Energy Conservation Program for Consumer Products: Clothes Washer Energy Conservation Standards

[Federal Register: October 5, 2000 (Volume 65, Number 194)]
[Proposed Rules]
[Page 59549-59588]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr05oc00-19]

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Part III

Department of Energy

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Office of Energy Efficiency and Renewable Energy

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10 CFR Part 430

Energy Conservation Program for Consumer Products: Clothes Washer
Energy Conservation Standards; Proposed Rule

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DEPARTMENT OF ENERGY

Office of Energy Efficiency and Renewable Energy

10 CFR Part 430

[Docket No. EE-RM-94-403]
RIN 1904-AA67

Energy Conservation Program for Consumer Products: Clothes Washer
Energy Conservation Standards

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

ACTION: Notice of proposed rulemaking and public hearing.

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SUMMARY: The Energy Policy and Conservation Act, as amended
(hereinafter referred to as EPCA or the Act), prescribes energy
conservation standards for certain major household appliances, and
requires the Department of Energy (DOE, Department, or we) to
administer an energy conservation program for these products. We
conducted several analyses regarding the energy savings, benefits and
burdens of amended energy conservation standards for clothes washers
and have shared the results of these analyses with all stakeholders.
Based on these analyses, several of the major stakeholders, including
clothes washer manufacturers and energy efficiency advocates, submitted
to the Department a joint proposal for the highest standard level which
they believed to be technically feasible and economically justified.
Based on our review of this proposal, we found the proposed standards
technically feasible and economically justified. Therefore, today we
propose to amend the energy conservation standard for clothes washers
for residential applications as recommended in the joint proposal and
announce a public hearing.
As part of this rulemaking in response to the joint proposal by the
clothes washer manufacturers and energy efficiency advocates, we have
also included revisions to the test procedure based on issues found
during this rulemaking dealing with the energy test cloth, remaining
moisture content (RMC), extractor testing and the correction factor. In
addition, we incorporated minor editorial changes to help clarify both
Appendix J and J1 of the test procedure based on the joint proposal by
stakeholders. These changes have been included in their entirety in
this rulemaking pertaining to the test procedure.

DATES: If you wish to submit comments on the proposed rule, they must
be received on or before December 4, 2000 to Ms. Brenda Edwards-Jones
at the address listed below. We request 10 copies of the written
comments and, if possible, a computer disk. Oral views, data, and
arguments may be presented at the public hearing. We will hold a Public
Hearing on November 15, 2000, beginning at 9:00 a.m.
If you wish to speak at the hearing, requests must be received by
the Department no later than 4:00 p.m., November 6, 2000. Copies of
statements to be given at the public hearing must be received by the
Department no later than 4:00 p.m., November 6, 2000. We will read the
statements in advance of the hearing and would appreciate the oral
presentations to be limited to a summary of the statement. The length
of each oral presentation is limited to 5 minutes.

ADDRESSES: The hearing will be at the U.S. Department of Energy,
Forrestal Building, Room 6E-069, 1000 Independence Avenue, SW.,
Washington, DC 20585. Written comments, oral statements, and requests
to speak at the hearing are to be submitted to Ms. Brenda Edwards-
Jones, U.S. Department of Energy, Office of Energy Efficiency and
Renewable Energy, Energy Conservation Program for Consumer Products:
Clothes Washers Energy Conservation Standards, Docket No. EE-RM-94-403,
1000 Independence Avenue, SW., Washington, DC 20585-0121.
Copies of the public comments received, the Technical Support
Document (TSD) and the transcript of the public hearing may be read at
the DOE Freedom of Information Reading Room, U.S. Department of Energy,
Forrestal Building, Room 1E-190, 1000 Independence Avenue, SW.,
Washington, DC 20585, (202) 586-3142, between the hours of 9:00 a.m.
and 4:00 p.m., Monday through Friday, except Federal holidays. Copies
of the TSD may be obtained from: U.S. Department of Energy, Office of
Energy Efficiency and Renewable Energy, Forrestal Building, Mail
Station EE-41, 1000 Independence Avenue, SW., Washington, DC 20585-
0121. (202) 586-9127. Copies of the analysis can also be found on the
Codes and Standards Internet site at: http://www.eren.doe.gov/
buildings/codes_standards/applbrf/clwasher.html
For more information concerning public participation in this
rulemaking proceeding see Section VII, ``Public Comment Procedures,''
of this Notice.

FOR FURTHER INFORMATION CONTACT: Bryan Berringer, U.S. Department of
Energy, Office of Energy Efficiency and Renewable Energy, Forrestal
Building, Mail Station EE-41, 1000 Independence Avenue, SW, Washington,
DC 20585-0121, (202) 586-0371, E-mail: Bryan.Berringer@EE.DOE.GOV, or
Eugene Margolis, U.S. Department of Energy, Office of General Counsel,
Forrestal Building, Mail Station GC-72, 1000 Independence Avenue, SW,
Washington, DC 20585, (202) 586-9526, E-mail:
Eugene.Margolis@HQ.DOE.GOV.

SUPPLEMENTARY INFORMATION:
I. Summary of Proposed Rule
II. Introduction
A. Consumer Overview
B. Authority
C. Background
1. Current Standards
2. History of Previous Rulemakings
3. Process Improvement
4. Test Procedures
III. General Discussion
A. Test Procedures
B. Technological Feasibility
1. General
2. Maximum Technologically Feasible Levels
3. Product Classes
C. Energy Savings
1. Determination of Savings
2. Significance of Savings
D. Rebuttable Presumption
E. Economic Justification
1. Economic Impact on Manufacturers and Consumers
2. Life-Cycle Cost (LCC)
3. Energy Savings
4. Lessening of Utility or Performance of Products
5. Impact of Lessening of Competition
6. Need of the Nation to Conserve Energy
7. Other Factors
IV. Methodology
A. Product Classes
B. Engineering Analysis
C. Life-Cycle Cost (LCC) Analysis
D. Payback Period Analysis
E. National Impact Analyses
1. National Energy Savings (NES) Spreadsheet Model
2. Net National Employment
F. Consumer Analysis
G. Manufacturer Impact Analysis
H. Utility Analysis
I. Environmental Analysis
V. Analytical Results
A. Trial Standard Levels
1. Economic Impacts on Consumers
a. Life-Cycle-Cost
b. Payback Period
c. Rebuttable Presumption Payback
d. Consumer Sub-Group Analysis
2. Economic Impact on Manufacturers
B. Significance of Energy Savings
C. Lessening of Utility or Performance of Products
D. Impact of Lessening of Competition
E. Need of the Nation to Save Energy and Net National Employment
1. National Net Present Value
2. National Water Savings

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3. Environmental Impacts
4. Net National Employment
F. Conclusion
VI. Procedural Reviews
A. Review under the National Environmental Policy Act of 1969
B. Review under Executive Order 12866, ``Regulatory Planning and
Review''
C. Review under the Regulatory Flexibility Act of 1980
D. Review under the Paperwork Reduction Act
E. Review under Executive Order 12988, ``Civil Justice Reform''
F. ``Takings'' Assessment Review
G. Review under Executive Order 13132, ``Federalism''
H. Review under the Unfunded Mandates Reform Act of 1995
I. Review under the Treasury and General Government
Appropriation Act of 1999
J. Review Under the Plain Language Directives
VII. Public Comment Procedures
A. Written Comment Procedures
B. Public Workshop (Hearing)
1. Procedure for Submitting Requests to Speak
2. Conduct of Workshop (Hearing)

I. Summary of the Proposed Rule

The EPCA, as amended, specifies that any new or amended energy
conservation standard the Department prescribes shall be designed to
``achieve the maximum improvement in energy efficiency * * * which the
Secretary determines is technologically feasible and economically
justified.'' Section 325(o)(2)(A), 42 U.S.C. 6295(o)(2)(A).
Furthermore, the amended standard must ``result in significant
conservation of energy.'' Section 325(o)(2(B)(3)(B), 42 U.S.C.
6295(o)(2)(B)(3)(B).
In accordance with the statutory criteria discussed in this notice,
we are proposing to amend the clothes washer energy efficiency
standards. The proposed standards are based on a Joint Stakeholders
Comment recommendation submitted to the Department by clothes washer
manufacturers and energy conservation advocates. (Joint Comment, No.
204). The Joint Stakeholders consist of the following: Alliance Laundry
Systems LLC; Amana Appliances; Asko Incorporated; Frigidaire Home
Products; General Electric Appliances (GEA), Maytag Corporation; Miele,
Inc.; Fisher & Paykel Ltd; Whirlpool Corporation; Alliance to Save
Energy; American Council for an Energy Efficient Economy (ACEEE);
Appliance Standards Awareness Project; California Energy Commission
(CEC); City of Austin, Texas; Natural Resources Defense Council (NRDC);
Northwest Power Planning Council; and Pacific Gas and Electric (PG&E).
The proposal as submitted in the Joint Stakeholders Comment consists of
four parts as follows:
``Clothes Washer Energy Standard. The clothes washer energy
standards for standard class clothes washers shall be 1.04 modified
energy factor (MEF) in 1/1/2004 and 1.26 MEF in 1/1/2007. The energy
test procedure will be revised to ensure that variability between test
cloths will not significantly affect remaining moisture content (RMC)
results. Additional clarifications will also be made to test procedure.
Energy Star Labeling Program. Energy Star levels shall be set as
follows: Standard Class Clothes Washers--1.26 MEF in 2001; 1.42 MEF in
2004; Refrigerator/Freezers--10% better than the 2001 standard in 2001;
change to 15% better than the 2001 in 2004.
Tax Credit for the Production of Energy Efficient Clothes Washers
and Refrigerator-Freezers. The credit shall provide for two energy
efficiency tiers, each with separately designated funds. There is $30
million in each designated fund per company per efficiency tier. Cap of
$60 million per company for the two funds or yearly cap with carry
forward. Annual total tax credit cannot exceed in any taxable year 2%
of corporate gross revenues as determined by average of 3 prior years.
Standard Class Clothes Washers: Two tiers coterminous 2001-2006;
$50 per unit for products manufactured with a 1.26 MEF and $100 per
unit for products manufactured with a 1.42 MEF, increasing to 1.5 MEF
in 2004. Includes residential-style ``coin-operated'' washers.
Refrigerators: First tier effective in 2001. $50 per unit for
products manufactured 10% above 2001 minimum efficiency standard.
Credit runs through 2004. Second tier also effective in 2001 and runs
through 2006. It is $100 for products manufactured 15% above the 2001
minimum efficiency standard. Credits apply to automatic defrost
refrigerator-freezers only, at 16.5 cubic feet internal volume and
above.
Voluntary Industry Water Program. Water factor reporting shall be
part of a voluntary industry sponsored program. AHAM members agree to
publicly disclose through AHAM, water factors for each model that meets
Energy Star/Tax Credit MEF levels, starting sometime in calendar year
2001. In calendar year 2002 and each year thereafter, industry-wide
shipment weighted average water factors for units shipped in the
previous year shall be reported by AHAM. Water factor calculations will
use Appendix J water factor through 2003 and will use Appendix J1
thereafter. Starting in 2007, AHAM members agree to report water factor
for all models. AHAM will sponsor water conference.'' (Joint Comment,
No. 204).
This rulemaking only addresses the clothes washer energy standards
of this agreement. The above proposed standard, based on this agreement
would go into effect in stages, with the first level going into effect
on January 1, 2004, and the second level going into effect on January
1, 2007. The initial standard is a 22 percent (%) reduction in energy
consumption over the current standard or a MEF of 1.04, and can be
attained with current vertical-axis (V-axis) clothes washer designs.
The later, more stringent standard, is a 35 percent reduction in energy
consumption over the current standard or a MEF of 1.26. While both
vertical- and horizontal-axis (H-axis) design clothes washers are
currently available in retail appliance stores at these levels, they
represent less than nine percent of the washers sold per year.
The Department's analyses indicates that the proposed standards,
trial standard level of a 1.04 MEF in 2004 and a 1.26 MEF in 2007 saves
an estimated 5.52 quads of energy over 27 years (2004-2030), a
significant amount. This amount is more than the primary energy used
for heating water in all U.S. buildings (residential, commercial and
industrial) in 1997 (3.82 quads). The economic impacts on consumers
(i.e., the average life-cycle cost (LCC) savings) are positive.
The national NPV of trial standard level of a 1.04 MEF in 2004 and
a 1.26 MEF in 2007 is $15.3 billion from 2004-2030 in 1997 dollars.
This is the estimated total value of future savings discounted to 1997
minus the estimated increased equipment costs also discounted to 1997.
The clothes washer industry net present value (INPV) today is estimated
to be $1,452 million. If we adopt trial standard level proposed, we
expect manufacturers may lose between 28.6-36.0% of the INPV, which is
approximately $411.0-$518.3 million. With the present value of future
energy savings for the U.S. of $15.3 billion, this would exceed
industry losses due to energy efficiency standards by about 30 times.
Additionally, based on our interviews with the five major
manufacturers, we do not expect any plant closings or loss of
employment because the manufacturers stated that they would stay in
business.
The proposed standard has significant environmental benefits,
reducing greenhouse gas emissions and air pollution. This proposed
standard level would result in cumulative greenhouse gas emission
reductions of 95.1 million

