[Federal Register Volume 80, Number 5 (Thursday, January 8, 2015)]
[Proposed Rules]
[Pages 1171-1236]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-30839]



[[Page 1171]]

Vol. 80

Thursday,

No. 5

January 8, 2015

Part III





Department of Energy





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10 CFR Part 431





Energy Conservation Program for Certain Industrial Equipment: Energy 
Conservation Standards and Test Procedures for Commercial Heating, Air-
Conditioning, and Water-Heating Equipment; Proposed Rule

Federal Register / Vol. 80 , No. 5 / Thursday, January 8, 2015 / 
Proposed Rules

[[Page 1172]]


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DEPARTMENT OF ENERGY

10 CFR Part 431

[Docket No. EERE-2014-BT-STD-0015]
RIN 1904-AD23


Energy Conservation Program for Certain Industrial Equipment: 
Energy Conservation Standards and Test Procedures for Commercial 
Heating, Air-Conditioning, and Water-Heating Equipment

AGENCY: Office of Energy Efficiency and Renewable Energy, Department of 
Energy.

ACTION: Notice of proposed rulemaking (NOPR) and announcement of public 
meeting.

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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 
several classes of commercial heating, air-conditioning, and water-
heating equipment. EPCA also requires that each time the American 
Society of Heating, Refrigerating and Air-Conditioning Engineers 
(ASHRAE) Standard 90.1 is amended with respect to the standard levels 
or design requirements applicable to that equipment, the U.S. 
Department of Energy (DOE) must adopt amended uniform national 
standards for this equipment equivalent to those in ASHRAE Standard 
90.1, unless DOE determines that there is clear and convincing evidence 
showing that more-stringent, amended standards would be technologically 
feasible and economically justified, and would save a significant 
additional amount of energy. ASHRAE most recently amended Standard 90.1 
on October 9, 2013. Based upon its analysis of the energy savings 
potential of amended energy conservation standards and the lack of 
clear and convincing evidence to support more-stringent standards, DOE 
is proposing to adopt the amended standards in ASHRAE Standard 90.1 
for: Small three-phase commercial air-cooled air conditioners (single 
package only) and heat pumps (single package and split system) less 
than 65,000 Btu/h; water-source heat pumps; and commercial oil-fired 
storage water heaters. DOE is also making a proposed determination that 
the standards for small three-phase commercial air-cooled air 
conditioners (split system) do not need to be amended. Finally, DOE is 
proposing updates to the current Federal test procedures to incorporate 
by reference the most current version of the American National 
Standards Institute (ANSI) Z21.47, Gas-fired central furnaces, 
specified in ASHRAE Standard 90.1 applicable to commercial warm-air 
furnaces, and to the most current version of ASHRAE 103, Method of 
Testing for Annual Fuel Utilization Efficiency of Residential Central 
Furnaces and Boilers. This document also announces a public meeting to 
receive comment on these proposed standards and associated analyses and 
results, as well as the proposed test procedure provisions.

DATES: Meeting: DOE will hold a public meeting on Friday, February 6, 
2015 from 1:00 p.m. to 4:00 p.m., in Washington, DC. The meeting will 
also be broadcast as a webinar. See section X, ``Public 
Participation,'' for webinar registration information, participant 
instructions, and information about the capabilities available to 
webinar participants.
    Comments: DOE will accept comments, data, and information regarding 
this notice of proposed rulemaking (NOPR) before and after the public 
meeting, but no later than March 24, 2015. See section X, ``Public 
Participation,'' for details.

ADDRESSES: The public meeting will be held at the U.S. Department of 
Energy, Forrestal Building, Room 8E-089, 1000 Independence Avenue SW., 
Washington, DC 20585. To attend, please notify Ms. Brenda Edwards at 
(202) 586-2945. Please note that foreign nationals visiting DOE 
Headquarters are subject to advance security screening procedures. Any 
foreign national wishing to participate in the meeting should advise 
DOE as soon as possible by contacting Ms. Edwards at the phone number 
above to initiate the necessary procedures. Please also note that any 
person wishing to bring a laptop or tablet into the Forrestal Building 
will be required to obtain a property pass. Visitors should avoid 
bringing laptops, or allow an extra 45 minutes. Persons may also attend 
the public meeting via webinar. For more information, refer to section 
X, ``Public Participation,'' near the end of this document.
    Due to the REAL ID Act implemented by the Department of Homeland 
Security (DHS), there have been recent changes regarding identification 
(ID) requirements for individuals wishing to enter Federal buildings 
from specific States and U.S. territories. As a result, driver's 
licenses from the following States or territory will not be accepted 
for building entry, and instead, one of the alternate forms of ID 
listed below will be required.
    DHS has determined that regular driver's licenses (and ID cards) 
from the following jurisdictions are not acceptable for entry into DOE 
facilities: Alaska, American Samoa, Arizona, Louisiana, Maine, 
Massachusetts, Minnesota, New York, Oklahoma, and Washington.
    Acceptable alternate forms of Photo-ID include: U.S. Passport or 
Passport Card; an Enhanced Driver's License or Enhanced ID-Card issued 
by the States of Minnesota, New York or Washington (Enhanced licenses 
issued by these States are clearly marked Enhanced or Enhanced Driver's 
License); a military ID or other Federal government-issued Photo-ID 
card.
    Instructions: Any comments submitted must identify the NOPR on 
Energy Conservation Standards and Test Procedures for ASHRAE Standard 
90.1 Equipment, and provide docket number EERE-2014-BT-STD-0015 and/or 
regulatory information number (RIN) 1904-AD23. Comments may be 
submitted using any of the following methods:
    1. Federal eRulemaking Portal: www.regulations.gov. Follow the 
instructions for submitting comments.
    2. E-Mail: ComHeatingACWHEquip2014STD0015@ee.doe.gov. Include the 
docket number and/or RIN in the subject line of the message. Submit 
electronic comments in WordPerfect, Microsoft Word, PDF, or ASCII file 
format, and avoid the use of special characters or any form of 
encryption.
    3. Postal Mail: Ms. Brenda Edwards, U.S. Department of Energy, 
Building Technologies Office, Mailstop EE-5B, 1000 Independence Avenue 
SW., Washington, DC 20585-0121. If possible, please submit all items on 
a compact disc (CD), in which case it is not necessary to include 
printed copies.
    4. Hand Delivery/Courier: Ms. Brenda Edwards, U.S. Department of 
Energy, Building Technologies Office, 950 L'Enfant Plaza SW., Suite 
600, Washington, DC 20024. Telephone: (202) 586-2945. If possible, 
please submit all items on a CD, in which case it is not necessary to 
include printed copies.
    Written comments regarding the burden-hour estimates or other 
aspects of the collection-of-information requirements contained in this 
proposed rule may be submitted to Office of Energy Efficiency and 
Renewable Energy through the methods listed above and by email to 
Chad_S_Whiteman@omb.eop.gov.
    No telefacsimilies (faxes) will be accepted. For detailed 
instructions on submitting comments and additional

[[Page 1173]]

information on the rulemaking process, see section X of this document 
(Public Participation).
    Docket: 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 may not be publicly 
available, such as those containing information that is exempt from 
public disclosure.
    A link to the docket Web page can be found at: www.regulations.gov/#!docketDetail;D=EERE-2014-BT-STD-0015. This Web page contains a link 
to the docket for this document on the www.regulations.gov site. The 
www.regulations.gov Web page contains simple instructions on how to 
access all documents, including public comments, in the docket. See 
section X, ``Public Participation,'' for further information on how to 
submit comments through www.regulations.gov.
    For further information on how to submit a comment, review other 
public comments and the docket, or participate in the public meeting, 
contact Ms. Brenda Edwards at (202) 586-2945 or by email: 
Brenda.Edwards@ee.doe.gov.

FOR FURTHER INFORMATION CONTACT: Ms. Ashley Armstrong, 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) 586-6590. Email: 
Ashley.Armstrong@ee.doe.gov.
    Mr. Eric Stas, U.S. Department of Energy, Office of the General 
Counsel, GC-33, 1000 Independence Avenue SW., Washington, DC 20585-
0121. Telephone: (202) 586-9507. Email: Eric.Stas@hq.doe.gov.
    For information on how to submit or review public comments, contact 
Ms. Brenda Edwards at (202) 586-2945 or by email: 
Brenda.Edwards@ee.doe.gov.

SUPPLEMENTARY INFORMATION: DOE proposes to incorporate by reference the 
following industry standards into 10 CFR 431.76:
     ANSI Z21.47-2012, ``Gas-Fired Central Furnaces,'' ANSI 
approved on March 27, 2012.
    Copies of ANSI Z21.47-2012 can be obtained from ANSI. American 
National Standards Institute. 25 W. 43rd Street, 4th Floor, New York, 
NY 10036. (212) 642-4900, or by going to http://www.ansi.org.
     ASHRAE Standard 103-2007, sections 7.2.2.4, 7.8, 9.2, and 
11.3.7, ``Method of Testing for Annual Fuel Utilization Efficiency of 
Residential Central Furnaces and Boilers,'' ANSI approved on March 25, 
2008.
    Copies of ASHRAE Standard 103-2007 can be obtained from ASHRAE. 
American Society of Heating, Refrigerating and Air-Conditioning 
Engineers Inc., 1791 Tullie Circle NE., Atlanta, Georgia 30329. (404) 
636-8400, or by going to http://www.ashrae.org.

Table of Contents

I. Summary of the Proposed Rule
II. Introduction
    A. Authority
    B. Background
    1. ASHRAE Standard 90.1-2013
    2. Notice of Data Availability
III. General Discussion of Comments Regarding the ASHRAE Process and 
DOE's Interpretation of EPCA's Requirements With Respect to ASHRAE 
Equipment
IV. General Discussion of the Changes in ASHRAE Standard 90.1-2013 
and Determination of Scope for Further Rulemaking Activity
    A. Commercial Package Air-Conditioning and Heating Equipment
    1. Air-Cooled Equipment
    2. Water-Source Equipment
    3. Packaged Terminal Air Conditioners and Heat Pumps
    4. Small-Duct, High-Velocity, and Through-the-Wall Equipment
    5. Single-Package Vertical Air Conditioners and Single-Package 
Vertical Heat Pumps
    B. Commercial Water Heaters
    C. Test Procedures
V. Methodology for Small Commercial Air-Cooled Air Conditioners and 
Heat Pumps Less Than 65,000 Btu/h
    A. Market Assessment
    1. Equipment Classes
    2. Review of Current Market
    a. Trade Association Information
    b. Manufacturer Information
    c. Market Data
    B. Engineering Analysis
    1. Approach
    2. Baseline Equipment
    3. Identification of Increased Efficiency Levels for Analysis
    4. Engineering Analysis Results
    a. Manufacturer Markups
    b. Shipping Costs
    C. Markups Analysis
    D. Energy Use Analysis
    E. Life-Cycle Cost and Payback Period Analysis
    1. Equipment Costs
    2. Installation Costs
    3. Unit Energy Consumption
    4. Electricity Prices and Electricity Price Trends
    5. Maintenance Costs
    6. Repair Costs
    7. Equipment Lifetime
    8. Discount Rate
    9. Base-Case Market Efficiency Distribution
    10. Compliance Date
    11. Payback Period Inputs
    F. National Impact Analysis--National Energy Savings and Net 
Present Value Analysis
    1. Approach
    2. Shipments Analysis
    3. Base-Case and Standards-Case Forecasted Distribution of 
Efficiencies
    4. National Energy Savings and Net Present Value
VI. Methodology for Water-Source Heat Pumps
    A. Market Assessment
    1. Equipment Classes
    2. Review of Current Market
    a. Trade Association Information
    b. Manufacturer Information
    c. Market Data
    B. Engineering Analysis
    1. Approach
    2. Baseline Equipment
    3. Identification of Increased Efficiency Levels for Analysis
    4. Engineering Analysis Results
    a. Manufacturer Markups
    b. Shipping Costs
    C. Markups Analysis
    D. Energy Use Analysis
    E. Life-Cycle Cost and Payback Period Analysis
    1. Equipment Costs
    2. Installation Costs
    3. Unit Energy Consumption
    4. Electricity Prices and Electricity Price Trends
    5. Maintenance Costs
    6. Repair Costs
    7. Equipment Lifetime
    8. Discount Rate
    9. Base-Case Market Efficiency Distribution
    10. Compliance Date
    11. Payback Period Inputs
    F. National Impact Analysis--National Energy Savings and Net 
Present Value Analysis
    1. Approach
    2. Shipments Analysis
    3. Base-Case and Standards-Case Forecasted Distribution of 
Efficiencies
    4. National Energy Savings and Net Present Value
VII. Methodology for Emissions Analysis and Monetizing Carbon 
Dioxide and Other Emissions Impacts
    A. Emissions Analysis
    B. 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. Valuation of Other Emissions Reductions
VIII. Analytical Results and Conclusions
    A. Efficiency Levels Analyzed
    1. Small Commercial Air-Cooled Air Conditioners and Heat Pumps 
Less Than 65,000 Btu/h
    2. Water-Source Heat Pumps
    3. Commercial Oil-Fired Storage Water Heaters
    B. Energy Savings and Economic Justification
    1. Small Commercial Air-Cooled Air Conditioners and Heat Pumps 
Less Than 65,000 Btu/h

[[Page 1174]]

    a. Economic Impacts on Commercial Customers
    b. National Impact Analysis
    2. Water-Source Heat Pumps
    a. Economic Impacts on Commercial Customers
    b. National Impact Analysis
    3. Commercial Oil-Fired Storage Water Heaters
    C. Need of the Nation To Conserve Energy
    D. Proposed Standards
    1. Small Commercial Air-Cooled Air Conditioners and Heat Pumps 
Less Than 65,000 Btu/h
    2. Water-Source Heat Pumps
    3. Commercial Oil-Fired Storage Water Heaters
IX. Procedural Issues and Regulatory Review
    A. Review Under Executive Order 12866 and 13563
    B. Review Under the Regulatory Flexibility Act
    C. Review Under the Paperwork Reduction Act of 1995
    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
X. Public Participation
    A. Attendance at the Public Meeting
    B. Procedure for Submitting Prepared General Statements for 
Distribution
    C. Conduct of the Public Meeting
    D. Submission of Comments
    E. Issues on Which DOE Seeks Comment
XI. Approval of the Office of the Secretary

I. Summary of the Proposed Rule

    Title III, Part C \1\ of the Energy Policy and Conservation Act of 
1975 (``EPCA'' or ``the Act''), Public Law 94-163, (42 U.S.C. 6311-
6317, as codified), added by Public Law 95-619, Title IV, section 
441(a), established the Energy Conservation Program for Certain 
Industrial Equipment, which sets forth a variety of provisions designed 
to improve energy efficiency. These encompass several types of 
commercial heating, air-conditioning, and water-heating equipment, 
including those that are the subject of this rulemaking. (42 U.S.C. 
6311(1)(B) and (K)) EPCA, as amended, also requires the U. S. 
Department of Energy (DOE) to consider amending the existing Federal 
energy conservation standard for certain types of listed commercial and 
industrial equipment (generally, commercial water heaters, commercial 
packaged boilers, commercial air-conditioning and heating equipment, 
and packaged terminal air conditioners and heat pumps) each time the 
American Society of Heating, Refrigerating and Air-Conditioning 
Engineers (ASHRAE) Standard 90.1, Energy Standard for Buildings Except 
Low-Rise Residential Buildings, is amended with respect to such 
equipment. (42 U.S.C. 6313(a)(6)(A)) For each type of equipment, EPCA 
directs that if ASHRAE Standard 90.1 is amended, DOE must adopt amended 
energy conservation standards at the new efficiency level in ASHRAE 
Standard 90.1, unless clear and convincing evidence supports a 
determination that adoption of a more-stringent efficiency level as a 
national standard would produce significant additional energy savings 
and be technologically feasible and economically justified. (42 U.S.C. 
6313(a)(6)(A)(ii)) If DOE decides to adopt as a national standard the 
efficiency levels specified in the amended ASHRAE Standard 90.1, DOE 
must establish such standard not later than 18 months after publication 
of the amended industry standard. (42 U.S.C. 6313(a)(6)(A)(ii)(I)) If 
DOE determines that a more-stringent standard is appropriate under the 
statutory criteria, DOE must establish such more-stringent standard not 
later than 30 months after publication of the revised ASHRAE Standard 
90.1. (42 U.S.C. 6313(a)(6)(B)) ASHRAE officially released ASHRAE 
Standard 90.1-2013 on October 9, 2013, thereby triggering DOE's 
previously referenced obligations pursuant to EPCA to determine for 
those types of equipment with efficiency level or design requirement 
changes beyond the current Federal standard, whether: (1) The amended 
industry standard should be adopted; or (2) clear and convincing 
evidence exists to justify more-stringent standard levels.
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    \1\ For editorial reasons, upon codification in the U.S. Code, 
Part C was redesignated Part A-1.
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    Accordingly, this NOPR sets forth DOE's determination of scope for 
consideration of amended energy conservation standards with respect to 
certain heating, ventilating, air-conditioning, and water-heating 
equipment addressed in ASHRAE Standard 90.1-2013. Such inquiry is 
necessary to ascertain whether the revised ASHRAE efficiency levels 
have become more stringent, thereby ensuring that any new amended 
national standard would not result in prohibited ``backsliding.'' For 
those equipment classes for which ASHRAE set more-stringent efficiency 
levels \2\ (i.e., small three-phase air-cooled air conditioners (single 
package only) and heat pumps (single package and split system) less 
than 65,000 Btu/h; water-source heat pumps; commercial oil-fired 
storage water heaters; single package vertical units; and packaged 
terminal air conditioners), DOE analyzed the energy savings potential 
of amended national energy conservation standards (at both the new 
ASHRAE Standard 90.1 efficiency levels and more-stringent efficiency 
levels). For small three-phase air-cooled air conditioners and heat 
pumps less than 65,000 Btu/h and water-source heat pumps, DOE analyzed 
the economic savings potential of amended national energy conservation 
standards at more-stringent efficiency levels, in addition to the 
energy savings potential. For commercial oil-fired storage water 
heaters, DOE determined that the potential for energy savings from 
adopting more-stringent levels than the ASHRAE Standard 90.1 levels was 
not significant, and, thus, DOE is proposing to adopt the ASHRAE 
Standard 90.1 levels without further analysis (see section IV.B for 
further details). For single package vertical units and packaged 
terminal air conditioners, DOE is performing economic analyses and 
responding to relevant comments from the NODA in separate rulemakings 
that were previously ongoing,\3\ and consequently, the analysis for 
this equipment and further discussion or proposal of standard levels 
will not be discussed in this NOPR.
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    \2\ ASHRAE Standard 90.1-2013 did not change any of the design 
requirements for the commercial (HVAC) and water-heating equipment 
covered by EPCA.
    \3\ See Packaged Terminal Air Conditioners and Heat Pumps 
Standards Rulemaking Web page: www1.eere.energy.gov/buildings/appliance_standards/rulemaking.aspx/ruleid/64 and Single Package 
Vertical Air Conditioners and Heat Pumps Standards Rulemaking Web 
page: www1.eere.energy.gov/buildings/appliance_standards/rulemaking.aspx?ruleid=107.
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    DOE has tentatively concluded that for three classes of small 
three-phase air-cooled air conditioners and heat pumps less than 65,000 
Btu/h, three classes of water-source heat pumps, and one class of 
commercial oil-fired storage water heaters: (1) The revised efficiency 
levels in ASHRAE 90.1-2013 \4\ are more stringent than current national 
standards; and (2) their adoption as Federal energy conservation 
standards would result in energy savings where models exist below the 
revised efficiency levels. DOE has also tentatively concluded that 
there is not clear and convincing evidence that would justify adoption 
of more-stringent efficiency levels for this equipment.
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    \4\ To obtain a copy of ASHRAE Standard 90.1-2013, visit https://www.ashrae.org/resources--publications/bookstore/standard-90-1.

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[[Page 1175]]

    It is noted that DOE's regulations currently have a single 
equipment class for small, three-phase commercial air-cooled air 
conditioners less than 65,000 Btu/h, which covers both split-system and 
single-package models. Although ASHRAE Standard 90.1-2013 did not amend 
standard levels for the split-system models within that equipment 
class, it did so for the single-package models. Given this split, DOE 
is proposing to once again separate these two types of equipment into 
separate equipment classes. In the NOPR, DOE is proposing to evaluate 
amended standards for split-system models under the six-year-lookback 
provision at 42 U.S.C. 6313(a)(6)(C). Following this evaluation, DOE 
has tentatively concluded that there is not clear and convincing 
evidence that would justify adoption of more-stringent efficiency 
levels for small three-phase split-system air-cooled air conditioners 
less than 65,000 Btu/h, where the efficiency level in ASHRAE 90.1-2013 
is the same as the current Federal energy conservation standards.
    Thus, in accordance with the criteria discussed elsewhere in this 
document, DOE is proposing amended energy conservation standards for 
three classes of small three-phase air-cooled air conditioners and heat 
pumps less than 65,000 Btu/h, three classes of water-source heat pumps, 
and one class of commercial oil-fired storage water heaters by adopting 
the efficiency levels specified by ASHRAE Standard 90.1-2013, as shown 
in Table I.1. The proposed standards, if adopted, would apply to all 
equipment listed in Table I.1 and manufactured in, or imported into, 
the United States on or after the date two years after the effective 
date specified in ASHRAE Standard 90.1-2013 (i.e., by January 1, 2017 
for small air-cooled air conditioners and heat pumps and by October 9, 
2015 for water-source heat pumps and oil-fired storage water heaters). 
(42 U.S.C. 6313(a)(6)(D)(i)) DOE is making a determination that 
standards for split-system air-cooled air conditioners less than 65,000 
Btu/h do not need to be amended.

          Table I.1--Proposed Energy Conservation Standards for Specific Types of Commercial Equipment
----------------------------------------------------------------------------------------------------------------
             Equipment class                     Efficiency level              Anticipated  compliance date
----------------------------------------------------------------------------------------------------------------
Three-Phase Air-Cooled Single-Package Air  14.0 SEER...................  January 1, 2017.
 Conditioners <65,000 Btu/h.
Three-Phase Air-Cooled Single-Package      14.0 SEER,..................  January 1, 2017.
 Heat Pumps <65,000 Btu/h.                 8.0 HSPF....................
Three-Phase Air-Cooled Split-System Heat   14.0 SEER,..................  January 1, 2017.
 Pumps <65,000 Btu/h.                      8.2 HSPF....................
Oil-Fired Storage Water Heaters >105,000   80% Et......................  October 9, 2015.
 Btu/h and <4,000 Btu/h/gal.
Water-Source (Water-to-Air, Water-Loop)    12.2 EER,...................  October 9, 2015.
 Heat Pumps <17,000 Btu/h.                 4.3 COP.....................
Water-Source (Water-to-Air, Water-Loop)    13.0 EER,...................  October 9, 2015.
 Heat Pumps >=17,000 and <65,000 Btu/h.    4.3 COP.....................
Water-Source (Water-to-Air, Water-Loop)    13.0 EER,...................  October 9, 2015.
 Heat Pumps >=65,000 and <135,000 Btu/h.   4.3 COP.....................
----------------------------------------------------------------------------------------------------------------

    In addition, when the generally accepted industry test procedures 
referenced in ASHRAE Standard 90.1 are updated, EPCA requires DOE to 
amend the DOE test procedures for the relevant type(s) of ASHRAE 
equipment (which manufacturers are required to use in order to certify 
compliance with energy conservation standards mandated under EPCA) to 
be consistent with the amended industry test procedure. (42 U.S.C. 
6314(a)(4)(B)) DOE typically incorporates such industry test standards 
by reference, unless it determines they would not meet the requirements 
of 42 U.S.C. 6314(a)(2) and (3). Specifically, the amendments in this 
NOPR would update the citations and incorporations by reference in 
DOE's regulations to the most recent version of American National 
Standards Institute (ANSI) Z21.47, Standard for Gas-Fired Central 
Furnaces (i.e., ANSI Z21.47-2012). However, as a substantive matter, 
DOE notes that the most recent version does not contain any updates to 
the sections currently referenced by the DOE test procedure, so no 
additional burden would be expected to result from this test procedure 
update.
    Additionally, EISA 2007 amended EPCA to require that at least once 
every 7 years, DOE must conduct an evaluation of the test procedures 
for all covered equipment and either amend test procedures (if the 
Secretary determines that amended test procedures would more accurately 
or fully comply with the requirements of 42 U.S.C. 6314(a)(2)-(3)) or 
publish notice in the Federal Register of any determination not to 
amend a test procedure. (42 U.S.C. 6314(a)(1)(A)) Under this 
requirement, DOE has reviewed the test procedure for commercial warm-
air furnaces and is proposing to update the citations and 
incorporations by reference to the most recent version of ASHRAE 103, 
Method of Testing for Annual Fuel Utilization Efficiency of Residential 
Central Furnaces and Boiler (i.e., ASHRAE 103-2007), Thus, the final 
rule resulting from this rulemaking will satisfy the requirement to 
review the test procedures for commercial warm-air furnaces within 
seven years. DOE notes that the most recent version of ASHRAE 103 does 
not contain any updates to the sections currently referenced by the DOE 
test procedure, so no additional burden would be expected to result 
from this test procedure update.

II. Introduction

    The following section briefly discusses the statutory authority 
underlying this proposal, as well as some of the relevant historical 
background related to the establishment of standards for small three-
phase air-cooled air conditioners and heat pumps less than 65,000 Btu/
h, water-source heat pumps, and commercial oil-fired storage water 
heaters.

A. Authority

    Title III, Part C \5\ of the Energy Policy and Conservation Act of 
1975 (EPCA or the Act), Public Law 94-163 (42 U.S.C. 6311-6317, as 
codified), added by Public Law 95-619, Title IV, section 441(a), 
established the Energy Conservation Program for Certain Industrial 
Equipment, which includes the commercial heating, air-conditioning, and 
water-heating equipment that is the subject of this

[[Page 1176]]

rulemaking.\6\ In general, this program addresses the energy efficiency 
of certain types of commercial and industrial equipment. Relevant 
provisions of the Act specifically include definitions (42 U.S.C. 
6311), energy conservation standards (42 U.S.C. 6313), test procedures 
(42 U.S.C. 6314), labelling provisions (42 U.S.C. 6315), and the 
authority to require information and reports from manufacturers (42 
U.S.C. 6316).
---------------------------------------------------------------------------

    \5\ For editorial reasons, upon codification in the U.S. Code, 
Part C was redesignated Part A-1.
    \6\ All references to EPCA in this document refer to the statute 
as amended through the American Energy Manufacturing Technical 
Corrections Act (AEMTCA), Public Law 112-210 (Dec. 18, 2012).
---------------------------------------------------------------------------

    EPCA contains mandatory energy conservation standards for 
commercial heating, air-conditioning, and water-heating equipment. (42 
U.S.C. 6313(a)) Specifically, the statute sets standards for small, 
large, and very large commercial package air-conditioning and heating 
equipment, packaged terminal air conditioners (PTACs), packaged 
terminal heat pumps (PTHPs), warm-air furnaces, packaged boilers, 
storage water heaters, instantaneous water heaters, and unfired hot 
water storage tanks. Id. In doing so, EPCA established Federal energy 
conservation standards that generally correspond to the levels in 
ASHRAE Standard 90.1, as in effect on October 24, 1992 (i.e., ASHRAE 
Standard 90.1-1989), for each type of covered equipment listed in 42 
U.S.C. 6313(a). The Energy Independence and Security Act of 2007 (EISA 
2007) amended EPCA by adding definitions and setting minimum energy 
conservation standards for single-package vertical air conditioners 
(SPVACs) and single-package vertical heat pumps (SPVHPs). (42 U.S.C. 
6313(a)(10)(A)) The efficiency standards for SPVACs and SPVHPs 
established by EISA 2007 correspond to the levels contained in ASHRAE 
Standard 90.1-2004, which originated as addendum ``d'' to ASHRAE 
Standard 90.1-2001.
    In acknowledgement of technological changes that yield energy 
efficiency benefits, the U.S. Congress further directed DOE through 
EPCA to consider amending the existing Federal energy conservation 
standard for each type of equipment listed, each time ASHRAE Standard 
90.1 is amended with respect to such equipment. (42 U.S.C. 
6313(a)(6)(A)) For each type of equipment, EPCA directs that if ASHRAE 
Standard 90.1 is amended,\7\ DOE must publish in the Federal Register 
an analysis of the energy savings potential of amended energy 
efficiency standards within 180 days of the amendment of ASHRAE 
Standard 90.1. (42 U.S.C. 6313(a)(6)(A)(i)) EPCA further directs that 
DOE must adopt amended standards at the new efficiency level in ASHRAE 
Standard 90.1, unless clear and convincing evidence supports a 
determination that adoption of a more-stringent level would produce 
significant additional energy savings and be technologically feasible 
and economically justified. (42 U.S.C. 6313(a)(6)(A)(ii)) If DOE 
decides to adopt as a national standard the efficiency levels specified 
in the amended ASHRAE Standard 90.1, DOE must establish such standard 
not later than 18 months after publication of the amended industry 
standard. (42 U.S.C. 6313(a)(6)(A)(ii)(I)) However, if DOE determines 
that a more-stringent standard is justified under 42 U.S.C. 
6313(a)(6)(A)(ii)(II), then it must establish such more-stringent 
standard not later than 30 months after publication of the amended 
ASHRAE Standard 90.1. (42 U.S.C. 6313(a)(6)(B)) In addition, DOE notes 
that pursuant to the EISA 2007 amendments to EPCA, under 42 U.S.C. 
6313(a)(6)(C), the agency must periodically review its already-
established energy conservation standards for ASHRAE equipment. In 
December 2012, this provision was further amended by the American 
Energy Manufacturing Technical Corrections Act (AEMTCA) to clarify that 
DOE's periodic review of ASHRAE equipment must occur ``[e]very six 
years.'' (42 U.S.C. 6313(a)(6)(C)(i))
---------------------------------------------------------------------------

    \7\ Although EPCA does not explicitly define the term 
``amended'' in the context of ASHRAE Standard 90.1, DOE provided its 
interpretation of what would constitute an ``amended standard'' in a 
final rule published in the Federal Register on March 7, 2007 
(hereafter referred to as the ``March 2007 final rule''). 72 FR 
10038. In that rule, DOE stated that the statutory trigger requiring 
DOE to adopt uniform national standards based on ASHRAE action is 
for ASHRAE to change a standard for any of the equipment listed in 
EPCA section 342(a)(6)(A)(i) (42 U.S.C. 6313(a)(6)(A)(i)) by 
increasing the energy efficiency level for that equipment type. Id. 
at 10042. In other words, if the revised ASHRAE Standard 90.1 leaves 
the standard level unchanged or lowers the standard, as compared to 
the level specified by the national standard adopted pursuant to 
EPCA, DOE does not have the authority to conduct a rulemaking to 
consider a higher standard for that equipment pursuant to 42 U.S.C. 
6313(a)(6)(A). DOE subsequently reiterated this position in a final 
rule published in the Federal Register on July 22, 2009 (74 FR 
36312, 36313) and again on May 16, 2012 (77 FR 28928, 28937). 
However, in the AEMTCA amendments to EPCA in 2012, Congress modified 
several provisions related to ASHRAE Standard 90.1 equipment. In 
relevant part, DOE is now triggered to act whenever ASHRAE Standard 
90.1's ``standard levels or design requirements under that 
standard'' are amended. (42 U.S.C. 6313(a)(6)(A)(i)) Furthermore, 
DOE is now required to conduct an evaluation of each class of 
covered equipment in ASHRAE Standard 90.1 ``every 6 years.'' (42 
U.S.C. 6313(a)(6)(C)(i)) For any covered equipment for which more 
than 6 years has elapsed since issuance of the most recent final 
rule establishing or amending a standard for such equipment, DOE 
must publish either the required notice of determination that 
standards do not need to be amended or a NOPR with proposed 
standards by December 31, 2013. (42 U.S.C. 6313(a)(6)(C)(vi)) DOE 
has incorporated these new statutory mandates into its rulemaking 
process for covered ASHRAE 90.1 equipment.
---------------------------------------------------------------------------

    AEMTCA also modified EPCA to specify that any amendment to the 
design requirements with respect to the ASHRAE equipment would trigger 
DOE review of the potential energy savings under U.S.C. 
6313(a)(6)(A)(i). Additionally, AEMTCA amended EPCA to require that if 
DOE proposes an amended standard for ASHRAE equipment at levels more 
stringent than those in ASHRAE Standard 90.1, DOE, in deciding whether 
a standard is economically justified, must determine, after receiving 
comments on the proposed standard, whether the benefits of the standard 
exceed its burdens by considering, to the maximum extent practicable, 
the following seven 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 product in the type (or class) compared to any increase in 
the price, initial charges, or maintenance expenses of the products 
likely to result from the standard;
    (3) The total projected amount of energy savings likely to result 
directly from the standard;
    (4) Any lessening of the utility or the performance of the 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 conservation; and
    (7) Other factors the Secretary considers relevant.
    (42 U.S.C. 6313(a)(6)(B)(ii))
    EPCA also requires that if a test procedure referenced in ASHRAE 
Standard 90.1 is updated, DOE must update its test procedure to be 
consistent with the amended test procedure in ASHRAE Standard 90.1, 
unless DOE determines that the amended test procedure is not reasonably 
designed to produce test results that reflect the energy efficiency, 
energy use, or estimated operating costs of the ASHRAE equipment during 
a representative average use cycle. In addition, DOE must determine 
that the amended test procedure is not unduly burdensome to conduct. 
(42 U.S.C. 6314(a)(2) and(4))
    Additionally, EISA 2007 amended EPCA to require that at least once 
every 7 years, DOE must conduct an

[[Page 1177]]

evaluation of the test procedures for all covered equipment and either 
amend test procedures (if the Secretary determines that amended test 
procedures would more accurately or fully comply with the requirements 
of 42 U.S.C. 6314(a)(2)-(3)) or publish notice in the Federal Register 
of any determination not to amend a test procedure. (42 U.S.C. 
6314(a)(1)(A)) The final rule resulting from this rulemaking will 
satisfy the requirement to review the test procedures for commercial 
warm-air furnaces within seven years.
    On October 9, 2013 ASHRAE officially released and made public 
ASHRAE Standard 90.1-2013. This action triggered DOE's obligations 
under 42 U.S.C. 6313(a)(6), as outlined previously.
    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. 6313(a)(6)(B)(iii)(I)) Also, the Secretary may not 
prescribe an amended or new standard if interested persons have 
established by a preponderance of the evidence that such standard would 
likely result in the unavailability in the United States of 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. 
6313(a)(6)(B)(iii)(II)(aa))
    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, as applicable, water) savings 
during the first year that the consumer will receive as a result of the 
standard, as calculated under the applicable test procedure.
    Additionally, when a type or class of covered equipment such as 
ASHRAE equipment, has two or more subcategories, DOE often specifies 
more than one standard level. DOE generally will adopt a different 
standard level than that which applies generally to such type or class 
of products for any group of covered products that have the same 
function or intended use if DOE determines that products within such 
group: (A) Consume a different kind of energy from that consumed by 
other covered products within such type (or class); or (B) have a 
capacity or other performance-related feature which other products 
within such type (or class) do not have and which justifies a higher or 
lower standard. In determining whether a performance-related feature 
justifies a different standard for a group of products, DOE generally 
considers such factors as the utility to the consumer of the feature 
and other factors DOE deems appropriate. In a rule prescribing such a 
standard, DOE includes an explanation of the basis on which such higher 
or lower level was established. DOE plans to follow a similar process 
in the context of this rulemaking.

B. Background

1. ASHRAE Standard 90.1-2013
    As noted previously, ASHRAE released a new version of ASHRAE 
Standard 90.1 on October 9, 2013. The ASHRAE standard addresses 
efficiency levels for many types of commercial heating, ventilating, 
air-conditioning (HVAC), and water-heating equipment covered by EPCA. 
ASHRAE Standard 90.1-2013 revised its efficiency levels for certain 
commercial equipment, but for the remaining equipment, ASHRAE left in 
place the preexisting levels (i.e., the efficiency levels in ASHRAE 
Standard 90.1-2010). ASHRAE Standard 90.1-2013 did not change any of 
the design requirements for the commercial HVAC and water-heating 
equipment covered by EPCA.
    Table II.1 presents the equipment classes (and corresponding 
efficiency levels) for which efficiency levels in ASHRAE Standard 90.1-
2013 (for metrics included in Federal energy conservation standards) 
differed from those in the previous version of ASHRAE Standard 90.1 
(i.e., ASHRAE Standard 90.1-2010). Table II.1 also presents the 
existing Federal energy conservation standards and the corresponding 
standard levels in both ASHRAE Standard 90.1-2010 and ASHRAE Standard 
90.1-2013 for those equipment classes. Section IV of this document 
assesses each of these equipment types to determine whether the 
amendments in ASHRAE Standard 90.1-2013 constitute increased energy 
efficiency levels, as would necessitate further analysis of the 
potential energy savings from amended Federal energy conservation 
standards; the conclusions of this assessment are presented in the 
final column of Table II.1.

 Table II.1--Federal Energy Conservation Standards and Energy Efficiency Levels in ASHRAE Standard 90.1-2013 for
                                    Specific Types of Commercial Equipment *
----------------------------------------------------------------------------------------------------------------
                                   Energy efficiency   Energy efficiency    Federal energy      Energy-savings
    ASHRAE equipment class **      levels in ASHRAE    levels in ASHRAE      conservation     potential analysis
                                  Standard 90.1-2010  Standard 90.1-2013       standards           required?
----------------------------------------------------------------------------------------------------------------
                      Commercial Package Air-Conditioning and Heating Equipment--Air-Cooled
----------------------------------------------------------------------------------------------------------------
Air-Cooled Air Conditioner, 3-    13.0 SEER.........  14.0 SEER (as of 1/ 13.0 SEER.........  Yes--See section
 Phase, Single-Package, <65,000                        1/2015).                                IV.A.1.
 Btu/h.
Air-Cooled Heat Pump, 3-Phase,    13.0 SEER, 7.7      14.0 SEER, 8.0      13.0 SEER, 7.7      Yes--See section
 Single-Package, <65,000 Btu/h.    HSPF.               HSPF (as of 1/1/    HSPF.               IV.A.1.
                                                       2015).
Air-Cooled Heat Pump, 3-Phase,    13.0 SEER, 7.7      14.0 SEER, 8.2      13.0 SEER, 7.7      Yes--See section
 Split System, <65,000 Btu/h.      HSPF.               HSPF (as of 1/1/    HSPF.               IV.A.1.
                                                       2015).
----------------------------------------------------------------------------------------------------------------
                     Commercial Package Air-Conditioning and Heating Equipment--Water-Source
----------------------------------------------------------------------------------------------------------------
Water-Source Heat Pump, <17,000   11.2 EER, 4.2 COP.  12.2 EER, 4.3       11.2 EER, 4.2 COP.  Yes--See section
 Btu/h.                                                COPH***.                                IV.A.2.
Water-Source Heat Pump, >=17,000  12.0 EER, 4.2 COP.  13.0 EER, 4.3       12.0 EER, 4.2 COP.  Yes--See section
 and <65,000 Btu/h.                                    COPH***.                                IV.A.2.
Water-Source Heat Pump, >=65,000  12.0 EER, 4.2 COP.  13.0 EER, 4.3       12.0 EER, 4.2 COP.  Yes--See section
 and <135,000 Btu/h.                                   COPH***.                                IV.A.2.
----------------------------------------------------------------------------------------------------------------

[[Page 1178]]

 
                        Commercial Package Air-Conditioning and Heating Equipment--PTACs
----------------------------------------------------------------------------------------------------------------
Package Terminal Air              EER = 11.7 as of    EER = 11.9 (as of   EER = 11.7........  Yes--See section
 Conditioner, <7,000 Btu/h,        10/8/12).           1/1/2015).                              IV.A.3.
 Standard Size (New
 Construction) [dagger].
Package Terminal Air              EER = 13.8--(0.300  EER = 14.0--(0.300  EER = 13.8--(0.300  Yes--See section
 Conditioner, >=7,000 and          x                   x                   x                   IV.A.3.
 <=15,000 Btu/h, Standard Size     Cap[thinsp][dagge   Cap[thinsp][dagge   Cap[thinsp][dagge
 (New Construction) [dagger].      r][dagger]) (as     r][dagger]) (as     r][dagger]).
                                   of 10/8/12).        of 1/1/2015).
Package Terminal Air              EER = 9.3 (as of    EER = 9.5 (as of 1/ EER = 9.3.........  Yes--See section
 Conditioner, >15,000 Btu/h,       10/8/12).           1/2015).                                IV.A.3.
 Standard Size (New
 Construction) [dagger].
----------------------------------------------------------------------------------------------------------------
                     Commercial Package Air-Conditioning and Heating Equipment--SDHV and TTW
----------------------------------------------------------------------------------------------------------------
Through-the-Wall (TTW), Air-      13.0 SEER, 7.4      12.0 SEER, 7.4      13.0 SEER, 7.7      No--See section
 Cooled Heat Pumps, <=30,000 Btu/  HSPF.               HSPF.               HSPF.               IV.A.4.
 h.
Small-Duct, High-Velocity, Air-   10.0 SEER.........  11.0 SEER.........  13.0 SEER.........  No--See section
 Cooled (SDHV) Air Conditioners,                                                               IV.A.4.
 <65,000 Btu/h.
Small-Duct, High-Velocity, Air-   10.0 SEER, HSPF     11.0 SEER, 6.8      13.0 SEER, 7.7      No--See section
 Cooled Heat Pumps, <65,000 Btu/   not listed          HSPF.               HSPF.               IV.A.4.
 h.                                [dagger][dagger][
                                   dagger].
----------------------------------------------------------------------------------------------------------------
                  Commercial Package Air-Conditioning and Heating Equipment--SPVACs and SPVHPs
----------------------------------------------------------------------------------------------------------------
Single Package Vertical Air       9.0 EER...........  10.0 EER..........  9.0 EER...........  Yes--See section
 Conditioners, <65,000 Btu/h.                                                                  IV.A.5.
Single Package Vertical Air       8.9 EER...........  10.0 EER..........  8.9 EER...........  Yes--See section
 Conditioners, >=65,000 and                                                                    IV.A.5.
 <135,000 Btu/h.
Single Package Vertical Air       8.6 EER...........  10.0 EER..........  8.6 EER...........  Yes--See section
 Conditioners, >=135,000 and                                                                   IV.A.5.
 <240,000 Btu/h.
Single Package Vertical Heat      9.0 EER, 3.0 COP..  10.0 EER, 3.0       9.0 EER, 3.0 COP..  Yes--See section
 Pumps, <65,000 Btu/h.                                 COPH***.                                IV.A.5.
Single Package Vertical Heat      8.9 EER, 3.0 COP..  10.0 EER, 3.0       8.9 EER, 3.0 COP..  Yes--See section
 Pumps, >=65,000 and <135,000                          COPH***.                                IV.A.5.
 Btu/h.
Single Package Vertical Heat      8.6 EER, 2.9 COP..  10.0 EER, 3.0       8.6 EER, 2.9 COP..  Yes--See section
 Pumps, >=135,000 and <240,000                         COPH***.                                IV.A.5.
 Btu/h.
Single Package Vertical Air       N/A...............  9.2 EER...........  N/                  No--See section
 Conditioners Nonweatherized                                               A[thinsp][dagger].  IV.A.5.
 Space Constrained, <=30,000 Btu/
 h.
Single Package Vertical Air       N/A...............  9.0 EER...........  N/                  No--See section
 Conditioners Nonweatherized                                               A[thinsp][dagger].  IV.A.5.
 Space Constrained, >30,000 and
 <=36,000 Btu/h.
Single Package Vertical Heat      N/A...............  9.2 EER, 3.0 COPH.  N/                  No--See section
 Pumps Nonweatherized Space                                                A[thinsp][dagger].  IV.A.5.
 Constrained, <=30,000 Btu/h.
Single Package Vertical Heat      N/A...............  9.0 EER, 3.0 COPH.  N/                  No--See section
 Pumps Nonweatherized Space                                                A[thinsp][dagger].  IV.A.5.
 Constrained, >30,000 and
 <=36,000 Btu/h.
----------------------------------------------------------------------------------------------------------------
                                            Commercial Water Heaters
----------------------------------------------------------------------------------------------------------------
Electric Storage Water Heaters,   20 + 35 V1/2 SL     0.3 + 27/Vm         0.3 + 27/Vm         No--See Section
 >12 kW, >=20 gal.                 [Dagger][Dagger],   [Dagger][Dagger][   [Dagger][Dagger][   IV.B.
                                   Btu/h.              Dagger] %/h.        Dagger] %/h.
Gas Storage Water Heaters,        80% Et; Q/800 +     80% Et; Q/799 +     80% Et; Q/800 +     No--See Section
 >75,000 Btu/h, <4,000 Btu/h/gal.  110 V1/2 SL         16.6 V1/2 SL        110 Vr1/2 Btu/hr.   IV.B.
                                   [diamso], Btu/h.    [diamso], Btu/
                                                       h[diamso][diamso].
Oil Storage Water Heaters,        78% Et; Q/800 +     80% Et; Q/799 +     78% Et; Q/800 +     Yes--See Section
 >105,000 Btu/h, <4,000 Btu/h/     110 V1/2 SL         16.6 V1/2 SL        110 Vr1/2 Btu/hr.   IV.B.
 gal.                              [diamso], Btu/h.    [diamso], Btu/
                                                       h[diamso][diamso].
Gas Instantaneous Water Heaters,  80% Et, Q/800 +     80% Et, Q/799 +     80% Et, Q/800 +     No--See Section
 >=200,000 Btu/h, >=4,000 Btu/h/   110 V1/2 SL         16.6 V1/2 SL        110 Vr1/2 Btu/hr.   IV.B.
 gal, >=10 gal.                    [diamso], Btu/h.    [diamso], Btu/
                                                       h[diamso][diamso].
Oil Instantaneous Water Heaters,  78% Et, Q/800 +     78% Et, Q/799 +     78% Et, Q/800 +     No--See Section
 >210,000 Btu/h, >=4,000 Btu/h/    110 V1/2 SL         16.6 V1/2 SL        110 Vr1/2 Btu/hr.   IV.B.
 gal, >=10 gal.                    [diamso], Btu/h.    [diamso], Btu/
                                                       h[diamso][diamso].
----------------------------------------------------------------------------------------------------------------
* ``Et'' means thermal efficiency; ``EER'' means energy efficiency ratio; ``SEER'' means seasonal energy
  efficiency ratio; ``HSPF'' means heating seasonal performance factor; ``COP'' and ``COPH'' mean coefficient of
  performance; and ``Btu/h'' or ``Btu/hr'' means British thermal units per hour.
** ASHRAE Standard 90.1-2013 equipment classes may differ from the equipment classes defined in DOE's
  regulations, but no loss of coverage will occur (i.e., all previously covered DOE equipment classes remain
  covered equipment).
*** While ASHRAE Standard 90.1-2013 added a subscript H to COP for all heat pumps, its definition for
  ``coefficient of performance (COP), heat pump--heating'' has not changed. As a result, DOE believes the
  subscript to be a clarifying change of nomenclature (to differentiate from the COP metric used for
  refrigeration) only, rather than a change to the metric itself.
[dagger] ``Standard size'' refers to PTAC equipment with wall sleeve dimensions >=16 inches high or >=42 inches
  wide. For DOE's purposes, this equipment class applies to standard-size equipment regardless of application
  (e.g., new construction or replacement).
[dagger][dagger] ``Cap'' means cooling capacity in kBtu/h at 95[deg]F outdoor dry-bulb temperature.
[dagger][dagger][dagger] This may have been an editorial error in ASHRAE 90.1-2010.

