[Federal Register Volume 81, Number 17 (Wednesday, January 27, 2016)]
[Rules and Regulations]
[Pages 4748-4802]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-00068]
[[Page 4747]]
Vol. 81
Wednesday,
No. 17
January 27, 2016
Part II
Department of Energy
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10 CFR Parts 429 and 431
Energy Conservation Program: Energy Conservation Standards for
Commercial Prerinse Spray Valves; Final Rule
Federal Register / Vol. 81 , No. 17 / Wednesday, January 27, 2016 /
Rules and Regulations
[[Page 4748]]
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DEPARTMENT OF ENERGY
10 CFR Parts 429 and 431
[Docket Number EERE-2014-BT-STD-0027]
RIN 1904-AD31
Energy Conservation Program: Energy Conservation Standards for
Commercial Prerinse Spray Valves
AGENCY: Office of Energy Efficiency and Renewable Energy, Department of
Energy.
ACTION: Final rule.
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SUMMARY: The Energy Policy and Conservation Act of 1975 (EPCA), as
amended, prescribes energy conservation standards for various consumer
products and certain commercial and industrial equipment, including
commercial prerinse spray valves (CPSVs). EPCA also requires the U.S.
Department of Energy (DOE) to periodically determine whether more-
stringent standards would be technologically feasible and economically
justified, and would save a significant amount of energy. In this final
rule, DOE is adopting more-stringent energy conservation standards for
commercial prerinse spray valves because DOE has determined that the
amended energy conservation standards for these products would result
in significant conservation of energy, and are technologically feasible
and economically justified.
DATES: The effective date of this rule is March 28, 2016. Compliance
with the amended standards established for commercial prerinse spray
valves in this final rule is required on and after January 28, 2019.
ADDRESSES: The docket, which includes Federal Register notices, public
meeting attendee lists and transcripts, comments, and other supporting
documents/materials, is available for review at www.regulations.gov.
All documents in the docket are listed in the www.regulations.gov
index. However, some documents listed in the index, such as those
containing information that is exempt from public disclosure, may not
be publicly available.
A link to the docket Web page can be found at:
www1.eere.energy.gov/buildings/appliance_standards/rulemaking.aspx?ruleid=100. The www.regulations.gov Web page contains
instructions on how to access all documents, including public comments,
in the docket.
For further information on how to review the docket, contact Ms.
Brenda Edwards at (202) 586-2945 or by email:
[email protected].
FOR FURTHER INFORMATION CONTACT:
Mr. James Raba, U.S. Department of Energy, Office of Energy
Efficiency and Renewable Energy, Building Technologies Office, EE-5B,
1000 Independence Avenue SW., Washington, DC 20585-0121. Telephone:
(202) 586-8654. Email: [email protected].
Mr. Peter Cochran, U.S. Department of Energy, Office of the General
Counsel, GC-33, 1000 Independence Avenue SW., Washington, DC 20585-
0121. Telephone: (202) 586-9496. Email: [email protected].
SUPPLEMENTARY INFORMATION:
Table of Contents
I. Synopsis of the Final Rule
A. Benefits and Costs to Consumers
B. Impact on Manufacturers
C. National Benefits and Costs
D. Conclusion
II. Introduction
A. Authority
B. Background
1. Current Standards
2. History of Standards Rulemaking for Commercial Prerinse Spray
Valves
C. General Rulemaking Comments
III. General Discussion
A. Product Classes and Scope of Coverage
B. Test Procedure
C. Certification, Compliance, Enforcement and Labeling
D. Technological Feasibility
1. General
2. Maximum Technologically Feasible Levels
E. Energy Savings
1. Determination of Savings
2. Significance of Savings
F. Economic Justification
1. Specific Criteria
a. Economic Impact on Manufacturers and Consumers
b. Savings in Operating Costs Compared to Increase in Price (LCC
and PBP)
c. Energy and Water Savings
d. Lessening of Utility or Performance of Products
e. Impact of Any Lessening of Competition
f. Need for National Energy Conservation
g. Other Factors
2. Rebuttable Presumption
IV. Methodology and Discussion of Related Comments
A. Market and Technology Assessment
1. Market Assessment
2. Product Classes
a. Spray Force
b. Number of Classes
c. Other Comments
3. Technology Assessment
B. Screening Analysis
C. Engineering Analysis
1. Engineering Approach
2. Linear Relationship Spray Force and Flow Rate
3. Baseline and Max-Tech Models
4. Proposed CPSV NOPR Standard Levels
a. Availability of Products
b. Standard Levels
5. Manufacturing Cost Analysis
D. Markups Analysis
E. Energy and Water Use Analysis
F. Life-Cycle Cost and Payback Period Analysis
1. Product Cost
2. Installation Cost
3. Annual Energy and Water Consumption
4. Energy Prices
5. Water and Wastewater Prices
6. Maintenance and Repair Costs
7. Product Lifetime
8. Discount Rates
9. Efficiency Distribution in the No-New-Standards Case
10. Payback Period Analysis
11. Rebuttable-Presumption Payback Period
G. Shipments Analysis
1. Sensitivity Cases
H. National Impact Analysis
1. National Energy and Water Savings
2. Net Present Value Analysis
I. Consumer Subgroup Analysis
J. Manufacturer Impact Analysis
1. Overview
2. Government Regulatory Impact Model
a. GRIM Key Inputs
b. GRIM Scenarios
3. Discussion of Comments
K. Emissions Analysis
L. Monetizing Carbon Dioxide and Other Emissions Impacts
1. Social Cost of Carbon
a. Monetizing Carbon Dioxide Emissions
b. Development of Social Cost of Carbon Values
c. Current Approach and Key Assumptions
2. Social Cost of Other Air Pollutants
3. Comments
M. Utility Impact Analysis
N. Employment Impact Analysis
V. Analytical Results and Conclusions
A. Trial Standard Levels
B. Economic Justification and Energy Savings
1. Economic Impacts on Individual Consumers
a. Life-Cycle Cost and Payback Period
b. Consumer Subgroup Analysis
c. Rebuttable Presumption Payback
2. Economic Impacts on Manufacturers
a. Industry Cash Flow Analysis Results
b. Impacts on Employment
c. Impacts on Manufacturing Capacity
d. Impacts on Subgroups of Manufacturers
e. Cumulative Regulatory Burden
3. National Impact Analysis
a. Significance of Energy Savings
b. Net Present Value of Consumer Costs and Benefits
c. Indirect Impacts on Employment
4. Impact on Utility or Performance of Products
5. Impact of Any Lessening of Competition
6. Need of the Nation To Conserve Energy
7. Other Factors
8. Summary of National Economic Impacts
C. Conclusion
1. Benefits and Burdens of TSLs Considered for Commercial
Prerinse Spray Valve Standards
2. Summary of Annualized Benefits and Costs of the Amended
Standards
[[Page 4749]]
VI. Procedural Issues and Regulatory Review
A. Review Under Executive Orders 12866 and 13563
B. Review Under the Regulatory Flexibility Act
1. Statement of the Need for, and Objectives of, the Rule
2. Statement of the Significant Issues Raised by Public Comments
3. Response to Comments Submitted by the Small Business
Administration
4. Description on Estimated Number of Small Entities Regulated
5. Description and Estimate of Compliance Requirements
6. Description of Steps To Minimize Impacts to Small Businesses
C. Review Under the Paperwork Reduction Act
D. Review Under the National Environmental Policy Act of 1969
E. Review Under Executive Order 13132
F. Review Under Executive Order 12988
G. Review Under the Unfunded Mandates Reform Act of 1995
H. Review Under the Treasury and General Government
Appropriations Act, 1999
I. Review Under Executive Order 12630
J. Review Under the Treasury and General Government
Appropriations Act, 2001
K. Review Under Executive Order 13211
L. Review Under the Information Quality Bulletin for Peer Review
M. Congressional Notification
VII. Approval of the Office of the Secretary
I. Synopsis of the Final Rule
Title III of the Energy Policy and Conservation Act of 1975
(EPCA),\1\ sets forth a variety of provisions designed to improve
energy efficiency. Part B of title III established the ``Energy
Conservation Program for Consumer Products Other Than Automobiles.''
These products include commercial prerinse spray valves (CPSVs), the
subject of this document.\2\
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\1\ All references to EPCA in this document refer to the statute
as amended through the Energy Efficiency Improvements Act of 2015,
Public Law 114-11 (Apr. 30, 2015).
\2\ Because Congress included commercial prerinse spray valves
in Part B of Title III of EPCA, the consumer product provisions of
Part B (not the industrial equipment provisions of Part C) apply to
commercial prerinse spray valves. However, because commercial
prerinse spray valves are commonly considered to be commercial
equipment, as a matter of administrative convenience and to minimize
confusion among interested parties, DOE placed the requirements for
commercial prerinse spray valves into subpart O of 10 CFR part 431.
Part 431 contains DOE regulations for commercial and industrial
equipment.
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Pursuant to EPCA, any new or amended energy conservation standard
must be designed to achieve the maximum improvement in energy
efficiency that DOE determines is technologically feasible and
economically justified. (42 U.S.C. 6295(o)(2)(A)) Furthermore, the new
or amended standard must result in significant conservation of energy.
(42 U.S.C. 6295(o)(3)(B)) EPCA also provides that not later than 6
years after issuance of any final rule establishing or amending a
standard, DOE must publish either a notice of determination that
standards for the product do not need to be amended, or a notice of
proposed rulemaking including new proposed energy conservation
standards. (42 U.S.C. 6295(m)(1)) Not later than 2 years after such a
document is issued, DOE must publish a final rule amending the standard
for the product. (42 U.S.C. 6295(m)(3)
In accordance with these and other statutory provisions discussed
in this document, DOE is adopting amended energy conservation standards
for commercial prerinse spray valves. The amended standards, which are
expressed in terms of the flow rate (in gallons per minute, gpm) for
each product class (defined by spray force in ounce-force, ozf), are
shown in Table I.1. The amended standards will apply to all classes of
commercial prerinse spray valves listed in Table I.1 that are
manufactured in, or imported into, the United States on or after
January 28, 2019.
Table I.1--Amended Energy Conservation Standards for Commercial Prerinse
Spray Valves
------------------------------------------------------------------------
Maximum
Product class flow rate
(gpm)
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1. Product Class 1 (<=5.0 ozf).............................. 1.00
2. Product Class 2 (>5.0 ozf and <=8.0 ozf)................. 1.20
3. Product Class 3 (>8.0 ozf)............................... 1.28
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A. Benefits and Costs to Consumers
Table I.2 presents DOE's evaluation of the economic impacts of the
amended standards on commercial prerinse spray valves, as measured by
the average life-cycle cost (LCC) savings and the simple payback period
(PBP).\3\ The average LCC savings are non-negative for all product
classes. The PBP for all product classes is also less than the
projected average CPSV lifetime of approximately 5 years.
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\3\ The average LCC savings are measured relative to the no-new-
standards case efficiency distribution, which depicts the CPSV
market in the compliance year (see section IV.F). The simple PBP,
which is designed to compare specific efficiency levels, is measured
relative to the baseline CPSV model (see section IV.C.1).
Table I.2--Impacts of Amended Energy Conservation Standards on Consumers
of Commercial Prerinse Spray Valves
------------------------------------------------------------------------
Simple
Average LCC payback
Product class savings period (years)
(2014$) * **
------------------------------------------------------------------------
1. Product Class 1 (<=5.0 ozf).......... 0 0.0
2. Product Class 2 (>5.0 ozf and <=8.0 0 0.0
ozf)...................................
3. Product Class 3 (>8.0 ozf)........... 547 0.0
------------------------------------------------------------------------
* Product classes 1 and 2 have zero LCC savings because the no-new-
standards case efficiency distribution (see section IV.F.9) shows the
entire CPSV market at or above the amended standard for these product
classes.
** For product classes 1 and 2, because there is no change in the market
resulting from the standard, DOE represented these PBPs as zero.
Additionally, in all product classes, because more efficient units do
not cost more up front, consumers begin saving money as soon as a more
efficient product is installed (the payback is immediate).
DOE's analysis of the impacts of the amended standards on consumers
is described in more detail in section IV.F of this document.
B. Impact on Manufacturers
The industry net present value (INPV) is the sum of the discounted
cash flows to the industry from the base year through the end of the
analysis period (2015 through 2048). Using a real discount rate of 6.9
percent,\4\ DOE estimates that the INPV for manufacturers of commercial
prerinse spray valves in the case without amended standards (referred
to as the
[[Page 4750]]
no-new-standards case) is $8.6 million in 2014$. Under the amended
standards adopted in this final rule, DOE expects that manufacturers
may lose up to 13.1 percent of this INPV, which is equivalent to
approximately $1.1 million. Additionally, based on its analysis of
available information, DOE does not expect significant impacts on
manufacturing capacity or loss of employment.
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\4\ The discount rate is an industry average discount rate,
which was estimated using publically available industry financial
data for companies that sell CPSVs in the U.S. Data sources are
listed in section IV.J.
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DOE's analysis of the impacts of the amended standards on
manufacturers is described in more detail in section IV.J of this
document.
C. National Benefits and Costs \5\
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\5\ All monetary values in this section are expressed in 2014
dollars and, where appropriate, are discounted to 2015 unless
explicitly stated otherwise. Energy savings in this section refer to
the full-fuel-cycle savings (see section IV.H for discussion).
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DOE's analyses indicate that the amended energy conservation
standards for commercial prerinse spray valves would save a significant
amount of energy and water. Relative to the no-new-standards case, the
lifetime energy savings for commercial prerinse spray valves purchased
in the 30-year period that begins in the compliance year (2019-2048)
amounts to 0.10 quadrillion Btu (quads) \6\ and 119.57 billion gallons
of water. This represents a savings of 8 percent relative to the energy
use of these products in the no-new-standards case. This also
represents a savings of 8 percent relative to the water use of these
products in the no-new-standards case.
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\6\ A quad is equal to 10\15\ British thermal units (Btu). The
quantity refers to full-fuel-cycle (FFC) energy savings. FFC energy
savings includes the energy consumed in extracting, processing, and
transporting primary fuels (i.e., coal, natural gas, petroleum
fuels), and, thus, presents a more complete picture of the impacts
of energy efficiency standards. For more information on the FFC
metric, see section IV.H.1.
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The cumulative net present value (NPV) of total consumer costs and
savings of the standards for commercial prerinse spray valves ranges
from $0.72 billion (at a 7-percent discount rate) to $1.48 billion (at
a 3-percent discount rate). This NPV expresses the estimated total
value of future operating-cost savings minus the estimated increased
product costs for commercial prerinse spray valves purchased in 2019-
2048.
In addition, the standards for commercial prerinse spray valves are
projected to yield significant environmental benefits. DOE estimates
that the standards will result in cumulative emission reductions (from
2019-2048) of 5.87 million metric tons (Mt) \7\ of carbon dioxide
(CO2), 1.79 thousand tons of sulfur dioxide
(SO2), 14.70 thousand tons of nitrogen oxides
(NOX), 47.37 thousand tons of methane (CH4), 0.04
thousand tons of nitrous oxide (N2O), and 0.01 tons of
mercury (Hg).\8\ The cumulative reduction in CO2 emissions
through 2030 amounts to 1.86 Mt, which is equivalent to the emissions
resulting from the annual electricity use of about 255,000 homes.
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\7\ A metric ton is equivalent to 1.1 short tons. Results for
NOX and Hg are presented in short tons.
\8\ DOE calculated emissions reductions relative to the no-new-
standards-case, which reflects key assumptions in the Annual Energy
Outlook 2015 (AEO2015) Reference case, which generally represents
current legislation and environmental regulations for which
implementing regulations were available as of October 31, 2014.
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The value of the CO2 reductions is calculated using a
range of values per metric ton of CO2 (otherwise known as
the Social Cost of Carbon, or SCC) developed by a recent Federal
interagency working group.\9\ The derivation of the SCC values is
discussed in section IV.L of this document. Using discount rates
appropriate for each set of SCC values, DOE estimates that the net
present monetary value of the CO2 emissions reduction (not
including CO2 equivalent emissions of other gases with
global warming potential) is between $0.04 billion and $0.59 billion.
DOE also estimates that the net present monetary value of the
NOX emissions reduction is between $24 and $53 million at a
7-percent discount rate, and between $52 and $117 million at a 3-
percent discount rate.\10\
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\9\ Technical Update of the Social Cost of Carbon for Regulatory
Impact Analysis Under Executive Order 12866, Interagency Working
Group on Social Cost of Carbon, United States Government (May 2013;
revised July 2015) (Available at: http://www.whitehouse.gov/sites/default/files/omb/inforeg/scc-tsd-final-july-2015.pdf).
\10\ DOE estimated the monetized value of NOX
emissions reductions using benefit per ton estimates from the
Regulatory Impact Analysis titled, ``Proposed Carbon Pollution
Guidelines for Existing Power Plants and Emission Standards for
Modified and Reconstructed Power Plants,'' published in June 2014 by
EPA's Office of Air Quality Planning and Standards. (Available at:
http://www3.epa.gov/ttnecas1/regdata/RIAs/111dproposalRIAfinal0602.pdf.) See section IV.L.2 for further
discussion. Note that the agency is presenting a national benefit-
per-ton estimate for particulate matter emitted from the Electricity
Generating Unit sector based on an estimate of premature mortality
derived from the ACS study (Krewski et al., 2009). If the benefit-
per-ton estimates were based on the Six Cities study (Lepuele et
al., 2011), the values would be nearly two-and-a-half times larger.
Because of the sensitivity of the benefit-per-ton estimate to the
geographical considerations of sources and receptors of emissions,
DOE intends to investigate refinements to the agency's current
approach of one national estimate by assessing the regional approach
taken by EPA's Regulatory Impact Analysis for the Clean Power Plan
Final Rule. Note that DOE is currently investigating valuation of
avoided SO2 and Hg emissions.
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Table I.3 summarizes the national economic benefits and costs
expected to result from the amended standards for commercial prerinse
spray valves.
Table I.3--Summary of National Economic Benefits and Costs of Amended
Energy Conservation Standards for Commercial Prerinse Spray Valves *
------------------------------------------------------------------------
Present value
Category (million Discount rate
2014$) (%)
------------------------------------------------------------------------
Benefits
------------------------------------------------------------------------
Operating Cost Savings.................. 718 7
1,476 3
CO2 Reduction Monetized Value ($12.2/ 44 5
metric ton case) **....................
CO2 Reduction Monetized Value ($40.0/ 195 3
metric ton case) **....................
CO2 Reduction Monetized Value ($62.3/ 308 2.5
metric ton case) **....................
CO2 Reduction Monetized Value ($117/ 594 3
metric ton case) **....................
NOX Reduction Monetized Value [dagger].. 24 7
52 3
-------------------------------
Total Benefits [dagger][dagger]......... 937 7
1,724 3
------------------------------------------------------------------------
[[Page 4751]]
Costs
------------------------------------------------------------------------
Manufacturer Conversion Costs [dagger].. 1 to 2 N/A
------------------------------------------------------------------------
Total Net Benefits [dagger][dagger]
------------------------------------------------------------------------
Including Emissions Reduction Monetized 937 7
Value..................................
1,724 3
------------------------------------------------------------------------
* This table presents the costs and benefits associated with commercial
prerinse spray valves shipped in 2019-2048. These results include
benefits to consumers which accrue after 2048 from the products
purchased in 2019-2048. The costs account for the incremental variable
and fixed costs incurred by manufacturers due to the standard, some of
which may be incurred in preparation for the rule.
** The CO2 values represent global monetized values of the SCC, in
2014$, in 2015 under several scenarios of the updated SCC values. The
first three cases use the averages of SCC distributions calculated
using 5%, 3%, and 2.5% discount rates, respectively. The fourth case
represents the 95th percentile of the SCC distribution calculated
using a 3% discount rate. The SCC time series incorporate an
escalation factor.
[dagger] The $/ton values used for NOX are described in section IV.L.
DOE estimated the monetized value of NOX emissions reductions using
benefit per ton estimates from the Regulatory Impact Analysis titled,
``Proposed Carbon Pollution Guidelines for Existing Power Plants and
Emission Standards for Modified and Reconstructed Power Plants,''
published in June 2014 by EPA's Office of Air Quality Planning and
Standards. (Available at: http://www3.epa.gov/ttnecas1/regdata/RIAs/111dproposalRIAfinal0602.pdf). See section IV.L.2 for further
discussion. DOE is presenting a national benefit-per-ton estimate for
particulate matter emitted from the Electric Generating Unit sector
based on an estimate of premature mortality derived from the ACS study
(Krewski et al., 2009). If the benefit-per-ton estimates were based on
the Six Cities study (Lepuele et al., 2011), the values would be
nearly two-and-a-half times larger. Because of the sensitivity of the
benefit-per-ton estimate to the geographical considerations of sources
and receptors of emissions, DOE intends to investigate refinements to
the current approach of one national estimate by assessing the
regional approach taken by EPA's Regulatory Impact Analysis for the
Clean Power Plan Final Rule.
[dagger][dagger] Total Benefits for both the 3% and 7% cases are derived
using the series corresponding to average SCC with 3-percent discount
rate ($40.0/t case).
The benefits and costs of the amended standards, for commercial
prerinse spray valves sold in 2019-2048, can also be expressed in terms
of annualized values. The monetary values for the total annualized net
benefits are the sum of: (1) The annualized national economic value of
the benefits from consumer operation of products that meet the amended
standards (consisting primarily of operating cost savings from using
less energy and water, minus increases in product purchase and
installation costs, which is another way of representing consumer NPV);
and (2) the annualized monetary value of the benefits of CO2
and NOX emission reductions.\11\
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\11\ To convert the time-series of costs and benefits into
annualized values, DOE calculated a present value in 2015, the year
used for discounting the NPV of total consumer costs and savings.
For the benefits, DOE calculated a present value associated with
each year's shipments in the year in which the shipments occur
(e.g., 2020 or 2030), and then discounted the present value from
each year to 2015. The calculation uses discount rates of 3 and 7
percent for all costs and benefits except for the value of
CO2 reductions, for which DOE used case-specific discount
rates, as shown in Table I.3. Using the present value, DOE then
calculated the fixed annual payment over a 30-year period, starting
in the compliance year, that yields the same present value.
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Although the value of operating cost savings and CO2
emission reductions are both important, two issues are relevant. First,
the national operating cost savings are domestic U.S. consumer monetary
savings that occur as a result of market transactions, whereas the
value of CO2 reductions is based on a global value. Second,
the assessments of operating cost savings and CO2 savings
are performed with different methods that use different time frames for
analysis. The national operating cost savings is measured for the
lifetime of commercial prerinse spray valves shipped in 2019-2048.
Because CO2 emissions have a very long residence time in the
atmosphere,\12\ the SCC values in future years reflect future
CO2-emissions impacts that continue beyond 2100.
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\12\ The atmospheric lifetime of CO2 is estimated of
the order of 30-95 years. Jacobson, MZ, ``Correction to `Control of
fossil-fuel particulate black carbon and organic matter, possibly
the most effective method of slowing global warming,' '' J. Geophys.
Res. 110. pp. D14105 (2005).
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Estimates of annualized benefits and costs of the amended standards
are shown in Table I.4. Using a 7-percent discount rate for benefits
and costs other than CO2 reduction (for which DOE used a 3-
percent discount rate, along with the average SCC series that has a
value of $40.0 per metric ton in 2015), there are no increased product
costs associated with the standards adopted in this final rule. The
benefits under the 7% discount rate case are $71 million per year in
reduced product operating costs, $11 million per year in CO2
reductions, and $2 million to $5 million per year in reduced
NOX emissions. In this case, the net benefit amounts to
approximately $84 million per year. Using a 3-percent discount rate for
all benefits and costs as well as the average SCC series that has a
value of $40.0 per metric ton in 2015, there are still no increased
product costs associated with the amended standards in this rule, while
the benefits are $82 million per year in reduced operating costs, $11
million in CO2 reductions, and $3 million to $7 million in
reduced NOX emissions. In this case (3% discount rate), the
net benefit amounts to approximately $96 million per year.
[[Page 4752]]
Table I.4--Annualized Benefits and Costs of Amended Standards for Commercial Prerinse Spray Valves *
--------------------------------------------------------------------------------------------------------------------------------------------------------
Million 2014$/year
-----------------------------------------------------------------------------------
Discount rate Low net benefits High net benefits
Primary estimate * estimate * estimate *
--------------------------------------------------------------------------------------------------------------------------------------------------------
Benefits
--------------------------------------------------------------------------------------------------------------------------------------------------------
Consumer Operating Cost Savings... 7%.............................. 71........................ 66........................ 74
3%.............................. 82........................ 76........................ 86
CO2 Reduction at $12.2/t **....... 5%.............................. 3......................... 3......................... 3
CO2 Reduction at $40.0/t **....... 3%.............................. 11........................ 11........................ 11
CO2 Reduction at $62.3/t **....... 2.5%............................ 16........................ 16........................ 16
CO2 Reduction at $117/t **........ 3%.............................. 33........................ 33........................ 33
NOX Reduction Monetized Value 7%.............................. 2......................... 2......................... 5
[dagger].
3%.............................. 3......................... 3......................... 7
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Total Benefits [dagger][dagger]... 7% plus CO2 range............... 77 to 106................. 71 to 101................. 82 to 112
7%.............................. 84........................ 79........................ 90
3% plus CO2 range............... 89 to 118................. 82 to 112................. 96 to 126
3%.............................. 96........................ 89........................ 104
--------------------------------------------------------------------------------------------------------------------------------------------------------
Costs
--------------------------------------------------------------------------------------------------------------------------------------------------------
Manufacturer Conversion Costs 7%.............................. 0.08 to 0.13.............. 0.08 to 0.13.............. 0.08 to 0.13
[dagger][dagger][dagger].
3%.............................. 0.05 to 0.08.............. 0.05 to 0.08.............. 0.05 to 0.08
--------------------------------------------------------------------------------------------------------------------------------------------------------
Total Net Benefits
--------------------------------------------------------------------------------------------------------------------------------------------------------
Total 7% plus CO2 range............... 77 to 106................. 71 to 101................. 82 to 112
[dagger][dagger][dagger][dagger].
7%.............................. 84........................ 79........................ 90
3% plus CO2 range............... 89 to 118................. 82 to 112................. 96 to 126
3%.............................. 96........................ 89........................ 104
--------------------------------------------------------------------------------------------------------------------------------------------------------
* This table presents the annualized costs and benefits associated with commercial prerinse spray valves shipped in 2019-2048. These results include
benefits to consumers which accrue after 2048 from the products purchased in 2019-2048. The results account for the incremental variable and fixed
costs incurred by manufacturers due to the amended standard, some of which may be incurred in preparation for the rule. The primary, low benefits, and
high benefits estimates utilize projections of energy prices from the Annual Energy Outlook 2015 (AEO2015) reference case, low estimate, and high
estimate, respectively.
** The CO2 values represent global monetized values of the SCC, in 2014$, in 2015 under several scenarios of the updated SCC values. The first three
cases use the averages of SCC distributions calculated using 5 percent, 3 percent, and 2.5 percent discount rates, respectively. The fourth case
represents the 95th percentile of the SCC distribution calculated using a 3 percent discount rate.
[dagger] The $/ton values used for NOX are described in section IV.L. DOE estimated the monetized value of NOX emissions reductions using benefit per
ton estimates from the Regulatory Impact Analysis titled, ``Proposed Carbon Pollution Guidelines for Existing Power Plants and Emission Standards for
Modified and Reconstructed Power Plants,'' published in June 2014 by EPA's Office of Air Quality Planning and Standards. (Available at: http://www3.epa.gov/ttnecas1/regdata/RIAs/111dproposalRIAfinal0602.pdf) See section IV.L.2 for further discussion. For DOE's Primary Estimate and Low Net
Benefits Estimate, the agency is presenting a national benefit-per-ton estimate for particulate matter emitted from the Electric Generating Unit
sector based on an estimate of premature mortality derived from the ACS study (Krewski et al., 2009). For DOE's High Net Benefits Estimate, the
benefit-per-ton estimates were based on the Six Cities study (Lepuele et al., 2011), which are nearly two-and-a-half times larger than those from the
ACS study. Because of the sensitivity of the benefit-per-ton estimate to the geographical considerations of sources and receptors of emission, DOE
intends to investigate refinements to the agency's current approach of one national estimate by assessing the regional approach taken by EPA's
Regulatory Impact Analysis for the Clean Power Plan Final Rule.
[dagger][dagger] Total benefits for both the 3-percent and 7-percent cases are derived using the series corresponding to the average SCC with a 3-
percent discount rate ($40.0/metric ton case). In the rows labeled ``7% plus CO2 range'' and ``3% plus CO2 range,'' the operating cost and NOX
benefits are calculated using the labeled discount rate, and those values are added to the full range of CO2 values.
[dagger][dagger][dagger] The lower value of the range represents costs associated with the Sourced Components conversion cost scenario. The upper value
represents costs for the Fabricated Components scenario.
[dagger][dagger][dagger][dagger] Total benefits for both the 3 percent and 7 percent cases are derived using the series corresponding to the average SCC
with 3 percent discount rate. In the rows labeled ``7% plus CO2 range'' and ``3% plus CO2 range,'' the operating cost and NOX benefits are calculated
using the labeled discount rate, and those values are added to the full range of CO2 values. Manufacturer Conversion Costs are not included in the net
benefits calculations.
DOE's analysis of the national impacts of the amended standards is
described in sections IV.H, IV.K, and IV.L of this document.
D. Conclusion
Based on the analyses conducted for this final rule, DOE found the
benefits to the nation of the standards (energy and water savings,
consumer LCC savings, positive NPV of consumer benefit, and emission
reductions) outweigh the burdens (loss of INPV). DOE has concluded that
the standards in this final rule represent the maximum improvement in
energy efficiency that is technologically feasible and economically
justified, and would result in significant conservation of energy.
II. Introduction
The following sections briefly discusses the statutory authority
underlying this final rule, as well as some of the relevant historical
background related to the establishment of standards for commercial
prerinse spray valves.
A. Authority
Title III, Part B of EPCA established the Energy Conservation
Program for Consumer Products Other Than Automobiles. As part of this
program, EPCA prescribed energy conservation standards for commercial
prerinse spray valves, which are the subject of this rulemaking. (42
U.S.C. 6292(dd)) Under 42 U.S.C. 6295(m), DOE must
[[Page 4753]]
periodically review its already established energy conservation
standards for a covered product no later than 6 years from the issuance
of a final rule establishing or amending a standard for the product.
After publishing a notice of proposed rulemaking (NOPR) including new
proposed standards, DOE must publish a final rule amending the standard
for the product no later than 2 years after the NOPR is issued. (42
U.S.C. 6295(m)(3)(A) This final rule fulfills this statutory
requirement.
Pursuant to EPCA, DOE's energy conservation program for covered
products consists essentially of four parts: (1) Testing, (2) labeling,
(3) the establishment of Federal energy conservation standards, and (4)
certification and enforcement procedures. The Secretary of Energy
(Secretary) or the Federal Trade Commission (FTC), as appropriate, may
prescribe labeling requirements for commercial prerinse spray valves.
(42 U.S.C. 6294(a)(5)(A))
Subject to certain criteria and conditions, DOE is required to
develop test procedures to measure the energy efficiency, energy use,
or estimated annual operating cost of each covered product. (42 U.S.C.
6293(b)(3)) Manufacturers of covered products must use the prescribed
DOE test procedure as the basis for certifying to DOE that their
products comply with the applicable energy conservation standards
adopted under EPCA and when making representations to the public
regarding the energy use or efficiency of those products. (42 U.S.C.
6293(c) and 6295(s)) Similarly, DOE must use these test procedures to
determine whether the products comply with standards adopted pursuant
to EPCA. (42 U.S.C. 6295(s)) The DOE test procedure for commercial
prerinse spray valves appears at title 10 of the Code of Federal
Regulations (CFR) part 431, subpart O. DOE released a pre-publication
notice of the test procedure final rule for commercial prerinse spray
valves (CPSV TP final rule) on December 18, 2015.\13\
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\13\ The pre-publication Federal Register notice of the CPSV TP
final rule issued by DOE is available on DOE's Web site at http://energy.gov/sites/prod/files/2015/12/f27/CPSV%20TP%20Final%20Rule.pdf. Following publication in the Federal
Register, the CPSV TP final rule will be available at
www.regulations.gov under Docket # EERE-2014.BT-TP-0055.
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DOE must follow specific statutory criteria for prescribing new or
amended standards for covered products, including commercial prerinse
spray valves. Any new or amended standard for a covered product must be
designed to achieve the maximum improvement in energy efficiency that
is technologically feasible and economically justified. (42 U.S.C.
6295(o)(2)(A)) Furthermore, DOE may not adopt any standard that would
not result in the significant conservation of energy. (42 U.S.C.
6295(o)(3)(B)) Moreover, DOE may not prescribe a standard for certain
products, including commercial prerinse spray valves, if no test
procedure has been established for the product (42 U.S.C.
6295(o)(3)(A)) In deciding whether a proposed standard is economically
justified, DOE must determine whether the benefits of the standard
exceed its burdens. (42 U.S.C. 6295(o)(2)(B)(i)) DOE must make this
determination after receiving comments on the proposed standard, and by
considering, to the greatest extent practicable, the following seven
statutory factors:
(1) The economic impact of the standard on manufacturers and
consumers of the products subject to the standard;
(2) The savings in operating costs throughout the estimated average
life of the covered products in the type (or class) compared to any
increase in the price, initial charges, or maintenance expenses for the
covered products that are likely to result from the standard;
(3) The total projected amount of energy (or as applicable, water)
savings likely to result directly from the standard;
(4) Any lessening of the utility or the performance of the covered
products likely to result from the standard;
(5) The impact of any lessening of competition, as determined in
writing by the Attorney General, that is likely to result from the
standard;
(6) The need for national energy and water conservation; and
(7) Other factors the Secretary considers relevant.
(42 U.S.C. 6295(o)(2)(B)(i)(I)-(VII))
Further, EPCA, as codified, establishes a rebuttable presumption
that a standard is economically justified 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 and water savings the consumer will
receive during the first year that the standard applies, as calculated
under the applicable test procedure. (42 U.S.C. 6295(o)(2)(B)(iii))
EPCA, as codified, also contains what is known as an ``anti-
backsliding'' provision, which prevents the Secretary from prescribing
any amended standard that either increases the maximum allowable energy
use or decreases the minimum required energy efficiency of a covered
product. (42 U.S.C. 6295(o)(1)) Also, the Secretary may not prescribe
an amended or new standard if interested persons have established by a
preponderance of the evidence that the standard is likely to result in
the unavailability in the United States in any covered product type (or
class) of performance characteristics (including reliability),
features, sizes, capacities, and volumes that are substantially the
same as those generally available in the United States at the time of
the Secretary's finding. (42 U.S.C. 6295(o)(4))
Additionally, EPCA specifies requirements when promulgating an
energy conservation standard for a covered product that has two or more
subcategories. DOE must specify a different standard level for a type
or class of products that has the same function or intended use if DOE
determines that products within such group: (1) Consume a different
kind of energy from that consumed by other covered products within such
type (or class); or (2) have a capacity or other performance-related
feature which other products within such type (or class) do not have
and such feature justifies a higher or lower standard. (42 U.S.C.
6295(q)(1)) In determining whether a performance-related feature
justifies a different standard for a group of products, DOE shall
consider such factors as the utility to the consumer of such a feature
and other factors DOE deems appropriate. Id. Any rule prescribing such
a standard must include an explanation of the basis on which such
higher or lower level was established. (42 U.S.C. 6295(q)(2))
Federal energy conservation requirements generally supersede State
laws or regulations concerning energy conservation testing, labeling,
and standards. (42 U.S.C. 6297(a)-(c)) California, however, has a
statutory exemption to preemption for commercial prerinse spray valve
standards adopted by the California Energy Commission before January 1,
2005. (42 U.S.C. 6297(c)(7)) As a result, while federal commercial
prerinse spray valve standards, including any amended standards that
may result from this rulemaking, apply in California, California's
commercial prerinse spray valve standards also apply as they are exempt
from preemption. DOE may also grant waivers of Federal preemption for
particular State laws or regulations, in accordance with the procedures
and other provisions set forth under 42 U.S.C. 6297(d)).
[[Page 4754]]
Finally, pursuant to the amendments contained in the Energy
Independence and Security Act of 2007 (EISA 2007), Public Law 110-140,
any final rule for new or amended energy conservation standards
promulgated after July 1, 2010, is required to address standby mode and
off mode energy use. (42 U.S.C. 6295(gg)(3)) Specifically, when DOE
adopts a standard for a covered product after that date, it must, if
justified by the criteria for adoption of standards under EPCA (42
U.S.C. 6295(o)), incorporate standby mode and off mode energy use into
a single standard, or, if that is not feasible, adopt a separate
standard for such energy use for that product. (42 U.S.C.