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metric tons (Mt) of carbon dioxide (CO2 equivalent.
Additionally, air pollution would be reduced by the elimination of
253.5 thousand metric tons of nitrous oxides (NOX) and 28.1
thousand metric tons of sulfur dioxide (SO2) from 2004-2030.
The NOX reduction are derived from the power sector and
household emissions, whereas the SO2 reductions are derived
only from household emission.
The proposed standard also saves a significant quantity of water,
which amounts to 11.59 trillion gallons through the period 2004-2030.
Therefore, DOE has determined that the benefits (energy and water
savings, consumer life cycle cost savings, national net present value
increase, job creation and emission reductions) to the nation outweigh
the burdens (loss of manufacturer net present value and consumer life
cycle cost increases for some users of clothes washers). We conclude
that the proposed standard of a 1.04 MEF in 2004 and a 1.26 MEF in 2007
is economically justified. Furthermore, DOE has determined this
standard level is technologically feasible. Clothes washers reaching
this standard level already are commercially available in both V- and
H-axis models.

II. Introduction

A. Consumer Overview

The Energy Policy and Conservation Act, as amended, specifies that
the Department must consider, for amended standards, those standards
that ``achieve the maximum improvement in energy efficiency which the
Secretary determines is technologically feasible and economically
justified'' and which will ``result in significant conservation of
energy.'' Accordingly, today's proposed rule would be amending the
energy conservation standard for residential clothes washers.
We are currently establishing a new energy efficiency standard for
clothes washers that will amend the standard set in 1994. When today's
proposed standards go into effect, they will essentially require more
efficient Standard class clothes washers. The efficiency levels can be
met by either top or front loading machines. The major stakeholders,
including manufacturers and energy efficiency advocates, have jointly
submitted a proposed clothes washer efficiency standard to the
Department that they both feel is technically feasible and economically
justified. The proposed standard would go into effect in two stages.
The first stage would begin January 1, 2004, and require that all new
residential clothes washers be 22 percent more efficient than today's
baseline clothes washer. The second stage would begin January 1, 2007,
and require that all new residential clothes washers be 35 percent more
efficient than today's baseline clothes washer.
The Department has reviewed this proposal and its analyses, and
agrees that the standard they proposed is technically feasible and
economically justified. The Department therefore proposes to amend the
energy conservation standard for Standard class clothes washers for
residential applications as recommended in the joint stakeholders
proposal and announce a public hearing.
As a result of today's proposed rule, clothes water efficiency
standard will provide significant energy savings and water savings to
the nation. The Department's analyses indicates that the proposed
standards would save an estimated 5.52 quads of energy over 27 years
(2004 to 2030). That is equivalent to saving enough electricity to
light 16 million U.S. homes for 25 years, while cutting greenhouse gas
emissions by an amount equal to that produced by three million cars
every year. This proposed standard level would result in cumulative
greenhouse gas emission reductions of 95.1 million metric tons (Mt) of
carbon dioxide (CO2) equivalent. Additionally, air pollution
would be reduced by the elimination of 253.5 thousand metric tons of
nitrous oxides (NOX) and 28.1 thousand metric tons of sulfur
dioxide (SO2) from 2004 to 2030. The NOX
reductions are derived from the power sector and household emissions.
The SO2 reductions are derived only from household emissions
and is a result of less home heating oil and LPG being used in oil-
fired and LPG-fired water heaters for water heating.\1\ DOE is seeking
comment on what will be the likely impact of EPA rules, such as its
proposed rule to reduce sulfur levels in highway diesel fuel, on home
heating oil sulfur levels and household SO2 emissions. In
2020, the standards will save the amount of electricity generated by 15
large, 400 megawatt, power plants. \2\ The standards will save enough
water to supply the needs of 6.6 million households for 25 years. The
water savings will reach up to 11 trillion gallons, meaning less water
needs to be pumped from America's aquifers and rivers, and less strain
on many of the nation's overtaxed water and sewer systems. In total, we
estimated the net present value (NPV) to the nation of this standard to
be $15.3 billion from 2004 to 2030.
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\1\ The Department recognizes that the Environmental Protection
Agency is considering regulations which could affect the amount of
sulfur in home heating oil.
\2\ DOE estimates that standards will result in 5 coal-fired and
11 gas-fired power plants avoided.
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The proposed clothes washer energy efficiency standard will not
impact clothes washer features valued by consumers. For instance,
consumers will still be able to purchase either a top loading clothes
washer or a front loading machine, whichever they prefer. The energy
and water savings will result primarily from a variety of design
changes, such as higher spin speeds, more efficient use of hot water,
more sensitive clothes load technologies, more efficient motors, and
the increased use of spray rinse cycles. The Department does not expect
the cleaning ability or reliability of washing machines to be
compromised by the design changes anticipated under the proposed
clothes washer standard.
The Department expects the purchase price of the high efficiency
clothes washers (i.e., 35 percent efficiency increase) to be
approximately $200 higher than the average price of clothes washers
today. Although the purchase cost is expected to increase, the energy
and water efficiency gains will result in lower washer-related energy
costs and water costs, saving consumers $30 a year on their utility
bills and 18 gallons of water for every load of wash. As such, the life
cycle cost analysis estimates that the payback period for the high
efficiency machines will be approximately 7 years. In other words, the
energy and water cost savings will enable the average consumer to
recoup the additional $200 he/she had to spend on the purchase of the
high efficiency machine in 7 years through the energy and water cost
savings. When these savings are summed over the lifetime of the high
efficiency machine, consumers will save $260, on average, compared to
today's baseline clothes washing machines.

B. Authority

Part B of Title III of the Energy Policy and Conservation Act, Pub.
L. 94-163, as amended by the National Energy Conservation Policy Act,
Pub. L. 95-619, by the National Appliance Energy Conservation Act, Pub.
L. 100-12, by the National Appliance Energy Conservation Amendments of
1988, Pub. L. 100-357, and the Energy Policy Act of 1992, Pub. L. 102-
486 \3\ (the Act

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or EPCA) created the Energy Conservation Program for Consumer Products
other than Automobiles. The consumer products subject to this program
(often referred to hereafter as ``covered products'') include clothes
washers.
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\3\ Part B of Title III of the Energy Policy and Conservation
Act, as amended by the National Energy Conservation Policy Act, the
National Appliance Energy Conservation Act, the National Appliance
Energy Conservation Amendments of 1988, and the Energy Policy Act of
1992, is referred to in this notice as the ``Act.'' Part B of Title
III is codified at 42 U.S.C. 6291 et seq. Part B of Title III of the
Energy Policy and Conservation Act, as amended by the National
Energy Conservation Policy Act only, is referred to in this notice
as the National Energy Conservation Policy Act.
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Under the Act, the program consists essentially of three parts:
testing, labeling, and Federal energy conservation standards. The
Department, in consultation with the National Institute of Standards
and Technology, amends or establishes new test procedures for each of
the covered products. Section 323. The test procedures measure the
energy efficiency, energy use, or estimated annual operating cost of a
covered product during a representative average use cycle or period of
use. They must not be unduly burdensome to conduct. Section 323(b)(3).
A test procedure is not required if DOE determines by rule that one
cannot be developed. Section 323(d)(1). Test procedures appear at 10
CFR Part 430, Subpart B.
A test procedure promulgated under Section 323 of the Act must be
reasonably designed to produce test results which measure energy
efficiency, energy use, water use (in the case of shower heads,
faucets, water closets and urinals), or estimated annual operating cost
of a covered product during a representative average use cycle or
period of use, and must not be unduly burdensome to conduct. EPCA,
Section 323(b)(3). A test procedure is not required if DOE determines
by rule that one cannot be developed. EPCA, Section 323(d)(1). One
hundred and eighty days after a test procedure for a product is
adopted, no manufacturer may make representations with respect to
energy use, efficiency or water use of such product, or the cost of
energy consumed by such product, except as reflected in tests conducted
according to the DOE procedure. EPCA, Section 323(c)(2). This 180-day
period may be extended for up to an additional 180 days if the
Secretary determines that the requirements of Section 323(c)(2) would
impose undue burden. EPCA, Section 323(c)(3).
Section 323(e) of the Act requires DOE to determine to what extent,
if any, a proposed test procedure would alter the measured energy
efficiency, measured energy use or measured water use of any covered
product as determined under the existing test procedure. If DOE
determines that an amended test procedure would alter the measured
efficiency or measured use of a covered product, DOE is required to
amend the applicable energy conservation standard accordingly. EPCA,
Section 323(e)(2).
The Federal Trade Commission (FTC) prescribes rules governing the
labeling of covered products after DOE publishes test procedures.
Section 324(a). The FTC labels indicate the annual operating cost for
the particular model and the range of estimated annual operating costs
for other models of that product. Section 324(c)(1). Disclosure of
estimated operating cost is not required if the FTC determines that
such disclosure is not likely to assist consumers in making purchasing
decisions, or is not economically feasible. In such a case, the FTC
must require a different useful measure of energy consumption. Section
324(c). At the present time, there are Federal Trade Commission rules
requiring labels for the following products: room air conditioners,
furnaces, clothes washers, dishwashers, water heaters, refrigerators,
refrigerator-freezers and freezers, central air conditioners and
central air conditioning heat pumps, and fluorescent lamp ballasts.
The National Appliance Energy Conservation Act of 1987 amended the
Act to impose prescriptive standards (design feature requirements) for
clothes washers as part of the energy conservation program for consumer
products. EPCA, Sec. 325(g), 42 U.S.C. 6295(g). The design feature
requirement that clothes washers shall have an unheated rinse option
was effective for appliances manufactured on or after January 1, 1988.
The Act required the Department to conduct a rulemaking by January 1,
1990, to determine if the above mentioned standards should be amended.
The Act provided that any amendment to the standards would apply to
products manufactured three years after the rulemaking. The Final Rule
was issued on May 14, 1991, and is effective for products manufactured
on or after May 14, 1994, (hereinafter referred to as the May 1991
Final Rule) which required top loading compact clothes washers (less
than 1.6 cubic feet capacity) to have an energy factor (EF) of 0.90
cubic feet/kilowatt-hours/cycle (cu.ft/Kwh/cycle) and top loading
standard clothes washers (1.6 cu. ft. or greater capacity) to have an
EF of 1.18 cu. ft./Kwh/cycle). 56 FR 22279. The Act also requires the
Department to conduct a subsequent rulemaking no later than five years
after the date of publication of the previous final rule.
Any new or amended standard must be designed so as to achieve the
maximum improvement in energy efficiency that is technologically
feasible and economically justified. Section 325(o)(2)(A).
Section 325(o)(2)(B)(i) provides that before DOE determines whether
a standard is economically justified, it must first solicit comments on
a proposed standard. After reviewing comments on the proposal, DOE must
then determine that the benefits of the standard exceed its burdens,
based, to the greatest extent practicable, on a weighing of the
following seven factors:
(1) The economic impact of the standard on the manufacturers and on
the consumers;
(2) The savings in operating costs throughout the estimated average
life of the covered product in the type (or class) compared to any
increase in the price, initial charges, or maintenance expenses;
(3) The total projected amount of energy, or as applicable, water,
savings likely to result directly from the standard;
(4) Any lessening of the utility or the performance of the covered
products likely to result from the standard;
(5) The impact of any lessening of competition, as determined in
writing by the Attorney General, that is likely to result from the
standard;
(6) The need for national energy and water conservation; and
(7) Other factors the Secretary considers relevant.
In addition, Section 325(o)(2)(B)(iii), 42 U.S.C.
6295(o)(2)(b)(iii), establishes a rebuttable presumption of economic
justification in instances where the Secretary determines that ``the
additional cost to the consumer of purchasing a product complying with
an energy conservation standard level will be less than three times the
value of the energy, and as applicable, water, savings during the first
year that the consumer will receive as a result of the standard, as
calculated under the applicable test procedure. * * *'' The rebuttable
presumption test is an alternative path to establishing economic
justification.
Section 327 of the Act addresses the effect of Federal rules on
State laws or regulations concerning testing, labeling, and standards.
Generally, all such State laws or regulations are superseded by the Act
unless specifically exempted in Section 327. The Department can grant a
waiver of preemption in accordance with the procedures and other
provisions of Section 327(d) of the Act. 42 U.S.C. 6297(d).

