOE's claim that the resulting
increased cost in a mobile home resulting from the required
installation of a condensing furnace could price some consumers out of
the housing market. These commenters countered that this cost
differential would amount to less than a dollar a month on the monthly
mortgage payment and that mortgage lending decisions do not turn on
such small margins. The Advocates Joint Comment argued that a
condensing furnace could actually make a home more affordable for such
consumers by lowering energy bills, thereby freeing up money for other
necessities such as food and medicine (seeking to refute DOE's argument
on this point). The commenters also used this example to challenge
DOE's concerns about energy savings being spread out over long payback
periods, again citing the 2016 furnaces SNOPR for the proposition that
under a 92-percent AFUE standard, a
[[Page 4810]]
mobile home furnace with a 21.5 year lifetime would have a payback
period of just 1.7 years. (Advocates Joint Comment, No. 95 at p. 3)
Regarding energy affordability, the Advocates Joint Comment argued
that rental housing markets have been thoroughly studied in the
economic literature, and on the topic of whether increased appliance
costs are passed on to consumers in the form of higher rent, it quoted
Dr. Larry Dale, an economist for DOE who stated the following at an
April 13, 2015 public meeting: ``The implications from these findings
are: tenants benefit from lower energy bills; rent increases may not,
and I would say almost certainly do not, cover the higher equipment
costs. So overall, tenants (meaning largely low-income households in
this case, or rather the other way around, low-income households that
are largely tenants) are probably better off than suggested by our LCC
[life-cycle cost] analysis.'' \27\ The Advocates Joint Comment
concluded that the best way for DOE to make decisions about future
standards is to fully evaluate the costs and benefits of such potential
standards, including through a consumer subgroup analysis which
accounts for effects on renters, as opposed to setting separate product
classes for condensing and non-condensing appliances, where such costs
and benefits would not even get considered. (Advocates Joint Comment,
No. 95 at pp. 5-6)
---------------------------------------------------------------------------
\27\ U.S. Department of Energy Public Meeting Transcript on the
Energy Conservation Standards for Residential Furnaces (April 13,
2015), p. 12, lines 3-10 (Available at: https://www.regulations.gov/document?D=EERE-2014-BT-STD-0031-0050).
---------------------------------------------------------------------------
According to the NRDC, if implemented, the revised interpretation
would have an extremely detrimental impact on the potential for natural
gas savings from future appliance energy conservation standards,
thereby resulting in higher energy bills for customers using gas
appliances, especially low-income households. (NRDC, No. 94 at p. 1)
Focusing on commercial consumers, Ceres raised similar concerns that if
DOE were to establish separate product/equipment classes for
residential furnaces and commercial water heaters based upon the use of
condensing vs. non-condensing technology, such action would increase
costs for ordinary businesses and their customers, who own and operate
such appliances. (Ceres, No. 69 at p. 1) Ceres argued that granting the
Gas Industry Petition would essentially result in a subsidy to those
special interest groups, rather than benefit the American people or
economy. (Ceres, No. 69 at p. 2) To overcome these concerns, NRDC
reasoned that there are solutions to the problems which the proposed
interpretive rule seeks to address, none of which would require
reinterpretation of EPCA's ``features'' provision. More specifically,
NRDC stated that if a consumer decides that the installation cost and/
or aesthetic implications of a condensing appliance are too high, one
could switch from a gas-fired appliance to an electric one; a similar
comment was made by the Advocates Joint Comment II. (NRDC, No. 94 at
pp. 6-7; Advocates Joint Comment II, No. 118 at pp. 4-5)
Other commenters acknowledged and agreed with the Department's
separate discussion of likely consumer cost impacts (particularly for
low-income consumers) that would be associated with energy conservation
standards set at a level which can only be met through the use of
condensing technology. For example, Weil-McLain expressed appreciation
for DOE's acknowledgment of the cost impact that requiring a condensing
appliance would have on low-income segments of the population, and it
argued that the same concerns exist in the commercial market, because
small businesses could face increased costs and job losses if they
could no longer purchase Category I Vented Appliances. (Weil-McLain,
No. 86 at p. 2) Carrier also cited continued affordability for low-
income consumers as an important issue. (Carrier, No. 92 at p. 1)
The Petitioners et al. Joint Comment argued that suggestions that
favorable action on the petition would harm the economic interests of
consumers, especially low-income consumers, are based upon the flawed
premise that a condensing standard for residential furnaces would give
low-income renters the benefits of lower utility bills because a
condensing furnace would then be installed in such cases. However, the
Petitioners et al. Joint Comment suggested that existing multi-family
properties, which provide much of the country's affordable housing
stock, face some of the most serious technical impediments to
installation of condensing gas furnaces. Consequently, the Petitioners
et al. Joint Comment argued that a condensing furnaces standard would,
in fact, force many property owners to switch to alternatives such as
electric resistance heating as their only practical option, which could
actually burden low-income renters with substantially higher utility
bills. (Petitioners et al. Joint Comment, No. 80 at p. 4)
In response, DOE reiterates that, despite discussing potential
ancillary economic effects, the Department based its ``features''
determination in the proposed interpretive rule upon non-economic
grounds. Because DOE did not rely on economic factors in reaching its
decision, commenters' allegations that the agency gave undue weight to
economic considerations are incorrect. Similarly, arguments as to the
economic justification of proposed standards for residential furnaces,
commercial water heaters, or other similarly situated products are not
relevant to DOE's ``features'' determination under EPCA. As discussed
elsewhere in this document, DOE reexamined new and existing information
(including the substantial evidence contained in existing rulemaking
dockets) in light of the arguments raised in the Gas Industry Petition,
and the agency determined that a revised interpretation would better
comport with the requirements of the statute. DOE has come to see that
in the substantial number of difficult installation situations, the
practical differences between condensing and non-condensing appliance
operation would be a distinction that many consumers may recognize and
value, such that maintaining a non-condensing option would constitute
an important consumer utility. DOE's decision to find non-condensing
technology (and associated venting) to be a ``feature'' under EPCA
preserves this consumer utility and consumer choice.
DOE acknowledges that the economic impacts of its energy
conservation standards rulemakings are both complex and of great
importance. That is why the Department conducts a comprehensive
economic analysis as part of those rulemakings, including consumer and
manufacturer subgroup analyses, as appropriate. However, as the
commenters stress, these economic considerations are beyond the scope
of the ``features'' determination at issue in this final interpretive
rule.