6295(gg)(3)(A)-(B)) DOE's recently updated test procedures for
commercial prerinse spray valves do not address standby mode and off
mode energy use, because they are not applicable for this product.
Accordingly, in this rulemaking, DOE only addresses active mode energy
consumption because commercial prerinse spray valves only consume
energy and water in active mode.
B. Background
1. Current Standards
In a final rule published on October 18, 2005 (2005 CPSV final
rule), DOE codified the current energy conservation standard for
commercial prerinse spray valves that was prescribed by the Energy
Policy Act of 2005 (EPAct 2005), Public Law 109-58 (August 8, 2005). 70
FR 60407, 60410. The 2005 CPSV final rule established that all
commercial prerinse spray valves manufactured on or after January 1,
2006, must have a flow rate of not more than 1.6 gpm. Id.
2. History of Standards Rulemaking for Commercial Prerinse Spray Valves
DOE initiated the current rulemaking on September 11, 2014, by
issuing an analytical Framework document (2014 CPSV Framework document)
that explained the issues, analyses, and analytical approaches that DOE
anticipated using to develop energy conservation standards for
commercial prerinse spray valves. 79 FR 54213. DOE held a public
meeting on September 30, 2014 to discuss the 2014 CPSV Framework
document, and solicited comments from interested parties regarding
DOE's analytical approach. DOE received comments that helped identify
and resolve issues pertaining to the 2014 CPSV Framework document
relevant to this rulemaking.
DOE published a NOPR for the CPSV energy conservation standards
rulemaking on July 9, 2015 (CPSV NOPR). 80 FR 39486. DOE held a public
meeting on July 28, 2015 to present the CPSV NOPR, which included the
engineering analysis, downstream economic analyses, manufacturer impact
analysis, and proposed standards. In the public meeting, DOE also
sought comments from interested parties on these subjects, and
facilitated interested parties' involvement in the rulemaking. At the
public meeting, and during the comment period, DOE received comments
that helped DOE identify issues and refine the analyses presented in
the CPSV NOPR for this final rule.
Based on the issues raised in response to the CPSV NOPR, DOE
published a notice of data availability (NODA) for the CPSV energy
conservation standards rulemaking on November 20, 2015 (CPSV NODA).\14\
80 FR 72608. In the CPSV NODA, DOE described revisions to its analyses
of commercial prerinse spray valves in the following areas: (1)
Engineering, (2) manufacturer impacts, (3) LCC and PBP, and (4)
national impacts. DOE also presented updated trial standard level (TSL)
combinations. DOE sought comments on all aspects of the updated
analyses. During the CPSV NODA comment period, DOE received comments in
response to issues raised in the CPSV NODA.
---------------------------------------------------------------------------
\14\ DOE initially published the CPSV NODA on November 12, 2015.
80 FR 69888. Due to errors in the CPSV NODA, DOE withdrew the
document and published a corrected NODA on November 20, 2015. 80 FR
72608.
---------------------------------------------------------------------------
This final rule responds to issues raised by commenters in response
to the 2014 CPSV Framework document, CPSV NOPR, and CPSV NODA.
C. General Rulemaking Comments
In response to the CPSV NOPR, Alliance for Water Efficiency (AWE)
recommended that this rulemaking be postponed until the stakeholders
develop and agree upon a cleaning performance test that mimics ``real
world'' performance. (AWE, No. 28 at p. 6) \15\ As discussed
previously, under 42 U.S.C. 6295(m), the agency must periodically
review its already established energy conservation standards for a
covered product. DOE codified the current energy conservation standard
for commercial prerinse spray valves in the 2005 CPSV final rule.
Therefore, DOE is required to conduct a review of CPSV energy
conservation standards, and cannot postpone this rulemaking further. A
discussion of the CPSV test procedure is provided in section III.B of
this document.
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\15\ A notation in this form provides a reference for
information that is in the docket of DOE's rulemaking to amend
energy conservation standards for commercial prerinse spray valves.
(Docket No. EERE-2014-BT-STD-0027, which is maintained at
www.regulations.gov). This particular notation refers to a comment:
(1) Submitted by AWE; (2) appearing in document number 28 of the
docket; and (3) appearing on page 6 of that document.
---------------------------------------------------------------------------
In response to the CPSV NODA, DOE received a comment from the
Plumbing Manufacturers Institute (PMI) requesting the comment period
for the CPSV NODA be extended. PMI cited the short duration of the
comment period, as well as the Thanksgiving holiday to support their
request for an extension. (PMI, No. 41 at p. 1) DOE chose to maintain
the comment period at 14 days, which DOE believes is sufficient time to
review the updated analyses and provide comment. Additionally, while
input data was updated in response to comments received, the analytical
framework remained unchanged.
PMI further commented that the process by which DOE obtained data
to develop energy conservation standards lacked transparency. PMI
stated that DOE should have formed a working group. (PMI, No. 43 at p.
1) DOE disagrees with PMI's comment that DOE's regular notice-and-
comment rulemaking process lacks transparency with regards to data
collection. DOE solicited comments and data from interested parties in
response to the 2014 CPSV Framework document, the CPSV NOPR, and the
CPSV NODA. Based on data obtained during these public comment periods,
DOE revised its analyses and proposed standards.
III. General Discussion
A. Product Classes and Scope of Coverage
EPCA defines the term ``commercial prerinse spray valve'' as a
``handheld device designed and marketed for use with commercial
dishwashing and ware washing equipment that sprays water on dishes,
flatware, and other food service items for the purpose of removing food
residue before cleaning the items.'' (42 U.S.C. 6291(33)(A) In the CPSV
TP final rule, DOE modified the CPSV definition to clarify the scope of
coverage, and adopted the following definition: ``Commercial prerinse
spray valve'' is defined as a handheld device that has a release to
close valve and is suitable for removing food residue from food service
items before cleaning them in commercial dishwashing and ware washing
equipment. The analyses conducted for this final rule were based on the
scope of coverage provided by this amended definition.
When evaluating and establishing energy conservation standards, DOE
divides covered products into product classes by the type of energy
used, or by
[[Page 4755]]
capacity or other performance-related features that justify a different
standard. In making a determination whether a performance-related
feature justifies a different standard, DOE considers such factors as
the utility of the feature to the consumer and other factors DOE
determines are appropriate. (42 U.S.C. 6295(q))
Currently, all covered commercial prerinse spray valves are
included in a single product class that is subject to a 1.6-gpm
standard for maximum flow rate. 10 CFR 431.266. In the CPSV NOPR, DOE
proposed three separate product classes based on spray force. DOE
believes that spray force is a performance-related feature of
commercial prerinse spray valves, and that each of the defined spray
force ranges is associated with unique consumer utility for specific
CPSV applications. (42 U.S.C. 6295(q)) DOE also requested comments from
interested parties. See section IV.A.2 for more discussion on the
product classes addressed in this final rule.
B. Test Procedure
In addition to establishing the current maximum flow rate for
commercial prerinse spray valves, EPCA also prescribed that the test
procedure for measuring flow rate for commercial prerinse spray valves
be based on American Society for Testing and Materials (ASTM) Standard
F2324, ``Standard Test Method for Pre-Rinse Spray Valves.'' (42 U.S.C.
6293(b)(14)) In a final rule published December 8, 2006, DOE
incorporated by reference ASTM Standard F2324-03 as the DOE test
procedure for commercial prerinse spray valves. 71 FR 71340, 71374. In
a final rule published on October 23, 2013, DOE incorporated by
reference ASTM Standard F2324-03 (2009) for testing commercial prerinse
spray valves, which reaffirmed the 2003 version. 78 FR 62970, 62980.
In 2013, ASTM amended Standard F2324-03 (2009) to replace the
cleanability test with a spray force test, based on research conducted
by the U.S. Environmental Protection Agency's (EPA) WaterSense[supreg]
program.\16\ The most current version of the ASTM industry standard is
the version published in 2013, ASTM Standard F2324-13.
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\16\ EPA WaterSense program, WaterSense Specification for
Commercial Prerinse Spray Valves Supporting Statement. Version 1.0
(Sept. 19, 2013). Available at: www.epa.gov/watersense/partners/prsv_final.html.
---------------------------------------------------------------------------
DOE published the NOPR for the CPSV test procedure on June 23, 2015
(CPSV TP NOPR). 80 FR 35874. In the CPSV TP NOPR, DOE proposed to
incorporate by reference relevant portions of the amended ASTM Standard
F2324-13, requiring spray force and flow rate to be measured in
accordance with the industry standard. Additionally, DOE proposed a
clarification to the definition of ``commercial prerinse spray valve''
as well as adding a new definition for ``spray force.'' For commercial
prerinse spray valves with multiple spray settings, DOE proposed that
both flow rate and spray force be measured for each available spray
setting. DOE also proposed modifications to the rounding requirements
for flow rate and added rounding requirements for spray force. Finally,
DOE proposed modification of the sampling plan to remove the provisions
related to determining representative values where customers would
favor higher values. DOE presented the CPSV TP NOPR in the public
meeting on July 28, 2015.
DOE issued a pre-publication notice for the final rule for the CPSV
TP on December 18, 2015. The final rule incorporates by reference
relevant portions of the latest version of the industry testing
standard from the ASTM Standard F2324-13, including the procedure for
measuring spray force, revises the definitions of ``commercial prerinse
spray valve'' and ``basic model,'' clarifies the test procedure for
products with multiple spray settings, establishes rounding
requirements for flow rate and spray force measurements, and removes
irrelevant portions of the statistical methods for certification,
compliance, and enforcement of commercial prerinse spray valves. The
amended standards adopted in this final rule were based on testing
conducted in accordance with the amended test procedure adopted in the
CPSV TP final rule.
C. Certification, Compliance, Enforcement and Labeling
This final rule establishes three separate product classes for
commercial prerinse spray valves based on spray force. DOE recognizes
that some commercial prerinse spray valves contain multiple spray
settings and may fall into more than one product class. If the spray
settings on a CPSV unit fall into multiple product classes,
manufacturers must certify separate basic models for each product class
and may only group individual spray settings into basic models within
each product class. The tested spray force for each spray setting
determines which product class definition applies to each spray
setting. Therefore, a commercial prerinse spray valve that contains
multiple spray settings, or is sold with multiple spray faces, may be
classified as more than one product class. In this case, the commercial
prerinse spray valve is required to meet the appropriate energy
conservation standard for each product class.
With regards to labeling, in the CPSV NOPR public meeting, the
Natural Resource Defense Council (NRDC) questioned whether the
institution of product classes for commercial prerinse spray valves
will affect product labeling, and more specifically, whether the
product class in which a commercial prerinse spray valve is categorized
needs to be represented on product literature. (NRDC, Public Meeting
Transcript, No. 23 at p. 110) NRDC also requested guidance on how
commercial prerinse spray valves will be labeled if the proposal of
multiple product classes were adopted. (NRDC, Public Meeting
Transcript, No. 23 at p. 110)
This final rule does not include labeling requirements for
commercial prerinse spray valves. Accordingly, this final rule does not
require manufacturers to include product class information on product
labels. However, DOE notes that any representations of flow rate are
required to be determined in accordance with the DOE test procedure and
applicable sampling plans.
D. Technological Feasibility
1. General
In each energy conservation standards rulemaking, DOE conducts a
screening analysis based on information gathered on all current
technology options and prototype designs that could improve the
efficiency of the products that are the subject of the rulemaking. As
the first step in such an analysis, DOE develops a list of technology
options for consideration in consultation with manufacturers, design
engineers, and other interested parties. DOE then determines which of
those means for improving efficiency are technologically feasible. DOE
considers technologies incorporated in commercially available products
or in working prototypes to be technologically feasible. 10 CFR part
430, subpart C, appendix A, section 4(a)(4)(i)
After DOE has determined that particular technology options are
technologically feasible, it further evaluates each technology option
in light of the following additional screening criteria: (1)
Practicability to manufacture, install, and service; (2) adverse
impacts on product utility or availability; and (3) adverse impacts on
health or safety. 10 CFR part 430, subpart C, appendix A, section
[[Page 4756]]
4(a)(4)(ii)-(iv) Additionally, it is DOE policy not to include in its
analysis any proprietary technology that is a unique pathway to
achieving a certain efficiency level (EL). Section IV.B of this
document discusses the results of the screening analysis for commercial
prerinse spray valves, particularly the technology options DOE
considered, those it screened out, and those that are the basis for the
standards considered in this rulemaking. For further details on the
screening analysis for this rulemaking, see chapter 4 of the final rule
technical support document (TSD).
2. Maximum Technologically Feasible Levels
When DOE adopts an amended standard for a type or class of covered
product, it must determine the maximum improvement in energy efficiency
or maximum reduction in energy use that is technologically feasible for
such product. (42 U.S.C. 6295(p)(1)) Accordingly, in the engineering
analysis, DOE determined the maximum technologically feasible (max-
tech) improvements in efficiency for commercial prerinse spray valves
using the design parameters for the most efficient products available
on the market or in working prototypes. The max-tech levels that DOE
determined for this rulemaking are described in section IV.C.3 of this
document and in chapter 5 of the final rule TSD.
E. Energy Savings
1. Determination of Savings
For each TSL, DOE projected energy savings from the application of
the TSL to commercial prerinse spray valves purchased in the 30-year
period that begins in the year of compliance with any amended standards
(2019-2048).\17\ The savings are measured over the entire lifetime of
products purchased in the 30-year analysis period. DOE quantified the
energy savings attributable to each TSL as the difference in energy
consumption between each standards case and the no-new-standards case.
The no-new-standards case represents a projection of energy consumption
that reflects how the market for a product would likely evolve in the
absence of amended energy conservation standards.
---------------------------------------------------------------------------
\17\ DOE also presents a sensitivity analysis that considers
impacts for products shipped in a 9-year period.
---------------------------------------------------------------------------
DOE used its national impact analysis (NIA) spreadsheet models to
estimate energy savings from amended standards for commercial prerinse
spray valves. The NIA spreadsheet model (described in section IV.H of
this document) calculates savings in site energy, which is the energy
directly consumed by products at the locations where they are used. DOE
calculates national energy savings (NES) in terms of primary energy
savings, which is the savings in energy that is used to generate and
transmit the site energy, and also in terms of full-fuel-cycle (FFC)
energy savings. The FFC metric includes the energy consumed in
extracting, processing, and transporting primary fuels (i.e., coal,
natural gas, petroleum fuels), and thus presents a more complete
picture of the impacts of energy conservation standards.\18\ DOE's
approach is based on the calculation of an FFC multiplier for each of
the energy types used by covered products. For more information on FFC
energy savings, see section IV.H.1 of this document. For natural gas,
the primary energy savings are considered to be equal to the site
energy savings.
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\18\ The FFC metric is discussed in DOE's statement of policy
and notice of policy amendment. 76 FR 51282 (Aug. 18, 2011), as
amended at 77 FR 49701 (Aug. 17, 2012).
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2. Significance of Savings
To adopt more stringent standards for commercial prerinse spray
valves, DOE must determine that such action would result in
``significant'' energy savings. (42 U.S.C. 6295(o)(3)(B)) Although the
term ``significant'' is not defined in EPCA, the U.S. Court of Appeals
for the District of Columbia Circuit in Natural Resources Defense
Council v. Herrington, 768 F.2d 1355, 1373 (D.C. Cir. 1985), indicated
that Congress intended ``significant'' energy savings in the context of
EPCA to be savings that were not ``genuinely trivial.'' The energy
savings for all the TSLs considered in this rulemaking, including the
amended standards, are nontrivial, and, therefore, DOE considers them
``significant'' within the meaning of section 325 of EPCA.
F. Economic Justification
1. Specific Criteria
As previously noted, EPCA provides seven factors to be evaluated in
determining whether a potential energy conservation standard is
economically justified. (42 U.S.C. 6295(o)(2)(B)(i)(I)-(VII)) The
following sections discuss how DOE has addressed each of those seven
factors in this rulemaking.
a. Economic Impact on Manufacturers and Consumers
In determining the impacts of an amended standard on manufacturers,
DOE conducts a manufacturer impact analysis (MIA), as discussed in
section IV.J. DOE first uses an annual cash flow approach to determine
the quantitative impacts. This step includes both a short-term
assessment--based on the cost and capital requirements during the
period between when a regulation is issued and when entities must
comply with the regulation--and a long-term assessment over a 30-year
period. The industry-wide impacts analyzed include (1) INPV, which
values the industry on the basis of expected future cash flows; (2)
cash flows by year; (3) changes in revenue and income; and (4) other
measures of impact, as appropriate. Second, DOE analyzes and reports
the impacts on different types of manufacturers, including impacts on
small manufacturers. Third, DOE considers the impact of standards on
domestic manufacturer employment and manufacturing capacity, as well as
the potential for standards to result in plant closures and loss of
capital investment. Finally, DOE takes into account cumulative impacts
of various DOE regulations and other regulatory requirements on
manufacturers.
For individual consumers, measures of economic impact include the
changes in LCC and PBP associated with amended standards. These
measures are discussed further in the following section. For consumers
in the aggregate, DOE also calculates the national NPV of the economic
impacts applicable to a particular rulemaking. DOE also evaluates the
LCC impacts of potential standards on identifiable subgroups of
consumers that may be affected disproportionately by a national
standard.
b. Savings in Operating Costs Compared To Increase in Price (LCC and
PBP)
EPCA requires DOE to consider the savings in operating costs
throughout the estimated average life of the covered product in the
type (or class) compared to any increase in the price of, or in the
initial charges for, or maintenance expenses of, the covered product
that are likely to result from a standard. (42 U.S.C.
6295(o)(2)(B)(i)(II)) DOE conducts this comparison in its LCC and PBP
analysis.
The LCC is the sum of the purchase price of a product (including
its installation) and the operating cost (including water, energy,
maintenance, and repair expenditures) discounted over the lifetime of
the product. The LCC analysis requires a variety of inputs, such as
product prices; product energy and water consumption; energy and water
and wastewater prices; maintenance and repair costs; product lifetime;
and discount rates appropriate for consumers. To account for
[[Page 4757]]
uncertainty and variability in specific inputs, such as product
lifetime and discount rate, DOE uses a distribution of values, with
probabilities attached to each value.
The PBP is the estimated amount of time (in years) it takes
consumers to recover the increased purchase cost (including
installation) of a more-efficient product through lower operating
costs. DOE calculates the PBP by dividing the change in purchase cost
due to a more-stringent standard by the change in annual operating cost
for the year that standards are assumed to take effect.
For its LCC and PBP analysis, DOE assumes that consumers will
purchase the covered products in the first year of compliance with
amended standards. The LCC savings for the considered efficiency levels
are calculated relative to the case that reflects projected market
trends in the absence of amended standards. DOE's LCC and PBP analysis
is discussed in further detail in section IV.F.
c. Energy and Water Savings
Although significant conservation of energy is a separate statutory
requirement for adopting an energy conservation standard, EPCA requires
DOE, in determining the economic justification of a standard, to
consider the total projected energy and water savings that are expected
to result directly from the standard. (42 U.S.C. 6295(o)(2)(B)(i)(III))
As discussed in section III.E, DOE uses the NIA spreadsheet models to
project national energy and water savings.
d. Lessening of Utility or Performance of Products
In determining whether a proposed standard is economically
justified, DOE evaluates any lessening of the utility or performance of
the considered products. (42 U.S.C. 6295(o)(2)(B)(i)(IV)) Based on data
available to DOE, the standards adopted in this final rule would not
reduce the utility or performance of the products under consideration
in this rulemaking.
e. Impact of Any Lessening of Competition
EPCA directs DOE to consider the impact of any lessening of
competition, as determined in writing by the Attorney General of the
United States (Attorney General), that is likely to result from a
standard. (42 U.S.C. 6295(o)(2)(B)(i)(V)) DOE transmitted a copy of its
proposed rule to the Attorney General with a request that the
Department of Justice (DOJ) provide its determination to the Secretary
within 60 days of the publication of a proposed rule, together with an
analysis of the nature and extent of the impact. (42 U.S.C.
6295(o)(2)(B)(ii)). On September 4, 2015, DOJ provided its
determination to DOE that the amended standards for commercial prerinse
spray valves are unlikely to have a significant adverse impact on
competition. DOE has included this determination from DOJ at the end of
this final rule.
f. Need for National Energy Conservation
DOE also considers the need for national energy conservation in
determining whether a new or amended standard is economically
justified. (42 U.S.C. 6295(o)(2)(B)(i)(VI)) The energy savings from the
amended standards are likely to provide improvements to the security
and reliability of the nation's energy system. Reductions in the demand
for electricity also may result in reduced costs for maintaining the
reliability of the nation's electricity system. DOE conducts a utility
impact analysis to estimate how standards may affect the nation's
needed power generation capacity, as discussed in section IV.M.
The amended standards are also likely to result in environmental
benefits in the form of reduced emissions of air pollutants and
greenhouse gases (GHGs) associated with energy production and use. DOE
conducts an emissions analysis to estimate how standards may affect
these emissions, as discussed in section IV.K. DOE also estimates the
economic value of emissions reductions resulting from the considered
TSLs, as discussed in section IV.L.
g. Other Factors
EPCA 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. (42 U.S.C. 6295(o)(2)(B)(i)(VII))
No other factors were considered in this analysis.
2. Rebuttable Presumption
As set forth in 42 U.S.C. 6295(o)(2)(B)(iii), EPCA creates a
rebuttable presumption that an energy conservation standard is
economically justified if the additional cost to the consumer of a
product that meets the standard is less than three times the value of
the first year's energy and water savings resulting from the standard,
as calculated under the applicable DOE test procedure. DOE's LCC and
PBP analyses generate values used to calculate the effect the amended
energy conservation standards would have on the PBP for consumers.
These analyses include, but are not limited to, the 3-year PBP
contemplated under the rebuttable-presumption test. In addition, DOE
routinely conducts an economic analysis that considers the full range
of impacts to consumers, manufacturers, the nation, and the
environment, as required under 42 U.S.C. 6295(o)(2)(B)(i). The results
of this analysis serve as the basis for DOE's evaluation of the
economic justification for an amended standard level (thereby
supporting or rebutting the results of any preliminary determination of
economic justification). The rebuttable presumption payback calculation
is discussed in section IV.F.11 of this document.
IV. Methodology and Discussion of Related Comments
This section addresses the analyses DOE has performed for this
rulemaking with regard to commercial prerinse spray valves. Separate
subsections address each component of DOE's analyses.
DOE used several analytical tools to estimate the impact of the
standards considered in this document. The first tool is a spreadsheet
that calculates the LCC savings and PBP of the amended energy
conservation standards. The NIA uses a second spreadsheet set that
provides shipments forecasts and calculates NES and NPV of total
consumer costs and savings expected to result from amended energy
conservation standards. DOE uses a third spreadsheet tool, the
Government Regulatory Impact Model (GRIM), to assess manufacturer
impacts of amended standards. These three spreadsheet tools are
available on the DOE Web site for this rulemaking: https://www1.eere.energy.gov/buildings/appliance_standards/rulemaking.aspx?ruleid=100.
Additionally, DOE used a version of the Energy Information
Administration's (EIA) National Energy Modeling System (NEMS) for the
emission and utility impact analyses. The NEMS model simulates the
energy sector of the U.S. economy. EIA uses NEMS to prepare the AEO, a
widely-known baseline energy forecast for the United States.\19\
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\19\ For more information on NEMS, refer to The National Energy
Modeling System: An Overview 2009, DOE/EIA-0581 (Oct. 2009)
(Available at: https://www.eia.gov/forecasts/aeo/info_nems_archive.cfm).
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The version of NEMS used for appliance standards analysis, which
makes minor modifications to the AEO version, is called NEMS-BT.\20\
NEMS-
[[Page 4758]]
BT accounts for the interactions among the various energy supply and
demand sectors and the economy as a whole.
---------------------------------------------------------------------------
\20\ EIA approves the use of the name ``NEMS'' to describe only
an AEO version of the model without any modification to code or
data. Because the present analysis entails some minor code
modifications and runs the model under various policy scenarios that
deviate from AEO assumptions, the name ``NEMS-BT'' refers to the
model as used here. (BT stands for DOE's Building Technologies
Office.)
---------------------------------------------------------------------------
A. Market and Technology Assessment
DOE develops information in the market and technology assessment
that provides an overall picture of the market for commercial prerinse
spray valves, including the purpose of the products, the industry
structure, manufacturers, market characteristics, and technologies used
in the products. This activity includes both quantitative and
qualitative assessments, based primarily on publicly-available
information. The subjects addressed in the market and technology
assessment for this rulemaking include: (1) Market assessment, (2)
product classes, (3) technology assessment, and (4) impact on
compliance, certification and enforcement. The key findings of DOE's
market assessment are summarized in the following sections. See chapter
3 of the final rule TSD for further discussion of the market and
technology assessment.
1. Market Assessment
As part of the market assessment, DOE examined manufacturers, trade
associations, and the quantities and types of products sold and offered
in the market. DOE reviewed relevant literature to develop an
understanding of the CPSV industry in the United States, including
market research data, government databases, retail listings, and
industry publications (e.g., manufacturer catalogs). Using this
information, DOE assessed the overall state of the industry, CPSV
manufacturer model-based market shares, shipments, general technical
information on commercial prerinse spray valves, and industry trends.
In comments to the CPSV NOPR, T&S Brass suggested that information
and data acquired through the WaterSense program be considered, as the
program set a reasonable efficiency goal and established the groundwork
for a viable CPSV efficiency program. (T&S Brass, No. 33 at p. 3) AWE
stated that the WaterSense research seems to be ignored by DOE. (AWE,
No. 28 at p. 7)
For this rulemaking, DOE performed market research using various
reports and databases, including the WaterSense database that lists the
spray force of WaterSense labeled products. DOE used the spray force
results from the WaterSense labeled products as input to the
engineering analysis (see chapter 5 of the final rule TSD). Also, DOE
used the WaterSense field study report: (1) To characterize the CPSV
market; (2) to perform a sensitivity analysis of water pressure for
testing commercial prerinse spray valves as part of the CPSV test
procedure rulemaking; \21\ and (3) as inputs to the energy and water
use analysis (see chapter 7 of the final rule TSD).
---------------------------------------------------------------------------
\21\ The water pressure sensitivity analysis is available at
www.regulations.gov under docket number EERE-2014-BT-TP-0055.
---------------------------------------------------------------------------
To characterize the market, DOE analyzed the model-based market
shares of major manufacturers based on the number of basic models \22\
observed through the DOE Compliance Certification Management System
(CCMS) database, WaterSense database, and Web searches.\23\ DOE
concluded that the CPSV market includes 46 basic models from 13
manufacturers. Chapter 3 of the final rule TSD provides more details on
the CPSV market.
---------------------------------------------------------------------------
\22\ Basic model means all units of a given type of covered
product (or class thereof) manufactured by one manufacturer, having
the same primary energy source, and having essentially identical
electrical, physical, and functional (or hydraulic) characteristics
that affect energy use, energy efficiency, water use, or water
efficiency. 10 CFR 431.262.
\23\ U.S. Department of Energy. Compliance Certification
Database (available at http://www.regulations.doe.gov/certification-data/); U.S. EPA, Water Sense (available at www.epa.gov/watersense/product_search.html).
---------------------------------------------------------------------------
Additionally, DOE also characterized the efficiency (flow rate)
distribution of commercial prerinse spray valves currently on the
market. DOE performed this analysis in the CPSV NOPR, and presented it
during the CPSV NOPR public meeting. DOE's analysis indicated a wide
range of CPSV flow rates on the market with rated flow rates between
0.59 and 1.60 gpm. DOE received a comment during the CPSV NOPR public
meeting regarding the efficiency distribution. T&S Brass stated that
consumer satisfaction was not represented in DOE's analysis, and that
consumer satisfaction is very high at the upper range of the market
flow rate distribution. (T&S Brass, Public Meeting Transcript, No. 23
at p. 31) T&S Brass further commented that the showerhead-type
commercial prerinse spray valves represent the majority of the market
and highest level of customer satisfaction because these units prevent
splash-back. (T&S Brass, Public Meeting Transcript, No. 23 at pp. 42-
43)
While consumer satisfaction is not directly referenced in the
efficiency distribution graph presented by DOE in the CPSV NOPR, DOE
has acknowledged consumer satisfaction and consumer utility as
important aspects to consider when establishing product classes for
commercial prerinse spray valves. This is described further in the
product class section of this document (section IV.A.2). Additionally,
in response to comments from interested parties, DOE updated both its
engineering analysis and downstream analysis to account for the shower-
type commercial prerinse spray valves and its majority market
shipments. The updated engineering analysis is presented in section
IV.C of this document, and the updated shipments analysis is presented
in section IV.G of this document.
2. Product Classes
When evaluating and establishing energy conservation standards, DOE
considers dividing covered products into classes by (a) the type of
energy used, (b) the capacity of the product, or (c) other performance-
related features that justify different standard levels. (42 U.S.C.
6295(q)) Currently, DOE regulates all covered commercial prerinse spray
valves as a single product class that is subject to a 1.6-gpm standard
for flow rate. 10 CFR 431.266. DOE, however, has determined that spray
force is a performance-related feature that justifies different
standard levels. Consequently, this final rule establishes three
product classes based on spray force ranges: (1) Product class 1 (less
than or equal to 5.0 ounce-force, or ozf), (2) product class 2 (greater
than 5.0 ozf but less than or equal to 8.0 ozf), and (3) product class
3 (greater than 8.0 ozf). These are the same product classes that were
proposed in the CPSV NOPR, but with a different naming convention.
a. Spray Force
In the CPSV NOPR and public meeting, DOE presented data indicating
a strong correlation between spray force and flow rate, as described
further in section IV.C.2 of this final rule and in chapter 5 of the
TSD. Specifically, units with higher spray force have inherently higher
flow rates, and units with lower spray force have inherently lower flow
rates. This direct relationship provided justification for creating
multiple product classes defined by ranges of spray force.
In the CPSV NOPR, DOE cited a WaterSense field study that found
that low water pressure, or spray force, can be a source of user
dissatisfaction for some applications.\24\ DOE also received
[[Page 4759]]
multiple comments in response to the 2014 CPSV Framework document
stating that spray force is a performance related feature that could be
used to define product classes. The Advocates commented that product
classes must be considered to distinguish commercial prerinse spray
valves, and that DOE could consider using spray force as one way to
delineate separate product classes. (Advocates, No. 11 at p. 2) The CA
IOUs urged DOE to consider user satisfaction when considering the
efficiency metric, as some field surveys have shown that users that are
dissatisfied with efficient commercial prerinse spray valves will
substitute them with those that likely increase overall water
consumption. Therefore, CA IOUs suggested either incorporating spray
force into the efficiency metric, or alternatively, using spray force
to establish product classes as a way to account for differentiating
products. (CA IOUs, No. 14 at p. 1) T&S Brass commented that the
applications of commercial prerinse spray valves could vary from
rinsing to cleaning baked-on food, and that the different applications
might require different spray forces. T&S Brass stated that it offers a
variety of prerinse spray valves that have different design features
based on end users' applications. (T&S Brass, Public Meeting
Transcript, No. 6 at p. 40) In response to the CPSV NOPR, Chicago
Faucets commented that spray force is useful for predicting customer
satisfaction. (Chicago Faucets, No. 26 at p. 2)
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\24\ EPA WaterSense, Prerinse Spray Valves Field Study Report,
at 24-25 (Mar. 31, 2011) (Available at: www.epa.gov/watersense/docs/final_epa_prsv_study_report_033111v2_508.pdf).
---------------------------------------------------------------------------
Furthermore, DOE market research indicates three distinct
categories of end-user applications for commercial prerinse spray
valves, which require different levels of spray force: (1) Cleaning
delicate glassware and removing loose food particles from dishware
(which requires the least amount of spray force); (2) cleaning wet
foods; and (3) cleaning baked-on foods (which requires the greatest
amount of spray force).
DOE also received general comments regarding the use of spray force
to define separate product classes for commercial prerinse spray
valves. T&S Brass recommended that the DOE establish the CPSV
efficiency goal based only upon maximum flow rate, as this is directly
related to water conservation. (T&S Brass, No. 33 at p. 3) Chicago
Faucets commented that the addition of the spray force test into
mandated Federal law is unnecessary and counterproductive. Chicago
Faucets believes that the focus should be on water conservation.
Chicago Faucets stated that the spray force test method has no bearing
on water conservation and that it was intended as a tool for marketing
and selling spray valves, and nothing more. (Chicago Faucets, No. 26 at
p. 2) The North American Association of Food Equipment Manufacturers
(NAFEM) stated that it appears to them that DOE is requiring
manufacturers to design commercial prerinse spray valves to meet the
classification system and spray force requirements which have been pre-
determined by DOE. (NAFEM, PMI, No. 31 at p. 1)
AWE commented in response to the CPSV NOPR that there is no
evidence that spray force is the only factor for consumer satisfaction
and performance in cleaning dishware. (AWE, No. 28 at p. 3) AWE further
commented that spray force should be excluded from the proposed rule as
it is irrelevant to efficiency, and that the only measure of valve
water efficiency is a volumetric measure, stated in gallons per minute.
(AWE, No. 28 at p. 3) AWE also stated that high spray force can be a
hindrance to performance for some operations due to excessive splash
and aerosolizing water. (AWE, No. 28 at p. 4)
In comments received during the CPSV NOPR public meeting and
through written submissions, the majority of the interested parties
opposed DOE's product class structure based on spray force, and
recommended that DOE maintain a single product class. (Chicago Faucets,
No. 26 at pp. 1-2; PMI, No. 27 at p. 1; Fisher, No. 30 at p. 1;
Appliance Standards Awareness Project (ASAP), Northwest Energy
Efficiency Alliance (NEEA), NRDC, No. 32 at p. 1; Pacific Gas and
Electric (PG&E), Southern California Edison (SCE), Southern California
Gas Company (SCGC), San Diego Gas and Electric (SDG&E), No. 34 at pp.
1-2; AWE, No. 28 at p. 7; T&S Brass, No. 33 at p. 2) PMI, PG&E, SCE,
SCGC, and SDG&E (collectively, the ``CA IOUs'') and, ASAP and NRDC
reiterated their comments in favor of a single product class in
response to the CPSV NODA. (PMI, No. 43 at p. 1; CA IOUs, No. 44 at pp.
1-2; ASAP and NRDC, No. 45 at p. 1)
On the other hand, several interested parties supported the
consideration of spray force for the standard. Fisher stated that the
standard should focus on flow rate and spray force, but allow the
consumer to determine which of these performance factors will satisfy
their requirements. (Fisher, No. 30 at p. 1) ASAP, NEEA, and NRDC
(collectively, the ``Advocates'') and the CA IOUs commented that they
support the proposal to add a requirement to measure and report spray
force. The Advocates and CA IOUs believe that the addition of spray
force will help stakeholders to better understand CPSV product
performance and help inform the incorporation of this metric into a
future rulemaking. Additionally, the Advocates stated that the
collection of spray force product data will also inform the EPA
WaterSense program and other efforts to improve water and energy
efficiency in commercial kitchens. (Advocates, No. 32 at p. 2; CA IOUs,
No. 34 at p. 3).
DOE acknowledges that some interested parties generally oppose the
use of spray force to define separate product classes for commercial
prerinse spray valves. However, DOE received no comments contradicting
its conclusion that spray force is a performance-related feature
related to consumer utility. DOE also acknowledges that there are other
features that could also affect consumer utility of commercial prerinse
spray valves, including spray shape and amount of splash back; however,
these metrics are not as easily quantifiable as spray force, nor can
they be easily tested or defined. Based on the WaterSense studies, the
totality of comments received in response to the 2014 CPSV Framework
document and CPSV NOPR, and additional market research, DOE concludes
that spray force is a performance-related feature that justifies
different standard levels. DOE is not establishing a minimum spray
force requirement in this final rule; rather, spray force is used only
to define the boundaries between the three product classes.
b. Number of Classes
To determine the number of product classes, DOE tested and analyzed
a wide range of CPSV units on the market, spanning multiple
manufacturers, flow rates, and spray shapes. DOE believes that the
units analyzed for this rulemaking are representative of the entire
CPSV market. DOE's test data and additional market research indicated
three clusters of spray force data points, which DOE used as the basis
for proposing three separate product classes. Additional details
regarding this test data is provided in chapter 5 of the final rule
TSD.
Product class 1 included units with spray force less than or equal
to 5.0 ounce-force (ozf), product class 2 included units with spray
force greater than 5.0 ozf but less than or equal to 8.0 ozf, and
product class 3 included units with spray force greater than 8.0 ozf.
