[Federal Register Volume 87, Number 108 (Monday, June 6, 2022)]
[Rules and Regulations]
[Pages 34067-34093]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-12107]
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DEPARTMENT OF ENERGY
10 CFR Part 431
[EERE-2019-BT-STD-0034]
RIN 1904-AE56
Energy Conservation Program: Energy Conservation Standards for
Commercial Prerinse Spray Valves
AGENCY: Office of Energy Efficiency and Renewable Energy, Department of
Energy.
ACTION: Final determination.
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SUMMARY: The Energy Policy and Conservation Act (``EPCA''), as amended,
prescribes energy conservation standards for various consumer products
and certain commercial and industrial equipment, including commercial
prerinse spray valves (``CPSVs'') equipment. EPCA also requires the
U.S. Department of Energy (``DOE'' or ``the Department'') to
periodically determine whether more stringent, amended standards would
be technologically feasible and economically justified, and would
result in significant energy savings. In this final determination, DOE
has determined that amended energy conservation standards for
commercial prerinse spray valves are not needed.
DATES: The effective date of this rule is July 6, 2022.
ADDRESSES: The docket for this rulemaking, which includes Federal
Register notices, public meeting attendee lists and transcripts,
comments, and other supporting documents/materials, is available for
review at www.regulations.gov. All documents in the docket are listed
in the www.regulations.gov index. However, not all documents listed in
the index may be publicly available, such as information that is exempt
from public disclosure.
The docket web page can be found at www.regulations.gov/docket/EERE-2019-BT-STD-0034. 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) 287-1445 or by
email: [email protected].
FOR FURTHER INFORMATION CONTACT: Mr. Bryan Berringer, U.S. Department
of Energy, Office of Energy Efficiency and Renewable Energy, Building
Technologies Office, EE-5B, 1000 Independence Avenue SW, Washington, DC
20585-0121. Telephone: (202) 586-0371. Email:
[email protected].
Ms. Kathryn McIntosh, U.S. Department of Energy, Office of the
General Counsel, GC-33, 1000 Independence Avenue SW, Washington, DC
20585-0121. Telephone: (202) 586-2002. Email:
[email protected].
SUPPLEMENTARY INFORMATION:
Table of Contents
I. Synopsis of the Final Determination
II. Introduction
A. Authority
B. Background
1. Current Standards
2. History of Standards Rulemakings for Commercial Prerinse
Spray Valves
III. General Discussion
[[Page 34068]]
A. Product Classes and Scope of Coverage
B. Test Procedure
C. Technological Feasibility
1. General
2. Maximum Technologically Feasible Levels
D. Energy Savings
1. Determination of Savings
2. Significance of Savings
E. Cost Effectiveness
F. Further Considerations
IV. Methodology and Discussion of Related Comments
A. Market and Technology Assessment
1. Scope of Coverage
2. Technology Options
B. Screening Analysis
1. Screened Out Technologies
2. Remaining Technologies
3. Product Classes
4. Market Assessment
C. Engineering Analysis
1. Efficiency Analysis
2. Cost Analysis
3. Cost Efficiency Results
D. Markups Analysis
E. Energy and Water Use Analysis
F. Life-Cycle Cost and Payback Period Analysis
1. Product Cost
2. Installation Cost
3. Annual Energy Consumption
4. Energy Prices
5. Water and Wastewater Prices
6. Maintenance and Repair Costs
7. Product Lifetime
8. Discount Rates
9. Energy Efficiency Distribution in the No-New-Standards Case
10. Payback Period Analysis
G. Shipments Analysis
H. National Impact Analysis
1. Product Efficiency Trends
2. Customer Choice Scenarios
3. National Energy Savings
4. Net Present Value Analysis
I. Manufacturer Impact Analysis
1. Overview
2. GRIM Analysis and Key Inputs
V. Analytical Results and Conclusions
A. Economic Impacts on Individual Consumers
B. Economic Impacts on Manufacturers
1. Industry Cash Flow Analysis Results
2. Direct Impacts on Employment
3. Impacts on Manufacturing Capacity
4. Impacts on Subgroups of Manufacturers
5. Cumulative Regulatory Burden
C. National Impact Analysis
1. Significance of Energy Savings
2. Net Present Value of Consumer Costs and Benefits
D. Final Determination
1. Technological Feasibility
2. Cost Effectiveness
3. Significant Conservation of Energy
4. Additional Consideration
5. Summary
VI. Procedural Issues and Regulatory Review
A. Review Under Executive Order 12866 and 13563
B. Review Under the Regulatory Flexibility Act
C. Review Under the Paperwork Reduction Act
D. Review Under the National Environmental Policy Act of 1969
E. Review Under Executive Order 13132
F. Review Under Executive Order 12988
G. Review Under the Unfunded Mandates Reform Act of 1995
H. Review Under the Treasury and General Government
Appropriations Act, 1999
I. Review Under Executive Order 12630
J. Review Under the Treasury and General Government
Appropriations Act, 2001
K. Review Under Executive Order 13211
L. Review Under the Information Quality Bulletin for Peer Review
M. Congressional Notification
VII. Approval of the Office of the Secretary
I. Synopsis of the Final Determination
Title III, Part B \1\ of EPCA,\2\ established the Energy
Conservation Program for Consumer Products Other Than Automobiles. (42
U.S.C. 6291-6309) These products include CPSVs, the subject of this
final determination.\3\
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\1\ For editorial reasons, upon codification in the U.S. Code,
Part B was redesignated Part A.
\2\ All references to EPCA in this document refer to the statute
as amended through the Energy Act of 2020, Public Law 116-260 (Dec.
27, 2020), which reflect the last statutory amendments that impact
Parts A and A-1 of EPCA.
\3\ Because Congress included commercial prerinse spray valves
in Part B of Title III of EPCA, the consumer product provisions of
Part B (not the industrial equipment provisions of Part C) apply to
CPSVs. However, because CPSVs are commonly considered to be
commercial equipment, as a matter of administrative convenience and
to minimize confusion among interested parties, DOE placed the
requirements for CPSVs into subpart O of 10 CFR part 431. Part 431
contains DOE regulations for commercial and industrial equipment.
DOE refers to CPSVs as either ``products'' or ``equipment.''
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DOE is issuing this final determination pursuant to the EPCA
requirement that, not later than 6 years after issuance of any final
rule establishing or amending a standard, DOE must publish either a
notification of determination that standards for the product do not
need to be amended, or a notice of proposed rulemaking (``NOPR'')
including new proposed energy conservation standards (proceeding to a
final rule, as appropriate). (42 U.S.C. 6295(m))
For this final determination, DOE analyzed CPSVs subject to
standards specified in title 10 of the Code of Federal Regulations
(``CFR'') part 431, section 266.
DOE first analyzed the technological feasibility of more energy
(water) efficient CPSVs and CPSVs with lower energy use. For those
CPSVs for which DOE determined higher standards to be technologically
feasible, DOE estimated energy savings that would result from potential
energy conservation standards by conducting a national impacts analysis
(``NIA''). DOE evaluated whether higher standards would be cost
effective by conducting life-cycle cost (``LCC'') and payback period
(``PBP'') analyses and estimated the net present value (``NPV'') of the
total costs and benefits experienced by consumers.
Based on the results of the analyses, summarized in section V of
this document, DOE has determined that current standards for CPSVs do
not need to be amended because any potential benefits are outweighed by
the risk of increased energy and water usage due to the increased risk
of product type switching, costs, and additional burden to
manufacturers.
II. Introduction
The following section briefly discusses the statutory authority
underlying this final determination, as well as some of the historical
background relevant to the establishment of standards for CPSVs.
A. Authority
EPCA authorizes DOE to regulate the energy efficiency of a number
of consumer products and certain industrial equipment. Title III, Part
B of EPCA established the Energy Conservation Program for Consumer
Products Other Than Automobiles. These products include CPSVs, the
subject of this document. (42 U.S.C. 6291(33)). EPCA prescribed energy
conservation standards (in terms of flow rate) for these products (42
U.S.C. 6295(dd)) and directs DOE to conduct future rulemakings to
determine whether to amend these standards. (42 U.S.C. 6295(m)).
The energy conservation program under EPCA consists essentially of
four parts: (1) Testing, (2) labeling, (3) the establishment of Federal
energy conservation standards, and (4) certification and enforcement
procedures. Relevant provisions of EPCA specifically include
definitions (42 U.S.C. 6291), test procedures (42 U.S.C. 6293),
labeling (42 U.S.C. 6294), energy conservation standards (42 U.S.C.
6295), and the authority to require information and reports from
manufacturers (42 U.S.C. 6296).
Subject to certain criteria and conditions, DOE is required to
develop test procedures to measure the energy efficiency, energy use,
or estimated annual operating cost of each covered product. (42 U.S.C.
6295(o)(3)(A) and 42 U.S.C. 6295(r)) Manufacturers of covered products
must use the prescribed DOE test procedure as the basis for certifying
to DOE that their products comply with the applicable energy
conservation standards adopted under EPCA and when making
representations to the public regarding the energy use or efficiency of
those products. (42 U.S.C. 6293(c) and 42 U.S.C. 6295(s)) Similarly,
DOE must use
[[Page 34069]]
these test procedures to determine whether the products comply with
standards adopted pursuant to EPCA. (42 U.S.C. 6295(s)) The DOE test
procedures for commercial prerinse spray valves appear at 10 CFR
431.264.
Federal energy conservation requirements generally supersede State
laws or regulations concerning energy conservation testing, labeling,
and standards. (42 U.S.C. 6297(a)-(c)) California, however, has a
statutory exemption to preemption for CPSV standards adopted by the
California Energy Commission before January 1, 2005. (42 U.S.C.
6297(c)(7)) As a result, while Federal CPSV standards apply in
California, California's CPSV standards also apply for standards
adopted by January 1, 2005, as they are exempt from preemption. In
2018, California revised its regulations so that the maximum flow rate
requirements align with those implemented by DOE for CPSVs. DOE may,
however, grant waivers of Federal preemption for particular State laws
or regulations, in accordance with the procedures and other provisions
set forth under EPCA. (See 42 U.S.C. 6297(d))
Pursuant to the amendments contained in the Energy Independence and
Security Act of 2007 (``EISA 2007''), Public Law 110-140, any final
rule for new or amended energy conservation standards promulgated after
July 1, 2010, is required to address standby mode and off mode energy
use. (42 U.S.C. 6295(gg)(3)) Specifically, when DOE adopts a standard
for a covered product after that date, it must, if justified by the
criteria for adoption of standards under EPCA (42 U.S.C. 6295(o)),
incorporate standby mode and off mode energy use into a single
standard, or, if that is not feasible, adopt a separate standard for
such energy use for that product. (42 U.S.C. 6295(gg)(3)(A)-(B))
Because CPSVs only consume energy and water in active mode, DOE's test
procedures for CPSVs do not address standby mode and off mode energy
use as they are not applicable for this product.
DOE must periodically review its already established energy
conservation standards for a covered product no later than 6 years from
the issuance of a final rule establishing or amending a standard for a
covered product. (42 U.S.C. 6295(m)) This 6-year look-back provision
requires that DOE publish either a determination that standards do not
need to be amended or a NOPR, including new proposed standards
(proceeding to a final rule, as appropriate). (42 U.S.C. 6295(m)(1)(A)-
(B)) EPCA further provides that, not later than 3 years after the
issuance of a final determination not to amend standards, DOE must
publish either a notification of determination that standards for the
product do not need to be amended, or a NOPR including new proposed
energy conservation standards (proceeding to a final rule, as
appropriate). (42 U.S.C. 6295(m)(3)(B)). DOE must make the analysis on
which a determination is based publicly available and provide an
opportunity for written comment. (42 U.S.C. 6295(m)(2)).
A determination that amended standards are not needed must be based
on consideration of whether amended standards will result in
significant conservation of energy, are technologically feasible, and
are cost effective. (42 U.S.C. 6295(m)(1)(A) and 42 U.S.C. 6295(n)(2))
Additionally, any new or amended energy conservation standard
prescribed by the Secretary of Energy (``Secretary'') for any type (or
class) of covered product shall be designed to achieve the maximum
improvement in energy efficiency that the Secretary determines is
technologically feasible and economically justified. (42 U.S.C.
6295(o)(2)(A)). Among the factors DOE considers in evaluating whether a
proposed standard level is economically justified is whether the
proposed standard at that level is cost effective, as defined under 42
U.S.C. 6295(o)(2)(B)(i)(II). Under 42 U.S.C. 6295(o)(2)(B)(i)(II), an
evaluation of cost effectiveness requires DOE to consider savings in
operating costs throughout the estimated average life of the covered
products in the type (or class) compared to any increase in the price,
initial charges, or maintenance expenses for the covered products that
are likely to result from the standard. (42 U.S.C. 6295(n)(2) and 42
U.S.C. 6295(o)(2)(B)(i)(II)).
DOE is publishing this final determination in satisfaction of the
6-year review requirement in EPCA.
B. Background
1. Current Standards
In a final rule published on January 27, 2016, (``January 2016
Final Rule''), DOE prescribed the current energy conservation standards
for CPSVs manufactured on and after January 28, 2019. 81 FR 4748. These
standards prescribe a maximum flow rate in gallons per minute (``gpm'')
for each product class and are set forth in DOE's regulations at 10 CFR
431.266 and repeated in Table II.1.
Table II.1--Federal Energy Conservation Standards for Commercial
Prerinse Spray Valves
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Flow rate
Product class (spray force in ounce-force, ozf) (gpm)
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Product Class 1 (<=5.0 ozf)............................. 1.00
Product Class 2 (>5.0 ozf and <=8.0 ozf)................ 1.20
Product Class 3 (>8.0 ozf).............................. 1.28
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2. History of Standards Rulemakings for Commercial Prerinse Spray
Valves
In support of the present review of the CPSV energy conservation
standards, on June 10, 2020, DOE published a request for information
(``RFI'') that identified various issues on which DOE sought comment to
inform its determination of whether the standards need to be amended.
85 FR 35383 (``June 2020 RFI''). Then, on August 18, 2021, DOE
published a notice of proposed determination (``August 2021 NOPD'') in
which DOE initially determined that amended energy conservation
standards for CPSVs were not needed. 86 FR 46330. On September 1, 2021,
DOE held a public webinar in which it presented the methods and
analysis in the August 2021 NOPD and solicited public comment.\4\
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\4\ Webinar transcript available at www.regulations.gov/document/EERE-2019-BT-STD-0034-0015.
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DOE received written comments in response to the August 2021 NOPD
from the interested parties listed in Table II.2.
Table II.2--August 2021 NOPD Written Comments
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Reference in this
Organization(s) final Organization type
determination
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Appliance Standards Awareness Efficiency Efficiency
Project, Natural Resources Advocates. Organization.
Defense Council.
[[Page 34070]]
Northwest Energy Efficiency NEEA.............. Efficiency
Alliance. Organization.
Pacific Gas and Electric CA IOUs........... Utilities.
Company, San Diego Gas and
Electric, and Southern
California Edison.
Plumbing Manufacturers Inc...... PMI............... Trade Association.
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A parenthetical reference at the end of a comment quotation or
paraphrase provides the location of the item in the public record.\5\
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\5\ The parenthetical reference provides a reference for
information located in the docket. (Docket No. EERE-2019-BT-STD-
0034, which is maintained at www.regulations.gov/docket/EERE-2019-BT-STD-0034). The references are arranged as follows: (commenter
name, comment docket ID number, page of that document).
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III. General Discussion
DOE developed this final determination after considering comments,
data, and information from interested parties that represent a variety
of interests. This document addresses issues raised by these
commenters.
A. Product Classes and Scope of Coverage
When evaluating and establishing energy conservation standards, DOE
divides covered products into product classes by the type of energy
used or by capacity or other performance-related features that justify
differing standards. In making a determination whether a performance-
related feature justifies a different standard, DOE must consider such
factors as the utility of the feature to the consumer and other factors
DOE determines are appropriate. (42 U.S.C. 6295(q)) The CPSV product
classes for this final determination are discussed in further detail in
section IV.B.3 of this document. This determination covers CPSVs, which
are defined as handheld devices that have a release-to-close valve and
are suitable for removing food residue from food service items before
cleaning them in commercial dishwashing or ware washing equipment. 10
CFR 431.262. DOE may determine that a device is suitable for removing
food residue from food service items before cleaning them in commercial
dishwashing or ware washing equipment based on any or all of the
following:
(1) Equipment design and representations (e.g., whether equipment
is represented as being capable of rinsing dishes as compared to
equipment that is represented exclusively for washing walls and floors
or animal washing),
(2) Channels of marketing and sales (e.g., whether equipment is
marketed or sold through outlets that market or sell to food service
entities), and/or
(3) Actual sales (including whether the end-users are restaurants
or commercial or institutional kitchens, even if those sales are
indirectly through an entity such as a distributor).\6\
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\6\ The definition of commercial prerinse spray valve was
recently amended in the March 2022 test procedure final rule, 87 FR
13901, 13905 (March 11, 2022). In that final rule, DOE stated that
the amended definition only codified existing guidance and did not
change the scope of the definition. Id.
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Id.
The scope of coverage is discussed in further detail in section
IV.A.1. of this document.
B. Test Procedure
EPCA sets forth generally applicable criteria and procedures for
DOE's adoption and amendment of test procedures. (42 U.S.C. 6293)
Manufacturers of covered products must use these test procedures to
certify to DOE that their product complies with energy conservation
standards and to quantify the efficiency of their product. (42 U.S.C.
6295(s) and 42 U.S.C. 6293(c)). DOE's current energy conservation
standards for CPSVs are expressed in terms of gpm. 10 CFR 431.266.
