97-24978. Energy Conservation Program for Consumer Products: Final Rule Regarding Energy Conservation Standards for Room Air Conditioners  

  • [Federal Register Volume 62, Number 185 (Wednesday, September 24, 1997)]
    [Rules and Regulations]
    [Pages 50122-50150]
    From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
    [FR Doc No: 97-24978]
    
    
    
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    Part III
    
    
    
    
    
    Department of Energy
    
    
    
    
    
    _______________________________________________________________________
    
    
    
    Office of Energy Efficiency and Renewable Energy
    
    
    
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    10 CFR Part 430
    
    
    
    Energy Conservation Program for Consumer Products; Conservation 
    Standards for Room Air Conditioners; Final Rule
    
    Federal Register / Vol. 62, No. 185 / Wednesday, September 24, 1997 / 
    Rules and Regulations
    
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    DEPARTMENT OF ENERGY
    
    Office of Energy Efficiency and Renewable Energy
    
    10 CFR Part 430
    
    [Docket Numbers EE-RM-90-201 and EE-RM-93-801-RAC]
    RIN 1904-AA38
    
    
    Energy Conservation Program for Consumer Products: Final Rule 
    Regarding Energy Conservation Standards for Room Air Conditioners
    
    AGENCY: Office of Energy Efficiency and Renewable Energy, Department of 
    Energy (DOE).
    
    ACTION: Final Rule.
    
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    SUMMARY: The Department of Energy (DOE or Department) has determined 
    that revised energy conservation standards for room air conditioners 
    will result in a significant conservation of energy, are 
    technologically feasible, and are economically justified. On this 
    basis, the Department is today amending the existing energy 
    conservation standards for room air conditioners. The Department 
    projects the standards to save 0.64 quad of energy through 2030, which 
    is likely to result in a cumulative reduction of emissions of 
    approximately 95,000 tons of nitrogen dioxide and 54 million tons of 
    carbon dioxide.
    
    EFFECTIVE DATE: The effective date of the standards is October 1, 2000.
    
    ADDRESSES: A copy of the Technical Support Document (TSD) for this 
    product may be read at the DOE Freedom of Information Reading Room, 
    U.S. Department of Energy, Forrestal Building, Room 1E-190, 1000 
    Independence Avenue, SW., Washington, DC 20585, (202) 586-3142, between 
    the hours of 9:00 a.m. and 4:00 p.m., Monday through Friday, except 
    Federal holidays. Copies of the TSD may be obtained from: U.S. 
    Department of Energy, Office of Energy Efficiency and Renewable Energy, 
    Forrestal Building, Mail Station EE-43, 1000 Independence Avenue, SW., 
    Washington, DC 20585. (202) 586-9127.
    
    FOR FURTHER INFORMATION CONTACT:
    
    Kathi Epping, U.S. Department of Energy, Office of Energy Efficiency 
    and Renewable Energy, Forrestal Building, Mail Station EE-43, 1000 
    Independence Avenue, SW., Washington, DC 20585, (202) 586-7425
    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.
    
    SUPPLEMENTARY INFORMATION:
    
    I. Introduction
        a. Authority
        b. Background
    II. Summary of Final Rule
    III. Discussion of Comments
        a. Room Air Conditioner Comments
        1. Classes
        2. Design Options
        3. Engineering Simulation Model
        4. Proposed Efficiency Standards
        5. Other Comments
        6. Other Comments Regarding FR Notice of January 29, 1997
        b. General Analytical Comments
    IV. Analysis of Room Air Conditioner Standards
        a. Efficiency Levels Analyzed
        b. Significance of Energy Savings
        c. Economic Justification
        1. Economic Impact on Manufacturers and Consumers
        2. Life-cycle Cost and Net Present Value
        3. Energy Savings
        4. Lessening of Utility or Performance of Products
        5. Impact of Lessening of Competition
        6. Need of the Nation to Save Energy
        7. Other Factors
        d. Payback Period
        e. Conclusion
    V. Procedural Issues and Regulatory Review
        a. Review Under the National Environmental Policy Act
        b. Review Under Executive Order 12866, ``Regulatory Planning and 
    Review''
        c. Review Under the Regulatory Flexibility Act
        d. Review Under the Paperwork Reduction Act
        e. Review Under Executive Order 12988, ``Civil Justice Reform''
        f. ``Takings'' Assessment Review
        g. Federalism Review
        h. Review Under the Unfunded Mandates Reform Act
        i. Review Under Small Business Regulatory Enforcement Fairness 
    Act of 1996
    
    I. Introduction
    
    a. Authority
    
        Part B of Title III of the Energy Policy and Conservation Act, Pub. 
    L. 94-163, as amended by the National Energy Conservation Policy Act 
    (NECPA), Pub. L. 95-619, the National Appliance Energy Conservation Act 
    (NAECA), Pub. L. 100-12, the National Appliance Energy Conservation 
    Amendments of 1988 (NAECA 1988), Pub. L. 100-357, and the Energy Policy 
    Act of 1992 (EPAct), Pub. L. 102-486,1 created the Energy 
    Conservation Program for Consumer Products other than Automobiles. The 
    consumer products subject to this program are called ``covered 
    products.'' The covered products specified by statute include room air 
    conditioners. EPCA, section 322, 42 U.S.C. 6292.
    ---------------------------------------------------------------------------
    
        \1\ The Energy Policy and Conservation Act, as amended by the 
    National Energy Conservation Policy Act, the National Appliance 
    Energy Conservation Act, the National Appliance Energy Conservation 
    Amendments of 1988, and the Energy Policy Act of 1992, is referred 
    to in this notice as the ``EPCA.'' Part B of Title III is codified 
    at 42 U.S.C. 6291 et seq.
    ---------------------------------------------------------------------------
    
        For room air conditioners, EPCA prescribes an initial Federal 
    energy conservation standard effective in 1990 and specifies that the 
    Department shall publish a final rule no later than January 1, 1992, to 
    determine if the 1990 standards should be amended. A second review must 
    be completed within five years after publication of this final rule. 
    EPCA, section 325(c), 42 U.S.C. 6295(c). 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, 325(o)(2)(A), 42 U.S.C. 6295(o)(2)(A). The Secretary 
    may not prescribe any amended standard which increases the maximum 
    allowable energy use or decreases the minimum required energy 
    efficiency of a covered product. EPCA, section 325(o)(1), 42 U.S.C. 
    6295(o)(1).
        Section 325(o)(2)(B) provides that DOE, in determining whether a 
    standard is economically justified, must determine whether 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 of, in the initial charges for, or maintenance 
    expenses of, the covered products which are likely to result from the 
    imposition of the standard;
        (3) The total projected amount of energy 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 conservation; and
        (7) Other factors the Secretary considers relevant.
        In addition, section 325(o)(2)(B)(iii) establishes a rebuttable 
    presumption of economic justification in instances where the Secretary 
    determines that
    
    [[Page 50123]]
    
    ``the additional cost to the consumer of purchasing a product complying 
    with an energy conservation standard level will be less than three 
    times the value of the energy savings during the first year that the 
    consumer will receive as a result of the standard, as calculated under 
    the applicable test procedure.''
    
    b. Background
    
        The purpose of this rulemaking is to review the energy conservation 
    standards for room air conditioners. In 1990, DOE published an advance 
    notice of proposed rulemaking with regard to standards for nine covered 
    products, including room air conditioners. 55 FR 39624 (September 28, 
    1990) (hereinafter referred to as the September 1990 advance notice). 
    The September 1990 advance notice presented the product classes that 
    DOE planned to analyze and provided a detailed discussion of the 
    analytical methodology and models that the Department expected to use.
        On March 4, 1994, DOE published a notice of proposed rulemaking 
    (NOPR) concerning eight products, including room air conditioners. 59 
    FR 10464 (March 4, 1994) (hereinafter referred to as the Proposed 
    Rule). The standards the Department proposed for room air conditioners 
    are shown in the following table:
    
         Table 1-1.--Proposed Standards Levels for Room Air Conditioners    
    ------------------------------------------------------------------------
                                              Energy efficiency ratio       
                                     ---------------------------------------
              Product class            Current standards  Standards proposed
                                      (effective January   in 1994 Proposed 
                                           1, 1990)              Rule       
    ------------------------------------------------------------------------
    1. Without reverse cycle, with                                          
     louvered sides, and less than                                          
     6,000 Btu/h....................                 8.0                11.1
    2. Without reverse cycle, with                                          
     louvered sides, and 6,000 to                                           
     7,999 Btu/h....................                 8.5                10.3
    3. Without reverse cycle, with                                          
     louvered sides, and 8,000 to                                           
     13,999 Btu/h...................                 9.0                11.0
    4. Without reverse cycle, with                                          
     louvered sides, and 14,000 to                                          
     19,999 Btu/h...................                 8.8                11.1
    5. Without reverse cycle, with                                          
     louvered sides, and 20,000 Btu/                                        
     h or more......................                 8.2                 9.6
    6. Without reverse cycle,                                               
     without louvered sides, and                                            
     less than 6,000 Btu/h..........                 8.0                10.7
    7. Without reverse cycle,                                               
     without louvered sides, and                                            
     6,000 to 7,999 Btu/h...........                 8.5                 9.9
    8. Without reverse cycle,                                               
     without louvered sides, and                                            
     8,000 to 13,999 Btu/h..........                 8.5                10.7
    9. Without reverse cycle,                                               
     without louvered sides, and                                            
     14,000 to 19,999 Btu/h.........                 8.5                10.8
    10. Without reverse cycle,                                              
     without louvered sides, and                                            
     20,000 Btu/h or more...........                 8.2                 9.3
    11. With reverse cycle and with                                         
     louvered sides.................                 8.5                10.8
    12. With reverse cycle and                                              
     without louvered sides.........                 8.0                10.4
    ------------------------------------------------------------------------
    
        DOE received over 8,000 comments during the comment period on the 
    1994 Proposed Rule and from participants at public hearings held in 
    Washington, DC on April 5-7 and June 7-8, 1994. Most of the comments 
    related to other products; twelve of the comments dealt specifically 
    with room air conditioners.
        After reviewing the comments on the proposed standards for room air 
    conditioners, the Department concluded that a number of significant 
    issues were raised which required additional analysis. In 1995, the 
    Department revised the analyses regarding room air conditioners to 
    account for the comments and data received during the public comment 
    period. (This revised analysis became the basis for the 1996 Draft 
    Report.)
        A moratorium was placed on publication of proposed or final rules 
    for appliance efficiency standards as part of the FY 1996 
    appropriations legislation. Pub. L. 104-134. That moratorium expired on 
    September 30, 1996.
        In 1995 and 1996, the Department conducted a review of its process 
    for developing appliance energy efficiency standards. This review 
    resulted in the publication of a final rule, entitled ``Procedures for 
    Consideration of New or Revised Energy Conservation Standards for 
    Consumer Products'' (hereinafter referred to as the Process Rule). 61 
    FR 36973 (July 15, 1996). Although the new procedures in the Process 
    Rule do not apply to this rulemaking, 61 FR at 36980, DOE has employed 
    an approach consistent with the new procedures in completing work on 
    this rule. In keeping with the new process, and based on comments 
    received in response to the Proposed Rule, DOE distributed for comment 
    a Draft Report on the Potential Impact of Alternative Energy Efficiency 
    Levels for Room Air Conditioners (hereinafter referred to as Draft 
    Report). The Draft Report contained DOE's revised analysis, begun in 
    1995, examining five alternative efficiency levels. The Draft Report 
    was distributed to a mailing list that included all of the commenters 
    on the proposed rule on room air conditioners on May 5, 1996. (EE-RM-
    93-801-RAC 2 No. 1 and No. 2.) The letter invited comment on 
    the Draft Report by no later than July 1, 1996.
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        \2\ EE-RM-90-201 refers to the docket for the September 1990 
    advance notice and the 1994 Proposed Rule. Docket No. EE-RM-93-801-
    RAC contains the 1996 Draft Report, comments to the 1996 Draft 
    Report, comments to the 1997 reopening notice, and the supplemental 
    analysis.
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        Between the beginning of June and the end of November 1996, DOE 
    received six comments on the Draft Report and related issues. DOE 
    officials also held meetings on September 26 with representatives of 
    the Association of Home Appliance Manufacturers (AHAM) and interested 
    manufacturers and on September 27 with the American Council For an 
    Energy Efficient Economy (ACEEE), the Alliance to Save Energy, the 
    Natural Resources Defense Council (NRDC), and State energy officials 
    from California, Florida, and Oregon. (EE-RM-93-801-RAC No. 11 and No. 
    12.)
        On the basis of these comments, DOE prepared a TSD which comprises 
    the Draft Report and a supplemental analysis conducted on a candidate 
    standard level not included in the Draft Report. The supplemental 
    analysis focused on a set of efficiency levels for the same 9 classes 
    analyzed in the proposed rule. (EE-RM-93-801-RAC No. 13.)
        In a Federal Register (FR) Notice dated January 29, 1997, the 
    Department reopened the comment period for room air conditioners for 15 
    days. This notice announced the availability of the supplemental 
    analysis and gave indication of the standard levels the Department was 
    inclined to promulgate in the final rule. The Department received 4 
    comments in response to this notice.
    
    II. Summary of Final Rule
    
        The standards set forth in today's rule are projected to save 
    approximately 0.64 quad of energy through 2030. Although
    
    [[Page 50124]]
    
    the standards in the Proposed Rule were projected to save 2.2 quads, 
    DOE has concluded, based on public comment and further analysis, that 
    the proposed standards are not economically justified. The standard 
    levels set forth in today's rule are significantly less costly than 
    those standards in the proposed rule. The following table presents the 
    standards established in today's rule:
    
    ------------------------------------------------------------------------
                                       Energy efficiency ratio, effective as
                                                        of                  
              Product class          ---------------------------------------
                                        January 1, 1990     October 1, 2000 
    ------------------------------------------------------------------------
    1. Without reverse cycle, with                                          
     louvered sides, and less than                                          
     6,000 Btu/h....................                 8.0                 9.7
    2. Without reverse cycle, with                                          
     louvered sides, and 6,000 to                                           
     7,999 Btu/h....................                 8.5                 9.7
    3. Without reverse cycle, with                                          
     louvered sides, and 8,000 to                                           
     13,999 Btu/h...................                 9.0                 9.8
    4. Without reverse cycle, with                                          
     louvered sides, and 14,000 to                                          
     19,999 Btu/h...................                 8.8                 9.7
    5. Without reverse cycle, with                                          
     louvered sides, and 20,000 Btu/                                        
     h or more......................                 8.2                 8.5
    6. Without reverse cycle,                                               
     without louvered sides, and                                            
     less than 6,000 Btu/h..........                 8.0                 9.0
    7. Without reverse cycle,                                               
     without louvered sides, and                                            
     6,000 to 7,999 Btu/h...........                 8.5                 9.0
    8. Without reverse cycle,                                               
     without louvered sides, and                                            
     8,000 to 13,999 Btu/h..........                 8.5                 8.5
    9. Without reverse cycle,                                               
     without louvered sides, and                                            
     14,000 to 19,999 Btu/h.........                 8.5                 8.5
    10. Without reverse cycle,                                              
     without louvered sides, and                                            
     20,000 Btu/h or more...........                 8.2                 8.5
    11. With reverse cycle, with                                            
     louvered sides, and less than                                          
     20,000 Btu/h...................                 8.5                 9.0
    12. With reverse cycle, without                                         
     louvered sides, and less than                                          
     14,000 Btu/h...................                 8.0                 8.5
    13. With reverse cycle, with                                            
     louvered sides, and 20,000 Btu/                                        
     h or more......................                 8.5                 8.5
    14. With reverse cycle, without                                         
     louvered sides, and 14,000 Btu/                                        
     h or more......................                 8.0                 8.0
    15. Casement-Only...............             ( \1\ )                 8.7
    16. Casement-Slider.............             ( \1\ )                 9.5
    ------------------------------------------------------------------------
    \1\ Casement-only and casement-slider room air conditioners are not     
      separate product classes under standards effective January 1, 1990.   
      These units are subject to the applicable standards in classes 1      
      through 14 based on unit capacity and the presence or absence of      
      louvered sides and a reverse cycle.                                   
    
    III. Discussion of Comments
    
    a. Room Air Conditioner Comments.
    
        This section addresses comments to the 1994 Proposed Rule, the 1996 
    Draft Report, and the 1997 reopening notice. The ``RAC'' notation 
    signifies that the following comment is from Docket No. EE-RM-93-801-
    RAC which contains comments to the 1996 Draft Report and the 1997 
    reopening notice. All other comments are from Docket No. EE-RM-90-201 
    which contains comments from the 1994 Proposed Rule. Note that the 
    Draft Report addressed many of the comments to the 1994 Proposed Rule.
    1. Classes
        In the 1994 Proposed Rule, the Department proposed fourteen classes 
    of room air conditioners. These product classes consisted of five 
    categories; units with side louvers, units without side louvers, units 
    with reversing valve and with side louvers, units with reversing valve 
    and without side louvers, and casement-type units. There were five 
    class divisions by capacity within each of the two categories without 
    reversing valves. Casement-type units were divided into the following 
    two classes: casement only units and casement-slider units.
        Units with louvered sides and without reversing valves. The 
    California Energy Commission (CEC) proposed a reduction in product 
    classes from twelve to four, eliminating the class divisions based on 
    capacity. They stated that the profusion of classes makes comparison of 
    models difficult since the label-reading consumer does not compare all 
    the models available. In addition, disincentives could be created that 
    discourage manufacturers from making efficiency improvements to models 
    near capacity breakpoints because design changes can push the capacity 
    into the next category which has a higher or lower standard level. 
    (CEC, No. 539 at 2-3.) Fedders Corporation (Fedders) proposed that the 
    three smallest capacity classes for units with side louvers and without 
    reversing valve be consolidated into a single class. It called for this 
    consolidation due to the disparity in cost and dehumidifying capability 
    that would arise from having significantly different efficiency 
    standards promulgated for these three classes. (Fedders, April 7, 1994, 
    Transcript at 120-122.) AHAM proposed that the Department retain the 
    current five capacity class divisions for units with side louvers and 
    without reversing valves. (AHAM, No. 1 at 2.)
        In the 1994 Proposed Rule, DOE explained that performance and 
    installation constraints necessitate class divisions by capacity. 
    Manufacturers limit their production of cabinets to three or four 
    sizes. Units of similar capacity tend to be designed for the same 
    cabinet size. The space and configuration limitations imposed by the 
    cabinet tend to produce units with similar efficiencies. Because 
    efficiency is essentially a function of cabinet size, and thus 
    capacity, class divisions by capacity are warranted. In the Final Rule, 
    the minimum efficiency standards for each of the four classes with 
    louvered sides and capacities less than 20,000 Btu/h all have nearly 
    the same efficiency value (efficiencies range from 9.7 to 9.8 EER), 
    reducing the concern about inappropriate incentives to change product 
    capacity to take advantage of capacity based standards. The Department 
    agrees with AHAM that the current 5 capacity-based classes should be 
    retained.
        Units without louvered sides and without reversing valves. AHAM, 
    Frigidaire Company (Frigidaire), and Sanyo Electric Company (Sanyo) 
    proposed that classes without louvered sides and without reversing 
    valve be consolidated into two classes: units with capacities of less 
    than 8,000 Btu/h and units with capacities greater than or equal to 
    8000 Btu/h. (AHAM, No. 1 at 2; Frigidaire, No. 544 at 5; Sanyo, No. 771 
    at 3.) AHAM states that the capacity classes established for units with 
    side louvers and without reverse cycle are not particularly applicable 
    to the other types of classes. (AHAM, RAC No. 4 at 1.) In support of 
    making this recommendation, AHAM stated that since the 1990 minimum 
    efficiency standards became effective, models without louvered sides 
    have been produced only in the 6,000 to 7,999 Btu/h capacity class or 
    the 8,000 to 13,999 Btu/h class. The sizes of existing sleeves and the 
    efficiency standards have constrained capacities to these two classes. 
    (AHAM, No. 1 at 20.) In its comments to the 1996 Draft report, AHAM 
    again urged the Department to reduce the number of classes from five
    
    [[Page 50125]]
    
    to two for these units. (AHAM, RAC No. 4 at Attachment 1 pg. 1.)
        As discussed with respect to classes with louvered sides and 
    without reversing valves, class divisions by capacity are warranted for 
    units without louvered sides because of the effect that economic and 
    installation constraints have on capacity and efficiency. Although 
    manufacturers currently do not produce units in two of the existing 
    five capacity classes, the Department has decided not to consolidate 
    these classes into those units with capacities less than and greater 
    than 8,000 Btu/h. However, the new standards for the two classes of 
    units less than 8,000 Btu/h are the same (9.0 EER) and the new 
    standards for the three classes of units with capacities of 8,000 Btu/h 
    or more are the same (8.5 EER.) In the future, manufacturers might 
    produce units in classes where none are currently being produced. For 
    example, models are now being produced in the less than 6000 Btu/h 
    class where models were not being manufactured previously. Therefore, 
    the Department will retain all five of the existing classes for units 
    without louvers and without reverse cycle.
        Units with reversing valves. AHAM and Sanyo proposed that units 
    with reversing valves be consolidated into a single class if the 
    efficiency standard specified for them is a single fixed EER difference 
    below all other cooling-only classes (i.e., classes without reversing 
    valve.) A fixed EER difference of 0.5 EER was proposed. (AHAM, No. 1 at 
    2; Sanyo, No. 771 at 3.) This recommendation essentially creates as 
    many classes for units with reversing valves as there are for units 
    without reversing valves. Both Whirlpool Corporation (Whirlpool) and 
    Fedders agreed with this recommendation. (Whirlpool, April 7, 1994, 
    Transcript at 106; Fedders, April 7, 1994, Transcript at 136.) In a 
    April 23, 1996 joint letter to AHAM, ACEEE and NRDC agreed with the 
    fixed 0.5 EER difference between reverse-cycle classes and their 
    corresponding ``cool-only'' classes. (ACEEE/NRDC, RAC No. 3 at 4.) In 
    addition, during a meeting with ACEEE, Alliance to Save Energy, 
    California Energy Commission, Florida Energy Office, Oregon Department 
    of Energy, and NRDC, a recommendation was made to refer to reverse 
    cycle products as ``heat pump air conditioners'' in the future. (RAC 
    No. 10 at 2.) AHAM responded that these systems are not designed to be 
    sophisticated heat pumps but rather to modify a room air conditioner by 
    adding a reverse cycle to ``make it function as a heat pump within the 
    confines of a relatively small enclosure.'' (AHAM, RAC No. 6 at 3.)
        The Department has determined its current class structure for units 
    without reversing valves (two product classes: one for units with 
    louvered sides and another for units without louvered sides) is not 
    adequate. Therefore, the Department is adding two classes for units 
    with reverse cycle to accommodate the concerns expressed in public 
    comments. The two additional classes are class 13--units with reverse 
    cycle, with louvers, and with a capacity of 20,000 Btu/h or more--and 
    class 14--units with reverse cycle, without louvers, and capacity of 
    14,000 Btu/h or more.
        Casement-Type Units. In the 1994 Proposed Rule, the Department 
    proposed additional classes for casement-slider and casement-only room 
    air conditioners because of the unique utility they offer to the 
    consumer. Casement-type units offer a performance-related feature 
    (fitting into casement windows) which other room air conditioners 
    cannot provide. AHAM and Frigidaire supported the Department's proposal 
    to establish separate classes for casement only and casement/slider 
    units. In addition, AHAM stated that because of the limited number of 
    models available and the narrow range of capacities, class divisions by 
    capacity are not necessary for these unit types. (AHAM, No. 1 at 21-22; 
    Frigidaire, No. 544 at 6.) In their comments to the Draft Report, ACEEE 
    and NRDC recommended that casement-only units be combined in the same 
    category as casement-slider units due to the fact that there is only 
    one casement-only unit on the market. ACEEE and NRDC are also concerned 
    that a loophole may be created because lower-priced casement units may 
    be used in applications that do not require the special dimensions 
    required by casement-only units. They commented that adjustable side 
    panels can be used to enclose the space created when a window is wider 
    than the air conditioner. (ACEEE/NRDC, RAC No. 5 at 4.)
        The Department believes that the size limitations imposed on 
    casement-type units are more significant than those faced by typical 
    units which are designed for double-hung windows. Since this 
    performance-related feature justifies a lower efficiency standard, 
    separate classes will be established for casement-slider and casement-
    only units. The Department agrees with AHAM that class divisions by 
    capacity are not necessary because of the narrow range of capacities in 
    which models are currently available. According to AHAM's Directory of 
    Certified Room Air Conditioners, casement-slider units range in 
    capacity from 5,000 to 11,000 Btu/h, while there is currently only one 
    casement-only unit, which has a capacity of 6,200 Btu/h. The Department 
    believes that there is utility added by having a casement-only as well 
    as a casement-slider class. In addition, the Department believes that 
    the dimensions of casement units are restrictive enough to prevent a 
    loophole.
        Ductless Split Systems. Fedders proposed that ductless split system 
    air conditioners be regulated under room air conditioner efficiency 
    standards as it believes that they are directly competing against room 
    air conditioners for market share. (Fedders, April 7, 1994, Transcript 
    at 123.) The NRDC agreed with the Fedders recommendation. (NRDC, No. 55 
    at 28)
        The Department's efficiency standards for split system-type central 
    air conditioners also apply to ductless split systems. The Department 
    makes no distinction between split systems which deliver conditioned 
    air with or without ducts. Thus, because split systems are covered 
    under standards for central air conditioners, ductless split system air 
    conditioners will not be established as an additional class for room 
    air conditioners.
    2. Design Options
        Commenters provided detailed comments on several of the design 
    options that were analyzed by the Department for the proposed 
    rulemaking.
        Rotary compressors. Compressor efficiency was the design option 
    that drew the greatest amount of comment. AHAM, Amana Refrigeration, 
    Inc. (Amana), Frigidaire, Fedders, Sanyo, Matsushita Electric 
    Corporation (Matsushita), Whirlpool, and Tecumseh Corporation 
    (Tecumseh) all provided comments stating that rotary compressors cannot 
    attain the 11.5 to 12.0 EER efficiency levels assumed in the 
    Department's analysis. They stated that the maximum efficiency of 
    currently available rotary compressors falls in the 10.7 to 10.9 EER 
    range. Compressor manufacturers stated that only minor efficiency 
    improvements are expected within the next three to five years. The 
    combined effect of these efficiency improvements would yield only a 
    11.1 to 11.3 EER rotary compressor. And although efficiency increases 
    of this magnitude may be theoretically achievable, they would require 
    the development of high-efficiency motors which are currently not 
    available, use of higher-grade materials in the rotary compressor
    