DOE received comments regarding the method behind how the product
classes were established. Specifically, AWE stated that using a scatter
graph of spray force from different models, then dividing into thirds,
is not a scientific
[[Page 4760]]
method to classify products. (AWE, No. 28 at p. 3) AWE recommended that
the classification system not be implemented and believes that it is
arbitrary, unjustified, and its effect on water use is unknown. (AWE,
No. 28 at p. 6)
DOE selected 5.0 ozf as the spray force cut-off between product
class 1 and product class 2 based on DOE's test data and market
research, which clearly showed a cluster of CPSV units above and below
that threshold. One cluster of CPSV units had spray force ranges
between 4.1 and 4.8 ozf, and the other cluster was between 5.5 and 7.7
ozf. Additionally, in comments to the 2014 CPSV Framework document, T&S
Brass suggested a flow rate cut-off of 0.80 gpm between the ``ultra-
low-flow'' and ``low-flow'' commercial prerinse spray valves. (T&S
Brass, No. 12 at p. 3) A flow rate of 0.80 gpm equates to 5.3 ozf using
the flow rate-spray force linear relationship determined by DOE. Based
on these considerations, DOE established the threshold between the two
classes at 5.0 ozf.
DOE selected 8.0 ozf as the spray force cut-off between product
class 2 and product class 3 based on test results of commercial
prerinse spray valves with shower-type spray shapes. Shower-type spray
shapes provide the distinct utility of minimizing ``splash back'' which
can be associated with nozzle-type designs at higher flow rates. In
addition to the three clusters of data points in the flow rate-spray
force plot, DOE testing showed that the upper range of the market, in
terms of flow rate, predominantly includes shower-type units. DOE found
that the lowest tested spray force of any shower-type unit was 8.1 ozf.
Additionally, in comments to the 2014 CPSV Framework document, T&S
Brass suggested a flow rate cut-off of 1.28 gpm between the ``low-
flow'' and ``standard'' commercial prerinse spray valves. (T&S Brass,
No. 12 at p. 3) A flow rate of 1.28 gpm equates to 8.5 ozf using the
flow rate-spray force linear relationship determined by DOE. Based on
these considerations, DOE selected 8.0 ozf to differentiate product
class 3 units from other commercial prerinse spray valves available on
the market.
As described in the CPSV NOPR, DOE believed that each of these
defined spray force ranges is associated with unique consumer utility
for specific CPSV applications. Specifically, product class 1 provides
distinct utility for cleaning delicate glassware and removing loose
food particles from dishware, product class 2 provides distinct utility
for cleaning wet foods, and product class 3 provides distinct utility
for cleaning baked-on foods. DOE believes that these categorizations
appropriately reflect the various end uses of commercial prereinse
spray valves and has defined the three product classes accordingly.
c. Other Comments
In response to the NOPR, interested parties commented that the
proposed product classes would limit manufacturers' product designs and
innovation, and create confusion to consumers. (T&S Brass, Public
Meeting Transcript, No. 23 at pp. 51-52; Chicago Faucets, Public
Meeting Transcript, No. 23 at pp. 49-51; NAFEM, PMI, No. 31 at p. 1;
PMI, No. 27 at p. 1; Chicago Faucets, No. 26 at p. 2; T&S Brass, No. 33
at p. 2; AWE, No. 28 at p. 6; CA IOUs, No. 44 at p. 2) Specifically,
AWE stated that the classifications could alter the market in a manner
that deters the use of more efficient and better performing products.
(AWE, No. 28 at p. 4)
By maintaining flow rate as the regulated efficiency metric and
creating three product classes, DOE believes the product class
structure would not prescribe or limit any particular design options
for CPSV manufacturers. DOE's technology assessment and screening
analysis identified multiple possible design options that manufacturers
could implement to achieve reductions in flow rate, which apply to both
shower-type and nozzle-type commercial prerinse spray valves. In
addition, manufacturers would not be precluded from implementing other
innovative design options that may be developed in the future.
Additionally, DOE does not expect the product class structure to
create confusion for the consumer, because DOE market research
indicates that CPSV marketing materials predominantly highlight the
spray pattern shape (e.g., solid stream, shower, fan) and flow rate of
CPSV models. The product class structure does not prescribe any changes
to the type of information manufacturers can provide in CPSV marketing
materials.
CA IOUs stated that different product classes are not marketed to
consumers that would necessitate three different product standards
based on spray force. According to the CA IOUs, commercial prerinse
spray valves are marketed based on physical dimensions, and in some
cases flow rate. (CA IOUs, No. 34 at pp. 1-2; CA IOUs, No. 44 at p. 2)
DOE also has not specified any labeling requirements in this final
rule. DOE only requires that manufacturers provide the information
contained in the certification reports when certifying that all
applicable CPSV models are compliant with the standard. DOE is not
requiring that the product classes be used to market commercial
prerinse spray valves; the product classes are used to determine the
applicable standard, and are used for certification, compliance, and
enforcement purposes. See section III.C for more details on compliance,
certification and enforcement. Therefore, DOE does not expect that the
product class structure would alter the market and deter the use of
higher-efficiency and better performing products, as the representation
of the commercial prerinse spray valves will continue to be in terms of
flow rate.
AWE commented that there is no evidence presented as to how a
consumer should choose between the different classifications, and that
consumer choice tends to gravitate towards ``heavy-duty'' under the
false premise that bigger is better. (AWE, No. 28 at pp. 3-4) The
Advocates stated that if DOE creates the three product classes, then it
would drive the market to the ``heavy-duty'' class. The Advocates
expressed concern that without the benefit of the current distribution
of CPSV market shares based on flow rate, creating three product
classes could increase the average flow rate of products sold in the
market. (Advocates, No. 32 at p. 2; ASAP and NRDC, No. 45 at p. 1)
DOE realizes that consumers may switch between product classes, and
the flow rate of commercial prerinse spray valves used by some
consumers may increase instead of decrease due to energy conservation
standards. DOE analyzed the effects of product class switching in the
downstream analyses and evaluated the results of product class
switching when setting a standard in section V.C.1. A detailed
description of DOE's method to model product class switching is
contained in chapter 9 of the final rule TSD.
DOE received comments on the naming convention used for the
proposed product classes in the CPSV NOPR. T&S Brass recommended
changing the product class names because the ``heavy-duty'' term is
already widely used in the industry to represent products that last
long. (T&S Brass, Public Meeting Transcript, No. 23 at pp. 110-111)
During the public meeting, DOE requested that stakeholders provide an
alternate naming convention for the product classes. Chicago Faucets
stated that the proposed product class names, especially ``light
duty,'' may prevent customers from choosing the lower flow products.
Users prefer durable, heavy duty products, particularly in
[[Page 4761]]
commercial applications where commercial prerinse spray valves are most
commonly used. Therefore, Chicago Faucets suggested using ``Level 1'',
``Level 2'', and ``Level 3'' instead. (Chicago Faucets, No. 26 at p. 3)
Fisher stated that the terms ``heavy duty'', ``standard duty'', and
``light duty'' should not be used as the terminology for the different
product classes. (Fisher, No. 30 at p. 1)
Based on feedback from interested parties, DOE has renamed the
product classes in this final rule as product class 1, product class 2,
and product class 3 instead of ``light-duty,'' ``standard-duty,'' and
``heavy-duty,'' respectively. DOE also notes that the product class
names defined by DOE do not restrict how manufacturers may refer to
their products in marketing literature, provided that such products
meet the appropriate standard based on DOE's defined product classes.
Finally, DOE also received comments regarding potential other
product classes that could be considered in future rulemakings. The
Advocates commented that there is some market differentiation between
commercial prerinse spray valves intended for cleaning dishware before
sanitizing in a commercial dishwasher, and commercial prerinse spray
valves intended for pot and pan cleaning. The Advocates recommended
that DOE may wish to consider product classes based on such existing
market differentiation during the next update to the standards.
(Advocates, No. 32 at p. 2) CA IOUs stated that the market appears to
be moving towards different usage type, such as dining and pot cleaning
spray valves. CA IOUs recommended when DOE begins the process of a new
energy conservation standard in a future rulemaking, that DOE should
consider separate standards for dining and pot and pan cleaning. (CA
IOUs, No. 34 at p. 2; CA IOUs, No. 44 at p. 2)
3. Technology Assessment
In the CPSV NOPR technology assessment, DOE identified six
technology options that would improve the efficiency of commercial
prerinse spray valves, as measured by the CPSV DOE test procedure.
These include the following: (1) Addition of flow control insert, (2)
smaller spray hole area, (3) aerators, (4) additional valves, (5)
changing spray hole shape, and (6) venturi meter to orifice plate
nozzle geometries.
DOE received one comment in support of the venturi meter to orifice
plate nozzle geometry technology option. CA IOUs supported DOE's
consideration of implementing an orifice plate nozzle design to produce
a lower flow rather than a venturi meter nozzle with similar inlet and
outlet dimensions. (CA IOUs, No. 34 at pp. 2-3) AWE, on the other hand,
opposed design[hyphen]restrictive requirements in a specification
unless health and/or safety are at risk. Instead, AWE stated that it is
appropriate to mandate an outcome (e.g., gallons per minute) directly
related to water and energy efficiency, rather than
pre[hyphen]determine design parameters. Once the desired outcome is
defined, manufacturers will innovate and develop products that yield
the mandated outcomes. (AWE, No. 28, p. 7)
As part of its rulemaking analysis process, DOE analyzes technology
options that can be implemented to improve the efficiency of a covered
product. The technology options identified for commercial prerinse
spray valves provide feasible means for decreasing flow rate (or
increasing efficiency) to meet the amended standard. However, DOE does
not mandate any technology options that can be used to meet the amended
standard. Manufacturers can use all technologies available to them to
meet the amended energy conservation standard. In addition,
manufacturers would also not be precluded from implementing other
innovative design options that may be developed in the future.
For this final rule, DOE analyzed the same six technology options
that were described in the CPSV NOPR. Chapter 3 of the final rule TSD
provides additional details on all the technology options identified by
DOE as part of the technology assessment.
B. Screening Analysis
DOE uses the following four screening criteria to determine which
technology options are suitable for further consideration in an energy
conservation standards rulemaking:
(1) Technological feasibility. Technologies that are not
incorporated in commercial products or in working prototypes will not
be considered further.
(2) Practicability to manufacture, install, and service. If it is
determined that mass production and reliable installation and servicing
of a technology in commercial products could not be achieved on the
scale necessary to serve the relevant market at the time of the
projected compliance date of the standard, then that technology will
not be considered further.
(3) Impacts on product utility or product availability. If it is
determined that a technology would have significant adverse impact on
the utility of the product to significant subgroups of consumers or
would result in the unavailability of any covered product type with
performance characteristics (including reliability), features, sizes,
capacities, and volumes that are substantially the same as products
generally available in the United States at the time, it will not be
considered further.
(4) Adverse impacts on health or safety. If it is determined that a
technology would have significant adverse impacts on health or safety,
it will not be considered further.
10 CFR part 430, subpart C, appendix A, 4(a)(4) and 5(b)
If DOE determines that a technology, or a combination of
technologies, fails to meet one or more of the previously mentioned
four criteria, it will be excluded from further consideration in the
engineering analysis. The reasons for eliminating any technology are
discussed in the following sections.
The subsequent sections include comments from interested parties
pertinent to the screening criteria, DOE's evaluation of each
technology option against the screening analysis criteria, and whether
DOE determined that a technology option should be excluded (screened
out) based on the screening criteria.
In the CPSV NOPR, DOE screened out the following technology
options: The addition of a flow control insert, aerators, and
additional valves. DOE did not receive any comments regarding the
design options that were screened out. The remaining technology options
listed in section IV.A.3 met all four screening criteria and were
analyzed in the CPSV NOPR. DOE did not receive any additional comments
regarding these technology options. Therefore, DOE did not screen out
the following technology options for the final rule analysis: (1)
Smaller spray hole area, (2) changing spray hole shape, and (3) venturi
meter to orifice plate nozzle geometries.
DOE determined that these technology options are technologically
feasible because they are being used or have previously been used in
commercially available products or working prototypes. DOE also finds
that all of the remaining technology options meet the other screening
criteria (i.e., practicable to manufacture, install, and service and do
not result in adverse impacts on consumer utility, product
availability, health, or safety). For additional details, see chapter 4
of the final rule TSD.
[[Page 4762]]
C. Engineering Analysis
In the engineering analysis, DOE establishes the relationship
between the manufacturer production cost (MPC) and improved CPSV
efficiency. This relationship serves as the basis for cost-benefit
calculations for individual consumers, manufacturers, and the nation.
DOE typically structures the engineering analysis using one of three
approaches: (1) Design option, (2) efficiency level, or (3) reverse
engineering (or cost assessment). The design-option approach involves
adding the estimated cost and associated efficiency of various
efficiency-improving design changes to the baseline to model different
levels of efficiency. The efficiency-level approach uses estimates of
costs and efficiencies of products available on the market at distinct
efficiency levels to develop the cost-efficiency relationship. The
reverse-engineering approach involves testing products for efficiency
and determining cost from a detailed bill of materials (BOM) derived
from reverse engineering representative products.
For this analysis, DOE structured its engineering analysis for
commercial prerinse spray valves using a combination of the design
option approach and the reverse-engineering approach. The analysis is
performed in terms of incremental increases in efficiency (decreases in
flow rate) due to the implementation of selected design options, while
the estimated MPCs for each successive design option are based on
product teardowns and a bottom-up manufacturing cost assessment. Using
this hybrid approach, DOE developed the relationship between MPC and
CPSV efficiency.
Chapter 5 of the final rule TSD discusses the baseline efficiencies
for each product class (in terms of flow rate), the design options DOE
considered, the methodology used to develop manufacturing production
costs, and the cost-efficiency relationships. The LCC and PBP analysis
uses the cost-efficiency relationships developed in the engineering
analysis.
1. Engineering Approach
For each of the three adopted product classes, DOE selected a
baseline efficiency (in terms of flow rate) as a reference point from
which to measure changes resulting from each design option. DOE then
developed separate cost-efficiency relationships for each product class
analyzed. The following is a summary of the method DOE used to
determine the cost-efficiency relationship for commercial prerinse
spray valves:
(1) Perform flow rate and spray force tests on a representative
sample of commercial prerinse spray valves in every product class.
(2) Develop a detailed BOM for the tested commercial prerinse spray
valves through product teardowns, and construct a commercial prerinse
spray valve cost model.
(3) Use the test data and cost model to calculate the incremental
increase in efficiency (i.e., decrease in flow rate) and cost increase
of adding specific design options to a baseline model.
In response to the CPSV NOPR, NAFEM stated that DOE has not tested
commercial prerinse spray valves in real life foodservice settings.
NAFEM believes that consumer satisfaction is essential for the
companies selling these products. (NAFEM, No. 31 at p. 1)
DOE has not performed testing in foodservice settings because DOE
test procedures, not field performance, must be used to determine
whether the products comply with standards adopted pursuant to EPCA.
(42 U.S.C. 6295(s)) Instead, DOE conducted multiple commercial prerinse
spray valve tests according to the amended DOE test procedure.
2. Linear Relationship Spray Force and Flow Rate
In the CPSV NOPR public meeting, DOE presented the relationship
between spray force and flow rate. This relationship was determined
using DOE test data for spray force and flow rate for a wide range of
commercial prerinse valves. The tested units included the entire
spectrum of available spray patterns and flow rates that DOE was aware
of at the time of the analysis. In addition, DOE collected
supplementary data from DOE's CCMS, the U.S. EPA WaterSense program,
and FSTC reports. DOE analyzed the collected data and found a strong
linear relationship between flow rate and spray force.
DOE received several comments related to the spray force and flow
rate relationship. NRDC requested that DOE consider identifying the
configuration of the commercial prerinse spray valves in the spray
force-flow rate relationship without revealing the individual model.
(NRDC, Public Meeting Transcript, No. 23 at p. 45) DOE updated the flow
rate-spray force plot in this final rule to identify commercial
prerinse spray valves that have shower-type spray patterns. The updated
relationship can be found in chapter 5 of the final rule TSD.
T&S Brass stated that the relationship between spray force and flow
rate does not address consumer satisfaction. Instead, the relationship
assumes that consumers are satisfied with all products. (T&S Brass,
Public Meeting Transcript, No. 23 at p. 47)
DOE acknowledges that different CPSV products may provide different
levels of consumer satisfaction. DOE believes, however, that the
amended standards promulgated in this final rule for the three defined
product classes will maintain the same variety of product features on
the market as under the current standard. DOE's analysis indicates that
the amended standards will not result in a loss of consumer utility
compared to the current standards.
T&S Brass stated that while the flow rate values for the basic
models are included in the relationship between spray force and flow
rate, the impact of market share is not included. Therefore, if market
share was included, there will be more data points on the higher end of
flow rate. However, T&S Brass also commented that even with the
additional data points, the linear relationship will not change. (T&S
Brass, Public Meeting Transcript, No. 23 at pp. 48-49) Since publishing
the CSPV NOPR, DOE tested additional units from product class 3, and
added the test results for the units that were compliant with DOE's
current CPSV standard (1.6 gpm) to the relationship shown in chapter 5
of the final rule TSD. The relationship continues to show flow rate
varies linearly with spray force, irrespective of market share.
However, based on the comment from T&S Brass, DOE has updated the
assumption in the shipments analysis to account for more shipments in
product class 3. This is presented in section IV.G of this document.
3. Baseline and Max-Tech Models
To analyze design options for energy efficiency improvements, DOE
defined a baseline model for each product class. Typically, the
baseline model is a model that meets current energy conservation
standards. DOE defined the baseline efficiency for all product classes
as the current Federal standard of 1.6 gpm.
DOE defined the market baseline for product classes 1 and 2 as the
greater of (1) the highest flow rate in the class that meets the
Federal standard, or (2) the flow rate at the upper spray force bound
of the product class as predicted by the spray force-flow rate linear
relationship described in chapter 5 of the TSD. The most consumptive
unit that was tested in product class 1 had a flow rate of 0.97 gpm,
which exceeds the 0.75 gpm predicted by the linear relationship between
spray force and flow rate for
[[Page 4763]]
the product class 1 upper spray force bound of 5.0 ozf. DOE rounded the
market baseline flow rate of product class 1 to 1.00 gpm. The market
baseline for product class 2, predicted by the spray force-flow rate
linear relationship, is 1.20 gpm at the upper spray force bound of 8.0
ozf. DOE did not find any commercial prerinse spray valves in product
class 2 that exceed this flow rate. For product class 3, the market
baseline equals the Federal flow rate standard of 1.60 gpm.
The analysis also identified the lowest flow rate that is
commercially available within each product class (i.e., the max-tech
model). DOE determined the max-tech level as the least consumptive
tested commercial prerinse spray valve in each product class. The max-
tech levels for product classes 1, 2, and 3 are 0.62, 0.73, and 1.13
gpm, respectively. Finally, DOE also defined intermediate efficiency
levels between the baseline and max-tech levels for each product class.
Further information about DOE's efficiency level definitions is
provided in chapter 5 of the final rule TSD. Table IV.1 through Table
IV.3 provide the updated efficiency levels for all three product
classes.
Table IV.1--Efficiency Levels for CPSV Product Class 1
[Spray force <= 5.0 ozf]
------------------------------------------------------------------------
Flow rate
Efficiency level Description (gpm)
------------------------------------------------------------------------
Baseline....................... Current Federal 1.60
standard.
Level 1........................ Market minimum......... 1.00
Level 2........................ 15% improvement over 0.85
market minimum.
Level 3........................ 25% improvement over 0.75
market minimum.
Level 4........................ Maximum technologically- 0.62
feasible (max-tech).
------------------------------------------------------------------------
Table IV.2--Efficiency Levels for CPSV Product Class 2
[5.0 ozf < spray force <= 8.0 ozf]
------------------------------------------------------------------------
Flow rate
Efficiency level Description (gpm)
------------------------------------------------------------------------
Baseline....................... Current Federal 1.60
standard.
Level 1........................ Market minimum......... 1.20
Level 2........................ 15% improvement over 1.02
market minimum.
Level 3........................ 25% improvement over 0.90
market minimum.
Level 4........................ Maximum technologically- 0.73
feasible (max-tech).
------------------------------------------------------------------------
Table IV.3--Efficiency Levels for CPSV Product Class 3
[Spray force > 8.0 ozf]
------------------------------------------------------------------------
Flow rate
Efficiency level Description (gpm)
------------------------------------------------------------------------
Baseline....................... Current Federal 1.60
standard.
Level 1........................ 10% improvement over 1.44
baseline.
Level 2........................ WaterSense level; 20% 1.28
improvement over
baseline.
Level 3........................ Maximum technologically- 1.13
feasible (max-tech).
------------------------------------------------------------------------
In response to the updates to the engineering analysis in the CPSV
NODA, CA IOUs stated that DOE should provide a reason for changing the
efficiency level 2 for product class 3 from 1.24 gpm to 1.28 gpm. (CA
IOUs, No. 44 at p. 2)
DOE notes that the flow rate for efficiency level 2 for product
class 3 remains unchanged at 1.28 gpm since the CPSV NOPR. Instead, DOE
has only updated the max-tech level of product class 3 since the CPSV
NOPR. In the CPSV NOPR, the max-tech level for product class 3 was set
at 1.24 gpm based on test results. After the CPSV NOPR, DOE performed
additional testing and based on these test results, DOE identified a
new max-tech level for product class 3. Therefore, DOE revised the max-
tech level in product class 3 from 1.24 gpm to 1.13 gpm.
4. Proposed CPSV NOPR Standard Levels
In the CPSV NOPR, DOE proposed the standard levels to be 0.65,
0.97, and 1.24 gpm for light, standard, and heavy-duty product classes,
respectively. 80 FR 39487. DOE received comments on the loss of product
availability regarding the proposed standards as well as several other
comments about the standard levels, which are addressed in the
following sections.
a. Availability of Products
AWE commented that the CPSV NOPR proposal has design-restrictive
requirements and will likely lead to less diverse products on the
market. (AWE, No. 28 at pp. 6-7) AWE recommended that the rule include
the use of WaterSense test criteria to determine compliance to any
Federal minimum standard. (AWE, No. 28 at p. 4) AWE also stated that
the proposed spray force criteria are in direct conflict with
WaterSense criteria, and that only 3 of the 22 prerinse spray valves
currently meeting WaterSense specifications also meet the minimum
requirements proposed in this rulemaking. AWE commented that the
remaining 19 products, together with the new WaterSense products about
to be released, would no longer be compliant with the DOE standard.
(AWE, No. 28 at p. 5)
Chicago Faucets expressed a similar concern that the levels
proposed in the CPSV NOPR are too stringent, stating
[[Page 4764]]
that 86 percent of the products certified to voluntary Federal EPA
WaterSense requirements will be obsolete and the investments in the
WaterSense program will not be recovered. Chicago Faucets stated that
this might lead to limited resources in the future for this product.
Additionally, Chicago Faucets stated that 60 percent of the models in
the spray force and flow rate graph presented in the CPSV NOPR would
not pass the new requirement. Chicago Faucets believes that the more
stringent requirements could easily disrupt the free market,
eliminating the majority of the products offered today and restricting
competition by reducing the number of manufacturers of CPSV products.
(Chicago Faucets, No. 26 at pp. 2-3) NAFEM also commented that the
proposed standard will require the manufacturers to abandon current
products and the investment they made. (NAFEM, No. 28 at p. 1)
T&S Brass commented that the proposed standard would eliminate
multi-orifice showerhead-type spray valves. Single-orifice type spray
valves could have applications where there is a lot of splash back.
Therefore, customers will be forced into products that they will not be
satisfied with. (T&S Brass, Public Meeting Transcript, No. 23 at p. 40)
CA IOUs disagreed with T&S Brass and stated that commercial
prerinse spray valves with single orifice, multi orifice, or venturi
meter nozzle designs would be able to meet the 1.24 gpm standard, based
on their own testing results. Additionally, CA IOUs did not observe any
splash back issues with a single orifice nozzle design, nor did they
observe any concerns about splash back based upon customer interviews.
(CA IOUs, No. 34 at pp. 2-3)
EPCA establishes that DOE may not prescribe an amended standard if
interested persons have established by a preponderance of the evidence
that the standard is likely to result in the unavailability in the
United States in any covered product type (or class) of performance
characteristics (including reliability), features, sizes, capacities,
and volumes that are substantially the same as those generally
available in the United States. (42 U.S.C. 6295(o)(4)) In this final
rule, DOE revised the efficiency level definitions and the analysis of
the trial standard levels (TSL) based on feedback from interested
parties. The amended standards adopted in this final rule are less
stringent than those proposed in the CPSV NOPR for all three product
classes. DOE notes that the amended standards adopted in this final
rule are set at the market minimum for product class 1 and product
class 2 at 1.00 gpm and 1.20 gpm respectively. The amended standards
for these product classes have no impact on the current CPSV market,
because all CPSV models in those product classes already meet the
market minimum level. In product class 3, the amended standard is set
at the WaterSense level of 1.28 gpm, and approximately 55 percent of
CPSV units in product class 3 already meet this level. The 1.28 gpm
level maintains the availability of multi-orifice shower-type units on
the market, as described further in the following section. More
discussion on the amended standard and the discussion on the TSL
selections are provided in section IV.C.4.b, and section V.C.1
respectively.
b. Standard Levels
DOE also received comments about the standard levels that were
proposed in the CPSV NOPR. Chicago Faucets expressed concern with the
flow rate levels proposed in the CPSV NOPR and noted that the proposed
flow rates are only hundredths of one gallon per minute lower than the
common flow rates used in the plumbing industry of 1.00 gpm and 1.25
gpm. (Chicago Faucets, No. 26 at p. 3) Chicago Faucets also commented
that if DOE were to move forward with the CPSV NOPR approach, DOE
should use standard levels of 0.65 gpm, 1.00 gpm, and 1.25 gpm for
light duty, standard duty, and heavy duty, respectively. (Chicago
Faucets, No. 26 at p. 3)
The Advocates and CA IOUs recommended that DOE amend the standard
to be a maximum flow rate of 1.24 gpm for all commercial prerinse spray
valves. The Advocates and the CA IOUs recommended this flow rate,
because they believe that 1.24 gpm is a technologically feasible
efficiency level, and would realize significant water and energy
savings and still maintain a positive LCC. (Advocates, No. 11 at p. 2)
Additionally, CA IOUs stated that based on their testing, the 1.24 gpm
level was feasible for equipment from different manufacturers, while
also maintaining product performance. (CA IOUs, No. 34 at p. 2) In
response to the CPSV NODA, the CA IOUs, ASAP and NRDC reiterated that
DOE should adopt a single 1.24 gpm level for all product classes. (CA
IOUs, No. 44 at p. 2; ASAP and NRDC, No. 45 at p. 2).
PMI recommended that DOE replace the proposed three product classes
with a single product class that contains the 1.28 gpm WaterSense
level. (PMI, No. 43 at p. 1) AWE stated that setting a Federal maximum
at 1.28 gpm would prevent WaterSense from establishing a commercial
prerinse spray valve program with a significantly lower water use
threshold. (AWE, No. 28 at p. 7) T&S Brass stated if DOE ultimately
decides to adopt the current EPA WaterSense specification at 1.28 gpm
for commercial prerinse spray valves, that a reasonable transition
period from the voluntary to mandatory status would be an effective
date of January 2020. (T&S Brass, No. 12 at p. 3) Similarly, AWE urged
DOE to postpone this rulemaking process for at least 2 years to prevent
an industry-wide backlash against water efficiency. (AWE, No. 28 at pp.
7-8) AWE further recommended that DOE postpone this rulemaking by at
least 2 years until additional data can be obtained through the
WaterSense reporting process. (AWE, No. 28 at pp. 7-8)
As presented in section I, DOE is adopting standard levels of 1.00
gpm, 1.20 gpm and 1.28 gpm for product classes 1, 2 and 3,
respectively. The adopted standards are set at the market minimum level
for product classes 1 and 2, and at the WaterSense level for product
class 3. DOE believes that these flow rates are the minimum flow rates
for each product class that would not induce consumers to switch
product classes. DOE also notes that the 1.28 gpm standard for product
class 3 alleviates many of the concerns expressed by interested parties
because (1) the engineering analysis shows that the 1.28 gpm level is
technologically feasible; (2) interested parties, including the trade
organization PMI, certain efficiency advocates and a manufacturer,
commented that 1.28 gpm would be an appropriate standard level that
would not negatively impact consumer utility for the highest-flow
product class, and (3) the 1.28 gpm level represents the WaterSense
Program criteria, which was developed in a collaborative process
between EPA and interested parties, including manufacturers. In
addition, the amended standard standards for product classes 1 and 2
have no impact on the current CPSV market, because all CPSV models in
those product classes already meet the market minimum level.
More discussion on this standard level is in sections V.A and V.C.1
of this document.
Regarding the compliance date of the amended standards, EPCA states
that a manufacturer shall not be required to apply new standards to a
product with respect to which other new standards have been required
during the prior 6 year period. (EPCA U.S.C. 6295(m)(4)(B)) As
described earlier in this document, the current standard became
effective January 1, 2006. Manufacturers will have 3 years to
[[Page 4765]]
comply with the amended standards after publication of this final rule.
DOE believes that 3 years is sufficient time for manufacturers to
transition products to the amended standard level. DOE also notes that
the effective date of the amended standards in this final rule will be
more than 6 years after the voluntary WaterSense specification date of
September 19, 2013.
The standard levels set in this final rule also alleviate the
concern about product class switching that was raised by CA IOUs. CA
IOUs suggested using one product class, because one of the benefits is
that it would not result in product class switching. (CA IOUs, No. 34
at p. 2) DOE does not expect product class switching to occur under the
amended standards promulgated by this final rule, as the standard
levels for product classes 1 and 2 do not move consumers from the
current market minimums. A detailed description of DOE's method to
model product class switching is contained in chapter 9 of the final
rule TSD.
5. Manufacturing Cost Analysis
DOE estimated the manufacturing costs using a reverse-engineering
approach, which involves a bottom-up manufacturing cost assessment
based on a detailed BOM derived from teardowns of the product being
analyzed. The detailed BOM includes labor costs, depreciation costs,
utilities, maintenance, tax, and insurance costs, in addition to the
individual component costs. These manufacturing costs are developed to
be an industry average and do not take into account how efficiently a
particular manufacturing facility operates.
To develop the relationship between cost and performance for
commercial prerinse spray valves, DOE used a reverse-engineering
analysis, or teardown analysis. DOE purchased off-the-shelf commercial
prerinse spray valves available on the market and dismantled them
component by component to determine what technologies and designs
manufacturers use to decrease CPSV flow rate. DOE then used independent
costing methods, along with component-supplier data, to estimate the
costs of the components.
DOE derived detailed manufacturing cost estimate data based on its
reverse engineering analysis, which included the cost of the product
components, labor, purchased parts and materials, and investment.
A portion of DOE's test sample included four product series from
four different manufacturers. Through testing, DOE found that the flow
rates of the units varied within each series. However, based on the
reverse-engineering analysis, the manufacturing costs for the units
within each series were the same. Therefore, DOE concluded that there
is no manufacturing cost difference for incremental efficiency
improvements between models within the same series from the same
manufacturer.
DOE also tested and performed a teardown analysis on commercial
prerinse spray valves from additional manufacturers. These commercial
prerinse spray valves represented a range of market baseline to max-
tech units in each class. The testing and teardown results indicated
that the manufacturing costs between different units from different
manufacturers can vary based on the type of material, amount of
material, and/or process used. However, DOE determined that these
factors do not affect the efficiency of a commercial prerinse spray
valve. Therefore, DOE did not include these cost differences in the
engineering analysis. Chapter 5 of the final rule TSD provides further
details on the teardown analysis, component costs, and costs that were
developed as part of the cost-efficiency curves.
D. Markups Analysis
The purpose of the markups analysis is to translate the MPC derived
from the engineering analysis into the final consumer purchase price by
applying the appropriate markups. The first step in this process is
converting the MPC into the manufacturer selling price (MSP) by
applying the manufacturer markup. The manufacturer markup accounts for
cost of sales, general and administrative expenses, research and
development costs, other corporate expenses, and profit. As described
further in chapter 6 of the final rule TSD, the manufacturer markup of
1.30 was calculated as the market share weighted average value for the
industry. DOE developed this manufacturer markup by examining several
major CPSV manufacturers' gross margin information from annual reports
and Securities and Exchange Commission 10-K reports. Because the 10-K
reports do not provide gross margin information at the subsidiary
level, the estimated markups represent the average markups that the
parent company applies over its entire range of product offerings, and
does not necessarily represent the manufacturer markup of the
subsidiary. Both the MPC and the MSP values are used in the MIA.
Next, DOE uses manufacturer-to-consumer markups to convert the MSP
into a consumer purchase price, which is then used in the LCC and PBP
analysis, as well as the NIA. Consumer purchase prices are necessary
for the baseline efficiency level and all other efficiency levels under
consideration.
DOE recognizes that the consumer purchase price depends on the
distribution channel (i.e., how the product is distributed from the
manufacturer to the consumer) the consumer uses to purchase the
product. DOE identified the following distribution channels for
commercial prerinse spray valves:
A. Manufacturer [rarr] Final Consumer (Direct Sales)
B. Manufacturer [rarr] Authorized Distributor [rarr] Final Consumer
C. Manufacturer [rarr] Retailer [rarr] Final Consumer
D. Manufacturer [rarr] Service Company [rarr] Final Consumer
Baseline markups are multipliers that convert the MSP of products
at the baseline efficiency level to consumer purchase price.
Incremental markups are multipliers that convert the incremental
increase in MSP for products at each higher efficiency level (compared
to the MSP at the baseline efficiency level) to corresponding
incremental increases in the consumer purchase price. Consistent with
the CPSV NOPR, in the analysis in this final rule, DOE used only
baseline markups to convert the MSP of products to the consumer
purchase price. This is due to the fact that the engineering analysis
indicated that there is no price increase with improvements in
efficiency for commercial prerinse spray valves. Thus, incremental
markups were not required. Chapter 6 of the final rule TSD provides
further details on the distribution channels and calculated markups. No
comments regarding the markups analysis or distribution chains were
received from interested parties.
E. Energy and Water Use Analysis
The purpose of the energy and water use analysis is to determine
the annual energy and water consumption of commercial prerinse spray
valves to assess the associated energy and water savings potential of
different product efficiencies. The energy and water use analysis
estimates the range of energy and water use of commercial prerinse
spray valves in the field (i.e., as they are actually used by
consumers). To this end, DOE performed an energy and water use analysis
that calculated energy and water use of commercial prerinse spray
valves for each product class and efficiency level identified in the
engineering analysis. The energy and water use analysis provides the
basis for other analyses DOE performed,
[[Page 4766]]
particularly assessments of the energy and water savings and the
savings in consumer operating costs that could result from adoption of
the amended standards.
In the CPSV NOPR analysis, DOE calculated the energy and water use
by determining the representative daily operating time of the product
by major building types that contain commercial kitchens found in the
Commercial Building Energy Consumption Survey (CBECS).\25\ The daily
CPSV operating time was annualized based on operating schedules for
each building type. Annual water use for each product class was
determined by multiplying the annual operating time by the flow rate at
an operating pressure of 60 psi, in accordance with the amended DOE
test procedure, for each efficiency level.
---------------------------------------------------------------------------
\25\ Survey data available at www.eia.gov/consumption/commercial/data/2003/index.cfm.
---------------------------------------------------------------------------
Annual site energy use was calculated by multiplying the annual
water use in gallons by the energy required to heat each gallon of
water to an end-use temperature of 108 [deg]F.\26\ Cold water supply
temperatures used in this calculation were derived for the nine U.S.
census regions based on ambient air temperatures and the hot water
supply temperature was assumed to be 140 [deg]F based on American
Society of Heating, Refrigerating, and Air-Conditioning Engineers
(ASHRAE) Standard 12-2000 regarding the appropriate hot water
temperatures necessary to prevent legionellosis and other bacterial
diseases.\27\ The proportion of buildings which used natural gas or
electricity for water heating found in the CBECS database were
multiplied by the energy consumption of each kind of water heater,
taking into account the efficiency level of the product, to obtain the
total energy consumption of each product class and efficiency level of
commercial prerinse spray valves.
---------------------------------------------------------------------------
\26\ End-use temperature was determined based on a review of
several field studies. See chapter 7 of the CPSV NOPR TSD for a list
of the field studies reviewed.
\27\ ASHRAE Standard 12-2000: Minimizing the Risk of
Legionellosis Associated with Building Water Systems, (February
2000).