In response to the CA IOUs' and Lennox's comments about Canadian
and European experiences with condensing furnaces and water heaters,
DOE does not find them directly opposite to the present case. First,
such nations are situated significantly northward of large portion of
the United States, so consequently, their climatic profile is different
than that of the U.S., and that would be expected to impact their
determinations of economic justification for standard-setting purposes.
More importantly, however, it must be recognized that these foreign
nations operate under an entirely different legal and regulatory
structure, and
[[Page 4811]]
consequently, they are not subject to and have no duty to follow the
statutory requirements of EPCA, including the ``features'' provision.
2. Fuel Switching
Commenters on DOE's proposed interpretive rule expressed
conflicting views on the topic of fuel switching. The Petitioners et
al. Joint Comment urged DOE to reconsider its analysis concerning the
significance of fuel switching in the context of efficiency regulation.
These commenters argued that fuel switching could occur because of the
unavailability of important product characteristics, such as instances
where it would be impractical to install condensing products or where
such products could not be installed without the need for undesirable
building modifications that consumers would be unwilling to accept.
They added that driving gas products out of the market is not a
legitimate regulatory objective under a statute designed to promote the
efficiency of regulated products. Thus, the Petitioners et al. Joint
Comment reasoned that in conducting its standards rulemakings, DOE must
justify its standards on the basis of the economics of required
efficiency improvements (i.e., by accounting for those cases where poor
economic outcomes drive consumers to alternative products), rather than
by excluding such outcomes from the analysis and substituting more
favorable economic outcomes based upon assumed product substitution.
They asserted that using the logic of DOE's historic approach to
economic analyses, standards could be determined to be economically
justified on the grounds that they are so economically unjustified that
consumers would no longer purchase the regulated products at all. These
commenters argued that DOE's life-cycle cost analysis and payback
analysis must reflect these real economic costs, rather than simply
reducing the number of products sold.\28\ (Petitioners et al. Joint
Comment, No. 80 at pp. 13-15)
---------------------------------------------------------------------------
\28\ The Petitioners et al. Joint Comment argued that while the
adverse impact of a standard on product sales should be ignored for
purposes of the payback period and LCC analyses, it should not be
ignored for purposes of other analyses, such as the manufacturer
impact analysis, utility impact analysis, and national energy
savings analysis.
---------------------------------------------------------------------------
The CEC challenged DOE's statement that through its proposed
interpretation it was seeking neither to determine winners and losers
nor to limit consumer choice. The commenter pointed to DOE's September
2016 residential furnaces SNOPR, in which the Department determined
that fewer than 8 percent of consumers would switch from gas furnaces
to heat pumps or electric furnaces, and which did not find any
consumers compelled to switch (although some might do so for a variety
of reasons, including economic savings) (citing 81 FR 65720, 65813
(Sept. 23, 2016)). The CEC argued that by following its statutory
mandate, DOE would be ensuring that consumers can make free and
informed decisions about the cost of products they are purchasing. The
CEC added that DOE did not offer any facts, data, or reasoning to
suggest that a significant subset of consumers would resist switching
to a more-efficient product because of fuel type or why such concerns
would outweigh the energy consumption data or the risk of undermining
the entire appliance efficiency program. The commenter concluded that
these are economic concerns more properly addressed by the stringency
of standards, rather than the creation of new product classes. (CEC,
No. 89 at p. 5)
Regarding fuel switching, the Environmentalists Joint Comment
stated that such concerns are unsupported. These commenters argued that
EPCA poses no barriers to adoption of an energy conservation standard
based upon fuel switching, recognizing that appliances using different
fuel types compete against each other in the marketplace. The
Environmentalists Joint Comment pointed out that in 1987, Congress
amended EPCA (at 42 U.S.C. 6295(f)(1)(B)(iii)) to require that DOE
prescribe energy conservation standards for small gas furnaces at a
level ``which the Secretary determines is not likely to result in a
significant shift from gas heating to electric resistance heating with
respect to either residential construction on furnace replacement.''
\29\ In light of that provision, these commenters argued that Congress
could have easily extended this consideration to subsequent rulemakings
to amend the standards for residential furnaces and commercial water
heaters, but it did not. The Environmentalists Joint Comment stated
that if fuel switching concerns were to be addressed by the statute's
``features'' provisions, such outcome would render the statutory
language regarding fuel switching limitations for small furnaces
superfluous. (Environmentalists Joint Comment, No. 90 at pp. 4-5)
---------------------------------------------------------------------------
\29\ The Environmentalists Joint Comment pointed to legislative
history in H. Rpt. 100-11 at 35 and in S. Rpt. 100-6 at 6, 1987
U.S.C.C.A.N. at 56, which suggest that Congress's concerns were
about switching to electric resistance heating, not heat pumps.
---------------------------------------------------------------------------
The Advocates Joint Comment largely dismissed any concerns about
fuel switching and sought to offer alternative solutions that would not
require the establishment of separate product classes under EPCA's
``features'' provision. These commenters argued that consumers with a
preference for gas heat would still have that option, albeit with
higher installation costs, and that DOE can account for any such subset
of consumer behavior through its modeling of fuel switching. (Advocates
Joint Comment, No. 95 at pp. 3-5)
In response, DOE acknowledges that fuel switching is a more nuanced
matter when viewed beyond a purely economic lens. As an economic
matter, a fuel-switching analysis shows how many consumers could change
from one type of appliance to another as a result of amended energy
conservation standards, occurrences that would have repercussions for
down-steam analyses related to costs and benefits. As commenters point
out, there is considerable evidence of the potential for fuel switching
in the residential furnaces, commercial water heaters, and other
relevant rulemaking dockets. As the CEC noted, DOE's September 2016
residential furnaces SNOPR found that up to 8 percent of consumers
would switch from gas furnaces to heat pumps or electric furnaces under
that proposal. However, DOE had not previously focused on the
motivation behind such consumer fuel switching. In past rulemakings,
DOE viewed fuel switching as just an economic decision, devoid of any
consumer utility impacts. However, as more fully explained in section
III.A.1.a of this document, after careful review of the Gas Industry
Petition and public comments, DOE has come to see that a non-condensing
gas appliance (and related venting) offers the ability for consumers
with difficult installation situations to make like-for-like appliance
replacements without the need for major modifications to their dwelling
or commercial business. Such modifications could potentially result in
the loss of patio or storage space, the installation of unsightly
piping, or the loss of windows. These are interactions with the
appliance which the consumer would notice, concerns beyond the
appliance's primary function of providing warm air (for furnaces) or
hot water (for water heaters). Under DOE's revised interpretation,
these utilities are to be regarded as performance-related
characteristics to be protected under EPCA's ``features'' provision,
rather than simply an economic matter to be resolved through higher
standards and unwelcome fuel switching, as the Advocates Joint Comment
and CEC recommend. The Gas Industry
[[Page 4812]]
Petitioners have provided information related to such installations in
the context of various appliance rulemakings, in addition to the
current docket. Additional benefits of DOE's revised interpretation
include expanded consumer choice, in terms of both product selection
and fuel type.