    [[Page 50126]]
    
    mechanism, and new compressor production methods and equipment. Both 
    AHAM and Amana additionally commented that physical samples of new 
    compressors need to be available to room air conditioner manufacturers 
    at least 36 months prior to the effective date of the standards to 
    provide adequate time for development, reliability and field testing. 
    (AHAM, No. 1 at 7; Amana, Inc., No. 347 at 1; Frigidaire, No. 544 at 2; 
    Fedders, April 7, 1994, Transcript at 121-122; Sanyo, No. 771 at 7-9; 
    Matsushita, April 7, 1994, Transcript at 88-90; Tecumseh, April 7,1994, 
    Transcript at 97-99; Whirlpool, April 7, 1994, Transcript at 102-103.) 
    ACEEE commented that compressor efficiencies have been improving in 
    recent years and are still below the theoretical limit. It stated that 
    according to trade press articles, rotary and reciprocating compressors 
    with efficiencies exceeding 11.0 EER are already available and further 
    increases in efficiency are being developed. It argues that if 11.5 to 
    12.0 EER compressors are not realized, other technologies could be used 
    to attain the Department's proposed efficiency levels. (ACEEE, No. 557 
    at 21.) ACEEE and NRDC commented that slightly more efficient 
    compressors which are likely to become available soon should be used in 
    the analyses in future rulemakings. (ACEEE/NRDC, RAC No. 5 at 1.)
        The Department rejects AHAM's suggestion that design options must 
    be available 36 months prior to the effective date of the standards. 
    However, the prediction in the 1994 Proposed Rule that 11.5 to 12.0 EER 
    compressors would be available by the year new efficiency standards 
    would become effective was based on development plans of a compressor 
    manufacturer to produce 11.6 to 12.0 EER compressors. Subsequently, 
    those development plans were canceled. Because rotary compressor 
    manufacturers state that they cannot produce compressors with 
    efficiency levels approaching the 11.5 to 12.0 EER range, the 
    Department, in the Draft Report, analyzed only rotary compressors which 
    are currently on the market. Depending on their capacity, the most 
    efficient rotary compressors range in efficiency from 10.7 to 11.1 EER. 
    In its comments to the 1996 Draft Report, AHAM stated that the revised 
    report addressed its concerns. (AHAM, RAC No. 4 at Attachment 1, pg 2.)
        Scroll compressors. Only AHAM provided comments regarding scroll 
    compressors. It stated that scroll compressors are currently not 
    available in capacities less than 18,000 Btu/h and that efficiencies 
    are either no more or slightly more efficient than rotary compressors. 
    In addition, scroll compressor application heights are typically three 
    to five inches greater than comparable rotary compressors, therefore 
    requiring a larger chassis. Copeland Corporation (Copeland), a scroll 
    compressor manufacturer, was cited by AHAM as having announced plans to 
    develop a new, smaller scroll design optimized in the 14,000 to 24,000 
    Btu/h capacity range. AHAM stated this design could be expanded 
    effectively into room air conditioner applications with more reasonable 
    cost premiums and with efficiencies possibly in the 11.5 to 12.0 EER 
    range, but because it is not possible to make these compressors 
    available to manufacturers 36 months prior to the effective date of new 
    standards, they should not be considered by the Department for this 
    rulemaking. (AHAM, No. 1 at 8.) Again, ACEEE and NRDC in their joint 
    comments to the Draft Report stated that slightly more efficient 
    compressors which are likely to become available soon should be used in 
    the analyses in future rulemakings. (ACEEE/NRDC, RAC No. 5 at 1.)
        Again, the Department rejects AHAM's suggestion that design options 
    must be available 36 months prior to the effective date of the 
    standards. Although Copeland Corporation is currently investigating 
    this more efficient compressor technology in the 14,000 to 24,000 Btu/h 
    capacity range, they could not commit to produce it. Because there was 
    not sufficient evidence this technology would be available by the 
    effective date of the standards, only Scroll compressors which are 
    currently on the market were considered for the Department's Final Rule 
    analysis. For compressors which would be suitable for room air 
    conditioner applications, Copeland's scroll compressors currently range 
    in efficiency from 10.8 to 11.1 EER. The lowest capacity scroll 
    compressor offered by Copeland is 16,500 Btu/h. Thus, scroll 
    compressors were only considered for room air conditioners with 
    capacities of at least 16,000 Btu/h. The information DOE received from 
    compressor manufacturers showed that scroll compressor heights are only 
    1-2 inches greater than comparable rotary compressors. Moreover, 
    because this design option was not contained in any of the standard 
    levels the Department found to be economically justified, the 
    Department does not consider this height differential to be an issue. 
    AHAM commented that it was satisfied with the treatment of this issue 
    in the Draft Report. (AHAM, RAC No. 4 at Attachment 1 pg. 2.)
        Reciprocating compressors. The Department's analysis of an advanced 
    reciprocating compressor design called the inertia compressor received 
    comments by AHAM, Frigidaire, and Bristol Compressors (Bristol.) All 
    three commented that inertia compressors with efficiencies in the range 
    of 11.5 to 12.0 EER are expected to be available within the next couple 
    of years but only in capacities exceeding 18,000 Btu/h. Inertia 
    compressors are significantly heavier, larger, and noisier than the 
    rotary compressors that are currently used in room air conditioner 
    applications. Larger chassis sizes would be required to accommodate the 
    increased weight and size of the inertia compressor. In addition, sound 
    blankets would be necessary to muffle the increased noise levels. Thus, 
    cost premiums and the accompanying application costs make inertia 
    compressors difficult to cost justify for room air conditioners. (AHAM, 
    No. 1 at 8-9; Frigidaire, No. 544 at 2; Bristol, June 7, 1994, 
    Transcript at 355-362.)
        Although the Department recognizes that advanced reciprocating 
    compressors are heavier and larger than existing rotary compressors, no 
    information was provided as to how great the application costs for 
    enlarging and bracing the chassis would be for incorporating them into 
    room air conditioner units. Thus, only the cost of the compressor 
    itself, with its accompanying sound blanket, was explicitly included in 
    the Department's Final Rule analysis. For those instances where the 
    advanced reciprocating compressor exceeded the weight of the rotary 
    compressor by a significant amount (over 30 percent), an increase in 
    chassis size was assumed to be necessary for incorporating the larger 
    and heavier compressor. Therefore, a design option which resulted in a 
    chassis size increase (i.e., increased evaporator and condenser face 
    areas) always preceded the incorporation of an advanced reciprocating 
    compressor. The added costs for increasing the chassis were assumed to 
    cover the expense of incorporating the reciprocating compressor. For 
    compressors which would be suitable for room air conditioner 
    applications, Bristol's inertia compressors currently range in 
    efficiency from 11.2 to 11.8 EER. The lowest capacity inertia 
    compressor offered by Bristol is 18,000 Btu/h. Thus, inertia 
    compressors were considered only for room air conditioners with 
    capacities of at least 18,000 Btu/h. In its comments to the 1996 Draft 
    Report, AHAM indicated that this approach
    
    [[Page 50127]]
    
    addressed its concerns. (AHAM, RAC No. 4 at Attachment 1 pg 2.)
        Fan motor efficiency. Only AHAM provided comments with regard to 
    improvements in fan motor efficiency. It stated that permanent split 
    capacitor (PSC) fan motors are already used in 98 percent of room air 
    conditioners. The efficiency of PSC fan motors fall in the range of 50 
    percent to 70 percent with larger motors being more efficient. AHAM 
    admitted that some modest gains may be achieved with PSC fan motors in 
    specific applications. With regard to electronically commutated motors 
    (ECM), otherwise known as brushless permanent magnet motors (BPM), AHAM 
    stated that they cost 2.5 to 3 times more than standard PSC motors. In 
    addition, they weigh approximately twice that of a standard PSC motor. 
    ECM efficiencies range from 68 percent to 78 percent. ECMs are 
    currently not available with the double ended shaft required for room 
    air conditioner applications because controls block one end of the 
    motor. AHAM believes that ECMs with double ended shafts are not likely 
    to be made available in the foreseeable future. Even if ECMs were 
    manufactured with double ended shafts, AHAM claimed that manufacturers 
    would need physical samples 24 months before the effective date of 
    standards. (AHAM, No. 1 at 10 and RAC No. 4 at 5.)
        The Department recognizes that most room air conditioner designs 
    already incorporate permanent split capacitor fan motors. But for two 
    of the product classes analyzed, the representative baseline units used 
    inefficient shaded pole motors. Thus, for these two classes, 
    significant efficiency gains were achieved by replacing the shaded pole 
    motors with more efficient permanent split capacitor motors. For all 
    other classes, the representative baseline units already incorporate 
    permanent split capacitor motors. Further fan motor efficiency 
    increases were assumed to be achieved only through the use of ECMs. 
    Although current ECM controls are situated at one end of the motor, the 
    Department believes that there is no reason why they cannot be moved to 
    another location on the motor. Thus, it is assumed that ECMs can be 
    manufactured with double ended shafts. Although the Department 
    recognizes that ECMs weigh approximately twice as much as standard 
    permanent split capacitor motors, no information was provided about the 
    application costs for bracing the chassis to incorporate them into room 
    air conditioner units. Thus, only the cost of the ECM itself was 
    explicitly taken into account in the Department's Final Rule analysis. 
    However, because the analysis showed that ECMs were not an advantageous 
    design option, any cost increases due to increased ECM weight need not 
    be considered further. In its comments to the 1996 Draft Report, AHAM 
    indicated that the analysis, which assumes a fan motor efficiency of 30 
    percent for shaded pole and 50 percent for permanent split capacitor 
    (PSC) when changing from a shaded pole to a PSC, addresses its concern. 
    (AHAM, RAC No. 4 at Attachment 1, pg. 2.)
        Variable speed compressors. AHAM stated that variable speed 
    compressors are not currently used in room air conditioner applications 
    and should not be considered a technically viable design option. AHAM 
    commented that the cost premium is 30 percent to 50 percent above 
    comparable single-speed compressors. Although variable speed 
    compressors are available off-shore in capacities and sizes suitable 
    for use in room air conditioners, improvements in efficiency cannot be 
    measured with the Department's current test procedure. AHAM commented 
    that the Department's current single condition test procedure 
    adequately matches consumer usage patterns for room air conditioners. 
    (AHAM, No. 1 at 12.) AHAM does not believe variable speed compressors 
    are ``capable of being assembled into room air conditioners by the 
    effective date'' and should not be considered a viable design option. 
    (AHAM, RAC No. 4 at 5.)
        Although the Department recognizes that the current test procedure 
    is not adequate for determining the benefits due to variable speed 
    compressors, they are still analyzed as a design option for room air 
    conditioners. As done for the Proposed Rule's analysis, efficiency 
    gains are established based on estimates from central air conditioning 
    applications. The efficiency improvement, because it is primarily a 
    result of reduced cycling (i.e., reduced on and off operation), is 
    reported in terms of the seasonal energy efficiency ratio (SEER). A 
    minimum efficiency standard cannot be based on its inclusion because 
    the current test procedure does not recognize a SEER rating as an 
    appropriate measure of efficiency. In addition, variable speed 
    compressors were not included in any of the efficiency levels DOE 
    determined to be economically justified.
        Heat exchanger design options. A number of comments were received 
    regarding design changes to improve heat exchanger (evaporator and 
    condenser) performance. These improvements can be put into two 
    categories: designs for increasing the heat exchanger surface area and 
    designs for increasing the heat transfer coefficients. The heat 
    transfer surface area can be increased by any of the following methods: 
    increasing the frontal area of the coil by increasing the height or 
    width; adding a subcooler to the condenser coil; increasing the depth 
    of the coil by adding vertical tube rows; or increasing the fin 
    density. The heat transfer coefficients can be increased by using an 
    enhanced fin design or grooved (rifled) refrigerant tubing.
        With regard to heat exchanger improvements, manufacturers expressed 
    great concern over design options that would require an increase in 
    chassis size, namely, increases in heat exchanger size. AHAM claimed 
    that tooling for a new chassis size can range in cost from $1.5 to $5.0 
    million per manufacturer. In addition, it stated that there are limits 
    to the efficiency that can be achieved through increases in coil size 
    without causing problems with latent cooling capacity (i.e., 
    dehumidification.) It also stated that if standards require larger 
    chassis sizes, there will be loss of utility in terms of portability 
    and availability of larger capacities that can fit into smaller 
    windows. In addition, availability of very large capacities would be 
    reduced. (AHAM, No. 1 at 11-12.) AHAM also stated that an increase in 
    coil size could affect compressor reliability. It stated that if room 
    air conditioner efficiency is increased by enlarging the coil, the 
    compressor capacity must be reduced to maintain the capacity of the 
    system. But because the unit now has more refrigerant as a result of 
    enlarging the coil, it is more likely that the smaller compressor's 
    maximum charge limitation would be reached. The closer the refrigerant 
    charge comes to the compressor's charge limit, the more likely that 
    compressor failure would occur. (AHAM, Transcript, April 7, 1994, at 
    66.) Amana stated that its current coil designs are already optimized. 
    (Amana, Inc., No. 347 at 1.) Sanyo stated that increasing the condenser 
    surface area is not feasible as the chassis enclosure is already too 
    crowded. (Sanyo, No. 771 at 9.)
        AHAM and several manufacturers commented that the Department's 
    proposed efficiency standards would require increases in chassis size 
    for all room air conditioner product classes because some design 
    options that the Department assumed would be available, primarily 11.5 
    to 12.0 EER compressors, would not exist by the time the proposed 
    standards became effective. AHAM stated that even a small increase in 
    the efficiency standard will cause some models to move to a larger 
    chassis size. According to AHAM,
    
    [[Page 50128]]
    
    92 percent of total production would need to move to a larger chassis 
    size to meet the standards proposed in the 1994 Proposed Rule. AHAM 
    further commented that because chassis sizes vary widely among 
    manufacturers, new standards will have significant competitive effects. 
    (AHAM, No. 1 at 1, 14-18.) Amana, Whirlpool and Frigidaire all provided 
    comments reinforcing AHAM's comments. Amana stated that to meet the 
    Department's proposed standards it would need to redesign nine of 
    thirteen basic models into a larger chassis. These manufacturers 
    further commented that the higher prices resulting from chassis size 
    increases place an unfair burden on low income consumers. (Amana, No. 
    347 at 1; Whirlpool, No. 391A. at 1; Frigidaire, No. 544. at 3.)
        AHAM provided the Department with a graph which shows the 
    percentage of production which would be required to change chassis size 
    at each EER. (AHAM No. 1 at 14.) In its comments to the Draft Report, 
    AHAM states that ``more stringent standards [than the standards 
    proposed by AHAM] will cause a significant number of chassis size 
    changes with step function-like cost implications to manufacturers and 
    raise utility, marketing and competitive issues.'' (AHAM, RAC No. 6 at 
    1.) AHAM stated the baseline model method of analysis does not 
    realistically represent the impact on cost of increasing the chassis 
    size. AHAM believes the Department should weight the cost of a larger 
    chassis by the proportion of models needing a larger chassis to achieve 
    specific efficiency levels. (AHAM, RAC No. 4 at 3.) In their most 
    recent comments, ACEEE and NRDC state this approach is reasonable, but 
    they believe the life cycle cost minimums, resulting when costs of 
    chassis size increases are prorated, should be used to select 
    standards. Referring to the graph provided by AHAM, ACEEE and NRDC 
    state that the proportion of models requiring a larger chassis size at 
    9.8 EER is ``scarcely different'' than the proportion required by 9.5 
    EER and that only at EER levels above 9.8 EER do a significant 
    proportion of models need a larger chassis. Furthermore, they state 
    ``to consider chassis size as an independent decision-making factor 
    would overemphasize chassis size in making a final decision.'' (ACEEE/
    NRDC, RAC No. 5 at 2.)
        The impact of increased heat exchanger size on dehumidification was 
    assessed with the engineering computer simulation model. The simulation 
    model not only estimates the efficiency increase that results from 
    adding more coil area but also its effect on latent heat removal. For 
    all the room air conditioners which were modeled, the heat exchanger 
    increases which were analyzed resulted in latent heat ratios of at 
    least 25 percent. The latent heat ratio is the latent heat rate removal 
    of the air conditioner divided by its total cooling capacity. AHAM 
    considers 25 percent to be the minimum acceptable latent heat ratio. 
    With regard to the issue of compressor reliability, although the 
    Department recognizes that an increase in coil size coupled with a 
    decrease in compressor capacity could affect the reliability of the 
    compressor, manufacturer data were not provided as to the maximum 
    charge limit of room air conditioner compressors. The Department's 
    analysis of larger coil sizes assumed that the compressor capacity 
    would not have to be reduced when analyzing larger coil sizes. Thus, 
    with regard to how the Department conducted its analysis, it is 
    unlikely that compressor reliability would be negatively impacted. 
    Moreover, increasing evaporator/condenser coil area was not contained 
    in any of the standard levels DOE found to be economically justified.
        With regard to the issue that some manufacturers may be 
    competitively disadvantaged by being required to increase chassis size, 
    the Department carefully considered the information provided by AHAM 
    which indicates that the proposed standards in the 1994 Proposed Rule 
    would require 92 percent of manufacturers to increase chassis size. 
    Both the Department and AHAM recognize that any change in efficiency 
    standard will require some manufacturers to increase chassis size. The 
    Department has attempted to reduce the number of chassis size changes 
    as much as possible while still achieving the goal of promulgating 
    standards which maximize energy efficiency consistent with economic 
    justification. The standards set forth would require an increased 
    chassis size for a substantially smaller subset--approximately 25 
    percent--of products.
        The Department considered AHAM's recalculations of life-cycle cost 
    minimums which prorated the cost of chassis size increases. (AHAM, RAC 
    No. 9 at Attachment 3A.) DOE has selected standard levels corresponding 
    to the minimum life cycle costs when chassis size cost is prorated for 
    the classes for which AHAM provided this information (i.e., classes 1 
    through 5).
        AHAM commented that manufacturers will make adjustments to the 
    number of tube rows and the density of fins in order to optimize heat 
    exchanger performance. Because heat exchangers are, in general, already 
    optimized, however, adjusting either the tube rows or the fin density 
    is not a significant factor in increasing system efficiency. (AHAM, No. 
    1 at 9.) Sanyo stated that adding tube rows or fin material causes 
    increased air flow restrictions and requires design changes to fan and 
    fan motors. If motor speeds are increased to obtain high airflow, 
    unacceptable noise levels result. (Sanyo, No. 771 at 9.)
        The Department agrees with AHAM and Sanyo that the number of tube 
    rows and the fin density are already optimized to yield the greatest 
    heat exchanger performance. In using the engineering computer 
    simulation model, increases in either tube row density or fin density 
    provided negligible increases in system performance. In its comments to 
    the 1996 Draft Report, AHAM indicated that because the simulation model 
    shows negligible increases in system performance by increasing the fin 
    density and number of tube rows, AHAM is no longer concerned about this 
    matter. (AHAM, RAC No. 4 at Attachment 1 pg. 2.)
        AHAM stated that enhanced fins are already used in 64 percent of 
    the evaporators produced by manufacturers and 99 percent of the 
    condensers. AHAM also commented that good projections for the 
    efficiency improvement due to enhanced fins are not available. AHAM 
    further commented that the increased use of enhanced fins in 
    evaporators is likely to be limited because in some cases condensate 
    drainage is a limiting factor. AHAM believes that additional 
    significant improvements in fin design are not expected in the 
    foreseeable future. (AHAM, No. 1 at 10.) Sanyo stated that many models 
    already employ enhanced fins. (Sanyo, No. 771 at 9.)
        The Department recognizes that most room air conditioner designs 
    incorporate enhanced fins. Consequently, most of the representative 
    baseline units for the product classes analyzed by the Department 
    already include enhanced (i.e., slit-type) fins. For those baseline 
    units where enhanced fins could be added, efficiency improvements were 
    based on information provided by room air conditioner and heat 
    exchanger manufacturers. Publicly available research information was 
    used to check the reasonableness of the data supplied by manufacturers. 
    The manufacturer information also included data on how densely enhanced 
    fins could be packed until condensate drainage became a problem. In 
    accordance with this manufacturer data, the Department's
    