---------------------------------------------------------------------------
In response to the CPSV NOPR, DOE received several comments related
to the energy and water use analysis. Specifically, NRDC questioned how
DOE derived the hot water ratio used in the energy and water use and
why the hot water ratio was not consistent throughout the U.S. NRDC
further inquired if the end use temperature of 108 [deg]F was
consistent throughout the analysis. (NRDC, Public Meeting Transcript,
No. 23 at pp. 61-63)
The hot water ratio used in the CPSV NOPR and the final rule energy
and water use analysis(see chapter 7 of the final rule TSD) calculates
the proportion of hot water from the water heater that mixes with the
incoming cold water from the local mains water at the commercial
prerinse spray valve to deliver water at 108 [deg]F. The cold water is
derived regionally for each census division and building type where
commercial prerinse spray valves are installed. The hot water ratio is
not consistent throughout the United States because the mains water
temperature is not consistent throughout the United States. As noted
previously, end use temperature was calculated using data from the
average end use temperature from CPSV field studies.
DOE also received comments in response to the CPSV NOPR related to
the water pressure used in the energy and water use analysis. AWE
commented that the representative range of water pressures in
commercial kitchens should be determined in order to determine a
reasonable range of both flow rate and spray force to be maintained by
the valves. (AWE, No. 28 at p. 5) ASAP was concerned that not testing
at different water pressures could affect the definition of the product
classes, and make it difficult to ensure customer satisfaction. (ASAP,
No. 23 at p. 27) AWE commented that spray force is largely dependent
upon water pressure, and that the supplied water pressure can vary by
at least 70 psi between different service areas. AWE stated that this
can cause models to be classified differently in varying locales, and
is not addressed in the proposal. (AWE, No. 28 at p. 3) AWE further
stated that mandatory requirements demand a higher level of scrutiny,
and recommended that DOE postpone the rulemaking until further research
data is available on how water pressure affects performance in real
life settings. (AWE, No. 28 at p. 5)
DOE is not establishing spray force requirements in this final
rule; instead, spray force is used only to define the boundaries
between product classes. DOE understands that the measured flow rate of
commercial prerinse spray valves will vary as a function of water
pressure. In evaluating the representative water pressure used in the
CPSV test procedure, DOE performed a sensitivity analysis to determine
typical water pressure values and their impact on measured flow rate,
titled ``Analysis of Water Pressure for Testing Commercial Prerinse
Spray Valves Final Report.'' \28\ DOE concluded, as part of this
analysis, that the representative water pressure for evaluating the
energy and water use of commercial prerinse spray valves was 60 psi.
---------------------------------------------------------------------------
\28\ The water pressure sensitivity analysis is available at
regulations.gov under docket number EERE-2014-BT-TP-0055.
---------------------------------------------------------------------------
Chapter 7 of the final rule TSD provides details and the results of
DOE's energy use analysis for commercial prerinse spray valves.
F. Life-Cycle Cost and Payback Period Analysis
DOE conducted the LCC and PBP analysis to evaluate the economic
impacts on individual consumers of the amended energy conservation
standards for commercial prerinse spray valves. The LCC is the total
consumer expense over the life of the product, consisting of purchase
and installation costs plus operating costs (expenses for energy and
water use, maintenance, and repair). To compute the operating costs,
DOE discounts future operating costs to the time of purchase and sums
them over the lifetime of the product. The PBP is the estimated amount
of time (in years) it takes consumers to recover the potential
increased purchase cost (including installation) of more efficient
products through lower operating costs. DOE calculates the PBP by
dividing the change in purchase cost at higher efficiency levels by the
change in annual operating cost for the first year the amended
standards are in effect (2019).\29\
---------------------------------------------------------------------------
\29\ As compliance with the amended standards will be required
at the very end of 2018, DOE used 2019 as the first year in the
analysis period.
---------------------------------------------------------------------------
For any given efficiency level, DOE measures the change in LCC
relative to an estimate of the no-new-standards case product efficiency
distribution. The no-new-standards case estimate reflects the market in
the absence of amended energy conservation standards, including the
market for products that exceed the current energy conservation
standard. In contrast, the PBP for a given efficiency level is measured
relative to the baseline product.
Inputs to the calculation of total installed cost include the cost
of the product--which includes MSPs, distribution channel markups, and
sales taxes--and installation costs. Inputs to the calculation of
operating expenses include annual energy and water consumption, energy
prices and price projections, combined water prices (which include
water and wastewater prices) and price projections, repair and
maintenance costs, product lifetimes, and discount rates. DOE created
[[Page 4767]]
distributions of values for product lifetime, discount rates, energy
and combined water prices, and sales taxes, with probabilities attached
to each value to account for their uncertainty and variability.
The computer model DOE used to calculate the LCC and PBP, which
incorporates Crystal Ball\TM\ (a commercially available software
program), relies on a Monte Carlo simulation to incorporate uncertainty
and variability into the analysis. The Monte Carlo simulations randomly
sample input values from the probability distributions and CPSV user
samples. The model calculated the LCC and PBP for products at each
efficiency level for 10,000 CPSV users per simulation run.
DOE calculated the LCC and PBP for all consumers as if each were to
purchase a new commercial prerinse spray valve in 2019, the first year
of the analysis period.
Table IV.4 summarizes the approach and data DOE used to derive
inputs to the LCC and PBP calculations. The subsections that follow
provide further discussion. Details of the spreadsheet model, and of
all the inputs to the LCC and PBP analyses, are contained in chapter 8
and its appendices of the final rule TSD.
Table IV.4--Summary of Inputs and Methods for the LCC and PBP Analysis *
------------------------------------------------------------------------
Inputs Source/method
------------------------------------------------------------------------
Product Cost......................... Derived by multiplying MSPs by
distribution channel markups and
sales tax, as appropriate.
Installation Costs................... Baseline installation cost
determined with data from U.S.
Department of Labor. Assumed no
change with efficiency level.
Annual Energy and Water Use.......... Determined from the energy
required to heat a gallon of
water used at the prerinse spray
valve multiplied by the average
annual operating time and flow
rate of each product class.
Variability: By census region.
Energy, Water and Wastewater Prices.. Energy: Based on EIA's Form 826
data for 2014. Variability: By
State. Water: Based on 2012 AWWA
Survey. Variability: By State.
Energy and Water Price Trends........ Energy: Forecasted using AEO2015
price forecasts. Water:
Forecasted using Bureau of Labor
Statistics (BLS) historic water
price index information.
Maintenance and Repair Costs......... Assumed no change with efficiency
level.
Product Lifetime..................... DOE assumed an average lifetime
of 5 years. Variability:
Characterized using modified
Weibull probability
distributions.
Discount Rates....................... Estimated using the average cost
of capital to commercial
prerinse spray valve consumers.
Cost of capital was found using
information from the Federal
reserve and from Damodaran
online data.
First Year of Analysis Period........ 2019.
------------------------------------------------------------------------
* References for the data sources mentioned in this table are provided
in the sections following the table or in chapter 8 of the final rule
TSD.
1. Product Cost
To calculate consumer product costs, DOE multiplied the MSPs
developed from the engineering analysis by the distribution channel
markups described in section IV.D (along with sales taxes). DOE used
baseline markups, but did not apply incremental markups, because the
engineering analysis indicated that there is no price increase with
improvements in efficiency for commercial prerinse spray valves.
Product costs are assumed to remain constant over the analysis period.
2. Installation Cost
Installation cost includes labor, overhead, and any miscellaneous
materials and parts needed to install the product. DOE used data from
the U.S. Department of Labor to estimate the baseline installation cost
for commercial prerinse spray valves.\30\ DOE found no evidence and
received no comments in the NOPR stage of this rulemaking that indicate
installation costs will be impacted with increased efficiency levels.
---------------------------------------------------------------------------
\30\ U.S. Department of Labor--Wage and Hour Division. Minimum
Wage. http://www.dol.gov/whd/minimumwage.htm. Washington, DC.
---------------------------------------------------------------------------
3. Annual Energy and Water Consumption
Chapter 7 of the final rule TSD details DOE's analysis of CPSV
annual energy and water use at various efficiency levels. For each
sampled building type, DOE determined the energy and water consumption
for a commercial prerinse spray valve at different efficiency levels
using the approach described in section IV.E of this document.
4. Energy Prices
DOE derived energy prices from the EIA regional average energy
price data for the commercial sectors. DOE used projections of these
energy prices for commercial consumers to estimate future energy prices
in the LCC and PBP analysis. AEO2015 was used as the default source of
projections for future energy prices.
DOE developed estimates of commercial electricity and natural gas
prices for each state and the District of Columbia (DC). DOE derived
average regional energy prices from data that are published annually
based on EIA Form 826.\31\ DOE then used AEO2015 price projections to
estimate commercial electricity and natural gas prices in future years.
AEO2015 price projections have an end year of 2040. To estimate price
trends after 2040, DOE used the average annual rate of change in prices
from 2030 to 2040. DOE assumed that 100 percent of installations were
in commercial locations.
---------------------------------------------------------------------------
\31\ U.S. Department of Energy--Energy Information
Administration. Form EIA-826 Database Monthly Electric Utility Sales
and Revenue Data (EIA-826 Sales and Revenue Spreadsheets). 2015.
http://www.eia.gov/electricity/data/eia826/. Washington, DC.
---------------------------------------------------------------------------
5. Water and Wastewater Prices
DOE obtained data on water and wastewater prices from the 2012
American Water Works Association (AWWA) surveys for this document.\32\
For each state and the District of Columbia, DOE combined all
individual utility observations within the state to develop one value
for water and wastewater service. Because water and wastewater charges
are frequently tied to the same metered commodity values, DOE combined
the prices for water and wastewater into one total dollar per thousand
gallons figure. This figure is
[[Page 4768]]
referred to as the combined water price. DOE used the consumer price
index (CPI) data for water related consumption (1970-2013) in
developing a real growth rate for combined water price forecasts.\33\
---------------------------------------------------------------------------
\32\ American Water Works Association. AWWA 2012 Water and
Wastewater Rate Survey. http://www.awwa.org/resources-tools/water-and-wastewater-utility-management/water-wastewater-rates.aspx.
\33\ U.S. Department of Labor--Bureau of Labor Statistics, 1970-
2014 Tables 3A, 24. 2014. http://www.bls.gov/cpi/cpid1401.pdf.
---------------------------------------------------------------------------
Chapter 8 of the final rule TSD provides more detail about DOE's
approach to developing water and wastewater prices.
6. Maintenance and Repair Costs
Repair costs are associated with repairing or replacing product
components that have failed in the product; maintenance costs are
associated with maintaining the operation of the product. Typically,
small incremental increases in product efficiency produce no, or only
minor, changes in repair and maintenance costs compared to baseline
efficiency products.
Throughout this rulemaking process, DOE has requested information
as to whether maintenance and repair costs are a function of efficiency
level and product class. DOE did not receive comments during the CPSV
NOPR public meeting or comment period regarding these costs. Thus,
consistent with the analysis conducted at the NOPR stage of this
rulemaking, DOE assumed that consumers would replace the commercial
prerinse spray valve upon failure rather than repairing the product.
Additionally, DOE modeled no changes in maintenance or repair costs
between different efficiency levels.
7. Product Lifetime
Because product lifetime varies depending on utilization and other
factors, DOE developed a distribution of product lifetimes. The use of
a lifetime distribution helps account for the variability of product
lifetimes.
DOE considered--but did not implement--the use of factors such as
usage, water temperature, and pressure as means of determining the
distribution of lifetimes of commercial prerinse spray valves in the
analysis for this document. DOE developed a Weibull distribution with
an average lifetime of 5 years and a maximum lifetime of 10 years. In
the CPSV NOPR analysis, DOE modified the Weibull distribution to
reflect 10 percent of commercial prerinse spray valves failing within
the first year after installation, and maintained that characteristic
for the final rule analysis. See chapter 8 of the final rule TSD for
further details on the method and sources DOE used to develop CPSV
lifetimes.
8. Discount Rates
In the calculation of LCC, DOE developed discount rates by
estimating the average cost of capital to commercial prerinse spray
valve consumers. DOE applies discount rates to commercial consumers to
estimate the present value of future cash flows derived from a project
or investment. Most companies use both debt and equity capital to fund
investments, so the cost of capital is the weighted-average cost to the
firm of equity and debt financing. See chapter 8 in the final rule TSD
for further details on the development of consumer discount rates.
9. Efficiency Distribution in the No-New-Standards Case
To accurately estimate the share of consumers that will be affected
by the amended energy conservation standard at a particular efficiency
level, DOE's LCC and PBP analysis considered the projected distribution
of product efficiencies that consumers purchase under the no-new-
standards case. DOE refers to this distribution of product efficiencies
as a no-new-standards case efficiency distribution.
To estimate the no-new-standards case efficiency distribution of
commercial prerinse spray valves in 2019 (the first year of the
analysis period), DOE relied on data from the Food Service Technology
Center and DOE's CCMS Database for commercial prerinse spray
valves.\34\ Additionally, DOE conducted general internet searches and
examined manufacturer literature to understand the characteristics of
the spray valves currently offered on the market. DOE assumed that the
no-new-standards case percentages in 2019 would stay the same through
the analysis period. The no-new-standards case efficiency distribution
is described in chapter 8 of the final rule TSD.
---------------------------------------------------------------------------
\34\ The Food Service Technology Center test data for prerinse
spray valves is available at www.fishnick.com/equipment/sprayvalves/
. The DOE compliance certification data for commercial prerinse
spray valves is available at www.regulations.doe.gov/certification-data/.
---------------------------------------------------------------------------
The estimated shares for the no-new-standards case efficiency
distribution for commercial prerinse spray valves are shown in Table
IV.5.
Table IV.5--Commercial Prerinse Spray Valve No-New-Standards Case Efficiency Distribution by Product Class in
2019
----------------------------------------------------------------------------------------------------------------
Product class 1 Product class 2 Product class 3
Efficiency level (% of shipments) (% of shipments) (% of shipments)
----------------------------------------------------------------------------------------------------------------
0...................................................... 0 0 40
1...................................................... 10 40 35
2...................................................... 0 50 20
3...................................................... 80 0 5
4...................................................... 10 10 N/A
----------------------------------------------------------------------------------------------------------------
10. Payback Period Analysis
The payback period is the amount of time it takes the consumer to
recover the additional installed cost of more-efficient products,
compared to baseline products, through energy and water cost savings.
Payback periods are expressed in years. Payback periods that exceed the
life of the product mean that the increased total installed cost is not
recovered in reduced operating expenses.
The inputs to the PBP calculation for each efficiency level are the
change in total installed cost of the product and the change in the
first year annual operating expenditures relative to the baseline. The
PBP calculation uses the same inputs as the LCC analysis, except that
discount rates are not needed. As explained in the engineering analysis
(section IV.C) there are no additional installed costs for more
efficient commercial prerinse spray valves, making the PBPs in this
analysis zero.
11. Rebuttable-Presumption Payback Period
EPCA, as amended, establishes a rebuttable presumption that a
standard
[[Page 4769]]
is economically justified if DOE 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 first
year's energy (and, as applicable, water) savings resulting from the
standard, as calculated under the test procedure in place for that
standard. (42 U.S.C. 6295(o)(2)(B)(iii)) For each considered efficiency
level, DOE determined the value of the first year's energy and water
savings by calculating the quantity of those savings in accordance with
the applicable DOE test procedure, and multiplying that amount by the
average energy and combined water price forecast for the year in which
compliance with the amended standard will be required. The results are
summarized in section V.B.1.c of this document.
G. Shipments Analysis
DOE uses projections of product shipments to calculate the national
impacts of amended energy conservation standards on energy and water
use, NPV, and future manufacturer cash flows. DOE develops shipment
projections based on historic economic figures and an analysis of key
market drivers for commercial prerinse spray valves. In DOE's shipments
model, CPSV shipments are driven by both new construction and stock
replacements. The shipments model takes an accounting approach,
tracking market shares of each product class and the vintage of units
in the existing stock. Stock accounting uses product shipments as
inputs to estimate the age distribution of in-service product stocks
for all years. The age distribution of in-service products is a key
input to calculations of the NES, national water savings, and NPV,
because operating costs for any year depend on the age distribution of
the stock.
In the shipments analysis for this final rule, DOE gathered
information pertaining to commercial prerinse spray valves for many
building types besides restaurants from the Puget Sound Energy Program,
EPA WaterSense Field Study, and other industry reports.35 36
---------------------------------------------------------------------------
\35\ U.S. Environmental Protection Agency WaterSense. Pre-Rinse
Spray Valve Field Study Report. March 2011. Washington DC. Available
at: http://www.epa.gov/watersense/partners/prsv_background.html#study.
\36\ SBW Consulting, Inc. and Koeller and Company. Pre-Rinse
Spray Valve Programs: How Are They Really Doing? December 2005.
Seattle, WA. Available at: http://www.allianceforwaterefficiency.org/Commercial_Food_Service_Introduction.aspx.
---------------------------------------------------------------------------
In the CPSV NOPR analysis, DOE disaggregated total industry
shipments into the three product classes. At the CPSV NOPR public
meeting, T&S Brass commented that more shipments should be allocated to
product class 3, which was the ``heavy duty'' product class in the CPSV
NOPR. (T&S Brass, Public Meeting Transcript, No. 23 at p. 80) After
considering the comment from T&S Brass, and with further study into the
CPSV market, DOE updated the allocation of total shipments by product
class for the final rule, as shown in Table IV.6.
Table IV.6--NOPR vs. Final Rule Shipments Allocations by Product Class
----------------------------------------------------------------------------------------------------------------
Product class 1 Product class 2 Product class 3
(%) (%) (%)
----------------------------------------------------------------------------------------------------------------
NOPR................................................... 20 50 30
Final Rule............................................. 10 30 60
----------------------------------------------------------------------------------------------------------------
DOE based the retirement function (the time at which the product
fails and is replaced) on the probability distribution for product
lifetime that was developed in the LCC and PBP analysis. The shipments
model assumes that no units are retired below a minimum product
lifetime (one year of service) and that all units are retired before
exceeding a maximum product lifetime (10 years of service).
DOE determined that a roll-up scenario is most appropriate to
establish the distribution of efficiencies in the first year of
compliance with the amended standards. Under the ``roll-up'' scenario,
DOE assumes: (1) Product efficiencies in the no-new-standards case that
do not meet the standard level ``roll-up'' to meet the required
standard levels for each standards case; and (2) product efficiencies
above the standard level are not affected. The details of DOE's
approach to forecast efficiency trends are described in chapter 8 of
the final rule TSD.
The nature of the market for commercial prerinse spray valves makes
it possible that consumers may, under examined TSLs and product
classes, opt to switch product classes to a commercial prerinse spray
valve that consumes more water and energy than their current product.
In particular, if current choices of product flow rate correspond to
consumers' optimal choice under the current regulatory environment, it
is probable that some consumers would switch from product class 1 to
product class 2, and from product class 2 to product class 3, in
response to amended standards, given the lack of restrictions on doing
so. DOE implemented a mechanism in the shipments model to estimate such
consumer choices. The economics resulting from product class switching
may result in lower optimal efficiency levels and reduced estimates of
water and energy savings, as compared to the case without class
switching. A detailed description of DOE's method to model product
class switching is contained in chapter 9 of the final rule TSD.
1. Sensitivity Cases
In addition to a standard shipments scenario, DOE also developed
two alternative shipments scenarios to help examine potential impacts
in specific situations.
The first alternative shipments scenario, introduced in the CPSV
NODA, alters standards-case shipments for product class 3. 80 FR 72608.
In this shipments scenario, some consumers exit the CPSV market rather
than comply with amended standards. Since the utility of single-orifice
CPSV models may not be equivalent in some applications that previously
used shower-type CPSV models, this alternative shipments scenario
enables analysis of the case where, rather than accepting the decreased
usability of a compliant CPSV model, consumers of shower-type units
instead exit the CPSV market and purchase faucets that have a maximum
flow rate of 2.2 gpm under the current Federal standard. Thus,
shipments of compliant CPSV models are much lower under this scenario.
With this scenario, DOE is able to account for the energy and water use
of CPSV models that remain within the scope of this rule and also for
the change in energy and water use for consumers that chose to exit the
CPSV
[[Page 4770]]
market, and instead purchase faucets, as a result of the standard.
The second alternative shipments scenario modifies the no-new-
standards case for product classes 1 and 2. In the case of the first
two product classes, EL 1 represents the market minimum level, while EL
0 represents a baseline at the Federal standard level of 1.6 gpm, as
described in section IV.C.3. Although DOE did not observe any models at
the baseline, DOE recognizes that it is possible that some shipments
could occur at this level. In order to better understand the
implications of moving the standard from EL 0 to EL 1, for this
sensitivity case, 1 percent of no-new-standards case shipments in each
of the first two product classes are assumed to fall into EL 0. These
shipments were originally located at EL 1 in the default shipments
scenario. Although additional product-class switching would possibly
occur as a result of standards impacting these consumers, somewhat
reducing any incremental savings, it was not considered in this
sensitivity case.
Specific analyses undertaken with these alternative shipments
scenarios are discussed in section V.A. Results of those analyses are
provided in sections V.B.2 and V.B.3.
H. National Impact Analysis
The NIA assesses the NES, national water savings, and NPV of total
consumer costs and savings that are expected to result from amended
standards at specific efficiency levels. DOE calculates the NES,
national water savings, and NPV based on projections of annual CPSV
shipments, along with the annual energy and water consumption and total
installed cost data from the energy and water use analysis, as well as
the LCC and PBP analysis. DOE forecasted the energy and water savings,
operating cost savings, product costs, and NPV of consumer benefits
over the lifetime of commercial prerinse spray valves sold from 2019
through 2048.
DOE evaluates the impacts of amended standards by comparing a no-
new-standards case with standards-case projections. The no-new-
standards case characterizes energy and water use and consumer costs
for each product class in the absence of new or amended energy
conservation standards. For this projection, DOE considers historical
trends in efficiency and various forces that are likely to affect the
mix of efficiencies over time. DOE compares the no-new-standards case
with projections characterizing the market for each product class if
DOE adopted new or amended standards at specific efficiency levels
(i.e., the TSLs or standards cases) for that class. For the standards
cases, DOE considers how a given standard would likely affect the
market shares of products with efficiencies greater than the standard.
DOE uses a spreadsheet model to calculate the energy and water
savings, and the national consumer costs and savings for each TSL.
Chapter 10 of the final rule TSD describes the models and how to use
them; interested parties can review DOE's analyses by changing various
input quantities within the spreadsheet. The NIA spreadsheet model uses
typical or weighted-average mean values (as opposed to probability
distributions) as inputs.
DOE used projections of energy and combined water prices as
described in section IV.F.4 and IV.F.5, as well as chapter 8 of the
final rule TSD. As part of the NIA, DOE analyzed scenarios that used
inputs from the AEO2015 Low Economic Growth and High Economic Growth
cases. Those cases have higher and lower energy price trends compared
to the reference case. NIA results based on these cases are available
via the NIA analysis spreadsheet.
Table IV.7 summarizes the inputs and methods DOE used for the NIA
analysis for the final rule. Discussion of these inputs and methods
follows the table. See chapter 10 of the final rule TSD for further
details.
Table IV.7--Summary of Inputs and Methods for the National Impact
Analysis
------------------------------------------------------------------------
Inputs Method
------------------------------------------------------------------------
Shipments............................ Annual shipments from shipments
model.
First Year of Analysis Period........ 2019.
No-Standards Case Forecasted Efficiency distributions are
Efficiencies. forecasted based on historical
efficiency data.
Standards Case Forecasted Used a ``roll-up'' scenario.
Efficiencies.
Annual Energy and Water Consumption Annual weighted-average values
per Unit. are a function of energy and
water use at each TSL.
Total Installed Cost per Unit........ Annual weighted-average values
are a function of cost at each
TSL.
Incorporates forecast of future
product prices based on
historical data.
Annual Energy and Combined Water Cost Annual weighted-average values as
per Unit. a function of the annual energy
and water consumption per unit,
and energy, and combined water
treatment prices.
Energy Prices........................ AEO2015 forecasts (to 2040) and
extrapolation through 2058.
Energy Site-to-Source Conversion Varies yearly and is generated by
Factors. NEMS-BT.
Discount Rate........................ 3 and 7 percent real.
Present Year......................... Future expenses discounted to
2015, when the final rule will
be published.
------------------------------------------------------------------------
1. National Energy and Water Savings
The NES analysis involves a comparison of national energy and water
consumption of the considered products in each TSL with consumption in
the no-new-standards case with no amended energy and water conservation
standards. DOE calculated the national energy and water consumption by
multiplying the number of units (stock) of each product (by vintage or
age) by the unit energy and water consumption (also by vintage). DOE
calculated annual NES and national water savings based on the
difference in national energy and water consumption for the no-new-
standards case and for each higher efficiency standard. DOE estimated
energy consumption and savings based on site energy and converted the
electricity consumption and savings to primary energy (i.e., the energy
consumed by power plants to generate site electricity) using annual
conversion factors derived from AEO2015. Cumulative energy and water
savings are the sum of the NES and national water savings for each year
over the timeframe of the analysis. DOE has historically presented NES
in terms of primary energy savings. In the case of electricity use and
savings, this quantity includes the energy consumed by power plants to
generate delivered (site) electricity.
In 2011, in response to the recommendations of a committee on
``Point-of-Use and Full-Fuel-Cycle Measurement Approaches to Energy
[[Page 4771]]
Efficiency Standards'' appointed by the National Academy of Sciences,
DOE announced its intention to use FFC measures of energy use and GHG
and other emissions in the NIAs and emissions analyses included in
future energy conservation standards rulemakings. 76 FR 51281 (August
18, 2011). After evaluating the approaches discussed in the August 18,
2011 document, DOE published a statement of amended policy in which DOE
explained its determination that EIA's NEMS is the most appropriate
tool for its FFC analysis and its intention to use NEMS for that
purpose. 77 FR 49701 (August 17, 2012). NEMS is a public domain, multi-
sector, partial equilibrium model of the U.S. energy sector \37\ that
EIA uses to prepare its Annual Energy Outlook. The approach used for
deriving FFC measures of energy use and emissions is described in
appendix 10B of the final rule TSD.
---------------------------------------------------------------------------
\37\ For more information on NEMS, refer to the Energy
Information Administration. The National Energy Modeling System: An
Overview 2009. October 2009. DOE/EIA-0581. https://www.eia.gov/forecasts/aeo/nems/overview/pdf/0581(2009).pdf.
---------------------------------------------------------------------------
In response to the CPSV NOPR, ASAP asked if DOE considered the
energy required to treat and transport the water used by commercial
prerinse spray valves in its energy analysis. (ASAP, Public Meeting
Transcript, No. 23 at pp. 63-64)
DOE recognizes the important relationship between water and energy
use. In June 2014, a DOE working group published a report on this
relationship, which acknowledged the need for a more interconnected
approach to energy and water use analysis.\38\ The report also
identified the need for data and an integrated water-energy analytical
platform, which remains under development.
---------------------------------------------------------------------------
\38\ U.S. Department of Energy, The Water-Energy Nexus:
Challenges and Opportunities (June 2014) (Available
at:www.energy.gov/sites/prod/files/2014/06/f16/Water%20Energy%20Nexus%20Report%20June%202014.pdf).
---------------------------------------------------------------------------
2. Net Present Value Analysis
The inputs for determining the NPV of the total costs and benefits
experienced by consumers are (1) total annual installed cost, (2) total
annual savings in operating costs, and (3) a discount factor to
calculate the present value of costs and savings. DOE calculates net
savings each year as the difference between the no-new-standards case
and each standards case in terms of total savings in operating costs
versus total increases in installed costs. DOE calculates operating
cost savings over the lifetime of each product shipped during the
forecast period. The operating cost savings are energy and combined
water cost savings.
In calculating the NPV, DOE multiplies the net savings in future
years by a discount factor to determine their present value. For this
final rule, DOE estimated the NPV of consumer benefits using both a 3-
percent and a 7-percent real discount rate. DOE uses these discount
rates in accordance with guidance provided by the Office of Management
and Budget (OMB) to Federal agencies on the development of regulatory
analysis.\39\ The discount rates for the determination of NPV are in
contrast to the discount rates used in the LCC analysis, which are
designed to reflect a consumer's perspective. The 7-percent real value
is an estimate of the average before-tax rate of return to private
capital in the U.S. economy. The 3-percent real value represents the
``social rate of time preference,'' which is the rate at which society
discounts future consumption flows to their present value.
---------------------------------------------------------------------------
\39\ U.S. Office of Management and Budget. Circular A-4:
Regulatory Analysis,'' (Sept. 17, 2003), section E (Available at:
www.whitehouse.gov/omb/memoranda/m03-21.html).
---------------------------------------------------------------------------
I. Consumer Subgroup Analysis
In analyzing the potential impact of new or amended standards on
consumers, DOE evaluates the impact on identifiable subgroups of
consumers that may be disproportionately affected by a new or amended
national standard. DOE evaluated impacts on particular subgroups of
consumers by analyzing the LCC impacts and PBP for those particular
consumers from alternative standard levels. For this final rule, DOE
analyzed the impacts of the considered standard levels on single
entities and limited service establishment end users.
In general, the higher the cost of capital and the lower the cost
of energy and water, the more likely it is that an entity would be
disproportionately affected by the requirement to purchase higher
efficiency product. An example of a single entity would be a small,
independent, or family-owned business that operates in a single
location. Compared to large corporations and franchises, these single
entities might be subjected to higher costs of capital.
The other subgroup DOE analyzed in the subgroup analysis is a
limited service establishment. These consumers likely have
significantly lower operating times than the average consumer. Lower
operating times typically lead to lower operating cost savings over the
lifetime of the product, making this subgroup of consumers
disproportionately affected by amended efficiency standards. Chapter 11
of the final rule TSD describes the consumer subgroup analysis in
greater detail.
J. Manufacturer Impact Analysis
1. Overview
DOE performed an MIA to estimate the financial impacts of amended
energy conservation standards on manufacturers of commercial prerinse
spray valves and to estimate the potential impacts of such standards on
employment and manufacturing capacity. The MIA has both quantitative
and qualitative aspects and includes analyses of forecasted industry
cash flows, the INPV, investments in research and development (R&D) and
manufacturing capital, and domestic manufacturing employment.
Additionally, the MIA seeks to determine how amended energy
conservation standards might affect manufacturing employment, capacity,
and competition, as well as how standards contribute to overall
regulatory burden. Finally, the MIA serves to identify any
disproportionate impacts on manufacturer subgroups, including small
business manufacturers.
The quantitative elements of the MIA rely on the GRIM, an industry
cash flow model with inputs specific to this rulemaking. The key GRIM
inputs include data on the industry cost structure, unit production
costs, product shipments, manufacturer markups, and investments in R&D
and manufacturing capital required to produce compliant products. The
key GRIM outputs are the INPV, which is the sum of industry annual cash
flows over the analysis period, discounted using the industry-weighted
average cost of capital, and the impact to domestic manufacturing
employment. The model uses standard accounting principles to estimate
the impacts of more-stringent energy conservation standards on a given
industry by comparing changes in INPV and domestic manufacturing
employment between a no-new-standards case and the various TSLs. To
capture the uncertainty relating to manufacturer pricing strategy
following amended standards, the GRIM estimates a range of possible
impacts under different markup scenarios.
The qualitative part of the MIA addresses manufacturer
characteristics and market trends. Specifically, the MIA considers such
factors as manufacturing capacity, competition within the industry, the
cumulative impact of other DOE and non-DOE regulations, and impacts on
manufacturer subgroups. The complete MIA is outlined in chapter 12 of
the final rule TSD.
[[Page 4772]]
DOE conducted the MIA for this rulemaking in three phases. In Phase
1 of the MIA, DOE prepared a profile of the CPSV manufacturing industry
based on the market and technology assessment, information on the
present and past market structure and characteristics of the industry,
product attributes, product shipments, manufacturer markups, and the
cost structure for various manufacturers.
The profile also included an analysis of manufacturers in the
industry using Security and Exchange Commission 10-K filings, Standard
& Poor's stock reports, and corporate annual reports released by
publicly held companies.\40\ DOE used this and other publicly available
information to derive preliminary financial inputs for the GRIM,
including an industry discount rate, manufacturer markup, cost of goods
sold and depreciation, selling, general, and administrative (SG&A)
expenses, and R&D expenses.
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\40\ SEC Form 10-K filings are available at www.sec.gov/edgar.shtml. Stock reports are available at
www.standardandpoors.com.
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In Phase 2 of the MIA, DOE prepared the GRIM, an industry cash flow
analysis, to quantify the impacts of potential amended energy
conservation standards on the industry as a whole. In general, energy
conservation standards can affect manufacturer cash flow in three
distinct ways: (1) Create a need for increased investment, (2) raise
production costs per unit, and (3) alter revenue due to higher per-unit
prices and changes in sales volumes. DOE used the GRIM to model these
effects in a cash flow analysis of the CPSV manufacturing industry. In
performing this analysis, DOE used the financial parameters developed
in Phase 1, the cost-efficiency curves from the engineering analysis,
and the shipment assumptions from the NIA.
In Phase 3, DOE evaluated subgroups of manufacturers that may be
disproportionately impacted by standards or that may not be accurately
represented by the average cost assumptions used to develop the
industry cash flow analysis. For example, small businesses,
manufacturers of niche products, or companies exhibiting a cost
structure that differs significantly from the industry average could be
more negatively affected. While DOE did not identify any other subgroup
of manufacturers of commercial prerinse spray valves that would warrant
a separate analysis, DOE specifically investigated impacts on small
business manufacturers. See sections V.B.2.d and VI.B of this document
for more information.
In Phase 3, the MIA also addresses the direct impact on employment
tied to the manufacturing of commercial prerinse spray valves, as well
as impacts on manufacturing capacity. Additionally, the MIA explores
the cumulative regulatory burdens facing CPSV manufacturers. See
section V.B.2.b of this document and chapter 12 of the final rule TSD
for more information on the impacts of amended energy conservation
standards for commercial prerinse spray valves on direct employment,
manufacturing capacity, and cumulative regulatory burdens.
2. Government Regulatory Impact Model
DOE uses the GRIM to quantify the changes in cash flow that result
in a higher or lower industry value due to energy conservation
standards. The GRIM is a standard, discounted cash-flow model that
incorporates manufacturer costs, markups, shipments, and industry
financial information as inputs, and models changes in manufacturing
costs, shipments, investments, and margins that may result from amended
energy conservation standards. The GRIM uses these inputs to arrive at
a series of annual cash flows, beginning with the base year of the
analysis, 2015, and continuing through 2048. DOE uses the industry-
average weighted average cost of capital (WACC) of 6.9 percent, as this
represents the minimum rate of return necessary to cover the debt and
equity obligations manufacturers use to finance operations.
DOE used the GRIM to compare INPV in the no-new-standards case with
INPV at each TSL (the standards case). The difference in INPV between
the no-new-standards and standards cases represents the financial
impact of the amended standard on manufacturers. Additional details
about the GRIM can be found in chapter 12 of the final rule TSD.
a. GRIM Key Inputs
Manufacturer Production Costs
Manufacturer production costs are the costs to the manufacturer to
produce a commercial prerinse spray valve. These costs include
materials, labor, overhead, and depreciation. Changes in the MPCs of
commercial prerinse spray valves can affect revenues, gross margins,
and cash flow of the industry, making product cost data key inputs for
DOE's analysis. DOE estimated the MPCs for the three CPSV product
classes at the baseline and higher efficiency levels, as described in
section IV.C.5 of this document. The cost model also disaggregated the
MPCs into the cost of materials, labor, overhead, and depreciation. DOE
used the MPCs and cost breakdowns, as described in chapter 5 of the
final rule TSD, for each efficiency level analyzed in the GRIM.
No-New-Standards Case Shipments Forecast
The GRIM estimates manufacturer revenues in each year of the
forecast based in part on total unit shipments and the distribution of
these values by efficiency level and product class. Generally, changes
in the efficiency mix and total shipments at each standard level affect
manufacturer finances. The GRIM uses the NIA shipments forecasts from
2015 through 2048, the end of the analysis period.
To calculate shipments, DOE developed a shipments model for each
product class based on an analysis of key market drivers for commercial
prerinse spray valves. For greater detail on the shipments analysis,
see section IV.G of this document and chapter 9 of the final rule TSD.
Product and Capital Conversion Costs
Amended energy conservation standards may cause manufacturers to
incur conversion costs to make necessary changes to their production
facilities and bring product designs into compliance. For the MIA, DOE
classified these costs into two major groups: (1) Product conversion
costs and (2) capital conversion costs. Product conversion costs are
investments in R&D, testing, marketing, and other non-capitalized costs
focused on making product designs comply with the amended energy
conservation standard. Capital conversion costs are investments in
property, plant, and equipment to adapt or change existing production
facilities so that new product designs can be fabricated and assembled.