In light of this final interpretive rule, DOE reasons that the
Petitioners et al. Joint Comment's primary concerns vis-[agrave]-vis
fuel switching have been addressed. However, these commenters' more
technical arguments about the fuel switching analysis embedded within
DOE's analytical methodology are more properly a matter to be addressed
after the conclusion of the ongoing peer review of DOE's analytical
processes being conducted by the National Academies of Sciences,
Engineering, and Medicine (see more detailed discussion at section
III.C of this document).
While DOE appreciates the Environmentalists Joint Comment's
argument about the statutory directive to prevent a significant shift
from gas heating to electric resistance heating when prescribing energy
conservation standards for ``small'' gas furnaces under 42 U.S.C.
6295(f)(1)(B)(iii), the Department finds the commenters' legal theory
to be a bit off point. First, DOE's goal is not to prevent fuel
switching, but rather to prevent the loss of consumer utility. Having
an appliance that fits in a limited/confined space is something very
useful to the average consumer, and the statute expressly lists sizes
as one of the protected aspects under 42 U.S.C. 6295(o)(4).
Furthermore, DOE would argue in the alternative that the ``small''
furnaces provision to which the commenters point does not address the
matter of fuel switching generally, but instead it articulates a
particular concern to not encourage a shift to a certain type of
electric appliance--i.e., electric resistance heating. Notably, the
statute does not mention heat pumps, another electric heating option.
Thus, DOE concludes that the Environmentalists Joint Comment paints
with too broad a brush in making its argument to prohibit consideration
of fuel switching effects.
3. Other Economic Issues
Commenters also raised a few additional economic matters that did
not fit squarely within any of the previous categories. The CA IOUs
recommended that DOE should perform a cost-benefit analysis on the
proposed new product class(es) that would arise from its proposed
interpretation, as well as evaluating the potential costs to all
consumers, manufacturers, and the environment resulting from such a
change. The commenters argued that even if economic impacts were an
appropriate rationale for a new product class, DOE's analysis of such
impacts is incomplete. (CA IOUs, No. 85 at p. 5) The CA IOUs' analysis
suggests that the potential impact of the new product classifications
could be both significant and widespread, with the impacts related to
residential furnaces alone potentially resulting in $1.8 billion/year
in lost utility bill savings by 2050 and a 78 percent reduction in
energy savings compared to the SNOPR published in 2016. Given the
tremendous negative impacts for consumers, manufacturers, and the
environment that are likely to result from DOE's proposed
interpretation, the CA IOUs urged the Department not to move forward
without weighing these impacts against the economic impacts used to
justify the new product/equipment classes. (CA IOUs, No. 85 at p. 6)
A.O. Smith asserted that DOE's proposed interpretation would
increase business uncertainty and impose unnecessary burdens upon
manufacturers who would need to align their stock keeping units (SKUs)
and divert resources that would otherwise be invested in more
innovative technologies. A.O. Smith further alleged that DOE's proposed
interpretation would favor low-cost and subsidized imported products,
thereby creating an ``un-level'' playing field for domestic
manufacturers. (A.O. Smith, No. 88 at p. 6)
In response, DOE has explained at length elsewhere in this document
that a ``feature'' determination pursuant to EPCA does not turn on
economic impacts, whatever the outcome of that decision. Although DOE
explored some of these impacts in its proposed interpretive rule to
examine the Gas Industry Petition in the broader context, the agency
has not relied upon those economic impacts as the basis for either its
proposal or this final interpretive rule determining non-condensing
technology (and associated venting) to be a ``feature'' within the
meaning of the statute. Consequently, the Department has concluded that
it is not necessary to conduct the type of cost-benefit analysis
suggested by the CA IOUs, because ultimately, it would not change the
results of DOE's ``features'' determination.
As to A.O. Smith's unsubstantiated arguments about business
uncertainty and burden associated with the proposed interpretive rule,
DOE finds such arguments to be without merit. DOE has been clear in
both its earlier proposal and in this final interpretive rule regarding
its revised interpretation. Furthermore, if the potential for
litigation (and related uncertainty) were to be a basis for DOE to
withhold regulatory action (including relevant statutory
interpretations), it could completely ossify the administrative law
process, because cross-cutting stakeholder interests render most agency
actions subject to potential legal challenge. DOE finds A.O. Smith's
statements about burden and resource diversion to be without merit,
given that the revised interpretation would essentially maintain the
status quo. If A.O. Smith is operating effectively in the current
market where both condensing and non-condensing appliances are
available, it is difficult to see how its operational landscape would
shift as a result of DOE's interpretation. Similarly, A.O. Smith's
arguments about favoring low-cost/subsidized imported products and
creating an un-level playing field for domestic manufacturers fail for
the same reason. Because DOE's final interpretation does not alter the
current standard levels or market, the Department is satisfied that the
field remains appropriately level and fair for all market participants.