    [[Page 50129]]
    
    analysis limited enhanced fin densities before condensate drainage 
    became a problem. In its comments to the 1996 Draft Report, AHAM 
    indicated that this approach addressed its concerns. (AHAM, RAC No. 4 
    at Attachment 1 pg. 2.)
        AHAM stated that grooved refrigerant tubes are already used in 97 
    percent of the evaporators produced by manufacturers and 86 percent of 
    the condensers. AHAM also commented that good projections for the 
    efficiency improvement due to grooved tubes are not available. AHAM 
    does not expect additional significant improvements in tube design in 
    the foreseeable future. (AHAM, No. 1 at 10.) Sanyo stated that many 
    models already employ grooved tubes. (Sanyo, No. 771 at 9.)
        As with enhanced fins, the Department recognizes that most room air 
    conditioner designs already incorporate grooved refrigerant tubing. 
    However, for many of the representative baseline units that were 
    selected (with consultation from AHAM) for the Proposed Rule's 
    analysis, grooved tubing was not incorporated into the design. For the 
    Department's Proposed Rule analysis, manufacturer test data was used to 
    determine the efficiency improvements due to grooved tubing. However, 
    publicly available research data indicated the manufacturer test data 
    overstated the possible improvement. In addition, the analysis 
    conducted for the Proposed Rule did not account for the increase in 
    refrigerant-side pressure drop due to the grooved tubing. Thus, for the 
    Department's analysis for the Final Rule, efficiency and pressure drop 
    estimates were based on research data published by the American Society 
    of Heating, Refrigerating and Air-Conditioning Engineers (ASHRAE.) In 
    its comments to the 1996 Draft Report, AHAM commented that this 
    approach addressed its concern. (AHAM, RAC No. 4 at Attachment 1 pg. 
    2.)
        In their comments to the Draft Report, ACEEE and NRDC state that 
    the report seems to ignore a new heat exchanger technology by Modine 
    Technology that can achieve ``at least a 0.75 increase in EER'' without 
    changing chassis size. (ACEEE/NRDC, RAC No. 5 at 1.) The advocates 
    recommend that new technologies such as this one be considered in 
    future rulemakings. The Oregon Department of Energy also stated its 
    belief that most manufacturers were in contact with Modine Technology. 
    (RAC No. 10 at 2.)
        The efficiency improvement made possible by the new heat exchanger 
    technology to which the energy efficiency advocates referred is based 
    on theoretical calculations. Modine Technology's new heat exchanger has 
    shown improvements in central air conditioners; however, it has not 
    been tested in room air conditioners. The Department does intend to 
    analyze this technology in future rulemakings.
        AHAM, Amana, Frigidaire, Fedders, and Sanyo all provided comments 
    with regard to subcoolers. Test data was provided indicating that the 
    efficiency improvement due to subcoolers is significantly lower than 
    that estimated by the Department in the 1994 Proposed Rule. AHAM 
    presented data indicating that, on average, the actual efficiency and 
    capacity improvements are 44 percent and 67 percent, respectively, of 
    that projected by the Department's simulation model. Also, according to 
    the AHAM, four out of seven room air conditioner manufacturers do not 
    currently use subcoolers and five of the seven manufacturers would need 
    to make major tooling changes on all or some of their chassis. (AHAM, 
    No. 1 at 6-7; Amana, No. 347 at 2; Frigidaire, No. 544 at 2-3; Fedders, 
    No. 693 at 2-6; Sanyo, No. 771 at 9.)
        Based on comments, the Department used manufacturer test data to 
    calibrate the subcooler efficiency increases that were estimated by the 
    simulation model. For each room air conditioner model simulated, the 
    temperature of the condensate into which the subcooler is immersed was 
    adjusted until the simulated efficiency increase matched that indicated 
    by the manufacturer test data. Depending on the capacity of the unit, 
    the manufacturer test data demonstrates unit efficiency increases of 
    between 1.4 percent to 3.0 percent, as compared to approximately 6 
    percent increases found in the analysis for the Proposed Rule. The 
    simulation model was adjusted based on this test data. AHAM indicated 
    that this approach addressed its earlier concern. (AHAM, RAC No. 4 at 
    Attachment 1 pg. 2.) In addition, DOE used manufacturer cost 
    information provided by AHAM to calculate the economic impact of 
    incorporating a subcooler as one of the room air conditioner design 
    options.
        Design options already in use. Many manufacturers claimed that they 
    already use many of the design options that are being considered by the 
    Department for increasing energy efficiency. (AHAM, April 7, 1994, 
    Transcript at 51-52; Amana, No. 347 at 1; Frigidaire, No. 544 at 4; 
    Fedders, No. 693 at 1; Sanyo, No. 771 at 8.) Both Amana and Frigidaire 
    stated that they already use high efficiency rotary compressors, 
    grooved tubes, enhanced fins and permanent capacitor fan motors. Amana 
    stated that the only design options available for increasing efficiency 
    are more efficient compressors, larger coil sizes, larger chassis 
    sizes, and the addition of a liquid line subcooler. (Amana, No. 347 at 
    1; Frigidaire, No. 544 at 4.)
        The design options which are considered in the analysis are based 
    on the characteristics of the representative baseline units. The 
    baseline models used in this analysis were selected through 
    consultation with AHAM. If a baseline unit does not include particular 
    design options, then those options are analyzed as measures to improve 
    the efficiency of the unit. Although some of these design options are 
    already commonly used, they may not all be used simultaneously. For 
    example, some of the baseline units used more efficient compressors to 
    achieve a certain efficiency rating, while many of the units on the 
    market used less efficient compressors but improved heat exchanger 
    design options to achieve the same level of efficiency.
    3. Engineering Simulation Model
        The Department received several comments regarding the engineering 
    computer simulation model that it used in its analysis of efficiency 
    improvements for room air conditioners. Comments were provided 
    primarily by AHAM and can be categorized into three areas: (1) the 
    accuracy of the simulation model; (2) the method in which the modeling 
    analysis was conducted; and (3) the selection of baseline models for 
    room air conditioners without louvered sides.
        In comparing simulation results from the Department's computer 
    simulation model to test data gathered from four room air conditioner 
    models, AHAM demonstrated that there is a marked tendency for the 
    simulation model to overestimate system efficiency. It concluded that 
    the simulation model has the potential for making errors of 5 percent 
    or more, especially when extended well beyond the point where actual 
    correlative test data exists. (AHAM, No. 1 at 3.) Frigidaire and Sanyo 
    reinforced the AHAM's comments when they presented data demonstrating 
    that the simulation model estimated higher benefits for design options 
    than are realized in practice. (Frigidaire, No. 544 at 4; Sanyo, No. 
    771 at 10-12.)
        The simulation model was extensively reviewed by the room air 
    conditioner industry. For the 1994 Proposed Rule, simulation results 
    were calibrated to manufacturer test data for all of the representative 
    baseline units modeled. The Department recognizes that when simulation 
    results are calibrated to a single manufacturer's test
    
    [[Page 50130]]
    
    data, it is possible that the model will yield errors of 5 percent or 
    more when used to simulate the performance of other manufacturers' 
    units. Where test data is not available, the Department expects to 
    continue to use the simulation model to estimate the efficiency 
    increases resulting from the incorporation of design options. When 
    manufacturer test data is provided, as in the case of subcoolers, the 
    Department will use it to adjust the simulation model.
        AHAM commented that several errors were made in the simulation 
    modeling. The first pertains to compressor modeling and the fact that 
    actual compressor performance data was used only in the modeling of 
    baseline equipment. The Department derived performance data for more 
    efficient compressors by multiplying the motor input values from the 
    baseline compressor data by the ratio of the baseline and high-
    efficiency compressor nominal energy efficiency ratios (EER.) This type 
    of analysis shows overall room air conditioner efficiency improvement 
    equal to 89 percent of the nominal compressor EER improvement. Limited 
    test data shows that the overall room air conditioner efficiency 
    increase is about 75 percent of the nominal compressor EER improvement. 
    AHAM advocated using actual compressor performance data for the 
    analysis of more efficient compressors but to limit maximum system 
    efficiency improvements to 75 percent of the nominal compressor EER 
    increase. It also stated that when deriving compressor coefficients for 
    input to the simulation model, the Department must use compressor 
    performance data that spans the entire range of evaporating and 
    condensing temperatures under which the compressor might operate. 
    Otherwise, incorrect input coefficients could be generated. (AHAM, No. 
    1 at 3-6 and AHAM, RAC No. 4 at Attachment 1 pg 1.)
        The Department agrees with AHAM that actual compressor performance 
    data should be used to model the performance of compressors. Nominal 
    compressor performance is based on ratings at standardized temperature 
    conditions, and actual compressor performance may be significantly 
    different at actual room air conditioner operating conditions. Using 
    the nominal efficiency to compare the performance between two 
    compressors only provides the efficiency difference at the standardized 
    conditions. Using actual compressor performance data to model 
    compressor operation captures the effect that different operating 
    conditions have on room air conditioner performance. Thus, actual 
    compressor performance data, spanning the entire range of evaporating 
    and condensing temperatures in which the compressor might operate, was 
    used to model the performance of all the compressors analyzed for the 
    Final Rule. The Department disagrees with AHAM that system efficiency 
    improvements should be limited to 75 percent of the nominal compressor 
    EER increase. The basis for using compressor performance data is to 
    more accurately assess the system improvement due to more efficient 
    compressors. Placing a ceiling on the efficiency improvement eliminates 
    the possibility of gaining system EER increases due to more favorable 
    compressor operating conditions. As it turned out, most of the 
    compressors modeled as design options in the Final Rule analysis 
    yielded system efficiency increases that were equal to or less than 75 
    percent of the nominal compressor EER increase. Only one of the 
    compressors analyzed yielded a system efficiency increase significantly 
    above the AHAM's suggested 75 percent ceiling. This compressor was used 
    at standard level 5, which was found to be not economically justified.
        According to AHAM, another error in the simulation modeling 
    concerns the use of superheat. It noted that the Department incorrectly 
    specified the input for superheat from manufacturer test data by using 
    the difference between the mid-evaporator temperature and a temperature 
    on the suction line. It claimed that the Department should have 
    adjusted the superheat input to the simulation model until the 
    difference between the averages of the simulated evaporator inlet and 
    outlet temperatures and the simulated suction line inlet and outlet 
    temperatures were equal to the test value. (AHAM, No. 1 at 5.)
        The Department's method for specifying the superheat was in 
    accordance with recommendations made by AHAM in 1990. These 
    recommendations included making modifications to the simulation model 
    in order to account for the presence of an accumulator. The 
    modifications were based on treating the inlet to the accumulator as 
    the inlet to the compressor shell for rotary compressors. In order to 
    account for superheating occurring within the accumulator, the 
    simulation model was modified to include provisions to account for the 
    temperature and pressure increases that occur within the accumulator. 
    The location on the suction line where the temperature was measured was 
    at the accumulator inlet (i.e., the suction line outlet). The superheat 
    in the simulation model is defined as the difference between the 
    compressor shell inlet's refrigerant and saturation temperatures; 
    therefore, knowing that the suction line temperature was measured at 
    the accumulator inlet provided confidence in using it to specify the 
    superheat. Because the test data did not provide the accumulator 
    inlet's saturation temperature, the mid-evaporator temperature was used 
    as a close approximation of the evaporator saturation temperature, 
    which is also a close approximation for the compressor shell inlet 
    saturation temperature. Therefore, the Department believes it 
    appropriate to use the difference between the mid-evaporator and 
    accumulator inlet temperatures to specify the superheat. AHAM indicated 
    in its comments to the Draft Report that this method addresses its 
    concerns. (AHAM, RAC No. 4 at Attachment 1, pg. 1.)
        In estimating room air conditioner efficiency increases resulting 
    from more efficient fan motors, AHAM commented that it was 
    inappropriate to use combined fan and fan motor efficiencies as input 
    to the simulation model. Rather than using efficiencies, it advocated 
    using fan motor power as an input as it asserts that room air 
    conditioner efficiencies will be overestimated by using fan and fan 
    motor efficiencies. (AHAM, No. 1 at 5.)
        The simulation model was originally developed to model the 
    performance of central air conditioners. Manufacturers generally agreed 
    to this approach. However, some adjustments had to be made to model a 
    different air delivery system. For room air conditioners, the 
    evaporator and condenser fans are both driven by a single fan motor, as 
    opposed to central air conditioners, in which each fan is driven by its 
    own fan motor. For the room air conditioner model, the Department 
    decided to describe the air delivery system with combined fan and fan 
    motor efficiencies in order to account for the impact of evaporator and 
    condenser air-side pressure drop on fan motor power use. This modeling 
    scheme also assumed that the evaporator fan accounted for 40 percent of 
    the total fan motor power while the condenser fan accounted for the 
    remaining 60 percent. AHAM was in agreement with modeling the room air 
    conditioner's air delivery system by using a ``40/60 split'' on the fan 
    motor power. But due to this modeling scheme, only 60 percent of the 
    fan motor heat loss was added to the condenser air stream. All of the 
    heat loss from the fan motor should be added to the condenser air 
    stream as the motor resides in the outdoor section of the room air 
    conditioner. The Department
    
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    decided to change the simulation model in order to account for the fan 
    motor's full heat loss. In the Department's analysis for the 1994 
    Proposed Rule, simulation results were calibrated to test data for all 
    the baseline models. Because accounting for the full heat loss slightly 
    lowers the system efficiency, minor adjustments had to be made to the 
    power and capacity correction factors contained in the input files in 
    order to recalibrate the simulation results to the baseline model test 
    data. In AHAM's comments to the 1996 Draft Report, AHAM indicated that 
    this method addressed its concerns. (AHAM, RAC No. 4 at Attachment 1, 
    pg 1.)
        AHAM claimed the simulation modeling analysis used incorrect power 
    consumption penalties to account for reversing valves and for no 
    louvers. With regard to reversing valves, AHAM noted that the TSD for 
    the 1994 Proposed Rule reports two different power consumption 
    penalties: 3 percent and 4 percent. AHAM noted that the Department's 
    simulation analysis actually calculates a power reduction value of 2.5 
    percent. AHAM recommended using a penalty of five percent when modeling 
    reverse cycle units with the simulation model. With regard to the power 
    consumption penalty used for units without louvered sides, AHAM claimed 
    that the value of 4 percent used in the Department's simulation 
    analysis does not account for the reduced airflow across the condenser 
    coil due to the non-louvered sides. Although it proposed no alternative 
    power penalty to account for non-louvered sides, it stated that the 
    condenser face area being modeled should be decreased because outdoor 
    air is drawn through the back of the unit rather than through louvered 
    sides, and thus less condenser area is available for heat exchange. 
    (AHAM, April 7, 1994, Transcript at 62-65.)
        For the 1994 Proposed Rule, power consumption penalties to account 
    for reversing valves and to account for no louvers were applied only to 
    the compressor's power consumption. Because the power penalty is 
    assessed only to the compressor, the overall power increase for the 
    entire room air conditioner is always slightly smaller than the 
    reported power penalty value. The TSD for the Proposed Rule did 
    mistakenly report two different penalties for reversing valves. The 
    value that was actually used was 3 percent. The power penalty used to 
    account for non-louvered sides was 4 percent. A 5 percent power penalty 
    was used for the Final Rule to account for products with a reversing 
    valve. Because an alternative power penalty value was not proposed for 
    non-louvered sides, the Department retained the use of a 4 percent 
    power penalty. This 4 percent power penalty was assumed to account for 
    any degradation in performance due to drawing outdoor air directly 
    through the condenser coil. Thus, the modeled condenser face area was 
    not reduced.
        In its comments to the 1996 Draft Report, AHAM states that although 
    the Draft Report indicates that power consumption penalties were used 
    in the simulation model, it appears (referencing Table 1.6 of the Draft 
    Report) that baseline data for actual models were used, and that these 
    results are not consistent with actual practice. (AHAM, RAC No. 4 at 
    2.) The Department did use the power consumption penalties in the 
    simulation model for the Draft Report. Table 1.6 of the Draft Report is 
    intended to show that the results produced by the simulation model are 
    close to the actual test data.
        Both AHAM and Sanyo asserted that the Department selected baseline 
    models for ``through-the-wall'' units (units without louvered sides) 
    with efficiencies that were not representative of the class. They both 
    stated that baseline models were derived from models with louvered 
    sides, and thus, the analysis conducted for these products is 
    meaningless. Sanyo stressed that the largest capacity size within the 
    smallest enclosure for the particular product class of interest should 
    be selected as a representative baseline model. (AHAM, No. 1 at 19; 
    Sanyo, No. 771 at 6-10.)
        In the analysis for the 1994 Proposed Rule, representative baseline 
    models for non-louvered and reversing valve classes were derived from 
    the baseline models that were selected for louvered classes. The 
    Department agrees with AHAM and Sanyo in that actual baseline units 
    should be used to represent the non-louvered and reversing valve 
    classes. Thus, the Department based its analysis of non-louvered and 
    reversing valve classes on modeling of actual baseline units. With 
    regard to non-louvered classes, manufacturer data were available only 
    for two of the existing five capacity classes; 6,000 to 7,999 Btu/h and 
    8,000 to 13,999 Btu/h. Thus, analyses were conducted only for the two 
    classes where manufacturer data were available. Manufacturer data were 
    also available for selecting representative baseline units for 
    reversing valve classes, with and without louvered sides, and 
    engineering analyses were conducted for both these classes.
        Based on its recommended changes for improving the performance of 
    the engineering simulation model, AHAM re-ran the model for the five 
    capacity classes with louvered sides and without a reversing valve. For 
    all five classes, the efficiency levels determined by AHAM's simulation 
    analysis were significantly lower than the Department's proposed 
    efficiency standards. (AHAM, No. 1 at 26.) Using the version of the 
    simulation model that the Department used for its Proposed Rule 
    analysis, Sanyo conducted a simulation analysis for classes without 
    louvered sides. With its analysis, it also concluded that efficiency 
    gains were significantly below those that the Department demonstrated 
    were possible for classes without louvered sides. (Sanyo, No. 771.) 
    Like AHAM, Fedders also performed an efficiency analysis for the five 
    capacity classes with louvered sides and without a reversing valve. But 
    instead of using the Department's simulation model, it used test data 
    (and interpolated estimates based on test data) to project efficiency 
    increases. Fedders' results were similar to AHAM's in that the 
    efficiency levels that were calculated were significantly lower than 
    the Department's proposed standards for all five classes. (Fedders, No. 
    693 at Sec. 1, 1-6.)
        Based on the comments received, DOE made a number of adjustments to 
    the simulation model, as described above, and changed the method in 
    which certain design options were analyzed. After these adjustments, 
    the Department's simulation results were close to those reported by 
    AHAM. For the five capacity classes being compared, these were the only 
    two classes for which DOE and AHAM had efficiency results that differed 
    by greater than 1 percent--the 6,000 to 7,999 Btu/h class and the 
    14,000 to 19,999 Btu/h class.
        In the case of the 6000 to 7999 Btu/h class, the discrepancy 
    (approximately 3 percent) between AHAM's simulation results and the 
    Department's simulation results for the Final Rule can be attributed to 
    an error in the earlier simulation model. This error, which was present 
    in the simulation model that AHAM used and that the Department used in 
    its analysis for the Proposed Rule, was corrected for the Department's 
    Final Rule analysis. Thus, correcting this error in the version of the 
    simulation model used by the AHAM would yield a predicted efficiency 
    that would be closer to that estimated by the Department for the Final 
    Rule. The error related acceptable difference between the calculated 
    condenser exiting temperatures from the two subroutines--because the 
    acceptable difference was too low, the model
    
    [[Page 50132]]
    
    converged at solutions that produced condenser heat transfer 
    coefficients which were too small.
        In the case of the 14,000 to 19,999 Btu/h class, the discrepancy 
    (approximately 3.5 percent) was primarily attributable to AHAM's method 
    of estimating efficiency improvements due to an additional design 
    option (condenser grooved tubes) that was analyzed by the Department 
    but not by AHAM. If the Department had not considered this design 
    option, the discrepancy would only be 0.6 percent.
        In AHAM's comments to the 1996 Draft Report, AHAM stated that it 
    was ``satisfied with the efficiency analyses of models with side 
    louvers and without reverse cycle up to the application of the BPM fan 
    motor and the variable speed compressor'' and that after correcting for 
    the errors described in the preceding paragraphs, ``the correlations 
    would all be within an acceptable 1%''. (AHAM, RAC No. 4 at 2.)
        With regard to Fedders' estimates, the Department's revised 
    efficiency estimates were still significantly different: discrepancies, 
    on average, were over 3.5 percent. Unfortunately, Fedders did not 
    provide detailed information on how it arrived at its estimates. Given 
    the close agreement with the results reported by AHAM, the Department 
    is comfortable with its revised simulation results.
        In its comments to the Draft Report, AHAM stated that the ``fine 
    tuning of the simulation model has led to reasonably good 
    correlations'' for models with side louvers and with a reverse cycle. 
    However, AHAM stated that although the simulation model was calibrated 
    to baseline data for actual models without louvers and actual models 
    with a reverse cycle, ``the simulated effect of the applied design 
    options is not consistent with actual practice.'' AHAM also stated that 
    considerable time and effort would be required to ``get the same level 
    of correlation that was achieved for models with louvers and without a 
    reverse cycle.'' AHAM also states that the wide variability of results 
    when comparing simulation model efficiency results to AHAM's results 
    shows that there is a ``significant problem'' in simulating models with 
    reverse cycle. (AHAM, RAC No. 4 at 2-4.) In addition, with regard to 
    units with a reverse cycle, AHAM stated that ``poor correlation with 
    these units is most likely due to the unusual restrictions in the 
    refrigeration circuit due to the reversing valve and compromises made 
    to balance both the heating and the cooling of the unit.'' (AHAM, RAC 
    No. 4 at 4.) ACEEE and NRDC recommended in their joint comments that 
    ``problems with the simulation models can be dealt with by examining 
    the efficiencies of units now on the market, in order to sanity check 
    the simulation model results.'' (ACEEE/NRDC, RAC No. 5 at 3.)
        The Department agrees that its computer model may not accurately 
    simulate actual performance for models without louvers (classes 6-10) 
    or models with a reverse cycle (classes 11 and 12). Consequently, the 
    Department has relied more heavily on the comments in selecting 
    standards levels. For classes with a reverse cycle, the Department 
    chose standard levels which took into consideration the comments by 
    both the manufacturers and energy efficiency advocates. With regard to 
    the recommendation made by ACEEE and NRDC, the Department consulted the 
    AHAM directory when making decisions on the efficiency standards to set 
    forth in this rule.
    4. Proposed Efficiency Standards
        Support for proposed standards. Southern California Edison Company 
    (SCEC), ACEEE, Central Hudson Gas & Electric Corporation (CHGEC), and 
    Alabama Power Company (APC) all generally supported the Department's 
    proposed standards. ACEEE stated that the standards proposed in the 
    1994 Proposed Rule are supported due to the availability of products 
    with high efficiency levels in the marketplace. ACEEE stated that 
    according to AHAM's 1993 and 1994 directories, units with louvered 
    sides and without a reversing valve are available with efficiencies 
    exceeding 11.0 EER in the 6000 to 7999 Btu/h and 8000 to 13,999 Btu/h 
    product classes. In the 14,000-19,999 Btu/h product class, models are 
    available with efficiencies of 10.5 EER. The ACEEE asserted that even 
    if the Department underestimated the extra first cost of the proposed 
    standards by a factor of two, they would still be cost effective. 
    (ACEEE, No. 557 at 20-22.) CHGEC stated that for its service area, the 
    proposed standards would save approximately 103 kWh per unit for a 
    typical 8000 Btu/h size. (CHGEC, No. 601 at 1.) SCEC and APC generally 
    supported the rulemaking proposals. (SCEC, No. 14 at 1; APC, No. 696 at 
    20.)
        Although the Department recognizes the comments supporting the 
    proposed standards, lower efficiency standards are being promulgated in 
    this Final Rule. Revisions made to both the engineering simulation 
    model and the method in which certain design options were analyzed, 
    based on public comment, resulted in lower efficiency standards being 
    selected for all product classes.
        Proposed standard level 6. In addition to receiving comments in 
    support of the proposed standards, the NRDC commented that the 
    Department did not provide justifiable reasons for rejecting even the 
    higher efficiency standards in the 1994 Proposed Rule. NRDC's argument 
    included: (1) the Department's rejection of the higher standards 
    (described as standard level six in the 1994 Proposed Rule) based on 
    the standard level's long payback is legally unacceptable; (2) though 
    short-term return on equity is reduced by standard level six, the long-
    term return is not significantly reduced; and (3) manufacturer cost 
    impacts are premised on the continuation of current practices for 
    utility rate design under which residential peak kilowatt-hours do not 
    carry a price premium. (NRDC, April 5, 1994, Transcript at 115-116.)
        There are significant differences between the candidate standard 
    levels selected for the proposed rule and those levels selected for the 
    final rule. These differences are a result of revisions made to the 
    engineering analysis.
        In response to NRDC's specific comments, the Department recognizes 
    that in determining whether a standard is economically justified, the 
    Secretary cannot consider the failure to meet the rebuttable 
    presumption criterion. EPCA, section 325(o)(2)(B)(iii), 42 U.S.C. 
    6295(o)(2)(B)(iii). However, the Department does consider energy cost 
    savings relative to incremental first cost. EPCA, section 
    325(o)(2)(B)(I)(II), 42 U.S.C. 6295(o)(2)(B)(I)(II). The Department 
    also considers both short run and long run return on equity as 
    important factors in determining the rule's impact on manufacturers. In 
    addition, the Department strives to fairly assess consumer cost 
    impacts, including sensitivity analysis of high and low State energy 
    prices.
        Adverse effects of standards. The Department received several 
    comments regarding the adverse affects of promulgating the proposed 
    standards. The greatest concern of manufacturers, that heat exchanger 
    coils and cabinets would need to be expanded, at significant expense, 
    in order to meet the Department's proposed standards, was discussed 
    previously under comments pertaining to design options requiring 
    increased chassis sizes. Other manufacturer concerns included: (1) The 
    disparity in the proposed efficiency levels for class 1 (less than 
    6,000 Btu/h, with louvers and without a reversing valve) and class 2 
    (6,000-7,999 Btu/h, with louvers and without a reversing valve); (2) 
    the effect of higher efficiency
    