On March 11, 2022, DOE published a test procedure final rule for
CPSVs that amended the definition of ``commercial prerinse spray
valve'' to codify existing guidance for determining whether a device is
suitable for removing food residue from food service items that did not
change the scope of products covered, updated references to the
reaffirmed ASTM International (``ASTM'') Standard (ASTM F2324-13
(2019)), and explicitly permitted voluntary representations at water
pressures other than 60 pounds per square inch (``psi'') in
manufacturer literature. 87 FR 13901 (``March 2022 TP Final Rule'').
DOE determined that the amendments to the test procedure adopted in the
March 2022 TP Final Rule will not alter the measured efficiency of
CPSVs or require retesting or recertification solely as a result of
DOE's adoption of the amendments to the test procedures. 87 FR 13901,
13903.
C. Technological Feasibility
1. General
In evaluating potential amendments to energy conservation
standards, DOE conducts a screening analysis based on information
gathered on all current technology options and prototype designs that
could improve the efficiency of the products or equipment that are the
subject of the determination. As the first step in such an analysis,
DOE develops a list of technology options for consideration in
consultation with manufacturers, design engineers, and other interested
parties. DOE then determines which of those means for improving
efficiency are technologically feasible. DOE considers technologies
incorporated in commercially available products or in working
prototypes to be technologically feasible. Sections 6(b)(3)(i) and
7(b)(1) of appendix A to 10 CFR part 430, subpart C (``appendix A'').
After DOE has determined that particular technology options are
technologically feasible, it further evaluates each technology option
in light of the following additional screening criteria: (1)
Practicability to manufacture, install, and service; (2) adverse
impacts on product utility or availability; (3) adverse impacts on
health or safety; and (4) unique pathway proprietary technologies.
Sections 6(b)(3)(ii)-(v) and 7(b)(2)-(5) of appendix A. Section IV.B of
this document discusses the results of the screening analysis for
CPSVs, particularly the designs DOE considered, those it screened out,
and those that are the basis for the standards considered in this
determination. For further details on the screening analysis for this
final determination, see chapter 4 of the final determination technical
support document (``TSD'').
2. Maximum Technologically Feasible Levels
As when DOE proposes to adopt an amended standard for a type or
class of covered product, it must determine the maximum improvement in
energy efficiency or maximum reduction in
[[Page 34071]]
energy use that is technologically feasible for such a product. (42
U.S.C. 6295(p)(1)). Accordingly, in the engineering analysis, DOE
determined the maximum technologically feasible (``max-tech'')
improvements in energy efficiency for CPSVs using the design parameters
for the most efficient products available on the market or in working
prototypes. The max-tech levels that DOE determined for this analysis
are described in section IV.C of this document and in chapter 5 of the
final determination TSD.
D. Energy Savings
1. Determination of Savings
For each efficiency level (``EL'') evaluated, DOE projected energy
savings from application of the efficiency level to the CPSVs purchased
in the 30-year period that begins in the assumed year of compliance
with the potential standards (2027-2056). The savings are measured over
the entire lifetime of the CPSVs purchased in the previous 30-year
period. DOE quantified the energy savings attributable to each
efficiency level as the difference in energy consumption between each
standards case and the no-new-standards case. The no-new-standards case
represents a projection of energy consumption that reflects how the
market for a product would likely evolve in the absence of amended
energy conservation standards.
DOE used its NIA spreadsheet model to estimate national energy
savings (``NES'') from potential amended or new standards for CPSVs.
The NIA spreadsheet model (described in section IV.H of this document)
calculates energy savings in terms of site energy, which is the energy
directly consumed by products at the locations where they are used. For
electricity, DOE reports NES in terms of primary energy savings, which
is the savings in the energy that is used to generate and transmit the
site electricity. DOE also calculates NES in terms of full-fuel-cycle
(``FFC'') energy savings. The FFC metric includes the energy consumed
in extracting, processing, and transporting primary fuels (i.e., coal,
natural gas, petroleum fuels), and thus presents a more complete
picture of the impacts of energy conservation standards.\7\ DOE's
approach is based on the calculation of an FFC multiplier for each of
the energy types used by covered products or equipment. For more
information on FFC energy savings, see section IV.H of this document.
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\7\ The FFC metric is discussed in DOE's statement of policy and
notice of policy amendment. 76 FR 51282 (Aug. 18, 2011), as amended
at 77 FR 49701 (Aug. 17, 2012).
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2. Significance of Savings
In determining whether amended standards are needed, DOE must
consider whether such standards will result in significant conservation
of energy. (42 U.S.C. 6295(m)(1)(A)) The significance of energy savings
offered by a new or amended energy conservation standard cannot be
determined without knowledge of the specific circumstances surrounding
a given rulemaking.\8\ For example, the United States rejoined the
Paris Agreement on February 19, 2021. As part of that agreement, the
United States has committed to reducing greenhouse gas (``GHG'')
emissions in order to limit the rise in mean global temperature.\9\ As
such, energy savings that reduce GHG emissions have taken on greater
importance. Accordingly, DOE evaluates the significance of energy
savings on a case-by-case basis (as discussed in section V.D.3).
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\8\ See 86 FR 70892, 70901 (Dec. 13, 2021).
\9\ See Executive Order 14008, 86 FR 7619 (Feb. 1, 2021),
``Tackling the Climate Crisis at Home and Abroad''.
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E. Cost Effectiveness
In making a determination of whether amended energy conservation
standards are needed, EPCA requires DOE to consider the cost
effectiveness of amended standards in the context of the savings in
operating costs throughout the estimated average life of the covered
product compared to any increase in the price of, or in the initial
charges for, or maintenance expenses of, the covered product that are
likely to result from a standard. (42 U.S.C. 6295(m)(1)(A), 42 U.S.C.
6295(n)(2), and 42 U.S.C. 6295(o)(2)(B)(i)(II)).
In determining cost effectiveness of amending standards for CPSVs,
DOE conducted LCC and PBP analyses that estimate the costs and benefits
to users from potential standards. To further inform DOE's
consideration of the cost effectiveness of potential amended standards,
DOE considered the NPV of total costs and benefits estimated as part of
the NIA. The inputs for determining the NPV of the total costs and
benefits experienced by consumers are (1) total annual installed cost,
(2) total annual operating costs (energy costs and repair and
maintenance costs), and (3) a discount factor to calculate the present
value of costs and savings.
F. Further Considerations
As stated previously, pursuant to EPCA, absent DOE publishing a
notification of determination that energy conservation standards for
CPSVs do not need to be amended, DOE must issue a NOPR that includes
new proposed standards. (42 U.S.C. 6295(m)(1)(B)). The new proposed
standards in any such NOPR must be based on the criteria established
under 42 U.S.C. 6295(o) and follow the procedures established under 42
U.S.C. 6295(p). (42 U.S.C. 6295(m)(1)(B)). The criteria in 42 U.S.C.
6295(o) require that standards be designed to achieve the maximum
improvement in energy efficiency, which the Secretary determines is
technologically feasible and economically justified. (42 U.S.C.
6295(o)(2)(A)). In deciding whether a proposed standard is economically
justified, DOE must determine whether the benefits of the standard
exceed its burdens. (42 U.S.C. 6295(o)(2)(B)(i)). DOE must make this
determination after receiving comments on the proposed standard, and by
considering, to the greatest extent practicable, the following seven
statutory factors:
(1) The economic impact of the standard on manufacturers and
consumers of the products subject to the standard;
(2) The savings in operating costs throughout the estimated
average life of the covered products in the type (or class) compared
to any increase in the price, initial charges for, or maintenance
expenses of the covered products that are likely to result from the
standard;
(3) The total projected amount of energy (or as applicable,
water) savings likely to result directly from the standard;
(4) Any lessening of the utility or the performance of the
covered products likely to result from the standard;
(5) The impact of any lessening of competition, as determined in
writing by the Attorney General, that is likely to result from the
standard;
(6) The need for national energy and water conservation; and
(7) Other factors the Secretary considers relevant.
(42 U.S.C. 6295(o)(2)(B)(i)(I)-(VII))
As discussed in the January 2016 Final Rule, DOE found that amended
standards at a level more stringent than those adopted would not be
economically justified under the considerations of the seven factors
prescribed in EPCA. 81 FR 4748, 4794 (Jan. 27, 2016). Specifically, the
Secretary concluded that at the more stringent standards levels, the
benefits of energy savings, positive NPV of consumer benefits, emission
reductions, and the estimated monetary value of the emissions
reductions would be outweighed by the reduction in manufacturer
industry value. Id. Consequently, the Secretary concluded that
standards more stringent than those adopted were not economically
justified. Id. For the determination in
[[Page 34072]]
this document, DOE has considered potential manufacturer impacts
associated with amended energy conservation standards (See section IV.I
of this document).
IV. Methodology and Discussion of Related Comments
This section addresses the analyses DOE has performed for this
final determination regarding CPSVs. Separate subsections address each
component of DOE's analyses. DOE used several analytical tools to
estimate the impact of potential energy conservation standards. The
first tool is a spreadsheet that calculates the LCC savings and PBP of
potential energy conservation standards. The NIA uses a second
spreadsheet set that provides shipments projections and calculates NES
and NPV of total consumer costs and savings expected to result from
potential energy conservation standards. These spreadsheet tools are
available on the website: www.regulations.gov/docket/EERE-2019-BT-STD-0034.
In response to the August 2021 NOPD, PMI commented generally that
they support DOE's proposed determination that amended energy
conservation standards are not needed. (PMI, No. 16 at p. 1)
A. Market and Technology Assessment
DOE develops information in the market and technology assessment
that provides an overall picture of the market for the products
concerned, including the purpose of the products, the industry
structure, manufacturers, market characteristics, and technologies used
in the products. This activity includes both quantitative and
qualitative assessments, based primarily on publicly available
information. The subjects addressed in the market and technology
assessment for this final determination include (1) a determination of
the scope and product classes, (2) manufacturers and industry
structure, (3) existing efficiency programs, (4) shipments information,
(5) market and industry trends, and (6) technologies or design options
that could improve the energy efficiency of commercial prerinse spray
valves. The key findings of DOE's market assessment are summarized in
the following sections. See chapter 3 of the final determination TSD
for further discussion of the market and technology assessment.
1. Scope of Coverage
In this analysis, DOE relied on the definition of CPSVs in 10 CFR
431.262, which defines CPSV as a handheld device that has a release-to-
close valve and is suitable for removing food residue from food service
items before cleaning them in commercial dishwashing or ware washing
equipment. DOE may determine that a device is suitable for removing
food residue from food service items before cleaning them in commercial
dishwashing or ware washing equipment based on any or all of the
following: (1) equipment design and representations (e.g., whether
equipment is represented as being capable of rinsing dishes as compared
to equipment that is represented exclusively for washing walls and
floors or animal washing); (2) channels of marketing and sales (e.g.,
whether equipment is marketed or sold through outlets that market or
sell to food service entities); and/or (3) actual sales (including
whether the end-users are restaurants or commercial or institutional
kitchens, even if those sales are indirectly through an entity such as
a distributor). 10 CFR 431.262. Any product meeting the definition of
CPSV is included in DOE's scope of coverage.
2. Technology Options
In the August 2021 NOPD, DOE identified several technology options
that would be expected to improve the efficiency of CPSVs, as measured
by the DOE test procedure. 86 FR 46330, 46336. The complete list of
technology options identified are as follows:
Addition of flow control insert,
Smaller spray hole area,
Aerators,
Additional valves,
Changing spray hole shape, and
Venturi meter to orifice plate nozzle geometries. \10\
---------------------------------------------------------------------------
\10\ A venturi meter is a nozzle where the fluid accelerates
through a converging cone of 15-20 degrees. An orifice plate is a
flat plate with a circular hole drilled in it.
---------------------------------------------------------------------------
DOE also discussed use of a pressure compensating aerator (``PCA'')
as a technology to potentially improve efficiency. 86 FR 46330, 46336.
DOE stated that PCAs typically use an O-ring that compresses and
relaxes in response to system pressure. When there is no pressure, the
O-ring is relaxed and allows the aerator to be fully opened. As the
pressure increases, the O-ring is compressed into the aerator opening
to partially block water passage. This establishes an inverse
relationship between the area of the aerator opening and the water
pressure, and can be designed such that the water flow rate is
approximately constant with pressure. Id
Further, DOE stated that the Federal test procedure measures flow
rate and spray force at a singular, representative water pressure and
adding a PCA would not change the flow rate or spray force at DOE's
test pressure. Id. DOE requested comment on its determination that PCAs
would not change the flow rate or spray force at DOE's test pressure.
Id.
In response to the August 2021 NOPD, the CA IOUs agreed that PCAs
would not change the flow rate or spray force under DOE's test
procedure. (CA IOUs, No. 18 at p. 2) The CA IOUs recommended DOE
require testing at two test pressures, 40 psi and 60 psi, so that PCAs
can be included in the engineering analysis. (Id. at p. 2) Similarly,
NEEA recommended DOE require testing at both 60 psi and 40 psi and
include PCAs as a technology option to increase customer satisfaction.
(NEEA, No. 19 at pp. 3-4) NEEA asserted that under DOE's existing test
procedure there is limited opportunity for efficiency improvements and
that requiring testing at more pressures could prevent product class
switching and encourage PCAs as a technology option. (NEEA, No. 19 at
p. 1) NEEA commented that DOE amending the test procedure to require
testing at lower pressures would encourage technologies, such as PCAs,
that increase customer satisfaction at lower flow rates. (NEEA, No. 19
at p. 1-2)
In the March 2022 TP Final Rule, DOE amended its test procedure to
explicitly permit voluntary testing at alternative pressures in
addition to testing at 60 psi. 87 FR 13901, 13906. This amendment
permits manufacturers to market any potential benefits of PCAs at
alternate pressures. DOE notes, however, the test pressure specified in
10 CFR 431.264 is based on ASTM F2324, which is an industry consensus
standard that includes input from a wide variety of national
stakeholders and was corroborated with the data compiled for a prior
test procedure rulemaking. Id. DOE noted that it has not received any
new data indicating that an alternative test pressure would be more
representative. Id.
Moreover, relative to a CPSV without a PCA, a CPSV with a PCA would
have greater water usage at pressures below 60 psi and lesser water
usage at pressures above 60 psi. As such, PCAs may not represent a
technology option that saves any water because low-pressure
applications would consume more water than applications at the
representative pressure of 60 psi. Accordingly, DOE does not consider
PCAs as a technology option that would save energy or water.
In summary, for this analysis, DOE considers the technology options
shown
[[Page 34073]]
in Table IV.1. Detailed descriptions of these technology options can be
found in chapter 3 of the final determination TSD.
Table IV.1--Commercial Prerinse Spray Valves Technology Options
------------------------------------------------------------------------
-------------------------------------------------------------------------
Technology option
------------------------------------------------------------------------
Addition of Flow Control Insert.
Smaller Spray Hole Area.
Aerators.
Additional Valves.
Changing Spray Hole Shape.
Venturi Meter to Orifice Plate Nozzle Geometries.
------------------------------------------------------------------------
B. Screening Analysis
DOE uses the following five screening criteria to determine which
technology options are suitable for further consideration in an energy
conservation standards rulemaking:
(1) Technological feasibility. Technologies that are not
incorporated in commercial products or in working prototypes will
not be considered further.
(2) Practicability to manufacture, install, and service. If it
is determined that mass production and reliable installation and
servicing of a technology in commercial products could not be
achieved on the scale necessary to serve the relevant market at the
time of the projected compliance date of the standard, then that
technology will not be considered further.
(3) Impacts on product utility or product availability. If it is
determined that a technology would have significant adverse impact
on the utility of the product to significant subgroups of consumers
or would result in the unavailability of any covered product type
with performance characteristics (including reliability), features,
sizes, capacities, and volumes that are substantially the same as
products generally available in the United States at the time, it
will not be considered further.
(4) Adverse impacts on health or safety. If it is determined
that a technology would have significant adverse impacts on health
or safety, it will not be considered further.
(5) Unique Pathway Proprietary Technologies. If a design option
utilizes proprietary technology that represents a unique pathway to
achieving a given efficiency level, that technology will not be
considered further due to the potential for monopolistic concerns.
Sections 6(b)(3) and 7(b) of appendix A to 10 CFR part 430, subpart
C.
In summary, if DOE determines that a technology, or a combination
of technologies, fails to meet one or more of the listed five criteria,
it will be excluded from further consideration in the engineering
analysis.
1. Screened Out Technologies
In the August 2021 NOPD, DOE proposed to screen out the same
technology options from the January 2016 Final Rule, which were
addition of flow control insert, aerators, and additional valves. 86 FR
46330, 46336. DOE's review of the market continues to support DOE's
prior determination that these technologies are not suitable for
further consideration because they are not included in any commercially
available products or working prototypes and therefore do not meet the
screening criteria for technologically feasibility, as discussed in
chapter 4 of the final determination TSD. DOE did not receive any
comment suggesting including any of these technology options.
Therefore, DOE has maintained the proposed August 2021 NOPD conclusions
and has screened out the same technology options as presented in Table
IV.2.
Table IV.2--Screened Out Technology Options
--------------------------------------------------------------------------------------------------------------------------------------------------------
Screening criteria (X = basis for screening out)
------------------------------------------------------------------------------------------------
Screened technology option Practicability to Adverse impact Unique pathway
Technological manufacture, on product Adverse impacts on proprietary
feasibility install, and service utility health and safety technologies
--------------------------------------------------------------------------------------------------------------------------------------------------------
Addition of Flow Control Insert........................ X .................... ................ .................... ................
Aerators............................................... X .................... ................ .................... ................
Additional Valves...................................... X .................... ................ .................... ................
--------------------------------------------------------------------------------------------------------------------------------------------------------
2. Remaining Technologies
After reviewing each technology, DOE did not screen out the
following technology options and considers them as design options in
the engineering analysis, consistent with the August 2021 NOPD:
smaller spray hole area,
changing spray hole shape, and
venturi meter to orifice plate nozzle geometries.
