[Federal Register Volume 63, Number 223 (Thursday, November 19, 1998)]
[Proposed Rules]
[Pages 64344-64370]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-30555]
[[Page 64343]]
_______________________________________________________________________
Part III
Department of Energy
_______________________________________________________________________
Office of Energy Efficiency and Renewable Energy
_______________________________________________________________________
10 CFR Part 430
_______________________________________________________________________
Energy Conservation Program for Consumer Products: Energy Conservation
Standards for Clothes Washers; Proposed Rule
Federal Register / Vol. 63, No. 223 / Thursday, November 19, 1998 /
Proposed Rules
[[Page 64344]]
DEPARTMENT OF ENERGY
Office of Energy Efficiency and Renewable Energy
10 CFR Part 430
[Docket No. EE-RM-94-403]
RIN 1904-AA67
Energy Conservation Program for Consumer Products: Energy
Conservation Standards for Clothes Washers
AGENCY: Office of Energy Efficiency and Renewable Energy, Department of
Energy.
ACTION: Supplemental Advance Notice of Proposed Rulemaking.
-----------------------------------------------------------------------
SUMMARY: The Energy Policy and Conservation Act, as amended (EPCA or
Act), requires the Department of Energy (DOE or Department) to consider
amending the energy conservation standards for certain major household
appliances. This supplemental advance notice of proposed rulemaking
(ANOPR) addresses the requirement of EPCA to consider amending the
energy conservation standards for clothes washers no later than five
years after the date of publication of the previous final rule (May 14,
1991).
The purpose of this supplemental ANOPR is to provide interested
persons with an opportunity to comment on:
First, the product classes that the Department is planning to
analyze;
Second, the analytical framework, models (e.g., the Government
Regulatory Impact Model (GRIM)), and tools (e.g., a Monte Carlo
sampling methodology, and life-cycle-cost (LCC) and national energy
savings (NES) spreadsheets) that the Department expects to use in
performing analyses of the impacts of standards; and
Third, the results of preliminary analyses for life-cycle-cost,
payback and national energy savings contained in the Preliminary
Technical Support Document: Energy Efficiency Standards for Consumer
Products: Clothes Washers (TSD) and summarized in this supplemental
ANOPR.
DATES: Written comments must be received by February 2, 1999. The
Department requests 10 copies of the written comments and, if possible,
a computer disk. The Office of Codes and Standards is currently using
WordPerfect 6.1.
A public hearing will be held on December 14 (1:00-4:00 p.m.) and
15 (9:00 a.m.-4:00 p.m.), 1998. See Supplementary Information for
further details.
ADDRESSES: Written comments should be submitted to: U.S. Department of
Energy, Attn: Brenda Edwards-Jones, Office of Energy Efficiency and
Renewable Energy, ``Energy Efficiency Standards for Consumer
Products,'' (Docket No. EE-RM-94-403), EE-431, Forrestal Building, 1000
Independence Avenue, SW, Room 1J-018, Washington, D.C. 20585, (202)
586-9127.
The public hearing will be held at the U.S. Department of Energy,
Forrestal Building, 1000 Independence Avenue SW, Room 1E-245,
Washington, D.C. 20585.
Copies of the Preliminary Technical Support Document: Energy
Efficiency Standards for Consumer Products: Clothes Washers (TSD) may
also be obtained from: U.S. Department of Energy, Office of Codes and
Standards, 1000 Independence Avenue, SW, Rm 1J-018, Washington, D.C.
20585-0121, (202) 586-9127.
Public Information: The public may access the Freedom of
Information Reading Room, located at the U.S. Department of Energy,
Forrestal Building, 1000 Independence Avenue, SW, Room 1E-190,
Washington, D.C. 20585 between the hours of 9:00 a.m. and 4:00 p.m.,
Monday through Friday, (except Federal holidays). Call (202) 586-6020
for information.
For more information concerning public participation in this
rulemaking proceeding, see section IV, ``Public Comment Procedures,''
of this document.
FOR FURTHER INFORMATION CONTACT: Bryan Berringer, U.S. Department of
Energy, Office of Energy Efficiency and Renewable Energy, Forrestal
Building, Mail Station EE-431, 1000 Independence Avenue, SW,
Washington, D.C. 20585-0121, (202) 586-0371, E-mail:
[email protected]
Eugene Margolis, Esq., U.S. Department of Energy, Office of General
Counsel, Forrestal Building, Mail Station GC-72, 1000 Independence
Avenue, SW, Washington, D.C. 20585, (202) 586-9507, E-mail:
[email protected]
SUPPLEMENTARY INFORMATION:
I. Introduction
A. Authority
B. Background
1. History
2. Test Procedure
3. Process Improvement
II. Clothes Washers Analyses
A. Preliminary Market and Technology Assessment
1. Market Assessment
a. General
b. Product Specific
2. Technology Assessment
a. General
b. Product Specific
3. Preliminary Base Case Shipments Forecast
a. General
b. Product Specific
B. Screening Analysis
1. Product Classes
a. General
b. Product Specific
2. Baseline Unit
a. General
b. Product Specific
3. Design Options/Efficiency Level
a. General
b. Product Specific
4. Proprietary Designs
a. General
b. Product Specific
C. Engineering Analysis
1. Energy Savings Potential and Manufacturing Costs
a. General
b. Product Specific
I. Manufacturing Cost--Reverse Engineering
D. Life-Cycle-Cost (LCC) and Payback Analysis
1. Life-Cycle-Cost Spreadsheet
a. General
b. Product Specific
i. LCC Analysis
ii. Payback Analysis (Distribution of Paybacks)
iii. Rebuttable/Test Procedure Payback
2. Preliminary Results
a. General
b. Product Specific
E. Preliminary National Impact Analyses
1. National Energy Savings (NES) Spreadsheet Model
a. General
b. Product Specific
2. Preliminary Results
a. General
b. Product Specific
3. Indirect Employment Impacts
a. General
b. Product Specific
F. Consumer Analyses
1. Purchase Price
a. General
b. Product Specific
2. Consumer Participation
a. General
b. Product Specific
G. Manufacturer Analysis
1. Industry Cash Flow
a. General
b. Product Specific
2. Manufacturer Sub-Group Analysis
a. General
b. Product Specific
3. Interview Process
a. General
b. Product Specific
H. Competitive Impact Assessment
a. General
b. Product Specific
I. Utility Analysis
1. Proposed Methodology
a. General
b. Product Specific
i. Assumptions
ii. Results
J. Environmental Analysis
[[Page 64345]]
1. Proposed Methodology
a. General
b. Product Specific
K. Regulatory Impact Analysis
III. Proposed Standards Scenarios
IV. Public Comment Procedures
A. Participation in Rulemaking
B. Written Comment Procedures
C. Issues for Public Comment
V. Review Under Executive Order 12866
I. Introduction
A. Authority
Part B of Title III of the Energy Policy and Conservation Act,
Public Law 94-163, as amended by the National Energy Conservation
Policy Act, Public Law 95-619, the National Appliance Energy
Conservation Act of 1987, Public Law 100-12, the National Appliance
Energy Conservation Amendments of 1988, Public Law 100-357, and the
Energy Policy Act of 1992, Public Law 102-486 (the Act or EPCA),
created the Energy Conservation Program for Various Consumer Products
other than Automobiles. 42 U.S.C. 6291-6309.
The National Appliance Energy Conservation Act of 1987 amended the
Act to impose prescriptive standards (design feature requirements) for
clothes washers as part of the energy conservation program for consumer
products. EPCA, Section 325(g), 42 U.S.C. 6295(g). The design feature
requirement that clothes washers shall have an unheated rinse option
was effective for appliances manufactured on or after January 1, 1988.
The Act required the Department to conduct a rulemaking by January 1,
1990, to determine if the above mentioned standards should be amended.
The Act provided that any amendment to the standards would apply to
products manufactured three years after the rulemaking. The Final Rule
was issued on May 14, 1991, and is effective for products manufactured
on or after May 14, 1994 (hereinafter referred to as the May 1991 Final
Rule). 56 FR 22279. The Act also requires the Department to conduct a
subsequent rulemaking no later than five years after the date of
publication of the previous final rule.
Before the Department determines whether or not an energy
conservation standard is economically justified, it must first solicit
comments on the proposed standard. EPCA, Section 325(p), 42 U.S.C.
6295(p). Any new or amended standard is required to be designed so as
to achieve the maximum improvement in energy efficiency that is
technologically feasible and economically justified. EPCA, Section
325(o)(2), 42 U.S.C. 6295(o)(2). After reviewing comments on the
proposal, the Department must then determine that the benefits of the
standard exceed its burdens based to the greatest extent practicable,
on a weighing of the following seven factors:
(1) The economic impact of the standard on the manufacturers and on
the consumers of the products subject to such standard;
(2) The savings in operating costs throughout the estimated average
life of the covered product in the type (or class) compared to any
increase in the price, initial charges, or maintenance expenses for the
covered products that are likely to result directly from the imposition
of the standard;
(3) The total projected amount of energy, or as applicable, water,
savings likely to result directly from the imposition of the standard;
(4) Any lessening of the utility or the performance of the covered
products likely to result from the imposition of 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
imposition of the standard;
(6) The need for national energy and water conservation; and
(7) Other factors the Secretary considers relevant.
B. Background
1. History
The Department initiated a clothes washer rulemaking to determine
if the standards (design feature requirements) imposed by the Act
should be amended. The Department published an Advance Notice of
Proposed Rulemaking (ANOPR) (53 FR 17712, May 18, 1988), a Notice of
Proposed Rulemaking (NOPR) (54 FR 32744, August 9, 1989), and the May
1991 Final Rule. The May 1991 Final Rule mandated performance-based
energy conservation standards for clothes washers. The standards
specified a minimum energy factor (EF) for two of the five classes of
clothes washers (top-loading standard and top-loading compact). The
energy conservation standards in the May 1991 Final Rule are effective
for products manufactured on or after May 14, 1994.
In the May 1991 Final Rule, the Department announced that it was
accelerating the second review of energy efficiency standards for
clothes washers because it became aware, after the rulemaking was
closed, of a design option (horizontal-axis (H-axis) wash tub in a top-
loading washer) in use in Europe that was not included in the proposed
rule and upon which no comment was received. The Department did not
consider establishing a standard based on the top-loading H-axis design
option because this information came to the attention of the Department
after the close of the comment period on the proposed rule and thus was
not subject to public debate.
On September 28, 1990, the Department published an ANOPR for nine
products which included the second review of energy efficiency
standards for clothes washers. 55 FR 39624. In response to that notice,
a number of energy efficiency advocates and appliance manufacturers
requested that the Department delay the second review until a 1995-1996
time frame. The additional time was requested in order to allow
manufacturers time to meet the standards in the May 1991 Final Rule
which became effective on May 14, 1994, and to fully evaluate new, more
energy efficient technologies such as top-loading H-axis clothes
washers. This additional time, manufacturers contended, would enable
them to provide more meaningful and relevant comments on the next,
legislatively required, rulemaking. The Department considered the
request, and by letter, dated February 26, 1992, notified the parties
requesting the delay that the Department had determined that it would
conduct the rulemaking on the later schedule, as requested.
On November 14, 1994, the Department issued an ANOPR to begin the
second review of energy efficiency standards for clothes washers,
dishwashers and clothes dryers. In this ANOPR, the Department presented
the product classes that the Department planned to analyze, the
analytical framework and models that the Department expected to use in
performing analyses, and issues on which the Department was interested
in gathering data. The Department received comments in response to this
ANOPR and also collected data from the manufacturers which was compiled
by the Association of Home Appliance Manufacturers (AHAM) on May 8,
1995, and July 6, 1995. (AHAM, No. 27 and 38.)
2. Test Procedure
Simultaneous with the rulemaking for clothes washer standards, the
Department was also in the process of revising the clothes washer test
procedure. The Department needed to address a number of innovative
technologies for which there were no test procedures. A number of
proposals were published, one on December 22, 1993 (58 FR 67710), and
another on March 23, 1995. 60 FR 15330. In its comments to the March,
1995 proposed rule, AHAM requested that DOE adopt
[[Page 64346]]
an additional new test procedure, based on current consumer habits,
which would be used in considering the revision of the clothes washer
energy conservation standards, and would go into effect upon issuance
of standards.
On April 22, 1996, the Department issued a supplemental NOPR
proposing such a new test procedure, Appendix J1, as well as certain
additional revisions to the currently applicable test procedure in
Appendix J to Subpart B of 10 CFR Part 430. 61 FR 17589. The
supplemental notice was published to seek comments on whether it should
adopt the AHAM recommended test procedure with certain changes. The
Final Rule, published on August 27, 1997, adopted this recommendation.
62 FR 45484. Appendix J1 of the revised test procedure would go into
effect upon issuance of standards. Appendix J1 includes a modified
energy factor (MEF) which replaces the EF. Contrasting with the
previous EF (Energy Factor) descriptor, the MEF descriptor incorporates
clothes dryer energy by consideration of the remaining moisture content
(RMC) of clothes leaving the clothes washer. Other substantive
differences between the test procedures include using different water
temperatures for testing and using cloth loads in J1 and not in J. The
issuance of the Final Rule was a major step in accelerating the
development of clothes washer standards because it provided the basis
upon which the energy and water consumption, as well as the
manufacturing costs would be submitted.
3. Process Improvement
During consideration of the fiscal year 1996 appropriations, there
was considerable debate about the efficacy of the standards program.
The Department of the Interior and Related Agencies Appropriations Act
for Fiscal Year 1996 included a moratorium on proposing or issuing
energy conservation appliance standards for the remainder of Fiscal
Year 1996. See Pub. L. 104-134. Congress advised DOE to correct the
standards-setting process and to bring together stakeholders (such as
manufacturers and environmentalists) for assistance. In September 1995,
the Department announced a formal effort to consider further
improvements to the process used to develop appliance efficiency
standards, calling on energy efficiency groups, manufacturers, trade
associations, state agencies, utilities and other interested parties to
provide input to guide the Department. On July 15, 1996, the Department
published a Final Rule: Procedures for Consideration of New or Revised
Energy Conservation Standards for Consumer Products (hereinafter
referred to as the Process Rule). 61 FR 36974.
The Process Rule outlines the procedural improvements identified by
the interested parties. The process improvement effort included a
review of the: (1) economic models, such as the Manufacturer Analysis
Model and Residential Energy Model; (2) analytical tools, such as the
use of a Monte Carlo sampling methodology; and (3) prioritization of
future rules. The Process Rule includes the accounting for uncertainty
and variability by doing scenario or probability analysis (as detailed
in the Process Rule, 10 CFR 430, Subpart C, Appendix A Secs. 1(f),
4(d)(2), and 10(f)(1)). In addition, an Advisory Committee on Appliance
Energy Efficiency Standards, consisting of a representative group of
these interested parties, was established to make recommendations to
the Secretary regarding the implementation of the Process Rule.
The clothes washer standards rulemaking is the first rule to be
developed under the Process Rule. Although there were two previous
ANOPRs, the Department made a commitment to use the Process Rule to the
extent possible in the development of the new clothes washer standards.
In this supplemental ANOPR, the Department is presenting the framework
by which it will develop the standards. The framework reflects
improvements and steps detailed in the Process Rule. The rulemaking
process is dynamic. If timely new data, models or tools that enhance
the development of standards become available, they will be
incorporated into the rulemaking. For example the Advisory Committee
has made several recommendations and the Department has proposed
responses which are discussed in this supplemental ANOPR.
On November 15, 1996, the Department held a workshop to discuss
proposed design options and a preliminary engineering analysis for
clothes washers. Two reports were presented: ``Draft Report on the
Preliminary Engineering Analysis for Clothes Washers'' and ``Draft
Report on Design Options for Clothes Washer'' (Clothes Washer Public
Workshop, No. 55 B and C). A number of concerns were raised relating to
the application of the Process Rule to the clothes washer rulemaking,
including the need for a review of the manufacturing impact analysis
model and methodologies, and a review of non-regulatory approaches
(Thiele, No. 55L, at 80), whether the manufacturing cost data collected
needed to be updated (Topping, No. 55L, at 52), and whether the
Department ought to continue relying on the old methods of doing the
analysis. (Perlis, No. 55L at 167.)
Responding to comments from the November 1996 workshop concerning
the application of the Process Rule to the clothes washer rulemaking,
the Department developed an analytical framework for appliance
standards rulemaking. It was presented during a clothes washer workshop
held on July 23, 1997. The analytical framework describes the different
analyses (e.g., the LCC, payback and national impact analyses) to be
conducted (See Table 1), the method for conducting them, e.g., the use
of a new LCC and NES spreadsheet and the relationship between the
various analyses. The framework will be tailored to each rulemaking.
Therefore, the same procedures will not necessarily be followed in all
of the rulemakings. For example, although manufacturing cost data needs
to be collected for each rulemaking, the method for collecting the data
can be customized to the specific product.
Table 1.--Clothes Washer Analyses Under Process Rule
------------------------------------------------------------------------
ANOPR NOPR Final rule
------------------------------------------------------------------------
Screening Analysis.......... Revised Pre-ANOPR Revise Analyses (LCC
Analyses (LCC and and National
National Impacts Impacts Analyses).
Analyses)
Engineering Analysis........ Consumer Sub-group
Analysis.
Life-Cycle-Cost Analysis.... Industry Cash-flow
Analysis (GRIM).
Preliminary National Impacts Manufacturer Impact
Analysis. Analysis.
Utility Impact
Analysis.
[[Page 64347]]
Environmental
Analysis.
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The Department is in the process of developing two new spreadsheet
tools in an effort to meet the objectives of the Process Rule. The
first spreadsheet calculates LCC, and payback. The second one
calculates national energy savings (NES). Both tools will be tailored
for specific products. These spreadsheets and the results of the
preliminary analysis were discussed at a clothes washer workshop held
on March 11, 1998.
The Department has reviewed the recommendations made by the
Advisory Committee on Appliance Energy Efficiency Standards on April
21, 1998. (Advisory Committee, No. 96). These recommendations relate to
using the full range of consumer marginal energy rates (CMER) in the
LCC analysis (replacing the use of national average energy prices),
defining a range of energy price futures for each fuel used in the
economic analyses and defining a range of primary energy conversion
factors and associated emission reductions, based on the generation
displaced by energy efficiency standards for each rulemaking. The
Department plans to incorporate the recommendations, when appropriate,
into the various rulemaking analyses.
Today's supplemental ANOPR pertains to clothes washers and utilizes
the framework described in Section II. Although the November, 1994
ANOPR included clothes dryers and dishwashers, clothes washers are
considered a high priority product and have been separated out to
accelerate the rulemaking. Comments previously received for the
September 28, 1990, ANOPR and the November 1994 ANOPR relative to
clothes washers are being addressed in this document, where applicable.
II. Clothes Washers Analyses
This section includes a general introduction to each analysis
section and provides a discussion of issues relative to the clothes
washer rule.
A. Preliminary Market and Technology Assessment
The preliminary market and technology assessment characterizes the
relevant product markets and existing technology options including
prototype designs.
1. Market Assessment
a. General. When initiating a standards rulemaking, the Department
develops information on the present and past industry structure and
market characteristics of the product(s) concerned. This activity
consists of both quantitative and qualitative efforts to assess the
industry and products based on publicly available information. Issues
to be addressed include: (1) manufacturer market share and
characteristics; (2) trends in the number of firms; (3) the financial
situation of manufacturers; (4) existing non-regulatory efficiency
improvement initiatives; and (5) trends in product characteristics and
retail markets. The information collected serves as resource material
to be used throughout the rulemaking.
b. Product Specific. The Department reviewed existing literature
and data sources to get an overall picture of the clothes washer market
in the United States. Information was compiled primarily from industry
publications (trade journals), government agencies, trade organizations
(AHAM) and research reports. The Department gathered the following
information: (1) manufacturer market share; (2) historical shipments;
(3) washer sales by outlet type; (4) top retailers; (5) price
distribution; (6) market saturation; (7) voluntary programs; (8) fuel
distribution of water heaters; and (9) gas and electric sales of dryers
(brand names). Information relating to consumer impact and voluntary
programs also was obtained. The information described is discussed in
the sections where it is used in the analysis. The Preliminary TSD
provides additional information.