[[Page 1179]]

 
[Dagger] While ASHRAE Standard 90.1-2013 added this equipment class, DOE believes that equipment falling into
  these classes is already covered by Federal standards, most commonly in the residential space-constrained
  central air conditioning equipment class with minimum standards of 12.0 SEER for air conditioners and heat
  pumps and 7.4 HSPF for heat pumps. See section II.A.5.1 of this NODA for further detail.
[Dagger][Dagger] ``V'' means rated volume in gallons; ``SL'' means standby loss.
[Dagger][Dagger][Dagger] ``Vm'' means measured volume in tank.
[diamso] ``Q'' means the nameplate input rate in Btu/hr; ``V'' means rated volume in gallons; ``SL'' means
  standby loss. DOE's descriptor, ``Vr,'' also means rated volume in gallons and differs only in nomenclature.
[diamso][diamso] As explained in section IV.B, DOE believes that all changes to standby loss levels for these
  equipment classes were editorial errors because they are identical to SI (International System of Units;
  metric system) formulas rather than I-P (Inch-Pound; English system) formulas.

    DOE notes that ASHRAE 90.1-2013 also increased integrated energy 
efficiency ratio (IEER) levels for additional equipment not listed in 
Table II.1, including small, large, and very large air-cooled and 
water-cooled air conditioners and heat pumps. However, because current 
Federal energy conservation standards for this equipment do not use 
IEER as a rating metric, DOE is not triggered to review this equipment. 
In September 2014, DOE published a notice of proposed rulemaking (NOPR) 
for commercial air-cooled equipment. 79 FR 58948 (Sept. 30, 2014). In 
the NOPR, DOE proposed amended standards for small, large, and very 
large air-cooled commercial air conditioners and heat pumps based on 
IEER as the energy efficiency descriptor. Should DOE finalize new 
standards using IEER as the metric, future increases in IEER levels in 
ASHRAE Standard 90.1 as compared to the Federal energy conservation 
standards would trigger DOE to review its efficiency levels for that 
equipment.
2. Notice of Data Availability
    On April 11, 2014, DOE published a notice of data availability 
(April 2014 NODA) in the Federal Register and requested public comment 
as a preliminary step required pursuant to EPCA when DOE considers 
amended energy conservation standards for certain types of commercial 
equipment covered by ASHRAE Standard 90.1. 79 FR 20114. Specifically, 
the April 2014 NODA presented for public comment DOE's analysis of the 
potential energy savings estimates related to amended national energy 
conservation standards for the types of commercial equipment for which 
DOE was triggered by ASHRAE action, based on: (1) The modified 
efficiency levels contained within ASHRAE Standard 90.1-2013; and (2) 
more-stringent efficiency levels. Id. at 20134-36. DOE has described 
these analyses and preliminary conclusions and sought input from 
interested parties, including the submission of data and other relevant 
information. Id.
    In addition, DOE presented a discussion in the April 2014 NODA of 
the changes found in ASHRAE Standard 90.1-2013. Id. at 20119-25. The 
April 2014 NODA includes a description of DOE's evaluation of each 
ASHRAE equipment type in order for DOE to determine whether the 
amendments in ASHRAE Standard 90.1-2013 have increased efficiency 
levels or changed design requirements. As an initial matter, DOE sought 
to determine which requirements for covered equipment in ASHRAE 
Standard 90.1, if any: (1) Have been revised solely to reflect the 
level of the current Federal energy conservation standard (where ASHRAE 
is merely ``catching up'' to the current national standard); (2) have 
been revised but with a reduction in stringency; or (3) have had any 
other revisions made that do not change the standard's stringency, in 
which case, DOE is not triggered to act under 42 U.S.C. 6313(a)(6) for 
that particular equipment type. For those types of equipment in ASHRAE 
Standard 90.1 for which ASHRAE actually increased efficiency levels 
above the current Federal standard, DOE subjected that equipment to the 
potential energy savings analysis discussed previously and presented 
the results in the April 2014 NODA for public comment. 79 FR 20114, 
20134-36 (April 11, 2014). Lastly, DOE presented an initial assessment 
of the test procedure changes included in ASHRAE Standard 90.1-2013. 
Id. at 20124-25.
    As a result of the preliminary determination of scope set forth in 
the April 2014 NODA, DOE found that there were equipment types for 
which ASHRAE increased the efficiency levels (thereby triggering 
further analysis) including: (1) Three classes of small three-phase 
air-cooled air conditioners and heat pumps less than 65,000 Btu/h; (2) 
three classes of small water-source heat pumps; (3) six classes of 
single package vertical units; (4) three classes of packaged terminal 
air conditioners; and (5) commercial oil-fired storage water heaters. 
79 FR 20114, 20119-23 (April 11, 2014). DOE presented its methodology, 
data, and results for the preliminary energy savings analysis developed 
for these equipment classes in the April 2014 NODA for public comment. 
79 FR 20114, 20125-38 (April 11, 2014).

III. General Discussion of Comments Regarding the ASHRAE Process and 
DOE's Interpretation of EPCA's Requirements With Respect to ASHRAE 
Equipment

    In response to its request for comment on the April 2014 NODA, DOE 
received 11 comments from manufacturers, trade associations, utilities, 
and energy efficiency advocates. Commenters included: First Co.; Lennox 
International Inc.; National Comfort Products (NCP); Earthjustice; 
Goodman Global, Inc.; California Investor-Owned Utilities (CA IOUs); GE 
Appliances; a group including Appliance Standards Awareness Project 
(ASAP), the American Council for an Energy-Efficient Economy (ACEEE), 
the Natural Resources Defense Council (NRDC), and the Northwest Energy 
Efficiency Alliance (jointly referred to as the Advocates); Daikin 
Applied; Edison Electric Institute (EEI); and the Air-conditioning, 
Heating, and Refrigeration Institute (AHRI). As discussed previously, 
these comments are available in the docket for this rulemaking and may 
be reviewed as described in the ADDRESSES section. The following 
section summarizes the issues raised in these comments, along with 
DOE's responses.
    DOE received numerous comments regarding whether it should, in 
general, adopt levels contained in ASHRAE standard 90.1-2013 as the 
Federal energy conservation standard, rather than more-stringent 
levels. Several commenters stated that DOE should follow ASHRAE's lead 
(e.g., Daikin Applied, No. 0022 at p. 1; Goodman Global, Inc., No. 0018 
at p. 4; Lennox International Inc., No. 0015 at p. 1-2). AHRI stated 
that the ASHRAE revisions represent consensus standards that were 
subject to rigorous public review and were evaluated for cost-
effectiveness. (AHRI, No. 24 at p. 1) Because the current Federal 
values are lower than ASHRAE 90.1-2013 values, EEI argued that less-
efficient equipment could continue to enter the market until the 
effective date of any DOE standards, which would be four years after 
DOE completes the rulemaking for levels higher than ASHRAE. (EEI, No. 
23 at p. 2) EEI added that adopting ASHRAE would reduce the amount of 
DOE

[[Page 1180]]

resources needed for updating these standards. (Id.)
    On the other hand, the Advocates and CA IOUs commented that 
significant, non-trivial energy savings would be achievable by adopting 
higher efficiency levels than those in ASHRAE 90.1-2013 for the 
equipment classes analyzed in the NODA, at least when considered in 
aggregate. (Advocates, No. 21 at p. 1; CA IOUs, No. 19 at pp. 2-3) The 
commenters provided justifications for adopting higher efficiency 
levels for specific equipment classes; these details are discussed in 
the relevant sections of this NOPR.
    In response to the submitted comments, DOE notes that it makes 
decisions about whether to adopt levels in ASHRAE 90.1-2013 or higher 
efficiency levels based on application of the statutory criteria to 
potential standard levels for individual equipment types (per its 
mandate under EPCA), rather than upon some general assessment of 
perceived benefits of a shorter process by adopting the ASHRAE levels 
or any other reason. Specifically, EPCA directs that if ASHRAE Standard 
90.1 is amended, DOE must adopt amended energy conservation standards 
at the new efficiency level in ASHRAE Standard 90.1, unless clear and 
convincing evidence supports a determination that adoption of a more-
stringent level as a national standard would produce significant 
additional energy savings and be technologically feasible and 
economically justified. (42 U.S.C. 6313(a)(6)(A)(ii)) In order to 
determine if more-stringent efficiency levels would meet EPCA's 
criteria, DOE must review the efficiency levels in ASHRAE Standard 
90.1-2013 and more-stringent efficiency levels for their energy savings 
and economic potentials irrespective of whether the efficiency levels 
were part of a consensus standards process. The specific rationale for 
DOE's decisions for each equipment type can be found in the relevant 
sections of this document.
    AHRI also lodged several complaints regarding the analyses 
described in the April 2014 NODA. AHRI stated that DOE's analysis 
ignored the energy savings from changes ASHRAE implemented even before 
Standard 90.1-2013 was published. For example, AHRI argued that 
ASHRAE's water-source heat pump level was developed in 2011, adopted in 
2012, and took effect immediately. (AHRI, No. 24 at p. 2) Thus, the 
products have been providing energy savings for at least 2 years. (Id.) 
AHRI further asserted that DOE's analysis ignores the savings that 
occur from implementation of the ASHRAE standard in 2015 or 2017, 
rather than developing its own revised standard that would take effect 
in 2020. According to AHRI, DOE's rulemaking process will lose 3 to 5 
years of energy savings, and DOE's analysis must consider the energy 
savings associated with earlier implementation of the ASHRAE 90.1-2013. 
(Id.) Finally, AHRI stated that the April 2014 NODA did not address 
technological feasibility and economic justification, unlike ASHRAE 
90.1. (Id.)
    In response, DOE only takes into account energy savings that result 
from adoption of a Federal standard, not from adoption of an industry 
standard such as ASHRAE Standard 90.1. However, DOE did take the 
savings gap into account in the April 2014 NODA by using an analysis 
period of 30 years beginning with 2015 or 2017 for the ASHRAE level, 
and a shorter analysis period beginning in 2020 but with the same end 
date for efficiency levels higher than ASHRAE. As part of any 
rulemaking triggered by ASHRAE, DOE follows EPCA's mandate by only 
addressing energy savings in the NODA and analyzing technological 
feasibility and economic justification in the NOPR where the potential 
for energy savings appears to be significant. DOE further notes that it 
can only take credit for savings from mandatory Federal standards and, 
therefore, cannot take credit for early adoption of ASHRAE Standard 
90.1 levels prior to the compliance date of the corresponding DOE 
standard when evaluating any decision to amend DOE standards. DOE 
commends ASHRAE's action to amend Standard 90.1, as well as any early 
adoption of these levels by manufacturers to improve commercial 
equipment efficiency and to reduce national energy use. DOE strives to 
consider such early adoption in its analysis to the extent that further 
energy savings associated with DOE's adoption of either the ASHRAE 90.1 
standard level or a more-stringent standard level would be negated or 
reduced. In other words, DOE seeks to determine any shifts in the 
baseline prior to adoption of amended DOE standards, thereby allowing 
for a more accurate assessment of energy savings. See section V.F.3 for 
more information regarding efficiency distributions of equipment 
shipments that allow proper consideration of the energy savings 
generated specifically by DOE's potential actions.

IV. General Discussion of the Changes in ASHRAE Standard 90.1-2013 and 
Determination of Scope for Further Rulemaking Activity

    As discussed previously, before beginning an analysis of the 
potential economic impacts and energy savings that would result from 
adopting the efficiency levels specified by ASHRAE Standard 90.1-2013 
or more-stringent efficiency levels, DOE first sought to determine 
whether or not the ASHRAE Standard 90.1-2013 efficiency levels actually 
represented an increase in efficiency above the current Federal 
standard levels. This section discusses each equipment class for which 
the ASHRAE Standard 90.1-2013 efficiency level differs from the current 
Federal standard level, along with DOE's preliminary conclusion as to 
the action DOE is taking with respect to that equipment. (Once again, 
DOE notes that ASHRAE Standard 90.1-2013 did not change any of the 
design requirements for the commercial HVAC and water-heating equipment 
covered by EPCA, so DOE is not conducting further analysis in the 
sections below on that basis.)

A. Commercial Package Air-Conditioning and Heating Equipment

    EPCA, as amended, defines ``commercial package air conditioning and 
heating equipment'' as air-cooled, evaporatively-cooled, water-cooled, 
or water-source (not including ground water-source) electrically 
operated, unitary central air conditioners and central air conditioning 
heat pumps for commercial use. (42 U.S.C. 6311(8)(A); 10 CFR 431.92) 
EPCA also defines ``small,'' ``large,'' and ``very large'' commercial 
package air conditioning and heating equipment based on the equipment's 
rated cooling capacity. (42 6311(8)(B)-(D); 10 CFR 431.92) ``Small 
commercial package air conditioning and heating equipment'' means 
equipment rated less than 135,000 Btu per hour (cooling capacity). (42 
U.S.C. 6311(8)(B); 10 CFR 431.92) ``Large commercial package air 
conditioning and heating equipment'' means equipment rated at or above 
135,000 Btu per hour and less than 240,000 Btu per hour (cooling 
capacity). (42 U.S.C. 6311(8)(C); 10 CFR 431.92) ``Very large 
commercial package air conditioning and heating equipment'' means 
equipment rated at or above 240,000 Btu per hour and less than 760,000 
Btu per hour (cooling capacity). (42 U.S.C. 6311(8)(D); 10 CFR 431.92)
1. Air-Cooled Equipment
    The current Federal energy conservation standards for the three

[[Page 1181]]

classes of air-cooled commercial package air conditioners and heat 
pumps for which ASHRAE Standard 90.1-2013 amended efficiency levels are 
shown in Table II.1 and can be found in DOE's regulations at 10 CFR 
431.97. The Federal energy conservation standards for air-cooled air 
conditioners and heat pumps are differentiated based on the unit's 
cooling capacity (i.e., small, large, or very large). For small 
equipment, there is an additional disaggregation into: (1) Equipment 
less than 65,000 Btu/h and (2) equipment greater than or equal to 
65,000 Btu/h and less than 135,000 Btu/h. In setting initial standards 
for three-phase equipment less than 65,000 Btu/h, Congress used the 
same metric for this commercial equipment as for residential single-
phase equipment (i.e., seasonal energy efficiency ratio (SEER)), which 
is reflected in DOE's current regulations. Unlike the current Federal 
energy conservation standards, ASHRAE Standard 90.1 also differentiates 
the equipment that is less than 65,000 Btu/h into split system and 
single package subcategories. Historically, ASHRAE has set equivalent 
efficiency levels for this equipment; however, effective January 1, 
2015, ASHRAE Standard 90.1-2013 increases the efficiency level for 
single package air conditioners but not split system air conditioners. 
The increased efficiency level for single package air conditioners 
surpasses the current Federal energy conservation standard level for 
the overall equipment class, while the efficiency level for split 
system air conditioners meets and does not exceed the Federal energy 
conservation standard for the overall equipment class. ASHRAE Standard 
90.1-2013 also increases the efficiency levels, effective January 1, 
2015, for both single package and split system air-cooled heat pumps, 
for SEER and heating seasonal performance factor (HSPF), to efficiency 
levels that surpass the current Federal energy conservation standard 
levels. ASHRAE Standard 90.1-2013 increases the HSPF level for split 
systems above that for single package heat pumps.
    Because ASHRAE increased the standard for only single package air 
conditioners, and increased the HSPF level to a more stringent level 
for split system heat pumps than for single package heat pumps, in the 
April 2014 NODA, DOE proposed to consider separate equipment classes 
for single package and split system equipment in the overall equipment 
classes of small commercial package air conditioners and heat pumps 
(air-cooled, three-phase) less than 65,000 Btu/h, as existed prior to 
codification of EISA 2007, and requested comment on this issue.
    In response, AHRI, Goodman Global, and Lennox International agreed 
that DOE should re-create separate classes for split system and single 
package equipment with input ratings less than 65,000 Btu/h. (AHRI, No. 
24 at p. 2; Goodman Global, Inc., No. 18 at p. 2; Lennox International 
Inc., No. 15 at p. 5) The CA IOUs instead preferred having only two 
equipment classes, one for air conditioners, and one for heat pumps, 
with identical levels across single package and split system equipment. 
(CA IOUs, No. 19 at p. 4) In order to facilitate following the 
statutory requirements of the ASHRAE trigger, in this NOPR, DOE 
continues to propose the re-creation of separate equipment classes.
    With regard to split system three-phase air conditioners, 
Earthjustice stated that standards must be reviewed, if not under the 
ASHRAE trigger, then under the six-year look back, as the clock will 
expire next year. (Earthjustice, No. 17 at pp. 1-2) Specifically, 
Earthjustice opined that ASHRAE has amended the Standard 90.1 levels 
for air[hyphen]cooled, three[hyphen]phase air[hyphen]conditioners less 
than 65,000 Btu/h by increasing the required SEER levels for single 
package air conditioners and all heat pump units. The fact that ASHRAE 
did not also increase the Standard 90.1[hyphen]required SEER level for 
split system air conditioners in this equipment class does not insulate 
split system units from DOE's obligation to consider amended standards. 
The ``more stringent'' standard that EPCA obliges DOE to consider for 
this equipment class may be one that, for example, applies a SEER 14 
level (or a higher SEER level) to all air[hyphen]cooled 3[hyphen]phase 
air-conditioners less than 65,000 Btu/h (see 42 U.S.C. 
6313(a)(6)(A)(ii)(II)). (Earthjustice, No. 17 at p. 1) In addition, 
more than six years have elapsed since EISA 2007 amended the standards 
for the split system air conditioners at issue, and even if the 
6[hyphen]year clock began to run only when DOE incorporated the EISA 
2007 levels into the Code of Federal Regulations, the time limit for 
DOE's review will expire next year.\8\ (Earthjustice, No. 17 at pp. 1-
2) The CA IOUs also requested that DOE update efficiency levels for 
split-system air conditioners even though ASHRAE did not update them. 
(CA IOUs, No. 19 at p. 4)
---------------------------------------------------------------------------

    \8\ DOE notes that pursuant to the EISA 2007 amendments to EPCA, 
under 42 U.S.C. 6313(a)(6)(C), the agency must periodically review 
its already established energy conservation standards for ASHRAE 
equipment. In December 2012, this provision was further amended by 
the American Energy Manufacturing Technical Corrections Act (AEMTCA) 
to clarify that DOE's periodic review of ASHRAE equipment must occur 
``[e]very six years.'' (42 U.S.C. 6313(a)(6)(C)(i)) The final rule 
incorporating the EISA 2007 prescribed levels into the CFR was 
published on March 23, 2009. 74 FR 12058.
---------------------------------------------------------------------------

    In response, DOE initially notes that EPCA's trigger regarding 
ASHRAE equipment is tied to the equipment that ASHRAE acts to amend. 
(42 U.S.C. 6313(a)(6)(A)) In this case, DOE was triggered for 3-phase 
air-cooled single-package air conditioners less than 65,000 Btu/h, but 
not the split-system variant, even though both types of units were 
included in a more comprehensive DOE equipment class. As noted 
previously, DOE is acting to prevent confusion by proposing to re-
create separate product classes for the two types of systems. However, 
DOE has decided to now consider amended standards for 3-phase air-
cooled split-system air conditioners less than 65,000 Btu/h under its 
6-year look back authority. (42 U.S.C. 6313(a)(6)(C)(i)) It is worth 
noting that DOE did not consider ASHRAE's single-package air 
conditioner level of 14 SEER as the default adoption value for split-
system air conditioners. Instead, DOE is treating those as a separate 
equipment class and has reviewed the adoption of 14 SEER for split-
system air conditioners as a level more stringent than ASHRAE that must 
result in significant additional conservation of energy and be 
technologically feasible and economically justified.
    In the April 2014 NODA, DOE conducted an analysis of the potential 
energy savings due to amended standards for single-package air 
conditioners and single-package and split-system heat pumps (air-
cooled, three-phase, less than 65,000 Btu/h). At that time, DOE did not 
conduct an analysis of the potential energy savings for split-system 
air conditioners, but it added it to the analysis performed for this 
NOPR.
    In response to the April 2014 NODA, Goodman Global supported the 
ASHRAE levels for small air-cooled air conditioners and heat pumps so 
that single-phase and three-phase products would have the same minimum 
efficiencies, which is a reduced burden. (Goodman Global, Inc., No. 17 
at p. 4) Goodman Global added that it does not believe higher values 
than ASHRAE Standard 90.1-2013 could be justified from a simple payback 
perspective. (Id.) In contrast, the Advocates and the CA IOUs supported 
higher efficiency levels for three-phase equipment. The CA IOUs argued 
that the higher annual operating hours in nonresidential applications 
would support a higher

[[Page 1182]]

efficiency standard. (CA IOUs, No. 19 at p. 4) The Advocates stated 
that three-phase commercial units use a three-phase compressor, which 
is generally more efficient than a single-phase compressor, which 
suggests that a three-phase central air conditioner or heat pump has 
the potential to be more efficient than a comparable single-phase unit 
does. (Advocates, No. 21 at p. 1) Furthermore, the Advocates commented 
that efficiency levels were found on the market that were much higher 
than the ASHARE Standard 90.1-2013 level of SEER 14 and that energy 
savings as high as 0.2 quads may be possible. (Advocates, No. 21 at p. 
3) The CA IOUs stated that more than one-fifth of the models of three-
phase air-cooled single-package units for sale in California could meet 
a 16 SEER standard, which would result in energy savings five times 
greater than the 0.02 quad savings from simply adopting the ASHRAE 
level. (CA IOUs, No. 0019 at p. 2) The CA IOUs added that most 
manufacturers currently have products that meet 15 SEER, and given that 
a compliance date for more-stringent levels would be 2020, the 
manufacturers that do not would have 6 years to redesign. (Id.)
    Upon reviewing the results of the potential energy savings analysis 
in the April 2014 NODA, DOE agrees with the Advocates and the CA IOUs 
that additional significant energy savings are possible and has 
conducted additional economic analysis on this equipment. However, 
after analysis, DOE has tentatively determined that efficiency levels 
higher than those in ASHRAE Standard 90.1-2013 are not economically 
justified for any of the four equipment classes and is proposing in 
this NOPR to adopt the energy efficiency levels contained in ASHRAE 
Standard 90.1-2013 for small air-cooled commercial package air 
conditioning and heating equipment less than 65,000 Btu/h (see section 
VIII.D.1). For split system air conditioners, DOE is not updating 
standards, as the ASHRAE levels are equal to the current Federal 
minimum.
    For small commercial three-phase equipment less than 65,000 Btu/h, 
the CA IOUs stated that DOE should consider including the energy 
efficiency ratio (EER) metric, along with SEER, to align more closely 
with industry standards. (CA IOUs, No. 0019 at p. 3-4) The commenter 
noted that original equipment manufacturers would use both metrics when 
rating a unit. The CA IOUs also commented that the SEER metric is based 
on residential use patterns and, by itself, may not be appropriate to 
characterize energy use in nonresidential buildings. According to the 
commenter, full-load EER better approximates performance during peak 
loading conditions. (Id.)
    In response, DOE does not have authority to adopt multiple metrics 
for a single equipment class. Pursuant to 42U.S.C. 6313(a)(6), the 
Secretary has authority to amend the energy conservation standards for 
specified equipment, but under 42 U.S.C. 6311(18), the statute's 
definition of the term ``energy conservation standard'' is limited to: 
(A) A performance standard that prescribes a minimum level of energy 
efficiency or a maximum quantity of energy use for a product; or (B) a 
design requirement for a product. The language of EPCA authorizes DOE 
to establish a single performance standard or a single design standard, 
but not multiple performance standards.
2. Water-Source Equipment
    The current Federal energy conservation standards for the three 
classes of commercial water-source heat pumps for which ASHRAE Standard 
90.1-2013 amended efficiency levels are shown in Table II.1 and can be 
found in DOE's regulations at 10 CFR 431.97. The Federal energy 
conservation standards for water-source equipment are differentiated 
based on the model's cooling capacity. ASHRAE Standard 90.1-2013 
increased the energy efficiency levels for all three equipment classes 
to efficiency levels that surpass the current Federal energy 
conservation standard levels. Therefore, DOE conducted an analysis of 
the potential energy savings due to amended standards for this 
equipment in the April 2014 NODA.
    In response to the April 2014 NODA, the Advocates requested that 
DOE conduct further analysis to consider higher efficiency levels than 
those in ASHRAE Standard 90.1-2013 efficiency levels for water-source 
heat pumps, because efficiency levels as high as 21 EER are available 
on the market and higher efficiency levels could achieve additional 
national energy savings of as much as 1 quad. (The Advocates, No. 21 at 
p. 1) Upon reviewing the results of the potential energy savings 
analysis in the April 2014 NODA, DOE agrees with the Advocates that 
additional energy savings are possible and has conducted further 
analysis on this equipment. However, after the analysis, DOE has 
tentatively determined that there is not clear and convincing evidence 
that efficiency levels higher than those in ASHRAE 90.1-2013 are 
economically justified for any of the three water-source heat pump 
classes and is proposing in this NOPR to adopt the energy efficiency 
levels contained in ASHRAE Standard 90.1-2013 for water-source heat 
pumps (see section VIII.D.2).
    ASHRAE Standard 90.1-2013 also changed the name of this equipment 
class from ``water source'' to ``water to air, water-loop'' and changed 
the heating-mode descriptor for this equipment from COP to 
COPH. In the April 2014 NODA, DOE suggested that these were 
editorial changes only and that this new nomenclature refers to the 
same water-source heat pump equipment covered by Federal energy 
conservation standards, but with the metric nomenclature serving to 
clarify the difference between COP for refrigeration and COP for heat 
pumps. DOE requested comment on this issue. 79 FR 20114, 20120, 20137 
(April 11, 2014). In response, AHRI agreed that the nomenclature 
changes were editorial. (AHRI, No. 24 at p. 3)
    In the April 2014 NODA, DOE noted that EPCA does not define 
``water-source heat pump'' other than to exclude ground-water-source 
units from the definition of ``commercial package air conditioning and 
heating equipment'' at 42 U.S.C. 6311(8)(A). 79 FR 20114, 20120 (April 
11, 2014). However, DOE noted that there are several related types of 
water-source and ground-water-source heat pumps, as shown in Table 
IV.1. ASHRAE Standard 90.1-2013 included new nomenclature for all such 
types of heat pumps. DOE further noted that the vast majority of water-
source (water-to-air, water-loop) heat pump models are also rated for 
performance in ground-loop or ground-water heat pump applications. It 
is DOE's understanding that design differences of the models used in 
the different applications are minimal, including potential use of 
material with better corrosion resistance in the water coil (for open-
loop systems only) and/or added insulation for ground-water or ground-
loop systems. Efficiency ratings are different across these three 
application types primarily because of the different test conditions. 
(Ground and ground-water-source systems are tested with cooler entering 
water.) Because of the similarity in models across applications, DOE 
believes that increased efficiency standards for water-loop 
applications may affect heat pumps for ground-source and ground-water 
applications, although they are excluded from coverage. Id.


[[Page 1183]]



   Table IV.1--Nomenclature for Types of Water-Loop, Ground-Loop, and
                     Ground-Water-Source Heat Pumps
------------------------------------------------------------------------
                                 ASHRAE standard 90.1-
   ASHRAE standard 90.1-2010             2013            Test procedure
------------------------------------------------------------------------
Water-source (86[deg] entering  Water-to-air, water-    ISO Standard
 water).                         loop.                   13256-1.
Ground-water-source (59[deg]    Water-to-air, ground-
 entering water).                water.
Ground-water source (77[deg]    Brine-to-air, ground-
 entering water).                loop.
Water-source water-to-water     Water-to-water, water-  ISO Standard
 (86[deg] entering water).       loop.                   13256-2.
Water-source water-to-water     Water-to-water, ground-
 (59[deg] entering water).       water.
Ground-water-source brine-to-   Brine-to-water, ground-
 water (77[deg] entering         loop.
 water).
------------------------------------------------------------------------

    In the April 2014 NODA, DOE considered adding a definition for 
``water-source heat pump'' to the Code of Federal Regulations (CFR) 
that would include both single-phase and three-phase units of all 
capacities (up to 760,000 Btu/h) and would be applicable to water-to-
air heat pumps. Specifically, DOE considered adapting the definition 
from that in the ASHRAE handbook: \9\ ``A water-source heat pump is a 
[single-phase or three-phase] reverse-cycle heat pump that uses [a 
circulating water loop] as the heat source for heating and as the heat 
sink for cooling. The main components are a compressor, refrigerant-to-
water heat exchanger, refrigerant-to-air heat exchanger, refrigerant 
expansion devices, and refrigerant reversing valve.'' DOE requested 
comment on this definition. 79 FR 20114, 20120 (April 11, 2014).
---------------------------------------------------------------------------

    \9\ 2012 ASHRAE Handbook, Heating, Ventilating, and Air-
Conditioning Systems and Equipment. ASHRAE, Chapter 9 (Available at: 
https://www.ashrae.org/resources-publications/description-of-the-2012-ashrae-handbook-hvac-systems-and-equipment).
---------------------------------------------------------------------------

    Regarding the proposed definition, Goodman Global agreed that it is 
beneficial to all stakeholders to define as clearly as possible the 
products being regulated. (Goodman Global, Inc., No. 17 at p. 2) On the 
other hand, AHRI stated that a definition for ``water-source heat 
pump'' was outside the scope of activity of this document, because 
ASHRAE Standard 90.1 does not contain any definition of a water-source 
heat pump. (AHRI, No. 24 at p. 3) AHRI also argued that the lack of 
definition has not hampered implementation of Federal minimum 
efficiency for such equipment and that DOE has not established any 
significant need or provided any compelling reasons that require the 
addition of this definition. (Id.) DOE agrees with Goodman Global and 
does not agree with AHRI, tentatively concluding that the nomenclature 
changes in ASHRAE Standard 90.1 that moved away from the term ``water-
source'' necessitate inclusion of a definition for clarity.
    AHRI and Daikin Applied expressed concern with the definition 
covering capacities up to 760,000 Btu/h, noting that neither ASHRAE 
Standard 90.1 nor DOE have standards for models above 135,000 Btu/h. 
(AHRI, No. 24 at p. 3; Daikin Applied, No. 22 at p. 1) Daikin Applied 
further commented that the size of the market above 135,000 Btu/h is 
approximately 2-3 percent of the total, that the AHRI certification 
program stops at 166,000 Btu/h, and that practically speaking, the 
largest models on the market are 250,000 Btu/h. (Id.) Daikin Applied 
argued that there would be test burdens associated with accommodating 
the larger sizes in test labs. (Id.) In response, DOE notes that 
regardless of any current size limits on water-source heat pump 
standards, it does not change the fact that Congress set forth the 
scope of coverage in the statutory definitions for ``commercial package 
air conditioning and heating equipment'' and ``very large commercial 
package air conditioning and heating equipment,'' which is limited to 
equipment with a cooling capacity below 760,000 Btu per hour. (42 
U.S.C. 6311(8)(A) and (D)) However, setting in place a definition of 
``water-source heat pump'' that clearly delineates what that equipment 
entails, as well as the limits on DOE's regulatory authority, would not 
in and of itself generate any standards compliance responsibilities or 
test burden. If the market changed and larger-size units became the 
norm, such standards might be appropriate, with ASHRAE presumably 
setting levels for such equipment. However, providing increased clarity 
through an appropriate definition is not directly tied to any such 
future developments.
    Accordingly, DOE proposes to adopt the following definition, 
adapted from the ASHRAE Handbook and the definition proposed in the 
April 2014 NODA, and specifically referencing the new nomenclature 
included in ASHRAE 90.1-2013: ``Water-source heat pump means a single-
phase or three-phase reverse-cycle heat pump of all capacities (up to 
760,000 Btu/h) that uses a circulating water loop as the heat source 
for heating and as the heat sink for cooling. The main components are a 
compressor, refrigerant-to-water heat exchanger, refrigerant-to-air 
heat exchanger, refrigerant expansion devices, refrigerant reversing 
valve, and indoor fan. Such equipment includes, but is not limited to, 
water-to-air water-loop heat pumps.'' DOE requests additional comment 
on this proposed definition. This is identified as Issue 1 under 
``Issues on Which DOE Seeks Comment'' in section X.E of this NOPR.
    Furthermore, DOE is proposing to revise the nomenclature for its 
water-source heat pump equipment classes to match the revised 
nomenclature in ASHRAE 90.1-2013: water-to-air, water-loop. 
Specifically, DOE proposes to revise Table 1 to 10 CFR 431.96 and 
Tables 1 and 2 to 10 CFR 431.97 to refer to ``water-source (water-to-
air, water-loop)'' heat pumps rather than simply ``water-source'' heat 
pumps. Throughout this document, any reference to water-source heat 
pump equipment classes should be considered as referring to water-to-
air, water-loop heat pumps.
    In preparing this rulemaking, DOE noticed that the 2013 CFR \10\ 
and the current e-CFR \11\ contained errors in Table 1 and Table 2 to 
10 CFR 431.96 and Table 2 to 10 CFR 431.97 for small water-source heat 
pumps (i.e., less than 135,000 Btu/h), as well as in Table 1 to 10 CFR 
431.97 for small, large, and very large water-source heat pumps. DOE 
has determined that these errors were incorporated through the previous 
ASHRAE-trigger final rule. 77 FR 28928 (May 16, 2012). By this 
rulemaking, DOE seeks to clarify the relevant tables by removing the 
inadvertently amended language.
---------------------------------------------------------------------------

    \10\ See http://www.gpo.gov/fdsys/pkg/CFR-2013-title10-vol3/pdf/CFR-2013-title10-vol3-part431-subpartF.pdf.
    \11\ See http://www.ecfr.gov/cgi-bin/retrieveECFR?gp=&SID=1f6aa69cce81d1ccc6e9158c94d81e91&r=PART&n=pt10.3.431#sp10.3.431.f.
---------------------------------------------------------------------------

3. Packaged Terminal Air Conditioners and Heat Pumps
    EPCA defines a ``packaged terminal air conditioner'' as ``a wall 
sleeve and a separate unencased combination of heating and cooling 
assemblies specified by the builder and intended for mounting through 
the wall. It includes a prime source of refrigeration, separable 
outdoor louvers, forced ventilation, and heating availability by

[[Page 1184]]

builder's choice of hot water, steam, or electricity.'' (42 U.S.C. 
6311(10)(A)) EPCA defines a ``packaged terminal heat pump'' as ``a 
packaged terminal air conditioner that utilizes reverse cycle 
refrigeration as its prime heat source and should have supplementary 
heat source available to builders with the choice of hot water, steam, 
or electric resistant heat.'' (42 U.S.C. 6311(10)(B)) DOE codified 
these definitions at 10 CFR 431.92 in a direct final rule published in 
the Federal Register on October 21, 2004. 69 FR 61962, 61970.
    The current Federal energy conservation standards for the three 
classes of PTACs for which ASHRAE Standard 90.1-2013 amended efficiency 
levels are shown in Table II.1 and are found in DOE's regulations at 10 
CFR 431.97. The Federal energy conservation standards for PTACs are 
differentiated based on the cooling capacity and physical dimensions 
(standard versus nonstandard size). ASHRAE Standard 90.1-2013 increased 
the energy efficiency levels for all three standard-size PTAC equipment 
classes to efficiency levels that meet those for PTHPs and surpass the 
current Federal energy conservation standard levels for PTACs. 
Therefore, DOE conducted an analysis of the potential energy savings 
due to amended standards for standard-size PTACs in the April 2014 
NODA. 79 FR 20114, 20120-21 (April 11, 2014).
    Prior to the ASHRAE trigger, in February 2013, DOE published a 
notice of public meeting and availability of the Framework Document 
regarding energy conservation standards for packaged terminal air 
conditioners and heat pumps standards. 78 FR 12252 (Feb. 22, 2013). 
This Framework Document was published as a first step toward meeting 
the six-year look back requirement specified in EISA 2007. (42 U.S.C. 
6313(a)(6)(C)(i)) As part of the six-year look back, in September 2014, 
DOE issued a NOPR for PTAC and PTHP equipment that included equipment 
classes for which ASHRAE Standard 90.1-2013 increased efficiency levels 
(i.e., standard-size PTACs), as well as those for which it did not. 79 
FR 55537 (Sept. 16, 2014). Consequently, PTACs will not be discussed in 
the remainder of this document; comments received on the April 2014 
NODA related to PTACs were discussed in the PTAC NOPR.
4. Small-Duct, High-Velocity, and Through-The-Wall Equipment
    EPCA does not separate three-phase small-duct high-velocity (SDHV) 
or through-the-wall (TTW) heat pumps from other types of small 
commercial package air-conditioning and heating equipment in its 
definitions. (42 U.S.C. 6311(8)) Therefore, EPCA's definition of 
``small commercial package air conditioning and heating equipment'' 
would include three-phase SDHV and TTW heat pumps. In contrast, single-
phase SDHV and space-constrained equipment (including TTW), which are 
not the subject of this document, have separate product classes under 
DOE's residential central air conditioner and heat pump standards (see 
10 CFR 430.32(c)).
    ASHRAE Standard 90.1-2013 appeared to change some of the efficiency 
levels for three-phase SDHV and TTW equipment. Specifically, ASHRAE 
Standard 90.1-2010 had increased the cooling efficiency requirements 
for TTW heat pumps to 13.0 SEER in comparison to the efficiency levels 
of 12.0 SEER in ASHRAE Standard 90.1-2007. However, in March 2011, 
ASHRAE issued Proposed Addendum h for public review that would correct 
the minimum SEER for this equipment to 12.0 SEER, and this addendum was 
approved and incorporated into ASHRAE Standard 90.1-2013. Therefore, 
this change in ASHRAE Standard 90.1-2013 was correcting an editorial 
error in ASHRAE Standard 90.1-2010.
    For SDHV air conditioners and heat pumps, ASHRAE Standard 90.1-2013 
increases the cooling efficiency requirement from 10.0 SEER to 11.0 
SEER. It also includes a heating efficiency requirement for SDHV heat 
pumps of 6.8 HSPF, which was present in ASHRAE 90.1-2007 but not ASHRAE 
90.1-2010 (which DOE also thought to be an editorial error). These 
changes were made through Addendum bj to ASHRAE 90.1-2010, which noted 
that the previously adopted Addendum j to ASHRAE Standard 90.1-2010 had 
deleted the SDHV equipment class entirely because all SDHV models sold 
were single-phase residential products, but that Addendum bj was re-
establishing the equipment class because manufacturers had expressed an 
intention to introduce three-phase equipment to the market. In 
addition, Addendum bj noted that it contained minimum efficiency levels 
identical to those established by DOE for single-phase residential SDHV 
products.
    The DOE standards for both commercial (three-phase) TTW and SDHV 
air conditioners, which are 13.0 SEER, and for heat pumps, which are 
13.0 SEER and 7.7 HSPF, were established for the overall equipment 
category of small commercial package air-conditioning and heating 
equipment by EISA 2007, which amended EPCA. (42 U.S.C. 6313(a)(7)(D)) 
Because the ASHRAE Standard 90.1-2013 efficiency levels for three-phase 
TTW and SDHV equipment are less than the applicable Federal standards, 
DOE has tentatively concluded that it is not required to take action on 
this equipment at this time (see 42 U.S.C. 6313(a)(6)(A)(i) and 
(B)(iii)(I)). DOE did not receive comment on this issue and reaffirms 
this position.
5. Single-Package Vertical Air Conditioners and Single-Package Vertical 
Heat Pumps
    EPCA, as amended, defines ``single package vertical air 
conditioner'' as air-cooled commercial package air conditioning and 
heating equipment that:
    (1) Is factory-assembled as a single package that:
    (i) Has major components that are arranged vertically;
    (ii) is an encased combination of cooling and optional heating 
components; and
    (iii) is intended for exterior mounting on, adjacent interior to, 
or through an outside wall;
    (2) is powered by a single- or 3-phase current;
    (3) may contain one or more separate indoor grilles, outdoor 
louvers, various ventilation options, indoor free air discharges, 
ductwork, wall plenum, or sleeves; and
    (4) has heating components that may include electrical resistance, 
steam, hot water, or gas, but may not include reverse cycle 
refrigeration as a heating means.
    (42 U.S.C. 6311(22) ; 10 CFR 431.92)
    EPCA, as amended, defines ``single package vertical heat pump'' as 
a single-package vertical air conditioner that
    (1) uses reverse cycle refrigeration as its primary heat source; 
and
    (2) may include secondary supplemental heating by means of 
electrical resistance, steam, hot water, or gas.
    (42 U.S.C. 6311(23); 10 CFR 431.92)
    The current Federal energy conservation standards for the six 
classes of single-package vertical units (SPVUs) for which ASHRAE 
Standard 90.1-2013 amended efficiency levels are shown in Table II.1 
and can be found in DOE's regulations at 10 CFR 431.97. The equipment 
classes for SPVACs and SPVHPs, as well as their attendant Federal 
energy conservation standards, are differentiated based on cooling 
capacity. ASHRAE Standard 90.1-2013 increased the energy efficiency 
levels for all six equipment classes to efficiency levels that surpass 
the current Federal energy conservation standard levels. Therefore, DOE 
conducted an analysis of the potential energy savings

[[Page 1185]]

due to amended standards for this equipment in the April 2014 NODA. 79 
FR 20114, 20121 (April 11, 2014).
    In response to the April 2014 NODA, Lennox urged DOE to adopt the 
ASHRAE Standard 90.1-2013 efficiency levels for SPVUs. (Lennox 
International Inc., No. 0015 at p. 2) On the other hand, the Advocates 
encouraged DOE to initiate a rulemaking for SPVUs to consider higher 
efficiency levels than those in ASHRAE Standard 90.1-2013 because of 
potential national energy savings up to 0.48 quads. (Advocates, No. 21 
at p. 3) DOE notes that prior to the release of ASHRAE Standard 90.1-
2013, DOE had already been conducting a rulemaking on SPVUs as a result 
of a one-time review requirement added by EISA 2007. See 76 FR 25622, 
25633 (May 5, 2011). DOE will continue to conduct its SPVU analysis as 
part of a separate rulemaking that will also meet the requirements of 
the ASHRAE trigger, and accordingly, DOE has not included any further 
analysis or results regarding SPVUs in this NOPR. In the April 11, 2014 
NODA, DOE also discussed its consideration of a space-constrained SPVU 
equipment class (79 FR 20114, 20121-23); DOE's consideration of that 
issue will also occur in the separate SPVU rulemaking.

