[Federal Register Volume 65, Number 194 (Thursday, October 5, 2000)]
[Proposed Rules]
[Pages 59550-59588]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-25335]
[[Page 59549]]
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Part III
Department of Energy
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Office of Energy Efficiency and Renewable Energy
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10 CFR Part 430
Energy Conservation Program for Consumer Products: Clothes Washer
Energy Conservation Standards; Proposed Rule
Federal Register / Vol. 65 , No. 194 / Thursday, October 5, 2000 /
Proposed Rules
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DEPARTMENT OF ENERGY
Office of Energy Efficiency and Renewable Energy
10 CFR Part 430
[Docket No. EE-RM-94-403]
RIN 1904-AA67
Energy Conservation Program for Consumer Products: Clothes Washer
Energy Conservation Standards
AGENCY: Office of Energy Efficiency and Renewable Energy, Department of
Energy.
ACTION: Notice of proposed rulemaking and public hearing.
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SUMMARY: The Energy Policy and Conservation Act, as amended
(hereinafter referred to as EPCA or the Act), prescribes energy
conservation standards for certain major household appliances, and
requires the Department of Energy (DOE, Department, or we) to
administer an energy conservation program for these products. We
conducted several analyses regarding the energy savings, benefits and
burdens of amended energy conservation standards for clothes washers
and have shared the results of these analyses with all stakeholders.
Based on these analyses, several of the major stakeholders, including
clothes washer manufacturers and energy efficiency advocates, submitted
to the Department a joint proposal for the highest standard level which
they believed to be technically feasible and economically justified.
Based on our review of this proposal, we found the proposed standards
technically feasible and economically justified. Therefore, today we
propose to amend the energy conservation standard for clothes washers
for residential applications as recommended in the joint proposal and
announce a public hearing.
As part of this rulemaking in response to the joint proposal by the
clothes washer manufacturers and energy efficiency advocates, we have
also included revisions to the test procedure based on issues found
during this rulemaking dealing with the energy test cloth, remaining
moisture content (RMC), extractor testing and the correction factor. In
addition, we incorporated minor editorial changes to help clarify both
Appendix J and J1 of the test procedure based on the joint proposal by
stakeholders. These changes have been included in their entirety in
this rulemaking pertaining to the test procedure.
DATES: If you wish to submit comments on the proposed rule, they must
be received on or before December 4, 2000 to Ms. Brenda Edwards-Jones
at the address listed below. We request 10 copies of the written
comments and, if possible, a computer disk. Oral views, data, and
arguments may be presented at the public hearing. We will hold a Public
Hearing on November 15, 2000, beginning at 9:00 a.m.
If you wish to speak at the hearing, requests must be received by
the Department no later than 4:00 p.m., November 6, 2000. Copies of
statements to be given at the public hearing must be received by the
Department no later than 4:00 p.m., November 6, 2000. We will read the
statements in advance of the hearing and would appreciate the oral
presentations to be limited to a summary of the statement. The length
of each oral presentation is limited to 5 minutes.
ADDRESSES: The hearing will be at the U.S. Department of Energy,
Forrestal Building, Room 6E-069, 1000 Independence Avenue, SW.,
Washington, DC 20585. Written comments, oral statements, and requests
to speak at the hearing are to be submitted to Ms. Brenda Edwards-
Jones, U.S. Department of Energy, Office of Energy Efficiency and
Renewable Energy, Energy Conservation Program for Consumer Products:
Clothes Washers Energy Conservation Standards, Docket No. EE-RM-94-403,
1000 Independence Avenue, SW., Washington, DC 20585-0121.
Copies of the public comments received, the Technical Support
Document (TSD) and the transcript of the public hearing 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-41, 1000 Independence Avenue, SW., Washington, DC 20585-
0121. (202) 586-9127. Copies of the analysis can also be found on the
Codes and Standards Internet site at: http://www.eren.doe.gov/buildings/codes_standards/applbrf/clwasher.html
For more information concerning public participation in this
rulemaking proceeding see Section VII, ``Public Comment Procedures,''
of this Notice.
FOR FURTHER INFORMATION CONTACT: Bryan Berringer, U.S. Department of
Energy, Office of Energy Efficiency and Renewable Energy, Forrestal
Building, Mail Station EE-41, 1000 Independence Avenue, SW, Washington,
DC 20585-0121, (202) 586-0371, E-mail: [email protected], or
Eugene Margolis, U.S. Department of Energy, Office of General Counsel,
Forrestal Building, Mail Station GC-72, 1000 Independence Avenue, SW,
Washington, DC 20585, (202) 586-9526, E-mail:
[email protected].
SUPPLEMENTARY INFORMATION:
I. Summary of Proposed Rule
II. Introduction
A. Consumer Overview
B. Authority
C. Background
1. Current Standards
2. History of Previous Rulemakings
3. Process Improvement
4. Test Procedures
III. General Discussion
A. Test Procedures
B. Technological Feasibility
1. General
2. Maximum Technologically Feasible Levels
3. Product Classes
C. Energy Savings
1. Determination of Savings
2. Significance of Savings
D. Rebuttable Presumption
E. Economic Justification
1. Economic Impact on Manufacturers and Consumers
2. Life-Cycle Cost (LCC)
3. Energy Savings
4. Lessening of Utility or Performance of Products
5. Impact of Lessening of Competition
6. Need of the Nation to Conserve Energy
7. Other Factors
IV. Methodology
A. Product Classes
B. Engineering Analysis
C. Life-Cycle Cost (LCC) Analysis
D. Payback Period Analysis
E. National Impact Analyses
1. National Energy Savings (NES) Spreadsheet Model
2. Net National Employment
F. Consumer Analysis
G. Manufacturer Impact Analysis
H. Utility Analysis
I. Environmental Analysis
V. Analytical Results
A. Trial Standard Levels
1. Economic Impacts on Consumers
a. Life-Cycle-Cost
b. Payback Period
c. Rebuttable Presumption Payback
d. Consumer Sub-Group Analysis
2. Economic Impact on Manufacturers
B. Significance of Energy Savings
C. Lessening of Utility or Performance of Products
D. Impact of Lessening of Competition
E. Need of the Nation to Save Energy and Net National Employment
1. National Net Present Value
2. National Water Savings
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3. Environmental Impacts
4. Net National Employment
F. Conclusion
VI. Procedural Reviews
A. Review under the National Environmental Policy Act of 1969
B. Review under Executive Order 12866, ``Regulatory Planning and
Review''
C. Review under the Regulatory Flexibility Act of 1980
D. Review under the Paperwork Reduction Act
E. Review under Executive Order 12988, ``Civil Justice Reform''
F. ``Takings'' Assessment Review
G. Review under Executive Order 13132, ``Federalism''
H. Review under the Unfunded Mandates Reform Act of 1995
I. Review under the Treasury and General Government
Appropriation Act of 1999
J. Review Under the Plain Language Directives
VII. Public Comment Procedures
A. Written Comment Procedures
B. Public Workshop (Hearing)
1. Procedure for Submitting Requests to Speak
2. Conduct of Workshop (Hearing)
I. Summary of the Proposed Rule
The EPCA, as amended, specifies that any new or amended energy
conservation standard the Department prescribes shall be designed to
``achieve the maximum improvement in energy efficiency * * * which the
Secretary determines is technologically feasible and economically
justified.'' Section 325(o)(2)(A), 42 U.S.C. 6295(o)(2)(A).
Furthermore, the amended standard must ``result in significant
conservation of energy.'' Section 325(o)(2(B)(3)(B), 42 U.S.C.
6295(o)(2)(B)(3)(B).
In accordance with the statutory criteria discussed in this notice,
we are proposing to amend the clothes washer energy efficiency
standards. The proposed standards are based on a Joint Stakeholders
Comment recommendation submitted to the Department by clothes washer
manufacturers and energy conservation advocates. (Joint Comment, No.
204). The Joint Stakeholders consist of the following: Alliance Laundry
Systems LLC; Amana Appliances; Asko Incorporated; Frigidaire Home
Products; General Electric Appliances (GEA), Maytag Corporation; Miele,
Inc.; Fisher & Paykel Ltd; Whirlpool Corporation; Alliance to Save
Energy; American Council for an Energy Efficient Economy (ACEEE);
Appliance Standards Awareness Project; California Energy Commission
(CEC); City of Austin, Texas; Natural Resources Defense Council (NRDC);
Northwest Power Planning Council; and Pacific Gas and Electric (PG&E).
The proposal as submitted in the Joint Stakeholders Comment consists of
four parts as follows:
``Clothes Washer Energy Standard. The clothes washer energy
standards for standard class clothes washers shall be 1.04 modified
energy factor (MEF) in 1/1/2004 and 1.26 MEF in 1/1/2007. The energy
test procedure will be revised to ensure that variability between test
cloths will not significantly affect remaining moisture content (RMC)
results. Additional clarifications will also be made to test procedure.
Energy Star Labeling Program. Energy Star levels shall be set as
follows: Standard Class Clothes Washers--1.26 MEF in 2001; 1.42 MEF in
2004; Refrigerator/Freezers--10% better than the 2001 standard in 2001;
change to 15% better than the 2001 in 2004.
Tax Credit for the Production of Energy Efficient Clothes Washers
and Refrigerator-Freezers. The credit shall provide for two energy
efficiency tiers, each with separately designated funds. There is $30
million in each designated fund per company per efficiency tier. Cap of
$60 million per company for the two funds or yearly cap with carry
forward. Annual total tax credit cannot exceed in any taxable year 2%
of corporate gross revenues as determined by average of 3 prior years.
Standard Class Clothes Washers: Two tiers coterminous 2001-2006;
$50 per unit for products manufactured with a 1.26 MEF and $100 per
unit for products manufactured with a 1.42 MEF, increasing to 1.5 MEF
in 2004. Includes residential-style ``coin-operated'' washers.
Refrigerators: First tier effective in 2001. $50 per unit for
products manufactured 10% above 2001 minimum efficiency standard.
Credit runs through 2004. Second tier also effective in 2001 and runs
through 2006. It is $100 for products manufactured 15% above the 2001
minimum efficiency standard. Credits apply to automatic defrost
refrigerator-freezers only, at 16.5 cubic feet internal volume and
above.
Voluntary Industry Water Program. Water factor reporting shall be
part of a voluntary industry sponsored program. AHAM members agree to
publicly disclose through AHAM, water factors for each model that meets
Energy Star/Tax Credit MEF levels, starting sometime in calendar year
2001. In calendar year 2002 and each year thereafter, industry-wide
shipment weighted average water factors for units shipped in the
previous year shall be reported by AHAM. Water factor calculations will
use Appendix J water factor through 2003 and will use Appendix J1
thereafter. Starting in 2007, AHAM members agree to report water factor
for all models. AHAM will sponsor water conference.'' (Joint Comment,
No. 204).
This rulemaking only addresses the clothes washer energy standards
of this agreement. The above proposed standard, based on this agreement
would go into effect in stages, with the first level going into effect
on January 1, 2004, and the second level going into effect on January
1, 2007. The initial standard is a 22 percent (%) reduction in energy
consumption over the current standard or a MEF of 1.04, and can be
attained with current vertical-axis (V-axis) clothes washer designs.
The later, more stringent standard, is a 35 percent reduction in energy
consumption over the current standard or a MEF of 1.26. While both
vertical- and horizontal-axis (H-axis) design clothes washers are
currently available in retail appliance stores at these levels, they
represent less than nine percent of the washers sold per year.
The Department's analyses indicates that the proposed standards,
trial standard level of a 1.04 MEF in 2004 and a 1.26 MEF in 2007 saves
an estimated 5.52 quads of energy over 27 years (2004-2030), a
significant amount. This amount is more than the primary energy used
for heating water in all U.S. buildings (residential, commercial and
industrial) in 1997 (3.82 quads). The economic impacts on consumers
(i.e., the average life-cycle cost (LCC) savings) are positive.
The national NPV of trial standard level of a 1.04 MEF in 2004 and
a 1.26 MEF in 2007 is $15.3 billion from 2004-2030 in 1997 dollars.
This is the estimated total value of future savings discounted to 1997
minus the estimated increased equipment costs also discounted to 1997.
The clothes washer industry net present value (INPV) today is estimated
to be $1,452 million. If we adopt trial standard level proposed, we
expect manufacturers may lose between 28.6-36.0% of the INPV, which is
approximately $411.0-$518.3 million. With the present value of future
energy savings for the U.S. of $15.3 billion, this would exceed
industry losses due to energy efficiency standards by about 30 times.
Additionally, based on our interviews with the five major
manufacturers, we do not expect any plant closings or loss of
employment because the manufacturers stated that they would stay in
business.
The proposed standard has significant environmental benefits,
reducing greenhouse gas emissions and air pollution. This proposed
standard level would result in cumulative greenhouse gas emission
reductions of 95.1 million
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metric tons (Mt) of carbon dioxide (CO2 equivalent.
Additionally, air pollution would be reduced by the elimination of
253.5 thousand metric tons of nitrous oxides (NOX) and 28.1
thousand metric tons of sulfur dioxide (SO2) from 2004-2030.
The NOX reduction are derived from the power sector and
household emissions, whereas the SO2 reductions are derived
only from household emission.
The proposed standard also saves a significant quantity of water,
which amounts to 11.59 trillion gallons through the period 2004-2030.
Therefore, DOE has determined that the benefits (energy and water
savings, consumer life cycle cost savings, national net present value
increase, job creation and emission reductions) to the nation outweigh
the burdens (loss of manufacturer net present value and consumer life
cycle cost increases for some users of clothes washers). We conclude
that the proposed standard of a 1.04 MEF in 2004 and a 1.26 MEF in 2007
is economically justified. Furthermore, DOE has determined this
standard level is technologically feasible. Clothes washers reaching
this standard level already are commercially available in both V- and
H-axis models.
II. Introduction
A. Consumer Overview
The Energy Policy and Conservation Act, as amended, specifies that
the Department must consider, for amended standards, those standards
that ``achieve the maximum improvement in energy efficiency which the
Secretary determines is technologically feasible and economically
justified'' and which will ``result in significant conservation of
energy.'' Accordingly, today's proposed rule would be amending the
energy conservation standard for residential clothes washers.
We are currently establishing a new energy efficiency standard for
clothes washers that will amend the standard set in 1994. When today's
proposed standards go into effect, they will essentially require more
efficient Standard class clothes washers. The efficiency levels can be
met by either top or front loading machines. The major stakeholders,
including manufacturers and energy efficiency advocates, have jointly
submitted a proposed clothes washer efficiency standard to the
Department that they both feel is technically feasible and economically
justified. The proposed standard would go into effect in two stages.
The first stage would begin January 1, 2004, and require that all new
residential clothes washers be 22 percent more efficient than today's
baseline clothes washer. The second stage would begin January 1, 2007,
and require that all new residential clothes washers be 35 percent more
efficient than today's baseline clothes washer.
The Department has reviewed this proposal and its analyses, and
agrees that the standard they proposed is technically feasible and
economically justified. The Department therefore proposes to amend the
energy conservation standard for Standard class clothes washers for
residential applications as recommended in the joint stakeholders
proposal and announce a public hearing.
As a result of today's proposed rule, clothes water efficiency
standard will provide significant energy savings and water savings to
the nation. The Department's analyses indicates that the proposed
standards would save an estimated 5.52 quads of energy over 27 years
(2004 to 2030). That is equivalent to saving enough electricity to
light 16 million U.S. homes for 25 years, while cutting greenhouse gas
emissions by an amount equal to that produced by three million cars
every year. This proposed standard level would result in cumulative
greenhouse gas emission reductions of 95.1 million metric tons (Mt) of
carbon dioxide (CO2) equivalent. Additionally, air pollution
would be reduced by the elimination of 253.5 thousand metric tons of
nitrous oxides (NOX) and 28.1 thousand metric tons of sulfur
dioxide (SO2) from 2004 to 2030. The NOX
reductions are derived from the power sector and household emissions.
The SO2 reductions are derived only from household emissions
and is a result of less home heating oil and LPG being used in oil-
fired and LPG-fired water heaters for water heating.\1\ DOE is seeking
comment on what will be the likely impact of EPA rules, such as its
proposed rule to reduce sulfur levels in highway diesel fuel, on home
heating oil sulfur levels and household SO2 emissions. In
2020, the standards will save the amount of electricity generated by 15
large, 400 megawatt, power plants. \2\ The standards will save enough
water to supply the needs of 6.6 million households for 25 years. The
water savings will reach up to 11 trillion gallons, meaning less water
needs to be pumped from America's aquifers and rivers, and less strain
on many of the nation's overtaxed water and sewer systems. In total, we
estimated the net present value (NPV) to the nation of this standard to
be $15.3 billion from 2004 to 2030.
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\1\ The Department recognizes that the Environmental Protection
Agency is considering regulations which could affect the amount of
sulfur in home heating oil.
\2\ DOE estimates that standards will result in 5 coal-fired and
11 gas-fired power plants avoided.
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The proposed clothes washer energy efficiency standard will not
impact clothes washer features valued by consumers. For instance,
consumers will still be able to purchase either a top loading clothes
washer or a front loading machine, whichever they prefer. The energy
and water savings will result primarily from a variety of design
changes, such as higher spin speeds, more efficient use of hot water,
more sensitive clothes load technologies, more efficient motors, and
the increased use of spray rinse cycles. The Department does not expect
the cleaning ability or reliability of washing machines to be
compromised by the design changes anticipated under the proposed
clothes washer standard.
The Department expects the purchase price of the high efficiency
clothes washers (i.e., 35 percent efficiency increase) to be
approximately $200 higher than the average price of clothes washers
today. Although the purchase cost is expected to increase, the energy
and water efficiency gains will result in lower washer-related energy
costs and water costs, saving consumers $30 a year on their utility
bills and 18 gallons of water for every load of wash. As such, the life
cycle cost analysis estimates that the payback period for the high
efficiency machines will be approximately 7 years. In other words, the
energy and water cost savings will enable the average consumer to
recoup the additional $200 he/she had to spend on the purchase of the
high efficiency machine in 7 years through the energy and water cost
savings. When these savings are summed over the lifetime of the high
efficiency machine, consumers will save $260, on average, compared to
today's baseline clothes washing machines.
B. 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,
Pub. L. 95-619, by the National Appliance Energy Conservation Act, Pub.
L. 100-12, by the National Appliance Energy Conservation Amendments of
1988, Pub. L. 100-357, and the Energy Policy Act of 1992, Pub. L. 102-
486 \3\ (the Act
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or EPCA) created the Energy Conservation Program for Consumer Products
other than Automobiles. The consumer products subject to this program
(often referred to hereafter as ``covered products'') include clothes
washers.
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\3\ Part B of Title III of 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 ``Act.'' Part B of Title
III is codified at 42 U.S.C. 6291 et seq. Part B of Title III of the
Energy Policy and Conservation Act, as amended by the National
Energy Conservation Policy Act only, is referred to in this notice
as the National Energy Conservation Policy Act.
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Under the Act, the program consists essentially of three parts:
testing, labeling, and Federal energy conservation standards. The
Department, in consultation with the National Institute of Standards
and Technology, amends or establishes new test procedures for each of
the covered products. Section 323. The test procedures measure the
energy efficiency, energy use, or estimated annual operating cost of a
covered product during a representative average use cycle or period of
use. They must not be unduly burdensome to conduct. Section 323(b)(3).
A test procedure is not required if DOE determines by rule that one
cannot be developed. Section 323(d)(1). Test procedures appear at 10
CFR Part 430, Subpart B.
A test procedure promulgated under Section 323 of the Act must be
reasonably designed to produce test results which measure energy
efficiency, energy use, water use (in the case of shower heads,
faucets, water closets and urinals), or estimated annual operating cost
of a covered product during a representative average use cycle or
period of use, and must not be unduly burdensome to conduct. EPCA,
Section 323(b)(3). A test procedure is not required if DOE determines
by rule that one cannot be developed. EPCA, Section 323(d)(1). One
hundred and eighty days after a test procedure for a product is
adopted, no manufacturer may make representations with respect to
energy use, efficiency or water use of such product, or the cost of
energy consumed by such product, except as reflected in tests conducted
according to the DOE procedure. EPCA, Section 323(c)(2). This 180-day
period may be extended for up to an additional 180 days if the
Secretary determines that the requirements of Section 323(c)(2) would
impose undue burden. EPCA, Section 323(c)(3).
Section 323(e) of the Act requires DOE to determine to what extent,
if any, a proposed test procedure would alter the measured energy
efficiency, measured energy use or measured water use of any covered
product as determined under the existing test procedure. If DOE
determines that an amended test procedure would alter the measured
efficiency or measured use of a covered product, DOE is required to
amend the applicable energy conservation standard accordingly. EPCA,
Section 323(e)(2).
The Federal Trade Commission (FTC) prescribes rules governing the
labeling of covered products after DOE publishes test procedures.
Section 324(a). The FTC labels indicate the annual operating cost for
the particular model and the range of estimated annual operating costs
for other models of that product. Section 324(c)(1). Disclosure of
estimated operating cost is not required if the FTC determines that
such disclosure is not likely to assist consumers in making purchasing
decisions, or is not economically feasible. In such a case, the FTC
must require a different useful measure of energy consumption. Section
324(c). At the present time, there are Federal Trade Commission rules
requiring labels for the following products: room air conditioners,
furnaces, clothes washers, dishwashers, water heaters, refrigerators,
refrigerator-freezers and freezers, central air conditioners and
central air conditioning heat pumps, and fluorescent lamp ballasts.
The National Appliance Energy Conservation Act of 1987 amended the
Act to impose prescriptive standards (design feature requirements) for
clothes washers as part of the energy conservation program for consumer
products. EPCA, Sec. 325(g), 42 U.S.C. 6295(g). The design feature
requirement that clothes washers shall have an unheated rinse option
was effective for appliances manufactured on or after January 1, 1988.
The Act required the Department to conduct a rulemaking by January 1,
1990, to determine if the above mentioned standards should be amended.
The Act provided that any amendment to the standards would apply to
products manufactured three years after the rulemaking. The Final Rule
was issued on May 14, 1991, and is effective for products manufactured
on or after May 14, 1994, (hereinafter referred to as the May 1991
Final Rule) which required top loading compact clothes washers (less
than 1.6 cubic feet capacity) to have an energy factor (EF) of 0.90
cubic feet/kilowatt-hours/cycle (cu.ft/Kwh/cycle) and top loading
standard clothes washers (1.6 cu. ft. or greater capacity) to have an
EF of 1.18 cu. ft./Kwh/cycle). 56 FR 22279. The Act also requires the
Department to conduct a subsequent rulemaking no later than five years
after the date of publication of the previous final rule.
Any new or amended standard must be designed so as to achieve the
maximum improvement in energy efficiency that is technologically
feasible and economically justified. Section 325(o)(2)(A).
Section 325(o)(2)(B)(i) provides that before DOE determines whether
a standard is economically justified, it must first solicit comments on
a proposed standard. After reviewing comments on the proposal, DOE must
then determine that the benefits of the standard exceed its burdens,
based, to the greatest extent practicable, on a weighing of the
following seven factors:
(1) The economic impact of the standard on the manufacturers and on
the consumers;
(2) The savings in operating costs throughout the estimated average
life of the covered product in the type (or class) compared to any
increase in the price, initial charges, or maintenance expenses;
(3) The total projected amount of energy, or as applicable, water,
savings likely to result directly from the standard;
(4) Any lessening of the utility or the performance of the covered
products likely to result from the standard;
(5) The impact of any lessening of competition, as determined in
writing by the Attorney General, that is likely to result from the
standard;
(6) The need for national energy and water conservation; and
(7) Other factors the Secretary considers relevant.
In addition, Section 325(o)(2)(B)(iii), 42 U.S.C.
6295(o)(2)(b)(iii), establishes a rebuttable presumption of economic
justification in instances where the Secretary determines that ``the
additional cost to the consumer of purchasing a product complying with
an energy conservation standard level will be less than three times the
value of the energy, and as applicable, water, savings during the first
year that the consumer will receive as a result of the standard, as
calculated under the applicable test procedure. * * *'' The rebuttable
presumption test is an alternative path to establishing economic
justification.
Section 327 of the Act addresses the effect of Federal rules on
State laws or regulations concerning testing, labeling, and standards.
Generally, all such State laws or regulations are superseded by the Act
unless specifically exempted in Section 327. The Department can grant a
waiver of preemption in accordance with the procedures and other
provisions of Section 327(d) of the Act. 42 U.S.C. 6297(d).
[[Page 59554]]
C. Background
1. Current Standards
The existing clothes washer efficiency standards have been in
effect since 1994. Energy efficiency for a clothes washer is measured
in terms of an energy factor (EF), which measures overall clothes
washer efficiency, in terms of cubic feet per kilowatt-hour per cycle,
and is determined by the DOE test procedure. 10 CFR Part 430, Subpart
B, Appendix J. The current clothes washer efficiency standards are as
follows:
Top loading, compact (less than 1.6 cubic feet capacity),
EF = 0.90.
Top loading, standard (1.6 cubic feet or greater
capacity), EF = 1.18.
Top loading, semi-automatic, must have an unheated rinse
option.
Front loading, must have an unheated rinse option.
Suds saving, must have an unheated rinse option.
2. History of Previous Rulemakings
On November 14, 1994 DOE published an Advance Notice of Proposed
Rulemaking (ANOPR). 59 FR 56423. On November 19, 1998, DOE published a
Supplemental ANOPR. (Hereafter referred to as the 1998 Supplemental
ANOPR.) 63 FR 64344. In the 1998 Supplemental ANOPR, we provided
interested persons an opportunity to comment on:
(1) The product classes that we propose to analyze;
(2) The analytical framework, models (e.g., the Government
Regulatory Impact Model (GRIM)), and tools (e.g., a Monte Carlo
sampling methodology, and life-cycle-cost (LCC) and national energy
savings (NES) spreadsheets) that we plan to use in performing analyses
of the impacts of standards; and
(3) The results of preliminary analyses for LCC, payback and
national energy savings contained in the Preliminary Technical Support
Document: Energy Efficiency Standards for Consumer Products: Clothes
Washers (TSD) dated October 1998 and summarized in the 1998
Supplemental ANOPR.