2. Technology Assessment
a. General. Information relative to existing technology options and
prototype designs are used as inputs to the screening analysis. In
consultation with interested parties, the Department develops a list of
design options for consideration. All technologically feasible design
options are candidates in this initial assessment.
b. Product Specific. This clothes washer rulemaking analysis was
originally performed using the design option approach. In this
approach, information is gathered on all possible energy saving design
options. The Department gathered design option information from
previous clothes washer analyses, trade publications, industry research
organizations, product brochures from domestic and foreign
manufacturers, and appliance conferences, including the International
Appliance Technical Conference (IATC). Features such as high spin speed
(allowing for lower remaining moisture content) and automatic fill
control became important due to changes in the clothes washer test
procedure. AHAM provided additional information on the energy savings
potential and viability of these designs. The ``Draft Report on Design
Options for Clothes Washers'' and ``Draft Report on the Preliminary
Engineering Analysis for Clothes Washers'' provide details on the
potential technologies. (Clothes Washer Public Workshop, No. 55B and
55C).
The technology assessment began with a study of the efficiencies of
washers currently on the market. To gain greater insight and to begin
creating an efficiency distribution of current product offerings, the
Department used both Appendix J and J1 test procedures on nine
different clothes washers; seven vertical-axis (V-axis) models and two
H-axis models. Products from all five major American manufacturers were
included. The complete results are given in the Preliminary TSD. The
testing program results show a large variation in MEF values are
possible for clothes washers with nearly identical EF ratings. The
Federal Trade Commission (FTC) and manufacturers (through AHAM) also
provided energy efficiency labeling information. Further descriptions
of the most current data are provided in the engineering section of the
Preliminary TSD.
3. Preliminary Base Case Shipments Forecast
a. General. The Department develops a base case forecast of product
shipments in the absence of new standards. This forecast requires an
assessment of the impacts of past and existing non-regulatory efforts
by manufacturers, utilities and other interested parties. DOE considers
information on the actual impacts of such initiatives to date, and also
[[Page 64348]]
considers information presented regarding the possible impacts that any
existing initiatives might have in the future. Such information could
include a demonstration of the steps manufacturers, distribution
channels, utilities or others will take to realize such voluntary
efficiency improvements.
The base case shipments forecast is used as input to the national
impacts analysis, in which a forecast of annual shipments and their
weighted average energy efficiency is needed to the year 2030.
b. Product Specific. In order to develop its base case forecast for
clothes washer sales the Department reviewed: (1) Federal procurement
guidelines; (2) voluntary programs (i.e., utility and consortium
educational materials and/or rebates); (3) government and industry
demonstration and information programs (e.g., Energy Star Program); and
(4) documented discussions with organizations and individuals. Clothes
washer sales will be forecasted by efficiency level for the time period
of 2003 to 2030. This forecast will be more difficult for the clothes
washer rulemaking, because the efficiency factor (EF) was changed to
the modified energy factor (MEF). The Department has limited
information concerning the energy performance of existing product
offerings using the MEF descriptor. Given the vastly different nature
of the variables and testing methods of the current J and future J1
test procedures, the EF values cannot be translated to MEF values. In
addition, the analysis revealed a rapidly evolving market response to
the introduction of new H-axis model clothes washers. In 1997, the
WashWise consortium interviewed manufacturers and asked them to
estimate the market share of H-axis washers in five years. WashWise is
a public/private partnership between Pacific Northwest electric, gas,
water and wastewater utilities, appliance manufacturers and local
retailers. Their goal is to reduce the use of energy and water by
encouraging consumers in Washington, Oregon, Idaho and western Montana
to purchase resource-efficient washers. The results showed a large
divergence of estimates ranging from a low of 5 percent to a high of 25
percent (Coming Clean About Resource-Efficient Clothes Washers: An
Initial WashWise Program and Market Progress Report-Final Report, No.
E98-003, January 28, 1998). (March 11, 1998 Workshop Material, No. 82
OO).
For the purpose of the base case forecast in the preliminary
national impacts analysis, the effect of voluntary programs has been
expressed as the percent of new clothes washers sold each year that
will have efficiencies corresponding to those of H-axis washers. The H-
axis washer is characterized using the data submitted by AHAM for a 35
percent energy reduction from the baseline MEF. The spreadsheet uses
disaggregated values (i.e., water heater energy, dryer energy and
mechanical energy) provided by AHAM. Disaggregated values provided by
AHAM for the baseline washer are also used for the base case forecast.
Calculations based on disaggregated values reflect the efficiencies of
machines actually being sold which may differ from the minimum required
efficiency. The preliminary base case assumes a 1.5 percent share of H-
axis machines in 1995 with a 0.5 percent increase in H-axis sales every
year thereafter, until 2030 (i.e., 19 percent).
The NES spreadsheet allows for changes in the distribution of
efficiencies of clothes washers due to non-regulatory programs. The
user specifies the percent of new clothes washer sales that will
achieve the selected energy reduction (relative to the baseline washer
design) in future years. In later analyses (i.e., the NOPR) the
Department expects to use a distribution of current and forecasted
efficiencies based on the best available information. Information is
still being gathered for this task. The Department seeks comment on
this forecast and welcomes any available information on current product
efficiencies.
B. Screening Analysis
The screening analysis reviews various technologies with regard to
whether they: (a) are impracticable to manufacture, install and
service; (b) have an adverse impact on product utility or product
availability; and (c) have adverse impacts on health and safety. The
screening analysis establishes product classes, baseline units, and
efficiency levels (or combinations of design options) for further
analysis.
1. Product Classes
a. General. Product types are divided into classes using the
following criteria: (a) the type of energy used; (b) capacity; and (c)
performance-related features that affect consumer utility or
efficiency. Different energy efficiency standards will apply to
different product classes. In general, classes are defined using
information obtained in discussions with appliance manufacturers, trade
associations, and other interested parties.
b. Product Specific. The Department's three proposals regarding
clothes washer product classes and a discussion of related comments
follow:
Eliminate the Semi-Automatic Top-Loading, Front-Loading
and Suds Saving classes identified in the May 1991 Final Rule. The
Department is proposing to eliminate certain previously defined
classifications (Semi-Automatic Top-Loading, Front-Loading and Suds
Saving) because they do not offer any added utility which is inherently
less energy efficient and therefore would require protection from the
energy conservation standards. EPCA, Sec. 325(o)(2)(B)(I)(IV), 42
U.S.C. 6295 (o)(2)(B)(I)(IV). In the May 1991 Final Rule, these classes
were not subject to minimum energy conservation standards because they
represented a small portion of the market, and due to a lack of
adequate information to analyze them. However, the 1988 standard
requiring an unheated rinse option is still applicable to these
classes. The Department has further reviewed this topic and believes
that these products should be subject to the minimum energy
conservation standards applicable to either compact or standard clothes
washers.
Divide all products into a Compact (less than 2.0
ft.3 capacity) Class and a Standard (2.0 ft.3 or
greater capacity) Class. In its written comments, Whirlpool asked the
Department to maintain the current efficiency requirement for the
compact class due to the limited potential for energy-efficient
improvements and the small market share for these products. Whirlpool
also indicated that the V-axis compact clothes washer market and the
manufacturing base for these products has changed since the current
standards were developed. The previous stand-alone 1.6 ft.3
compact V-axis clothes washer products have been replaced by a product
that maintains the small cabinet (22'' width) utility and portability
(via castors); however, its basket capacity is slightly larger. Because
of the limited market size, Whirlpool is currently the only American
manufacturer of these products. They also supply them to other
appliance companies for sale under various brand names. For these
reasons, the Department will revise the compact V-axis product class
definition (1.6 ft.3 capacity) to include all V-axis clothes
washers less than 2.0 ft.3 (Whirlpool, No. 69 at 3). The
Department plans to increase the compact class to include all clothes
washers (both V- and H-axis machines) less than 2.0 ft.3 and
seeks comments on this change.
Classify H- and V-Axis clothes washers as compact or
standard rather
[[Page 64349]]
than establish a separate class for these products. Based on current
information, the Department believes that there is no basis for
separate classes for H- and V-axis clothes washers. Recent and near-
term product offerings, and working prototypes of horizontal and
vertical axis clothes washers demonstrate large energy savings while
maintaining important product features. The Department received
comments suggesting that it identify V- and H-axis machines as a single
product class. Whirlpool stated that the DOE's analyses to date and the
recent consumer acceptance in the market of H-axis products confirm the
validity of a single product class, irrespective of the axis. Whirlpool
further stated that the concerns over clothes washer performance,
consumer utility and reliability are unfounded in either principal or
fact. (Whirlpool, No. 93 at 1.) The Natural Resources Defense Council
(NRDC) stated that the ``H-axis'' design option does not affect the
utility of clothes washers and it is not the only design option that
can comply with the standards. According to the NRDC, the evidence does
not support the establishment of different standards even if separate
classes were established. (NRDC, No. 60 at 1.)
However, other commenters feel that the Department should not
reject separate product classes. General Electric Appliances (GEA)
indicated that the Department is proceeding as if all relevant consumer
utilities are met by H-axis products already on the market or by
machines planned for production. GEA further stated that the port of
access is not the only relevant consumer utility that must be
addressed. Many other consumer utilities, including reliability, must
be addressed. (GEA, No. 88 at 2.) The Department seeks additional
comments on this issue and is currently working with stakeholders to
formulate a process to gather additional consumer input on the issues
surrounding clothes washer utility. This process is discussed further
in Section II.F.2.b.
2. Baseline Units
a. General. In order to analyze design options for energy
efficiency improvements, the Department defines a baseline unit. For
each product class, the assumed baseline unit is a unit that minimally
exceeds the existing standard. To determine the characteristics of the
baseline unit in this screening analysis, the Department gathered
information from trade organizations, manufacturers, and consultants
with expertise in specific product types.
b. Product Specific. The Department issued two new test procedures
during the course of this rulemaking: Appendices ``J'' and ``J1.'' 62
FR 45484. (See Section I.B.2. on Test Procedure.) The engineering
analysis for this supplemental ANOPR is based on the Appendix J1 test
procedure. This test procedure calculates a MEF descriptor. Unlike its
EF predecessor, the MEF uses remaining moisture content (RMC) to
account for energy saved due to lower drying times and temperature use
factors (TUFs). Using cloth loads and different water temperatures are
among the many other substantive differences between the J and J1 test
procedures. Given these different testing methods and variables, there
is no computational relationship between the EF and MEF descriptors.
In order to determine the MEF value for the baseline unit, clothes
washer manufacturers were asked to take a representative clothes washer
with an EF as close as possible to 1.18 (current minimum EF) and
perform the new J1 procedure. If no clothes washer was available with
an EF value close to 1.18, they were asked to adjust the water volume,
machine energy, and/or hot water volume to obtain an EF of 1.18. Five
manufacturers (Amana, Frigidaire, GEA, Maytag and Whirlpool) submitted
data to AHAM. AHAM mathematically averaged these values to derive an
industry average MEF value of 0.817 for the baseline unit (based on an
EF=1.18).
3. Design Options/Efficiency Levels
a. General. Following the development of an initial list of design
options during the technology assessment and the screening analysis,
the Department, in consultation with interested parties, will select
appropriate efficiency levels (or combinations of design options) for
manufacturing cost and energy use data collection.
b. Product Specific. This clothes washer rulemaking analysis was
originally performed using the design option approach. The November
1994 ANOPR included a list of design options that could be considered
in determining the potential energy savings from new clothes washers
standards. Data on the cost and energy consumption of these design
options were obtained from U.S. clothes washer manufacturers through
AHAM on May 8, 1995 (AHAM, No. 27). At the July 13, 1995, Workshop, DOE
presented a detailed design option analysis that also ranked the cost
effectiveness of each option under consideration. On July 6, 1995, AHAM
provided additional design option information and comments about the
way the information should be interpreted. (AHAM, No. 38.)
A report using the updated design option information was presented
during a screening workshop held on November 15, 1996. The report
entitled, ``Draft Report on Design Options for Clothes Washers,'' used
criteria laid out in the Process Rule to screen out design options and
preclude them from further analysis. After the workshop, AHAM commented
that the manufacturers did not believe that disclosure of the design
options used to achieve a given efficiency level was practical, had
value or could be released without disclosure of proprietary
information. (AHAM, No. 67 at 1,2.) Since the technical approach to
achieve any particular efficiency level above the baseline likely
involves multiple design options specific to each company, AHAM stated
that its members believed that supplying cost and energy use data for
several energy levels was sufficient. Several efficiency levels were
selected which corresponded approximately to the efficiency levels
calculated using the design-option approach. These efficiency levels
were discussed at the March 11, 1998, workshop.
It was agreed that the efficiency level approach would be used.
Levels were established and utilized in the engineering analysis (See
Section II.c.1.b).
4. Proprietary Designs
a. General. In its analysis, the Department considers all design
options that are commercially available or present in a working
prototype, including proprietary designs. Proprietary designs are fully
considered in the Department's engineering and economic analyses.
b. Product Specific. At the November 15, 1996, workshop, it was
acknowledged that Whirlpool had four patented proprietary prototype
designs that used V- and H-axis platforms. Whirlpool indicated that
these were working prototypes. (Whirlpool, No. 55L at 77.) On November
29, 1996, the Department sent a letter to the stakeholders with the
patent numbers for the Whirlpool designs as requested during the
November workshop. (DOE, No. 57.)
In response to a Department request to obtain more information,
AHAM stated that it was inappropriate for its members to comment on the
cost/efficiencies of the Whirlpool designs. AHAM asked that prior to
seeking cost/efficiency information on these designs, DOE should verify
that these clothes washer designs were viable, were able to perform
their intended function and had
[[Page 64350]]
usage patterns and lifetimes similar to existing clothes washers. (AHAM
No. 67 at 2.) At the July 1997 workshop, GEA expressed concern that the
Department had not verified that the Whirlpool designs met consumer
utility performance requirements. (GEA, No. 72L at 210.)
In response to these concerns, the Department witnessed efficiency
testing of the prototype design conducted according to the revised DOE
clothes washer test procedure. The results of the testing demonstrated
that the prototype could reach efficiency levels comparable to H-axis
efficiency levels. The Department also witnessed other performance
tests on the Whirlpool design. Tests performed include: (1) cleanliness
testing, using several different stains; (2) gentleness of action
testing; and (3) and rinsability. The test results were benchmarked by
conducting identical tests on two other clothes washers: A top selling
V-axis model and a top selling H-axis model. The tests were conducted
twice for each machine using a seven pound test load. The American
Standards Testing Material ASTM-D4265 standard was used for evaluating
stain and soil removal. Nine different types of stained swatches were
evaluated, six samples of each stain. The cloth used was specified in
the AHAM test methods in addition to various other cloths. The
gentleness testing was conducted using a material with a five hole
pattern cut into the swatches and was evaluated based on the number of
strands present after washing. The rinsability was determined by
placing the washed cloths into a high speed exacter and analyzing the
residual detergent in the water exacted. In all cases, the performance
of the Whirlpool design fell within the range of results obtained for
the other clothes washers tested.
The Department will consider the Whirlpool prototype design in this
rulemaking in the engineering and economic analyses. However, since the
manufacturing costs estimates for the prototype are derived using a
different approach than for other efficiency levels cost estimates, the
economic analysis will be conducted separately. Further discussion on
the costing of the Whirlpool prototype can be found in Section
II.C.1.b.i.
C. Engineering Analysis
The engineering analysis first determines the maximum
technologically feasible energy efficiency level and then develops
cost-efficiency relationships to show the manufacturer costs of
achieving increased efficiency.
1. Energy Savings Potential and Manufacturing Costs
a. General. The engineering analysis estimates the energy savings
potential of the individual or combinations of design options not
eliminated in the previous screening analysis. The Department, in
consultation with stakeholders, uses the most appropriate means
available to determine energy consumption, including an overall system
approach or engineering modeling. Ranges and uncertainties in
performance are established. The energy savings measures developed in
the engineering analysis are combined with end-user costs in the LCC
analysis.
The engineering analysis involves adding individual or combinations
of design options to the baseline unit. A cost-efficiency relationship
is developed to show the manufacturer cost of achieving increased
efficiency. The efficiency levels corresponding to various design
option combinations are determined from manufacturer data submittals
and from DOE engineering calculations.
The Act requires that, in considering any new or amended standards,
the Department must consider those that ``shall be designed to achieve
the maximum improvement in energy efficiency that the Secretary
determines is technologically feasible and economically justified.''
EPCA, Sec. 325(l)(2)(A), 42 U.S.C. 6295(l)(2)(A). Therefore an
essential role of the engineering analysis consists of identifying the
maximum technologically feasible level. The maximum technologically
feasible level is one that can be reached by the addition of efficiency
improvements and/or design options, both commercially feasible and in
prototypes, to the baseline units. The Department believes that the
design options comprising the maximum technologically feasible level
must have been physically demonstrated in at least a prototype form to
be considered technologically feasible.
Three methodologies can be used to generate the manufacturing costs
needed for the engineering analysis. These methods include: (1) The
design-option approach, reporting the incremental costs of adding
design options to a baseline model; (2) the efficiency-level approach,
reporting relative costs of achieving energy efficiency improvements;
and/or (3) the cost-assessment approach which requires a ``bottoms-up''
manufacturing cost assessment based on a detailed bill of materials.
The Department considers public comments in determining the best
approach for a rulemaking.
If the efficiency-level approach is used, the Department will
select appropriate efficiency levels for data collection on the basis
of: (1) Energy savings potential identified from engineering models;
(2) observation of existing products on the market; and/or (3)
information obtained for the technology assessment. Stakeholders will
be consulted on the efficiency level selection.
The use of a design-option approach provides useful information
such as the identification of potential technological paths
manufacturers could use to achieve increased product energy efficiency.
It also allows the use of engineering models to simulate the energy
consumption of different design configurations under various user
profiles and applications. However, the Department recognizes that the
manufacturer cost information derived in the design-option approach
does not reflect the variability in design strategies and cost
structures that can exist between manufacturers. Therefore, the
Department may derive additional manufacturing cost estimates from
other approaches developed in consultation with interested parties.
The cost-assessment approach can be used to supplement the
efficiency-level or design option approaches under special
circumstances when data is not publicly available because of
proprietary reasons, the product is a prototype and/or the data is not
provided by the manufacturers.
b. Product Specific. At the workshop held on November 15, 1996, a
report entitled, ``Draft Report on the Preliminary Engineering Analysis
for Clothes Washers,'' was presented. This report analyzed the
engineering data submitted by AHAM concerning the manufacturing cost
and energy savings potential for different design strategies that
combined design options. Stakeholders and peer reviewers at the
workshop provided guidance on how the engineering analysis could be
improved. Some manufacturers requested that the Department accept new
data in replacement of the data originally supplied. (AHAM, No. 6 at 1;
Whirlpool, No. 65 at 2.) New cost and performance data was available
owing to recent experience in manufacturing efficient designs. It was
noted that the existing data did not, as the process rule describes,
consider uncertainty and variability in manufacturing costs. (Perlis,
No. 55L at 161-5.) Additionally, peer reviewers commented that cost
effectiveness is manufacturer specific and suggested that the
Department
[[Page 64351]]
consider soliciting from manufacturers cost-efficiency curves that
leave them free to select optimal design strategies. (Topping, No. 55H
at 6.) (Gordon, No. 55I at 5.)
Following the workshop, the Department received a comment from a
manufacturer which recommended that further engineering analyses for
the rulemaking be focused on energy efficiency (MEF) levels and not on
design options. Whirlpool also stated that cost-efficiency curves
should be developed for the industry. (Whirlpool, No. 65, at 5).
Whirlpool remarked that a cost-efficiency approach, which shows
manufacturer costs for increased efficiency, is the most suitable
because it provides a high degree of design confidentiality. It
recommended that this method be used in the engineering analysis, and
that the Department should abandon the practice of adding design
options or combinations of options to the baseline clothes washer.
(Whirlpool, No. 69 at 3). Whirlpool recommended that the data base for
the engineering analysis be updated where large variabilities and/or
uncertainties existed. They noted that the market has continued to
evolve as many new products had been introduced since the development
of the current database. (Whirlpool, No. 92 at 3).