C. Analytical Issues
In seeking to justify the need for a determination that non-
condensing technology (and associated venting) are a performance-
related feature, the Petitioners et al. Joint Comment raised what it
perceived to be flaws in the analytical methodology underlying DOE
rulemakings. First, the Petitioners et al. Joint Comment urged DOE to
reconsider its analysis concerning the significance of fuel switching
in the context of efficiency regulation. These commenters argued that
fuel switching could occur because of the unavailability of important
product characteristics, such as instances where it would be
impractical to install condensing products or where such products could
not be installed without the need for undesirable building
modifications that consumers would be unwilling to accept. They added
that driving gas products out of the market is not a legitimate
regulatory objective under a statute designed to promote the efficiency
of regulated products. Thus, the Petitioners et al. Joint Comment
reasoned that in conducting its standards rulemakings, DOE must justify
its standards on the basis of the economics of required efficiency
improvements (i.e., by accounting for those cases where poor economic
outcomes drive consumers to alternative products), rather than by
excluding such
[[Page 4813]]
outcomes from the analysis and substituting more favorable economic
outcomes based upon assumed product substitution. They asserted that
using the logic of DOE's historic approach to economic analyses,
standards could be determined to be economically justified on the
ground that they are so economically unjustified that consumers would
no longer purchase the regulated products at all. These commenters
argued that DOE's life-cycle cost analysis and payback analysis must
reflect these real economic costs, rather than simply reducing the
number of products sold.\30\ (Petitioners et al. Joint Comment, No. 80
at pp. 13-15)
---------------------------------------------------------------------------
\30\ The Petitioners et al. Joint Comment argued that while the
adverse impact of a standard on product sales should be ignored for
purposes of the payback period and LCC analyses, it should not be
ignored for purposes of other analyses, such as the manufacturer
impact analysis, utility impact analysis, and national energy
savings analysis.
---------------------------------------------------------------------------
Second, the Petitioners et al. Joint Comment urged DOE to
acknowledge that there is a systemic error in its base-case efficiency
assignment (due to the random nature of that assignment) which these
commenters argue invalidates the entire economic analysis underlying
the agency's pending proposals. Their argument was that, even if the
overall number of efficiency investments is correct, DOE's analysis is
based upon the wrong efficiency investments because it uses a random
selection of investments rather than a selection reflecting outcomes
that those purchasers would decline to make in the absence of
regulatory compulsion. According to these commenters, this defect in
DOE's economic analysis provides a separate and independent basis for
DOE to withdraw its pending proposed rules for residential furnaces and
commercial water heaters. (Petitioners et al. Joint Comment, No. 80 at
pp. 15-16) Lennox made a similar argument about what it described as
the ``random nature'' of DOE's consumer analysis, which it argues
fundamentally (and incorrectly) assumes that consumers act
irrationally. (Lennox, No. 114 at p. 4)
In further critique of DOE's analytical methodology, the
Petitioners et al. Joint Comment argued that because DOE's analysis is
based on the wrong installations, it does not provide a valid
assessment of a rule's impacts, and it produces a systematic
overstatement of regulatory benefits and understatement of costs. These
commenters asserted that this problem with DOE's modeling approach
fatally undermines a rulemaking's economic analysis, so they argued
that there is no reasonable basis to conclude that standards based on
that analysis are economically justified. For this reason alone, the
Petitioners et al. Joint Comment concluded that withdrawal of the
Department's pending proposals is warranted. (Petitioners et al. Joint
Comment, No. 80 at p. 17)
In response, DOE notes that National Academies of Sciences,
Engineering, and Medicine (collectively, ``the NAS'') are currently
conducting a peer review of the analytical methods employed by DOE in
setting energy conservation standards regulations for the energy
performance of consumer products and commercial equipment. See https://www.nationalacademies.org/our-work/review-of-methods-for-setting-building-and-equipment-performance-standards. At the time of the
drafting of this final interpretive rule, the NAS committee responsible
for this task has held public meetings on November 19-20, 2019, on
March 2-3, 2020, and on May 5, 2020, to discuss various aspects related
to DOE's analytical methodology when developing standards for those
consumer products and industrial equipment that DOE regulates. DOE
understands that at least some of the authors of the Petitioners et al.
Joint Comment have participated in the NAS proceeding, raising issues
regarding DOE's analytical methodologies similar to those submitted in
the comments on DOE's proposed interpretation. At the conclusion of the
study, the NAS will issue a consensus report with findings and
recommendations on how DOE can improve its regulatory analyses to align
with best practices for cost-benefit analysis. Once completed, DOE will
review the NAS report and modify or adjust its own analytical methods
consistent with those recommendations and DOE's statutory obligations.
Until DOE has had the opportunity to assess the conclusions of these
independent experts, the Department has concluded that it would be
premature to make changes to its current analytical methodology.
Although DOE has ultimately decided to withdraw its pending rulemaking
proposal for residential non-weatherized gas furnaces, residential
mobile home gas furnaces, and commercial water heating equipment (for
the reasons explained in section III.D.3 of this document), the
Department makes clear that it is not doing so on the basis of the
analytical arguments raised by the Gas Industry Petitioners and
discussed in this section. Thus, DOE's decision to grant the withdrawal
request should not be viewed as in any way prejudging or preempting the
outcomes of the NAS peer review process.
D. Other Issues
Finally, commenters on DOE's proposed interpretive rule raised a
handful of other issues which did not fall neatly within the other
sections of this comment summary, so they are addressed here in the
balance of this comment discussion.
1. AFUE2
Regarding residential furnaces, AHRI stated that one reason it
supports DOE's proposed interpretation is that it would help facilitate
adoption of a unified energy efficiency metric for those products.
(AHRI, No. 91 at pp. 1-2; similar comment by Nortek, No. 71 at pp. 1-2;
Nortek, No. 107 at p. 3) More specifically, AHRI explained that in
October 2018, it submitted a petition for rulemaking to DOE seeking to
establish a combined energy efficiency metric (referred to as
``AFUE2'') for residential furnaces (currently rated using annual fuel
utilization efficiency (AFUE)), furnace fans (currently rated using fan
efficiency ratio (FER)), and standby mode/off mode energy consumption
(currently rated in watts). AHRI suggested that furnace product classes
split into condensing and non-condensing product classes (similar to
what is currently done for furnace fans) would facilitate this
transition by ensuring that the new, combined AFUE2 metric does not
violate EPCA's ``anti-backsliding'' provision at 42 U.S.C.
6295(o)(1).\31\ (AHRI, No. 91 at pp. 2-3) In response to the September
2020 SNOPIR, AHRI stated that if DOE decides not to adopt condensing/
non-condensing product classes or its recommended AFUE2 approach for
residential furnaces, then the trade association expressed support for
the Department to pursue more tailored approaches such as capacity-
based standards for smaller residential furnaces, which could also
preserve non-condensing products for many difficult replacement
installations. (AHRI, No. 109 at p. 3)
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\31\ 42 U.S.C. 6295(o)(1) provides: ``The Secretary [of Energy]
may not prescribe any amended standard which increases the maximum
allowable energy use, or, in the case of showerheads, faucets, water
closets, or urinals, water use, or decreases the minimum required
energy efficiency, of a covered product.''