B. Commercial Water Heaters

    EPCA defines ``storage water heater'' as a water heater that heats 
and stores water within the appliance at a thermostatically controlled 
temperature for delivery on demand. This term does not include units 
with an input rating of 4,000 Btu/h or more per gallon of stored water. 
(42 U.S.C. 6311(12)(A)) DOE further clarified this definition in its 
regulations by adding that it is industrial equipment. 10 CFR 431.102. 
EPCA defines ``instantaneous water heater'' as a water heater that has 
an input rating of at least 4,000 Btu/h per gallon of stored water. (42 
U.S.C. 6311(12)(B)) DOE further clarified this definition in its 
regulations by adding that it is industrial equipment, including 
products meeting this description that are designed to heat water to 
temperatures of 180[deg]F or higher. 10 CFR 431.102.
    The current Federal energy conservation standards for the five 
classes of storage and instantaneous water heaters for which ASHRAE 
Standard 90.1-2013 amended efficiency levels are shown in Table II.1 
and set forth in DOE's regulations at 10 CFR 431.110. The equipment 
classes for commercial storage and instantaneous water heaters, and 
attendant Federal energy conservation standards, are differentiated 
based on fuel type and size category. ASHRAE Standard 90.1-2013 
appeared to change the standby loss levels for four equipment classes 
(gas-fired storage water heaters, oil-fired storage water heaters, gas-
fired instantaneous water heaters, and oil-fired instantaneous water 
heaters) to efficiency levels that surpass the current Federal energy 
conservation standard levels. However, as discussed in the April 11, 
2014 NODA, upon review of the changes, DOE believes that all changes to 
standby loss levels for these equipment classes were editorial errors 
because they are identical to SI (International System of Units; metric 
system) formulas rather than I-P (Inch-Pound; English system) formulas. 
79 FR 20114, 20123. Therefore, DOE did not conduct an analysis of the 
potential energy savings for this equipment. DOE received no comment on 
this issue.
    As discussed in the April 11, 2014 NODA, ASHRAE Standard 90.1-2013 
also changed the standby loss level for electric storage water heaters, 
in this case in a purposeful manner to align with the current Federal 
energy conservation standard level. Id. Because these levels meet and 
do not exceed the current Federal standards, DOE did not conduct an 
analysis of the potential energy savings for this equipment class.
    ASHRAE Standard 90.1-2013 also increased the thermal efficiency 
levels for oil-fired storage water heaters to efficiency levels that 
surpass the current Federal energy conservation standards. Therefore, 
DOE conducted an analysis of the potential energy savings due to 
amended thermal efficiency standards for oil-fired storage water 
heaters in the April 2014 NODA. Id.
    DOE did not receive any comments from stakeholders specific to the 
efficiency level DOE should adopt for oil-fired storage water heaters. 
Based on the results of the April 2014 NODA, DOE has determined that 
there are minimal energy savings available from this equipment and has 
not conducted further analyses on these products. Therefore, DOE is 
proposing in this NOPR to adopt the energy efficiency levels contained 
in ASHRAE Standard 90.1-2013 for commercial oil-fired storage water 
heaters (see section VIII.D.3).
    In response to the April 2014 NODA, DOE received comment from the 
Advocates that the standards for all commercial water heaters, not just 
oil-fired storage water heaters, are due for a six-year look back. 
(Advocates, No. 21 at p. 3) Although DOE acknowledges its statutory 
obligation to review the standards for commercial water heaters, in 
order to best allocate available resources, DOE is limiting the scope 
of this current rulemaking to ASHRAE-triggered equipment. However, in 
October 2014, the agency issued a request for information (RFI) 
regarding commercial water heaters to initiate a separate six-year look 
back rulemaking for all categories of commercial water heating 
equipment. 79 FR 62899 (Oct. 21, 2014).

C. Test Procedures

    EPCA requires the Secretary to amend the DOE test procedures for 
covered ASHRAE equipment to the latest version of those generally 
accepted industry testing procedures or the rating procedures developed 
or recognized by AHRI or by ASHRAE, as referenced by ASHRAE/IES 
Standard 90.1, unless the Secretary determines by rule published in the 
Federal Register and supported by clear and convincing evidence that 
the latest version of the industry test procedure does not meet the 
requirements for test procedures described in paragraphs (2) and (3) of 
42 U.S.C. 6314(a).\12\ (42 U.S.C. 6314(a)(4)(B)) ASHRAE Standard 90.1-
2013 updated several of its test procedures for ASHRAE equipment. 
Specifically, ASHRAE Standard 90.1-2013 updated to the most recent 
editions of test procedures for small commercial package air 
conditioners and heating equipment (AHRI 210/240-2008 with Addendum 1 
and 2, Performance Rating of Unitary Air-Conditioning & Air-Source Heat 
Pump Equipment), large and very large commercial package air 
conditioners and heating equipment (AHRI 340/360-2007 with Addenda 1 
and 2, Performance Rating of Commercial and Industrial Unitary Air-
Conditioning and Heat Pump Equipment), variable refrigerant flow 
equipment (AHRI 1230-2010 with Addendum 1, Performance Rating of 
Variable Refrigerant Flow (VRF) Multi-Split Air-Conditioning and Heat 
Pump Equipment), commercial warm-air furnaces (ANSI (American National 
Standards Institute) Z21.47-2012, Standard for Gas-Fired Central

[[Page 1186]]

Furnaces), and commercial water heaters (ANSI Z21.10.3-2011, Gas Water 
Heaters, Volume III, Storage Water Heaters with Input Ratings Above 
75,000 Btu Per Hour, Circulating and Instantaneous).
---------------------------------------------------------------------------

    \12\ (2) Test procedures prescribed in accordance with this 
section shall be reasonably designed to produce test results which 
reflect energy efficiency, energy use, and estimated operating costs 
of a type of industrial equipment (or class thereof) during a 
representative average use cycle (as determined by the Secretary), 
and shall not be unduly burdensome to conduct. (3) If the test 
procedure is a procedure for determining estimated annual operating 
costs, such procedure shall provide that such costs shall be 
calculated from measurements of energy use in a representative 
average-use cycle (as determined by the Secretary), and from 
representative average unit costs of the energy needed to operate 
such equipment during such cycle. The Secretary shall provide 
information to manufacturers of covered equipment respecting 
representative average unit costs of energy.
---------------------------------------------------------------------------

    In the April 2014 NODA, DOE preliminarily reviewed each of the test 
procedures that were updated in ASHRAE Standard 90.1-2013 and discussed 
the changes to those industry test procedures. 79 FR 20114, 20123-25 
(April 11, 2014). DOE found that for AHRI 210/240, AHRI 340/360, AHRI 
1230, and ANSI Z1.10.3, DOE had already incorporated by reference the 
most recent version \13\ and did not need to take action. DOE received 
no comment on this issue. For ANSI Z21.47, DOE determined that the 
changes to the 2012 version do not impact those provisions of that 
industry test procedure that are used under the DOE test procedure for 
gas-fired warm air furnaces, and, therefore, such changes do not affect 
the energy efficiency ratings for gas-fired furnaces. Consequently, DOE 
determined that no further action was required at the time. Id. at 
20124-25. In response to the April 2014 NODA, AHRI, Goodman Global, and 
Lennox International agreed with DOE's substantive assessment of ANSI 
Z21.47-2012. (AHRI, No. 24 at p. 5; Goodman Global, Inc., No. 18 at p. 
2; Lennox International, Inc., No. 15 at p. 6) However, in keeping with 
EPCA's mandate to incorporate the latest version of the applicable 
industry test procedure pursuant to 42 U.S.C. 6314(a)(4)(B), DOE is 
proposing to incorporate by reference ANSI Z21.47-2012. Once again, DOE 
anticipates no substantive change or increase in test burden to be 
associated with this test procedure amendment for warm air furnaces.
---------------------------------------------------------------------------

    \13\ This final rule for commercial heating, air-conditioning, 
and water-heating equipment was published in the Federal Register on 
May 16, 2012. 77 FR 28928.
---------------------------------------------------------------------------

    DOE is also required to review the test procedures for covered 
ASHRAE equipment at least once every seven years. (42 U.S.C. 
6314(a)(1)(A)) In addition to the updates to the referenced standards 
discussed previously, DOE is proposing to update the citations and 
incorporations by reference in DOE's regulations for commercial warm-
air furnaces to the most recent version of ASHRAE 103, Method of 
Testing for Annual Fuel Utilization Efficiency of Residential Central 
Furnaces and Boiler (i.e., ASHRAE 103-2007). The applicable sections of 
this standard include measurement of condensate and calculation of 
additional heat gain and heat losses for condensing furnaces. DOE notes 
that the most recent version does not contain any updates to the 
sections currently referenced by the DOE test procedure, so no 
additional burden would be expected to result from this test procedure 
update.
    DOE is aware that some commercial furnaces are designed for make-up 
air heating (i.e., heating 100 percent outdoor air). DOE defines 
``commercial warm air furnace'' at 10 CFR 431.72 as self-contained oil-
fired or gas-fired furnaces designed to supply heated air through ducts 
to spaces that require it, with a capacity (rated maximum input) at or 
above 225,000 Btu/h. Further, DOE's definitions specify that this 
equipment includes combination warm air furnace/electric air 
conditioning units but does not include unit heaters and duct furnaces. 
Given the characteristics of this category of commercial furnaces, DOE 
tentatively concludes that gas-fired and oil-fired commercial furnaces 
that are designed for make-up air heating and that have input ratings 
at or above 225,000 Btu/h meet the definition of ``commercial warm air 
furnace'' because they are self-contained units that supply heated air 
through ducts. Consequently, DOE is clarifying that commercial warm air 
furnaces that are designed for make-up air heating are subject to DOE's 
regulatory requirements, including being tested according to the test 
procedure specified in 10 CFR 431.76.
    DOE is seeking comments on any relevant issues that would affect 
the test procedure for commercial warm air furnaces. Interested parties 
are welcome to comment on any aspect of the DOE commercial warm air 
furnaces test procedure as part of this comprehensive 7-year-review. 
This is identified as issue 2 in section X.E, ``Issues on Which DOE 
Seeks Comment.''

V. Methodology for Small Commercial Air-Cooled Air Conditioners and 
Heat Pumps Less Than 65,000 Btu/h

    This section addresses the analyses DOE has performed for this 
rulemaking with respect to small commercial air-cooled air conditioners 
and heat pumps less than 65,000 Btu/h. A separate subsection addresses 
each analysis. In overview, DOE used a spreadsheet to calculate the 
life-cycle cost (LCC) and payback periods (PBPs) of potential energy 
conservation standards. DOE used another spreadsheet to provide 
shipments projections and then calculate national energy savings and 
net present value impacts of potential amended energy conservation 
standards.

A. Market Assessment

    To begin its review of the ASHRAE Standard 90.1-2013 efficiency 
levels, DOE developed information that provides an overall picture of 
the market for the equipment concerned, including the purpose of the 
equipment, the industry structure, and market characteristics. This 
activity included both quantitative and qualitative assessments based 
primarily on publicly-available information. The subjects addressed in 
the market assessment for this rulemaking include equipment classes, 
manufacturers, quantities, and types of equipment sold and offered for 
sale. The key findings of DOE's market assessment are summarized in the 
following sections. For additional detail, see chapter 2 of the NOPR 
technical support document (TSD).
1. Equipment Classes
    As discussed previously, the Federal energy conservation standards 
for air-cooled air conditioners and heat pumps are differentiated based 
on the cooling capacity (i.e., small, large, or very large). For small 
equipment, there is an additional disaggregation into: (1) Equipment 
less than 65,000 Btu/h and (2) equipment greater than or equal to 
65,000 Btu/h and less than 135,000 Btu/h. ASHRAE Standard 90.1-2013 
also differentiates the equipment that is less than 65,000 Btu/h into 
split system and single package subcategories. In the past, DOE has 
followed the same disaggregation. However, when EISA 2007 increased the 
efficiency levels to identical levels across single package and split 
system equipment, effective in 2008, DOE combined the equipment classes 
in the CFR, resulting in only two equipment classes, one for air 
conditioners and one for heat pumps. 74 FR 12058, 12074 (March 23, 
2009). Because ASHRAE has increased the standard for only single 
package air conditioners, and has increased the HSPF level to a more 
stringent level for split system heat pumps than for single package 
heat pumps, and DOE is obligated to adopt, at a minimum, the increased 
level in ASHRAE 90.1-2013 for that equipment class, DOE proposes to re-
create separate equipment classes for single package and split system 
equipment in the overall equipment classes of small commercial package 
air conditioners and heat pumps (three-phase air-cooled) less than 
65,000 Btu/h, as shown in Table V.1.

[[Page 1187]]



Table V.1--Proposed Equipment Classes for Small Commercial Packaged Air-
            Conditioning and Heating Equipment <65,000 Btu/h
------------------------------------------------------------------------
                                              Cooling
                 Product                  capacity  (Btu/  Sub-category
                                                h)
------------------------------------------------------------------------
Small Commercial Packaged Air                    <65,000              AC
 Conditioning and Heating Equipment (Air-                             HP
 Cooled, 3-Phase, Split System).........
Small Commercial Packaged Air                    <65,000              AC
 Conditioning and Heating Equipment (Air-                             HP
 Cooled, 3-Phase, Single Package).......
------------------------------------------------------------------------

2. Review of Current Market
    In order to obtain the information needed for the market assessment 
for this rulemaking, DOE consulted a variety of sources, including 
manufacturer literature, manufacturer Web sites, and the AHRI certified 
directory.\14\ The information DOE gathered serves as resource material 
throughout the rulemaking. The sections below provide an overview of 
the market assessment, and chapter 2 of the NOPR TSD provides 
additional detail on the market assessment, including citations to 
relevant sources.
---------------------------------------------------------------------------

    \14\ AHRI Directory of Certified Product Performance (2013) 
(Available at: www.ahridirectory.org) (Last accessed November 11, 
2013).
---------------------------------------------------------------------------

a. Trade Association Information
    DOE researched various trade groups representing manufacturers, 
distributors, and installers of the various types of equipment being 
analyzed in this rulemaking. AHRI is one of the largest trade 
associations for manufacturers of space-heating, cooling, and water-
heating equipment, representing more than 90 percent of the residential 
and commercial air-conditioning, space-heating, water-heating, and 
commercial refrigeration equipment manufactured in the United 
States.\15\ AHRI also develops and publishes test procedure standards 
for measuring and certifying the performance of residential and 
commercial HVAC equipment and coordinates with the International 
Organization for Standardization (ISO) to help harmonize U.S. standards 
with international standards, if feasible. AHRI also maintains the AHRI 
Directory of Certified Product Performance, which is a database that 
lists all the products and equipment that have been certified by AHRI, 
thereby providing equipment ratings for all manufacturers who elect to 
participate in the program. DOE utilized this database in developing 
base-case efficiency distributions.
---------------------------------------------------------------------------

    \15\ Air-Conditioning, Heating, and Refrigeration Institute Web 
site, About Us (2013) (Available at: www.ari.org/site/318/About-Us) 
(Last accessed December 18, 2014).
---------------------------------------------------------------------------

    The Heating, Air-conditioning and Refrigeration Distributors 
International (HARDI) is a trade association that represents over 450 
wholesale heating, ventilating, air-conditioning, and refrigeration 
(HVACR) companies, plus over 300 manufacturing associates and nearly 
140 manufacturing representatives. HARDI estimates that 80 percent of 
the revenue of HVACR systems goes through its members.\16\ DOE did not 
utilize HARDI data for this rule.
---------------------------------------------------------------------------

    \16\ Heating, Air-conditioning & Refrigeration Distributors 
International Web site, About HARDI (2014) (Available at: 
www.hardinet.org/about-hardi-0) (Last accessed February 10, 2014).
---------------------------------------------------------------------------

    The Air Conditioning Contractors of America (ACCA) is another trade 
association whose members include over 4,000 contractors and 60,000 
professionals in the indoor environment and energy service community. 
According to their Web site, ACCA provides contractors with technical, 
legal, and market resources, helping to promote good practices and to 
keep buildings safe, clean, and affordable.\17\ DOE did not use ACCA 
data for this rule.
---------------------------------------------------------------------------

    \17\ Air Conditioning Contractors of America Web site, About 
ACCA (2014) (Available at: www.acca.org/acca) (Last accessed 
February 10, 2014).
---------------------------------------------------------------------------

b. Manufacturer Information
    DOE reviewed data for air-cooled commercial air conditioners and 
heat pumps currently on the market by examining the AHRI Directory of 
Certified Product Performance. DOE identified 23 parent companies 
(comprising 61 manufacturers) of small three-phase air-cooled air 
conditioners and heat pumps, which are listed in chapter 2 of the NOPR 
TSD. Of these manufacturers, five were identified as small businesses 
based upon number of employees and the employee thresholds set by the 
Small Business Administration. More details on this analysis can be 
found below in section IX.B.
c. Market Data
    DOE reviewed the AHRI database to characterize the efficiency and 
performance of small commercial air-cooled air conditioners and heat 
pumps less than 65,000 Btu/h models currently on the market. The full 
results of this market characterization are found in chapter 2 of the 
NOPR TSD. For split-system air conditioners, the average SEER value was 
13.9, and 120 models (0.1 percent of the total models) have SEER 
ratings below the ASHRAE Standard 90.1-2013 level of 13.0 SEER. For 
single-package air conditioners, the average SEER value was 14.3, and 
1,450 models (45 percent of the total models) have SEER ratings below 
the ASHRAE Standard 90.1-2013 level of 14.0 SEER.
    For single-package heat pumps, the average SEER value is 14.0. Of 
the models identified by DOE, 653 models (54 percent of the total 
models) have SEER ratings below the ASHRAE Standard 90.1-2013 level of 
14.0 SEER. The average HSPF value for this equipment class is 7.9. Of 
the models identified by DOE, 632 models (52 percent of the total 
models) have HSPF ratings below the ASHRAE Standard 90.1-2013 levels of 
8.0. For split-system heat pumps, the average SEER value for this 
equipment class is 13.7. Of the models identified by DOE, 30,009 models 
(64 percent of the total models) have SEER ratings below the ASHRAE 
Standard 90.1-2013 level of 14.0. The average HSPF for this equipment 
class is 7.9. Of the models identified by DOE, 36,902 models (79 
percent of the total models) have HSPF ratings below the ASHRAE 
Standard 90.1-2013 level of 8.2. For more information on market 
performance data, see chapter 2 of the NOPR TSD.

B. Engineering Analysis

    The engineering analysis establishes the relationship between an 
increase in energy efficiency and the increase in cost (manufacturer 
selling price (MSP)) of a piece of equipment DOE is evaluating for 
potential amended energy conservation standards. This relationship 
serves as the basis for cost-benefit calculations for individual

[[Page 1188]]

consumers, manufacturers, and the Nation. The engineering analysis 
identifies representative baseline equipment, which is the starting 
point for analyzing possible energy efficiency improvements. For 
covered ASHRAE equipment, DOE sets the baseline for analysis at the 
ASHRAE Standard 90.1 efficiency level, because by statute, DOE cannot 
adopt any level below the revised ASHRAE level. The engineering 
analysis then identifies higher efficiency levels and the incremental 
increase in product cost associated with achieving the higher 
efficiency levels. After identifying the baseline models and cost of 
achieving increased efficiency, DOE estimates the additional costs to 
the commercial consumer through an analysis of contractor costs and 
markups and uses that information in the downstream analyses to examine 
the costs and benefits associated with increased equipment efficiency.
    DOE typically structures its engineering analysis around one of 
three methodologies: (1) The design-option approach, which calculates 
the incremental costs of adding specific design options to a baseline 
model; (2) the efficiency-level approach, which calculates the relative 
costs of achieving increases in energy efficiency levels without regard 
to the particular design options used to achieve such increases; and/or 
(3) the reverse-engineering or cost-assessment approach, which involves 
a ``bottom-up'' manufacturing cost assessment based on a detailed bill 
of materials derived from teardowns of the equipment being analyzed. A 
supplementary method called a catalog teardown uses published 
manufacturer catalogs and supplementary component data to estimate the 
major physical differences between a piece of equipment that has been 
physically disassembled and another piece of similar equipment for 
which catalog data are available to determine the cost of the latter 
equipment. Deciding which methodology to use for the engineering 
analysis depends on the equipment, the design options under study, and 
any historical data upon which DOE may draw.
1. Approach
    For this analysis, DOE used a combination of the efficiency-level 
and the cost-assessment approach. DOE used the efficiency-level 
approach to identify incremental improvements in efficiency for each 
equipment class and the cost-assessment approach to develop a cost for 
each efficiency level. The efficiency levels that DOE considered in the 
engineering analysis were representative of three-phase central air 
conditioners and heat pumps currently produced by manufacturers at the 
time the engineering analysis was developed. DOE relied on data 
reported in the AHRI Directory of Certified Product Performance to 
select representative efficiency levels.
    DOE generated a bill of materials (BOM) for each representative 
product that it disassembled. DOE did this for multiple manufacturers' 
products that span a range of efficiency levels for the equipment 
classes that are analyzed in this rulemaking. The BOMs describe the 
manufacture of the equipment in detail, listing all parts and including 
all manufacturing steps required to make each part and to assemble the 
unit. DOE also conducted catalog teardowns to supplement the 
information obtained directly from physical teardowns. Subsequently, 
DOE developed a cost model that calculates manufacturer production cost 
(MPC) for each unit, based on the detailed BOM data. Chapter 3 of the 
NOPR TSD describes DOE's cost model in greater detail. The calculated 
costs are plotted as a function of the equipment efficiency levels 
(based on rated efficiency) to create cost-efficiency curves. DOE notes 
that the cost at some efficiency levels was interpolated or 
extrapolated based on the available physical and catalog teardown data.
    DOE developed cost-efficiency curves for a representative capacity 
of three tons, which it decided well represents the range of capacities 
on the market for commercial three-phase products. Because other 
capacity levels had similar designs and efficiency levels, cost-
efficiency curves were not developed for any other capacities. Instead, 
DOE was able to utilize the cost-efficiency curve for the 
representative capacity and apply it to all three-phase products.
    DOE based the cost-efficiency relationship for three-phase central 
air conditioners and heat pumps on reverse engineering conducted for 
the June 2011 direct final rule (DFR) for single-phase central air 
conditioners and heat pumps. 76 FR 37408. DOE researched manufacturer 
literature and noticed that most model numbers between single-phase 
products and three-phase equipment are interchangeable, with only a 
single-digit difference in the model number for the supply voltage. 
Although three-phase equipment contains three-phase compressors instead 
of single-phase compressors, DOE did not notice any inconsistency in 
energy efficiency ratings between single-phase products and three-phase 
equipment. To supplement the 2011 DFR data (29 physical teardowns and 
12 catalog teardowns), DOE completed one physical teardown and seven 
catalog teardowns of three-phase equipment. This approach allowed DOE 
to provide an estimate of equipment prices at different efficiencies 
and spanned a range of technologies currently on the market that are 
used to achieve the increased efficiency levels.
2. Baseline Equipment
    DOE selected baseline efficiency levels as reference points for 
each equipment class, against which it measured changes resulting from 
potential amended energy conservation standards. DOE defined the 
baseline efficiency levels as reference points to compare the 
technology, energy savings, and cost of equipment with higher energy 
efficiency levels. Typically, units at the baseline efficiency level 
just meet Federal energy conservation standards and provide basic 
consumer utility. However, EPCA requires that DOE must adopt either the 
ASHRAE Standard 90.1-2013 levels or more-stringent levels. Therefore, 
because the ASHRAE Standard 90.1-2013 levels were the lowest levels 
that DOE could adopt, DOE used those levels as the reference points 
against which more-stringent levels were evaluated.

----------------------------------------------------------------------------------------------------------------
                                                                Single-package                    Single-package
                                              Split-system AC         AC        Split-system HP         HP
----------------------------------------------------------------------------------------------------------------
                                              SEER
----------------------------------------------------------------------------------------------------------------
Baseline--Federal Standard..................            13.0             13.0             13.0             13.0
Baseline--ASHRAE Standard...................            13.0             14.0             14.0             14.0
----------------------------------------------------------------------------------------------------------------
                                              HSPF
----------------------------------------------------------------------------------------------------------------
Baseline--Federal Standard..................  ...............  ...............             7.7              7.7

[[Page 1189]]

 
Baseline--ASHRAE Standard...................  ...............  ...............             8.2              8.0
----------------------------------------------------------------------------------------------------------------

    Table V.2 shows the current baseline and ASHRAE efficiency levels 
for each equipment class of small commercial air-cooled air 
conditioners and heat pumps <65,000 Btu/h.

 Table V.2--Baseline Efficiency Levels for Small Commercial Air-Cooled Air Conditioners (AC) and Heat Pumps (HP)
                                                  <65,000 Btu/h
----------------------------------------------------------------------------------------------------------------
                                                                Single-package                    Single-package
                                              Split-system AC         AC        Split-system HP         HP
----------------------------------------------------------------------------------------------------------------
                                              SEER
----------------------------------------------------------------------------------------------------------------
Baseline--Federal Standard..................            13.0             13.0             13.0             13.0
Baseline--ASHRAE Standard...................            13.0             14.0             14.0             14.0
----------------------------------------------------------------------------------------------------------------
                                              HSPF
----------------------------------------------------------------------------------------------------------------
Baseline--Federal Standard..................  ...............  ...............             7.7              7.7
Baseline--ASHRAE Standard...................  ...............  ...............             8.2              8.0
----------------------------------------------------------------------------------------------------------------

3. Identification of Increased Efficiency Levels for Analysis
    DOE analyzed several efficiency levels and obtained incremental 
cost data for the four equipment classes under consideration. Table V.3 
presents the efficiency levels examined for each equipment class. As 
part of the engineering analyses, DOE considered up to six efficiency 
levels beyond the baseline for each equipment class. DOE derived the 
maximum technologically feasible (``max-tech'') level from the market 
maximum in the AHRI Certified Directory,\18\ as of November 2013. The 
highest available efficiency level for split-system heat pumps was 
16.2, compared to 18.05 for single-package heat pumps. DOE has 
tentatively determined that split-system heat pumps are capable of 
reaching the same efficiency level as single-package units, because the 
same technologies to increase efficiency can be employed across both 
equipment classes. As a result, the analyzed ``max-tech'' level for 
single-package and split-system heat pumps was 18.05. In the April 2014 
commercial heating, air-conditioning, and water-heating equipment NODA, 
DOE determined the ``max-tech'' level for single-package air 
conditioners to be 19.15. 79 FR 20114, 20126 (April 11, 2014). DOE also 
tentatively determined that split-system air conditioners are capable 
of reaching the same efficiency levels as single-package units. For the 
engineering analysis, DOE rounded the ``max-tech'' levels to integer 
values of 18 and 19 for split-system and single-package heat pumps, and 
split-system and single-package air conditioners, respectively. The 
impact of this rounding, which results in efficiency levels that are 
whole-number values of SEER, is minimal.
---------------------------------------------------------------------------

    \18\ See: http://www.ahridirectory.org/ahridirectory/pages/home.aspx.
---------------------------------------------------------------------------

    The efficiency levels for each considered equipment class are 
presented in Table V.3. For additional details on the efficiency levels 
selected for analysis, see chapter 3 of the NOPR TSD.

                       Table V.3--Efficiency Levels for Small Commercial Air-Cooled Air Conditioners and Heat Pumps <65,000 Btu/h
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                    Split-system AC   Single-package           Split-system HP                  Single-package HP
                                                   -----------------        AC       -------------------------------------------------------------------
                 Efficiency level                                   -----------------
                                                          SEER             SEER             SEER             HSPF             SEER             HSPF
--------------------------------------------------------------------------------------------------------------------------------------------------------
Federal Baseline..................................              13               13               13              7.7               13              7.7
0--ASHRAE Baseline*...............................              14               14               14              8.2               14              8.0
1.................................................              15               15               15              8.5               15              8.4
2.................................................              16               16               16              8.7               16              8.8
3.................................................              17               17               17              9.0               17              8.9
4**...............................................              18               18               18              9.2               18              9.1
5***..............................................              19               19   ...............  ...............  ...............  ...............
--------------------------------------------------------------------------------------------------------------------------------------------------------
* For consistency across equipment classes, DOE refers to 14 SEER as EL 0, which is only the ASHRAE Baseline for three of the equipment classes,
  excluding split-system AC.
** Efficiency Level 4 is ``Max-Tech'' for HP equipment classes.
*** Efficiency Level 5 is ``Max-Tech'' for AC equipment classes.


[[Page 1190]]

4. Engineering Analysis Results
    The results of the engineering analysis are cost-efficiency curves 
based on results from the cost models for analyzed units. DOE's 
calculated MPCs for small commercial air conditioners and heat pumps 
less than 65,000 Btu/h are shown in Table V.4 through Table V.7, and 
further details on the calculation of these curves can be found in 
chapter 3 of the NOPR TSD. DOE used the cost-efficiency curves from the 
engineering analysis as an input for the life-cycle cost and payback 
period analyses.

   Table V.4--Manufacturer Production Costs for Three-Ton Split-System
                 Commercial Air-Cooled Air Conditioners
------------------------------------------------------------------------
                          SEER                               MPC [$]
------------------------------------------------------------------------
13.....................................................             855
14.....................................................             937
15.....................................................           1,023
16.....................................................           1,115
17.....................................................           1,212
18.....................................................           1,316
19.....................................................           1,427
------------------------------------------------------------------------


  Table V.5--Manufacturer Production Costs for Three-Ton Single-Package
                 Commercial Air-Cooled Air Conditioners
------------------------------------------------------------------------
                          SEER                               MPC [$]
------------------------------------------------------------------------
13.....................................................           1,003
14.....................................................           1,122
15.....................................................           1,241
16.....................................................           1,361
17.....................................................           1,480
18.....................................................           1,599
19.....................................................           1,719
------------------------------------------------------------------------


   Table V.6--Manufacturer Production Costs for Three-Ton Split-System
                    Commercial Air-Cooled Heat Pumps
------------------------------------------------------------------------
                    SEER                          HSPF         MPC [$]
------------------------------------------------------------------------
13..........................................          7.7         1,068
14..........................................          8.2         1,154
15..........................................          8.5         1,244
16..........................................          8.7         1,377
17..........................................          9.0         1,486
18..........................................          9.2         1,601
------------------------------------------------------------------------


  Table V.7--Manufacturer Production Costs for Three-Ton Single-Package
                    Commercial Air-Cooled Heat Pumps
------------------------------------------------------------------------
                    SEER                          HSPF         MPC [$]
------------------------------------------------------------------------
13..........................................          7.7         1,239
14..........................................          8.0         1,372
15..........................................          8.4         1,504
16..........................................          8.8         1,637
17..........................................          8.9         1,769
18..........................................          9.1         1,902
------------------------------------------------------------------------

a. Manufacturer Markups
    DOE applies a non-production cost multiplier (the manufacturer 
markup) to the full MPC to account for corporate non-production costs 
and profit. The resulting manufacturer selling price (MSP) is the price 
at which the manufacturer can recover all production and non-production 
costs and earn a profit. To meet new or amended energy conservation 
standards, manufacturers often introduce design changes to their 
equipment lines that result in increased manufacturer production costs. 
Depending on the competitive environment for these particular types of 
equipment, some or all of the increased production costs may be passed 
from manufacturers to retailers and eventually to commercial consumers 
in the form of higher purchase prices. As production costs increase, 
manufacturers typically incur additional overhead. The MSP should be 
high enough to recover the full cost of the equipment (i.e., full 
production and non-production costs) and yield a profit. The 
manufacturer markup has an important bearing on profitability. A high 
markup under a standards scenario suggests manufacturers can pass along 
the increased variable costs and some of the capital and product 
conversion costs (the one-time expenditures) to the consumer. A low 
markup suggests that manufacturers will not be able to recover as much 
of the necessary investment in plants and equipment.
    For small commercial air-cooled air-conditioners and heat pumps, 
DOE used a manufacturer markup of 1.3, as developed for the 2011 direct 
final rule for single-phase central air conditioners and heat pumps. 76 
FR 37408 (June 27, 2011). This markup was calculated using U.S. 
Security and Exchange Commission (SEC) 10-K reports for publicly-owned 
heating and cooling companies, as well as feedback from manufacturer 
interviews. See chapter 3 of the NOPR TSD for more details about the 
methodology DOE used to determine the manufacturing markup.
b. Shipping Costs
    Manufacturers of commercial HVAC products typically pay for freight 
(shipping) to the first step in the distribution chain. Freight is not 
a manufacturing cost, but because it is a substantial cost incurred by 
the manufacturer, DOE accounts for shipping costs separately from other 
non-production costs that comprise the manufacturer markup. DOE 
calculated the MSP for small commercial air-cooled air-conditioners and 
heat pumps by multiplying the MPC at each efficiency level (determined 
from the cost model) by the manufacturer markup and adding shipping 
costs for equipment at the given efficiency level. More specifically, 
DOE calculated shipping costs at each efficiency level based on a 
typical 53-foot straight-frame trailer with a storage volume of 4,240 
cubic feet. DOE examined the sizes of small commercial air-cooled air-
conditioners and heat pumps and determined the number of units that 
would fit in each trailer, based on assumptions about the arrangement 
of units in the trailer. See chapter 3 of the NOPR TSD for more details 
about the methodology DOE used to determine the shipping costs.

C. Markups Analysis

    The markups analysis develops appropriate markups in the 
distribution chain to convert the estimates of manufacturer selling 
price derived in the engineering analysis to commercial consumer 
prices. (``Commercial consumer'' refers to purchasers of the equipment 
being regulated.) DOE calculates overall baseline and incremental 
markups based on the equipment markups at each step in the distribution 
chain. The incremental markup relates the change in the manufacturer 
sales price of higher-efficiency models (the incremental cost increase) 
to the change in the commercial consumer price.
    In the 2014 NOPR for Central Unitary Air Conditioners (CUAC), which 
includes equipment similar to but larger than that in this NOPR, DOE 
determined that there are three types of distribution channels to 
describe how the equipment passes from the manufacturer to the 
commercial consumer. 79 FR 58948, 58975 (Sept. 30, 2014). In the new 
construction market, the manufacturer sells the equipment to a 
wholesaler. The wholesaler sells the equipment to a mechanical 
contractor, who sells it to a general contractor, who in turn sells the 
equipment to the commercial consumer or end user as part of the 
building. In the replacement market, the

[[Page 1191]]

manufacturer sells to a wholesaler, who sells to a mechanical 
contractor, who in turn sells the equipment to the commercial consumer 
or end user. In the third distribution channel, used in both the new 
construction and replacement markets, the manufacturer sells the 
equipment directly to the customer through a national account.
    In this NOPR, DOE used two of the three distribution channels 
described above to determine the markups. Given the small cooling 
capacities of air conditioners and heat pumps less than 65,000 Btu/h, 
DOE did not use the national accounts distribution chain in the markups 
analysis. National accounts are composed of large commercial consumers 
of HVAC equipment that negotiate equipment prices directly with the 
manufacturers, such as national retail chains. The end market consumers 
of three-ton central air conditioners and heat pumps are small offices 
and small retailers and do not fit the profile of large national 
chains.
    In the 2014 CUAC NOPR, based on information that equipment 
manufacturers provided, commercial consumers were estimated to purchase 
50 percent of the covered equipment through small mechanical 
contractors, 32.5 percent through large mechanical contractors, and the 
remaining 17.5 percent through national accounts. 79 FR 58948, 58976 
(Sept. 30, 2014). For this NOPR, DOE removed the national accounts 
distribution channel and recalculated the size of the small and large 
mechanical contractor distribution channels assuming they make up the 
entire market. Therefore, the small mechanical distribution chain 
accounts for 61 percent of equipment purchases (i.e., 50 percent 
divided by the sum of 50 percent and 32.5 percent), and the large 
mechanical contractor distribution chain represents 39 percent of 
purchases.
    For this NOPR, DOE used the markups from the 2014 CUAC NOPR, for 
which DOE utilized updated versions of: (1) The Heating, Air 
Conditioning & Refrigeration Distributors International 2010 Profit 
Report to develop wholesaler markups; (2) the Air Conditioning 
Contractors of America's (ACCA) 2005 Financial Analysis for the HVACR 
Contracting Industry to develop mechanical contractor markups; and (3) 
U.S. Census Bureau economic data for the commercial and institutional 
building construction industry to develop general contractor 
markups.\19\
---------------------------------------------------------------------------

    \19\ U.S. Census Bureau, 2007 Economic Census, Construction 
Industry Series and Wholesale Trade Subject Series (Available at: 
www.census.gov/econ/census/data/historical_data.html).
---------------------------------------------------------------------------

    Chapter 5 of the NOPR TSD provides further detail on the estimation 
of markups.

D. Energy Use Analysis

    The energy use analysis provides estimates of the annual energy 
consumption of small air-cooled air conditioners and heat pumps with 
cooling capacities less than 65,000 Btu/h at the considered efficiency 
levels. DOE uses these values in the LCC and PBP analyses and in the 
NIA.
    The cooling unit energy consumption (UEC) by equipment type and 
efficiency level came from the national impact analysis associated with 
the 2011 direct final rule (DFR) for residential central air 
conditioners and heat pumps. (EERE-2011-BT-STD-0011-0011). 
Specifically, DOE used the UECs for single-phase equipment installed in 
commercial buildings. The UECs for split system and single package 
equipment were similar in the 2011 analysis for lower efficiency 
levels, but at higher efficiency levels, the only UECs available were 
for split-system equipment. DOE assumed that the similarities at lower 
levels could be expected to hold at higher efficiency levels; 
therefore, DOE is using the UECs for split equipment for all equipment 
classes in this NOPR, including split system and single package. In the 
April 11, 2014 NODA, DOE requested comment on the use of UECs from an 
analysis of single-phase products in commercial applications. 79 FR 
20114, 20137. In response. Goodman, Lennox, and AHRI commented that 
single-phase and three-phase products should not differ substantially 
in energy consumption. (Goodman Global, Inc., No. 18 at p. 2; Lennox 
International, Inc., No. 15 at p. 6; AHRI, No. 24 at p. 5) Goodman 
added that for products less than 65,000 Btu/h, industry practice 
involves creating a single-phase product and then changing the 
compressor from single-phase to three-phase while leaving the motors 
for the condenser fan and evaporator blower at single-phase. (Goodman 
Global, Inc., No. 18 at p. 2) DOE agrees with the commenters and has 
maintained this approach.
    In order to assess variability in the cooling UEC by region and 
building type, DOE used a Pacific Northwest National Laboratory report 
\20\ that estimated the annual energy usage of space cooling and 
heating products using a Full Load Equivalent Operating Hour (FLEOH) 
approach. DOE normalized the provided FLEOHs to the UEC data discussed 
above to vary the average UEC across region and building type. The 
building types used in this analysis are small retail establishments 
and small offices.
---------------------------------------------------------------------------

    \20\ See Appendix D of the 2000 Screening Analysis for EPACT-
Covered Commercial HVAC and Water-Heating Equipment. (EERE-2006-STD-
0098-0015)
---------------------------------------------------------------------------

    In the April 11, 2014 NODA, DOE stated that it also considered 
analyzing heating UECs for heat pumps. 79 FR 20114, 20126. However, in 
reviewing the 2011 analysis, DOE found that the heating UECs did not 
scale proportionally with HSPF for commercial installations. Id. 
Therefore, DOE preliminarily determined that it was not possible to 
quantify energy savings given the available data. DOE requested comment 
seeking data and information related to the heating energy use of 
commercial heat pumps. Id. at 20137.
    In response, AHRI commented that Pacific Northwest National 
Laboratory (PNNL) analyzes the benefits of increased efficiency 
requirements in ASHRAE 90.1-2013, and it increased the heating seasonal 
performance factor (HSPF) for 3-phase heat pumps less than 65,000 Btu/
h. Therefore, PNNL may have information on the energy savings related 
to ASHRAE's standard. (AHRI, No. 24 at p. 6) Goodman suggests it is 
logical for there to be a reasonable relationship between the HSPF 
rating and UEC. (Goodman Global, Inc., No. 18 at p. 2) On the other 
hand, Lennox pointed out that HSPF is an efficiency metric designed to 
reflect the performance of a heat pump operating against a residential 
load profile in which the building balance point is at 65[deg]F. Most 
commercial buildings have enough internal heat gain that their heating 
balance points can be at 30[deg]F or below.\21\ Therefore, the heat 
pump will not have a heating demand until the ambient temperature 
reaches this balance point. Much of the performance contribution for 
heat pumps to reach a high HSPF comes from its performance in the 
temperature range where it will never operate in a commercial building. 
For this reason, there will be little energy savings from increasing 
HSPF for commercial air-cooled equipment. (Lennox International Inc., 
No. 15 at p. 8)
---------------------------------------------------------------------------

    \21\ In other words, the quantity of people, lighting, and 
equipment in the commercial building produce so much heat (i.e., 
internal heat gain) that heating is not required until the 
temperature is quite low, as mentioned in this case to be 30 [deg]F. 
In contrast, residential buildings tend to have lower internal heat 
gain, so heating is required at a higher temperature.
---------------------------------------------------------------------------

    DOE notes that ASHRAE increased the HSPF and SEER levels for this 
equipment to levels that matched DOE's residential requirements, for

[[Page 1192]]

consistency in the market rather than necessarily to achieve energy 
savings. In light of Goodman and Lennox's comments, DOE has further 
reviewed the results of the simulations for the 2011 DFR and determined 
that the heating loads for these small commercial applications are 
extremely low (less than 500 kwh/year). As a result, DOE has not 
included any energy savings due to the increase in HSPF for this 
equipment.