[[Page 59554]]

C. Background

1. Current Standards
The existing clothes washer efficiency standards have been in
effect since 1994. Energy efficiency for a clothes washer is measured
in terms of an energy factor (EF), which measures overall clothes
washer efficiency, in terms of cubic feet per kilowatt-hour per cycle,
and is determined by the DOE test procedure. 10 CFR Part 430, Subpart
B, Appendix J. The current clothes washer efficiency standards are as
follows:
Top loading, compact (less than 1.6 cubic feet capacity),
EF = 0.90.
Top loading, standard (1.6 cubic feet or greater
capacity), EF = 1.18.
Top loading, semi-automatic, must have an unheated rinse
option.
Front loading, must have an unheated rinse option.
Suds saving, must have an unheated rinse option.
2. History of Previous Rulemakings
On November 14, 1994 DOE published an Advance Notice of Proposed
Rulemaking (ANOPR). 59 FR 56423. On November 19, 1998, DOE published a
Supplemental ANOPR. (Hereafter referred to as the 1998 Supplemental
ANOPR.) 63 FR 64344. In the 1998 Supplemental ANOPR, we provided
interested persons an opportunity to comment on:
(1) The product classes that we propose to analyze;
(2) The analytical framework, models (e.g., the Government
Regulatory Impact Model (GRIM)), and tools (e.g., a Monte Carlo
sampling methodology, and life-cycle-cost (LCC) and national energy
savings (NES) spreadsheets) that we plan to use in performing analyses
of the impacts of standards; and
(3) The results of preliminary analyses for LCC, payback and
national energy savings contained in the Preliminary Technical Support
Document: Energy Efficiency Standards for Consumer Products: Clothes
Washers (TSD) dated October 1998 and summarized in the 1998
Supplemental ANOPR.
3. Process Improvement
The fiscal year (FY) 1996 appropriations legislation imposed a
moratorium on proposed or final rules for appliance efficiency
standards for FY 1996. Public Law 104-134. During the moratorium, the
Department examined the appliance standards program and how it was
working. Congress advised DOE to correct the standards-setting process
and to bring together stakeholders (such as manufacturers and
environmentalists) for assistance. We consulted with energy efficiency
groups, manufacturers, trade associations, state agencies, utilities
and other interested parties to provide input to the process used to
develop appliance efficiency standards. As a result, on July 15, 1996,
the Department published a Final Rule: Procedures for Consideration of
New or Revised Energy Conservation Standards for Consumer Products
(referred to as the Process Rule) (61 FR 36974), codified at 10 CFR
Part 430, Subpart C, Appendix A. DOE completed this review and decided
to use the Process Rule, to the extent possible, in the development of
the revised clothes washer standards.
We developed an analytical framework for the clothes washer
standards rulemaking for our stakeholders. The analytical framework
described the different analyses (e.g., LCC, payback and manufacturing
impact analyses (MIA)) to be conducted, the method for conducting them,
the use of new LCC and national energy savings (NES) spreadsheets, and
the relationship between the various analyses. We have conducted
several meetings, workshops and discussions regarding energy efficiency
standards for clothes washers. These workshops included discussions on
proposed design options and a preliminary engineering analysis on
November 15, 1996; development of an analytical framework for appliance
standards rulemaking on July 23, 1997; and development of two new
spreadsheet tools for LCC and NES on March 11, 1998. We conducted
public hearings on December 15, 1998, to receive additional comments on
the 1998 Supplemental ANOPR and on July 22, 1999, to discuss the
process, analytical tools and uncertainties with the test procedures.
In this rulemaking we incorporated the recommendations made by the
Advisory Committee on Appliance Energy Efficiency Standards on April
21, 1998. (Advisory Committee, No. 96). These recommendations relate to
using the full range of consumer marginal energy prices (CMEP) in the
LCC analysis (replacing the use of national average energy prices),
defining a range of energy price futures for each fuel used in the
economic analyses and defining a range of primary energy conversion
factors and associated emission reductions, based on the generation
displaced by energy efficiency standards for each rulemaking. We
discuss how these recommendations have been incorporated in the
discussions on methodology (Section IV). Marginal energy prices are
used in the LCC, payback and NES analyses. Because the NES results are
inputs to the analyses for utility, emissions and employment; these
analyses are also impacted by using marginal rates.
4. Test Procedures
Federal test procedures for clothes washers were first established
in 1977. Simultaneous with the rulemaking for clothes washer standards,
the Department was also in the process of revising the clothes washer
test procedure. The Department needed to address a number of innovative
technologies for which there were no test procedures. A number of
proposals were published, one on December 22, 1993, (58 FR 67710) and
another on March 23, 1995. 60 FR 15330. In its comments to the March,
1995 proposed rule, AHAM requested that DOE adopt an additional new
test procedure, based on current consumer habits, which would be used
in considering the revision of the clothes washer energy conservation
standards, and would go into effect upon issuance of standards.
On April 22, 1996, the Department issued a supplemental Notice of
Proposed Rulemaking proposing such a new test procedure, Appendix J1,
as well as certain additional revisions to the currently applicable
test procedure in Appendix J to Subpart B of 10 CFR Part 430. 61 FR
17589. The supplemental notice was published to seek comments on
whether DOE should adopt the AHAM recommended test procedure with
certain changes. The Final Rule, published on August 27, 1997, adopted
this recommendation. 62 FR 45484. Appendix J is the current applicable
test procedure. Appendix J1 is informational and will not become
mandatory until the energy conservation standards of this rule become
effective. Appendix J1 includes a modified energy factor (MEF) which
replaces the EF. Contrasting with the previous EF (energy factor)
descriptor, the MEF descriptor incorporates clothes dryer energy by
consideration of the remaining moisture content (RMC) of clothes
leaving the clothes washer. Other substantive differences between the
test procedures include using different water temperatures for testing
and using cloth loads in J1 and not in J. The issuance of the Final
Rule was a major step in accelerating the development of clothes washer
standards because it provided the basis upon which the energy and water
consumption, as well as the manufacturing costs would be submitted.

[[Page 59555]]

III. General Discussion

A. Test Procedure

As part of the July 15, 1996, Process Rule (61 FR 36974), we stated
that a final modified test procedure would be issued prior to the
notice of proposed rulemaking on standards. The process described in
this rule provides for greatly enhanced opportunities for public input,
improved analytical approaches, and encouragement of consensus-based
standards. Section 7, Test Procedures, of the Process Rule provides
that modifications in test procedures will be proposed before revised
standards are proposed. Today's proposed revisions to the clothes
washer test procedures follows the process in the Process Rule in that
the Final Rule for test procedures was published on August 27, 1997,
with the exception of today's proposed revisions to the test procedure
language as recommended by clothes washer manufacturers and energy
conservation advocates. (Joint Comment, No. 204)
During this standards rulemaking, it was discovered that the test
cloth to be used for determining the RMC was giving inconsistent
results. Over the approximately 20 year period that the original
clothes washer and clothes dryer test procedures have been used, no
variations or inconsistency of washer or dryer test results had been
attributed to variations in the test cloths. A significant
inconsistency in RMC test results under the new Appendix J1 procedure
was noted by Alliance Laundry Systems LLC and was brought to the
Department of Energy's attention in a letter dated June 7, 1999.
(Alliance Laundry Systems, No. 179). In the tests referred to in this
letter, which were run at Intertek Testing Services (ITS), the RMC
values that were obtained in one machine with two different lots of
energy test cloths differed by over 11 percentage points (67.9% versus
56.0%). When these two lots of energy test cloth were run through a
second machine, a similar difference in RMC occurred.
The effect of RMC on MEF can be substantial, particularly for
washers which are more efficient with respect to electrical consumption
and use of hot water. The following scenario illustrates: For a high
efficiency horizontal axis washer, an 18% increase in RMC (54.5%-64.5%)
will result in a 13% decrease in MEF (1.52-1.33). For a lower
efficiency washer, a 17% increase in RMC (57.7%-67.7%) will result in
only a 6% decrease in MEF (0.82-0.77).
The Department investigated possible causes for the inconsistent
test results, and results are summarized in the DOE report,
``Development of a Standardized Energy Test Cloth for Measuring
Remaining Moisture Content in a Residential Clothes Washer,'' May 2000.
(DOE, No. 200). As part of our investigation into the cause of these
discrepancies, we found that various lots of test cloth will yield
inconsistent RMC results. To understand the effects of operating
variables and cloth specifications, it was necessary to conduct
laboratory tests to determine RMC. To insure that test results would
not be influenced or biased by any manufacturer's product (clothes
washer), we used an extractor to remove moisture content. An extractor
is a centrifuge--basically a rotating basket that has a controllable
speed to produce a variety of centrifugal forces. The speed was varied
to impose different centripetal accelerations on the test load. These
accelerations are reported in terms of gravitational acceleration (g).
We also soak the cloth in a tub at controlled temperature rather than
use the agitated soak cycle provided by a typical washer. The RMC tests
closely resembles those specified in the energy test procedure.
An extractor based test has been established to examine RMC values
at different gravitational forces (g-forces). A correction factor is
derived by which the deviation between a new production batch of test
cloth and a standard reference test cloth is measured. This deviation
is measured as the root mean square between the set of measured RMC
values and the set of standard RMC values. If this absolute deviation
is below 2%, then no correction factors are needed in MEF tests using
that batch of cloth. If the absolute root-mean-square (RMS) difference
between the cloth RMC values and standard RMC values is above 2%, then
correction factors may be applied when using the cloth to test the MEF
of a clothes washer.
As part of this rulemaking, we have included revisions to the test
procedure based on our proposed language addressed in the May 2000
report dealing with the energy test cloth, RMC, extractor testing and
the correction factor and Joint Stakeholders Comment. (Joint Comment
No. 204). In addition, we incorporated AHAM's comments and Joint
Stakeholders Comment requesting minor editorial changes to help clarify
both Appendix J and J1. (AHAM , Nos. 197 and 199, and Joint Comment No.
204). These changes have been included in their entirety in this
rulemaking pertaining to the test procedure.