DOE determined that these technology options are technologically
feasible because they are being used or have previously been used in
commercially available products or working prototypes. Also, these
remaining technology options meet the other screening criteria (i.e.,
practicable to manufacture, install, and service and do not result in
adverse impacts on consumer utility, product availability, health, or
safety). For additional details, see chapter 4 of the final
determination TSD.
3. Product Classes
In general, when evaluating and establishing energy conservation
standards, DOE divides the covered product into classes by (1) the type
of energy used, (2) the capacity of the product, or (3) any other
performance-related feature that affects energy efficiency and
justifies different standard levels, considering factors such as
consumer utility. (42 U.S.C. 6295(q))
For CPSVs, the current energy conservation standards specified in
10 CFR 431.266 are based on three product classes determined according
to spray force, which is a performance-related feature that provides
utility to the consumer. ``Spray force'' is defined as the amount of
force exerted onto the spray disc, measured in ounce-force (``ozf'').
10 CFR 431.262. Table IV.3 lists the current three product classes for
CPSVs.
Table IV.3--Current Commercial Prerinse Spray Valve Product Classes
------------------------------------------------------------------------
Spray force in ounce-force
Product class (ozf)
------------------------------------------------------------------------
Product Class 1........................... <=5.0 ozf.
Product Class 2........................... >5.0 ozf and <=8.0 ozf.
Product Class 3........................... >8.0 ozf.
------------------------------------------------------------------------
These product classes were based on previous market research that
identified three distinct end-user applications requiring differing
amounts of spray force: (1) cleaning delicate glassware and removing
loose food particles from dishware (which requires the least amount of
spray force), (2) cleaning wet food, and (3) cleaning baked-on foods
[[Page 34074]]
(which requires the greatest amount of spray force). 81 FR 4748, 4758-
4759.
In the August 2021 NOPD, DOE proposed to maintain the existing
product class structure for the analysis conducted. 86 FR 46330, 46337.
In response, DOE received comments from the CA IOUs and Efficiency
Advocates suggesting DOE consider an alternate approach using an
equation-based standard where the maximum water flow rate of a product
is calculated based on its measured spray force. (CA IOUs, No. 18 at
pp. 1-2; Efficiency Advocates, No. 17 at pp. 1-2) Upon further review,
DOE has determined that an equation-based standard would limit the
design flexibility regarding nozzle and valve characteristics for
consumers and manufacturers while not yielding any water or energy
savings. Further discussion on this topic is provided in section
IV.C.1.b of this document.
In this final determination, DOE continues to conclude that the
current three product class structure is appropriate and has maintained
the same approach.
4. Market Assessment
For this final determination, DOE relied on government databases,
retail listings, and industry publications (e.g., manufacturer
catalogs) to assess the overall state of the industry. DOE used this
market analysis to generate the shipments analysis, discussed in
section IV.G. of this document. DOE maintained the nearest neighbor
switching assumptions \11\ proposed in the August 2021 NOPD, as
discussed in section IV.G.
---------------------------------------------------------------------------
\11\ In this scenario, consumers would choose the product with
the flow rate that is closest to their current product flow rate,
even if it has a higher spray force (thus product class switching).
Under the nearest neighbor scenario, DOE assumed 100 percent of
consumers would choose the closest flow rate. 86 FR 46330, 64344.
---------------------------------------------------------------------------
C. Engineering Analysis
The purpose of the engineering analysis is to establish the
relationship between the efficiency and cost of CPSVs. There are two
elements to consider in the engineering analysis: the selection of
efficiency levels to analyze (i.e., the ``efficiency analysis'') and
the determination of product cost at each efficiency level (i.e., the
``cost analysis''). In determining the performance of more efficient
products, DOE considers technologies and design option combinations not
eliminated by the screening analysis. For each product class, DOE
estimates the baseline cost, as well as the incremental cost for the
product at efficiency levels above the baseline. The output of the
engineering analysis is a set of cost efficiency ``curves'' that are
used in downstream analyses (i.e., the LCC and PBP analyses and the
NIA).
1. Efficiency Analysis
DOE typically uses one of two approaches to develop energy
efficiency levels for the engineering analysis: (1) relying on observed
efficiency levels in the market (i.e., the efficiency level approach),
or (2) determining the incremental efficiency improvements associated
with incorporating specific design options to a baseline model (i.e.,
the design option approach). Using the efficiency level approach, the
efficiency levels established for the analysis are determined based on
the market distribution of existing products (in other words, based on
the range of efficiencies and efficiency level ``clusters'' that
already exist on the market). Using the design option approach, the
efficiency levels established for the analysis are determined through
detailed engineering calculations and/or computer simulations of the
efficiency improvements from implementing specific design options that
have been identified in the technology assessment. DOE may also rely on
a combination of these two approaches. For example, the efficiency
level approach (based on actual products on the market) may be extended
using the design option approach to interpolate to define ``gap fill''
levels (to bridge large gaps between other identified efficiency
levels) and/or to extrapolate to the max-tech level (particularly in
cases where the ``max-tech'' level exceeds the maximum efficiency level
currently available on the market).
In this final determination, just like what was proposed in the
August 2021 NOPD and the January 2016 Final Rule, DOE is adopting a
design option approach. The analysis is performed in terms of
incremental increases in efficiency (decreases in flow rate) due to
implementation of selected design options.
a. Baseline Efficiency Levels
For each product class, DOE generally selects a baseline model as a
reference point for each class, and measures changes resulting from
potential energy conservation standards against the baseline. The
baseline model in each product class represents the characteristics of
a product typical of that class (e.g., capacity, physical size).
Generally, a baseline model is one that just meets current energy
conservation standards, or, if no standards are in place, the baseline
is typically the most common or least efficient unit on the market.
The current minimum energy conservation standards represent the
baseline efficiency levels for each product class. The current
standards for each product class are based on flow rate in gpm.
b. Higher Efficiency Levels
As part of DOE's analysis, the maximum available efficiency level
is the highest efficiency (i.e., lowest water use in a given product
class) unit currently available on the market. DOE also defines a max-
tech efficiency level to represent the maximum possible efficiency for
a given product.
In the August 2021 NOPR, DOE presented the max-tech CPSV for each
product class. 86 FR 46330, 46338. DOE noted that product class 2 and
product class 3 were consistent with the max-tech values used in the
January 2016 Final Rule, while a new max-tech had been identified for
product class 1.\12\ DOE did not receive any comment suggesting the
max-tech values were inappropriate. DOE has used the max-tech
efficiency level flow rates presented in Table IV.4 in this analysis.
---------------------------------------------------------------------------
\12\ The new max-tech model utilizes a smaller spray hole area
to further reduce flow rate. This is not a new technology option;
rather, it is further utilizing a technology option considered
during the January 2016 Final Rule.
Table IV.4--Maximum Efficiency Levels Currently Available
------------------------------------------------------------------------
Flow rate
Product class (gpm)
------------------------------------------------------------------------
Product Class 1......................................... 0.45
Product Class 2......................................... 0.73
Product Class 3......................................... 1.13
------------------------------------------------------------------------
In the January 2016 Final Rule, DOE presented a theoretical linear
relationship between CPSV flow rate and spray force, derived from both
Bernoulli's principle of incompressible flow and the concept of
conservation of mass in a fluid system. 81 FR 4748, 4762. DOE had
verified this linear relationship through market testing of available
products and close matching between the theoretical relationship and
the flow rates and spray forces of available products. Id. In the
August 2021 NOPD, DOE stated that it continued to use the linear
relationship between CPSV flow rate and spray force in its engineering
analysis. 86 FR 46330, 46339. Specifically, in chapter 5 of the August
2021 NOPD TSD,\13\ DOE discusses that while DOE generally
[[Page 34075]]
relied on manufacturer reported spray force data and prior DOE testing
to characterize the range of spray forces available on the market, DOE
used the linear relationship to inform how various technology options
that reduce flow rate would impact spray force. The relationship
between flow rate and spray force is given below:
---------------------------------------------------------------------------
\13\ Chapter 5 of the August 2021 NOPD TSD is available at
www.regulations.gov/document/EERE-2019-BT-STD-0034-0010.
\14\ See chapter 5 of the August 2021 NOPD TSD.
[GRAPHIC] [TIFF OMITTED] TR06JN22.000
In response to the August 2021 NOPD, both the Efficiency Advocates
and CA IOUs commented that there are spray valves in the DOE Compliance
Certification Database (``CCD'') with similar flow rate and a range of
spray forces, suggesting manufacturers may be able to reduce flow rate
without losing spray force. Accordingly, both recommended that DOE
consider setting maximum flow rate standard based on a linear
relationship that incorporates spray force. (Efficiency Advocates, No.
17 at pp. 1-2; CA IOUs, No. 18 at pp. 1-2)
DOE notes that the equation relating spray force and flow rate is
theoretical and while it aligns well with what DOE has observed in the
industry, there is going to be some amount of deviation observed in
industry as the theoretical relationship does not perfectly translate
to the real world. The theoretical relationship includes assumptions
about ideal flow through a nozzle, which assumes certain factors are
constant (i.e., uniform velocity profile, viscosity, turbulence, etc.).
While these terms can generally be treated as constant in modeling and
estimating, they are present in real world applications. Therefore, the
linear equation is approximately accurate for modeling what the
theoretical spray force would be for a given flow rate. As discussed
previously, DOE used the equation in the engineering analysis only to
inform how various technology options that reduce flow rate would
impact spray force.
Setting an efficiency standard based on the equation, however,
would allow for very little freedom in manufacturer designs and little
tolerance for deviations beyond the theoretical linear relationship
between spray force and flow rate. DOE has previously acknowledged that
other characteristics beyond spray force, including spray shape and the
amount of splash back, could also affect consumer utility of CPSVs. 81
FR 4748, 4759. An equation-based standard could run the risk of only
permitting certain spray shapes and splash back characteristics to meet
this theoretical equation-based standard. In other words, an equation-
based standard could require spray valve designs that have minimal
deviation from the ideal flow assumptions included in the derivation of
Equation 1. In effect, an equation-based approach could force all CPSVs
to look exactly the same. Conversely, keeping the proposed approach of
one flow rate standard per product class continues to allow for some
flexibility and tolerance in design.
The CA IOUs and Efficiency Advocates further suggested that an
equation-based efficiency standard would encourage products that
deliver a higher spray force while reducing flow rate (and in turn,
reducing water consumption). (Efficiency Advocates, No. 17 at p. 1; CA
IOUs, No. 18 at p. 1) The Efficiency Advocates also suggested that an
equation-based approach would reduce the likelihood of product
switching. (Efficiency Advocates, No. 17 at p. 1)
DOE does not agree that an equation-based standard would reduce
product switching. A CPSV could be designed to achieve the hypothetical
equation-based standard by either changing the spray force, or by
changing the flow rate. The Efficiency Advocates' suggestion is
premised on consumers selecting products based on spray force (i.e.,
under an equation-based standard consumers would select the lowest flow
rate that provides the desired spray force). DOE's review of the market
indicates that manufacturers typically advertise only flow rate,
suggesting that in selecting CPSVs, flow rate is the more determinative
characteristic. Accordingly, DOE's analysis assumes that consumers
switch to the nearest flow rate, not nearest spray force (i.e., nearest
neighbor, as discussed in section IV.H of this document).
With an equation-based approach, consumers would continue to choose
the product with the flow rate that is closest to the desired flow
rate; therefore, there would be zero water savings. DOE has previously
relied on the nearest neighbor assumption and requested comment on it
several times. 86 FR 46330, 46344-46345; 80 FR 39486, 39538 (Jul. 9,
2015). DOE has not received comment to the contrary. DOE sees no
advantage in an equation-based standard for CPSVs and therefore has
maintained the existing product class structure in the analysis
supporting this final determination.
2. Cost Analysis
The cost analysis portion of the engineering analysis is conducted
using one cost approach or a combination of cost approaches. The
selection of cost approach depends on a suite of factors, including the
availability and reliability of public information, characteristics of
the regulated product, and the availability and timeliness of
purchasing the product on the market. The cost approaches are
summarized as follows:
Physical teardowns: Under this approach, DOE physically
dismantles a commercially available product, component-by-component, to
develop a detailed bill of materials (``BOM'') for the product.
Catalog teardowns: In lieu of physically deconstructing a
product, DOE identifies each component using parts diagrams (available
from manufacturer websites or appliance repair websites, for example)
to develop the BOM for the product.
Price surveys: If neither a physical nor catalog teardown
is feasible (e.g., for tightly integrated products such as fluorescent
lamps, which are infeasible to disassemble and for which parts diagrams
are unavailable) or cost-prohibitive and otherwise impractical (e.g.,
large commercial boilers), DOE conducts price surveys using publicly
available pricing data published on major online retailer websites and/
or by soliciting prices from distributors and other commercial
channels.
In the August 2021 NOPD, DOE stated that it did not observe any new
technology options since the January 2016 Final Rule, and therefore,
updated the cost analysis from the January 2016 Final Rule to be
representative of the market in 2020. 86 FR 46330, 46339. DOE updated
the material prices of each component of the previously torn down CPSVs
and updated the labor,
[[Page 34076]]
depreciation, utilities, maintenance, tax, and insurance costs. DOE did
not include any CPSVs that have exited the market or had their design
modified since they were torn down. The resulting BOM provided the
basis for the manufacturer production cost (``MPC'') estimates. The
updated costs reaffirmed that there are differences in manufacturing
costs between units from different manufacturers. However, none of the
differences are directly related to the efficiency of a CPSV. Rather,
the differences were primarily due to differences in the type and
amount of material used (e.g., plastic versus brass or stainless steel
spray nozzles). Therefore, DOE concluded that MPC was unaffected by
efficiency level, both within product classes and across product
classes. Id.
In the August 2021 NOPD, DOE requested comment and data regarding
any changes in MPC that would not be accounted for by updating the cost
analysis of the previously conducted product teardowns. Further, DOE
requested any data that would contradict its determination of no
incremental cost associated with improvements in efficiency of CPSVs.
Id.
DOE did not receive any comments regarding the cost analysis
conclusions presented in the August 2021 NOPD. DOE continues to
conclude that MPC is unaffected by efficiency level, same as the
conclusion from the August 2021 NOPD and the January 2016 Final Rule
(i.e., MPC remains constant across all product classes). As such, the
resulting cost analysis provided the basis for the MPC estimates.
To account for manufacturers' non-production costs and profit
margin, DOE applies a non-production cost multiplier (the manufacturer
markup) to the MPC. The resulting manufacturer selling price (``MSP'')
is the price at which the manufacturer distributes a unit into
commerce. DOE developed an average manufacturer markup by examining the
annual Securities and Exchange Commission (``SEC'') 10-K reports filed
by publicly traded manufacturers primarily engaged in appliance
manufacturing and whose combined product range includes CPSVs. The
manufacturer markup is discussed in more detail in section IV.I.2.d of
this document.
3. Cost Efficiency Results
The results of the engineering analysis are reported as cost
efficiency data and indicate that manufacturing production costs are
unaffected by efficiency level within a product class and across
product classes. Therefore, DOE determined the final MPC as the average
MPC of all CPSVs. The summary of the cost efficiency relationships for
product classes 1, 2, and 3 are presented in Table IV.5, Table IV.6,
and Table IV.7, respectively. See chapter 5 of the final determination
TSD for additional detail on the engineering analysis and complete cost
efficiency results.
Table IV.5--Cost Efficiency Relationship for Product Class 1
[Spray force <=5.0 ozf]
----------------------------------------------------------------------------------------------------------------
Manufacturer Incremental
Efficiency level Efficiency level Flow rate production cost over
description (gpm) cost (2020$) baseline ($)
----------------------------------------------------------------------------------------------------------------
Baseline........................... Current Federal standard... 1.00 $26.91 $0.00
Level 1............................ 15% improvement over 0.85 26.91 0.00
Federal standard.
Level 2............................ 25% improvement over 0.75 26.91 0.00
Federal standard.
Level 3............................ Maximum technologically 0.45 26.91 0.00
feasible (max-tech).
----------------------------------------------------------------------------------------------------------------
Table IV.6--Cost Efficiency Relationship for Product Class 2
[Spray force >5.0 ozf and <=8.0 ozf]
----------------------------------------------------------------------------------------------------------------
Manufacturer Incremental
Efficiency level Efficiency level Flow rate production cost over
description (gpm) cost (2020$) baseline ($)
----------------------------------------------------------------------------------------------------------------
Baseline........................... Current Federal standard... 1.20 $26.91 $0.00
Level 1............................ 15% improvement over 1.02 26.91 0.00
Federal standard.
Level 2............................ 25% improvement over 0.90 26.91 0.00
Federal standard.
Level 3............................ Maximum technologically 0.73 26.91 0.00
feasible (max-tech).
----------------------------------------------------------------------------------------------------------------
Table IV.7--Cost Efficiency Relationship for Product Class 3
[Spray force >8.0 ozf]
----------------------------------------------------------------------------------------------------------------
Manufacturer Incremental
Efficiency level Efficiency level Flow rate production cost over
description (gpm) cost (2020$) baseline ($)
----------------------------------------------------------------------------------------------------------------
Baseline........................... Current Federal standard... 1.28 $26.91 $0.00
Level 1............................ Maximum technologically- 1.13 26.91 0.00
feasible (max-tech).
----------------------------------------------------------------------------------------------------------------
See chapter 5 of the final determination TSD for additional detail
on the engineering analysis and complete cost efficiency results.
D. Markups Analysis
The markups analysis develops appropriate markups (e.g., retailer
markups, distributor markups, contractor markups) in the distribution
chain and sales taxes to convert the MSP estimates derived in the
engineering analysis to consumer prices,
[[Page 34077]]
which are then used in the LCC and PBP analysis and in the manufacturer
impact analysis (``MIA''). At each step in the distribution channel,
companies mark up the price of the product to cover business costs and
profit margin.