E. Life-Cycle Cost and Payback Period Analysis

    The purpose of the LCC and PBP analysis is to analyze the effects 
of potential amended energy conservation standards on commercial 
consumers of small commercial air-cooled air conditioners and heat 
pumps less than 65,000 btu/h by determining how a potential amended 
standard affects their operating expenses (usually decreased) and their 
total installed costs (usually increased).
    The LCC is the total consumer expense over the life of the 
equipment, consisting of equipment and installation costs plus 
operating costs (i.e., expenses for energy use, maintenance, and 
repair). DOE discounts future operating costs to the time of purchase 
using commercial consumer discount rates. The PBP is the estimated 
amount of time (in years) it takes commercial consumers to recover the 
increased total installed cost (including equipment and installation 
costs) of a more-efficient type of equipment through lower operating 
costs. DOE calculates the PBP by dividing the change in total installed 
cost (normally higher) due to a standard by the change in annual 
operating cost (normally lower) that results from the potential 
standard. However, unlike the LCC, DOE only considers the first year's 
operating expenses in the PBP calculation. Because the PBP does not 
account for changes in operating expenses over time or the time value 
of money, it is also referred to as a simple PBP.
    For any given efficiency level, DOE measures the PBP and the change 
in LCC relative to an estimate of the base-case efficiency level. For 
split-system air conditioners, for which ASHRAE did not increase 
efficiency levels, the base-case estimate reflects the market in the 
absence of amended energy conservation standards, including the market 
for equipment that exceeds the current energy conservation standards. 
For single-package air conditioners, split-system heat pumps, and 
single-package heat pumps, the base-case estimate reflects the market 
in the case where the ASHRAE 90.1-2013 level becomes the Federal 
minimum, and the LCC calculates the LCC savings likely to result from 
higher efficiency levels compared with the ASHRAE base-case.
    DOE conducted an LCC and PBP analysis for small commercial air-
cooled air conditioners and heat pumps less than 65,000 btu/h using a 
computer spreadsheet model. When combined with Crystal Ball (a 
commercially-available software program), the LCC and PBP model 
generates a Monte Carlo simulation to perform the analyses by 
incorporating uncertainty and variability considerations in certain of 
the key parameters as discussed below. Inputs to the LCC and PBP 
analysis are categorized as: (1) Inputs for establishing the total 
installed cost and (2) inputs for calculating the operating expense. 
The following sections contain brief discussions of comments on the 
inputs and key assumptions of DOE's LCC and PBP analysis and explain 
how DOE took these comments into consideration. They are also described 
in detail in chapter 6 of the NOPR TSD.
1. Equipment Costs
    In the LCC and PBP analysis, the equipment costs faced by 
purchasers of small air-cooled air conditioning and heat pump equipment 
are derived from the MSPs estimated in the engineering analysis, the 
overall markups estimated in the markups analysis, and sales tax.
    To develop an equipment price trend for the NOPR, DOE derived an 
inflation-adjusted index of the producer price index (PPI) for 
``unitary air-conditioners, except air source heat pumps'' from 1978 to 
2013, which is the PPI series most relevant to small air-cooled air-
conditioning equipment. The PPI index for heat pumps covered too short 
a time period to provide a useful picture of pricing trends, so the 
air-conditioner time series was used for both air conditioners and heat 
pumps. DOE expects this to be a reasonably accurate assessment for heat 
pumps because heat pumps are produced by the same manufacturers as air-
conditioners and contain most of the same components. Although the 
overall PPI index shows a long-term declining trend, data for the last 
decade have shown a flat-to-slightly-rising trend. Given the 
uncertainty as to which of the trends will prevail in coming years, DOE 
chose to apply a constant price trend (at 2013 levels) for the NOPR. 
See chapter 6 of the NOPR TSD for more information on the price trends.
2. Installation Costs
    DOE derived national average installation costs for small air-
cooled air conditioning and heat pump equipment from data provided in 
RS Means 2013.\22\ RS Means provides estimates for installation costs 
for the subject equipment by equipment capacity, as well as cost 
indices that reflect the variation in installation costs for 656 cities 
in the United States. The RS Means data identify several cities in all 
50 States and the District of Columbia. DOE incorporated location-based 
cost indices into the analysis to capture variation in installation 
costs, depending on the location of the consumer.
---------------------------------------------------------------------------

    \22\ RS Means Mechanical Cost Data 2013. Reed Construction Data, 
LLC (2012).
---------------------------------------------------------------------------

    Based on these data, DOE tentatively concluded that data for 3-ton 
rooftop air conditioners would be sufficiently representative of the 
installation costs for air conditioners less than 65,000 btu/h. For 
heat pumps, DOE used the installation costs for 3-ton air-source heat 
pumps.
    DOE also varied installation cost as a function of equipment 
weight. Because weight tends to increase with equipment efficiency, 
installation cost increased with equipment efficiency. The weight of 
the equipment in each class and efficiency level was determined through 
the engineering analysis.
3. Unit Energy Consumption
    The calculation of annual per-unit energy consumption by each class 
of the subject small air-cooled air conditioning and heating equipment 
at each considered efficiency level is based on the energy use analysis 
as described above in section V.D and in chapter 4 of the NOPR TSD.
4. Electricity Prices and Electricity Price Trends
    DOE used average and marginal electricity prices by Census Division 
based on tariffs from a representative sample of electric utilities. 
This approach calculates energy expenses based on actual commercial 
building average and marginal electricity prices that customers are 
paying.\23\ The Commercial Buildings Energy Consumption Survey (CBECS) 
1992 and CBECS 1995 surveys provide monthly electricity consumption and 
demand for a large sample of buildings. DOE used these values to help 
develop usage patterns associated with various building types. Using 
these monthly values in conjunction with the tariff data, DOE 
calculated monthly electricity

[[Page 1193]]

bills for each building. The average price of electricity is defined as 
the total electricity bill divided by total electricity consumption. 
From this average price, the marginal price for electricity consumption 
was determined by applying a 5-percent decrement to the average CBECS 
consumption data and recalculating the electricity bill. Using building 
location and the prices derived from the above method, an average and 
marginal price were determined for each region of the U.S.
---------------------------------------------------------------------------

    \23\ Coughlin, K., C. Bolduc, R. Van Buskirk, G. Rosenquist and 
J.E. McMahon, ``Tariff-based Analysis of Commercial Building 
Electricity Prices'' (2008) Lawrence Berkeley National Laboratory: 
Berkeley, CA. Report No. LBNL-55551.
---------------------------------------------------------------------------

    The average electricity price multiplied by the baseline 
electricity consumption for each equipment class defines the baseline 
LCC. For each efficiency level, the operating cost savings are 
calculated by multiplying the electricity consumption savings (relative 
to the baseline) by the marginal consumption price.
    For this NOPR, the tariff-based prices were updated to 2013 using 
the commercial electricity price index published in the AEO. An 
examination of data published by the Edison Electric Institute \24\ 
indicates that the rate of increase of marginal and average prices is 
not significantly different, so the same factor was used for both 
pricing estimates. DOE projected future electricity prices using trends 
in average commercial electricity price from AEO 2014.
---------------------------------------------------------------------------

    \24\ Edison Electric Institute, EEI Typical Bills and Average 
Rates Report (bi-annual, 2007-2012).
---------------------------------------------------------------------------

    For further discussion of electricity prices, see chapter 6 of the 
NOPR TSD.
5. Maintenance Costs
    Maintenance costs are costs to the commercial consumer of ensuring 
continued operation of the equipment (e.g., checking and maintaining 
refrigerant charge levels and cleaning heat-exchanger coils). DOE 
derived annualized maintenance costs for small commercial air-cooled 
air conditioners and heat pumps from RS Means data.\25\ These data 
provided estimates of person-hours, labor rates, and materials required 
to maintain commercial air-conditioning and heating equipment. The 
estimated annualized maintenance cost is $298 for air conditioners 
rated between 36,000 Btu/h and 288,000 Btu/h and $329 for heat pumps 
rated between 36,000 Btu/h and 288,000 Btu/h; this capacity range 
includes the equipment that is the subject of this NOPR. DOE assumed 
that the maintenance costs do not vary with efficiency level.
---------------------------------------------------------------------------

    \25\ RS Means Facilities Maintenance & Repair Cost Data 2013. 
Reed Construction Data, LLC. (2012).
---------------------------------------------------------------------------

6. Repair Costs
    Repair costs are costs to the commercial consumer associated with 
repairing or replacing components that have failed. DOE utilized RS 
Means \26\ to find the repair costs for small commercial air-cooled air 
conditioners and heat pumps. For air conditioners, DOE used the repair 
costs for a 3-ton, single-zone rooftop unit. For heat pumps, DOE took 
the repair costs for 1.5-ton, 5-ton, and 10-ton air-to-air heat pumps 
and linearly scaled the repair costs to derive a 3-ton repair cost. DOE 
assumed that the repair would be a one-time event in year 10 of the 
equipment life. DOE then annualized the present value of the cost over 
the average equipment life of 19 or 16 years (for air conditioners and 
heat pumps, respectively) to obtain an annualized equivalent repair 
cost. This value ranges from $141 to $154 at the baseline level, 
depending on equipment class. The materials portion of the repair cost 
was scaled with the percentage increase in manufacturers' production 
cost by efficiency level. The labor cost was held constant across 
efficiency levels. This annualized repair cost was then added to the 
maintenance cost to create an annual ``maintenance and repair cost'' 
for the lifetime of the equipment. For further discussion of how DOE 
derived and implemented repair costs, see chapter 6 of the NOPR TSD.
---------------------------------------------------------------------------

    \26\ Id.
---------------------------------------------------------------------------

7. Equipment Lifetime
    Equipment lifetime is the age at which the subject small air-cooled 
air conditioners and heat pumps less than 65,000 Btu/h are retired from 
service. DOE based equipment lifetime on a retirement function in the 
form of a Weibull probability distribution. DOE used the inputs from 
the 2011 DFR technical support document for central air conditioners 
and heat pumps, which represented a mean lifetime of 19.01 years for 
air conditioners and 16.24 years for heat pumps, and used the same 
values for units in both residential and commercial applications. 
(EERE-2011-BT-STD-0011-0012) Given the similarity of such equipment 
types, DOE believes the lifetime for single-phase equipment may be a 
reasonable approximation of the lifetime for similar three-phase 
equipment.
8. Discount Rate
    The discount rate is the rate at which future expenditures are 
discounted to estimate their present value. The cost of capital 
commonly is used to estimate the present value of cash flows to be 
derived from a typical company 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. DOE uses the capital asset pricing model (CAPM) to calculate 
the equity capital component, and financial data sources to calculate 
the cost of debt financing.
    DOE derived the discount rates by estimating the weighted-average 
cost of capital (WACC) of companies that purchase air-cooled air-
conditioning equipment. More details regarding DOE's estimates of 
commercial consumer discount rates are provided in chapter 6 of the 
NOPR TSD.
9. Base-Case Market Efficiency Distribution
    For the LCC analysis, DOE analyzes the considered efficiency levels 
relative to a base case (i.e., the case without amended energy 
efficiency standards, in this case the current Federal standards for 
split-system air conditioners, and the default scenario in which DOE is 
required to adopt the efficiency levels in ASHRAE 90.1-2013 for the 
three equipment classes triggered by ASHRAE). This analysis requires an 
estimate of the distribution of equipment efficiencies in the base case 
(i.e., what consumers would have purchased in the compliance year in 
the absence of amended standards for split-system air conditioners, or 
amended standards more stringent than those in ASHRAE 90.1-2013 for the 
three triggered equipment classes). DOE refers to this distribution of 
equipment energy efficiencies as the base-case efficiency distribution. 
For more information on the development of the base-case distribution, 
see section V.F.3 and chapter 6 of the NOPR TSD.
10. Compliance Date
    DOE calculated the LCC and PBP for all commercial consumers as if 
each were to purchase new equipment in the year that compliance with 
amended standards is required. Generally, covered equipment to which a 
new or amended energy conservation standard applies must comply with 
the standard if such equipment is manufactured or imported on or after 
a specified date. In this NOPR, DOE is evaluating whether more-
stringent efficiency levels than those in ASHRAE Standard 90.1-2013 
would be technologically feasible, economically justified, and result 
in a significant additional amount of energy savings. If DOE were to 
propose a rule prescribing energy conservation standards at the 
efficiency levels contained in ASHRAE Standard 90.1-2013 for the three 
triggered equipment

[[Page 1194]]

classes, EPCA states that compliance with any such standards shall be 
required on or after a date which is two or three years (depending on 
equipment size) after the compliance date of the applicable minimum 
energy efficiency requirement in the amended ASHRAE/IES standard. (42 
U.S.C. 6313(a)(6)(D)) Given the equipment size at issue here, DOE has 
applied the two-year implementation period to determine the compliance 
date of any energy conservation standard equal to the efficiency levels 
specified by ASHRAE Standard 90.1-2013 proposed by this rulemaking. 
Thus, if DOE decides to adopt the efficiency levels in ASHRAE Standard 
90.1-2013, the compliance date of the rulemaking would be dependent 
upon the date specified in ASHRAE Standard 90.1-2013 or its publication 
date, if none is specified. In this case, the rule would apply to small 
commercial air-cooled air conditioners and heat pumps less than 65,000 
Btu/h manufactured on or after January 1, 2017, which is two years 
after the date specified in ASHRAE Standard 90.1-2013.
    If DOE were to propose a rule prescribing energy conservation 
standards more stringent than the efficiency levels contained in ASHRAE 
Standard 90.1-2013, EPCA states that compliance with any such standards 
is required for products manufactured on or after a date which is four 
years after the date the final rule is published in the Federal 
Register. (42 U.S.C. 6313(a)(6)(D)) DOE has applied this 4-year 
implementation period to determine the compliance date for any energy 
conservation standard more stringent than the efficiency levels 
specified by ASHRAE Standard 90.1-2013 that might be prescribed at the 
final rule stage for the three equipment classes triggered by ASHRAE. 
Thus, for equipment for which DOE might adopt a level more stringent 
than the ASHRAE efficiency levels, the rule would apply to products 
manufactured on or after a date four years from the date of publication 
of the final rule, which the statute requires to be completed by April 
9, 2016 (thereby resulting in a compliance date no later than April 9, 
2020).\27\
---------------------------------------------------------------------------

    \27\ Since ASHRAE published ASHRAE Standard 90.1-2013 on October 
9, 2013, EPCA requires that DOE publish a final rule adopting more-
stringent standards than those in ASHRAE Standard 90.1-2013, if 
warranted, within 30 months of ASHRAE action (i.e., by April 2016). 
Thus, four years from April 2016 would be April 2020, which would be 
the anticipated compliance date for DOE adoption of more-stringent 
standards.
---------------------------------------------------------------------------

    For split system air-cooled air conditioners, which DOE evaluated 
under the 6 year look back, DOE applied a different compliance date. 
Specifically, EPCA states that amended standards prescribed under this 
subsection shall apply to products manufactured after a date that is 
the later of: (I) the date that is 3 years after publication of the 
final rule establishing a new standard; or (II) the date that is 6 
years after the effective date of the current standard for a covered 
product. (42 U.S.C. 6313(a)(6)(C)(iv)) Because DOE must publish a final 
rule by April 9, 2016, in the case that it adopts standards higher than 
those in ASHRAE Standard 90.1 for the other three equipment classes, 
DOE projected that the date under clause (I) would be April 2019, which 
is later than the date under clause (II). For purposes of its analysis, 
DOE used 2019 as the first year of compliance with amended standards.
    Economic justification is not required for DOE to adopt the 
efficiency levels in ASHRAE 90.1-2013, as DOE is statutorily required 
to, at a minimum, adopt those levels. Therefore, DOE did not perform an 
LCC analysis on the ASHRAE Standard 90.1-2013 levels, and for purposes 
of the LCC analysis, DOE used 2020 as the first year of compliance with 
amended standards.
11. Payback Period Inputs
    The payback period is the amount of time it takes the commercial 
consumer to recover the additional installed cost of more-efficient 
equipment, compared to baseline equipment, through energy cost savings. 
Payback periods are expressed in years. Payback periods that exceed the 
life of the equipment mean that the increased total installed cost is 
not recovered in reduced operating expenses.
    Similar to the LCC, the inputs to the PBP calculation are the total 
installed cost of the equipment to the commercial consumer for each 
efficiency level and the average annual operating expenditures for each 
efficiency level for each building type and Census Division, weighted 
by the probability of shipment to each market. The PBP calculation uses 
the same inputs as the LCC analysis, except that discount rates are not 
needed. Because the simple PBP does not take into account changes in 
operating expenses over time or the time value of money, DOE considered 
only the first year's operating expenses to calculate the PBP, unlike 
the LCC, which is calculated over the lifetime of the equipment. 
Chapter 6 of the NOPR TSD provides additional detail about the PBP.

F. National Impact Analysis--National Energy Savings and Net Present 
Value Analysis

    The national impact analysis (NIA) evaluates the effects of a 
considered energy conservation standard from a national perspective 
rather than from the consumer perspective represented by the LCC. This 
analysis assesses the net present value (NPV) (future amounts 
discounted to the present) and the national energy savings (NES) of 
total commercial consumer costs and savings, which are expected to 
result from amended standards at specific efficiency levels. For each 
efficiency level analyzed, DOE calculated the NPV and NES for adopting 
more-stringent standards than the efficiency levels specified in ASHRAE 
Standard 90.1-2013.
    The NES refers to cumulative energy savings from 2017 through 2046 
for the three equipment classes triggered by ASHRAE; however when 
evaluating more-stringent standards, energy savings do not begin 
accruing until the later compliance date of 2020. DOE calculated new 
energy savings in each year relative to a base case, defined as DOE 
adoption of the efficiency levels specified by ASHRAE Standard 90.1-
2013. DOE also calculated energy savings from adopting efficiency 
levels specified by ASHRAE Standard 90.1-2013 compared to the EPCA base 
case (i.e., the current Federal standards).
    For split-system air conditioners, the NES refers to cumulative 
energy savings from 2019 through 2048 for all standards cases. DOE 
calculated new energy savings in each year relative to a base case, 
defined as the current Federal standards, which are equivalent to the 
efficiency levels specified by ASHRAE Standard 90.1-2013.
    The NPV refers to cumulative monetary savings. DOE calculated net 
monetary savings in each year relative to the base case (ASHRAE 
Standard 90.1-2013) as the difference between total operating cost 
savings and increases in total installed cost. Cumulative savings are 
the sum of the annual NPV over the specified period. DOE accounted for 
operating cost savings until past 2100, when the equipment installed in 
the 30th year after the compliance date of the amended standards should 
be retired.
1. Approach
    The NES and NPV are a function of the total number of units in use 
and their efficiencies. Both the NES and NPV depend on annual shipments 
and equipment lifetime. Both calculations start by using the shipments 
estimate

[[Page 1195]]

and the quantity of units in service derived from the shipments model.
    With regard to estimating the NES, because more-efficient air 
conditioners and heat pumps are expected to gradually replace less-
efficient ones, the energy per unit of capacity used by the air 
conditioners and heat pumps in service gradually decreases in the 
standards case relative to the base case. DOE calculated the NES by 
subtracting energy use under a standards-case scenario from energy use 
in a base-case scenario.
    Unit energy savings for each equipment class are taken from the LCC 
spreadsheet for each efficiency level and weighted based on market 
efficiency distributions. To estimate the total energy savings for each 
efficiency level, DOE first calculated the national site energy 
consumption (i.e., the energy directly consumed by the units of 
equipment in operation) for each class of air conditioner and heat 
pumps for each year of the analysis period. The NES and NPV analysis 
periods begin with the earliest expected compliance date of amended 
Federal energy conservation standards (i.e., 2017 for the equipment 
classes triggered by ASHRAE, assuming DOE adoption of the baseline 
ASHRAE Standard 90.1-2013 efficiency levels, and 2019 for split-system 
air conditioners, 3 years after DOE would likely issue a final rule 
requiring standards more stringent than ASHRAE). For the analysis of 
DOE's potential adoption of more-stringent efficiency levels for the 
equipment classes triggered by ASHRAE, the earliest compliance date 
would be 2020, four years after DOE would likely issue a final rule 
requiring such standards. Second, DOE determined the annual site energy 
savings, consisting of the difference in site energy consumption 
between the base case and the standards case for each class of small 
commercial air conditioner and heat pump less than 65,000 Btu/h. Third, 
DOE converted the annual site energy savings into the annual primary 
and FFC energy savings using annual conversion factors derived from the 
AEO 2014 version of the Energy Information Administration's (EIA) 
National Energy Modeling System (NEMS). Finally, DOE summed the annual 
primary and FFC energy savings from 2017 to 2046 (or 2019 to 2048) to 
calculate the total NES for that period. DOE performed these 
calculations for each efficiency level considered for small commercial 
air conditioners and heat pumps in this rulemaking.
    DOE considered whether a rebound effect is applicable in its NES 
analysis. A rebound effect occurs when an increase in equipment 
efficiency leads to an increased demand for its service. The NEMS model 
assumes a certain elasticity factor to account for an increased demand 
for service due to the increase in cooling (or heating) efficiency.\28\ 
EIA refers to this as an efficiency rebound. For the small commercial 
air conditioning and heating equipment market, there are two ways that 
a rebound effect could occur: (1) Increased use of the air conditioning 
equipment within the commercial buildings in which they are installed; 
and (2) additional instances of air conditioning of building spaces 
that were not being cooled before.
---------------------------------------------------------------------------

    \28\ An overview of the NEMS model and documentation is found at 
http://www.eia.doe.gov/oiaf/aeo/overview/index.html.
---------------------------------------------------------------------------

    DOE does not expect either of these instances to occur because the 
annual energy use for this equipment is very low; therefore, the energy 
cost savings from more-efficient equipment would likely not be high 
enough to induce a commercial consumer to increase the use of the 
equipment, either in a previously-cooled space or another previously-
uncooled space. Therefore, DOE did not assume a rebound effect in the 
present NOPR analysis. DOE seeks input from interested parties on 
whether there will be a rebound effect for improvements in the 
efficiency of small commercial air conditioners and heat pumps. If 
interested parties believe a rebound effect would occur, DOE is 
interested in receiving data quantifying the effects, as well as input 
regarding how should DOE quantify this in its analysis. This is 
identified as Issue 3 under ``Issues on Which DOE Seeks Comment'' in 
section X.E of this NOPR.
    To estimate NPV, DOE calculated the net impact as the difference 
between net operating cost savings (including electricity cost savings 
and increased repair costs) and increases in total installed costs 
(including customer prices). DOE calculated the NPV of each considered 
standard level over the life of the equipment using the following three 
steps. First, DOE determined the difference between the equipment costs 
under the standard-level case and the base case in order to obtain the 
net equipment cost increase resulting from the higher standard level. 
As noted in section V.E.1, DOE used a constant price assumption as the 
default price forecast. Second, DOE determined the difference between 
the base-case operating costs and the standard-level operating costs in 
order to obtain the net operating cost savings from each higher 
efficiency level. Third, DOE determined the difference between the net 
operating cost savings and the net equipment cost increase in order to 
obtain the net savings (or expense) for each year. DOE then discounted 
the annual net savings (or expenses) to 2014 for air conditioners and 
heat pumps bought on or after 2017 (or 2019) and summed the discounted 
values to provide the NPV of an efficiency level. An NPV greater than 
zero shows net savings (i.e., the efficiency level would reduce 
commercial consumer expenditures relative to the base case in present 
value terms). An NPV that is less than zero indicates that the 
efficiency level would result in a net increase in commercial consumer 
expenditures in present value terms.
    To make the analysis more transparent to all interested parties, 
DOE used a commercially-available spreadsheet tool to calculate the 
energy savings and the national economic costs and savings from 
potential amended standards. Interested parties can review DOE's 
analyses by changing various input quantities within the spreadsheet.
    Unlike the LCC analysis, the NES spreadsheet does not use 
distributions for inputs or outputs, but relies on national average 
first costs and energy costs developed from the LCC spreadsheet. DOE 
used the NES spreadsheet to perform calculations of energy savings and 
NPV using the annual energy consumption and total installed cost data 
from the LCC analysis. DOE projected the energy savings, energy cost 
savings, equipment costs, and NPV of benefits for equipment sold in 
each small commercial air-cooled air conditioner and heat pump class 
from 2017 through 2046 (or 2019 through 2048). For the three equipment 
classes triggered by ASHRAE, for efficiency levels more stringent than 
those in ASHRAE 90.1-2013, energy savings and costs do not begin 
accruing until 2020, the estimated first year of compliance. The 
projections provided annual and cumulative values for all four output 
parameters described previously.
2. Shipments Analysis
    Equipment shipments are an important element in the estimate of the 
future impact of a potential energy conservation standard. DOE 
developed shipment projections for small commercial air-cooled air 
conditioners and heat pumps less than 65,000 Btu/h and, in turn, 
calculated equipment stock over the course of the analysis period by 
assuming a Weibull distribution with an average 19-year equipment life 
for air conditioners and a 16-year life for heat pumps. (See section 
V.E.7 for more information on lifetime.) DOE used the shipments 
projection and the equipment

[[Page 1196]]

stock to determine the NES. The shipments portion of the spreadsheet 
model projects small commercial air-cooled air conditioner and heat 
pump shipments through 2046.
    In the April 11, 2014 NODA, DOE relied on 1999 shipment estimates 
along with trends from the U.S. Census to estimate shipments for this 
equipment. 79 FR 20114, 20130. Table V.8 shows the 1999 shipments 
estimates from the 2000 Screening Analysis for EPACT-Covered Commercial 
HVAC and Water-Heating Equipment (EERE-2006-STD-0098-0015). While the 
U.S. Census provides shipments data for air-cooled equipment less than 
65,000 Btu/h, it does not disaggregate the shipments into single-phase 
and three-phase. Therefore, DOE used the Census data from 1999 to 2010 
\29\ as a trend from which to extrapolate DOE's 1999 estimated 
shipments data (which is divided by equipment class) for three-phase 
equipment for the time period from 2000 to 2010. DOE then used the 
estimated shipments from 1999 to 2010 to establish a trend from which 
to project shipments beyond 2010. For heat pumps, DOE used a linear 
trend, which is slightly decreasing for single-package units and 
increasing for split systems. However, for single-package air 
conditioners, the trend was precipitously declining. As a result, for 
single-package air conditioners for the years after 2010, DOE used the 
average value from 1999 to 2010.
---------------------------------------------------------------------------

    \29\ U.S. Census Bureau, Current Industrial Reports for 
Refrigeration, Air Conditioning, and Warm Air Heating Equipment, 
MA333M. Note that the current industrial reports were discontinued 
in 2010, so more recent data are not available. (Available at: 
http://www.census.gov/manufacturing/cir/historical_data/ma333m/index.html).

 Table V.8--DOE Estimated Shipments of Small Three-Phase Commercial Air
                Conditioners and Heat Pumps <65,000 Btu/h
------------------------------------------------------------------------
                       Equipment class                            1999
------------------------------------------------------------------------
Three-Phase Air-Cooled Split-System Air Conditioners <65,000      91,598
 Btu/h.......................................................
Three-Phase Air-Cooled Single-Package Air Conditioners           213,728
 <65,000 Btu/h...............................................
Three-Phase Air-Cooled Split-System Heat Pumps <65,000 Btu/h.     11,903
Three-Phase Air-Cooled Single-Package Heat Pumps <65,000 Btu/     27,773
 h...........................................................
------------------------------------------------------------------------

    DOE received several comments on the NODA in response to these 
shipments estimates. Goodman found it illogical for DOE to base the 
initial value of shipments on data that was estimated a decade and a 
half ago. (Goodman Global, Inc., No. 18 at p. 3) The initial values, 
Goodman stated, should come from aggregated data provided by an 
industry trade association such as AHRI. (Id.) Goodman, AHRI, and 
Lennox also argued that by averaging shipments over 1999 to 2010, DOE 
did not account for the recent decline in shipments and, therefore, was 
overstating market volumes and potential energy savings. (AHRI, No. 24 
at p. 8; Goodman, No. 18 at p. 3; Lennox International, No. 15 at p. 7) 
AHRI also asserted that the analysis did not support either the 
assumption that current shipments of packaged three-phase heat pumps 
less than 65,000 Btu/h are at 1999 levels and will decrease only slowly 
during the next 35 years or the assumption that current shipments of 
three-phase split-system heat pumps less than 65,000 Btu/h are nearly 
double those of 1999 and will more than double again in the next 35 
years. (AHRI, No. 24 at p. 8).
    In response to these comments, DOE reviewed its shipments analysis. 
AHRI did not provide any more recent data, so DOE continued to rely on 
the 1999 estimates for the initial value. However, DOE did revise its 
shipment projections for the years beyond 2010. Because the Census data 
end in 2010, DOE cannot use that data to determine whether shipments 
continue to decline past 2010. Therefore, DOE reviewed AHRI's monthly 
shipments data for the broader category of central air conditioners and 
heat pumps to determine more recent trends.\30\ DOE found that the 
average annual growth rate from 2005 to 2010 was -12 percent for air 
conditioners and -4 percent for heat pumps. However, the average annual 
growth rate from 2010 to 2014 was 7 percent for air conditioners and 8 
percent for heat pumps. These data indicate that the decline in 
shipments through 2010 has stopped and has in fact begun to reverse. 
Therefore, DOE used the AHRI-reported growth rates from 2010 to 2011 
(10 percent for air conditioners and 1 percent for heat pumps) to scale 
its projected 2010 shipments to 2011, at which time it could begin 
projecting shipments using Annual Energy Outlook (AEO) 2014 forecasts 
(2011 through 2040) for commercial floor space. DOE assumed that 
shipments of small commercial air-cooled air conditioners and heat 
pumps would be related to the growth of commercial floor space. DOE 
used this projection, with an average annual growth rate of 1 percent, 
to project shipments for each of the four equipment classes through 
2040. For years beyond 2040, DOE also applied an average annual growth 
rate of 1 percent.
---------------------------------------------------------------------------

    \30\ AHRI, HVACR & Water Heating Industry Statistical Profile 
(2012) (Available at: http://www.ari.org/site/883/Resources/Statistics/AHRI-Industry-Statistical-Profile). See also AHRI Monthly 
Shipments: http://www.ari.org/site/498/Resources/Statistics/Monthly-Shipments; especially December 2013 release: http://www.ari.org/App_Content/ahri/files/Statistics/Monthly%20Shipments/2013/December2013.pdf; May 2014 release: http://www.ari.org/App_Content/ahri/files/Statistics/Monthly%20Shipments/2014/May2014.pdf.
---------------------------------------------------------------------------

    Table V.9 shows the projected shipments for the different equipment 
classes of small commercial air-cooled air conditioners and heat pumps 
less than 65,000 Btu/h for selected years from 2017 to 2046, as well as 
the cumulative shipments. As equipment purchase price and repair costs 
increase with efficiency, DOE recognizes that higher first costs and 
repair costs can result in a drop in shipments. However, DOE had no 
basis for estimating the elasticity of shipments for small commercial 
air-cooled air conditioners and heat pumps less than 65,000 Btu/h as a 
function of first costs, repair costs, or operating costs. In addition, 
because air-cooled air conditioners are likely the lowest-cost option 
for air conditioning small office and retail applications, DOE has 
tentatively concluded that it is unlikely that shipments would change 
as a result of higher first costs and repair costs. Therefore, DOE 
presumed that the shipments projection would not change with higher 
standard levels. DOE seeks input on this assumption. This is identified 
as Issue 4 under ``Issues on Which DOE Seeks Comment'' in section X.E 
of this NOPR. Chapter 7 of the NOPR TSD provides additional details on 
the shipments forecasts.

[[Page 1197]]



                      Table V.9--Shipments Projection for Small Commercial Air-Cooled Air Conditioners and Heat Pumps <65,000 Btu/h
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                    Units shipped by year and equipment class
                                                        ------------------------------------------------------------------------------------------------
                                                                                                                                              Cumulative
                       Equipment                                                                                                              shipments
                                                            2017        2020        2025        2030        2035        2040        2046     (2017-2046)
                                                                                                                                                  *
--------------------------------------------------------------------------------------------------------------------------------------------------------
Three-Phase Air-Cooled Split-System Air Conditioners         80,210      83,175      87,651      91,610      96,170     101,593     107,802    2,806,115
 <65,000 Btu/h.........................................
Three-Phase Air-Cooled Single-Package Air Conditioners      122,271     126,790     133,613     139,649     146,600     154,867     164,332    4,277,584
 <65,000 Btu/h.........................................
Three-Phase Air-Cooled Split-System Heat Pumps <65,000       19,634      20,360      21,455      22,424      23,541      24,868      26,388      686,883
 Btu/h.................................................
Three-Phase Air-Cooled Single-Package Heat Pumps             25,157      26,086      27,490      28,732      30,162      31,863      33,810      880,091
 <65,000 Btu/h.........................................
    Total..............................................     247,272     256,411     270,210     282,415     296,473     313,191     332,333    8,650,673
--------------------------------------------------------------------------------------------------------------------------------------------------------
* Note that the analysis period for split-system air conditioners is 2019-2048, but for comparison purposes, the same time period for cumulative
  shipments is shown for each equipment class.

3. Base-Case and Standards-Case Forecasted Distribution of Efficiencies
    In the April 11, 2014 NODA, DOE presented base-case efficiency 
distributions based on model availability in the AHRI certified 
directory. 79 FR 20114, 20132. DOE bundled the efficiency levels into 
``efficiency ranges'' and determined the percentage of models within 
each range. DOE applied the percentages of models within each 
efficiency range to the total unit shipments for a given equipment 
class to estimate the distribution of shipments within the base case. 
In response, AHRI commented that DOE's use of a market-weighted unit 
energy consumption (UEC) based on the distribution of efficiencies of 
available models was flawed. (AHRI, No. 24 at p. 7) AHRI stated that 
the majority of shipments involve models at or near the minimum 
efficiency standard level, with volume of shipments decreasing as 
efficiency increases. Although there may be no information on the exact 
percentages, AHRI considered this to be the general pattern. (Id.) 
Goodman Global also disagreed that roughly half or more of commercial 
HVAC products less than 65,000 Btu/h shipped today are above the 
minimum efficiency level; Goodman estimated roughly three-quarters of 
such models are at base efficiency today. (Goodman Global, Inc. No 18 
at p. 3) Neither AHRI nor Goodman provided any data to support their 
positions or to allow DOE to better estimate the base-case efficiency 
distribution. Therefore, DOE has retained the initial distribution used 
in the NODA.
    For this NOPR, DOE has estimated a base-case efficiency trend of an 
increase of approximately 1 SEER every 35 years, based on the EER trend 
from 2012 to 2035 found in the Commercial Unitary Air Conditioner 
Advance Notice of Proposed Rulemaking (ANOPR).\31\ DOE used this same 
trend in the standards-case scenarios. DOE requests comment on the 
estimated efficiency trend. This is identified as Issue 5 under 
``Issues on Which DOE Seeks Comment'' in section X.E of this NOPR.
---------------------------------------------------------------------------

    \31\ See DOE's technical support document underlying DOE's July 
29, 2004 ANOPR. 69 FR 45460 (Available at: http://www.regulations.gov/#!documentDetail;D=EERE-2006-STD-0103-0078). DOE 
assumed that the EER trend would reasonably represent a SEER trend.
---------------------------------------------------------------------------

    As in the April 11, 2014 NODA, for each efficiency level analyzed, 
DOE used a ``roll-up'' scenario to establish the market shares by 
efficiency level for the year that compliance would be required with 
amended standards (i.e., 2017 for adoption of efficiency levels in 
ASHRAE Standard 90.1-2013 or 2020 if DOE adopts more-stringent 
efficiency levels than those in ASHRAE Standard 90.1-2013). 79 FR 
20114, 20132. DOE collected information that suggests the efficiencies 
of equipment in the base case that did not meet the standard level 
under consideration would roll up to meet the standard level. This 
information also suggests that equipment efficiencies in the base case 
that were above the standard level under consideration would not be 
affected. In response to the April 2014 NODA, AHRI and Goodman agreed 
that the roll-up scenario was a reasonable assumption. (AHRI, No. 24 at 
p. 8; Goodman Global, Inc., No. 18 at p. 3) Table V.10 presents the 
estimated base-case efficiency market shares for each small commercial 
air-cooled air conditioner and heat pump equipment class.

 Table V.10--Base-Case Efficiency Market Shares for Small Commercial Air-Cooled Air Conditioners and Heat Pumps
                                                  <65,000 Btu/h
----------------------------------------------------------------------------------------------------------------
 Three-phase air-cooled split-system air  Three-phase air-cooled  Three-phase air-cooled  Three-phase air-cooled
   conditioners <65,000 Btu/h  (2019)       single-package air       split-system heat      single-package heat
-----------------------------------------  conditioners <65,000     pumps <65,000 Btu/h     pumps <65,000 Btu/h
                                               Btu/h  (2020)              (2020)                  (2020)
                                Market   -----------------------------------------------------------------------
            SEER              share  (%)                Market                  Market                  Market
                                             SEER     share  (%)     SEER     share  (%)     SEER     share  (%)
----------------------------------------------------------------------------------------------------------------
13..........................          26          13           0          13           0          13           0
14..........................          50          14          52          14          80          14          69

[[Page 1198]]

 
15..........................          22          15          30          15          19          15          21
16..........................           2          16           7          16           1          16           9
17..........................           0          17           4          17           0          17           1
18..........................           0          18           7          18           0          18           1
19..........................           0          19           0  ..........  ..........  ..........  ..........
----------------------------------------------------------------------------------------------------------------
Note: The 0% market share at 13.0 SEER for three equipment classes is accounting for the default adoption of
  ASHRAE Standard 90.1-2013 levels in 2017.

4. National Energy Savings and Net Present Value
    The stock of small commercial air-cooled air conditioner and heat 
pump equipment less than 65,000 Btu/h is the total number of units in 
each equipment class purchased or shipped from previous years that have 
survived until a given point. The NES spreadsheet,\32\ through use of 
the shipments model, keeps track of the total number of units shipped 
each year. For purposes of the NES and NPV analyses, DOE assumes that 
shipments of air conditioner and heat pump units survive for an average 
of 19 years and 16 years, respectively, following a Weibull 
distribution, at the end of which time they are removed from service.
---------------------------------------------------------------------------

    \32\ The NES spreadsheet can be found in the docket for the 
ASHRAE rulemaking at: www.regulations.gov/#!docketDetail;D=EERE-
2014-BT-STD-0015.
---------------------------------------------------------------------------

    The national annual energy consumption is the product of the annual 
unit energy consumption and the number of units of each vintage in the 
stock, summed over all vintages. This approach accounts for differences 
in unit energy consumption from year to year. In determining national 
annual energy consumption, DOE estimated energy consumption and savings 
based on site energy and converted the electricity consumption and 
savings to primary energy using annual conversion factors derived from 
the AEO 2014 version of NEMS. Cumulative energy savings are the sum of 
the NES for each year over the timeframe of the analysis.
    In response to the recommendations of a committee on ``Point-of-Use 
and Full-Fuel-Cycle Measurement Approaches to Energy Efficiency 
Standards'' appointed by the National Academy of Sciences, DOE 
announced its intention to use FFC measures of energy use and 
greenhouse gas and other emissions in the national impact analyses and 
emissions analyses included in future energy conservation standards 
rulemakings. 76 FR 51281 (Aug. 18, 2011). After evaluating the 
approaches discussed in the August 18, 2011 notice, DOE published a 
statement of amended policy in the Federal Register in which DOE 
explained its determination that NEMS is the most appropriate tool for 
its FFC analysis and its intention to use NEMS for that purpose. 77 FR 
49701 (Aug. 17, 2012). The approach used for this NOPR is described in 
Appendix 8-A of the NOPR TSD.
    In accordance with the OMB's guidelines on regulatory analysis, DOE 
calculated NPV using both a 7-percent and a 3-percent real discount 
rate. The 7-percent rate is an estimate of the average before-tax rate 
of return on private capital in the U.S. economy. DOE used this 
discount rate to approximate the opportunity cost of capital in the 
private sector, because recent OMB analysis has found the average rate 
of return on capital to be near this rate. DOE used the 3-percent rate 
to capture the potential effects of standards on private consumption 
(e.g., through higher prices for products and reduced purchases of 
energy). This rate represents the rate at which society discounts 
future consumption flows to their present value. This rate can be 
approximated by the real rate of return on long-term government debt 
(i.e., yield on United States Treasury notes minus annual rate of 
change in the Consumer Price Index), which has averaged about 3 percent 
on a pre-tax basis for the past 30 years.
    Table V.11 summarizes the inputs to the NES spreadsheet model along 
with a brief description of the data sources. The results of DOE's NES 
and NPV analysis are summarized in section VIII.B.1.b and described in 
detail in chapter 8 of the NOPR TSD.

 Table V.11--Summary of Small Commercial Air-Cooled Air Conditioner and
            Heat Pumps <65,000 Btu/h NES and NPV Model Inputs
------------------------------------------------------------------------
              Inputs                             Description
------------------------------------------------------------------------
Shipments.........................  Annual shipments based on U.S.
                                     Census, AHRI monthly shipment
                                     reports, and AEO2014 forecasts of
                                     commercial floor space. (See
                                     chapter 7 of the NOPR TSD.)
Compliance Date of Standard.......  2020 for adoption of a more-
                                     stringent efficiency level than
                                     those specified by ASHRAE Standard
                                     90.1-2013 for the three equipment
                                     classes triggered by ASHRAE.
                                    2017 for adoption of the efficiency
                                     levels specified by ASHRAE Standard
                                     90.1-2013.
                                    2019 for split-system air
                                     conditioners.
Base-Case Efficiencies............  Distribution of base-case shipments
                                     by efficiency level, with
                                     efficiency trend of an increase of
                                     1 EER every 35 years.

[[Page 1199]]

 
Standards-Case Efficiencies.......  Distribution of shipments by
                                     efficiency level for each standards
                                     case. In compliance year, units
                                     below the standard level ``roll-
                                     up'' to meet the standard.
                                     Efficiency trend of an increase of
                                     1 EER every 35 years.
Annual Energy Use per Unit........  Annual national weighted-average
                                     values are a function of efficiency
                                     level. (See chapter 4 of the NOPR
                                     TSD.)
Total Installed Cost per Unit.....  Annual weighted-average values are a
                                     function of efficiency level. (See
                                     chapter 5 of the NOPR TSD.)
Annualized Maintenance and Repair   Annual weighted-average values are a
 Costs per Unit.                     function of efficiency level. (See
                                     chapter 5 of the NOPR TSD.)
Escalation of Fuel Prices.........  AEO2014 forecasts (to 2040) and
                                     extrapolation for beyond 2040. (See
                                     chapter 8 of the NOPR TSD.)
Site to Primary and FFC Conversion  Based on AEO2014 forecasts (to 2040)
                                     and extrapolation for beyond 2040.
                                     (See chapter 8 of the NOPR TSD.)
Discount Rate.....................  3 percent and 7 percent real.
Present Year......................  Future costs are discounted to 2014.
------------------------------------------------------------------------

VI. Methodology for Water-Source Heat Pumps

    This section addresses the analyses DOE has performed for this 
rulemaking with respect to water-source heat pumps. A separate 
subsection addresses each analysis. In overview, DOE used a spreadsheet 
to calculate the LCC and PBPs of potential energy conservation 
standards. DOE used another spreadsheet to provide shipments 
projections and then calculate national energy savings and net present 
value impacts of potential amended energy conservation standards.