B. Technological Feasibility

1. General
There are or have been clothes washers in the market at all of the
efficiency levels analyzed in today's notice. Therefore, the Department
believes all of the efficiency levels discussed in today's notice are
technologically feasible.
2. Maximum Technologically Feasible Levels
Under the guidelines in the Process Rule, DOE will eliminate from
consideration, early in the process, any design option which is not
practicable to manufacture, install, or service, will eliminate product
utility features or for which there are safety concerns that can not be
resolved. In order to conduct the screening analysis, the Department
gathers information regarding all current technology options and
prototype designs. In consultation with interested parties, the
Department develops a list of design options for consideration in the
rulemaking. All technologically feasible design options are candidates
in this initial assessment. We did not reject any design options from
consideration in this rulemaking.
The Department considers design options technologically feasible if
they are already in use by the respective industry or research has
progressed to the development of a working prototype. The Process Rule
sets forth a definition of technological feasibility as follows:
``Technologies incorporated in commercially available products or in
working prototypes will be considered technologically feasible.'' 10
CFR 430, Subpart C, Appendix A(4)(a)(4)(I).
When we amend or consider new standards, we must consider those
that ``shall be designed to achieve the maximum improvement in energy
efficiency which the Secretary determines is technologically feasible
and economically justified.'' (Section 325 (l)(2)(A)). For this clothes
washer rulemaking, the Department determined that a 50% reduction in
the energy use of the baseline model (corresponding to an MEF of 1.634)
is the maximum technologically feasible level for the Standard class
(1.6 ft.\3\ or greater capacity). This determination was based on
information relative to existing technology options and prototype
designs. In consultation with interested parties, the Department
developed a list of design options for consideration. All
technologically feasible design options were candidates in this initial
assessment. Furthermore, the clothes washer rulemaking analysis was
originally performed using the design

[[Page 59556]]

option approach. Using this approach, information was gathered on all
possible energy saving design options. The Department gathered design
option information from previous clothes washer analyses, trade
publications, industry research organizations, product brochures from
domestic and foreign manufacturers, and appliance conferences,
including the International Appliance Technical Conference (IATC). The
``Draft Report on Design Options for Clothes Washers'' and ``Draft
Report on the Preliminary Engineering Analysis for Clothes Washers''
provide details on the potential technologies. (Clothes Washer Public
Workshop, No. 55B and 55C).
3. Product Classes
DOE divides clothes washers into classes based on the size and
features, e.g., suds saving. For the existing standards, DOE defines
residential clothes washers in the following classes:
Top loading, compact (less than 1.6 cubic feet capacity);
Top loading, standard (1.6 cubic feet or greater
capacity);
Top loading, semi-automatic;
Front loading; and
Suds saving.
The Department is proposing to maintain the current definitions for
all these product classes. For this rulemaking, the Department is
proposing to maintain the current requirements for the Semi-Automatic
Top-Loading and Suds Saving classes. In the May 1991 Final Rule, these
classes were not subject to minimum energy conservation standards
because they represented a small portion of the market, and due to a
lack of adequate information to analyze them. The standard for these
classes will continue to be ``not applicable,'' except for the 1988
requirement of an unheated rinse water option.

C. Energy Savings

1. Determination of Savings
The Department forecasted energy savings through the use of a
national energy savings (NES) spreadsheet, which forecasted energy
savings over the period of analysis for candidate standards relative to
the base case. The Department quantified the energy savings that would
be attributable to a standard as the difference in energy consumption
between the candidate standards case and the base case. The base case
represents the forecast of energy consumption in the absence of amended
mandatory efficiency standards.
The NES spreadsheet model is described in Section IV.e of this
notice, infra, and in Chapters 9 and 10 of the TSD. The NES spreadsheet
model first calculates the energy savings in site energy. The energy
savings to the nation is expressed in quads, that is, quadrillions of
British thermal units (Btus).
2. Significance of Savings
Under Section 325(o)(3)(B) of the Act, the Department is prohibited
from adopting a standard for a product if that standard would not
result in ``significant'' energy savings. While the term
``significant'' has never been defined in the Act, the U.S. Court of
Appeals, in 768 F.2d 1355, 1373 (D.C. Cir. 1985), concluded that
Congressional intent in using the word ``significant'' was to mean
``non-trivial.''

D. Rebuttable Presumption

The National Appliance Energy Conservation Act established new
criteria for determining whether a standard level is economically
justified. Section 325(o)(2)(B)(iii) states:

``If the Secretary finds that the additional cost to the
consumer of purchasing a product complying with an energy
conservation standard level will be less than three times the value
of the energy * * * savings during the first year that the consumer
will receive as a result of the standard, as calculated under the
applicable test procedure, there shall be a rebuttable presumption
that such standard level is economically justified. A determination
by the Secretary that such criterion is not met shall not be taken
into consideration in the Secretary's determination of whether a
standard is economically justified.''

If the increase in initial price of an appliance due to a
conservation standard would repay itself to the consumer in energy
savings in less than three years, then we presume that such standard is
economically justified.\4\ This presumption of economic justification
can be rebutted upon a proper showing.
---------------------------------------------------------------------------

\4\ For this calculation, the Department calculated cost-of-
operation based on the DOE test procedures with assumed usage shown
in Chapter 7 of the TSD. Consumers that use the clothes washer less
will experience a longer payback while those that use them more will
have a shorter payback.
---------------------------------------------------------------------------

E. Economic Justification

As noted earlier, Section 325(o)(2)(B)(i) of the Act provides seven
factors to be evaluated in determining whether a conservation standard
is economically justified.
1. Economic Impact on Manufacturers and Consumers
The July 1996 Process Improvement Rule established procedures,
interpretations and policies to guide the Department in the
consideration of new or revised appliance efficiency standards
(Procedures for Consideration of New or Revised Energy Conservation
Standards for Consumer products). 61 FR 36974 (July 15, 1996). Key
objectives of the rule have direct bearing on the implementation of
manufacturer impact analyses. First, the Department will utilize an
annual cash flow approach in determining the quantitative impacts on
manufacturers. This includes a short-term assessment based on the cost
and capital requirements during the period between the announcement of
a regulation and the time when the regulation comes into effect, and a
long-term assessment. Impacts analyzed include industry net present
value, cash flows by year, changes in revenue and income, and other
measures of impact, as appropriate. Second, the Department will analyze
and report the impacts on different types of manufacturers, with
particular attention to impacts on small manufacturers. Third, the
Department will consider the impact of standards on domestic
manufacturer employment, manufacturing capacity, plant closures and
loss of capital investment. Finally, the Department will take into
account cumulative impacts of different DOE regulations on
manufacturers.
For consumers, measures of economic impact are the changes in
purchase price and annual energy expense. The purchase price and annual
energy expense, i.e., life-cycle cost, of each standard level are
presented in Chapter 7 of the TSD. Under Section 325 of the Act, the
life-cycle cost analysis is a separate factor to be considered in
determining economic justification.
2. Life-Cycle Cost (LCC)
One measure of the effect of proposed standards on consumers is the
change in operating expense as compared to the change in purchase
price, both resulting from standards. This is quantified by the
difference in the LCC between the baseline and the more efficient
technologies for the clothes washers analyzed. The LCC is the sum of
the purchase price and the operating expense, including installation
and maintenance expenditures, discounted over the lifetime of the
appliance.
For each clothes washer, we calculated the life-cycle costs for six
efficiency levels: 20, 25, 35, 40, and 50% reduction in the energy use
of the baseline model. In addition, a two-step standard as proposed by
the Joint Stakeholders Comment was analyzed. A distribution of discount
rates averaging 6.1% was used in the calculations. The consumer is
assumed to purchase a clothes washer in 2004 or 2007 (for step 2 of the
Joint Stakeholders Comment).

[[Page 59557]]

Price forecasts are taken from the 1999 Annual Energy Outlook of the
Energy Information Administration (DOE/EIA-0383). Chapter 7 of the TSD
contains the details of the life-cycle cost calculations including
those considered under factor seven below, infra.
3. Energy Savings
While significant conservation of energy is a separate statutory
requirement for imposing an energy conservation standard, the Act
requires DOE, in determining the economic justification of a standard,
to consider the total projected energy savings that are expected to
result directly from revised standards. The Department used the NES
spreadsheet results, discussed earlier, in its consideration of total
projected savings. The savings are provided in Section V of today's
notice.
4. Lessening of Utility or Performance of Products
This factor cannot be quantified. In establishing classes of
products the Department tries to eliminate any degradation of utility
or performance in the products under consideration in this rulemaking.
An issue of utility that was considered in this rule concerns the
consumer utility of V-axis and H-axis machines. We conducted consumer
focus groups and a conjoint analysis study to address this issue.
5. Impact of Lessening of Competition
It is important to note that this factor has two parts; on the one
hand, it assumes that there could be some lessening of competition as a
result of standards; and on the other hand, it directs the Attorney
General to gauge the impact, if any, of that effect.
In order to assist the Attorney General in making such a
determination, the Department will provide the Attorney General with
copies of this notice and the Technical Support Document for review.
6. Need of the Nation To Conserve Energy
Most of the non-monetary benefits of the proposed standard are
likely to be reflected in improvements to the environment, rather than
in the security or reliability of the Nation's energy system. We report
the environmental effects in Section V of today's notice.
7. Other Factors
This provision allows the Secretary of Energy, in determining
whether a standard is economically justified, to consider any other
factors that the Secretary deems to be relevant. Section
325(o)(2)(B)(i)(VI), 42 U.S.C. 6295(o)(2)(B)(i)(VI).
Under this factor, we considered the water savings from each
standard level. The Department received numerous comments asking for
the inclusion of a water factor standard in addition to the MEF
standard. (City of Austin, No. 105 at 1; City of Bellingham,
Washington, Department of Public Works, No. 106 at 1; Lower Colorado
River Authority (LRCA), No. 109 at 1; Amy Vicker and Associates, Inc.,
No. 110 at 1; City of San Diego, No. 123 at 1; City of Santa Barbara,
Public Works Department, No. 125 at 1; City of Seattle, No. 126 at 2;
Santa Clara Valley Water District, No. 127 at 1; American Water Works
Association, No. 149 at 1; City of Redmond, Office of the Mayor, No.
153 at 1; Massachusetts Water Resources Authority, No. 152 at 4; State
of New Mexico, Office of the State Engineer, No. 158 at 1). As stated
previously, the Department is considering water savings as a factor in
determining the economic justification of the clothes washer standard
level. However, the Department does not have the authority to prescribe
a minimum water factor standard.
Another factor that the Department considered is the life-cycle
cost impacts on those subgroups of consumers who, if forced by
standards to purchase more efficient washers, would choose to repair
their existing machines.

IV. Methodology

The methodology to be used in this rulemaking was described in the
1998 Supplemental ANOPR and accompanying TSD. In this section we will
discuss comments and changes in the methodology. These changes were
performed because new data was obtained or in response to comments
received after publication of the 1998 Supplemental ANOPR.
In general, when information is based on periodic forecasts and
surveys such as the Annual Energy Outlook (AEO) forecasts of energy
prices and the Residential Energy Consumption Survey, both from the
Energy Information Administration (EIA), we try to use the latest
available information. The analysis in support of this proposed rule
was performed using RECS93 and AEO 1999 data. Just prior to publication
of this proposed rule both RECS97 and AEO2000 data became available.
Although we do not expect a significant difference in results by
updating to RECS97 and AEO2000, we intend to use this updated
information for the final rule. We seek comment on the use of the most
current RECS and AEO data.