DOE requested comment in the June 2020 RFI regarding markups per
distribution channel as well as the portion of equipment sold via each
distribution channel. 85 FR 35383, 35390 (Jun. 10, 2020). DOE did not
receive any comments related to markups per distribution channel.
For commercial prerinse spray valves, the main parties in the
distribution chain are manufacturers, distributors, retailers, and
service companies. Each party in the distribution chain sells to the
final consumer. Table IV.8 provides the portion of equipment passing
through different distribution channels that DOE included in the August
2021 NOPD. 86 FR 46330, 46340.
Table IV.8--Commercial Prerinse Spray Valve Distribution Channels
------------------------------------------------------------------------
Percentage
Channel Pathway through channel
------------------------------------------------------------------------
A................................ Manufacturer [rarr] 17
Final Consumer
(Direct Sales).
B................................ Manufacturer [rarr] 33
Authorized
Distributor [rarr]
Final Consumer.
C................................ Manufacturer [rarr] 17
Retailer [rarr]
Final Consumer.
D................................ Manufacturer [rarr] 33
Service Company
[rarr] Final
Consumer.
------------------------------------------------------------------------
DOE developed baseline markups for each entity in the distribution
chain. Baseline markups are multipliers that convert the MSP of
equipment at the baseline efficiency level to consumer purchase price.
Incremental markups are multipliers that convert the incremental
increase in MSP for a product at each higher efficiency level (compared
to the MSP at the baseline efficiency level) to the corresponding
purchase price. In the analysis for the August 2021 NOPD, DOE used only
baseline markups, as the engineering analysis indicated that there is
no price increase with improvements in efficiency for commercial
prerinse spray valves.
DOE relied on annual reports and SEC 10-K reports from public
companies in the different distribution channels to estimate average
baseline markups. Table IV.9 provides the markups for each distribution
channel that DOE used in the NOPD analysis. 86 FR 46330, 46340-46341.
Table IV.9--Commercial Prerinse Spray Valve Baseline Channels
------------------------------------------------------------------------
Channel Pathway Baseline markup
------------------------------------------------------------------------
A................................ Manufacturer [rarr] 1.72
Final Consumer
(Direct Sales).
B................................ Manufacturer [rarr] 1.72
Authorized
Distributor [rarr]
Final Consumer.
C................................ Manufacturer [rarr] 1.52
Retailer [rarr]
Final Consumer.
D................................ Manufacturer [rarr] 1.87
Service Company
[rarr] Final
Consumer.
------------------------------------------------------------------------
DOE did not receive any comments regarding the markups presented in
the August 2021 NOPD. DOE used these markup values in the final
determination analysis.
Sales tax also factors into the mark-ups. DOE did not receive any
comments related to sales tax in response to the August 2021 NOPD.
However, DOE updated the sales tax to reflect the 2022 sales tax and
weighted by 2022 population. The change in sales tax between the August
2021 NOPD and this final determination is a small increase in national
average sales tax.
Chapter 6 of the final determination TSD provides details on DOE's
development of markups for CPSVs.
E. Energy and Water Use Analysis
The purpose of the energy use analysis is to determine the annual
energy consumption of CPSVs at different efficiencies in representative
U.S. commercial buildings, and to assess the energy savings potential
of increased CPSV efficiency. The energy use analysis estimates the
range of energy use of CPSVs in the field (i.e., as they are actually
used by consumers). The energy use analysis provides the basis for
other analyses DOE performed, particularly assessments of the energy
savings and the savings in consumer operating costs that could result
from adoption of amended or new standards. DOE proposed to the use the
same energy and water use analysis process from the January 2016 Final
Rule in the August 2021 NOPD. 86 FR 46330, 46341.
As discussed in section IV.C.1 of this document, DOE developed flow
rates for each efficiency level analyzed in the engineering analysis.
DOE calculated the energy and water use by determining the
representative daily operating time of the product by major building
types that contain commercial kitchens found in the 2012 Commercial
Building Energy Consumption Survey (``CBECS'').\15\ The daily CPSV
operating time was annualized based on operating schedules for each
building type. In the June 2020 RFI, DOE presented CPSV annual
operating hours and requested comment on those hours. 85 FR 35383,
35390. DOE did not receive any comments related to operating hours. DOE
also received no comments to the August 2021 NOPD related to operating
hours. However, after the August 2021 NOPD was published, 2018 CBECS
was released. For this final determination, DOE used operating hours
from the 2018 CBECS. There were no major differences in operating hours
or water usage between CBECS 2012 and CBECS 2018. However, the mixture
of fuel type for water heaters changed between CBECS 2012 and CBECS
2018 to a slightly larger amount of natural gas water heaters in CBECS
2018 compared to CBECS 2012. Although the efficiency values did not
change between the NOPD and this final determination, the energy and
water use values slightly
[[Page 34078]]
changed. The differences in energy and water use stem from the change
in water heater mixture use as well as small reduction in operating
hours from the update of CBECS 2018. Water use for each equipment class
was determined by multiplying the annual operating time by the flow
rate and operating pressure of 60 psi for each efficiency level. DOE
requested comment in the June 2020 RFI requesting feedback related to
the typical operating pressure of the water typically supplied to
commercial prerinse spray valves and DOE's assumption of 60 psi. 85 FR
35383, 35390. PMI concurred with this operating pressure and stated
that 60 2 psi is representative of the average U.S. water
pressure in commercial kitchens. (PMI, No. 4 at pp. 4-5)
---------------------------------------------------------------------------
\15\ U.S. Department of Energy-Energy Information
Administration. Commercial Building Energy Consumption Survey. 2020.
Washington, DC. Available at www.eia.gov/consumption/commercial/data/2012/.
---------------------------------------------------------------------------
DOE used 60 psi operating pressure in the August 2021 NOPD. 86 FR
46330, 46341. DOE did not receive any comments related to operating
pressure and retained the 60 psi value for this final determination.
In the August 2021 NOPD, energy use was calculated by multiplying
the annual water use in gallons by the energy required to heat each
gallon of water to an end-use temperature of 108 [deg]F. DOE requested
comment in the June 2020 RFI related to the end-use water temperature
of the water leaving the CPSVs and any related supporting data. 85 FR
35383, 35390. In response to the June 2020 RFI, PMI stated that it was
not aware of any data or market information that suggested a different
temperature than the 108 [deg]F end-use temperature. (PMI, No. 4 at p.
5) In this final determination as DOE did in the NOPD, cold water
supply temperatures used in the energy use calculation were derived for
the nine U.S. census regions based on ambient air temperatures, and hot
water supply temperature was assumed to be 140 [deg]F based on American
Society of Heating, Refrigerating, and Air-Conditioning Engineers
(``ASHRAE'') Standard 12-2020.\16\ DOE did not receive any comments
related to the energy use methodology used in the August 2021 NOPD. DOE
used the same process for energy and water use analysis with the
exception of using the more current 2018 CBECS data for this final
determination.
---------------------------------------------------------------------------
\16\ ASHRAE. 2020. ASHRAE Standard 12-2020: Managing the Risk of
Legionellosis Associated with Building Water Systems.
---------------------------------------------------------------------------
Chapter 7 of the final determination TSD provides details on DOE's
energy use analysis for commercial prerinse spray valves.
F. Life-Cycle Cost and Payback Period Analysis
DOE conducted LCC and PBP analyses to evaluate the economic impacts
on individual consumers of potential energy conservation standards for
CPSVs.\17\ The effect of new or amended energy conservation standards
on individual consumers usually involves a reduction in operating cost
and an increase in purchase cost. DOE used the following two metrics to
measure consumer impacts:
---------------------------------------------------------------------------
\17\ The original NOPD (86 FR 46330) published on August 18,
2021 accidentally omitted a few pages of this introductory section.
The omitted text was addressed during the public meeting webinar
held on September 1, 2021, (see EERE-2019-BT-STD-0034-0013) as well
as via an email distributed on September 22, 2021.
---------------------------------------------------------------------------
The LCC is the total consumer expense of an appliance or
product over the life of that product, consisting of total installed
cost (MSP, distribution chain markups, sales tax, and installation
costs) plus operating costs (expenses for energy use, maintenance, and
repair). To compute the operating costs, DOE discounts future operating
costs to the time of purchase and sums them over the lifetime of the
product.
The PBP is the estimated amount of time (in years) it
takes consumers to recover the increased purchase cost (including
installation) of a more efficient product through lower operating
costs. DOE calculates the PBP by dividing the change in purchase cost
at higher efficiency levels by the change in annual operating cost for
the year that amended or new standards are assumed to take effect.
For any given efficiency level, DOE measures the change in LCC
relative to the LCC in the no-new-standards case, which reflects the
estimated efficiency distribution of CPSVs in the absence of new or
amended energy conservation standards. In contrast, the PBP for a given
efficiency level is measured relative to the baseline product.
Inputs to the calculation of total installed cost include the cost
of the product--which includes MPCs, manufacturer markups, retailer and
distributor markups, and sales taxes--and installation costs. Inputs to
the calculation of operating expenses include annual energy
consumption, energy prices and price projections, repair and
maintenance costs, product lifetimes, and discount rates. DOE created
distributions of values for product lifetime, discount rates, and sales
taxes, with probabilities attached to each value, to account for their
uncertainty and variability.
The computer model DOE uses to calculate the LCC and PBP relies on
a Monte Carlo simulation to incorporate uncertainty and variability
into the analysis. The Monte Carlo simulations randomly sample input
values from the probability distributions and CPSV user samples. For
this determination, the Monte Carlo approach is implemented in
Microsoft Excel together with the Crystal Ball\TM\ add-on.\18\ The
model calculated the LCC and PBP for products at each efficiency level
for 10,000 CPSV users per simulation run. The analytical results
include a distribution of 10,000 data points showing the range of LCC
savings for a given efficiency level relative to the no-new-standards
case efficiency distribution. The LCC savings are the summation of the
differences in LCC between a given efficiency level and the standard
level under consideration, weighted by the percent of consumers who are
at that given efficiency level relative to all consumers who are
affected. For product efficiencies greater than or equal to the
efficiency of the standard level under consideration, the LCC and PBP
calculations reveal that a consumer is not impacted by the standard
level. By accounting for consumers who already purchase more efficient
products, DOE avoids overstating the potential benefits from increasing
product efficiency.
---------------------------------------------------------------------------
\18\ Crystal Ball\TM\ is a commercially-available software tool
to facilitate the creation of these types of models by generating
probability distributions and summarizing results within Excel,
available at www.oracle.com/technetwork/middleware/crystalball/overview/index.html.
---------------------------------------------------------------------------
DOE calculated the LCC and PBP for all consumers of CPSVs as if
each were to purchase a new product in the expected year of required
compliance with new or amended standards. Any amended standards would
apply to CPSVs manufactured 3 years after the date on which any new or
amended standard is published, consistent with the 3-year compliance
period used during the January 2016 Final Rule. 81 FR 4748, 4764-4765.
For purposes of its analysis, DOE used 2027 as the first year of
compliance with any amended standards for CPSVs.
Table IV.10 summarizes the approach and data DOE used to derive
inputs to the LCC and PBP calculations. The subsections that follow
provide further discussion. Details of the spreadsheet model, and of
all the inputs to the LCC and PBP analyses, are contained in chapter 8
of the final determination TSD and its appendices.
[[Page 34079]]
Table IV.10--Summary of Inputs and Methods for the LCC and PBP Analysis
\*\
------------------------------------------------------------------------
Inputs Source/Method
------------------------------------------------------------------------
Product Cost........................... Derived by multiplying MPCs by
manufacturer and retailer
markups and sales tax, as
appropriate.
Installation Costs..................... Baseline installation cost
determined with data from U.S.
Department of Labor and U.S.
Bureau of Labor Statistics.
Assumed no change with
efficiency level.
Annual Energy Use...................... The energy use multiplied by
the average hours per year.
Average number of hours based
on field data.
Variability: Based on the 2018
CBECS.
Energy Prices.......................... Electricity: Based on the U.S.
Energy Information
Administration (``EIA'') Form
861 data for 2020.
Variability: Regional energy
prices determined for 27
regions.
Energy Price Trends.................... Based on the Annual Energy
Outlook 2021 (``AEO2021'')
price projections.
Repair and Maintenance Costs........... Assumed no change with
efficiency level.
Product Lifetime....................... Average: 5 years.
Discount Rates......................... Approach involves identifying
all possible debt or asset
classes that might be used to
purchase the considered
appliances or might be
affected indirectly. Primary
data source was the Federal
Reserve Board's Survey of
Consumer Finances.
Compliance Date........................ 2027.
------------------------------------------------------------------------
\*\ References for the data sources mentioned in this table are provided
in the sections following the table or in chapter 8 of the final
determination TSD.
1. Product Cost
To calculate consumer product costs, DOE multiplied the MSPs
developed in the engineering analysis by the distribution channel
markups described in section IV.D of this document (along with sales
taxes). As stated earlier in this document, DOE used baseline markups,
but did not apply incremental markups because the engineering analysis
indicated that there is no price increase with improvements in
efficiency for CPSVs.
In prior energy conservation standards rulemakings, DOE estimated
the total installed costs per unit for product and then assumed that
costs remain constant throughout the analysis period. This assumption
is conservative because product costs tend to decrease over time. In
2011, DOE published a notice of data availability (``NODA'') titled
Equipment Process Forecasting in Energy Conservation Standards
Analysis. 76 FR 9696 (Feb. 22, 2011). In the NODA, DOE proposed a
methodology for determining whether equipment process have trended
downward in real terms. The methodology examines so-called price or
experimental learning, wherein, with ever-increasing experience with
the production of a product, manufacturers are able to reduce their
production costs through innovations in technology and process.
CPSVs are formed metal devices. Neither changes in technology nor
process are expected to occur to change the price of the product in
this analysis. For this analysis, DOE assumed that product costs remain
constant over the analysis period. This is consistent with the January
2016 Final Rule. 81 FR 4748, 4767.
2. Installation Cost
Installation cost includes labor, overhead, and any miscellaneous
materials and parts needed to install the product. DOE used data from
the U.S. Department of Labor to estimate the baseline installation cost
for CPSVs. In the August 2021 NOPD, DOE found no evidence that the
installation costs would be affected by increased efficiency levels,
which was consistent with the January 2016 Final Rule. 86 FR 46330,
46342. DOE received no comments related to installation costs. In this
final determination, DOE did not vary installation costs with
efficiency levels.
3. Annual Energy Consumption
For each sampled CPSV user, DOE determined the energy consumption
for a CPSV at different efficiency levels using the approach described
previously in section IV.E of this document.
4. Energy Prices
In the August 2021 NOPD, DOE derived average annual commercial
electricity prices for 27 geographic regions using data from the U.S.
Energy Information Administration (``EIA'') Form EIA-861 database
(based on the ``Annual Electric Power Industry Report'').\19\ DOE
derived average natural gas prices using data from EIA's natural gas
prices.\20\
---------------------------------------------------------------------------
\19\ Available at www.eia.doe.gov/cneaf/electricity/page/eia861.html.
\20\ Available at www.eia.gov/dnav/ng/ng_pri_sum_a_EPG0_PCS_DMcf_m.htm.
---------------------------------------------------------------------------
To estimate energy prices in future years, DOE multiplied the
average regional energy prices by a projection of annual change in
national average commercial energy price in AEO2021.\21\ AEO2021 has an
end year of 2050. To estimate price trends after 2050, DOE used the
average annual rate of change in prices from 2040 through 2050.
---------------------------------------------------------------------------
\21\ U.S. Department of Energy--Energy Information
Administration. Annual Energy Outlook 2021 with Projections to 2050.
2021. Washington, DC (AEO2021). Available at www.eia.gov/outlooks/aeo/.
---------------------------------------------------------------------------
DOE received no comments related to energy prices. DOE used the
same methodology for this final determination.
5. Water and Wastewater Prices
For the analysis presented in the August 2021 NOPD, DOE obtained
data on water and wastewater prices from the 2019 American Water Works
Association (``AWWA'') surveys for this analysis.\22\ For each State
and the District of Columbia, DOE combined all individual utility
observations within the State to develop one value for water and
wastewater service. Because water and wastewater charges are frequently
tied to the same metered commodity values, DOE combined the prices for
water and wastewater into one total dollar per thousand gallons amount.
[[Page 34080]]
This amount is referred to as the combined water price. DOE used the
consumer price index (``CPI'') data for water related consumption
(1974-2019) in developing a real growth rate for combined water price
forecasts. DOE requested comment in the June 2020 RFI whether a
different water price dataset should be considered. 85 FR 35383, 35391.
DOE received no comments related to water price datasets in response to
either the June 2020 RFI or the August 2021 NOPD. DOE used the same
methodology for this final determination.
---------------------------------------------------------------------------
\22\ American Water Works Association. 2019 Water and Wastewater
Rate Survey. 2019. Available at www.awwa.org/Store/2019-Water-and-Wastewater-Rate-Survey--Digital-Set/ProductDetail/79004009.
---------------------------------------------------------------------------
Chapter 8 of the final determination TSD provides more detail about
DOE's approach to developing water and wastewater prices.
6. Maintenance and Repair Costs
Repair costs are associated with repairing or replacing product
components that have failed in an appliance; maintenance costs are
associated with maintaining the operation of the product. Typically,
small incremental increases in product efficiency produce no, or only
minor, changes in repair and maintenance costs compared to baseline
efficiency products. DOE requested comment in the June 2020 RFI on the
assumption of zero maintenance and repair costs upon failure. DOE
assumed that consumers would replace the CPSV upon failure rather than
repairing the product. 85 FR 35383, 35391. DOE also requested comment
if these changes would differ per efficiency level. Id. DOE received no
comments related to maintenance nor repair costs.
For the analysis presented in the August 2021 NOPD, DOE modeled
CPSVs as not being repaired, and no maintenance costs. Additionally,
DOE modeled no changes in maintenance or repair costs between different
efficiency levels. DOE received no comments related to this assumption
in the August 2021 NOPD. In this final determination, DOE assumed CPSVs
as not being repaired, and no maintenance costs.