3. Process Improvement
The fiscal year (FY) 1996 appropriations legislation imposed a
moratorium on proposed or final rules for appliance efficiency
standards for FY 1996. Public Law 104-134. During the moratorium, the
Department examined the appliance standards program and how it was
working. Congress advised DOE to correct the standards-setting process
and to bring together stakeholders (such as manufacturers and
environmentalists) for assistance. We consulted with energy efficiency
groups, manufacturers, trade associations, state agencies, utilities
and other interested parties to provide input to the process used to
develop appliance efficiency standards. As a result, on July 15, 1996,
the Department published a Final Rule: Procedures for Consideration of
New or Revised Energy Conservation Standards for Consumer Products
(referred to as the Process Rule) (61 FR 36974), codified at 10 CFR
Part 430, Subpart C, Appendix A. DOE completed this review and decided
to use the Process Rule, to the extent possible, in the development of
the revised clothes washer standards.
We developed an analytical framework for the clothes washer
standards rulemaking for our stakeholders. The analytical framework
described the different analyses (e.g., LCC, payback and manufacturing
impact analyses (MIA)) to be conducted, the method for conducting them,
the use of new LCC and national energy savings (NES) spreadsheets, and
the relationship between the various analyses. We have conducted
several meetings, workshops and discussions regarding energy efficiency
standards for clothes washers. These workshops included discussions on
proposed design options and a preliminary engineering analysis on
November 15, 1996; development of an analytical framework for appliance
standards rulemaking on July 23, 1997; and development of two new
spreadsheet tools for LCC and NES on March 11, 1998. We conducted
public hearings on December 15, 1998, to receive additional comments on
the 1998 Supplemental ANOPR and on July 22, 1999, to discuss the
process, analytical tools and uncertainties with the test procedures.
In this rulemaking we incorporated the recommendations made by the
Advisory Committee on Appliance Energy Efficiency Standards on April
21, 1998. (Advisory Committee, No. 96). These recommendations relate to
using the full range of consumer marginal energy prices (CMEP) in the
LCC analysis (replacing the use of national average energy prices),
defining a range of energy price futures for each fuel used in the
economic analyses and defining a range of primary energy conversion
factors and associated emission reductions, based on the generation
displaced by energy efficiency standards for each rulemaking. We
discuss how these recommendations have been incorporated in the
discussions on methodology (Section IV). Marginal energy prices are
used in the LCC, payback and NES analyses. Because the NES results are
inputs to the analyses for utility, emissions and employment; these
analyses are also impacted by using marginal rates.
4. Test Procedures
Federal test procedures for clothes washers were first established
in 1977. Simultaneous with the rulemaking for clothes washer standards,
the Department was also in the process of revising the clothes washer
test procedure. The Department needed to address a number of innovative
technologies for which there were no test procedures. A number of
proposals were published, one on December 22, 1993, (58 FR 67710) and
another on March 23, 1995. 60 FR 15330. In its comments to the March,
1995 proposed rule, AHAM requested that DOE adopt an additional new
test procedure, based on current consumer habits, which would be used
in considering the revision of the clothes washer energy conservation
standards, and would go into effect upon issuance of standards.
On April 22, 1996, the Department issued a supplemental Notice of
Proposed Rulemaking proposing such a new test procedure, Appendix J1,
as well as certain additional revisions to the currently applicable
test procedure in Appendix J to Subpart B of 10 CFR Part 430. 61 FR
17589. The supplemental notice was published to seek comments on
whether DOE should adopt the AHAM recommended test procedure with
certain changes. The Final Rule, published on August 27, 1997, adopted
this recommendation. 62 FR 45484. Appendix J is the current applicable
test procedure. Appendix J1 is informational and will not become
mandatory until the energy conservation standards of this rule become
effective. Appendix J1 includes a modified energy factor (MEF) which
replaces the EF. Contrasting with the previous EF (energy factor)
descriptor, the MEF descriptor incorporates clothes dryer energy by
consideration of the remaining moisture content (RMC) of clothes
leaving the clothes washer. Other substantive differences between the
test procedures include using different water temperatures for testing
and using cloth loads in J1 and not in J. The issuance of the Final
Rule was a major step in accelerating the development of clothes washer
standards because it provided the basis upon which the energy and water
consumption, as well as the manufacturing costs would be submitted.
[[Page 59555]]
III. General Discussion
A. Test Procedure
As part of the July 15, 1996, Process Rule (61 FR 36974), we stated
that a final modified test procedure would be issued prior to the
notice of proposed rulemaking on standards. The process described in
this rule provides for greatly enhanced opportunities for public input,
improved analytical approaches, and encouragement of consensus-based
standards. Section 7, Test Procedures, of the Process Rule provides
that modifications in test procedures will be proposed before revised
standards are proposed. Today's proposed revisions to the clothes
washer test procedures follows the process in the Process Rule in that
the Final Rule for test procedures was published on August 27, 1997,
with the exception of today's proposed revisions to the test procedure
language as recommended by clothes washer manufacturers and energy
conservation advocates. (Joint Comment, No. 204)
During this standards rulemaking, it was discovered that the test
cloth to be used for determining the RMC was giving inconsistent
results. Over the approximately 20 year period that the original
clothes washer and clothes dryer test procedures have been used, no
variations or inconsistency of washer or dryer test results had been
attributed to variations in the test cloths. A significant
inconsistency in RMC test results under the new Appendix J1 procedure
was noted by Alliance Laundry Systems LLC and was brought to the
Department of Energy's attention in a letter dated June 7, 1999.
(Alliance Laundry Systems, No. 179). In the tests referred to in this
letter, which were run at Intertek Testing Services (ITS), the RMC
values that were obtained in one machine with two different lots of
energy test cloths differed by over 11 percentage points (67.9% versus
56.0%). When these two lots of energy test cloth were run through a
second machine, a similar difference in RMC occurred.
The effect of RMC on MEF can be substantial, particularly for
washers which are more efficient with respect to electrical consumption
and use of hot water. The following scenario illustrates: For a high
efficiency horizontal axis washer, an 18% increase in RMC (54.5%-64.5%)
will result in a 13% decrease in MEF (1.52-1.33). For a lower
efficiency washer, a 17% increase in RMC (57.7%-67.7%) will result in
only a 6% decrease in MEF (0.82-0.77).
The Department investigated possible causes for the inconsistent
test results, and results are summarized in the DOE report,
``Development of a Standardized Energy Test Cloth for Measuring
Remaining Moisture Content in a Residential Clothes Washer,'' May 2000.
(DOE, No. 200). As part of our investigation into the cause of these
discrepancies, we found that various lots of test cloth will yield
inconsistent RMC results. To understand the effects of operating
variables and cloth specifications, it was necessary to conduct
laboratory tests to determine RMC. To insure that test results would
not be influenced or biased by any manufacturer's product (clothes
washer), we used an extractor to remove moisture content. An extractor
is a centrifuge--basically a rotating basket that has a controllable
speed to produce a variety of centrifugal forces. The speed was varied
to impose different centripetal accelerations on the test load. These
accelerations are reported in terms of gravitational acceleration (g).
We also soak the cloth in a tub at controlled temperature rather than
use the agitated soak cycle provided by a typical washer. The RMC tests
closely resembles those specified in the energy test procedure.
An extractor based test has been established to examine RMC values
at different gravitational forces (g-forces). A correction factor is
derived by which the deviation between a new production batch of test
cloth and a standard reference test cloth is measured. This deviation
is measured as the root mean square between the set of measured RMC
values and the set of standard RMC values. If this absolute deviation
is below 2%, then no correction factors are needed in MEF tests using
that batch of cloth. If the absolute root-mean-square (RMS) difference
between the cloth RMC values and standard RMC values is above 2%, then
correction factors may be applied when using the cloth to test the MEF
of a clothes washer.
As part of this rulemaking, we have included revisions to the test
procedure based on our proposed language addressed in the May 2000
report dealing with the energy test cloth, RMC, extractor testing and
the correction factor and Joint Stakeholders Comment. (Joint Comment
No. 204). In addition, we incorporated AHAM's comments and Joint
Stakeholders Comment requesting minor editorial changes to help clarify
both Appendix J and J1. (AHAM , Nos. 197 and 199, and Joint Comment No.
204). These changes have been included in their entirety in this
rulemaking pertaining to the test procedure.
B. Technological Feasibility
1. General
There are or have been clothes washers in the market at all of the
efficiency levels analyzed in today's notice. Therefore, the Department
believes all of the efficiency levels discussed in today's notice are
technologically feasible.
2. Maximum Technologically Feasible Levels
Under the guidelines in the Process Rule, DOE will eliminate from
consideration, early in the process, any design option which is not
practicable to manufacture, install, or service, will eliminate product
utility features or for which there are safety concerns that can not be
resolved. In order to conduct the screening analysis, the Department
gathers information regarding all current technology options and
prototype designs. In consultation with interested parties, the
Department develops a list of design options for consideration in the
rulemaking. All technologically feasible design options are candidates
in this initial assessment. We did not reject any design options from
consideration in this rulemaking.
The Department considers design options technologically feasible if
they are already in use by the respective industry or research has
progressed to the development of a working prototype. The Process Rule
sets forth a definition of technological feasibility as follows:
``Technologies incorporated in commercially available products or in
working prototypes will be considered technologically feasible.'' 10
CFR 430, Subpart C, Appendix A(4)(a)(4)(I).
When we amend or consider new standards, we must consider those
that ``shall be designed to achieve the maximum improvement in energy
efficiency which the Secretary determines is technologically feasible
and economically justified.'' (Section 325 (l)(2)(A)). For this clothes
washer rulemaking, the Department determined that a 50% reduction in
the energy use of the baseline model (corresponding to an MEF of 1.634)
is the maximum technologically feasible level for the Standard class
(1.6 ft.\3\ or greater capacity). This determination was based on
information relative to existing technology options and prototype
designs. In consultation with interested parties, the Department
developed a list of design options for consideration. All
technologically feasible design options were candidates in this initial
assessment. Furthermore, the clothes washer rulemaking analysis was
originally performed using the design
[[Page 59556]]
option approach. Using this approach, information was gathered on all
possible energy saving design options. The Department gathered design
option information from previous clothes washer analyses, trade
publications, industry research organizations, product brochures from
domestic and foreign manufacturers, and appliance conferences,
including the International Appliance Technical Conference (IATC). The
``Draft Report on Design Options for Clothes Washers'' and ``Draft
Report on the Preliminary Engineering Analysis for Clothes Washers''
provide details on the potential technologies. (Clothes Washer Public
Workshop, No. 55B and 55C).
3. Product Classes
DOE divides clothes washers into classes based on the size and
features, e.g., suds saving. For the existing standards, DOE defines
residential clothes washers in the following classes:
Top loading, compact (less than 1.6 cubic feet capacity);
Top loading, standard (1.6 cubic feet or greater
capacity);
Top loading, semi-automatic;
Front loading; and
Suds saving.
The Department is proposing to maintain the current definitions for
all these product classes. For this rulemaking, the Department is
proposing to maintain the current requirements for the Semi-Automatic
Top-Loading and Suds Saving classes. In the May 1991 Final Rule, these
classes were not subject to minimum energy conservation standards
because they represented a small portion of the market, and due to a
lack of adequate information to analyze them. The standard for these
classes will continue to be ``not applicable,'' except for the 1988
requirement of an unheated rinse water option.
C. Energy Savings
1. Determination of Savings
The Department forecasted energy savings through the use of a
national energy savings (NES) spreadsheet, which forecasted energy
savings over the period of analysis for candidate standards relative to
the base case. The Department quantified the energy savings that would
be attributable to a standard as the difference in energy consumption
between the candidate standards case and the base case. The base case
represents the forecast of energy consumption in the absence of amended
mandatory efficiency standards.
The NES spreadsheet model is described in Section IV.e of this
notice, infra, and in Chapters 9 and 10 of the TSD. The NES spreadsheet
model first calculates the energy savings in site energy. The energy
savings to the nation is expressed in quads, that is, quadrillions of
British thermal units (Btus).
2. Significance of Savings
Under Section 325(o)(3)(B) of the Act, the Department is prohibited
from adopting a standard for a product if that standard would not
result in ``significant'' energy savings. While the term
``significant'' has never been defined in the Act, the U.S. Court of
Appeals, in 768 F.2d 1355, 1373 (D.C. Cir. 1985), concluded that
Congressional intent in using the word ``significant'' was to mean
``non-trivial.''
D. Rebuttable Presumption
The National Appliance Energy Conservation Act established new
criteria for determining whether a standard level is economically
justified. Section 325(o)(2)(B)(iii) states:
``If the Secretary finds that the additional cost to the
consumer of purchasing a product complying with an energy
conservation standard level will be less than three times the value
of the energy * * * savings during the first year that the consumer
will receive as a result of the standard, as calculated under the
applicable test procedure, there shall be a rebuttable presumption
that such standard level is economically justified. A determination
by the Secretary that such criterion is not met shall not be taken
into consideration in the Secretary's determination of whether a
standard is economically justified.''
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 we presume that such standard is
economically justified.\4\ This presumption of economic justification
can be rebutted upon a proper showing.
---------------------------------------------------------------------------
\4\ For this calculation, the Department calculated cost-of-
operation based on the DOE test procedures with assumed usage shown
in Chapter 7 of the TSD. Consumers that use the clothes washer less
will experience a longer payback while those that use them more will
have a shorter payback.
---------------------------------------------------------------------------
E. Economic Justification
As noted earlier, Section 325(o)(2)(B)(i) of the Act provides seven
factors to be evaluated in determining whether a conservation standard
is economically justified.
1. Economic Impact on Manufacturers and Consumers
The July 1996 Process Improvement Rule established procedures,
interpretations and policies to guide the Department in the
consideration of new or revised appliance efficiency standards
(Procedures for Consideration of New or Revised Energy Conservation
Standards for Consumer products). 61 FR 36974 (July 15, 1996). Key
objectives of the rule have direct bearing on the implementation of
manufacturer impact analyses. First, the Department will utilize an
annual cash flow approach in determining the quantitative impacts on
manufacturers. This includes a short-term assessment based on the cost
and capital requirements during the period between the announcement of
a regulation and the time when the regulation comes into effect, and a
long-term assessment. Impacts analyzed include industry net present
value, cash flows by year, changes in revenue and income, and other
measures of impact, as appropriate. Second, the Department will analyze
and report the impacts on different types of manufacturers, with
particular attention to impacts on small manufacturers. Third, the
Department will consider the impact of standards on domestic
manufacturer employment, manufacturing capacity, plant closures and
loss of capital investment. Finally, the Department will take into
account cumulative impacts of different DOE regulations on
manufacturers.
For consumers, measures of economic impact are the changes in
purchase price and annual energy expense. The purchase price and annual
energy expense, i.e., life-cycle cost, of each standard level are
presented in Chapter 7 of the TSD. Under Section 325 of the Act, the
life-cycle cost analysis is a separate factor to be considered in
determining economic justification.
2. Life-Cycle Cost (LCC)
One measure of the effect of proposed standards on consumers is the
change in operating expense as compared to the change in purchase
price, both resulting from standards. This is quantified by the
difference in the LCC between the baseline and the more efficient
technologies for the clothes washers analyzed. The LCC is the sum of
the purchase price and the operating expense, including installation
and maintenance expenditures, discounted over the lifetime of the
appliance.
For each clothes washer, we calculated the life-cycle costs for six
efficiency levels: 20, 25, 35, 40, and 50% reduction in the energy use
of the baseline model. In addition, a two-step standard as proposed by
the Joint Stakeholders Comment was analyzed. A distribution of discount
rates averaging 6.1% was used in the calculations. The consumer is
assumed to purchase a clothes washer in 2004 or 2007 (for step 2 of the
Joint Stakeholders Comment).
[[Page 59557]]
Price forecasts are taken from the 1999 Annual Energy Outlook of the
Energy Information Administration (DOE/EIA-0383). Chapter 7 of the TSD
contains the details of the life-cycle cost calculations including
those considered under factor seven below, infra.
3. Energy Savings
While significant conservation of energy is a separate statutory
requirement for imposing an energy conservation standard, the Act
requires DOE, in determining the economic justification of a standard,
to consider the total projected energy savings that are expected to
result directly from revised standards. The Department used the NES
spreadsheet results, discussed earlier, in its consideration of total
projected savings. The savings are provided in Section V of today's
notice.
4. Lessening of Utility or Performance of Products
This factor cannot be quantified. In establishing classes of
products the Department tries to eliminate any degradation of utility
or performance in the products under consideration in this rulemaking.
An issue of utility that was considered in this rule concerns the
consumer utility of V-axis and H-axis machines. We conducted consumer
focus groups and a conjoint analysis study to address this issue.
5. Impact of Lessening of Competition
It is important to note that this factor has two parts; on the one
hand, it assumes that there could be some lessening of competition as a
result of standards; and on the other hand, it directs the Attorney
General to gauge the impact, if any, of that effect.
In order to assist the Attorney General in making such a
determination, the Department will provide the Attorney General with
copies of this notice and the Technical Support Document for review.
6. Need of the Nation To Conserve Energy
Most of the non-monetary benefits of the proposed standard are
likely to be reflected in improvements to the environment, rather than
in the security or reliability of the Nation's energy system. We report
the environmental effects in Section V of today's notice.
7. Other Factors
This provision allows the Secretary of Energy, in determining
whether a standard is economically justified, to consider any other
factors that the Secretary deems to be relevant. Section
325(o)(2)(B)(i)(VI), 42 U.S.C. 6295(o)(2)(B)(i)(VI).
Under this factor, we considered the water savings from each
standard level. The Department received numerous comments asking for
the inclusion of a water factor standard in addition to the MEF
standard. (City of Austin, No. 105 at 1; City of Bellingham,
Washington, Department of Public Works, No. 106 at 1; Lower Colorado
River Authority (LRCA), No. 109 at 1; Amy Vicker and Associates, Inc.,
No. 110 at 1; City of San Diego, No. 123 at 1; City of Santa Barbara,
Public Works Department, No. 125 at 1; City of Seattle, No. 126 at 2;
Santa Clara Valley Water District, No. 127 at 1; American Water Works
Association, No. 149 at 1; City of Redmond, Office of the Mayor, No.
153 at 1; Massachusetts Water Resources Authority, No. 152 at 4; State
of New Mexico, Office of the State Engineer, No. 158 at 1). As stated
previously, the Department is considering water savings as a factor in
determining the economic justification of the clothes washer standard
level. However, the Department does not have the authority to prescribe
a minimum water factor standard.
Another factor that the Department considered is the life-cycle
cost impacts on those subgroups of consumers who, if forced by
standards to purchase more efficient washers, would choose to repair
their existing machines.
IV. Methodology
The methodology to be used in this rulemaking was described in the
1998 Supplemental ANOPR and accompanying TSD. In this section we will
discuss comments and changes in the methodology. These changes were
performed because new data was obtained or in response to comments
received after publication of the 1998 Supplemental ANOPR.
In general, when information is based on periodic forecasts and
surveys such as the Annual Energy Outlook (AEO) forecasts of energy
prices and the Residential Energy Consumption Survey, both from the
Energy Information Administration (EIA), we try to use the latest
available information. The analysis in support of this proposed rule
was performed using RECS93 and AEO 1999 data. Just prior to publication
of this proposed rule both RECS97 and AEO2000 data became available.
Although we do not expect a significant difference in results by
updating to RECS97 and AEO2000, we intend to use this updated
information for the final rule. We seek comment on the use of the most
current RECS and AEO data.
A. Product Classes
The Supplemental ANOPR contained three proposals regarding clothes
washer product classes. The first proposal suggested eliminating the
Semi-Automatic Top-Loading, Front-Loading and Suds Saving classes
identified in the May 1991 Final Rule. In its second proposal, the
Department proposed to increase the compact class to include all
clothes washers with a volume less than 2.0 cubic feet. The third
proposal was to not establish separate classes for Horizontal and
Vertical-axis clothes washers.
The Department received no comments on its proposal to eliminate
the Semi-Automatic Top-Loading and Suds Saving classes. In the May 1991
Final Rule, these classes were not subject to minimum energy
conservation standards because they represented a small portion of the
market, and due to a lack of adequate information to analyze them.
However, the 1988 standard requiring an unheated rise option is still
applicable to these classes. Given the continued absence of information
available to analyze these classes and ensure that they could meet the
proposed standard levels, the Department is proposing to maintain these
product classes but not to subject them to minimum energy conservation
standards. However, the unheated rise water option is still applicable
to these classes.
DOE received several comments regarding changing the definition of
the compact clothes washers class maximum capacity, from 1.6 cubic feet
to 2.0 cubic feet. Whirlpool believes that this re-definition for the
compact class would better reflect the actual product offerings that
exist in the marketplace which range from 1.6 to 1.96 cubic feet.
(Whirlpool, No. 141 at 3). Amana Appliances is not opposed to the
change. (Amana, No. 146 at 1). ACEEE and American Water Works
Association (AWWA) also find this proposal acceptable. (ACEEE, No. 150
at 4 and AWWA, No. 149 at 4). Maytag is concerned that a clothes washer
at 2.0 cubic feet, if not subjected to the same standard as full size
washers will become a relatively larger volume seller. This would
result in a reduction in the potential national energy and water
savings of the standard and may place some manufacturers that have
complied with more stringent standards at a competitive disadvantage.
Accordingly, Maytag recommends that the Department develops safeguards
as retail market share or product sales volume limits which, if
exceeded, would require the product to meet the
[[Page 59558]]
same energy standards as full-size washers. (Maytag, No. 137 at 4-5).
PG&E supported changing the ``compact'' size to 2.0 cubic feet, up from
1.6 cubic feet under the condition that the ``compact'' washers are
required to at least meet the 25 percent more efficient standard level.
(PG&E, No. 189 at 1).
We received several comments in support of maintaining the current
limit of 1.6 cubic feet for the compact class. (Northwest Energy
Efficiency Alliance, No. 131 at 3; the Northwest Power Planning
Council, No. 135 at 2; Bosch, No. 142 at 1; and Miele, No. 156 at 1).
GEA opposed the change in definition because it believed there is
substantial room for these products to increase their efficiency. (GEA,
No. 143 at 11). The Oregon Office of Energy commented that the new 2.0
cu. ft. definition puts a significantly greater number of more
efficient machines in the compact class. For this reason it will insist
that the Department conduct enough of an analysis on this class of
products to justify raising the standard for this class. (Oregon, No.
162 at 2).
Staber Industries proposed removing tub size as a factor in
determining both capacity and energy efficiency and proposed instead
classifying washers by loading capacity. (Staber, Nos. 185 and 187).
The Department agrees that the increasing the compact class size to
2.0 cu. ft. will increase the number of washers in this class and
possibly incorporate products currently already more efficient than
compact models of 1.6 cu. ft. The Department has not been provided any
information in order to conduct such an analysis. For this notice the
Department is maintaining the existing 1.6 cu. ft. definition of the
compact product class and given the small size of this market (less
than one percent) is proposing not to change the minimum efficiency
levels. However given the new test procedure (Appendix J1) and the
change in descriptor it is necessary to translate the current standard
of EF of 0.9 into an MEF value. Since no mathematical translation is
possible, we have estimated this value using engineering calculations
and assumptions which are detailed in the TSD. This value is estimated
to be an MEF of 0.65.
For the Final Rule, the Department will consider changes to the
definition and efficiency standards for the top loading compact class.
A new definition could have different capacity requirements (such as
less than 2.0 cu. ft.) and additional requirements for the maximum
external dimensions (such as a width not to exceed 22.5 inches). The
Department will also consider any new information on the efficiency of
current models under Appendix J1. The Department seeks comment on these
issues.
The Department's ANOPR proposal to eliminate the Front-Loading
product class also received no negative comments. NRDC commented that
the existence of a top-loading horizontal-axis washer clearly dispels
the notion that the location of a washer's port of access (Top or
Front) is synonymous with axis of rotation (Vertical and Horizontal).
Amana notes that because of technological differences it would be more
appropriate to refer to the current ``Front-Loading'' and ``Top-
Loading'' product classes as Horizontal-Axis and Vertical-Axis (Amana,
No. 146 at 1). Elimination of the Front-Loader class is invariably
linked by many comments with the need to establish separate classes for
V- and H-axis washers.
The Department received numerous comments on the proposal not to
establish separate classes for V- and H-axis clothes washers. Comments
supportive of the Department's proposal were received from Maytag,
Whirlpool, Bosch, Staber, Miele, NRDC, the Alliance to Save Energy,
ACEEE, and approximately fifteen state or city agencies and utilities.
(Maytag, No. 137 at 2; Whirlpool, No. 141 at 7; Bosch , No. 142 at 1;
Staber, Nos. 185 and 187; Miele, No. 156 at 1; NRDC, No. 138 at 5; the
Alliance to Save Energy, No. 148 at 2; and ACEEE, No. 150 at 5).
GEA, Alliance Laundry and Amana opposed the Department's proposal.
GEA commented that the unique characteristic and energy performance of
H- and V-axis washers require two-product classes with separate minimum
energy efficiency standards for each. H-axis are less convenient and
potentially less reliable with different systems or features for
loading clothes and adding clothes during the wash cycle, longer cycle
times, smaller capacities, more expensive detergents, and availability
of deep pre-soak which are important to consumers. (GEA, No. 143 at 2).
Alliance Laundry commented that the V- and H-axis product
classifications would ignore relevant consumer utility differences and
would combine two distinct products which do not compete in the market
for energy comparison purposes. (Alliance Laundry, No. 145 at 3). Amana
commented that the machines differ in cost/price, utility, energy
efficiency, performance, and ergonomics. The integration of these two
categories into one will increase rather than decrease confusion in the
marketplace with consumers. (Amana, No. 146 at 2). These concerns, DOE
believes, are superceded by the Joint Comment in which the same
standard was agreed to for V- and H-axis products.