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    standards on the replacement market for ``through-the-wall'' units 
    (i.e., units without louvered sides) ; (3) the effect higher standards 
    would have on sales of units with reversing valves; (4) the impact on 
    the dehumidification capability of low capacity units; and (5) the 
    impact on low-income consumers.
        The proposed standard of 11.1 EER for class 1 units was 
    significantly greater than the proposed standard of 10.3 EER for class 
    2 units. Both AHAM and Frigidaire claimed that this disparity in the 
    efficiency levels will result in significantly higher consumer costs 
    for class 1 units. They asserted that this disparity will eventually 
    eliminate class 1 units from the marketplace because consumers would 
    purchase less expensive class 2 units. They stated that eliminating low 
    cost class 1 units would adversely effect low income consumers. With 
    regard to energy consumption, for applications where class 1 units are 
    more suitable, they stated that class 2 units might run less to provide 
    the same amount of cooling, but their overall power consumption would 
    be higher because they would operate at a lower efficiency. For units 
    of equal efficiency providing cooling to environments with the same 
    sensible and latent loads, limited manufacturer test data indicated 
    that a class 2 unit (6,000 Btu/h capacity) consumes 6 percent more 
    power than a class 1 unit (5,000 Btu/h capacity.) In addition, both 
    AHAM and Frigidaire claimed that to offset humidity effects, class 2 
    units would probably be run with a lower thermostat setting resulting 
    in increased run times and increased energy use. Both commenters urged 
    the Department to set standard levels for class 1 units that are no 
    greater than the standards that are set for class 2 units. (AHAM, No. 1 
    at 18-19; Frigidaire, No. 544 at 6-9.)
        ACEEE also noted the disparity in the proposed efficiency levels 
    for class 1 and class 2 units. It noted that class 3 units (8,000 to 
    13,999 Btu/h) have a significantly higher efficiency standard than 
    class 2 units. ACEEE commented that promulgating a significantly lower 
    standard for class 2 units would likely result in manufacturers 
    concentrating a greater fraction of shipments in this size range, 
    leading to lower than expected energy savings from the proposed 
    standards. The ACEEE urged the Department to raise the standard for 
    class 2 units to 11.0 or 11.1 EER. ACEEE claimed this level is 
    ``technically feasible according to the Department's analysis,'' citing 
    that the top-rated model in the market in this capacity range has an 
    11.0 EER. ACEEE believed that because the DOE life-cycle cost analysis 
    showed only a slight increase in life-cycle cost going from an EER of 
    10.25 to 10.74 for this capacity range, a ``small additional step to an 
    EER of 11.0--11.1 should not have much of an impact on LCC either.'' It 
    also urged the Department to raise the standard for the 6000 to 7999 
    Btu/h product class without side louvers to the same levels being 
    proposed for the less than 6000 Btu/h and 8000 to 13,999 Btu/h product 
    classes. (ACEEE, No. 557 at 22.)
        The Department disagrees that ACEEE's extrapolation of the life-
    cycle cost analysis of the 1994 Proposed rule indicates that an 
    increase to 11.0--11.1 EER should have little impact on life-cycle 
    cost. Moreover, the reanalysis provided in the Draft Report resulted in 
    efficiency levels for classes 1 and 2 being approximately the same. 
    AHAM indicated in its comments to the Draft Report that these results 
    addressed its concerns. (AHAM, RAC No. 4 at Attachment 1, pg 3.) In 
    addition, for the final rule, the Department has selected standards for 
    class 1 and class 2 that are equal. ACEEE and NRDC also support these 
    standard levels. (ACEEE/NRDC, RAC No. 14 at 3.)
        AHAM, manufacturers, and real estate organizations commented that 
    the proposed efficiency standards would obsolete the replacement market 
    for ``through-the-wall'' units (i.e., units without louvered sides.) 
    Because of the unavailability of 11.5 to 12.0 EER compressors, chassis 
    sizes would need to be increased to meet the proposed efficiency 
    standards. But because of the overall size restrictions due to 
    ``through-the-wall'' sleeves already in service, chassis sizes cannot 
    be increased without obsoleting the existing sleeves. If existing wall 
    openings are expanded to accommodate larger units, retrofit costs are 
    estimated to be between $250 and $500. These commenters argue that the 
    proposed standards would force the discontinuation of higher capacity 
    systems as only smaller capacity units would be able to fit into 
    existing sleeve openings. (AHAM, No. 1 at 19; Given & Spindler 
    Companies (G&S), No. 302 at 1-2; Frigidaire, No. 544. at 5; Institute 
    of Real Estate Management (IREM), No. 553 at 7; Sanyo, No. 771 at 3-6; 
    Friedrich Air Conditioning Co. (Friedrich), April 7, 1994, Transcript 
    at 77-80.) Both IREM and G&S requested that the Department exempt 
    ``through-the-wall'' units because of the undue burden upon owners who 
    will be forced to make retrofit changes without any financial 
    compensation. (G&S, No. 302 at 1-2; IREM, No. 553 at 7.) Sanyo stated 
    that the efficiency levels proposed in the 1994 Proposed Rule would 
    force higher capacity units to be discontinued. (Sanyo, No. 771 at 3.) 
    The AHAM presented data demonstrating that existing models meeting the 
    current efficiency standards already employ all available design 
    options. The AHAM stated that any increase in efficiency can only be 
    accomplished by increasing chassis size or by further decreasing 
    cooling capacity. (AHAM, No. 1 at 20.) Frigidaire stated that above 
    8,000 Btu/h, any increase in the current standard ``will result in a 
    lower BTUH capacity, thus reducing the utility of this product 
    category.'' Frigidaire notes that in order ``to comply with the 1990 
    Energy Standards, we were forced to reduce the capacity in this product 
    class from 13,500 BTU to 10,700 BTU.'' (Frigidaire, No. 544 at 5.) In 
    its comments to the 1996 Draft Report, AHAM reiterated the industry's 
    struggle to achieve the current standards in the largest capacity 
    models which has resulted in the reduction of the maximum capacity 
    available. (AHAM, RAC No. 4 at 4.) Both the National Apartment 
    Association (NAA) and the National Multi Housing Council (NMHC) 
    requested that the Department adopt an efficiency standard for units 
    without louvered sides that takes into consideration the adverse impact 
    upon the multi-family housing industry. (G&S, No. 302 at 2; IREM, No. 
    553 at 7.) Because the multi-family housing industry predominantly uses 
    air conditioner units without louvered sides, NAA and NMHC are 
    concerned about the impact of increased cabinet size (due to higher 
    efficiency standards) on these ``through-the-wall'' units.
        The ACEEE opposed exempting ``through-the-wall'' units from more 
    stringent standards. It stated that such an exemption would create a 
    loophole that could result in a significant reduction in energy 
    savings. It believed that manufacturers should be able to produce these 
    units using the same or similar components used in louvered-type units. 
    Through gains in economy of scale, costs with maintaining different 
    product lines for models with and without side louvers could be 
    avoided. (ACEEE, No. 557 at 23.) ACEEE and NRDC are particularly 
    concerned about loopholes if standards are not increased for units 
    below 14,000 Btu/h. (ACEEE/NRDC, RAC No. 5 at 3.) In February 1997, 
    ACEEE and NRDC urged the Department to raise the standard for class 8 
    (units without louvers, without a reverse cycle, and 8,000--13,999 Btu/
    h) to 8.7 EER in an effort to reduce the likelihood of a loophole. In 
    addition, they stated that according to the data provided by AHAM 
    (AHAM, RAC No. 9 at Attachment 1), the 1994 sales weighted average for 
    this class is 8.73
    
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    EER. (ACEEE/NRDC, RAC No. 14 at 3.) AHAM stated that these concerns are 
    based ``on the incorrect view that these products are essentially the 
    same except for the presence of side louvers.'' AHAM states that the 
    elimination of side louvers causes extensive changes that result in ``a 
    significant loss of efficiency for the same capacity.'' (AHAM, RAC No. 
    6 at 2.) Furthermore, AHAM stated that increasing the standard for 
    class 8 would eliminate higher capacity units, causing harm to building 
    owners and consumers, and would ``violate NAECA's safe harbor rule in 
    Section 325(n)(4).'' (AHAM, RAC No. 16 at 4.)
        In its comments to the 1994 Proposed Rule NRDC was concerned that 
    the practice of using small sleeves may amount to a permanent 
    constraint on how far energy efficiency can be increased. It suggested 
    that the Department analyze what fraction of the market cannot accept 
    design options that increase sleeve size. Then the Department should 
    determine the economic impact of replacing design options that do 
    require increased size with other less cost-effective options for that 
    fraction of the market that cannot adapt. NRDC also suggested that the 
    Department consider adopting a second tier of efficiency standards 
    which would be available for states to adopt voluntarily through 
    building codes. This way, room air conditioners could be designed to 
    the optimum level for the new construction market without imposing 
    unreasonable costs on the replacement market. (NRDC, No. 55 at 27.)
        The Department agrees with manufacturers and real estate 
    organizations that added retrofit costs would be necessary for units 
    which require larger sleeves and, as a result, larger wall openings. 
    Thus, for units without louvered sides, an additional installation cost 
    of $375 is assumed for design options which require a larger chassis 
    (i.e., for increased evaporator and condenser face areas.) The 
    Department was not provided with the necessary information to determine 
    the percentage of existing sleeves which could not accept larger 
    chassis sizes. Thus, the added retrofit cost of $375 was assumed to 
    apply to all units requiring a chassis size change. In addition, since 
    the percentage of units being used in new construction is believed to 
    be small, all units were assumed to incur the added retrofit cost, 
    regardless of application. The Department examined the 1997 AHAM 
    Directory. It indicates that for higher capacity models (9,000 Btu/h or 
    more), only one manufacturer currently produces units which could meet 
    the advocates recommendation of 8.7 EER, despite the fact that this 
    value is the 1994 shipment weighted average for this class. The 
    Department agrees that there is reason to believe that increasing 
    standards for units without louvers and without reverse cycle may 
    result in eliminating higher capacity units from the market. Thus, the 
    Department will not increase standards for ``through-the-wall'' units 
    of 8,000 Btu/h capacity or more in today's rule. These standard levels 
    minimize or eliminate the need to increase chassis size. Consequently, 
    the Department does not believe the multifamily housing industry will 
    be negatively impacted.
        As for the advocates concern over possible loopholes, the 
    Department intends to monitor market trends for these classes and will 
    consider these trends during its next review of room air conditioner 
    standards. Regarding NRDC's suggestion that the Department adopt a 
    second tier standard for states to adopt voluntarily through building 
    codes, in accordance with the legislation, a recommendation for a 
    second tier standard for adoption through voluntary building codes must 
    be done separately from manufacturing standards. However, because the 
    ``through-the-wall'' units account for only about one-tenth of air 
    conditioner energy use and because only a fraction of these units are 
    in new construction, the Department does not believe this measure is 
    warranted.
        In their comments to the 1994 Proposed Rule, AHAM and Whirlpool 
    also expressed that, as a result of setting standards too high for 
    units with a reversing valve, more electric resistance heat models will 
    be sold because of their significantly lower cost. They stated that 
    this will result in an overall increase in energy consumption. (AHAM, 
    No. 1 at 21; Whirlpool, April 7, 1994, Transcript at 103-105.) The 
    standards for units with a reverse cycle set forth in today's rule are 
    significantly lower than those standards proposed in the 1994 Proposed 
    Rule, so this concern should be mitigated.
        Fedders claimed that energy consumption due to reduced 
    dehumidification is adversely affected by the standard levels proposed 
    in the 1994 Proposed Rule for class 1 through class 3. Fedders 
    presented calculations demonstrating that units meeting the proposed 
    standard levels will consume more energy than units meeting existing 
    efficiency standards. Fedders stated that units meeting the proposed 
    standard levels will need to operate longer in order to dehumidify as 
    effectively as units meeting the existing standards. (Fedders, No. 693 
    at 1-5, Sec. 2.)
        Fedders' claims of longer run times for more efficient units are 
    based on its estimates of the dehumidification capability of existing 
    minimum efficiency units and those which comply with the Proposed 
    Rule's proposed efficiency standards. Fedders' dehumidification data 
    for units at the proposed efficiency levels were based on historical 
    test data which were extrapolated to the proposed levels. The 
    Department's engineering simulation model indicated that the proposed 
    efficiency standards did not significantly reduce the dehumidification 
    capability of the units which were modeled. The Department has 
    questions about Fedders' assumptions used to calculate room air 
    conditioner run times. For example, although Fedders acknowledges that 
    sizing recommendations for room air conditioners are dependent on such 
    things as building construction, window types and insulation levels, 
    its cooling load calculations are based on a single room size and a 
    single set of initial indoor room conditions. Most importantly, because 
    the standards promulgated in this final rule are significantly lower 
    than those proposed in the 1994 Proposed Rule, the dehumidification 
    capabilities should no longer be in question.
        One of the country's largest retailers, the Sears, Roebuck and 
    Company (Sears), asserted that the standards proposed in the 1994 
    Proposed Rule impose disproportionate hardships on low income consumers 
    as most room air conditioner consumers have lower than average incomes. 
    Whirlpool substantiates this claim by presenting data on the income 
    distribution of typical room air conditioner purchasers. (Sears, April 
    7, 1994, Transcript at 115; Whirlpool, No. 391A at 1-2.)
        The standards set forth in the final rule will have substantially 
    less impact on purchase price than those standards proposed in the 1994 
    Proposed Rule and will have shorter payback periods. For example, class 
    1 has an approximate first cost increase of $10, and a payback period 
    of approximately 2 years, satisfying the rebuttable presumption 
    criteria for economical justification. The Department does not believe 
    the standards set forth today will have a substantial negative impact 
    on low income consumers.
        Efficiency Standards Recommendations. Several commenters concerned 
    about adverse effects of promulgating the efficiency standards proposed 
    in the 1994 Proposed Rule recommended to DOE alternative levels
    
    [[Page 50135]]
    
    at which to set the standards for room air conditioners. For classes 
    with louvered sides and without a reversing valve, Frigidaire 
    recommended the following efficiency standards: 9.0 EER for the less 
    than 6000 Btu/h class, 9.5 EER for the 6000 to 7999 Btu/h class, 9.5 
    EER for the 8000 to 13,999 Btu/h class, 9.5 EER for the 14,000 to 
    19,999 Btu/h class, and 8.5 EER for the greater than 20,000 Btu/h 
    class. (Frigidaire, No. 544 at 10.) In its comments to the 1994 
    Proposed Rule, Fedders called for consolidating the three smallest 
    capacity classes into a single class and setting the efficiency 
    standard at 10.0 EER. For the two largest capacity classes, Fedders 
    agreed with the Department's proposed standards (11.1 and 9.8 EER). 
    (Fedders, April 7, 1994, Transcript at 120-122.) The CEC recommended a 
    single efficiency standard for all classes with louvered sides and 
    without a reversing valve. It recommended setting the efficiency 
    standard based on the level which the Department proposed (11.0) for 
    the most popular class (i.e., the 8000 to 13,999 Btu/h class.) (CEC, 
    No. 539 at 2,3.)
        For classes without louvered sides and without a reversing valve, 
    AHAM, Frigidaire, and Sanyo recommended that the current five capacity 
    classes be consolidated into two classes: units less than 8000 Btu/h 
    and units greater than or equal to 8000 Btu/h. For the less than 8000 
    Btu/h class, AHAM, Frigidaire, and Sanyo all recommended setting the 
    efficiency standard at 9.0 EER. For the greater than or equal to 8000 
    Btu/h class, they all recommended setting the standard at 8.5 EER. AHAM 
    presented data demonstrating that existing models meeting the current 
    efficiency standards already employ all available design options. They 
    stated that any increase in efficiency can only be accomplished by 
    increasing chassis size or by further decreasing cooling capacity. 
    (AHAM, No. 1 at 20; AHAM RAC No. 4 at 1-2; Frigidaire, No. 544 at 5; 
    Sanyo, No. 771 at 3.) Friedrich recommended that units without louvered 
    sides be exempt from efficiency regulation. (Friedrich, April 7, 1994, 
    Transcript at 84.) The CEC recommended a single efficiency standard for 
    all classes without louvered sides and without a reversing valve. The 
    Commission recommended setting the efficiency standard based on the 
    level which the Department proposed (10.7 EER) for the most popular 
    class (i.e., the 8000 to 13,999 Btu/h class). (CEC, No. 539 at 2,3.)
        For classes with a reversing valve, AHAM stated that the efficiency 
    of a reverse cycle unit in the cooling mode is theoretically less than 
    the efficiency for a cooling-only model due to the additional pressure 
    drop caused by the reversing valve and inefficiencies created by the 
    refrigerant charge being adjusted for an acceptable balance between 
    cooling and heating performance. AHAM presented data demonstrating that 
    the average reduction in efficiency due to a reversing valve is 0.42 
    EER. In order to cover the majority of reverse cycle units, AHAM 
    recommended setting a standard for reverse cycle units which is 0.5 EER 
    less than the standard for a comparable cool-only model with or without 
    louvered sides. (AHAM, No. 1 at 20, 21.) Both Sanyo and Whirlpool also 
    recommended setting the same type of standard. (Sanyo, No. 771 at 3; 
    Whirlpool, April 7, 1994, Transcript at 103-105.) The CEC proposed 
    maintaining the current classification for units with a reversing 
    valve; one class for units with louvered sides and another class for 
    units without louvered sides. The CEC agreed the efficiency levels 
    proposed by the Department for reverse cycle units. (CEC, No. 539 at 
    2,3.)
        On April 23, 1996, ACEEE and NRDC sent a letter to AHAM with the 
    following table of proposed standard levels (ACEEE/NRDC, RAC No. 3 at 
    3.):
    
    ------------------------------------------------------------------------
                        Class                            Standard level     
    ------------------------------------------------------------------------
    Units without reverse cycle and with louvered                           
     sides:                                                                 
        Capacity less than 20,000 Btu/h..........  10.0 EER.                
        Capacity 20,000 Btu/h and more...........  9.0 EER.                 
    Units without reverse cycle and without        9.0 EER.                 
     louvered sides.                                                        
    Slider/casement and casement-only units......  9.0 EER.                 
    Units with reverse cycle, all capacities.....  0.5 EER less than the    
                                                    standard for comparable 
                                                    cool-only model.        
    ------------------------------------------------------------------------
    
        In its comments to the 1996 Draft report, AHAM proposed the 
    following standards (AHAM, RAC No. 6 at 2):
    
    ------------------------------------------------------------------------
                        Class                            Standard level     
    ------------------------------------------------------------------------
    Units without reverse cycle and with louvered                           
     sides:                                                                 
        Capacity less than 20,000 Btu/h..........  9.5 EER.                 
        Capacity 20,000 Btu/h and more...........  8.5 EER.                 
    Units without reverse cycle and without                                 
     louvered sides:                                                        
        Capacity less than 8,000 Btu/h...........  9.0 EER.                 
        Capacity 8,000 Btu/h or more.............  8.5 EER.                 
    Units with reverse cycle, with louvers.......  8.5 EER. ***             
    Units with reverse cycle, without louvers....  8.0 ERR.***              
    Casement-only................................  8.7 EER.                 
    Casement-slider..............................  9.5 EER.                 
    ------------------------------------------------------------------------
    *** AHAM would prefer to set the standard for reverse cycle units 0.5   
      EER less than the standard for its ``cool-only'' counterpart. This    
      recommendation results in ten classes for reverse cycle units. Because
      DOE did not support ten classes for reverse cycle units, AHAM stated  
      that the standard should be set in reference to the highest capacity  
      class. For example, if the standard for models without reverse cycle, 
      without louvers, 20,000 Btu/h or more were set at 8.5 EER, then the   
      standard for units with reverse cycle, without louvers, 20,000 Btu/h  
      or more should be set at 8.0 EER. (AHAM, RAC No. 6 at 2-3.)           
    
        Following the meetings in late September 1996, ACEEE modified its 
    recommendation to the following standards (ACEEE/NRDC, RAC No. 5 at 4-
    5)
    
    [[Page 50136]]
    
    
    
    ------------------------------------------------------------------------
                        Class                               Standard        
    ------------------------------------------------------------------------
    Without reverse cycle and with louvered sides  9.7 EER.                 
     less than 6,000 Btu/h.                                                 
    Without reverse cycle and with louvered sides  9.7 EER.                 
     6,000 to 7,999 Btu/h.                                                  
    Without reverse cycle and with louvered sides  9.8 EER.                 
     8,000 to 13,999 Btu/h.                                                 
    Without reverse cycle and with louvered sides  9.7 EER.                 
     14,000 to 19,999 Btu/h.                                                
    Without reverse cycle and with louvered sides  8.5 EER.                 
     20,000 or more Btu/h.                                                  
    Without reverse cycle and without louvered     9.0 EER.                 
     sides less than 14,000 Btu/h.                                          
    Without reverse cycle and without louvered     8.5 EER.                 
     sides 14,000 or more Btu/h.                                            
    With reverse cycle and with louvered sides...  9.0 EER.                 
    With reverse cycle, without louvered sides...  8.5 EER.                 
    Casement (Casement-only and Casement-slider).  9.5 EER.                 
    ------------------------------------------------------------------------
    
        For classes without louvered sides, ACEEE and NRDC stated in their 
    November 1996 comments that they were willing to accept 8.5 EER for 
    capacities of 14,000 Btu/h or more. However, ACEEE and NRDC emphasized 
    their recommendation of 9.0 EER for the 8,000--13,999 Btu/h capacity 
    class, stating that: this EER is the minimum life cycle cost point 
    according to the Draft Report; the 1994 sales weighted average of 8.73 
    EER approaches this recommendation; and 20 percent of 1996 models in 
    this class meet or exceed this level according to the March 1996 AHAM 
    Directory. They were concerned that AHAM's 8.5 EER recommendation could 
    ``create a loophole in that units without louvered sides at 8.5 EER 
    would cost manufacturers less than units with louvered sides at 9.5 EER 
    ($240 vs. $263 according to the DOE draft analysis).'' (ACEEE/NRDC, RAC 
    No. 5 at 3.) In its comments to the Draft Report, AHAM states that 
    there is a significant cost and energy efficiency differential between 
    models with and without side louvers. (AHAM, RAC No. 6 at 2.) In 
    February 1997, ACEEE and NRDC urged the Department to raise the 
    standard for class 8 to at least 8.7 EER. (ACEEE/NRDC, RAC No. 14 at 
    3.)
        As discussed earlier, although manufacturers currently do not 
    produce units in two of the existing five capacity classes, the 
    Department has retained the five capacity-based classes. The Department 
    conducted analyses only for the two classes for which manufacturer data 
    were available (the 6,000 to 7,999 Btu/h and the 8,000 to 13,999 Btu/h 
    classes.) In this Final Rule, the Department has applied the same 
    efficiency standard (9.0 EER) to the 6,000 to 7,999 Btu/h class and the 
    less than 6,000 Btu/h class. The efficiency standard for the 8,000 to 
    13,999 Btu/h class (8.5 EER) is also applied to the 14,000 to 19,999 
    Btu/h class and the 20,000 Btu/h or more class. According to 1997 AHAM 
    Directory, the highest capacity ``through-the-wall'' unit currently 
    manufactured has a capacity of 12,500 Btu/h, and only one manufacturer 
    currently makes units at a capacity of 9,000 Btu/h or higher which meet 
    the 8.7 EER standard proposed by ACEEE/NRDC. On this basis, the 
    Department has determined that raising this standard is likely to 
    result in higher capacity models being withdrawn from the market to the 
    disbenefit of consumers.
        With regard to the comment that units without louvered sides at 8.5 
    EER would cost manufacturers less than units with louvered sides at 9.5 
    EER, ACEEE and NRDC appear to refer to the values found in tables 1.12 
    and 1.16 in the Draft Report. The two units being compared have 
    different capacities; therefore a direct cost comparison is not 
    appropriate. However, the Department shares the general concern about 
    the possibility that differences in standard levels for different 
    classes may cause shifts in product use and sales, and as stated 
    previously, the Department intends to monitor market trends for these 
    classes. If it appears that products without louvers are used in lieu 
    of units with louvers because of differences in energy efficiency 
    standards, the Department will consider the need to set comparable 
    standards during its next review of room air conditioner standards.
        In their comments to the Draft Report, ACEEE and NRDC recommend a 
    9.0 EER for reverse cycle units with louvers and an 8.5 EER for reverse 
    cycle units without louvers. They stated that these levels are well 
    below the minimum life-cycle cost point of the Draft Report. 
    Furthermore, they state that a third of the 1996 reverse cycle units 
    with louvers and 80 percent of the 1996 reverse cycle units without 
    louvers meet these levels. The advocates also note that the only 
    reverse cycle unit in the 1996 AHAM directory above 20,000 Btu/h has a 
    9.0 EER. (ACEEE/NRDC, RAC No. 5 at 3.) In addition, they are concerned 
    about ``loopholes'' which may result if the standards are not raised. 
    (RAC, No. 12 at 1.) AHAM counters that a loophole would not be created 
    because the cost of building a unit with a reverse valve is ``quite 
    significant.'' (AHAM, RAC No. 6 at 3.) The energy advocates also state 
    that the Department's analysis appears to only evaluate cooling energy 
    savings and not heating energy savings. (ACEEE/NRDC, RAC No. 5 at 2.)
        In response to comments, DOE has split classes 11 and 12. AHAM, 
    NRDC, and ACEEE all recommended setting the standards for reverse cycle 
    units at 0.5 EER less than their cool-only counterparts. (ACEEE/NRDC, 
    RAC No. 3 and AHAM, No. 1 at 21.) For units with reverse cycle and 
    louvered sides, the energy efficiency advocates believe an EER of 9.0 
    is acceptable. (ACEEE/NRDC, RAC No. 5 at 5.) AHAM also finds this level 
    to be acceptable for units with capacities less than 20,000 Btu/h. 
    However, for units at 20,000 Btu/h or more, AHAM argues that the 
    standard should not be higher than the standard for its ``cool-only'' 
    counterpart. (AHAM, RAC No. 6 at 3.) The Department agrees. By 
    splitting class 11 at 20,000 Btu/h, the Department can raise the 
    standard for most of the units with reverse cycle and with louvers to 
    9.0 EER, without raising the standard for units of capacities of 20,000 
    Btu/h or more above the 8.5 EER of its cool-only counterpart.
        Similarly, the Department has split class 12 and set the standard 
    for units less than 14,000 Btu/h at 8.5 EER while keeping the standard 
    for units of 14,000 Btu/h or more at 8.0 EER. This split is largely 
    consistent with the recommendations of ACEEE, NRDC, and AHAM for a 0.5 
    EER differential between reverse cycle units and their ``cool-only'' 
    counterparts for units without louvers, with the exception of units in 
    the 8,000-13,999 Btu/h capacity range for which there is no 
    differential. According to the 1997 AHAM directory, only one model with 
    reverse cycle and without louvers in this capacity range does not meet 
    an 8.5 EER. In response to the advocates question as to why the 
    Department's analysis only evaluates cooling energy savings and not 
    heating energy savings, the Department does not evaluate heating 
    savings because the test procedure is unable to account for the heating 
    energy savings.
    