DOE contacted manufacturers of commercial prerinse spray valves for
the purpose of conducting interviews. However, no manufacturer agreed
to participate in an interview. In the absence of information from
manufacturers, DOE created estimates of industry capital and product
conversion costs using the engineering cost model and information
gained during product teardowns. DOE requested comments on the
estimates of industry capital and product conversion costs provided in
the CPSV NOPR. Since, no interested parties provided comments, DOE used
the same methodology to estimate industry product and capital
conversion costs in this final rule. DOE's estimates of the product and
capital conversion
[[Page 4773]]
costs for the CPSV manufacturing industry can be found in section
V.B.2.a of this document and in chapter 12 of the final rule TSD.
b. GRIM Scenarios
Standards Case Shipments Forecasts
The MIA results presented in section V.B.2 of this document use
shipments from the NIA. For standards case shipments, DOE assumed that
CPSV consumers would choose to buy the commercial prerinse spray valve
that has the flow rate that is closest to the flow rate of the product
they currently use and that complies with the new standard (and,
accordingly, manufacturers would choose to produce products with the
closest flow rate to those they currently produce). Due to the
structure of the product classes and efficiency levels for this rule,
in certain instances, product class switching is predicted to occur,
wherein consumers choose to buy the product with the flow rate that is
closest to their current product's flow rate even if it has a higher
spray force (putting those products into a different product class).
Where product class switching does not occur, no-new-standards case
shipments of products that did not meet the new standard would roll up
to meet the standard starting in the compliance year. See section
IV.F.9 of this document for a description of the standards case
efficiency distributions. See section IV.G of this document for further
detail relating to the shipments analysis.
The NIA also used historical data to derive a price scaling index
to forecast product costs. The MPCs and MSPs in the GRIM use the
default price forecast for all scenarios, which assumes constant
pricing. See section IV.H of this document for a discussion of DOE's
price forecasting methodology.
Markup Scenarios
MSP is equal to MPC times a manufacturer markup. The MSP includes
direct manufacturing production costs (i.e., labor, material,
depreciation, and overhead estimated in DOE's MPCs) and all non-
production costs (i.e., SG&A, R&D, and interest), along with profit.
DOE used the baseline manufacturer markup of 1.30, developed during
Phase 1 and subsequently revised, for all products when modeling the
no-new-standards case in the GRIM. For the standards case in the GRIM,
DOE modeled the preservation of gross margin as a percentage of
revenues markup scenario markup scenario. For this scenario, DOE placed
no premium on higher efficiency products. This is based on the
assumption that efficiency is not the primary factor influencing
purchasing decisions for CPSV consumers.
The preservation of gross margin as a percentage of revenues markup
scenario assumes that the baseline markup of 1.30 is maintained for all
products in the standards case. This scenario corresponds with the
assumption that manufacturers are able to pass additional production
costs due to amended standards through to their consumers.
Capital Conversion Cost Scenarios
DOE developed two capital conversion costs scenarios to estimate an
upper and lower bound of industry profitability as a result of amended
energy conservation standards for commercial prerinse spray valves. The
assumption underlying both scenarios is that capital conversion costs
associated with increasing the efficiency of commercial prerinse spray
valves are exclusively related to the fabrication of plastic nozzles,
as manufacturers would have to redesign nozzle molds to produce a
nozzle with fewer or smaller spray holes. DOE does not believe there
will be capital conversion costs associated with the in-house
fabrication of metal nozzles. A more detailed discussion of capital
conversion cost assumptions is provided in chapter 12 of the final rule
TSD.
One capital conversion cost scenario, representing the upper bound
of industry profitability, assumes that the majority of CPSV
manufacturers source components (including the nozzle) from component
suppliers and simply assemble the commercial prerinse spray valves
(i.e., Sourced Components Scenario). The second scenario, representing
the lower bound of industry profitability, assumes that all of the CPSV
manufacturers currently selling products with plastic spray nozzles
fabricate these nozzles in-house (i.e., Fabricated Components
Scenario). More detail regarding these capital conversion cost
scenarios is provided in chapter 12 of the final rule TSD.
3. Discussion of Comments
During the CPSV NOPR public meeting and in public comments
submitted in response to the CPSV NOPR, manufacturers, trade
organizations, and advocacy groups provided several comments on the
potential impact of amended energy conservation standards on
manufacturers. These comments are outlined in the following text. DOE
notes that these comments helped to update the analysis reflected in
this final rule.
In response to the CPSV NOPR, several stakeholders expressed
concerns relating to the overlapping effects of the EPA's WaterSense
program and the potential amended DOE energy conservation standards on
CPSV manufacturers. AWE stated that any update to DOE test criteria
will place an unreasonable burden on the manufacturers who participated
in WaterSense. (AWE, No. 28 at p. 3) Any amendment to current DOE
standards will require manufacturers to abandon current products and
again invest the capital and time to meet criteria that is entirely
different than the WaterSense criteria. (AWE, No. 28 at p. 7)
Similarly, T&S Brass commented that cumulative regulatory burden is a
key issue for manufacturers, and that compliance with EPA's WaterSense
required a significant financial investment in product redesigns. Two
manufacturers chose to invest in developing, certifying, and promoting
high efficiency products through WaterSense last year, and are now
faced with a more stringent regulatory requirement and the associated
costs of development and certification. (T&S Brass, No. 33 at pp. 2-3)
Fisher also stated that compliance with WaterSense standards
required Fisher to devote substantial resources to product development,
testing, certification, updating literature, packaging, catalogs, Web
sites, labeling, markings, marketing, and consumer education. Fisher
believes DOE's proposed standards will require duplicative efforts and
expenses and will jeopardize the WaterSense program. (Fisher, No. 30 at
p. 1)
PMI and NAFEM echoed these concerns. PMI stated that the proposed
standards puts a strain its members, T&S Brass and Fisher
Manufacturing, who have recently invested capital in redesigning and
reengineering their products to comply with the EPA WaterSense
specification. (PMI, No. 27 at p. 1) Additionally, NAFEM believes that
the collaborative process used to develop WaterSense would be wasted as
a result of DOE's amended standards. (NAFEM, No. 31 at p. 1)
DOE acknowledges the existence of the voluntary WaterSense program
and that three manufacturers, T&S Brass, Fisher Manufacturing, and
Chicago Faucets, are currently participating in the WaterSense program.
At the time of the CPSV NOPR, DOE had proposed standard levels of 0.65
gpm, 0.97 gpm, and 1.24 gpm for light-, standard-, and heavy-duty
product classes, respectively (since the CPSV NOPR, DOE updated
[[Page 4774]]
the product class names from light-, standard-, and heavy-duty to
product class 1, 2, and 3). DOE has updated its proposal for this final
rule to standard levels of 1.00 gpm and 1.20 gpm for product class 1
and product class 2, and at the WaterSense level (1.28 gpm) for product
class 3. All products certified to WaterSense currently meet the
standard levels described in this final rule. Therefore, DOE expects
the cumulative regulatory burdens due to the amended energy
conservation standards, relative to the WaterSense program, to be
limited. DOE investigates cumulative regulatory burden impacts
associated with this rulemaking in more detail in section V.B.2.e of
this document, and in chapter 12 of the final rule TSD.
Next, Chicago Faucets stated that current commercial prerinse spray
valves are rated for 1.00 or 1.25 gpm, and that the new proposed levels
(i.e., as proposed in the CPSV NOPR; 0.65 gpm, 0.97 gpm and 1.24 gpm
for light-, standard-, and heavy-duty product classes, respectively)
will require spray valves to be retested and recertified at great
expense to manufacturers. (Chicago Faucets, No. 26 at p. 3)
In the MIA, DOE classifies retesting and recertification costs as
product conversion costs. For the CPSV NOPR, DOE used the engineering
analysis as a basis for estimating total conversion costs that are
expected to be incurred by the industry at each efficiency level. DOE
requested comment and additional information relating to industry
product and capital conversion cost estimates. DOE did not receive any
comment and therefore continues to use the same methodology for
estimating conversion costs in this final rule. More information on
conversion costs can be found in section V.B.2 of this document and
chapter 12 of the final rule TSD.
Finally, relating to DOE's CPSV NOPR finding that the average small
manufacturer would likely have to reinvest between 81 and 120 percent
of operating profit per year over the conversion period to comply with
proposed amended energy conservation standards, T&S Brass commented
that since eight of 11 CPSV manufacturers are small businesses, and
concentrated in commercial prerinse spray valves and related products,
amended standards would be a major financial strain on the majority of
the industry. (T&S Brass, No. 33 at p. 2)
DOE acknowledges that small businesses manufacturers may be
disproportionately impacted by energy conservation standards relative
to larger, more diversified manufacturers. In this document, DOE
provides an updated analysis of disproportionate impacts, based on the
revised engineering analysis and standard levels. The impacts of
amended energy conservation standards on small business manufacturers
are detailed in section VI.B of this document and in chapter 12 of the
final rule TSD.
K. Emissions Analysis
The emissions analysis consists of two components. The first
component estimates the effect of amended energy conservation standards
on power sector and site (where applicable) combustion emissions of
CO2, NOX, SO2, and Hg. The second
component estimates the impacts of amended standards on emissions of
two additional GHGs, CH4 and N2O, as well as the
reductions to emissions of all species due to ``upstream'' activities
in the fuel production chain. These upstream activities comprise
extraction, processing, and transporting fuels to the site of
combustion. The associated emissions are referred to as upstream
emissions.
The analysis of power sector emissions uses marginal emissions
factors calculated using a methodology based on results published for
the AEO2015 reference case and a set of side cases that implement a
variety of efficiency-related policies. The methodology is described in
chapter 15 of the final rule TSD.
Combustion emissions of CH4 and N2O are
estimated using emissions intensity factors published by the EPA, GHG
Emissions Factors Hub.\41\ The FFC upstream emissions are estimated
based on the methodology described in chapter 15 of the final rule TSD.
The upstream emissions include both emissions from fuel combustion
during extraction, processing, and transportation of fuel, and
``fugitive'' emissions (direct leakage to the atmosphere) of
CH4 and CO2.
---------------------------------------------------------------------------
\41\ Available at: http://www.epa.gov/climateleadership/inventory/ghg-emissions.html.
---------------------------------------------------------------------------
The emissions intensity factors are expressed in terms of physical
units per MWh or MMBtu of site energy savings. Total emissions
reductions are estimated using the energy savings calculated in the
NIA.
For CH4 and N2O, DOE calculated emissions
reduction in tons and also in terms of units of carbon dioxide
equivalent (CO2eq). Gases are converted to CO2eq
by multiplying each ton of gas by the gas' global warming potential
(GWP) over a 100-year time horizon. Based on the Fifth Assessment
Report of the Intergovernmental Panel on Climate Change,\42\ DOE used
GWP values of 28 for CH4 and 265 for N2O.
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\42\ IPCC, 2013: Climate Change 2013: The Physical Science
Basis. Contribution of Working Group I to the Fifth Assessment
Report of the Intergovernmental Panel on Climate Change [Stocker,
T.F., D. Qin, G.-K. Plattner, M. Tignor, S.K. Allen, J. Boschung, A.
Nauels, Y. Xia, V. Bex and P.M. Midgley (eds.)]. Cambridge
University Press, Cambridge, United Kingdom and New York, NY, USA.
Chapter 8.
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The AEO2015 projections incorporate the projected impacts of
existing air quality regulations on emissions. AEO2015 generally
represents current legislation and environmental regulations, including
recent government actions, for which implementing regulations were
available as of October 31, 2014. DOE's estimation of impacts accounts
for the presence of the emissions control programs discussed in the
following paragraphs.
SO2 emissions from affected electric generating units
(EGUs) are subject to nationwide and regional emissions cap-and-trade
programs. Title IV of the Clean Air Act sets an annual emissions cap on
SO2 for affected EGUs in the 48 contiguous States and the
District of Columbia. (42 U.S.C. 7651 et seq.) SO2 emissions
from 28 eastern States and the District of Columbia were also limited
under the Clean Air Interstate Rule (CAIR). 70 FR 25162 (May 12, 2005).
CAIR created an allowance-based trading program that operates along
with the Title IV program. In 2008, CAIR was remanded to EPA by the
U.S. Court of Appeals for the District of Columbia Circuit, but it
remained in effect.\43\ In 2011, EPA issued a replacement for CAIR, the
Cross-State Air Pollution Rule (CSAPR). 76 FR 48208 (August 8, 2011).
On August 21, 2012, the D.C. Circuit issued a decision to vacate
CSAPR,\44\ and the court ordered EPA to continue administering CAIR. On
April 29, 2014, the U.S. Supreme Court reversed the judgment of the
D.C. Circuit and remanded the case for further proceedings consistent
with the Supreme Court's opinion.\45\ On October 23, 2014, the D.C.
Circuit lifted the stay of CSAPR.\46\ Pursuant to this
[[Page 4775]]
action, CSAPR went into effect (and CAIR ceased to be in effect) as of
January 1, 2015.
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\43\ See North Carolina v. EPA, 550 F.3d 1176 (D.C. Cir. 2008);
North Carolina v. EPA, 531 F.3d 896 (D.C. Cir. 2008).
\44\ See EME Homer City Generation, LP v. EPA, 696 F.3d 7, 38
(D.C. Cir. 2012), cert. granted, 81 U.S.L.W. 3567, 81 U.S.L.W. 3696,
81 U.S.L.W. 3702 (U.S. June 24, 2013) (No. 12-1182).
\45\ See EPA v. EME Homer City Generation, 134 S.Ct. 1584, 1610
(U.S. 2014). The Supreme Court held in part that EPA's methodology
for quantifying emissions that must be eliminated in certain States
due to their impacts in other downwind States was based on a
permissible, workable, and equitable interpretation of the Clean Air
Act provision that provides statutory authority for CSAPR.
\46\ See Georgia v. EPA, Order (D.C. Cir. filed October 23,
2014) (No. 11-1302).
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EIA was not able to incorporate CSAPR into AEO2015, so it assumes
implementation of CAIR. Although DOE's analysis used emissions factors
that assume that CAIR, not CSAPR, is the regulation in force, the
difference between CAIR and CSAPR is not relevant for the purpose of
DOE's analysis of emissions impacts from energy conservation standards.
The attainment of emissions caps is typically flexible among EGUs
and is enforced through the use of emissions allowances and tradable
permits. Under existing EPA regulations, any excess SO2
emissions allowances resulting from the lower electricity demand caused
by the adoption of an efficiency standard could be used to permit
offsetting increases in SO2 emissions by any regulated EGU.
In past rulemakings, DOE recognized that there was uncertainty about
the effects of efficiency standards on SO2 emissions covered
by the existing cap-and-trade system, but it concluded that negligible
reductions in power sector SO2 emissions would occur as a
result of standards.
Beginning in 2016, however, SO2 emissions will fall as a
result of the Mercury and Air Toxics Standards (MATS) for power plants.
77 FR 9304 (Feb. 16, 2012). In the MATS rule, EPA established a
standard for hydrogen chloride as a surrogate for acid gas hazardous
air pollutants (HAP), and also established a standard for
SO2 (a non-HAP acid gas) as an alternative equivalent
surrogate standard for acid gas HAP. The same controls are used to
reduce HAP and non-HAP acid gas; thus, SO2 emissions will be
reduced as a result of the control technologies installed on coal-fired
power plants to comply with the MATS requirements for acid gas. AEO2015
assumes that, in order to continue operating, coal plants must have
either flue gas desulfurization or dry sorbent injection systems
installed by 2016. Both technologies, which are used to reduce acid gas
emissions, also reduce SO2 emissions. Under the MATS,
emissions will be far below the cap established by CAIR, so it is
unlikely that excess SO2 emissions allowances resulting from
the lower electricity demand will be needed or used to permit
offsetting increases in SO2 emissions by any regulated
EGU.\47\ Therefore, DOE believes that energy conservation standards
will generally reduce SO2 emissions in 2016 and beyond.
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\47\ DOE notes that the Supreme Court recently remanded EPA's
2012 rule regarding national emission standards for hazardous air
pollutants from certain electric utility steam generating units. See
Michigan v. EPA (Case No. 14-46, 2015). DOE has tentatively
determined that the remand of the MATS rule does not change the
assumptions regarding the impact of energy efficiency standards on
SO2 emissions. Further, while the remand of the MATS rule
may have an impact on the overall amount of mercury emitted by power
plants, it does not change the impact of the energy efficiency
standards on mercury emissions. DOE will continue to monitor
developments related to this case and respond to them as
appropriate.
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CAIR established a cap on NOX emissions in 28 eastern
States and the District of Columbia.\48\ Energy conservation standards
are expected to have little effect on NOX emissions in those
States covered by CAIR because excess NOX emissions
allowances resulting from the lower electricity demand could be used to
permit offsetting increases in NOX emissions from other
facilities. However, standards are expected to reduce NOX
emissions in the States not affected by the caps, so DOE estimated
NOX emissions reductions from the standards in this final
rule for these States.
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\48\ CSAPR also applies to NOX and it would supersede
the regulation of NOX under CAIR. As stated previously,
the current analysis assumes that CAIR, not CSAPR, is the regulation
in force. The difference between CAIR and CSAPR with regard to DOE's
analysis of NOX emissions is slight.
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The MATS limit mercury emissions from power plants, but they do not
include emissions caps and, therefore, DOE's energy conservation
standards would likely reduce Hg emissions. DOE estimated mercury
emissions reduction using emissions factors based on AEO2015, which
incorporates the MATS.
L. Monetizing Carbon Dioxide and Other Emissions Impacts
As part of the development of this rule, DOE considered the
estimated monetary benefits from the reduced emissions of
CO2 and NOX that are expected to result from each
of the TSLs considered. In order to make this calculation analogous to
the calculation of the NPV of consumer benefit, DOE considered the
reduced emissions expected to result over the lifetime of products
shipped in the forecast period for each TSL. This section summarizes
the basis for the monetary values used for each of these emissions and
presents the values considered in this final rule.
For this final rule, DOE relied on a set of values for the SCC that
was developed by a Federal interagency process. The basis for these
values is summarized in the next section, and a more detailed
description of the methodologies used is provided as an appendix to
chapter 14 of the final rule TSD.
1. Social Cost of Carbon
SCC is an estimate of the monetized damages associated with an
incremental increase in carbon emissions in a given year. It is
intended to include (but is not limited to) climate-change-related
changes in net agricultural productivity, human health, property
damages from increased flood risk, and the value of ecosystem services.
Estimates of the SCC are provided in dollars per metric ton of
CO2. A domestic SCC value is meant to reflect the value of
damages in the United States resulting from a unit change in
CO2 emissions, while a global SCC value is meant to reflect
the value of damages worldwide.
Under section 1(b) of Executive Order 12866, ``Regulatory Planning
and Review,'' 58 FR 51735 (Oct. 4, 1993), agencies must, to the extent
permitted by law, ``assess both the costs and the benefits of the
intended regulation and, recognizing that some costs and benefits are
difficult to quantify, propose or adopt a regulation only upon a
reasoned determination that the benefits of the intended regulation
justify its costs.'' The purpose of the SCC estimates presented here is
to allow agencies to incorporate the monetized social benefits of
reducing CO2 emissions into cost-benefit analyses of
regulatory actions. The estimates are presented with an acknowledgement
of the many uncertainties involved and with a clear understanding that
they should be updated over time to reflect increasing knowledge of the
science and economics of climate impacts.
In conducting the interagency process that developed the SCC
values, technical experts from numerous agencies met on a regular basis
to consider public comments, explore the technical literature in
relevant fields, and discuss key model inputs and assumptions. Key
uncertainties and model differences transparently and consistently
inform the range of SCC estimates. These uncertainties and model
differences are discussed in the interagency working group's reports,
which are reproduced in appendix 14A and 14B of the TSD, as are the
major assumptions. The 2010 SCC values have been used in a number of
Federal rulemakings upon which the public had opportunity to comment.
In November 2013, the OMB announced a new opportunity for public
comment on the TSD underlying the revised SCC estimates. See 78 FR
70586 (Nov. 26, 2013). In July 2015, OMB published a detailed summary
and formal response to the many comments that were
[[Page 4776]]
received.\49\ In the response, the interagency working group continued
to recommend the use of the SCC estimates as they represent the best
scientific information on the impacts of climate change in a form
appropriate for incorporating the damages from incremental
CO2 emissions changes into regulatory analyses.\50\ DOE
stands ready to work with OMB and the other members of the interagency
working group on further review and revision of the SCC estimates as
appropriate.
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\49\ Available at https://www.whitehouse.gov/blog/2015/07/02/estimating-benefits-carbon-dioxide-emissions-reductions.
\50\ Interagency Working Group on Social Cost of Carbon, U.S.
Government, Response to Comments: Social Cost of Carbon for
Regulatory Impact Analysis Under Executive Order 12866, at 5 (July
2015).
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a. Monetizing Carbon Dioxide Emissions
When attempting to assess the incremental economic impacts of
CO2 emissions, the analyst faces a number of challenges. A
report from the National Research Council \51\ points out that any
assessment will suffer from uncertainty, speculation, and lack of
information about (1) future emissions of GHGs, (2) the effects of past
and future emissions on the climate system, (3) the impact of changes
in climate on the physical and biological environment, and (4) the
translation of these environmental impacts into economic damages. As a
result, any effort to quantify and monetize the harms associated with
climate change will raise questions of science, economics, and ethics,
and should be viewed as provisional.
---------------------------------------------------------------------------
\51\ National Research Council, Hidden Costs of Energy: Unpriced
Consequences of Energy Production and Use, National Academies Press:
Washington, DC (2009).
---------------------------------------------------------------------------
Despite the limits of both quantification and monetization, SCC
estimates can be useful in estimating the social benefits of reducing
CO2 emissions. The agency can estimate the benefits from
reduced (or costs from increased) emissions in any future year by
multiplying the change in emissions in that year by the SCC values
appropriate for that year. The NPV of the benefits can then be
calculated by multiplying each of these future benefits by an
appropriate discount factor and summing across all affected years.
It is important to emphasize that the interagency process is
committed to updating these estimates as the science and economic
understanding of climate change and its impacts on society improves
over time. In the meantime, the interagency group will continue to
explore the issues raised by this analysis and will consider public
comments as part of the ongoing interagency process.
b. Development of Social Cost of Carbon Values
In 2009, an interagency process was initiated to offer a
preliminary assessment of how best to quantify the benefits from
reducing CO2 emissions. To ensure consistency in how
benefits are evaluated across Federal agencies, the Administration
sought to develop a transparent and defensible method, specifically
designed for the rulemaking process, to quantify avoided climate change
damages from reduced CO2 emissions. The interagency group
did not undertake any original analysis. Instead, it combined SCC
estimates from the existing literature to use as interim values until a
more comprehensive analysis could be conducted. The outcome of the
preliminary assessment by the interagency group was a set of five
interim values--global SCC estimates for 2007 (in 2006$) of $55, $33,
$19, $10, and $5 per metric ton of CO2. These interim values
represented the first sustained interagency effort within the U.S.
government to develop an SCC for use in regulatory analysis. The
results of this preliminary effort were presented in several proposed
and final rules.
c. Current Approach and Key Assumptions
After the release of the interim values, the interagency group
reconvened on a regular basis to generate improved SCC estimates.
Specifically, the group considered public comments and further explored
the technical literature in relevant fields. The interagency group
relied on three integrated assessment models commonly used to estimate
the SCC--the FUND, DICE, and PAGE models. These models are frequently
cited in the peer-reviewed literature and were used in the last
assessment of the Intergovernmental Panel on Climate Change (IPCC).
Each model was given equal weight in the SCC values that were
developed.
Each model takes a slightly different approach in modeling how
changes in emissions result in changes in economic damages. A key
objective of the interagency process was to enable a consistent
exploration of the three models, while respecting the different
approaches to quantifying damages taken by the key modelers in the
field. An extensive review of the literature was conducted to select
three sets of input parameters for these models--climate sensitivity,
socio-economic and emissions trajectories, and discount rates. A
probability distribution for climate sensitivity was specified as an
input into all three models. In addition, the interagency group used a
range of scenarios for the socio-economic parameters and a range of
values for the discount rate. All other model features were left
unchanged, relying on the model developers' best estimates and
judgments.
In 2010, the interagency group selected four sets of SCC values for
use in regulatory analyses. Three sets of values are based on the
average SCC from the three integrated assessment models, at discount
rates of 2.5, 3, and 5 percent. The fourth set, which represents the
95th percentile SCC estimate across all three models at a 3-percent
discount rate, was included to represent higher-than-expected impacts
from climate change further out in the tails of the SCC distribution.
The values grow in real terms over time. Additionally, the interagency
group determined that a range of values from 7 percent to 23 percent
should be used to adjust the global SCC to calculate domestic
effects,\52\ although preference is given to consideration of the
global benefits of reducing CO2 emissions. Table IV.8
presents the values in the 2010 interagency group report,\53\ which is
reproduced in appendix 14A of the final rule TSD.
---------------------------------------------------------------------------
\52\ It is recognized that this calculation for domestic values
is approximate, provisional, and highly speculative. There is no a
priori reason why domestic benefits should be a constant fraction of
net global damages over time.
\53\ Social Cost of Carbon for Regulatory Impact Analysis Under
Executive Order 12866. Interagency Working Group on Social Cost of
Carbon, U.S. Government (February 2010) (Available at:
www.whitehouse.gov/sites/default/files/omb/inforeg/for-agencies/Social-Cost-of-Carbon-for-RIA.pdf).
[[Page 4777]]
Table IV.8--Annual SCC Values From 2010 Interagency Report, 2010-2050
[2007$ per metric ton CO2]
----------------------------------------------------------------------------------------------------------------
Discount rate
-------------------------------------------------------------------
Year 5% 3% 2.5% 3%
-------------------------------------------------------------------
Average Average Average 95th percentile
----------------------------------------------------------------------------------------------------------------
2010........................................ 4.7 21.4 35.1 64.9
2015........................................ 5.7 23.8 38.4 72.8
2020........................................ 6.8 26.3 41.7 80.7
2025........................................ 8.2 29.6 45.9 90.4
2030........................................ 9.7 32.8 50.0 100.0
2035........................................ 11.2 36.0 54.2 109.7
2040........................................ 12.7 39.2 58.4 119.3
2045........................................ 14.2 42.1 61.7 127.8
2050........................................ 15.7 44.9 65.0 136.2
----------------------------------------------------------------------------------------------------------------
The SCC values used for this document were generated using the most
recent versions of the three integrated assessment models that have
been published in the peer-reviewed literature, as described in the
2013 update from the interagency working group (revised July 2015).\54\
---------------------------------------------------------------------------
\54\ Technical Update of the Social Cost of Carbon for
Regulatory Impact Analysis Under Executive Order 12866, Interagency
Working Group on Social Cost of Carbon, United States Government
(May 2013; revised July 2015) (Available at: http://www.whitehouse.gov/sites/default/files/omb/inforeg/scc-tsd-final-july-2015.pdf).
---------------------------------------------------------------------------
Table IV.9 shows the updated sets of SCC estimates from the 2013
interagency update in 5-year increments from 2010 to 2050. The full set
of annual SCC estimates between 2010 and 2050 is reported in appendix
14B of the final rule TSD. The central value that emerges is the
average SCC across models at the 3-percent discount rate. However, for
purposes of capturing the uncertainties involved in regulatory impact
analysis, the interagency group emphasizes the importance of including
all four sets of SCC values.
Table IV.9--Annual SCC Values From 2013 Interagency Report (Revised July 2015), 2010-2050
[2007$ per metric ton CO2]
----------------------------------------------------------------------------------------------------------------
Discount rate
-------------------------------------------------------------------
Year 5% 3% 2.5% 3%
-------------------------------------------------------------------
Average Average Average 95th percentile
----------------------------------------------------------------------------------------------------------------
2010........................................ 10 31 50 86
2015........................................ 11 36 56 105
2020........................................ 12 42 62 123
2025........................................ 14 46 68 138
2030........................................ 16 50 73 152
2035........................................ 18 55 78 168
2040........................................ 21 60 84 183
2045........................................ 23 64 89 197
2050........................................ 26 69 95 212
----------------------------------------------------------------------------------------------------------------
It is important to recognize that a number of key uncertainties
remain, and that current SCC estimates should be treated as provisional
and revisable because they will evolve with improved scientific and
economic understanding. The interagency group also recognizes that the
existing models are imperfect and incomplete. The 2009 National
Research Council report points out that there is tension between the
goal of producing quantified estimates of the economic damages from an
incremental ton of carbon and the limits of existing efforts to model
these effects. There are a number of analytical challenges that are
being addressed by the research community, including research programs
housed in many of the Federal agencies participating in the interagency
process to estimate the SCC. The interagency group intends to
periodically review and reconsider those estimates to reflect
increasing knowledge of the science and economics of climate impacts,
as well as improvements in modeling.
In summary, in considering the potential global benefits resulting
from reduced CO2 emissions, DOE used the values from the
2013 interagency report (revised July 2015), adjusted to 2014$ using
the implicit price deflator for gross domestic product (GDP) from the
Bureau of Economic Analysis. For each of the four sets of SCC cases
specified, the values for emissions in 2015 were $12.2, $40.0, $62.3,
and $117 per metric ton avoided (values expressed in 2014$). DOE
derived values after 2050 using the relevant growth rates for the 2040-
2050 period in the interagency update.
DOE multiplied the CO2 emissions reduction estimated for
each year by the SCC value for that year in each of the four cases. To
calculate a present value of the stream of monetary values, DOE
discounted the values in each of the four cases using the specific
discount rate that had been used to obtain the SCC values in each case.
2. Social Cost of Other Air Pollutants
As noted previously, DOE has estimated how the considered energy
[[Page 4778]]
conservation standards would reduce site NOX emissions
nationwide and decrease power sector NOX emissions in those
22 States not affected by the CAIR.
DOE estimated the monetized value of NOX emissions
reductions using benefit per ton estimates from the Regulatory Impact
Analysis titled, ``Proposed Carbon Pollution Guidelines for Existing
Power Plants and Emission Standards for Modified and Reconstructed
Power Plants,'' published in June 2014 by EPA's Office of Air Quality
Planning and Standards. The report includes high and low values for
NOX (as PM2.5) for 2020, 2025, and 2030
discounted at 3 percent and 7 percent,\55\ which are presented in
chapter 14 of the final rule TSD. DOE assigned values for 2021-2024 and
2026-2029 using, respectively, the values for 2020 and 2025. DOE
assigned values after 2030 using the value for 2030.
---------------------------------------------------------------------------
\55\ For the monetized NOX benefits associated with
PM2.5, the related benefits (derived from benefit-per-ton
values) are based on an estimate of premature mortality derived from
the ACS study (Krewski et al., 2009), which is the lower of the two
EPA central tendencies. Using the lower value is more conservative
when making the policy decision concerning whether a particular
standard level is economically justified so using the higher value
would also be justified. If the benefit-per-ton estimates were based
on the Six Cities study (Lepuele et al., 2012), the values would be
nearly two-and-a-half times larger. (See chapter 14 of the final
rule TSD for further description of the studies mentioned here.)
---------------------------------------------------------------------------
DOE multiplied the emissions reduction (tons) in each year by the
associated $/ton values, and then discounted each series using discount
rates of 3 percent and 7 percent as appropriate. DOE will continue for
evaluate the monetization of avoided NOX emissions and will
make any appropriate updates in energy conservation standards
rulemakings.
DOE is evaluating appropriate monetization of avoided
SO2 and Hg emissions in energy conservation standards
rulemakings. DOE has not included monetization of those emissions in
the current analysis.
3. Comments
In response to the CPSV NOPR, DOE received two comments regarding
the use of SCC. In a comment submitted by the U.S. Chamber of Commerce
along with the American Chemistry Council, the American Coke and Coal
Chemicals Institute, the American Forest & Paper Association, the
American Fuel & Petrochemical Manufacturers, the American Petroleum
Institute, the Brick Industry Association, the Council of Industrial
Boiler Owners, the National Association of Manufacturers, the National
Mining Association, the National Oilseed Processors Association, and
the Portland Cement Association (collectively, ``the Associations''),
the commenters objected to DOE's continued use of SCC in the cost-
benefit analysis and stated their belief that SCC should be withdrawn
as a basis for the rule. The Associations further stated that the SCC
calculation should not be used in any rulemaking or policymaking until
it undergoes a more rigorous notice, review, and comment process. (The
Associations, No. 29, at p. 4) DOE also received a comment from a group
consisting of the Environmental Defense Fund, Institute for Policy
Integrity at New York University School of Law, Natural Resources
Defense Council, and Union of Concerned Scientists (collectively,
``Joint Commenters'') that supported DOE's current use of the
Interagency Working Group's SCC estimate. The Joint Commenters further
indicated that DOE should also include a qualitative assessment of all
significant climate effects that are not currently quantified in the
monetized estimate. (Joint Commenters, No. 21, at p. 19)
DOE appreciates the comments and acknowledges the many
uncertainties involved with monetizing the social benefits of reducing
CO2 emissions. However, DOE reiterates that the use of the
SCC estimates, as recommended by the working group, represent the best
scientific information on the impacts of climate change in a form
appropriate for incorporating into regulatory analyses.
M. Utility Impact Analysis
The utility impact analysis estimates several effects on the
electric power industry that would result from the adoption of new or
amended energy conservation standards. The utility impact analysis
estimates the changes in installed electrical capacity and generation
that would result for each TSL. The analysis is based on published
output from the NEMS associated with AEO2015. NEMS produced the AEO
Reference case, as well as a number of side cases that estimate the
economy-wide impacts of changes to energy supply and demand. DOE uses
published side cases that incorporate efficiency-related policies to
estimate the marginal impacts of reduced energy demand on the utility
sector. The output of this analysis is a set of time-dependent
coefficients that capture the change in electricity generation, primary
fuel consumption, installed capacity, and power sector emissions due to
a unit reduction in demand for a given end use. These coefficients are
multiplied by the stream of electricity savings calculated in the NIA
to provide estimates of selected utility impacts of new or amended
energy conservation standards.
Chapter 15 of the final rule TSD describes the utility impact
analysis in further detail.
N. Employment Impact Analysis
DOE considers employment impacts in the domestic economy as one
factor in selecting a standard. Employment impacts from new or amended
energy conservation standards include both direct and indirect impacts.
Direct employment impacts are any changes in the number of employees of
manufacturers of the products subject to standards, their suppliers,
and related service firms. The MIA addresses the direct employment
impacts. Indirect employment impacts are changes in national employment
that occur due to the shift in expenditures and capital investment
caused by the purchase and operation of more-efficient appliances.
Indirect employment impacts from standards consist of the net jobs
created or eliminated in the national economy, other than in the
manufacturing sector being regulated, caused by (1) reduced spending by
end users on energy, (2) reduced spending on new energy supply by the
utility industry, (3) increased consumer spending on new products to
which the new standards apply, and (4) the effects of those three
factors throughout the economy.
One method for assessing the possible effects on the demand for
labor of such shifts in economic activity is to compare sector
employment statistics developed by the Labor Department's Bureau of
Labor Statistics (BLS).\56\ 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. Data from BLS indicate
that expenditures in the utility sector generally create fewer jobs
(both directly and indirectly) than expenditures in other sectors of
the economy.\57\ There are many reasons for these differences,
including wage differences and the fact that the utility sector is more
capital-intensive and less labor-intensive than other sectors. Energy
conservation standards have the effect of reducing consumer utility
bills.
[[Page 4779]]
Because reduced consumer expenditures for energy likely lead to
increased expenditures in other sectors of the economy, the general
effect of efficiency standards is to shift economic activity from a
less labor-intensive sector (i.e., the utility sector) to more labor-
intensive sectors (e.g., the retail and service sectors). Thus, based
on the BLS data alone, DOE believes net national employment may
increase due to shifts in economic activity resulting from amended
standards for commercial prerinse spray valves.
---------------------------------------------------------------------------
\56\ Data on industry employment, hours, labor compensation,
value of production, and the implicit price deflator for output for
these industries are available upon request by calling the Division
of Industry Productivity Studies (202-691-5618) or by sending a
request by email to [email protected].
\57\ See Bureau of Economic Analysis, Regional Multipliers: A
User Handbook for the Regional Input-Output Modeling System (RIMS
II), U.S. Department of Commerce (1992).
---------------------------------------------------------------------------
DOE estimated indirect national employment impacts for the standard
levels considered in this final rule using an input/output model of the
U.S. economy called Impact of Sector Energy Technologies version 4.0
(ImSET).\58\ ImSET is a special-purpose version of the ``U.S. Benchmark
National Input-Output'' (I-O) model, which was designed to estimate the
national employment and income effects of energy-saving technologies.
The ImSET software includes a computer-based I-O model having
structural coefficients that characterize economic flows among 187
sectors most relevant to industrial, commercial, and residential
building energy use.
---------------------------------------------------------------------------
\58\ Livingston OV, SR Bender, MJ Scott, and RW Schultz. 2015.
ImSET 4.0: Impact of Sector Energy Technologies Model Description
and User's Guide. PNNL-24563, Pacific Northwest National Laboratory,
Richland, WA. (2015).