7. Product Lifetime
For CPSVs, DOE used lifetime estimates from manufacturer datasheets
and other published data sources. DOE requested comment in the June
2020 RFI regarding lifetime and lifetime distributions, and restated
the values from the January 2016 Final Rule--an average lifetime of 5
years and maximum of 10 years. 85 FR 35383, 35391. DOE did not receive
any comments related to lifetime of CPSVs in response to the June 2020
RFI.
For the analysis presented in the August 2021 NOPD, DOE developed a
Weibull distribution with an average lifetime of 5 years and a maximum
lifetime of 10 years. The use of a lifetime distribution for this
analysis helps account for the variability in product lifetimes. DOE
received no comments related to the lifetime values or distribution in
response to the August 2021 NOPD. In this final determination, DOE
assumed the same life values and distributions as in the August 2021
NOPD.
8. Discount Rates
In the calculation of LCC, DOE applies discount rates appropriate
to CPSV users to estimate the present value of future operating costs.
DOE estimated a distribution of commercial discount rates for CPSVs
based on consumer financing costs and the opportunity cost of consumer
funds.
DOE applies weighted-average discount rates calculated from
consumer debt and asset data, rather than marginal or implicit discount
rates.\23\ DOE notes that the LCC does not analyze the appliance
purchase decision, so the implicit discount rate is not relevant in
this model. The LCC estimates NPV over the lifetime of the product, so
the appropriate discount rate will reflect the general opportunity cost
of commercial consumer funds, taking this time scale into account.
Given the long-time horizon modeled in the LCC, the application of a
marginal interest rate associated with an initial source of funds is
inaccurate. Regardless of the method of purchase, consumers are
expected to continue to rebalance their debt and asset holdings over
the LCC analysis period, based on the restrictions consumers face in
their debt payment requirements and the relative size of the interest
rates available on debts and assets. DOE estimates the aggregate impact
of this rebalancing using the historical distribution of debts and
assets.
---------------------------------------------------------------------------
\23\ The implicit discount rate is inferred from a consumer
purchase decision between two otherwise identical goods with
different first cost and operating cost. It is the interest rate
that equates the increment of first cost to the difference in NPV of
lifetime operating cost, incorporating the influence of several
factors: transaction costs, risk premiums and response to
uncertainty, time preferences, and interest rates at which a
consumer is able to borrow or lend.
---------------------------------------------------------------------------
In the August 2021 NOPD, to establish commercial discount rates for
the LCC analysis, DOE identified all relevant commercial consumer debt
or asset classes in order to approximate a commercial consumer's
opportunity cost of funds related to appliance energy cost savings. It
estimated the average percentage shares of the various types of debt
and equity by commercial consumer building type using data from
Damodaran Online \24\ for 1998-2019. Using Damodaran Online and the
Federal Reserve, DOE developed a distribution of rates for each type of
debt and asset by building type to represent the rates that may apply
in the year in which amended standards would take effect. DOE assigned
each sample building a specific discount rate drawn from one of the
distributions. The average rate across all types of commercial consumer
debt and equity, weighted by the shares of each type, given business
size, is 7.0 percent.
---------------------------------------------------------------------------
\24\ Damodaran Online. Available at pages.stern.nyu.edu/
~adamodar/ (accessed April 2020).
---------------------------------------------------------------------------
DOE received no comments related to discount rate in response to
the August 2021 NOPD. In this final determination, DOE uses the same
analysis process for discount rates and values. However, the inputs for
discount rates changed and this final determination uses a slightly
lower discount rate for the LCC than compared to the August 2021 NOPD.
See chapter 8 of the final determination TSD for further details on
the development of consumer discount rates.
9. Energy Efficiency Distribution in the No-New-Standards Case
To accurately estimate the share of consumers that would be
affected by a potential energy conservation standard at a particular
efficiency level, DOE's LCC analysis considered the projected
distribution (market shares) of product efficiencies under the no-new-
standards case (i.e., the case without amended or new energy
conservation standards).
To estimate the energy efficiency distribution of CPSVs for 2027
(the first year of the analysis period), DOE conducted general internet
searches and examined manufacturer literature to understand the
characteristics of the spray values currently offered on the market.
DOE assumed that the no-new-standards case percentages in 2027 would
stay the same through the analysis period. The estimated market shares
by product class for the no-new-standards case for CPSVs DOE assumed in
the August 2021 NOPD are shown in Table IV.11 of this document. The
estimated market shares within each product class for the no-new-
standards case for CPSVs DOE assumed in the August 2021 NOPD are shown
in Table IV.12.
[[Page 34081]]
Table IV.11--Product Class Distribution in No-New-Standards Case
------------------------------------------------------------------------
Portion of
Product class shipments (% of
shipments)
------------------------------------------------------------------------
1..................................................... 10
2..................................................... 70
3..................................................... 20
------------------------------------------------------------------------
Table IV.12--Efficiency Level Distribution Within Each Product Class in No-New-Standards Case
----------------------------------------------------------------------------------------------------------------
Product class 1 Product class 2 Product class 3
Efficiency Level (% of shipments) (% of shipments) (% of shipments)
----------------------------------------------------------------------------------------------------------------
0...................................................... 3.1 74.2 86.0
1...................................................... ................. 24.2 14.0
2...................................................... 87.5 ................. .................
3...................................................... 9.4 1.5 .................
----------------------------------------------------------------------------------------------------------------
DOE received no direct comments related to the August 2021 NOPD
assumed efficiency distributions. However, both the CA IOUs and NEEA
commented that the CCD database does not contain any models in product
class 3, suggesting that the lack of product availability in product
class 3 indicates a need for additional research as to consumer
preferences in the CPSV market, including in-depth market and sales
analysis to better inform DOE's product type switching methodology.
NEEA stated that DOE should also account for market availability of
products. (CA IOUs, No. 15 at pp. 18-19; NEEA, No. 19 at p. 3) DOE
agrees that the CCD, when queried between March 2021 and March 2022,
did not contain any models in product class 3. However, DOE has
identified such products in manufacturer catalogs and on the market.
The values in Table IV.11 are based on DOE's survey of the market
indicating that 20 percent of products available are in product class
3. The values in Table IV.12 are partially based on data from the CCD
as well as DOE's review of market data. The values in Table IV.12
indicate products exist for EL 0 and EL 1 in product class 3. Given the
presence of CPSVs in product class three, there is not a need to
account for market availability as suggested by NEEA.
DOE uses these same efficiency distributions from the August 2021
NOPD in this final determination.
See chapter 8 of the final determination TSD for further
information on the derivation of the efficiency distributions.
10. Payback Period Analysis
The PBP is the amount of time it takes the consumer to recover the
additional installed cost of more efficient products, compared to
baseline products, through energy cost savings. The PBP is expressed in
years. The PBP that exceeds the life of the product means that the
increased total installed cost is not recovered in reduced operating
expenses.
The inputs to the PBP calculation for each efficiency level are the
change in total installed cost of the product and the change in the
first-year annual operating expenditures relative to the baseline. The
PBP calculation uses the same inputs as the LCC analysis, except that
discount rates are not needed.
G. Shipments Analysis
DOE uses projections of annual product shipments to calculate the
national impacts of potential amended or new energy conservation
standards on energy use, NPV, and future manufacturer cash flows.\25\
The shipments model takes an accounting approach in tracking market
shares of each product class and the vintage of units in the stock.
Stock accounting uses product shipments as inputs to estimate the age
distribution of in-service product stocks for all years. The age
distribution of in-service product stocks is a key input to
calculations of both the NES and NPV, because operating costs for any
year depend on the number of CPSVs in operation during that year.
---------------------------------------------------------------------------
\25\ DOE uses data on manufacturer shipments as a proxy for
national sales, as aggregate data on sales are lacking. In general,
one would expect a close correspondence between shipments and sales.
---------------------------------------------------------------------------
In the August 2021 NOPD, historical CPSV shipment data were
obtained from industry reports as well as DOE's CCD.\26\ NEEA commented
that the CCD does not contain any models in product class 3. (NEEA, No.
19 at p. 3) In this final determination, DOE consulted manufacturer
catalogues to identify the product class 3 data. DOE also used the CCD
to help inform some of the efficiency values reported in Table IV.12 of
this document.
---------------------------------------------------------------------------
\26\ Department of Energy--Office of Energy Efficiency and
Renewable Energy. U.S. Department of Energy's Compliance
Certification Database. Available at www.regulations.doe.gov/certification-data/#q=Product_Group_s%3A*.
---------------------------------------------------------------------------
In the August 2021 NOPD, DOE used the commercial floorspace growth
rate to make projections through 2056. PMI commented that at least
20,000 restaurants closed in 2020 as a result of the COVID-19 pandemic.
(PMI, No. 4 at pp. 3-4) DOE modeled flat growth in 2020 through 2022
for CPSVs and assumed that growth would increase by the time the
analysis period starts in 2027. 86 FR 46330, 46344.
H. National Impact Analysis
The NIA assesses the NES and the NPV from a national perspective of
total consumer costs and savings that would be expected to result from
new or amended standards at specific efficiency levels.\27\
(``Consumer'' in this context refers to consumers of the equipment
being regulated.) DOE calculates the NES and NPV for the potential
standard levels considered based on projections of annual product
shipments, along with the annual energy consumption and total installed
cost data from the energy use and LCC analyses. For the present
analysis, DOE projected the energy savings, operating cost savings,
product costs, and NPV of consumer benefits over the lifetime of CPSVs
sold from 2027 through 2056.
---------------------------------------------------------------------------
\27\ The NIA accounts for impacts in the 50 states and
Washington, DC.
---------------------------------------------------------------------------
DOE evaluates the effects of new or amended standards by comparing
a case without such standards with standards-case projections. The no-
new-standards case characterizes energy use and consumer costs for each
CPSV product class in the absence of new or amended
[[Page 34082]]
energy conservation standards. For this projection, DOE considers
historical trends in efficiency and various forces that are likely to
affect the mix of efficiencies over time. DOE compares the no-new-
standards case with projections characterizing the market for each CPSV
product class if DOE adopted new or amended standards at specific
energy efficiency levels (i.e., the efficiency levels or standards
cases) for that class. For the standards cases, DOE considers how a
given standard would likely affect the market shares of CPSVs with
lower flow rates than the standard.
DOE uses a spreadsheet model to calculate the energy savings and
the national consumer costs and savings from each efficiency level.
Interested parties can review DOE's analyses by changing various input
quantities within the spreadsheet. The NIA spreadsheet model uses
typical values (as opposed to probability distributions) as inputs.
Table IV.13 summarizes the inputs and methods DOE used for the NIA
analysis for the final determination. Discussion of these inputs and
methods follows the table. See chapter 10 of the final determination
TSD for details.
Table IV.13--Summary of Inputs and Methods for the National Impact
Analysis
------------------------------------------------------------------------
Inputs Method
------------------------------------------------------------------------
Shipments............................ Annual shipments from shipments
model.
Modeled Compliance Date of Standard.. 2027.
Efficiency Trends.................... No-new-standards case. Standards
cases.
Annual Energy Consumption per Unit... Annual weighted-average values
are a function of energy use at
each EL.
Total Installed Cost per Unit........ Annual weighted-average values
are a function of cost at each
EL.
Annual Energy Cost per Unit.......... Annual weighted-average values as
a function of the annual energy
consumption per unit and energy
prices.
Repair and Maintenance Cost per Unit. Annual values do not change with
efficiency level.
Energy Prices........................ AEO2021 projections (to 2050) and
extrapolation through 2056.
Energy Site-to-Primary and FFC A time-series conversion factor
Conversion. based on AEO2021.
Discount Rate........................ 3 percent and 7 percent.
Present Year......................... 2022.
------------------------------------------------------------------------
1. Product Efficiency Trends
A key component of the NIA is the trend in energy efficiency
projected for the no-new-standards case and each of the standards
cases. Section IV.F.9 of this document describes how DOE developed an
energy efficiency distribution for the no-new-standards case (which
yields a shipment weighted-average efficiency) for each of the
considered product classes for the year of anticipated compliance with
an amended or new standard.
For the standards cases, DOE considered three consumer choice
scenarios to establish the shipment-weighted efficiency for the year
that standards are assumed to become effective (2027). Further
descriptions of the scenarios are provided in the following section.
2. Customer Choice Scenarios
In the January 2016 Final Rule, DOE acknowledged both the
possibility that consumers would switch between product classes and the
possibility that a subset of consumers would exit the CPSV market and
purchase higher flow rate products (e.g., faucets). 81 FR 4748, 4769.
In the August 2021 NOPD, DOE included two scenarios of switching. In
one scenario (nearest neighbor), some product class 2 consumers opted
to purchase product class 3 equipment. In the second scenario (product
type switch), some product class 3 consumers opted to purchase a faucet
instead of another spray valve. 86 FR 46330, 46344. Therefore, the NIA
model allows for evaluation of a no product switch scenario (``rolling-
up'' within product class), as well as the nearest neighbor and product
type switch scenarios.
NEEA recommended DOE conduct research to further explore customer
satisfaction in the CPSV market. (NEEA, No. 19 at p. 2)
In the August 2021 NOPD, as well as in this final determination,
DOE analyzed three permutations of consumer behavior in the analyses,
which capture a range of consumer choice options. DOE analyzed the
major options available to consumers if standards were amended
including the following:
``Rolling-up'' within product class. Consumers purchase a
device in the product class (no product class switch). This is a
typical scenario when consumer demand for a utility feature of a
product class limits consumers switching to another product class.
Nearest neighbor. Consumers purchase a device with similar
flow rate even if in a different product class (i.e., nearest
neighbor).
Product-type switching. Consumers opt to purchase a
different product type altogether (e.g., consumers opt to purchase a
higher flow product like a faucet).
NEEA stated that they believed that it is more likely that
consumers would switch within the product classes in order to keep
using a spray valve of any flow rate or spray force rather than leave
the market. (NEEA, No. 19 at p. 3) NEEA also commented that product
type switching was a valid scenario, but the reality of consumers
opting for a faucet is not as regularly expected as presented in the
August 2021 NOPD. (NEEA, No. 19 at p. 2).
Under the nearest neighbor scenario, if the current choices of
product under the current regulations correspond to the consumers'
optimal product, it is probable that some consumers would switch from
product class 1 to product class 2 or from product class 2 to product
class 3 in response to amended standards in order to maintain their
satisfaction with the product. In more extreme cases, consumers may
also opt to exit the CPSV market and purchase a different type of
product (e.g., a faucet) with a higher flow rate (i.e., product type
switch). The Federal standard for faucets established a maximum flow
rate of 2.2 gpm. 10 CFR 430.32(o). The economics resulting from nearest
neighbor and product-type switching may result in lower optimal
efficiency levels and reduced estimates of water and energy savings, as
compared to the case without class switching.
DOE is not aware of any other consumer preference scenarios that
should be evaluated. DOE did not receive any specific comments on
alternate consumer preference scenarios that are possible and that
should be evaluated. Therefore, DOE has maintained the same scenarios
from the August 2021 NOPD. DOE presents the nearest neighbor scenario
as the
[[Page 34083]]
Reference case in the final determination but presents results from
each of the scenarios in Chapter 10 of the final determination TSD.
In the nearest neighbor scenario, consumers would choose the
product with the flow rate that is closest to their current product
flow rate, even if it has a higher spray force (product class
switching). Under the nearest neighbor scenario, DOE assumed 100
percent of consumers would choose the closest flow rate. Table IV.14
lists the flow rate for the potential efficiency levels evaluated in
the August 2021 NOPD. 86 FR 46330, 46344.
Table IV.14--Commercial Prerinse Spray Valve Flow Rates
----------------------------------------------------------------------------------------------------------------
Product class 1 Product class 2 Product class 3
Efficiency level --------------------------------------------------------
Flow rate (gpm) Flow rate (gpm) Flow rate (gpm)
----------------------------------------------------------------------------------------------------------------
Baseline............................................... 1.00 1.20 1.28
Level 1................................................ * 0.85 1.02 1.13
Level 2................................................ 0.75 * 0.90 .................
Level 3................................................ 0.45 0.73 .................
----------------------------------------------------------------------------------------------------------------
\*\ Market data do not indicate currently available product that meet this efficiency level.
In response to the August 2021 NOPD, NEEA commented that they
believed that it is more likely that consumers would switch between
product classes in order to keep using a spray valve of any flow rate
or spray force rather than leave the market altogether (moving to a
faucet), as CPSVs have performance features specifically tailored for
commercial dishwashing applications that traditional faucets do not.
(NEEA, No. 19 at p. 3) DOE agrees that is more likely consumers will
switch between product classes and not opt to purchase faucets. For
this reason, DOE uses the nearest neighbor scenario (switching between
product classes while still purchasing spray valves) as the Reference
case in this final determination, however DOE cannot rule out the
potential of consumers leaving the CPSV market all together.
To the extent that customers would opt to leave the CPSV market,
that scenario is more likely as a result of more stringent standards
for this rulemaking than it was for the January 2016 Final Rule. As
discussed, the availability of CPSVs that are in product class 3 may be
limited and as such the lack of units available in product class 3
makes it more likely that consumers seeking the product utility
associated with the spray force currently offered in product class 2
would exit the CPSV market. Therefore, the likelihood of consumers
opting for alternative products outside of the CPSV market in response
to amended standards in this rulemaking is more likely than presented
in the January 2016 Final Rule. See 86 46330, 46344-46346 (August 11,
2021).
A detailed discussion of DOE's method to model this sensitivity
analysis is contained in chapter 10 of the final determination TSD.
3. National Energy Savings
The NES analysis involves a comparison of national energy
consumption of the considered product between each potential standards
case (EL) and the case with no new or amended energy conservation
standards. DOE calculated the national energy consumption by
multiplying the number of units (stock) of each product (by vintage or
age) by the unit energy consumption (also by vintage). DOE calculated
annual NES based on the difference in national energy consumption for
the no-new-standards case and for each higher efficiency standard case.