    [[Page 50137]]
    
        In their February 1997 comments to the notice reopening the comment 
    period, ACEEE/NRDC stated that establishing separate classes with 
    weaker standards for higher capacity units with a reverse cycle is 
    unnecessary because all currently existing models at these capacity 
    levels meet their recommended standards, without splitting the classes. 
    (ACEEE/NRDC. RAC No. 14 at 3.) Although all currently existing models 
    with louvers and with a reverse cycle at 20,000 Btu/h or more meet a 
    9.0 EER, the Department does not believe new models entering the market 
    should be required to meet a standard higher than the standard for a 
    unit without a reverse cycle. In addition, the Department recognizes 
    that no models currently exist with a reverse cycle and without louvers 
    at 14,000 Btu/h or more; however, the Department believes that it 
    should allow manufacturers the opportunity to design units without 
    louvers and with a reverse cycle at higher capacities, and the evidence 
    indicates that manufacturers could not meet a standard greater than 8.0 
    EER at capacities of 14,000 Btu/h or more. Furthermore, in April 1996, 
    the advocates supported AHAM's recommendation to make the standard for 
    reverse cycle units 0.5 EER less than the standard for its cool-only 
    counterpart. (ACEEE/NRDC, RAC No. 3 at 3.) This recommendation would 
    create 10 classes for reverse cycle room air conditioners. Thus, the 
    Department questions why the advocates suggest that promoting only four 
    classes for reverse cycle units is superfluous.
        AHAM stated that casement-type units are already using all 
    available design options and are limited in size because of their 
    applications. (AHAM, No. 1 at 22.) In its comments to the Draft Report, 
    AHAM recommended efficiency standards of 9.5 EER for slider/casement 
    units and 8.7 EER for casement-only units. (AHAM, RAC No. 6 at 2.) In 
    its comments to the 1994 Proposed Rule, Frigidaire recommended a 
    standard of 9.0 EER for slider/casement units. (Frigidaire, No. 544 at 
    6.) Because the 1994 Proposed Rule did not propose standards for 
    casement-type units, ACEEE, CEC, NRDC, and the New York State Energy 
    Office (NYSEO) urged the Department to collect the necessary data in 
    order to perform an analysis and set efficiency standards for these 
    units. ACEEE and NRDC stated that if data is not available to perform 
    an analysis, standards should be set for casement-type units that are 
    equivalent to those for typical room air conditioners. NRDC added that 
    the Department is prohibited under NAECA from reducing the stringency 
    of energy efficiency standards. The CEC asked the Department to clarify 
    whether States may adopt efficiency standards for casement-type classes 
    without preemption or whether another standard level applies to these 
    products until the Department adopts a separate level. (ACEEE, No. 557 
    at 23; CEC, No. 539 at 3; NRDC, April 5, 1994, Transcript at 116-117; 
    NYSEO, June 8, 1994, Transcript at 18-19.) The Department considers 
    casement-type units to be air conditioners. Therefore, these units are 
    subject to the currently applicable standards based on unit capacity 
    and the presence or absence of louvered sides and a reverse cycle.
        In their February 1997 comments, ACEEE and NRDC stated that a 
    special class set aside for one casement-only model in existence is not 
    necessary. They are concerned that a casement-only unit at an 8.7 EER 
    will be less expensive to produce than a ``standard'' unit at 9.7 EER. 
    They believe this cost disparity would cause manufacturers to 
    capitalize on this niche class. (ACEEE/NRDC, RAC No. 14 at 2.) AHAM 
    counters that casement units are expensive relative to their capacity 
    and that there would be no economic incentive to exploit this class. 
    Furthermore, casement-only units add a unique utility not provided by 
    casement-slider units. (AHAM, RAC No. 16 at 3.) In addition, in 
    February 1997, Friedrich provided information regarding the relative 
    costs of casement room air conditioners as compared to ``standard'' 
    models with side louvers and without a reverse valve. This information 
    shows that casement-only and casement-slider room air conditioners are 
    significantly more expensive than units that do not meet the size 
    constraints of casement room air conditioners. (RAC No. 18.) Therefore, 
    the Department has found no economical advantage to using casement-type 
    units at lower energy efficiency ratings for standard room air 
    conditioner applications. Thus, the Department has selected separate 
    classes for casement room air conditioners. DOE has selected the 
    efficiency standard recommended by AHAM, ACEEE, and NRDC for casement-
    slider units (9.5 EER) (AHAM, RAC No. 6 at 2 and ACEEE/NRDC, RAC No. 5 
    at 5) and the standard recommended by AHAM for casement-only units (8.7 
    EER). (AHAM, RAC No. 6 at 2.) However, due to the energy efficiency 
    advocates' concern about the possibility of ``loopholes,'' the 
    Department will monitor market trends for these classes. If it appears 
    that casement units are used in lieu of ``standard'' units because of 
    differences in energy efficiency standards, the Department will 
    consider the need to set comparable standards during its next review of 
    room air conditioner standards.
        AHAM stated that its recommended standards would result in 
    meaningful energy savings but would alleviate the economic burden on 
    manufacturers. AHAM states that in light of the economic burden of 
    chassis size increases, the cumulative burden of other rulemakings, and 
    the relatively modest energy use of room air conditioners that ``more 
    stringent standards than that proposed by industry would be 
    unreasonable and unjustified.'' (AHAM, RAC No. 6 at 1.)
        The standards established in today's rule are similar to the 
    standards recommended by AHAM. The Department selected slightly higher 
    standards for the first four classes. AHAM's primary concern was the 
    cost of increasing chassis size. Because the standard levels the 
    Department has selected for the first five classes are based on the 
    life cycle cost minimums when the cost of increasing chassis size is 
    prorated, the Department believes the cost impact is reduced.
    5. Other Comments
        Effective date of standards. Commenting on the 1994 Proposed Rule, 
    Fedders proposed accelerating the effective date from January 1st to 
    August 1st. It claimed this would prevent manufacturers from producing 
    large quantities of less efficient units during the months of August 
    through December. (Fedders, April 7, 1994, Transcript at 123-124.)
        AHAM urged the Department to set an effective date of October 1, 
    2000, in order to coordinate with manufacturing cycles. AHAM stated 
    that production begins in August or September and runs through June or 
    July. AHAM stated that an arbitrary effective date of 3 years from the 
    date of the rule, and likely in the middle of a manufacturing season, 
    would cause severe economic hardships on manufacturers which are not 
    accounted for in the manufacturing impact analysis. (AHAM, RAC No. 16 
    at 3.)
        The Department agrees, due to the unique seasonal nature of room 
    air conditioners, the effective date should be coordinated with 
    manufacturing cycles. Thus, this rule will take effect on October 
    1,2000.
        Units consuming less than 500 watts. Commenting on the 1994 
    Proposed Rule, Fedders recommended that room
    
    [[Page 50138]]
    
    air conditioners consuming less than 500 watts be exempted from 
    regulation. In support of this recommendation, it stated that a 3000 
    Btu/h capacity unit at an efficiency of 8.0 EER consumes 375 watts 
    compared to a 5000 Btu/h capacity unit at 11.1 EER that consumes 450 
    watts. Fedders argued that this exemption would encourage development 
    of units that are smaller and consume less energy and resources. 
    (Fedders, April 7, 1994, Transcript at 122-123.) AHAM, Frigidaire, 
    NRDC, and the ACEEE all opposed the Fedders' recommendation. AHAM 
    disagreed with Fedders' claim that as many as two-thirds of the rooms 
    in which 5000 Btu/h capacity units are installed could be adequately 
    cooled with units as small as 3000 Btu/h. AHAM saw no reason that 
    smaller units should be given an advantage by being exempted from a 
    standard and ``strenuously disagreed with Fedders' proposed exemption 
    for models of less than 500 watts.'' (AHAM, No. 1 at 23 and AHAM, RAC 
    No. 4 at Attachment 1, pg 4.) Frigidaire stated that the recommendation 
    by Fedders is counterproductive to saving energy as, under it, low 
    capacity units of low efficiency will be introduced into the 
    marketplace. (Frigidaire, No. 544 at 11.) The NRDC agreed with the 
    motivation behind Fedders' suggestion but did not agree with the 
    specifics of the recommendation as it would allow the creation of a new 
    market driven entirely by low first cost. NRDC suggested that the 
    Department consider a lower standard for a product class below 4000 
    Btu/h in capacity based on comparable criteria to the standard set for 
    the below 6000 Btu/h class. (NRDC, No. 55 at 28.) The ACEEE opposed the 
    Fedders' recommendation as it believes it could lead to widespread use 
    of inefficient smaller capacity units. (ACEEE, No. 557 at 22.)
        The Department agrees with both AHAM and ACEEE that room air 
    conditioners which consume less than 500 watts should not be exempt 
    from efficiency regulation. The Department recognizes that small 
    capacity units may draw less power than larger capacity systems. But 
    the Department does not agree with Fedders' claims that, for units in 
    the less than 6000 Btu/h class, small capacity units will consume less 
    energy than more efficient, larger capacity systems. In creating a 
    separate product class for units with capacities below 6000 Btu/h, the 
    Department has recognized that small capacity units are used 
    differently than units in larger capacity classes. Applications for 
    small capacity units tend to be for small rooms where the cooling load 
    is relatively low. To further differentiate the less than 6000 Btu/h 
    class by capacity would require field tests demonstrating that there 
    are applications which are suitable specifically for units with 
    extremely small capacities. Such field data has not been presented.
        Phase out of HCFC-22. With concern that the phase out 4 
    of HCFC-22 (the refrigerant used by all room air conditioners) might be 
    accelerated, AHAM recommended, in its comments to the 1994 Proposed 
    Rule, that the Department promulgate a second tier of standard levels 
    for HCFC-free room air conditioners. AHAM stated that some replacement 
    refrigerants show a drop in efficiency of 10 percent. AHAM proposed 
    that the second tier be set initially at 10 percent less than the 
    efficiency standards for room air conditioners using HCFC-22. AHAM 
    proposed that second tier of standards would be effective upon the 
    phase-out date of HCFC-22 and would not be available if the HCFC-22 
    phase out date is not accelerated. (AHAM, No. 1 at 22,23.) Because 
    compressor testing indicates that alternative refrigerant blends will 
    decrease efficiency, Matsushita commented that any efficiency standards 
    promulgated for room air conditioners should apply only to units 
    charged with HCFC-22. (Matsushita, April 7, 1994, Transcript at 91-92.) 
    Frigidaire urged the Department to consider possible energy penalties 
    for HCFC-22 alternative refrigerants. (Frigidaire, No. 544 at 11.) NRDC 
    did not support creating less stringent standards for room air 
    conditioners using alternative refrigerants. NRDC believed that units 
    with new refrigerant alternatives can attain the same efficiency level 
    as units using HCFC-22. NRDC suggested that the Department collaborate 
    with the Environmental Protection Agency on decisions regarding the 
    phase out of HCFCs. Because the Department must promulgate another 
    rulemaking before a phaseout would occur, NRDC stated that the phase 
    out date of HCFC-22 is not within the period of applicability for room 
    air conditioner efficiency standards. It urged that the Department 
    should not plan around a phase out requirement that does not exist. 
    (NRDC, No. 55 at 27,28.) ACEEE stated that alternative refrigerants, 
    such as AZ-20, have been demonstrated to increase room air conditioner 
    efficiency as compared to HCFC-22. (ACEEE, No. 557 at 21.)
    ---------------------------------------------------------------------------
    
        \4\ The EPA's final rule accelerating the phaseout of ozone-
    depleting substances bans the production and consumption of virgin 
    HCFC-22 unless it is used as feedstock or in equipment manufactured 
    before January 1, 2010. The final rule also bans the production and 
    consumption of HCFC-22 on January 1, 2020, except for limited 
    exemptions specified by statute. 60 FR 24970 (Wednesday May 10, 
    1995).
    ---------------------------------------------------------------------------
    
        In 1996, Fedders stated it has concern over replacement 
    refrigerants. Fedders commented that the Montreal Protocol may require 
    phase-out sooner than the current phaseout date of 2010. Fedders stated 
    that the industry will be required to do extensive retooling if the new 
    standards cannot be met with replacement refrigerants. Furthermore, 
    Fedders stated that the U.S. is ``dangerously close to the legal caps 
    of HCFC chemicals.'' Fedders was concerned ``the EPA will impose 
    restrictions on production, thereby necessitating implementation of 
    replacement refrigerants quickly.'' Therefore, Fedders recommended 
    maintaining the current energy efficiency regulations until the issues 
    related to refrigerant charges are ``resolved and implemented into 
    commerce.'' (Fedders, RAC No. 7 and RAC No. 8.)
        In its comments to the 1996 Draft Report, AHAM stated that the 
    issue of replacement refrigerants is a far more serious problem than 
    the Department acknowledges. It states that because of the size 
    restrictions of room air conditioners and because the compressor and 
    condenser are located in a window, the potential adverse effects of 
    high pressure refrigerants are higher, and low pressure alternates 
    demonstrate efficiency penalties. (AHAM, RAC No. 4 at 5.) In February 
    1997, AHAM requested that the Department make a provision for 
    compliance problems which may result from the transition to HCFC-free 
    refrigerants.
        In their comments to the Draft Report, ACEEE and NRDC stated that 
    because the standard set forth in today's rule will cover the 2000-2005 
    time period, alternative refrigerants will likely be an issue for the 
    next statutorily required standard review but not this review. In 
    addition, the advocates state that it is unlikely for replacement 
    refrigerants to result in an energy penalty and may result in a slight 
    energy efficiency increase. (ACEEE/NRDC, RAC No. At 3.)
        The Department agrees that the phase out date of 2010 for HCFC-22 
    is far enough in the future that no adjustment to these standards is 
    necessary. Replacements for HCFC-22 are being developed. Concerned over 
    the impact that the phase out of HCFC-22 would have on the unitary air 
    conditioner and heat pump industry, the Air Conditioning and 
    Refrigeration Institute initiated the Alternative Refrigerant
    
    [[Page 50139]]
    
    Evaluation Program (AREP). AREP has identified several HCFC-22 
    alternatives. Two of the more promising replacements include a low-
    glide ternary blend consisting of HFC-32, HFC-125 and HFC-134a 
    refrigerants, and an azeotrope consisting of H.C.-32 and H.C.-125 
    refrigerants. A detailed discussion of replacement refrigerants can be 
    found on page 1.18 of the TSD.
        Although two of the more promising alternatives demonstrate slight 
    disadvantages compared to R-22, the Department expects that the 
    performance characteristics of the available alternative refrigerant 
    blends will improve as more experience is gained with their use in 
    different formulations. The Department does not anticipate a problem 
    with degradation of performance of refrigerants related to the HCFC-22 
    phaseout. The EPA states that it does not intend to accelerate the 
    HCFC-22 phaseout. (RAC No. 19.) The Department recognizes the 
    possibility that the phaseout date could be accelerated or the 
    availability of HCFC-22 could diminish. DOE will continue to monitor 
    the situation and take appropriate actions.
        Based on this information, the Department declines to establish a 
    two tier system that takes into account a possible degradation in 
    system performance using replacement refrigerants.
        Exemption of refrigerant-gas free units. Fedders stated that in 
    order to promote the research and development of alternative air 
    conditioning systems, the Department should exempt refrigerant-gas free 
    room air conditioners from efficiency regulation. (Fedders, April 7, 
    1994, Transcript at 123.)
        The Department will not exempt refrigerant-gas free room air 
    conditioners from efficiency regulation because the energy conservation 
    policies underlying the EPCA do not support such an exemption.
        Installation Costs. A few commenters opposed the proposed standard 
    because of increased installation costs. (G&S No. 302 at 2; Amana, No. 
    347 at 2; Southwestern Public Service Co No. 495 at 5; Whirlpool, No. 
    391A at 4; CHGEC, No. 601 at 1; and AHAM No. 1 for some classes.)
        The Department analyzed the net consumer benefit from the 
    imposition of the standards, estimating costs, including installation 
    costs, and benefits to the utility customer, and concluded that the 
    benefits outweighed the increased costs.
    6. Other comments regarding FR Notice of January 29, 1997
        Southern Company Services, Inc. stated that these standards appear 
    reasonable and economically justified. (Southern Gas, RAC No. 15 at 1.) 
    ACEEE and NRDC stated that the standards the Department indicated it 
    was inclined to select for the final rule were generally reasonable, 
    and they strongly supported those standards for the first five classes. 
    For the remaining classes, they suggested a few changes which were 
    addressed under ``Efficiency Standards Recommendations.'' (ACEEE/NRDC, 
    RAC No. 14 at 3.) AHAM stated that under two critical conditions, the 
    majority of their members accepted the standard levels the Department 
    indicated it was inclined to select in the January 29 notice. These 
    conditions concerned non-HCFC refrigerants and the effective date of 
    the standards, discussed in the previous section. (AHAM, RAC No. 16 at 
    1) Glenn Schleede of Energy Market & Policy Analysis, Inc. (EM&PA) 
    stated that the economic analysis is based on outdated and invalid 
    assumptions about potential energy costs. Mr. Schleede's comments dealt 
    specifically with: overestimating national energy cost savings; using 
    total residential electricity cost per kilowatt-hour to calculate 
    national and consumer energy savings; the utility impact model; and the 
    variables and assumptions used in the model. Mr. Schleede believes all 
    calculations of life cycle costs, payback periods, and consumer energy 
    cost savings in the TSD are based on unrealistically high estimates of 
    future energy (particularly electricity) prices. He also believes the 
    Department has not ``taken into account the interests of real 
    consumers.'' (EM&PA, RAC No. 17.)
        In the analyses for the Draft Report, the Department utilized EIA 
    forecasts that have not yet addressed the possible price effects of the 
    electric utility regulatory reforms and industry restructuring that are 
    anticipated. Due to this and other uncertainties in electricity price 
    forecasts, the Department conducts sensitivity analyses to bound the 
    possible ranges of impacts. The Department intends to increase the use 
    of sensitivity analyses and scenario analyses in future rulemakings. 61 
    FR at 36987 (to be codified at 10 CFR Part 430, Subpart C, Appendix A, 
    section 11(e)(1)). The Department will continue to examine how to 
    better account for these changes in the future.
        Various cases of Net Present Value (NPV) and life-cycle cost 
    sensitivity to changes in energy price and equipment price were 
    analyzed. These sensitivity analyses are discussed in section IV.c.2., 
    ``Life-cycle Cost and Net Present Value,'' of today's rule. These 
    sensitivity analyses included the effect of using the lowest state 
    energy prices on life-cycle cost and the use of energy price 
    projections provided by the Gas Research Institute to calculate NPV and 
    energy savings.
        As a complement to energy price sensitivities, the Department 
    calculated the cost of conserved energy (CCE) for its appliance energy-
    efficiency standards under consideration. The CCE is the increase in 
    purchase price amortized over the lifetime of the appliance. The 
    advantage of the CCE approach is that it does not require assumptions 
    about future energy prices, because it uses only the purchase expense 
    of the efficiency measure and the expected energy savings. The consumer 
    will benefit whenever the cost of conserved energy is less than the 
    energy price paid by the consumer for that end use. The CCE's 
    calculated for the standards set forth in today's rule are all less 
    than the energy prices projected by either the EIA or GRI. See 
    Supplemental tables 4.10-4.18 in the TSD.
        For consumer impacts such as payback and changes in life cycle 
    cost, which are measured at the effective date of the standard, the 
    Department believes both fixed and variable costs should be included 
    because these costs are currently reflected in consumer utility bills 
    based on cost-of-service rates. It is not anticipated that the 
    reductions in energy demand resulting from energy efficiency standards 
    for room air conditioners are likely to have any significant effect on 
    consumer electricity rates (or prices).
        In estimating the national net present value of the cost savings 
    resulting from more stringent efficiency standards, it may be 
    appropriate to distinguish between the expected cost impacts on 
    individual consumers and the cost impacts on the nation as a whole. To 
    determine whether there is a significant difference between consumer 
    and national cost impacts, it would be necessary to distinguish between 
    the long run fixed and variable costs of serving residential 
    electricity demand. For example, if electricity demand is reduced, 
    utilities will be able to cut back immediately on the fuel used to 
    generate electricity and, over the long run, should also be able to 
    reduce their power generating, transmission and possibly even their 
    distribution capacity. However, reduced demand is unlikely to affect 
    the cost to a utility of billing and servicing individual
    