A. Product Classes

The Supplemental ANOPR contained three proposals regarding clothes
washer product classes. The first proposal suggested eliminating the
Semi-Automatic Top-Loading, Front-Loading and Suds Saving classes
identified in the May 1991 Final Rule. In its second proposal, the
Department proposed to increase the compact class to include all
clothes washers with a volume less than 2.0 cubic feet. The third
proposal was to not establish separate classes for Horizontal and
Vertical-axis clothes washers.
The Department received no comments on its proposal to eliminate
the Semi-Automatic Top-Loading and Suds Saving classes. In the May 1991
Final Rule, these classes were not subject to minimum energy
conservation standards because they represented a small portion of the
market, and due to a lack of adequate information to analyze them.
However, the 1988 standard requiring an unheated rise option is still
applicable to these classes. Given the continued absence of information
available to analyze these classes and ensure that they could meet the
proposed standard levels, the Department is proposing to maintain these
product classes but not to subject them to minimum energy conservation
standards. However, the unheated rise water option is still applicable
to these classes.
DOE received several comments regarding changing the definition of
the compact clothes washers class maximum capacity, from 1.6 cubic feet
to 2.0 cubic feet. Whirlpool believes that this re-definition for the
compact class would better reflect the actual product offerings that
exist in the marketplace which range from 1.6 to 1.96 cubic feet.
(Whirlpool, No. 141 at 3). Amana Appliances is not opposed to the
change. (Amana, No. 146 at 1). ACEEE and American Water Works
Association (AWWA) also find this proposal acceptable. (ACEEE, No. 150
at 4 and AWWA, No. 149 at 4). Maytag is concerned that a clothes washer
at 2.0 cubic feet, if not subjected to the same standard as full size
washers will become a relatively larger volume seller. This would
result in a reduction in the potential national energy and water
savings of the standard and may place some manufacturers that have
complied with more stringent standards at a competitive disadvantage.
Accordingly, Maytag recommends that the Department develops safeguards
as retail market share or product sales volume limits which, if
exceeded, would require the product to meet the

[[Page 59558]]

same energy standards as full-size washers. (Maytag, No. 137 at 4-5).
PG&E supported changing the ``compact'' size to 2.0 cubic feet, up from
1.6 cubic feet under the condition that the ``compact'' washers are
required to at least meet the 25 percent more efficient standard level.
(PG&E, No. 189 at 1).
We received several comments in support of maintaining the current
limit of 1.6 cubic feet for the compact class. (Northwest Energy
Efficiency Alliance, No. 131 at 3; the Northwest Power Planning
Council, No. 135 at 2; Bosch, No. 142 at 1; and Miele, No. 156 at 1).
GEA opposed the change in definition because it believed there is
substantial room for these products to increase their efficiency. (GEA,
No. 143 at 11). The Oregon Office of Energy commented that the new 2.0
cu. ft. definition puts a significantly greater number of more
efficient machines in the compact class. For this reason it will insist
that the Department conduct enough of an analysis on this class of
products to justify raising the standard for this class. (Oregon, No.
162 at 2).
Staber Industries proposed removing tub size as a factor in
determining both capacity and energy efficiency and proposed instead
classifying washers by loading capacity. (Staber, Nos. 185 and 187).
The Department agrees that the increasing the compact class size to
2.0 cu. ft. will increase the number of washers in this class and
possibly incorporate products currently already more efficient than
compact models of 1.6 cu. ft. The Department has not been provided any
information in order to conduct such an analysis. For this notice the
Department is maintaining the existing 1.6 cu. ft. definition of the
compact product class and given the small size of this market (less
than one percent) is proposing not to change the minimum efficiency
levels. However given the new test procedure (Appendix J1) and the
change in descriptor it is necessary to translate the current standard
of EF of 0.9 into an MEF value. Since no mathematical translation is
possible, we have estimated this value using engineering calculations
and assumptions which are detailed in the TSD. This value is estimated
to be an MEF of 0.65.
For the Final Rule, the Department will consider changes to the
definition and efficiency standards for the top loading compact class.
A new definition could have different capacity requirements (such as
less than 2.0 cu. ft.) and additional requirements for the maximum
external dimensions (such as a width not to exceed 22.5 inches). The
Department will also consider any new information on the efficiency of
current models under Appendix J1. The Department seeks comment on these
issues.
The Department's ANOPR proposal to eliminate the Front-Loading
product class also received no negative comments. NRDC commented that
the existence of a top-loading horizontal-axis washer clearly dispels
the notion that the location of a washer's port of access (Top or
Front) is synonymous with axis of rotation (Vertical and Horizontal).
Amana notes that because of technological differences it would be more
appropriate to refer to the current ``Front-Loading'' and ``Top-
Loading'' product classes as Horizontal-Axis and Vertical-Axis (Amana,
No. 146 at 1). Elimination of the Front-Loader class is invariably
linked by many comments with the need to establish separate classes for
V- and H-axis washers.
The Department received numerous comments on the proposal not to
establish separate classes for V- and H-axis clothes washers. Comments
supportive of the Department's proposal were received from Maytag,
Whirlpool, Bosch, Staber, Miele, NRDC, the Alliance to Save Energy,
ACEEE, and approximately fifteen state or city agencies and utilities.
(Maytag, No. 137 at 2; Whirlpool, No. 141 at 7; Bosch , No. 142 at 1;
Staber, Nos. 185 and 187; Miele, No. 156 at 1; NRDC, No. 138 at 5; the
Alliance to Save Energy, No. 148 at 2; and ACEEE, No. 150 at 5).
GEA, Alliance Laundry and Amana opposed the Department's proposal.
GEA commented that the unique characteristic and energy performance of
H- and V-axis washers require two-product classes with separate minimum
energy efficiency standards for each. H-axis are less convenient and
potentially less reliable with different systems or features for
loading clothes and adding clothes during the wash cycle, longer cycle
times, smaller capacities, more expensive detergents, and availability
of deep pre-soak which are important to consumers. (GEA, No. 143 at 2).
Alliance Laundry commented that the V- and H-axis product
classifications would ignore relevant consumer utility differences and
would combine two distinct products which do not compete in the market
for energy comparison purposes. (Alliance Laundry, No. 145 at 3). Amana
commented that the machines differ in cost/price, utility, energy
efficiency, performance, and ergonomics. The integration of these two
categories into one will increase rather than decrease confusion in the
marketplace with consumers. (Amana, No. 146 at 2). These concerns, DOE
believes, are superceded by the Joint Comment in which the same
standard was agreed to for V- and H-axis products.
The Alliance to Save Energy commented that recent technology
development shows that various axis types can meet relatively stringent
performance criteria. (Alliance to Save Energy, No. 148 at 2). The
Department agrees with this view. Recent product introductions by
Whirlpool Corporation and Fisher & Paykel of high-efficiency V-axis
washers have positively demonstrated that V-axis designs are available
for the same range of efficiencies as H-axis washers. Since both H-axis
and V-axis washers can achieve the same range of efficiency, there is
no basis for separate efficiency standards based on axis of rotation or
orientation of loading. Additionally the existence of a Top Loading
horizontal-axis washers dispels the notion that orientation of loading
is necessarily associated with efficiency. Therefore, in today's
proposal the Department is maintaining the Front Loading product class
but is proposing a single efficiency standard for both the Front
Loading and the Top Loading, Standard class washers.

B. Engineering Analysis

The engineering analysis develops cost-efficiency relationships to
show the manufacturer costs of achieving increased efficiency. Three
methodologies can be used to generate the manufacturing costs needed
for the engineering analysis. These methods include: (1) The design-
option approach, reporting the incremental costs of adding design
options to a baseline model; (2) the efficiency-level approach,
reporting relative costs of achieving energy efficiency improvements;
and/or (3) the cost-assessment approach which requires a ``bottoms-up''
manufacturing cost assessment based on a detailed bill of materials.
As summarized in the Supplemental ANOPR, the engineering analysis
was conducted using the efficiency-level approach. The cost-assessment
approach was also used to supplement the efficiency-level approach
because of the existence of a proprietary technology for which no data
was available. The objective of the manufacturing cost assessment was
to quantify the differential manufacturing costs of producing high
efficiency clothes washers based on (1) a Whirlpool proprietary V-axis
design, and (2) commercially available V- and H-axis designs.

[[Page 59559]]

C. Life-Cycle Cost (LCC) Analysis

The effect of standards on individual consumers includes a change
in operating expense (usually decreased) and a change in purchase price
(usually increased). The life-cycle cost (LCC) spread sheet is used to
analyze the economic impacts of possible standards on individual
consumers. This section describes modifications to the LCC spreadsheet
model and revisions to data inputs as a result to new data or
recommendations from comments received after the publication of the
1998 Supplemental ANOPR. 63 FR 64353 (November 19, 1998).
Table 1 summarizes the assumptions used in the LCC analysis for the
1998 Supplemental ANOPR analysis and the changes made for this proposed
rule analysis than followed by a written discussion of these changes.

Table 1.--Assumptions in the LCC Analysis \1\
------------------------------------------------------------------------
Parameter Supplemental ANOPR Proposed rule
------------------------------------------------------------------------
Energy Price.................... average prices.... marginal prices.
Variation in Household Energy 1993 RECS data.... Marginal prices
Prices, Energy Use, and Water derived from 1993
Heater Shares. RECS data and
adjusted to 1997
prices.
Energy Price Projections........ AEO 1998 reference AEO 1999
case to the year reference, high &
2020, with low cases to the
extrapolations to year 2020, with
the year 2030. extrapolations to
the year 2030;
used FEMP
methodology for
extrapolations.
Water and Sewer Prices.......... Urban ($0.00 to Urban 0-$7.97.
$7.84 per 1000 Rural 0-$7.97.
gallons). Rural (no sewer) 0-
Ave. price = $3.18 $3.53.
per 1000 gals. Individual well
2.61 kWh/1000
gals.
Ave. price = $2.48
per 1000 gals.
Annual Real Change in Water and 0 percent......... Urban = 3.01%
Sewer Cost (Water Price (high 5.41%, low
Projections). 0.53%).
Rural = 3.01%
(high 5.41%, low
0.53%).
Rural with septic
= 0.64% (high
2.93%, low -
2.89%).
Individual well
(electricity
price
escalation).
Manufacturer Cost............... AHAM.............. No change.
Manufacturer Mark-ups........... Min. 1.000........ Range: varies with
Mean 1.175........ standard level.
Max. 1.350........ Distribution:
Distribution: uniform.
triangular.
Retail Mark-up.................. 1.4............... No change.
Detergent Savings............... not an input allowed as an
parameter. input (detergent
savings = zero).
Discount Rate................... Distribution (0-15 No change.
percent).
Lifetime........................ Distribution (12- No change.
17 years).
Cycles Per Year................. Distribution from No change.
RECS database
(207-645).
Start Year (Effective Date of 2003.............. 2004 (and 2007 if
Standard). a second tier).
------------------------------------------------------------------------
\1\ All prices and costs are shown in 1997 dollars.