Responding to DOE's request for comments on an approach to
gathering data for the engineering analysis, AHAM stated that its
members believed that supplying cost and energy use data for several
energy levels was sufficient. These levels would include baseline and
efficiencies of 5, 10, 15, 20, 35, 40, 45 and 50 percent above
baseline. The efficiencies of 5, 10, 15 and 20 percent would apply to a
V-axis clothes washer and, the efficiencies of 35, 40, 45, and 50
percent would apply to a H-axis clothes washer. (AHAM, No. 67 at 1).
These efficiency levels were selected to correspond approximately to
the efficiency levels calculated using the design-option approach. The
Department and the manufacturers later agreed to include data for V-
axis clothes washers 25 percent above the baseline to adjust for a
revision to the baseline MEF from .88 to .817. A complete description
of the data collection methodology including a discussion of
uncertainty and variability in manufacturing costs, as well as the
guidelines used to calculate manufacturing costs is included in the
Preliminary TSD.
ACEEE raised concerns relative to the manufacturer cost data
provided by AHAM. ACEEE stated that, in general, the average
incremental retail costs for high-efficiency washers (35 percent
improvement and up) seemed a bit too high based on discussions that it
had with a variety of manufacturers and clothes washer technical
experts. More specifically, ACEEE expressed concerns that these data
show a substantial price jump between the 40 percent and 45 percent
improvement cases. ACEEE believes that the 45 percent improvement level
can be met with standard H-axis machines with very small incremental
costs relative to the 40 percent improvement H-axis machines. It
recommends that DOE collect additional data on 40 percent and 45
percent improvement machines, including reverse engineering and
revising the previous measure-based engineering analysis. (ACEEE, No.
94 at 1).
The Department notes that the costs reported by AHAM at efficiency
levels 40 percent and 45 percent are a representation of industry cost
submitals for these levels. Also, given the changes in the test
procedure, previous data from the design option engineering analysis
cannot be used without causing significant concerns about accuracy and
relevance. The results of the cost assessment summarized in Section
II.C.1.b.i. will however provide a secondary source of manufacturing
costs for several efficiency levels.
At the March 11, 1998, workshop, the Department requested cost and
consumption data for V-axis clothes washers at efficiencies of 30, 35,
and 40 percent above the baseline. The Department decided to make this
request after receiving the results of a third-party independent
testing that was conducted on top selling clothes washer models
manufactured and sold in the U.S. This testing was held in order to
determine if there was a correlation between the EF and the MEF
descriptors defined in the test procedure (Appendix J and J1) Final
Rule for clothes washers. 62 FR 45484. Since the test procedure was
recently finalized, there was no information available on the MEF
values for clothes washers currently on the market. This information is
needed to determine a distribution of shipments. The preliminary test
results indicated that there were at least two currently available V-
axis models on the market that could reach efficiency levels near a 30
percent improvement level.
AHAM responded to this request for additional information on April
3 and 8, 1998. AHAM commented that the testing performed for DOE
reflects an incorrect assessment of energy efficiency on current models
and indicated that manufacturers could not achieve these levels with
traditional V-axis clothes washers. (AHAM, No. 84 and 86). Based on
follow-up testing conducted for DOE, there appears to be a significant
variation in the RMC values obtained in tests even for clothes washers
of the same model. DOE plans to further review this issue. Since the
two models approaching a 30 percent improvement in efficiency were
``super capacity'' models, the Department will try to determine if
capacity or volume effects the maximum achievable efficiency
improvement in V-axis designs. The Department seeks comment on this
issue.
i. Manufacturing Cost--Reverse Engineering. At the November 1996
workshop, it was acknowledged that Whirlpool had four patented
proprietary, working prototype designs which included both vertical and
horizontal axis platforms. (Whirlpool, No. 55L at 77). During the
workshop, Whirlpool asked that the designs be included in the
rulemaking analysis. It also indicated that it would be appropriate to
conduct an independent study to estimate the manufacturing costs of the
new designs. (Whirlpool, No. 55L at 169). Whirlpool did not see the
practicality of each manufacturer estimating the cost of the Whirlpool
designs. Estimates by other manufacturers would only be based on patent
information. Therefore it could not be expected to produce consistency
in approach or a high degree of accuracy. (Whirlpool, No. 69 at 4).
Maytag commented that the Whirlpool designs needed to be subjected
to a full and complete engineering and cost analysis by DOE. Maytag
requested that all manufacturers be given the opportunity to
participate in this process since the cost of applying these designs to
a manufacturer's own basic washer design varies greatly from
manufacturer to manufacturer. (Maytag, No. 64 at 1). GEA also stated
that the analysis needed to be expanded to cover the designs disclosed
by Whirlpool. It further stated that only a revised method focusing on
the technical know-how, manufacturing capabilities and economic
strengths of individual manufacturers would permit the proper
evaluation of the impacts on ``atypical manufacturers.'' (GEA, No. 63
at 7).
In response the Department conducted a ``tear-down'' manufacturing
cost assessment of one of the V-axis Whirlpool prototypes. The main
objective of the manufacturing cost assessment is to quantify the
differential manufacturing costs of producing high efficiency clothes
washers based on (1) the Whirlpool proprietary V-axis design, and (2)
commercially available V- and
[[Page 64352]]
H-axis designs. The overall project consists of two phases:
Phase I provides detailed cost estimates for two state-of-art, high
volume, V-axis washers as a baseline for further analysis. The major
objective of this phase is to obtain stakeholder comment on the costing
methodology and baseline costs. Preliminary results of Phase I were
presented during the March 1998 workshop. The Phase I methodology and
final results are presented in the Preliminary TSD.
Phase II will develop a differential cost estimate for the
proprietary V-axis design and for two commercially-available H-axis
clothes washers, relative to the baseline clothes washers evaluated in
Phase I. This phase is currently in progress. Preliminary results will
be made available for public review prior to publishing the NOPR.
Raytheon Appliances (now Alliance Laundry Systems LLC) had
questions regarding a number of assumptions in the reverse engineering
analysis. These assumptions concerned work shifts per day, equipment
depreciation life, capacity utilization and production volume. After
considering Raytheon's comments, the Department modified some of the
assumptions used in the manufacturing cost assessment approach.
As suggested by Raytheon, the assumption of 2.5 shifts per day was
reduced to 2.0 shifts per day. The Department agrees that 2.5 shifts
per day is high based on additional visits to several clothes washer
manufacturing plants and further discussions with manufacturing staff
in the industry. Originally, 2.5 shifts per day was chosen based on an
average of 2 shifts per day for assembly operations and 3.0 shifts per
day for fabrication processes (pressing, machining, injection molding,
etc.). The baseline manufacturing cost analysis has been revised to
reflect an average of 2.0 shifts per day for the plant.
The assumption of a 15-17 year lifetime for baseline equipment
depreciation life was not changed to 5-7 years as suggested. Based on
the Department's industry structure analysis from publicly available
sources, the Department believes a 5-7 year life would be considered
too short for an average equipment depreciation life. Although some
equipment does have a relatively short service life (hand tools
1 year), an average of 15-17 years is more appropriate for
the overall plant and equipment. In the analysis, various equipment
depreciation lives are used depending on the specific type of
equipment. When summarizing the total investment, the overall average
is approximately 15 years.
As suggested by Raytheon, the 100 percent capacity utilization
assumption was reduced. However it was reduced to 95 percent not 80-90
percent as proposed. Although 100 percent utilization might seem
unrealistic, many operations run at or above capacity, depending on
current market conditions. Since utilization is dependent on the
market, the Department has reduced the utilization to 95 percent to
reflect the less than ideal situation. The Department did not lower the
utilization to 80 or 90 percent since current market conditions for
most manufacturers would indicate higher production. Furthermore, the
theoretical ``greenfield'' (entirely new) plant for the baseline unit
assumed that construction and sizing were based on current sales and
appropriate market forecasts.
The current assumption of a production rate of 1.5 million units
per year remains unchanged even though it does not represent a smaller
manufacturer such as Raytheon Appliances. The Department is aware that
1.5 million units is not representative of the smaller (or larger)
manufacturers, but does represent a median volume. At this time, the
Department is keeping the production volume for the ``greenfield''
plant at 1.5 million units per year; however, DOE will be investigating
an alternative scenario for a low volume (<500,000 units="" per="" year)="" manufacturer="" such="" as="" raytheon="" appliances.="" it="" is="" important="" to="" note="" that="" the="" baseline="" value="" will="" be="" used="" to="" calculate="" a="" differential="" cost="" for="" production="" of="" a="" higher="" efficiency="" washer="" at="" the="" same="" production="" volume.="" in="" summary,="" the="" department="" has="" considered="" all="" the="" suggested="" corrections="" and="" made="" changes="" to="" the="" baseline="" analysis="" as="" deemed="" appropriate="" at="" this="" time="" (2.5="" shifts="" reduced="" to="" 2.0="" shifts,="" and="" 100="" percent="" capacity="" utilization="" reduced="" to="" 95="" percent).="" for="" a="" baseline="" unit,="" the="" department's="" industry="" analysis="" is="" based="" on="" public="" available="" data="" (e.g.,="" census="" of="" manufacturers="" by="" u.s.="" department="" of="" commerce)="" which="" indicates="" that="" equipment="" depreciation="" life="" should="" remain="" unchanged.="" the="" department="" will="" be="" investigating="" the="" effects="" of="" lower="" production="" volumes="" in="" the="" nopr="" analysis.="" a="" sensitivity="" analysis="" was="" used="" to="" evaluate="" each="" of="" the="" assumptions="" commented="" on="" by="" raytheon.="" the="" impact="" of="" these="" changes="" on="" the="" estimate="" of="" baseline="" cost="" is="" approximately="" 3="" to="" 4="" percent.="" d.="" life-cycle-cost="" (lcc)="" and="" payback="" analysis="" in="" determining="" economic="" justification,="" the="" act="" directs="" the="" department="" to="" consider="" a="" number="" of="" different="" factors,="" including="" the="" economic="" impact="" of="" potential="" standards="" on="" consumers.="" the="" act="" also="" establishes="" a="" rebuttable="" presumption="" that="" a="" standard="" is="" economically="" justified="" if="" the="" additional="" product="" costs="" attributed="" to="" the="" standard="" are="" less="" than="" three="" times="" the="" value="" of="" the="" first="" year="" energy="" cost="" savings.="" epca,="" sec.="" 325(o)(2)(b)(iii),="" 42="" u.s.c.="" 6295="" (o)(2)(b)(iii).="" to="" consider="" these="" requirements="" the="" department="" calculates="" changes="" in="" lccs="" to="" the="" consumers="" that="" are="" likely="" to="" result="" from="" the="" proposed="" standard="" and="" two="" different="" simple="" payback="" periods:="" distributions="" of="" payback="" periods="" and="" a="" payback="" period="" (which="" follows="" the="" test="" procedure="" without="" variation),="" calculated="" for="" purposes="" of="" the="" rebuttable="" presumption="" clause.="" the="" effect="" of="" standards="" on="" individual="" consumers="" includes="" a="" change="" in="" the="" operating="" expense="" (usually="" decreased)="" and="" a="" change="" in="" the="" purchase="" price="" (usually="" increased).="" the="" net="" effect="" is="" analyzed="" by="" calculating="" the="" change="" in="" lcc="" as="" compared="" to="" the="" base="" case="" (the="" current="" analysis="" compares="" the="" lcc="" of="" a="" new="" efficiency="" level="" to="" the="" aham="" baseline).="" inputs="" to="" the="" lcc="" calculation="" include="" the="" installed="" consumer="" cost="" (purchase="" price="" plus="" installation="" cost),="" operating="" expenses="" (energy,="" water,="" sewer,="" and="" maintenance="" costs),="" lifetime="" of="" the="" appliance,="" and="" a="" discount="" rate.="" the="" lcc="" and="" one="" of="" the="" payback="" periods="" (distribution="" payback)="" are="" calculated="" using="" the="" lcc="" spreadsheet="" model="" developed="" in="" microsoft="" excel="" for="" windows="" 95,="" combined="" with="" crystal="" ball="" (a="" commercially="" available="" software="" program)="" based="" on="" actual="" distributions="" of="" input="" variables.="" the="" second="" payback,="" test="" procedure="" payback,="" is="" not="" calculated="" using="" crystal="" ball="" and="" input="" variable="" distributions,="" but="" is="" instead="" based="" on="" the="" spreadsheet="" option="" allowing="" single="" input="" values.="" based="" on="" the="" results="" of="" the="" lcc="" analysis,="" doe="" selects="" candidate="" standard="" levels="" for="" a="" more="" detailed="" analysis.="" the="" range="" of="" candidate="" standard="" levels="" typically="" includes:="" (1)="" the="" most="" energy-efficient="" combination="" of="" design="" options="" or="" most="" energy-efficient="" level;="" (2)="" the="" combination="" of="" design="" options="" or="" efficiency="" level="" with="" the="" lowest="" lcc;="" and="" (3)="" the="" combination="" of="" design="" options="" or="" efficiency="" levels="" with="" a="" payback="" period="" of="" not="" more="" than="" three="" years.="" additionally,="" candidate="" standard="" levels="" that="" incorporate="" noteworthy="" technologies="" or="" fill="" in="" large="" gaps="" [[page="" 64353]]="" between="" efficiency="" levels="" of="" other="" candidate="" standards="" levels="" may="" be="" selected.="" the="" payback,="" for="" purposes="" of="" the="" rebuttable="" presumption="" test,="" attempts="" to="" capture="" the="" payback="" to="" consumers="" affected="" if="" a="" new="" standard="" was="" promulgated.="" it="" compares="" the="" cost="" and="" energy="" use="" of="" clothes="" washers="" consumers="" would="" buy="" in="" the="" year="" the="" standard="" becomes="" effective="" with="" what="" they="" would="" buy="" without="" a="" new="" efficiency="" standard.="" in="" some="" cases="" this="" means="" comparing="" the="" baseline="" energy="" efficiency="" and="" cost="" with="" the="" trial="" standard="" level,="" in="" other="" cases="" the="" trial="" standard="" level="" would="" also="" be="" compared="" to="" a="" higher="" efficiency="" washer="" purchased="" without="" new="" standards="" (but="" at="" a="" lower="" efficiency="" than="" the="" trial="" standard="" level).="" a="" weighted="" average="" of="" these="" payback="" periods,="" in="" the="" year="" a="" new="" standard="" level="" would="" take="" effect,="" is="" considered="" the="" payback="" for="" purposes="" of="" the="" rebuttable="" presumption="" clause.="" in="" future="" analyses="" (for="" the="" nopr),="" all="" of="" the="" consumer="" economic="" analysis="" discussed="" above="" will="" be="" based="" on="" a="" projected="" distribution="" of="" efficiencies="" sold="" at="" the="" time="" a="" new="" standard="" becomes="" effective="" (i.e.,="" the="" base="" case).="" in="" order="" to="" compare="" the="" lccs="" to="" the="" distribution="" of="" washer="" efficiencies,="" the="" lcc="" spreadsheet="" will="" be="" modified="" to="" enable="" the="" user="" to="" input="" the="" market="" share="" of="" each="" washer="" efficiency="" level="" in="" 5="" percent="" increments.="" 1.="" life-cycle-cost="" spreadsheet="" model="" a.="" general.="" this="" section="" describes="" the="" lcc="" spreadsheet="" model="" used="" for="" analyzing="" the="" economic="" impacts="" of="" possible="" standards="" on="" individual="" consumers.="" the="" lcc="" analysis="" is="" conducted="" using="" a="" spreadsheet="" model="" developed="" in="" microsoft="" excel="" for="" windows="" 95,="" combined="" with="" crystal="" ball="" (a="" commercially="" available="" software="" program).="" the="" model="" uses="" a="" monte="" carlo="" simulation="" to="" perform="" the="" analysis="" considering="" uncertainty="" and="" variability.="" the="" spreadsheet="" is="" organized="" so="" that="" ranges="" (distributions)="" can="" be="" entered="" for="" each="" input="" variable="" needed="" to="" perform="" the="" calculations.="" in="" recognition="" that="" each="" household="" is="" unique,="" variability="" is="" explicitly="" accounted="" for="" in="" the="" model="" by="" performing="" the="" lcc="" calculation="" for="" a="" large="" number="" of="" individual="" households.="" a="" monte="" carlo="" simulation="" is="" used="" to="" sample="" individual="" households="" from="" the="" energy="" information="" administration's="" (eia)="" residential="" energy="" consumption="" survey="" (recs)="" database.="" the="" results="" are="" expressed="" as="" the="" number="" of="" households="" having="" impacts="" of="" particular="" magnitudes.="" the="" statistics="" provided="" by="" the="" 1993="" recs="" are="" based="" on="" a="" sample="" of="" 7,111="" households="" from="" the="" population="" of="" all="" primary,="" occupied="" residential="" housing="" units="" in="" the="" united="" states.="" each="" household="" is="" weighted="" so="" that="" the="" data="" properly="" represents="" the="" 96.6="" million="" households="" in="" the="" 50="" states="" and="" the="" district="" of="" columbia.="" the="" spreadsheet="" has="" the="" capability="" to="" sample="" only="" subsets="" of="" households="" for="" the="" analysis="" of="" particular="" sub-populations,="" for="" example,="" low="" income="" households.="" it="" also="" has="" the="" capability="" of="" isolating="" households="" in="" the="" recs="" database="" that="" have="" a="" particular="" fuel="" combination="" of="" appliances="" (e.g.,="" in="" the="" case="" of="" water="" heating="" and="" clothes="" drying="" the="" possible="" combinations="" of="" appliances="" include="" electric/electric,="" electric/gas,="" gas/electric,="" gas/gas,="" oil/electric,="" or="" oil/gas).="" alternately="" a="" combination="" of="" fuel="" types,="" weighted="" to="" observed="" proportions="" can="" be="" specified,="" representing="" the="" entire="" population.="" the="" spreadsheet="" samples="" subsets="" of="" the="" u.s.="" population="" from="" the="" recs="" to="" calculate="" the="" effect="" on="" sub-group="" populations.="" a="" description="" of="" the="" methodology="" and="" contents="" of="" the="" recs="" database="" is="" contained="" in="" the="" preliminary="" tsd.="" major="" inputs="" to="" the="" lcc="" analysis="" are:="" (1)="" consumer="" expense="" for="" purchasing="" an="" appliance;="" (2)="" the="" period="" of="" time="" the="" appliance="" will="" provide="" service="" (lifetime);="" (3)="" the="" value="" to="" a="" residential="" customer="" of="" saving="" electricity,="" expressed="" as="" cents="" per="" kilowatt-hour;="" (4)="" the="" value="" to="" a="" residential="" customer="" of="" saving="" gas,="" expressed="" as="" dollars="" per="" million="" british="" thermal="" unit="" (btu);="" (5)="" the="" residential="" price="" of="" distillate;="" (6)="" energy="" and/or="" water="" consumption;="" (7)="" residential="" customer="" rate="" for="" water="" and="" wastewater="" (sewer)($/thousand="" gallons),="" excluding="" fixed="" charges;="" and="" (8)="" the="" rate="" at="" which="" expenditures="" (cash="" flows)="" are="" discounted="" to="" establish="" their="" present="" value.="" a="" more="" detailed="" discussion="" of="" the="" spreadsheet="" is="" contained="" in="" the="" preliminary="" tsd.="" for="" lcc="" analyses="" the="" advisory="" committee="" recommended="" that="" doe="" use="" the="" full="" range="" of="" consumer="" marginal="" energy="" rates="" instead="" of="" national="" average="" energy="" prices.="" absent="" consumer="" marginal="" energy="" rate="" information,="" the="" committee="" recommended="" doe="" use="" a="" range="" of="" net="" energy="" rates,="" calculated="" by="" removing="" all="" fixed="" charges.="" the="" department="" agrees="" the="" use="" of="" marginal="" energy="" rates="" would="" improve="" the="" accuracy="" of="" the="" analysis="" (lcc="" and="" nes)="" and="" will="" attempt="" to="" determine="" marginal="" rates.