    [[Page 50140]]
    
    customers. Furthermore, because virtually all consumer electricity 
    rates are still based on average costs and do not reflect the 
    variations in these costs that occur hourly, it is also possible that 
    improving the efficiency of particular appliances will result in 
    significant reductions in the high costs of meeting peak demand or, in 
    other cases, may simply reduce utility base loads (resulting in much 
    lower cost savings). Unfortunately, the Department does not have 
    adequate information upon which to distinguish accurately between 
    consumer cost savings and the cost reductions likely to be experienced 
    by utilities or the nation as a whole. In the absence of such 
    information, the Department believes that its use of retail prices as 
    the basis for calculating the net present value of projected cost 
    savings to the nation (national benefits) is a reasonable approach.
        In addition to the impact of energy savings in today's world, there 
    is much speculation as to the impact of electric utility restructuring 
    on future electric rates. However, with federal and state regulations 
    being very undefined, the Department believes it would be pointless to 
    attempt to reflect unknown future electric rate structures in today's 
    analyses. In future rulemakings, the Department will consider such 
    impacts as they become evident. The Department concludes from the 
    information set forth above that it is properly calculating consumer 
    energy cost savings and national net present value.
        With regard to the variables and assumptions used in the models, 
    the assumptions regarding discount rates have been discussed 
    extensively, and DOE used the discount rates it determined to be most 
    appropriate. For future rulemakings, the Department always seeks and 
    welcomes the most current information regarding its models and will 
    continue to improve them.
    
    b. General Analytical Comments
    
        This section discusses the general analytical issues raised by the 
    comments to the 1994 Proposed Rule.
        The Engineering Analysis identified design options for improvements 
    in efficiency along with the associated costs to manufacturers for each 
    class of product. For each design option, these costs constitute the 
    increased per-unit cost to manufacturers to achieve the indicated 
    energy efficiency levels. Manufacturer, wholesaler, and retailer 
    markups will result in a consumer purchase price higher than the 
    manufacturer cost.
        In the analysis which supported the Draft Report, the Department 
    used a computer model that simulates a hypothetical company to assess 
    the likely impacts of standards on manufacturers and to determine the 
    effects of standards on the industry at large. This model, the 
    Manufacturer Analysis Model (MAM), is described in the TSD. (See TSD, 
    Appendix C.) It provides a broad array of outputs, including shipments, 
    price, revenue, net income, and short- and long-run returns on equity. 
    An ``Output Table'' lists values for all these outputs for the base 
    case and for each of the five standard levels analyzed. It also gives a 
    range for each of these estimates. The base case represents the 
    forecasts of outputs with a range of energy efficiencies which are 
    expected if there are no new or amended standards. A ``Sensitivity 
    Chart'' (TSD, Appendix C) shows how returns on equity would be affected 
    by a change in any one of the nine control variables of the model. The 
    Manufacturer Analysis Model consists of 13 modules. The module which 
    estimates the impact of standards on total industry net present value 
    is version 1.2 of the Government Regulatory Impact Model (GRIM), dated 
    March 1, 1993, which was developed by the Arthur D. Little Consulting 
    Company (ADL) under contract to AHAM, the Gas Appliance Manufacturers 
    Association (GAMA), and the Air-Conditioning and Refrigeration 
    Institute (ARI). (See TSD, Appendix C for more details.)
        Arthur D. Little, Inc. (ADL) submitted comments on the 1994 
    Proposed Rule on behalf of AHAM, the Air-Conditioning and Refrigeration 
    Institute (ARI), and the Gas Appliance Manufacturers Association 
    (GAMA.) ADL and others criticized the methodology and analytical models 
    used to assess standards. These comments raised concerns about the 
    determination of the impact of standards on manufacturers, particularly 
    the way the Department used the GRIM developed by industry, and the 
    failure to consider the impact of multiple DOE and other agency 
    regulations. Other analytical issues raised included the determination 
    of consumer paybacks from energy savings, expected life of the product, 
    economic assumptions, the use of prototypical firms, and other 
    assumptions and variables used in the simulation model. (ADL, No. 665 
    at 1, 8-10, 14-19; AHAM, Transcript April 7, 1994, at 173.) Amana 
    commented that historical models are difficult to construct and that 
    prices fluctuate, and therefore, the Department should not ``place too 
    much stock in computer models.'' Basing its statement on the consumer 
    price index (CPI), producer price index (PPI), and average energy use 
    trends, Amana also stated that there is no evidence to suggest that 
    capital cost increases due to efficiency improvements are passed on to 
    the consumer. (Amana, No. 347 at 2-3.)
        In implementing the Process Rule, the Department is now undertaking 
    a review of the manufacturing impact analysis model and methodologies. 
    In developing its new methodology, the Department will take into 
    account the comments received concerning its methodology. However, 
    while DOE is committed to working with the interested public to improve 
    these analytical tools, DOE believes the analytical approach used in 
    conjunction with the Draft Report is a reasonable basis for assessing 
    manufacturer impact.
        The Department recognizes that the manufacturers disagreed with the 
    analytical method used in the 1994 Proposed Rule and the Draft Report 
    regarding impacts on manufacturers. However, the Department assumes 
    that the standards recommended by AHAM would not have adverse impacts 
    on the industry or the individual manufacturers. The standards the 
    Department sets forth in today's rule are quite similar to those 
    recommended by AHAM. The Department has selected slightly higher (0.2-
    0.3 EER) standards than those standards proposed by AHAM for the 
    classes 1 through 4. AHAM's primary concern was the impact of the cost 
    of chassis size increases on manufacturers. The Department took into 
    consideration a graph provided by AHAM which shows the percent of 
    production requiring a chassis size change at each EER level. In 
    selecting the standard levels for classes 1 through 4, the Department, 
    in an effort to mitigate the identified cost impact on manufacturers, 
    was careful to avoid any significant increase in the percentage of 
    production requiring a chassis size change.
        ACEEE recommended that DOE compile the best available data on two 
    key variables: markup from manufacturer to the consumer and changes in 
    purchase patterns in response to efficiency-induced price increases. 
    This data should be used for the current analysis in both the 
    Government Regulatory Impact Model (GRIM) and the Manufacturer Impact 
    Model (MIM.) Over the long term, ACEEE suggested that DOE work with 
    industry to co-fund a study on consumer purchase behavior in response 
    to efficiency-induced price increases that would help improve the
    
    [[Page 50141]]
    
    usefulness of both GRIM and MIM. (ACEEE, No. 557 at 5.)
        DOE has decided to integrate the GRIM with the MIM which has 
    resulted in the development of a new model entitled the Lawrence 
    Berkeley Laboratory Manufacturer Analysis Model (LBL-MAM.) The 
    Department will continue in its efforts to collect the best available 
    data on markups to use in its analytical tools. With regard to consumer 
    response to efficiency-induced price increases, the Department's 
    consumer analysis contains, for each covered product, values that 
    represent the likely response. These values were originally estimated 
    by analyses of data concerning product purchases during the 1970's and 
    have been updated. The Department continues attempting to update its 
    assumptions where updates are warranted and welcomes ACEEE's 
    suggestions. DOE will explore the feasibility of a cooperative study on 
    empirically-verifiable updates on price elasticity.
    
    IV. Analysis of Room Air Conditioner Standards
    
        Revised standards for room air conditioners shall be designed to 
    achieve the maximum improvement in energy efficiency that is 
    technologically feasible and economically justified. These and related 
    statutory criteria are addressed below.
    
    a. Efficiency Levels Analyzed
    
        The Department examined a range of standard levels for room air 
    conditioners. Table 4-1 presents the five efficiency levels selected 
    for analysis in the Draft Report, as well as the supplemental 
    efficiency level. Level 5 corresponds to the highest efficiency level, 
    max tech, considered in the engineering analysis. The Final TSD 
    contains the information analyzed in the Draft Report and the 
    supplemental analysis.
        After analyzing the comments received concerning the Draft Report, 
    the Department decided to analyze an additional standard level, defined 
    as the supplemental level. The Department calculated the energy 
    savings, net present value, life-cycle cost, life-cycle cost 
    sensitivity to energy prices, payback period, and environmental 
    emissions reduction for this supplemental standard level. These tables 
    can be found in the Supplemental section of the TSD.
    
                             Table 4-1.--Standard Levels Analyzed for Room Air Conditioners                         
    ----------------------------------------------------------------------------------------------------------------
                                                                     Suppl.                                         
               Product class              Level 1      Level 2       level       Level 3      Level 4      Level 5  
    ----------------------------------------------------------------------------------------------------------------
    Without reverse cycle, with                                                                                     
     louvered sides, and less than                                                                                  
     6,000 Btu/h......................         9.32         9.71          9.7        10.00        10.38        11.74
    Without reverse cycle, with                                                                                     
     louvered sides, and 6,000 to                                                                                   
     7,999 Btu/h......................         9.38         9.66          9.7         9.91        10.33        11.67
    Without reverse cycle, with                                                                                     
     louvered sides, and 8,000 to                                                                                   
     13,999 Btu/h.....................         9.71         9.85          9.8        10.11        10.97        12.39
    Without louvered sides, with                                                                                    
     reverse cycle, and 14,000 to                                                                                   
     19,999 Btu/h.....................         9.70         9.98          9.7        10.15        10.15        12.77
    Without reverse cycle, with                                                                                     
     louvered sides, and 20,000 Btu/h                                                                               
     or more..........................         8.39         8.39          8.5         8.51         8.88        11.14
    Without reverse cycle, without                                                                                  
     louvered sides, and less than                                                                                  
     6,000 Btu/h......................         9.10         9.10          9.0         9.23         9.23        11.52
    Without reverse cycle, without                                                                                  
     louvered sides, and 6,000 to                                                                                   
     7,999 Btu/h......................         9.10         9.10          9.0         9.23         9.23        11.52
    Without reverse cycle, without                                                                                  
     louvered sides, and 8,000 to                                                                                   
     13,999 Btu/h.....................         8.80         9.05          8.5         9.12         9.12        11.08
    Without reverse cycle, without                                                                                  
     louvered sides, and 14,000 to                                                                                  
     19,999 Btu/h.....................         8.80         9.05          8.5         9.12         9.12        11.08
    Without reverse cycle, without                                                                                  
     louvered sides, and 20,000 Btu/h                                                                               
     or more..........................         8.80         9.05          8.5         9.12         9.12        11.08
    With reverse cycle and with                                                                                     
     louvered sides...................         9.05         9.05          9.0         9.27         9.27        11.16
    With reverse cycle and without                                                                                  
     louvered sides...................         8.72         8.72          8.5         8.86         8.86        10.87
    ----------------------------------------------------------------------------------------------------------------
    
        Rather than presenting the results for all classes of room air 
    conditioners in today's rule, the Department selected a class of room 
    air conditioners as being representative, or typical, of the product 
    and is presenting the results only for that class. The results for the 
    other classes can be found in the TSD in the same sections as those 
    referenced for the representative class. The representative class for 
    room air conditioners is units with side louvers, without a reverse 
    cycle, and with a capacity of 8,000-13,999 Btu per hour. This class of 
    room air conditioners has the largest sales volume. For this 
    representative class, trial standard level 1 accomplishes efficiency 
    improvements from the baseline by increasing the compressor EER to 
    10.8; level 2 adds a subcooler; level 3 adds evaporator and condenser 
    grooved tubing; level 4 increases the evaporator and condenser coil 
    area; and level 5 adds a variable-speed compressor and brushless 
    permanent magnet fan motor. Similar design options are used to achieve 
    the above efficiencies for the other classes and are found tabulated in 
    Section 1.5 of the TSD. The supplemental level was not based on any 
    specific configuration of design options, but rather it resulted from 
    consideration of the comments DOE received regarding the Draft Report. 
    The analysis used in the Draft Report became the basis for the TSD. 
    Consequently, calculations in the TSD and today's rule are based on 
    those energy price forecasts from the 1995 Annual Energy Outlook (AEO) 
    of the Energy Information Administration (EIA) , the current forecast 
    at the time of the analysis, unless otherwise noted. (DOE/EIA-
    0383(95)). Supplemental calculations were performed where the 
    Department determined it would be appropriate to reflect the most 
    current prices.
        The Department believes that all the standard levels it examined 
    are technologically feasible. The only questions which were raised by 
    commenters about technological feasibility pertained to Brushless 
    Permanent Magnetic (BPM) fan motors and variable speed compressors. 
    These
    
    [[Page 50142]]
    
    design options were only considered at the most stringent standard 
    levels.
    
    b. Significance of Savings
    
        Under section 325(o)(3)(B) of EPCA, the Department is prohibited 
    from adopting a standard for a product if that standard would not 
    result in ``significant'' energy savings. The Department forecasted 
    energy consumption by the use of the LBL-REM. (See Appendix B of the 
    TSD.) To estimate the energy savings by the year 2030 due to revised 
    standards, the energy consumption of new room air conditioners under 
    the base case is compared to the energy consumption of those sold under 
    the candidate standard levels. For the candidate energy conservation 
    standards, the Lawrence Berkeley Laboratory-Residential Energy Model 
    projects that over the period 1999-2030, the following energy savings 
    would result for all classes of the product:
    
    Level 1--0.36 Quad
    Level 2--0.52 Quad
    Supplemental Level--0.49 Quad
    Level 3--0.69 Quad
    Level 4--0.96 Quad
    Level 5--0.72 Quad
    
        The preceding values of energy savings use AEO 1995 energy price 
    forecasts; however, calculating the energy savings for the supplemental 
    level using AEO 1997 produces an energy savings of 0.64 
    Quad.5
    ---------------------------------------------------------------------------
    
        \5\ AEO 1995 projected higher energy prices in the future as 
    compared to AEO 1997. Consequently, using AEO 1995 projections, a 
    larger percentage of consumers are projected to purchase higher 
    efficiency room air conditioners in the absence of standards (in the 
    base case), as compared to the base case using AEO 1997 projections. 
    This relative difference results in a larger projected energy 
    savings between the base case and the standards case using AEO 1997 
    projections as compared to AEO 1995 projections.
    ---------------------------------------------------------------------------
    
        While the term ``significant'' is not defined in EPCA, the U.S. 
    Court of Appeals for the District of Columbia Circuit concluded that 
    Congress intended the word ``significant'' to mean ``non-trivial.'' 
    Natural Resources Defense Council v. Herrington. 768 F.2d 1355, 1373 
    (D.C.Cir. 1985). Thus, for this rulemaking, DOE concludes that each 
    standard level considered results in significant energy savings.
    
    c. Economic Justification
    
        Section 325(o)(2)(B) of EPCA provides seven factors to be 
    evaluated, to the greatest extent practicable, in determining whether a 
    conservation standard is economically justified.
        1. Economic Impact on Manufacturers and Consumers
        The engineering analysis identified improvements in efficiency 
    along with the associated costs to manufacturers for each efficiency 
    level for each class of product. For each design option, these 
    associated costs constitute the increased per-unit cost to 
    manufacturers to achieve the indicated energy efficiency levels. 
    Manufacturer, wholesaler, and retailer markups will result in a 
    consumer purchase price higher than the manufacturer cost.
        To assess the likely impacts of standards on manufacturers and to 
    determine the effects of standards on different-sized firms, the 
    Department used a computer model that simulates hypothetical firms in 
    the industry under consideration. This model, the Manufacturer Analysis 
    Model (MAM), is explained in the TSD. (See TSD, Appendix C.)
        For consumers, measures of economic impact are the changes in 
    purchase price, annual energy expense, and installation costs. The 
    purchase price, installation cost, and cumulative annual energy 
    expense, i.e., life-cycle cost, of each standard level are presented in 
    Chapter 3 of the TSD. Under section 325 of the EPCA, the life-cycle 
    cost analysis is a separate factor to be considered in determining 
    economic justification.
        The per unit increased costs to manufacturers to meet the 
    efficiency of levels 1-5 for the representative class are $6.11, $8.37, 
    $13.17, $47.09, and $242.52, respectively. The increased per unit cost 
    for the supplemental level falls within the range of $6-$9 for the 
    representative class. See Tables 1.10-1.18 in the TSD.
        The consumer price increases for the representative class are 
    estimated to be $11, $15, $23, $82, and $434 for standard levels 1-5, 
    respectively. The consumer price increase for the supplemental level is 
    estimated to be $13. See Tables 4.1-4.9 and Supplemental Tables 4.1-4.9 
    in the TSD.
        The per-unit reduction in annual costs of operation (i.e., energy 
    expense) for the representative class are $2, $3, $4, $8, and $13 for 
    standard levels 1-5, respectively, and $2.5 for the supplemental level. 
    See Tables 4.1-4.9 and Supplemental Tables 4.1-4.9 in the TSD.
        The Lawrence Berkeley Laboratory-Manufacturer Impact Model results 
    for all classes of room air conditioners show that revised standards 
    could cause a prototypical manufacturer to have some reductions in 
    short-run return on equity from the 10.9 percent return in the base 
    case. Standard levels 1 through 5 are projected to produce short-run 
    returns on equity of 10.7 percent, 10.6 percent, 10.5 percent, 8.8 
    percent, and 0.13 percent, respectively. The short-run return on equity 
    for the supplemental level is projected to be in the range of 10.5-10.7 
    percent. Revised standards have little or no effect on the prototypical 
    manufacturer's long-run return on equity. Standard levels 1 through 5 
    are projected to produce long-run returns on equity of 10.8 percent, 
    10.8 percent, 10.8 percent, 10.3 percent, and 7.2 percent, 
    respectively. For the supplemental level the long-run return on equity 
    would also be approximately 10.8 percent. See Tables 5.1 and 5.3 in the 
    TSD.
        2. Life-cycle Cost and Net Present Value
        One measure of the effect of proposed standards on consumers is the 
    change in life-cycle costs, including recurring operating expenses, the 
    purchase price, and the installation costs resulting from the new 
    standards. The change in life-cycle cost is quantified by the 
    difference in the life-cycle costs between the base case and candidate 
    standard case for each of the product classes analyzed. The life-cycle 
    cost is the sum of the purchase price and the cumulative operating 
    expense, including installation and maintenance expenditures, 
    discounted over the lifetime of the appliance. The life-cycle cost was 
    calculated for the range of efficiencies analyzed in the ``Engineering 
    Analysis'' section of the TSD, for each class, in the year standards 
    are imposed, using real consumer discount rates of six percent.
        For the representative class, life-cycle costs at standard levels 
    1-3 as well as the supplemental level are less than the baseline unit. 
    Standard level 1 would reduce life-cycle costs for the average affected 
    consumer of $6.76 for the representative class of room air conditioner; 
    standard level 2 would reduce average life-cycle costs by $6.67, 
    standard level 3 by $8.48, and the supplemental level by $6.59; for 
    standard levels 4 and 5, the life-cycle costs are projected to increase 
    $19.4 and $328, respectively, compared to the base case. Of the five 
    candidate standard levels, a unit meeting standard level 3 would have 
    the lowest consumer life-cycle cost for the representative class. See 
    Figures 4.4, Tables 4.1-4.18, and Supplemental Tables 4.1-4.18 in the 
    TSD.
        The Department's baseline method of analysis 6 
    calculated costs of increasing
    
    [[Page 50143]]
    
    chassis size at the standard level at which the baseline required a 
    chassis size change. This analysis produced the preceding values for 
    life-cycle cost. In addition, AHAM provided analysis in which the cost 
    of increasing chassis size was prorated at each standard level. Using 
    this method and the data provided by AHAM (AHAM, RAC No. 9 at 
    Attachment 3A), for classes 1-5, which make up 85 percent of the 
    shipments, the supplemental standard level has the lowest life-cycle 
    cost when prorating chassis size cost.
    ---------------------------------------------------------------------------
    
        \6\  The engineering analysis is conducted on the basis of 
    selecting a representative ``baseline'' unit for each room air 
    conditioner product class. The selected ``baseline'' unit is an 
    actual room air conditioner model that has an EER close to the 
    existing minimum efficiency standard and a cooling capacity that is 
    representative of most units in the product class. The physical 
    characteristics of the ``baseline'' unit (e.g., compressor 
    efficiency and heat exchanger design) dictate which design options 
    can be considered to improve its efficiency and at what rate the 
    manufacturer cost will be increased. The selected ``baseline'' 
    unit's physical make-up is known not to be representative of all 
    minimum efficiency equipment in its product classes. But because its 
    EER and capacity are representative, it is assumed that the design 
    options that are added to improve its efficiency will yield a 
    manufacturer cost vs. efficiency relationship that is representative 
    of all ``baseline'' units in the product class, irrespective of 
    physical design.
    ---------------------------------------------------------------------------
    
        The Department examined the effect of different discount rates (2, 
    6, and 15 percent) on the life-cycle cost curves and generally found 
    little impact. See Figures 4.1-4.9 in the TSD. Life-cycle cost 
    sensitivity to changes in energy price and equipment price were 
    analyzed. See Figure 4.10, Table 4.19, and Supplemental Table 4.19 in 
    the TSD. This analysis shows that the life-cycle cost minimums remain 
    unchanged at high energy prices. For low State energy prices, any 
    increase in standard above the baseline, shows a life-cycle cost 
    increase; however, through standard level 3, this increase is less than 
    $3 (and approximately $1 for the standards in today's rule).
        As previously addressed under Discussion of Comments, the 
    Department also calculated life cycle costs and paybacks using energy 
    prices calculated by the Gas Research Institute (GRI). (See the 
    Supplemental Sensitivity Analysis subsection of the TSD.) The life-
    cycle minimums resulting from the GRI projections remain unchanged from 
    the analysis using the AEO price forecasts. The payback periods 
    increase slightly, using the GRI forecasts, but remain well within the 
    expected lifetime of the product.
        The Net Present Value analysis, a measure of the net savings to 
    society, indicates that for all classes of room air conditioners, 
    standard level 1 would produce an NPV of $0.40 billion to consumers. 
    The corresponding net present values for standard levels 2-5 are $0.54 
    billion, $0.59 billion, $-0.26 billion, and $-10.9 billion, 
    respectively (based on AEO 1995 energy price projections). See Table 
    3.6 in the TSD. The NPV for the supplemental level is $0.51 billion 
    using AEO 1995, for basis of comparison. Using AEO 1997 data, the NPV 
    of the supplemental level is calculated to be $0.45 billion. See the 
    Supplemental Sensitivity Analysis subsection of the TSD.
        A sensitivity analysis was also conducted for energy savings and 
    Net Present Value (NPV), using GRI forecasts for the following cases: 
    the GRI fuel price projection, low equipment price, high equipment 
    price, and high efficiency trend. (See the Supplemental Sensitivity 
    Analysis subsection of the TSD.) The results of this analysis show that 
    although the NPV and energy savings change in each scenario, both the 
    NPV and the energy savings remain positive, indicating an overall 
    benefit to the consumer and the nation.
    3. Energy Savings
        EPCA requires DOE to consider the total projected energy savings 
    that result from revised standards. The Department forecasted energy 
    consumption through the use of the LBL-REM. (See Appendix B of the TSD 
    for a detailed discussion of the LBL-REM.) The projected savings using 
    AEO 1997 is 0.64 Quad for the supplemental level. See Supplemental 
    Table 3.97 in the TSD. Also, see section IV.c. in today's rule for the 
    energy savings of the other efficiency levels.
    4. Lessening of Utility or Performance of Products
        In establishing classes of products and design options, the 
    Department tried to eliminate consideration of any design option that 
    would result in degradation of utility or performance. Thus, a separate 
    class with a different efficiency standard was created for a product 
    where the record indicated that the product included a utility or 
    performance-related feature that affected energy efficiency. For 
    example, the Department added classes for casement-only and casement-
    slider room air conditioners. These room air conditioners offer the 
    unique utility of fitting into slider and casement windows. In this 
    way, the Department attempted to minimize the impact of amended 
    standards on the utility and performance of room air conditioners.
    5. Impact of Lessening of Competition
        The Energy Policy and Conservation Act directs the Department to 
    consider the impact of any lessening of competition that is likely to 
    result from the standards, as determined by the Attorney General.
        In a letter dated September 16, 1994, the Department of Justice 
    (DOJ) expressed concern about the effects the standards proposed in the 
    1994 Proposed Rule might have on industry. DOJ stated that there was 
    evidence that some of the design options suggested in the 1994 Proposed 
    Rule were less effective and more costly than the TSD indicated and 
    that manufacturers may, among other things, need to redesign the 
    chassis of some classes to comply with the standard. DOJ concluded that 
    such redesigns could add to unit installation costs, make units larger 
    and more cumbersome to install, and otherwise depress demand. 
    Furthermore, DOJ noted evidence that at least one product, the five 
    thousand Btu/h unit, may cease to be manufactured if the standard 
    proposed in 1994 were adopted. DOJ was also concerned about the 
    availability and efficacy of some design options suggested in the TSD 
    for the Proposed Rule. DOJ concluded that the proposed standard could 
    have a substantial negative impact on demand and rates of return, and 
    could cause one or more firms to cease the manufacture and sale of some 
    of these products, thus lessening competition. (DOJ, No. 840 at 5.) The 
    September 16, 1994, letter is printed at the end of today's rule.
        The Department of Justice comments were based on the standards 
    proposed in the 1994 Proposed Rule. The revised analysis contained in 
    the 1996 Draft Report and the supplemental analysis, and commented upon 
    by the public, addressed many of the concerns raised by DOJ. The 
    standards promulgated in today's final rule have been adjusted from the 
    proposed standards in order to mitigate the types of concerns raised by 
    DOJ. For example, the Final Rule sets the same standard level for class 
    1 as for class 2, addressing the concern that class 1 units would be 
    eliminated from the marketplace as a result of the revised standards. 
    The Department's revised analysis addressed concerns about the 
    installation costs and chassis size increases, and the standards in the 
    Final Rule reflect this revised analysis. The manufacturing impact 
    analysis shows no significant shifts in manufacturer rates of return 
    under the supplemental standards level. Thus, the Department of Energy 
    concludes that the concerns raised by the DOJ have been addressed, and 
    DOE does not expect competition to be negatively impacted by this final 
    rule.
    6. Need of the Nation to Save Energy
        Enhanced energy efficiency improves the Nation's energy security, 
    strengthens the economy, and reduces the environmental impacts of 
    energy production. In 1997, 3.4 percent of residential sector 
    electricity consumption (corresponding to 0.38
    