A. Market Assessment

    To begin its review of the ASHRAE Standard 90.1-2013 efficiency 
levels, DOE developed information that provides an overall picture of 
the market for the equipment concerned, including the purpose of the 
equipment, the industry structure, and market characteristics. This 
activity included both quantitative and qualitative assessments based 
primarily on publicly-available information. The subjects addressed in 
the market assessment for this rulemaking include equipment classes, 
manufacturers, quantities, and types of equipment sold and offered for 
sale. The key findings of DOE's market assessment are summarized 
subsequently. For additional detail, see chapter 2 of the NOPR TSD.
1. Equipment Classes
    EPCA and ASHRAE Standard 90.1-2013 both divide water-source heat 
pumps into three categories based on the following cooling capacity 
ranges: (1) <17,000 Btu/h; (2) >=17,000 and <65,000 Btu/h; and (3) 
>=65,000 and <135,000 Btu/h. As noted previously, ASHRAE 90.1-2013 
revised the nomenclature for these equipment classes to refer to 
``water-to-air, water-loop.'' In this document, DOE is proposing to 
revise the nomenclature for these equipment classes (but not the 
broader category) to match that used by ASHRAE.
2. Review of Current Market
    In order to obtain the information needed for the market assessment 
for this rulemaking, DOE consulted a variety of sources, including 
manufacturer literature, manufacturer Web sites, and the AHRI certified 
directory.\33\ The information DOE gathered serves as resource material 
throughout the rulemaking. The sections that follow provide an overview 
of the market assessment, and chapter 2 of the NOPR TSD provides 
additional detail on the market assessment, including citations to 
relevant sources.
---------------------------------------------------------------------------

    \33\ AHRI Directory of Certified Product Performance (2013) 
(Available at: www.ahridirectory.org) (Last accessed November 11, 
2013).
---------------------------------------------------------------------------

a. Trade Association Information
    DOE identified the same trade groups relevant to water-source heat 
pumps as to those listed in section V.A.2.a for small air-cooled air 
conditioners and heat pumps, namely AHRI, HARDI, and ACCA. DOE used 
data available from AHRI in its analysis, as described in the next 
section.
b. Manufacturer Information
    DOE reviewed data for water-source (water-to-air, water-loop) heat 
pumps currently on the market by examining the AHRI Directory of 
Certified Product Performance. DOE identified 18 parent companies 
(comprising 21 manufacturers) of water-source (water-to-air, water-
loop) heat pumps, which are listed in chapter 2 of the NOPR TSD. Of 
these manufacturers, seven were identified as small businesses based 
upon number of employees and the employee thresholds set by the Small 
Business Administration. More details on this analysis can be found 
below in section IX.B.
c. Market Data
    DOE reviewed the AHRI database to characterize the efficiency and 
performance of water-source (water-to-air, water-loop) heat pump models 
currently on the market. The full results of this market 
characterization are found in chapter 2 of the NOPR TSD. For water-
source heat pumps less than 17,000 Btu/h, the average EER was 13.8, and 
the average coefficient of performance (COP) was 4.7. Of the models 
identified by DOE, 34 (six percent of the total models) have EERs rated 
below the ASHRAE Standard 90.1-2013 levels, and 30 (five percent of the 
total models) have COPs rated below the ASHRAE Standard 90.1-2013 
levels. For water-source heat pumps greater than or equal to 17,000 
Btu/h and less than 65,000 Btu/h, the average EER was 15.2, and the 
average COP was 4.9. Of the models identified by DOE, 72 (two percent 
of the total models) have EERs rated below the ASHRAE Standard 90.1-
2013 levels, and 133 (four percent of the total models) have COPs rated 
below the ASHRAE Standard 90.1-2013 levels. For water-source heat pumps 
greater than or equal to 65,000 Btu/h and less than 135,000 Btu/h, the 
average EER was 14.7, and the average COP was 4.8. Of the models 
identified by DOE, five (one percent of the total models) have EERs 
rated below the ASHRAE Standard 90.1-2013 levels, and two (0.5 percent 
of the total models) have COPs rated below the ASHRAE Standard 90.1-
2013 levels.

[[Page 1200]]

B. Engineering Analysis

    The engineering analysis establishes the relationship between an 
increase in energy efficiency and the increase in cost (manufacturer 
selling price (MSP)) of a piece of equipment DOE is evaluating for 
potential amended energy conservation standards. This relationship 
serves as the basis for cost-benefit calculations for individual 
consumers, manufacturers, and the Nation. The engineering analysis 
identifies representative baseline equipment, which is the starting 
point for analyzing possible energy efficiency improvements. For 
covered ASHRAE equipment, DOE sets the baseline for analysis at the 
ASHRAE Standard 90.1 efficiency level, because by statute, DOE cannot 
adopt any level below the revised ASHRAE level. The engineering 
analysis then identifies higher efficiency levels and the incremental 
increase in product cost associated with achieving the higher 
efficiency levels. After identifying the baseline models and cost of 
achieving increased efficiency, DOE estimates the additional costs to 
the commercial consumer through an analysis of contractor costs and 
markups, and uses that information in the downstream analyses to 
examine the costs and benefits associated with increased equipment 
efficiency.
    DOE typically structures its engineering analysis around one of 
three methodologies: (1) The design-option approach, which calculates 
the incremental costs of adding specific design options to a baseline 
model; (2) the efficiency-level approach, which calculates the relative 
costs of achieving increases in energy efficiency levels without regard 
to the particular design options used to achieve such increases; and/or 
(3) the reverse-engineering or cost-assessment approach, which involves 
a ``bottom-up'' manufacturing cost assessment based on a detailed bill 
of materials derived from teardowns of the equipment being analyzed. A 
supplementary method called a catalog teardown uses published 
manufacturer catalogs and supplementary component data to estimate the 
major physical differences between a piece of equipment that has been 
physically disassembled and another piece of similar equipment for 
which catalog data are available to determine the cost of the latter 
equipment. Deciding which methodology to use for the engineering 
analysis depends on the equipment, the design options under study, and 
any historical data upon which DOE may draw.
1. Approach
    For this analysis, DOE used a combination of the efficiency-level 
approach and the cost-assessment approach. DOE used the efficiency-
level approach to identify incremental improvements in efficiency for 
each equipment class and the cost-assessment approach to develop a cost 
for each efficiency level. The efficiency levels that DOE considered in 
the engineering analysis were representative of commercial water-source 
heat pumps currently produced by manufacturers at the time the 
engineering analysis was developed. DOE relied on data reported in the 
AHRI Directory of Certified Product Performance to select 
representative efficiency levels. This directory reported EER, COP, 
heating and cooling capacities, and other data for all three 
application types (water-loop, ground-water, ground-loop) for all AHRI-
certified units. After identifying representative efficiency levels, 
DOE used a catalog teardown or ``virtual teardown'' approach to 
estimate equipment costs at each level. DOE obtained general 
descriptions of key water-source heat pump components in product 
literature and used data collected for dozens of HVAC products to 
characterize the components' design details. This approach was used 
instead of the physical teardown approach due to time constraints.
    Although there are benefits to using a catalog teardown approach, 
DOE notes that there are drawbacks as well. Most significantly, there 
are differences between water-source heat pumps and the commercial 
heating and cooling equipment that were physically torn down. DOE was 
only able to account for these difference based upon data supplied from 
manufacturer catalogs or component data. Therefore, there may be 
additional minor details or parts of the units that were not accounted 
for. However, DOE has tentatively concluded that this approach provides 
a reasonable approximation of the cost increases associated with 
efficiency increases by including all major parts and components. In 
the end, the approach allowed DOE to provide estimates of equipment 
prices for the range of efficiencies currently available on the market.
    After selecting efficiency levels for each capacity class, as 
described in the sections that follow, DOE selected products for the 
catalog teardown analysis that corresponded to the representative 
efficiencies and cooling capacities. The engineering analysis included 
data for over 60 water-source heat pumps. DOE calculated the MPC for 
products spanning the full range of efficiencies from the baseline to 
the max-tech level for each analyzed equipment class. In some cases, 
catalog data providing sufficient information for cost analysis were 
not available at each efficiency level under consideration. Hence, DOE 
calculated the costs for some of the efficiency levels based on the 
cost/efficiency trends observed for other efficiency levels for which 
such catalog data were available. The engineering analysis is described 
in more detail in chapter 3 of the NOPR TSD.
2. Baseline Equipment
    DOE selected baseline efficiency levels as reference points for 
each equipment class, against which it measured changes resulting from 
potential amended energy conservation standards. DOE defined the 
baseline efficiency levels as reference points to compare the 
technology, energy savings, and cost of equipment with higher energy 
efficiency levels. Typically, units at the baseline efficiency level 
just meet Federal energy conservation standards and provide basic 
consumer utility. However, EPCA requires that DOE must adopt either the 
ASHRAE Standard 90.1-2013 levels or more-stringent levels. Therefore, 
because the ASHRAE Standard 90.1-2013 levels were the lowest levels 
that DOE could adopt, DOE used those levels as the reference points 
against which more-stringent levels were evaluated. Table VI.1 shows 
the current baseline and ASHRAE efficiency levels for each water-source 
heat pump equipment class. In Table VI.2 below, the ASHRAE levels are 
designated ``0'' and more-stringent levels are designated 1, 2, and so 
on.

[[Page 1201]]



                       Table VI.1--Baseline Efficiency Levels for Water-Source Heat Pumps
----------------------------------------------------------------------------------------------------------------
                                                                                Water-source      Water-source
                                                              Water-source     (water-to-air,    (water-to-air,
                                                             (water-to-air,      water-loop)       water-loop)
                                                               water-loop)       heat pumps        heat pumps
                                                               heat pumps       >=17,000 and      >=65,000 and
                                                              <17,000 Btu/h     <65,000 Btu/h    <135,000 Btu/h
----------------------------------------------------------------------------------------------------------------
                                             Efficiency level (EER)
----------------------------------------------------------------------------------------------------------------
Baseline--Federal Standard................................              11.2              12.0              12.0
Baseline--ASHRAE Standard.................................              12.2              13.0              13.0
----------------------------------------------------------------------------------------------------------------

3. Identification of Increased Efficiency Levels for Analysis
    DOE developed and considered potential increased energy efficiency 
levels for each equipment class. These more-stringent efficiency levels 
are representative of efficiency levels along the technology paths that 
manufacturers of residential heating products commonly use to maintain 
cost-effective designs while increasing energy efficiency. DOE 
developed more-stringent energy efficiency levels for each of the 
equipment classes, based on a review of AHRI's Directory of Certified 
Product Performance, manufacturer catalogs, and other publicly-
available literature. The efficiency levels selected for analysis for 
each water-source heat pump equipment class are shown in Table VI.2. 
Chapter 3 of the NOPR TSD shows additional details on the efficiency 
levels selected for analysis.

                      Table VI.2--Efficiency Levels for Analysis of Water-Source Heat Pumps
----------------------------------------------------------------------------------------------------------------
                                                                                Water-source      Water-source
                                                              Water-source     (water-to-air,    (water-to-air,
                                                             (water-to-air,      water-loop)       water-loop)
                                                               water-loop)       heat pumps        heat pumps
                                                               heat pumps       >=17,000 and      >=65,000 and
                                                              <17,000 Btu/h     <65,000 Btu/h    <135,000 Btu/h
----------------------------------------------------------------------------------------------------------------
                                         Efficiency Level (EER, Btu/W-h)
----------------------------------------------------------------------------------------------------------------
Baseline--Federal Standard................................              11.2              12.0              12.0
Baseline--ASHRAE Level (0)................................              12.2              13.0              13.0
Efficiency Level 1........................................              13.0              14.6              14.0
Efficiency Level 2........................................              14.0              16.6              15.0
Efficiency Level 3........................................              15.7              18.0              16.0
Efficiency Level 4 *......................................              16.5              19.2              17.2
Efficiency Level 5 **.....................................              18.1              21.6  ................
----------------------------------------------------------------------------------------------------------------
* Efficiency Level 4 is ``Max-Tech'' for the largest equipment classes.
** Efficiency Level 5 is ``Max-Tech'' for the two smaller equipment classes.

4. Engineering Analysis Results
    The results of the engineering analysis are cost-efficiency curves 
based on results from the cost models for analyzed units. DOE's 
calculated MPCs for the three analyzed classes of water-source heat 
pumps are shown in Table VI.3. DOE used the cost-efficiency curves from 
the engineering analysis as an input for the life-cycle cost and PBP 
analysis. Further details regarding MPCs for water-source heat pumps 
may be found in chapter 3 of the NOPR TSD.

                      Table VI.3--Manufacturer Production Costs for Water-Source Heat Pumps
----------------------------------------------------------------------------------------------------------------
                                                         Water-source        Water-source        Water-source
                                                        (water-to-air,      (water-to-air,      (water-to-air,
                                                       water-loop) heat    water-loop) heat    water-loop) heat
                                                      pumps <17,000 Btu/  pumps >=17,000 and  pumps >=65,000 and
                                                               h             <65,000 Btu/h      <135,000 Btu/h
                                                     -----------------------------------------------------------
                                                         EER     MPC ($)     EER     MPC ($)     EER     MPC ($)
----------------------------------------------------------------------------------------------------------------
ASHRAE--Level 0.....................................      12.2       860      13.0     1,346      13.0     3,274
Efficiency Level 1..................................      13.0       904      14.6     1,463      14.0     3,660
Efficiency Level 2..................................      14.0       960      16.6     1,609      15.0     4,045
Efficiency Level 3..................................      15.7     1,053      18.0     1,711      16.0     4,431
Efficiency Level 4..................................      16.5     1,097      19.2     1,798      17.2     4,893
Efficiency Level 5..................................      18.1     1,185      21.6     1,974  ........  ........
----------------------------------------------------------------------------------------------------------------


[[Page 1202]]

a. Manufacturer Markups
    As discussed in detail in section V.B.4.a, DOE applies a non-
production cost multiplier (the manufacturer markup) to the full MPC to 
account for corporate non-production costs and profit. The resulting 
manufacturer selling price (MSP) is the price at which the manufacturer 
can recover all production and nonproduction costs and earn a profit. 
Because water-source heat pumps and commercial air-cooled equipment are 
sold by similar heating and cooling product manufacturers, DOE used the 
same manufacturer markup of 1.3 that was developed for small commercial 
air-cooled air-conditioners and heat pumps, as described in chapter 3 
of the NOPR TSD.
b. Shipping Costs
    Manufacturers of commercial HVAC equipment typically pay for 
freight (shipping) to the first step in the distribution chain. Freight 
is not a manufacturing cost, but because it is a substantial cost 
incurred by the manufacturer, DOE accounts for shipping costs 
separately from other non-production costs that comprise the 
manufacturer markup. DOE calculated the MSP for water-source heat pumps 
by multiplying the MPC at each efficiency level (determined from the 
cost model) by the manufacturer markup and adding shipping costs. 
Shipping costs for water-source heat pumps were calculated similarly to 
those for small commercial air-cooled air-conditioners and heat pumps 
described in section V.B.4.b. See chapter 3 of the NOPR TSD for more 
details about DOE's shipping cost assumptions and the shipping costs 
per unit for each water-source heat pump product class.

C. Markups Analysis

    The markups analysis develops appropriate markups in the 
distribution chain to convert the estimates of manufacturer selling 
price derived in the engineering analysis to commercial consumer 
prices. (``Commercial consumer'' refers to purchasers of the equipment 
being regulated.) DOE calculates overall baseline and incremental 
markups based on the equipment markups at each step in the distribution 
chain. The incremental markup relates the change in the manufacturer 
sales price of higher-efficiency models (the incremental cost increase) 
to the change in the commercial consumer price.
    For water-source heat pumps, DOE used the same markups that were 
developed for small commercial air-cooled air-conditioners and heat 
pumps, as discussed in section V.C. DOE understands that the equipment 
move through the same distribution channels and that, therefore, using 
the same markups is reasonable. In addition, DOE's development of 
markups within those channels is at the broader equipment category 
level, in this case heating, ventilation, and air-conditioning 
equipment. As with small commercial air-cooled equipment, DOE did not 
use national accounts in its markups analysis for water-source heat 
pumps, because DOE does not believe that the commercial consumers of 
water-source heat pump equipment less than 135,000 Btu/h would 
typically be national retail chains that negotiate directly with 
manufacturers. DOE seeks comment on whether the use of national 
accounts would be appropriate in this analysis. This is identified as 
Issue 6 under ``Issues on Which DOE Seeks Comment'' in section X.E of 
this NOPR.
    Chapter 6 of the NOPR TSD provides further detail on the estimation 
of markups.

D. Energy Use Analysis

    The energy use analysis provides estimates of the annual energy 
consumption of water-source heat pumps at the considered efficiency 
levels. DOE uses these values in the LCC and PBP analyses and in the 
NIA.
    The cooling unit energy consumption (UEC) by equipment type and 
efficiency level used in the April 11, 2014 NODA came from Appendix D 
of the 2000 Screening Analysis for EPACT-Covered Commercial HVAC and 
Water-Heating Equipment. (EERE-2006-STD-0098-0015) 79 FR 20114, 20126-
27. Where identical efficiency levels were available, DOE used the UEC 
directly from the screening analysis. For additional efficiency levels, 
DOE scaled the UECs based on the ratio of EER, as was done in the 
original analysis. In response to the NODA, AHRI commented that DOE 
should use up-to-date data to estimate the cooling UEC of water-source 
heat pumps, because significant improvements have been made in envelope 
construction in the 14 years since the screening analysis was 
performed. (AHRI, No. 24 at p. 6) In reviewing this comment, DOE found 
that the NEMS commercial demand module accounts for improvements in 
building shell characteristics and changes in internal load by 
adjusting the cooling energy use with a factor that is a function of 
region and building activity. Consequently, for this NOPR, DOE used 
these factors to adjust the cooling energy use from the 2000 Screening 
Analysis.
    In the April 11, 2014 NODA, DOE did not analyze heating UECs for 
water-source heat pumps because of lack of data availability. 79 FR 
20114, 20126. DOE requested input and data related to this topic but 
did not receive any. For this NOPR, to characterize the heating-side 
performance, DOE analyzed CBECS 2003 data to develop a national-average 
annual energy use per square foot for buildings that use heat pumps. 
DOE assumed that the average COP of the commercial unitary heat pump 
(CUHP) was 2.9.\34\ DOE converted the energy use per square foot value 
to annual energy use per ton using a ton-per-square-foot relationship 
derived from the energy use analysis in the 2014 CUAC NOPR. (EERE-2013-
BT-STD-0007-0027) This analysis relates to equipment larger than some 
of the equipment that is the subject of this current NOPR and is 
directly applicable only to air-source heat pumps rather than water-
source heat pumps. However, for this NOPR, DOE assumed that this 
estimate was sufficiently representative of the heating energy use for 
all three classes of water-source heat pumps. DOE seeks comment on this 
issue. This is identified as Issue 7 under ``Issues on Which DOE Seeks 
Comment'' in section X.E of this NOPR.
---------------------------------------------------------------------------

    \34\ A heating efficiency of 2.9 COP corresponds to the existing 
minimum heating efficiency standard for commercial unitary heat 
pumps, a value which DOE believes is representative of the heat pump 
stock characterized by CBECS.
---------------------------------------------------------------------------

    Because equipment energy use is a function of efficiency, DOE 
assumed that the annual heating energy consumption of a unit scales 
proportionally with its heating COP efficiency level. Finally, to 
determine the COPs of units with given EERs, DOE correlated COP to EER 
based on the AHRI Certified Equipment Database.\35\ Thus, for any given 
cooling efficiency of a water-source heat pump, DOE was able to use 
this method to establish the corresponding heating efficiency, and, in 
turn, the associated annual heating energy consumption.
---------------------------------------------------------------------------

    \35\ See: http://www.ahridirectory.org/ahridirectory/pages/homeM.aspx.
---------------------------------------------------------------------------

    In order to create variability in the cooling and heating UECs by 
region and building type, DOE used a Pacific Northwest National 
Laboratory report \36\ that estimated the annual energy usage of space 
cooling and heating products using a Full Load Equivalent Operating 
Hour (FLEOH) approach. DOE normalized the provided FLEOHs to the UECs 
taken from the 2011 DFR for central air conditioners and heat pumps to 
vary the average UEC across region

[[Page 1203]]

and building type. In this analysis, DOE used the following building 
types: Office, education, lodging, multi-family apartments, and 
healthcare. DOE seeks comment on whether these building types are 
appropriate or whether there are other building types that should be 
considered for the water-source heat pump analysis. This is identified 
as Issue 8 under ``Issues on Which DOE Seeks Comment'' in section X.E 
of this NOPR.
---------------------------------------------------------------------------

    \36\ See Appendix D of the 2000 Screening Analysis for EPACT-
Covered Commercial HVAC and Water-Heating Equipment. (EERE-2006-STD-
0098-0015)
---------------------------------------------------------------------------

E. Life-Cycle Cost and Payback Period Analysis

    The purpose of the LCC and PBP analysis is to analyze the effects 
of potential amended energy conservation standards on commercial 
consumers of water-source heat pumps by determining how a potential 
amended standard affects their operating expenses (usually decreased) 
and their total installed costs (usually increased).
    The LCC is the total consumer expense over the life of the 
equipment, consisting of equipment and installation costs plus 
operating costs (i.e., expenses for energy use, maintenance, and 
repair). DOE discounts future operating costs to the time of purchase 
using commercial consumer discount rates. The PBP is the estimated 
amount of time (in years) it takes commercial consumers to recover the 
increased total installed cost (including equipment and installation 
costs) of a more-efficient type of equipment through lower operating 
costs. DOE calculates the PBP by dividing the change in total installed 
cost (normally higher) due to a standard by the change in annual 
operating cost (normally lower) that results from the potential 
standard. However, unlike the LCC, DOE only considers the first year's 
operating expenses in the PBP calculation. Because the PBP does not 
account for changes in operating expense over time or the time value of 
money, it is also referred to as a simple PBP.
    For any given efficiency level, DOE measures the PBP and the change 
in LCC relative to an estimate of the base-case efficiency level. For 
water-source heat pumps, the base-case estimate reflects the market in 
the case where the ASHRAE level becomes the Federal minimum, and the 
LCC calculates the LCC savings likely to result from higher efficiency 
levels compared with the ASHRAE base case.
    DOE conducted an LCC and PBP analysis for water-source heat pumps 
using a computer spreadsheet model. When combined with Crystal Ball (a 
commercially-available software program), the LCC and PBP model 
generates a Monte Carlo simulation to perform the analyses by 
incorporating uncertainty and variability considerations in certain of 
the key parameters as discussed below. Inputs to the LCC and PBP 
analysis are categorized as: (1) Inputs for establishing the total 
installed cost and (2) inputs for calculating the operating expense. 
The following sections contain brief discussions of comments on the 
inputs and key assumptions of DOE's LCC and PBP analysis and explain 
how DOE took these comments into consideration. They are also described 
in detail in chapter 6 of the NOPR TSD.
1. Equipment Costs
    In the LCC and PBP analysis, the equipment costs faced by 
purchasers of water-source heat pumps are derived from the MSPs 
estimated in the engineering analysis, the overall markups estimated in 
the markups analysis, and sales tax.
    To develop an equipment price trend for the NOPR, DOE derived an 
inflation-adjusted index of the PPI for ``all other miscellaneous 
refrigeration and air-conditioning equipment'' from 1990-2013, which is 
the PPI series most relevant to water-source heat pumps. Although the 
inflation-adjusted index shows a declining trend from 1990 to 2004, 
data since 2008 have shown a flat-to-slightly rising trend. Given the 
uncertainty as to which of the trends will prevail in coming years, DOE 
chose to apply a constant price trend (at 2013 levels) for each 
efficiency level in each equipment class for the NOPR. See chapter 6 of 
the NOPR TSD for more information on the price trends.
2. Installation Costs
    DOE derived installation costs for water-source heat pump equipment 
from current RS Means data (2013).\37\ RS Means provides estimates for 
installation costs for the subject equipment by equipment capacity, as 
well as cost indices that reflect the variation in installation costs 
for 656 cities in the United States. The RS Means data identify several 
cities in all 50 States and the District of Columbia. DOE incorporated 
location-based cost indices into the analysis to capture variation in 
installation costs, depending on the location of the consumer.
---------------------------------------------------------------------------

    \37\ RS Means Mechanical Cost Data 2013. Reed Construction Data, 
LLC. (2012).
---------------------------------------------------------------------------

    Based on these data, DOE tentatively concluded that data for 1-ton, 
3-ton, and 7.5-ton water-source heat pumps would be sufficiently 
representative of the installation costs for of water-source heat pumps 
with capacities of less than 17,000 btu/h, greater than or equal to 
17,000 and less than 65,000 btu/h, and greater than or equal to 65,000 
and less than 135,000 btu/h, respectively.
    DOE also varied installation cost as a function of equipment 
weight. Because weight tends to increase with equipment efficiency, 
installation cost increased with equipment efficiency. The weight of 
the equipment in each class and efficiency level was determined through 
the engineering analysis.
3. Unit Energy Consumption
    The calculation of annual per-unit energy consumption by each class 
of the subject water-source heat pumps at each considered efficiency 
level based on the energy use analysis is described above in section 
VI.D and in chapter 4 of the NOPR TSD.
4. Electricity Prices and Electricity Price Trends
    DOE used the same average and marginal electricity prices and 
electricity price trends as discussed in the methodology for small 
commercial air-cooled air conditioners and heat pumps (see section 
V.E.4). These data were developed for the broader commercial air-
conditioning category and, thus, are also relevant to water-source heat 
pumps.
5. Maintenance Costs
    Maintenance costs are costs to the commercial consumer of ensuring 
continued operation of the equipment (e.g., checking and maintaining 
refrigerant charge levels and cleaning heat-exchanger coils). Because 
RS Means does not provide maintenance costs for water-source heat 
pumps, DOE used annualized maintenance costs for air-source heat pumps, 
the closest related equipment category, derived from RS Means data.\38\ 
DOE does not expect the maintenance costs for water-source heat pumps 
to differ significantly from those for air-source heat pumps. These 
data provided estimates of person-hours, labor rates, and materials 
required to maintain commercial air-source heat pumps. The estimated 
annualized maintenance cost is $329 for a heat pump rated up to 60,000 
Btu/h and $398 for a heat pump rated greater than 60,000 Btu/h. DOE 
applied the former cost to water-source heat pumps less than 17,000 
Btu/h and heat pumps greater than or equal to 17,000 and less than 
65,000 Btu/h. DOE applied the latter cost to water-source heat pumps 
greater than or equal to 65,000 Btu/h

[[Page 1204]]

and less than 135,000 Btu/h. DOE requests comment on how maintenance 
costs for water-source heat pumps might be expected to differ from that 
for air-source heat pumps. This is identified as Issue 9 under ``Issues 
on Which DOE Seeks Comment'' in section X.E of this NOPR.
---------------------------------------------------------------------------

    \38\ RS Means Facilities Maintenance & Repair Cost Data 2013. 
Reed Construction Data, LLC. (2012).
---------------------------------------------------------------------------

6. Repair Costs
    Repair costs are costs to the commercial consumer associated with 
repairing or replacing components that have failed. As with maintenance 
costs, RS Means does not provide repair costs for water-source heat 
pumps. Therefore, DOE assumed the repair costs for water-source heat 
pumps would be similar to air-source units and utilized RS Means \39\ 
to find the repair costs for air-source heat pumps. DOE does not expect 
the repair costs for water-source heat pumps to differ significantly 
from those for air-source heat pumps. DOE took the repair costs for 
1.5-ton, 5-ton, and 10-ton air to air heat pumps and linearly scaled 
the repair costs to derive repair costs for 1-ton, 3-ton, and 7.5-ton 
equipment. DOE assumed that the repair would be a one-time event in 
year 10 of the equipment life. DOE then annualized the present value of 
the cost over the average equipment life (see next section) to obtain 
an annualized equivalent repair cost. This value ranged from $92 to 
$237 for the ASHRAE baseline, depending on equipment class. The 
materials portion of the repair cost was scaled with the percentage 
increase in manufacturers' production cost by efficiency level. The 
labor cost was held constant across efficiency levels. This annualized 
repair cost was then added to the maintenance cost to create an annual 
``maintenance and repair cost'' for the lifetime of the equipment. For 
further discussion of how DOE derived and implemented repair costs, see 
chapter 8 of the NOPR TSD. DOE requests comment on how repair costs for 
water-source heat pumps might be expected to differ from that for air-
source heat pumps. This is identified as Issue 10 under ``Issues on 
Which DOE Seeks Comment'' in section X.E of this NOPR.
---------------------------------------------------------------------------

    \39\ Id.
---------------------------------------------------------------------------

7. Equipment Lifetime
    Equipment lifetime is the age at which the subject water-source 
heat pump are retired from service. In the April 11, 2014 NODA, DOE 
used a mean lifetime of 19 years from the 2000 screening analysis for 
EPACT-Covered Commercial HVAC and Water-Heating Equipment (EERE-2006-
STD-0098-0015). 79 FR 20114, 20133. For this NOPR, DOE based equipment 
lifetime on a retirement function in the form of a Weibull probability 
distribution. Because a function specific to water-source heat pumps 
was not available, DOE used that for air-cooled air conditioners 
presented in the 2011 DFR (EERE-2011-BT-STD-0011-0012), as it is for 
similar equipment and represented the desired mean lifetime of 19 
years. DOE requests data and information that would help it develop a 
retirement function specific to water-source heat pumps. This is 
identified as Issue 11 under ``Issues on Which DOE Seeks Comment'' in 
section X.E of this NOPR.
8. Discount Rate
    The discount rate is the rate at which future expenditures are 
discounted to estimate their present value. The cost of capital 
commonly is used to estimate the present value of cash flows to be 
derived from a typical company project or investment. Most companies 
use both debt and equity capital to fund investments, so the cost of 
capital is the weighted-average cost of capital (WACC) to the firm of 
equity and debt financing. DOE uses the capital asset pricing model 
(CAPM) to calculate the equity capital component, and financial data 
sources to calculate the cost of debt financing.
    DOE derived the discount rates by estimating the cost of capital of 
companies that purchase water-source heat pump equipment. More details 
regarding DOE's estimates of commercial consumer discount rates are 
provided in chapter 6 of the NOPR TSD.
9. Base-Case Market Efficiency Distribution
    For the LCC analysis, DOE analyzes the considered efficiency levels 
relative to a base case (i.e., the case without amended energy 
efficiency standards, in this case the default scenario in which DOE is 
statutorily required to adopt the efficiency levels in ASHRAE 90.1-
2013). This analysis requires an estimate of the distribution of 
equipment efficiencies in the base case (i.e., what consumers would 
have purchased in the compliance year in the absence of amended 
standards more stringent than those in ASHRAE 90.1-2013). DOE refers to 
this distribution of equipment energy efficiencies as the base-case 
efficiency distribution. For more information on the development of the 
base-case distribution, see section VI.F.3 and chapter 6 of the NOPR 
TSD.
10. Compliance Date
    DOE calculated the LCC and PBP for all commercial consumers as if 
each were to purchase new equipment in the year that compliance with 
amended standards is required. Generally, covered equipment to which a 
new or amended energy conservation standard applies must comply with 
the standard if such equipment is manufactured or imported on or after 
a specified date. In this NOPR, DOE is evaluating whether more-
stringent efficiency levels than those in ASHRAE Standard 90.1-2013 
would be technologically feasible, economically justified, and result 
in a significant additional amount of energy savings. If DOE were to 
propose a rule prescribing energy conservation standards at the 
efficiency levels contained in ASHRAE Standard 90.1-2013, EPCA states 
that compliance with any such standards shall be required on or after a 
date which is two or three years (depending on equipment size) after 
the compliance date of the applicable minimum energy efficiency 
requirement in the amended ASHRAE/IES standard. (42 U.S.C. 
6313(a)(6)(D)) Given the equipment size at issue here, DOE has applied 
the two-year implementation period to determine the compliance date of 
any energy conservation standard equal to the efficiency levels 
specified by ASHRAE Standard 90.1-2013 proposed by this rulemaking. 
Thus, if DOE decides to adopt the efficiency levels in ASHRAE Standard 
90.1-2013, the compliance date of the rulemaking would be dependent 
upon the date specified in ASHRAE Standard 90.1-2013 or its publication 
date, if none is specified. In this case, the rule would apply to 
water-source heat pumps manufactured on or after October 9, 2015, which 
is two years after the publication date of ASHRAE Standard 90.1-2013.
    If DOE were to propose a rule prescribing energy conservation 
standards more stringent than the efficiency levels contained in ASHRAE 
Standard 90.1-2013, EPCA states that compliance with any such standards 
is required for equipment manufactured on or after a date which is four 
years after the date the final rule is published in the Federal 
Register. (42 U.S.C. 6313(a)(6)(D)) DOE has applied this 4-year 
implementation period to determine the compliance date for any energy 
conservation standard more stringent than the efficiency levels 
specified by ASHRAE Standard 90.1-2013 that might be prescribed at the 
final rule stage. Thus, for equipment for which DOE might adopt a level 
more stringent than the ASHRAE efficiency levels, the rule would apply 
to such equipment manufactured on or after a date four years from the 
date of

[[Page 1205]]

publication of the final rule, which the statute requires to be 
completed by April 9, 2016 (thereby resulting in a compliance date no 
later than April 9, 2020).\40\
---------------------------------------------------------------------------

    \40\ Since ASHRAE published ASHRAE Standard 90.1-2013 on October 
9, 2013, EPCA requires that DOE publish a final rule adopting more-
stringent standards than those in ASHRAE Standard 90.1-2013, if 
warranted, within 30 months of ASHRAE action (i.e., by April 2016). 
Thus, four years from April 2016 would be April 2020, which would be 
the anticipated compliance date for DOE adoption of more-stringent 
standards.
---------------------------------------------------------------------------

    Economic justification is not required for DOE to adopt the 
efficiency levels in ASHRAE 90.1-2013, as DOE is statutorily required 
to, at a minimum, adopt those levels. Therefore, DOE did not perform an 
LCC analysis on the ASHRAE Standard 90.1-2013 levels, and, for purposes 
of the LCC analysis, DOE used 2020 as the first year of compliance with 
amended standards.
11. Payback Period Inputs
    The payback period is the amount of time it takes the commercial 
consumer to recover the additional installed cost of more-efficient 
equipment, compared to baseline equipment, through energy cost savings. 
Payback periods are expressed in years. Payback periods that exceed the 
life of the equipment mean that the increased total installed cost is 
not recovered in reduced operating expenses.
    Similar to the LCC, the inputs to the PBP calculation are the total 
installed cost of the equipment to the commercial consumer for each 
efficiency level and the average annual operating expenditures for each 
efficiency level for each building type and Census Division, weighted 
by the probability of shipment to each market. The PBP calculation uses 
the same inputs as the LCC analysis, except that discount rates are not 
needed. Because the simple PBP does not take into account changes in 
operating expenses over time or the time value of money, DOE considered 
only the first year's operating expenses to calculate the PBP, unlike 
the LCC, which is calculated over the lifetime of the equipment. 
Chapter 6 of the NOPR TSD provides additional detail about the PBP.

F. National Impact Analysis--National Energy Savings and Net Present 
Value Analysis

    The NIA evaluates the effects of a considered energy conservation 
standard from a national perspective rather than from the consumer 
perspective represented by the LCC. This analysis assesses the NPV 
(future amounts discounted to the present) and the NES of total 
commercial consumer costs and savings, which are expected to result 
from amended standards at specific efficiency levels. For each 
efficiency level analyzed, DOE calculated the NPV and NES for adopting 
more-stringent standards than the efficiency levels specified in ASHRAE 
Standard 90.1-2013.
    The NES refers to cumulative energy savings from 2016 through 2045; 
\41\ however, when evaluating more-stringent standards, energy savings 
do not begin accruing until the later compliance date of 2020. DOE 
calculated new energy savings in each year relative to a base case, 
defined as DOE adoption of the efficiency levels specified by ASHRAE 
Standard 90.1-2013. DOE also calculated energy savings from adopting 
efficiency levels specified by ASHRAE Standard 90.1-2013 compared to 
the EPCA base case (i.e., the current Federal standards).
---------------------------------------------------------------------------

    \41\ Although the expected compliance date for adoption of the 
efficiency levels in ASHRAE Standard 90.1-2013 is October 9, 2015, 
DOE began its analysis period in 2016 to avoid ascribing savings to 
the three-quarters of 2015 prior to the compliance date.
---------------------------------------------------------------------------

    The NPV refers to cumulative monetary savings. DOE calculated net 
monetary savings in each year relative to the base case (ASHRAE 
Standard 90.1-2013) as the difference between total operating cost 
savings and increases in total installed cost. Cumulative savings are 
the sum of the annual NPV over the specified period. DOE accounted for 
operating cost savings until past 2100, when the equipment installed in 
the thirtieth year after the compliance date of the amended standards 
should be retired.
1. Approach
    The NES and NPV are a function of the total number of units and 
their efficiencies. Both the NES and NPV depend on annual shipments and 
equipment lifetime. Both calculations start by using the shipments 
estimate and the quantity of units in service derived from the 
shipments model. DOE used the same approach to determine NES and NPV 
for water-source heat pumps which was used for small commercial air-
cooled air-conditioning and heating equipment, as described in section 
V.F.1. In this case, the analysis period runs from 2016 through 2045.
    DOE considered whether a rebound effect is applicable in its NES 
analysis, a concept explained in detail in section V.F.1. DOE does not 
expect commercial consumers with water-source heat pump equipment to 
increase their use of the equipment, either in a previously cooled 
space or another previously uncooled space. Water-source heat pumps are 
part of engineered water-loop systems designed for specific 
applications. It is highly unlikely that the operation or installation 
of these systems would be changed simply as a result of energy cost 
savings. Therefore, DOE did not assume a rebound effect in the present 
NOPR analysis. DOE seeks input from interested parties on whether there 
will be a rebound effect for improvements in the efficiency of water-
source heat pumps. If interested parties believe a rebound effect would 
occur, DOE is interested in receiving data quantifying the effects, as 
well as input regarding how DOE should quantify this in its analysis. 
This is identified as Issue 3 under ``Issues on Which DOE Seeks 
Comment'' in section X.E of this NOPR.
2. Shipments Analysis
    Equipment shipments are an important element in the estimate of the 
future impact of a potential energy conservation standard. DOE 
developed shipment projections for water-source heat pumps and, in 
turn, calculated equipment stock over the course of the analysis period 
by assuming a Weibull distribution with an average 19-year equipment 
life. (See section V.E.7 for more information on equipment lifetime.) 
DOE used the shipments projection and the equipment stock to determine 
the NES. The shipments portion of the spreadsheet model projects water-
source heat pump shipments through 2045.
    In the April 11, 2014 NODA, DOE based its shipments analysis for 
water-source heat pumps on data from the U.S. Census. 79 FR 20114, 
20130. The U.S. Census published historical (1980, 1983-1994, 1997-
2006, and 2008-2010) water-source heat pump shipment data.\42\ Table 
VI.4 exhibits the shipment data provided for a selection of years. DOE 
analyzed data from the years 1990-2010 to establish a trend from which 
to project shipments beyond 2010. DOE used a linear trend. Because the 
Census data do not distinguish between equipment capacities, DOE used 
the shipments data by equipment class provided by AHRI in 1999, and 
published in the 2000 Screening Analysis for EPACT-Covered Commercial 
HVAC and Water-Heating Equipment (EERE-2006-STD-0098-0015), to 
distribute the total water-source heat pump shipments to individual 
equipment classes. Table

[[Page 1206]]

VI.5 exhibits the shipment data provided for 1999. DOE assumed that 
this distribution of shipments across the various equipment classes 
remained constant and has used this same distribution in its projection 
of future shipments of water-source heat pumps. The complete historical 
data set and the projected shipments for each equipment class can be 
found in the ASHRAE NOPR TSD.
---------------------------------------------------------------------------

    \42\ U.S. Census Bureau, Current Industrial Reports for 
Refrigeration, Air Conditioning, and Warm Air Heating Equipment, 
MA333M. Note that the current industrial reports were discontinued 
in 2010, so more recent data are not available (Available at: http://www.census.gov/manufacturing/cir/historical_data/ma333m/index.html).

                             Table VI.4--Total Shipments of Water-Source Heat Pumps
                                        [Census Product Code: 333415E181]
----------------------------------------------------------------------------------------------------------------
                                                                     1989             1999             2009
----------------------------------------------------------------------------------------------------------------
Total........................................................         157,080          120,545          180,101
----------------------------------------------------------------------------------------------------------------


                             Table VI.5--Total Shipments of Water-Source Heat Pumps
                                                     (AHRI)
----------------------------------------------------------------------------------------------------------------
                         Equipment class                               1999           Percent
-------------------------------------------------------------------------------------------------
WSHP <17000 Btu/h...............................................          41,000              31
WSHP 17000-65000 Btu/h..........................................          86,000              65
WSHP 65000-135000 Btu/h.........................................           5,000               4
----------------------------------------------------------------------------------------------------------------

    In the April 11, 2014 NODA, DOE noted that an EIA report on 
geothermal heat pump manufacturers \43\ shows shipments of water-source 
units (defined by EIA as those tested to ARI-320) as only 22,009 in 
2009 and 7,808 in 2000, which is significantly less than that reported 
by the Census (product code 333415E181) and by AHRI. 79 FR 20114, 
20130. DOE added that both the Census data and the EIA report show 
consistent shipments of separately-reported ground-source and ground-
water-source heat pumps (listed as Census product code 333415G and 
defined by EIA as those tested to ARI-325/330) at approximately 87,000 
shipments in 2009; DOE is not counting these shipments in its estimates 
as reported in Table VI.4. DOE believes that water-source heat pumps 
operate with a water loop using a boiler or chiller as the heat source 
or sink, and that, therefore, may not be considered ``geothermal;'' in 
this case, the EIA report may not include a comprehensive number of 
water-source heat pump shipments. Id.
---------------------------------------------------------------------------

    \43\ U.S. Energy Information Administration, Geothermal Heat 
Pump Manufacturing Activities 2009 (2010) (Available at: 
www.eia.gov/renewable/renewables/geothermalrpt09.pdf).
---------------------------------------------------------------------------

    In the April 11, 2014 NODA, DOE requested comment on the market for 
water-source heat pumps, especially what magnitude of annual shipments 
is most accurate and how shipments are expected to change over time. 
DOE also sought comment on the share of the market for ground-source 
and ground-water-source heat pump applications that use models also 
rated for water-loop application. Id. at 20130-31. In response, AHRI 
reported that it has no data on the market share of various 
applications and no comment on the current shipments or future trends. 
(AHRI, No. 24 at p. 7) DOE did not receive any other comment on this 
issue. Consequently, DOE has retained the shipments analysis used in 
the April 11, 2014 NODA for water-source heat pumps. Table VI.6 shows 
the projected shipments for the different equipment classes of water-
source heat pumps for selected years from 2016 to 2045, as well as the 
cumulative shipments.