Energy Prices. For the Supplemental ANOPR the LCC spreadsheet model
sampled the individual prices paid by households in the 1993 version of
the Residential Energy Consumption Survey (RECS). These prices were
updated (scaled up or down based on AEO 1998 national prices) and
converted to 1997 dollars. The Advisory Committee recommended DOE use
the full range of consumer marginal energy prices instead of national
average energy prices. Marginal energy prices are those prices
consumers pay (or save) for their last units of energy used (or saved).
The Department agreed that marginal energy prices would improve the
accuracy of the LCC analysis and estimated marginal rates for
electricity and natural gas from the 1993 RECS database.
In accordance with the Advisory Committee's recommendation, the
Department elected to substitute marginal energy prices for average
prices for calculating LCC and NPV. EIA gathered monthly energy bills
and energy consumption data for the RECS public use data. It did not
gather information on rate schedules, fixed charges, or marginal
prices. DOE estimated consumer marginal electricity and natural gas
prices directly from household data in the 1993 RECS public use data
survey as the change in household monthly energy bills divided by the
change in monthly energy consumption for each fuel, referred to as the
change in monthly bill method. This provides a precise marginal energy
rate based on actual household bills.
Households for which marginal energy prices could not be calculated
were eliminated, resulting in a reduction of approximately 10% of the
households used from the RECS. Although electricity rates were
calculated separately for four summer months (June-September) and,
separately for winter (October-May) months, unlike other appliances,
the usage of clothes washers for summer and winter months is on
average, approximately constant.
In order to understand and characterize regional variations in
pricing and distribution of fuel oil and LPG, we collected information
relating to pricing and distribution of fuel oil and LPG. We learned
that bills paid by residential consumers for both fuel oil and LPG are
essentially volume-driven, with a single block rate. We interpreted the
average prices inherent in those bills, as reported in the RECS public
use data, as being equivalent to marginal prices for the purposes of
the LCC price analysis. A detailed description of the methodology used
to determine marginal energy rates is contained in the report entitled
``Marginal Energy Prices Final Report, July, 1999,'' which can be
obtained at the website address: http://www.eren.doe.gov/buildings/
codes_standards/applbrf/clwasher.html.
As an enhancement to the LCC analysis for the proposed rule, Liquid

[[Page 59560]]

Petroleum Gas (LPG or propane) was added as a water heater fuel type.
Variation in Household Energy Prices, Energy Use, and Water Heater
Shares. In addition to determining energy prices RECS data is used to
determine the market share, i.e., percentage of water heaters and
dryers, that are electric, gas, liquefied petroleum gas (LPG) or oil.
The current analysis was based on Residential Energy Consumption Survey
1993 (RECS93) and Annual Energy Outlook 1999 (AEO99). Although
demographic information, price and equipment types change from survey
to survey, we do not expect that the differences are significant enough
to change the outcome of this rulemaking.
Energy Price Projections. For the proposed rule, the Annual Energy
Outlook 1999 (AEO99) forecasts replaced AEO98 energy price forecasts
for electricity, gas and oil. Given the uncertainty of projections of
future energy prices, DOE used scenario analysis to examine the
robustness of proposed energy efficiency standards under different
energy price conditions. The LCC calculations use these scenarios. Each
scenario provides a self-consistent projection, integrating energy
supply and demand. The scenarios differ from each other in the energy
prices that result. The Advisory Committee suggested the use of three
scenarios. While many scenarios can be envisioned, specification of
three scenarios should be sufficient to bound the range of energy
prices.
The AEO 1999 reference case provides a well-defined middle
scenario. DOE also used AEO fuel price forecasts under assumptions of
high and low economic growth. The future trend in energy prices assumed
in each of the three scenarios is clearly labeled and accessible in the
LCC spreadsheet. The Gas Research Institute (GRI) reference case fuel
price forecast is another choice available in the LCC spreadsheet.
Stakeholders can easily substitute alternative assumptions in the LCC
spreadsheet to examine additional scenarios as needed.
Another modification for the proposed rule analysis concerns the
extrapolation method used to project the AEO energy prices from 2020 to
2030. (The AEO contains energy prices projections to the year 2020.)
For the ANOPR the price of electricity was extrapolated based on the
trend of the last five years of the scenario used. For gas and oil,
prices values were kept constant from the year at which the
extrapolation was necessary.
For the proposed rule we are now using the approach EIA uses to
forecast fuel prices for the Federal Energy Management Program (FEMP).
This was done to be consistent with the rest of the energy forecasting
also done by EIA.
Water and Sewer Prices. For the Supplemental ANOPR the main source
of data on water and sewer prices was from a 1994 survey of water
prices in major metropolitan areas by Ernst & Young. The Ernst and
Young data was adjusted for service population, base utility charges
and average household use by Al Dietemann of Seattle Water.
The Department received several comments on this issue. Denver
Water suggested replacing the 1994 Rates Study done by Ernst and Young
and using the 1998 Raftelis Study. (Denver Water, No. 107 at 20). The
American Water Works Association (AWWA) commented that an average water
price of $3.18 per thousand gallons as used was too high. (AWWA, No.
108 at 64360). Energy Market and Policy Analysis, Inc. observed that
the data was limited to certain metropolitan areas and probably would
overstate water and sewer costs in non-metropolitan areas. Therefore,
use of the data would probably overstate potential water and sewer cost
savings that might be achieved by using a washer that uses less water.
(Energy Market and Policy Analysis, Inc., No. 144 at 8).
In response to comments received and for the proposed rule
analysis, 1998 prices and projected escalation rates were added for
rural water and wastewater to the previous estimates for urban
customers. The revised analysis, based on the 1998 Raftelis Study,
divided water use into categories of urban, rural with water and
wastewater utilities, rural with water utility service and septic tank,
and individual well with septic tank. The range of prices used for each
category is: for urban areas 0-$7.97, rural areas 0-$7.97, rural areas
(no sewer) 0-$3.53, individual well 2.61 kWh/1000 gals. The resulting
average price is $2.48 per 1,000 gallons.
Water Price Projections. As of the time of publication of the
Supplemental ANOPR, the Department had found no national level water
price forecasts and thus the Supplemental ANOPR assumed that future
water prices would remain constant. In the Supplemental ANOPR the
Department agreed that future water prices should not be assumed to be
constant and described an approach to establish marginal water prices
and escalation rates. See Chapter 7 of the TSD for details on how these
marginal water prices and escalation rates where determined.
At a workshop held on December 15, 1998, DOE detailed its proposal
for water prices and escalation rates. Support for this proposal was
given by ACEEE, the Oregon Office of Energy, NRDC, the Northwest Energy
Efficiency Alliance, PG&E, and the City of Seattle, Seattle Public
Utilities. (ACEEE, No. 150 at 1; Oregon Office of Energy, No. 162 at 7;
NRDC, No. 138 at 14; Northwest Energy Efficiency Alliance, No. 131 at
2; PG&E, No. 130 at 2; and the City of Seattle, Seattle Public
Utilities, No. 126 at 2). In contrast, the Edison Electric Institute
(EEI) commented that the escalation rate of 3.1% real will probably
overstate the change in water and wastewater prices. (EEI, No. 122 at
6).
For the proposed rule, escalation rates were specified for urban
and rural water and wastewater customers. The average escalation rates
used are: for urban areas, 3.01% (high 5.41%, low 0.53%), rural areas,
3.01% (high 5.41%, low 0.53%), rural areas with septic 0.64% (high
2.93%, low -2.89%). Finally for areas with individual wells, the
electricity price escalation rates were used.
Manufacturing Cost. The cost data used was provided by
manufacturers. It was then compiled and reported to the Department by
AHAM as a range of costs at each efficiency level. NRDC observed that
the Department's engineering analysis weights incremental costs
submitted by AHAM manufacturers by their 1997 market shares. In its
opinion the real impact on consumers will be weighted not by 1997
market shares but by the market shares following the introduction of
the standards. The argument is based not on a lack of credibility of
the AHAM data but on the assumption that the market share of the very
expensive machines will go down. As a consequence, NRDC believes the
Department should weight the outlier points at the high cost end of the
cost distribution curve minimally, if at all, in doing its analysis.
(NRDC, No. 138 at 6 and 14).
The Department agrees that a wide variation in costs exists in the
AHAM data. This variation in incremental costs are driven in part by
the variability in cost structures of the various manufacturers
(production volume, current technology) and in part by the variability
in designs. Additionally, given the lack of experience manufacturing
some of these technologies, uncertainty contributes to the range in
costs. The Department believes the mean values of the distribution are
the most appropriate for consideration in the LCC analysis and will
weight analysis results for values surrounding the mean more heavily.
However it will continue to incorporate the full range of costs as it
represents a probability-weighted distribution of

[[Page 59561]]

costs based on the full spectrum of possible costs.
Manufacturer Mark-ups. In the Preliminary TSD for the ANOPR, the
Department used a manufacturer mark-up over the full production costs
with a maximum value of 1.35, which maintains industry (manufacturer)
cost structure, and a minimum value of 1.00, which represents a pass-
through of full production costs. This was modeled as a triangular
distribution with a minimum value of 1.00, a most likely value of
1.175, and a maximum value of 1.35. For the proposed rule, a uniform
distribution was used. The range of the mark-up is dependent on the
standard level and obtained from the GRIM model.
Alliance Laundry believes that the low end of 1.00 for the
manufacturing mark-up should not be used at all. It commented that
history suggests manufacturing mark-up is within the 1.27 to 1.35
range. (Alliance Laundry, No. 164 at 10). The Oregon Office of Energy
commented that manufacturer mark-ups are not static over time. Nor are
they typically the same for products at the lower end of the product
line as they are for the upper end. It further recommended that DOE
find a way to model a variable mark-up pattern for each manufacturer--a
pattern that is appropriate for each and responsive to market
conditions as they evolve. (Oregon Office of Energy, No. 162 at 8). As
suggested, the Department worked with each manufacturer to forecast its
future mark-ups at the various standards levels factoring anticipated
market dynamics. These market dynamics include: the technology status
of existing product offerings as it relates to the cost-efficiency
relationship; the status of manufacturing technology, including an
assessment of conversion and restructuring costs; likely product
offerings at each efficiency level (e.g., V-axis, H-axis), consumer
demand for product features and its implications for trade-offs between
manufacturing cost and consumer utility; patent restrictions on design
options; brand equity; availability of technical and financial
resources; manufacturing versus sourcing strategies; and company cost
structure and ability to pass on fixed (and sometimes even variable)
costs. Individual mark-up forecasts were aggregated to characterize the
industry and the resulting range of mark-ups was used in both the
industry GRIM and LCC analysis.
Retail Mark-up. In the Preliminary TSD for the ANOPR, the
Department used a fixed retail mark-up of 1.40, and a fixed mark-up of
1.052 to cover the sales tax. There was no change made for the proposed
rule. ACEEE commented that the retail mark-up of 40% is too high. It
proposed that the Department use an average retail mark-up based on the
last five years of available data. (ACEEE, No. 150 at 4). In response
to this comment, the Department did examine more recent data from the
same data sources originally used (Dealerscope Merchandising's Annual
Statistics Surveys, Bureau of Census--Current Industrial Report (CIR),
Bureau of Labor Statistics--Consumer Expenditure Survey (CES),
INTELECT--Elrick & Lavidge Computerized Audit Program (ELCAP) price
database, AHAM Fact Book) and found no significant cause to alter its
earlier estimate.
Detergent Savings. In the Supplemental ANOPR we did not include any
possible detergent savings into the LCC analysis. The Northwest Power
Planning Council, Oregon Office of Energy, ACEEE, Northwest Energy
Efficiency Alliance, and PG&E commented that the Department should
consider detergent cost savings as a benefit of H-axis clothes washers.
(Northwest Power Planning Council, No. 135 at 1; Oregon Office of
Energy, No. 162 at 6; ACEEE, No. 150 at 4; Northwest Energy Efficiency
Alliance, No. 131 at 2&3; and PG&E, No. 189 at 2). These comments did
not have specific recommendations as to appropriate values to use for
detergent cost savings in the LCC.
Alliance Laundry System LLC commented that detergent cost savings
associated with horizontal axis machines are unlikely. In fact,
detergent costs may even be higher due to the fact that higher priced
specially formulated detergent may have to be used for optimal cleaning
performance. (Alliance Laundry, No. 145 at 11). Maytag believes that
the detergent and dosage recommended by the detergent manufacturer will
produce the best washing performance and that detergent use will not be
a significant factor in consumer operating cost savings. (Maytag, No.
137 at 7).
The Department believes there is no conclusive evidence that
detergent costs will change due to new standards. We believe results of
the Bern Study (Bern Clothes Washer Study Final Report; ORNL/M-6382;
prepared by Oak Ridge National Laboratory for the U.S. DOE, dated March
1998) do not show any significant difference in cost savings related to
detergent use. Patterns of detergent use will change as detergent
specially formulated for H-axis machines become more available. In
addition, comments by major detergent manufacturers state that savings
based on less detergent use will not occur (Procter & Gamble, No. 9 at
1) and using a lessor amount of detergent produced inferior cleaning
performance (Lever Brothers, No. 51 at 2). In consideration of the
previous evidence detergent savings were not included in the analysis.
However, the LCC spread sheet does include the capability to input
detergent costs, at the users' option.
Cycles per year. The EEI commented that the number of washer cycles
appeared to be on the high side, especially for one and two person
households. (EEI, No. 122 at 3). The Department used the most current
information available to estimate the cycles per year. The Department
adjusted the number of cycles per year based on the number of occupants
for each RECS household. The cycles per week are based on a Procter and
Gamble survey and adjusted using the RECS data, so the overall average
cycles per year agree with the test procedure assumption of an overall
average of 392 cycles per year.
Discount Rate. The LCC spreadsheet uses a distribution for discount
rates ranging from 0 to 15%. These represent the variability in
financing methods consumers use in purchasing appliances. The average
discount rate from this distribution is 6.1% real.
Four comments suggested that the discount rate used in the consumer
analysis was likely too high. Comments stated that DOE should take into
account such factors as: declining bank card rates, the substantial
fraction of card users who pay off monthly credit card balances, the
substantial number of buyers who use lower-cost credit such as home
equity credit lines, and bank card default rates. Future interest rates
on credit cards are not expected to rise, so future inflation will
yield lower real interest rates. (Alliance to Save Energy, No. 148 at
3; ACEEE, No. 150 at 4; Oregon Office of Energy, No. 162 at 7; and
NRDC, No. 138 at 6). Three comments suggested that the discount rate
may be too low. (Energy Market and Policy Analysis, Inc., No. 144 at 8;
Consumer Alert, No. 155 at 4; and EEI, No. 122 at 6). Opportunity costs
are higher and EIA uses higher rates for forecasting residential
purchase decisions. DOE policy is to base discount rates on average
financing costs (or opportunity cost of reduced savings).
In the Process Rule, DOE committed to using real (adjusted for
federal taxes) discount rates for residential consumers by considering
a range of three different real discount rates: credit card financing
rate, a rate based on consumers having substantial savings, and a mid-
range