---------------------------------------------------------------------------
A number of other commenters also expressed support for AHRI's
AFUE2 petition for rulemaking. (Nortek, No. 71 at pp. 2-3; Mortex, No.
72 at p. 1; Carrier, No. 92 at p. 2; Nortek, No. 107 at p. 3) Nortek
suggested that there are synergies and burden reduction that would be
associated with granting AHRI's AFUE2 petition. Nortek reasoned that
efforts to come up with a
[[Page 4814]]
unified test procedure would be greatly simplified if the furnace and
furnace fan product classes were aligned to differentiate condensing
and non-condensing products. (Nortek, No. 71 at pp. 2-3; Nortek, No.
107 at p. 3) Mortex added that an AFUE2 metric would make it easier for
consumers to use one number to compare different furnace models
(similar point made by Nortek), and to this end, Mortex recommended
using the same product classes set forth for furnace fans when
developing the unified AFUE2 metric and associated energy conservation
standards. (Mortex, No. 72 at p. 1; Nortek, No. 107 at p. 3) Carrier
also suggested that a consolidated AFUE2 metric would reduce both the
number of required rulemakings and unnecessary burdens/costs for
manufacturers. (Carrier, No. 92 at p. 2) Several commenters on the
September 2020 SNOPIR reiterated these arguments in support of
transition to an AFUE2 metric. (Nortek, No. 107 at p. 3; AHRI, No. 109
at p. 3; Carrier, No. 110 at p. 2)
In response, DOE notes that the Department is currently considering
the merits of AHRI's AFUE2 petition for rulemaking, including the
reasoning recited in these comments, in a separate proceeding. DOE
acknowledges that an interpretation finding non-condensing technology
(and associated venting) to be a ``feature'' could potentially
facilitate implementation of an AFUE2 metric, if the agency decides to
grant the AHRI petition. However, such considerations pertaining to
that distinct regulatory matter did not factor into the Department's
decision-making process underpinning this final interpretive rule.
Instead, this final interpretive rule is grounded in the law and facts
particular to the matter raised in the Gas Industry Petition and
discussed in this document.
2. Environmental and Climate Policy Issues
The AGs Joint Comment faulted DOE's proposed interpretive rule for
its potential to create missed opportunities for consumers, businesses,
and governments to conserve energy and to reduce economic and
environmental costs of energy production and use (similar comment made
by Electrify Now). These commenters argued that DOE's actions on the
Gas Industry Petition have delayed promulgation of energy conservation
standards, which in turn has hampered State and municipal energy
efficiency, clean energy, and climate goals. Finally, the AGs Joint
Comment cited the International Energy Agency (IEA) Energy Efficiency
2018 market report which highlights the potential for energy efficiency
savings to help achieve global energy sustainability; these commenters
stated that according to the IEA report, increased energy efficiency
could account for half of the reductions in carbon dioxide emissions
needed to attain a sustainable development scenario in 2040, and U.S.
leadership would help drive deployment of more-efficient appliances and
equipment worldwide. (AGs Joint Comment, No. 82 at p. 13; Electrify
Now, No. 106 at p. 2) The CEC argued that the proposed interpretive
rule would weaken human health and environmental health through
increased avoidable air pollution. (CEC, No. 89 at pp. 1-2) Along these
same lines, an anonymous commenter (and a number of other individuals)
expressed opposition to DOE's proposed interpretation and urged its
withdrawal, alleging that it would weaken energy conservation standards
and harm public health by increasing the amount of greenhouse gas
emissions. (Anonymous, No. 68 at p. 1; Sorkin, No. 73 at p. 1; Reed,
No. 74; Woods, No. 76 at p. 1; Anonymous, No. 98 at p. 1; A.O. Smith,
No. 113 at p. 5)
In response, DOE agrees that there may be costs and benefits
resulting from energy conservation standards beyond those to be
considered by Department when setting energy conservation standards
under the Energy Policy and Conservation Act. Those impacts are not
relevant to the current determination. Rather, the Department is
constrained to act within its statutory authority--both in terms of
standard setting and when making ``features'' determinations--and the
provisions of EPCA make clear that while important, energy and cost
savings are not the only relevant statutory considerations. As a prime
example, EPCA's ``features'' provisions demonstrate that Congress
intended certain aspects of covered products/equipment with consumer
utility to be preserved, even if that means forgoing the energy savings
or other benefits that might result from their elimination. (42 U.S.C.
6295(o)(4); 42 U.S.C. 6313(a)(6)(B)(iii)(II)(aa); and as applicable in
certain cases through 42 U.S.C. 6316(a)). Under its revised
interpretation, DOE has determined non-condensing technology (and
associated venting) to be a ``feature'' within the meaning of the
statute, as would justify a separate product/equipment class and energy
conservation standard in appropriate cases. Such decision, where
justified under the statute, does not turn on other externalities that
may exist in the context of energy conservation standards.
3. Other Requested Relief
Beyond finalizing the interpretive rule along the lines proposed,
the Petitioners et al. Joint Comment urged DOE to take further action,
including issuing written findings consistent with its revised
interpretation in the context of its pending residential furnaces and
commercial water heaters rulemakings pursuant to EPCA's ``features''
provisions at 42 U.S.C. 6295(o)(4) and 42 U.S.C.
6313(a)(6)(B)(iii)(II)(aa), respectively. These commenters also urged
DOE to withdraw the pending proposed rules in those same rulemakings
based upon those written findings. According to the Petitioners et al.
Joint Comment, such actions are justified by the evidence, warranted by
DOE's proposed interpretive rule, and sufficient to establish that
adoption of the pending proposals would be contrary to law.\32\
(Petitioners et al. Joint Comment, No. 80 at p. 4)
---------------------------------------------------------------------------
\32\ The Gas Industry Petitioners again raised the issue of
withdrawal of the rulemaking proposals for the subject residential
furnaces and commercial water heating equipment in the September 29,
2020 letter urging prompt action on the petition. (Docket No. EERE-
2018-BT-STD-0018-0101) In reiterating the arguments raised in its
earlier public comments, the Gas Industry Petitioners noted that
because these appliances are now the subject of litigation, it would
be beneficial to clarify the administrative record for these
rulemakings so as to be consistent with DOE's final interpretation.