---------------------------------------------------------------------------
DOE notes that ImSET is not a general equilibrium forecasting
model, and understands the uncertainties involved in projecting
employment impacts, especially changes in the later years of the
analysis. Because ImSET does not incorporate price changes, the
employment effects predicted by ImSET may over-estimate actual job
impacts over the long run for this rule. Therefore, DOE generated
results for near-term timeframes, where these uncertainties are
reduced. For more details on the employment impact analysis, see
chapter 16 of the final rule TSD.
V. Analytical Results and Conclusions
The following section addresses the results from DOE's analyses
with respect to the considered energy conservation standards for
commercial prerinse spray valves. It addresses the TSLs examined by
DOE, the projected impacts of each of these levels if adopted as energy
conservation standards for commercial prerinse spray valves, and the
standards levels that DOE is adopting in this final rule. Additional
details regarding DOE's analyses are contained in the final rule TSD
supporting this document.
A. Trial Standard Levels
DOE analyzed the benefits and burdens of four TSLs for commercial
prerinse spray valves. These TSLs were developed by combining specific
efficiency levels for each of the product classes analyzed by DOE. DOE
also analyzed two additional TSLs that utilized the alternative
shipments scenarios discussed in section IV.G.1. DOE presents the
results for each of the TSLs in this document, while the engineering
analysis results for all efficiency levels that DOE analyzed are in the
final rule TSD.
Table V.1 presents the TSLs and the corresponding efficiency levels
for commercial prerinse spray valves. These TSLs were chosen based on
the following criteria:
TSL 1 represents the first EL above the market minimum for
each product class. That is, for product classes 1 and 2, TSL 1
represents EL 2 which is a 15 percent increase in efficiency above the
market minimum. For product class 3, TSL 1 represents EL 1 which is a
10 percent increase in efficiency above the market minimum.
TSL 2 represents the second EL above market minimum for
each product class. That is, for product classes 1 and 2, TSL 2
represents EL 3 which is a 25 percent increase in efficiency above the
market minimum. For product class 3, TSL 3 represents the WaterSense
level, or 20 percent increase in efficiency above the market minimum.
TSL 3 represents the minimum flow rates for each product
class that: (1) Would not induce consumers to switch product classes as
a result of a standard at those flow rates (as discussed in the CPSV
NOPR); and (2) retains shower-type designs.
TSL 3a is a sensitivity-case variant of TSL 3, utilizing
the second alternative shipments scenario described in section IV.G.1.
This shipments scenario permits examination of the potential for
additional savings if one percent of the shipments are assumed to fall
into EL 0, rather than at EL 1, in the no-new-standards case for
product classes 1 and 2. NIA results were generated for this case.
TSL 4 represents max-tech for all product classes under
the default shipments scenario, which assumes the total volume of
shipments does not change as a function of the standard level selected.
Consumers in product classes 1 and 2 would purchase a compliant CPSV
model with flow rates most similar to the flow rate they would purchase
in the absence of a standard. This TSL assumes that purchasers of
shower-type commercial prerinse spray valves would transition to
single-orifice CPSV models.
TSL 4a represents a sensitivity-case max-tech for all
product classes under an alternative shipments scenario, as described
in section IV.G.1. Since the utility of single-orifice CPSV models may
not be equivalent to shower-type CPSV models for some applications,
this alternative shipments scenario assumes consumers of shower-type
units exit the CPSV market and purchase faucets, which have a maximum
flow rate of 2.2 gpm under the current Federal standard. Thus,
shipments of compliant CPSV models are much lower under this TSL and
water consumption is higher due to increased faucet shipments. Both MIA
and NIA results were developed for this case.
Table V.1--Trial Standard Levels for Commercial Prerinse Spray Valves
----------------------------------------------------------------------------------------------------------------
Product class Product class Product class
1 2 3
TSL ------------------------------------------------ Shipments scenario
EL EL EL
----------------------------------------------------------------------------------------------------------------
1.................................... 2 2 1 Default.
2.................................... 3 3 2 Default.
3.................................... 1 1 2 Default.
3a................................... 1 1 2 Alternate.
4.................................... 4 4 3 Default.
4a................................... 4 4 3 Alternate.
----------------------------------------------------------------------------------------------------------------
[[Page 4780]]
B. Economic Justification and Energy Savings
1. Economic Impacts on Individual Consumers
DOE analyzed the economic impacts on commercial prerinse spray
valve consumers by looking at the effects the amended standards at each
TSL would have on the LCC and PBP analysis. DOE also examined the
impacts of amended standards on consumer subgroups. These analyses are
discussed in the following sections.
a. Life-Cycle Cost and Payback Period
To evaluate the net economic impact of the amended energy
conservation standards on consumers of commercial prerinse spray
valves, DOE conducted an LCC and PBP analysis for each TSL. In general,
higher-efficiency products affect consumers in two ways: (1) Purchase
price increases; and (2) annual operating cost decreases. Because DOE
did not find that the purchase price of commercial prerinse spray
valves increased with increasing efficiency, the only effect of higher-
efficiency products to consumers is decreased operating costs. Inputs
used for calculating the LCC and PBP include: (1) Total installed costs
(i.e., product price plus installation costs); and (2) operating costs
(i.e., annual energy use, energy prices, energy price trends, repair
costs, and maintenance costs). The LCC calculation also uses product
lifetime and a discount rate. Chapter 8 of the final rule TSD provides
detailed information on the LCC and PBP analyses.
Table V.2 through Table V.7 show the LCC and PBP results for the
TSLs considered for each product class. In the first of each pair of
tables, the simple PBP is measured relative to the baseline product. In
the second of each pair of tables, the LCC savings are measured
relative to the average LCC in the no-new-standards case in the
compliance year (see section IV.F.10 of this document). No impacts
occur when the no-new-standards case efficiency for a specific consumer
equals or exceeds the efficiency at a given TSL. In this situation, a
standard would have no effect because the product installed would be at
or above that standard level without amended standards. For commercial
prerinse spray valves, DOE determined that there was no increase in
purchase price with increasing EL within each product class. Therefore,
LCC and PBP results instead reflect differences in operating costs due
to decreased energy and water use for each EL.
Table V.2--Average LCC and PBP Results by Efficiency Level for Product Class 1 (<=5.0 ozf) Commercial Prerinse Spray Valves
--------------------------------------------------------------------------------------------------------------------------------------------------------
Average costs (2014$)
---------------------------------------------------------------- Simple Average
TSL EL First year's Lifetime payback lifetime
Installed cost operating operating LCC (years) (years)
cost cost
--------------------------------------------------------------------------------------------------------------------------------------------------------
--...................................... 0 76 780 3,556 3,643 .............. 4.9
3....................................... 1 76 487 2,229 2,305 0.0 4.9
1....................................... 2 76 414 1,895 1,971 0.0 4.9
2....................................... 3 76 366 1,672 1,748 0.0 4.9
4....................................... 4 76 302 1,382 1,458 0.0 4.9
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note: The results for each TSL are calculated assuming that all consumers use products at that efficiency level. The PBP is measured relative to the
baseline product.
Table V.3--Average LCC Savings Relative to the No-New-Standards Case Efficiency Distribution for Product Class 1
(<=5.0 ozf) Commercial Prerinse Spray Valves
----------------------------------------------------------------------------------------------------------------
Life-cycle cost savings
-------------------------------
Percent of
TSL EL consumers that Average
experience savings *
(net cost) (2014$)
----------------------------------------------------------------------------------------------------------------
--.............................................................. 0 .............. ..............
3............................................................... 1 0 ** 0
1............................................................... 2 0 334
2............................................................... 3 0 557
4............................................................... 4 0 352
----------------------------------------------------------------------------------------------------------------
* Note: The calculation includes consumers with zero LCC savings (no impact).
** At TSL 3, the average LCC impact is a savings of $0 for CPSV models in product classes 1 and 2 because the
market minimums are the standard for those classes. Because no consumers in the no-new-standards case purchase
products with a higher flow rate than the respective market minimums, no consumers are affected by a standard
set at EL 1 (market minimum) in product classes 1 and 2.
[[Page 4781]]
Table V.4--Average LCC and PBP Results by Efficiency Level for Product Class 2 (>5.0 ozf and <=8.0 ozf) Commercial Prerinse Spray Valves
--------------------------------------------------------------------------------------------------------------------------------------------------------
Average costs (2014$)
---------------------------------------------------------------- Simple Average
TSL EL First year's Lifetime payback lifetime
Installed cost operating operating LCC (years) (years)
cost cost
--------------------------------------------------------------------------------------------------------------------------------------------------------
--...................................... 0 76 780 3,556 3,643 .............. 4.9
3....................................... 1 76 585 2,675 2,751 0.0 4.9
1....................................... 2 76 497 2,274 2,350 0.0 4.9
2....................................... 3 76 439 2,006 2,082 0.0 4.9
4....................................... 4 76 356 1,627 1,704 0.0 4.9
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note: The results for each TSL are calculated assuming that all consumers use products at that efficiency level. The PBP is measured relative to the
baseline product.
Table V.5--Average LCC Savings Relative to the No-New-Standards Case Efficiency Distribution for Product Class 2
(>5.0 ozf and <=8.0 ozf) Commercial Prerinse Spray Valves
----------------------------------------------------------------------------------------------------------------
Life-cycle cost savings
-------------------------------
Percent of
TSL EL consumers that Average
experience savings *
(net cost) (2014$)
----------------------------------------------------------------------------------------------------------------
--.............................................................. 0 .............. ..............
3............................................................... 1 0 ** 0
1............................................................... 2 0 401
2............................................................... 3 0 446
4............................................................... 4 0 825
----------------------------------------------------------------------------------------------------------------
* Note: The calculation includes consumers with zero LCC savings (no impact).
** At TSL 3, the average LCC impact is a savings of $0 for CPSV models in product classes 1 and 2 because the
market minimums are the standard for those classes. Because no consumers in the no-new-standards case purchase
products with a higher flow rate than the respective market minimums, no consumers are affected by a standard
set at EL 1 (market minimum) in product classes 1 and 2.
Table V.6--Average LCC and PBP Results by Efficiency Level for Product Class 3 (>8.0 ozf) Commercial Prerinse Spray Valves
--------------------------------------------------------------------------------------------------------------------------------------------------------
Average costs (2014$)
---------------------------------------------------------------- Simple Average
TSL EL First year's Lifetime payback lifetime
Installed cost operating operating LCC (years) (years)
cost cost
--------------------------------------------------------------------------------------------------------------------------------------------------------
--...................................... 0 76 780 3,566 3,643 .............. 4.9
1....................................... 1 76 702 3,210 3,286 0.0 4.9
2, 3.................................... 2 76 624 2,853 2,929 0.0 4.9
4....................................... 3 76 551 2,519 2,595 0.0 4.9
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note: The results for each TSL are calculated assuming that all consumers use products at that efficiency level. The PBP is measured relative to the
baseline product.
Table V.7--Average LCC Savings Relative to the No-New-Standards Case Efficiency Distribution for Product Class 3
(>8.0 ozf) Commercial Prerinse Spray Valves
----------------------------------------------------------------------------------------------------------------
Life-cycle cost savings
-------------------------------
Percent of
TSL EL consumers that Average
experience savings *
(net cost) (2014$)
----------------------------------------------------------------------------------------------------------------
--.............................................................. 0 .............. ..............
1............................................................... 1 0 357
2, 3............................................................ 2 0 547
4............................................................... 3 0 766
----------------------------------------------------------------------------------------------------------------
Note: The calculation includes consumers with zero LCC savings (no impact).
[[Page 4782]]
b. Consumer Subgroup Analysis
In the consumer subgroup analysis, DOE estimated the impact of the
considered TSLs on small businesses and limited service establishments.
Table V.8 through Table V.10 compare the average LCC savings at each
efficiency level for the two consumer subgroups, along with the average
LCC savings for the entire sample for each product class for commercial
prerinse spray valves. The average LCC savings for single entities and
limited service establishments at the considered ELs are not
substantially different from the average for all consumers. Chapter 11
of the final rule TSD presents the complete LCC and PBP results for the
subgroups.
Table V.8--Product Class 1 (<=5.0 ozf) Commercial Prerinse Spray Valves: Comparison of Average LCC Savings for Consumer Subgroups and All Consumers
--------------------------------------------------------------------------------------------------------------------------------------------------------
Average life-cycle cost savings (2014$) Simple payback period (years)
---------------------------------------------------------------------------------------------------
TSL Single Limited service Single Limited service
entities establishments All consumers entities establishments All consumers
--------------------------------------------------------------------------------------------------------------------------------------------------------
1................................................... 317 267 334 0.0 0.0 0.0
2................................................... 529 446 557 0.0 0.0 0.0
3................................................... * 0 * 0 * 0 0.0 0.0 0.0
4................................................... 334 281 352 0.0 0.0 0.0
--------------------------------------------------------------------------------------------------------------------------------------------------------
* At TSL 3, the average LCC impact is a savings of $0 for CPSV models in product classes 1 and 2 because the market minimums are the standard for those
classes. Because no consumers in the no-new-standards case purchase products with a higher flow rate than the respective market minimums, no consumers
are affected by a standard set at EL 1 (market minimum) in product classes 1 and 2.
Table V.9--Product Class 2 (>5.0 ozf and <=8.0 ozf) Commercial Prerinse Spray Valves: Comparison of Average LCC Savings for Consumer Subgroups and All
Consumers
--------------------------------------------------------------------------------------------------------------------------------------------------------
Average life-cycle cost savings (2014$) Simple payback period (years)
---------------------------------------------------------------------------------------------------
TSL Single Limited service Single Limited service
entities establishments All consumers entities establishments All consumers
--------------------------------------------------------------------------------------------------------------------------------------------------------
1................................................... 381 321 401 0.0 0.0 0.0
2................................................... 423 357 446 0.0 0.0 0.0
3................................................... * 0 * 0 * 0 0.0 0.0 0.0
4................................................... 782 660 825 0.0 0.0 0.0
--------------------------------------------------------------------------------------------------------------------------------------------------------
* At TSL 3, the average LCC impact is a savings of $0 for CPSV models in product classes 1 and 2 because the market minimums are the standard for those
classes. Because no consumers in the no-new-standards case purchase products with a higher flow rate than the respective market minimums, no consumers
are affected by a standard set at EL 1 (market minimum) in product classes 1 and 2.
Table V.10--Product Class 3 (>8.0 ozf) Commercial Prerinse Spray Valves: Comparison of Average LCC Savings for Consumer Subgroups and All Consumers
--------------------------------------------------------------------------------------------------------------------------------------------------------
Average life-cycle cost savings (2014$) Simple payback period (years)
---------------------------------------------------------------------------------------------------
TSL Single Limited service Single Limited service
entities establishments All consumers entities establishments All consumers
--------------------------------------------------------------------------------------------------------------------------------------------------------
1................................................... 338 285 357 0.0 0.0 0.0
2................................................... 519 437 547 0.0 0.0 0.0
3................................................... 519 437 547 0.0 0.0 0.0
4................................................... 727 613 766 0.0 0.0 0.0
--------------------------------------------------------------------------------------------------------------------------------------------------------
c. Rebuttable Presumption Payback
As discussed in section IV.F.11, EPCA establishes a rebuttable
presumption that an energy conservation standard is economically
justified if the increased purchase cost for a product that meets the
standard is less than three times the value of the first year energy
and water savings resulting from the standard. In calculating a
rebuttable presumption PBP for each of the considered TSLs, DOE used
discrete values, and, as required by EPCA, based the energy and water
use calculation on the DOE test procedure for commercial prerinse spray
valves. Table V.11 presents the rebuttable-presumption PBPs for the
considered TSLs. In addition to examining the rebuttable-presumption
criterion, DOE also considered whether the standard levels are
economically justified through a more detailed analysis of the economic
impacts of those levels that considers the full range of impacts to the
consumer, manufacturer, nation, and environment. (42 U.S.C.
6295(o)(2)(B)(i) The results of that analysis serve as the basis for
DOE to definitively evaluate the economic justification for a potential
standard level, thereby supporting or rebutting the results of any
preliminary determination of economic justification. As indicated in
the engineering analysis, there is no increased purchase cost for
products that meets the standard, so the rebuttable PBP for each
considered TSL is zero.
[[Page 4783]]
Table V.11--Commercial Prerinse Spray Valves: Rebuttable PBPs
----------------------------------------------------------------------------------------------------------------
Rebuttable payback period for trial standard level (years)
Product class ---------------------------------------------------------------
1 2 3 4
----------------------------------------------------------------------------------------------------------------
Product Class 1 (<=5.0 ozf)..................... 0.0 0.0 0.0 0.0
Product Class 2 (>5.0 ozf and <=8.0 ozf)........ 0.0 0.0 0.0 0.0
Product Class 3 (>8.0 ozf)...................... 0.0 0.0 0.0 0.0
----------------------------------------------------------------------------------------------------------------
2. Economic Impacts on Manufacturers
DOE performed an MIA to estimate the impact of amended energy
conservation standards on manufacturers of commercial prerinse spray
valves. Section V.B.2.a describes the expected impacts on manufacturers
at each TSL. Chapter 12 of the final rule TSD explains the analysis in
further detail.
a. Industry Cash Flow Analysis Results
DOE modeled two scenarios using different conversion cost
assumptions to evaluate the range of cash flow impacts on the CPSV
manufacturing industry from amended energy conservation standards. Each
scenario results in a unique set of cash flows and corresponding
industry value at each TSL. These assumptions correspond to the bounds
of a range of capital conversion costs that DOE anticipates could occur
in response to amended standards. The following tables illustrate the
financial impacts (represented by changes in INPV) of amended energy
conservation standards on manufacturers of commercial prerinse spray
valves, as well as the conversion costs that DOE estimates
manufacturers would incur for each product class at each TSL.
DOE also conducted a sensitivity MIA (reflected in TSL 4a) based on
an alternative shipments scenario described in section IV.G.1. DOE
assumed that a percentage of consumers currently using product class 3
commercial prerinse spray valves will switch to using faucets at higher
flow rates. DOE did not include faucet shipments in its shipments
analysis. Therefore, overall shipments decrease in the alternative
shipments scenario. The alternative shipments scenario is described in
more detail in section IV.G.1. The results for the sensitivity MIA are
presented in Table V.12 and Table V.13 as well as in chapter 12 of the
final rule TSD.
The INPV results refer to the difference in industry value between
the no-new-standards case and the standards case, which DOE calculated
by summing the discounted industry cash flows from the base year (2015)
through the end of the analysis period (2048). The discussion also
notes the difference in cash flow between the no-new-standards case and
the standards case in the year before the compliance date of amended
energy conservation standards.
Table V.12--Manufacturer Impact Analysis for Commercial Prerinse Spray Valves--With the Sourced Components Capital Conversion Costs Scenario
--------------------------------------------------------------------------------------------------------------------------------------------------------
No-new- Trial Standard Level
Units standards ----------------------------------------------------------------
case 1 2 3 4 4a
--------------------------------------------------------------------------------------------------------------------------------------------------------
INPV..................................... 2014$ MM.................... 8.6 7.7 7.5 8.0 7.1 5.5
Change in INPV ($)....................... 2014$ MM.................... .............. (0.8) (1.1) (0.6) (1.5) (3.1)
Change in INPV (%)....................... %........................... .............. (9.9) (12.8) (6.5) (17.4) (36.3)
Product Conversion Costs................. 2014$ MM.................... .............. 1.5 1.8 0.8 2.4 1.9
Capital Conversion Costs................. 2014$ MM.................... .............. 0.1 0.2 0.2 0.2 0.0
Total Investment Required................ 2014$ MM.................... .............. 1.6 2.0 1.0 2.6 1.9
--------------------------------------------------------------------------------------------------------------------------------------------------------
* Parentheses indicate negative values.
Table V.13--Manufacturer Impact Analysis for Commercial Prerinse Spray Valves--With the Fabricated Components Capital Conversion Costs Scenario
--------------------------------------------------------------------------------------------------------------------------------------------------------
No-new- Trial Standard Level
Units standards ----------------------------------------------------------------
case 1 2 3 4 4a
--------------------------------------------------------------------------------------------------------------------------------------------------------
INPV..................................... 2014$ MM.................... 8.6 7.1 6.7 7.4 6.2 4.8
Change in INPV ($)....................... 2014$ MM.................... .............. (1.5) (1.8) (1.1) (2.4) (3.8)
Change in INPV (%)....................... %........................... .............. (17.5) (21.4) (13.1) (28.0) (44.4)
Product Conversion Costs................. 2014$ MM.................... .............. 1.5 1.8 0.8 2.4 1.9
Capital Conversion Costs................. 2014$ MM.................... .............. 0.8 1.0 0.8 1.2 0.8
Total Investment Required................ 2014$ MM.................... .............. 2.3 2.8 1.6 3.6 2.7
--------------------------------------------------------------------------------------------------------------------------------------------------------
* Parentheses indicate negative values.
[[Page 4784]]
At TSL 1, DOE estimates impacts on INPV to range from -$1.5 million
to -$0.8 million, or a change in INPV of -17.5 percent to -9.9 percent
for the Fabricated Components and Sourced Components Capital Conversion
Costs scenarios, respectively. At this level, industry free cash flow
is estimated to decrease by as much as 165.6 percent to -$0.3 million,
compared to the no-new-standards case value of $0.5 million in the year
leading up to the amended energy conservation standards. As DOE
forecasts that approximately 63 percent of commercial prerinse spray
valves shipments in the no-new-standards case will meet TSL 1 in the
first year that standards are in effect (2019), 37 percent of the
market shipments are affected at this standard level. The impact on
INPV at TSL 1 stems exclusively from the conversion costs associated
with the conversion of baseline units to those meeting the standards
set at TSL 1. Product and capital conversion costs are estimated to be
approximately $1.2 million for the Sourced Components Capital
Conversion Costs scenario and $2.0 million for the Fabricated
Components Capital Conversion Costs scenario.
At TSL 2, DOE estimates impacts on INPV to range from -$1.8 million
to -$1.1 million, or a change in INPV of -21.4 percent to -12.8 percent
for the Fabricated Components and Sourced Components Capital Conversion
Costs scenarios, respectively. At this level, industry free cash flow
is estimated to decrease by as much as 202.7 percent to -$0.5 million,
compared to the no-new-standards case value of $0.5 million in the year
leading up to the amended energy conservation standards. As it is
estimated that only approximately 27 percent of commercial prerinse
spray valves shipments will meet the efficiency levels specified at TSL
2 in the first year that standards are in effect (2019), 73 percent of
the market shipments are affected at this standard level. As with TSL
1, the impact on INPV at TSL 2 stems exclusively from the conversion
costs associated with the conversion of lower efficiency units to those
meeting the standards set at TSL 2. Since the majority of commercial
prerinse spray valves will have to be updated to reach the standard
level, product and capital conversion costs are estimated to be
approximately $2.0 million for the Sourced Components Capital
Conversion Costs scenario and $2.8 million for the Fabricated
Components Capital Conversion Costs scenario.
At TSL 3, DOE estimates impacts on INPV to range from -$1.1 million
to -$0.6 million, or a change in INPV of -13.1 percent to -6.5 percent
for the Fabricated Components and Sourced Components Capital Conversion
Cost scenarios, respectively. At this level, industry free cash flow is
estimated to decrease by as much as 124.4 percent to -$0.1 million,
compared to the no-new-standards case value of $0.5 million in the year
leading up to the amended energy conservation standards. It is
estimated that 55 percent of commercial prerinse spray valves shipments
will meet the efficiency levels specified at TSL 3 in the first year
that standards are in effect (2019); 45 percent of market shipments are
affected at this standard level. Again, the impact on INPV at TSL 3
stems exclusively from the conversion costs associated with the
conversion of lower efficiency units to those meeting the standards set
at TSL 3. Since the majority of commercial prerinse spray valves
already meet the standard level, product and capital conversion costs
are estimated to be approximately $1.0 million for the Sourced
Components Capital Conversion Costs scenario and $1.6 million for the
Fabricated Components Capital Conversion Costs model.
At TSL 4, DOE estimates impacts on INPV to range from -$2.4 million
to -$1.5 million, or a change in INPV of -28.0 percent to -17.4 percent
for the Fabricated Components and Sourced Components Capital Conversion
Cost scenarios, respectively. At this level, industry free cash flow is
estimated to decrease by as much as 275.3 percent to -$0.8 million,
compared to the no-new-standards case value of $0.5 million in the year
leading up to the amended energy conservation standards. It is
estimated that just 7 percent of commercial prerinse spray valves
shipments will meet the efficiency levels specified at TSL 4 in the
first year that standards are in effect (2019). Again, the impact on
INPV at TSL 4 stems exclusively from the conversion costs associated
with the conversion of lower efficiency units to those meeting the
standards set at TSL 4. Since the majority of commercial prerinse spray
valves will have to be updated to reach the standard level, product and
capital conversion costs are estimated to be approximately $2.6 million
for the Sourced Components Capital Conversion Costs scenario and $3.6
million for the Fabricated Components Capital Conversion Costs
scenario.
Finally, at TSL 4a, DOE estimates impacts on INPV to range from -
$3.8 million to -$3.1 million, or a change in INPV of -44.4 percent to
-36.3 percent for the Fabricated Components and Sourced Components
Capital Conversion Cost scenarios, respectively. At this level,
industry free cash flow is estimated to decrease by as much as 189.4
percent to -$0.4 million, compared to the no-new-standards case value
of $0.5 million in the year leading up to the amended energy
conservation standards. It is estimated that just 7 percent of
commercial prerinse spray valves will meet the efficiency levels
specified at TSL 4a in the first year that standards are in effect
(2019). The impact on INPV at TSL 4a stems from the conversion costs
associated with the conversion of lower efficiency units to those
meeting the standards set at TSL 4a, and from a reduction in shipments
in product class 3 by 46 percent. Since the majority of commercial
prerinse spray valves will have to be updated to reach the standard
level, product and capital conversion costs are estimated to be
approximately $1.9 million for the Sourced Components Capital
Conversion Costs scenario and $2.7 million for the Fabricated
Components Capital Conversion Costs scenario.
b. Impacts on Employment
DOE used the GRIM to estimate the domestic labor expenditures and
number of domestic production workers in the no-new-standards case and
at each TSL from 2014 through 2048. DOE used the labor content of each
product and the MPCs from the engineering analysis to estimate the
total annual labor expenditures associated with commercial prerinse
spray valves sold in the United States. Using statistical data from the
U.S. Census Bureau's 2013 ``Annual Survey of Manufactures'' (2013 ASM)
as well as market research, DOE estimates that 100 percent of
commercial prerinse spray valves sold in the United States are
assembled domestically, and hence that portion of total labor
expenditures is attributable to domestic labor.\59\ Labor expenditures
for the manufacturing of products are a function of the labor intensity
of the product, the sales volume, and an assumption that wages in real
terms remain constant.
---------------------------------------------------------------------------
\59\ U.S. Census Bureau. U.S. Census Bureau Annual Survey of
Manufacturers 2013. 2013. Available at http://www.census.gov/manufacturing/asm/historical_data/index.html.
---------------------------------------------------------------------------
Using the GRIM, DOE forecasts the domestic labor expenditure for
commercial prerinse spray valve production labor in 2019 will be
approximately $1.9 million. Using the $20.51 hourly wage rate including
fringe benefits and 2,019 production hours per year per employee found
in the 2013 ASM, DOE estimates there will be approximately 46 domestic
production workers involved in assembling and, to
[[Page 4785]]
a lesser extent, fabricating components for commercial prerinse spray
valves in 2019, the year in which the amended standards go into effect.
In addition, DOE estimates that 21 non-production employees in the
United States will support commercial prerinse spray valve production.
The employment spreadsheet of the commercial prerinse spray valve GRIM
shows the annual domestic employment impacts in further detail.\60\
---------------------------------------------------------------------------
\60\ The employment spreadsheet is available in the GRIM at
www.regulations.gov under docket number EERE-2014-BT-STD-0027.
---------------------------------------------------------------------------
The production worker estimates in this section cover workers only
up to the line-supervisor level who are directly involved in
fabricating and assembling commercial prerinse spray valves within an
original equipment manufacturer (OEM) facility. Workers performing
services that are closely associated with production operations, such
as material handling with a forklift, are also included as production
labor. Additionally, the employment impacts shown are independent of
the employment impacts from the broader U.S. economy, which are
documented in chapter 12 of the final rule TSD.
Table V.14 depicts the potential levels of production employment
that could result following amended energy conservation standards as
calculated by the GRIM. The employment levels shown reflect the
scenario in which manufacturers continue to produce the same scope of
covered products in domestic facilities and domestic production is not
shifted to lower-labor-cost countries. The following discussion
includes a qualitative evaluation of the likelihood of negative
domestic production employment impacts at the various TSLs.
Table V.14--Total Number of Domestic Commercial Prerinse Spray Valve Production Workers in 2019
--------------------------------------------------------------------------------------------------------------------------------------------------------
Trial standard level
No-new- ------------------------------------------------------------------------------------
standards case 1 2 3 4 4a
--------------------------------------------------------------------------------------------------------------------------------------------------------
Total Number of Domestic Production Workers in 46 46 46 46 46 27
2019 (without changes in production locations)...
--------------------------------------------------------------------------------------------------------------------------------------------------------
The design options specified for achieving greater efficiency
levels (i.e., reducing the spray hole area, changing spray hole shape,
or changing the nozzle geometry from a venturi meter to an orifice
plate) do not increase the labor content (measured in dollars) of
commercial prerinse spray valves at any EL, nor do they increase total
MPC. Except for TSL 4a, the total industry shipments are forecasted to
be constant across TSLs. Therefore, DOE predicts no change in domestic
manufacturing employment levels, provided manufacturers do not relocate
production facilities outside of the United States, at TSLs 1 to 4. At
TSL 4a, the total number of production workers for commercial prerinse
spray valves in the United States is expected to decrease to 27 due to
a reduction in industry shipments.
c. Impacts on Manufacturing Capacity
Approximately 55 percent of CPSV shipments already comply with the
amended energy conservation standards adopted in this rulemaking. The
majority of manufacturers already offer products that meet the amended
energy conservation standards for commercial prerinse spray valves.
Therefore, DOE does not foresee any impact on manufacturing capacity
during the period leading up to the compliance date.
d. Impacts on Subgroups of Manufacturers
Using average cost assumptions to develop an industry cash-flow
estimate may not be adequate for assessing differential impacts among
manufacturer subgroups. Small manufacturers, niche product
manufacturers, and manufacturers exhibiting a cost structure
substantially different from the industry average could be affected
disproportionately. DOE examined the potential for disproportionate
impacts on small business manufacturers in section VI.B of this
document. DOE did not identify any other manufacturer subgroups for
this rulemaking.
e. Cumulative Regulatory Burden
While any one regulation may not impose a significant burden on
manufacturers, the combined effects of several impending regulations
may have serious consequences for some manufacturers, groups of
manufacturers, or an entire industry. Assessing the impact of a single
regulation may overlook this cumulative regulatory burden. In addition
to energy conservation standards, other regulations can significantly
affect manufacturers' financial operations. Multiple regulations
affecting the same manufacturer can strain profits and can lead
companies to abandon product lines or markets with lower expected
future returns than competing products. For these reasons, DOE conducts
an analysis of cumulative regulatory burden as part of its energy
conservation standards rulemakings.
For the cumulative regulatory burden, DOE considers other DOE
regulations that could affect commercial prerinse spray valve
manufacturers that will take effect approximately 3 years before or
after the compliance date for the amended energy conservation
standards. The compliance years and expected industry conversion costs
of energy conservation standards that may also impact commercial
prerinse spray valve manufacturers are indicated in Table V.15.
Table V.15--Compliance Dates and Expected Conversion Expenses of Federal
Energy Conservation Standards Affecting Commercial Prerinse Spray Valve
Manufacturers
------------------------------------------------------------------------
Compliance Estimated conversion
Regulation date costs
------------------------------------------------------------------------
Commercial Refrigerators, 3/27/2017 $43.1 million.
Freezers and
Refrigerator[dash]Freezers, 79
FR 17725 (March 28, 2014).
------------------------------------------------------------------------
[[Page 4786]]
Industry and State-Level Standards
In addition to DOE's energy conservation regulations for commercial
prerinse spray valves and other products also sold by commercial
prerinse spray valve manufacturers, several other existing and pending
regulations apply to commercial prerinse spray valves, including third-
party and international industry standards and certification programs
(e.g., ASME A112.18.1/CSA B125.1, ASTM Standard F2324) and state water
efficiency regulations (e.g., California, Texas, and Massachusetts).
Additionally, in response to the CPSV NOPR, DOE received several
comments related to the substantial cumulative burden associated with
compliance with the EPA WaterSense specification. DOE summarized these
comments in section IV.J.3 of this document. See chapter 12 of the
final rule TSD for the results of DOE's analysis of the cumulative
regulatory burden.
3. National Impact Analysis
a. Significance of Energy Savings
To estimate the energy and water savings attributable to amended
standards for commercial prerinse spray valves, DOE compared the energy
consumption of those products under the no-new-standards case to their
anticipated energy consumption under each TSL. The savings are measured
over the entire lifetime of products purchased in the 30-year period
that begins in the first year of compliance with the amended standards
(2019-2048). Table V.16 presents DOE's projections of the NES for each
TSL considered for commercial prerinse spray valves. The savings were
calculated using the approach described in section IV.H.1 of this
document.
Table V.16--Commercial Prerinse Spray Valves: Cumulative National Energy and Water Savings for Products Shipped
in 2019-2048
----------------------------------------------------------------------------------------------------------------
National energy savings
(quads) National water
TSL Product class -------------------------------- savings
Primary FFC (billion gal)
----------------------------------------------------------------------------------------------------------------
1..................................... 1 (<=5.0 ozf)........... 0.008 0.009 10.831
2 (>5.0 ozf and <=8.0 0.113 0.123 144.916
ozf).
3 (>8.0 ozf)............ (0.082) (0.089) (105.275)
=================
Total TSL 1....................... ........................ 0.039 0.043 50.471
=================
2..................................... 1 (<=5.0 ozf)........... 0.008 0.009 10.831
2 (>5.0 ozf and <=8.0 0.244 0.264 311.926
ozf).
3 (>8.0 ozf)............ (0.165) (0.179) (210.875)
-----------------
Total TSL 2....................... ........................ 0.087 0.095 111.882
=================
3..................................... 1 (<=5.0 ozf)........... 0.000 0.000 0.000
2 (>5.0 ozf and <=8.0 0.000 0.000 0.000
ozf).
3 (>8.0 ozf)............ 0.093 0.101 119.572
=================
=================
3a.................................... 1 (<=5.0 ozf)........... 0.001 0.001 0.650
2 (>5.0 ozf and <=8.0 0.001 0.001 1.300
ozf).
3 (>8.0 ozf)............ 0.093 0.101 119.572
-----------------------------------------------
Total TSL 3a...................... ........................ 0.095 0.103 121.521
=================
4..................................... 1 (<=5.0 ozf)........... 0.059 0.064 75.815
2 (>5.0 ozf and <=8.0 0.196 0.212 250.516
ozf).
3 (>8.0 ozf)............ (0.092) (0.100) (118.272)
-----------------------------------------------
Total TSL 4....................... ........................ 0.163 0.176 208.059
=================
4a.................................... 1 (<=5.0 ozf)........... 0.059 0.064 75.815
2 (>5.0 ozf and <=8.0 0.196 0.212 250.516
ozf).
3 (>8.0 ozf)............ (0.463) (0.503) (593.418)
-----------------------------------------------
Total TSL 4a...................... ........................ (0.209) (0.226) (267.087)
----------------------------------------------------------------------------------------------------------------
OMB Circular A-4 \61\ requires agencies to present analytical
results, including separate schedules of the monetized benefits and
costs that show the type and timing of benefits and costs. Circular A-4
also directs agencies to consider the variability of key elements
underlying the estimates of benefits and costs. For this rulemaking,
DOE undertook a sensitivity analysis using 9, rather than 30, years of
product shipments. The choice of a 9-year period is a proxy for the
timeline in EPCA for the review of certain energy conservation
standards and potential revision of and compliance with such revised
standards.\62\ The review timeframe established in EPCA is generally
not synchronized with the product lifetime, product manufacturing
cycles, or other factors specific to CPSV equipment. Thus, such results
are presented for informational purposes only and are not indicative of
any
[[Page 4787]]
change in DOE's analytical methodology. Table V.17 reports cumulative
national energy and water savings associated with this shorter analysis
period of 2019-2027. The impacts are counted over the lifetime of
products purchased during this period.
---------------------------------------------------------------------------
\61\ U.S. Office of Management and Budget, ``Circular A-4:
Regulatory Analysis'' (Sept. 17, 2003) (Available at: http://www.whitehouse.gov/omb/circulars_a004_a-4/).