                                              Table VI.6--Shipments Projection for Water-Source Heat Pumps
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                    Units Shipped by Year and Equipment Class
                                                        ------------------------------------------------------------------------------------------------
                       Equipment                                                                                                              Cumulative
                                                            2016        2020        2025        2030        2035        2040        2045      shipments
                                                                                                                                             (2016-2045)
--------------------------------------------------------------------------------------------------------------------------------------------------------
WSHP <17000 Btu/h......................................      62,934      68,072      74,495      80,918      87,341      93,764     100,187    2,446,810
WSHP 17000-65000 Btu/h.................................     132,007     142,785     156,258     169,731     183,203     196,676     210,148    5,132,334
WSHP 65000-135000 Btu/h................................       7,675       8,301       9,085       9,868      10,651      11,435      12,218    7,579,144
                                                        ------------------------------------------------------------------------------------------------
    Total..............................................     202,616     219,159     239,838     260,517     281,195     301,874     322,553    7,877,536
--------------------------------------------------------------------------------------------------------------------------------------------------------

    As equipment purchase price and repair costs increase with 
efficiency, DOE recognizes that higher first costs and repair costs can 
result in a drop in shipments. However, DOE had no basis for estimating 
the elasticity of shipments for water-source heat pumps as a function 
of first costs, repair costs, or operating costs. In addition, because 
water-source heat pumps are often installed for their higher efficiency 
as compared to air-cooled equipment, DOE has tentatively concluded that 
it is unlikely that shipments would change as a result of higher first 
costs and repair costs. Therefore, DOE presumed that the shipments 
projection would not change with higher standard levels. DOE seeks 
input on this assumption. This is identified as Issue 4 under ``Issues 
on Which DOE Seeks Comment'' in section X.E of this NOPR. Chapter 7 of 
the NOPR TSD provides additional details on the shipments forecasts.
3. Base-Case and Standards-Case Forecasted Distribution of Efficiencies
    In the April 11, 2014 NODA, DOE presented base-case efficiency 
distributions based on model

[[Page 1207]]

availability in the AHRI certified directory. 79 FR 20114, 20132. As 
noted in section V.F.3, DOE received comments that this was an 
incorrect assumption; however, no data were provided that would allow 
DOE to better estimate the base-case efficiency distribution. 
Therefore, DOE has retained the initial distribution used in the April 
2014 NODA.
    For this NOPR, DOE has estimated a base-case efficiency trend of an 
increase of approximately 1 EER every 35 years, based on the trend from 
2012 to 2035 found in the Commercial Unitary Air Conditioner Advance 
Notice of Proposed Rulemaking (ANOPR).\44\ DOE used this same trend in 
the standards-case scenarios. DOE requests comment on its estimated 
efficiency trends. This is identified as Issue 5 under ``Issues on 
Which DOE Seeks Comment'' in section X.E of this NOPR.
---------------------------------------------------------------------------

    \44\ See DOE's technical support document underlying DOE's July 
29, 2004 ANOPR. 69 FR 45460 (Available at: www.regulations.gov/#!documentDetail;D=EERE-2006-STD-70103-0078).
---------------------------------------------------------------------------

    As in the April 11, 2014 NODA, for each efficiency level analyzed, 
DOE used a ``roll-up'' scenario to establish the market shares by 
efficiency level for the first full year that compliance would be 
required with amended standards (i.e., 2016 for adoption of efficiency 
levels in ASHRAE Standard 90.1-2013 or 2020 if DOE adopts more-
stringent efficiency levels than those in ASHRAE Standard 90.1-2013). 
As noted in section V.F.3, stakeholders agreed that this was a 
reasonable assumption. Table VI.7 presents the estimated base-case 
efficiency market shares for each water-source heat pump equipment 
class.

               Table VI.7--Base-Case Efficiency Market Shares in 2020 for Water-Source Heat Pumps
----------------------------------------------------------------------------------------------------------------
  Water-source (water-to-air, water-loop) heat      Water-source (water-to-air,     Water-source (water-to-air,
              pumps  <17,000 Btu/h                    water-loop) heat pumps          water-loop) heat pumps
-------------------------------------------------   >=17,000 and  <65,000 Btu/h    >=65,000 and  <135,000 Btu/h
                                                 ---------------------------------------------------------------
               EER                 Market share                    Market share                    Market share
                                         %              EER              %              EER              %
----------------------------------------------------------------------------------------------------------------
11.2............................             0.0            12.0             0.0            12.0             0.0
12.2............................             0.7            13.0             7.6            13.0             0.0
13.0............................            49.7            14.6            55.1            14.0            29.8
14.0............................            22.0            16.6            25.0            15.0            48.5
15.7............................            20.5            18.0             8.9            16.0            20.1
16.5............................             4.9            19.2             2.5            17.0             1.7
18.1............................             2.3            21.6             1.0
----------------------------------------------------------------------------------------------------------------
Note: The 0% market share at the first listed EER level is accounting for the default adoption of ASHRAE
  Standard 90.1-2013 levels in 2016.

4. National Energy Savings and Net Present Value
    The stock of water-source heat pump equipment is the total number 
of units in each equipment class purchased or shipped from previous 
years that have survived until a given point in time. The NES 
spreadsheet,\45\ through use of the shipments model, keeps track of the 
total number of units shipped each year. For purposes of the NES and 
NPV analyses, DOE assumes that shipments of water-source heat pump 
units survive for an average of 19 years, following a Weibull 
distribution, at the end of which time they are removed from service.
---------------------------------------------------------------------------

    \45\ The NES spreadsheet can be found in the docket for the 
ASHRAE rulemaking at: www.regulations.gov/#!docketDetail;D=EERE-
2014-BT-STD-0015.
---------------------------------------------------------------------------

    The national annual energy consumption is the product of the annual 
unit energy consumption and the number of units of each vintage in the 
stock, summed over all vintages. This approach accounts for differences 
in unit energy consumption from year to year. In determining national 
annual energy consumption, DOE estimated energy consumption and savings 
based on site energy and converted the electricity consumption and 
savings to primary energy using annual conversion factors derived from 
the AEO 2014 version of NEMS. Cumulative energy savings are the sum of 
the NES for each year over the timeframe of the analysis.
    In response to the recommendations of a committee on ``Point-of-Use 
and Full-Fuel-Cycle Measurement Approaches to Energy Efficiency 
Standards'' appointed by the National Academy of Sciences, DOE 
announced its intention to use FFC measures of energy use and 
greenhouse gas and other emissions in the national impact analyses and 
emissions analyses included in future energy conservation standards 
rulemakings. 76 FR 51281 (Aug. 18, 2011). After evaluating the 
approaches discussed in the August 18, 2011 notice, DOE published a 
statement of amended policy in the Federal Register in which DOE 
explained its determination that NEMS is the most appropriate tool for 
its FFC analysis and its intention to use NEMS for that purpose. 77 FR 
49701 (Aug. 17, 2012). The approach used for this NOPR is described in 
Appendix 8-A of the NOPR TSD.
    Table VI.8 summarizes the inputs to the NES spreadsheet model along 
with a brief description of the data sources. The results of DOE's NES 
and NPV analysis are summarized in section VIII.B.2.b and described in 
detail in chapter 7 of the NOPR TSD.

 Table VI.8--Summary of Water-Source Heat Pump NES and NPV Model Inputs
------------------------------------------------------------------------
              Inputs                             Description
------------------------------------------------------------------------
Shipments.........................  Annual shipments based on U.S.
                                     Census data. (See chapter 7 of the
                                     NOPR TSD.)
Compliance Date of Standard.......  2020 for adoption of a more-
                                     stringent efficiency level than
                                     those specified by ASHRAE Standard
                                     90.1-2013.
                                    2016 for adoption of the efficiency
                                     levels specified by ASHRAE Standard
                                     90.1-2013.
Base-Case Efficiencies............  Distribution of base-case shipments
                                     by efficiency level, with
                                     efficiency trend of an increase of
                                     1 EER every 35 years.

[[Page 1208]]

 
Standards-Case Efficiencies.......  Distribution of shipments by
                                     efficiency level for each standards
                                     case. In compliance year, units
                                     below the standard level ``roll-
                                     up'' to meet the standard.
                                     Efficiency trend of an increase of
                                     1 EER every 35 years.
Annual Energy Use per Unit........  Annual national weighted-average
                                     values are a function of efficiency
                                     level. (See chapter 4 of the NOPR
                                     TSD.)
Total Installed Cost per Unit.....  Annual weighted-average values are a
                                     function of efficiency level. (See
                                     chapter 5 of the NOPR TSD.)
Annualized Maintenance and Repair   Annual weighted-average values are a
 Costs per Unit.                     function of efficiency level. (See
                                     chapter 5 of the NOPR TSD.)
Escalation of Fuel Prices.........  AEO2014 forecasts (to 2040) and
                                     extrapolation for beyond 2040. (See
                                     chapter 8 of the NOPR TSD.)
Site to Primary and FFC Conversion  Based on AEO2014 forecasts (to 2040)
                                     and extrapolation for beyond 2040.
                                     (See chapter 8 of the NOPR TSD.)
Discount Rate.....................  3 percent and 7 percent real.
Present Year......................  Future costs are discounted to 2014.
------------------------------------------------------------------------

VII. Methodology for Emissions Analysis and Monetizing Carbon Dioxide 
and Other Emissions Impacts

A. Emissions Analysis

    In the emissions analysis, DOE estimates the reduction in power 
sector emissions of carbon dioxide (CO2), nitrogen oxides 
(NOX), sulfur dioxide (SO2), and mercury (Hg) 
from potential amended energy conservation standards for the ASHRAE 
equipment that is the subject of this document. In addition, DOE 
estimates emissions impacts in production activities (extracting, 
processing, and transporting fuels) that provide the energy inputs to 
power plants. These are referred to as ``upstream'' emissions. 
Together, these emissions account for the full-fuel cycle (FFC). In 
accordance with DOE's FFC Statement of Policy (76 FR 51281 (Aug. 18, 
2011) as amended at 77 FR 49701 (August 17, 2012)), the FFC analysis 
also includes impacts on emissions of methane (CH4) and 
nitrous oxide (N2O), both of which are recognized as 
greenhouse gases. The combustion emissions factors and the method DOE 
used to derive upstream emissions factors are described in chapter 9 of 
the NOPR TSD. The cumulative emissions reduction estimated for the 
subject ASHRAE equipment is presented in section VIII.C.
    DOE primarily conducted the emissions analysis using emissions 
factors for CO2 and most of the other gases derived from 
data in AEO 2014. Combustion emissions of CH4 and 
N2O were estimated using emissions intensity factors 
published by the U.S. Environmental Protection Agency (EPA) in its 
Greenhouse Gas (GHG) Emissions Factors Hub.\46\ DOE developed separate 
emissions factors for power sector emissions and upstream emissions. 
The method that DOE used to derive emissions factors is described in 
chapter 9 of the NOPR TSD.
---------------------------------------------------------------------------

    \46\ See http://www.epa.gov/climateleadership/inventory/ghg-emissions.html.
---------------------------------------------------------------------------

    EIA prepares the AEO using NEMS. Each annual version of NEMS 
incorporates the projected impacts of existing air quality regulations 
on emissions. AEO 2014 generally represents current legislation and 
environmental regulations, including recent government actions, for 
which implementing regulations were available as of October 31, 2013.
    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 (DC). (42 U.S.C. 7651 et seq.) SO2 
emissions from 28 eastern States and DC were also limited under the 
Clean Air Interstate Rule (CAIR). 70 FR 25162 (May 12, 2005). CAIR, 
which created an allowance-based trading program that operates along 
with the Title IV program, was remanded to the EPA by the U.S. Court of 
Appeals for the District of Columbia Circuit, but it remained in 
effect.\47\ In 2011, EPA issued a replacement for CAIR, the Cross-State 
Air Pollution Rule (CSAPR). 76 FR 48208 (Aug. 8, 2011). On August 21, 
2012, the D.C. Circuit issued a decision to vacate CSAPR.\48\ The court 
ordered EPA to continue administering CAIR. The emissions factors used 
for this NOPR, which are based on AEO 2014, assume that CAIR remains a 
binding regulation through 2040.\49\
---------------------------------------------------------------------------

    \47\ 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).
    \48\ 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).
    \49\ 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. 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. See EPA v. EME Homer City 
Generation, No 12-1182, slip op. at 32 (U.S. April 29, 2014). On 
October 23, 2014, the D.C. Circuit lifted the stay of CSAPR. 
Pursuant to this action, CSAPR will go into effect (and the Clean 
Air Interstate Rule will sunset) as of January 1, 2015. However, 
because DOE used emissions factors based on AEO 2014 for this NOPR, 
the analysis assumes 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 SO2 emissions.
---------------------------------------------------------------------------

    The attainment of emissions caps is typically flexible among EGUs 
and is enforced through the use of emissions allowances and tradable 
permits. Beginning in 2016, however, SO2 emissions will 
decline significantly as a result of the Mercury and Air Toxics 
Standards (MATS) for power plants. 77 FR 9304 (Feb. 16, 2012). In the 
final 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. AEO 2014 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 are used to reduce acid gas emissions, and also 
reduce SO2 emissions. Under the MATS, emissions

[[Page 1209]]

will be far below the cap established by CAIR, so it is unlikely that 
excess SO2 emissions allowances resulting from the lower 
electricity demand would be needed or used to permit offsetting 
increases in SO2 emissions by any regulated EGU. Therefore, 
DOE believes that energy efficiency standards will reduce 
SO2 emissions in 2016 and beyond.
    CAIR established a cap on NOX emissions in 28 eastern 
States and the District of Columbia.\50\ 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. However, 
standards would be expected to reduce NOX emissions in the 
States not affected by the caps, so DOE estimated NOX 
emissions reductions from the standards considered in this NOPR for 
these States.
---------------------------------------------------------------------------

    \50\ 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 is slight.
---------------------------------------------------------------------------

    The MATS limit mercury emissions from power plants, but they do not 
include emissions caps. DOE estimated mercury emissions using emissions 
factors based on AEO 2014, which incorporates the MATS.

B. Monetizing Carbon Dioxide and Other Emissions Impacts

    As part of the development of this proposed rule, DOE considered 
the estimated monetary benefits from the reduced emissions of 
CO2 and NOX that are expected to result from each 
of the efficiency levels 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 equipment shipped in the forecast period for each efficiency level. 
This section summarizes the basis for the monetary values used for each 
of these emissions and presents the values considered in this NOPR.
    For this NOPR, DOE relied on a set of values for the social cost of 
carbon (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 NOPR TSD.
1. Social Cost of Carbon
    The 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) 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.
    As part of the interagency process that developed these SCC 
estimates, 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. The main 
objective of this process was to develop a range of SCC values using a 
defensible set of input assumptions grounded in the existing scientific 
and economic literatures. In this way, key uncertainties and model 
differences transparently and consistently inform the range of SCC 
estimates used in the rulemaking process.
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 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 carbon dioxide 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

[[Page 1210]]

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 to model 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 VII.1 
presents the values in the 2010 interagency group report,\53\ which is 
reproduced in appendix 10-A of the NOPR 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, United States Government (February 2010) (Available at: 
www.whitehouse.gov/sites/default/files/omb/inforeg/for-agencies/Social-Cost-of-Carbon-for-RIA.pdf).

                     Table VII.1--Annual SCC Values From 2010 Interagency Report, 2010-2050
                                           [2007$ per metric ton CO2]
----------------------------------------------------------------------------------------------------------------
                                                                           Discount rate
                                                 ---------------------------------------------------------------
                                                        5%              3%             2.5%             3%
                      Year                       ---------------------------------------------------------------
                                                                                                       95th
                                                      Average         Average         Average       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.\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 November 2013) (Available at: http://www.whitehouse.gov/sites/default/files/omb/assets/inforeg/technical-update-social-cost-of-carbon-for-regulator-impact-analysis.pdf).
---------------------------------------------------------------------------

    Table VII.2 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 
10-B of the NOPR 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 VII.2--Annual SCC Values From 2013 Interagency Report, 2010-2050
                                           [2007$ per metric ton CO2]
----------------------------------------------------------------------------------------------------------------
                                                                           Discount rate
                                                 ---------------------------------------------------------------
                                                        5%              3%             2.5%             3%
                      Year                       ---------------------------------------------------------------
                                                                                                       95th
                                                      Average         Average         Average       percentile
----------------------------------------------------------------------------------------------------------------
2010............................................              11              32              51              89
2015............................................              11              37              57             109

[[Page 1211]]

 
2020............................................              12              43              64             128
2025............................................              14              47              69             143
2030............................................              16              52              75             159
2035............................................              19              56              80             175
2040............................................              21              61              86             191
2045............................................              24              66              92             206
2050............................................              26              71              97             220
----------------------------------------------------------------------------------------------------------------

    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 mentioned previously 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 adjusted to 2013$ 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 $12.0, $40.5, $62.4, and $119 per metric ton 
avoided (values expressed in 2013$). 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. Valuation of Other Emissions Reductions
    As noted previously, DOE has taken into account how considered 
energy conservation standards would reduce site NOX 
emissions nationwide and increase power sector NOX emissions 
in those 22 States not affected by the CAIR. DOE estimated the 
monetized value of net NOX emissions reductions resulting 
from each of the efficiency levels considered for this NOPR based on 
estimates found in the relevant scientific literature. Estimates of 
monetary value for reducing NOX from stationary sources 
range from $476 to $4,893 per ton in 2013$.\55\ DOE calculated monetary 
benefits using a medium value for NOX emissions of $2,684 
per short ton (in 2013$) and real discount rates of 3 percent and 7 
percent.
---------------------------------------------------------------------------

    \55\ U.S. Office of Management and Budget, Office of Information 
and Regulatory Affairs, 2006 Report to Congress on the Costs and 
Benefits of Federal Regulations and Unfunded Mandates on State, 
Local, and Tribal Entities (2006) (Available at: www.whitehouse.gov/sites/default/files/omb/assets/omb/inforeg/2006_cb/2006_cb_final_report.pdf).
---------------------------------------------------------------------------

    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.

VIII. Analytical Results and Conclusions

A. Efficiency Levels Analyzed

1. Small Commercial Air-Cooled Air Conditioners and Heat Pumps Less 
Than 65,000 Btu/h
    The methodology for small commercial air-cooled air conditioners 
and heat pumps less than 65,000 Btu/h was presented in section V of 
this NOPR. Table VIII.1 presents the market baseline efficiency level 
and the higher efficiency levels analyzed for each equipment class of 
small commercial air-cooled air conditioners and heat pumps less than 
65,000 Btu/h subject to this proposed rule. The EPCA baseline 
efficiency levels correspond to the lowest efficiency levels currently 
available on the market. The efficiency levels above the baseline 
represent efficiency levels specified by ASHRAE Standard 90.1-2013 and 
efficiency levels more stringent than those specified in ASHRAE 
Standard 90.1-2013 where equipment is currently available on the 
market. Note that for the energy savings and economic analysis, 
efficiency levels above those specified in ASHRAE Standard 90.1-2013 
are compared to ASHRAE Standard 90.1-2013 as the baseline rather than 
the EPCA baseline (i.e., the current Federal standards). For split-
system air conditioners, for which ASHRAE 90.1-2013 did not change the 
efficiency level, all efficiency levels are compared to the Federal or 
EPCA baseline.

[[Page 1212]]



Table VIII.1--Efficiency Levels Analyzed for Small Commercial Air-Cooled Air Conditioners and Heat Pumps <65,000
                                                      Btu/h
----------------------------------------------------------------------------------------------------------------
                                            Small three-      Small three-      Small three-      Small three-
                                          phase air-cooled  phase air-cooled  phase air-cooled  phase air-cooled
                                          split-system air   single-package     split-system     single-package
                                            conditioners    air conditioners     heat pumps        heat pumps
                                            <65,000 Btu/h     <65,000 Btu/h     <65,000 Btu/h     <65,000 Btu/h
----------------------------------------------------------------------------------------------------------------
                                          Efficiency Level (SEER/HSPF)
----------------------------------------------------------------------------------------------------------------
Baseline--Federal Standard..............                13                13            13/7.7            13/7.7
ASHRAE Level (0)........................              * 14                14            14/8.2            14/8.0
Efficiency Level 1......................                15                15            15/8.5            15/8.4
Efficiency Level 2......................                16                16            16/8.7            16/8.8
Efficiency Level 3......................                17                17            17/9.0            17/8.9
Efficiency Level 4 **...................                18                18          18.0/9.2          18.0/9.1
Efficiency Level 5 ***..................                19                19  ................  ................
----------------------------------------------------------------------------------------------------------------
* For split system air conditioners, the ASHRAE level is 13.0 SEER. DOE analyzed the 14.0 SEER level as a level
  more stringent than ASHRAE, but designated it as efficiency level 0 for consistency in SEER level across
  equipment classes.
** Efficiency Level 4 is ``Max-Tech'' for HP equipment classes.
*** Efficiency Level 5 is ``Max-Tech'' for AC equipment classes.

2. Water-Source Heat Pumps
    Table VIII.2 presents the baseline efficiency level and the more-
stringent efficiency levels analyzed for each equipment class of water-
source heat pumps subject to this proposed rule. The baseline 
efficiency levels correspond to the lowest efficiency levels currently 
available on the market. The efficiency levels above the baseline 
represent efficiency levels specified in ASHRAE Standard 90.1-2013 and 
more-stringent efficiency levels where equipment is currently available 
on the market.

                      Table VIII.2--Efficiency Levels Analyzed for Water-Source Heat Pumps
----------------------------------------------------------------------------------------------------------------
                                                                                Water-source      Water-source
                                                              Water-source     (water-to-air,    (water-to-air,
                                                             (water-to-air,   water-loop) heat  water-loop) heat
                                                            water-loop) heat   pumps >=17,000    pumps >=65,000
                                                              pumps <17,000   and <65,000 Btu/  and <135,000 Btu/
                                                                  Btu/h               h                 h
----------------------------------------------------------------------------------------------------------------
                                           Efficiency Level (EER/COP)
----------------------------------------------------------------------------------------------------------------
Baseline--Federal Standard................................          11.2/4.2          12.0/4.2          12.0/4.2
ASHRAE Level (0)..........................................          12.2/4.3          13.0/4.3          13.0/4.3
Efficiency Level 1........................................          13.0/4.6          14.6/4.8          14.0/4.7
Efficiency Level 2........................................          14.0/4.8          16.6/5.3          15.0/4.8
Efficiency Level 3........................................          15.7/5.1          18.0/5.6          16.0/5.0
Efficiency Level 4 *......................................          16.5/5.3          19.2/5.9          17.2/5.1
Efficiency Level 5 **.....................................          18.1/5.6          21.6/6.5  ................
----------------------------------------------------------------------------------------------------------------
* Efficiency Level 4 is ``Max-Tech'' for the largest equipment class.
** Efficiency Level 5 is ``Max-Tech'' for the two smaller equipment classes.

3. Commercial Oil-Fired Storage Water Heaters
    The methodology for oil-fired storage water heating equipment was 
presented in the April 2014 NODA. 79 FR 20114, 20129-33 (April 11, 
2014). Table VIII.3 presents the baseline efficiency level and the 
more-stringent efficiency levels analyzed for the class of oil-fired 
storage water heaters subject to this proposed rule. The baseline 
efficiency levels correspond to the lowest efficiency levels currently 
available on the market. The efficiency levels above the baseline 
represent efficiency levels specified in ASHRAE Standard 90.1-2013 and 
more-stringent efficiency levels where equipment is currently available 
on the market.

    Table VIII.3--Efficiency Levels Analyzed for Commercial Oil-Fired
                     Storage Water-Heating Equipment
------------------------------------------------------------------------
                                                      Oil-fired storage
                                                        water-heating
                                                     equipment (>105,000
                                                    Btu/h and <4,000 Btu/
                                                         h/gal) (%)
------------------------------------------------------------------------
               Efficiency level (Et)
------------------------------------------------------------------------
Baseline--Federal Standard........................                    78
ASHRAE Level (0)..................................                    80
Efficiency Level 1................................                    81

[[Page 1213]]

 
Efficiency Level 2--``Max-Tech''--................                    82
------------------------------------------------------------------------

B. Energy Savings and Economic Justification

1. Small Commercial Air-Cooled Air Conditioners and Heat Pumps Less 
Than 65,000 Btu/h
a. Economic Impacts on Commercial Customers
1. Life-Cycle Cost and Payback Period
    To evaluate the net economic impact of potential amended energy 
conservation standards on commercial consumers of small commercial air-
cooled air conditioners and heat pumps, DOE conducted LCC and PBP 
analyses for each efficiency level. In general, higher-efficiency 
equipment would affect commercial consumers in two ways: (1) Purchase 
price would increase, and (2) annual operating costs would decrease. 
Inputs used for calculating the LCC and PBP include total installed 
costs (i.e., equipment price plus installation costs), and operating 
costs (i.e., annual energy usage, energy prices, energy price trends, 
repair costs, and maintenance costs). The LCC calculation also uses 
equipment lifetime and a discount rate.
    The output of the LCC model is a mean LCC savings (or cost \56\) 
for each equipment class, relative to the baseline small commercial 
air-cooled air conditioner and heat pump efficiency level. The LCC 
analysis also provides information on the percentage of commercial 
consumers that are negatively affected by an increase in the minimum 
efficiency standard.
---------------------------------------------------------------------------

    \56\ An LCC cost is shown as a negative savings in the results 
presented.
---------------------------------------------------------------------------

    DOE also performed a PBP analysis as part of the LCC analysis. The 
PBP is the number of years it would take for the commercial consumer to 
recover the increased costs of higher-efficiency equipment as a result 
of energy savings based on the operating cost savings. The PBP is an 
economic benefit-cost measure that uses benefits and costs without 
discounting. Chapter 6 of the NOPR TSD provides detailed information on 
the LCC and PBP analyses.
    DOE's LCC and PBP analyses provided five key outputs for each 
efficiency level above the baseline (i.e., efficiency levels above the 
current Federal standard for split-system air conditioners or 
efficiency levels more stringent than those in ASHRAE Standard 90.1-
2013 for the three triggered equipment classes), as reported in Table 
VIII.4 through Table VIII.11 below. These outputs include the 
proportion of small commercial air-cooled air conditioner and heat pump 
purchases in which the purchase of such a unit that is compliant with 
the amended energy conservation standard creates a net LCC increase, no 
impact, or a net LCC savings for the commercial consumer. Another 
output is the average net LCC savings from standard-compliant 
equipment, as well as the average PBP for the consumer investment in 
standard-compliant equipment.
    Chapter 6 of the NOPR TSD provides detailed information on the LCC 
and PBP analyses.
    Table VIII.4 through Table VIII.11 show the LCC and PBP results for 
all efficiency levels considered for each class of small commercial 
air-cooled air conditioner and heat pump in this NOPR. In the first of 
each pair of tables, the simple payback is measured relative to the 
baseline equipment (i.e., equipment at the current Federal standards 
for split-system air conditioners or equipment with the efficiency 
levels required in ASHRAE Standard 90.1-2013 for the three triggered 
equipment classes). In the second tables, the LCC savings are measured 
relative to the base-case efficiency distribution in the compliance 
year (i.e., the range of equipment expected to be on the market in the 
absence of amended standards for split-system air conditioners or the 
default case where DOE adopts the efficiency levels in ASHRAE Standard 
90.1-2013 for the three triggered equipment classes).

       Table VIII.4--Average LCC and PBP Results by Efficiency Level for Small Three-Phase Air-Cooled Split-System Air Conditioners <65,000 Btu/h
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                Average costs 2013$
                                                         ---------------------------------------------------------------- Simple payback      Average
                    Efficiency level                                       First year's      Lifetime                         (years)        lifetime
                                                          Installed cost  operating cost  operating cost        LCC                           (years)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Baseline................................................          $3,859            $765          $7,424         $11,282             N/A              19
0.......................................................           4,106             762           7,389          11,495              68              19
1.......................................................           4,353             755           7,326          11,680              49              19
2.......................................................           4,619             749           7,268          11,887              47              19
3.......................................................           4,873             753           7,302          12,176              80              19
4.......................................................           5,138             757           7,342          12,480             148              19
5.......................................................           5,415             762           7,400          12,815             562              19
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note: The results for each efficiency level are calculated assuming that all commercial consumers use equipment with that efficiency level. The PBP is
  measured relative to the baseline equipment.


[[Page 1214]]


     Table VIII.5--LCC Savings Relative to the Base-Case Efficiency
     Distribution for Small Three-Phase Air-Cooled Split-System Air
                       Conditioners <65,000 Btu/h
------------------------------------------------------------------------
                                              Life-cycle cost savings
                                         -------------------------------
                                          % of Customers      Average
            Efficiency level                    that         savings *
                                            experience   ---------------
                                         ----------------
                                             Net cost          2013$
------------------------------------------------------------------------
0.......................................              26            (55)
1.......................................              75           (196)
2.......................................              97           (398)
3.......................................             100           (687)
4.......................................             100           (992)
5.......................................             100         (1,326)
------------------------------------------------------------------------
* The calculation includes households with zero LCC savings (no impact).


      Table VIII.6--Average LCC and PBP Results by Efficiency Level for Small Three-Phase Air-Cooled Single-Package Air Conditioners <65,000 Btu/h
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                               Average costs  2013$
                                                         ---------------------------------------------------------------- Simple payback      Average
                    Efficiency level                                       First year's      Lifetime                         (years)        Lifetime
                                                          Installed cost  operating cost  operating cost        LCC                           (years)
--------------------------------------------------------------------------------------------------------------------------------------------------------
ASHRAE Baseline.........................................          $4,731            $761          $7,408         $12,139             N/A              19
1.......................................................           5,036             747           7,275          12,311              47              19
2.......................................................           5,343             742           7,224          12,567              50              19
3.......................................................           5,642             746           7,262          12,904              80              19
4.......................................................           5,944             750           7,300          13,244             128              19
5.......................................................           6,308             755           7,350          13,659             261              19
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note: The results for each efficiency level are calculated assuming that all commercial consumers use equipment with that efficiency level. The PBP is
  measured relative to the baseline equipment.


     Table VIII.7--LCC Savings Relative to the Base-Case Efficiency
    Distribution for Small Three-Phase Air-Cooled Single-Package Air
                       Conditioners <65,000 Btu/h
------------------------------------------------------------------------
                                         Life-cycle cost savings
                               -----------------------------------------
                                   % of Customers     Average savings *
       Efficiency level           that experience   --------------------
                               ---------------------
                                      Net cost              2013$
------------------------------------------------------------------------
1.............................                   49                 (89)
2.............................                   81                (297)
3.............................                   89                (596)
4.............................                   93                (913)
5.............................                  100              (1,326)
------------------------------------------------------------------------
* The calculation includes households with zero LCC savings (no impact).


          Table VIII.8--Average LCC and PBP Results by Efficiency Level for Small Three-Phase Air-Cooled Split-System Heat Pumps <65,000 Btu/h
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                               Average costs  2013$
                                                         ---------------------------------------------------------------- Simple payback      Average
                    Efficiency level                                       First year's      Lifetime                         (years)        lifetime
                                                          Installed cost  operating cost  operating cost        LCC                           (years)
--------------------------------------------------------------------------------------------------------------------------------------------------------
ASHRAE Baseline.........................................          $4,467            $784          $6,969         $11,436             N/A              16
1.......................................................           4,725             772           6,857          11,582              35              16
2.......................................................           5,066             766           6,807          11,873              41              16
3.......................................................           5,346             766           6,811          12,157              54              16
4.......................................................           5,636             767           6,819          12,454              70              16
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note: The results for each efficiency level are calculated assuming that all commercial consumers use equipment with that efficiency level. The PBP is
  measured relative to the baseline equipment.


[[Page 1215]]


     Table VIII.9--LCC Savings Relative to the Base-Case Efficiency
  Distribution for Small Three-Phase Air-Cooled Split-System Heat Pumps
                              <65,000 Btu/h
------------------------------------------------------------------------
                                         Life-cycle cost savings
                               -----------------------------------------
                                % of customers that   Average savings *
       Efficiency level              experience     --------------------
                               ---------------------
                                      Net cost              2013$
------------------------------------------------------------------------
1.............................                   75                (117)
2.............................                   99                (406)
3.............................                  100                (690)
4.............................                  100                (988)
------------------------------------------------------------------------
* The calculation includes households with zero LCC savings (no impact).


         Table VIII.10--Average LCC and PBP Results by Efficiency Level for Small Three-Phase Air-Cooled Single-Package Heat Pumps <65,000 Btu/h
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                Average costs 2013$
                                                         ---------------------------------------------------------------- Simple payback      Average
                    Efficiency level                                       First year's      Lifetime                         (years)        lifetime
                                                          Installed cost  operating cost  operating cost        LCC                           (years)
--------------------------------------------------------------------------------------------------------------------------------------------------------
ASHRAE Baseline.........................................          $5,103            $786          $6,982         $12,085             N/A              16
1.......................................................           5,444             773           6,869          12,313              50              16
2.......................................................           5,771             766           6,810          12,581              50              16
3.......................................................           6,099             767           6,817          12,915              67              16
4.......................................................           6,484             768           6,823          13,307              87              16
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note: The results for each efficiency level are calculated assuming that all commercial consumers use equipment with that efficiency level. The PBP is
  measured relative to the baseline equipment.


     Table VIII.11--LCC Savings Relative to the Base-Case Efficiency
 Distribution for Small Three-Phase Air-Cooled Single-Package Heat Pumps
                              <65,000 Btu/h
------------------------------------------------------------------------
                                         Life-cycle cost savings
                               -----------------------------------------
                                % of customers that   Average savings *
       Efficiency level              experience     --------------------
                               ---------------------
                                      Net cost              2013$
------------------------------------------------------------------------
1.............................                   68               ($157)
2.............................                   90               ($399)
3.............................                   99               ($728)
4.............................                   99             ($1,117)
------------------------------------------------------------------------
* The calculation includes households with zero LCC savings (no impact).

b. National Impact Analysis
1. Amount and Significance of Energy Savings
    To estimate the lifetime energy savings for equipment shipped 
through 2046 (or 2048) due to amended energy conservation standards, 
DOE compared the energy consumption of small commercial air-cooled air 
conditioners and heat pumps less than 65,000 Btu/h under the ASHRAE 
Standard 90.1-2013 efficiency levels (or current Federal levels for 
split-system air conditioners) to energy consumption of the same small 
commercial air-cooled air conditioners and heat pumps under more-
stringent efficiency standards. For the three equipment classes 
triggered by ASHRAE, DOE also compared the energy consumption of those 
small commercial air-cooled air conditioners and heat pumps under the 
ASHRAE Standard 90.1-2013 efficiency levels to energy consumption of 
small commercial air-cooled air conditioners and heat pumps under the 
current EPCA base case (i.e., under current Federal standards). DOE 
examined up to five efficiency levels higher than those of ASHRAE 
Standard 90.1-2013. Table VIII.12 through Table VIII.15 show the 
projected national energy savings at each of the considered standard 
levels. (See chapter 8 of the NOPR TSD.)

Table VIII.12--Potential Energy Savings for Small Three-Phase Air-Cooled
               Split-System Air Conditioners <65,000 Btu/h
------------------------------------------------------------------------
                                   Primary energy
       Efficiency level           savings estimate    FFC energy savings
                                      (quads)          estimate (quads)
------------------------------------------------------------------------
Level 0--14 SEER..............                 0.02                 0.02
Level 1--15 SEER..............                 0.08                 0.08

[[Page 1216]]

 
Level 2--16 SEER..............                 0.13                 0.14
Level 3--17 SEER..............                 0.16                 0.17
Level 4--18 SEER..............                 0.18                 0.19
Level 5--``Max-Tech''--19 SEER                 0.19                 0.20
------------------------------------------------------------------------


Table VIII.13--Potential Energy Savings for Small Three-Phase Air-Cooled
              Single-Package Air Conditioners <65,000 Btu/h
------------------------------------------------------------------------
                                   Primary energy
       Efficiency level          savings estimate*    FFC energy savings
                                      (quads)         estimate* (quads)
------------------------------------------------------------------------
Level 0--ASHRAE--14 SEER......                 0.04                 0.04
Level 1--15 SEER..............                 0.05                 0.06
Level 2--16 SEER..............                 0.11                 0.12
Level 3--17 SEER..............                 0.15                 0.15
Level 4--18 SEER..............                 0.18                 0.18
Level 5--``Max-Tech''--19 SEER                 0.19                 0.20
------------------------------------------------------------------------
* The potential energy savings for efficiency levels more stringent than
  those specified by ASHRAE Standard 90.1-2013 were calculated relative
  to the efficiency levels that would result if ASHRAE Standard 90.1-
  2013 standards were adopted.


Table VIII.14--Potential Energy Savings for Small Three-Phase Air-Cooled
                  Split-System Heat Pumps <65,000 Btu/h
------------------------------------------------------------------------
                                   Primary energy
       Efficiency level          savings estimate*    FFC energy savings
                                      (quads)         estimate* (quads)
------------------------------------------------------------------------
Level 0--ASHRAE--14 SEER......                 0.01                 0.01
Level 1--15 SEER..............                 0.01                 0.01
Level 2--16 SEER..............                 0.02                 0.02
Level 3--17 SEER..............                 0.03                 0.03
Level 4--``Max-Tech''--18 SEER                 0.03                 0.03
------------------------------------------------------------------------
* The potential energy savings for efficiency levels more stringent than
  those specified by ASHRAE Standard 90.1-2013 were calculated relative
  to the efficiency levels that would result if ASHRAE Standard 90.1-
  2013 standards were adopted.


Table VIII.15--Potential Energy Savings for Small Three-Phase Air-Cooled
                 Single-Package Heat Pumps <65,000 Btu/h
------------------------------------------------------------------------
                                   Primary energy
       Efficiency level          savings estimate*    FFC energy savings
                                      (quads)         estimate* (quads)
------------------------------------------------------------------------
Level 0--ASHRAE--14 SEER......                 0.01                 0.01
Level 1--15 SEER..............                 0.01                 0.01
Level 2--16 SEER..............                 0.02                 0.02
Level 3--17 SEER..............                 0.03                 0.03
Level 4--``Max-Tech''--18 SEER                 0.04                 0.04
------------------------------------------------------------------------
* The potential energy savings for efficiency levels more stringent than
  those specified by ASHRAE Standard 90.1-2013 were calculated relative
  to the efficiency levels that would result if ASHRAE Standard 90.1-
  2013 standards were adopted.

2. Net Present Value of Customer Costs and Benefits
    The NPV analysis is a measure of the cumulative commercial consumer 
benefit or cost of standards to the Nation. In accordance with OMB's 
guidelines on regulatory analysis (OMB Circular A-4, section E (Sept. 
17, 2003)), DOE calculated NPV using both a 7-percent and a 3-percent 
real discount rate. Table VIII.16 and Table VIII.17 provide an overview 
of the NPV results. (See chapter 8 of the NOPR TSD for further detail.)

[[Page 1217]]



  Table VIII.16--Summary of Cumulative Net Present Value for Small Three-Phase Air-Cooled Air Conditioners and
                                            Heat Pumps <65,000 Btu/h
                                          [Discounted at seven percent]
                                       [Net present value (billion 2013$)]
----------------------------------------------------------------------------------------------------------------
                                     Efficiency   Efficiency   Efficiency   Efficiency   Efficiency   Efficiency
          Equipment class             level 0      level 1      level 2      level 3      level 4      level 5
----------------------------------------------------------------------------------------------------------------
Three-Phase Air-Cooled Split-            (0.04)       (0.16)       (0.36)       (0.61)       (0.88)       (1.08)
 System Air Conditioners..........
<65,000 Btu/h.....................
Three-Phase Air-Cooled Single-             *N/A       (0.13)       (0.40)       (0.75)       (1.16)       (1.51)
 Package Air Conditioners.........
<65,000 Btu/h.....................
Three-Phase Air-Cooled Split-              *N/A       (0.03)       (0.08)       (0.14)       (0.18)        **N/A
 System Heat Pumps <65,000 Btu/h..
Three-Phase Air-Cooled Single-             *N/A       (0.04)       (0.10)       (0.19)       (0.25)        **N/A
 Package Heat Pumps <65,000 Btu/h.
----------------------------------------------------------------------------------------------------------------
Notes: Numbers in parentheses indicate negative NPV.
The net present value for efficiency levels more stringent than those specified by ASHRAE Standard 90.1-2013
  were calculated relative to the efficiency levels that would result if ASHRAE Standard 90.1-2013 standards
  were adopted.
* Economic analysis was not conducted for the ASHRAE levels (EL 0).
** The max-tech level for this equipment class is EL 4.


  Table VIII.17--Summary of Cumulative Net Present Value for Small Three-Phase Air-Cooled Air Conditioners and
                                            Heat Pumps <65,000 Btu/h
                                          [Discounted at three percent]
                                       [Net present value (billion 2013$)]
----------------------------------------------------------------------------------------------------------------
                                     Efficiency   Efficiency   Efficiency   Efficiency   Efficiency   Efficiency
          Equipment class             level 0      level 1      level 2      level 3      level 4      level 5
----------------------------------------------------------------------------------------------------------------
Three-Phase Air-Cooled Split-            (0.07)       (0.26)       (0.61)       (1.11)       (1.64)       (2.01)
 System Air Conditioners <65,000
 Btu/h............................
Three-Phase Air-Cooled Single-            * N/A       (0.20)       (0.71)       (1.41)       (2.21)       (2.84)
 Package Air Conditioners <65,000
 Btu/h............................
Three-Phase Air-Cooled Split-             * N/A       (0.05)       (0.14)       (0.25)       (0.32)       ** N/A
 System Heat Pumps <65,000 Btu/h..
Three-Phase Air-Cooled Single-            * N/A       (0.07)       (0.18)       (0.34)       (0.46)       ** N/A
 Package Heat Pumps <65,000 Btu/h.
----------------------------------------------------------------------------------------------------------------
Notes: Numbers in parentheses indicate negative NPV.
The net present value for efficiency levels more stringent than those specified by ASHRAE Standard 90.1-2013
  were calculated relative to the efficiency levels that would result if ASHRAE Standard 90.1-2013 standards
  were adopted.
* Economic analysis was not conducted for the ASHRAE levels (EL 0).
** The max-tech level for this equipment class is EL 4.

2. Water-Source Heat Pumps
a. Economic Impacts on Commercial Customers
1. Life-Cycle Cost and Payback Period
    Table VIII.18 through Table VIII.23 show the LCC and PBP results 
for all efficiency levels considered for each class of water-source 
heat pump in this NOPR. In the first of each pair of tables, the simple 
payback is measured relative to the baseline equipment (i.e., equipment 
with the efficiency level specified in ASHRAE Standard 90.1-2013). In 
the second tables, the LCC savings are measured relative to the base-
case efficiency distribution in the compliance year (i.e., the range of 
equipment expected to be on the market in the default case where DOE 
adopts the efficiency levels in ASHRAE Standard 90.1-2013).

           Table VIII.18--Average LCC and PBP Results by Efficiency Level for Water-Source Heat Pumps (Water-to-Air, Water-Loop) <17,000 Btu/h
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                               Average costs  2013$
                                                         ---------------------------------------------------------------- Simple payback      Average
                    Efficiency level                                       First year's      Lifetime                         (years)        lifetime
                                                          Installed cost  operating cost  operating cost        LCC                           (years)
--------------------------------------------------------------------------------------------------------------------------------------------------------
ASHRAE Baseline.........................................          $3,184            $645          $7,581         $10,765  ..............          $3,184
1.......................................................           3,320             636           7,469          10,789              15           3,320
2.......................................................           3,494             628           7,385          10,879              17           3,494
3.......................................................           3,782             619           7,271          11,054              20           3,782
4.......................................................           3,917             615           7,229          11,146              21           3,917
5.......................................................           4,189             609           7,159          11,349              24           4,189
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note: The results for each efficiency level are calculated assuming that all commercial consumers use equipment with that efficiency level. The PBP is
  measured relative to the baseline equipment.


[[Page 1218]]


     Table VIII.19--LCC Savings Relative to the Base-Case Efficiency
   Distribution for Water-Source (Water-to-Air, Water-Loop) Heat Pumps
                              <17,000 Btu/h
------------------------------------------------------------------------
                                                 Life-cycle cost savings
                                               -------------------------
                                                 Percent of    Average
                                                 customers    savings *
               Efficiency level                     that    ------------
                                                 experience
                                               -------------    2013$
                                                  Net cost
------------------------------------------------------------------------
1.............................................            0            0
2.............................................           46         (46)
3.............................................           68        (173)
4.............................................           89        (259)
5.............................................           95        (458)
------------------------------------------------------------------------
* The calculation includes households with zero LCC savings (no impact).


 Table VIII.20--Average LCC and PBP Results by Efficiency Level for Water-Source (Water-to-Air, Water-Loop) Heat Pumps >=17,000 Btu/h and <65,000 Btu/h
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                               Average costs  2013$
                                                         ---------------------------------------------------------------- Simple payback      Average
                    Efficiency level                                       First year's      Lifetime                         (years)        lifetime
                                                          Installed cost  operating cost  operating cost        LCC                           (years)
--------------------------------------------------------------------------------------------------------------------------------------------------------
ASHRAE Baseline.........................................          $4,834          $1,102         $12,980         $17,814  ..............              19
1.......................................................           5,111           1,059          12,473          17,584             6.2              19
2.......................................................           5,458           1,024          12,057          17,515             7.3              19
3.......................................................           5,700           1,008          11,868          17,569             8.2              19
4.......................................................           5,908             999          11,759          17,667             9.1              19
5.......................................................           6,328             982          11,564          17,892            10.8              19
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note: The results for each efficiency level are calculated assuming that all commercial consumers use equipment with that efficiency level. The PBP is
  measured relative to the baseline equipment.