DOE estimated energy consumption and savings based on site energy and
converted the electricity consumption and savings to primary energy
(i.e., the energy consumed by power plants to generate site
electricity) using annual conversion factors derived from AEO2021.
Cumulative energy savings are the sum of the NES for each year over the
timeframe of the analysis.
The use of a more efficient product is occasionally associated with
a direct rebound effect, which refers to an increase in utilization of
the product due to the increase in efficiency. For CPSVs, DOE did not
use a rebound effect estimate. DOE does not include the rebound effect
in the NPV analysis because it reasons that the increased service from
greater use of the product has an economic value that is reflected in
the value of the foregone energy savings.
In 2011, in response to the recommendations of a committee on
``Point-of-Use and Full-Fuel-Cycle Measurement Approaches to Energy
Efficiency Standards'' appointed by the National Academy of Sciences,
DOE announced its intention to use FFC measures of energy use and
greenhouse gas and other emissions in the NIA and emissions analyses
included in future energy conservation standards rulemakings. 76 FR
51281 (Aug. 18, 2011). After evaluating the approaches discussed in the
August 18, 2011, notice, DOE published a statement of amended policy in
which DOE explained its determination that EIA's National Energy
Modeling System (``NEMS'') is the most appropriate tool for its FFC
analysis and its intention to use NEMS for that purpose. 77 FR 49701
(Aug. 17, 2012). NEMS is a public domain, multi-sector, partial
equilibrium model of the U.S. energy sector \28\ that EIA uses to
prepare its AEO. The FFC factors incorporate losses in production, and
delivery in the case of natural gas, (including fugitive emissions) and
additional energy used to produce and deliver the various fuels used by
power plants. The approach used for deriving FFC measures of energy use
and emissions is described in appendix 10B of the final determination
TSD.
---------------------------------------------------------------------------
\28\ For more information on NEMS, refer to The National Energy
Modeling System: An Overview 2009, DOE/EIA-0581(2009), October 2009.
Available at www.eia.gov/analysis/pdfpages/0581(2009)index.php.
---------------------------------------------------------------------------
4. Net Present Value Analysis
The inputs for determining the NPV of the total costs and benefits
experienced by consumers are (1) total annual installed cost, (2) total
annual operating costs (energy costs and repair and maintenance costs),
and (3) a discount factor to calculate the present value of costs and
savings. DOE calculates net savings each year as the difference between
the no-new-standards case and each standards case in terms of total
savings in operating costs versus total increases in installed costs.
DOE calculates operating cost savings over the lifetime of each product
shipped during the projection period.
[[Page 34084]]
The operating cost savings are energy cost savings, which are
calculated using the estimated energy savings in each year and the
projected price of the appropriate form of energy. To estimate energy
prices in future years, DOE multiplied the average regional energy
prices by the projection of annual national average commercial energy
price changes in the Reference case from AEO2021, which has an end year
of 2050. To estimate price trends after 2050, DOE used the average
annual rate of change in prices from 2020 through 2050. As part of the
NIA, DOE also analyzed scenarios that used inputs from variants of the
AEO2021 Reference case that have lower and higher economic growth.
Those cases have lower and higher energy price trends compared to the
Reference case. NIA results based on these cases are presented in
appendix 10C of the final determination TSD.
In calculating the NPV, DOE multiplies the net savings in future
years by a discount factor to determine their present value. For this
final determination, DOE estimated the NPV of consumer benefits using
both a 3-percent and a 7-percent real discount rate. DOE uses these
discount rates in accordance with guidance provided by the Office of
Management and Budget (``OMB'') to Federal agencies on the development
of regulatory analysis.\29\ The discount rates for the determination of
NPV are in contrast to the discount rates used in the LCC analysis,
which are designed to reflect a consumer's perspective. The 7-percent
real value is an estimate of the average before-tax rate of return to
private capital in the U.S. economy. The 3-percent real value
represents the ``social rate of time preference,'' which is the rate at
which society discounts future consumption flows to their present
value.
---------------------------------------------------------------------------
\29\ United States Office of Management and Budget. Circular A-
4: Regulatory Analysis. September 17, 2003. Section E. Available at
www.whitehouse.gov/omb/memoranda/m03-21.html.
---------------------------------------------------------------------------
I. Manufacturer Impact Analysis
1. Overview
DOE conducted an MIA for CPSVs to estimate the financial impacts of
analyzed amended energy conservation standards on manufacturers of
CPSVs. The MIA has both quantitative and qualitative aspects and
includes analyses of projected industry cash flows, the industry net
present value (``INPV''), investments in research and development and
manufacturing capital, and domestic manufacturing employment.
Additionally, the MIA seeks to determine how amended energy
conservation standards might affect manufacturing employment, capacity,
and competition, as well as how standards contribute to overall
regulatory burden. Finally, the MIA serves to identify any
disproportionate impacts on manufacturer subgroups, including small
business manufacturers.
The quantitative part of the MIA relies on the Government
Regulatory Impact Model (``GRIM''), an industry cash flow model
customized for the CPSVs covered in this final determination. The key
GRIM inputs are data on the industry cost structure, MPCs, and
shipments, as well as assumptions about manufacturer markups and
manufacturer conversion costs. The key MIA output is INPV, which is the
sum of industry annual cash flows over the analysis period, discounted
using the industry weighted-average cost of capital, and the impact to
domestic manufacturing employment. The GRIM calculates annual cash
flows using standard accounting principles. DOE used the GRIM to
compare changes in INPV between the no-new-standards case and various
efficiency levels, the standards cases. The difference in INPV between
the no-new-standards case and the standards cases represents the
financial impact of analyzed amended energy conservation standards on
CPSV manufacturers. Different sets of assumptions (conversion cost
scenarios) produce different INPV results. The qualitative part of the
MIA addresses factors such as manufacturing capacity; characteristics
of, and impacts on, any particular subgroup of manufacturers, including
small manufacturers; the cumulative regulatory burden placed on CPSV
manufacturers; and any impacts on competition.
2. GRIM Analysis and Key Inputs
DOE uses the GRIM to quantify the changes in cash flows over time
due to the analyzed amended energy conservation standards. These
changes in cash flows result in either a higher or lower INPV for the
standards cases compared to the no-new-standards case. The GRIM uses a
standard annual cash flow analysis that incorporates MPCs, manufacturer
markups, shipments, and industry financial information as inputs. It
then models changes in manufacturer investments that may result from
the analyzed amended energy conservation standards. The GRIM uses these
inputs to calculate a series of annual cash flows beginning with the
reference year of the analysis (2022) and continuing to the terminal
year of the analysis (2056). DOE computes INPV by summing the stream of
annual discounted cash flows during the analysis period. DOE continued
to use a real discount rate of 6.86 percent, the same discount rate
used in the August 2021 NOPD, for CPSV manufacturers in this final
determination. 86 FR 46330, 46346.\30\ Many of the GRIM inputs come
from the engineering analysis, the shipments analysis, and other
research conducted during the MIA. The major GRIM inputs are described
in detail in the following sections.
---------------------------------------------------------------------------
\30\ The August 2021 NOPD incorrectly stated that the discount
rate used in the NOPD MIA was 6.89%. However, the value that was
actually used in the GRIM file was 6.86%. 86 FR 46330, 46346.
---------------------------------------------------------------------------
a. Manufacturer Product Costs
Manufacturing more efficient products is typically more expensive
than manufacturing baseline products. However, as discussed in section
IV.C.2 of this document, the MPCs for all CPSVs are constant at every
efficiency level and for every product class. In the MIA, DOE used the
MPCs calculated in the engineering analysis, as described in section
IV.C.2 of this document and further detailed in chapter 5 of the final
determination TSD.
b. Shipment Projections
INPV, the key GRIM output, depends on industry revenue, which
depends on the quantity and prices of CPSVs shipped in each year of the
analysis period. Industry revenue calculations require forecasts of (1)
the total annual shipment volume of CPSVs, (2) the distribution of
shipments across the product classes, and (3) the distribution of
shipments across efficiency levels.
In the MIA, DOE used the shipments calculated as part of the
shipments analysis discussion in section IV.G of this document and
chapter 9 of the final determination TSD.
c. Product and Capital Conversion Costs
DOE expects the analyzed amended CPSV energy conservation standards
would cause manufacturers to incur conversion costs to bring their
production facilities and product designs into compliance with the
analyzed amended standards. For the MIA, DOE classified these
conversion costs into two groups: (1) capital conversion costs and (2)
product conversion costs. Capital conversion costs are investments in
property, plant, and equipment necessary to adapt or change existing
production facilities so new product designs can be fabricated and
assembled. Product conversion costs are investments in research,
development, testing, marketing, certification, and other non-
capitalized costs necessary to make product designs
[[Page 34085]]
comply with the analyzed amended standards.
In general, DOE assumes all conversion-related investments occur
between the year of publication of a potential final rule and the year
by which manufacturers must comply with potential amended standards.
DOE created estimates of industry capital and product conversion costs
using the engineering cost model and information gained during product
teardowns. Product conversion costs depend on the number of CPSV models
that need to be redesigned and retested as well as the number of
manufacturers that need to update brochures and marketing materials.
Capital conversion costs are based on the number of plastic spray
patterns that would need to be fabricated by CPSV manufacturers. The
conversion cost estimates are presented in section V.B of this
document.
d. Manufacturer Markup
As discussed in section IV.I.2.a of this document, the MPCs for
CPSVs are the manufacturers' costs for those products. The MPCs include
materials, direct labor, depreciation, and overhead, which are
collectively referred to as the cost of goods sold. The MSP is the
price received by CPSV manufacturers from the first sale of those
products, typically to a distributor, regardless of the downstream
distribution channel through which the CPSVs are ultimately sold. The
MSP is not the price the end-user pays for CPSVs because there are
typically multiple sales along the distribution chain and various
markups applied to each sale. The MSP equals the MPC multiplied by the
manufacturer markup. The manufacturer markup covers all the CPSV
manufacturer's non-production costs (i.e., selling, general, and
administrative expenses; research and development; and interest) as
well as profit. Total industry revenue for CPSV manufacturers equals
the MSPs at each efficiency level multiplied by the number of shipments
at that efficiency level for all product classes. As previously discuss
in section IV.C.2 of this document, the MPC for all CPSVs is the same
at each efficiency level for all product classes. Therefore, total
industry revenue equals the MSP multiplied by the number of shipments.
In the June 2020 RFI, DOE requested comment on whether the
manufacturer markup of 1.30 from the January 2016 Final Rule is still
appropriate to represent the market share weighted-average value. 85 FR
35383, 35389. DOE did not receive any comments on this topic in either
the June 2020 RFI or the August 2021 NOPD. Therefore, DOE used the same
manufacturer markup of 1.30 that was used in the August 2021 NOPD.
V. Analytical Results and Conclusions
The following section addresses the results from DOE's analyses
with respect to the analyzed energy conservation standards for CPSVs.
It addresses the efficiency levels examined by DOE and the projected
impacts of each of these levels. Additional details regarding DOE's
analyses are contained in the final determination TSD supporting this
document.
In response to the August 2021 NOPD, NEEA commented that it is not
clear what scenario was used for DOE's determination of the product
switching methodology. (NEEA, No. 19 at p. 2) DOE's reference case in
the NOPD was the nearest neighbor scenario, which is the same in this
final determination. However, DOE also considered the effect of
product-type switching for the determination. As discussed in section
IV.H.2 of this document, DOE notes to the extent that customers would
opt to leave the CPSV market, that scenario is more likely as a result
of more stringent standards for this determination than it was for the
January 2016 Final Rule. Therefore, the product-type switch scenario
was also a consideration for the final determination.
A. Economic Impacts on Individual Consumers
DOE analyzed the cost effectiveness (i.e., the savings in operating
costs throughout the estimated average life of CPSVs compared to any
increase in the price of, or in the initial charges for, or maintenance
expenses of, the CPSVs) that is likely to result from the imposition of
a standard at an efficiency level by considering the LCC and PBP at
each efficiency level. These analyses are discussed in the following
sections.
In general, a more efficient product can affect consumers in two
ways: (1) purchase price increases and (2) annual operating costs
decrease. In the case of CPSVs, there is no incremental cost associated
with the more efficient product. Inputs used for calculating the LCC
and PBP include total installed costs (i.e., product price plus
installation costs) and operating costs (i.e., annual energy use,
energy prices, energy price trends, repair costs, and maintenance
costs). The LCC calculation also uses product lifetime and a discount
rate. Chapter 8 of the final determination TSD provides detailed
information on the LCC and PBP analyses.
Table V.1 shows the average LCC and PBP results for the efficiency
levels considered for CPSVs in this analysis.
Table V.1--Average LCC and PBP Results by Efficiency Level
------------------------------------------------------------------------
Simple
LCC savings payback
Efficiency level (2020$) period
(years)
------------------------------------------------------------------------
EL 1.......................................... $371.02 0
EL 2.......................................... 723.57 0
EL 3.......................................... 735.58 0
------------------------------------------------------------------------
The average LCC results in Table V.1 reflect the assumption of a
consumer opting to stay within the same product class and not
incorporating the switching between product classes or product types
that is modeled when assessing national impacts. The results in Table
V.1 also assume a consumer purchases a product from an efficiency level
that exists in the market. As a result, product class 1 consumers at
baseline efficiency level purchase EL 2 products in the LCC analysis,
and product class 2 consumers at EL 1 purchase EL 3 in the LCC
analysis.
B. Economic Impacts on Manufacturers
DOE performed an MIA to estimate the impact of potential amended
energy conservation standards on manufacturers of CPSVs. DOE modeled
MIA results using the reference case, Nearest Neighbor. The following
sections describe the expected impacts on CPSV manufacturers at each
efficiency level. Chapter 11 of the final determination TSD explains
the MIA in further detail.
1. Industry Cash Flow Analysis Results
In this section, DOE provides MIA results from the analysis, which
examines changes in the industry that could result from amended
standards. Table V.2 and Table V.3 depict the estimated financial
impacts (represented by changes in INPV) of potential amended energy
conservation standards on CPSV manufacturers, as well as the conversion
costs that DOE estimates manufacturers would incur at each efficiency
level. To evaluate the range of cash flow impacts on the CPSV industry,
DOE modeled two conversion cost scenarios that correspond to the range
of potential manufacturer investments that may occur in responses to
potential amended standards. Each conversion cost scenario results in a
unique set of cash flows and corresponding industry values at each
efficiency level.
In the following discussion, the INPV results refer to the
difference in industry value between the no-new-standards case and the
standards cases that result from the sum of discounted cash flows from
the reference year (2022) through
[[Page 34086]]
the end of the analysis period (2056). The results also discuss the
difference in cash flows between the no-new-standards case and the
standards cases in the year before the analyzed compliance date for
potential amended energy conservation standards. This differential
represents the size of the required conversion costs relative to the
cash flow generated by the CPSV industry in the absence of amended
energy conservation standards.
To assess the upper (less severe) end of the range of potential
impacts on CPSV manufacturers, DOE modeled a sourced conversion cost
scenario. This scenario assumes that the majority of CPSV
manufacturers, but not all CPSV manufacturers, source components
(including the nozzle) from component suppliers and simply assemble the
CPSVs. In this scenario, the CPSV manufacturers that DOE assumed source
components would not incur a capital conversion cost related to the
fabrication of plastic nozzles if CPSV manufacturers must redesign
nozzle molds due to the analyzed amended energy conservation standards.
To assess the lower (more severe) end of the range of potential
impacts on CPSV manufacturers, DOE modeled a fabricated conversion cost
scenario. This scenario assumes that all CPSV manufacturers currently
selling products with plastic spray nozzles fabricate these nozzles in-
house. In this scenario, all CPSV manufacturers incur capital
conversion costs related to the fabrication of plastic nozzles if CPSV
manufacturers must redesign nozzle molds due to analyzed amended energy
conservation standards.
Table V.2 and Table V.3 present the projected results for CPSVs
under the sourced and fabricated conversion cost scenarios. DOE
examined results for all product classes together since most
manufacturers sell products across a variety of the analyzed product
classes.
Table V.2--Manufacturer Impact Analysis for Commercial Prerinse Spray Valves--Sourced Conversion Cost Scenario
----------------------------------------------------------------------------------------------------------------
Efficiency level *
Units No-new- -----------------------------------------------
standards case 1 2 3
----------------------------------------------------------------------------------------------------------------
INPV.......................... 2020$ millions.. 11.6 10.7 10.7 10.7
Change in INPV................ 2020$ millions.. .............. (0.9) (0.9) (0.9)
%............... .............. (8.0) (8.0) (8.0)
Product Conversion Costs...... 2020$ millions.. .............. 1.3 1.3 1.3
Capital Conversion Costs...... 2020$ millions.. .............. 0.1 0.1 0.1
Total Conversion Costs........ 2020$ millions.. .............. 1.4 1.4 1.4
----------------------------------------------------------------------------------------------------------------
* Numbers in parentheses indicate negative numbers.
Table V.3--Manufacturer Impact Analysis for Commercial Prerinse Spray Valves--Fabricated Conversion Cost
Scenario
----------------------------------------------------------------------------------------------------------------
Efficiency level *
Units No-new- -----------------------------------------------
standards case 1 2 3
----------------------------------------------------------------------------------------------------------------
INPV.......................... 2020$ millions.. 11.6 10.5 10.5 10.4
Change in INPV................ 2020$ millions.. .............. (1.0) (1.0) (1.2)
%............... .............. (9.0) (9.0) (10.1)
Product Conversion Costs...... 2020$ millions.. .............. 1.3 1.3 1.3
Capital Conversion Costs...... 2020$ millions.. .............. 0.3 0.3 0.4
Total Conversion Costs........ 2020$ millions.. .............. 1.6 1.6 1.7
----------------------------------------------------------------------------------------------------------------
* Numbers in parentheses indicate negative numbers.