\62\ Section 325(m) of EPCA requires DOE to review its standards
at least once every 6 years, and requires, for certain products, a
3-year period after any new standard is promulgated before
compliance is required, except that in no case may any new standards
be required within 6 years of the compliance date of the previous
standards. While adding a 6-year review to the 3-year compliance
period adds up to 9 years, DOE notes that it may undertake reviews
at any time within the 6 year period and that the 3-year compliance
date may yield to the 6-year backstop. A 9-year analysis period may
not be appropriate given the variability that occurs in the timing
of standards reviews and the fact that for some consumer products,
the compliance period is 5 years rather than 3 years.
Table V.17--Commercial Prerinse Spray Valves: Cumulative National Energy and Water Savings for Products Shipped
in 2019-2027
----------------------------------------------------------------------------------------------------------------
National energy savings
(quads) National water
TSL Product class -------------------------------- savings
Primary FFC (billion gal)
----------------------------------------------------------------------------------------------------------------
1..................................... 1 (<=5.0 ozf)........... 0.002 0.003 2.917
2 (>5.0 ozf and <=8.0 0.031 0.034 39.030
ozf).
3 (>8.0 ozf)............ (0.023) (0.025) (28.353)
-----------------------------------------------
Total TSL 1....................... ........................ 0.011 0.012 13.593
-----------------------------------------------
2..................................... 1 (<=5.0 ozf)........... 0.002 0.003 2.917
2 (>5.0 ozf and <=8.0 0.068 0.073 84.010
ozf).
3 (>8.0 ozf)............ (0.046) (0.050) (56.794)
-----------------------------------------------
Total TSL 2....................... ........................ 0.024 0.026 30.133
-----------------------------------------------
3..................................... 1 (<=5.0 ozf)........... 0.000 0.000 0.000
2 (>5.0 ozf and <=8.0 0.000 0.000 0.000
ozf).
3 (>8.0 ozf)............ 0.026 0.028 32.204
-----------------------------------------------
Total TSL 3....................... ........................ 0.026 0.028 32.204
-----------------------------------------------
3a.................................... 1 (<=5.0 ozf)........... 0.000 0.000 0.175
2 (>5.0 ozf and <=8.0 0.000 0.000 0.350
ozf).
3 (>8.0 ozf)............ 0.026 0.028 32.204
-----------------------------------------------
Total TSL 3a...................... ........................ 0.026 0.029 32.729
-----------------------------------------------
4..................................... 1 (<=5.0 ozf)........... 0.016 0.018 20.419
2 (>5.0 ozf and <=8.0 0.054 0.059 67.471
ozf).
3 (>8.0 ozf)............ (0.026) (0.028) (31.854)
-----------------------------------------------
Total TSL 4....................... ........................ 0.045 0.049 56.036
-----------------------------------------------
4a.................................... 1 (<=5.0 ozf)........... 0.016 0.018 20.419
2 (>5.0 ozf and <=8.0 0.054 0.059 67.471
ozf).
3 (>8.0 ozf)............ (0.129) (0.140) (159.824)
-----------------------------------------------
Total TSL 4a...................... ........................ (0.058) (0.063) (71.934)
----------------------------------------------------------------------------------------------------------------
b. Net Present Value of Consumer Costs and Benefits
DOE estimated the cumulative NPV to the nation of the total costs
and savings for consumers that would result from particular standard
levels for commercial prerinse spray valves. In accordance with OMB's
guidelines on regulatory analysis,\63\ DOE calculated NPV using both a
7-percent and a 3-percent real discount rate.
---------------------------------------------------------------------------
\63\ U.S. Office of Management and Budget, ``Circular A-4:
Regulatory Analysis, section E,'' (Sept. 17, 2003) (Available at:
http://www.whitehouse.gov/omb/circulars_a004_a-4/).
---------------------------------------------------------------------------
Table V.18 shows the consumer NPV results for each TSL DOE
considered for commercial prerinse spray valves. The impacts are
counted over the lifetime of products purchased in 2019-2048.
Table V.18--Commercial Prerinse Spray Valves: Cumulative Net Present Value of Consumer Benefits for Product
Shipped in 2019-2048
----------------------------------------------------------------------------------------------------------------
Net present value (billion
$2014)
TSL Product class -------------------------------
7-Percent 3-Percent
discount rate discount rate
----------------------------------------------------------------------------------------------------------------
1............................................. 1 (<=5.0 ozf)................... 0.067 0.137
2 (>5.0 ozf and <=8.0 ozf)...... 0.892 1.828
3 (>8.0 ozf).................... (0.656) (1.342)
-------------------------------
Total TSL 1............................... ................................ 0.303 0.623
-------------------------------
2............................................. 1 (<=5.0 ozf)................... 0.067 0.137
2 (>5.0 ozf and <=8.0 ozf)...... 1.924 3.943
3 (>8.0 ozf).................... (1.319) (2.699)
-------------------------------
Total TSL 2............................... ................................ 0.672 1.381
-------------------------------
[[Page 4788]]
3............................................. 1 (<=5.0 ozf)................... 0.000 0.000
2 (>5.0 ozf and <=8.0 ozf)...... 0.000 0.000
3 (>8.0 ozf).................... 0.718 1.476
-------------------------------
Total TSL 3............................... ................................ 0.718 1.476
-------------------------------
3a............................................ 1 (<=5.0 ozf)................... 0.004 0.008
2 (>5.0 ozf and <=8.0 ozf)...... 0.008 0.016
3 (>8.0 ozf).................... 0.718 1.476
-------------------------------
Total TSL 3a.............................. ................................ 0.730 1.500
-------------------------------
4............................................. 1 (<=5.0 ozf)................... 0.473 0.968
2 (>5.0 ozf and <=8.0 ozf)...... 1.539 3.156
3 (>8.0 ozf).................... (0.763) (1.557)
-------------------------------
Total TSL 4............................... ................................ 1.249 2.568
-------------------------------
4a *.......................................... 1 (<=5.0 ozf)................... 0.473 0.968
2 (>5.0 ozf and <=8.0 ozf)...... 1.539 3.156
3 (>8.0 ozf).................... (3.616) (7.421)
-------------------------------
Total TSL 4a.............................. ................................ (1.603) (3.296)
----------------------------------------------------------------------------------------------------------------
* In TSL 4a, DOE assumed that the installed costs for faucets and commercial prerinse spray valves are equal.
DOE also determined financial impacts for a sensitivity case
utilizing a 9-year analysis period. Table V.19 reports NPV results
associated with this shorter analysis period. The impacts are counted
over the lifetime of products purchased in 2019-2027. This information
is presented for informational purposes only, and is not indicative of
any change in DOE's analytical methodology or decision criteria.
Table V.19--Commercial Prerinse Spray Valves: Cumulative Net Present Value of Customer Benefits for Equipment
Shipped in 2019-2027
----------------------------------------------------------------------------------------------------------------
Net present value (billion
$2014)
TSL Product class -------------------------------
7[dash]Percent 3[dash]Percent
discount rate discount rate
----------------------------------------------------------------------------------------------------------------
1............................................. 1 (<=5.0 ozf)................... 0.030 0.044
2 (>5.0 ozf and <=8.0 ozf)...... 0.397 0.580
3 (>8.0 ozf).................... (0.293) (0.427)
-------------------------------
Total TSL 1............................... ................................ 0.135 0.197
-------------------------------
2............................................. 1 (<=5.0 ozf)................... 0.030 0.044
2 (>5.0 ozf and <=8.0 ozf)...... 0.858 1.252
3 (>8.0 ozf).................... (0.589) (0.859)
-------------------------------
Total TSL 2............................... ................................ 0.299 0.437
-------------------------------
3............................................. 1 (<=5.0 ozf)................... 0.000 0.000
2 (>5.0 ozf and <=8.0 ozf)...... 0.000 0.000
3 (>8.0 ozf).................... 0.319 0.467
-------------------------------
Total TSL 3............................... ................................ 0.319 0.467
-------------------------------
3a............................................ 1 (<=5.0 ozf)................... 0.002 0.003
2 (>5.0 ozf and <=8.0 ozf)...... 0.003 0.005
3 (>8.0 ozf).................... 0.319 0.467
-------------------------------
Total TSL 3a.............................. ................................ 0.324 0.474
-------------------------------
4............................................. 1 (<=5.0 ozf)................... 0.211 0.308
2 (>5.0 ozf and <=8.0 ozf)...... 0.686 1.002
3 (>8.0 ozf).................... (0.342) (0.497)
-------------------------------
Total TSL 4............................... ................................ 0.555 0.812
-------------------------------
4a *.......................................... 1 (<=5.0 ozf)................... 0.211 0.308
2 (>5.0 ozf and <=8.0 ozf)...... 0.686 1.002
[[Page 4789]]
3 (>8.0 ozf).................... (1.610) (2.352)
-------------------------------
Total TSL 4a.............................. ................................ (.713) (1.043)
----------------------------------------------------------------------------------------------------------------
*In TSL 4a, DOE assumed that the installed costs for faucets and commercial prerinse spray valves are equal.
c. Indirect Impacts on Employment
DOE expects amended energy conservation standards for commercial
prerinse spray valves to reduce energy bills for consumers of those
products, with the resulting net savings being redirected to other
forms of economic activity. These expected shifts in spending and
economic activity could affect the demand for labor. Thus, indirect
employment impacts may result from expenditures shifting between goods
(the substitution effect) and changes in income and overall
expenditures (the income effect). As described in section IV.N of this
document, DOE used an input/output model of the U.S. economy to
estimate indirect employment impacts of the TSLs that DOE considered in
this rulemaking. DOE understands that there are uncertainties involved
in projecting employment impacts, especially changes in the later years
of the analysis. Therefore, DOE generated results for near-term
timeframes (2020-2025), where these uncertainties are reduced.
The results suggest that the amended standards are likely to have a
negligible impact on the net demand for labor in the economy. All TSLs
increase net demand for labor by fewer than 500 jobs. The net change in
jobs is so small that it would be imperceptible in national labor
statistics, and it might be offset by other, unanticipated effects on
employment. Chapter 16 of the final rule TSD presents detailed results
regarding indirect employment impacts. As shown in Table V.20, DOE
estimates that net indirect employment impacts from a CPSV amended
standard are small relative to the national economy.
Table V.20--Net Short-Term Change in Employment (Jobs)
------------------------------------------------------------------------
Trial Standard Level 2020 2025
------------------------------------------------------------------------
1....................................... 36 103
2....................................... 80 229
3....................................... 86 244
4....................................... 149 425
------------------------------------------------------------------------
4. Impact on Utility or Performance of Products
Based on testing conducted in support of this rulemaking, discussed
in section IV.C.4.b of this document, DOE has concluded that the
amended standards in this final rule would not reduce the utility or
performance of the commercial prerinse spray valves under consideration
in this rulemaking. Manufacturers of these products currently offer
units that meet or exceed the amended standards.
5. Impact of Any Lessening of Competition
As discussed in section III.F.1.e, the Attorney General determines
the impact, if any, of any lessening of competition likely to result
from a proposed standard and transmits such determination in writing to
the Secretary within 60 days of the publication of a proposed rule,
along with an analysis of the nature and extent of the impact. To
assist the Attorney General in making such determination, DOE provided
the DOJ with copies of the CPSV NOPR and TSD for review. In its
assessment letter responding to DOE, DOJ concluded that the amended
energy conservation standards for commercial prerinse spray valves are
unlikely to have a significant adverse impact on competition. DOE is
publishing the Attorney General's assessment at the end of this
document.
6. Need of the Nation To Conserve Energy
Enhanced energy efficiency, where economically justified, improves
the nation's energy security, strengthens the economy, and reduces the
environmental impacts (costs) of energy production. Reduced electricity
demand due to energy conservation standards is also likely to reduce
the cost of maintaining the reliability of the electricity system,
particularly during peak-load periods. As a measure of this reduced
demand, chapter 15 in the final rule TSD presents the estimated
reduction in generating capacity, relative to the no-new-standards
case, for the TSLs that DOE considered in this rulemaking.
Energy conservation from amended standards for commercial prerinse
spray valves is expected to yield environmental benefits in the form of
reduced emissions of air pollutants and GHGs. Table V.21 provides DOE's
estimate of cumulative emissions reductions expected to result from the
TSLs considered in this rulemaking. The table includes both power
sector emissions and upstream emissions. The emissions were calculated
using the multipliers discussed in section IV.K. DOE reports annual
emissions reductions for each TSL in chapter 13 of the final rule TSD.
[[Page 4790]]
Table V.21--Cumulative Emissions Reduction Estimated for Commercial Prerinse Spray Valves Trial Standard Levels
for Products Shipped in 2019-2048
----------------------------------------------------------------------------------------------------------------
TSL
---------------------------------------------------------------
1 2 3 4
----------------------------------------------------------------------------------------------------------------
Power Sector and Site Emissions
----------------------------------------------------------------------------------------------------------------
CO2 (million metric tons)....................... 2.26 5.00 5.35 9.31
NOX (thousand tons)............................. 2.82 6.24 6.67 11.61
Hg (tons)....................................... 0.00 0.01 0.01 0.01
N2O (thousand tons)............................. 0.02 0.04 0.04 0.07
CH4 (thousand tons)............................. 0.13 0.28 0.30 0.52
SO2 (thousand tons)............................. 0.74 1.64 1.75 3.05
----------------------------------------------------------------------------------------------------------------
Upstream Emissions
----------------------------------------------------------------------------------------------------------------
CO2 (million metric tons)....................... 0.22 0.48 0.52 0.90
NOX (thousand tons)............................. 3.39 7.51 8.03 13.97
Hg (tons)....................................... 0.00 0.00 0.00 0.00
N2O (thousand tons)............................. 0.00 0.00 0.00 0.00
CH4 (thousand tons)............................. 19.87 44.04 47.07 81.90
SO2 (thousand tons)............................. 0.01 0.03 0.03 0.05
----------------------------------------------------------------------------------------------------------------
Total Emissions
----------------------------------------------------------------------------------------------------------------
CO2 (million metric tons)....................... 2.48 5.49 5.87 10.21
NOX (thousand tons)............................. 6.20 13.75 14.70 25.57
Hg (tons)....................................... 0.00 0.01 0.01 0.01
N2O (thousand tons)............................. 0.02 0.04 0.04 0.07
N2O (thousand tons CO2eq)....................... 4.75 10.53 11.25 19.57
CH4 (thousand tons)............................. 19.99 44.32 47.37 82.42
CH4 (thousand tons CO2eq) *..................... 559.83 1,241.00 1,326.29 2,307.80
SO2 (thousand tons)............................. 0.75 1.67 1.79 3.11
----------------------------------------------------------------------------------------------------------------
* CO2eq is the quantity of CO2 that would have the same GWP.
As part of the analysis for this rule, DOE estimated monetary
benefits likely to result from the reduced emissions of CO2
and NOX that DOE estimated for each of the considered TSLs
for commercial prerinse spray valves. As discussed in section IV.L of
this document, for CO2, DOE used the most recent values for
the SCC developed by an interagency process. The four sets of SCC
values for CO2 emissions reductions in 2015 resulting from
that process (expressed in 2014$) are represented by $12.2/metric ton
(the average value from a distribution that uses a 5-percent discount
rate), $40.0/metric ton (the average value from a distribution that
uses a 3-percent discount rate), $62.3/metric ton (the average value
from a distribution that uses a 2.5-percent discount rate), and $117/
metric ton (the 95th-percentile value from a distribution that uses a
3-percent discount rate). The values for later years are higher due to
increasing damages (public health, economic, and environmental) as the
projected magnitude of climate change increases.
Table V.22 presents the global value of CO2 emissions
reductions at each TSL. For each of the four cases, DOE calculated a
present value of the stream of annual values using the same discount
rate as was used in the studies upon which the dollar-per-ton values
are based. DOE calculated domestic values as a range from 7 percent to
23 percent of the global values; these results are presented in chapter
14 of the final rule TSD.
Table V.22--Estimates of Global Present Value of CO2 Emissions Reduction for Commercial Prerinse Spray Valves
TSLs Shipped in 2019-2048
----------------------------------------------------------------------------------------------------------------
SCC case * (million 2014$)
---------------------------------------------------------------
TSL 5% discount 3% discount 2.5% discount 3% discount
rate, average rate, average rate, average rate, 95th
* * * percentile *
----------------------------------------------------------------------------------------------------------------
Primary Energy Emissions
----------------------------------------------------------------------------------------------------------------
1............................................... 17 75 119 229
2............................................... 38 167 263 507
3............................................... 40 178 281 541
4............................................... 70 310 489 942
----------------------------------------------------------------------------------------------------------------
Upstream Emissions
----------------------------------------------------------------------------------------------------------------
1............................................... 2 7 11 22
2............................................... 4 16 25 49
[[Page 4791]]
3............................................... 4 17 27 52
4............................................... 7 30 47 91
----------------------------------------------------------------------------------------------------------------
Total Emissions
----------------------------------------------------------------------------------------------------------------
1............................................... 19 82 130 251
2............................................... 41 183 288 555
3............................................... 44 195 308 594
4............................................... 77 340 536 1,033
----------------------------------------------------------------------------------------------------------------
* For each of the four cases, the corresponding SCC value for emissions in 2015 is $12.2, $40.0, $62.3, and $117
per metric ton (2014$). The values are for CO2 only (i.e., not CO2eq of other greenhouse gases).
DOE is well aware that scientific and economic knowledge about the
contribution of CO2 and other GHG emissions to changes in
the future global climate and the potential resulting damages to the
world economy continues to evolve rapidly. Thus, any value placed on
reduced CO2 emissions in this rulemaking is subject to
change. DOE, together with other Federal agencies, will continue to
review various methodologies for estimating the monetary value of
reductions in CO2 and other GHG emissions. This ongoing
review will consider the comments on this subject that are part of the
public record for this and other rulemakings, as well as other
methodological assumptions and issues. However, consistent with DOE's
legal obligations, and taking into account the uncertainty involved
with this particular issue, DOE has included in this final rule the
most recent values and analyses resulting from the interagency review
process.
DOE also estimated the cumulative monetary value of the economic
benefits associated with NOX emissions reductions
anticipated to result from the considered TSLs for commercial prerinse
spray valves. The dollar-per-ton value that DOE used is discussed in
section IV.L of this document. Table V.23 presents the cumulative
present values for NOX emissions for each TSL calculated
using 7-percent and 3-percent discount rates.
Table V.23--Estimates of Present Value of NOX Emissions Reduction Under
Commercial Prerinse Spray Valves Trial Standard Levels
------------------------------------------------------------------------
Million 2014$
-------------------------------
TSL 3% discount 7% discount
rate rate
------------------------------------------------------------------------
Power Sector Emissions
------------------------------------------------------------------------
1....................................... 10 5
2....................................... 22 10
3....................................... 24 11
4....................................... 42 19
------------------------------------------------------------------------
Upstream Emissions
------------------------------------------------------------------------
1....................................... 12 5
2....................................... 27 12
3....................................... 29 13
4....................................... 50 22
------------------------------------------------------------------------
Total Emissions
------------------------------------------------------------------------
1....................................... 22 10
2....................................... 49 22
3....................................... 52 24
4....................................... 91 42
------------------------------------------------------------------------
7. Other Factors
The Secretary of Energy, in determining whether a standard is
economically justified, may consider any other factors that the
Secretary deems to be relevant. (42 U.S.C. 6295(o)(2)(B)(i)(VII)) No
other factors were considered in this analysis.
8. Summary of National Economic Impacts
The NPV of the monetized benefits associated with emissions
reductions can be viewed as a complement to the NPV of the consumer
savings calculated
[[Page 4792]]
for each TSL considered in this rulemaking. Table V.24 presents the NPV
values that result from adding the estimates of the potential economic
benefits resulting from reduced CO2 and NOX
emissions in each of four valuation scenarios to the NPV of consumer
savings calculated for each TSL considered in this rulemaking, at both
a 7-percent and 3-percent discount rate. The CO2 values used
in the columns of each table correspond to the four sets of SCC values
discussed in section V.B.6.
Table V.24--Net Present Value of Consumer Savings Combined With Present Value of Monetized Benefits From CO2 and
NOX Emissions Reductions
----------------------------------------------------------------------------------------------------------------
Billion 2014$
---------------------------------------------------------------
SCC Value of SCC Value of SCC Value of SCC Value of
TSL $12.2/metric $40.0/metric $62.3/metric $117/metric
ton CO2* and ton CO2* and ton CO2* and ton CO2* and
Medium Value Medium Value Medium Value Medium Value
for NOX** for NOX** for NOX** for NOX**
----------------------------------------------------------------------------------------------------------------
Consumer NPV at 3% Discount Rate added with:
----------------------------------------------------------------------------------------------------------------
1............................................... 0.664 0.728 0.775 0.896
2............................................... 1.471 1.613 1.718 1.985
3............................................... 1.572 1.724 1.836 2.122
4............................................... 2.736 2.999 3.195 3.692
----------------------------------------------------------------------------------------------------------------
Consumer NPV at 7% Discount Rate added with:
----------------------------------------------------------------------------------------------------------------
1............................................... 0.332 0.396 0.443 0.564
2............................................... 0.735 0.877 0.982 1.249
3............................................... 0.786 0.937 1.050 1.335
4............................................... 1.367 1.630 1.826 2.323
----------------------------------------------------------------------------------------------------------------
* For each of the four cases, the corresponding SCC value for emissions in 2015 is $12.2, $40.0, $62.3, and $117
per metric ton (2014$).
** The medium value for NOX is $2,723 per short ton (2014$)
In considering the results discussed previously, two issues are
relevant. First, the national operating cost savings are domestic U.S.
monetary savings that occur as a result of market transactions, while
the value of CO2 reductions is based on a global value.
Second, the assessments of operating cost savings and the SCC are
performed with different methods that use different time frames for
analysis. The national operating cost savings is measured for the
lifetime of products shipped in 2019 through 2048. Because
CO2 emissions have a very long residence time in the
atmosphere,\64\ the SCC values in future years reflect future climate-
related impacts that continue beyond 2100.
---------------------------------------------------------------------------
\64\ The atmospheric lifetime of CO2 is estimated of
the order of 30-95 years. Jacobson, MZ, ``Correction to `Control of
fossil-fuel particulate black carbon and organic matter, possibly
the most effective method of slowing global warming,' '' J. Geophys.
Res. 110. pp. D14105 (2005).
---------------------------------------------------------------------------
C. Conclusion
Any new or amended energy conservation standards that DOE adopts
for any type (or class) of covered product must be designed to achieve
the maximum improvement in energy efficiency that the Secretary
determines is technologically feasible and economically justified. (42
U.S.C. 6295(o)(2)(A)) In determining whether a standard is economically
justified, the Secretary must determine whether the benefits of the
standard exceed its burdens by, to the greatest extent practicable,
considering the seven statutory factors discussed previously. (42
U.S.C. 6295(o)(2)(B)(i)) The new or amended standard must also result
in significant conservation of energy. (42 U.S.C. 6295(o)(3)(B))
For this final rule, DOE considered the impacts of amended
standards for commercial prerinse spray valves at each TSL, beginning
with the max-tech level, to determine whether that level was
economically justified. Where the max-tech level was not justified, DOE
then considered the next most efficient level and undertook the same
evaluation until it reached the highest efficiency level that is both
technologically feasible and economically justified and saves a
significant amount of energy.
Tables in the following section present a summary of the results of
DOE's quantitative analysis for each TSL. In addition to the
quantitative results presented in the tables, DOE also considers other
burdens and benefits that affect economic justification. These include
the impacts on identifiable subgroups of consumers who may be
disproportionately affected by a national standard and impacts on
employment.
DOE also notes that the economics literature provides a wide-
ranging discussion of how consumers trade off upfront costs and energy
savings in the absence of government intervention. Much of this
literature attempts to explain why consumers appear to undervalue
energy efficiency improvements. There is evidence that consumers
undervalue future energy savings as a result of: (1) A lack of
information; (2) a lack of sufficient salience of the long-term or
aggregate benefits; (3) a lack of sufficient savings to warrant
delaying or altering purchases; (4) excessive focus on the short term,
in the form of inconsistent weighting of future energy cost savings
relative to available returns on other investments; (5) computational
or other difficulties associated with the evaluation of relevant
tradeoffs; and (6) a divergence in incentives (for example, between
renters and owners, or builders and purchasers). Having less than
perfect foresight and a high degree of uncertainty about the future,
consumers may trade off these types of investments at a higher than
expected rate between current consumption and uncertain future energy
cost savings.
In DOE's current regulatory analysis, potential changes in the
benefits and costs of a regulation due to changes in consumer purchase
decisions are included in two ways. First, if consumers forego the
purchase of a product in the standards case, this decreases sales for
product manufacturers, and the impact on manufacturers attributed to
lost revenue is included in the MIA. Second, DOE
[[Page 4793]]
accounts for energy savings attributable only to products actually used
by consumers in the standards case; if a regulatory option decreases
the number of products purchased by consumers, this decreases the
potential energy savings from an energy conservation standard. DOE
provides estimates of shipments and changes in the volume of product
purchases in chapter 9 of the final rule TSD. However, DOE's current
analysis does not explicitly control for heterogeneity in consumer
preferences, preferences across subcategories of products or specific
features, or consumer price sensitivity variation according to
household income.\65\
---------------------------------------------------------------------------
\65\ P.C. Reiss and M.W. White, Household Electricity Demand,
Revisited, Review of Economic Studies 72, 853-883 (2005).
---------------------------------------------------------------------------
While DOE is not prepared at present to provide a fuller
quantifiable framework for estimating the benefits and costs of changes
in consumer purchase decisions due to an energy conservation standard,
DOE is committed to developing a framework that can support empirical
quantitative tools for improved assessment of the consumer welfare
impacts of appliance standards. DOE has posted a paper that discusses
the issue of consumer welfare impacts of appliance energy conservation
standards, and potential enhancements to the methodology by which these
impacts are defined and estimated in the regulatory process.\66\
---------------------------------------------------------------------------
\66\ Alan Sanstad, Notes on the Economics of Household Energy
Consumption and Technology Choice. Lawrence Berkeley National
Laboratory (2010) (Available online at: https://www1.eere.energy.gov/buildings/appliance_standards/pdfs/consumer_ee_theory.pdf).
---------------------------------------------------------------------------
1. Benefits and Burdens of TSLs Considered for Commercial Prerinse
Spray Valve Standards
Table V.25 and Table V.26 summarize the quantitative impacts
estimated for each TSL for commercial prerinse spray valves. The
national impacts are measured over the lifetime of commercial prerinse
spray valves purchased in the 30-year period that begins in the first
year of compliance with amended standards (2019-2048). The energy
savings, emissions reductions, and value of emissions reductions refer
to full-fuel-cycle results. The efficiency levels contained in each TSL
are described in section V.A of this document. Note that the tables in
this section report the results only for the standard TSLs that utilize
the default shipments scenario. Results for the two sensitivity-case
TSLs are reported in sections V.B.2 and V.B.3.
Table V.25--Summary of Analytical Results for Commercial Prerinse Spray Valve Trial Standard Levels: National Impacts
--------------------------------------------------------------------------------------------------------------------------------------------------------
Category TSL 1 TSL 2 TSL 3 TSL 4
--------------------------------------------------------------------------------------------------------------------------------------------------------
Cumulative FFC Energy Savings (quads)
--------------------------------------------------------------------------------------------------------------------------------------------------------
0.04........................ 0.10....................... 0.10....................... 0.18.
--------------------------------------------------------------------------------------------------------------------------------------------------------
Cumulative Water Savings (billion gal)
--------------------------------------------------------------------------------------------------------------------------------------------------------
50.47....................... 111.88..................... 119.57..................... 208.06.
--------------------------------------------------------------------------------------------------------------------------------------------------------
NPV of Consumer Benefits (2014$ billion)
--------------------------------------------------------------------------------------------------------------------------------------------------------
3% discount rate................... 0.62........................ 1.38....................... 1.48....................... 2.57.
7% discount rate................... 0.30........................ 0.67....................... 0.72....................... 1.25.
--------------------------------------------------------------------------------------------------------------------------------------------------------
Cumulative FFC Emissions Reduction
--------------------------------------------------------------------------------------------------------------------------------------------------------
CO2 million metric tons............ 2.48........................ 5.49....................... 5.87....................... 10.21.
NOX thousand tons.................. 6.20........................ 13.75...................... 14.70...................... 25.57.
Hg tons............................ 0.00........................ 0.01....................... 0.01....................... 0.01.
N2O thousand tons.................. 0.02........................ 0.04....................... 0.04....................... 0.07.
N2O thousand tons CO2eq*........... 4.75........................ 10.53...................... 11.25...................... 19.57.
CH4 thousand tons.................. 19.99....................... 44.32...................... 47.37...................... 82.42.
CH4 thousand tons CO2eq*........... 559.83...................... 1,241.00................... 1,326.29................... 2,307.80.
SO2 thousand tons.................. 0.75........................ 1.67....................... 1.79....................... 3.11.
--------------------------------------------------------------------------------------------------------------------------------------------------------
Value of Emissions Reduction
--------------------------------------------------------------------------------------------------------------------------------------------------------
CO2 2014$ million **............... 19 to 251................... 41 to 555.................. 44 to 594.................. 77 to 1033.
NOX--3% discount rate 2014$ million 22 to 50.................... 49 to 110.................. 52 to 117.................. 91 to 204.
NOX--7% discount rate 2014$ million 10 to 22.................... 22 to 50................... 24 to 53................... 42 to 92.
--------------------------------------------------------------------------------------------------------------------------------------------------------
* CO2eq is the quantity of CO2 that would have the same GWP.
** Range of the economic value of CO2 reductions is based on estimates of the global benefit of reduced CO2 emissions.
Table V.26--Summary of Analytical Results for Commercial Prerinse Spray Valve Trial Standard Levels: Manufacturer and Consumer Impacts
--------------------------------------------------------------------------------------------------------------------------------------------------------
Category TSL 1 * TSL 2 * TSL 3 * TSL 4 *
--------------------------------------------------------------------------------------------------------------------------------------------------------
Manufacturer Impacts
--------------------------------------------------------------------------------------------------------------------------------------------------------
Industry NPV Relative to a No-New- 7.1-7.7..................... 6.7-7.5.................... 7.4-8.0.................... 6.2-7.1.
Standards Case Value of 8.6 (2014$
million, 6.9% discount rate).
Industry NPV (% change)............ (17.5)-(9.9)................ (21.4)-(12.8).............. (13.1)-(6.5)............... (28.0)-(17.4).
--------------------------------------------------------------------------------------------------------------------------------------------------------
[[Page 4794]]
Direct Employment Impacts
--------------------------------------------------------------------------------------------------------------------------------------------------------
Potential Increase in Domestic 0........................... 0.......................... 0.......................... 0.
Production Workers in 2019.
--------------------------------------------------------------------------------------------------------------------------------------------------------
Consumer Average LCC Savings (2014$)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Product Class 1 (<=5.0 ozf)........ 334......................... 557........................ N/A........................ 352.
Product Class 2 (>5.0 and <=8.0 401......................... 446........................ N/A........................ 825.
ozf).
Product Class 3 (>8.0 ozf)......... 357......................... 547........................ 547........................ 766.
--------------------------------------------------------------------------------------------------------------------------------------------------------
Consumer Simple PBP (years)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Product Class 1 (<=5.0 ozf)........ 0.0......................... 0.0........................ 0.0........................ 0.0.
Product Class 2 (>5.0 and <=8.0 0.0......................... 0.0........................ 0.0........................ 0.0.
ozf).
Product Class 3 (>8.0 ozf)......... 0.0......................... 0.0........................ 0.0........................ 0.0.
--------------------------------------------------------------------------------------------------------------------------------------------------------
Distribution of Consumer LCC Impacts--Net Cost (%)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Product Class 1 (<=5.0 ozf)........ 0........................... 0.......................... 0.......................... 0.
Product Class 2 (>5.0 and <=8.0 0........................... 0.......................... 0.......................... 0.
ozf).
Product Class 3 (>8.0 ozf)......... 0........................... 0.......................... 0.......................... 0.
--------------------------------------------------------------------------------------------------------------------------------------------------------
* Parentheses indicate negative (-) values. The entry ``N/A'' means not applicable because there is no change in the standard at certain TSLs.
DOE first considered TSL 4, which represents the max-tech
efficiency levels. TSL 4 would save 0.18 quads of energy and 208.06
billion gallons of water. Under TSL 4, the NPV of consumer benefit
would be $1.25 billion using a discount rate of 7 percent, and $2.57
billion using a discount rate of 3 percent.
The cumulative emissions reductions at TSL 4 are 10.21 Mt of
CO2, 25.57 thousand tons of NOX, 3.11 thousand
tons of SO2, 0.01 tons of Hg, 0.07 thousand tons of
N2O, and 82.42 thousand tons of CH4. The
estimated monetary value of the CO2 emissions reductions at
TSL 4 ranges from $77 million to $1,033 million.
At TSL 4, the average LCC impact is a savings of $357 for CPSV
models in product class 1, $825 for CPSV models in product class 2, and
$766 for CPSV models in product class 3. The simple PBP is 0.0 years
for all CPSV models because there are no incremental equipment costs
for more efficient products. The fraction of consumers experiencing an
LCC net cost is 0 percent for all CPSV models.
At TSL 4, the projected change in INPV ranges from a decrease of
$2.4 million to a decrease of $1.5 million. If the lower bound of the
range of impacts is reached, TSL 4 could result in a net loss of up to
28.0 percent in INPV for manufacturers.
Although TSL 4 for commercial prerinse spray valves provides
positive LCC savings and a positive total NPV of consumer benefits, the
estimated industry losses are large. Moreover, the studied sensitivity
case of TSL 4a indicated that the outcomes of setting a standard at TSL
4 could be far less favorable, including sufficient loss of utility to
drive consumers from the CPSV market to another product.
TSL 4a would increase energy use by 0.23 quads of energy, and
increase water use by 267.08 billion gallons of water. Under TSL 4a,
the NPV of consumer benefit would be -$1.60 billion using a discount
rate of 7 percent, and -$3.30 billion using a discount rate of 3
percent.
At TSL 4a, the projected change in INPV ranges from a decrease of
$3.8 million to a decrease of $3.1 million. If the lower bound of the
range of impacts is reached, TSL 4 could result in a net loss of up to
44.4 percent in INPV for manufacturers.
Therefore, the Secretary concludes that at TSL 4 the benefits of
energy savings, positive NPV of consumer benefits, emission reductions,
and the estimated monetary value of the emissions reductions would be
outweighed by the reduction in manufacturer industry value.
Consequently, the Secretary has concluded that TSL 4 is not
economically justified.
DOE then considered TSL 3, which saves an estimated total of 0.10
quads of energy and 119.57 billion gallons of water. TSL 3 has an
estimated NPV of consumer benefit of $0.72 billion using a 7-percent
discount rate, and $1.48 billion using a 3-percent discount rate.
TSL 3 represents the minimum flow rate for each product class that
would not induce consumers to switch product classes as a result of a
standard at those flow rates, and retains shower-type designs.
Therefore, unlike TSL 4, TSL 3 maintains consumer utility and the
availability of all types of products currently in the marketplace.
The cumulative emissions reductions at TSL 3 are 5.87 Mt of
CO2, 14.70 thousand tons of NOX, 1.79 thousand
tons of SO2, 0.01 tons of Hg, and 47.37 thousand tons of
CH4. The estimated monetary value of the CO2
emissions reductions at TSL 3 ranges from $44 million to $594 million.
At TSL 3, the average LCC impact is a savings of $0 for CPSV models
in product classes 1 and 2 because the market minimums are the standard
for those classes. Because no consumers in the no-new-standards case
purchase products with a higher flow rate than the respective market
minimums, no consumers are affected by a standard set at EL 1 (market
minimum) in product classes 1 and 2. Consumers of CPSV models in
product class 3 save an average of $547 over a product's lifetime. The
simple payback period is 0.0 years for all CPSV models. The fraction of
consumers experiencing an LCC net cost is 0 percent for all CPSV
models.
At TSL 3, the projected change in INPV ranges from a decrease of
$1.1 million to a decrease of $0.6 million. If the lower bound of the
range of impacts is reached, TSL 3 could result in a net loss of up to
13.1 percent in INPV for manufacturers. Moreover, the studied
sensitivity case of TSL 3a indicated that
[[Page 4795]]
the outcomes of setting a standard at TSL 3 could provide an
opportunity for incremental savings for product classes 1 and 2, if
some products exist at the current minimum standard level. These
additional savings enable TSL 3a to save an estimated total of 0.10
quads of energy and 121.52 billion gallons of water. TSL 3a has an
estimated NPV of consumer benefit of $0.73 billion using a 7-percent
discount rate, and $1.50 billion using a 3-percent discount rate.
DOE concludes that at TSL 3 for commercial prerinse spray valves,
the benefits of energy savings, water savings, positive NPV of consumer
benefits, emission reductions, and the estimated monetary value of the
CO2 emissions reductions would outweigh the negative impacts
on manufacturers, including the conversion costs that could result in a
reduction in INPV for manufacturers.