     Table VIII.21--LCC Savings Relative to the Base-Case Efficiency
   Distribution for Water-Source (Water-to-Air, Water-Loop) Heat Pumps
                    >=17,000 Btu/h and < 65,000 Btu/h
------------------------------------------------------------------------
                                                 Life-cycle cost savings
                                               -------------------------
                                                 Percent of    Average
                                                 customers    savings *
               Efficiency level                     that    ------------
                                                 experience
                                               -------------    2013$
                                                  Net cost
------------------------------------------------------------------------
1.............................................            2           19
2.............................................           29           62
3.............................................           53           14
4.............................................           66         (80)
5.............................................           76        (303)
------------------------------------------------------------------------
* The calculation includes households with zero LCC savings (no impact).


 Table VIII.22--Average LCC and PBP Results by Efficiency Level for Water-Source (Water-to-Air, Water-Loop) Heat Pumps >=65,000 Btu/h and <135,000 Btu/h
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                               Average costs  2013$
                                                         ---------------------------------------------------------------- Simple payback      Average
                    Efficiency level                                       First year's      Lifetime                         (years)        lifetime
                                                          Installed cost  operating cost  operating cost        LCC                           (years)
--------------------------------------------------------------------------------------------------------------------------------------------------------
ASHRAE Baseline.........................................         $11,886          $2,170         $25,586         $37,471  ..............              19
1.......................................................          12,832           2,095          24,705          37,537              14              19
2.......................................................          13,780           2,057          24,246          38,026              16              19
3.......................................................          14,681           2,024          23,865          38,546              17              19

[[Page 1219]]

 
4.......................................................          15,817           1,993          23,492          39,309              20              19
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note: The results for each efficiency level are calculated assuming that all commercial consumers use equipment with that efficiency level. The PBP is
  measured relative to the baseline equipment.


     Table VIII.23--LCC Savings Relative to the Base-Case Efficiency
   Distribution for Water-Source (Water-to-Air, Water-Loop) Heat Pumps
                    >=65,000 Btu/h and <135,000 Btu/h
------------------------------------------------------------------------
                                                 Life-cycle cost savings
                                               -------------------------
                                                 Percent of    Average
                                                 customers     savings*
               Efficiency level                     that    ------------
                                                 experience
                                               -------------    2013$
                                                  Net cost
------------------------------------------------------------------------
1.............................................         ** 0         ** 0
2.............................................           27        (147)
3.............................................           72        (556)
4.............................................           93      (1,305)
------------------------------------------------------------------------
* The calculation includes households with zero LCC savings (no impact).
** The base-case efficiency distribution has 0-percent market share at
  the ASHRAE baseline; therefore, there are no savings for EL1.

b. National Impact Analysis
1. Amount and Significance of Energy Savings
    To estimate the lifetime energy savings for equipment shipped 
through 2045 due to amended energy conservation standards, DOE compared 
the energy consumption of commercial water-source heat pumps under the 
ASHRAE Standard 90.1-2013 efficiency levels to energy consumption of 
the same water-source heat pumps under more-stringent efficiency 
standards. DOE also compared the energy consumption of those commercial 
water-source heat pumps under the ASHRAE Standard 90.1-2013 efficiency 
levels to energy consumption of commercial water-source heat pumps 
under the current EPCA base case (i.e., under current Federal 
standards). DOE examined up to five efficiency levels higher than those 
of ASHRAE Standard 90.1-2013. Table VIII.24 through Table VIII.26 show 
the projected national energy savings at each of the considered 
standard levels. (See chapter 8 of the NOPR TSD.)

 Table VIII.24--Potential Energy Savings for Water-Source (Water-to-Air,
                  Water-Loop) Heat Pumps <17,000 Btu/h
------------------------------------------------------------------------
                                   Primary energy
       Efficiency level          savings estimate *   FFC energy savings
                                      (quads)         estimate * (quads)
------------------------------------------------------------------------
Level 0--ASHRAE--12.2 EER **..
Level 1--13.0 EER.............               0.0002               0.0002
Level 2--14.0 EER.............                 0.02                 0.02
Level 3--15.7 EER.............                 0.06                 0.06
Level 4--16.5 EER.............                 0.08                 0.08
Level 5--``Max-Tech''--18.1                    0.11                 0.11
 EER..........................
------------------------------------------------------------------------
* The potential energy savings for efficiency levels more stringent than
  those specified by ASHRAE Standard 90.1-2013 were calculated relative
  to the efficiency levels that would result if ASHRAE Standard 90.1-
  2013 standards were adopted.
** The base-case efficiency distribution has 0-percent market share at
  the Federal baseline; therefore, there are no savings for the ASHRAE
  level.


 Table VIII.25--Potential Energy Savings for Water-Source (Water-to-Air,
            Water-Loop) Heat Pumps >=17,000 and <65,000 Btu/h
------------------------------------------------------------------------
                                   Primary energy
       Efficiency level          savings estimate *   FFC energy savings
                                      (quads)         estimate * (quads)
------------------------------------------------------------------------
Level 0--ASHRAE--13.0 EER **..
Level 1--14.6 EER.............                 0.02                 0.03
Level 2--16.6 EER.............                 0.26                 0.27
Level 3--18.0 EER.............                 0.45                 0.47
Level 4--19.2 EER.............                 0.60                 0.63
Level 5--``Max-Tech''--21.6                    0.83                 0.87
 EER..........................
------------------------------------------------------------------------
* The potential energy savings for efficiency levels more stringent than
  those specified by ASHRAE Standard 90.1-2013 were calculated relative
  to the efficiency levels that would result if ASHRAE Standard 90.1-
  2013 standards were adopted.
** The base-case efficiency distribution has 0-percent market share at
  the Federal baseline; therefore, there are no savings for the ASHRAE
  level.


[[Page 1220]]


 Table VIII.26--Potential Energy Savings for Water-Source (Water-to-Air,
           Water-Loop) Heat Pumps >=65,000 and <135,000 Btu/h
------------------------------------------------------------------------
                                   Primary energy
       Efficiency level          savings estimate *   FFC energy savings
                                      (quads)         estimate * (quads)
------------------------------------------------------------------------
Level 0--ASHRAE--13.0 EER **..
Level 1--14.0 EER **..........
Level 2--15.0 EER.............                 0.01                 0.01
Level 3--16.0 EER.............                 0.03                 0.03
Level 4--``Max-Tech''--17.2                    0.05                 0.05
 EER..........................
------------------------------------------------------------------------
* The potential energy savings for efficiency levels more stringent than
  those specified by ASHRAE Standard 90.1-2013 were calculated relative
  to the efficiency levels that would result if ASHRAE Standard 90.1-
  2013 standards were adopted.
** The base-case efficiency distribution has 0-percent market share at
  the Federal baseline and the ASHRAE baseline; therefore, there are no
  savings for the ASHRAE level or EL1.

2. Net Present Value of Customer Costs and Benefits
    Table VIII.27 and Table VIII.28 provide an overview of the NPV 
results. (See chapter 8 of the NOPR TSD for further detail.)

  Table VIII.27--Summary of Cumulative Net Present Value for Water-Source (Water-to-Air, Water-Loop) Heat Pumps
                                          [Discounted at seven percent]
                                       [Net present value (billion 2013$)]
----------------------------------------------------------------------------------------------------------------
                                                Efficiency    Efficiency    Efficiency   Efficiency   Efficiency
               Equipment class                    level 1       level 2      level 3      level 4      level 5
----------------------------------------------------------------------------------------------------------------
Water-Source (Water-to-Air, Water-Loop) HP           (0.00)        (0.04)       (0.13)       (0.19)       (0.30)
 <17,000 Btu/h...............................
Water-Source (Water-to-Air, Water-Loop) HP            0.01          0.01        (0.09)       (0.24)       (0.53)
 >=17,000 to <65,000 Btu/h...................
Water-Source (Water-to-Air, Water-Loop) HP            *            (0.01)       (0.05)       (0.10)       ** N/A
 >=65,000 to 135,000 Btu/h...................
----------------------------------------------------------------------------------------------------------------
Notes: Numbers in parentheses indicate negative NPV.
The net present value for efficiency levels more stringent than those specified by ASHRAE Standard 90.1-2013
  were calculated relative to the efficiency levels that would result if ASHRAE Standard 90.1-2013 standards
  were adopted. Economic analysis was not conducted for the ASHRAE levels (EL 0).
* The base-case efficiency distribution has 0-percent market share at the ASHRAE baseline; therefore, there are
  no savings for EL1.
** The max-tech level for this equipment class is EL 4.


  Table VIII.28--Summary of Cumulative Net Present Value for Water-Source (Water-to-Air, Water-Loop) Heat Pumps
                                          [Discounted at three percent]
                                       [Net Present Value (Billion 2013$)]
----------------------------------------------------------------------------------------------------------------
                                              Efficiency    Efficiency    Efficiency    Efficiency    Efficiency
              Equipment class                   level 1       level 2       level 3       level 4      level 5
----------------------------------------------------------------------------------------------------------------
Water-Source (Water-to-Air, Water-Loop) HP         (0.00)        (0.05)        (0.19)        (0.29)       (0.46)
 <17,000 Btu/h.............................
Water-Source (Water-to-Air, Water-Loop) HP          0.03          0.26          0.22          0.05        (0.31)
 >=17,000 to <65,000 Btu/h.................
Water-Source (Water-to-Air, Water-Loop) HP        (*)            (0.02)        (0.07)        (0.14)       ** N/A
 >=65,000 to 135,000 Btu/h.................
----------------------------------------------------------------------------------------------------------------
Notes: Numbers in parentheses indicate negative NPV.
The net present value for efficiency levels more stringent than those specified by ASHRAE Standard 90.1-2013
  were calculated relative to the efficiency levels that would result if ASHRAE Standard 90.1-2013 standards
  were adopted. Economic analysis was not conducted for the ASHRAE levels (EL 0).
* The base-case efficiency distribution has 0-percent market share at the ASHRAE baseline; therefore, there are
  no savings for EL1.
** The max-tech level for this equipment class is EL 4.

3. Commercial Oil-Fired Storage Water Heaters
    DOE estimated the potential primary energy savings in quads (i.e., 
10\15\ Btu) for each efficiency level considered within each equipment 
class analyzed. Table VIII.29 shows the potential energy savings 
resulting from the analyses conducted as part of the April 2014 NODA. 
79 FR 20114, 20136 (April 11, 2014). In response to the NODA, AHRI 
stated that DOE's derivation of unit energy consumption for oil-fired 
storage water heaters based on a proportional relationship to gas-fired 
storage water heaters in the Commercial Building Energy Consumption 
Survey (CBECS) might not be fully correct because of regional 
variations between the two energy sources. (AHRI, No. 24 at p. 7) After 
re-examining the energy savings analysis for oil-fired storage water 
heaters, DOE has tentatively determined

[[Page 1221]]

that any resulting imprecision in this estimate would not be enough to 
make the energy-savings estimates for this class non-trivial, and, 
therefore, DOE did not adjust its analysis for the NOPR.

  Table VIII.29--Potential Energy Savings Estimates for Commercial Oil-
     Fired Storage Water Heaters >105,000 Btu/h and <4,000 Btu/h/gal
------------------------------------------------------------------------
                                                  Primary
                                                   energy     FFC energy
               Efficiency level                   savings      savings
                                                 estimate *   estimate *
                                                  (Quads)      (Quads)
------------------------------------------------------------------------
Level 0--ASHRAE--80% Et.......................        0.002        0.002
Level 1--81% Et...............................        0.001        0.001
Level 2--``Max-Tech''--82% Et.................        0.002        0.002
------------------------------------------------------------------------
* The potential energy savings for efficiency levels more stringent than
  those specified by ASHRAE Standard 90.1-2013 were calculated relative
  to the efficiency levels that would result if ASHRAE Standard 90.1-
  2013 standards were adopted.

    As mentioned in section IV.B, DOE did not conduct an economic 
analysis for this oil-fired storage water heater equipment category 
because of the minimal energy savings.

C. Need of the Nation To Conserve Energy

    An improvement in the energy efficiency of the equipment subject to 
this rule, where economically justified, is likely to improve the 
security of the nation's energy system by reducing overall demand for 
energy, to strengthen the economy, and to reduce the environmental 
impacts or costs of energy production. Reduced electricity demand may 
also improve the reliability of the electricity system, particularly 
during peak-load periods. Reductions in national electric generating 
capacity estimated for each efficiency level considered in this 
rulemaking, throughout the same analysis period as the NIA, are 
reported in chapter 11 of the NOPR TSD.
    Energy savings from amended standards for the small air-cooled air 
conditioners and heat pumps less than 65,000 Btu/h, water-source heat 
pumps, and oil-fired storage water heaters covered in this NOPR could 
also produce environmental benefits in the form of reduced emissions of 
air pollutants and greenhouse gases.
    Table VIII.30 and Table VIII.31 provide DOE's estimate of 
cumulative emissions reductions projected to result from the efficiency 
levels analyzed in this rulemaking.\57\ The tables include both power 
sector emissions and upstream emissions. The upstream emissions were 
calculated using the multipliers discussed in section VII.A. DOE 
reports annual CO2, NOX, and Hg emissions 
reductions for each efficiency level in chapter 9 of the NOPR TSD. As 
discussed in section VII.A, DOE did not include NOX 
emissions reduction from power plants in States subject to CAIR, 
because an energy conservation standard would not affect the overall 
level of NOX emissions in those States due to the emissions 
caps mandated by CAIR.
---------------------------------------------------------------------------

    \57\ Because DOE did not conduct additional analysis for oil-
fired storage water heaters, estimates of environmental benefits for 
amended standards for that equipment type are not shown here.

  Table VIII.30--Cumulative Emissions Reduction for Potential Standards for Small Three-Phase Air-Cooled Air Conditioners and Heat Pumps <65,000 Btu/h
                     [2017-2046 for ASHRAE level; 2020-2046 for more-stringent levels; 2019-2048 for split-system air conditioners]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                 Efficiency level
                                                         -----------------------------------------------------------------------------------------------
                                                             ASHRAE/0            1               2               3               4               5
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                 Power Sector Emissions
--------------------------------------------------------------------------------------------------------------------------------------------------------
CO2 (million metric tons)...............................          3.7             8.9            16.8            20.8            24.3            25.9
SO2 (thousand tons).....................................          2.9             6.9            13.0            16.1            18.8            20.1
NOX (thousand tons).....................................          2.8             6.7            12.6            15.6            18.2            19.4
Hg (tons)...............................................          0.01            0.02            0.04            0.05            0.06            0.06
N2O (thousand tons).....................................          0.05            0.13            0.24            0.30            0.35            0.37
CH4 (thousand tons).....................................          0.38            0.90            1.69            2.10            2.45            2.61
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                   Upstream Emissions
--------------------------------------------------------------------------------------------------------------------------------------------------------
CO2 (million metric tons)...............................          0.22            0.54            1.00            1.24            1.45            1.54
SO2 (thousand tons).....................................          0.04            0.09            0.17            0.22            0.25            0.27
NOX (thousand tons).....................................          3.2             7.6            14.3            17.7            20.7            22.0
Hg (tons)...............................................          0.0001          0.0002          0.0004          0.0005          0.0006          0.0006
N2O (thousand tons).....................................          0.002           0.005           0.009           0.011           0.012           0.013
CH4 (thousand tons).....................................         19              45              83             103             121             128
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                   Total FFC Emissions
--------------------------------------------------------------------------------------------------------------------------------------------------------
CO2 (million metric tons)...............................          4.0             9.5            17.8            22.1            25.8            27.4
SO2 (thousand tons).....................................          2.9             7.0            13.2            16.4            19.1            20.3
NOX (thousand tons).....................................          6.0            14.3            26.8            33.4            38.9            41.4
Hg (tons)...............................................          0.01            0.02            0.04            0.05            0.06            0.06
N2O (thousand tons).....................................          0.06            0.13            0.25            0.31            0.36            0.39
CH4 (thousand tons).....................................         19              45              85             105             123             131
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note: The potential emissions reduction for efficiency levels more stringent than those specified by ASHRAE Standard 90.1-2013 were calculated relative
  to the efficiency levels that would result if ASHRAE Standard 90.1-2013 standards were adopted.


[[Page 1222]]


                            Table VIII.31--Cumulative Emissions Reduction for Potential Standards for Water-Source Heat Pumps
                                            [2016-2045 for ASHRAE level; 2020-2045 for more-stringent levels]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                 Efficiency level
                                                         -----------------------------------------------------------------------------------------------
                                                            ASHRAE/0 *           1               2               3               4               5
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                 Power Sector Emissions
--------------------------------------------------------------------------------------------------------------------------------------------------------
CO2 (million metric tons)...............................  ..............         1.4            16.3            30.5            41.6            56.8
SO2 (thousand tons).....................................  ..............         1.1            12.9            24.2            32.9            44.9
NOX (thousand tons).....................................  ..............         1.1            12.3            23.1            31.4            42.9
Hg (tons)...............................................  ..............         0.003           0.040           0.075           0.101           0.139
N2O (thousand tons).....................................  ..............         0.02            0.23            0.44            0.60            0.81
CH4 (thousand tons).....................................  ..............         0.14            1.63            3.06            4.17            5.69
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                   Upstream Emissions
--------------------------------------------------------------------------------------------------------------------------------------------------------
CO2 (million metric tons)...............................  ..............         0.08            0.97            1.81            2.47            3.37
SO2 (thousand tons).....................................  ..............         0.01            0.17            0.32            0.43            0.59
NOX (thousand tons).....................................  ..............         1.2            13.8            25.9            35.2            48.0
Hg (tons)...............................................  ..............         0.00003         0.00037         0.00070         0.00095         0.00130
N2O (thousand tons).....................................  ..............         0.001           0.008           0.016           0.021           0.029
CH4 (thousand tons).....................................  ..............         7.0            80.5           150.8           205.2           279.9
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                   Total FFC Emissions
--------------------------------------------------------------------------------------------------------------------------------------------------------
CO2 (million metric tons)...............................  ..............         1.5            17.3            32.4            44.0            60.1
SO2 (thousand tons).....................................  ..............         1.1            13.1            24.5            33.3            45.5
NOX (thousand tons).....................................  ..............         2.3            26.1            49.0            66.7            91.0
Hg (tons)...............................................  ..............         0.004           0.040           0.075           0.102           0.140
N2O (thousand tons).....................................  ..............         0.02            0.24            0.45            0.62            0.84
CH4 (thousand tons).....................................  ..............         7.2            82.1           153.9           209.4           285.6
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note: The potential emissions reduction for efficiency levels more stringent than those specified by ASHRAE Standard 90.1-2013 were calculated relative
  to the efficiency levels that would result if ASHRAE Standard 90.1-2013 standards were adopted.
* There are no reductions for the ASHRAE level because there is no market share projected at the Federal baseline in the base case.

    As part of the analysis for this NOPR, DOE estimated monetary 
benefits likely to result from the reduced emissions of CO2 
and NOX estimated for each of the efficiency levels analyzed 
for small air-cooled air conditioners and heat pumps less than 65,000 
Btu/h, water-source heat pumps, and oil-fired storage water heaters. As 
discussed in section VII.B.1, for CO2, DOE used values for 
the SCC developed by an interagency process. The interagency group 
selected four sets of SCC values for use in regulatory analyses. Three 
sets are based on the average SCC from three integrated assessment 
models, at discount rates of 2.5 percent, 3 percent, and 5 percent. The 
fourth set, which represents the 95th-percentile SCC estimate across 
all three models at a 3-percent discount rate, is included to represent 
higher-than-expected impacts from temperature change further out in the 
tails of the SCC distribution. The four SCC values for CO2 
emissions reductions in 2015, expressed in 2013$, are $12.0/ton, $40.5/
ton, $62.4/ton, and $119/ton. The values for later years are higher due 
to increasing emissions-related costs as the magnitude of projected 
climate change increases.
    Table VIII.32 and Table VIII.33 present the global value of 
CO2 emissions reductions at each efficiency level. 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, 
and these results are presented in chapter 10 of the NOPR TSD.

Table VIII.32--Global Present Value of CO2 Emissions Reduction for Potential Standards for Small Three-Phase Air-
                              Cooled Air Conditioners and Heat Pumps <65,000 Btu/h
----------------------------------------------------------------------------------------------------------------
                                                                         SCC scenario *
                                               -----------------------------------------------------------------
               Efficiency level                                                                     3% discount
                                                  5% discount      3% discount     2.5% discount    rate, 95th
                                                 rate, average    rate, average    rate, average    percentile
----------------------------------------------------------------------------------------------------------------
                                                                          million 2013$
----------------------------------------------------------------------------------------------------------------
                                             Power Sector Emissions
----------------------------------------------------------------------------------------------------------------
ASHRAE/0......................................             23              110               177             340
1.............................................             53              261               420             808
2.............................................            103              498               799            1541
3.............................................            127              617               990            1910
4.............................................            149              721              1156            2231
5.............................................            159              768              1232            2378
----------------------------------------------------------------------------------------------------------------

[[Page 1223]]

 
                                               Upstream Emissions
----------------------------------------------------------------------------------------------------------------
ASHRAE/0......................................              1.3              6.5              10              20
1.............................................              3.1             15                25              48
2.............................................              6.0             29                47              91
3.............................................              7.4             36                59             113
4.............................................              8.7             43                68             132
5.............................................              9.3             45                73             140
----------------------------------------------------------------------------------------------------------------
                                               Total FFC Emissions
----------------------------------------------------------------------------------------------------------------
ASHRAE/0......................................             24              116               187             360
1.............................................             56              277               445             856
2.............................................            109              527               846            1632
3.............................................            135              654              1049            2023
4.............................................            157              763              1224            2362
5.............................................            168              814              1305            2518
----------------------------------------------------------------------------------------------------------------
Note: The potential emissions reduction for efficiency levels more stringent than those specified by ASHRAE
  Standard 90.1-2013 were calculated relative to the efficiency levels that would result if ASHRAE Standard 90.1-
  2013 standards were adopted.
* For each of the four cases, the corresponding SCC value for emissions in 2015 is $12.0, $40.5, $62.4 and $119
  per metric ton (2013$).


  Table VIII.33--Global Present Value of CO2 Emissions Reduction for Potential Standards for Water-Source Heat
                                                      Pumps
----------------------------------------------------------------------------------------------------------------
                                                                        SCC scenario *
                                             -------------------------------------------------------------------
              Efficiency level                                                                     3% discount
                                                5% discount      3% discount     2.5% discount      rate, 95th
                                               rate, average    rate, average    rate, average      percentile
----------------------------------------------------------------------------------------------------------------
                                                                         million 2013$
----------------------------------------------------------------------------------------------------------------
                                             Power Sector Emissions
----------------------------------------------------------------------------------------------------------------
ASHRAE/0 **.................................  ...............  ...............  ...............  ...............
1...........................................              8.7             42               68              131
2...........................................             99              482              773             1491
3...........................................            186              902             1448             2794
4...........................................            253             1228             1972             3804
5...........................................            347             1681             2698             5206
----------------------------------------------------------------------------------------------------------------
                                               Upstream Emissions
----------------------------------------------------------------------------------------------------------------
ASHRAE/0 **.................................  ...............  ...............  ...............  ...............
1...........................................              0.5              2.5              4.0              7.7
2...........................................              5.8             28               45               88
3...........................................             11               53               85              164
4...........................................             15               72              116              224
5...........................................             20               99              159              306
----------------------------------------------------------------------------------------------------------------
                                               Total FFC Emissions
----------------------------------------------------------------------------------------------------------------
ASHRAE/0 **.................................  ...............  ...............  ...............  ...............
1...........................................              9.2             45               72              138
2...........................................            105              510              818             1579
3...........................................            196              955             1533             2958
4...........................................            267             1300             2088             4028
5...........................................            367             1780             2856             5512
----------------------------------------------------------------------------------------------------------------
Note: The potential emissions reduction for efficiency levels more stringent than those specified by ASHRAE
  Standard 90.1-2013 were calculated relative to the efficiency levels that would result if ASHRAE Standard 90.1-
  2013 standards were adopted.
* For each of the four cases, the corresponding SCC value for emissions in 2015 is $12.0, $40.5, $62.4 and $119
  per metric ton (2013$).
** There are no reductions for the ASHRAE level because there is no market share projected at the Federal
  baseline in the base case.

    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

[[Page 1224]]

continues to evolve rapidly. Thus, any value placed in this rulemaking 
on reducing CO2 emissions 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 NOPR the most recent values 
and analyses resulting from the interagency review process.
    DOE also estimated a range for the cumulative monetary value of the 
economic benefits associated with NOX emissions reductions 
anticipated to result from amended standards for the small air-cooled 
air conditioners and heat pumps less than 65,000 Btu/h, water-source 
heat pumps, and oil-fired storage water heaters that are the subject of 
this NOPR. The dollar-per-ton values that DOE used are discussed in 
section VII.B.2.
    Table VIII.34 and Table VIII.35 present the present value of 
cumulative NOX emissions reductions for each efficiency 
level calculated using the average dollar-per-ton values and 7-percent 
and 3-percent discount rates.

  Table VIII.34--Present Value of NOX Emissions Reduction for Potential
  Standards for Small Three-Phase Air-Cooled Air Conditioners and Heat
                           Pumps <65,000 Btu/h
 [2017-2046 for ASHRAE Level; 2020-2046 for More-Stringent Levels; 2019-
                 2048 for Split-System Air Conditioners]
------------------------------------------------------------------------
                                               3% discount   7% discount
              Efficiency level                    rate          rate
------------------------------------------------------------------------
                                                     million 2013$
------------------------------------------------------------------------
                                                Power Sector Emissions
------------------------------------------------------------------------
ASHRAE/0....................................           3.3           1.4
1...........................................           7.8           3.2
2...........................................          15             6.4
3...........................................          19             7.9
4...........................................          22             9.2
5...........................................          23             9.9
------------------------------------------------------------------------
                           Upstream Emissions
------------------------------------------------------------------------
ASHRAE/0....................................           3.6           1.4
1...........................................           8.6           3.3
2...........................................          17             6.6
3...........................................          21             8.2
4...........................................          24             9.5
5...........................................          26            10
------------------------------------------------------------------------
                           Total FFC Emissions
------------------------------------------------------------------------
ASHRAE/0....................................           7.0           2.8
1...........................................          16             6.5
2...........................................          32            13
3...........................................          39            16
4...........................................          46            19
5...........................................          49            20
------------------------------------------------------------------------
Note: The potential emissions reduction for efficiency levels more
  stringent than those specified by ASHRAE Standard 90.1-2013 were
  calculated relative to the efficiency levels that would result if
  ASHRAE Standard 90.1-2013 standards were adopted.


  Table VIII.35--Present Value of NOX Emissions Reduction for Potential
                  Standards for Water-Source Heat Pumps
    [2016-2045 for ASHRAE Level; 2020-2045 for More-Stringent Levels]
------------------------------------------------------------------------
                                               3% discount   7% discount
              Efficiency level                    rate          rate
------------------------------------------------------------------------
                                                     million 2013$
------------------------------------------------------------------------
                         Power Sector Emissions
------------------------------------------------------------------------
ASHRAE/0*...................................  ............  ............
1...........................................           1.3           0.5
2...........................................          15             6.0
3...........................................          27            11
4...........................................          37            15
5...........................................          51            21
------------------------------------------------------------------------
                           Upstream Emissions
------------------------------------------------------------------------
ASHRAE/0*...................................  ............  ............
1...........................................           1.4           0.5
2...........................................          16             6.2
3...........................................          30            12
4...........................................          41            16
5...........................................          56            22
------------------------------------------------------------------------
                           Total FFC Emissions
------------------------------------------------------------------------
ASHRAE/0*...................................
1...........................................           2.7           1.1
2...........................................          31            12
3...........................................          57            23
4...........................................          78            31
5...........................................         107            43
------------------------------------------------------------------------
Note: The potential emissions reduction for efficiency levels more
  stringent than those specified by ASHRAE Standard 90.1-2013 were
  calculated relative to the efficiency levels that would result if
  ASHRAE Standard 90.1-2013 standards were adopted.
* There are no reductions for the ASHRAE level because there is no
  market share projected at the Federal baseline in the base case.

D. Proposed Standards

1. Small Commercial Air-Cooled Air Conditioners and Heat Pumps Less 
Than 65,000 Btu/h
    As noted previously, EPCA specifies that, for any commercial and 
industrial equipment addressed under 42 U.S.C. 6313(a)(6)(A)(i), DOE 
may prescribe an energy conservation standard more stringent than the 
level for such equipment in ASHRAE Standard 90.1, as amended, only if 
``clear and convincing evidence'' shows that a more-stringent standard 
would result in significant additional conservation of energy and is 
technologically feasible and economically justified. (42 U.S.C. 
6313(a)(6)(A)(ii)(II)) This requirement also applies to split-system 
air conditioners evaluated under the 6-year look back. (42 U.S.C. 
6313)(a)(6)(C)(i)(II))
    In evaluating more-stringent efficiency levels than those specified 
by ASHRAE Standard 90.1-2013 for small air-cooled air conditioners and 
heat pumps less than 65,000 Btu/h, DOE reviewed the results in terms of 
their technological feasibility, significance of energy savings, and 
economic justification.
    DOE has tentatively concluded that all of the SEER and HSPF levels 
considered by DOE are technologically feasible, as units with 
equivalent efficiency appeared to be available in the current market at 
all levels examined.
    DOE examined the potential energy savings that would result from 
the efficiency levels specified in ASHRAE Standard 90.1-2013 and 
compared these to the potential energy savings that would result from 
efficiency levels more stringent than those in ASHRAE Standard 90.1-
2013. DOE estimates that 0.05 quads of energy would be saved if DOE 
adopts the efficiency levels set in ASHRAE Standard 90.1-2013 for each 
small air-cooled air conditioner and heat pump class specified in that 
standard. If DOE were to adopt efficiency levels more stringent than 
those specified by ASHRAE Standard 90.1-2013, the potential additional 
energy savings range from 0.02 quads to 0.45 quads. Associated with 
proposing more-stringent efficiency levels for the three triggered 
equipment classes is a three-year delay in implementation compared to 
the adoption of energy conservation standards at the levels specified 
in ASHRAE Standard 90.1-2013 (see section V.E.10). This delay in

[[Page 1225]]

implementation of amended energy conservation standards would result in 
a small amount of energy savings being lost in the first years (2017 
through 2020) compared to the savings from adopting the levels in 
ASHRAE Standard 90.1-2013; however, this loss may be compensated for by 
increased savings in later years. Taken in isolation, the energy 
savings associated with more-stringent standards might be considered 
significant enough to warrant adoption of such standards. However, as 
noted previously, energy savings are not the only factor that DOE must 
consider.
    In considering whether potential standards are economically 
justified, DOE also examined the LCC savings and national NPV that 
would result from adopting efficiency levels more stringent than those 
set forth in ASHRAE Standard 90.1-2013. The analytical results show 
negative average LCC savings and negative national NPV at both 7-
percent and 3-percent discount rate for all efficiency levels in all 
four equipment classes. These results indicate that adoption of 
efficiency levels more stringent than those in ASHRAE Standard 90.1-
2013 as Federal energy conservation standards would likely lead to 
negative economic outcomes for the Nation. Consequently, this criterion 
for adoption of more-stringent standard levels does not appear to have 
been met.
    As such, DOE does not have ``clear and convincing evidence'' that 
any significant additional conservation of energy that would result 
from adoption of more-stringent efficiency levels than those specified 
in ASHRAE Standard 90.1-2013 would be economically justified. 
Therefore, DOE is proposing to adopt the energy efficiency levels for 
these products as set forth in ASHRAE Standard 90.1-2013. For split-
system air conditioners, for which the efficiency level was not updated 
in Standard 90.1-2013, DOE is making a determination that standards for 
the product do not need to be amended for the reasons stated above. 
Table VIII.36 presents the proposed amended energy conservation 
standards and compliance dates for small air-cooled air conditioners 
and heat pumps less than 65,000 Btu/h.

Table VIII.36--Proposed Energy Conservation Standards for Small Three-Phase Air-Cooled Air Conditioners and Heat
                                               Pumps <65,000 Btu/h
----------------------------------------------------------------------------------------------------------------
              Equipment type                     Efficiency level                    Compliance date
----------------------------------------------------------------------------------------------------------------
Three-Phase Air-Cooled Split System Air    13.0 SEER *.................  June 16, 2008.
 Conditioners.
<65,000 Btu/h............................
Three-Phase Air-Cooled Single Package Air  14.0 SEER...................  January 1, 2017.
 Conditioners.
<65,000 Btu/h............................
Three-Phase Air-Cooled Split System Heat   14.0 SEER...................  January 1, 2017.
 Pumps <65,000 Btu/h.                      8.2 HSPF....................
Three-Phase Air-Cooled Single Package      14.0 SEER...................  January 1, 2017.
 Heat Pumps <65,000 Btu/h.                 8.0 HSPF....................
----------------------------------------------------------------------------------------------------------------
 *13.0 SEER is the existing Federal minimum energy conservation standard for three-phase air-cooled split system
  air conditioners <65,000 Btu/h.

2. Water-Source Heat Pumps
    In evaluating more-stringent efficiency levels for water-source 
heat pumps than those specified by ASHRAE Standard 90.1-2013, DOE 
reviewed the results in terms of their technological feasibility, 
significance of energy savings, and economic justification.
    DOE has tentatively concluded that all of the EER and COP levels 
considered by DOE are technologically feasible, as units with 
equivalent efficiency appeared to be available in the current market at 
all levels examined.
    DOE examined the potential energy savings that would result from 
the efficiency levels specified in ASHRAE Standard 90.1-2013 and 
compared these to the potential energy savings that would result from 
efficiency levels more stringent than those in ASHRAE Standard 90.1-
2013. DOE does not estimate any energy savings from adopting the levels 
set in ASHRAE Standard 90.1-2013, as very few models exist on the 
market below that level, and by 2020, DOE expects those models to be 
off the market. If DOE were to adopt efficiency levels more stringent 
than those specified by ASHRAE Standard 90.1-2013, the potential 
additional energy savings range from 0.03 quads to 1.0 quads. 
Associated with proposing more-stringent efficiency levels is a four-
and-a-half-year delay in implementation compared to the adoption of 
energy conservation standards at the levels specified in ASHRAE 
Standard 90.1-2013 (see section VI.E.10). This delay in implementation 
of amended energy conservation standards would result in a small amount 
of energy savings being lost in the first years (2016 through 2020) 
compared to the savings from adopting the levels in ASHRAE Standard 
90.1-2013; however, this loss may be compensated for by increased 
savings in later years. Taken in isolation, the energy savings 
associated with more-stringent standards might be considered 
significant enough to warrant adoption of such standards. However, as 
noted above, energy savings are not the only factor which DOE must 
consider.
    In considering whether potential standards are economically 
justified, DOE also examined the NPV that would result from adopting 
efficiency levels more stringent than those set forth in ASHRAE 
Standard 90.1-2013. With a 7-percent discount rate, EL 1 results in 
positive NPV, and ELs 2 through 5 result in negative NPV. With a 3-
percent discount rate, ELs 1 and 2 create positive NPV, while ELs 3 
through 5 result in negative NPVs. These results indicate that adoption 
of efficiency levels more stringent than those in ASHRAE Standard 90.1-
2013 as Federal energy conservation standards might lead to negative 
economic outcomes for the Nation, except at EL1, which offers very 
little energy savings.
    Furthermore, although DOE based it analyses on the best available 
data when examining the potential energy savings and the economic 
justification of efficiency levels more stringent than those specified 
in ASHRAE Standard 90.1-2013, DOE believes there are several 
limitations regarding that data which should be considered before 
proposing amended energy conservation standards for water-source heat 
pumps.
    First, DOE reexamined the uncertainty in its analysis of water-
source heat pumps. As noted in section VI.D, DOE relied on cooling 
energy use estimates from a 2000 study. While DOE applied a scaling 
factor to attempt to account for changes in buildings since

[[Page 1226]]

2000, this is only a rough estimate. DOE considered running building 
simulations by applying a water-source heat pump module to reference 
buildings. However, DOE has been unable to obtain reliable information 
on the distribution of water-source heat pump applications. Therefore, 
it is not clear which building types would be most useful to simulate 
and how DOE would weight the results of the simulations. Furthermore, 
DOE has no field data with which to corroborate the results of the 
simulations. The analysis of heating energy use is also very uncertain; 
DOE relied on estimates for air-source heat pumps, but it is unclear 
whether water-source heat pumps would have similar heating usage, as 
they tend to be used in different applications. Any inaccuracy in UEC 
directly impacts the energy savings estimates and consumer impacts.
    Second, in developing its analysis, DOE made refinements to various 
inputs, such as heating UEC and repair cost. DOE observed that the NPV 
results were highly sensitive to small changes in these inputs, with 
NPV for EL 2, for example, changing from positive to negative and back 
over several iterations. This model sensitivity, combined with high 
uncertainty in various inputs, makes it difficult for DOE to determine 
that the results provide clear and convincing evidence that higher 
standards would be economically justified.
    Third, DOE relied on shipments estimates from the U.S. Census. As 
noted in section VI.F.2, these estimates are considerably higher than 
those found in an EIA report. Furthermore, DOE disaggregated the 
shipments into equipment class using data from over a decade ago. 
Although DOE requested comment in the April 2014 NODA, DOE has not 
received any information or data regarding the shipments of this 
equipment. Any inaccuracy in the shipment projection in total or by 
equipment class contributes to the uncertainty of the energy savings 
results and, thus, makes it difficult for DOE to determine that any 
additional energy savings are significant.
    Fourth, due to the limited data on the existing distribution of 
shipments by efficiency level or historical efficiency trends, DOE was 
not able to assess possible future changes in either the available 
efficiencies of equipment in the water-source heat pump market or the 
sales distribution of shipments by efficiency level in the absence of 
setting more-stringent standards. Instead, DOE applied an efficiency 
trend from a commercial air conditioner rulemaking published 10 years 
ago. DOE recognizes that manufacturers may continue to make future 
improvements in water-source heat pump efficiencies even in the absence 
of mandated energy conservation standards. In particular, water-source 
heat pumps tend to be a fairly efficient product, and the distribution 
of model availability indicates that many commercial consumers are 
already purchasing equipment well above the baseline. Consequently, it 
is likely that the true improvements in efficiency in the absence of a 
standard may be higher than estimated. This possibility increases the 
uncertainty of the energy savings estimates. To the extent that 
manufacturers improve equipment efficiency and commercial consumers 
choose to purchase improved products in the absence of standards, the 
energy savings estimates would likely be reduced.
    In light of the above, DOE would again restate the statutory test 
for adopting energy conservation standards more stringent than the 
levels in ASHRAE Standard 90.1. DOE must have ``clear and convincing'' 
evidence in order to propose efficiency levels more stringent than 
those specified in ASHRAE Standard 90.1-2013, and for the reasons 
explained in this document, the totality of information does not meet 
the level necessary to support these more-stringent efficiency levels 
for water-source heat pumps. Consequently, DOE has tentatively decided 
to propose the efficiency levels in ASHRAE Standard 90.1-2013 as 
amended energy conservation standards for all three water-source heat 
pump equipment classes. Accordingly, Table VIII.37 presents the 
proposed amended energy conservation standards and compliance dates for 
water-source heat pumps.

                Table VIII.37--Proposed Energy Conservation Standards for Water-Source Heat Pumps
----------------------------------------------------------------------------------------------------------------
              Equipment type                     Efficiency level                    Compliance date
----------------------------------------------------------------------------------------------------------------
Water-Source (Water-to-Air, Water-Loop)    12.2 EER....................  October 9, 2015.
 HP <17,000 Btu/h.                         4.3 COP.....................
Water-Source (Water-to-Air, Water-Loop)    13.0 EER....................  October 9, 2015.
 HP >=17,000 to <65,000 Btu/h.             4.3 COP.....................
Water-Source (Water-to-Air, Water-Loop)    13.0 EER....................  October 9, 2015.
 HP >=65,000 to 135,000 Btu/h.             4.3 COP.....................
----------------------------------------------------------------------------------------------------------------

    DOE seeks comments from interested parties on its proposed amended 
energy conservation standards for water-source heat pumps, as well as 
the other efficiency levels considered. This is identified as Issue 12 
under ``Issues on Which DOE Seeks Comment'' in section X.E of this 
NOPR. Although DOE currently believes that it would be appropriate to 
adopt the efficiency levels in ASHRAE Standard 90.1-2013 for water-
source heat pumps, DOE may consider the possibility of setting 
standards at more-stringent efficiency levels if public comments and 
additional data supply clear and convincing evidence in support of such 
an approach.
3. Commercial Oil-Fired Storage Water Heaters
    EPCA specifies that, for any commercial and industrial equipment 
addressed under 42 U.S.C. 6313(a)(6)(A)(i), DOE may prescribe an energy 
conservation standard more stringent than the level for such equipment 
in ASHRAE Standard 90.1, as amended, only if ``clear and convincing 
evidence'' shows that a more-stringent standard would result in 
significant additional conservation of energy and is technologically 
feasible and economically justified. (42 U.S.C. 6313(a)(6)(A)(ii)(II))
    In evaluating more-stringent efficiency levels for oil-fired 
storage water-heating equipment than those specified by ASHRAE Standard 
90.1-2013, DOE reviewed the results in terms of the significance of 
their additional energy savings. DOE believes that the energy savings 
from increasing national energy conservation standards for oil-fired 
storage water heaters above the levels specified by ASHRAE Standard 
90.1-2013 would be minimal. As such, DOE does not have ``clear and 
convincing evidence'' that significant additional conservation of 
energy would

[[Page 1227]]

result from adoption of more-stringent standard levels. Therefore, DOE 
did not examine whether the levels are economically justified, and DOE 
is proposing to adopt the energy efficiency levels for this equipment 
type as set forth in ASHRAE Standard 90.1-2013. Table VIII.38 presents 
the proposed energy conservation standard and compliance date for oil-
fired storage water heaters.

            Table VIII.38--Proposed Energy Conservation Standards for Oil-Fired Storage Water Heaters
----------------------------------------------------------------------------------------------------------------
              Equipment type                   Efficiency level (Et)                 Compliance date
----------------------------------------------------------------------------------------------------------------
Oil-Fired Storage Water Heaters >105,000   80%.........................  October 9, 2015.
 Btu/h and <4,000 Btu/h/gal.
----------------------------------------------------------------------------------------------------------------

IX. Procedural Issues and Regulatory Review

A. Review Under Executive Order 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 proposed standards set forth in this NOPR address 
are as follows:

    (1) Insufficient information and the high costs of gathering and 
analyzing relevant information leads some customers to miss 
opportunities to make cost-effective investments in energy 
efficiency.
    (2) In some cases the benefits of more efficient equipment are 
not realized due to misaligned incentives between purchasers and 
users. An example of such a case is when the equipment 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 small air-cooled air conditioners and heat pumps less 
than 65,000 Btu/h, water-source heat pumps, and oil-fired storage 
water heaters that are not captured by the users of such equipment. 
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 quantify some of the external benefits 
through use of social cost of carbon values.