The Alliance to Save Energy commented that recent technology
development shows that various axis types can meet relatively stringent
performance criteria. (Alliance to Save Energy, No. 148 at 2). The
Department agrees with this view. Recent product introductions by
Whirlpool Corporation and Fisher & Paykel of high-efficiency V-axis
washers have positively demonstrated that V-axis designs are available
for the same range of efficiencies as H-axis washers. Since both H-axis
and V-axis washers can achieve the same range of efficiency, there is
no basis for separate efficiency standards based on axis of rotation or
orientation of loading. Additionally the existence of a Top Loading
horizontal-axis washers dispels the notion that orientation of loading
is necessarily associated with efficiency. Therefore, in today's
proposal the Department is maintaining the Front Loading product class
but is proposing a single efficiency standard for both the Front
Loading and the Top Loading, Standard class washers.
B. Engineering Analysis
The engineering analysis develops cost-efficiency relationships to
show the manufacturer costs of achieving increased efficiency. Three
methodologies can be used to generate the manufacturing costs needed
for the engineering analysis. These methods include: (1) The design-
option approach, reporting the incremental costs of adding design
options to a baseline model; (2) the efficiency-level approach,
reporting relative costs of achieving energy efficiency improvements;
and/or (3) the cost-assessment approach which requires a ``bottoms-up''
manufacturing cost assessment based on a detailed bill of materials.
As summarized in the Supplemental ANOPR, the engineering analysis
was conducted using the efficiency-level approach. The cost-assessment
approach was also used to supplement the efficiency-level approach
because of the existence of a proprietary technology for which no data
was available. The objective of the manufacturing cost assessment was
to quantify the differential manufacturing costs of producing high
efficiency clothes washers based on (1) a Whirlpool proprietary V-axis
design, and (2) commercially available V- and H-axis designs.
[[Page 59559]]
C. Life-Cycle Cost (LCC) Analysis
The effect of standards on individual consumers includes a change
in operating expense (usually decreased) and a change in purchase price
(usually increased). The life-cycle cost (LCC) spread sheet is used to
analyze the economic impacts of possible standards on individual
consumers. This section describes modifications to the LCC spreadsheet
model and revisions to data inputs as a result to new data or
recommendations from comments received after the publication of the
1998 Supplemental ANOPR. 63 FR 64353 (November 19, 1998).
Table 1 summarizes the assumptions used in the LCC analysis for the
1998 Supplemental ANOPR analysis and the changes made for this proposed
rule analysis than followed by a written discussion of these changes.
Table 1.--Assumptions in the LCC Analysis \1\
------------------------------------------------------------------------
Parameter Supplemental ANOPR Proposed rule
------------------------------------------------------------------------
Energy Price.................... average prices.... marginal prices.
Variation in Household Energy 1993 RECS data.... Marginal prices
Prices, Energy Use, and Water derived from 1993
Heater Shares. RECS data and
adjusted to 1997
prices.
Energy Price Projections........ AEO 1998 reference AEO 1999
case to the year reference, high &
2020, with low cases to the
extrapolations to year 2020, with
the year 2030. extrapolations to
the year 2030;
used FEMP
methodology for
extrapolations.
Water and Sewer Prices.......... Urban ($0.00 to Urban 0-$7.97.
$7.84 per 1000 Rural 0-$7.97.
gallons). Rural (no sewer) 0-
Ave. price = $3.18 $3.53.
per 1000 gals. Individual well
2.61 kWh/1000
gals.
Ave. price = $2.48
per 1000 gals.
Annual Real Change in Water and 0 percent......... Urban = 3.01%
Sewer Cost (Water Price (high 5.41%, low
Projections). 0.53%).
Rural = 3.01%
(high 5.41%, low
0.53%).
Rural with septic
= 0.64% (high
2.93%, low -
2.89%).
Individual well
(electricity
price
escalation).
Manufacturer Cost............... AHAM.............. No change.
Manufacturer Mark-ups........... Min. 1.000........ Range: varies with
Mean 1.175........ standard level.
Max. 1.350........ Distribution:
Distribution: uniform.
triangular.
Retail Mark-up.................. 1.4............... No change.
Detergent Savings............... not an input allowed as an
parameter. input (detergent
savings = zero).
Discount Rate................... Distribution (0-15 No change.
percent).
Lifetime........................ Distribution (12- No change.
17 years).
Cycles Per Year................. Distribution from No change.
RECS database
(207-645).
Start Year (Effective Date of 2003.............. 2004 (and 2007 if
Standard). a second tier).
------------------------------------------------------------------------
\1\ All prices and costs are shown in 1997 dollars.
Energy Prices. For the Supplemental ANOPR the LCC spreadsheet model
sampled the individual prices paid by households in the 1993 version of
the Residential Energy Consumption Survey (RECS). These prices were
updated (scaled up or down based on AEO 1998 national prices) and
converted to 1997 dollars. The Advisory Committee recommended DOE use
the full range of consumer marginal energy prices instead of national
average energy prices. Marginal energy prices are those prices
consumers pay (or save) for their last units of energy used (or saved).
The Department agreed that marginal energy prices would improve the
accuracy of the LCC analysis and estimated marginal rates for
electricity and natural gas from the 1993 RECS database.
In accordance with the Advisory Committee's recommendation, the
Department elected to substitute marginal energy prices for average
prices for calculating LCC and NPV. EIA gathered monthly energy bills
and energy consumption data for the RECS public use data. It did not
gather information on rate schedules, fixed charges, or marginal
prices. DOE estimated consumer marginal electricity and natural gas
prices directly from household data in the 1993 RECS public use data
survey as the change in household monthly energy bills divided by the
change in monthly energy consumption for each fuel, referred to as the
change in monthly bill method. This provides a precise marginal energy
rate based on actual household bills.
Households for which marginal energy prices could not be calculated
were eliminated, resulting in a reduction of approximately 10% of the
households used from the RECS. Although electricity rates were
calculated separately for four summer months (June-September) and,
separately for winter (October-May) months, unlike other appliances,
the usage of clothes washers for summer and winter months is on
average, approximately constant.
In order to understand and characterize regional variations in
pricing and distribution of fuel oil and LPG, we collected information
relating to pricing and distribution of fuel oil and LPG. We learned
that bills paid by residential consumers for both fuel oil and LPG are
essentially volume-driven, with a single block rate. We interpreted the
average prices inherent in those bills, as reported in the RECS public
use data, as being equivalent to marginal prices for the purposes of
the LCC price analysis. A detailed description of the methodology used
to determine marginal energy rates is contained in the report entitled
``Marginal Energy Prices Final Report, July, 1999,'' which can be
obtained at the website address: http://www.eren.doe.gov/buildings/codes_standards/applbrf/clwasher.html.
As an enhancement to the LCC analysis for the proposed rule, Liquid
[[Page 59560]]
Petroleum Gas (LPG or propane) was added as a water heater fuel type.
Variation in Household Energy Prices, Energy Use, and Water Heater
Shares. In addition to determining energy prices RECS data is used to
determine the market share, i.e., percentage of water heaters and
dryers, that are electric, gas, liquefied petroleum gas (LPG) or oil.
The current analysis was based on Residential Energy Consumption Survey
1993 (RECS93) and Annual Energy Outlook 1999 (AEO99). Although
demographic information, price and equipment types change from survey
to survey, we do not expect that the differences are significant enough
to change the outcome of this rulemaking.
Energy Price Projections. For the proposed rule, the Annual Energy
Outlook 1999 (AEO99) forecasts replaced AEO98 energy price forecasts
for electricity, gas and oil. Given the uncertainty of projections of
future energy prices, DOE used scenario analysis to examine the
robustness of proposed energy efficiency standards under different
energy price conditions. The LCC calculations use these scenarios. Each
scenario provides a self-consistent projection, integrating energy
supply and demand. The scenarios differ from each other in the energy
prices that result. The Advisory Committee suggested the use of three
scenarios. While many scenarios can be envisioned, specification of
three scenarios should be sufficient to bound the range of energy
prices.
The AEO 1999 reference case provides a well-defined middle
scenario. DOE also used AEO fuel price forecasts under assumptions of
high and low economic growth. The future trend in energy prices assumed
in each of the three scenarios is clearly labeled and accessible in the
LCC spreadsheet. The Gas Research Institute (GRI) reference case fuel
price forecast is another choice available in the LCC spreadsheet.
Stakeholders can easily substitute alternative assumptions in the LCC
spreadsheet to examine additional scenarios as needed.
Another modification for the proposed rule analysis concerns the
extrapolation method used to project the AEO energy prices from 2020 to
2030. (The AEO contains energy prices projections to the year 2020.)
For the ANOPR the price of electricity was extrapolated based on the
trend of the last five years of the scenario used. For gas and oil,
prices values were kept constant from the year at which the
extrapolation was necessary.
For the proposed rule we are now using the approach EIA uses to
forecast fuel prices for the Federal Energy Management Program (FEMP).
This was done to be consistent with the rest of the energy forecasting
also done by EIA.
Water and Sewer Prices. For the Supplemental ANOPR the main source
of data on water and sewer prices was from a 1994 survey of water
prices in major metropolitan areas by Ernst & Young. The Ernst and
Young data was adjusted for service population, base utility charges
and average household use by Al Dietemann of Seattle Water.
The Department received several comments on this issue. Denver
Water suggested replacing the 1994 Rates Study done by Ernst and Young
and using the 1998 Raftelis Study. (Denver Water, No. 107 at 20). The
American Water Works Association (AWWA) commented that an average water
price of $3.18 per thousand gallons as used was too high. (AWWA, No.
108 at 64360). Energy Market and Policy Analysis, Inc. observed that
the data was limited to certain metropolitan areas and probably would
overstate water and sewer costs in non-metropolitan areas. Therefore,
use of the data would probably overstate potential water and sewer cost
savings that might be achieved by using a washer that uses less water.
(Energy Market and Policy Analysis, Inc., No. 144 at 8).
In response to comments received and for the proposed rule
analysis, 1998 prices and projected escalation rates were added for
rural water and wastewater to the previous estimates for urban
customers. The revised analysis, based on the 1998 Raftelis Study,
divided water use into categories of urban, rural with water and
wastewater utilities, rural with water utility service and septic tank,
and individual well with septic tank. The range of prices used for each
category is: for urban areas 0-$7.97, rural areas 0-$7.97, rural areas
(no sewer) 0-$3.53, individual well 2.61 kWh/1000 gals. The resulting
average price is $2.48 per 1,000 gallons.
Water Price Projections. As of the time of publication of the
Supplemental ANOPR, the Department had found no national level water
price forecasts and thus the Supplemental ANOPR assumed that future
water prices would remain constant. In the Supplemental ANOPR the
Department agreed that future water prices should not be assumed to be
constant and described an approach to establish marginal water prices
and escalation rates. See Chapter 7 of the TSD for details on how these
marginal water prices and escalation rates where determined.
At a workshop held on December 15, 1998, DOE detailed its proposal
for water prices and escalation rates. Support for this proposal was
given by ACEEE, the Oregon Office of Energy, NRDC, the Northwest Energy
Efficiency Alliance, PG&E, and the City of Seattle, Seattle Public
Utilities. (ACEEE, No. 150 at 1; Oregon Office of Energy, No. 162 at 7;
NRDC, No. 138 at 14; Northwest Energy Efficiency Alliance, No. 131 at
2; PG&E, No. 130 at 2; and the City of Seattle, Seattle Public
Utilities, No. 126 at 2). In contrast, the Edison Electric Institute
(EEI) commented that the escalation rate of 3.1% real will probably
overstate the change in water and wastewater prices. (EEI, No. 122 at
6).
For the proposed rule, escalation rates were specified for urban
and rural water and wastewater customers. The average escalation rates
used are: for urban areas, 3.01% (high 5.41%, low 0.53%), rural areas,
3.01% (high 5.41%, low 0.53%), rural areas with septic 0.64% (high
2.93%, low -2.89%). Finally for areas with individual wells, the
electricity price escalation rates were used.
Manufacturing Cost. The cost data used was provided by
manufacturers. It was then compiled and reported to the Department by
AHAM as a range of costs at each efficiency level. NRDC observed that
the Department's engineering analysis weights incremental costs
submitted by AHAM manufacturers by their 1997 market shares. In its
opinion the real impact on consumers will be weighted not by 1997
market shares but by the market shares following the introduction of
the standards. The argument is based not on a lack of credibility of
the AHAM data but on the assumption that the market share of the very
expensive machines will go down. As a consequence, NRDC believes the
Department should weight the outlier points at the high cost end of the
cost distribution curve minimally, if at all, in doing its analysis.
(NRDC, No. 138 at 6 and 14).
The Department agrees that a wide variation in costs exists in the
AHAM data. This variation in incremental costs are driven in part by
the variability in cost structures of the various manufacturers
(production volume, current technology) and in part by the variability
in designs. Additionally, given the lack of experience manufacturing
some of these technologies, uncertainty contributes to the range in
costs. The Department believes the mean values of the distribution are
the most appropriate for consideration in the LCC analysis and will
weight analysis results for values surrounding the mean more heavily.
However it will continue to incorporate the full range of costs as it
represents a probability-weighted distribution of
[[Page 59561]]
costs based on the full spectrum of possible costs.
Manufacturer Mark-ups. In the Preliminary TSD for the ANOPR, the
Department used a manufacturer mark-up over the full production costs
with a maximum value of 1.35, which maintains industry (manufacturer)
cost structure, and a minimum value of 1.00, which represents a pass-
through of full production costs. This was modeled as a triangular
distribution with a minimum value of 1.00, a most likely value of
1.175, and a maximum value of 1.35. For the proposed rule, a uniform
distribution was used. The range of the mark-up is dependent on the
standard level and obtained from the GRIM model.
Alliance Laundry believes that the low end of 1.00 for the
manufacturing mark-up should not be used at all. It commented that
history suggests manufacturing mark-up is within the 1.27 to 1.35
range. (Alliance Laundry, No. 164 at 10). The Oregon Office of Energy
commented that manufacturer mark-ups are not static over time. Nor are
they typically the same for products at the lower end of the product
line as they are for the upper end. It further recommended that DOE
find a way to model a variable mark-up pattern for each manufacturer--a
pattern that is appropriate for each and responsive to market
conditions as they evolve. (Oregon Office of Energy, No. 162 at 8). As
suggested, the Department worked with each manufacturer to forecast its
future mark-ups at the various standards levels factoring anticipated
market dynamics. These market dynamics include: the technology status
of existing product offerings as it relates to the cost-efficiency
relationship; the status of manufacturing technology, including an
assessment of conversion and restructuring costs; likely product
offerings at each efficiency level (e.g., V-axis, H-axis), consumer
demand for product features and its implications for trade-offs between
manufacturing cost and consumer utility; patent restrictions on design
options; brand equity; availability of technical and financial
resources; manufacturing versus sourcing strategies; and company cost
structure and ability to pass on fixed (and sometimes even variable)
costs. Individual mark-up forecasts were aggregated to characterize the
industry and the resulting range of mark-ups was used in both the
industry GRIM and LCC analysis.
Retail Mark-up. In the Preliminary TSD for the ANOPR, the
Department used a fixed retail mark-up of 1.40, and a fixed mark-up of
1.052 to cover the sales tax. There was no change made for the proposed
rule. ACEEE commented that the retail mark-up of 40% is too high. It
proposed that the Department use an average retail mark-up based on the
last five years of available data. (ACEEE, No. 150 at 4). In response
to this comment, the Department did examine more recent data from the
same data sources originally used (Dealerscope Merchandising's Annual
Statistics Surveys, Bureau of Census--Current Industrial Report (CIR),
Bureau of Labor Statistics--Consumer Expenditure Survey (CES),
INTELECT--Elrick & Lavidge Computerized Audit Program (ELCAP) price
database, AHAM Fact Book) and found no significant cause to alter its
earlier estimate.
Detergent Savings. In the Supplemental ANOPR we did not include any
possible detergent savings into the LCC analysis. The Northwest Power
Planning Council, Oregon Office of Energy, ACEEE, Northwest Energy
Efficiency Alliance, and PG&E commented that the Department should
consider detergent cost savings as a benefit of H-axis clothes washers.
(Northwest Power Planning Council, No. 135 at 1; Oregon Office of
Energy, No. 162 at 6; ACEEE, No. 150 at 4; Northwest Energy Efficiency
Alliance, No. 131 at 2&3; and PG&E, No. 189 at 2). These comments did
not have specific recommendations as to appropriate values to use for
detergent cost savings in the LCC.
Alliance Laundry System LLC commented that detergent cost savings
associated with horizontal axis machines are unlikely. In fact,
detergent costs may even be higher due to the fact that higher priced
specially formulated detergent may have to be used for optimal cleaning
performance. (Alliance Laundry, No. 145 at 11). Maytag believes that
the detergent and dosage recommended by the detergent manufacturer will
produce the best washing performance and that detergent use will not be
a significant factor in consumer operating cost savings. (Maytag, No.
137 at 7).
The Department believes there is no conclusive evidence that
detergent costs will change due to new standards. We believe results of
the Bern Study (Bern Clothes Washer Study Final Report; ORNL/M-6382;
prepared by Oak Ridge National Laboratory for the U.S. DOE, dated March
1998) do not show any significant difference in cost savings related to
detergent use. Patterns of detergent use will change as detergent
specially formulated for H-axis machines become more available. In
addition, comments by major detergent manufacturers state that savings
based on less detergent use will not occur (Procter & Gamble, No. 9 at
1) and using a lessor amount of detergent produced inferior cleaning
performance (Lever Brothers, No. 51 at 2). In consideration of the
previous evidence detergent savings were not included in the analysis.
However, the LCC spread sheet does include the capability to input
detergent costs, at the users' option.
Cycles per year. The EEI commented that the number of washer cycles
appeared to be on the high side, especially for one and two person
households. (EEI, No. 122 at 3). The Department used the most current
information available to estimate the cycles per year. The Department
adjusted the number of cycles per year based on the number of occupants
for each RECS household. The cycles per week are based on a Procter and
Gamble survey and adjusted using the RECS data, so the overall average
cycles per year agree with the test procedure assumption of an overall
average of 392 cycles per year.
Discount Rate. The LCC spreadsheet uses a distribution for discount
rates ranging from 0 to 15%. These represent the variability in
financing methods consumers use in purchasing appliances. The average
discount rate from this distribution is 6.1% real.
Four comments suggested that the discount rate used in the consumer
analysis was likely too high. Comments stated that DOE should take into
account such factors as: declining bank card rates, the substantial
fraction of card users who pay off monthly credit card balances, the
substantial number of buyers who use lower-cost credit such as home
equity credit lines, and bank card default rates. Future interest rates
on credit cards are not expected to rise, so future inflation will
yield lower real interest rates. (Alliance to Save Energy, No. 148 at
3; ACEEE, No. 150 at 4; Oregon Office of Energy, No. 162 at 7; and
NRDC, No. 138 at 6). Three comments suggested that the discount rate
may be too low. (Energy Market and Policy Analysis, Inc., No. 144 at 8;
Consumer Alert, No. 155 at 4; and EEI, No. 122 at 6). Opportunity costs
are higher and EIA uses higher rates for forecasting residential
purchase decisions. DOE policy is to base discount rates on average
financing costs (or opportunity cost of reduced savings).
In the Process Rule, DOE committed to using real (adjusted for
federal taxes) discount rates for residential consumers by considering
a range of three different real discount rates: credit card financing
rate, a rate based on consumers having substantial savings, and a mid-
range
[[Page 59562]]
rate. The mid-range discount rate will represent DOE's approximation of
the average financing cost (or opportunity cost of reduced savings)
experienced by typical consumers.
Based on the guidelines from the Process Rule, we derived a
distribution of discount rates to reflect the variability in financing
methods consumers can use in purchasing clothes washers. The real
interest rate associated with financing an appliance purchase is a good
indicator of the additional costs incurred by consumers who pay a
higher first cost, but enjoy future savings, although it is not the
only indicator of such costs. While the method used to derive this
distribution relies on a number of uncertain assumptions regarding the
financing methods used by consumers, DOE believes the resulting
distribution of discount rates encompasses the full range of discount
rates that are appropriate to consider in evaluating the impacts of
standards on consumers (i.e., values represented by the mid-range
financing cost, consumers with no savings, and consumers with
substantial savings), as well as all the discount rates that fall
between the high and low extreme values.
DOE assumes the method of purchase used by consumers is indicative
of the source of the funds and the type of financing used, although DOE
is not aware of detailed research into this relationship. Whirlpool
Corporation indicated that approximately 40% of white goods are
purchased in cash, 35% with credit cards, and 25% with retailer loans.
(1994 Eight Product Notice of Proposed Rulemaking, 59 FR 10464, March
4, 1994.) Whirlpool also indicated that 25% of appliance purchases are
for new homes. However, we know consumers purchase 20% of clothes
washers with new homes, i.e., in mortgages, and 80% as replacements for
existing clothes washers in separate retail purchases. Consumers pay
for retail purchases by cash, credit cards, or loans. In order to
derive a full distribution of discount rates, DOE estimated a range of
interest rates, based on historical data and judgments of future
trends, for different types of consumer savings or financing.
For new housing, the estimated nominal mortgage rate ranges from 5-
8%, the derived after-tax rate is based on a tax of 28%, and a 2%
inflation rate is subtracted from the total. The result is a range of
real mortgage rates from 1.60%-3.76%. Example: 5%*(100%-28%)-2%=1.6%.
For cash, the minimum interest rate is 0%. This rate applies to
consumers making cash purchases without withdrawing from savings
accounts or interest bearing checking accounts. For the maximum rate,
the opportunity cost is the interest that could have been earned in a
savings account or mutual fund. Historic savings rate ranged from 4.5-
5.5% from 1970-1986 (real rates of -8.27 to +3.58%). We believe the
current maximum is the opportunity cost represented by the interest
earned in a typical mutual fund (assumed to be 6% real). DOE selected a
real rate of 3% as the mean.
DOE assumed the interest rates for retail loans and credit cards
have the same range. The minimum credit card rate is 6% real.
Introductory rates on some credit cards today are 5.9% nominal, but
after the introductory period (often six months), the rate can increase
sharply. Maximum rates are more than 20% nominal. However, if the
consumer pays with a credit card and the balance is paid in less than
the life of the clothes washer, then the effective interest rate is
lower than the nominal credit card rate. The current assumption is a
range of 6-15% real.
Combining the assumed shares of each financing method, the above
real interest rates result in a weighted-average (mean) value of 6% and
a distribution that varies from 0-15%. Sensitivity studies show that
while the LCC results are sensitive to the value chosen for the mean
discount rate, the LCC results are not sensitive to the distribution of
discount rates.
DOE believes the methods described above are valid for establishing
a distribution of discount rates relevant to most purchasers of the
products covered by this rulemaking. However, the Department
acknowledges that different assumptions could be made about likely
interest, inflation and marginal tax rates, or about consumer financing
methods, and that different approaches to identifying consumer discount
rates might also be valid. For example, it is possible to base consumer
discount rates on the average real rates of return on consumer
investment or other measures of the opportunity costs incurred by
consumers who purchase the covered products. DOE does not believe,
however, such alternative assumptions or alternative approaches would
significantly alter the range of discount rates used by the Department
or the conclusions drawn from the LCC analyses conducted using these
discount rates.
The Department is seeking any information that would support
significant alterations in the range or distribution of the discount
rates derived from its analysis. Alternatively, DOE is soliciting
comment on the possible use of a standardized distribution of discount
rates ranging from approximately 4-12%, with a mean of 6%. The use of
such a standardized distribution would explicitly recognize the many
uncertainties associated with DOE's current analysis and, based on
sensitivity analyses already performed by DOE, such a standardized
distribution would not significantly alter the conclusions of DOE's
life cycle cost analyses.
Lifetime. The ANOPR analysis assumes that the period of time a
clothes washer will provide service ranges from 12 to 16 years with an
average of 14.2 years. One comment asked the Department to explain the
assumptions used to determine the lifetime of a clothes washer. Since
few consumers who purchase a clothes washer own it for the full
lifetime of the appliance, using this value in the LCC may overstate
the benefits to the original purchaser. (Energy Market and Policy
Analysis, Inc., No. 119 at 4). For the national energy savings,
calculating the benefits requires consideration of the full lifetime of
the product. In response, DOE believes that the requirements of the
statute are to analyze the savings in operating costs throughout the
estimated average life of the covered product even if there is more
than one owner during this lifetime for the LCC analysis.
Start Year. This is the year the new standard is expected to become
effective. The Joint Stakeholder Comment proposes a two-step standard
in which the first standard level is effective in 2004 and the second
high standard level becomes effective in 2007. (Joint Comment No. 204).
Maintenance and Repair Costs. The ANOPR analysis assumed no change
in maintenance and repair costs as a result of new clothes washer
standards. The Department received a comment expressing the need to
account for maintenance, repair and warranty costs in the LCC analysis.
(Energy Market and Policy Analysis, Inc., No. 119 at 3). Staber
Industries also requested that the Department consider maintenance in
the LCC analysis since H-axis have no transmissions and it is more
reliable than V-axis. (Staber, Nos. 185 and 187). In response, the
Department's analysis does not consider changes in the maintenance and
repair cost as we do not have any data to indicate the costs to be
different for more efficient products for the proposed rule.
Request for Comment. DOE requests comments on the LCC analysis,
particularly the range of values used as input to the analysis. For
example,
[[Page 59563]]
RECS does not measure usage so we used the Proctor & Gamble survey data
for national average usage values and then adjusted those values based
on RECS-reported household size. DOE would like comment both on the
Proctor & Gamble and RECS data as well as the method DOE used to
develop the range of usage.
D. Payback Period Analysis
The payback period measures the amount of time needed to recover
the additional consumer investment in increased efficiency through
lower operating costs. The payback period is the ratio of the increase
in purchase price to the decrease in annual operating expenditures from
replacing the baseline clothes washer with a more efficient washer. We
express payback periods in years.
Rebuttable Payback. In accordance with EPCA, DOE calculated payback
based on the values specified by the DOE test procedure, Appendix J1.