---------------------------------------------------------------------------
The Petitioners et al. Joint Comment stated that if DOE adopts its
interpretive rule as proposed, then the proposals in the residential
furnaces and commercial water heaters rulemakings are legally defective
and cannot be adopted as proposed, so they reasoned that withdrawal is
appropriate and that it would show the public DOE is making
constructive progress on these rulemakings. These commenters suggested
that the withdrawal document could also serve as a vehicle to give the
public notice that new proposals will be required and to request
comment informing the development of those proposals. The Petitioners
et al. Joint Comment also argued that withdrawal of the pending
proposals is warranted to correct the public record, because both were
subject to substantial adverse comment to which DOE has never
responded. These commenters also argued that transparency dictates
that, if the Department's interpretation has changed, DOE should not
leave these documents as the latest statement of its views until such
time as new proposals can be crafted. The Petitioners et al. Joint
Comment reasoned that failure to act quickly would ``undermine the
[[Page 4815]]
significance of DOE's response to the Petition,'' and it urged DOE to
move forward in the manner it suggests, even if that were to accelerate
the timing of potential litigation. (Petitioners et al. Joint Comment,
No. 80 at pp. 5-6)
The Petitioners et al. Joint Comment also urged DOE to formally
renounce its prior asserted legal basis for its historic position that
type of venting is not a ``feature,'' a position which rendered a ban
of atmospherically vented gas products permissible. According to these
commenters, DOE's previous interpretation that there is no difference
in consumer utility between atmospherically vented products and
condensing products was factually unsupported, despite the fact that
DOE had acknowledged such differences. The Petitioners et al. Joint
Comment asserted that the applicability of the statute's ``features''
provision was clear and that DOE ignored this fact and ``simply read
unqualified statutory language to include qualifications of DOE's own
creation.'' The comment stated that DOE's previous analysis was too
narrow in focus and that questions as to whether ``a consumer's
interaction with and perception of a furnace or water heater may go
beyond its primary function'' are legally irrelevant. (Petitioners et
al. Joint Comment, No. 80 at pp. 8-9)
After careful consideration, DOE has decided to address these
supplemental actions requested by the Petitioners et al. Joint Comment
as follows. The Department is quite certain that stakeholders and the
interested public will become aware very rapidly of this final
interpretive rule once it is published in the Federal Register, thereby
making arguments about the need for greater transparency specious.
After reading this final interpretive rule, its meaning should be
clear, so ``renunciation'' of DOE's past position is not necessary to,
in effect, deliver the final interpretation's message a second time. It
should also be readily apparent that the pending rulemakings for
residential furnaces, commercial water heaters, and any other
similarly-situated products/equipment will require further rulemaking
action to ensure that they are consistent with this revised
interpretation. DOE has plainly stated as much in both its proposed
interpretive rule, as well as this document. For these reasons, DOE had
previously tentatively determined that withdrawal of its existing
rulemaking proposals for residential non-weatherized gas furnaces,
residential mobile home gas furnaces, and commercial water heating
equipment would be unnecessary. However, given DOE's own statements as
to the need for further rulemaking, DOE has reconsidered this matter
raised by commenters and has decided to withdraw these rulemaking
proposals, as requested by the Petitioners et al. Joint Comment. As
they currently stand, the existing proposals are inconsistent with this
final interpretation and, accordingly, cannot be adopted without
modification, so DOE has determined that their withdrawal may have some
additional benefit in terms of promoting clarity and eliminating any
potential for confusion. As noted previously in the preamble of this
final interpretive rule, elsewhere in this issue of the Federal
Register, DOE withdraws its March 12, 2015 proposed rule and September
23, 2016 supplemental proposed rule for energy conservation standards
for non-weatherized gas furnace and mobile home gas furnaces, as well
as its May 31, 2016 proposed rule for energy conservation standards for
commercial water heating equipment.
4. Final Agency Action
A.O. Smith asserted that DOE is seeking to shield its features
provision determination from judicial review by claiming that it does
not constitute ``agency action.'' Instead, A.O. Smith commented that
the determination, once finalized, would be subject to review under the
Administrative Procedure Act. The commenter argued that rather than
being merely interpretive, the interpretation would have a definitive
and direct effect by requiring/binding the Department to maintain non-
condensing products/equipment in the marketplace, despite the fact that
further implementing rulemaking may be necessary. According to A.O.
Smith, a final interpretation would constitute final agency action
because it would: (1) Consummate DOE's features determination with
respect to condensing technology and (2) affect legal rights and
obligations. The commenter argued that such results are final and not
subject to further DOE discretion, and consequently, the company
reasoned that the final interpretation would have a direct and certain
substantive effect by ensuring that manufacturers would continue to be
able to produce and distribute in commerce non-condensing products/
equipment, independent of the outcomes of the related energy
conservation standards rulemakings. (A.O. Smith, No. 88 at pp. 13-15)
DOE disputes A.O. Smith's allegation that the Department is
attempting to shield its final interpretive rule from judicial review.
Moreover, while DOE acknowledges that the courts ultimately determine
what constitutes a final agency action, A.O. Smith's attempt to
characterize DOE's final interpretive rule as ``final agency action''
under the APA is based upon a flawed reading of the statute and
relevant legal precedent. This final interpretive rule is a type of
rule or regulation within the meaning of 5 U.S.C. 551(4).\33\ It is
well established under the APA that agencies have the authority to
issue interpretive rules, and that these rules are a valuable tool for
an agency to use to advise the public prospectively and in a clear and
transparent manner of the agency's construction of a statute it
administers. Shalala v. Guernsey Memorial Hospital, 514 U.S. 87, 99
(1995); compare Chrysler Corp. v. Brown, 441 U.S. 281, 302-303 (1979)
(whereas ``legislative rules'' have the ``force and effect of the
law''). An interpretive rule does not have substantive force and effect
on its own. It is not until the agency takes an action in which the
interpretation is applied and becomes enforceable that the
interpretation can have an effect and, even then, only through that
subsequent action. Cf. Bennett v. Spear, 520 U.S. 154, 177-78, 117 S.
Ct. 1154, 137 L. Ed. 2d 281 (1997); Am. Tort Reform Ass'n v.
Occupational Safety & Health Admin., 738 F.3d 387, 395 (D.C. Cir. 2013)
(interpretive rules or statements of policy generally do not qualify as
final agency action because they are not finally determinative of the
issues or rights to which they are addressed); see also Am. Mining
Cong. v. Mine Safety & Health Admin., 995 F.2d 1106, 1112 (D.C. Cir.
1993) (holding that whether a rule is interpretive turns on whether it
has independent ``legal effect''); Sec. Indus. & Fin. Mkts. Ass'n v.