At EL 1, DOE estimates the impacts on INPV to range from -$1.0
million to -$0.9 million, or a change in INPV of -9.0 percent to -8.0
percent. At EL 1, industry free cash flow (operating cash flow minus
capital expenditures) is estimated to decrease to $0.1 million, or a
drop of up to 88.2 percent, compared to the no-new-standards case value
of $0.7 million in 2026, the year leading up to the analyzed compliance
date of potential amended energy conservation standards.
Percentage impacts on INPV are moderately negative at EL 1. DOE
projects that in the analyzed year of compliance (2027), 97 percent of
CPSV shipments in product class 1, 26 percent of CPSV shipments in
product class 2, and 14 percent of CPSV shipments in product class 3
will meet EL 1. EL 1 represents max-tech for product class 3. DOE
expects CPSV manufacturers to incur approximately $1.3 million in
product conversion costs to update brochures and marketing material and
retest and redesign CPSV models that would need to be redesigned if
standards were set at EL 1. Additionally, CPSV manufacturers would
incur between $0.3 million and $0.1 million in capital conversion costs
to fabricate new plastic nozzle molds to accommodate spray patterns
that could meet potential amended standards set at EL 1.
At EL 2, DOE estimates the impacts on INPV to range from -$1.0
million to -$0.9 million, or a change in INPV of -9.0 percent to -8.0
percent. At EL 2, industry free cash flow (operating cash flow minus
capital expenditures) is estimated to decrease to $0.1 million, or a
drop of up to 88.2 percent, compared to the no-new-standards case value
of $0.7 million in 2026, the year leading up to the analyzed compliance
date of potential amended energy conservation standards.
Percentage impacts on INPV are moderately negative at EL 2. DOE
projects that in the analyzed year of compliance (2027), 97 percent of
CPSV shipments in product class 1 and 2 percent of CPSV shipments in
product class 2 will meet or exceed EL 2. Product class 3 is at max-
tech (at EL 1) and 14 percent of product class 3 CPSV shipments will
meet max-tech. DOE expects CPSV manufacturers to incur approximately
$1.3 million in product conversion costs to update brochures and
marketing material and retest and
[[Page 34087]]
redesign CPSV models that would need to be redesigned if standards were
set at EL 2 (and EL 1, which is max-tech, for product class 3).
Additionally, CPSV manufacturers would incur between $0.3 million and
$0.1 million in capital conversion costs to fabricate new plastic
nozzle molds to accommodate spray patterns that could meet potential
amended standards set at EL 2 (and EL 1, which is max-tech, for product
class 3).
At EL 3, max-tech for all product classes, DOE estimates the
impacts on INPV to range from -$1.2 million to -$0.9 million, or a
change in INPV of -10.1 percent to -8.0 percent. At EL 3, industry free
cash flow (operating cash flow minus capital expenditures) is estimated
to decrease to less than $0.1 million, or a drop of up to 99.0 percent,
compared to the no-new-standards case value of $0.7 million in 2026,
the year leading up to the analyzed compliance date of potential
amended energy conservation standards.
Percentage impacts on INPV are moderately negative at EL 3. DOE
projects that in the analyzed year of compliance (2027), 9 percent of
CPSV shipments in product class 1, 2 percent of CPSV shipments in
product class 2, and 14 percent of CPSV shipments in product class 3
will meet max-tech. DOE expects CPSV manufacturers to incur
approximately $1.3 million in product conversion costs to update
brochures and marketing material and retest and redesign CPSV models
that would need to be redesigned if standards were set at max-tech (EL
3 for product classes 1 and 2 and EL 1 for product class 3).
Additionally, CPSV manufacturers would incur between $0.4 million and
$0.1 million in capital conversion costs to fabricate new plastic
nozzle molds to accommodate spray patterns that could meet potential
amended standards set at max-tech (EL 3 for product classes 1 and 2 and
EL 1 for product class 3).
2. Direct Impacts on Employment
The design option specified for achieving greater efficiency levels
(i.e., changing the total spray hole area of the CPSV nozzle) does not
increase the labor content (measured in dollars) of CPSVs at any EL,
nor does it increase total MPC or labor associated with manufacturing
CPSVs. Additionally, total industry shipments are forecasted to be
constant at all the analyzed standard levels. Therefore, DOE predicts
no change in domestic manufacturing employment levels due to any of the
analyzed standard levels.
3. Impacts on Manufacturing Capacity
Not every CPSV manufacturer makes CPSV models that could meet all
the analyzed amended energy conservation standards for all product
classes. However, DOE believes that manufacturers would not need to
make substantial platform changes or significant investments for their
CPSV products to meet any of the amended energy conservation standards
analyzed in this rulemaking. Therefore, DOE does not foresee any
significant impact on manufacturing capacity due to any of the analyzed
amended energy conservation standards.
4. Impacts on Subgroups of Manufacturers
Using average cost assumptions to develop an industry cash flow
estimate may not be adequate for assessing differential impacts among
manufacturer subgroups. Small manufacturers, niche product
manufacturers, and manufacturers exhibiting cost structures
substantially different from the industry average could be affected
disproportionately. DOE analyzed the impacts on small businesses in
section VI.B of this document. DOE did not identify any other
manufacturer subgroups for this rulemaking.
5. Cumulative Regulatory Burden
One aspect of assessing manufacturer burden involves looking at the
cumulative impact of multiple DOE standards and the product-specific
regulatory actions of other Federal agencies that affect the
manufacturers of a covered product. While any one regulation may not
impose a significant burden on manufacturers, the combined effects of
several existing or impending regulations may have serious consequences
for some manufacturers, groups of manufacturers, or an entire industry.
Assessing the impact of a single regulation may overlook this
cumulative regulatory burden. In addition to energy conservation
standards, other regulations can significantly affect manufacturers'
financial operations. Multiple regulations affecting the same
manufacturer can strain profits and lead companies to abandon product
lines or markets with lower expected future returns than competing
products. For these reasons, DOE typically conducts an analysis of
cumulative regulatory burden as part of its rulemakings pertaining to
appliance efficiency. However, given the conclusion discussed in
section V.D of this document, DOE did not conduct a cumulative
regulatory burden analysis.
C. National Impact Analysis
This section presents DOE's estimates of the NES and the NPV of
consumer benefits that would result from each of the efficiency levels
considered as potential amended standards.
1. Significance of Energy Savings
To estimate the energy savings attributable to potential amended
standards for CPSVs, DOE compared their energy consumption under the
no-new-standards case to their anticipated energy consumption under
each efficiency level. The savings are measured over the entire
lifetime of the product purchased in the 30-year period that begins in
the year of anticipated compliance with amended standards (2027-2056).
Table V.4 presents DOE's projections of the NES for each efficiency
level considered for CPSVs for all three scenarios considered (section
IV.H.2 of this document).
Table V.4--Cumulative National Energy and Water Savings for Commercial Prerinse Spray Valves; 30 Years of
Shipments
[2027-2056]
----------------------------------------------------------------------------------------------------------------
National energy and water savings
--------------------------------------------------------
Efficiency level National water
Primary energy FFC energy savings (billion
(quads) (quads) gal)
----------------------------------------------------------------------------------------------------------------
Scenario #1--``Rolling-up'' within product class
----------------------------------------------------------------------------------------------------------------
1...................................................... 0.151 0.160 159.328
2...................................................... 0.312 0.329 328.747
[[Page 34088]]
3...................................................... 0.279 0.295 294.188
----------------------------------------------------------------------------------------------------------------
Scenario #2--Nearest Neighbor [REFERENCE CASE]
----------------------------------------------------------------------------------------------------------------
1...................................................... 0.050 0.053 52.571
2...................................................... 0.036 0.038 37.468
3...................................................... 0.037 0.039 39.004
----------------------------------------------------------------------------------------------------------------
Scenario #3--Product type switching
----------------------------------------------------------------------------------------------------------------
1...................................................... (0.098) (0.103) (102.905)
2...................................................... (0.112) (0.108) (118.009)
3...................................................... (0.110) (0.117) (116.473)
----------------------------------------------------------------------------------------------------------------
* Values in parenthesis indicate negative values.
OMB Circular A-4 \31\ requires agencies to present analytical
results, including separate schedules of the monetized benefits and
costs that show the type and timing of benefits and costs. Circular A-4
also directs agencies to consider the variability of key elements
underlying the estimates of benefits and costs. For this final
determination, DOE undertook a sensitivity analysis using 9 years,
rather than 30 years, of product shipments. The choice of a 9-year
period is a proxy for the timeline in EPCA for the review of certain
energy conservation standards and potential revision of and compliance
with such revised standards.\32\ The review timeframe established in
EPCA is generally not synchronized with the product lifetime, product
manufacturing cycles, or other factors specific to CPSVs. Thus, such
results are presented for informational purposes only and are not
indicative of any change in DOE's analytical methodology. Table V.5
presents DOE's 9-year projections of the NES for each efficiency level
considered for CPSVs for all three scenarios considered (section IV.H.2
of this document). The impacts are counted over the lifetime of CPSVs
purchased in 2027-2035.
---------------------------------------------------------------------------
\31\ U.S. Office of Management and Budget. Circular A-4:
Regulatory Analysis. September 17, 2003. Available at
obamawhitehouse.archives.gov/omb/circulars_a004_a-4/.
\32\ Section 325(m) of EPCA requires DOE to review its standards
at least once every 6 years, and requires, for certain products, a
3-year period after any new standard is promulgated before
compliance is required, except that in no case may any new standards
be required within 6 years of the compliance date of the previous
standards. If DOE makes a determination that amended standards are
not needed, it must conduct a subsequent review within three years
following such a determination. As DOE is evaluating the need to
amend the standards, the sensitivity analysis is based on the review
timeframe associated with amended standards. While adding a 6-year
review to the 3-year compliance period adds up to 9 years, DOE notes
that it may undertake reviews at any time within the 6-year period
and that the 3-year compliance date may yield to the 6-year
backstop. A 9-year analysis period may not be appropriate given the
variability that occurs in the timing of standards reviews and the
fact that for some products, the compliance period is 5 years rather
than 3 years.
Table V.5--Cumulative National Energy and Water Savings for Commercial Prerinse Spray Valves; 9 Years of
Shipments
[2027-2035]
----------------------------------------------------------------------------------------------------------------
National energy and water savings
--------------------------------------------------------
Efficiency level National water
Primary energy FFC energy savings (billion
(quads) (quads) gal)
----------------------------------------------------------------------------------------------------------------
Scenario #1--``Rolling-up'' within product class
----------------------------------------------------------------------------------------------------------------
1...................................................... 0.041 0.043 42.911
2...................................................... 0.084 0.084 88.541
3...................................................... 0.075 0.075 79.233
----------------------------------------------------------------------------------------------------------------
Scenario #2--Nearest Neighbor [REFERENCE CASE]
----------------------------------------------------------------------------------------------------------------
1...................................................... 0.003 0.013 14.159
2...................................................... 0.002 0.010 10.091
3...................................................... 0.003 0.010 10.505
----------------------------------------------------------------------------------------------------------------
Scenario #3--Product-type switching
----------------------------------------------------------------------------------------------------------------
1...................................................... (0.026) (0.028) (27.715)
2...................................................... (0.030) (0.032) (31.783)
[[Page 34089]]
3...................................................... (0.030) (0.032) (31.369)
----------------------------------------------------------------------------------------------------------------
* Values in parenthesis indicate negative values.
2. Net Present Value of Consumer Costs and Benefits
DOE estimated the cumulative NPV for consumers that would result
from the efficiency levels considered for CPSVs. In accordance with
OMB's guidelines on regulatory analysis,\33\ DOE calculated NPV using
both a 7-percent and a 3-percent real discount rate. Table V.6 shows
the consumer NPV results for each efficiency level considered for CPSVs
for all three scenarios considered (see section IV.H.2 of this
document). The impacts are counted over the lifetime of a product
purchased in 2027-2056.
---------------------------------------------------------------------------
\33\ U.S. Office of Management and Budget. Circular A-4:
Regulatory Analysis. September 17, 2003. Available at
obamawhitehouse.archives.gov/omb/circulars_a004_a-4/.
Table V.6--Cumulative Net Present Value of Consumer Benefits for
Commercial Prerinse Spray Valves; 30 Years of Shipments
[2027-2056]
------------------------------------------------------------------------
Net present value (billion $2020) *
-------------------------------------
Efficiency level 7-percent 3-percent
discount rate discount rate
------------------------------------------------------------------------
Scenario #1--``Rolling-up'' within product class
------------------------------------------------------------------------
1................................. 1.109 2.360
2................................. 2.266 4.815
3................................. 2.009 4.276
------------------------------------------------------------------------
Scenario #2--Nearest Neighbor [REFERENCE CASE]
------------------------------------------------------------------------
1................................. 0.335 0.740
2................................. 0.239 0.527
3................................. 0.249 0.549
------------------------------------------------------------------------
Scenario #3--Product type switching
------------------------------------------------------------------------
1................................. (0.701) (1.498)
2................................. (0.805) (1.698)
3................................. (0.794) (1.676)
------------------------------------------------------------------------
* Values in parenthesis indicate negative values.
The NPV results based on the aforementioned 9-year analytical
period for all three scenarios considered are presented in Table V.7.
The impacts are counted over the lifetime of a product purchased in
2027-2035. As mentioned previously, such results are presented for
informational purposes only and are not indicative of any change in
DOE's analytical methodology or decision criteria.
Table V.7--Cumulative Net Present Value of Consumer Benefits for
Commercial Prerinse Spray Valves; 9 Years of Shipments (2027-2035)
------------------------------------------------------------------------
Net present value (billion $2020)*
-------------------------------------
Efficiency Level 7-percent 3-percent
discount rate discount rate
------------------------------------------------------------------------
Scenario #1--``Rolling-up'' within product class
------------------------------------------------------------------------
1................................. 0.501 0.778
2................................. 1.028 1.562
[[Page 34090]]
3................................. 0.913 1.388
------------------------------------------------------------------------
Scenario #2--Nearest Neighbor [REFERENCE CASE]
------------------------------------------------------------------------
1................................. 0.150 0.236
2................................. 0.107 0.168
3................................. 0.111 0.175
------------------------------------------------------------------------
Scenario #3--Product-type switching
------------------------------------------------------------------------
1................................. (0.298) (0.449)
2................................. (0.345) (0.518)
3................................. (0.340) (0.511)
------------------------------------------------------------------------
* Values in parenthesis indicate negative values.
D. Final Determination
As required by EPCA, this final determination analyzes whether
amended standards for CPSVs would result in significant conservation of
energy, be technologically feasible, and be cost effective. (42 U.S.C.
6295(m)(1)(A) and 42 U.S.C. 6295(n)(2)) Additionally, DOE also
estimated the impact on manufacturers. The criteria considered under 42
U.S.C. 6295(m)(1)(A) and the additional analysis are discussed in the
following subsections. Because an analysis of potential cost
effectiveness and energy savings first requires an evaluation of the
relevant technology, DOE first discusses the technological feasibility
of amended standards. DOE then addresses the cost effectiveness and
energy savings associated with potential amended standards.
1. Technological Feasibility
EPCA mandates that DOE consider whether amended energy conservation
standards for CPSVs would be technologically feasible. (42 U.S.C.
6295(m)(1)(A) and 42 U.S.C. 6295(n)(2)(B)) DOE has determined that
there are technology options that would improve the efficiency of
CPSVs. These technology options are being used in commercially
available CPSVs and therefore are technologically feasible. (See
section IV.A.2 for further information.) Hence, DOE has determined that
amended energy conservation standards for CPSVs are technologically
feasible.
2. Cost Effectiveness
EPCA requires DOE to consider whether energy conservation standards
for CPSVs would be cost effective through an evaluation of the savings
in operating costs throughout the estimated average life of the covered
product compared to any increase in the price of, or in the initial
charges for, or maintenance expenses of, the covered product which are
likely to result from the imposition of an amended standard. (42 U.S.C.
6295(m)(1)(A), 42 U.S.C. 6295(n)(2)(C), and 42 U.S.C.
6295(o)(2)(B)(i)(II)). DOE conducted an LCC analysis to estimate the
net costs/benefits to users from increased efficiency in the considered
CPSVs. (See results in Table V.1 of this document). DOE then aggregated
the results from the LCC analysis to estimate the NPV of the total
costs and benefits experienced by the Nation for all three scenarios
considered. (See results in Table V.6 of this document). As noted, the
inputs for determining the NPV are (1) total annual installed cost, (2)
total annual operating costs (energy costs and repair and maintenance
costs), and (3) a discount factor to calculate the present value of
costs and savings.
DOE considered each of the efficiency levels. All efficiency levels
for the reference case scenario (i.e., nearest neighbor) would result
in a positive NPV at the 3-percent and 7-percent discount rates. DOE
notes that the lack of incremental costs to consumers associated with
more efficient products makes LCC and NPV values cost effective.
However, in DOE's product type switch scenario, amended standards could
result in a negative NPV (see section V.D.4 for further discussion).
3. Significant Conservation of Energy
EPCA also mandates that DOE consider whether amended energy
conservation standards for CPSVs would result in significant
conservation of energy. (42 U.S.C. 6295(m)(1)(A) and 42 U.S.C.
6295(n)(2)(A)). To estimate the energy savings attributable to
potential amended standards for CPSVs, DOE compared their energy
consumption under the no-new-standards case to their anticipated energy
consumption under each potential standard level. The savings are
measured over the entire lifetime of product purchased in the 30-year
period that begins in the year of anticipated compliance with amended
standards (2027-2056).
DOE estimates that amended standards for CPSVs for the reference
case scenario (i.e., nearest neighbor) would result in maximum energy
savings of 0.053 quads FFC energy savings at EL 1 over a 30-year
analysis period (2027-2056). (See results in Table V.4 of this
document.) However, in DOE's product type switch scenario, amended
standards could result in an increase in FFC energy use (see section
V.D.4 for further discussion).