[[Page 59562]]

rate. The mid-range discount rate will represent DOE's approximation of
the average financing cost (or opportunity cost of reduced savings)
experienced by typical consumers.
Based on the guidelines from the Process Rule, we derived a
distribution of discount rates to reflect the variability in financing
methods consumers can use in purchasing clothes washers. The real
interest rate associated with financing an appliance purchase is a good
indicator of the additional costs incurred by consumers who pay a
higher first cost, but enjoy future savings, although it is not the
only indicator of such costs. While the method used to derive this
distribution relies on a number of uncertain assumptions regarding the
financing methods used by consumers, DOE believes the resulting
distribution of discount rates encompasses the full range of discount
rates that are appropriate to consider in evaluating the impacts of
standards on consumers (i.e., values represented by the mid-range
financing cost, consumers with no savings, and consumers with
substantial savings), as well as all the discount rates that fall
between the high and low extreme values.
DOE assumes the method of purchase used by consumers is indicative
of the source of the funds and the type of financing used, although DOE
is not aware of detailed research into this relationship. Whirlpool
Corporation indicated that approximately 40% of white goods are
purchased in cash, 35% with credit cards, and 25% with retailer loans.
(1994 Eight Product Notice of Proposed Rulemaking, 59 FR 10464, March
4, 1994.) Whirlpool also indicated that 25% of appliance purchases are
for new homes. However, we know consumers purchase 20% of clothes
washers with new homes, i.e., in mortgages, and 80% as replacements for
existing clothes washers in separate retail purchases. Consumers pay
for retail purchases by cash, credit cards, or loans. In order to
derive a full distribution of discount rates, DOE estimated a range of
interest rates, based on historical data and judgments of future
trends, for different types of consumer savings or financing.
For new housing, the estimated nominal mortgage rate ranges from 5-
8%, the derived after-tax rate is based on a tax of 28%, and a 2%
inflation rate is subtracted from the total. The result is a range of
real mortgage rates from 1.60%-3.76%. Example: 5%*(100%-28%)-2%=1.6%.
For cash, the minimum interest rate is 0%. This rate applies to
consumers making cash purchases without withdrawing from savings
accounts or interest bearing checking accounts. For the maximum rate,
the opportunity cost is the interest that could have been earned in a
savings account or mutual fund. Historic savings rate ranged from 4.5-
5.5% from 1970-1986 (real rates of -8.27 to +3.58%). We believe the
current maximum is the opportunity cost represented by the interest
earned in a typical mutual fund (assumed to be 6% real). DOE selected a
real rate of 3% as the mean.
DOE assumed the interest rates for retail loans and credit cards
have the same range. The minimum credit card rate is 6% real.
Introductory rates on some credit cards today are 5.9% nominal, but
after the introductory period (often six months), the rate can increase
sharply. Maximum rates are more than 20% nominal. However, if the
consumer pays with a credit card and the balance is paid in less than
the life of the clothes washer, then the effective interest rate is
lower than the nominal credit card rate. The current assumption is a
range of 6-15% real.
Combining the assumed shares of each financing method, the above
real interest rates result in a weighted-average (mean) value of 6% and
a distribution that varies from 0-15%. Sensitivity studies show that
while the LCC results are sensitive to the value chosen for the mean
discount rate, the LCC results are not sensitive to the distribution of
discount rates.
DOE believes the methods described above are valid for establishing
a distribution of discount rates relevant to most purchasers of the
products covered by this rulemaking. However, the Department
acknowledges that different assumptions could be made about likely
interest, inflation and marginal tax rates, or about consumer financing
methods, and that different approaches to identifying consumer discount
rates might also be valid. For example, it is possible to base consumer
discount rates on the average real rates of return on consumer
investment or other measures of the opportunity costs incurred by
consumers who purchase the covered products. DOE does not believe,
however, such alternative assumptions or alternative approaches would
significantly alter the range of discount rates used by the Department
or the conclusions drawn from the LCC analyses conducted using these
discount rates.
The Department is seeking any information that would support
significant alterations in the range or distribution of the discount
rates derived from its analysis. Alternatively, DOE is soliciting
comment on the possible use of a standardized distribution of discount
rates ranging from approximately 4-12%, with a mean of 6%. The use of
such a standardized distribution would explicitly recognize the many
uncertainties associated with DOE's current analysis and, based on
sensitivity analyses already performed by DOE, such a standardized
distribution would not significantly alter the conclusions of DOE's
life cycle cost analyses.
Lifetime. The ANOPR analysis assumes that the period of time a
clothes washer will provide service ranges from 12 to 16 years with an
average of 14.2 years. One comment asked the Department to explain the
assumptions used to determine the lifetime of a clothes washer. Since
few consumers who purchase a clothes washer own it for the full
lifetime of the appliance, using this value in the LCC may overstate
the benefits to the original purchaser. (Energy Market and Policy
Analysis, Inc., No. 119 at 4). For the national energy savings,
calculating the benefits requires consideration of the full lifetime of
the product. In response, DOE believes that the requirements of the
statute are to analyze the savings in operating costs throughout the
estimated average life of the covered product even if there is more
than one owner during this lifetime for the LCC analysis.
Start Year. This is the year the new standard is expected to become
effective. The Joint Stakeholder Comment proposes a two-step standard
in which the first standard level is effective in 2004 and the second
high standard level becomes effective in 2007. (Joint Comment No. 204).
Maintenance and Repair Costs. The ANOPR analysis assumed no change
in maintenance and repair costs as a result of new clothes washer
standards. The Department received a comment expressing the need to
account for maintenance, repair and warranty costs in the LCC analysis.
(Energy Market and Policy Analysis, Inc., No. 119 at 3). Staber
Industries also requested that the Department consider maintenance in
the LCC analysis since H-axis have no transmissions and it is more
reliable than V-axis. (Staber, Nos. 185 and 187). In response, the
Department's analysis does not consider changes in the maintenance and
repair cost as we do not have any data to indicate the costs to be
different for more efficient products for the proposed rule.
Request for Comment. DOE requests comments on the LCC analysis,
particularly the range of values used as input to the analysis. For
example,

[[Page 59563]]

RECS does not measure usage so we used the Proctor & Gamble survey data
for national average usage values and then adjusted those values based
on RECS-reported household size. DOE would like comment both on the
Proctor & Gamble and RECS data as well as the method DOE used to
develop the range of usage.

D. Payback Period Analysis

The payback period measures the amount of time needed to recover
the additional consumer investment in increased efficiency through
lower operating costs. The payback period is the ratio of the increase
in purchase price to the decrease in annual operating expenditures from
replacing the baseline clothes washer with a more efficient washer. We
express payback periods in years.
Rebuttable Payback. In accordance with EPCA, DOE calculated payback
based on the values specified by the DOE test procedure, Appendix J1.
This includes the Appendix J1 test procedure assumption of an electric
water heater and an electric dryer. Today's amendments to Appendix J1
have no effect on these results. This payback, however, does take into
account that a distribution of clothes washer efficiencies exists in
the current and future stock. This distribution is approximated by
assuming that the efficiency of the stock of washers is a combination
of baseline and H-axis efficiency washers. Table 2 shows the changes in
assumptions since the ANOPR for the base case.

Table 2.--Changes in Rebuttable Payback Assumptions
------------------------------------------------------------------------
Parameter Supplemental ANOPR Proposed rule
------------------------------------------------------------------------
H-axis sales.................... 3.0% in 1998...... 6.25% in 1998.
Escalation of H-axis sales...... 0.5% annual 0.5% of sales not
(linear). already H-axis.
------------------------------------------------------------------------

Changes in assumptions outlined in Table 1 that also apply to
rebuttable payback include:
Water price;
Energy price;
Energy and water price escalation only to the year 2004;
and
Manufacturer mark-up (average of range is used).
Basecase Assumptions. The Department received comments on the
assumptions made concerning the existing saturation of higher
efficiency washers and their expected increase in sales over time. We
received comments stating that we had either overestimated or
underestimated the penetration of H-axis washers, and we either
overestimated or underestimated the future escalation of H-axis sales.
EEI, Whirlpool, NRDC, City of Seattle, Seattle Public Utilities,
Alliance Laundry System, Northwest Power Planning Council, ACEEE, and
Amana believes that the projections for sale of high efficiency units
is too low. (EEI, No. 122 at 3; Whirlpool, No. 141 at 12; NRDC, No. 138
at 8; City of Seattle, Seattle Public Utilities, No. 126 at 2; Alliance
Laundry, No. 145 at 20; Northwest Power Planning Council, No. 135 at 1;
ACEEE, No. 150 at 7; and Amana, No. 146 at 2). Northwest Energy
Efficiency Alliance, Oregon Office of Energy and the Alliance to Save
Energy believe DOE overestimated sales in the absence of standards
because many incentive programs are ending. (Northwest Energy
Efficiency Alliance, No. 131 at 4; Oregon Office of Energy, No. 162 at
2; and Alliance to Save Energy, No.148 at 3-4).
Based on additional updated data, we revised the estimated H-axis
sales in 1998 from 3.0% to 6.25%. Previously the annual escalation rate
of H-axis washer sales market were assumed to capture an additional
0.5% per year of all clothes washer sales but now the annual sales of
H-axis clothes washers is determined by an amount equal to 0.5% of the
previous year's V-axis sales. Additional sensitivity analyses were
performed at escalation rates of 0.25% and 0.75% with minimal effect on
rebuttable payback (less than half a year payback difference from the
reference case). Base case assumptions are addressed in greater detail
in the National Impact Analysis, infra.