    [[Page 50144]]
    
    quad source energy) was accounted for on a national basis by room air 
    conditioners. The Department estimates that over 30 years the revised 
    standards will save approximately 0.64 quads of primary energy.
    7. Other Factors
        Decreasing future electricity demand by means of standards will 
    decrease air pollution. Standards will result in a decrease in nitrogen 
    dioxide (NOx) emissions. For standard levels 1-5, over the 
    years 2000 to 2030, the total estimated NOx emission 
    reduction would be 55,000 tons; 80,000 tons; 104,000 tons; 141,000 
    tons; and 60,000 tons, respectively. For the supplemental level the 
    reduction is estimated at 74,000 tons using the AEO 1995 energy prices 
    and 95,000 tons using AEO 1997 energy prices. See Tables 7.1-7.5 and 
    Supplemental Tables 7.6 and 7.7 in the TSD.
    
    d. Payback Period
    
        Another consequence of the standards will be the reduction of 
    carbon dioxide (CO2) emissions. For standard level 1, over 
    the years 2000 to 2030, the total estimated CO2 emission 
    reduction would be 30 million tons. For standard levels 2-5, the 
    reductions would be 44 million tons; 57 million tons; 79 million tons; 
    and 55 million tons, respectively. For the supplemental level the 
    reduction is estimated at 41 million tons using AEO 1995 energy prices 
    and 54 million tons using AEO 1997. See Tables 7.1--7.5 and 
    Supplemental Tables 7.6 and 7.7 in the TSD.
        Energy associated with these standards would also reduce the costs 
    associated with SO2 compliance.7 See Tables 7.1--
    7.5 and Supplemental Tables 7.6 and 7.7 in the TSD.
                                  ___________
    
    
    7 Decreases in SO2 emissions will not occur 
    because the Clean Air Act places a ceiling on SO2 
    emissions that will be met under any regulatory regime. In the case 
    of SO2 therefore, the emissions reductions should be 
    interpreted as reduced costs to electricity generators for 
    controlling SO2. For all classes of room air 
    conditioners, over the years 2000 to 2030, the estimated need to 
    control SO2 is estimated to be reduced by 59,000 tons; 
    86,000 tons; 111,000 tons; 149,000 tons; and 43,000 tons, for 
    levels 1-5, respectively. For the supplemental level the reduction 
    is estimated at 79,000 tons. However, using AEO 1997, the reduction 
    is estimated at 100,000 tons. This reduced need to control 
    emissions will be reflected in lower costs of pollution control at 
    utilities or lower price allowances.
    
        If the increase in initial price of an appliance due to a 
    conservation standard would repay itself to the consumer in energy 
    savings in less than three years, then it is presumed that such 
    standard is economically justified.8 EPCA, Section 
    325(o)(2)(B)(iii), 42 U.S.C. 6295(o)(2)(B)(iii). This presumption of 
    economic justification can be rebutted upon a proper showing. Failure 
    to qualify for this presumption shall not be taken into consideration 
    in determining whether a standard is economically justified. Id.
                                  ___________
    
    
    8 For this calculation, the Department calculated cost-
    of-operation based on the DOE test procedures. Therefore, the 
    consumer is assumed to be an ``average'' consumer as defined by the 
    DOE test procedures. Consumers who use the products less than the 
    test procedure assumes will experience a longer payback while those 
    who use them more than the test procedure assumes will have a 
    shorter payback.
    
        Table 4.2 presents the payback periods 9 for the 
    efficiency levels analyzed for the representative class of the product. 
    For this representative class, none of the standard levels satisfy the 
    rebuttable presumption test. Standard level 4 meets the rebuttable 
    presumption criteria for classes 4 and 12. Standard level 3 meets the 
    rebuttable presumption criteria for classes 1, 4 and 12. The standards 
    set forth in today's rule meet the rebuttable presumption criteria for 
    classes 1, 2, 4, 8-10, and 12. Payback periods for all classes of room 
    air conditioners may be found in Tables 4.10--4.18 and Supplemental 
    Tables 4.10--4.18 in the TSD.
                                  ___________
    
    
    9 These payback periods are weighted averages. They 
    compare the portion of the projected distributions of designs in 
    the base case that are less efficient than the standard level to 
    the design at the standard level. Designs with energy consumption 
    at or below the standard level are not affected by the standard and 
    are excluded from the calculation of impacts.
    
          Table 4-2.--Payback Periods of Design Options (Years) for the     
                  Representative Class of Room Air Conditioners             
    ------------------------------------------------------------------------
                                                                    Payback 
                            Standard level                           period 
    ------------------------------------------------------------------------
    1............................................................        3.8
    2............................................................        3.9
    Supplemental.................................................        3.8
    3............................................................        4.2
    4............................................................        8.3
    5............................................................       27.2
    ------------------------------------------------------------------------
    
    e. Conclusion
    
        1. Additional Product Classes. The Department has added four new 
    product classes. First, the Department is adding two classes for 
    casement-type units because of the unique utility they offer the 
    consumer. The size limitations imposed on casement-type units are more 
    significant than the limitations of typical units designed for double-
    hung windows, and the performance-related feature (fitting into 
    casement windows) justifies a lower efficiency standard. The two 
    additional product classes for casement units are casement-only units 
    and casement-slider units. In today's rule, definitions for these terms 
    are being added to Section 430.2 Subpart A of 42 U.S.C. 6291-6309. For 
    today's rule, the Department has selected the efficiency standard 
    recommended by AHAM, ACEEE, and NRDC for casement-slider units (9.5 
    EER) (AHAM, RAC No. 6 at 2 and ACEEE/NRDC, RAC No. 5 at 5) and the 
    standard recommended by AHAM for casement-only units (8.7 EER). (AHAM, 
    RAC No. 6 at 2.)
        Second, the Department is splitting each of two classes for reverse 
    cycle units into two classes. Splitting of these two classes 
    accommodates the concerns expressed in public comments. The class of 
    units with a reverse cycle and louvered sides is split between 
    capacities of less than 20,000 Btu/h (class 11) and 20,000 Btu/h or 
    more (new class 13). The class of units with reverse cycle and without 
    louvered sides is split between capacities of less than 14,000 Btu/h 
    (class 12) and capacities of 14,000 Btu/h or more (new class 14).
        2. Standards. Section 325(o)(2)(A) of the Act specifies that the 
    Department must establish standards that ``achieve the maximum 
    improvement in energy efficiency which the Secretary determines is 
    technologically feasible and economically justified.'' EPCA, section 
    325(o)(2)(A). Technologically feasible design options are 
    ``technologies which can be incorporated in commercial products or in 
    working prototypes.'' 10 CFR part 430, Appendix A to Subpart C, 
    4(a)(4)(I).
    
    [[Page 50145]]
    
    A standard level is economically justified if the benefits exceed the 
    burdens. EPCA, section 325(o)(2)(B)(I).
        A maximum technologically feasible (max tech) design option was 
    identified for each class of room air conditioners. The max tech levels 
    were derived by adding energy-conserving engineering design options to 
    the baseline units for each of the respective classes in order of 
    decreasing consumer payback. The max tech level includes higher 
    efficiency fan motors, which were added as one of the first design 
    options, and variable speed compressors, which were added as one of the 
    last design options because of their slower payback. A complete 
    discussion of each max tech level, and the design options included in 
    each, is found in the Engineering Analysis in the TSD, Chapter 3.
        Table 5-1 presents the max tech performance levels for all classes 
    of the subject product:
    
      Table 5-1.--Maximum Technologically Feasible Standard Levels for Room 
              Air Conditioners Expressed in Energy Efficiency Ratio         
    ------------------------------------------------------------------------
                                                                  Energy    
                          Product class                         efficiency  
                                                                   ratio    
    ------------------------------------------------------------------------
    Without reverse cycle, with louvered sides, and less                    
     than 6,000 Btu/h.......................................            11.7
    Without reverse cycle, with louvered sides, and 6,000 to                
     7,999 Btu/h............................................            11.7
    Without reverse cycle, with louvered sides, and 8,000 to                
     13,999 Btu/h...........................................            12.4
    Without reverse cycle, with louvered sides, and 14,000                  
     to 19,999 Btu/h........................................            12.8
    Without reverse cycle, with louvered sides, and 20,000                  
     Btu/h or more..........................................            11.1
    Without reverse cycle, without louvered sides, and less                 
     than 6,000 Btu/h.......................................            11.5
    Without reverse cycle, without louvered sides, and 6,000                
     to 7,999 Btu/h.........................................            11.5
    Without reverse cycle, without louvered sides, and 8,000                
     to 13,999 Btu/h........................................            11.1
    Without reverse cycle, without louvered sides, and                      
     14,000 to 19,000 Btu/h.................................            11.1
    Without reverse cycle, without louvered sides, and                      
     20,000 Btu/h or more...................................            11.1
    With reverse cycle and with louvered sides..............            11.2
    With reverse cycle and without louvered sides...........            10.9
    ------------------------------------------------------------------------
    
        Accordingly, the Department first considered the max tech level of 
    efficiency, i.e., standard level 5. Of the standard levels analyzed, 
    level 5 would save the most energy (4.1 quads between 1999 and 2030.) 
    However, because many consumers would not purchase room air 
    conditioners due to the high first cost associated with this standard 
    level, purchases of central air conditioners and heat pumps will 
    increase, resulting in a reduction of savings for room air 
    conditioners. After accounting for this offset, the net savings is 0.72 
    quad. Also, in order to meet this standard, the Department assumes that 
    all room air conditioners would incorporate larger and improved heat 
    transfer devices in addition to high efficiency, variable-speed fan 
    motors and compressors. However, at this standard level, the payback 
    period of 27 years for the representative class, and up to 107 years 
    for other classes, exceeds the 12.5-year life of the product. The life-
    cycle cost increases are $328 for the representative class and up to 
    $911 for other classes. This level also drives the short-run 
    manufacturer return on equity from 10.9 percent to 0.13 percent. The 
    Department therefore concludes that the burdens of standard level 5 for 
    room air conditioners outweigh the benefits and that this standard 
    level is not economically justified, and thus the Department rejects 
    the standard level.
        The next most stringent standard level is standard level 4. This 
    standard level is projected to save 1.34 quads of energy. However, many 
    consumers would not purchase room air conditioners due to the high 
    first cost associated with this standard level, resulting in increased 
    purchases of central air conditioners and heat pumps and a reduction of 
    savings for room air conditioners. After accounting for this offset, 
    the savings are 0.96 quad. For the representative class this level 
    produces a life-cycle cost increase of $19 compared to the base case. 
    Classes 4 and 12 meet the rebuttable presumption criteria. However, the 
    payback period for the representative class is 8.3 years, with payback 
    periods of up to 10.6 years for the other classes (80 percent of the 
    average product lifetime of 12.5 years). This level also reduces 
    manufacturer short-run return on equity from 10.9 percent to 8.8 
    percent, a reduction of nearly 20 percent. The Department therefore, 
    concludes that the burdens of standard level 4 for room air 
    conditioners outweigh the benefits and that this standard level is not 
    economically justified, and thus the Department rejects the standard 
    level.
        The next most stringent standard level is standard level 3. 
    Standard level 3 is projected to save 0.79 quad of energy. After 
    accounting for the increased use of central air conditioners and heat 
    pumps, the savings become 0.69 quad. For the representative class, the 
    analysis shows this level produces a life-cycle cost decrease of $8.5 
    compared to the base case and a payback of 4.2 years. This standard 
    level meets the rebuttable presumption criteria for classes 1, 4 and 
    12. The manufacturer impact analysis for this level shows a 
    manufacturer short-run return on equity reduction from 10.9 percent to 
    10.5 percent. Although the feedback generated from the LBL-MAM 
    indicated acceptable manufacturer impact, the comments received from 
    manufacturers on the 1996 Draft Report indicated burdens to 
    manufacturers which were not identified by the model. The Department 
    believes these impacts must be considered. A class-specific approach 
    was taken to consider these impacts.
        For classes 1 through 5, the manufacturers disagreed with the 
    Department's baseline method of analysis wherein, for each class, a 
    specific model was simulated for improvement up to and including a 
    chassis size change, when necessary for that model. AHAM commented that 
    this method does not adequately account for the cost of increasing 
    chassis size. AHAM believes the cost of increasing chassis size should 
    be prorated for each efficiency level analyzed, because at each 
    efficiency improvement, some models within each class would need to 
    undergo a chassis size change, even though the specific model being 
    analyzed did not necessarily need a chassis size change. AHAM provided 
    the Department with a graph depicting the percent of production 
    required to change chassis size at each standard level for each of the 
    first five classes. (AHAM, No, 1 at 14.) AHAM calculates that 
    efficiency level 3 would require 39 percent of production to move to a 
    larger chassis size. However, because the baseline method of analysis 
    does not prorate the cost at each level, the impact of 39 percent of 
    production requiring a
    
    [[Page 50146]]
    
    larger chassis is not considered by the model. (AHAM, No. 4 at 3.)
        For classes 6 through 12, AHAM argues that because the engineering 
    simulation model was designed using units with louvered sides and 
    without a reversing valve, the simulation does not provide a good 
    simulation for units without louvers or units with a reversing valve. 
    AHAM commented that this inaccuracy understates the extreme differences 
    between the air flow patterns on the condenser side of units with and 
    without louvers, as well as the refrigeration circuit restrictions 
    caused by the reversing valve and concessions made to balance both 
    cooling and heating in one unit. As addressed in section III, 
    ``Discussion of Comments,'' manufacturers emphasize that increasing the 
    standards could eliminate higher capacity models from the market due to 
    the impracticality of increasing the chassis size for these units. 
    (AHAM, RAC No. 4 at 3-4.)
        For these reasons, the Department concludes the burdens of standard 
    level 3 outweigh the benefits and that the standard level is not 
    economically justified, and thus, the Department rejects this standard 
    level.
        Based on the comments received regarding the 1996 Draft Report, the 
    Department next considered a supplemental efficiency level. The 
    comments the Department received in response to its 1996 Draft Report 
    contained recommended standards from AHAM and from ACEEE and NRDC. 
    These recommended standards fell in the range between efficiency levels 
    1, 2 and 3, depending on the product class.
        For classes with louvered sides and without a reversing valve, 
    ACEEE and NRDC recommended 10.0 EER for the first four classes, while 
    AHAM recommended 9.5 EER for the first four classes. For class 5, all 
    three organizations supported an 8.5 EER. AHAM calculated the life 
    cycle costs when prorating the cost of increasing the chassis size for 
    each of the efficiency levels. The life cycle cost minimums fell in the 
    9.7-9.8 range for the first four classes and 8.5 EER for class 5. The 
    Department concluded that these life-cycle cost minimums should be 
    considered in the supplemental efficiency level.
        For classes without louvered sides and without a reverse cycle, the 
    Department also received comments and recommendations for efficiency 
    standards. For most of these classes, both AHAM and the efficiency 
    advocates agreed upon standard levels. Consequently, these levels were 
    selected for the Department's supplemental efficiency level. For class 
    8, upon which AHAM and the efficiency advocates had differing 
    recommendations, the Department concluded, after analyzing the AHAM 
    Directory, that there is evidence that increasing standards for units 
    without louvers and without reverse cycle may result in eliminating 
    higher capacity units from the market. Thus, the Department chose 8.5 
    EER for this class.
        For classes with a reverse cycle, the Department again took the 
    comments and recommendations it received into consideration in adding 
    and establishing efficiency levels to examine as part of the 
    supplemental efficiency level. In response to public comment, the 
    Department split the two classes for reverse cycle units in order to 
    address the concerns of AHAM, ACEEE, and NRDC.
        After carefully considering the analysis, the Department is 
    amending the existing statutory standard for room air conditioners with 
    the supplemental standard level for room air conditioners. The 
    Department concludes that the supplemental standard level for room air 
    conditioners saves a significant amount of energy and is designed to be 
    technologically feasible and economically justified.
        This level of efficiency will result in significant energy savings. 
    During the period 2000--2030, these savings are calculated to be 0.64 
    quad 10 of primary energy. In addition, the standard is 
    expected to have a positive effect on the environment by reducing the 
    emissions of NOX and CO2 by 95,000 tons and 54 
    million tons, respectively.
    ---------------------------------------------------------------------------
    
        \10\ This value was calculated using AEO 1997 and factoring in 
    the offset from the increased use of central air conditioners and 
    heat pumps.
    ---------------------------------------------------------------------------
    
        The technologies that are necessary to meet this standard are 
    presently available. The Department finds this level to be economically 
    justified. The consumer payback of this standard level is 3.8 years for 
    the representative class and no more than 5 years for any class. This 
    standard is at or close to the lowest life-cycle cost for all classes 
    and is expected to result in a reduction in life-cycle cost of 
    approximately $6.6 for the representative class and up to $23 for the 
    other classes. Additionally, the standard is expected to have a small 
    impact on the prototypical manufacturer's short run return on equity 
    and no impact on their long run return on equity, as calculated by the 
    Department. Furthermore, the efficiency levels are reasonably close to 
    the standards recommended by AHAM, which presumably reflect acceptable 
    manufacturer impacts. Although stakeholder consensus was not reached, 
    the public comments converged following the reanalysis, meetings with 
    stakeholders, and the notice reopening the comment period. The 
    efficiency levels selected for today's rule fall within the small range 
    of difference between the stakeholder recommendations. These efficiency 
    levels address the concerns raised by the Department of Justice with 
    regard to the standards in the 1994 Proposed Rule. In addition, since 
    this standard does not involve substantial redesign or retooling, the 
    Department expects that it will not have negative impacts on smaller 
    competitors. Moreover, for classes 1, 2, 4, 8-10, and 12 there is a 
    payback period of less than 3 years and thus a presumption of economic 
    justification. For these reasons, DOE concludes that these standard 
    levels are economically justified and thus promulgates them as 
    revisions to the existing standards.
    
    V. Procedural Issues and Regulatory Review
    
    a. Review Under the National Environmental Policy Act
    
        In issuing the proposed rule, the Department prepared an 
    Environmental Assessment (EA) (DOE/EA-0819) that was published within 
    the Technical Support Document for the Proposed Rule. (DOE/EE-0009, 
    November 1993.) The environmental effects associated with various 
    standard levels were not found to be significant, and a Finding of No 
    Significant Impact (FONSI) was published. 59 FR 15868 (April 5, 1994).
        In conducting the analysis for the final rule, the Department 
    evaluated several design options suggested in comments on the proposed 
    rule. As a result, the energy savings estimates and resulting 
    environmental effects in the final rule differ somewhat from those 
    presented in the proposed rule. For example, by the year 2030, the 
    reductions in nitrogen dioxide (NO2) and carbon dioxide 
    (CO2) emissions from the standard on room air conditioners 
    are expected to be 95,000 tons and 54,000,000 tons respectively. The 
    environmental effects expected from the final rule fall within ranges 
    of environmental impacts that DOE found in the FONSI not to be 
    significant.
    
    b. Review Under Executive Order 12866, ``Regulatory Planning and 
    Review''
    
        Today's regulatory action has been determined to be an 
    ``economically significant regulatory action'' under Executive Order 
    12866, ``Regulatory Planning and Review.'' 58 FR 51735 (October 4, 
    1993.) Accordingly, today's action was subject to review under the
    
    [[Page 50147]]
    
    Executive Order by the Office of Information and Regulatory Affairs 
    (OIRA).
        Pursuant to E.O. 12866, DOE prepared a draft regulatory analysis. 
    Six major alternatives were identified by DOE as representing feasible 
    policy alternatives for achieving consumer product energy efficiency. 
    Each alternative was evaluated in terms of its ability to achieve 
    significant energy savings at reasonable costs and has been compared to 
    the effectiveness of the rule. 59 FR 10464, 10525-6 (March 4, 1994.) No 
    new data has been received concerning this review, and no substantive 
    changes have been made to this action since the review of the draft by 
    OIRA. The non-regulatory alternatives analyzed in the draft Regulatory 
    Analysis were evaluated for the eight products in aggregate. None of 
    the alternatives analyzed saved as much energy as the standards in the 
    Proposed Rule. The Department believes that the non-regulatory 
    alternatives for each product would have energy savings proportional to 
    the savings for all eight products. Therefore, the Department concludes 
    that non-regulatory alternatives are not likely to meet or exceed the 
    energy savings expected from the standards set forth in today's rule.
    
    c. Review Under the Regulatory Flexibility Act
    
        The Regulatory Flexibility Act, 5 U.S.C. 601 et seq., requires an 
    assessment of the impact of regulations on small businesses unless an 
    agency certifies that the rule will not have a significant economic 
    impact on a substantial number of small businesses and other small 
    entities. To be considered a small business, a manufacturer of room 
    air-conditioners and its affiliates may employ a maximum of 750 
    employees. (Small Business Administration size standards, 61 FR 3280.) 
    In the notice of proposed rulemaking, DOE certified pursuant to section 
    605(b) of the Regulatory Flexibility Act that the proposed action would 
    not have a ``significant economic impact on a substantial number of 
    small entities,'' and, thus, a regulatory flexibility analysis was not 
    prepared.
        The Department has not identified any firms that both manufacture 
    room air conditioners covered by EPCA, and have, together with their 
    affiliates, 750 or fewer employees. The Department estimates there are 
    approximately nine domestic firms and six foreign firms that 
    manufacture room air conditioners covered under EPCA, with three 
    domestic companies holding approximately 70 percent of U.S. room air 
    conditioner sales. Many room air conditioner manufacturers are 
    affiliated with larger U.S. or foreign firms which manufacture full 
    product lines of home appliances.
        DOE's notice of proposed rulemaking elicited no public comments on 
    the economic impact of the proposed rule on small businesses. One 
    commenter did criticize the Manufacturer Impact Model (MIM) and claimed 
    that the model is inadequate for estimating the impact of standards on 
    small firms. The comment was not supported by any data to cause the 
    Department to conclude that this final rule would have a significant 
    impact on small businesses subject to the regulation.
        Today's final rule contains less stringent room air conditioner 
    energy efficiency standards than the proposed rule. The final rule 
    establishes standards in a range from 8.0 to 9.8 EER, and it would add 
    four new product classes to accommodate room air conditioners with and 
    without side louvers and reverse cycle as well as casement room air 
    conditioners. These changes in the final rule will significantly reduce 
    any potential economic impact of the rule on small businesses. 
    Therefore, DOE certifies that this final rule will not have a 
    significant economic impact on a substantial number of small entities.
    