="" the="" department="" believes="" it="" is="" unknown="" at="" this="" point="" if="" removing="" fixed="" costs="" is="" more="" or="" less="" reflective="" of="" marginal="" rates="" and="" does="" not="" intend="" to="" take="" this="" intermediate="" step.="" in="" order="" to="" develop="" consumer="" marginal="" energy="" rates,="" the="" department="" proposes="" to="" collect="" data="" on="" current="" rate="" schedules="" and="" energy="" consumption.="" these="" rates="" will="" be="" assigned="" to="" a="" national="" sample="" of="" buildings,="" weighted="" to="" represent="" the="" total="" u.s.="" population="" of="" buildings.="" the="" result="" will="" be="" a="" weighted="" distribution="" of="" consumption="" by="" marginal="" rates.="" this="" approach="" will="" be="" applied="" for="" residential="" and="" commercial="" customers.="" doe="" proposes="" to="" obtain="" a="" sample="" of="" residential="" buildings="" from="" existing="" surveys,="" such="" as="" the="" recs="" or="" from="" a="" commercially="" available="" database.="" the="" commercially="" available="" database="" is="" more="" expensive,="" but="" has="" significant="" added="" value="" in="" terms="" of="" assigning="" the="" buildings="" to="" states="" or="" to="" utilities,="" including="" a="" broader="" sample="" of="" the="" population,="" and="" permitting="" stratification="" of="" this="" larger="" sample="" to="" distinguish="" among="" some="" subpopulations.="" each="" building="" will="" be="" assigned="" to="" a="" geographic="" region="" (e.g.,="" state="" or="" utility="" service="" territory).="" energy="" consumption="" by="" month="" will="" be="" included="" in="" the="" database="" for="" each="" building,="" in="" order="" to="" treat="" seasonal="" changes="" in="" consumption="" and="" rates.="" peak="" demand="" will="" be="" included="" for="" commercial="" buildings.="" recent="" federal="" surveys="" (recs,="" commercial="" building="" energy="" consumption="" survey="" (cbecs))="" gather="" information="" by="" fuel="" on="" annual="" energy="" consumption="" and="" total="" expenditures.="" total="" expenditures="" included="" customer="" and="" other="" fixed="" charges,="" energy="" rates,="" demand="" charges,="" taxes,="" etc.="" but="" these="" are="" not="" tabulated="" separately="" from="" each="" other.="" these="" surveys="" gathered="" customer="" bills="" but="" did="" not="" extract="" information="" on="" rate="" schedules,="" fixed="" charges="" or="" marginal="" rates.="" the="" department="" proposes="" to="" explore="" the="" feasibility="" of="" extracting="" historical="" information="" on="" rate="" schedules,="" including="" the="" relationship="" between="" fixed="" charges="" and="" marginal="" rates="" to="" average="" prices.="" this="" effort,="" if="" successful,="" will="" provide="" information="" about="" the="" extent="" to="" which="" marginal="" rates="" differ="" from="" average="" prices,="" or="" from="" average="" prices="" less="" fixed="" charges.="" given="" restructuring="" of="" parts="" of="" the="" energy="" supply="" sector,="" customers="" may="" have="" more="" than="" one="" bill="" (e.g.,="" one="" from="" the="" distribution="" company,="" and="" one="" or="" more="" from="" generators="" or="" suppliers).="" to="" capture="" complete="" information,="" future="" surveys="" are="" expected="" to="" gather="" energy="" pricing="" information="" directly="" from="" customers,="" rather="" than="" from="" utilities="" or="" local="" distribution="" companies.="" the="" most="" efficient="" means="" to="" collect="" energy="" pricing="" information="" in="" the="" future="" involves="" changing="" the="" current="" processing="" of="" the="" billing="" information="" so="" as="" to="" gather="" more="" detail="" from="" the="" bills,="" to="" include="" consumption="" by="" month="" and="" pricing="" [[page="" 64354]]="" information.="" the="" pricing="" information="" would="" have="" for="" each="" customer="" the="" rate="" schedule="" including="" the="" marginal="" rates,="" fixed="" charges,="" demand="" charges="" for="" commercial="" and="" industrial="" customers,="" or="" time-of-use="" rates="" where="" applicable.="" the="" department="" will="" express="" the="" need="" for="" these="" data="" in="" discussions="" with="" eia="" concerning="" the="" design="" of="" future="" surveys.="" residential="" electricity="" rate="" schedules="" will="" be="" collected="" from="" federal="" databases="" where="" available,="" or="" state="" regulatory="" agencies.="" the="" information="" obtained="" for="" each="" rate="" schedule="" will="" include="" any="" fixed="" charges="" (customer="" charges,="" etc.),="" block="" structure,="" and="" rate="" per="" kilowatt-hour="" (kwh)="" by="" block.="" information="" from="" utilities="" or="" local="" distribution="" companies="" will="" be="" examined="" to="" determine:="" confirmation="" of="" the="" set="" of="" rate="" schedules,="" the="" number="" of="" customers="" by="" state="" using="" each="" rate="" schedule,="" the="" total="" electricity="" sales="" by="" state="" by="" rate="" schedule,="" and="" (if="" possible)="" monthly="" electricity="" sales="" by="" state="" by="" rate="" schedule.="" residential="" natural="" gas="" rate="" schedules="" will="" be="" collected="" from="" federal="" databases="" where="" available,="" or="" state="" regulatory="" agencies.="" the="" information="" obtained="" for="" each="" rate="" schedule="" will="" include="" any="" fixed="" charges="" (customer="" charges,="" etc.),="" block="" structure,="" and="" rate="" per="" therm="" by="" block.="" information="" from="" utilities="" or="" local="" distribution="" companies="" will="" be="" examined="" to="" determine:="" confirmation="" of="" the="" set="" of="" rate="" schedules,="" the="" number="" of="" customers="" by="" state="" using="" each="" rate="" schedule,="" the="" total="" gas="" sales="" by="" state="" by="" rate="" schedule,="" and="" (if="" possible)="" monthly="" gas="" sales="" by="" state="" by="" rate="" schedule.="" commercial="" and="" industrial="" electricity="" rate="" schedules="" will="" be="" examined="" in="" a="" similar="" process="" as="" for="" residential="" electricity="" rates,="" but="" with="" additional="" information="" to="" account="" for="" demand="" charges.="" the="" information="" obtained="" for="" each="" rate="" schedule="" will="" distinguish="" any="" fixed="" charges="" (customer="" charges,="" etc.),="" block="" structure,="" rate="" per="" kwh="" by="" block,="" and="" demand="" charges.="" in="" the="" database="" of="" buildings,="" such="" characteristics="" as="" energy="" consumption="" and="" expenditures="" and="" number="" of="" customers="" by="" state="" or="" utility="" will="" be="" used="" to="" map="" a="" rate="" schedule="" onto="" each="" of="" the="" buildings="" in="" the="" national="" sample.="" the="" marginal="" rate="" for="" each="" building="" will="" be="" the="" block="" from="" the="" rate="" schedule="" corresponding="" to="" that="" building's="" monthly="" energy="" consumption.="" for="" life="" cycle="" savings="" calculations,="" monthly="" energy="" savings="" will="" be="" estimated="" for="" each="" building.="" these="" savings="" will="" be="" evaluated="" for="" each="" building="" at="" the="" monthly="" marginal="" rate,="" using="" the="" rate="" schedule="" assigned="" to="" each="" building.="" until="" a="" time="" series="" of="" marginal="" rates="" is="" available,="" future="" trends="" in="" energy="" prices="" will="" be="" used="" to="" derive="" estimates="" of="" cmer="" to="" be="" used="" in="" the="" economic="" analysis="" of="" possible="" energy="" performance="" standards.="" the="" trend="" in="" average="" price="" (by="" fuel="" and="" sector)="" will="" be="" used="" to="" create="" an="" index="" relative="" to="" current="" prices="" and="" applied="" to="" the="" current="" range="" of="" marginal="" rates.="" in="" other="" words,="" it="" will="" be="" assumed="" that="" the="" marginal="" rates="" will="" change="" in="" proportion="" to="" the="" expected="" change="" in="" average="" price.="" given="" the="" uncertainty="" of="" projections="" of="" future="" energy="" prices,="" scenario="" analysis="" will="" be="" used="" to="" examine="" the="" robustness="" of="" possible="" energy="" efficiency="" standards="" under="" different="" energy="" price="" conditions.="" these="" scenarios="" will="" be="" used="" in="" the="" lcc="" and="" the="" nes="" calculations="" discussed="" in="" section="" ii.e.1.="" each="" scenario="" will="" provide="" a="" self-="" consistent="" projection,="" integrating="" energy="" supply="" and="" demand.="" the="" scenarios="" will="" differ="" from="" each="" other="" in="" the="" energy="" prices="" that="" result.="" the="" committee="" suggested="" the="" use="" of="" three="" scenarios.="" while="" many="" scenarios="" can="" be="" envisioned,="" specification="" of="" three="" scenarios="" should="" be="" sufficient="" to="" bound="" the="" range="" of="" energy="" prices.="" the="" most="" recent="" doe="" annual="" energy="" outlook="" 1998="" (aeo="" 1998)="" reference="" case="" provides="" a="" well-defined="" middle="" scenario.="" in="" addition,="" the="" range="" of="" scenarios="" used="" in="" the="" aeo="" will="" be="" examined="" to="" establish="" the="" scenarios="" with="" the="" highest="" and="" lowest="" energy="" prices="" in="" the="" sector="" and="" fuel="" of="" interest.="" as="" an="" example,="" for="" commercial="" products="" such="" as="" fluorescent="" lamp="" ballasts,="" commercial="" and="" industrial="" electricity="" prices="" will="" be="" examined.="" aeo="" scenarios="" will="" serve="" as="" the="" fall="" back="" high="" and="" low="" scenarios,="" and="" the="" focus="" of="" discussion="" with="" stakeholders="" on="" further="" refinements="" to="" the="" high="" and="" low="" bounds.="" the="" range="" of="" energy="" prices="" represented="" by="" these="" scenarios="" and="" the="" underlying="" assumptions="" will="" be="" made="" available="" to="" stakeholders="" for="" comment.="" independent="" estimates="" of="" future="" energy="" prices="" will="" also="" be="" considered.="" based="" upon="" stakeholder="" input,="" the="" underlying="" assumptions="" may="" be="" further="" revised.="" this="" process="" will="" result="" in="" defining="" a="" likely="" high="" and="" low="" bound="" on="" the="" energy="" price="" trends.="" the="" economic="" analysis="" will="" be="" conducted="" using="" a="" spreadsheet="" for="" lcc,="" and="" one="" for="" nes.="" the="" future="" trend="" in="" energy="" prices="" assumed="" in="" each="" of="" the="" three="" scenarios="" will="" be="" clearly="" labeled="" and="" accessible="" in="" each="" spreadsheet.="" doe="" and="" stakeholders="" will="" be="" able="" to="" easily="" substitute="" alternative="" assumptions="" in="" the="" spreadsheets="" to="" examine="" additional="" scenarios="" as="" needed.="" two="" approaches="" are="" proposed="" to="" estimate="" forecast="" marginal="" rates:="" (1)="" for="" now,="" the="" trends="" from="" the="" three="" scenarios="" will="" be="" converted="" to="" indexes="" and="" applied="" to="" the="" current="" range="" of="" consumer="" marginal="" energy="" rates="" to="" estimate="" future="" consumer="" marginal="" energy="" rates.="" so="" if="" the="" trend="" in="" average="" residential="" electricity="" prices="" were="" to="" decline="" by="" 20="" percent="" over="" some="" period="" of="" time,="" then="" the="" marginal="" rate="" for="" each="" household="" would="" be="" assumed="" to="" decline="" from="" its="" initial="" observed="" value="" by="" 20="" percent="" over="" that="" same="" period="" of="" time.="" (2)="" restructuring="" is="" expected="" to="" simplify="" rates="" and="" to="" homogenize="" rates="" to="" some="" extent.="" that="" is,="" rates="" are="" expected="" to="" move="" toward="" the="" middle="" of="" the="" range.="" the="" index="" approach="" is="" subject="" to="" question="" if="" the="" change="" in="" the="" range="" of="" marginal="" rates="" varies="" depending="" upon="" the="" initial="" marginal="" rate.="" the="" current="" range="" of="" average="" residential="" prices="" is="" from="" about="" 2="" to="" 14="" cents="" per="" kwh.="" if="" in="" the="" future="" the="" highest="" current="" rates="" decline,="" but="" the="" lowest="" current="" rates="" fail="" to="" decline="" (or="" even="" increase)="" over="" time,="" then="" the="" index="" approach="" fails.="" a="" second="" approach="" can="" account="" for="" the="" differences="" in="" trends="" by="" using="" regional="" data.="" national="" energy="" modeling="" system="" (nems)="" provides="" regional="" information="" on="" average="" prices="" by="" sector="" over="" time.="" the="" rates="" for="" buildings,="" including="" residential="" households,="" in="" each="" region="" will="" be="" scaled="" to="" correspond="" to="" the="" future="" trend="" in="" average="" prices="" for="" that="" region.="" b.="" product="" specific.="" this="" section="" discusses="" the="" approaches="" for="" analyzing="" the="" economic="" impacts="" on="" individual="" consumers="" from="" potential="" new="" clothes="" washer="" standards.="" a="" spreadsheet="" as="" described="" in="" section="" ii.d.1.a.="" is="" used="" to="" calculate="" these="" economic="" values.="" in="" future="" analyses,="" all="" three="" of="" the="" economic="" metrics="" will="" be="" compared="" to="" a="" base="" case="" of="" washer="" efficiencies="" sold="" in="" the="" year="" the="" new="" standard="" would="" take="" effect.="" in="" this="" preliminary="" analysis,="" only="" the="" test="" procedure="" payback="" is="" compared="" to="" a="" distribution="" of="" efficiencies="" forecasted="" to="" the="" year="" 2003.="" i.="" lcc="" analysis.="" table="" 2="" summarizes="" some="" of="" the="" major="" assumptions="" used="" to="" calculate="" the="" consumer="" economic="" impacts="" of="" various="" energy-="" efficiency="" levels.="" in="" addition="" a="" number="" of="" assumptions="" are="" discussed="" in="" more="" detail.="" [[page="" 64355]]="" table="" 2.--assumptions="" used="" in="" the="" lcc="" preliminary="" analysis="" ------------------------------------------------------------------------="" ------------------------------------------------------------------------="" start="" year="" (effective="" date="" of="" standard)="" 2003.="" retail="" prices:="" baseline="" clothes="" washer.="" retail="" price--$421="" including="" tax;="" from="" retail="" price="" survey.="" lifetime...............................="" distribution="" (12-17="" years).="" cycles="" per="" year........................="" distribution="" from="" recs="" database="" (207-645).="" energy="" price="" trend.....................="" aeo="" 1998="" reference="" case="" to="" the="" year="" 2020="" with="" extrapolations="" to="" the="" year="" 2030.="" water="" price............................="" distribution="" from="" ernst="" &="" young,="" 1994="" national="" water="" and="" wastewater="" rate="" survey="" ($0.00="" to="" $7.84="" per="" 1000="" gallons).="" annual="" real="" change="" in="" water="" and="" sewer="" 0="" percent.="" cost="" (water="" price="" escalator).="" discount="" rate..........................="" distribution="" (0-15="" percent).="" energy="" consumption="" per="" cycle...........="" aham="" data.="" variation="" in="" household="" energy="" prices,="" recs="" data="" .="" energy="" use,="" and="" water="" heater="" shares.="" ------------------------------------------------------------------------="" retail="" prices:="" the="" analysis="" accompanying="" this="" supplemental="" anopr="" uses="" a="" 2-step="" mark-up="" approach="" to="" estimate="" retail="" prices.="" first,="" the="" manufacturing="" costs="" (i.e.,="" full="" production="" costs)="" are="" marked="" up="" to="" the="" manufacturer="" price="" using="" a="" manufacturer="" mark-up.="" then="" the="" manufacturer="" price="" is="" marked="" up="" by="" a="" retail="" mark-up="" to="" arrive="" at="" the="" retail="" price.="" the="" price="" paid="" by="" the="" consumer="" includes="" the="" sales="" tax="" in="" addition="" to="" the="" retail="" price.="" this="" sales="" tax="" is="" accounted="" for="" by="" using="" a="" sales="" tax="" mark-up="" over="" the="" retail="" price="" of="" the="" clothes="" washers.="" in="" the="" preliminary="" tsd,="" the="" department="" used="" a="" fixed="" retail="" mark-up="" of="" 1.40,="" and="" a="" fixed="" mark-up="" of="" 1.052="" to="" cover="" the="" sales="" tax.="" the="" manufacturer="" mark-up="" over="" full="" production="" costs="" was="" bound="" by="" a="" maximum="" value="" of="" 1.35,="" which="" maintains="" industry="" (manufacturer)="" cost="" structure,="" and="" a="" minimum="" value="" of="" 1.00,="" which="" represents="" a="" pass-through="" of="" full="" production="" costs.="" the="" latter="" includes="" depreciation="" of="" new="" capital.="" recuperation="" of="" non-production="" costs="" are="" not="" included.="" in="" order="" to="" characterize="" the="" uncertainty="" in="" manufacturer="" mark-ups,="" the="" department="" used="" a="" triangular="" distribution="" characterized="" by="" a="" maximum="" manufacturer="" mark-up="" of="" 1.35,="" a="" minimum="" manufacturer="" mark-up="" of="" 1.00,="" and="" a="" most="" likely="" mark-up="" of="" 1.18="" (the="" average).="" using="" a="" fixed="" retail="" mark-up="" of="" 1.40="" and="" a="" sales="" tax="" mark-up="" of="" 1.052,="" the="" total="" mark-up="" from="" full="" production="" costs="" to="" consumer="" price="" ranges="" from="" a="" minimum="" of="" 1.473="" to="" a="" maximum="" of="" 1.990.="" the="" preliminary="" tsd="" presents="" a="" detailed="" discussion="" on="" retail="" mark-="" ups.="" the="" tsd="" also="" outlines="" the="" department's="" methodology="" for="" estimating="" manufacturer="" mark-ups.="" in="" the="" future="" nopr="" analyses,="" the="" department="" will="" use="" a="" consistent="" set="" of="" assumptions="" for="" prices="" across="" all="" analysis="" sections="" (manufacturer="" impact,="" national="" benefits,="" and="" consumer="" impacts).="" manufacturer="" prices="" will="" be="" marked="" up="" by="" a="" fixed="" retail="" mark-up="" (currently="" estimated="" at="" 1.40),="" and="" a="" sales="" tax="" mark-up="" (1.052)="" to="" arrive="" at="" the="" consumer="" price.="" whereas="" the="" development="" of="" price="" scenarios="" for="" the="" manufacturer="" impact="" analysis="" will="" be="" the="" subject="" of="" a="" future="" workshop,="" the="" department="" is="" considering="" an="" approach="" used="" in="" the="" 1991="" arthur="" d.="" little="" report="">1 to AHAM. This approach
entails creating manufacturer mark-up scenarios by conducting a
financial analysis using the Government Regulatory Impact Model (GRIM).
The GRIM is a standard annual cash flow analysis which uses price,
quantity, and cost information to assess the impact of regulatory
conditions on manufacturer income and cash flow. The model calculates
the actual cash flows, by year, and then determines the present value
of those cash flows, both without regulations and with regulations. The
post-standard retail prices required in order to achieve several
scenarios will be found by running the GRIM and treating manufacturer
price as a variable. Additional price (mark-up) scenarios that might be
considered include: (1) the price (mark-up) resulting in maintenance of
current industry value; (2) the price (mark-up) reducing industry value
to zero; and (3) the price (mark-up) resulting from pass-through of
incremental material, labor, and burden costs only.
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\1\ Arthur D. Little, Inc., Financial Impact of DOE Top Loading
Horizontal Axis Standards on U.S. Washing Machine Manufacturers,
Report to Association of Home Appliance Manufacturers Horizontal
Axis Task Force, August 1991. Page 19. (Speed Queen Company, No. 15,
Appendix G)
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The Department received three comments on the subject of
manufacturer mark-up. Raytheon commented that the low end of 1.00 for
the range of manufacturer mark-up should not be used. It recommended
that the economic justification involve not only full production costs
but all anticipated costs. (Raytheon, No. 91, at 1). GEA commented that
the Department's conclusion on the estimated manufacturer price was
erroneous. GEA pointed out that the Department had inexplicably
transformed an average manufacturer mark-up of 1.35 into an upper
bound. (GEA, No. 88 at 3-4). Whirlpool submitted that an estimation of
average manufacturer mark-up of 1.18 is acceptable at this point in the
rulemaking. (Whirlpool, No. 93, at 4). In response to these comments,
the Department notes that a simple pass through of incremental material
costs coupled with declining volumes has been suggested in a previous
industry submital as the ``the most likely scenario.'' As described
previously, the Department proposes to use the GRIM model to conduct
scenario analysis on manufacturer mark-ups to keep the set of
assumptions for all analysis sections consistent with one another. The
GRIM will use price-volume interactions and manufacturers will be able
to comment on the likely price scenario for different efficiency
levels. Shipment data will be obtained from the NES spreadsheet model
described in Section II.E.1. It may be reasonable to assume that the
ability to pass through incremental costs will vary as costs increase
and/or product attributes are changed.