United States CFTC, 67 F. Supp. 3d 373, 416, 425 (D.D.C. 2014). This
rule does not determine rights or obligations, or produce ``legal
consequences,'' see Bennett v. Spear, 520 U.S. at 177-78, or carry the
force and effect of law, see Ass'n of Flight Attendants-CWA, AFL-CIO v.
Huerta, 785 F.3d 710, 713 (D.C. Cir. 2015). This particular
interpretive rule will have no direct impact on regulated parties.
---------------------------------------------------------------------------
\33\ Under 5 U.S.C. 551(4), ``rule'' means the whole or part of
an agency statement of general or particular applicability and
future effect designed to implement, interpret, or prescribe law or
policy or describing the organization, procedure, or practice
requirements of an agency and includes the approval or prescription
for the future of rates, wages, corporate or financial structures or
reorganizations thereof, prices, facilities, appliances, services or
allowances therefor or of valuations, costs, or accounting, or
practices bearing on any of the foregoing.
---------------------------------------------------------------------------
Moreover, through this final interpretive rule, DOE is not making
any changes to its existing regulations in the
[[Page 4816]]
Code of Federal Regulations or policies regarding individual appliance
standards rulemakings, and it cannot and will not take any enforcement
action pursuant to its revised interpretation until after the effective
date of a legislative final rule, published in the Federal Register,
amending the applicable product/equipment classes and energy
conservation standards, as necessary.
In this final interpretation, DOE sets forth its understanding of
EPCA's ``features'' provisions as it relates to condensing and non-
condensing technology (and associated venting), but this understanding
must then be applied to the facts and data underlying any given
rulemaking. Given the potential for technological advances, the outcome
of a future rulemaking cannot be adjudged with certainty until such
time as a standards rulemaking is commenced. Thus, until such
interpretation is implemented through a final rule for energy
conservation standards, no party can validly claim any demonstrable and
definite harm. At the present time, current product/equipment classes
and standard levels remain unchanged by the final interpretive rule.
The market status quo is left unaltered by the final interpretive rule,
and there is no change in the products/equipment that can be sold in
the marketplace as a result.
IV. DOE's Final Interpretation
In consideration of public comments and other information received
on the proposed interpretive rule, DOE is revising its interpretation
of EPCA's ``features'' provision in the context of condensing and non-
condensing technology (and associated venting) used in furnaces, water
heating equipment, and similarly-situated appliances (where permitted
by EPCA). Based on those comments, DOE interprets the statute to
preclude the adoption of energy conservation standards that would limit
the market to natural gas, propane gas, and/or oil-fired furnaces,
water heaters, or similarly-situated covered products/equipment (where
permitted by EPCA) that use condensing combustion technology, as that
would result in the unavailability of a performance related feature
within the meaning of 42 U.S.C. 6295(o)(4) and 42 U.S.C.
6313(a)(6)(B)(iii)(II)(aa) (and as applicable in certain cases through
42 U.S.C. 6316(a)). Stated differently, DOE has determined that non-
condensing technology (and associated venting) constitutes a
performance-related ``feature'' for such appliances covered under EPCA.
The statute accords the Secretary of Energy considerable discretion
in terms of determining whether a performance characteristic of a
covered product/equipment amounts to a performance-related feature
which cannot be eliminated through adoption of an energy conservation
standard. DOE has taken the opportunity presented by the Gas Industry
Petition to reconsider its historical interpretation of EPCA's
``features'' provision in the context of condensing and non-condensing
technologies used by certain gas appliances. A number of factors have
convinced DOE to revise its interpretation, as explained in the reasons
that follow.
First, DOE acknowledges that it has, in the past, taken space
constraints and similar limitations into account when setting product
classes (e.g., PTACs, ventless clothes dryers). For example, DOE was
sensitive to the need for extensive building modifications when it
decided to set separate equipment classes for standard size PTACs and
non-standard size PTACs. 73 FR 58772 (Oct. 7, 2008). DOE expects that a
small but substantial number of installations would require similar
building modifications here, if DOE were to hold to its historical
interpretation. For example, these more complicated installations are
documented as part of DOE's analysis of the venting costs for
residential furnaces, which considered potential venting modifications
that could be required when replacing an existing category I furnace
with a condensing (category IV) furnace (see appendix 8D of the 2016
SNOPR TSD for further details). In certain situations, commenters have
made the case that accommodating condensing products may not even be
possible.
Second, DOE has focused on the consumer's interaction with the
product/equipment in deciding whether a performance feature is at
issue. In the context of residential furnaces and commercial water
heaters, DOE had previously tied consumer utility to the primary
function of the appliance (e.g., providing heat to a home or potable
hot water) in establishing the nexus to the consumer. In the past, DOE
opined that consumers were interested only in obtaining heat or hot
water from the appliance, such that they would not care about the
mechanism for generating that output. However, commenters have made
clear that in at least some cases, a condensing appliance may
necessitate significant and unwelcome physical modifications to a home
or business (e.g., by adding new venting into the living/commercial
space or decreasing closet or other storage/retail space), thereby
impacting consumer utility even under DOE's prior approach. Thus, DOE
is not changing the test for consumer utility (i.e., a consumer's
interaction with the subject product/equipment), but it is refining how
that test is to be applied in the context of condensing and non-
condensing appliances (and associated venting), after further
consideration of the facts regarding consumer preferences that relate
to application of the test.
Third, DOE notes that it has been its policy to remain neutral
regarding competing energy sources in the marketplace. As certain
commenters have pointed out and as DOE's own analyses have shown, some
enhanced level of fuel switching would be likely to accompany standard
setting using DOE's prior interpretation. Given that DOE's revised
interpretation essentially would support maintaining the market status
quo, the interpretation would support and be consistent with
maintaining a broader range of consumer choice across fuel types.
Creating separate product classes for condensing and non-condensing
furnaces, water heaters, and similarly-situated products/equipment
(where permitted by EPCA) would prevent many of these potential
problems. Although an approach consistent with DOE's interpretation may
have some impact on overall energy saving potential as a result of
establishing separate product/equipment classes, that is not the
touchstone of EPCA's ``features'' provision. Through that provision,
Congress expressed its will that certain product utilities will take
precedence over additional energy savings measures. DOE has applied
this provision on several occasions without major controversy. (For
example, DOE did not eliminate the oven window, which consumers found
useful, despite the potential for further energy savings that
elimination of the window would have created.) That said, DOE believes
that any potentially negative programmatic impacts of future actions
consistent with its revised interpretation are likely to be limited.