This includes the Appendix J1 test procedure assumption of an electric
water heater and an electric dryer. Today's amendments to Appendix J1
have no effect on these results. This payback, however, does take into
account that a distribution of clothes washer efficiencies exists in
the current and future stock. This distribution is approximated by
assuming that the efficiency of the stock of washers is a combination
of baseline and H-axis efficiency washers. Table 2 shows the changes in
assumptions since the ANOPR for the base case.
Table 2.--Changes in Rebuttable Payback Assumptions
------------------------------------------------------------------------
Parameter Supplemental ANOPR Proposed rule
------------------------------------------------------------------------
H-axis sales.................... 3.0% in 1998...... 6.25% in 1998.
Escalation of H-axis sales...... 0.5% annual 0.5% of sales not
(linear). already H-axis.
------------------------------------------------------------------------
Changes in assumptions outlined in Table 1 that also apply to
rebuttable payback include:
Water price;
Energy price;
Energy and water price escalation only to the year 2004;
and
Manufacturer mark-up (average of range is used).
Basecase Assumptions. The Department received comments on the
assumptions made concerning the existing saturation of higher
efficiency washers and their expected increase in sales over time. We
received comments stating that we had either overestimated or
underestimated the penetration of H-axis washers, and we either
overestimated or underestimated the future escalation of H-axis sales.
EEI, Whirlpool, NRDC, City of Seattle, Seattle Public Utilities,
Alliance Laundry System, Northwest Power Planning Council, ACEEE, and
Amana believes that the projections for sale of high efficiency units
is too low. (EEI, No. 122 at 3; Whirlpool, No. 141 at 12; NRDC, No. 138
at 8; City of Seattle, Seattle Public Utilities, No. 126 at 2; Alliance
Laundry, No. 145 at 20; Northwest Power Planning Council, No. 135 at 1;
ACEEE, No. 150 at 7; and Amana, No. 146 at 2). Northwest Energy
Efficiency Alliance, Oregon Office of Energy and the Alliance to Save
Energy believe DOE overestimated sales in the absence of standards
because many incentive programs are ending. (Northwest Energy
Efficiency Alliance, No. 131 at 4; Oregon Office of Energy, No. 162 at
2; and Alliance to Save Energy, No.148 at 3-4).
Based on additional updated data, we revised the estimated H-axis
sales in 1998 from 3.0% to 6.25%. Previously the annual escalation rate
of H-axis washer sales market were assumed to capture an additional
0.5% per year of all clothes washer sales but now the annual sales of
H-axis clothes washers is determined by an amount equal to 0.5% of the
previous year's V-axis sales. Additional sensitivity analyses were
performed at escalation rates of 0.25% and 0.75% with minimal effect on
rebuttable payback (less than half a year payback difference from the
reference case). Base case assumptions are addressed in greater detail
in the National Impact Analysis, infra.
E. National Impact Analyses
The national energy savings is determined in two steps using the
integrated NES/Shipments spreadsheet model. First the shipments are
determined before and after a new standard; and then the shipments are
used to calculate energy savings and national economic benefits (net
present value of the higher standards). Chapters 9 and 10 of the TSD
contains a detail explanation of the NES/Shipments spreadsheet model.
The basic outputs from the National Impact Analysis are shipments
forecasts, energy and water consumption, and the Net Present Value
(NPV) for baseline and standards scenarios. The shipments forecasts are
an input into the National Energy Savings model as well as an input for
the Manufacturing Impact Analysis. The cumulative savings for energy
and water are determined for the nation to the year 2030. Finally, the
net present values (NPVs) are determined for each standard level based
average data for the nation. See results in Section V of this notice.
1. National Energy Savings (NES) Spreadsheet Model
Historical Background. The development of the NES and shipments
model consisted of three phases: (1) Supplemental ANOPR and preliminary
TSD analysis, (2) analysis presented at the July 1999 Workshop, and (3)
proposed rule and TSD analysis.
At the time of the supplemental ANOPR the shipment model was a work
in progress. We asked for comment on a general accounting methodology
that included price, operating cost and income elasticities. Since the
shipments model was not fully developed at the time of the supplemental
ANOPR, a placeholder set of shipments were used as input to the NES
spreadsheet in order to produce a preliminary analysis on the national
impacts.
At the July 1999 Workshop, we presented a fully developed shipment
model that included a decision tree. The decision tree allows the
consumer to choose between not buying a washer, buying a new washer,
repairing a washer or buying a used washer. It also allows consumers to
decide to replace a washer before it was necessary (see TSD Chapter 9
for details). This model also incorporated results from the consumer
conjoint analysis along with fitting parameters to historical data.
After presenting this shipment model at the July 1999 Workshop, we
received comments regarding specific parameters of the model, sources
of data used in the model and whether or not the results forecasted
seemed reasonable. We received comments agreeing that the general
approach of the Shipment and NES models were appropriate, however,
comments included suggestions to modify parts of the models. (Oregon
Office of Energy, No. 162 at 8 and
[[Page 59564]]
ACEEE, No.188 at 3). Details of the Shipment and NES models are
discussed in the sections on elasticity below. After the Workshop we
carefully looked at the comments and began to make improvements to the
model. These improvements included refinements that were not
necessarily suggested by stakeholders but were based on using more data
and detail. In addition, suggestions contributed by a renowned
economist were carefully considered. (Assessment of DOE Shipments Model
for Forecasting the Impacts of Clothes Washer Standards, Kenneth Train,
Comment No. 194 at 13). After all of the revisions, the shipment model
forecasted had significantly different results. The two changes made
that had the greatest effect on results were using a longer historical
time period to fit forecasting equations to and accounting for new
appliance sales due to all changes in residence, not just purchases of
new housing.
The following section describes the modifications to the NES and
Shipment spreadsheets as recommended in comments received after the
publication of the 1998 Supplemental ANOPR. 63 FR 64347, 64359
(November 19, 1998).
The modifications to the NES Model follows the three phase
development from the Supplemental ANOPR analysis to the July 1999
Workshop analysis to the proposed rulemaking analysis. The changes to
the Shipment Model as incorporated into the NES are summarized in Table
3. Discussions of these changes and of comments received which prompted
these changes are also discussed after the table.
Table 3.--Modifications to the NES Model, Including Shipments Model
----------------------------------------------------------------------------------------------------------------
Parameter Supplemental ANOPR July 1999 workshop Proposed rule
----------------------------------------------------------------------------------------------------------------
Shipment Model................... accounting model accounting with decision accounting with decision
recommended--fixed tree. tree.
shipment values were
used as a placeholder.
Shipment Elasticities............ price.................... price................... price.
operating cost........... operating savings....... operating savings.
income................... top/front access feature top/front access
(These were used in feature.
analysis prior to the price/income.
Supplemental ANOPR.). income.
interest rate
elasticities.
Source of Elasticities........... In previous analyses the Operating savings-- Operating savings--
three input variables derived from the derived from the
below were used. WashWise Intercept WashWise Intercept
Price Elasticity (PE)-- Survey. Survey.
from Oak Ridge equation. Features elasticity-- Features elasticity--
Operating Cost (OC) based on conjoint based on conjoint
elasticity--derived from analysis. analysis.
implicit discount rate. Price elasticity--with Price elasticity--with
Income Elasticity--from other parameters set, other parameters set,
Oak Ridge model. determined by determined by
(For the ANOPR, a calibrating to 1981- calibrating to 1970-
shipment analysis had 1996 historical data. 1996 historical data.
not been performed yet
and shipments were kept
constant as a
placeholder pending
future analysis.).
Market Segments.................. new housing starts....... New housing starts...... New housing completions
existing homes early replacement market & moves.
(replacement washers). regular replacement early replacement
market. market.
extra repair market..... regular replacement
homes without a clothes market.
washer. extra repair market.
homes without a clothes
washer.
Houses that Drop Out of Washer not applicable........... energy accounted for-- energy accounted for--
Market. assumes laundry done at assumes laundry done at
Laundromat or elsewhere. Laundromat or
elsewhere.
Cost of Repairs and Used Washers. None..................... The model factored in Allows input on the cost
the price of a new of repairs and used
washer into the Replace washers relative to
or buy Used versus buy buying a new washer.
new decision without Changed the net washer
subtracting the cost of price in the Used vs.
repairing or buying a New decision model and
used washer. the Replace decision
model. The net washer
price is the price of a
new washer minus the
price of either the
used washer or the
repair, where the used
washer and the repair
are assumed to scale
with new washer price.
Residence-Change-Induced Purchase None, however in prior Assumes New Housing A small market of
analysis new housing Market is determined by purchases induced by
starts were accounted net housing increase. changes of residence is
for and this approach Ignores AHAM data on included. Assumed that
was recommended in the the number of washers new sales from changes
Supplemental ANOPR TSD. purchased due to a in residence are
change of residence. correlated with new
housing completions.
The volume of sales
induced by change of
residence is calibrated
with AHAM NFO data on
washers purchased due
to a move.
Implied Discount Rate Used in None--consumer discount 75%--from WashWise 75%--from WashWise
Historical Fit. rate had not been intercept survey. intercept survey.
established at this
point.
[[Page 59565]]
Historical Fit................... None..................... Historical fit made to Model projected back to
1981 to 1996 period. 1951. Fit made to 1970
to 1996 data.
Operating Cost Scaling........... None..................... Assumed operating cost Disaggregates operating
scaled with electricity cost and estimates
price changes. operating cost back to
1951 using Electricity,
Gas, Water, Oil, and
LPG price indices.
Stock Accounting................. Uses historical sales and Uses historical sales Model is more
saturation data as input and saturation data as independent of
to clothes washers input to clothes historical data inputs.
household stock washers household stock It uses model estimates
accounting due to lack accounting due to lack of annual sales as the
of model estimates prior of model estimates input into stock
to 1980. prior to 1980. accounting after 1951.
Housing Start Data............... Recommended using AEO Uses AEO 1996 Housing Uses AEO 1999
1996 Housing Starts Starts Projection. projections adjusted to
Projection. reflect housing
completions.
Initial Stock Assumption......... Pre-1957 clothes washer Pre-1957 clothes washer 1951 automatic washer
stock initialized as stock initialized as stock initialized at
zero. zero. 1.63 million (1950
sales) for one-year age
washers decreasing
linearly to 1.03
million at 13-year
vintage and zero
thereafter.
Operation Cost Comparison........ None--no shipments model Measured operating cost Measures savings in
yet For NES incremental savings relative to the current year relative
cost from the baseline real operating cost in to a baseline machine
washer. 1997 of a 1997 base (MEF=0.817) with
case machine current fuel costs.
(MEF=0.817).
Fuel Site-to-Source Conversion... constant value........... conversion varies yearly conversion varies yearly
and is generated by and is generated by
EIA's NEMS-BRS \1\ EIA's NEMS-BRS \1\
program. program.
Fuel Prices...................... average from RECS 93..... average of marginal average of marginal
prices determined from prices determined from
RECS93. RECS93.
Escalation of Fuel Prices........ AEO98.................... AEO98................... AEO99.
Fuel Price Extrapolation from LBNL method.............. method used by EIA, method used by EIA,
2020 to 2030. consistent with new LCC consistent with new LCC
methodology. methodology.
Water Heater Fuels............... electricity, gas, oil.... electricity, gas, oil... added LPG.
Water & Wastewater Prices........ urban rates: $3.18 per average rates: $2.66 per updated average for
1000 gallons. 1000 gallons in 1998. urban & rural:
avg.=$2.48 per 1000
gals. (1998) (see LCC).
Water & Wastewater Price 0%....................... 2.96% an average from 2.96% an average from
Escalation. LCC--a weighting of LCC--a weighting of
3.01% and 0.64% (see 3.01% and 0.64% (see
LCC). LCC).
Base Case: H-axis Escalation 0.5%..................... 0.5%.................... 0.5%.
Rates.
Base Case: H-axis Sales.......... 3% in 1998............... 6.25% in 1998........... 6.25% in 1998.
Discount Rate.................... 7%....................... 7%...................... 7%.
Manufacturer Mark-ups............ Min. 1.000............... Min. 1.000.............. Range: varies with
Mean 1.175............... Mean 1.175.............. standard level.
Max. 1.350............... Max. 1.350.............. Distribution: uniform.
Distribution: triangular. Distribution: triangular
----------------------------------------------------------------------------------------------------------------
\1\ EIA approves use of the names NEMS (National Energy Modeling System) only to describe an AEO version of the
model with out any modification to code or data. Since, in this work, there will be some minor code
modifications, DOE proposes use of the name NEMS-BRS for the model as used here.
Shipments Model. In the Supplemental ANOPR, we examined several
different approaches to forecasting washer sales. The investigated
models included an Auto-Regressive Moving Average Model (ARIMA), a
Multi-Variate Time Series Fit, a Saturation/Lifetime Model, and an
Accounting Model with elasticity. Of the different approaches, we
selected the Accounting Model because it was the most full-featured
model which included price and operating cost elasticities. At the July
1999 Workshop we described the revised accounting model for projecting
annual clothes washer shipments. After stakeholder comment the Shipment
model was further revised and integrated into a single spreadsheet
called the NES/Shipment spreadsheet. It includes the following
features:
Combined effects of price, operating cost, and features on
annual U.S. shipments
Market segments (e.g., new housing, replacement decisions,
non-owner adding a washer)
Decisions to repair rather than replace
Purchases of used washers
Age categories of clothes washers
The NES/Shipment spreadsheet now incorporates information from the
DOE Consumer Analysis. Since the Supplemental ANOPR, DOE has gathered
additional information about features of clothes washers that influence
consumers' purchase decisions, and analyzed consumer's stated
preferences. This new information also has been calibrated with updated
information about historical purchases. Details of the consumer
analysis and shipment
[[Page 59566]]
spreadsheet are explained in Chapters 8 (Consumer Analysis) and 9
(Shipments) of the TSD.
Shipment Elasticities. The Department received many comments
concerning which elasticities need to be considered in the shipments
model. Whirlpool notes that combining the impacts of the purchase
behavior of discretionary buyers with the postponement and repair
decisions or ``forced purchase'' consumers, and assuming energy
reduction regulation of 35% (a $250 retail price increase), it is
reasonable to expect shipment decreases in excess of 10%. (Whirlpool,
No. 141 at 10). Amana states that the elasticity of price and sales
needs to be considered. (Amana, No. 146 at 3). Both ACEEE and the
Alliance to Save Energy stated that the only market for which there is
likely to be an elasticity of demand is the early replacement market,
since homeowners expect to have access to a clothes washer and will
continue to purchase them even if the cost is higher. (ACEEE, No. 150
at 6 and Alliance to Save Energy, No. 148 at 3). The Oregon Office of
Energy and ACEEE recommended reconstructing the shipments model without
a price-based elasticity variable but including variables for
disposable income, credit availability, usable washer capacity, and
average washer cleaning ability (Oregon Office of Energy, No. 190 at 11
and ACEEE, No. 188 at 5).
In consideration of the comments received, the Department elected
to use elasticity values for the following factors: clothes washer
price, operating savings, top/front access feature, clothes washer
price/income. In addition, income elasticities, and interest rate
elasticities were added as input options to the spreadsheet. Details of
how elasticities were derived are explained in Chapter 9 (Shipments) of
the TSD.
Source of Elasticities. After we presented the shipments model at
the July 1999 Workshop, we received several comments relating to how
the value of elasticities are determined. The Oregon Office of Energy
took issue with the methodologies used to derive price elasticities,
especially the use of the consumer conjoint analysis. (Oregon Office of
Energy, Nos.162 at 8 and No. 190 at 4-9). Several comments also
question whether price elasticities derived from past declining prices
would apply in a future market of increased prices due to a standard.
(ACEEE, No.188 at 3; Oregon Office of Energy, No.190 at 8; and PG&E,
No. 189 at 2-3). PG&E also questions the use of the consumer research
survey to calibrate elasticity variables. It states that instead of
asking questions about a 10-year-old washer, the questions should have
been posed for a series of washer ages. It also believes that the
likely repair cost of a washer is likely to exceed the $150 value used
in the questionnaire. (PG&E, No. 189 at 2).
Many enhancements were made to the shipment model to address the
stakeholder comments listed above. The purpose of these model
enhancements is to provide the best possible estimates of the impacts
of standards, consistent with the recent history of washer shipments,
clothes washer market structure and consumer preferences. These
enhancements are: (1) Calibration of the model over a longer historical
period. (2) more detailed and accurate calculation of operating costs
and savings (3) inclusion of additional user specified explanatory
macroeconomic variables (4) inclusion of consumer responsiveness to
price and operating costs as calibrated to historical clothes washer
shipments. (5) calibration of the relative size of the features
response, and estimation of the rate at which clothes washer owners
might drop out of the market using the results from the Clothes Washer
Consumer Analysis. (6) use of NFO Research Incorporated data from a
1996 survey (prepared for AHAM) to estimate the proportion of early
(discretionary) replacements, and the proportion of new versus used
purchases. (7) consideration of AHAM historical shipments and
statistics on the recent (post 1994 standard) changes in mean clothes
washer efficiency. (8) inclusion of Consumer Reports data on repair
rates during the first five years of the clothes washer lifetime. These
enhancements are described in more detail below.
Market Segments. Shipment models used prior to the supplemental
ANOPR accounted for the new clothes washer and the replacement markets
which assumed that a washer was replaced by a new machine when it broke
down. The new shipment model presented at the July 1999 Workshop
provides a more detailed accounting of different market segments,
washer ownership categories and accounts for a variety of other market
dynamics including new versus used shipments, changes in repair
behavior and life extension of machines through extra repairs.
Houses That Drop Out of Washer Market. Houses that drop out of the
washer market are where the laundry is done at Laundromats or elsewhere
and were not accounted for in analyses presented prior to the July 1999
Workshop. One stakeholder commented that the analysis will be
incomplete and not useful without an assessment of the used appliance
market, and participation in that market on the part of low income
consumers. (Oregon Office of Energy, No. 162 at 11). Another comment
emphasized that low income consumers will find it increasingly
difficult to purchase clothes washers at more stringent standard
levels, and may simply not be able to buy a new machine. Thus DOE
should expect an increase in used/repaired clothes washer sales and a
relative decrease in shipments of new high efficiency models.
(Whirlpool, No. 141 at 15). In response to the previous comments, the
revised shipments model takes in account the households that drop out
of the washer market, and assumes that they wash their clothes at a
Laundromat or elsewhere.
Cost of Repair and Used Washers. The shipment model presented at
the July 1999 Workshop incorporated changes in the prices of new
washers, but not changes in the prices of used washers or the price of
repairing an existing washer. The Department received a comment which
asked that the model incorporate the higher price of used washers and
repair services resulting from increased demand as consumers delay the
purchase of new washers in response to higher prices. (Assessment of
DOE Shipments Model for Forecasting the Impacts of Clothes Washer
Standards, Kenneth Train, Comment No. 194 at 13). The proposed rule
Shipment/NES model now gives an input option for the cost ratios of
repairing a washer and of buying a used washer instead of buying a new
washer. This option is now an input in terms of the ratio between these
options and buying a new washer. See TSD Chapter 9 on Shipments.
Residence-Change-Induced Purchase. The versions of the Shipment
model presented at the July 22 Workshop only considered residence
changes for those purchasing new housing. The model now includes
purchases of washers for change of residences for new and existing
housing. This improvement to the model has a significant effect on
forecasted shipments.
Implied Discount Rate Used in Historical Fit. The implied discount
rate is a value that describes how important energy cost savings are to
consumers relative to increases in price. This is different from the 7%
discount rate used in the analysis that describes the time value of
money in order to convert dollar costs and savings (first price and
operating savings) to the same year in order to determine the LCC. Ken
Train commented that both a 20% implied discount rate which was derived
from the conjoint analysis and a 75% implied discount rate which was
derived from
[[Page 59567]]
the WashWise survey are consistent with historical shipments data. (Ken
Train, Comment No. 194 at 4 and 13). A lower implied discount rate
would place greater value on future operating cost savings and result
in a lower drop in shipments as compared to the higher implied discount
rate. We agree that several values for the implied discount rate can be
used to fit a curve to historical data. We derived an implied discount
rate by two methods: (1) The relationship of price and efficiency for
current models (based on the engineering analysis) is consistent with
an implied discount rate of 50-100%; (2) while stated preference
surveys are often unreliable indicators of revealed preferences, we
analyzed. We believe the WashWise intercept survey results are a more
accurate measurement of the implied discount rate because its sole
intent was specific to recent washer purchases, designed to measure
price savings and interviewed consumers at the point of purchase. In
contrast, the conjoint analysis provided a limited set of choices for
implied discount rate and was conducted in a setting removed from
purchase decision. See TSD Chapter 9. Both derivations (engineering
analysis and WashWise) are consistent with an implied discount rate of
75%. This value is higher than found from studies of other appliances,
perhaps in part because consumers are unaware of how much water costs
contribute to operating expense. The Department is interested in
comments.
Historical Fit; Operating Cost Scaling; Stock Accounting; Housing
Start Data; Initial Stock Assumption; and Operation Cost Comparison.
These parameters were refined, after the July 1999 Workshop, to reflect
updated data or longer historical time periods. These changes were not
prompted by any specific stakeholder comments.
Fuel Site-to-Source Conversion. The Appliance Energy Efficiency
Standards Advisory Committee recommended (letter dated April 21, 1998)
that we define a range of energy conversion factors and associated
emission reductions based on generation displaced by standards. In the
supplemental ANOPR, a constant conversion factor was used. EEI
commented that the value shown for electric conversion (heat rates) on
the NES spreadsheet is overstated by at least 11% because AEO 98
(authored by EIA) assigns the same factor for fossil fuel power plant
heat rates to hydro-electric and other renewable forms of electric
generation. This results in overstating primary energy savings from
reductions in electricity usage. (EEI, No.122 at 7). We have addressed
this issue by using a year-by-year conversion rate that is calculated
based on displaced generation using NES.
Fuel Prices. As discussed in the LCC methodology section, after the
supplemental ANOPR, marginal gas and electric prices were used, whereas
previously average prices were used. The marginal price is the price
paid for the last increment of fuel used. Refer to Section C. Life-
Cycle Cost (LCC) Analysis for a description of these changes.
Escalation of Fuel Prices. The Alliance to Save Energy, ACEEE and
the Oregon Office of Energy believe that assumptions of residential
price declines are overstated. (Alliance to Save Energy, No. 148 at 1-
2; ACEEE, No. 150 at 4; and Oregon Office of Energy, No. 162 at 6). The
Alliance to Save Energy recommends that DOE analyze at least one case
with flat residential energy prices. (Alliance to Save Energy, No. 148
at 1-2). ACEEE believes EIA estimates of residential energy price
declines remain too high. It cites its April 1998 comments in which it
referred to a survey by the Association of Energy Service Professionals
of its members projected on average that residential bills will
increase 4.9% with restructuring while commercial and industrial bills
will decrease an average of 5.8 to 8.6%. Based on this information,
ACEEE believes EIA's projections of future residential electricity
prices are higher in the 1999 Annual Energy Outlook than in the 1998.
ACEEE recommends that DOE conduct a sensitivity analysis with smaller
price declines, such as the EIA high use forecast. (ACEEE, No. 150 at
4). Similarly, the Oregon Office of Energy believes residential rates
will remain flat or rise somewhat. (Oregon Office of Energy, No.162 at
6).
While we generally agree that future energy prices are uncertain,
we are relying on the EIA and its forecasts for the analysis. To
account for the uncertainty, we have included the high and low fuel and
electricity forecasts, i.e., AEO low & high economic growth scenarios
in the analysis.
Fuel Price Extrapolation from 2020 to 2030. Refer to Section C.
Life-Cycle Cost (LCC) Analysisfor a description of this change.
Water Heater Fuels. LPG was added as a fuel type.
Water and Wastewater Prices; and Water and Wastewater Price
Escalation. Refer to Section C. Life-Cycle Cost (LCC) Analysis for a
description of these changes.
Base Case H-axis Escalation Rates; and Base Case H-axis Sales.
These issues concern the estimated initial percentage of sales that are
H-axis and the estimated escalation of H-axis sales. EEI, Whirlpool,
NRDC, City of Seattle, Seattle Public Utilities, Alliance Laundry
System LLC, Northwest Power Planning Council, ACEEE, and Amana believe
that the projections for sale of high efficient units is too low. (EEI,
No. 122 at 3; Whirlpool, No. 141 at 12; NRDC, No. 138 at 8; City of
Seattle, Seattle Public Utilities, No. 126 at 2; Alliance Laundry, No.
145 at 20; Northwest Power Planning Council, No. 135 at 1; ACEEE, No.
150 at 7; and Amana, No. 146 at 2). Northwest Energy Efficiency
Alliance, Oregon Office of Energy and the Alliance to Save Energy
believe DOE overestimated sale in the absence of standards because many
incentive programs are ending. (Northwest Energy Efficiency Alliance,
No. 131 at 4; Oregon Office of Energy, No. 162 at 2; and Alliance to
Save Energy, No. 148 at 3-4).
NRDC commented that the Supplemental ANOPR proposal to use a single
basecase forecast with a known gradually increasing penetration of high
efficiency clothes washers is incorrect. (NRDC, No. 138 at 8).
Whirlpool, Amana, and Alliance Laundry System LLC provide estimates of
the growth of H-axis clothes washers. Whirlpool commented that the
forecasts presented in the TSD of 0.5% per year growth in market
penetration is significantly low based on actual trends. (Whirlpool,
No. 141 at 12). Amana commented that the assumption of 1.5% H-axis
washers in 1995 with a 0.5% yearly increase has proved to be a
conservative assumption and that its competitive information indicates
a 6% market share of H-axis machines is a more appropriate number to
use at this time. (Amana, No. 146 at 2). Alliance Laundry System LLC
commented that it does not believe that front load washing penetration
will actually shrink 20% in the next 24 months, as the DOE spreadsheet
analysis presumes. (See TSD at page 8-16, Table 8.3). It believes that
a more realistic projection would show front load washing machines
gaining in acceptance for those consumers who choose energy and water
savings over other features such as ergonomics or far lower purchase
price. (Alliance Laundry, No. 145 at 20). With regard to the
assumptions concerning sales in absence of standards, ACEEE believes
the DOE forecast seems conservative in early years. Saturation are
currently running higher than DOE's forecast. But, without a standard,
we'd expect a leveling off at around 15% saturation (based on levels
achieved in the North-
[[Page 59568]]
West, even with heavy promotion). (ACEEE, No. 150 at 7).