    In addition, DOE has determined that the proposed regulatory action 
is not an ``economically significant regulatory action'' under section 
3(f)(1) of Executive Order 12866. Accordingly, DOE has not prepared a 
regulatory impact analysis (RIA) for this rule, and the Office of 
Information and Regulatory Affairs (OIRA) in the Office of Management 
and Budget (OMB) has not reviewed this rule.
    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 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, the Office of Information and Regulatory Affairs 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 NOPR 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 initial regulatory flexibility analysis (IRFA) 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).
    For manufacturers of small air-cooled air conditioners and heat 
pumps less than 65,000 Btu/h, water-source heat pumps, and oil-fired 
storage water heaters, 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. 65 FR 30836, 30848 (May 15, 
2000), as amended at 65 FR 53533, 53544 (Sept. 5, 2000) and 77 FR 
49991, 50000 (August 20, 2012), as codified at 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/Size_Standards_Table.pdf. The 
ASHRAE equipment covered by this rule are classified under NAICS 
333318, ``Other Commercial and Service Industry Machinery 
Manufacturing'' (oil-fired water heaters) and NAICS 333415, ``Air-
Conditioning and Warm Air Heating Equipment and Commercial and 
Industrial Refrigeration Equipment Manufacturing'' (all other equipment

[[Page 1228]]

addressed by the document). For an entity to be considered as a small 
business, the SBA sets a threshold of 1,000 employees or fewer for the 
first category including commercial water heaters and 750 employees or 
fewer for the second category.
    DOE examined each of the manufacturers it found during its market 
assessment and used publicly-available information to determine if any 
manufacturers identified qualify as a small business under the SBA 
guidelines discussed previously. (For a list of all manufacturers of 
ASHRAE equipment covered by this rule, see chapter 2 of the NOPR TSD.) 
DOE's research involved individual company Web sites and marketing 
research tools (e.g., Hoovers reports \58\) to create a list of 
companies that manufacture the types of ASHRAE equipment affected by 
this rule. DOE screened out companies that do not have domestic 
manufacturing operations for ASHRAE equipment (i.e., manufacturers that 
produce all of their ASHRAE equipment internationally). DOE also did 
not consider manufacturers that are subsidiaries of parent companies 
that exceed the applicable 1000-employee or 750-employee threshold set 
by the SBA to be small businesses. DOE identified 16 companies that 
qualify as small manufacturers: 5 central air conditioner manufacturers 
(of the 23 total identified), 7 water-source heat pump manufacturers 
(of the 18 total identified), and 7 oil-fired storage water heater 
manufacturers (of the 10 total identified). Please note that there are 
3 small manufacturers that produce equipment in more than one of these 
categories.
---------------------------------------------------------------------------

    \58\ For more information see: http://www.hoovers.com/.
---------------------------------------------------------------------------

    Based on reviews of product listing data in the AHRI Directory for 
commercial equipment, DOE estimates that small manufacturers account 
for less than 1 percent of the market for covered three-phase central 
air conditioner equipment and less than 5 percent of the market for 
covered water-source heat pump equipment. In the oil-fired storage 
water heat market, DOE understands that one of the small manufacturers 
is a significant player in the market. That manufacturer accounts for 
34 percent of product listings. DOE believes that the remaining oil-
fired storage water heater manufacturers account for less than 5 
percent of the market.
    DOE has reviewed this proposed rule under the provisions of the 
Regulatory Flexibility Act and the policies and procedures published on 
February 19, 2003. 68 FR 7990. As part of this rulemaking, DOE examined 
the potential impacts of amended standard levels on manufacturers, as 
well as the potential implications of the proposed revisions to the 
commercial warm air furnace test procedures on compliance burdens.
    DOE examined the impact of raising the standards to the proposed 
levels by examining the distribution of efficiencies of commercially-
available models in the AHRI Directory. For water-source heat pumps and 
oil-fired storage water heaters, DOE found that all manufacturers in 
the directory, including the small manufacturers, already offer 
equipment at and above the efficiency levels being proposed. While 
these small manufacturers would have to discontinue a fraction of their 
models in order to comply with the standards proposed in this 
rulemaking, DOE does not believe that there would be a significant 
burden placed on industry, as the market would shift to the new 
baseline levels when compliance with the new standards is required.
    For small commercial air-cooled air conditioners and heat pumps, 
DOE found one small manufacturer of single-package units in the 
directory with no models that could meet the proposed ASHRAE levels.
    To estimate the impacts of the proposed standard, DOE researched 
prior energy conservation standard analyses of the covered equipment, 
as well as any analyses of comparable single-phase products. The 2011 
direct final rule for residential furnaces, central air conditioners, 
and heat pumps included analysis for a 14 SEER efficiency level for 
split-system as well as single-package air conditioners and heat pumps. 
76 FR 37408 (June 27, 2011). The 2011 analysis indicated that 
manufacturers would need to include additional heat exchanger surface 
area and to include modulating components to reach the 14 SEER level 
from a 13 SEER baseline. The 2011 analyses further concluded that these 
improvements could be made without significant investments in equipment 
and production assets. The proposed levels for oil-fired storage water 
heaters or water-source heat pumps have not been analyzed as a part of 
any prior energy conservation standard rulemakings.
    However, DOE understands that the ASHRAE standards were developed 
through an industry consensus process, which included consideration of 
manufacturer input, including the impacts to small manufacturers, when 
increasing the efficiency of equipment. Because EPCA requires DOE to 
adopt the ASHRAE levels or to propose higher standards, DOE is limited 
in terms of the steps it can take to mitigate impacts to small 
businesses, but DOE reasons that such mitigation has already occurred 
since small manufacturers had input into the development of the 
industry consensus standard that DOE is statutorily required to adopt. 
DOE requests public comment on the number of small manufacturers 
producing covered three-phase central air conditioners, water-source 
heat pumps, and oil-fired storage water-heating equipment. 
Additionally, DOE requests data on the market shares of small 
manufactures covered in this rulemaking and the potential impacts of 
this rule on those manufacturers.
    As for the specific changes being proposed for the commercial warm 
air furnace test procedure, the test procedures (ANSI Z21.47-2012 and 
ASHRAE 103-2007) that DOE is proposing to incorporate by reference do 
not include any updates to the methodology in those sections utilized 
in the DOE test procedure. Thus, DOE has tentatively concluded that 
this test procedure rulemaking would keep the DOE test procedure 
current with the latest version of the applicable industry testing 
standards, but it will not change the methodology used to generate 
ratings of commercial warm air furnaces. Consequently, the proposed 
test procedure amendments would not be expected to have a substantive 
impact on manufacturers, either large or small.
    For the reasons stated previously, DOE did not prepare an initial 
regulatory flexibility analysis for the proposed rule. DOE will 
transmit its certification and a supporting statement of factual basis 
to the Chief Counsel for Advocacy of the SBA for review pursuant to 5 
U.S.C. 605(b).

C. Review Under the Paperwork Reduction Act of 1995

    Manufacturers of the ASHRAE equipment subject to this NOPR must 
certify to DOE that their equipment complies with any applicable energy 
conservation standards. In certifying compliance, manufacturers must 
test their equipment according to the applicable DOE test procedures 
for the relevant ASHRAE equipment, including any amendments adopted for 
those test procedures on the date that compliance is required. DOE has 
established regulations for the certification and recordkeeping 
requirements for all covered consumer products and commercial 
equipment, including the ASHRAE equipment in this NOPR. 76

[[Page 1229]]

FR 12422 (March 7, 2011). 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 20 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 proposed 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, App. B, 
B5.1(b); 1021.410(b) and Appendix B, B(1)-(5). The proposed rule fits 
within the 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 proposed rule. 
DOE's CX determination for this proposed rule is available at http://cxnepa.energy.gov/.

E. Review Under Executive Order 13132

    Executive Order 13132, ``Federalism,'' imposes certain requirements 
on Federal agencies formulating and implementing policies or 
regulations that preempt State law or that have Federalism 
implications. 64 FR 43255 (August 10, 1999). 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 
proposed rule and has tentatively 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 equipment types that are the subject of 
this proposed 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 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; and (3) 
provide a clear legal standard for affected conduct rather than a 
general standard; and (4) promote simplification and burden reduction. 
61 FR 4729 (Feb. 7, 1996). Regarding the review required by section 
3(a), section 3(b) of 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 proposed 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. Public Law 104-4, sec. 201 (codified at 2 U.S.C. 1531). 
For a proposed 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 proposed ``significant 
intergovernmental mandate,'' and requires an agency plan for giving 
notice and opportunity for timely input to potentially affected small 
governments before establishing any requirements that might 
significantly or uniquely affect them. On March 18, 1997, DOE published 
a statement of policy on its process for intergovernmental consultation 
under UMRA. 62 FR 12820. DOE's policy statement is also available at 
http://energy.gov/gc/office-general-counsel.
    This proposed rule contains neither an intergovernmental mandate 
nor a mandate that may result in the expenditure by State, local, and 
Tribal governments, in the aggregate, or by the private sector, of $100 
million or more in any year. Accordingly, no assessment or analysis is 
required under the UMRA.

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),

[[Page 1230]]

DOE has determined that this proposed 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 NOPR 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 proposed 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 proposed 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 tentatively concluded that this regulatory action, which 
sets forth proposed energy conservation standards for certain types of 
ASHRAE equipment, is not a significant energy action because the 
proposed standards are not a significant regulatory action under 
Executive Order 12866 and are not likely to have a significant adverse 
effect on the supply, distribution, or use of energy, nor has it been 
designated as such by the Administrator at OIRA. Accordingly, DOE has 
not prepared a Statement of Energy Effects on the proposed 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 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: http://energy.gov/eere/buildings/peer-review.

X. Public Participation

A. Attendance at the Public Meeting

    The time, date, and location of the public meeting are listed in 
the DATES and ADDRESSES sections at the beginning of this document. If 
you plan to attend the public meeting, please notify Ms. Brenda Edwards 
at (202) 586-2945 or Brenda.Edwards@ee.doe.gov. As explained in the 
ADDRESSES section, foreign nationals visiting DOE Headquarters are 
subject to advance security screening procedures. Any foreign national 
wishing to participate in the meeting should advise DOE of this fact as 
soon as possible by contacting Ms. Brenda Edwards to initiate the 
necessary procedures.
    In addition, you can attend the public meeting via webinar. Webinar 
registration information, participant instructions, and information 
about the capabilities available to webinar participants will be 
published on DOE's Web site at: https://www1.gotomeeting.com/register/584170792. Participants are responsible for ensuring their systems are 
compatible with the webinar software.

B. Procedure for Submitting Prepared General Statements for 
Distribution

    Any person who has plans to present a prepared general statement 
may request that copies of his or her statement be made available at 
the public meeting. Such persons may submit requests, along with an 
advance electronic copy of their statement in PDF (preferred), 
Microsoft Word or Excel, WordPerfect, or text (ASCII) file format, to 
the appropriate address shown in the ADDRESSES section at the beginning 
of this document. The request and advance copy of statements must be 
received at least one week before the public meeting and may be 
emailed, hand-delivered, or sent by mail. DOE prefers to receive 
requests and advance copies via email. Please include a telephone 
number to enable DOE staff to make follow-up contact, if needed.

C. Conduct of the Public Meeting

    DOE will designate a DOE official to preside at the public meeting 
and may also use a professional facilitator to aid discussion. The 
meeting will not be a judicial or evidentiary-type public hearing, but 
DOE will conduct it in accordance with section 336 of EPCA (42 U.S.C. 
6306). A court reporter will be present to record the proceedings and 
prepare a transcript. DOE reserves the right to schedule the order of 
presentations and to establish the procedures governing the conduct of 
the public meeting. There shall not be discussion of proprietary 
information, costs or prices, market share, or other commercial matters 
regulated by U.S. anti-trust laws. After the public meeting, interested 
parties may submit further comments on the proceedings, as well as on 
any aspect of the rulemaking, until the end of the comment period.
    The public meeting will be conducted in an informal, conference 
style. DOE will present summaries of comments received before the 
public meeting, allow time for prepared general statements by 
participants, and encourage all interested parties to share their views 
on issues affecting this rulemaking. Each participant will be allowed 
to make a general statement (within time limits determined by DOE),

[[Page 1231]]

before the discussion of specific topics. DOE will allow, as time 
permits, other participants to comment briefly on any general 
statements.
    At the end of all prepared statements on a topic, DOE will permit 
participants to clarify their statements briefly and comment on 
statements made by others. Participants should be prepared to answer 
questions by DOE and by other participants concerning these issues. DOE 
representatives may also ask questions of participants concerning other 
matters relevant to this rulemaking. The official conducting the public 
meeting will accept additional comments or questions from those 
attending, as time permits. The presiding official will announce any 
further procedural rules or modification of the above procedures that 
may be needed for the proper conduct of the public meeting.
    A transcript of the public meeting will be included in the docket, 
which can be viewed as described in the Docket section at the beginning 
of this document and will be accessible on the DOE Web site. In 
addition, any person may buy a copy of the transcript from the 
transcribing reporter.

D. Submission of Comments

    DOE will accept comments, data, and information regarding this 
proposed rule before or after the public meeting, but no later than the 
date provided in the DATES section at the beginning of this proposed 
rule. Interested parties may submit comments, data, and other 
information using any of the methods described in the ADDRESSES section 
at the beginning of this document.
    Submitting comments via www.regulations.gov. The 
www.regulations.gov Web page will require you to provide your name and 
contact information. Your contact information will be viewable to DOE 
Building Technologies staff only. Your contact information will not be 
publicly viewable except for your first and last names, organization 
name (if any), and submitter representative name (if any). If your 
comment is not processed properly because of technical difficulties, 
DOE will use this information to contact you. If DOE cannot read your 
comment due to technical difficulties and cannot contact you for 
clarification, DOE may not be able to consider your comment.
    However, your contact information will be publicly viewable if you 
include it in the comment itself or in any documents attached to your 
comment. Any information that you do not want to be publicly viewable 
should not be included in your comment, nor in any document attached to 
your comment. Otherwise, persons viewing comments will see only first 
and last names, organization names, correspondence containing comments, 
and any documents submitted with the comments.
    Do not submit to www.regulations.gov information for which 
disclosure is restricted by statute, such as trade secrets and 
commercial or financial information (hereinafter referred to as 
Confidential Business Information (CBI)). Comments submitted through 
www.regulations.gov cannot be claimed as CBI. Comments received through 
the Web site will waive any CBI claims for the information submitted. 
For information on submitting CBI, see the Confidential Business 
Information section below.
    DOE processes submissions made through www.regulations.gov before 
posting. Normally, comments will be posted within a few days of being 
submitted. However, if large volumes of comments are being processed 
simultaneously, your comment may not be viewable for up to several 
weeks. Please keep the comment tracking number that www.regulations.gov 
provides after you have successfully uploaded your comment.
    Submitting comments via email, hand delivery/courier, or mail. 
Comments and documents submitted via email, hand delivery, or mail also 
will be posted to www.regulations.gov. If you do not want your personal 
contact information to be publicly viewable, do not include it in your 
comment or any accompanying documents. Instead, provide your contact 
information in a cover letter. Include your first and last names, email 
address, telephone number, and optional mailing address. The cover 
letter will not be publicly viewable as long as it does not include any 
comments
    Include contact information each time you submit comments, data, 
documents, and other information to DOE. If you submit via mail or hand 
delivery/courier, please provide all items on a CD, if feasible, in 
which case it is not necessary to submit printed copies. No 
telefacsimiles (faxes) will be accepted.
    Comments, data, and other information submitted to DOE 
electronically should be provided in PDF (preferred), Microsoft Word or 
Excel, WordPerfect, or text (ASCII) file format. Provide documents that 
are not secured, that are written in English, and that are free of any 
defects or viruses. Documents should not contain special characters or 
any form of encryption and, if possible, they should carry the 
electronic signature of the author.
    Campaign form letters. Please submit campaign form letters by the 
originating organization in batches of between 50 to 500 form letters 
per PDF or as one form letter with a list of supporters' names compiled 
into one or more PDFs. This reduces comment processing and posting 
time.
    Confidential Business Information. Pursuant to 10 CFR 1004.11, any 
person submitting information that he or she believes to be 
confidential and exempt by law from public disclosure should submit via 
email, postal mail, or hand delivery/courier two well-marked copies: 
One copy of the document marked ``confidential'' including all the 
information believed to be confidential, and one copy of the document 
marked ``non-confidential'' with the information believed to be 
confidential deleted. Submit these documents via email or on a CD, if 
feasible. DOE will make its own determination about the confidential 
status of the information and treat it according to its determination.
    Factors of interest to DOE when evaluating requests to treat 
submitted information as confidential include: (1) A description of the 
items; (2) whether and why such items are customarily treated as 
confidential within the industry; (3) whether the information is 
generally known by or available from other sources; (4) whether the 
information has previously been made available to others without 
obligation concerning its confidentiality; (5) an explanation of the 
competitive injury to the submitting person which would result from 
public disclosure; (6) when such information might lose its 
confidential character due to the passage of time; and (7) why 
disclosure of the information would be contrary to the public interest.
    It is DOE's policy that all comments may be included in the public 
docket, without change and as received, including any personal 
information provided in the comments (except information deemed to be 
exempt from public disclosure).

E. Issues on Which DOE Seeks Comment

    Although DOE welcomes comments on any aspect of this proposal, DOE 
is particularly interested in receiving comments and views of 
interested parties concerning the following issues:

    1. DOE's proposed definition of ``water-source heat pump.''
    2. Any relevant issues that would affect the test procedures for 
commercial warm-air furnaces. Interested parties are welcome to 
comment on any aspect of these test procedures as part of this 
comprehensive 7-year-review.

[[Page 1232]]

    3. Is there a rebound effect in small air-cooled three-phase air 
conditioner and heat pump equipment less than 65,000 Btu/h or water-
source heat pump energy use as a result of improvements in the 
efficiency of such units?
    4. Would shipments of small air-cooled three-phase air 
conditioners and heat pump equipment less than 65,000 Btu/h or 
water-source heat pump equipment change at more-stringent standard 
levels?
    5. The use of the projected base-case efficiency trend of an 
increase of 1 SEER or EER every 35 years for small air-cooled three-
phase air conditioner and heat pump equipment less than 65,000 Btu/h 
and water-source heat pump equipment.
    6. Should the mark-ups analysis for water-source heat pumps 
include national accounts?
    7. DOE's methodology for developing heating UECs for water-
source heat pumps. DOE also seeks relevant data on this issue.
    8. The appropriate building types for the water-source heat pump 
energy use analysis, which currently include office, education, 
lodging, multi-family, and healthcare.
    9. How maintenance costs for water-source heat pumps might be 
expected to differ from that for air-source heat pumps.
    10. How repair costs for water-source heat pumps might be 
expected to differ from that for air-source heat pumps.
    11. What is the appropriate retirement function for water-source 
heat pumps?
    12. The proposed standard levels for water-source heat pumps, as 
well as the other efficiency levels considered.

XI. Approval of the Office of the Secretary

    The Secretary of Energy has approved publication of this notice of 
proposed rulemaking.

List of Subjects in 10 CFR Part 431

    Administrative practice and procedure, Confidential business 
information, Energy conservation, Incorporation by reference, Reporting 
and recordkeeping requirements.

    Issued in Washington, DC, on December 23, 2014.
Kathleen B. Hogan,
Deputy Assistant Secretary for Energy Efficiency, Energy Efficiency and 
Renewable Energy.
    For the reasons set forth in the preamble, DOE proposes to amend 
part 431 of Chapter II, Subchapter D, of Title 10 of the Code of 
Federal Regulations as set forth below:

PART 431--ENERGY EFFICIENCY PROGRAM FOR CERTAIN COMMERCIAL AND 
INDUSTRIAL EQUIPMENT

0
1. The authority citation for part 431 continues to read as follows:

    Authority:  42 U.S.C. 6291-6317.

0
2. Section 431.75 is amended by revising paragraphs (b) and (c) to read 
as follows:


Sec.  431.75  Materials incorporated by reference.

* * * * *
    (b) ANSI. American National Standards Institute. 25 W. 43rd Street, 
4th Floor, New York, NY 10036. (212) 642-4900 or go to http://www.ansi.org.
    (1) ANSI Z21.47-2012, (``ANSI Z21.47-2012''), ``Gas-Fired Central 
Furnaces,'' ANSI approved on March 27, 2012, IBR approved for Sec.  
431.76.
    (2) [Reserved]
    (c) ASHRAE. American Society of Heating, Refrigerating and Air-
Conditioning Engineers Inc., 1791 Tullie Circle, NE., Atlanta, Georgia 
30329, (404) 636-8400, or go to: http://www.ashrae.org.
    (1) ASHRAE Standard 103-2007, sections 7.2.2.4, 7.8, 9.2, and 
11.3.7, ``Method of Testing for Annual Fuel Utilization Efficiency of 
Residential Central Furnaces and Boilers,'' ANSI approved on March 25, 
2008, IBR approved for Sec.  431.76.
    (2) [Reserved]
* * * * *
0
3. Section 431.76 is revised to read as follows:


Sec.  431.76  Uniform test method for the measurement of energy 
efficiency of commercial warm air furnaces.

    (a) Scope. This section covers the test requirements used to 
measure the energy efficiency of commercial warm air furnaces with a 
rated maximum input of 225,000 Btu per hour or more. On and after [DATE 
360 DAYS AFTER PUBLICATION OF THE FINAL RULE IN THE Federal Register], 
any representations made with respect to the energy use or efficiency 
of commercial warm air furnaces must be made in accordance with the 
results of testing pursuant to this section. At that time, you must use 
the relevant procedures in ANSI Z21.47-2012 or UL 727-2006 
(incorporated by reference, see Sec.  431.75). On and after [DATE 30 
DAYS AFTER PUBLICATION OF THE FINAL RULE IN THE Federal Register] and 
prior to [DATE 360 DAYS AFTER PUBLICATION OF THE FINAL RULE IN THE 
Federal Register], manufacturers must test commercial warm air furnaces 
in accordance with this section or the section as it appeared at 10 CFR 
part 430, subpart B in the 10 CFR parts 200 to 499 edition revised 
January 1, 2014. DOE notes that, because testing under this section is 
required as of [DATE 360 DAYS AFTER PUBLICATION OF THE FINAL RULE IN 
THE Federal Register], manufacturers may wish to begin using this 
amended test procedure immediately. Any representations made with 
respect to the energy use or efficiency of such commercial warm air 
furnaces must be made in accordance with whichever version is selected.
    (b) Testing. Where this section prescribes use of ANSI Z21.47-2012 
or UL Standard 727-2006 (incorporated by reference, see Sec.  431.75), 
perform only the procedures pertinent to the measurement of the steady-
state efficiency, as specified in paragraph (c) of this section.
    (c) Test set-up--(1) Test set-up for gas-fired commercial warm air 
furnaces. The test set-up, including flue requirement, instrumentation, 
test conditions, and measurements for determining thermal efficiency is 
as specified in sections 1.1 (Scope), 2.1 (General), 2.2 (Basic Test 
Arrangements), 2.3 (Test Ducts and Plenums), 2.4 (Test Gases), 2.5 
(Test Pressures and Burner Adjustments), 2.6 (Static Pressure and Air 
Flow Adjustments), 2.39 (Thermal Efficiency), and 4.2.1 (Basic Test 
Arrangements for Direct Vent Central Furnaces) of ANSI Z21.47-2012 
(incorporated by reference, see Sec.  431.75). The thermal efficiency 
test must be conducted only at the normal inlet test pressure, as 
specified in section 2.5.1 of ANSI Z21.47-2012, and at the maximum 
hourly Btu input rating specified by the manufacturer for the product 
being tested.
    (2) Test setup for oil-fired commercial warm air furnaces. The test 
setup, including flue requirement, instrumentation, test conditions, 
and measurement for measuring thermal efficiency is as specified in 
sections 1 (Scope), 2 (Units of Measurement), 3 (Glossary), 37 
(General), 38 and 39 (Test Installation), 40 (Instrumentation, except 
40.4 and 40.6.2 through 40.6.7, which are not required for the thermal 
efficiency test), 41 (Initial Test Conditions), 42 (Combustion Test--
Burner and Furnace), 43.2 (Operation Tests), 44 (Limit Control Cutout 
Test), 45 (Continuity of Operation Test), and 46 (Air Flow, Downflow or 
Horizontal Furnace Test), of UL 727-2006 (incorporated by reference, 
see Sec.  431.75). You must conduct a fuel oil analysis for heating 
value, hydrogen content, carbon content, pounds per gallon, and 
American Petroleum Institute (API) gravity as specified in section 
8.2.2 of HI BTS-2000 (incorporated by reference, see Sec.  431.75). The 
steady-state combustion conditions, specified in Section 42.1 of UL 
727-2006, are attained when variations of not more than 5[emsp14][deg]F 
in the measured flue gas temperature occur for

[[Page 1233]]

three consecutive readings taken 15 minutes apart.
    (d) Additional test measurements--(1) Measurement of flue 
CO2 (carbon dioxide) for oil-fired commercial warm air 
furnaces. In addition to the flue temperature measurement specified in 
section 40.6.8 of UL 727-2006 (incorporated by reference, see Sec.  
431.75), you must locate one or two sampling tubes within six inches 
downstream from the flue temperature probe (as indicated on Figure 40.3 
of UL 727-2006). If you use an open end tube, it must project into the 
flue one-third of the chimney connector diameter. If you use other 
methods of sampling CO2, you must place the sampling tube so 
as to obtain an average sample. There must be no air leak between the 
temperature probe and the sampling tube location. You must collect the 
flue gas sample at the same time the flue gas temperature is recorded. 
The CO2 concentration of the flue gas must be as specified 
by the manufacturer for the product being tested, with a tolerance of 
0.1 percent. You must determine the flue CO2 
using an instrument with a reading error no greater than 0.1 percent.
    (2) Procedure for the measurement of condensate for a gas-fired 
condensing commercial warm air furnace. The test procedure for the 
measurement of the condensate from the flue gas under steady-state 
operation must be conducted as specified in sections 7.2.2.4, 7.8, and 
9.2 of ASHRAE 103-2007 (incorporated by reference, see Sec.  431.75) 
under the maximum rated input conditions. You must conduct this 
condensate measurement for an additional 30 minutes of steady-state 
operation after completion of the steady-state thermal efficiency test 
specified in paragraph (c) of this section.
    (e) Calculation of thermal efficiency--(1) Gas-fired commercial 
warm air furnaces. You must use the calculation procedure specified in 
section 2.39, Thermal Efficiency, of ANSI Standard Z21.47-2012 
(incorporated by reference, see Sec.  431.75).
    (2) Oil-fired commercial warm air furnaces. You must calculate the 
percent flue loss (in percent of heat input rate) by following the 
procedure specified in sections 11.1.4, 11.1.5, and 11.1.6.2 of the HI 
BTS-2000 (incorporated by reference, see Sec.  431.75). The thermal 
efficiency must be calculated as:

Thermal Efficiency (percent) = 100 percent - flue loss (in percent).

    (f) Procedure for the calculation of the additional heat gain and 
heat loss, and adjustment to the thermal efficiency, for a condensing 
commercial warm air furnace. (1) You must calculate the latent heat 
gain from the condensation of the water vapor in the flue gas, and 
calculate heat loss due to the flue condensate down the drain, as 
specified in sections 11.3.7.1 and 11.3.7.2 of ASHRAE Standard 103-2007 
(incorporated by reference, see Sec.  431.75), with the exception that 
in the equation for the heat loss due to hot condensate flowing down 
the drain in section 11.3.7.2, the assumed indoor temperature of 
70[emsp14][deg]F and the temperature term TOA must be 
replaced by the measured room temperature as specified in section 2.2.8 
of ANSI Z21.47-2012 (incorporated by reference, see Sec.  431.75).
    (2) Adjustment to the thermal efficiency for condensing furnaces. 
You must adjust the thermal efficiency as calculated in paragraph 
(e)(1) of this section by adding the latent gain, expressed in percent, 
from the condensation of the water vapor in the flue gas, and 
subtracting the heat loss (due to the flue condensate down the drain), 
also expressed in percent, both as calculated in paragraph (f)(1) of 
this section, to obtain the thermal efficiency of a condensing furnace.
0
4. Section 431.92 is amended by adding in alphabetical order a 
definition for ``Water-source heat pump'' to read as follows:


Sec.  431.92  Definitions concerning commercial air conditioners and 
heat pumps.

* * * * *
    Water-source heat pump means a single-phase or three-phase reverse-
cycle heat pump that uses a circulating water loop as the heat source 
for heating and as the heat sink for cooling. The main components are a 
compressor, refrigerant-to-water heat exchanger, refrigerant-to-air 
heat exchanger, refrigerant expansion devices, refrigerant reversing 
valve, and indoor fan. Such equipment includes, but is not limited to, 
water-to-air water-loop heat pumps.
0
5. Section 431.97 is amended by:
0
a. Revising paragraph (b);
0
b. Redesignating Tables 4 through 8 as Tables 5 through 9 respectively, 
in paragraphs (c), (d), (e) and (f); and
0
c. Revising paragraph (c).
    The revisions read as follows:


Sec.  431.97  Energy efficiency standards and their compliance dates.

* * * * *
    (b) Each commercial air conditioner or heat pump (not including 
single package vertical air conditioners and single package vertical 
heat pumps, packaged terminal air conditioners and packaged terminal 
heat pumps, computer room air conditioners, and variable refrigerant 
flow systems) manufactured on or after the compliance date listed in 
the corresponding table must meet the applicable minimum energy 
efficiency standard level(s) set forth in Tables 1, 2, 3, and 4 of this 
section.

                        Table 1 to Sec.   431.97--Minimum Cooling Efficiency Standards for Air-Conditioning and Heating Equipment
[Not including single package vertical air conditioners and single package vertical heat pumps, packaged terminal air conditioners and packaged terminal
                 heat pumps, computer room air conditioners, and variable refrigerant flow multi-split air conditioners and heat pumps]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                      Compliance date:
                                                                                                                                          equipment
        Equipment category             Cooling capacity         Sub-category          Heating type           Efficiency level        manufactured on and
                                                                                                                                         after . . .
--------------------------------------------------------------------------------------------------------------------------------------------------------
Small Commercial Packaged Air-      <65,000 Btu/h........  AC...................  All.................  SEER = 13.................  June 16, 2008.
 Conditioning and Heating                                  HP...................  All.................  SEER = 13.................  June 16, 2008.\1\
 Equipment (Air-Cooled, 3-Phase,
 Split-System).
Small Commercial Packaged Air-      <65,000 Btu/h........  AC...................  All.................  SEER = 13.................  June 16, 2008.\1\
 Conditioning and Heating                                  HP...................  All.................  SEER = 13.................  June 16, 2008.\1\
 Equipment (Air-Cooled, 3-Phase,
 Single-Package).

[[Page 1234]]

 
Small Commercial Packaged Air-      >=65,000 Btu/h and     AC...................  No Heating or         EER = 11.2................  January 1, 2010.
 Conditioning and Heating            <135,000 Btu/h.       .....................   Electric Resistance  ..........................  ....................
 Equipment (Air-Cooled).                                   HP...................   Heating.             EER = 11.0................  January 1, 2010.
                                                                                  All Other Types of    EER = 11.0................  January 1, 2010.
                                                                                   Heating.             ..........................  ....................
                                                                                  No Heating or         EER = 10.8................  January 1, 2010.
                                                                                   Electric Resistance
                                                                                   Heating.
                                                                                  All Other Types of
                                                                                   Heating.
Large Commercial Packaged Air-      >=135,000 Btu/h and    AC...................  No Heating or         EER = 11.0................  January 1, 2010.
 Conditioning and Heating            <240,000 Btu/h.       .....................   Electric Resistance  ..........................  ....................
 Equipment (Air-Cooled).                                   HP...................   Heating.             EER = 10.8................  January 1, 2010.
                                                                                  All Other Types of    EER = 10.6................  January 1, 2010.
                                                                                   Heating.             ..........................  ....................
                                                                                  No Heating or         EER = 10.4................  January 1, 2010.
                                                                                   Electric Resistance
                                                                                   Heating.
                                                                                  All Other Types of
                                                                                   Heating.
Very Large Commercial Packaged Air- >=240,000 Btu/h and    AC...................  No Heating or         EER = 10.0................  January 1, 2010.
 Conditioning and Heating            <760,000 Btu/h.       .....................   Electric Resistance  ..........................  ....................
 Equipment (Air-Cooled).                                   HP...................   Heating.             EER = 9.8.................  January 1, 2010.
                                                                                  All Other Types of    EER = 9.5.................  January 1, 2010.
                                                                                   Heating.             ..........................  ....................
                                                                                  No Heating or         EER = 9.3.................  January 1, 2010.
                                                                                   Electric Resistance
                                                                                   Heating.
                                                                                  All Other Types of
                                                                                   Heating.
Small Commercial Package Air-       <65,000 Btu/h........  AC...................  All.................  EER = 12.1................  October 29, 2003.
 Conditioning and Heating           >=65,000 Btu/h and     AC...................  No Heating or         EER = 12.1................  June 1, 2013.
 Equipment (Water-Cooled).           <135,000 Btu/h.                               Electric Resistance  ..........................  ....................
                                                                                   Heating.             EER = 11.9................  June 1, 2013.
                                                                                  All Other Types of
                                                                                   Heating.
Large Commercial Package Air-       >=135,000 and          AC...................  No Heating or         EER = 12.5................  June 1, 2014.
 Conditioning and Heating            <240,000 Btu/h.                               Electric Resistance  ..........................  ....................
 Equipment (Water-Cooled).                                                         Heating.             EER = 12.3................  June 1, 2014.
                                                                                  All Other Types of
                                                                                   Heating.
Very Large Commercial Package Air-  >=240,000 and          AC...................  No Heating or         EER = 12.4................  June 1, 2014.
 Conditioning and Heating            <760,000 Btu/h.                               Electric Resistance  ..........................  ....................
 Equipment (Water-Cooled).                                                         Heating.             EER = 12.2................  June 1, 2014.
                                                                                  All Other Types of
                                                                                   Heating.
Small Commercial Package Air-       <65,000 Btu/h........  AC...................  All.................  EER = 12.1................  October 29, 2003.
 Conditioning and Heating           >=65,000 and <135,000  AC...................  No Heating or         EER = 12.1................  June 1, 2013.
 Equipment (Evaporatively-Cooled).   Btu/h.                                        Electric Resistance  ..........................  ....................
                                                                                   Heating.             EER = 11.9................  June 1, 2013.
                                                                                  All Other Types of
                                                                                   Heating.
Large Commercial Package Air-       >=135,000 and          AC...................  No Heating or         EER = 12.0................  June 1, 2014.
 Conditioning and Heating            <240,000 Btu/h.                               Electric Resistance  ..........................  ....................
 Equipment (Evaporatively-Cooled).                                                 Heating.             EER = 11.8................  June 1, 2014.
                                                                                  All Other Types of
                                                                                   Heating.
Very Large Commercial Package Air-  >=240,000 and          AC...................  No Heating or         EER = 11.9................  June 1, 2014.
 Conditioning and Heating            <760,000 Btu/h.                               Electric Resistance  ..........................  ....................
 Equipment (Evaporatively-Cooled).                                                 Heating.             EER = 11.7................  June 1, 2014.
                                                                                  All Other Types of
                                                                                   Heating.
Small Commercial Packaged Air-      <17,000 Btu/h........  HP...................  All.................  EER = 11.2................  October 29, 2003.\2\
 Conditioning and Heating           >=17,000 Btu/h and     HP...................  All.................  EER = 12.0................  October 29, 2003.\2\
 Equipment (Water-Source: Water-to-  <65,000 Btu/h.        .....................  ....................  ..........................  ....................
 Air, Water-Loop).                  >=65,000 Btu/h and     HP...................  All.................  EER = 12.0................  October 29, 2003.\2\
                                     <135,000 Btu/h.
--------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ And manufactured before January 1, 2017. See Table 3 of this section for updated efficiency standards.
\2\ And manufactured before October 9, 2015. See Table 3 of this section for updated efficiency standards.


    Table 2 to Sec.   431.97--Minimum Heating Efficiency Standards for Air-Conditioning and Heating Equipment
                                                  [Heat Pumps]
----------------------------------------------------------------------------------------------------------------
                                                                                              Compliance date:
                                                                                                 equipment
          Equipment category              Cooling capacity          Efficiency level        manufactured on and
                                                                                                after . . .
----------------------------------------------------------------------------------------------------------------
Small Commercial Packaged Air-         <65,000 Btu/h........  HSPF = 7.7.................  June 16, 2008.\1\
 Conditioning and Heating Equipment
 (Air-Cooled, 3-Phase, Split-System).
Small Commercial Packaged Air-         <65,000 Btu/h........  HSPF = 7.7.................  June 16, 2008.\1\
 Conditioning and Heating Equipment
 (Air-Cooled, 3-Phase, Single-
 Package).
Small Commercial Packaged Air-         >=65,000 Btu/h and     COP = 3.3..................  January 1, 2010.
 Conditioning and Heating Equipment     <135,000 Btu/h.
 (Air-Cooled).

[[Page 1235]]

 
Large Commercial Packaged Air-         >=135,000 Btu/h and    COP = 3.2..................  January 1, 2010.
 Conditioning and Heating Equipment     <240,000 Btu/h.
 (Air-Cooled).
Very Large Commercial Packaged Air-    >=240,000 Btu/h and    COP = 3.2..................  January 1, 2010.
 Conditioning and Heating Equipment     <760,000 Btu/h.
 (Air-Cooled).
Small Commercial Packaged Air-         <135,000 Btu/h.......  COP = 4.2..................  October 29, 2003.\2\
 Conditioning and Heating Equipment
 (Water-Source: Water-to-Air, Water-
 Loop).
----------------------------------------------------------------------------------------------------------------
\1\ And manufactured before January 1, 2017. See Table 3 of this section for updated efficiency standards.
\2\ And manufactured before October 9, 2015. See Table 3 of this section for updated efficiency standards.


            Table 3 to Sec.   431.97--Updates to the Minimum Cooling Efficiency Standards for Certain Air-Conditioning and Heating Equipment
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                      Compliance date:
                                                                                                                                          equipment
        Equipment category             Cooling capacity         Sub-category          Heating type           Efficiency level        manufactured on and
                                                                                                                                         after . . .
--------------------------------------------------------------------------------------------------------------------------------------------------------
Small Commercial Packaged Air-      <65,000 Btu/h........  AC...................  All.................  SEER = 13.0...............  June 16, 2008.
 Conditioning and Heating
 Equipment (Air-Cooled, 3-Phase,
 Split-System).
                                                           HP...................  All.................  SEER = 14.0...............  January 1, 2017.
Small Commercial Packaged Air-      <65,000 Btu/h........  AC...................  All.................  SEER = 14.0...............  January 1, 2017.
 Conditioning and Heating
 Equipment (Air-Cooled, 3-Phase,
 Single-Package).
                                                           HP...................  All.................  SEER = 14.0...............  January 1, 2017.
Small Commercial Packaged Air-      <17,000 Btu/h........  HP...................  All.................  EER = 12.2................  October 9, 2015.
 Conditioning and Heating
 Equipment (Water-Source: Water-to-
 Air, Water-Loop).
                                    >=17,000 Btu/h and     HP...................  All.................  EER = 13.0................  October 9, 2015.
                                     <65,000 Btu/h.
                                    >=65,000 Btu/h and     HP...................  All.................  EER = 13.0................  October 9, 2015.
                                     <135,000 Btu/h.
--------------------------------------------------------------------------------------------------------------------------------------------------------


 Table 4 to Sec.   431.97--Updates to the Minimum Heating Efficiency Standards for Certain Air-Conditioning and
                                                Heating Equipment
                                                  [Heat pumps]
----------------------------------------------------------------------------------------------------------------
                                                                                      Compliance date: equipment
        Equipment category           Cooling capacity         Efficiency level       manufactured on and after .
                                                                                                 . .
----------------------------------------------------------------------------------------------------------------
Small Commercial Packaged Air-     <65,000 Btu/h......  HSPF = 8.2.................  January 1, 2017.
 Conditioning and Heating
 Equipment (Air-Cooled, 3-Phase,
 Split-System).
Small Commercial Packaged Air-     <65,000 Btu/h......  HSPF = 8.0.................  January 1, 2017.
 Conditioning and Heating
 Equipment (Air-Cooled, 3-Phase,
 Single-Package).
Small Commercial Packaged Air-     <135,000 Btu/h.....  COP = 4.3..................  October 9, 2015.
 Conditioning and Heating
 Equipment (Water-Source: Water-
 to-Air, Water-Loop).
----------------------------------------------------------------------------------------------------------------

    (c) Each packaged terminal air conditioner (PTAC) and packaged 
terminal heat pump (PTHP) manufactured on or after January 1, 1994, and 
before October 8, 2012 (for standard size PTACs and PTHPs) and before 
October 7, 2010 (for non-standard size PTACs and PTHPs) must meet the 
applicable minimum energy efficiency standard level(s) set forth in 
Table 5 of this section. Each PTAC and PTHP manufactured on or after 
October 8, 2012 (for standard size PTACs and PTHPs) and on or after 
October 7, 2010 (for non-standard size PTACs and PTHPs) must meet the 
applicable minimum energy efficiency standard level(s) set forth in 
Table 6 of this section.
* * * * *

[[Page 1236]]

0
6. Section 431.110 is revised to read as follows:


Sec.  431.110  Energy conservation standards and their effective dates.

    Each commercial storage water heater, instantaneous water heater, 
unfired hot water storage tank and hot water supply boiler \1\ must 
meet the applicable energy conservation standard level(s) as follows:
---------------------------------------------------------------------------

    \1\ Any packaged boiler that provides service water, that meets 
the definition of ``commercial packaged boiler'' in subpart E of 
this part, but does not meet the definition of '' hot water supply 
boiler'' in this subpart, must meet the requirements that apply to 
it under subpart E.

----------------------------------------------------------------------------------------------------------------
                                                                 Energy conservation standard \a\
                                                 ---------------------------------------------------------------
                                                   Maximum standby
                                                      loss \c\         Minimum thermal        Minimum thermal
      Equipment category              Size           (equipment     efficiency (equipment  efficiency (equipment
                                                   manufactured on   manufactured on and    manufactured on and
                                                      and after       after  October 29,      after October 9,
                                                     October 29,       2003 and before           2015) \b\
                                                      2003) \b\      October 9, 2015) \b\
----------------------------------------------------------------------------------------------------------------
Electric storage water heaters  All.............  0.30 + 27/Vm (%/  N/A..................  N/A.
                                                   hr).
Gas-fired storage water         <=155,000 Btu/hr  Q/800 + 110(Vr)1/ 80%..................  80%.
 heaters.                                          2 (Btu/hr).
                                >155,000 Btu/hr.  Q/800 + 110(Vr)1/ 80%..................  80%.
                                                   2 (Btu/hr).
Oil-fired storage water         <=155,000 Btu/hr  Q/800 + 110(Vr)1/ 78%..................  80%.
 heaters.                                          2 (Btu/hr).
                                >155,000 Btu/hr.  Q/800 + 110(Vr)1/ 78%..................  80%.
                                                   2 (Btu/hr).
Gas-fired instantaneous water   <10 gal.........  N/A.............  80%..................  80%.
 heaters and hot water supply
 boilers.
                                >=10 gal........  Q/800 + 110(Vr)1/ 80%..................  80%.
                                                   2 (Btu/hr).
Oil-fired instantaneous water   <10 gal.........  N/A.............  80%..................  80%.
 heaters and hot water supply
 boilers.
                                >=10 gal........  Q/800 + 110(Vr)1/ 78%..................  78%.
                                                   2 (Btu/hr).
----------------------------------------------------------------------------------------------------------------
Equipment category              Size                                Minimum thermal insulation
----------------------------------------------------------------------------------------------------------------
Unfired hot water storage tank  All.............                              R-12.5
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\a\ Vm is the measured storage volume, and Vr is the rated volume, both in gallons. Q is the nameplate input
  rate in Btu/hr.
\b\ For hot water supply boilers with a capacity of less than 10 gallons: (1) The standards are mandatory for
  products manufactured on and after October 21, 2005, and (2) products manufactured prior to that date, and on
  or after October 23, 2003, must meet either the standards listed in this table or the applicable standards in
  subpart E of this part for a ``commercial packaged boiler.''
\c\ Water heaters and hot water supply boilers having more than 140 gallons of storage capacity need not meet
  the standby loss requirement if: (1) The tank surface area is thermally insulated to R-12.5 or more; (2) a
  standing pilot light is not used; and (3) for gas or oil-fired storage water heaters, they have a fire damper
  or fan assisted combustion.


[FR Doc. 2014-30839 Filed 1-7-15; 8:45 am]
BILLING CODE 6450-01-P