The American Council for an Energy-Efficient Economy (ACEEE)
commented that, at the March 1998 workshop, the Circuit City
representative suggested that assuming an average 40 percent retail
markup is probably too high. A 25 percent retail markup was more
typical of the industry. The 40 percent estimate may have factored in
higher markups on extended warranties and other services. (ACEEE, No.
94 at 3). In reviewing Circuit City's comment, the Department
understands that the statement referred to a gross margin of 25 percent
which represents a mark-up of 1.33. This is in close agreement with the
Department analysis of retailer financial statements having an
important component of
[[Page 64356]]
appliances in their product mix ( 25.2 percent to 26.3 percent gross
margin). Also, as referenced in the Preliminary TSD, this gross margin
is the net of some buying and warehousing costs. At present the
Department has no basis for changing the retail mark-up assumption. DOE
will continue to research data sources and seeks comment on this issue.
Energy Prices: The LCC spreadsheet model samples the individual
prices paid by households in RECS(93) (latest published version of
RECS). These prices are updated (scaled up or down based on AEO 1998
national prices) and converted to 1997 dollars.
Energy Price Trend: Several possible fuel price scenarios are built
into the LCC spreadsheet model, including: (1) constant; (2) AEO 1998
reference case; (3) Gas Research Institute 1998 (GRI 1998); (4) high
growth; and (5) low growth. High growth and low growth currently refer
to AEO 1998 fuel price scenarios for high and low economic growth. GEA
indicated that the Department needs to take additional steps in
revising the LCC analysis. Everything in recent experience shows that
energy prices continue to decline faster than the forecasters' ability
to discern, but the Department continues to build in high price
assumptions.
ACEEE indicated that the EIA residential electricity price forecast
used in the analysis is too low. It recommends that DOE focus on the
EIA ``high economic growth'' case price projections. This case calls
for an average residential electricity price decrease of 8.3 percent
over the 1996-2010 period. (ACEEE, No. 94, at 3).
In the future, as discussed in the Department's response to the
Advisory Committee, the Department will review the range of scenarios
used in the AEO to establish the scenarios with the highest and lowest
energy prices in the sector and fuel of interest. The most recent DOE
AEO 1998 reference case provides a well-defined scenario. Sensitivities
both above and below these values can also be modeled in the AEO low
and high growth cases. For the above reasons AEO 1998 was used as the
forecast used in the preliminary analysis. The range of energy prices
represented by these scenarios and the underlying assumptions will be
made available to stakeholders for comments. This process will result
in defining a likely high and low bound on the energy price trend.
Water and Sewer Prices: Information on water prices is not as
readily available as fuel prices information. Some utilities have large
fixed charges, while others are subsidized or paid for through taxes.
Furthermore, there are no standard approaches to calculating water and
sewer costs. In some locations the price of water increases as
consumption increases. In other areas, water price decreases with
increasing consumption. Additional consideration must be given to
consumers who are not connected to a municipality water supply or
sewage system. In some cases, only one or the other is connected. As
with other variables, the Department plans to use a range of water
prices in the economic analysis to account for the variability among
different households.
The main source of data on water and sewer prices is from a 1994
survey of water prices in major metropolitan areas by Ernst & Young.
The Ernst and Young data was adjusted for service population, base
utility charges and average household use by Al Dietemann of Seattle
Water. These adjusted values are the basis for the water price used in
the preliminary analysis. For the NOPR analysis DOE plans to update the
1994 prices.
Water Price Escalator: The Department has found no national level
water price forecasts. Currently, DOE's analysis assumes that future
water rates are constant. Whirlpool stated that recent studies (Ernst &
Young, 1994 National Water and Wastewater Rate Survey; Raftelis
Environmental Consulting Group, 1996 Water and Wastewater Rate Survey)
show that water and wastewater charges have increased steadily each
year during the period from 1986 to 1996. This trend should be expected
to continue and should be reflected in the LCC calculations.
(Whirlpool, No. 93 at 2).
ACEEE stated that the present analysis is much too conservative
because it assumes that water prices will not increase in real terms.
Submitted for the docket was a just-published study by Osann and Young
which summarized typical water/sewer bills over the 1986-1996 period.
ACEEE recommended that a water/sewer bill inflation rate in the 1.1--
2.7 percent range (real) be incorporated into the economic analysis.
(ACEEE, No. 94 at
2-3).
The study referred to in the ACEEE comment (Osann and Young) shows
an average annual increase of 5.7 % for a residential water/sewer bill
over the 1986-1996 time period. Since the underlying inflation rate
given was 3.1% this provided an annual increase in water/sewer bills of
approximately 2.6% real. In another analysis, using EPA data, in the
(Osann and Young) report, infrastructure needs were estimated to be
$280 billion. Accounting for the total gallons used and a discount
rate, a rate increase of 1.1% (real) was estimated. The ACEEE comment
refers to total cost increases and does not specify what portion of the
increase can be assigned to an increase in marginal rate. The ACEEE
comment recommends a water/wastewater escalation rate of 1.1 to 2.7%
real but does not provide a single value or a distribution.
The Department agrees that future water prices should not be
assumed to be constant and is therefore in the process of further
analyzing both current prices and future escalation rates. The proposed
analysis is on going and will be completed after the ANOPR is released.
The proposed analysis consists of updating previous data from Ernst and
Young report as adjusted by Al Dietemann, as well as the use of new
data obtained from the American Water Works Association (AWWA). The
Ernst and Young data is being updated by calling 125 utilities, getting
their water rate schedules and their forecasts for the future, as well
as any historical information available. The Department is working on
combining these two data sources into one database. This data will be
organized by utility and can be mapped onto either individual RECs
households or onto regional areas. A distribution of water prices (as
in the current analysis) will be used, as well as a distribution of
escalation rates. In an attempt to be consistent with the methodology
being developed for fuel rates, the Department will attempt to
establish marginal water rates and water prices and escalation rates
that vary with the water/wastewater utility. The Department is seeking
comments concerning this approach.
Energy consumption per cycle: The energy use information used to
calculate LCC is taken from the engineering analysis and adjusted to
account for variability in field conditions. This adjustment is for the
loads of laundry washed per week, which varies from house to house. It
is expressed as a distribution of wash cycles per year that is obtained
from the RECS.
Several comments were received on the subject of RECS data. The use
of outdated RECS data, especially that related to family size and
annual loads, must be discontinued if a truer picture of potential
savings is to be drawn. (GEA, No. 88, at 3). Whirlpool noted that a
concern was raised at the March, 1998 workshop about the use of 1993
RECS data for the distribution of gas vs. electric water heaters and
dryers, family size and number of wash loads per year. Whirlpool agrees
that the RECS data could be brought up to date, but this is not a high
priority. Whirlpool argues that the use of the currently available
[[Page 64357]]
RECS data will not weaken any of the analyses for this rulemaking.
(Whirlpool, No. 93 at 1). DOE intends to use updated RECS data when it
becomes available.
Manufacturing cost: The LCC spreadsheet is organized so that a
range (incorporating variability and uncertainty) can be entered to
describe the manufacturing costs associated with increases in energy
efficiency. Efficiency improvements over the baseline model can be
selected in increments of 5 percent up to a 50 percent efficiency
improvement. The cost data used was provided by manufacturers. It was
then compiled and reported to the Department by AHAM.
Operating cost: ACEEE stated that the present analysis ignores the
possibility that some consumers will use less detergent with new high-
efficiency machines than with standard machines. It recommends that DOE
construct two alternative scenarios (one in which no detergent will be
saved and the other that assumes some consumers will use less
detergent). ACEEE indicated that the Bern Kansas study provided some
evidence for detergent savings. (ACEEE, No. 94 at 2). Procter and
Gamble commented that the perception that detergent dosage will be
reduced in horizontal axis or drum washers proportionally to water
volume is invalid. While this appears to be a popular belief, the
detergent dosage is not substantiated by the facts. Procter and Gamble
further stated that the important impact is that users of new lower
water use/energy efficient washers cannot expect to find detergent cost
savings. (Procter & Gamble, No. 9 at 1). DOE seeks additional data on
this issue.
ii. Payback Analysis (Distribution of Paybacks). Payback is
calculated based on the same inputs used for the LCC analysis (with the
difference that the values are based only on the first year the
standard takes effect). The output is a distribution of payback
periods. The mean payback period is also reported. Additional
information is available in the LCC spreadsheet but is not reported in
the Supplemental ANOPR or Preliminary TSD. This data includes charts of
cash flow taking into account the changing annual fuel prices.
In order to compare the Payback Periods to the distribution of
washer efficiencies, the LCC spreadsheet will be modified to enable the
user to input the market share of each washer efficiency level in 5
percent increments.
iii. Rebuttable/Test Procedure Payback. The payback for purposes of
the rebuttable presumption clause is calculated on the LCC spreadsheet
but without using any distributions or Crystal Ball. Payback periods
are first calculated between the new standard level and each washer
efficiency being sold in the year 2003. The paybacks are then weighted
and averaged according to the percentage of each washer efficiency sold
before a new standard is enacted. Rather than distributions, single
point values for the inputs are used. These values (including cycles
per year, electric fuel source, etc.) will correspond to those outlined
in the DOE test procedure, Appendix J1. The result is a single payback
value and not a distribution. The payback is calculated for the
expected effective year of the standard (e.g., 2003). Examples and
further details are presented in the TSD.
With the presently available data, the baseline efficiency level is
weighted with market shares of 94.5 percent for vertical axis washers
(baseline) and 5.5 percent for horizontal axis washers (35 percent
efficiency improvement). If available, data on a forecasted
distribution of washer efficiencies in the year 2003 will be used to
refine the above calculations for the NOPR analysis.
2. Preliminary Results
a. General. Calculation of LCC captures the tradeoff between the
purchase price and operating expenses for appliances. In addition, two
other measures of economic impact are calculated: distributions of
payback periods and a payback period calculated for purposes of the
rebuttable presumption clause. The outputs of the LCC spreadsheet
include distributions of the impact for each energy efficiency level
compared to the baseline. A variety of graphic displays illustrate the
implications of the analysis results. These include: (1) A cumulative
probability distribution showing the percentage of U.S. households
which would have a net saving by owning a more energy efficient
appliance, and (2) a chart depicting the variation in LCC for each
efficiency level considered.
b. Product Specific. This section presents preliminary results for
LCCs and payback periods for all efficiency levels in the engineering
analysis. Since the value of most inputs are uncertain and must be
represented by a distribution of values rather than a discrete value,
the results presented in the Preliminary TSD are also described by a
distribution of values. Tables 3 and 4 provide a brief overview by
showing percentile LCCs and payback periods, respectively, for the
efficiency level improvements. These tables are generated with the
current LCC spreadsheet and have not yet taken into account a
distribution of pre-new-standard washer efficiencies, but instead are
based on the AHAM baseline value. Greater detail is provided in the
Preliminary TSD.
The LCC spreadsheet calculates and reports changes in LCC (delta
LCC). The output is a distribution best illustrated by the cumulative
charts for LCC difference shown in the Preliminary TSD. The convention
is used whereby all values in parentheses are negative. Negative delta
LCCs mean that the LCC after standards is lower than that without
standards (i.e., the base case).
Table 3 showing the percentiles of LCC change is best described by
an example. The 0 percent value means that all delta LCCs are greater
than the value shown. The value for the 50th percentile means half of
the delta LCCs are higher and half are lower. The 100 percent value
means that 100 percent of the calculated values of delta LCC are less
than the shown value.
Taking the first row (5 percent efficiency level) as an example,
the values are interpreted as follows. The value shown for 0 percent
means that there is a 0 percent probability that a household will have
a reduction in LCC larger than the $83 in absolute value. Toward the
middle, there is a 50 percent probability that a household will have a
reduction in LCC larger than $16. The 100 percent column indicates that
there is a 100 percent probability that a household will have a
reduction in LCC larger than $2.
The column labeled ``mean'' refers to the mean of the distribution.
In other words, the average of all of the results of the Monte Carlo
runs.
The column labeled ``percent with LCC less than the baseline''
establishes at what percentile there will not be any difference in LCC
between the standards case and AHAM baseline (i.e., the delta LCC is
0). For example, for the first row of the table (5 percent energy
efficiency increase level), there is a 100 percent probability that
households will have a lower LCC if a standard were enacted. For the 50
percent efficiency level, there is a 74.2 percent probability that
households will have a lower LCC (In other words, 74.2 percent of
households will have a lower LCC if a 50 percent standard level is
enacted).
[[Page 64358]]
Table 3.--Percentile LCC
--------------------------------------------------------------------------------------------------------------------------------------------------------
Change in Percent with LCC less than baseline
LCC from ---------------------------------------------------------------------------------------
baseline \1\
shown by
percentiles
Percent efficiency level of the
distribution 0 10 25 50 75 90 100 Mean
of results
\2\ (values
in $)
--------------------------------------------------------------------------------------------------------------------------------------------------------
5................................................ ($83) ($33) ($24) ($16) ($11) ($8) ($2) ($19) 100.0
10................................................ ($232) ($82) ($55) ($36) ($23) ($15) $13 ($43) 99.5
15................................................ ($402) ($140) ($90) ($55) ($33) ($19) $63 ($68) 95.6
20................................................ ($504) ($161) ($98) ($55) ($26) $10 $129 ($67) 86.7
25................................................ ($1,486) ($465) ($303) ($164) ($67) $4 $137 ($205) 89.2
35................................................ ($1,997) ($639) ($408) ($211) ($59) $79 $570 ($252) 83.4
40................................................ ($2,039) ($649) ($412) ($207) ($64) $75 $645 ($253) 83.7
45................................................ ($2,068) ($606) ($365) ($155) $9 $159 $666 ($199) 73.6
50................................................ ($2,075) ($617) ($374) ($156) $6 $153 $571 ($204) 74.2
--------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ The baseline LCC, based on SWA of the most likely costs, is $1,554.
\2\ For sample size of 10,000 trials. Energy price trends are for AEO 1998. Operating costs include water prices. No escalator is assumed for water
price.
Table 4.--Payback Period
--------------------------------------------------------------------------------------------------------------------------------------------------------
Payback period in years shown by percentiles of the distribution of results \1\
Percent efficiency level ---------------------------------------------------------------------------------------
0 10 25 50 75 90 100 Mean
--------------------------------------------------------------------------------------------------------------------------------------------------------
5.............................................................. 0.0 0.0 0.0 0.0 0.0 0.2 3.7 0.1
10.............................................................. 0.0 0.0 0.0 0.1 0.5 1.6 15.8 0.6
15.............................................................. 0.0 0.0 0.1 0.2 0.6 4.1 40.7 1.4
20.............................................................. 0.0 0.1 0.2 0.5 5.2 10.8 57.9 3.6
25.............................................................. 0.0 0.8 1.8 3.6 6.0 8.8 34.5 4.4
35.............................................................. 0.8 2.0 2.8 4.2 6.9 11.4 49.8 5.8
40.............................................................. 0.7 2.0 2.8 4.3 6.9 11.4 57.8 5.8
45.............................................................. 0.7 2.4 3.6 5.8 9.3 13.9 54.0 7.2
50.............................................................. 0.9 2.7 3.8 5.9 9.1 13.5 54.5 7.2
--------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ For sample size of 10,000 trials. Energy price trends are for AEO 1998. Operating costs include water prices. No escalator is assumed for water
price.
Table 5 below shows the simple payback for purposes of the
rebuttable presumption clause. This means it follows test procedure
assumptions for electric water heaters and dryers.
Table 5.--Rebuttable Presumption Payback in Years \1\
------------------------------------------------------------------------
0 35
percent percent Weighted
Percent efficiency level to to payback
standard standard
------------------------------------------------------------------------
5........................................ 0.1 NA 0.1
10........................................ 0.2 NA 0.2
15........................................ 0.6 NA 0.6
20........................................ 1.8 NA 1.8
25........................................ 2.7 NA 2.7
35........................................ 3.7 NA 3.7
40........................................ 3.7 3.7 3.7
45........................................ 4.9 29.2 6.2
50........................................ 5.0 19.6 5.8
------------------------------------------------------------------------
\1\ Market shares of 94.5 percent V-axis and 5.5 percent H-axis are
assumed for the year 2003.
E. Preliminary National Impacts Analysis
The national impacts analysis assesses the net present value (NPV)
of total consumer LCC, energy (and water, if appropriate) savings and
indirect employment impacts. A preliminary assessment of the aggregate
impacts at the national level is conducted for the ANOPR. Analyzing
impacts of Federal energy-efficiency standards requires a comparison of
projected U.S. residential energy consumption with and without
standards. The base case, which is the projected U.S. residential
energy consumption without standards, includes the mix of efficiencies
being sold at the time the standard becomes effective. Sales
projections together with efficiency levels of the washers sold, are
important inputs to determine the total energy consumption due to
clothes washers under both base case and standards case scenarios. The
differences between the base case and standards case provides the
energy and cost savings. Depending on the analysis method used, the
sales under a standards case projection may differ from those of a base
case projection.
The Department estimates national energy and water, if applicable,
consumption for each year beginning with the expected effective date of
the standards. National annual energy and water savings are calculated
as the difference between two projections: a base case and a standards
case. Analysis includes estimated energy savings by fuel type for
electricity, natural gas, and oil. Energy consumption and savings are
estimated based on site energy (kWh of electricity, million Btu of
natural gas or oil used in the home), then the electricity consumption
and savings are converted to source energy.
DOE agrees with the Advisory Committee's recommendation that the
assumption of a constant conversion factor should be dropped in favor
of a conversion factor that changes from year
[[Page 64359]]
to year. The conversion factor would be calculated for each year of the
analysis based on the generating capacity displaced and the amount of
site energy saved (see detail procedure below). For future conversion
factors, DOE proposes to use the following method:
(1) Start with an integrated projection of electricity supply and
demand (e.g., the NEMS Annual Energy Outlook reference case), and
extract the source energy consumption.
(2) Estimate projected energy savings due to possible standards for
each year (e.g., using the NES spreadsheet).
(3) Feed these energy savings back to NEMS as a new scenario,
specifically a deviation from the reference case, to obtain the
corresponding source energy consumption.
(4) Obtain the difference in source energy consumption between this
standard level scenario and the reference case.
(5) Divide the source energy savings in Btu, adjusted for class
specific transmission and distribution losses, by the site energy
savings in kilowatt-hours to provide the time series of conversion
factors in Btu per kilowatt-hour.
The resulting conversion factors will change over time, and will
account for the displacement of generating sources. Furthermore, the
NES spreadsheet models will include a clearly defined column of
conversion factors, one for each year of the projection. DOE and
stakeholders can examine the effects of alternative assumptions by
replacing this column of numbers.
Measures of impact reported include the NPV of total consumer LCC,
NES and water savings, if appropriate, and indirect employment impacts.
Each of the above are determined for selected trial standard levels.
These calculations are done by the use of a spreadsheet tool called the
NES Spreadsheet Model, which has been developed for all the standard
rulemakings and tailored to each specific appliance rulemaking.
1. National Energy Savings (NES) Spreadsheet Model
a. General. In order to make the analysis more accessible and
transparent to all stakeholders, a spreadsheet model was developed
using Microsoft Excel in Windows 95 to calculate the national energy
and water savings, and the national economic costs and savings from new
standards. Input quantities can be changed within the spreadsheet. For
example, the markup factor to determine retail price from the
manufacturing cost can be easily changed in the spreadsheet. Unlike the
LCC analysis, in the NES Spreadsheet, distributions are not used for
inputs or outputs. Sensitivities can be demonstrated by running
different scenarios.