The Northwest Energy Efficiency Alliance believes that the baseline
forecast of resource-efficient clothes washers (RECWs) should begin
with a current (1998) market penetration rate of 5-6%. It should then
assume an annual increase of .75% every year until 2030 (i.e., 28%
market share by 2030). This forecast would place the market share of
RECWs at approximately 10% in 2030. This value represents the
conservative end of the range of estimates provided by manufacturers
participating in the Northwest Energy Efficiency Alliance's interviews,
(Market Progress Evaluation Report: WashWise No. 2, publication No.
E98-012.). (Northwest Energy Efficiency Alliance, No. 131 at 4.) Oregon
Office of Energy believes DOE has potentially overestimated the base
case share of high efficiency clothes washers defined by DOE, based on
AHAM data, to be 35% more efficient than the minimum efficiency
required of today's machines in future shipments. There is not a lot of
expectation that this share will grow significantly, now or in the near
term, as organized efficiency programs are seriously on the wane.
(Oregon Office of Energy, No. 162, at 2).
DOE agrees the market share of the more efficient clothes washers
is greater than estimated. Based on the comments, DOE has updated the
estimate of the H-axis sales to assume in 1998 that 6.25% of clothes
washers are H-axis, escalating at 0.5% a year.
Discount Rate. The NES analysis assumes a fixed discount rate of
7%. This is used in determining the savings and costs due to a new
standard and for calculating the NPV. This is unchanged from the ANOPR.
Manufacturer Mark-ups. For the Supplemental ANOPR the shipment
weighted average was used for the manufacturing mark-up. One value was
used for all standard levels. For the proposed rule, a range of
manufacturer mark-ups were calculated for each standard level. The
average of the range was used.
2. Net National Employment
The Process Rule includes national employment impacts among the
factors DOE considers in selecting a proposed standard. The Department
estimates the impacts of standards on employment for appliance
manufacturers, relevant service industries, energy suppliers, and the
economy in general. We estimate two employment impacts: total and
direct impacts. Total impacts--or net national employment impacts--are
impacts on the national economy, including the manufacturing sector
being regulated. Direct employment impacts would result if standards
led to a change in the number of employees at manufacturing plants and
related supply and service firms. The MIA only discusses the direct
employment impacts.
Net national employment impacts from clothes washer standards are
defined as net jobs created or eliminated in the general economy as a
consequence of: (1) reduced spending by end users on energy
(electricity, gas including LPG, and oil) and water; (2) reduced
spending on new energy supply by the utility industry; (3) increased
spending on the purchase price of new clothes washers; and (4) the
associated indirect effects of those three factors throughout the
national economy. The resulting net savings are expected to be
redirected to other forms of economic activity. We expect these shifts
in spending and economic activity to affect the demand for labor, but
there is no generally accepted method for estimating these effects.
One method to assess the possible effects on the demand for labor
of such shifts in economic activity is to compare sectoral employment
statistics developed by the Labor Department's Bureau of Labor
Statistics (BLS). The BLS regularly publishes its estimates of the
number of jobs per million dollars of economic activity in different
sectors of the economy, as well as the jobs created elsewhere in the
economy by this same economic activity. BLS data indicates that
expenditures in the electric sector generally create fewer jobs (both
directly and indirectly) than expenditures in other sectors of the
economy. There are many reasons for these differences, including the
capital-intensity of the utility sector and wage differences. Based on
the BLS data alone, we believe net national employment will increase
due to shifts in economic activity resulting from the clothes washer
standards.
In developing this proposed rule, the Department attempted a more
precise analysis of national employment impacts using an input/output
model of the U.S. economy. The model, ImBuild, was developed by the
Office of Building Technology, State and Community Programs, DOE.
ImBuild is a PC-based economic analysis model that characterizes the
interconnections among 35 sectors as national input/output structural
matrices. It can be applied to future time periods. ImBuild calculates
the total effect on employment, including job creation or deletion in
the manufacturing sector. Inputs to the ImBuild model are outputs of
the NES/Shipment spreadsheet. Since the electric utility sector is more
capital-intensive and less labor-intensive than other sectors (see
Bureau of Economic Analysis, Regional Multipliers: A User Handbook for
the Regional Input-Output Modeling System (RIMS II), Washington, DC.,
U.S. Department of Commerce, 1992), a shift in spending away from
energy bills into other sectors would be expected to increase overall
employment. For more details on the net national employment analysis,
please see Chapter 13 in the TSD.
Because this is a new analysis for an energy conservation standard
rulemaking, we are requesting public comments on the validity of the
analytical methods used and the appropriate interpretation and use of
the results of this analysis.
F. Consumer Analysis
In determining whether a standard is economically justified, we
consider any other factors that the Secretary deems to be relevant.
Under this factor, the Department is considering the life-cycle cost
impacts on those subgroups of consumers who, if forced by standards to
purchase H-axis machines, would choose to repair their existing
machines.
Consumer Sub-Groups
The consumer analysis evaluates impacts to any identifiable groups,
such as consumers of different income levels, who may be
disproportionately affected by any national energy efficiency standard
level. The impact on consumer sub-groups is determined using the LCC
spreadsheet model for low income households and for household where the
head of the household was a senior.
G. Manufacturer Impact Analysis
The manufacturer analysis estimates the financial impact of
standards on manufacturers and calculates impacts on employment and
manufacturing capacity.
Prior to initiating the detailed MIA for the clothes washer
rulemaking, the Department prepared a document titled ``Clothes Washer
Manufacturer Impact Analysis'' which outlines procedural steps and
identifies issues for consideration in the MIA. This document was
presented at a public workshop held on December 14-15, 1998. It was
based on the general framework for the MIA presented by the Department
at a workshop in March 1997 and was modified for its application to the
clothes washer rule.
As proposed in the approach document, the MIA was conducted in
three phases. Phase 1, ``Industry Profile,'' consisted of the
preparation of
[[Page 59569]]
an industry characterization. Phase 2, ``Preliminary Industry Cash
Flow,'' had as its focus the larger industry. In this phase, the
Government Regulatory Impact Model (GRIM) was used to prepare a
preliminary industry cash flow analysis. Here, the Department used
publicly available information developed in Phase 1 to adapt the GRIM
structure to facilitate the analysis of new clothes washer standards.
In Phase 3, ``Sub-Group Impact Analysis,'' the Department discussed
fully the results of the Preliminary Industry Cash Flow analysis with
each manufacturer and identified manufacturer-specific variances.
Phase 3 also entailed documenting additional impacts on employment
and manufacturing capacity through a structured interview process.
Phase 1, Industry Profile. Phase 1 of the MIA consisted of
preparing an Industry Profile. Prior to initiating the detailed impact
studies, DOE received input on the present and past structure and
market characteristics of the clothes washer industry. This activity
involved both quantitative and qualitative efforts to assess the
industry and products to be analyzed. Issues addressed included
manufacturer market shares and characteristics, trends in the number of
firms, the financial situation of manufacturers, and trends in clothes
washer characteristics and markets.
The industry profile included a top-down cost analysis of the
appliance industry that was used to estimate the disaggregated costs of
a baseline clothes washer. The cost structure was used to derive cost
and financial inputs for the GRIM--e.g., material, labor, overhead,
depreciation, Sales General & Administration (SG&A), and Research &
Development (R&D). The profile was also instrumental in estimating the
manufacturer and retail mark-ups that were used in the Life-Cycle Cost
Analysis.
Publicly-available quantitative data published by the U.S. Bureau
of Census with regards to the clothes washer industry was included in
Chapter 3 of the preliminary Technical Support Document (TSD) dated
October 1998 accompanying the clothes washer Supplemental ANOPR dated
November 19, 1998. These reports include such statistics as the number
of companies, manufacturing establishments, employment, payroll, value
added, cost of materials consumed, capital expenditures, product
shipments, and concentration ratios.
The Department also utilized additional sources of information to
further characterize the clothes washer industry. These included
company Securities and Exchange Commission (SEC) 10K and annual
reports, Moody's company data reports, Standard & Poor's (S&P) stock
reports, value line industry composites, and Dow Jones Financial
Services.
Phase 2, Preliminary Industry Cash Flow. Phase 2 of the MIA had as
its focus the ``larger'' industry. The analytical tool used for
calculating the financial impacts of standards on manufacturers is the
GRIM. In Phase 2, the GRIM was used to perform a preliminary industry
cash flow analysis.
For the Preliminary Industry Cash Flow Analysis, DOE prepared a
list of financial values to be used in the GRIM industry analysis.
These were calculated by studying publicly-available financial
statements of clothes washer manufacturers. A detailed definition of
financial inputs and their values for a ``prototypical'' clothes washer
manufacturer was presented in Chapter 9 of the preliminary TSD. Values
for currently sold ``Base Case'' prices were derived from the Bureau of
Census's Current Industrial Reports (CIRs). The dollar value of clothes
washer shipments from factories is divided by the quantity of clothes
washers shipped to arrive at the per-unit manufacturer price. In order
to estimate manufacturing costs--labor, materials, depreciation/
tooling, etc.--from the average manufacturer prices obtained from the
CIRs, a typical clothes washer industry cost structure was developed
using publicly-available information from the Census of Manufacturers
(CMs) and from industry statistics obtained from the SEC-10K reports.
Finally, in preparing the Preliminary Industry Cash Flow Analysis, DOE
used the same clothes washer shipment scenarios developed for the
National Energy Savings (NES) spreadsheet.
The Department received a comment accurately signaling an error in
the Preliminary Industry Cash Flow Analysis calculation of the cost of
capital. (NRDC, No. 138, at 12-13). The suggested change was made and
its impact is the reduction of the discount factor from 7.25% to 6.65%.
Another comment received concerned DOE's assumption of a 10.5% working
capital requirement. Given ValueLine's estimate of just under 7%, a
more detailed explanation for the Department's assumption was
requested. (Oregon Office of Energy, No. 162 at 8). The Department
recognizes that there exists considerable variability in the working
capital requirements of various firms based on information obtained
from SEC 10-K reports. Discussions with appliance industry analysts
indicated that working capital requirements are in the 7-14%, thus the
ANOPR input assumption. This assumption was subsequently verified
through interviews with six clothes washer manufacturers and found to
be accurate.
Phase 3, Sub-Group Impact Analysis. DOE conducted detailed
interviews with clothes washer manufacturers representing over 99% of
domestic clothes washer sales to gain insight into the potential
impacts of standards. During these interviews, the Department solicited
the information necessary to validate industry cash flows and to assess
employment and capacity impacts.
The interview process played a key role in the MIA, since it
allowed manufacturers to privately express their views on important
issues and provide confidential information needed to assess financial,
employment, and other business impacts. To verify the assumptions used
to derive the Preliminary Industry Cash Flow, an interview guide
solicited information on the possible impacts of new standards on
manufacturing costs, product prices, and sales.
Each manufacturer was provided a version of the GRIM that included
discrete manufacturer costs for all percentiles reported by the AHAM.
In preparation for the interview, each manufacturer could, if desired,
input its own data and assumptions to develop its own expected cash
flow. Alternatively, manufacturers could select the percentile values
that best represented their costs at different efficiency levels.
The evaluation of the possible impacts on direct employment and
manufacturing assets also drew heavily on the information gathered
during the interviews. The interview guide solicited both qualitative
and quantitative information. Supporting documentation was requested
whenever applicable. Interview participants were asked to identify all
confidential information provided in writing or orally as such.
Approximately two weeks following the interview, an interview summary
was provided to give manufacturers the opportunity to confirm the
accuracy and protect the confidentiality of all collected information.
Small Manufacturer Sub-Group. We received a comment following the
publication of the preliminary TSD indicating that smaller
manufacturers of clothes washers could be negatively affected more than
other manufacturers by any proposed standard. (Amana, No. 146 at 3). To
assess the potential impacts of possible washer standards on
[[Page 59570]]
smaller manufacturers, Arthur D. Little (ADL) conducted preliminary
interviews with the three smallest clothes washer manufacturers (by
market share) and held discussions on possible approaches to performing
the MIA for smaller manufacturers. ADL and the manufacturers discussed
how a small-manufacturer GRIM could be constructed and contrasted with
the industry cash flow analysis. Foremost in the discussions were
issues surrounding data collection and aggregation and the ensuing
confidentiality concerns given the small group of manufacturers and
their unbalanced size.
All of the smaller manufacturers worked with ADL to develop a
company-specific GRIM analysis for their firms. Even within the small
manufacturer sub-group, ADL found significant differences in financial
structure for the firms depending on their business models (e.g.,
original equipment manufacturer (OEM) vs. retail emphasis, product
market niche). ADL found that from a financial standpoint the common
characteristic of this group, in contrast with the overall industry,
was its need to spread fixed costs over smaller production volumes.
During the interviews, small manufacturers demonstrated that several of
the key costs necessary to meet any new regulation are largely
independent of the product volume produced. The most apparent are the
costs necessary to design a new product meeting the proposed energy
standards. Other costs, such as plant engineering, some tooling, and
other capital costs, have significant portions that are independent of
final production volumes.
To assess the ``differential'' potential impacts of possible washer
standards on smaller manufacturers without revealing individual
manufacturers' proprietary information, ADL prepared a cash flow
analysis of the potential effects on a ``prototypical'' smaller
manufacturer. The basic approach to analyzing the economic effects on a
smaller manufacturer involved determining the smaller company's fixed
cost structure relative to the industry average and the likely ability
of the smaller company to recover its full costs and investments after
implementation of a new standard.
Dryer Analysis: An important consideration regarding new efficiency
standards that came to light during the course of the manufacturer
interviews, was the pull-through effect of clothes washers on the
clothes dryer market. The majority of manufacturers indicated that
stringent standards on clothes washers would have an effect on dryers
since dryer sales are highly correlated to washer sales as people
frequently buy these appliances as a set. A separate GRIM (referred to
as the Dryer GRIM) was prepared in an effort to model the financial
impact of these considerations on the dryer business.
Impact on Clothes Washer Repair Industry: Should an increase in
energy efficiency standards result in higher prices for new clothes
washers, consumers may be influenced to repair old units rather than
purchase new ones at the higher price. The Oregon Office of Energy
strongly believes the parts side of the manufacturers' businesses
should be included in the manufacturer impact analysis and urges the
Department to gather the data necessary. (Oregon Office of Energy, No.
190, at 10). The Department agrees that the repair business should be
considered. Based on the forecast of clothes washer repairs in the LBNL
shipments model, the Department estimated the impact of a change in
clothes washer repair revenues on the NPV of the clothes washer
manufacturers' repair parts business.
H. Utility Analysis
The utility analysis estimates the effects of the reduced energy
consumption due to improved appliance efficiency on the utility
industry. Because electric utility restructuring is well underway, it
is no longer valid to assume a cost recovery mechanism under public
utility regulation, which was the basis of previous utility impact
analyses. Therefore, this utility analysis consists of a comparison
between forecast results for a case comparable to the AEO99 Reference
Case and forecasts for policy cases incorporating each of the clothes
washer trial standard levels.
Table 4 lists the major assumptions DOE used in the clothes washer
utility analysis. We discuss each of these assumptions briefly in this
section. For more details on the utility analysis, see Chapter 12 in
the TSD.
Table 4.--Assumptions Used in the Utility Impact Analysis
------------------------------------------------------------------------
Description Assumption
------------------------------------------------------------------------
Energy Prices............................ AEO99.
Energy Savings............................ From the NES spreadsheet as
site energy savings.
Interpolation of Scaling Factors.......... Linear.
------------------------------------------------------------------------
The Department uses a variant of EIA's widely recognized National
Energy Modeling System (NEMS) called the National Energy Modeling
System-Building Research and Standards (NEMS-BRS) for the utility
analysis, together with some scaling and interpolation calculations.\5\
EIA uses NEMS primarily for the purpose of preparing the Annual Energy
Outlook. Using NEMS, EIA produces a baseline forecast for the U.S.
energy economy through 2020. The NEMS-BRS model used for this analysis
is based on the AEO99 version of NEMS with minor modifications.
---------------------------------------------------------------------------
\5\ For more information on NEMS, please refer to the National
Energy Modeling System: An Overview 1998. DOE/EIA-0581 (98),
February, 1998. DOE/EIA approves use of the name NEMS to describe
only an official version of the model without any modification to
code or data. Because our analysis entails some minor code
modifications and the model is run under various policy scenarios
that are variations on DOE/EIA assumptions, the name NEMS-BRS refers
to the model as used here. BRS is DOE's Building Research and
Standards office.
---------------------------------------------------------------------------
NEMS-BRS has several advantages that have led to its adoption as
the source for basic forecasting in the appliance energy efficiency
analyses. NEMS-BRS relies on the AEO99 assumptions, which are well-
known and accepted due to the exposure and scrutiny each AEO receives.
In addition, the comprehensiveness of NEMS-BRS permits the modeling of
interactions among the various energy supply and demand sectors and the
economy as a whole, so it produces a sophisticated picture of the
effects of appliance standards. Perhaps most importantly, because it
explicitly simulates the impact on the industry, NEMS-BRS provides an
accurate estimate of marginal effects, which yield better indicators of
actual effects than estimates based on industry-wide average values.
Marginal rates show only the effects of standards. Average rates show
the effects of standards as well as what is happening in the market.
To analyze the effects of standards, we evaluate the trial standard
levels by entering the changes in electricity, gas, LPG, and oil
consumption values into the NEMS-BRS Residential Demand Module. We took
the energy savings input from the NES spreadsheet, applied it to the
clothes washer, water heater, and clothes dryer end uses, and allocated
it appropriately among census divisions. In the TSD, we report results
for several key industry parameters, notably residential energy sales,
generation, and installed capacity, including the fuel mix that is used
for generation. See Chapter 12 of the TSD for more details.
I. Environmental Analysis
The Department determines the environmental impacts of each
standard level as required in Section
[[Page 59571]]
325(o)(2)(B)(i)(VI), 42 U.S.C. 6295(o)(2)(B)(i)(VI). Specifically, DOE
calculates the reduction in carbon from carbon dioxide (CO2)
and nitrogen oxides (NOX) emissions with the NEMS-BRS
computer model, together with external calculations. DOE also
calculated the reduction in sulfur dioxide (SO2) household
emissions which are not covered by NEMS-BRS.
Table 5 lists the major assumptions DOE used in the clothes washer
environmental analysis. We discuss each of these assumptions briefly in
this section. For more details on the environmental analysis, please
see the Environmental Assessment which is published with the TSD.
Table 5.--Assumptions Used in the Environmental Analysis
------------------------------------------------------------------------
Description Assumption
------------------------------------------------------------------------
Energy Prices............................. AEO99.
Energy Savings............................ From the NES spreadsheet as
site energy savings.
Interpolation of Scaling Factors.......... Linear.
Household Emissions....................... C, NOX & SO2 estimated from
general factors.
------------------------------------------------------------------------
We analyze the environmental effects of proposed clothes washer
energy-efficiency standards using NEMS-BRS plus some scaling and
interpolation calculations. Inputs to NEMS-BRS are similar to those
used for the AEO99 reference case, except residential energy usage for
clothes washer, water heaters, and clothes dryers is reduced by the
amount of energy (gas, oil, LPG, and electricity) saved due to the
clothes washer trial standard levels.
The environmental analysis considers two pollutants, SO2
and NOX, and one emission, carbon. NEMS-BRS has an algorithm
for estimating NOX emissions from power generation. Since we
use the AEO99 version of NES, the May 25, 1999, EPA rule (64 FR 28249)
on trading of NOX is fully incorporated in our analysis.
However, NEMS-BRS estimates of NOX emissions are incomplete
because NEMS-BRS does not estimate household emissions. Household
emissions result from the combustion of fossil fuels, primarily natural
gas, within individual homes. Because households that use natural gas,
fuel oil, or LPG contribute to NOX emissions, DOE's analysis
includes a separate household NOX emissions estimation,
based on simple emissions factors derived from the general literature.
NEMS-BRS tracks carbon emissions based on the total of fuels consumed.
NEMS-BRS also produces comprehensive estimates of the benefits of the
trial standard levels, so no additional analysis is necessary. Because
SO2 emissions from power plants are capped by clean air
legislation, physical emissions of this pollutant from electricity
generation will be only minimally affected by possible clothes washer
standards. Therefore, we do not consider power plant SO2
emissions here, although we report household emissions savings using a
method similar to that described for NOX. See Appendix EA-1
in the TSD for a description of the methodology used to derive emission
factors for residential combustion.
The NES spreadsheet provides the input of energy savings for NEMS-
BRS, which then produces the emissions forecast. We calculate the net
benefits of the standard as the difference between emissions estimated
by the reference case version of NEMS-BRS and the emissions estimated
with the trial clothes washer standard in place. See the Environmental
Assessment (EA) which is published with the TSD for details.
V. Analytical Results
A. Trial Standard Levels
In selecting trial standard levels, we followed the guidance set
forth in the Process Rule. We identified and selected candidate
standard levels at the lowest LCC (Trial Standard Levels 4 and 5), a
three year or less payback period (Trial Standard Levels 1 and 2), and
the most energy efficient achievable design (Trial Standard Level 6).
Additionally, we selected as a trial standard level the efficiency
levels proposed in the joint recommendation submitted to the Department
by clothes washer manufacturers and energy conservation advocates
(Trial Standard Level 3). The Joint Stakeholders Comment levels would
go into effect in stages, with the first level going into effect on
January 1, 2004, and the second level going into effect on January 1,
2007. The initial standard will achieve a modified energy factor (MEF)
of 1.04 (approximately a 22 percent reduction in energy consumption
over the current standard). The later standard will achieve a MEF of
1.26 (approximately 35 percent reduction in energy consumption over the
current standard).
We have examined six trial standard levels. Table 6 presents the
baseline and trial standard levels, the associated MEF values and the
percentage reduction in energy use, from the baseline, achieved at the
trial standard level. Trial Standard Level 3 is the combination of
standards proposed in the Joint Stakeholders Comment. (Joint Comment
No. 204). In addition, Table 6 presents the retail price and
incremental price from the baseline. For the clothes washer rulemaking
the method we used to generate the manufacturing costs needed for the
engineering analysis was the efficiency level approach, reporting
relative costs of achieving energy efficiency improvements (represented
here as the percentage reduction in energy use).
Table 6.-- Trial Standard Levels For Clothes Washers
----------------------------------------------------------------------------------------------------------------
Incremental
Trial standard level MEF Percent reduction in Retail price from
energy use price baseline
----------------------------------------------------------------------------------------------------------------
Baseline............................. 0.817.................. 0...................... $421
1.................................... 1.021.................. 20..................... 450 $29
2.................................... 1.089.................. 25..................... 534 113
3.................................... 1.04 in 2004........... 22 in 2004............. 474 53
1.26 in 2007........... 35 in 2007............. 661 240
4.................................... 1.257.................. 35%.................... 661 240
5.................................... 1.362.................. 40%.................... 664 243
6.................................... 1.634.................. 50%.................... 775 354
----------------------------------------------------------------------------------------------------------------
[[Page 59572]]
1. Economic Impact on Consumers
a. Life-Cycle-Cost. To evaluate the economic impact on consumers,
we conducted a LCC analysis for each of the trial standard levels as
well as the proposed standards. LCC results are presented as
differences in the LCC relative to the baseline clothes washer design.
Life-cycle cost was determined for three scenarios: low, reference and
high growth. The reference growth scenario assumes the average fuel
price forecast found in the Energy Information Administration's (EIA)
Annual Energy Outlook 1999 (AEO99) and expected water price escalations
based on earlier DOE analysis, which can be found in Section 7.2 of the
TSD. The high growth scenario assumes high economic growth will
increase the demand for fuel, and therefore increase the price of fuel.
The high growth scenario also assumes a high water price and wastewater
escalation rate. The reference case is assumed by AEO the most likely
case and is bounded by the high and low growth scenarios. In Table 7 we
present results for the reference case. Results for the high and low
growth scenarios can be found in Section 7.2.3 of the TSD.
Table 7 shows the average LCC savings and the percentage of
households benefitting for each of the trial standard levels. The
average LCC savings for each of the trial standards and the joint
comment proposed standards are positive. The convention is used whereby
all values in parentheses are negative. A negative change in LCC means
that the LCC after standards is lower than without standards, and
implies positive LCC savings. Note that washers purchased under stage 1
and stage 2 of joint comment proposal have different LCC savings. The
LCC analysis indicates that 89% of households purchasing a clothes
washer at the 1.04 MEF level would benefit, in comparison to the LCC of
a baseline clothes washer. Starting in 2007, the LCC analysis indicates
that 80% of households will benefit from the joint comments standard
level, in comparison to the LCC of a baseline clothes washer.
Table 7.--Summary of LCC Results for the Reference Case
----------------------------------------------------------------------------------------------------------------
Mean change in Percent with
Trial standard level MEF LCC from LCC less than
baseline \1\ baseline \2\
----------------------------------------------------------------------------------------------------------------
1............................................. 1.021........................... (61) 84
2............................................. 1.089........................... (211) 87
3............................................. 1.04 in 2004.................... (103) 89
1.26 in 2007.................... (260) 80
4............................................. 1.257........................... (242) 79
5............................................. 1.362........................... (243) 80
6............................................. 1.634........................... (176) 69
----------------------------------------------------------------------------------------------------------------
\1\ The baseline LCC, based on the shipment weighted average of the most likely costs, is $1633.
\2\ For a sample of 10,000 households.
b. Payback Period. As part of the LCC analysis is the payback
analysis. We report the median payback for the reference case from the
distribution of paybacks for each trial standard level in Table 8. The
median payback is the median number of years required to recover, in
energy savings, the increased costs of the efficiency improvements. The
mean or average payback period is also reported. Results for the high
and low growth scenarios can be found in Section 7.2.3 of the TSD.