After considering the analysis and the benefits and burdens of TSL
3, DOE concludes that this TSL will offer the maximum improvement in
efficiency that is technologically feasible and economically justified,
and will result in the significant conservation of energy and water.
Therefore, DOE adopts TSL 3 for commercial prerinse spray valves. The
amended energy conservation standards for commercial prerinse spray
valves, which are described in terms of flow rate, are shown in Table
V.27.
Table V.27--Amended Energy Conservation Standards for Commercial
Prerinse Spray Valves
------------------------------------------------------------------------
Flow rate
Product class (gpm)
------------------------------------------------------------------------
Product Class1 (<=5.0 ozf).............................. 1.00
Product Class2 (>5.0 ozf and <=8.0 ozf)................. 1.20
Product Class 3 (>8.0 ozf).............................. 1.28
------------------------------------------------------------------------
2. Summary of Annualized Benefits and Costs of the Amended Standards
The benefits and costs of the amended standards can also be
expressed in terms of annualized values. The annualized net benefit is
the sum of (1) the annualized national economic value (expressed in
2014$) of the benefits from operating products that meet the amended
standards (consisting primarily of operating cost savings from using
less energy and water, minus increases in product purchase costs) and
(2) the annualized monetary value of the benefits of CO2 and
NOX emission reductions.\67\
---------------------------------------------------------------------------
\67\ To convert the time-series of costs and benefits into
annualized values, DOE calculated a present value in 2014, the year
used for discounting the NPV of total consumer costs and savings.
For the benefits, DOE calculated a present value associated with
each year's shipments in the year in which the shipments occur
(2020, 2030, etc.), and then discounted the present value from each
year to 2015. The calculation uses discount rates of 3 and 7 percent
for all costs and benefits except for the value of CO2
reductions, for which DOE used case-specific discount rates. Using
the present value, DOE then calculated the fixed annual payment over
a 30-year period, starting in the compliance year that yields the
same present value.
---------------------------------------------------------------------------
Table V.28 shows the annualized values for commercial prerinse
spray valves under TSL 3, expressed in 2014$. Using a 7-percent
discount rate for benefits and costs other than CO2
reduction (for which DOE used a 3-percent discount rate, along with the
SCC series that has a value of $40.0 per metric ton in 2015), there are
no increased product costs associated with the standards described in
this rule, while the benefits are $69.90 million per year in reduced
product operating costs, $10.94 million per year in CO2
reductions, and $1.00 million per year in reduced NOX
emissions. In this case, the net benefit amounts to $81.85 million per
year.
Using a 3-percent discount rate for all benefits and costs as well
as the average SCC series that has a value of $40.0 per metric ton in
2015, there are no increased product costs associated with the
standards described in this rule, while the benefits are $81.32 million
per year in reduced operating costs, $10.94 million in CO2
reductions, and $1.11 million in reduced NOX emissions. In
this case, the net benefit amounts to $93.37 million per year.
Table V.28--Annualized Benefits and Costs of Amended Standards (TSL 3) for Commercial Prerinse Spray Valves Sold
in 2019-2048
----------------------------------------------------------------------------------------------------------------
Million 2014$/year
-----------------------------------------------------------
Discount rate Low net benefits High net benefits
Primary estimate * estimate * estimate *
----------------------------------------------------------------------------------------------------------------
Benefits
----------------------------------------------------------------------------------------------------------------
Consumer Operating Cost Savings. 7%................ 71................ 66................ 74.
3%................ 82................ 76................ 86.
CO2 Reduction at $12.0/t **..... 5%................ 3................. 3................. 3.
CO2 Reduction at $40.5/t **..... 3%................ 11................ 11................ 11.
CO2 Reduction at $62.4/t **..... 2.5%.............. 16................ 16................ 16.
CO2 Reduction at $119/t **...... 3%................ 33................ 33................ 33.
NOX Reduction Monetized Value 7%................ 2................. 2................. 5.
[dagger].
3%................ 3................. 3................. 7.
-------------------------------------------------------------------------------
Total Benefits [dagger][dagger]. 7% plus CO2 range. 77 to 106......... 71 to 101......... 82 to 112.
7%................ 84................ 79................ 90.
3% plus CO2 range. 89 to 118......... 82 to 112......... 96 to 126.
3%................ 96................ 89................ 104.
----------------------------------------------------------------------------------------------------------------
Costs
----------------------------------------------------------------------------------------------------------------
Manufacturer Conversion Costs 7%................ 0.08 to 0.13...... 0.08 to 0.13...... 0.08 to 0.13.
[dagger][dagger][dagger].
3%................ 0.05 to 0.08...... 0.05 to 0.08...... 0.05 to 0.08.
----------------------------------------------------------------------------------------------------------------
Total Net Benefits
----------------------------------------------------------------------------------------------------------------
Total [dagger][dagger][dagger].. 7% plus CO2 range. 77 to 106......... 71 to 101......... 82 to 112.
7%................ 84................ 79................ 90.
3% plus CO2 range. 89 to 118......... 82 to 112......... 96 to 126.
[[Page 4796]]
3%................ 96................ 89................ 104.
----------------------------------------------------------------------------------------------------------------
* This table presents the annualized costs and benefits associated with commercial prerinse spray valves shipped
in 2019-2048. These results include benefits to consumers which accrue after 2048 from the products purchased
in 2019-2048. The results account for the incremental variable and fixed costs incurred by manufacturers due
to the amended standard, some of which may be incurred in preparation for the rule. The primary, low benefits,
and high benefits estimates utilize projections of energy prices from the AEO2015 reference case, low
estimate, and high estimate, respectively.
** The CO2 values represent global monetized values of the SCC, in 2014$, in 2015 under several scenarios of the
updated SCC values. The first three cases use the averages of SCC distributions calculated using 5 percent, 3
percent, and 2.5 percent discount rates, respectively. The fourth case represents the 95th percentile of the
SCC distribution calculated using a 3 percent discount rate.
[dagger] The $/ton values used for NOX are described in section IV.L. The Primary and Low Benefits Estimates
used the values at the low end of the ranges estimated by EPA, while the High Benefits Estimate uses the
values at the high end of the ranges.
[dagger][dagger] Total benefits for both the 3-percent and 7-percent cases are derived using the series
corresponding to the average SCC with a 3-percent discount rate ($40.0/metric ton case). In the rows labeled
``7% plus CO2 range'' and ``3% plus CO2 range,'' the operating cost and NOX benefits are calculated using the
labeled discount rate, and those values are added to the full range of CO2 values.
[dagger][dagger][dagger] The lower value of the range represents costs associated with the Sourced Components
conversion cost scenario. The upper value represents costs for the Fabricated Components scenario.
[dagger][dagger][dagger][dagger] Total benefits for both the 3 percent and 7 percent cases are derived using the
series corresponding to the average SCC with 3 percent discount rate. In the rows labeled ``7% plus CO[ihel2]
range'' and ``3% plus CO[ihel2] range,'' the operating cost and NOX benefits are calculated using the labeled
discount rate, and those values are added to the full range of CO[ihel2] values. Manufacturer Conversion Costs
are not included in the net benefits calculations.
VI. Procedural Issues and Regulatory Review
A. Review Under Executive Orders 12866 and 13563
Section 1(b)(1) of Executive Order 12866, ``Regulatory Planning and
Review,'' 58 FR 51735 (Oct. 4, 1993), requires each agency to identify
the problem that it intends to address, including, where applicable,
the failures of private markets or public institutions that warrant new
agency action, as well as to assess the significance of that problem.
The problems that the amended standards for commercial prerinse spray
valves are intended to address are as follows:
(1) Insufficient information and the high costs of gathering and
analyzing relevant information leads some consumers to miss
opportunities to make cost-effective investments in energy efficiency.
(2) In some cases the benefits of more efficient products are not
realized due to misaligned incentives between purchasers and users. An
example of such a case is when the product purchase decision is made by
a building contractor or building owner who does not pay the energy
costs.
(3) There are external benefits resulting from improved energy
efficiency of commercial prerinse spray valves that are not captured by
the users of such products. These benefits include externalities
related to public health, environmental protection and national energy
security that are not reflected in energy prices, such as reduced
emissions of air pollutants and greenhouse gases that impact human
health and global warming. DOE attempts to qualify some of the external
benefits through use of social cost of carbon values.
The Administrator of the Office of Information and Regulatory
Affairs (OIRA) in the OMB has determined that this regulatory action is
not a significant regulatory action under section (3)(f) of Executive
Order 12866. Section 6(a)(3)(A) of the Executive Order states that
absent a material change in the development of the planned regulatory
action, regulatory action not designated as significant will not be
subject to review under section 6(a)(3) unless, within 10 working days
of receipt of DOE's list of planned regulatory actions, the
Administrator of OIRA notifies the agency that OIRA has determined that
a planned regulation is a significant regulatory action within the
meaning of the Executive order. Accordingly, DOE is not submitting this
final rule for review by OIRA.
In addition, the Administrator of OIRA has determined that this
regulatory action is not an ``economically'' significant regulatory
action under section (3)(f)(1) of Executive Order 12866. Accordingly,
pursuant to section 6(a)(3)(C) of the Order, DOE has provided to OIRA
an assessment, including the underlying analysis, of benefits and costs
anticipated from the regulatory action, together with, to the extent
feasible, a quantification of those costs; and an assessment, including
the underlying analysis, of costs and benefits of potentially effective
and reasonably feasible alternatives to the planned regulation, and an
explanation why the planned regulatory action is preferable to the
identified potential alternatives. These assessments can be found in
the technical support document for this rulemaking. DOE has also
reviewed this regulation pursuant to Executive Order 13563, issued on
January 18, 2011. 76 FR 3281 (Jan. 21, 2011). Executive Order 13563 is
supplemental to and explicitly reaffirms the principles, structures,
and definitions governing regulatory review established in Executive
Order 12866. To the extent permitted by law, agencies are required by
Executive Order 13563 to: (1) Propose or adopt a regulation only upon a
reasoned determination that its benefits justify its costs (recognizing
that some benefits and costs are difficult to quantify); (2) tailor
regulations to impose the least burden on society, consistent with
obtaining regulatory objectives, taking into account, among other
things, and to the extent practicable, the costs of cumulative
regulations; (3) select, in choosing among alternative regulatory
approaches, those approaches that maximize net benefits (including
potential economic, environmental, public health and safety, and other
advantages; distributive impacts; and equity); (4) to the extent
feasible, specify performance objectives, rather than specifying the
behavior or manner of compliance that regulated entities must adopt;
and (5) identify and assess available alternatives to direct
regulation, including providing economic incentives to encourage the
desired behavior, such as user fees or marketable permits, or providing
[[Page 4797]]
information upon which choices can be made by the public.
DOE emphasizes as well that Executive Order 13563 requires agencies
to use the best available techniques to quantify anticipated present
and future benefits and costs as accurately as possible. In its
guidance, OIRA has emphasized that such techniques may include
identifying changing future compliance costs that might result from
technological innovation or anticipated behavioral changes. For the
reasons stated in the preamble, DOE believes that this final rule is
consistent with these principles, including the requirement that, to
the extent permitted by law, benefits justify costs and that net
benefits are maximized.
B. Review Under the Regulatory Flexibility Act
The Regulatory Flexibility Act (5 U.S.C. 601 et seq.) requires
preparation of an final regulatory flexibility analysis (FRFA) for any
rule that by law must be proposed for public comment, unless the agency
certifies that the rule, if promulgated, will not have a significant
economic impact on a substantial number of small entities. As required
by Executive Order 13272, ``Proper Consideration of Small Entities in
Agency Rulemaking,'' 67 FR 53461 (August 16, 2002), DOE published
procedures and policies on February 19, 2003, to ensure that the
potential impacts of its rules on small entities are properly
considered during the rulemaking process. 68 FR 7990. DOE has made its
procedures and policies available on the Office of the General
Counsel's Web site (http://energy.gov/gc/office-general-counsel). DOE
has prepared the following FRFA for the products that are the subject
of this rulemaking.
For manufacturers of commercial prerinse spray valves, the Small
Business Administration (SBA) has set a size threshold, which defines
those entities classified as ``small businesses'' for the purposes of
the statute. DOE used the SBA's small business size standards to
determine whether any small entities would be subject to the
requirements of the rule. See 13 CFR part 121. The size standards are
listed by North American Industry Classification System (NAICS) code
and industry description and are available at http://www.sba.gov/sites/default/files/files/Size_Standards_Table.pdf. Manufacturing of
commercial prerinse spray valves is classified under NAICS 332919,
``Other Metal Valve and Pipe Fitting Manufacturing.'' The SBA sets a
threshold of 500 employees or less for an entity to be considered as a
small business for this category.
1. Statement of the Need for, and Objectives of, the Rule
A statement of the need for, and objectives of, the rule is stated
elsewhere in the preamble and not repeated here.
2. Statement of the Significant Issues Raised by Public Comments
DOE received no comments specifically on the initial regulatory
flexibility analysis prepared for this rulemaking. Comments on the
economic impacts of the rule are discussed elsewhere in the preamble
and did not necessitate changes to the analysis required by the
Regulatory Flexibility Act.
3. Response to Comments Submitted by the Small Business Administration
The Small Business Administration did not file any comments on the
proposed rule.
4. Description on Estimated Number of Small Entities Regulated
To estimate the number of small businesses that could be impacted
by the amended energy conservation standards, DOE conducted a market
survey using public information to identify potential small
manufacturers. DOE reviewed the DOE's CCMS database, EPA's WaterSense
program database, individual company Web sites, and various marketing
research tools (e.g., Hoover's reports) to create a list of companies
that import, assemble, or otherwise manufacture commercial prerinse
spray valves covered by this rulemaking. DOE screened out companies
that do not offer products covered by this rulemaking, do not meet the
definition of a ``small business,'' or are foreign-owned and operated.
DOE identified 13 commercial spray valve manufacturers selling
commercial prerinse spray valves in the United States, 9 of which are
small businesses.
5. Description and Estimate of Compliance Requirements
The nine small domestic commercial prerinse spray valve
manufacturers account for approximately 83 percent of commercial spray
valve basic models currently on the market. The remaining 17 percent of
commercial spray valve spray basic models currently on the market are
offered by four large manufacturers.
Using basic model counts, DOE estimated the distribution of
industry conversion costs between small manufacturers and large
manufacturers. Using its count of manufacturers, DOE calculated capital
conversion costs (under both capital conversion costs scenarios, Table
VI.1) and product conversion costs (Table VI.2) for an average small
manufacturer versus an average large manufacturer. To provide context,
DOE presents the conversion costs relative to annual revenue and annual
operating profit under the standard level for the two capital
conversion cost scenarios considered in the MIA, as shown in Table VI.3
and Table VI.4. The current annual revenue and annual operating profit
estimates are derived from the GRIM's industry revenue calculations and
the market share breakdowns of small versus large manufacturers. Due to
the lack of direct market share data for individual manufacturers, DOE
used basic model counts as a percent of total basic models currently
available on the market as a proxy for market share.
Table VI.1--Comparison of Typical Small and Large Manufacturer's Capital Conversion Costs *
----------------------------------------------------------------------------------------------------------------
Sourced components capital Fabricated components capital
conversion costs scenario conversion costs scenario
---------------------------------------------------------------
Capital Capital Capital Capital
conversion conversion conversion conversion
Trial standard level costs for costs for costs for costs for
typical small typical large typical small typical large
manufacturer manufacturer manufacturer manufacturer
---------------------------------------------------------------
2014$ millions 2014$ millions 2014$ millions 2014$ millions
----------------------------------------------------------------------------------------------------------------
TSL 1........................................... 0.05 0.02 0.07 0.03
TSL 2........................................... 0.06 0.03 0.09 0.03
TSL 3........................................... 0.03 0.02 0.05 0.02
[[Page 4798]]
TSL 4........................................... 0.08 0.03 0.12 0.04
TSL 4a.......................................... 0.06 0.02 0.09 0.03
----------------------------------------------------------------------------------------------------------------
* Capital conversion costs are the capital investments made during the 3-year period between the publication of
the final rule and the first year of compliance with the amended standard.
Table VI.2--Comparison of Typical Small and Large Manufacturer's Product
Conversion Costs *
------------------------------------------------------------------------
Product Product
conversion conversion
costs for costs for
Trial standard level typical small typical large
manufacturer manufacturer
(2014$ (2014$
millions) millions)
------------------------------------------------------------------------
TSL 1................................... 0.14 0.07
TSL 2................................... 0.17 0.08
TSL 3................................... 0.07 0.05
TSL 4................................... 0.22 0.10
TSL 4a.................................. 0.18 0.07
------------------------------------------------------------------------
* Product conversion costs are the R&D and other product development
investments made during the 3-year period between the publication of
the final rule and the first year of compliance with the amended
standard.
Table VI.3--Comparison of Conversion Costs for an Average Small and an Average Large Manufacturer at TSL 3--
Sourced Components Capital Conversion Costs Scenario
----------------------------------------------------------------------------------------------------------------
Conversion
Capital Product Conversion costs/
conversion conversion costs/ conversion
cost (2014$ cost (2014$ conversion period
millions) millions) period operating
revenue* (%) profit * (%)
----------------------------------------------------------------------------------------------------------------
Small Manufacturer.............................. 0.03 0.07 4 39
Large Manufacturer.............................. 0.02 0.05 5 47
----------------------------------------------------------------------------------------------------------------
* The conversion period, the time between the final rule publication year and the first year of compliance for
this rulemaking, is 3 years.
Table VI.4--Comparison of Conversion Costs for an Average Small and an Average Large Manufacturer at TSL 3--
Fabricated Components Capital Conversion Costs Scenario
----------------------------------------------------------------------------------------------------------------
Conversion
Capital Product Conversion costs/
conversion conversion costs/ conversion
cost (2014$ cost (2014$ conversion period
millions) millions) period revenue operating
* (%) profit * (%)
----------------------------------------------------------------------------------------------------------------
Small Manufacturer.............................. 0.05 0.07 7 70
Large Manufacturer.............................. 0.02 0.05 6 58
----------------------------------------------------------------------------------------------------------------
* The conversion period, the time between the final rule publication year and the first year of compliance for
this rulemaking, is 3 years.
At the established standard level, depending on the capital
conversion cost scenario, DOE estimates total conversion costs for an
average small manufacturer to range from $30,000 to $50,000 for the
Sourced Components Capital Conversion Costs scenario and the Fabricated
Components Capital Conversion Costs scenario, respectively. This
suggests that an average small manufacturer would need to reinvest
roughly 39 percent to 70 percent of its operating profit per year over
the conversion period to comply with standards. Depending on the
capital conversion cost scenario, the total conversion costs for an
average large manufacturer range from $16,000 to $19,000 for the
Sourced Components Capital Conversion Costs scenario and the Fabricated
Components Capital Conversion Costs scenario, respectively. This
suggests that an average large manufacturer would need to reinvest
[[Page 4799]]
roughly 47 percent to 58 percent of its commercial prerinse spray
valve-related operating profit per year over the 3-year conversion
period.
6. Description of Steps To Minimize Impacts to Small Businesses
The discussion in the previous section analyzes impacts on small
businesses that would result from DOE's final rule, represented by TSL
3. In reviewing alternatives to the final rule, DOE examined energy
conservation standards set at both higher and lower efficiency levels.
With respect to TSL 4, DOE estimated that while there would be
significant consumer benefits from the projected energy savings of 0.18
quads of energy and 208.06 billion gallons of water (ranging from $1.25
billion using a 7-percent discount rate to $2.57 billion using a 3-
percent discount rate), along with emissions reductions and positive
LCC savings, the standards could result in an INPV reduction of $2.4
million to $1.5 million. DOE determined that this INPV reduction would
outweigh the potential benefits. (See also the description of DOE's
sensitivity case of TSL4a in section V.C.)
With respect to TSL 1 and TSL 2, EPCA requires DOE to establish
standards at the level that would achieve the maximum improvement in
energy efficiency that is technologically feasible and economically
justified. Based on its analysis, DOE concluded that TSL 3 achieves the
maximum improvement in energy efficiency that is technologically
feasible and economically justified. Therefore, DOE did not establish
standards at the levels considered at TSL 1 and TSL 2 because DOE
determined that higher levels were technologically feasible and
economically justified. DOE's analysis also shows that TSL 1 and TSL 2
would not reduce the impacts on small business manufacturers because
there are more products that require redesign at TSL 1 and TSL 2 than
at TSL 3. Therefore, TSL 3 results in lower impacts on small businesses
than TSL 1 and TSL 2.
In summary, DOE concluded that establishing standards at TSL 3
balances the benefits of the energy savings and the NPV benefits to
consumers at TSL 3 with the potential burdens placed on manufacturers,
including small business manufacturers. Accordingly, DOE is declining
to adopt the other TSLs considered in the analysis, or the other policy
alternatives detailed as part of the regulatory impacts analysis
included in chapter 17 of the final rule TSD.
Additional compliance flexibilities may be available through other
means. For example, individual manufacturers may petition for a waiver
of the applicable test procedure. 10 CFR 431.401. Further, EPCA
provides that a manufacturer whose annual gross revenue from all of its
operations does not exceed $8 million may apply for an exemption from
all or part of an energy conservation standard for a period not longer
than 24 months after the effective date of a final rule establishing
the standard. Additionally, Section 504 of the Department of Energy
Organization Act, 42 U.S.C. 7194, provides authority for the Secretary
to adjust a rule issued under EPCA in order to prevent ``special
hardship, inequity, or unfair distribution of burdens'' that may be
imposed on that manufacturer as a result of such rule. Manufacturers
should refer to 10 CFR part 430, subpart E, and part 1003 for
additional details.
C. Review Under the Paperwork Reduction Act
Manufacturers of commercial prerinse spray valves must certify to
DOE that their products comply with any applicable energy conservation
standards. In certifying compliance, manufacturers must test their
products according to the DOE test procedures for commercial prerinse
spray valves, including any amendments adopted for those test
procedures. DOE has established regulations for the certification and
recordkeeping requirements for all covered consumer products and
commercial equipment, including commercial prerinse spray valves. 76 FR
12422 (March 7, 2011); 80 FR 5099 (Jan. 30, 2015). The collection of
information requirement for the certification and recordkeeping is
subject to review and approval by OMB under the Paperwork Reduction Act
(PRA). This requirement has been approved by OMB under OMB Control
Number 1910-1400. Public reporting burden for the certification is
estimated to average 30 hours per response, including the time for
reviewing instructions, searching existing data sources, gathering and
maintaining the data needed, and completing and reviewing the
collection of information.
Notwithstanding any other provision of the law, no person is
required to respond to, nor shall any person be subject to a penalty
for failure to comply with, a collection of information subject to the
requirements of the PRA, unless that collection of information displays
a currently valid OMB Control Number.
D. Review Under the National Environmental Policy Act of 1969
Pursuant to the National Environmental Policy Act (NEPA) of 1969,
DOE has determined that the rule fits within the category of actions
included in Categorical Exclusion (CX) B5.1 and otherwise meets the
requirements for application of a CX. See 10 CFR part 1021, appendix B,
B5.1(b); Sec. 1021.410(b) and appendix B, B(1)-(5). The rule fits
within this category of actions because it is a rulemaking that
establishes energy conservation standards for consumer products or
industrial equipment, and for which none of the exceptions identified
in CX B5.1(b) apply. Therefore, DOE has made a CX determination for
this rulemaking, and DOE does not need to prepare an Environmental
Assessment or Environmental Impact Statement for this rule. DOE's CX
determination for this rule is available at http://cxnepa.energy.gov/.
E. Review Under Executive Order 13132
Executive Order 13132, ``Federalism'' 64 FR 43255 (Aug. 10, 1999)
imposes certain requirements on Federal agencies formulating and
implementing policies or regulations that preempt State law or that
have Federalism implications. The Executive Order requires agencies to
examine the constitutional and statutory authority supporting any
action that would limit the policymaking discretion of the States and
to carefully assess the necessity for such actions. The Executive Order
also requires agencies to have an accountable process to ensure
meaningful and timely input by State and local officials in the
development of regulatory policies that have Federalism implications.
On March 14, 2000, DOE published a statement of policy describing the
intergovernmental consultation process it will follow in the
development of such regulations. 65 FR 13735. DOE has examined this
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. EPCA governs
and prescribes Federal preemption of State regulations as to energy
conservation for the products that are the subject of this final rule.
States can petition DOE for exemption from such preemption to the
extent, and based on criteria, set forth in EPCA. (42 U.S.C. 6297)
Therefore, no further action is required by Executive Order 13132.
F. Review Under Executive Order 12988
With respect to the review of existing regulations and the
promulgation of
[[Page 4800]]
new regulations, section 3(a) of Executive Order 12988, ``Civil Justice
Reform,'' imposes on Federal agencies the general duty to adhere to the
following requirements: (1) Eliminate drafting errors and ambiguity;
(2) write regulations to minimize litigation; (3) provide a clear legal
standard for affected conduct rather than a general standard; and (4)
promote simplification and burden reduction. 61 FR 4729 (Feb. 7, 1996).
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 has completed the required review and determined
that, to the extent permitted by law, this final rule meets the
relevant standards of Executive Order 12988.
G. Review Under the Unfunded Mandates Reform Act of 1995
Title II of the Unfunded Mandates Reform Act of 1995 (UMRA)
requires each Federal agency to assess the effects of Federal
regulatory actions on State, local, and Tribal governments and the
private sector (Pub. L. 104-4, sec. 201, codified at 2 U.S.C. 1531).
For a regulatory action likely to result in a rule that may cause the
expenditure by State, local, and Tribal governments, in the aggregate,
or by the private sector of $100 million or more in any one year
(adjusted annually for inflation), section 202 of UMRA requires a
Federal agency to publish a written statement that estimates the
resulting costs, benefits, and other effects on the national economy.
(2 U.S.C. 1532(a), (b)) The UMRA also requires a Federal agency to
develop an effective process to permit timely input by elected officers
of State, local, and Tribal governments on a ``significant
intergovernmental mandate,'' and requires an agency plan for giving
notice and opportunity for timely input to potentially affected small
governments before establishing any requirements that might
significantly or uniquely affect small governments. On March 18, 1997,
DOE published a statement of policy on its process for
intergovernmental consultation under UMRA. 62 FR 12820. DOE's policy
statement is also available at http://energy.gov/sites/prod/files/gcprod/documents/umra_97.pdf.
DOE has concluded that this final rule will not require
expenditures of $100 million or more in any one year in the private
sector.
Section 202 of UMRA authorizes a Federal agency to respond to the
content requirements of UMRA in any other statement or analysis that
accompanies the final 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 this document and the final rule
TSD chapter 17, the ``Regulatory Impact Analysis,'' for this final rule
respond to those requirements.
Under section 205 of UMRA, the Department is obligated to identify
and consider a reasonable number of regulatory alternatives before
promulgating a rule for which a written statement under section 202 is
required. (2 U.S.C. 1535(a)) DOE is required to select from those
alternatives the most cost-effective and least burdensome alternative
that achieves the objectives of the rule unless DOE publishes an
explanation for doing otherwise, or the selection of such an
alternative is inconsistent with law. As required by 42 U.S.C. 6295(o)
and (dd), this final rule would establish amended energy conservation
standards for commercial prerinse spray valves that are designed to
achieve the maximum improvement in energy efficiency that DOE has
determined to be both technologically feasible and economically
justified. A full discussion of the alternatives considered by DOE is
presented in chapter 17 of the final rule TSD, ``Regulatory Impact
Analysis.''
H. Review Under the Treasury and General Government Appropriations Act,
1999
Section 654 of the Treasury and General Government Appropriations
Act, 1999 (Pub. L. 105-277) requires Federal agencies to issue a Family
Policymaking Assessment for any rule that may affect family well-being.
This rule would not have any impact on the autonomy or integrity of the
family as an institution. Accordingly, DOE has concluded that it is not
necessary to prepare a Family Policymaking Assessment.
I. Review Under Executive Order 12630
Pursuant to Executive Order 12630, ``Governmental Actions and
Interference with Constitutionally Protected Property Rights'' 53 FR
8859 (March 18, 1988), DOE has determined that this rule would not
result in any takings that might require compensation under the Fifth
Amendment to the U.S. Constitution.
J. Review Under the Treasury and General Government Appropriations Act,
2001
Section 515 of the Treasury and General Government Appropriations
Act, 2001 (44 U.S.C. 3516, note) provides for Federal agencies to
review most disseminations of information to the public under
information quality guidelines established by each agency pursuant to
general guidelines issued by OMB. OMB's guidelines were published at 67
FR 8452 (Feb. 22, 2002), and DOE's guidelines were published at 67 FR
62446 (Oct. 7, 2002). DOE has reviewed this final rule under the OMB
and DOE guidelines and has concluded that it is consistent with
applicable policies in those guidelines.
K. Review Under Executive Order 13211
Executive Order 13211, ``Actions Concerning Regulations That
Significantly Affect Energy Supply, Distribution, or Use,'' 66 FR 28355
(May 22, 2001), requires Federal agencies to prepare and submit to OIRA
at OMB, a Statement of Energy Effects for any significant energy
action. A ``significant energy action'' is defined as any action by an
agency that promulgates or is expected to lead to promulgation of a
final rule, and that: (1) Is a significant regulatory action under
Executive Order 12866, or any successor order; and (2) is likely to
have a significant adverse effect on the supply, distribution, or use
of energy, or (3) is designated by the Administrator of OIRA as a
significant energy action. For any significant energy action, the
agency must give a detailed statement of any adverse effects on energy
supply, distribution, or use should the proposal be implemented, and of
reasonable alternatives to the action and their expected benefits on
energy supply, distribution, and use.
DOE has concluded that this regulatory action, which sets forth
amended energy conservation standards for commercial prerinse spray
valves, is not a significant energy action because the standards are
not likely to have a significant adverse effect on the supply,
distribution, or use of energy, nor has it
[[Page 4801]]
been designated as such by the Administrator at OIRA. Accordingly, DOE
has not prepared a Statement of Energy Effects on this final rule.
L. Review Under the Information Quality Bulletin for Peer Review
On December 16, 2004, OMB, in consultation with the Office of
Science and Technology Policy (OSTP), issued its Final Information
Quality Bulletin for Peer Review (the Bulletin). 70 FR 2664 (Jan. 14,
2005). The Bulletin establishes that certain scientific information
shall be peer reviewed by qualified specialists before it is
disseminated by the Federal Government, including influential
scientific information related to agency regulatory actions. The
purpose of the bulletin is to enhance the quality and credibility of
the Government's scientific information. Under the Bulletin, the energy
conservation standards rulemaking analyses are ``influential scientific
information,'' which the Bulletin defines as ``scientific information
the agency reasonably can determine will have, or does have, a clear
and substantial impact on important public policies or private sector
decisions.'' Id. at FR 2667.
In response to OMB's Bulletin, DOE conducted formal in-progress
peer reviews of the energy conservation standards development process
and analyses and has prepared a Peer Review Report pertaining to the
energy conservation standards rulemaking analyses. Generation of this
report involved a rigorous, formal, and documented evaluation using
objective criteria and qualified and independent reviewers to make a
judgment as to the technical/scientific/business merit, the actual or
anticipated results, and the productivity and management effectiveness
of programs and/or projects. The ``Energy Conservation Standards
Rulemaking Peer Review Report'' dated February 2007 has been
disseminated and is available at the following Web site:
www1.eere.energy.gov/buildings/appliance_standards/peer_review.html.
M. Congressional Notification
As required by 5 U.S.C. 801, DOE will report to Congress on the
promulgation of this rule prior to its effective date. The report will
state that it has been determined that the rule is not a ``major rule''
as defined by 5 U.S.C. 804(2).
VII. Approval of the Office of the Secretary
The Secretary of Energy has approved publication of this final
rule.
List of Subjects
10 CFR Part 429
Administrative practice and procedure, Confidential business
information, Energy conservation, Household appliances, Reporting and
recordkeeping requirements.
10 CFR Part 431
Administrative practice and procedure, Confidential business
information, Energy conservation test procedures, Incorporation by
reference, Reporting and recordkeeping requirements.
Issued in Washington, DC, on December 29, 2015.
David J. Friedman,
Principal Deputy Assistant Secretary, Energy Efficiency and Renewable
Energy.
For the reasons stated in the preamble, DOE amends parts 429 and
431 of chapter II of title 10, Code of Federal Regulations as set forth
below:
PART 429--CERTIFICATION, COMPLIANCE, AND ENFORCEMENT FOR CONSUMER
PRODUCTS AND COMMERCIAL AND INDUSTRIAL EQUIPMENT
0
1. The authority citation for part 429 continues to read as follows:
Authority: 42 U.S.C. 6291-6317.
0
2. Section 429.51(b) is revised to read as follows:
Sec. 429.51 Commercial pre-rinse spray valves.
* * * * *
(b) Certification reports. (1) The requirements of Sec. 429.12 are
applicable to commercial prerinse spray valves; and
(2) Pursuant to Sec. 429.12(b)(13), a certification report must
include the following public product-specific information: The flow
rate, in gallons per minute (gpm), rounded to the nearest 0.01 gpm, and
the corresponding spray force, in ounce-force (ozf), rounded to the
nearest 0.1 ozf.
PART 431--ENERGY EFFICIENCY PROGRAM FOR CERTAIN COMMERCIAL AND
INDUSTRIAL EQUIPMENT
0
3. The authority citation for part 431 continues to read as follows:
Authority: 42 U.S.C. 6291-6317.
0
4. Section 431.266 is revised to read as follows:
Sec. 431.266 Energy conservation standards and their effective dates.
(a) Commercial prerinse spray valves manufactured on or after
January 1, 2006 and before January 28, 2019, shall have a flow rate of
not more than 1.6 gallons per minute. For the purposes of this
standard, a commercial prerinse spray valve is a handheld device
designed and marketed for use with commercial dishwashing and ware
washing equipment that sprays water on dishes, flatware, and other food
service items for the purpose of removing food residue before cleaning
the items.
(b) Commercial prerinse spray valves manufactured on or after
January 28, 2019 shall have a flow rate that does not exceed the
following:
------------------------------------------------------------------------
Flow rate
Product class (spray force in ounce-force, ozf) (gallons per
minute, gpm)
------------------------------------------------------------------------
Product Class 1 (<=5.0 ozf)............................. 1.00
Product Class 2 (>5.0 ozf and <=8.0 ozf)................ 1.20
Product Class 3 (>8.0 ozf).............................. 1.28
------------------------------------------------------------------------
(1) For the purposes of this standard, the definition of commercial
prerinse spray valve in Sec. 431.262 applies.
(2) [Reserved]
Note: The following letter will not appear in the Code of
Federal Regulations.
U.S. Department of Justice
Antitrust Division
William J. Baer
Assistant Attorney General
RFK Main Justice Building
950 Pennsylvania Ave. NW
Washington, DC 20530-0001
(202) 514-2401/(202) 616-2645 (Fax)
September 4, 2015
Anne Harkavy, Esq.
Deputy General Counsel for Litigation
1000 Independence Ave. SW.
U.S. Department of Energy Washington, DC 20585
Re: Energy Conservation Standards for Commercial Prerinse Spray
Valves Doc. No. EERE-2014-BT-STD-0027
Dear Deputy General Counsel Harkavy:
I am responding to your July 9, 2015, letter seeking the views
of the Attorney General about the potential impact on competition of
proposed energy standards for commercial prerinse spray valves.
Your request was submitted under Section 325(o)(2)(B)(i)(V) of
the Energy Policy and Conservation Act, as amended (ECPA), 42 U.S.C.
6295(o)(2)(B)(i)(V), which required the Attorney General to make a
determination of the impact of any lessening of competition that is
likely to result from the imposition of proposed energy conservation
standards. The Attorney General's responsibility for responding to
requests from other departments about the effect of a program on
competition has been delegated to the Assistant Attorney General for
the Antitrust Division in 28 CFR 0.40(g).
In conducting our analysis, the Antitrust Division examines
whether a proposed standard may lessen competition, for example, by
substantially limiting consumer
[[Page 4802]]
choice or increasing industry concentration. A lessening of
competition could result in higher prices to manufacturers and
consumers.
We have reviewed the proposed standards contained in the Notice
of Proposed Rulemaking (80 FR 39,486-39,539, July 9, 2015) and the
related Technical Support Documents. We have also listened to, and
reviewed materials from, the public meeting held on July 28, 2015.
Further, we have talked to various industry representatives to
determine their position regarding the proposed standards potential
effect on competition. Based on this review, our conclusion is that
the proposed energy conservation standards for commercial prerinse
spray valves are unlikely to have a significant adverse impact on
competition.
Sincerely,
William J. Baer
[FR Doc. 2016-00068 Filed 1-26-16; 8:45 am]
BILLING CODE 6450-01-P