One of the more important components of any estimate of future
impact is shipments. Forecasts of shipments for the base case and the
standard case need to be obtained as an input to the NES.
The most basic method for forecasting future shipments is a simple
saturation-based method which assumes saturations remain unchanged and
solves for a growth rate in shipments sufficient to keep saturations
constant in light of population growth. There are several factors that
can make this estimate inaccurate. These factors include possible
changes in: the number of households, saturation levels, appliance
lifetimes, prices (including operating costs), and consumer decisions
about whether to repair rather than replace an appliance. Because of
these complexities, and to improve on the forecasts, the following four
different statistical models were studied.
Auto-Regressive Moving Average (ARIMA) Model
Under this model, a univariate time series data analysis approach
is used to predict future values of a time series using only its
current and past data. The advantage of the ARIMA univariate approach
is that only time series data is needed to run the model. The
disadvantages of this approach are that (1) historical trends may not
be a good guide to the future, and (2) the model cannot explicitly
account for changes in the number of households, percent of household
owning washers, price, or operating expense.
AHAM has commented that it believes that the use of regression
analysis is inappropriate to project shipments of washers to the year
2030. AHAM suggests that a time series (ARIMA) type model is better.
AHAM commented that since the method presented at the July 23, 1997,
workshop seems to be heavily based on assumptions regarding the
saturation of certain housing types, the Department needs to provide
these underlying assumptions prior to any calculation of NES. (AHAM,
No. 76.) An ARIMA type model is among those being analyzed to obtain
shipment forecasts by the Department.
Multi-Variate Time Series Fit
In addition to the ARIMA univariate process for projecting sales, a
multi-variate time series data analysis was also reviewed. This
analysis is based not only on sales but new housing starts as well. The
advantage of the multi-variate time series method is that only two time
series are needed to build the model (i.e., shipments from the previous
year and the change in the number of households from the previous
year). The disadvantages of this approach are that (1) again,
historical trends may not be a good guide to the future, and (2) the
model cannot explicitly account for replacement sales, changes in
saturation, price, and operating cost.
Saturation/Lifetime Model
A saturation/lifetime (S/L) model was developed as yet another
alternative for forecasting sales. The S/L model assumes that the
saturation of an appliance varies with time. Appliance removals are
based upon assumptions regarding the distribution of the appliance
lifetimes, and the above functional form of the model allows for
flexibility in that different assumptions regarding saturations and
lifetimes can be used in an attempt to get the best fit to historical
data. The advantages of the saturation/lifetime method are that (1) the
method explicitly accounts for lifetimes, (2) housing and saturation
stocks are based only on time-series data, so that different housing
and saturation fits can be used to get ``good'' fits to historical
sales. The disadvantages of this approach are that (1) removals must be
based on assumptions about lifetimes, and (2) the model cannot
explicitly account for the impact of price and operating cost on
housing and saturation stocks.
Accounting Model
The accounting model seeks to forecast shipments by determining
sales destined for new homes plus the additional sales meant to replace
appliances being retired from service. For those sales meant for the
replacement market, the model accounts for the impact of homes which
are being retired from the existing housing stock. The advantages of
the accounting model are that (1) it is a straightforward and simple
model, (2) it explicitly accounts for new appliances separately in new
houses and replacements, and (3) price and operating costs can be
incorporated into saturation terms. The disadvantages of the accounting
model are that (1) saturations of appliances in new and stock homes
must be forecasted, (2) housing starts must be forecasted (e.g., based
on AEO projections), and removals must be based on assumptions about
lifetimes.
Table 6 shows the degree to which each approach accounts for
different variables that impact actual shipments.
[[Page 64360]]
Table 6.--Variables Accounted for by Different Forecast Approaches
----------------------------------------------------------------------------------------------------------------
Variable accounted for:
---------------------------------------------------------------------
Model Price and
Washer sales Number of Saturation Washer operating
households lifetime cost
----------------------------------------------------------------------------------------------------------------
ARIMA..................................... X ............ ............ ............
Multi-variate............................. X X ............ ............ ............
Saturation/Life........................... X X X X ............
Accounting................................ X X X X X
----------------------------------------------------------------------------------------------------------------
Among the important drivers of energy consumption are: voluntary
programs promoting higher energy efficiency products and consumers
response to changes in price and operating expense. The extent to which
voluntary programs may increase the share of energy efficient products,
prior to the implementation date of any new standards, is estimated in
the base case. How consumers respond to changes in prices and operating
expenses can be expressed by means of elasticities. An elasticity is
the percent change in one quantity in response to a percent change in a
driving variable. Elasticity will be taken into account if a method of
quantifying the price elasticity can be developed or perhaps several
scenarios can be modeled.
Other quantities in the NES spreadsheet are: energy price
projections including an analysis of consumer marginal energy rates for
each fuel (See Section II.D.1.a); effective date of the standard (start
year); discount rate and the year of the NPV (1997); manufacturing
cost; appliance purchase price; water cost and escalation rate;
baseline energy use;, impacts of other appliances applicable to the
rulemaking analysis; lifetime; fuel mix; and the conversion factor from
site to source energy.
The energy savings and NPV are calculated from the expected date
any standard level would take effect to the year 2030. Both individual
year and cumulative data are generated. Output charts and tables
provide: cumulative energy and water savings, (where applicable), the
cost and savings per year (in a chart) and the cost and NPV due to
standards.
b. Product Specific. The model to be used for the clothes washer
rulemaking is the one described above in Section II.E.1.a. Following is
a discussion of the application of this model for the clothes washer
rulemaking analysis.
Table 7 shows the assumptions used in NES for the preliminary
analysis which are summarized below and discussed in greater detail in
the Preliminary TSD.
Table 7.--Assumptions Used for Generating Preliminary National Impacts
------------------------------------------------------------------------
------------------------------------------------------------------------
Fuel Price............................. EIA Annual Energy Outlook 1998
to the year 2020 and
extrapolated to the year 2030.
Water Price............................ Average--$3.18 per 1000
gallons.
Discount Rate and the Year of the NPV.. 7 percent discounted to the
year 1997.
Start Year for New Standards........... 2003.
Annual Real Change in Water & Sewer 0 percent.
Cost (water price escalator).
Manufacturing Cost..................... Shipment-weighted average of
the most likely (from AHAM
data).
Total Mark up on Manufacturer Costs.... 1.731.
Energy Consumption Data............... AHAM data.
Clothes Washer Shipments............... Assumed same for standards and
base case (inelastic to price
and energy savings).
Percent Horizontal-Axis Washers........ 1.5 percent in 1995, increasing
by 0.5 percent each year.
Primary Energy Conversion Factors...... AEO 1998.
------------------------------------------------------------------------
Fuel Price: The energy price scenarios to be considered for the
clothes washer analysis include: AEO 1998 reference; GRI 1998; and high
and low cases (which are currently AEO high and low economic cases.)
Other boundary cases may be analyzed in response to the Advisory
Committee on Appliance Energy Efficiency Standards recommendations
relating to defining a range of energy price futures for each fuel used
in the rulemaking economic analysis. (Advisory Committee, No. 96 at 2)
(See Section II.D.1.a). See Preliminary TSD for more information on
extrapolation of prices between 2020 and 2030. The Department is
planning to revise the method contained in the current spreadsheet used
for the preliminary ANOPR analysis. AEO 1998 forecasts only go out to
the year 2020. Since the analysis needs projections to the year 2030,
other methods must be used for this time period. The Department plans
to use the EIA approach to forecast fuel prices for the Federal Energy
Management Program (FEMP). For petroleum prices, EIA uses the average
annual growth rate of the world oil price over the years 2010 to 2020
and then adds the implied refinery and distribution markups for each
petroleum product to arrive at the regional prices for the 2021 to 2030
period. Natural gas prices are similarly derived using the average
annual growth of wellhead natural gas over 2010 to 2020 and adding on
regional markups. Electricity prices are assumed to be constant after
2020 on the assumption that the transition to a restructured industry
will have been completed.
Annual Real Change in Water and Sewer Cost (water price escalator):
For the preliminary analysis the cost of water and the escalation rate
of water prices used in the analysis is specified in Table 7. For the
NOPR analysis, DOE plans to update prices and estimate future prices
and escalation rates. (See Section II.D.b.i.)
AHAM commented that the Department cannot use water savings in its
economic justification of standards. Under the provisions of NAECA,
this is not a specified consideration and is no more than a side-
benefit of the energy savings. (AHAM, No. 76 at 1.) The
[[Page 64361]]
Department believes that water savings should be accounted for. EPCA
states that in determining whether a standard is economically justified
the Secretary shall determine whether the benefits of the standard
exceed its burdens by, to the greatest extent practicable considering
``the total project amount of energy or as applicable, water savings
likely to result directly from the imposition of the standard,'' ``the
need for national energy and water conservation'' and ``other factors
the Secretary considers relevant.'' EPCA,
Sec. 325(o)(2)(B)(I)(III)(VI)(VII), 42 U.S.C.
6295(o)(2)(B)(I)(III)(VI)(VII).
Clothes Washer Shipments: In the analysis presented in the
Preliminary TSD the sales forecast for the base case and the standard
case are assumed to be the same. While DOE is reviewing the different
models to forecast shipments, shipment forecasts were created using the
Residential Energy Model (REM). The purpose for using this data is to
provide some data to demonstrate the NES methodology. This data does
not reflect how shipments will be determined. These forecasts will be
changed for the NOPR analysis.
The accounting model is still under development as price and
operating cost effects have yet to be incorporated. Research is on-
going to develop new estimates of price and operating expense
elasticities to account for: (1) changing the definition of operating
expense to include water and wastewater rates; (2) changing the
definition of the value of energy savings from average prices to
marginal rates; and (3) a longer time series to include more recent
data. Inasmuch as the accounting model is the only approach that will
take into account price and operating costs, the Department believes it
should be the primary tool for forecasting clothes washer shipments.
The Department seeks comments about the determination of price and
operating cost elasticities.
The base case assumes that clothes washers efficiencies will
increase due to non-regulatory reasons. Voluntary programs are expected
to increase the share of higher energy efficiency clothes washers sold.
The Department has reviewed existing literature relating to voluntary
programs (e.g., the Energy Star and WashWise Programs). See the
voluntary programs section of the Preliminary TSD for a summary of this
review.
Based on this review, in the preliminary analysis the impact of
voluntary programs is expressed as the percent of new clothes washers
each year that have efficiencies corresponding to those of H-axis
washers (35 percent energy reduction from the baseline MEF). The
initial share of H-axis machines is estimated to be 1.5 percent of
total washer sales in 1995. The impact of voluntary programs is
estimated to cause a 0.5 percent increase in H-axis share every year
thereafter. The current assumption is that in 2003 the percentage of
horizontal axis washers will be 5.5 percent. The energy information
used in the spreadsheet is taken from the disaggregated data provided
by AHAM for the standard level with the lowest efficiency H-axis model
(35 percent increase in energy efficiency). Additional work is underway
to estimate future efficiencies under the base case scenario. Current
estimates will be revised as additional data becomes available. The
Department welcomes any additional data useful for forecasting future
sales of high-efficiency washers due to non-regulatory reasons.
Primary Energy Conversion Factors: In the spreadsheet DOE is using
the AEO 1998 projections.
Clothes Washer Lifetime: To account for the savings over the
lifetime of new clothes washer sales, the analysis continues to the
year 2030. Clothes washers are expected to have a lifetime of about 12-
16 years. Some washers bought in 2002--prior to the new standards--are
expected to be replaced as late as 2018. In those cases, one lifetime
for washers meeting the new standards will end in 2030-2034.
2. Preliminary Results
a. General. National energy consumption is calculated for the base
case and each candidate standards level by multiplying the number of
clothes washers by vintage times unit energy consumption by vintage.
The vintage is the age of the washer (one-year old up to sixteen-years
old). National annual energy savings are calculated as the difference
between two projections: a base case (without new standards) and a
standards case. Cumulative energy and water savings, if appropriate,
are the sum of the annual national energy or water savings,
respectively, over several time periods (e.g., 2003-2010, 2003-2020,
and 2003-2030).
Once the energy savings have been determined, economic impacts are
calculated. The primary metric for measuring national economic impact
is the NPV. NPV (of total life-cycle costs) is the difference between
the present value of the energy savings over the life of the appliance
and the present value of (usually increased) initial costs of a more
efficient appliance. The NPV calculations also captures any differences
in installation or maintenance costs. On a national level the
efficiencies and number of appliances sold each year are also taken
into account. Another way of describing NPV is to determine the LCCs
(for all appliances sold) with and without standards and take the
difference.
Costs are typically increases in the purchase price associated with
the higher energy efficiency of appliances purchased in the standards
case compared to the base case. Costs are calculated as the difference
in the purchase price between the base case and standards case for new
appliances purchased each year multiplied by the appliance sales in the
standards case. Price increases appear as negative values in the NPV.
Savings are typically decreases in operating costs associated with
the higher energy efficiency of appliances purchased in the standards
case compared to the base case. Total operating cost savings is the
product of savings per unit and the number of units of each vintage
surviving in a particular year. Savings appear as positive values in
the NPV.
Net savings each year are calculated as the difference between
Total Operating Cost Savings and Total Equipment Costs. The savings are
calculated over the life of the appliance, accounting for the
differences in yearly energy rates.
Future annual costs and savings are discounted to the present time
and summed. The NPV is the difference between the present value of
increased costs of a more efficient appliance and the present value of
energy savings, relative to the base case expenditures. In other words
the NPV resembles the difference in total consumer LCC between the base
case and standards case, after correcting for any change in sales of
clothes washers. NPV greater than zero indicates net savings (i.e.,
that the standard reduces consumer expenditures in the standards case
relative to the base case). NPV less than zero indicates that the
standard incurs net costs.
The elements of the NPV can be expressed in another form, as the
benefit/cost ratio. The benefit is the savings in decreased energy
expenses, while the cost is the increase in the purchase price due to
standards relative to the base case. When the NPV is greater than zero,
the benefit/cost ratio is greater than one.
b. Product Specific. The results shown in Table 8 below, are based
on a single shipment weighted average (SWA) cost instead of a cost
distribution. Below is a description of the columns in the
[[Page 64362]]
Preliminary National Energy Savings Results, Table 8.
The first column shows the efficiency improvement over the base
case. This is the value of energy efficiency improvement based on the
baseline MEF provided by AHAM.
The second column shows the energy savings in quads. This
represents the amount of primary energy savings accumulated from the
years 2003 to 2030. The energy savings are a result of consumers buying
more efficient washers than they would normally have bought had no new
standard levels been enacted.
The third column shows the water savings in trillions of gallons at
the corresponding efficiency level.
The fourth column, NPV, shows the dollar savings corresponding to
the energy and water savings and accounting for increase in the
purchase price. The energy prices change from year to year and AEO 1998
projections of future prices are used.
The Preliminary TSD explains the results variables in greater
detail and has charts to accompany the tables.
Table 8.--Preliminary National Energy Savings Results (2003 to 2030
Cumulative)
------------------------------------------------------------------------
Net
Water present
Percent efficiency improvement over the Energy savings benefit
base case savings (trillion (NPV)
(quads) gallons) (billion
1997$)
------------------------------------------------------------------------
5........................................ 0.36 0.46 1.02
10....................................... 1.18 0.46 2.41
15....................................... 2.18 0.45 3.80
20....................................... 2.66 0.59 3.67
25....................................... 5.09 10.13 11.07
35....................................... 7.85 14.62 13.47
40....................................... 7.90 14.62 13.53
45....................................... 9.49 12.47 8.81
50....................................... 10.06 12.47 9.07
------------------------------------------------------------------------
3. Indirect Employment Impacts
a. General. The July 1996 Process Rule includes employment impacts
among the factors to be considered in selecting a proposed standard.
The Department estimates the impacts of standards on employment for
appliance manufacturers, relevant service industries, energy suppliers,
and the economy in general. Employment impacts are separated into
indirect and direct impacts. Direct employment impacts would result if
standards lead to a change in the number of employees at manufacturing
plants and related supply and service firms. Direct impacts will be
further discussed in the section on manufacturing analysis. Indirect
impacts are impacts on the national economy other than in the
manufacturing sector being regulated. Indirect impacts may result from
both expenditures shifting among goods (substitution effect), and
income changing, which will lead to a change in overall expenditure
levels (income effect).
Indirect employment impacts from standards are defined as net jobs
eliminated or created in the general economy as a consequence of
increased spending on the purchase price of appliances and reduced
household spending on energy. New appliance standards are expected to
increase the purchase price of appliances (retail price plus sales tax,
and installation). The same standards are also expected to decrease
energy consumption, and therefore reduce household expenditures for
energy. Over time, the increased purchase price is paid back through
energy savings. The savings in energy expenditures may be spent on
other items. Using an input/output model of the U.S. economy, this
analysis seeks to estimate the effects on different sectors, and the
net impact on jobs. National impacts will be estimated for major
sectors of the U.S. economy. Public and commercially available data
sources and software will be utilized to estimate employment impacts.
At least three scenarios will be analyzed to bound the range of
uncertainty in future energy prices. All methods and documentation will
be made available for review.
b. Product Specific. For purposes of national impact analysis,
possible indirect employment impacts for appliance manufacturers,
relevant service industries, energy suppliers, and the economy in
general (i.e., national employment) due to efficiency standards will be
analyzed. The Department is proposing to use a model, which focuses on
those sectors of the economy most relevant to buildings, developed by
the Office of Building Technologies and State Programs. This software,
IMBUILD, is a PC-based economic analysis system that characterizes the
interconnections among 35 sectors as national input-output structural
matrices. The model can be applied to future time periods. The IMBUILD
output includes employment, industry output, and wage income. The
impacts of new appliance standards are estimated in the NES spreadsheet
as household energy savings (reduced energy expenditures), and
increased appliance purchase price. These impacts are output from NES
and input to IMBUILD. Additional detail is provided in the Preliminary
TSD.
F. Consumer Analyses
The consumer analysis evaluates impacts to any identifiable groups,
such as consumers of different income levels, who may be
disproportionately affected by any national energy efficiency standard
level.
The Department could evaluate variations in regional energy prices,
water and sewer prices, variations in energy use and variations in
installation costs that might affect the NPV of a standard to consumer
sub-populations. To the extent possible, DOE obtains estimates of the
variability in each input quantity and considers this variability in
its calculation of consumer impacts. The analysis is structured to
answer questions such as: How many households are better off with
standards and by how much? How many households are not better off and
by how much? The variability in each input quantity and likely sources
of information are discussed with stakeholders.
Variations in energy use for a particular appliance can depend on
factors such as: climate, type of household, people in household, etc.
Annual energy use can be estimated by a calculation based on an
accepted test procedure or it can be measured directly in the field.
The Department could perform sensitivity analyses to consider how
differences in energy use will affect sub-groups of consumers.
The impact on consumer sub-groups will be determined using the LCC
spreadsheet model. Details of this model are explained in the LCC
section of the Preliminary TSD. Of particular interest is the potential
effect of standards on households with different income levels.
1. Purchase Price
a. General. The Department will be sensitive to increases in the
purchase price to avoid negative impacts to identifiable population
groups, such as consumers of different income levels. Additionally, the
Department will assess the likely impacts of an increased purchase
price on product sales and fuel switching.
b. Product Specific. In order to determine the effect of an
increase in the purchase price, it would be useful to know what the
elasticity of clothes washer prices is. The Department is still
determining how these data could be obtained. While preliminary
analyses indicate that factors, such as the current state of the
economy have a greater correlation to sales of washers than do an
increase in clothes washer prices, it is still important to estimate
the impact
[[Page 64363]]
of changing prices on the sales of clothes washers. In making estimates
of these price effects, the Department needs to gauge the difference in
clothes washer sales from a change in the price of all clothes washers,
as could result from revised energy efficiency standards. In addition,
the Department will be estimating how price changes from revised energy
efficiency standards for clothes washers will affect the behavior of
consumers.
2. Consumer Participation
a. General. The Department seeks to inform and involve consumers
and consumer representatives in the process of developing standards.