Table 8.--Summary of Payback Period Results--AEO reference
----------------------------------------------------------------------------------------------------------------
Median \1\ Mean \1\
Trial standard level MEF payback payback
----------------------------------------------------------------------------------------------------------------
1............................................. 1.021........................... 0.6 4.4
2............................................. 1.089........................... 4.0 5.0
3............................................. 1.04 in 2004.................... 3.5 4.6
1.26 in 2007.................... 5.0 6.8
4............................................. 1.257........................... 5.1 7.0
5............................................. 1.362........................... 5.1 7.0
6............................................. 1.634........................... 7.0 8.7
----------------------------------------------------------------------------------------------------------------
\1\ For a sample of 10,000 households.
c. Rebuttable Presumption Payback. The Act states that if the
Department determines that the payback period of a standard is less
than three years as calculated under the test procedure, there shall be
a rebuttable presumption that such trial standard level is economically
justified. The Act further states that if this three year payback is
not met, this determination shall not be taken into consideration in
deciding whether a standard is economically justified. Section
325(o)(2)(B)(iii), 42 U.S.C. 6295(o)(2)(B)(iii). Rebuttable Presumption
Paybacks (PBPs) are presented in order to provide the established
rebuttable presumption that a energy efficiency standard is
economically justified if the additional product costs attributed to
the standard are less than three times the value of the first year
energy cost savings. Rather than using distributions for input values,
the Rebuttable PBP is based on discrete values and is based on the DOE
clothes washer test procedure assumptions. These values (including
cycles per year, electric fuel source, etc.) correspond to those
outlined in the DOE test procedure, found in 10 CFR 10, Volume 3, Part
430, Subpart B, Appendix J1. The result is a single payback value and
not a distribution of PBPs.
Payback periods are calculated at the new standard level for all
efficiency levels of product sold in the basecase. For this analysis
the Department has assumed two efficiency levels in the
[[Page 59573]]
basecase: baseline units (MEF=.817) and units at a 35% reduction in the
energy use of the baseline model (MEF=1.26) to represent the H-axis
market segment. With the presently available data, the baseline
efficiency level is weighted with a market share of 91% and the
horizontal axis market share is weighted at 9%.
The payback periods are calculated for the expected effective year
of the standard ( 2004 or 2007) and are presented in Table 9.
Table 9.--Rebuttable Presumption Payback in Years
----------------------------------------------------------------------------------------------------------------
Payback for Payback for
baseline to 35% efficiency
standard level level to Market share
Trial standard level MEF ---------------- standard level weighted
---------------- payback period
Market share = Market share =
91% 9%
----------------------------------------------------------------------------------------------------------------
1..................................... 1.021................... 2.1 NA 2.1
2..................................... 1.089................... 2.9 NA 2.9
3..................................... 1.04 in 2004............ 2.5 NA 2.5.
1.26 in 2007............ 4.1 19.8 5.5
4..................................... 1.257................... 4.2 NA 4.2
5..................................... 1.362................... 4.3 19.6 5.7
6..................................... 1.634................... 5.7 23.2 7.3
----------------------------------------------------------------------------------------------------------------
Note: NA = not applicable.
The results in Table 9 are based on an increase of H-axis sales per
year of 0.5%. Previously the annual escalation rate of H-axis washer
sales market were assumed to capture an additional 0.5% per year of all
clothes washer sales but now the annual sales of H-axis clothes washers
is determined by an amount equal to 0.5% of the previous year's V-axis
sales. The negotiated scenario of a two-tier standard with MEF levels
of 1.04 becoming effective in the year 2004 and a MEF level of 1.26
becoming effective in the year 2007 is also represented. The values
shown for the second tier were calculated for the year 2007. All other
calculations are based on the year 2004. The effective year does not
have a great impact on the payback period because only the fuel and
water price are different for different years.
As can be seen from Table 9, Trial Standard Levels 1, 2 and the
first level of 3 satisfy the rebuttable presumption test.
d. Consumer Sub-Group Analysis. As part of the consumer analysis we
evaluated the impact to any identifiable groups or consumers, such as
households of different income levels, who may be disproportionately
affected by any national energy efficiency standard level. This
analysis examines the economic impacts on different groups of consumers
by estimating the average change in LCC and by calculating the fraction
of households that would benefit. We analyzed the potential effect of
standards for households with low income levels and senior households,
two consumer subgroups of interest identified by DOE and supported by
stakeholders. Seniors is defined as having a head of household over 65.
Low income is defined as at 100% of poverty level. (Inputs to the
spreadsheet used in determining life-cycle-cost and payback periods are
explained in detail in Chapter 7 of the TSD). We present the results of
the analysis in Table 10.
Table 10.--Consumer Subgroup LCC Savings and Percent of Households Benefitting
--------------------------------------------------------------------------------------------------------------------------------------------------------
Sample households benefitting (%) Average LCC savings ($)
Trial std levels MEF -----------------------------------------------------------------------------
Total Senior Low income Total Senior Low income
--------------------------------------------------------------------------------------------------------------------------------------------------------
1.......................................... 1.021........................ 84 79 85 61 41 69
2.......................................... 1.089........................ 87 80 88 211 137 243
3.......................................... 1.04 in 2004................. 90 84 90 103 68 118
1.26 in 2007................. 81 72 81 260 147 310
4.......................................... 1.257........................ 79 71 81 242 132 289
5.......................................... 1.362........................ 80 70 80 243 130 287
6.......................................... 1.634........................ 69 55 71 176 61 227
--------------------------------------------------------------------------------------------------------------------------------------------------------
The two consumer subgroups show the same trend in average LCC
savings and percent of sample households benefitting as the total
sample of households.
For the low-income subgroup the percentage of households
benefitting from standards is either the same or greater than for the
general population. This can be explained by looking at the cycles per
year (i.e., washer loads) used in determining the LCC. This number is
estimated from the number of occupants in a household. Our RECS sample
of low income households showed a greater number of people per
household and we calculated 410 cycles per year, greater than the 392
used for the general population.
The senior household subgroup had less people per household, and
therefore had less wash loads per year (on average 299 wash loads per
year or 24% less wash loads). Therefore, seniors benefitted from
standards somewhat less.
Other differences that could explain changes in LCC and the
percentage in a subgroup benefitting from standards are other factors
that determine the amount spent on fuel. Fuel costs are higher if
electric water heaters and dryers are used instead of gas. The
geographic location of these populations and the price they pay for
fuel also affect the number of households in a subgroup
[[Page 59574]]
benefitting. These differences were small when compared to the
differences in LCC due to the cycles per year between the subgroups and
the total sample population.
An analysis on the effects on payback period by subgroup are shown
in Table 11. In agreement with the LCC results, the payback periods for
the low income subgroup were somewhat shorter than that for the overall
population, while the payback periods were somewhat longer for the
senior subgroup. The primary reason for the differences in payback
period is the same as for the LCC analysis; the differences in wash
loads per year.
Table 11.--Consumer Subgroup Payback Period Comparisons
----------------------------------------------------------------------------------------------------------------
Average payback period in years
-----------------------------------------------
Trial Std levels MEF Total RECS
sample Senior Low income
----------------------------------------------------------------------------------------------------------------
1..................................... 1.021................... 4.4 5.4 4.4
2..................................... 1.089................... 5.0 6.4 4.9
3..................................... 1.04 in 2004............ 4.6 5.7 4.5.
1.26 in 2007............ 6.8 8.4 6.5
4..................................... 1.257................... 7.0 8.7 6.8
5..................................... 1.362................... 7.0 8.8 6.9
6..................................... 1.634................... 8.7 10.9 8.4
----------------------------------------------------------------------------------------------------------------
2. Economic Impact on Manufacturers
We performed a Manufacturer Impact Analysis (MIA) to determine the
impact of standards on manufacturers. The complete analysis is Chapter
11 of the TSD. In conducting the analysis, we conducted detailed
interviews with six clothes washer manufacturers that together supply
more than 99% of the domestic clothes washer market. The interviews
provided valuable information used to evaluate the impacts of a new
standard on manufacturers' cash flows, manufacturing capacities and
employment levels.
Definition of Shipments Scenarios. The Manufacturer Impact Analysis
was conducted using three shipment scenarios: High Price Elasticity
Scenario, Medium Price Elasticity Scenario, and Medium Price/Income
Elasticity Scenario. The High Price Elasticity scenario most closely
resembles the original shipments forecast which was presented at the
July 1999 workshop and used during the interviews. The results
presented in this notice are for the Medium Price Elasticity Scenario--
the reference case--which forecasts a reduction in clothes washer
shipments approximately half way between the other two scenarios.
Additional parameters used in forecasting shipments are summarized in
Table 17. Results for the High Price Elasticity and Medium Price/Income
Elasticity Scenarios are shown in Chapter 11 of the TSD.
Definition of Business Scenarios. During the interviews, several
manufacturers stated that they would possibly exit the clothes washer
manufacturing business if the standard exceeded certain improvement
levels. To capture this uncertainty in future industry dynamics, ADL
evaluated the industry financial impacts using two different business
scenarios. In the first scenario, the ``no consolidation scenario,'' it
is assumed that all current manufacturers continue to manufacture
clothes washers and maintain their market share, even if they believe
they will be unable to recuperate their incremental costs. This could
result in a negative Standard Case industry net present value (INPV)
for some manufacturers. In the second scenario, the ``industry
consolidation scenario,'' it is assumed that some manufacturers would
exit the industry or lose significant market share. In this scenario,
their volumes are redistributed among the remaining and more profitable
players in the industry.
Industry Cash Flow Results. The Department used the interviews to
understand each manufacturer's incremental costs and its ability to
pass through these costs at the various standard levels. Some
manufacturers provided their cash flow analysis using the GRIM
spreadsheet while others provided information on mark-ups, cost pass-
through assumptions, prices, and expected shipments which were used by
DOE to develop individual company cashflows. Individual company
cashflow results were aggregated to calculate standard induced changes
in Industry NPV (INPV) at each of the potential standard levels.
The aggregated industry Standard Case INPV for the ``No
Consolidation'' scenario and the Medium Price Elasticity Shipment
Scenario is presented in Table 12. Results for both business scenarios
and the three shipment scenarios are presented in Chapter 11 of the
TSD. Not all manufacturers provided information at the 50% level
(MEF=1.634) and hence the cash flows at this level were extrapolated
from the available information. Similarly, the Department extrapolated
data submitted at the 20% and 25% efficiency levels to estimate the
impacts of a two step standard with a reduction in the energy use of
the baseline model of approximately 22% (MEF=1.04) in 2004 followed by
a second step at 35% in 2007.
Table 12.--Industry Cash Flow Results for the ``No Consolidation'' Scenario--Medium Price Elasticity
--------------------------------------------------------------------------------------------------------------------------------------------------------
Base case Standard
Trial standard level MEF INPV Standard case Change in INPV % Change in INPV deviation
(million) INPV ($million) ($million) % NPV
--------------------------------------------------------------------------------------------------------------------------------------------------------
1........................................... 1.021......................... 1,439.1 1,420.4-1,349.5 (18.7)-(89.6) (1.3)-(6.2) 11.5
2........................................... 1.089......................... 1,439.1 1,033.8-877.2 (405.2)-(561.9) (28.2)-(39.0) 11.4
3........................................... 1.04 in 2004, 1.26 in 2007.... 1,439.1 1,028.0-920.8 (411.0)-(518.3) (28.6)-(36.0) 15.8
4........................................... 1.257......................... 1,439.1 944.7-842.3 (494.4)-(596.8) (34.4)-(41.5) 17.7
5........................................... 1.362......................... 1,439.1 1,002.1-929.9 (437.0)-(509.2) (30.4)-(35.4) 27.7
[[Page 59575]]
6........................................... 1.634......................... 1,439.1 989.7-815.2 (449.4)-(623.8) (31.2)-(43.3) 27.7
--------------------------------------------------------------------------------------------------------------------------------------------------------
From Table 12, we note that energy efficiency standards could
result in losses of INPV between $411.0 and $518.3 million (28.6-36%)
for the consensus proposal (Trial Standard Level 3). Although the
impacts of the consensus proposal approach those of Trial Standard
Levels 5 and 6, the Department found the impacts of Trial Standard
Levels 5 and 6 to be much more unevenly distributed between firms. This
large variability of impacts is attributed to the presence of existing
product at these levels (H-axis designs) for some firms which may gain
a competitive advantage over firms that do not have product.
The standard deviation (SD) \6\ values reported in Table 12 provide
a measure of how widely individual companies' percentage NPV changes
are dispersed from the industry percentage change in value (% change in
INPV). Calculating the SD of individual company % value change at each
efficiency level from the industry INPV % change yields the following
results: at Trial Standard Level 1 the SD is 11.5%; at Trial Standard
Level 2 the SD is 11.4%; at Trial Standard Level 3 the SD is 15.8%, at
Trial Standard Level 4 the SD is 17.7%; and at Trial Standard Levels 5
and 6 the SD leaps to 27.7%. This is significant because the greater
the difference in impacts between manufactures, the greater the risk of
industry consolidation. Several manufacturers believe that setting the
standard at Trial Standard Level 5 or more would result in industry
consolidation and the exit of two or three firms.
---------------------------------------------------------------------------
\6\ Refer to Chapter 11 of the TSD for details of how the
standard deviation was calculated.
---------------------------------------------------------------------------
Compared with Trial Standard Level 4 (MEF=1.26 in 2004), the
industry impacts of the consensus proposal (Trial Standard Level 3) are
lower and more evenly distributed among the manufacturers. A potential
factor lessening the impact of the consensus proposal from the impacts
shown is the possible effect of technological innovation. Delaying the
standard implementation date to 2007 for the more stringent level
(MEF=1.26) gives manufacturers more time to research and develop lower-
cost solutions to achieving higher standards.
Impact on Clothes Dryer Business. The majority of manufacturers
indicated that stringent standards on clothes washers would have a
corresponding effect on clothes dryers. Dryer sales are highly
correlated to washer sales as people frequently buy these appliances as
a set. From the manufacturers' data, it is estimated that approximately
45% to 55% of washers are sold in pairs with dryers. Therefore, any
change in washer volumes will impact a significant portion of the dryer
business. A separate GRIM was run in an effort to model the financial
impact of these considerations on the dryer business. Table 13 presents
the Base and Standard Case INPV for the Medium Price Elasticity
Shipment Scenario. The loss of value is significant for standard levels
2 and greater.
Table 13.--Standard Case NPV for Dryer Business--Medium Price Elasticity Scenario
----------------------------------------------------------------------------------------------------------------
Base case Standard Change in
Trial standard level MEF INPV case INPV INPV % Change
($million) ($million) ($million) in INPV
----------------------------------------------------------------------------------------------------------------
1.................................... 1.021................... 665.1 664.5 (0.6) (0.1)
2.................................... 1.089................... 665.1 660.6 (4.48) (0.7)
3.................................... 1.04 in 2004, 1.26 in 665.1 654.1 (11.0) (1.7)
2007.
4.................................... 1.257................... 665.1 648.3 (16.84) (2.5)
5.................................... 1.362................... 665.1 647.9 (17.2) (3.9)
6.................................... 1.634................... 665.1 638.3 (26.8) (4.0)
----------------------------------------------------------------------------------------------------------------
At the more stringent standard levels, manufacturers expect that
they will redesign and retool their clothes washer platforms and these
changes will dictate a change to the dryer platform as well.
Manufacturers estimate that, at the more stringent standard levels of
25% and above, total industry conversion costs for dryers could be in
the range of $25 million to $75 million. The Dryer GRIM does not
consider any conversion costs (capital and design) that might be
required to upgrade the dryer platforms at the more stringent standard
levels. Any such investments will increase the negative impact on the
INPV of the dryer industry over and above those presented in Table 13.
In addition, based on data gained from manufacturers, a decline in
washer-related dryer sales will result in a decline in employment
related to dryer production. The greatest impact is at and above a 35
percent reduction in the energy use of the baseline model, when
shipments are expected to decline substantially, resulting in a similar
impact on related employment levels. Table 14 summarizes the potential
impact of new clothes washer standards on dryer industry employment. As
shown Trial Standard Level 3 and above will result in a loss of more
than 200 jobs in the dryer industry.
[[Page 59576]]
Table 14.--Impact of Standards on Dryer Shipments on Dryer Industry Employment--Medium Price Elasticity Scenario
----------------------------------------------------------------------------------------------------------------
Forecast 2004 Impact
Trial standard level MEF 1999 dryer dryer relative to
employment employment 2004 base case
----------------------------------------------------------------------------------------------------------------
Basecase.............................. Base Case............... 2,544 2,594 ..............
1..................................... 1.021................... 2,544 2,578 (16)
2..................................... 1.089................... 2,544 2,520 (74)
3..................................... 1.04 in 2004............ 2,544 2,506/2,488 \1\(88)/(147)
1.26 in 2007............
4..................................... 1.257................... 2,544 2,352 (241)
5..................................... 1.362................... 2,544 2,348 (245)
6..................................... 1.634................... 2,544 2,226 (368)
----------------------------------------------------------------------------------------------------------------
\1\ Reduction on top of first standard reduction, not cumulative.
Impact on Clothes Washer Repair Industry. Should an increase in
energy efficiency standards result in higher prices for new clothes
washers, consumers may be influenced to repair old units rather than
purchase new ones at the higher price. Based on the forecast of clothes
washer repairs in the shipments model, we estimated the impact of a
change in clothes washer repair revenues on the INPV of the clothes
washer manufacturers' repair parts business. The INPV of the estimated
additional profit stream is presented in Table 15. As may be observed
the increase in NPV for the repair industry is one order of magnitude
lower than the loss of value of the dryer industry. For instance for
Trial Standard Level 3 the net present value of increases in OEM
revenue is .9 million compared to a loss of 11 million for the dryer
business.
Table 15.--Net Present Value of OEM Repair Revenues
[$ millions]
------------------------------------------------------------------------
Medium price
Trial standard level MEF elasticity
------------------------------------------------------------------------
1................................. 1.021............... 0.1
2................................. 1.089............... 0.2
3................................. 1.04 in 2004........ 0.9
1.26 in 2007........
4................................. 1.257............... 1.1
5................................. 1.362............... 1.1
6................................. 1.634............... 1.7
------------------------------------------------------------------------
Impacts on Small Manufacturers. Converting from a company's current
basic product line involves creating a new design, testing it and
moving it into production with associated capital investments. Small
manufacturers of clothes washers, because of their need to spread fixed
costs over smaller production volumes, could be affected more
negatively than large manufacturers by a proposed standard. The
Department conducted a separate GRIM analysis for small manufacturers
which are presented in Table 16. The changes in value due to a standard
for a small company compared to a large company illustrates the effects
of capital and engineering costs that are fixed with respect to
production volume.
As shown in Table 16, a small manufacturer (4.2% market share)
producing 331,000 clothes washers absent standards in 2004 sees its
value reduced by 78.9-89.9% for Trial Standard Level 2. A small
manufacturer (2.1% market share) producing 165,000 clothes washers in
2004 will lose all of its value (143.1-153.9%) since it is above 100%
for Trial Standard Level 2. This compares to the loss of 28.2-39.0% for
a large manufacturer (20% market share) producing 1,578,000 clothes
washers in 2004 for Trial Standard Level 2.
At the time of the manufacturer interviews, the U.S. washer
industry had one manufacturer of washers with a production volume of
approximately 300,000 units (Alliance Laundry Systems, LLC), most of
whose production was supplied to another relatively small appliance
company (Amana Appliances) under the terms of a private label supply
agreement entered into when the two companies were sold by Raytheon.
This agreement ended in September 1999, and Amana announced that it
would produce its own vertical-axis washers instead of sourcing them
from Alliance. Amana and Alliance both report that any standard that
requires a 25 percent or higher improvement (for Trial Standard Level 2
and above) in energy efficiency would certainly require major
investments and the development of a horizontal-axis machine. At this
time, neither Amana nor Alliance believes they have a functioning
horizontal-axis washer capable of cost-competitively participating in
the mass consumer marketplace.
The decision by either of the smaller producers, or any other
washer manufacturer, to exit washer production would require an
assessment of the linkages with their dryer business and with other
appliances. Manufacturers and their retail partners generally perceive
some value in being a full-line producer and greater value in producing
both washers and dryers. If a manufacturer perceived significant value
in its dryer businesses and if the total product line generated
acceptable rates of return, it might continue to produce washers, even
in the face of declining company values due to investment in new washer
technology. Based on the major loss in company value associated with
meeting a more stringent standard above Trial Standard Level 2 as seen
in Table 16, it is likely that one or both of the two smaller companies
would cease to produce washers covered by the standard and might also
cease to market them.
[[Page 59577]]
Table 16.--Change in Value of Small Manufacturers, Results for the ``No Consolidation'' Scenario--Medium Price
Elasticity Scenario (%)
----------------------------------------------------------------------------------------------------------------
Large Small Small
manufacturer manufacturer manufacturer
Trial standard level MEF (20% market (4.2% market (2.1% market
share) share) share)
----------------------------------------------------------------------------------------------------------------
1.................................. 1.021................ (1.3)-(6.2) (17.4)-(22.4) (37.9)-(42.8).
2.................................. 1.089................ (28.2)-(39.0) (78.9)-(89.8) (143.1)-(153.9).
3.................................. 1.04 in 2004......... (28.6)-(36.0) (83.1)-(90.6) (152.2)-(159.6).
1.26 in 2007.........
4.................................. 1.257................ (34.4)-(41.5) (91.8)-(98.9) (164.4)-(171.6).
5.................................. 1.362................ (30.4)-(35.4) (87.7)-(92.7) (160.3)-(165.3).
6.................................. 1.634................ (31.2)-(43.3) (90.7)-(102.8) (166.0)-(178.1).
----------------------------------------------------------------------------------------------------------------
Impacts on Employment. The weight of available evidence does not
support a conclusive assessment of the impact that new energy
efficiency standards would have on employment levels in the clothes
washer industry. The data that is available is extremely variable and
the true extent of the impact will be largely dependent on whether
manufacturers choose to exit the industry or move to non-domestic
production facilities.
Manufacturers stated that any decrease in shipments will have a
similar effect on employment, as employment levels tend to track
production levels. However, while reductions in shipments may lead to
reductions in employment at various manufacturers due to plant
closures, this could be matched by increased employment in United
States plants at those firms picking up the additional market share and
corresponding volumes. In addition, the manufacturers' data supplied to
the AHAM indicates that incremental labor-related costs are expected to
increase at the higher efficiency levels (by up to 50 percent at the 40
percent reduction in the energy use of the baseline model level), due
to the increased complexity of production and assembly of more
efficient machines. Tracking employment levels by shipments using this
data actually indicates total industry employment could increase as the
change in labor expense for higher efficiency machines is greater than
the change in labor resulting from the decline in shipments.
B. Significance of Energy Savings
The Act requires a standard to result in ``significant'' energy
savings. Section 325(o)(3)(B), 42 U.S.C. 6295(o)(3)(B). While the term
``significant'' is not defined in the Act, the U.S. Court of Appeals,
in Natural Resources Defense Council v. Herrington, 768 F.2d 1355, 1373
(D.C. Cir. 1985), stated that Congress intended ``significant'' energy
savings to be savings that were not ``genuinely trivial.'' The energy
savings for all of the trial standard levels considered in this
rulemaking are non-trivial and therefore we consider them
``significant'' within the meaning of Section 325 of the Act.
All efficiency levels for which we have engineering data were
analyzed. Each efficiency level was analyzed for three scenarios. Some
of the parameters that were varied are inputs to the shipment-model and
some are inputs to the NES spreadsheet model. Since shipments have an
effect on the national energy savings, changes to the shipment inputs
have a direct effect on the national energy savings. Changes in the
input parameter affect the base case results as well as the standards
case results. Table 17 outlines the input parameters used to generate
the high and low bound sensitivities. Three scenarios are run: (1)
reference case, (2) lower bound and (3) upper bound. The lower bound is
defined as having medium price/income elasticity. The upper bound is
defined as the price elasticity being high. All other parameters are
unchanged from the reference case.
Table 17.--NES Spreadsheet Model Shipments Sensitivities
----------------------------------------------------------------------------------------------------------------
Lower bound (least drop Upper bound (greatest
Parameter Reference case in shipments after drop in shipments after
standard) standards)
----------------------------------------------------------------------------------------------------------------
AEO growth........................... AEO99 reference........ AEO99 reference........ AEO99 reference.
Water Escalation Rate................ medium................. medium................. medium.
H-axis base case escalation.......... 0.5%................... 0.5%................... 0.5%.
Price Elasticity..................... medium................. none................... high.
Price/Income Elasticity.............. none................... medium................. none.
Top-loading Elasticity............... medium................. medium................. medium.
Manufacturer incremental price mark- medium................. medium................. medium.
up.
Year of standard..................... 2004................... 2004................... 2004.
----------------------------------------------------------------------------------------------------------------
The Lower Bound Scenario results in the greatest energy savings.
This scenario used price/income data to fit an equation to historical
data. This resulted in a greater number of shipments and greater
savings in energy than the reference case forecasted. The Upper Bound
Scenario resulted in the least energy savings. This scenario assumed a
high price elasticity. This resulted in lower shipments and energy
savings. The Reference Case Scenario used medium or average values as
parameter inputs and is bounded on both sides by the other scenarios
described above. This is considered the most likely scenario.
The national energy savings and net present value results from the
NES spreadsheet for the reference case are shown in Tables 18 and 19,
respectively. More detailed results are also available in Appendix N of
the TSD. Results are cumulative to 2030 and are shown as absolute
energy and water savings and as the discounted value of
[[Page 59578]]
these savings in dollar terms. Table 20 shows the water savings for
different standard levels. It can be seen that while the two-tier
standard is a combination or hybrid of Trial Standard Levels 1 and 4,
it is estimated to attain nearly the same energy, water, and national
cost savings as a pure Trial Standard Level 4.