    d. Review Under the Paperwork Reduction Act
    
        No new information or record keeping requirements are imposed by 
    this rulemaking. Accordingly, no Office of Management and Budget 
    clearance is required under the Paperwork Reduction Act. 44 U.S.C. 3501 
    et seq.
    
    e. Review Under Executive Order 12988, ``Civil Justice Reform''
    
        With respect to the review of existing regulations and the 
    promulgation of new regulations, section 3(a) of Executive Order 12988, 
    ``Civil Justice Reform,'' 61 FR 4729 (February 7, 1996), imposes on 
    Executive agencies the general duty to adhere to the following 
    requirements: (1) Eliminate drafting errors and ambiguity; (2) write 
    regulations to minimize litigation; and (3) provide a clear legal 
    standard for affected conduct rather than a general standard and 
    promote simplification and burden reduction. With regard to the review 
    required by section 3(a), section 3(b) of Executive Order 12988 
    specifically requires that Executive agencies make every reasonable 
    effort to ensure that the regulation: (1) Clearly specifies the 
    preemptive effect, if any; (2) clearly specifies any effect on existing 
    Federal law or regulation; (3) provides a clear legal standard for 
    affected conduct while promoting simplification and burden reduction; 
    (4) specifies the retroactive effect, if any; (5) adequately defines 
    key terms; and (6) addresses other important issues affecting clarity 
    and general draftsmanship under any guidelines issued by the Attorney 
    General. Section 3(c) of Executive Order 12988 requires Executive 
    agencies to review regulations in light of applicable standards in 
    section 3(a) and section 3(b) to determine whether they are met or it 
    is unreasonable to meet one or more of them. DOE reviewed today's final 
    rule under the standards of section 3 of the Executive Order and 
    determined that, to the extent permitted by law, the final regulations 
    meet the relevant standards.
    
    f. ``Takings'' Assessment Review
    
        It has been determined pursuant to Executive Order 12630, 
    ``Governmental Actions and Interference with Constitutionally Protected 
    Property Rights,'' 52 FR 8859 (March 18, 1988) that this regulation 
    would not result in any takings which might require compensation under 
    the Fifth Amendment to the United States Constitution.
    
    g. Federalism Review
    
        Executive Order 12612, ``Federalism,'' 52 FR 41685 (October 30, 
    1987) requires that regulations, rules, legislation, and any other 
    policy actions be reviewed for any substantial direct effect on States, 
    on the relationship between the Federal Government and the States, or 
    on the distribution of power and responsibilities among various levels 
    of government. If there are substantial direct effects, then Executive 
    Order 12612 requires preparation of a federalism assessment to be used 
    in all decisions involved in promulgating and implementing a regulation 
    or a rule.
        The Department finds that this final rule will not have a 
    substantial direct effect on State governments. State regulations that 
    may have existed on the products that are the subject of today's rule 
    were preempted by the Federal standards established in EPCA. States can 
    petition the Department for exemption from such preemption based on 
    criteria set forth in EPCA. None has done so. Accordingly, the 
    Department finds that the preparation of a federalism assessment for 
    this rulemaking is not warranted.
    
    h. Review Under the Unfunded Mandates Reform Act
    
        With respect to a proposed regulatory action that may result in the 
    expenditure by the private sector of $100 million or more (adjusted 
    annually for inflation), section 202 of the
    
    [[Page 50148]]
    
    Unfunded Mandates Reform Act of 1995 (UMRA) requires a Federal agency 
    to publish estimates of the resulting costs, benefits and other effects 
    on the national economy. 2 U.S.C. 1532(a), (b). Section 202 of UMRA 
    authorizes an agency to respond to the content requirements of UMRA in 
    any other statement or analysis that accompanies the proposed rule. 2 
    U.S.C. 1532(c).
        The content requirements of section 202(b) of UMRA relevant to a 
    private sector mandate substantially overlap the economic analysis 
    requirements that apply under section 325(o) of EPCA and Executive 
    Order 12866. The Supplementary Information section of the notice of 
    proposed rulemaking and ``Regulatory Impact Analysis'' section of the 
    TSD for the 1994 Proposed Rule responded to those requirements.
        Under section 205 of UMRA, the Department is obligated to identify 
    and consider a reasonable number of regulatory alternatives before 
    promulgating a rule for which a written statement under section 202 is 
    required. DOE is required to select from those alternatives the most 
    cost-effective and least burdensome alternative that achieves the 
    objectives of the rule unless DOE publishes an explanation for doing 
    otherwise or the selection of such an alternative is inconsistent with 
    law. As required by section 325(o) of the Energy Policy and 
    Conservation Act (42 U.S.C. 6295(o)), this final rule establishes 
    energy conservation standards for room air conditioners that are 
    designed to achieve the maximum improvement in energy efficiency which 
    DOE has determined to be both technologically feasible and economically 
    justified. A full discussion of the alternatives considered by DOE is 
    presented in the ``Regulatory Impact Analysis'' section of the TSD for 
    the 1994 Proposed Rule.
    
    i. Review Under the Small Business Regulatory Enforcement Fairness Act 
    of 1996
    
        Consistent with Subtitle E of the Small Business Regulatory 
    Enforcement Fairness Act of 1996, 5 U.S.C. 801-808, DOE will submit to 
    Congress a report regarding the issuance of today's final rule before 
    the effective date set forth at the outset of this notice.
    
    List of Subjects in 10 CFR Part 430
    
        Administrative practice and procedure, Energy conservation, 
    Household appliances.
    
        Issued in Washington, D.C., on September 12, 1997.
    Joseph J. Romm,
    Acting Assistant Secretary, Energy Efficiency and Renewable Energy.
    
        For the reasons set forth in the preamble Part 430 of Chapter II of 
    Title 10, Code of Federal Regulations, is amended as set forth below.
    
    Part 430--ENERGY CONSERVATION PROGRAM FOR CONSUMER PRODUCTS
    
        1. The authority citation for Part 430 continues to read as 
    follows:
    
        Authority: 42 U.S.C. 6291-6309.
    
        2. Section 430.2 of Subpart A is amended by adding new definitions 
    for ``Casement-only room air conditioner'' and ``Casement-slider room 
    air conditioner'' in alphabetical order, to read as follows:
    
    Subpart A--General Provisions
    
    
    Sec. 430.2  Definitions.
    
    * * * * *
        Casement-only means a room air conditioner designed for mounting in 
    a casement window with an encased assembly with a width of 14.8 inches 
    or less and a height of 11.2 inches or less.
        Casement-slider means a room air conditioner with an encased 
    assembly designed for mounting in a sliding or casement window with a 
    width of 15.5 inches or less.
    * * * * *
        3. Section 430.32 is amended by revising paragraph (b) to read as 
    follows:
    
    
    Sec. 430.32  Energy conservation standards and effective dates.
    
    * * * * *
        (b) Room air conditioners.
    
                                                                            
    ------------------------------------------------------------------------
                                                 Energy efficiency ratio,   
                                                      effective as of       
                  Product class              -------------------------------
                                               Jan. 1, 1990    Oct. 1, 2000 
    ------------------------------------------------------------------------
    1. Without reverse cycle, with louvered                                 
     sides, and less than 6,000 Btu/h.......             8.0             9.7
    2. Without reverse cycle, with louvered                                 
     sides, and 6,000 to 7,999 Btu/h........             8.5             9.7
    3. Without reverse cycle, with louvered                                 
     sides, and 8,000 to 13,999 Btu/h.......             9.0             9.8
    4. Without reverse cycle, with louvered                                 
     sides, and 14,000 to 19,999 Btu/h......             8.8             9.7
    5. Without reverse cycle, with louvered                                 
     sides, and 20,000 Btu/h or more........             8.2             8.5
    6. Without reverse cycle, without                                       
     louvered sides, and less than 6,000 Btu/                               
     h......................................             8.0             9.0
    7. Without reverse cycle, without                                       
     louvered sides, and 6,000 to 7,999 Btu/                                
     h......................................             8.5             9.0
    8. Without reverse cycle, without                                       
     louvered sides, and 8,000 to 13,999 Btu/                               
     h......................................             8.5             8.5
    9. Without reverse cycle, without                                       
     louvered sides, and 14,000 to 19,999                                   
     Btu/h..................................             8.5             8.5
    10. Without reverse cycle, without                                      
     louvered sides, and 20,000 Btu/h or                                    
     more...................................             8.2             8.5
    11. With reverse cycle, with louvered                                   
     sides, and less than 20,000 Btu/h......             8.5             9.0
    12. With reverse cycle, without louvered                                
     sides, and less than 14,000 Btu/h......             8.0             8.5
    13. With reverse cycle, with louvered                                   
     sides, and 20,000 Btu/h or more........             8.5             8.5
    14. With reverse cycle, without louvered                                
     sides, and 14,000 Btu/h or more........             8.0             8.0
    15. Casement-Only.......................               *             8.7
    16. Casement-Slider.....................               *            9.5 
    ------------------------------------------------------------------------
    * Casement-only and casement-slider room air conditioners are not       
      separate product classes under standards effective January 1, 1990.   
      These units are subject to the applicable standards in classes 1      
      through 14 based on unit capacity and the presence or absence of      
      louvered sides and a reverse cycle.                                   
    
    * * * * *
        Note: The following letter will not appear in the Code of 
    Federal Regulations.
    
    September 16, 1994
    
    Honorable Christine A. Ervin
    Assistant Secretary for Energy Efficiency and Renewable Energy
    United States Department of Energy, Forrestal Building, 1000 
    Independence Ave., S. W., Washington, D.C. 20585
    
    Dear Ms. Ervin:
    
        By letter dated March 14, 1994, the Department of Energy 
    (``DOE'') transmitted to the Attorney General a Notice of Proposed 
    Rulemaking (59 FR 10464) addressing energy
    
    [[Page 50149]]
    
    standards for eight classes of household appliances. Those classes 
    are: room air conditioners, water heaters, direct heating equipment, 
    mobile home furnaces, kitchen ranges and ovens, pool heaters, 
    fluorescent lamp ballasts and television sets. Section 325 of the 
    Energy Policy and Conservation Act, as amended in 1992 (42 U.S.C. 
    6295) (``the Act''), requires the Attorney General to determine the 
    impact, if any, of any lessening of competition likely to result 
    from the proposed standards. This letter contains the competitive 
    impact determination of the Department of Justice (``Department'').
    
    Summary
    
        The evidence available to the Department does not indicate that 
    any significant lessening of competition is likely to result from 
    the imposition of the proposed standards for mobile home furnaces 
    and pool heaters contained in the Notice. For television sets, 
    fluorescent lamp ballasts and professional-style or high-end kitchen 
    ranges it is the Department's judgement based on the available 
    evidence that significant anticompetitive effects are likely to 
    occur. For electric water heaters the evidence indicates that a 
    significant anticompetitive effect could take place if sufficient 
    time is not permitted firms to develop, produce and market products 
    complying with the new standard. For microwave ovens, oil-fired 
    water heaters, room air conditioners, and direct heating equipment 
    the evidence indicates that anticompetitive effects could result; 
    the Department is unable on the basis of the available evidence to 
    determine whether such effects are likely. Finally, the evidence 
    indicates that the cumulative effects of these and other regulatory 
    standards could be to lessen competition in certain markets for 
    household appliances.
        In preparing these comments the Department has considered the 
    Notice, the Technical Support Document (TSD) prepared by Lawrence 
    Berkeley Laboratory, written comments and oral comments collected by 
    the department in the time allowed and without the benefit of 
    compulsory process.
    
    Discussion
    
        Adoption of standards requiring greater energy efficiency in 
    household appliances could affect competition in a number of ways. 
    First, by raising the cost of appliances and reducing design and 
    feature choices, standards may lower demand. If standards impose 
    costs on manufacturers that can not be passed to consumers they can 
    lower manufacturers' rates of return. Either one or both of these 
    effects could cause manufacturers to exit the market with the effect 
    of lessening competition and raising prices. Second, imposition of 
    standards may lessen or discourage competition in the design and 
    development of new product features or technologies; such 
    competition benefits consumers and the economy.
        The record in this proceeding raises many factual issues 
    relating, among other things, to the technical feasibility of 
    certain standards, their economic impact on manufacturers and 
    consumers and consumer reaction to the changes in products that they 
    might require. In numerous instances, industry representatives and 
    technical consultants retained by them have challenged assumptions 
    and conclusions in the Notice and TSD. The Department is not in a 
    position to resolve many of these contested issues on the basis of 
    the available record. Accordingly, in some instances, the Department 
    is unable to reach a conclusion about the impact of the proposed 
    standards on competition.
    
    Fluorescent Lamp Ballasts
    
        One technical issue that has been raised is whether the proposed 
    standards for fluorescent lamp ballasts are attainable with 
    currently available technology. Numerous ballast manufacturers 
    assert that in many instances they are not. The Department concludes 
    that the doubts raised about the technical feasibility of the 
    standards are serious and affect a substantial number of ballast 
    classes. Thus, if the proposed standards were adopted some or all 
    manufacturers would likely have to cease the production of many 
    products and competition in the sale of those products would cease 
    or diminish.
    
    Television Sets and Related Technologies
    
        1. The weight of available evidence is that adoption of the 
    proposed standard for television sets could force all or many 
    manufacturers to revise their products to lessen the number and 
    quality of their features. Many in the industry contend that the 
    only way to produce products that will comply with the standard 
    would be to reduce or eliminate features that consume electricity 
    such as brighter pictures, remote control, picture-in-picture, 
    improved sound and in-set program guides and other features 
    presently being developed. Development and marketing of product 
    improvements and new features has been an important factor driving 
    competition in the market for television sets. Reducing or retarding 
    the development of such features could substantially reduce demand 
    for sets, retard development and refinement of technology, and 
    reduce utility of the product.
        Manufacturers might attempt to circumvent the proposed standard 
    by letting features ``migrate''--incorporating them in units to be 
    sold separately or packaged with television sets. It is claimed that 
    disaggregating features in this manner will decrease overall 
    television energy efficiency. There is evidence that it could also 
    lessen competition because the development and marketing of features 
    in such attached units could be costly and cumbersome, among other 
    things encountering receivers that receive cable signals.
        There is evidence that the proposed standard for television sets 
    could affect competition in other markets. Representatives of the 
    television industry assert that as the ``Information Highway'' 
    develops television manufacturers intend to expand the capabilities 
    of their products to include new features to enable them to serve as 
    in-home devices for data transmission and communication. They argue 
    that the TV receiver, already located in virtually every American 
    home, could be a uniquely efficient vehicle for the introduction of 
    new data-processing and communication devices. The Department does 
    not make final judgement on this contention but does conclude that, 
    given the apparent difficulties in the marketing of new features as 
    part of attached units, the standard is likely to retard the 
    development of technology and inhibit the ability of television 
    manufacturers to compete with computer manufacturers and others in 
    the development of new technologies and features for the Information 
    Highway.
    
    Professional-Style and Standard Ranges
    
        The Notice proposes a single set of standards for gas ovens and 
    cooking tops in household ranges. There is substantial evidence that 
    one category of home range cannot be manufactured to meet these 
    proposed standards without losing so much of its distinct 
    characteristics that it is no longer marketable. Professional-style 
    or high-end ranges are products designed to provide some of the 
    performance characteristics of professional or restaurant ranges for 
    home kitchens. Some of these characteristics which differentiate 
    them from standard kitchen ranges, such as high performance burners 
    and ovens, involve considerably more energy consumption than do 
    standard ranges; the special uses and appeal of these products, and 
    their premium in price, depends in good measure on these features. 
    Representatives of the range industry assert that high-end ranges 
    cannot be modified to comply with the proposed standards without 
    giving up so much of the special features of the product that they 
    are no longer marketable. The Department concludes that it is likely 
    that competition in the manufacture and sale of these products will 
    be eliminated if the proposed standards are adopted.
        While not as strong as the evidence relating to professional 
    style ranges there is evidence challenging the conclusions in the 
    TSD that the proposed standards for standard gas and electric range 
    ovens and cooking tops will not require significant retooling or 
    redesign and will have not more than minimal impact on 
    manufacturers' long run rates of return on equity. The Association 
    of Home Appliance Manufacturers contends that the standard could 
    have a destructive impact on the range industry. It and various 
    range manufacturers claim that design options suggested in the TSD 
    are not effective and that compliance would require substantial 
    investment in redesign and retooling. The Association also insists 
    that suppliers of equipment and technology necessary to comply may 
    not be able to respond simultaneously and evenly to range 
    manufacturers, a problem that could impose a competitive handicap on 
    some range manufacturers.
        A range manufacturer has commented that compliance with the 
    standard could seriously weaken it and its ability to compete. There 
    is also evidence that the cumulative costs of compliance with this 
    standard and with other and future appliance standards could induce 
    or force ``full line'' appliance manufacturers to exit one or more 
    of the markets that they serve. The range market is concentrated 
    and, while there is conflicting evidence, the Department concludes 
    that there is a possibility that this proposed standard could force 
    one or more
    
    [[Page 50150]]
    
    firms out of the manufacture of standard ranges thus lessening 
    competition.
    
    Microwave Ovens
    
        The Notice and the TSD conclude that the proposed standard for 
    microwave ovens will not involve any substantial redesign or 
    retooling by manufacturers and will have little impact on their long 
    run returns on equity. Representatives of the industry strongly 
    challenge these conclusions. For example, a representative of MCD 
    Corporation has testified that compliance with the standard would 
    require that her company, a manufacturer of microwaves, make large 
    investments in retooling, and would threaten its viability. The 
    Association of Home Appliance Manufacturers contends that the 
    standard will in all likelihood eliminate all U.S. Production of 
    microwaves and concentrate U.S. sales in the hands of one or two 
    companies. The Department is not in a position to resolve all of the 
    contested technical and financial issues but concludes that this 
    proposed standard could force some significant producers from this 
    concentrated market and substantially lessen competition in it.
    
    Room Air Conditioners
    
        The Notice and TSD conclude that this proposed standard will not 
    involve substantial redesign or retooling and, while it may produce 
    some reductions in the short run, will have little or no effect on 
    manufacturers' long run returns on equity. This conclusion has been 
    challenged by firms in the industry. There is evidence that some of 
    the design options suggested in the Notice are less effective and 
    more costly than the TSD assumes and that manufacturers may, among 
    other things, need to redesign the chassis of some classes to comply 
    with the standard. Such redesigns could add to unit installation 
    costs, make units larger and more cumbersome to install, and 
    otherwise depress demand. There is evidence that at least one 
    product, the five thousand BTU unit, may cease to be manufactured if 
    the standard is adopted. There are also unresolved issues about such 
    matters as the availability and efficacy of some design options 
    suggested in the TSD. The Department is not able to resolve these 
    issues but concludes that the standard could have a substantial 
    negative impact on demand and rates of return, and cause one or more 
    firms to cease the manufacture and sale of some of these products, 
    thus lessening competition.
    
    Direct Heating Equipment
    
        Manufacturers of direct heating equipment contend that this 
    standard will seriously depress demand for their product and likely 
    force some, perhaps all, manufacturers out of this business. Among 
    other things, they contend that the TSD substantially underestimates 
    the added costs of manufacture, and also the added installation 
    costs for venting and wiring, that will be required. They insist 
    that consumer cost increases will seriously depress demand for their 
    product and that their profit margins will suffer because it will be 
    impossible to pass on much of the increased manufacturing costs to 
    consumers. The Department cannot resolve many of these issues but 
    concludes that there is a possibility that several of the five 
    companies that account for most of the production of these products 
    might exit the market if the standard is adopted thus substantially 
    lessening competition.
    
    Water Heaters
    
        Manufacturers of oil-fired heaters contend that the proposed 
    standard for their product class would threaten the survival of the 
    product, likely forcing all or most producers out of this business. 
    Some claim that it may not be possible with presently available 
    technology to design and manufacture a product that would comply. 
    Manufacturers assert that the added costs of producing a product in 
    compliance with the standard would, in any event, be considerably 
    higher than the TSD indicates and that increases in price would very 
    seriously depress consumer demand for this product. Five firms, two 
    of them Canadian producers, account for most of the sales of this 
    product in the U.S. The Department is not able to resolve all the 
    questions raised regarding this standard; it concludes that there is 
    at least a possibility that the standard might force one or more of 
    these competitors to exitthe U.S. market. Another firm has been 
    taking steps to enter the oil-fired water heater market; adoption of 
    the standard may deter it from doing so. The loss of one such firm 
    could result in a substantial lessening of competition.
        DOE's proposed standard for electric water heaters would, in 
    effect, require that such products have an integral heat pump. DOE 
    concedes that this would involve major changes and might cause one 
    or more existing firms to cease the marketing of electric water 
    heaters but believes that other firms such as air conditioner 
    manufacturers may begin producing electric water heaters as a result 
    of the standard. There are complex and unresolved issues as to what 
    would happen to demand for electric water heaters if consumers were 
    required to purchase heat pumps with them. It seems clear that the 
    price of such units will be considerably higher than that of the 
    electric resistance heaters that the standard would remove from the 
    market, but the range of future prices, costs of installation and 
    maintenance and degree of consumer acceptance of a product that has 
    not been widely accepted until now are very difficult to predict. 
    Heat pump water heaters may be useful and economically attractive to 
    many consumers but serious issues have been raised in this 
    proceeding as to whether certain kinds of consumers, such as 
    households with relatively little demand for hot water, will derive 
    a benefit from the product.
        Even if the heat pump water heater is eventually widely accepted 
    in the market the Department has concluded that it is likely that 
    competition will be adversely affected for some period of time if 
    adequate time is not permitted for the phasing in of the standard. 
    Three million units or more of electric resistance units are now 
    sold annually in the U.S. Only a few thousand heat pump units are 
    now produced annually in this country, by two firms. It could take a 
    considerable time for other firms to design new product lines and 
    being substantial ne production capacity on line. There is also 
    evidence from those with experience with the product that heat pump 
    water heaters require special maintenance and servicing. 
    Considerable time may be required for firms to develop and train 
    adequate distribution and service networks if they are to compete 
    effectively. If adequate time for phasing in the standard is not 
    allowed, for a considerable period of time there could be fewer 
    companies competing effectively in the electric water heater 
    business than there are now, and competition in this concentrated 
    market could be substantially lessened.
    
    Cumulative Effects of Regulation
    
        Many of the manufacturers of appliances subject to the proposed 
    standards manufacture several different types of appliance, each 
    subject to those standards or to others authorized by the Act. As 
    indicated above, there is evidence that compliance with some of 
    these standards may require manufacturers to make considerable 
    investments. It is anticipated that future standards for other 
    appliances could require manufacturers to make similar investments. 
    Full-line manufacturers such as General Electric, Whirlpool, 
    Frigidaire, Amana and Maytag could thus be required to make changes 
    in several product lines.
        As the TSD recognizes, it is difficult for manufacturers to pass 
    redesign and retooling costs on to consumers. And the impact of a 
    single product redesign may fall more heavily on firms with small 
    shares of the market since they must write off their costs against 
    less sales volume. There is some evidence that firms, particularly 
    the smaller ones, facing the prospect of repeated redesigns 
    involving several different products, may be induced to cease 
    manufacturing one or more of such product lines. Thus to a degree 
    that we cannot fully assess there is a possibility that the 
    cumulative effect of these and future energy efficiency standards 
    could be to lessen competition in one or more home appliance 
    markets.
    
    Sincerely yours,
    
    Anne K. Bingaman,
    Assistant Attorney General.
    [FR Doc. 97-24978 Filed 9-23-97; 8:45 am]
    BILLING CODE 6450-01-P
    
    
    

Document Information

Comments Received:
0 Comments
Effective Date:
10/1/2000
Published:
09/24/1997
Department:
Energy Efficiency and Renewable Energy Office
Entry Type:
Rule
Action:
Final Rule.
Document Number:
97-24978
Dates:
The effective date of the standards is October 1, 2000.
Pages:
50122-50150 (29 pages)
Docket Numbers:
Docket Numbers EE-RM-90-201 and EE-RM-93-801-RAC
RINs:
1904-AA38: Energy Efficiency Standards for Room Air Conditioners
RIN Links:
https://www.federalregister.gov/regulations/1904-AA38/energy-efficiency-standards-for-room-air-conditioners
PDF File:
97-24978.pdf
CFR: (2)
10 CFR 430.2
10 CFR 430.32