This includes notification of consumer representatives during the
rulemaking process and where appropriate, seeking direct consumer
input.
b. Product Specific. The Act requires that ``the Secretary
consider, among other factors, if any lessening of the utility or the
performance of the products is likely to result from the imposition of
the standard. EPCA, Sec. 325 (o)(2)(B)(I)(3), 42 U.S.C. 6295
(o)(2)(B)(I)(3). In this rulemaking because comments have been received
specifically to the consumer utility and performance of V- and H-axis
clothes washers, the Department reviewed existing literature pertaining
to these issues.
The Department has made available a ``Draft Report on Consumer
Research for Clothes Washers.'' This document is included in the
appendix of the Preliminary TSD. The report summarizes research
relative to consumer satisfaction with H-axis washing machines. Sources
and projects summarized in the report include:
Major studies by consortia,
Individual utility demand side management & market
transformation studies,
Consumer test publications,
Trade organizations, and
Government projects.
Based on the December 1997 Advisory Committee meeting, the Consumer
Subcommittee made two key recommendations to obtain consumer input:
(1) Adopt a three-step process:
Obtain background research
Hold focus groups
Conduct interviews/surveys.
(2) Initiate the consumer analysis process in the clothes washer
rule.
In accordance with the Advisory Committee's recommendations, the
Department reviewed background information regarding consumer issues
related to clothes washers as discussed in the ``Draft Report on
Consumer Research for Clothes Washers.'' At the March 11, 1998, Clothes
Washer Workshop, the background research findings were presented and a
working group was formed to develop a method for obtaining additional
consumer input pertinent to the rule. Two comments were received on the
subject of additional consumer research. ACEEE found the body of
existing studies to be fairly compelling, and did not see a need for
extensive additional work. (ACEEE, No. 94 at 4). Raytheon recommended
that consumer purchase studies should involve consumers at all income
levels and be made using existing retail prices excluding rebate
incentives, for both V-axis and H-axis clothes washers. (Raytheon, No.
91 at 2).
The working group held a conference call on April 30, 1998, to
evaluate different techniques for obtaining consumer input. Focus
groups, surveys, and a conjoint analysis were all considered. The
working group recommended a three-step approach for obtaining
additional consumer input:
(1) Develop a list of attributes. Based on the working groups'
individual members' research and knowledge. Each member has submitted a
list of clothes washer attributes valued by consumers,
(2) Conduct a consumer survey to refine the list of attributes that
would be included in a quantitative consumer analysis study,
(3) Conduct a conjoint analysis to quantitatively estimate the
value consumers place on the clothes washer attributes.
The Department must first announce the process to use for
conducting any type of public survey in the Federal Register notice in
accordance with the requirements of the Paperwork Reduction Act of
1995, Public Law 104-13 (44 U.S.C. 3506(c)(2)(A)). This will be a
separate notice which is in process of being published. The Department
will then solicit bids for a marketing research firm to conduct the
focus groups to refine the list of attributes and to conduct the
conjoint analysis.
G. Manufacturer Impact Analysis
The manufacturer impact analysis estimates the financial impact of
standards on manufacturers and calculates impacts on competition,
employment, and manufacturing capacity.
Prior to initiating the detailed manufacturing impact analysis the
Department will prepare an approach document and have it available for
review. While the general framework will serve as a guide, the
Department intends to tailor the methodology for each rule on the basis
of stakeholder comments. The document will outline procedural steps and
outline issues for consideration. Three important elements of the
approach consist of the preparation of an industry cash-flow, the
development of a process to consider sub-group cash-flow, and the
design of an interview guide.
The policies outlined in the process rule required substantial
revisions to the analytical framework to be used in performing
manufacturer impact analysis for each rulemaking. In the approach
document, the Department will describe and obtain comments on the
methodology to be used in performing the manufacturer impact analyses.
The manufacturer impact analyses will be conducted in three phases.
Phase 1 consists of two activities, namely, preparation of an industry
characterization and identification of issues. The second phase has as
its focus the larger industry. In this phase, the GRIM will be used to
perform an industry cash flow analysis. Phase 3 involves repeating the
process described in Phase 2 (the industry cash-flow analysis) but on
different sub-groups of manufacturers. Phase 3 also entails calculating
additional impacts on competition, employment, and manufacturing
capacity.
1. Industry Cash Flow
a. General. A change in standards affects the analysis in three
distinct ways. Increased levels of standards will require additional
investment, will raise production costs, and will affect revenue
through higher prices and, possibly, lower quantities sold. To quantify
these changes the Department performs an industry cashflow analysis
using the GRIM. Usually this analysis will use manufacturing costs,
shipments forecasts, and price forecasts developed for the other
analyses. Financial information, also required as an input to GRIM,
will be developed based on publicly available data and confidentially
submitted manufacturer information.
The GRIM analysis uses a number of factors--annual expected
revenues; manufacturer costs such as cost of sales, selling and general
administration costs, taxes, and capital expenditures related to
depreciation, new standards, and maintenance--to arrive at a series of
annual cash flows beginning from before implementation of standards and
continuing explicitly for several years after implementation. The
measure of industry net present values are calculated by discounting
the annual cash flows from the period before implementation of
standards to some
[[Page 64364]]
future point in time. The Preliminary TSD describes the GRIM's
operating principles and presents alternative approaches to developing
the information necessary to perform the computations.
b. Product Specific. The Department has received manufacturing cost
data from manufacturers which was compiled and reported by AHAM. This
data will be used to conduct an industry cash flow analysis for the
NOPR. A draft document ``Financial Inputs to GRIM for the Clothes
Washer Rulemaking Analysis'' has been prepared for stakeholder review.
This document outlines and documents the financial assumptions to be
used in GRIM when performing the industry cash flow analyses. The
Department intends to use the manufacturing costs, retail prices, and
shipment values from the preliminary analysis in the GRIM model. This
will be distributed to interested parties prior to the workshop to be
held after publication of this Supplemental ANOPR.
2. Manufacturer Sub-Group Analysis
a. General. Using industry ``average'' cost values is not adequate
for assessing the variation in impacts among sub-groups of
manufacturers. Smaller manufacturers, niche players or manufacturers
exhibiting a cost structure largely different from industry averages
could be more negatively impacted. Ideally, the Department would
consider the impact on every firm individually. In highly concentrated
industries this may be possible. In industries having numerous
participants, the Department will use the results of the industry
characterization to group manufacturers exhibiting similar
characteristics. The financial analysis of the ``prototypical'' firm
performed in the Phase 2 industry analysis can serve as a benchmark
against which manufacturer sub-groups can be analyzed.
The manufacturing cost data collected for the engineering analysis
will be used to the extent practical in the sub-group impact analysis.
To be useful, however, this data should be disaggregated to reflect the
variability in costs between relevant sub-groups of firms.
The Department will conduct detailed interviews with as many
manufacturers as is possible to gain insight into the potential impacts
of standards. During these interviews, the Department will solicit the
information necessary to evaluate cashflows and to assess competitive,
employment and capacity impacts. Firm-specific cumulative burden will
also be considered.
b. Product Specific. In order to conduct a manufacturer sub-group
analysis, it will be necessary to define representative sub-groups and
conduct separate cash flow analysis for each. For example, one option
consists of conducting separate cash flows for all manufacturers.
Another option, could entail conducting cash flow analysis only for
those manufacturers which believe their impacts are more severe then
industry average. The Department will outline and discuss these and
other approaches at the post supplemental ANOPR analysis workshop.
Whirlpool proposed that the GRIM model be changed from input to
output aggregation. Each industry member would develop its own inputs
to the GRIM model over a range of MEF levels proposed by the DOE. The
GRIM models would be run by industry members to generate a range of
individual company outputs. The outputs of the individual companies
could then be aggregated to determine industry impact. Individual
companies would not be required to submit detailed input assumptions,
but only changes in revenues, shipments, profit after tax, and cash
flow, capital investment and design and marketing spending could also
be provided. A third party could do the aggregation and then conduct a
reality check by comparing the aggregated output to currently available
industry data. (Whirlpool No. 66 at 3). The Department seeks further
input as to how the data for the GRIM analysis should be collected from
the manufacturers and how it should be utilized.
3. Interview Process
a. General. The revised rulemaking process provides for greater
public input and for improved analytical approaches, with particular
emphasis on earlier and more extensive information gathering from
interested parties. The proposed three-phase manufacturer impact
analysis process will draw on multiple information sources, including
structured interviews with manufacturers and a broad cross-section of
interested parties. Interviews may be conducted in any and all phases
of the analyses as determined in Phase 1.
The interview process has a key role in the manufacturer impact
analyses, since it provides an opportunity for interested parties to
privately express their views on important issues. A key characteristic
of the interview process is that it is designed to allow confidential
information to be considered in the rulemaking decision.
The initial industry characterization will collect information from
relevant industry and market publications, industry trade
organizations, company financial reports, and product literature. This
information will aid in the development of detailed and focused
questionnaires, as needed, to perform all phases of the manufacturer
impact analyses. It is the intention of the Department that the
contents of questionnaires and the list of interview participants be
publicly vetted prior to initiating the interview process.
The Phase 3 (sub-group analysis) questionnaire will solicit
information on the possible impacts of potential efficiency levels on
manufacturing costs, product prices, and sales. Evaluation of the
possible impacts on direct employment, capital assets, and industry
competitiveness will also draw heavily on the information gathered
during the interviews. The questionnaires will solicit both qualitative
and quantitative information. Supporting information will be requested
whenever applicable.
Interviews will be conducted according to DOE procedures.
Interviews will be scheduled well in advance in order to provide every
opportunity for key individuals to be available for comment. Although a
written response to the questionnaire is acceptable, an interactive
interview process is preferred because it helps clarify responses and
provides the opportunity for additional issues to be identified.
Interview participants will be requested to identify all
confidential information provided in writing or orally. Approximately
two weeks following the interview, an interview summary will be
provided to give participants the opportunity to confirm the accuracy
and protect the confidentiality of all collected information. All the
information transmitted will be considered, when appropriate, in DOE's
decision-making process. However, confidential information will not be
made available in the public record.
DOE will collate the completed interview questionnaires and prepare
a summary of the major issues and outcomes. The Department will seek
comment on the outcome of the interview process.
b. Product Specific. The Department is developing an interview
guide to supplement the sub-group GRIM cash-flow analysis. The
interview will solicit information on the possible impacts of potential
efficiency levels on manufacturing costs, product prices, and sales. As
such it will contribute to the Department's understanding of how sub-
groups may have different values for these quantities compared with the
[[Page 64365]]
overall industry. This will allow the Department to report and explain
significant variances when publishing the analysis results.
Evaluation of the possible impacts on direct employment, capital
assets, and industry competitiveness will also draw heavily on the
information gathered during the interviews. The questionnaires will
solicit both qualitative and quantitative information. Supporting
information will be requested whenever applicable.
The Department plans to make a draft of the questionnaire available
prior to the post-supplemental ANOPR analysis workshop.
H. Competitive Impact Assessment
a. General. Legislation directs the Department to consider any
lessening of competition that is likely to result from standards. It
further directs the Attorney General to gauge the impacts, if any, of
any lessening of competition. DOE will make a determined effort to
gather and report firm-specific financial information and impacts. The
competitive analysis will focus on assessing the impacts to smaller,
yet significant, manufacturers. The assessment will be based on
manufacturing cost data and on information collected from interviews
with manufacturers, consistent with Phase 3 of the manufacturer impact
analyses. The Department of Justice (DOJ) has offered to help in
drafting questions to be used in the manufacturer interviews. These
questions will pertain to the assessment of the likelihood of increases
in market concentration levels and other market conditions that could
lead to anti-competitive pricing behavior. The manufacturer interviews
will focus on gathering information that would help in assessing
asymmetrical cost increases to some manufacturers, increased proportion
of fixed costs potentially increasing business risks, and potential
barriers to market entry (proprietary technologies, etc.).
b. Product Specific. The Department met with DOJ on June 11, 1998,
for initial discussions pertaining to the manufacturer impacts of
potential clothes washers standards. DOJ has agreed to review the
manufacturer questionnaire prior to discussions with the manufacturers.
I. Utility Analysis
The utility analysis estimates the effects of proposed standards on
electric and gas utilities.
1. Proposed Methodology
a. General. The Department proposes to use a version of EIA's
widely recognized NEMS for the utility and environmental analyses. NEMS
is a large multi-sectoral partial equilibrium model of the U.S. energy
sector that has been developed over several years by the EIA primarily
for the purpose of preparing the Annual Energy Outlook (AEO). NEMS
produces a widely recognized baseline forecast for the U.S. through
2020 and is available in the public domain. The version of NEMS to be
used for appliance standards analysis will be called NEMS-NAECA, and
will be based on the AEO 1998 version with minor
modifications.2
---------------------------------------------------------------------------
\2\ EIA approves use of the name NEMS only to describe an AEO
version of the model without any modification to code or data.
Since, in this work, there will be some minor code modifications and
the model will be run under various policy scenarios that deviate
from AEO assumptions, DOE proposes use of the name NEMS-NAECA for
the model as used here.
---------------------------------------------------------------------------
NEMS offers a sophisticated picture of the effect of appliance
standards since its scale allows it to measure the interactions between
the various energy supply and demand sectors and the economy as a
whole. In addition, the scale of NEMS permits analysis of the effects
of standards on both the electric and gas utility industries.
To analyze the effect of standards, NEMS-NAECA is first run exactly
as it would be to produce an AEO forecast, then a second run is
conducted with residential energy usage reduced by the amount of energy
(gas, oil, and electricity) saved due to appliance standards for the
appliance being analyzed. The energy savings input is obtained from the
NES spreadsheet. Outputs available are the same as those in the
original NEMS model including residential energy prices, generation and
installed capacity (and in the case of electricity, which primary fuel
is used for generation).
b. Product Specific. I. Assumptions. Other than the difference in
energy consumption due to clothes washer standards, input assumptions
into NEMS-NAECA will follow those used to produce AEO 1998. The entire
utility analysis will be conducted as a policy deviation from the AEO
1998, and the assumptions will be the basic set of assumptions applied.
For example, the operating characteristics (energy conversion
efficiency, emissions rates, etc.) of future electricity generating
plant will be exactly those used in AEO 1998, and the prospects for
natural gas supply will be exactly those assumed in AEO 1998.
Since the AEO 1998 version of NEMS-NAECA forecasts only to the year
2020, a method for extrapolating price data to 2030 is required. The
adopted method uses the EIA approach to forecast fuel prices for the
Federal Energy Management Programs (FEMP). These are the prices used by
FEMP to estimate life-cycle costs of Federal equipment procurements.
For petroleum products, the average growth rate for the world oil price
over the years 2010 to 2020 is used in combination with the refinery
and distribution markups from the year 2020 to determine the regional
price forecasts. Similarly, natural gas prices are derived from an
average growth rate figure in combination with regional price margins
from the year 2020. Electricity prices are held constant at 2020 levels
on the assumption that the transition to a restructured utility
industry will have been completed.
ii. Results. In principle, any of the forecasts that appear in AEO
1998 could be estimated by NEMS-NAECA to take into account the effects
of a particular clothes washer standard level. The Department intends
to report the major results on residential sales of fuels, prices of
fuels, and generating sources displaced by energy savings. As might be
expected, as the total energy use of America is much larger than that
possible due to the savings from clothes washers, there is little
expected difference in the forecasted price of energy.
J. Environmental Analysis
An Environmental Assessment is required pursuant to the National
Environmental Policy Act of 1969 (NEPA) (42 U.S.C. 4321 et seq.),
regulations of the Council on Environmental Quality (49 CFR parts 1500-
1508), the Department regulations for compliance with NEPA (10 CFR part
1021), and the Secretarial Policy on the National Environmental Policy
Act (June 1994). The Environmental Assessment will be presented as part
of the NOPR and an opportunity will be provided for comments prior to
the final rule.
The main environmental concern addressed is emissions from fossil
fuel-fired electricity generation. Power plant emissions include oxides
of nitrogen (NOX) and sulfur (SO2), as well as
carbon dioxide (CO2). The first two are major causes of acid
precipitation, which can affect humans by reducing the productivity of
farms, forests and fisheries, decreasing recreational opportunities and
degrading susceptible buildings and monuments. NOX is also a
precursor gas to urban smog and is
[[Page 64366]]
particularly detrimental to air quality during hot, still weather.
CO2 emissions contribute to raising the global temperature
via the ``greenhouse effect.'' The long-term consequences of higher
temperatures may include perturbed air and ocean currents, perturbed
precipitation patterns, changes in the gaseous equilibrium between the
atmosphere and the biosphere, and the melting of some of the ice now
covering polar lands and oceans, causing a rise in sea level.
1. Proposed Methodology
a. General. The Department proposes to use the EIA widely
recognized NEMS for the appliance environmental analyses (as well as
the utility analyses). The version of NEMS to be used for appliance
standards analysis will be called NEMS-NAECA, and will be based on the
AEO 1998 version with minor modifications. NEMS-NAECA is run exactly
the same as the original NEMS except that residential energy usage is
reduced by the amount of energy (gas, oil, and electricity) saved due
to appliance standards for the appliance being analyzed. The input of
energy savings is obtained from the NES spreadsheet. For the
environmental analysis, the output is the forecasted physical
emissions. The net benefits of a standard will be the difference
between emissions estimated by the AEO 1998 version of NEMS-NAECA and
those it estimates with a standard in place.
b. Product Specific. The environmental analysis should be
relatively straightforward using NEMS-NAECA. Carbon emissions are
tracked in NEMS using quite a detailed carbon module that provides good
results because of its broad coverage of all sectors and inclusion of
interactive effects. The only form of carbon tracked by NEMS-NAECA is
CO2, so the carbon discussed in this report is only in the
form of CO2 but is reported as elemental carbon to remain
consistent with the AEO 1998.3
---------------------------------------------------------------------------
\3\ The conversion factor from carbon to CO2 is
approximately 3.6667.
---------------------------------------------------------------------------
The two airborne pollutant emissions that have been reported in
past analyses, SO2 and NOX, are reported by NEMS-
NAECA. In the case of SO2, the Clean Air Act Amendments of
1990 set an SO2 emissions cap on all power generation. The
attainment of this target is flexible among generators through the use
of emissions allowances and tradable permits. NEMS includes a module
for SO2 allowance trading and delivers a forecast of
SO2 allowance prices. Please note that accurate simulation
of SO2 trading tends to imply that physical emissions
effects will be zero because emissions will always be at the ceiling.
This fact has caused considerable confusion in the past. However, there
is an SO2 benefit from conservation in the form of a lower
allowance price and, if big enough to be calculable by NEMS-NAECA, this
value will be reported. Please see TSD for further discussion of this
issue. One small effect that NEMS-NAECA must consider in addition to
AEO 1998 calculations is the effect of standards on SO2
emissions from in-house combustion of oil, since the emissions cap does
not apply to households. This effect is calculated using simple
emissions factors.
The NEMS algorithm for estimating NOX emissions also
does not estimate in-house emissions, nor are the emissions calculated
for ozone non-attainment areas. In-house emissions account for the
combustion of fossil fuels, primarily natural gas, within individual
homes. Since households that use natural gas, fuel oil or coal do
contribute to NOX emissions, the effect on in-home
NOX emissions will be calculated externally to NEMS-NAECA,
using simple emissions factors.
Energy use for selected appliance efficiency levels will be the
same as those in the NES spreadsheet. Other input assumptions into
NEMS-NAECA will follow those used to produce AEO 1998. In principle,
any of the forecasts that appear in AEO 1998 could be estimated by
NEMS-NAECA to take into account the effects of a particular clothes
washer standard level, but in the standard reporting, the Department
intends to report emissions of SO2, NOX and
CO2. The time horizon of NEMS-NAECA is 2020. Beyond this
point, results will be extrapolated using a simple formula (for
methodology, see preliminary TSD) to extend the forecast to 2030.
Alternative price forecasts corresponding to the side cases found in
AEO 1998 will also be generated for use by NES and will be explored in
a similar fashion with NEMS-NAECA runs.
K. Regulatory Impact Analysis
DOE will be preparing a draft regulatory analysis pursuant to E.O.
12866, ``Regulatory Planning and Review,'' which will be subject to
review under the Executive Order by the Office of Information and
Regulatory Affairs (OIRA) 58 FR 51735 (October 4, 1993). Six major
alternatives were identified by DOE as representing feasible policy
options to achieve consumer product energy efficiency. Each alternative
will be evaluated in terms of ability to achieve significant energy
savings at a reasonable cost and will be compared to the effectiveness
of the rule.