4. Additional Consideration
EPCA lists certain additional factors for DOE to consider in
deciding whether an amended energy conservation standard is
economically justified. (42 U.S.C. 6295(o)(2)(B)(i)(I)-(VII)).
As part of this analysis, DOE considers the economic impact of the
standard on manufacturers of the products subject to an amended
standard. (42 U.S.C. 6295(o)(2)(B)(i)(I). DOE investigated the
manufacturer impacts of any potential amended standards and estimates
that amended standards for CPSVs would result in a reduction in INPV
between 10.1 and 8.0 percent. (See results in Table V.2 and Table V.3
of this document.)
[[Page 34091]]
In this analysis, DOE also considers any lessening of the utility
or the performance of the covered products likely to result from the
imposition of the standard. (42 U.S.C. 6295(o)(2)(B)(i)(IV)). As noted
in section IV.G, spray force is a driving factor of consumer utility
and consumer satisfaction. As discussed in section IV.C.1.b of this
document, there is a direct relationship between flow rate and spray
force. Therefore, the relationship between consumer satisfaction and
spray force for CPSVs makes it possible that consumers may opt to
switch product classes if they are unsatisfied with the spray force
available to them in their current product class due to amended
standards. In some cases, consumers react to amended standards by
switching to an alternative product that consumes more water and energy
than their current product. As discussed in section IV.H.2 of this
document, the change in product availability since the January 2016
Final Rule makes it more likely that certain consumers would switch to
higher flow rate products in response to amended standards. This shift
increases the likelihood that amended standards could result in more
energy and water use and a negative NPV. Accordingly, DOE accounted for
this potential reduction in utility by considering the possibility of
the product type switch scenario (section IV.H.2 of this document).
In DOE's sensitivity analysis, wherein a subset of consumers exit
the CPSV market and switch to higher flow rate products such as faucets
(product type switch scenario), all efficiency levels would result in a
negative NPV at the 3-percent and 7-percent discount rates. Further,
amended standards could result in an increase in FFC energy use between
0.103 (EL1) and 0.117 (EL3) quads over a 30-year analysis period (2027-
2056).
Based on these additional considerations, DOE has determined that
amended standards would not be economically justified at any efficiency
level due to the increased likelihood of consumers switching products
to higher flow rate products as a result of decreased consumer utility
due to potential amended standards, and the corresponding negative NPV
of this product type switch scenario and the negative INPV.
5. Summary
In this final determination, although energy and water savings are
possible in the reference case analysis, there is risk that amended
standards could result in increased energy and water consumption if
consumers switch to products with higher flow rates, like faucets (as
demonstrated in the product type switch scenario). Similarly, the
product-type switch scenario would also result in a negative NPV for
consumers. As discussed in section IV.H.2 of this document, the change
in product availability since the 2016 Final Rule makes it more likely
that consumers would switch to products with higher flow rates in the
presence of amended standards. Therefore, it is more likely that
amended standards could result in increases in water, energy, and
costs. The risk of these potential increases outweigh the cost
effectiveness of any amended standards.
As such, any potential benefits from amended standards are
outweighed by the potential of increased energy and water use and the
additional burden on manufacturers. DOE has determined, based on the
estimated negative NPV values resulting from product type switching and
the estimated additional burden on manufacturers, amended standards
would not be economically justified. Therefore, DOE has determined that
amended standards for CPSVs are not justified at this time.
VI. Procedural Issues and Regulatory Review
A. Review Under Executive Order 12866 and 13563
Executive Order (``E.O.'') 12866, ``Regulatory Planning and
Review,'' as supplemented and reaffirmed by E.O. 13563, ``Improving
Regulation and Regulatory Review,'' 76 FR 3821 (Jan. 21, 2011),
requires agencies, to the extent permitted by law, to (1) propose or
adopt a regulation only upon a reasoned determination that its benefits
justify its costs (recognizing that some benefits and costs are
difficult to quantify); (2) tailor regulations to impose the least
burden on society, consistent with obtaining regulatory objectives,
taking into account, among other things, and to the extent practicable,
the costs of cumulative regulations; (3) select, in choosing among
alternative regulatory approaches, those approaches that maximize net
benefits (including potential economic, environmental, public health
and safety, and other advantages; distributive impacts; and equity);
(4) to the extent feasible, specify performance objectives, rather than
specifying the behavior or manner of compliance that regulated entities
must adopt; and (5) identify and assess available alternatives to
direct regulation, including providing economic incentives to encourage
the desired behavior, such as user fees or marketable permits, or
providing information upon which choices can be made by the public. DOE
emphasizes as well that E.O. 13563 requires agencies to use the best
available techniques to quantify anticipated present and future
benefits and costs as accurately as possible. In its guidance, the
Office of Information and Regulatory Affairs (``OIRA'') has emphasized
that such techniques may include identifying changing future compliance
costs that might result from technological innovation or anticipated
behavioral changes. For the reasons stated in the preamble, this final
regulatory action is consistent with these principles.
Section 6(a) of E.O. 12866 also requires agencies to submit
``significant regulatory actions'' to OIRA for review. OIRA has
determined that this final regulatory action does not constitute a
``significant regulatory action'' under section 3(f) of E.O. 12866.
Accordingly, this action was not submitted to OIRA for review under
E.O. 12866.
B. Review Under the Regulatory Flexibility Act
The Regulatory Flexibility Act (5 U.S.C. 601 et seq.) requires
preparation of a final regulatory flexibility analysis (``FRFA'') for
any rule that by law must be proposed for public comment, unless the
agency certifies that the rule, if promulgated, will not have a
significant economic impact on a substantial number of small entities.
As required by E.O. 13272, ``Proper Consideration of Small Entities in
Agency Rulemaking,'' 67 FR 53461 (Aug. 16, 2002), DOE published
procedures and policies on February 19, 2003, to ensure that the
potential impacts of its rules on small entities are properly
considered during the rulemaking process. 68 FR 7990. DOE has made its
procedures and policies available on the Office of the General
Counsel's website (www.energy.gov/gc/office-general-counsel).
DOE reviewed this final determination under the provisions of the
Regulatory Flexibility Act and the policies and procedures published on
February 19, 2003. DOE is not amending standards for CPSVs. This final
determination would not result in any CPSV manufacturer, large or
small, to incur any additional burden or significant economic impact
because the current energy conservation standards would remain
unchanged and in place. As a result, DOE concludes and certifies that
the final determination has no significant economic impact on any small
entities. Accordingly, DOE has not
[[Page 34092]]
prepared a FRFA for this final determination.
C. Review Under the Paperwork Reduction Act
Manufacturers of commercial prerinse spray valves must certify to
DOE that their products comply with any applicable energy conservation
standards. In certifying compliance, manufacturers must test their
products according to the DOE test procedures for commercial prerinse
spray valves, including any amendments adopted for those test
procedures. DOE has established regulations for the certification and
recordkeeping requirements for all covered consumer products and
commercial equipment, including commercial prerinse spray valves. (See
generally 10 CFR part 429). The collection-of-information requirement
for the certification and recordkeeping is subject to review and
approval by OMB under the Paperwork Reduction Act (``PRA''). This
requirement has been approved by OMB under OMB control number 1910-
1400. Public reporting burden for the certification is estimated to
average 35 hours per response, including the time for reviewing
instructions, searching existing data sources, gathering and
maintaining the data needed, and completing and reviewing the
collection of information.
Notwithstanding any other provision of the law, no person is
required to respond to, nor shall any person be subject to a penalty
for failure to comply with, a collection of information subject to the
requirements of the PRA, unless that collection of information displays
a currently valid OMB Control Number.
D. Review Under the National Environmental Policy Act of 1969
Pursuant to the National Environmental Policy Act of 1969
(``NEPA''), DOE has analyzed this proposed determination in accordance
with NEPA and DOE's NEPA implementing regulations (10 CFR part 1021).
DOE has determined that this rule qualifies for categorical exclusion
under 10 CFR part 1021, subpart D, appendix A4 because it is an
interpretation or ruling in regards to an existing regulation and
otherwise meets the requirements for application of a categorical
exclusion. See 10 CFR 1021.410. Therefore, DOE has determined that
promulgation of this rule is not a major Federal action significantly
affecting the quality of the human environment within the meaning of
NEPA, and does not require an Environmental Assessment or Environmental
Impact Statement.
E. Review Under Executive Order 13132
E.O. 13132, ``Federalism,'' 64 FR 43255 (Aug. 10, 1999), imposes
certain requirements on Federal agencies formulating and implementing
policies or regulations that preempt State law or that have federalism
implications. The E.O. requires agencies to examine the constitutional
and statutory authority supporting any action that would limit the
policymaking discretion of the States and to carefully assess the
necessity for such actions. The E.O. also requires agencies to have an
accountable process to ensure meaningful and timely input by State and
local officials in the development of regulatory policies that have
federalism implications. On March 14, 2000, DOE published a statement
of policy describing the intergovernmental consultation process it will
follow in the development of such regulations. 65 FR 13735. DOE has
examined this final determination and has determined that it would not
have a substantial direct effect on the States, on the relationship
between the national government and the States, or on the distribution
of power and responsibilities among the various levels of government.
EPCA governs and prescribes Federal preemption of State regulations as
to energy conservation for the products that are the subject of this
final determination. States can petition DOE for exemption from such
preemption to the extent, and based on criteria, set forth in EPCA. (42
U.S.C. 6297). Therefore, no further action is required by E.O. 13132.
F. Review Under Executive Order 12988
With respect to the review of existing regulations and the
promulgation of new regulations, section 3(a) of E.O. 12988, ``Civil
Justice Reform,'' imposes on Federal agencies the general duty to
adhere to the following requirements: (1) eliminate drafting errors and
ambiguity, (2) write regulations to minimize litigation, (3) provide a
clear legal standard for affected conduct rather than a general
standard, and (4) promote simplification and burden reduction. 61 FR
4729 (Feb. 7, 1996). Regarding the review required by section 3(a),
section 3(b) of E.O. 12988 specifically requires that executive
agencies make every reasonable effort to ensure that the regulation (1)
clearly specifies the preemptive effect, if any, (2) clearly specifies
any effect on existing Federal law or regulation, (3) provides a clear
legal standard for affected conduct while promoting simplification and
burden reduction, (4) specifies the retroactive effect, if any, (5)
adequately defines key terms, and (6) addresses other important issues
affecting clarity and general draftsmanship under any guidelines issued
by the Attorney General. Section 3(c) of E.O. 12988 requires executive
agencies to review regulations in light of applicable standards in
section 3(a) and section 3(b) to determine whether they are met or it
is unreasonable to meet one or more of them. DOE has completed the
required review and determined that, to the extent permitted by law,
this final determination meets the relevant standards of E.O. 12988.
G. Review Under the Unfunded Mandates Reform Act of 1995
Title II of the Unfunded Mandates Reform Act of 1995 (``UMRA'')
requires each Federal agency to assess the effects of Federal
regulatory actions on State, local, and Tribal governments and the
private sector. Public Law 104-4, sec. 201 (codified at 2 U.S.C. 1531).
For a regulatory action likely to result in a rule that may cause the
expenditure by State, local, and Tribal governments, in the aggregate,
or by the private sector of $100 million or more in any one year
(adjusted annually for inflation), section 202 of UMRA requires a
Federal agency to publish a written statement that estimates the
resulting costs, benefits, and other effects on the national economy.
(2 U.S.C. 1532(a)-(b)) The UMRA also requires a Federal agency to
develop an effective process to permit timely input by elected officers
of State, local, and Tribal governments on a ``significant
intergovernmental mandate,'' and requires an agency plan for giving
notice and opportunity for timely input to potentially affected small
governments before establishing any requirements that might
significantly or uniquely affect them. On March 18, 1997, DOE published
a statement of policy on its process for intergovernmental consultation
under UMRA. 62 FR 12820. DOE's policy statement is also available at
www.energy.gov/sites/prod/files/gcprod/documents/umra_97.pdf.
This final determination contains neither an intergovernmental
mandate nor a mandate that may result in the expenditure of $100
million or more in any year by State, local, and tribal governments, in
the aggregate, or by the private sector. As a result, the analytical
requirements of UMRA do not apply.
H. Review Under the Treasury and General Government Appropriations Act,
1999
Section 654 of the Treasury and General Government Appropriations
Act, 1999 (Pub. L. 105-277) requires Federal agencies to issue a Family
[[Page 34093]]
Policymaking Assessment for any rule that may affect family well-being.
This final determination would not have any impact on the autonomy or
integrity of the family as an institution. Accordingly, DOE has
concluded that it is not necessary to prepare a Family Policymaking
Assessment.
I. Review Under Executive Order 12630
Pursuant to E.O. 12630, ``Governmental Actions and Interference
with Constitutionally Protected Property Rights,'' 53 FR 8859 (Mar. 15,
1988), DOE has determined that this final determination would not
result in any takings that might require compensation under the Fifth
Amendment to the U.S. Constitution.
J. Review Under the Treasury and General Government Appropriations Act,
2001
Section 515 of the Treasury and General Government Appropriations
Act, 2001 (44 U.S.C. 3516 note) provides for Federal agencies to review
most disseminations of information to the public under information
quality guidelines established by each agency pursuant to general
guidelines issued by OMB. OMB's guidelines were published at 67 FR 8452
(Feb. 22, 2002), and DOE's guidelines were published at 67 FR 62446
(Oct. 7, 2002). Pursuant to OMB Memorandum M-19-15, Improving
Implementation of the Information Quality Act (April 24, 2019), DOE
published updated guidelines, which are available at www.energy.gov/sites/prod/files/2019/12/f70/DOE%20Final%20Updated%20IQA%20Guidelines%20Dec%202019.pdf. DOE has
reviewed this final determination under the OMB and DOE guidelines and
has concluded that it is consistent with applicable policies in those
guidelines.
K. Review Under Executive Order 13211
E.O. 13211, ``Actions Concerning Regulations That Significantly
Affect Energy Supply, Distribution, or Use,'' 66 FR 28355 (May 22,
2001), requires Federal agencies to prepare and submit to OIRA at OMB,
a Statement of Energy Effects for any significant energy action. A
``significant energy action'' is defined as any action by an agency
that promulgates or is expected to lead to promulgation of a final
rule, and that (1) is a significant regulatory action under E.O. 12866,
or any successor E.O.; and (2) is likely to have a significant adverse
effect on the supply, distribution, or use of energy, or (3) is
designated by the Administrator of OIRA as a significant energy action.
For any significant energy action, the agency must give a detailed
statement of any adverse effects on energy supply, distribution, or use
should the proposal be implemented, and of reasonable alternatives to
the action and their expected benefits on energy supply, distribution,
and use.
This final determination, which does not amend energy conservation
standards for CPSVs, is not a significant regulatory action under E.O.
12866. Moreover, it would not have a significant adverse effect on the
supply, distribution, or use of energy, nor has it been designated as
such by the Administrator at OIRA. Accordingly, DOE has not prepared a
Statement of Energy Effects.
L. Review Under the Information Quality Bulletin for Peer Review
On December 16, 2004, OMB, in consultation with the Office of
Science and Technology Policy (``OSTP''), issued its Final Information
Quality Bulletin for Peer Review (``the Bulletin''). 70 FR 2664 (Jan.
14, 2005). The Bulletin establishes that certain scientific information
shall be peer reviewed by qualified specialists before it is
disseminated by the Federal government, including influential
scientific information related to agency regulatory actions. The
purpose of the Bulletin is to enhance the quality and credibility of
the Government's scientific information. Under the Bulletin, the energy
conservation standards rulemaking analyses are ``influential scientific
information,'' which the Bulletin defines as ``scientific information
the agency reasonably can determine will have, or does have, a clear
and substantial impact on important public policies or private sector
decisions.'' 70 FR 2664, 2667 (Jan. 14, 2005).
In response to the Bulletin, DOE conducted formal peer reviews of
the energy conservation standards development process and the analyses
that are typically used and has prepared a Peer Review report
pertaining to the energy conservation standards rulemaking
analyses.\34\ Generation of this report involved a rigorous, formal,
and documented evaluation using objective criteria and qualified and
independent reviewers to make a judgment as to the technical/
scientific/business merit, the actual or anticipated results, and the
productivity and management effectiveness of programs and/or projects.
Because available data, models, and technological understanding have
changed since 2007, DOE has engaged with the National Academy of
Sciences to review DOE's analytical methodologies to ascertain whether
modifications are needed to improve the Department's analyses. DOE is
in the process of evaluating the resulting report.\35\
---------------------------------------------------------------------------
\34\ Department of Energy--Office of Energy Efficiency and
Renewable Energy. Energy Conservation Standards Rulemaking Peer
Review Report. 2007. Available at www.energy.gov/eere/buildings/downloads/energy-conservation-standards-rulemaking-peer-review-report-0.
\35\ The report is available at www.nationalacademies.org/our-work/review-of-methods-for-setting-building-and-equipment-performance-standards.
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M. Congressional Notification
As required by 5 U.S.C. 801, DOE will report to Congress on the
promulgation of this rule prior to its effective date. The report will
state that it has been determined that the rule is not a ``major rule''
as defined by 5 U.S.C. 804(2).
VII. Approval of the Office of the Secretary
The Secretary of Energy has approved publication of this final
determination.
Signing Authority
This document of the DOE was signed on May 31, 2022, by Kelly J.
Speakes-Backman, Principal Deputy 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 DOE. This administrative process in no way
alters the legal effect of this document upon publication in the
Federal Register.
Signed in Washington, DC, on June 1, 2022.
Treena V. Garrett,
Federal Register Liaison Officer, U.S. Department of Energy.
[FR Doc. 2022-12107 Filed 6-3-22; 8:45 am]
BILLING CODE 6450-01-P