All of the trial standard levels considered in this rulemaking have
significant energy savings, ranging from 2.12 quads to 7.53 quads,
depending on the trial standard level.
Table 18.--Reference Case--All Parameters Set to Medium or Average
------------------------------------------------------------------------
Energy
Trial standard level MEF savings
quads
------------------------------------------------------------------------
1.................................. 1.021................. 2.12
2.................................. 1.089................. 4.04
3.................................. 1.04 in 2004.......... 5.52
1.26 in 2007..........
4.................................. 1.257................. 5.99
5.................................. 1.362................. 6.03
6.................................. 1.634................. 7.53
------------------------------------------------------------------------
C. Lessening of Utility or Performance of Products
This section summarizes the results of the department's consumer
utility analysis. Preferences of low-income and elder populations are
also addressed.
The focus group and conjoint results indicate that price is the
most important attribute when consumers are purchasing a new clothes
washer, although in each case another attribute is virtually tied with
price in terms of importance. In the focus groups, 83% of the
respondents included price in their top ten list of important clothes
washer attributes, while 81% included wash tub capacity in that same
list. In the conjoint analysis, price had the highest relative
importance score (26%), followed closely by the availability of a wash
load size option on the control panel (25%). Of the six attributes
included in the conjoint analysis survey, door placement was the fifth
most important attribute with a relative importance score of 11% (for
further information, see Chapter 8 and Appendix J of the TSD).
In the likelihood of purchase scenarios, the purchase probabilities
were more sensitive to price than any of the other washer
attributes.\7\ While the shift from a standard to a high efficiency
machine resulted in a drop in the estimated purchase probability, this
was due to the change in price rather than to changes in the other
attributes. When price was held constant at the standard efficiency
level and the other attributes were allowed to change to reflect a high
efficiency machine, the likelihood of purchase increased. This is due
to the fact that consumers value energy savings more than top load door
placement.
---------------------------------------------------------------------------
\7\ Purchase probabilities indicate the likelihood a consumer
will purchase a particular clothes washer, assuming (s)he has made
the decision to buy a new clothes washer.
---------------------------------------------------------------------------
The purchase probability findings indicate that low-income
consumers and elderly consumers were slightly more likely to purchase a
high efficiency, front-load washing machine than the total group of
consumers. When the analysis focused exclusively on the impacts of
clothes washer prices increasing, the data indicated that a smaller
percentage of low-income consumers would be willing or able to purchase
machines in the $650 price level, when compared to the total group of
consumers. There was no statistical difference between elderly
consumers and the full sample at the $650 level. While the data from
the price impact questions indicate that low-income consumers are more
adversely affected by higher clothes washer prices than the sample as a
whole, the Department is unable to determine the magnitude of the
impact on future clothes washer purchases using the survey data. For
instance, the consumer analysis survey found that approximately half of
the low-income respondents currently do not own a clothes washer, while
more than three-quarters of the respondents making more than $25,000
annually own a washing machine. The Department is unable to determine
if this ratio would change with a price increase due to the proposed
standards. The fact that the survey found low-income consumers are more
likely to use store financing plans, such as no interest for one year,
to purchase a clothes washing machine than the sample as a whole
further clouds the magnitude of the new standards' impact on low-income
consumers because store financing encourages consumers to purchase high
price products by allowing payments to be paid over a number of months.
The Department concludes that none of the trial standard levels
reduces the performance of clothes washers. The Department conducted
extensive consumer research to understand the product features that
consumers value in clothes washers. Generally the trial standard levels
increase clothes washer price and reduce operating cost but do not
affect other product offerings. A significant issue raised during the
rulemaking concerns the relative consumer utility of V-axis and H-axis
washers. Some stakeholders believed that higher standard levels would
require H-axis designs and this would result in eliminating the top
loading V-axis machines thereby reducing utility for some consumers who
prefer that option. Recent product offerings of high efficiency V-axis
washers show that the axis-efficiency relationship is untenable.
D. Impact of Lessening of Competition
The Act directs the Department to consider any lessening of
competition that is likely to result from standards. It further directs
the Attorney General to determine the impact, if any, of competition
likely to result from such standard and transmit such determination,
not later than 60 days after the publication of a proposed rule to the
Secretary, together with an analysis of the nature and extent of such
impact. Section 325(o)(2)(B)(i)(V), 42 U.S.C. 6295(o)(2)(B)(i)(V).
In order to assist the Attorney General in making such a
determination, the Department has provided the Department of Justice
(DOJ) with copies of this notice and the TSD for review. At DOE's
request, the DOJ reviewed the manufacturer impact analysis interview
questionnaire to ensure that it would provide insight concerning any
lessening of competition due to any proposed trial standard levels.
E. Need of the Nation To Save Energy and Net National Employment
1. National Net Present Value
Table 19 lists the National NPV for the trial standard levels. The
NPV considers the combined discounted energy savings less the increased
consumer costs of a particular trial standard level. We base this
calculation on all expenses and savings occurring between 2004 and
2030.
The national NPV is positive for all the trial standard levels. In
this analysis, a positive NPV means that the estimated energy savings
are greater than the increased costs due to standards. It can be
observed that the National NPV of Trial Standard Levels 2 through 5 are
in the range of 14 to 17 billion dollars. Trial Standard Level 6
however has a lower NPV of 10 Billion due to the higher first cost of a
clothes washer at this efficiency level.
[[Page 59579]]
Table 19.--Reference Case--All Parameters Set to Medium or Average
------------------------------------------------------------------------
Net present
value (NPV)
(billion
Trial standard level MEF 1997$)
(discounted to
1999)
------------------------------------------------------------------------
1................................. 1.021............... 3.66
2................................. 1.089............... 14.29
3................................. 1.04 in 2004........ 15.30
1.26 in 2007........
4................................. 1.257............... 16.88
5................................. 1.362............... 16.73
6................................. 1.634............... 10.79
------------------------------------------------------------------------
2. National Water Savings
Table 20 presents the estimated energy water savings. The savings
is positive for all of the trial standard levels.
Table 20.--Reference Case--All Parameters Set to Medium or Average
------------------------------------------------------------------------
Water savings
Trial standard level MEF trillion
gallons
------------------------------------------------------------------------
1................................. 1.021............... 0.53
2................................. 1.089............... 9.09
3................................. 1.04 in 2004........ 11.59
1.26 in 2007........
4................................. 1.257............... 12.94
5................................. 1.362............... 12.94
6................................. 1.634............... 10.85
------------------------------------------------------------------------
3. Environmental Impacts
Enhanced energy efficiency improves the Nation's energy security,
strengthens the economy and reduces the environmental impacts of energy
production. The energy savings from clothes washer standards result in
reduced emissions of CO2, SO2 and NOX
and aid in addressing global climate change and reducing air pollution.
Depending on the standard level chosen, the cumulative emission
reductions to 2030 range from 38-135 Mt for carbon equivalent, 115-364
thousand metric tons (kt) for NOX, and 28-31 kt for
SO2. Cumulative emissions savings for the power and
households sectors through the year 2030 are presented in Table 21.
Table 21.--Cumulative Emissions Reductions Through 2030: Household and Power Sectors
--------------------------------------------------------------------------------------------------------------------------------------------------------
Trial standard level emission reductions and MEF
-----------------------------------------------------------------------------------------------------------------
Emission 3 1.04 in 2004,
1 0.817 2 1.089 1.26 in 2007 4 1.257 5 1.362 6 1.634
--------------------------------------------------------------------------------------------------------------------------------------------------------
Carbon(Mt)............................ 38.1 70.9 95.1 106.2 107.3 135
NOX (kt).............................. 115.6 193.6 253.5 280.6 283.1 364
SO2 (kt).............................. \1\ 31.4 \1\ 30.3 \1\ 28.1 \1\ 30.3 \1\ 30.3 \1\ 31.4
--------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ Results include only household emissions reductions because the power sector emissions cap implies that savings from electricity generation will be
negligible.
4. Net National Employment
Net national employment impacts from clothes washer standards are
defined as net jobs created or eliminated in the general economy as a
consequence of: (1) Reduced spending by end users on energy
(electricity, gas including LPG, and oil) and water; (2) reduced
spending on new energy supply by the utility industry; (3) increased
spending on the purchase price of new clothes washers; and (4) the
associated indirect effects of those three factors throughout the
national economy. Jobs are created when a clothes washer standard
results in operating cost savings that more than offset the greater
capital required to buy a more efficient clothes washer. More
information on how these impacts are estimated is presented in the Net
National Employment in Chapter 13 of the TSD.
The model used to estimate net national employment impacts suggests
that the greatest number of jobs would be created by the standard level
calling for a 35% reduction in clothes washer energy use. For this
standard level, the model estimates that there would be 142,800 more
jobs in 2030 than if there were no new efficiency standard implemented.
However, it is unlikely that net employment would increase to this
extent if the economy was continuing to perform at levels comparable
those experienced during 2000. Taking into consideration these
legitimate concerns regarding the interpretation and use of the
employment impacts analysis, the Department concludes only that the
proposed clothes washer standards are likely to produce employment
benefits that are sufficient to offset fully any
[[Page 59580]]
adverse impacts on employment in the clothes washer or energy
industries.
F. Conclusion
The Act specifies that any new or amended energy conservation
standard for any type (or class) of covered product shall be designed
to achieve the maximum improvement in energy efficiency which the
Secretary determines is technologically feasible and economically
justified. Section 325(o)(2)(A), 42 U.S.C. 6295(o)(2)(A). In
determining whether a standard is economically justified, the Secretary
must determine whether the benefits of the standard exceed its burdens.
Section 325(o)(2)(B)(i), 42 U.S.C. 6295(o)(2)(B)(i). The amended
standard must ``result in significant conservation of energy.'' Section
325(o)(2)(B)(3)(B), 42 U.S.C. 6295(o)(B)(3)(B).
We consider the impacts of standards at each of six trial standard
levels, beginning with the most efficient level. We have included a
summary of the analysis results in Table 22 to aid the reader in the
discussion of the benefits and burdens for the different trial standard
levels.
Table 22.--Summary Analysis Results
--------------------------------------------------------------------------------------------------------------------------------------------------------
Trial standard level 1 2 3 4 5 6
--------------------------------------------------------------------------------------------------------------------------------------------------------
MEF..................................................... 1.02 1.09 1.04 in 2004, 1.26 1.36 1.63
1.26 in 2007
Total Energy Saved (Quads).............................. 2.12 4.04 5.52 5.99 6.03 7.53
Water Savings (trillion gallons)........................ 0.53 9.09 11.59 12.94 12.94 10.85
NPV (Billion $)......................................... 3.66 14.29 15.3 16.88 16.73 10.79
--------------------------------------------------------------------------------------------------------------------------------------------------------
Emissions
--------------------------------------------------------------------------------------------------------------------------------------------------------
Carbon Equivalent (Mt).................................. 38.1 70.9 95.1 106.2 107.3 134.6
NOX (kt)................................................ 115.6 193.6 253.5 280.6 283.1 364
SO2 (kt) \1\............................................ 131.41 30.31 28.11 30.31 30.31 31.41
--------------------------------------------------------------------------------------------------------------------------------------------------------
Manufacturer Impacts
--------------------------------------------------------------------------------------------------------------------------------------------------------
Cumulative Loss in Industry NPV ($ Million) \2\......... 19.2-90.1 409.9-566.2 421.1-528.4 510.1-612.5 453.1-524.9 474.5-648.9
% Change in INPV........................................ (1.3)-(6.3) (28.5)-(39.3) (29.2)-(36.7) (35.4)-(42.5) (31.7-36.5) (33.0)-(45.2)
Standard Deviation % NPV................................ 11.5 11.4 15.8 17.7 27.7 27.7
--------------------------------------------------------------------------------------------------------------------------------------------------------
Life Cycle Cost ($)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Mean Savings ($)........................................ 61 211 103/260 242 243 176
Percent Households LCC Less than Baseline............... 84 87 89/80 79 80 69.
Payback (years)......................................... 4.4 5 4.6/6.8 7 7 8.7
--------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ Results only include household SO2 emissions reductions because SO2 emissions from power plants are capped by clean air legislation. Thus, SO2
emissions will only be negligibly affected by possible water heater standards.
\2\ Includes impacts on dryer and repair business.
Trial Standard Level 6--MEF 1.63
First, we considered the most efficient level (max tech), MEF 1.63,
which saves a total of 7.53 quads of energy through 2030. This is a
significant amount of energy. The cumulative water savings through 2030
would be 10.85 trillion gallons. The emissions reductions through 2030
would total 134.6 Mt of carbon equivalent, 364 kt of NOX,
and 31.41 kt of SO2, which are significant. At this level,
consumers experience a considerable savings in life cycle cost of $176,
with a payback of 8.7 years.
At Trial Standard Level 6, the clothes washer industry would
experience a cumulative INPV loss of between $474.5-648.9 million which
represents between 33.0 and 45.2% of the clothes washer industry value
absent standards ($1,439.1 million--basecase). This impact is not
evenly distributed among the six major manufactures.\8\ This large
variability of impacts is attributed to the presence of existing
product for some manufacturers at this efficiency level which means
that some firms may gain a competitive advantage. This variability is
measured by the standard deviation of individual companies' changes in
NPV.\9\ At this level the standard deviation in individual companies'
percentage change in NPV is 27.7%. Given the high industry impacts and
the uneven burden on individual firms, there exists a significant risk
of industry consolidation.
---------------------------------------------------------------------------
\8\ Alliance Laundry Systems LLC, Amana Appliances, Frigidaire
Home Products, General Electric Appliances (GEA), Maytag
Corporation, and Whirlpool Corporation.
\9\ The standard deviation is a measure of how widely individual
companies' percentage NPV changes are dispersed from the industry
percentage change in value. Refer to Chapter 11 of the TSD for a
description of the calculation method.
---------------------------------------------------------------------------
Based on the major loss in company value associated with meeting
this trial standard level (90.7 to 102.8% assuming a 2.1% market share
and 166 to 178.1% assuming a 4.2% market share) as shown in Table 16,
it is likely that one or both of the two smaller manufacturers \10\
would cease to produce clothes washers covered by the standard and
might also cease to market commercial clothes washers.
---------------------------------------------------------------------------
\10\ Alliance Laundry Systems LLC and Amana Appliances.
---------------------------------------------------------------------------
The Department concludes that the burdens of Trial Standard Level 6
outweigh the benefits. Consequently, the Department concludes Trial
Standard Level 6 is not economically justified.
Trial Standard Level 5--MEF 1.36
Next, we considered a 1.36 MEF, which saves a total of 6.03 quads
of energy through 2030, also a significant amount. The cumulative water
savings through 2030 for this trial standard level would be 12.94
trillion gallons. The emissions reductions through 2030 would total
107.3 Mt of carbon equivalent, 283.1 kt of NOX, and 30.31 kt
of SO2, which are significant. At this level, consumer
experience a
[[Page 59581]]
considerable savings in life cycle cost of $243, with a 7 year payback.
The clothes washer industry would experience a cumulative INPV loss
of between $453.1-524.9 million. This represents between 31.7 and 36.5%
of industry value absent standards ($1,439.1 million--basecase). For
the same reason in Trial Standard Level 6, this impact is not evenly
distributed among the six major manufactures. At this level the
standard deviation in individual companies' percentage change in NPV is
27.7%. Refer to Chapter 11 of the TSD for a description of the
calculation method for standard deviation. Given the high industry
impacts and the uneven burden on individual firms, there exists a
significant risk of industry consolidation.
Once again based on the major loss in company value associated with
meeting this standard level (87.7 to 92.7% assuming a 2.1% market share
and 160.3 to 165.3% assuming a 4.2% market share), as shown in Table
16, it is likely that one or both of the two smaller manufacturers
would cease to produce washers covered by the standard and might also
cease to market commercial clothes washers.
The Department concludes that the burdens of Trial Standard Level 5
outweigh the benefits. Consequently, the Department concludes Trial
Standard Level 5 is not economically justified.
Trial Standard Level 4--MEF 1.26
Next, we considered a 1.26 MEF, which saves a total of 5.99 quads
of energy through 2030, a significant amount. Just as in the case of
the 1.36 MEF, the cumulative water savings through 2030 would equal
12.94 trillion gallons. The cumulative emissions reductions through
2030, however, are slightly lower for the 1.26 MEF because the
cumulative energy savings is lower for this standard level than the
1.36 MEF. The 1.26 MEF level would save 106.2 Mt of carbon equivalent,
280.6 kt of NOX, and 30.31 kt of SO2, which are
significant. At this level, consumers experience a considerable savings
in life cycle cost of $242 with a payback of 7 years.
Under a 1.26 MEF standard, the clothes washer industry would
experience a cumulative INPV loss of between $510.1-612.5 million. This
represents between 35.4 and 42.5% of industry value absent standards
($1,439.1 million--basecase). Compared to Trial Standard Levels 5 and
6, this impact is more evenly distributed amongst the six major
manufactures as represented by a standard deviation in individual
companies' NPV of 17.7%, and thus there exists less risk of industry
consolidation. Refer to Chapter 11 of the TSD for a description of the
calculation method for standard deviation. This lower standard
deviation reflects the greater diversity of designs, approaches and
engineering flexibility to meet this efficiency level compared to Trial
Standard Levels 5 and 6. However, given the high level of investment
required to meet this efficiency level and an inability to spread fixed
costs over large volumes, small manufacturers are particularly
vulnerable. Based on the major loss in company value associated with
meeting this standard level (91.8 to 98.9% assuming a 2.1% market share
and 164.4 to 171.6% assuming a 4.2% market share), as shown in Table
16, it is likely that one or both of the two smaller manufacturers
would cease to produce washers covered by the standard and might also
cease to market commercial clothes washers.
The Department concludes that the burdens of Trial Standard Level 4
outweigh the benefits. Consequently, the Department concludes Trial
Standard Level 4 is not economically justified.
Trial Standard Level 3--MEF 1.04/1.26
Next, we considered the two step 1.04/1.26 MEF efficiency level,
which had been proposed in the Joint Stakeholders Comment. (Joint
Comment, No. 204). This trial standard level, Trial Standard Level 3,
had energy savings of 5.52 quads through 2030, a significant amount.
The cumulative water savings through 2030 would equal 11.59 trillion
gallons. The emissions reductions through 2030 would total 95.1 Mt of
carbon equivalent, 253.5 kt of NOX, and 28.11 kt of
SO2, which are significant. At the 1.04 MEF level, consumers
would experience a savings in life cycle cost of $103, while they would
experience a LCC savings of $260 at the 1.26 MEF level that would go
into effect in 2007. The payback for the 1.04 MEF level is 4.6 years,
and 6.8 years for the 1.26 MEF. The clothes washer industry would
experience a cumulative NPV loss of between $421.1-528.4 million
representing between 29.2 and 36.7% of basecase industry value.
Compared to a single step standard level of a 1.26 MEF implemented
in 2004, the Joint Stakeholders Comment proposal reduces the impacts of
the standards on manufacturers by delaying the effective date three
years for the 1.26 MEF level. This allows clothes washer manufacturers
more time to depreciate their current assets and plan a more orderly
transition of their production facilities. Delaying the standard
implementation date for the higher efficiency level gives manufacturers
more time to research and develop lower-cost solutions to achieve
higher standards.
Since the MIA shows that small manufacturers suffer the greatest
impact, the Department takes into consideration that the consensus
proposal was developed in consultation with, and supported by small
manufacturers.
Furthermore, we consider that the Joint Stakeholders Comment
specifically states that the proposal is not expected to eliminate any
competitors. (Joint Comment No. 204).
Based on the manufacturers' statement in the Joint Stakeholders
Comment, we believe that these impacts from the proposal are mitigated
and is sufficient to conclude that, given the benefits, the standards
submitted in the Joint Stakeholders Comment are economically justified.
(Joint Comment No. 204).
After carefully considering the analysis and comments, the
Department proposes to amend the energy conservation standards for
clothes washers as proposed by the Joint Stakeholders Comment. (Joint
Comment No. 204). The Department concludes this standard saves a
significant amount of energy and is technologically feasible and
economically justified. In determining economic justification, the
Department finds that the benefits of energy and water savings,
consumer life cycle cost savings, national net present value increase,
job creation and emission reductions resulting from the standard
outweigh the burdens of the loss of manufacturer net present value, and
consumer life cycle cost increases for some users of clothes washers
covered by today's notice. Therefore, the Department today proposes to
adopt the energy conservation standards for clothes washers at Trial
Standard Level 3.
VI. Procedural Issues and Regulatory Review
A. Review Under the National Environmental Policy Act of 1969
The Department is preparing an Environmental Assessment of the
impacts of the proposed rule and DOE anticipates completing a Finding
of No Significant Impact (FONSI) before publishing the final rule on
Energy Conservation Standards for Clothes Washers, pursuant to the
National Environmental Policy Act of 1969 (NEPA) (42 U.S.C. 4321 et
seq.), the regulations of the Council on
[[Page 59582]]
Environmental Quality (40 CFR parts 1500-1508), and the Department's
regulations for compliance with NEPA (10 CFR part 1021).
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
Executive Order by the Office of Information and Regulatory Affairs
(OIRA) in the Office of Management and Budget (OMB).
The draft rule submitted to OIRA and other documents submitted to
OIRA for review have been made a part of the rulemaking record and are
available for public review in the Department's Freedom of Information
Reading Room (1E-190), 1000 Independence Avenue, SW, Washington, DC
20585, between the hours of 9:00 a.m. and 4:00 p.m., Monday through
Friday, telephone (202) 586-3142.
The following summary of the Regulatory Impact Analysis (RIA)
focuses on the major alternatives considered in arriving at the
proposed approach to improving the energy efficiency of consumer
products. The reader is referred to the complete draft ``Regulatory
Impact Analysis,'' which is contained in the TSD, available as
indicated at the beginning of this proposed rule. It consists of: (1) A
statement of the problem addressed by this regulation, and the mandate
for government action; (2) a description and analysis of the feasible
policy alternatives to this regulation; (3) a quantitative comparison
of the impacts of the alternatives; and (4) the national economic
impacts of the proposed standard.
Each alternative has been evaluated in terms of its ability to
achieve significant energy savings at reasonable costs, and has been
compared to the effectiveness of the proposed rule. These alternatives
were analyzed with the NES/Shipments model modified to allow inputs for
voluntary measures, as explained in the RIA attached to the TSD.
The RIA calculates the effects of feasible policy alternatives to
clothes washer energy efficiency standards, and provides a quantitative
comparison of the impacts of the alternatives. We evaluate each
alternative in terms of its ability to achieve significant energy
savings at reasonable costs, and we compare it to the effectiveness of
the proposed rule.
We created the RIA using a series of alternative scenarios (with
various assumptions), which we used as input to the NES/Shipments model
for clothes washers.
We identified the following seven major policy alternatives for
achieving consumer product energy efficiency. These alternatives
include:
No New Regulatory Action
Enhanced Public Education & Information
Financial Incentives
--Tax credits
--Rebates
--Low income and seniors subsidy
Voluntary Energy Efficiency Targets (5 Years, 10 Years)
Mass Government Purchases
Early Replacement Program to existing standard levels
Early Replacement Program to high-efficiency clothes
washers (defined as having an MEF of 1.257, a 35% energy reduction
level)
The Proposed Approach (Performance Standards)
We have evaluated each alternative in terms of its ability to
achieve significant energy savings at reasonable costs (See Table 23),
and have compared it to the effectiveness of the proposed rule.
Table 23.--Alternatives Considered
----------------------------------------------------------------------------------------------------------------
Energy savings Water savings
Policy alternatives quads trillion gallons NPV $ in billions
----------------------------------------------------------------------------------------------------------------
Enhanced Public Education & Information................ 0.026 0.054 0.074
Consumer Tax Credits................................... 0.410 0.085 0.117
Consumer Rebates High Efficiency....................... 0.072 0.150 0.205
Low Income and Seniors Subsidy......................... 0.031 0.065 0.089
Manufacturer Tax Credits............................... 0.153-0.330 0.299-0.666 0.203-0.707
Voluntary Efficiency Target (5 year delay)............. 4.550 9.970 11.570
Voluntary Efficiency Target (10 year delay)............ 3.090 6.810 7.980
Mass Government Purchases.............................. ................. 0.013 .................
Early Replacement Program (w/Current Eff.)............. 0.004 0.006 0.024
Early Replacement Program (w/H-axis)................... 0.078 0.161 0.223
Proposed Negotiated Performance Standard............... 5.520 11.590 14.330
----------------------------------------------------------------------------------------------------------------
NPV=Net Present Value (2004-2030, in billion 1997 $).
Savings=Energy Savings (Source Quads).
The Net Present Value amounts shown in Table 23 refer to the NPV
for consumers. Rebates or tax credits are not included as an expense
since on average consumers are both paying for and receiving benefits
of the payments.
The case in which no regulatory action is taken with regard to
clothes washer efficiency constitutes the ``base case'' (or ``No
Action'') scenario. In this case, between the years 2004 and 2030,
clothes washers are expected to use 21.76 Quads (22.94 Exajoules (EJ))
of primary energy. Since this is the base case, energy savings and NPV
are zero by definition.
A short description of each alternative is provided below:
Enhanced Public Education and Information. This would make the
public more aware of energy savings available for more efficient
clothes washers (examples would be Energy Star labeling, web sites with
efficiency information and advertising). To model this possibility, we
assumed that the effective market discount rates change from 75% to 47%
for purchasers of clothes washers. This would have the same effect as a
$39 discount on high efficiency washer prices. This program is assumed
to continue through 2030.
Consumer Tax Credits. We assume tax credits equal to 15% of the
cost of high-efficiency models (MEF of 1.257) and that 60% of consumers
buying a clothes washer would take advantage of the tax credit. We
assume this program is in place for six years.
Manufacturer Tax Credits. We assume that a manufacturer tax credit
of $50 or $100 per machine with a cap on the number of washers per
manufacturer (based on the proposed tax credit). The
[[Page 59583]]
tax credits are capped at $30 million per manufacturer per Tier, or $60
million per manufacturer. This program is assumed to be in place in six
years between 2004 to 2010.