This interpretation is likely to be relevant to only a subset of
appliances, and DOE notes that market trends have favored the growing
reach of condensing furnaces, even as non-condensing alternatives have
remained available. DOE has every reason to believe that such trends
will continue.
DOE would clarify the limitations of its revised interpretation,
based upon the existing statutory provisions. As discussed previously,
DOE can adopt this interpretation for all relevant consumer products,
all non-ASHRAE
[[Page 4817]]
commercial and industrial equipment, and ASHRAE equipment in those
instances where DOE has clear and convincing evidence to adopt levels
higher than the levels in ASHRAE Standard 90.1. However, additional
rulemaking action by the Department will be required consistent with
the interpretation contained in this final interpretive rule. More
specifically, DOE is reserving appliance-specific implementation issues
(including class setting, associated venting, etc.) for review and
analysis in the context of individual product rulemakings. DOE has
concluded that such an approach would best serve all parties, including
manufacturers and consumers. Individual product rulemakings will have
the requisite mix of interested stakeholders, technical experts, a
comprehensive record with product-specific data (including a review of
relevant industry consensus standards), and the full suite of analyses
for class and standard setting. In that venue, DOE and interested
stakeholders will be better able to address any relevant technical
matters or product-specific nuances. Consequently, DOE anticipates
continued engagement and productive involvement by members of the
public and the regulated community in subsequent activities that may
follow this revised interpretation.
V. Conclusion
In summary, DOE has granted the Gas Industry Petition to the extent
that DOE interprets the statute to preclude the adoption of energy
conservation standards that would limit the market of natural gas,
propane gas and/or oil-fired furnaces, water heaters, or similarly-
situated covered products/equipment (where permitted by EPCA) to
appliances that use condensing combustion technology, as that would
result in the unavailability of a performance related feature within
the meaning of 42 U.S.C. 6295(o)(4) and 42 U.S.C.
6313(a)(6)(B)(iii)(II)(aa) (and as applicable in certain cases through
42 U.S.C. 6316(a)). Stated differently, DOE has determined that non-
condensing technology (and associated venting) constitutes a
performance-related ``feature'' for such appliances covered under EPCA.
Such interpretation would extend to all relevant/applicable cases
involving consumer products, non-ASHRAE commercial equipment, and
ASHRAE equipment where DOE adopts a level more stringent than the
ASHRAE level. Through this final interpretive rule, DOE states its
understanding of the proper interpretation of the statutory text in
light of the language and purposes of EPCA, so as to be consistent with
Congress's direction. Upon further consideration and after careful
review of the information presented with and in response to the Gas
Industry Petition, DOE has concluded that this revised interpretation
offers the best reading of EPCA's ``features'' provision.
DOE has denied the Gas Industry Petition as it pertains to those
rulemakings where ASHRAE sets standard levels that trigger DOE to
consider and adopt those level (unless DOE finds clear and convincing
evidence to adopt more-stringent levels), due to lack of authority.
(See section II.D. of this document.)
DOE has granted the Gas Industry Petition's request for DOE to
withdraw the existing proposed rules for residential furnaces and
commercial water heaters. The existing proposals are inconsistent with
this final interpretation and, accordingly, should not be adopted.
Consequently, DOE has determined that their withdrawal may have some
additional benefit in terms of promoting clarity and eliminating any
potential for confusion. DOE anticipates developing new notices of
proposed rulemaking for the subject residential furnaces and commercial
water heaters that would be consistent with this revised legal
interpretation. As noted previously in the preamble of this final
interpretive rule, elsewhere in this issue of the Federal Register, DOE
withdraws its March 12, 2015 proposed rule and September 23, 2016
supplemental proposed rule for energy conservation standards for non-
weatherized gas furnace and mobile home gas furnaces, as well as its
May 31, 2016 proposed rule for energy conservation standards for
commercial water heating equipment.
DOE wishes to make clear that an interpretive rule is a type of
rule or regulation within the meaning of those terms in the
Administrative Procedure Act, 5 U.S.C. 551(4). It is well established
under the APA that agencies have the authority to issue interpretive
rules, and that these rules are a valuable tool for an agency to use to
advise the public prospectively and in a clear and transparent manner
of the agency's construction of a statute it administers. As explained
above, DOE's legal interpretations do not themselves constitute final
agency action, and DOE does not believe that this rule reflects final
agency action.
Implementation of this interpretation in the context of energy
conservation standards for particular covered products or equipment,
and any changes to existing policies that may be appropriate in light
of this interpretation, will be the subject of subsequent actions. As
appropriate, the public will be notified and have an opportunity to
comment on any such proposals implementing the interpretation.
Furthermore, the many substantive comments received, including comments
that led to revisions of DOE's interpretation of the ``features''
provision,'' as reflected in this final interpretive rule, indicate
that the public had a meaningful opportunity to comment on DOE's
general interpretation. As DOE has indicated, there will be additional
processes after this interpretation has been issued but before any
rulemaking decisions are implemented that would have impacts on
regulated parties or any other stakeholders.
Review Under Executive Order 12866. This final interpretive rule
was determined by the Office of Management and Budget (OMB) Office of
Information and Regulatory Affairs (OIRA) to be a ``significant
regulatory action'' under section 3(f) of Executive Order 12866,
``Regulatory Planning and Review.'' 58 FR 51735 (Oct. 4, 1993).
Accordingly, this final interpretive rule was subject to review under
the Executive Order by OIRA.
VI. Approval of the Office of the Secretary
The Secretary of Energy has approved publication of this notice of
final interpretive rule.
Signing Authority
This document of the Department of Energy was signed on December
23, 2020, by Daniel R Simmons, Assistant Secretary for Energy
Efficiency and Renewable Energy, pursuant to delegated authority from
the Secretary of Energy. That document with the original signature and
date is maintained by DOE. For administrative purposes only, and in
compliance with requirements of the Office of the Federal Register, the
undersigned DOE Federal Register Liaison Officer has been authorized to
sign and submit the document in electronic format for publication, as
an official document of the Department of Energy. This administrative
process in no way alters the legal effect of this document upon
publication in the Federal Register.
Signed in Washington, DC on December 28, 2020.
Treena V. Garrett,
Federal Register Liaison Officer, U.S. Department of Energy.
[FR Doc. 2020-28956 Filed 1-14-21; 8:45 am]
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