E. National Impact Analyses

The national energy savings is determined in two steps using the
integrated NES/Shipments spreadsheet model. First the shipments are
determined before and after a new standard; and then the shipments are
used to calculate energy savings and national economic benefits (net
present value of the higher standards). Chapters 9 and 10 of the TSD
contains a detail explanation of the NES/Shipments spreadsheet model.
The basic outputs from the National Impact Analysis are shipments
forecasts, energy and water consumption, and the Net Present Value
(NPV) for baseline and standards scenarios. The shipments forecasts are
an input into the National Energy Savings model as well as an input for
the Manufacturing Impact Analysis. The cumulative savings for energy
and water are determined for the nation to the year 2030. Finally, the
net present values (NPVs) are determined for each standard level based
average data for the nation. See results in Section V of this notice.
1. National Energy Savings (NES) Spreadsheet Model
Historical Background. The development of the NES and shipments
model consisted of three phases: (1) Supplemental ANOPR and preliminary
TSD analysis, (2) analysis presented at the July 1999 Workshop, and (3)
proposed rule and TSD analysis.
At the time of the supplemental ANOPR the shipment model was a work
in progress. We asked for comment on a general accounting methodology
that included price, operating cost and income elasticities. Since the
shipments model was not fully developed at the time of the supplemental
ANOPR, a placeholder set of shipments were used as input to the NES
spreadsheet in order to produce a preliminary analysis on the national
impacts.
At the July 1999 Workshop, we presented a fully developed shipment
model that included a decision tree. The decision tree allows the
consumer to choose between not buying a washer, buying a new washer,
repairing a washer or buying a used washer. It also allows consumers to
decide to replace a washer before it was necessary (see TSD Chapter 9
for details). This model also incorporated results from the consumer
conjoint analysis along with fitting parameters to historical data.
After presenting this shipment model at the July 1999 Workshop, we
received comments regarding specific parameters of the model, sources
of data used in the model and whether or not the results forecasted
seemed reasonable. We received comments agreeing that the general
approach of the Shipment and NES models were appropriate, however,
comments included suggestions to modify parts of the models. (Oregon
Office of Energy, No. 162 at 8 and

[[Page 59564]]

ACEEE, No.188 at 3). Details of the Shipment and NES models are
discussed in the sections on elasticity below. After the Workshop we
carefully looked at the comments and began to make improvements to the
model. These improvements included refinements that were not
necessarily suggested by stakeholders but were based on using more data
and detail. In addition, suggestions contributed by a renowned
economist were carefully considered. (Assessment of DOE Shipments Model
for Forecasting the Impacts of Clothes Washer Standards, Kenneth Train,
Comment No. 194 at 13). After all of the revisions, the shipment model
forecasted had significantly different results. The two changes made
that had the greatest effect on results were using a longer historical
time period to fit forecasting equations to and accounting for new
appliance sales due to all changes in residence, not just purchases of
new housing.
The following section describes the modifications to the NES and
Shipment spreadsheets as recommended in comments received after the
publication of the 1998 Supplemental ANOPR. 63 FR 64347, 64359
(November 19, 1998).
The modifications to the NES Model follows the three phase
development from the Supplemental ANOPR analysis to the July 1999
Workshop analysis to the proposed rulemaking analysis. The changes to
the Shipment Model as incorporated into the NES are summarized in Table
3. Discussions of these changes and of comments received which prompted
these changes are also discussed after the table.

Table 3.--Modifications to the NES Model, Including Shipments Model
----------------------------------------------------------------------------------------------------------------
Parameter Supplemental ANOPR July 1999 workshop Proposed rule
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Shipment Model................... accounting model accounting with decision accounting with decision
recommended--fixed tree. tree.
shipment values were
used as a placeholder.
Shipment Elasticities............ price.................... price................... price.
operating cost........... operating savings....... operating savings.
income................... top/front access feature top/front access
(These were used in feature.
analysis prior to the price/income.
Supplemental ANOPR.). income.
interest rate
elasticities.
Source of Elasticities........... In previous analyses the Operating savings-- Operating savings--
three input variables derived from the derived from the
below were used. WashWise Intercept WashWise Intercept
Price Elasticity (PE)-- Survey. Survey.
from Oak Ridge equation. Features elasticity-- Features elasticity--
Operating Cost (OC) based on conjoint based on conjoint
elasticity--derived from analysis. analysis.
implicit discount rate. Price elasticity--with Price elasticity--with
Income Elasticity--from other parameters set, other parameters set,
Oak Ridge model. determined by determined by
(For the ANOPR, a calibrating to 1981- calibrating to 1970-
shipment analysis had 1996 historical data. 1996 historical data.
not been performed yet
and shipments were kept
constant as a
placeholder pending
future analysis.).
Market Segments.................. new housing starts....... New housing starts...... New housing completions
existing homes early replacement market & moves.
(replacement washers). regular replacement early replacement
market. market.
extra repair market..... regular replacement
homes without a clothes market.
washer. extra repair market.
homes without a clothes
washer.
Houses that Drop Out of Washer not applicable........... energy accounted for-- energy accounted for--
Market. assumes laundry done at assumes laundry done at
Laundromat or elsewhere. Laundromat or
elsewhere.
Cost of Repairs and Used Washers. None..................... The model factored in Allows input on the cost
the price of a new of repairs and used
washer into the Replace washers relative to
or buy Used versus buy buying a new washer.
new decision without Changed the net washer
subtracting the cost of price in the Used vs.
repairing or buying a New decision model and
used washer. the Replace decision
model. The net washer
price is the price of a
new washer minus the
price of either the
used washer or the
repair, where the used
washer and the repair
are assumed to scale
with new washer price.
Residence-Change-Induced Purchase None, however in prior Assumes New Housing A small market of
analysis new housing Market is determined by purchases induced by
starts were accounted net housing increase. changes of residence is
for and this approach Ignores AHAM data on included. Assumed that
was recommended in the the number of washers new sales from changes
Supplemental ANOPR TSD. purchased due to a in residence are
change of residence. correlated with new
housing completions.
The volume of sales
induced by change of
residence is calibrated
with AHAM NFO data on
washers purchased due
to a move.
Implied Discount Rate Used in None--consumer discount 75%--from WashWise 75%--from WashWise
Historical Fit. rate had not been intercept survey. intercept survey.
established at this
point.

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Historical Fit................... None..................... Historical fit made to Model projected back to
1981 to 1996 period. 1951. Fit made to 1970
to 1996 data.
Operating Cost Scaling........... None..................... Assumed operating cost Disaggregates operating
scaled with electricity cost and estimates
price changes. operating cost back to
1951 using Electricity,
Gas, Water, Oil, and
LPG price indices.
Stock Accounting................. Uses historical sales and Uses historical sales Model is more
saturation data as input and saturation data as independent of
to clothes washers input to clothes historical data inputs.
household stock washers household stock It uses model estimates
accounting due to lack accounting due to lack of annual sales as the
of model estimates prior of model estimates input into stock
to 1980. prior to 1980. accounting after 1951.
Housing Start Data............... Recommended using AEO Uses AEO 1996 Housing Uses AEO 1999
1996 Housing Starts Starts Projection. projections adjusted to
Projection. reflect housing
completions.
Initial Stock Assumption......... Pre-1957 clothes washer Pre-1957 clothes washer 1951 automatic washer
stock initialized as stock initialized as stock initialized at
zero. zero. 1.63 million (1950
sales) for one-year age
washers decreasing
linearly to 1.03
million at 13-year
vintage and zero
thereafter.
Operation Cost Comparison........ None--no shipments model Measured operating cost Measures savings in
yet For NES incremental savings relative to the current year relative
cost from the baseline real operating cost in to a baseline machine
washer. 1997 of a 1997 base (MEF=0.817) with
case machine current fuel costs.
(MEF=0.817).
Fuel Site-to-Source Conversion... constant value........... conversion varies yearly conversion varies yearly
and is generated by and is generated by
EIA's NEMS-BRS \1\ EIA's NEMS-BRS \1\
program. program.
Fuel Prices...................... average from RECS 93..... average of marginal average of marginal
prices determined from prices determined from
RECS93. RECS93.
Escalation of Fuel Prices........ AEO98.................... AEO98................... AEO99.
Fuel Price Extrapolation from LBNL method.............. method used by EIA, method used by EIA,
2020 to 2030. consistent with new LCC consistent with new LCC
methodology. methodology.
Water Heater Fuels............... electricity, gas, oil.... electricity, gas, oil... added LPG.
Water & Wastewater Prices........ urban rates: $3.18 per average rates: $2.66 per updated average for
1000 gallons. 1000 gallons in 1998. urban & rural:
avg.=$2.48 per 1000
gals. (1998) (see LCC).
Water & Wastewater Price 0%....................... 2.96% an average from 2.96% an average from
Escalation. LCC--a weighting of LCC--a weighting of
3.01% and 0.64% (see 3.01% and 0.64% (see
LCC). LCC).
Base Case: H-axis Escalation 0.5%..................... 0.5%.................... 0.5%.
Rates.
Base Case: H-axis Sales.......... 3% in 1998............... 6.25% in 1998........... 6.25% in 1998.
Discount Rate.................... 7%....................... 7%...................... 7%.
Manufacturer Mark-ups............ Min. 1.000............... Min. 1.000.............. Range: varies with
Mean 1.175............... Mean 1.175.............. standard level.
Max. 1.350............... Max. 1.350.............. Distribution: uniform.
Distribution: triangular. Distribution: triangular

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\1\ EIA approves use of the names NEMS (National Energy Modeling System) only to describe an AEO version of the
model with out any modification to code or data. Since, in this work, there will be some minor code
modifications, DOE proposes use of the name NEMS-BRS for the model as used here.

Shipments Model. In the Supplemental ANOPR, we examined several
different approaches to forecasting washer sales. The investigated
models included an Auto-Regressive Moving Average Model (ARIMA), a
Multi-Variate Time Series Fit, a Saturation/Lifetime Model, and an
Accounting Model with elasticity. Of the different approaches, we
selected the Accounting Model because it was the most full-featured
model which included price and operating cost elasticities. At the July
1999 Workshop we described the revised accounting model for projecting
annual clothes washer shipments. After stakeholder comment the Shipment
model was further revised and integrated into a single spreadsheet
called the NES/Shipment spreadsheet. It includes the following
features:
Combined effects of price, operating cost, and features on
annual U.S. shipments
Market segments (e.g., new housing, replacement decisions,
non-owner adding a washer)
Decisions to repair rather than replace
Purchases of used washers
Age categories of clothes washers
The NES/Shipment spreadsheet now incorporates information from the
DOE Consumer Analysis. Since the Supplemental ANOPR, DOE has gathered
additional information about features of clothes washers that influence
consumers' purchase decisions, and analyzed consumer's stated
preferences. This new information also has been calibrated with updated
information about historical purchases. Details of the consumer
analysis and shipment

[[Page 59566]]

spreadsheet are explained in Chapters 8 (Consumer Analysis) and 9
(Shipments) of the TSD.
Shipment Elasticities. The Department received many comments
concerning which elasticities need to be considered in the shipments
model. Whirlpool notes that combining the impacts of the purchase
behavior of discretionary buyers with the postponement and repair
decisions or ``forced purchase'' consumers, and assuming energy
reduction regulation of 35% (a $250 retail price increase), it is
reasonable to expect