Consumer Rebates. We assume a rebate of 15% of the retail price of
high-efficiency models for a period of 6 years. This is modeled by
reducing the price of a washer with a MEF of 1.257 (a 35% reduction in
energy use from the baseline model) by 15%.
Low Income and Seniors Subsidy. Based on the RECS survey for
households owning a clothes washer and dryer, 28% of households qualify
as low-income or senior households. We assumed a subsidy program would
provide an amount equivalent to 25% of the price of a high efficiency
clothes washer. This program was assumed to be in effect for 6 years.
Voluntary efficiency target (5 & 10 year delays). Assume a 1.26 MEF
washer efficiency level but taking place 5 and 10 years after 2007.
Mass Government Purchases. This alternative assumes a Government
agency such as the U.S. Department of Housing and Urban Development
(HUD) purchases high efficiency washers for low income housing. We
assume a program in which 25% of the 1.3 million households in public
housing would participate in the program. We also assume that only
washers reaching the end of their lifetime of 14 years would be
replaced. Over a 6 year program period, this would result in a
replacement of 138,000 clothes washers.
Early Replacement Programs. The purpose of this program would be to
remove older, presumably less efficient models from the clothes washer
stock with either existing base case efficiency washers or with high
efficiency (MEF of 1.257, 35% energy reduction) washers. We model this
by assuming a 15% increase in the size of the early replacement market
segment. This program like the others is assumed to have a duration of
6 years.
Performance Standards. The proposed standard (proposed standard
level 3).
Lastly, all of these alternatives must be gauged against the
performance standards we are proposing in this proposed rule. Such
performance standards would result in energy savings of 5.52 Quads
(5.82 EJ), and the NPV would be an expected $14.33 billion.
As indicated in the paragraphs above, none of the alternatives we
examined would save as much energy as the proposed rule. Also, several
of the alternative would require new enabling legislation, since
authority to carry out those alternatives does not presently exist.
C. Review Under the Regulatory Flexibility Act of 1980
The Regulatory Flexibility Act of 1980, 5 U.S.C. 601-612, requires
an assessment of the impact of regulations on small businesses. Small
businesses are defined as those firms within an industry that are
privately owned and less dominant in the market.
To be categorized as a ``small'' clothes washer manufacturer, a
firm must employ no more than 1,000 employees. The clothes washer
industry is characterized by six firms accounting for nearly 99% of
sales. By this definition none of the six major U.S. manufacturers of
clothes washers are considered ``small.'' The Department is aware of
one small domestic manufacturer of clothes washer, Staber Industries,
that produces a top loading horizontal-axis clothes washer. The energy
efficiency of this product already exceeds the proposed standard level.
The Department prepared a manufacturing impact analysis which was
made public and available to all the clothes washer manufacturers. This
analysis considered the effects on small manufacturers with a minimum
annual production of 165,000 units (representing a 2.1% market share).
The Department did not receive any information or comments indicating
that even smaller manufacturers of clothes washers would be impacted
differentially from those included in the small manufacturer analysis
performed.
In view of the foregoing, the Department has determined and hereby
certifies pursuant to Section 605(b) of the Regulatory Flexibility Act
that, for this particular industry, the proposed standard levels in
today's proposed rule will not ``have a significant economic impact on
a substantial number of small entities,'' and it is not necessary to
prepare a regulatory flexibility analysis.
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 proposed rule under the standards of Section 3 of the Executive
Order and determined that, to the extent permitted by law, the proposed
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 that might require compensation under
the Fifth Amendment to the United States Constitution.
G. Review Under Executive Order 13132, ``Federalism''
Executive Order 13132 (64 FR 43255, August 4, 1999) imposes certain
requirements on agencies formulating and implementing policies or
regulations that preempt State law or that have federalism
implications. Agencies are required to examine the constitutional and
statutory authority supporting any action that would limit the
policymaking discretion of the States and carefully assess the
necessity for such actions. Agencies also must provide State and local
officials an opportunity for meaningful and timely input in the
development of regulatory proposals that have federalism implications.
DOE published a notice of
[[Page 59584]]
its intergovernmental consultation policy on March 14, 2000. (65 FR
13735).
DOE has examined today's proposed rule and has determined that it
would not have a substantial direct effect on the States, on the
relationship between the national government and the States, or on the
distribution of power and responsibilities among the various levels of
government. State regulations that may have existed on the products
that are the subject of today's proposed rule were preempted by the
Federal standards established in the National Appliance Energy
Conservation Amendments of 1988. States can petition the Department for
exemption from such preemption based on criteria set forth in EPCA.
H. Review Under the Unfunded Mandates Reform Act of 1995
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 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 this proposed rule responds to those requirements.
Under Section 205 of UMRA, we are 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. We are 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 proposed rule would
establish energy conservation standards for clothes washers that are
designed to achieve the maximum improvement in energy efficiency that
DOE has determined to be both technologically feasible and economically
justified. DOE may not adopt an alternative that does not meet EPCA's
substantive standard. A full discussion of the alternatives considered
by DOE is presented in the ``Regulatory Impact Analysis'' section of
the TSD for this proposed rule.
I. Review Under the Treasury and General Government Appropriations Act
of 1999
Section 654 of the Treasury and General Government Appropriations
Act, 1999 (Pub. L. No. 105-277) requires Federal agencies to issue a
Family Policymaking Assessment for any proposed rule or policy that may
affect family well-being. Today's proposal would not have any impact on
the autonomy or integrity of the family as an institution. Accordingly,
DOE has concluded that it is not necessary to prepare a Family
Policymaking Assessment.
J. Review Under the Plain Language Directives
Section 1(b)(12) of Executive Order 12866 requires that each agency
draft its regulations to be simple and easy to understand, with the
goal of minimizing the potential for uncertainty and litigation arising
from such uncertainty. Similarly, the Presidential memorandum of June
1, 1998 (63 FR 31883) directs the heads of executive departments and
agencies to use plain language in all proposed and final rulemaking
documents published in the Federal Register.
Today's proposed rule uses the following general techniques to
abide by Section 1(b)(12) of Executive Order 12866 and the Presidential
memorandum of June 1, 1998 (63 FR 31883):
Organization of the material to serve the needs of the
readers (stakeholders).
Use of common, everyday words in short sentences.
Shorter sentences and sections.
We invite your comments on how to make this proposed rule easier to
understand.
VII. Public Comment Procedures
A. Written Comment Procedures
The Department invites interested persons to participate in the
rulemaking by submitting data, comments, or information with respect to
the proposed issues set forth in today's proposed rule to Ms. Brenda
Edwards-Jones, at the address indicated at the beginning of this
notice. We will consider all submittals received by the date specified
at the beginning of this notice in developing the final rule.
According to 10 CFR 1004.11, any person submitting information that
he or she believes to be confidential and exempt by law from public
disclosure should submit one complete copy of the document and ten (10)
copies, if possible, from which the information believed to be
confidential has been deleted. The Department of Energy will make its
own determination with regard to the confidential status of the
information and treat it according to its determination.
Factors of interest to the Department when evaluating requests to
treat as confidential information that has been submitted include: (1)
A description of the items; (2) an indication as to whether and why
such items are customarily treated as confidential within the industry;
(3) whether the information is generally known by or available from
other sources; (4) whether the information has previously been made
available to others without obligation concerning its confidentiality;
(5) an explanation of the competitive injury to the submitting person
which would result from public disclosure; (6) an indication as to when
such information might lose its confidential character due to the
passage of time; and (7) why disclosure of the information would be
contrary to the public interest.
B. Public Workshop (Hearing)
1. Procedures for Submitting Requests To Speak
You will find the time and place of the public workshop (hearing)
listed at the beginning of this notice of proposed rulemaking. The
Department invites any person who has an interest in today's notice of
proposed rulemaking, or who is a representative of a group or class of
persons that has an interest in these proposed issues, to make a
request for an opportunity to make an oral presentation. If you would
like to attend the public workshop, please notify Ms. Brenda Edwards-
Jones at (202) 586-2945. You may hand deliver requests to speak to the
address indicated at the beginning of this notice between the hours of
8:00 a.m. and 4:00 p.m., Monday through Friday, except Federal
holidays, or send them by mail.
The person making the request should state why he or she, either
individually or as a representative of a group or class of persons, is
an appropriate spokesperson, briefly describe the nature of the
interest in the rulemaking, and provide a telephone number for contact.
[[Page 59585]]
The Department requests each person wishing to speak to submit an
advance copy of his or her statement at least ten days prior to the
date of this workshop as indicated at the beginning of this notice. The
Department, at its discretion, may permit any person wishing to speak
who cannot meet this requirement to participate if that person has made
alternative arrangements with the Office of Building Research and
Standards in advance. The letter making a request to give an oral
presentation must ask for such alternative arrangements.
2. Conduct of Workshop (Hearing)
The workshop (hearing) will be conducted in an informal, conference
style. The Department may use a professional facilitator to facilitate
discussion, and a court reporter will be present to record the
transcript of the meeting. We will present summaries of major topics
contained in the comments received before the workshop, allow time for
presentations by workshop participants, and encourage all interested
parties to share their views on issues affecting this rulemaking.
Following the workshop, there is provided an additional comment period,
during which time interested parties will have an opportunity to
comment on the proceedings at the workshop, as well as on any aspect of
the rulemaking proceeding.
The Department reserves the right to select the persons to be heard
at the hearing, to schedule the respective presentations, and to
establish the procedures governing the conduct of the hearing. The
length of each presentation is limited to 5 minutes.
A DOE official will be designated to preside at the hearing. The
hearing will not be a judicial or an evidentiary-type hearing, but will
be conducted in accordance with 5 U.S.C. 533 and Section 336 of the
Act. At the conclusion of all initial oral statements at each day of
the hearing, each person who has made an oral statement will be given
the opportunity to make a rebuttal statement, subject to time
limitations. The rebuttal statement will be given in the order in which
the initial statements were made. The official conducting the hearing
will accept additional comments or questions from those attending, as
time permits. Any interested person may submit, to the presiding
official, written questions to be asked of any person making a
statement at the hearing. The presiding official will determine whether
the question is relevant, and whether time limitations permit it to be
presented for answer.
Further questioning of speakers will be permitted by DOE. The
presiding official will afford any interested person an opportunity to
question other interested persons who made oral presentations, and
employees of the United States who have made written or oral
presentations with respect to disputed issues of material fact relating
to the proposed rule. This opportunity will be afforded after any
rebuttal statements, to the extent that the presiding official
determines that such questioning is likely to result in a more timely
and effective resolution of such issues. If the time provided is
insufficient, DOE will consider affording an additional opportunity for
questioning at a mutually convenient time. Persons interested in making
use of this opportunity must submit their request to the presiding
official no later than shortly after the completion of any rebuttal
statements and be prepared to state specific justification, including
why the issue is one of disputed fact and how the proposed questions
would expedite their resolution.
Any further procedural rules regarding proper conduct of the
hearing will be announced by the presiding official.
The Department will arrange for a transcript of the workshop and
will make the entire record of this rulemaking, including the
transcript, available for inspection in the Department's Freedom of
Information Reading Room as provided at the beginning of this notice.
Any person may purchase a copy of the transcript from the transcribing
reporter. You can also download the TSD and other analyses from the
Internet at: http://www.eren.doe.gov/buildings/codes_standards/applbrf/clwasher.html
List of Subjects in 10 CFR Part 430
Administrative practice and procedure, Energy conservation,
Household appliances.
Issued in Washington, DC., September 26, 2000.
Dan W. Reicher,
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 proposed to be 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; 28 U.S.C. 2461 note.
2. Appendix J to subpart B of part 430 is amended by adding, in
section 2, paragraphs 2.3.1, 2.3.2, and by revising paragraphs 2.10,
2.11 and 2.11.1 to read as follows:
Appendix J to Subpart B of Part 430--Uniform Test Method for
Measuring the Energy Consumption of Automatic and Semi-Automatic
Clothes Washers
* * * * *
2. TESTING CONDITIONS
* * * * *
2.3 Supply water. * * *
2.3.1 Supply water requirements for water and energy consumption
testing. For nonwater-heating clothes washers not equipped with
thermostatically controlled water valves, the temperature of the hot
and cold water supply shall be maintained at 100 deg.
10 deg.F (37.8 deg.C 5.5 deg.C). For
nonwater-heating clothes washers equipped with thermostatically
controlled water valves, the temperature of the hot water supply
shall be maintained at 140 deg.F 5 deg.F (60.0 deg.C
2.8 deg.C) and the cold water supply shall be maintained
at 60 deg.F 5F deg. (15.6 deg.C 2.8 deg.C).
For water-heating clothes washers, the temperature of the hot water
supply shall be maintained at 140 deg.F 5 deg.F
(60.0 deg.C 2.8 deg.C) and the cold water supply shall
not exceed 60 deg.F (15.6 deg.C). Water meters shall be installed in
both the hot and cold water lines to measure water consumption.
2.3.2 Supply water requirements for remaining moisture content
testing. For nonwater-heating clothes washers not equipped with
thermostatically controlled water valves, the temperature of the hot
water supply shall be maintained at 140 deg.F 5 deg.F
and the cold water supply shall be maintained at 60 deg.F
5 deg.F. All other clothes washers shall be connected to
water supply temperatures as stated in section 2.3.1.
* * * * *
2.10 Wash time (period of agitation or tumble) setting. If the
maximum available wash time in the normal cycle is greater than 9.75
minutes, the wash time shall be not less than 9.75 minutes. If the
maximum available wash time in the normal cycle is less than 9.75
minutes, the wash time shall be the maximum available wash time.
* * * * *
2.11 Agitation speed and spin speed settings. Where controls are
provided for agitation speed and spin speed selections, set them as
follows:
2.11.1 For energy and water consumption tests, set at the normal
cycle settings. If settings at the normal cycle are not offered, set
the control settings to the maximum speed permitted on the clothes
washer.
3. Appendix J to subpart B of part 430 is amended, in section 3, by
revising paragraph 3.3.1 to read as follows:
3. TEST MEASUREMENTS
* * * * *
3.3.1 The wash temperature shall be the same as the rinse
temperature for all testing. Cold rinse is the coldest rinse
temperature
[[Page 59586]]
available on the machine. Warm rinse is the hottest rinse
temperature available on the machine.
* * * * *
4. Appendix J1 to Subpart B of part 430 is amended, in section 1,
by adding paragraphs 1.22 and 1.23 to read as follows:
Appendix J1 to Subpart B of Part 430--Uniform Test Method for
Measuring the Energy Consumption of Automatic and Semi-Automatic
Clothes Washers
* * * * *
1. DEFINITIONS AND SYMBOLS
1.22 Cold rinse means the coldest rinse temperature available on
the machine (and should be the same rinse temperature selection
tested in section 3.7).
1.23 Warm rinse means the hottest rinse temperature available on
the machine (and should be the same rinse temperature selection
5. Appendix J1 to subpart B of part 430 is amended in section 2 by
revising paragraphs 2.6.1, 2.6.2, and adding paragraphs 2.6.3 through
2.6.7.2, to read as follows:
2. TESTING CONDITIONS
* * * * *
2.6.1 Energy Test Cloth. The energy test cloth shall be made
from energy test cloth material, as specified in 2.6.4, that is 24
inches by 36 inches (61.0 cm by 91.4 cm) and has been hemmed to 22
inches by 34 inches (55.9 cm by 86.4 cm) before washing. The energy
test cloth shall be clean and shall not be used for more than 60
test runs (after preconditioning as specified in section 2.6.3).
Mixed lots of material shall not be used for testing the clothes
washers.
* * * * *
2.6.2 Energy Stuffer Cloth. The energy stuffer cloth shall be
made from energy test cloth material, as specified in 2.6.4, and
shall consist of pieces of material that are 12 inches by 12 inches
(30.5 cm by 30.5 cm) and have been hemmed to 10 inches by 10 inches
(25.4 cm by 25.4 cm) before washing. The energy stuffer cloth shall
be clean and shall not be used for more than 60 test runs (after
preconditioning as specified in section 2.6.3). Mixed lots of
material shall not be used for testing the clothes washers.
2.6.3 Preconditioning of Test Cloths. The new test cloths,
including energy test cloths and energy stuffer cloths, shall be
pre-conditioned in a clothes washer in the following manner:
2.6.3.1 Perform 5 complete normal wash-rinse-spin cycles, the
first two with AHAM Standard detergent 2A and the last three without
detergent. Place the test cloth in a clothes washer set at the
maximum water level. Wash the load for ten minutes in soft water (17
ppm hardness or less) using 6.0 grams per gallon of water of AHAM
Standard detergent 2A. The wash temperature is to be controlled to
135 deg.F 5 deg.F (57.2 deg.C 2.8C) and the
rinse temperature is to be controlled to 60 deg.F
5 deg.F (15.6 deg.C 2.8 deg.C). Repeat the
cycle with detergent and then repeat the cycle three additional
times without detergent, bone drying the load between cycles (total
of five wash and rinse cycles).
2.6.4 Energy test cloth material. The energy test cloths and
energy stuffer cloths shall be made from fabric meeting the
following specifications. The material should come from a roll of
material with a width of approximately 63 inches and approximately
500 yards per roll, however, other sizes maybe used if they fall
within the specifications.
2.6.4.1 Nominal fabric type. Pure finished bleached cloth, made
with a momie or granite weave, which is nominally 50 percent cotton
and 50 percent polyester.
2.6.4.2 The fabric weight shall be 5.60 ounces per square yard
(190.0 g/m \2\), 5 percent.
2.6.4.3 The thread count shall be 61 x 54 per inch (warp x
fill), 2 percent.
2.6.4.4 The warp yarn and filling yarn shall each have fiber
content of 50 percent 4 percent cotton, with the balance
being polyester, and be open end spun, 15/1 5 percent
cotton count blended yarn.
2.6.4.5 Water repellent finishes, such as fluoropolymer stain
resistant finishes shall not be applied to the test cloth. The
absence of such finishes shall be verified by:
2.6.4.5.1 AATCC-118 Oil Repellency Test (DuPont or 3M version)
of each new lot of test cloth (when purchased from the mill) to
confirm the absence of Scotchguard or other water repellent finish
(required scores of ``D'' across the board).
2.6.4.5.2 AATCC-79 Drop Absorbency Test of each new lot of test
cloth (when purchased from the mill) to confirm the absence of
Scotchguard or other water repellent finish (time to
absorb one drop should be on the order of 1 second).
2.6.4.6 The moisture absorption and retention shall be evaluated
for each new lot of test cloth by the Standard Extractor Remaining
Moisture Content (RMC) Test specified in section 2.6.5.
2.6.4.6.1 Repeat the Standard Extractor RMC Test in section
2.6.5 three times.
2.6.4.6.2 An RMC correction curve shall be calculated as
specified in section 2.6.6.
2.6.5 Standard Extractor RMC Test Procedure. The following
procedure is used to evaluate the moisture absorption and retention
characteristics of a lot of test cloth by measuring the RMC in a
standard extractor at a specified set of conditions. Table 2.6.5 is
the matrix of test conditions. The 500g requirement will only be
used if a clothes washer design can achieve spin speeds in the 500g
range. When this matrix is repeated 3 times, a total of 48 extractor
RMC test runs are required. For the purpose of the extractor RMC
test, the test cloths may be used for up to 60 test runs (after
preconditioning as specified in section 2.6.3).
Table 2.6.5.--Matrix of Extractor RMC Test Conditions
----------------------------------------------------------------------------------------------------------------
Warm soak Cold soak
``g'' Force ---------------------------------------------------------------
15 min. spin 4 min. spin 15 min. spin 4 min. spin
----------------------------------------------------------------------------------------------------------------
50.............................................. .............. .............. .............. ..............
200............................................. .............. .............. .............. ..............
350............................................. .............. .............. .............. ..............
500............................................. .............. .............. .............. ..............
----------------------------------------------------------------------------------------------------------------
2.6.5.1 The standard extractor RMC tests shall be run in a Bock
Model 215 extractor (having a basket diameter of 19.5 inches, length
of 12 inches, and volume of 2.1 ft \3\), with a variable speed drive
[Bock Engineered Products, P.O. Box 5127, Toledo, OH 43611] or an
equivalent extractor with same basket design (i.e. diameter, length,
volume, and hole configuration) and variable speed drive.
2.6.5.2 Test Load. Test cloths shall be preconditioned in
accordance with 2.6.3. The load size shall be 8.4 lbs., consistent
with section 3.8.1.
2.6.5.3 Procedure.
2.6.5.3.1 Record the ``bone-dry'' weight of the test load (WI).
2.6.5.3.2 Soak the test load for 20 minutes in 10 gallons of
soft ( 17 ppm) water. The entire test load shall be submerged. The
water temperature shall be 100 deg.F 5 deg.F.
2.6.5.3.3 Remove the test load and allow water to gravity drain
off of the test cloths. Then manually place the test cloths in the
basket of the extractor, distributing them evenly by eye. Spin the
load at a fixed speed corresponding to the intended centripetal
acceleration level (measured in units of the acceleration of
gravity, g) 1 g for the intended time period
5 seconds.
2.6.5.3.4 Record the weight of the test load immediately after
the completion of the extractor spin cycle (WC).
2.6.5.3.5 Calculate the RMC as (WC-WI)/WI.
2.6.5.3.6 The RMC of the test load shall be measured at three
(3) g levels: 50g; 200g; and 350g, using two different spin times at
each g level: 4 minutes; and 15 minutes. If a clothes washer design
can achieve spin speeds in the 500g range than the RMC of the test
load shall be measured at four (4) g levels: 50g; 200g; 350g; and
500g, using two different spin times at each g level: 4 minutes; and
15 minutes.
[[Page 59587]]
2.6.5.4 Repeat 2.6.5.3 using soft (17 ppm) water at 60 deg.F
5 deg.F.
2.6.6 Calculation of RMC correction curve.
2.6.6.1 Average the values of 3 test runs and fill in Table
2.6.5. Perform a linear least-squares fit to relate the standard RMC
(RMCstandard) values (shown in Table 2.6.6.1) to the
values measured in 2.6.5 (RMCcloth):
RMCstandard A * RMCcloth + B
Where A and B are coefficients of the linear least squares fit.
Table 2.6.6.1.--Standard RMC Values (RMCstandard)
----------------------------------------------------------------------------------------------------------------
RMC percent
---------------------------------------------------------------
G Warm soak Cold soak
---------------------------------------------------------------
15 min. spin 4 min. spin 15 min. spin 4 min. spin
----------------------------------------------------------------------------------------------------------------
50.............................................. 50.4 55.7 52.8 59.0
200............................................. 35.6 40.4 37.9 43.1
350............................................. 29.6 33.1 30.6 35.8
500............................................. 24.2 28.7 25.5 30.0
----------------------------------------------------------------------------------------------------------------
2.6.6.2 Check accuracy of linear least squares fit using the
following method:
The root mean square value of
[GRAPHIC] [TIFF OMITTED] TP05OC00.020
shall be less than 2 percent, where a sum is taken over all of the
different tests, where RMCstandard_ is
the RMC standard value measured for the I-th test, and
RMCcorr3_ is the corrected RMC value
for the I-th cloth test. This equation is valid only for the use
with three (3) g force values therefore when using the 500g
requirement; replace the 500g value instead of the 350g value.
2.6.7 Application of RMC correction curve.
2.6.7.1 Using the coefficients, A and B calculated in section
2.6.6.1:
RMCcorr = A * RMC + B
2.6.7.2 Substitute RMCcorr values in calculations in
section 3.8.
* * * * *
6. Appendix J1 to subpart B of part 430 is amended, in section
4.1.5, by revising the definition of ``ERx, ERa,
ERn'' to read as follows:
4. CALCULATION OF DERIVED RESULTS FROM TEST MEASUREMENTS
* * * * *
4.1.5 * * * ERx, ERa, ERn, are
reported electrical energy consumption values, in kilowatt-hours per
cycle, at maximum, average, and minimum test loads, respectively,
for the warm rinse cycle per definitions in section 3.7.2.
* * * * *
7. Section 430.32 of subpart C, 10 CFR part 430 is amended by
revising paragraph (g) to read as follows:
Sec. 430.32 Energy and water conservation standards and effective
dates.
* * * * *
(g) Clothes washers.
(1) Clothes washers manufactured before January 1, 2004, shall
have an energy factor no less than:
------------------------------------------------------------------------
Energy factor
(cu.ft./Kwh/cycle) Energy factor
Product class as of January 1, (cu.ft./Kwh/cycle)
1988 as of May 14, 1988
------------------------------------------------------------------------
i. Top Loading, Compact (less Not Applicable.\1\ 0.9.
than 1.6 ft.\3\ capacity).
ii. Top Loading, Standard (1.6 Not Applicable.\1\ 1.18.
ft.\3\ or greater capacity).
iii. Top Loading, Semi-Automatic Not Applicable.\1\ Not Applicable.\1\
iv. Front Loading............... Not Applicable.\1\ Not Applicable.\1\
v. Suds saving.................. Not Applicable.\1\ Not Applicable.\1\
------------------------------------------------------------------------
\1\ Must have an unheated rinse water option.
[[Page 59588]]
(2) Clothes washers manufactured after January 1, 2004, shall
have amodified energy factor no less than:
------------------------------------------------------------------------
Modified Energy Modified Energy
factor (cu.ft./ factor (cu.ft./
Product Class Kwh/cycle) as of Kwh/cycle) as of
January 1, 2004 January 1, 2007
------------------------------------------------------------------------
i. Top Loading, Compact (less 0.65.............. 0.65.
than 1.6 ft.\3\ capacity)..
ii. Standard (1.6 ft.\3\ or 1.04.............. 1.26.
greater capacity..
iii. Top Loading, Semi-Automatic Not Applicable.\1\ Not Applicable.\1\
iv. Front Loading............... 1.04.............. 1.26.
v. Suds saving.................. Not Applicable.\1\ Not Applicable.\1\
------------------------------------------------------------------------
\1\ Must have an unheated rinse water option.
* * * * *
[FR Doc. 00-25335 Filed 9-29-00; 9:42 am]
BILLING CODE 6450-01-P