As part of the docket for the Refrigerator Products Energy
Conservation Standards (Docket No. EE-RM93-801) AHAM stated that the
Department needs to improve the evaluation of non-regulatory means of
achieving energy savings. (AHAM, No. 207 at 7).
Under the Process Rule policies, the Department is committed to
continually explore non-regulatory alternatives to standards. In the
table below is a discussion of what was examined in 1994 and what is
being proposed for this rulemaking. The Department is seeking comments
on this approach. This approach is further discussed in the TSD.
------------------------------------------------------------------------
Alternatives to examine in
Alternatives examined in 1994 1998
------------------------------------------------------------------------
--No action............................... --No new regulatory action.
--Consumer tax credits.................... --Consumer tax credits.
--Manufacturer tax credits................ --Manufacturer tax credits.
--Performance standards................... --Performance standards.
--Consumer rebates........................ --Rebates.
--Prescriptive standards
--Voluntary standard...................... --Voluntary energy
efficiency targets.
--Enhanced labeling and consumer education
--Early replacement.
--Mass government purchases.
------------------------------------------------------------------------
III. Standards Scenarios
Upon reviewing the preliminary LCC and NES results, the Department
observes that the efficiency levels analyzed, 5 to 50 percent
efficiency improvement over baseline efficiency, produced a range of
impacts. For example, the NES impacts show a range from 0.36-10.06
quads of energy saved over the 2003 to 2030 period. As expected, the
higher the efficiency level, the greater the savings. Similarly, the
analysis shows an increase in water savings from 0.46 to 12.47
trillions of gallons saved. On the other hand, the NPV shows an
increase from $1.02 billion at the 5 percent level, to a maximum of
$13.53 billion at the 40 percent level, and then a reduction to $9.07
billion at the 50 percent level. The LCC and payback analyses show
results similar to the NPV analysis where the greatest economic benefit
is at the 40 percent level.
Based on the analyses performed, the 40 percent efficiency level
standard would appear to result in the greatest
[[Page 64367]]
economic benefit to the Nation. (See Tables 3, 4 and 8.) The national
net present benefit at the 40 percent efficiency level (which
represents an equivalent to a moderate H-axis level) is $13.53 billion.
This is approximately 22 percent higher than the NPV benefit at the 25
percent efficiency level (which represents the current highest V-axis
level) and 49 percent higher than the 50 percent level, the maximum
technologically feasible level. The LCC results in Table 3 indicate
that a 40 percent efficiency level has the greatest consumer mean LCC
savings. At 40 percent, the consumer mean LCC savings is $253, or $48
and $49 greater than the 25 and 50 percent levels, respectively. In
addition, at the 40 percent level, the range in LCC impacts is a
savings of $2,039 (0th percentile) to an increase of $645 (100th
percentile). The LCC analysis further shows that at the 40 percent
level approximately 83.7 percent of consumers will experience a LCC
savings; and that only 16.3 percent of the Nation's population will
experience an increase in LCC. Whereas, the LCC analysis indicates that
at the 25 percent efficiency level, standards will negatively impact
10.8 percent of the Nation's population and at the 50 percent level,
standards will adversely impact 25.8 percent of the population. (See
Table 3.)
Also, the rebuttable presumption payback periods shown in Table 5
indicate that all efficiency levels from 5 percent up to 25 percent
show a less than 3 year payback. The 40 percent efficiency level shows
a 3.7 year payback which represents a reasonable payback period
considering the increased energy savings at this level. There is a
significant jump in the payback period at the 45 and 50 percent
efficiency levels therefore making these efficiency levels look less
attractive.
These observations are based on preliminary LCC and NES results
which will be updated and revised in the NOPR and final rule analyses.
These observations, however, do not include analyses results from the
manufacturer impact or consumer subgroup and survey information.
The following are examples of possible alternative standards
scenarios for consideration by the Department:
A moderate standard at an early effective date. For
example, a level at a 25 percent improvement, effective three years
after the publication of the Final Rule.
A stringent standard, at a later effective date. For
example, a level at 45 percent improvement effective five years after
the publication of the Final Rule.
A two phase approach. For example, a level at 20 percent
effective three years after the publication of the Final Rule
(projected effective date--October, 2002) and a level at 40 percent
effective eight years after publication of the Final Rule.
The Department seeks comments on the alternative standard scenarios
for consideration in the analysis for the proposed rule.
IV. Public Comment Procedures
A. Participation in Rulemaking
The Department encourages the maximum level of public participation
possible in this rulemaking. Individual consumers, representatives of
consumer groups, manufacturers, associations, States or other
governmental entities, utilities, retailers, distributors,
manufacturers, and others are urged to submit written statements on the
proposal.
The Department has established a period of 75 days following
publication of this document for persons to comment on this proposal.
All public comments received will be available for review in the
Department's Freedom of Information Reading Room. In addition, the
following data is available in the Department's Freedom of Information
Reading Room:
Copies of the Preliminary TSD
Transcripts of the public hearings
Copies of the public comments received by the Department
Previous Federal Register notices relating to this clothes
washer rulemaking
A public hearing will be held on December 14 (1:00-4:00 p.m.) and
15 (9:00 a.m.-4:00 p.m.), 1998, at the U.S. Department of Energy,
Forrestal Building, 1000 Independence Avenue SW, Room 1E-245,
Washington, D.C. 20585. The December 14 session will be a training
session for the Government Regulatory Impact Model (GRIM). More
detailed information about this hearing will be on the Office of Codes
and Standards web site beginning in November. The web site address is
as follows: http://www.eren.doe.gov/buildings/codes__standards/
index.htm.
B. Written Comment Procedures
Interested persons are invited to participate in this proceeding by
submitting written data, views, or arguments with respect to the
subjects set forth in this document. Comments will not be accepted by
fax or e-mail. Instructions for submitting written comments are set
forth at the beginning of this document and below.
Comments should be labeled both on the envelope and on the
documents, ``Clothes Washer Rulemaking (Docket No. EE-RM-94-403),'' and
must be received by the date specified at the beginning of this
document. Ten copies are requested to be submitted. Additionally, the
Department would appreciate an electronic copy of the comments to the
extent possible. The Department is currently using
WordPerfectTM 6.1. All comments and other relevant
information received by the date specified at the beginning of this
document will be considered by the Department in the proposed rule.
All written comments received on the supplemental Advance Notice of
Proposed Rulemaking will be available for public inspection at the
Freedom of Information Reading Room, as provided at the beginning of
this document.
Pursuant to the provisions of 10 CFR 1004.11, any person submitting
information or data that is believed to be confidential, and exempt by
law from public disclosure, should submit one complete copy of the
document and ten (10) copies, if possible, from which the information
believed to be confidential has been deleted. The Department will make
its own determination with regard to the confidential status of the
information or data and treat it according to its determination.
Factors of interest to the Department, when evaluating requests to
treat information as confidential, include: (1) a description of the
item; (2) an indication as to whether and why such items of information
have been treated by the submitting party as confidential, and whether
and why such items are customarily treated as confidential, and whether
and why such items are customarily treated as confidential within the
industry; (3) whether the information is generally known or available
from other sources; (4) whether the information has previously been
available to others without obligation concerning its confidentiality;
(5) an explanation of the competitive injury to the submitting person
that would result from public disclosure; (6) an indication as to when
such information might lose its confidential character due to the
passage of time; and (7) whether disclosure of the information would be
in the public interest.
C. Issues for Public Comment
The Department is interested in receiving comments and data to
improve its preliminary analysis. In particular, the Department is
interested in seeking response to the following questions and/or
concerns that were addressed in this rulemaking.
[[Page 64368]]
Information on the energy efficiency and relative market shares of
current products on the market as described by the Modified Energy
Descriptor (MEF):
The Department has limited information concerning the
energy performance of existing product offerings using the MEF
descriptor. Given the vastly different nature of the variables and
testing methods of the current J and future J1 test procedures, the EF
values cannot be translated to MEF values.
Proposed product classes for products in this rulemaking:
In their written comments, Whirlpool asked the Department
to maintain the current efficiency requirement for the compact class
due to the limited potential for energy-efficient improvements and the
small market share for these products. Whirlpool also indicated that
the V-axis compact clothes washer market and the manufacturing base for
these products has changed since the current standards were developed.
The previous stand-alone 1.6 ft.\3\ compact V-axis clothes washer
products have been replaced by a product that maintains the small
cabinet (22'' width) utility and portability (via castors); however,
its basket capacity is slightly larger. Because of the limited market
size, Whirlpool is currently the only manufacturer of these products.
They also supply them to other appliance companies for sale under
various brand names. For these reasons, the Department will revise the
compact V-axis product class definition (1.6 ft.\3\ capacity) to
include all V-axis clothes washers less than 2.0 ft.\3\ (Whirlpool, No.
69 at 3). The Department plans to increase the compact class to include
all clothes washers (both V- and H-axis machines) less than 2.0 ft.\3\
and seeks comments on this change.
The Department received comments suggesting that it
identify V- and H-axis machines as a single product class. Whirlpool
stated that the DOE's analyses to date and the recent consumer
acceptance in the market of H-axis products confirm the validity of a
single product class, irrespective of the axis. Whirlpool further
stated that the concerns over clothes washer performance, consumer
utility and reliability are unfounded in either principle or fact.
(Whirlpool, No. 93 at 1.) The Natural Resources Defense Council (NRDC)
stated that the ``H-axis'' design option does not affect the utility of
clothes washers and it is not the only design option that can comply
with the standards. According to the NRDC, the evidence does not
support the establishment of different standards even if separate
classes were established. (NRDC, No. 60 at 1.)
However, other commenters feel that the Department should not
reject separate product classes. General Electric Appliances (GEA)
indicated that the Department is proceeding as if all relevant consumer
utilities are met by H-axis products already on the market or by
machines planned for production. GEA further stated that the port of
access is not the only relevant consumer utility that must be
addressed. Many other consumer utilities, including reliability, must
be addressed. (GEA, No. 88 at 2.) The Department seeks additional
comments on this issue and is currently working with stakeholders to
formulate a process to gather additional consumer input on the issues
surrounding clothes washer utility. This process is discussed further
in Section II.F.2.b.
The relationship between clothes washer capacity and the maximum
achievable efficiency using conventional V-axis designs:
AHAM commented that the testing performed for DOE reflects
an incorrect assessment of energy efficiency on current models and
indicated that manufacturers could not achieve these levels with
traditional V-axis clothes washers. (AHAM, No. 84 and 86). Based on
follow-up testing conducted for DOE, there appears to be a significant
variation in the RMC values obtained in tests even for clothes washers
of the same model. DOE plans to further review this issue. Since the
two models approaching a 30 percent improvement in efficiency were
``super capacity'' models, the Department will try to determine if
capacity or volume effects the maximum achievable efficiency
improvement in V-axis designs. The Department seeks comment on this
issue.
Data as to whether detergent use is a factor in consumer operating
cost and savings:
ACEEE stated that the present analysis ignores the
possibility that some consumers will use less detergent with new high-
efficiency machines than with standard machines. They recommend that
DOE construct two alternative scenarios (one that no detergent will be
saved and the other that some consumers will use less detergent). ACEEE
indicated that the Bern Kansas study provided some evidence for
detergent savings. (ACEEE, No. 94 at 2). Proctor and Gamble commented
that the perception that detergent dosage will reduce in horizontal
axis or drum washers essentially proportionally to water volume is
invalid. This appears to be a popular belief, but it is not
substantiated by the facts. The important impact is that users of new
lower water/energy efficient washers cannot expect to find detergent
cost savings. (Proctor & Gamble, No. 9 at 1). DOE seeks additional data
on this issue.
Data on retail mark-up assumption:
The American Council for an Energy-Efficient Economy
(ACEEE) commented that at the March 1998 workshop the Circuit City
representative suggested that assuming an average 40 percent retail
markup is probably too high. A 25 percent retail markup was more
typical of the industry. The 40 percent estimate may have factored in
higher markups on extended warranties and other services. (ACEEE, No.
94 at 3). In reviewing Circuit City's comment, the Department
understands that the statement referred to a gross margin of 25 percent
which represents a mark-up of 1.33. This is in close agreement with the
Department analysis of retailer financial statements having an
important component of appliances in their product mix (25.2 percent to
26.3 percent gross margin). Also, as referenced in the Preliminary TSD,
this gross margin is the net of some buying and warehousing costs. At
present the Department has no basis for changing the retail mark-up
assumption. DOE will continue to research data sources and seeks
comment on this issue.
Information on national level historical, current, and projections
of water and sewer rates:
Information on water prices is not as readily available as
fuel prices information. Some utilities have large fixed charges, while
others are subsidized or paid for through taxes. Furthermore, there are
no standard approaches to calculating water and sewer costs. In some
locations the price of water increases as consumption increases. In
other areas, water price decreases with increasing consumption.
Additional consideration must be given to consumers who are not
connected to a municipality water supply or sewage system. In some
cases, only one or the other is connected. As with other variables, the
Department plans to use a range of water prices in the economic
analysis to account for the variability among different households. DOE
seeks information on national level historical, current, and
projections of water and sewer rates.
The Department agrees that future water prices should not
be assumed to be constant and is therefore in the process of further
analyzing both current prices and future escalation rates. The proposed
analysis is on going and will be completed after the ANOPR
[[Page 64369]]
is released. The proposed analysis consists of updating previous data
from Ernst and Young report as adjusted by Al Dietemann, as well as the
use of new data obtained from the American Water Works Association
(AWWA). The Ernst and Young data is being updated by calling 125
utilities, getting their water rate schedules and their forecasts for
the future, as well as any historical information available. The
Department is working on combining these two data sources into one
database. This data will be organized by utility and can be mapped onto
either individual RECs households or onto regional areas. A
distribution of water prices (as in the current analysis) will be used,
as well as a distribution of escalation rates. In an attempt to be
consistent with the methodology being developed for fuel rates, the
Department will attempt to establish marginal water rates and water
prices and escalation rates that vary with the water/wastewater
utility. The Department is seeking comments concerning this approach.
Information relating to the determination of price and operating
cost elasticities:
In order to determine the effect of an increase in the
purchase price, it would be useful to know what the elasticity of
clothes washer prices is. The Department is still determining how these
data could be obtained. While preliminary analyses indicate that
factors, such as the current state of the economy have a greater
correlation to sales of washers than do an increase in clothes washer
prices, it is still important to estimate the impact of changing prices
on the sales of clothes washers. In making estimates of these price
effects, the Department needs to gauge the difference in clothes washer
sales from a change in the price of all clothes washers, as could
result from revised energy efficiency standards. In addition, the
Department will be estimating how price changes from revised energy
efficiency standards for clothes washers will affect the behavior of
consumers.
Information on how the data for the GRIM analysis should be
collected from the manufacturers:
Whirlpool proposed that the GRIM model be changed from
input to output aggregation. Each industry member would develop their
own inputs to the GRIM model over a range of MEF levels proposed by the
DOE. The GRIM models would be run by industry members to generate a
range of individual company outputs. The outputs of the individual
companies could then be aggregated to determine industry impact.
Individual companies would not be required to submit detailed input
assumptions, but only changes in revenues, shipments, profit after tax,
and cash flow, capital investment and design and marketing spending
could also be provided. A third party could do the aggregation and then
conduct a reality check by comparing the aggregated output to currently
available industry data. (Whirlpool No. 66 at 3). The Department seeks
further input as to how the data for the GRIM analysis should be
collected from the manufacturers and how it should be utilized.
Comments on the proposed DOE approach for determining shipments:
In as much as the accounting model is the only approach
that will take into account price and operating costs, the Department
believes it should be the primary tool for forecasting clothes washer
shipments. The Department seeks comments about the determination of
price and operating cost elasticities.
For the purpose of the base case forecast in the
preliminary analysis, the impact of voluntary programs has been
expressed as the percent of new clothes washers sold each year that
will have efficiencies corresponding to those of H-axis washers. The H-
axis washer is characterized using the data submitted by AHAM for a 35
percent energy reduction from the baseline MEF. The spreadsheet uses
disaggregated values (i.e., water heater energy, dryer energy and
mechanical energy) provided by AHAM. Disaggregated values provided by
AHAM for the baseline washer are also used for the base case forecast.
Calculations based on disaggregated values reflect the efficiencies of
machines actually being sold which may differ from the minimum required
efficiency. The preliminary base case assumes a 1.5 percent share of H-
axis machines in 1995 with a 0.5 percent increase in H-axis sales every
year thereafter, until 2030 (i.e., 19 percent).
The NES spreadsheet allows for changes in the distribution of
efficiencies of clothes washers due to non-regulatory programs. The
user specifies the percent of new clothes washer sales that will
achieve the selected energy reduction (relative to the baseline washer
design) in future years. In later analyses (i.e., the NOPR) the
Department expects to use a distribution of current and forecasted
efficiencies based on the best available information. Information is
still being gathered for this task. The Department seeks comment on
this forecast and welcomes any available information on current product
efficiencies.
Data on the possible adverse affects of standards on identifiable
groups of consumers that experience below-average utility or usage
rates:
The consumer analysis evaluates impacts to any
identifiable groups, such as consumers of different income levels, who
may be disproportionately affected by any national energy efficiency
standard level.
Information on what non-regulatory alternatives to standards need
to be reviewed:
Under the Process Rule policies, the Department is
committed to continually explore non-regulatory alternatives to
standards. In the table below is a discussion of what was examined in
1994 and what is being proposed for this rulemaking. The Department is
seeking comments on this approach. This approach is further discussed
in the TSD.
------------------------------------------------------------------------
Alternatives examined in 1994 Alternatives to examined
------------------------------------------------------------------------
--No action............................... --No new regulatory action.
--Consumer tax credits.................... --Consumer tax credits.
--Manufacturer tax credits................ --Manufacturer tax credits.
--Performance standards................... --Performance standards.
--Consumer rebates........................ --Rebates.
--Prescriptive standards.
--Voluntary standards..................... --Voluntary energy
efficiency targets.
--Enhanced labeling and consumer
education.
--Early replacement.
--Mass government purchases.
------------------------------------------------------------------------
Comments on the alternative standard scenarios:
The following are examples of possible alternative
standards scenarios for consideration by the Department:
A moderate standard at an early effective date. For
example, a level at a 25 percent improvement, effective three years
after the publication of the Final Rule.
A stringent standard, at a later effective date. For
example, a level at 45 percent improvement effective five years after
the publication of the Final Rule.
A two phase approach. For example, a level at 20 percent
effective three years after the publication of the Final Rule
(projected effective date--October, 2002) and a level at 40 percent
effective eight years after publication of the Final Rule.
V. Review Under Executive Order 12866
DOE provided to the Office of Information and Regulatory Affairs
[[Page 64370]]
(OIRA) in the Office of Management and Budget a copy of this document
for comment. At the proposal stage for this rulemaking, DOE and OIRA
will determine whether this rulemaking is a significant regulatory
action under Executive Order 12866, Regulatory Planning and Review. 58
FR 51735 (October 4, 1993). Were DOE to propose amendments to the
energy conservation standards for clothes washer, the rulemaking could
constitute an economically significant regulatory action and DOE would
prepare and submit to OIRA for review the assessment of costs and
benefits required by Section 6(a)(3) of Executive Order 12866. Other
procedural and analysis requirements in other Executive Orders and
statutes also may apply to such future rulemaking action, including the
requirements of the Regulatory Flexibility Act, 5 U.S. C. 601 et seq.;
the Paperwork Reduction Act, 44 U.S.C. 3501 et seq.; and the Unfunded
Mandates Act of 1995, Pub. L. 104-4; and the National Environmental
Policy Act of 1969, 42 U.S. C. 4321 et seq.
The draft of today's action and any other documents submitted to
OIRA for review have been made a part of the rulemaking record and are
available for public review in the Department's Freedom of Information
Reading Room, 1000 Independence Avenue, SW, Room 1E-190, Washington, DC
20585 between the hours of 9:00 and 4:00, Monday through Friday,
telephone (202) 586-6020.
Issued in Washington, DC, on October 23, 1998.
Dan W. Reicher,
Assistant Secretary, Energy Efficiency and Renewable Energy.
[FR Doc. 98-30555 Filed 11-18-98; 8:45 am]
BILLING CODE 6450-01-P
