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Proposed Rule2023-25869

Energy Conservation Program: Energy Conservation Standards for Oil, Electric, and Weatherized Gas Consumer Furnaces

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Published

November 29, 2023

Issuing agencies

Energy Department

Abstract

The Energy Policy and Conservation Act, as amended ("EPCA"), prescribes energy conservation standards for various consumer products and certain commercial and industrial equipment, including non- weatherized oil-fired furnaces ("NWOFs"), mobile home oil-fired furnaces ("MHOFs"), weatherized gas furnaces ("WGFs"), weatherized oil-fired furnaces ("WOFs"), and electric furnaces ("EFs"). EPCA also requires the U.S. Department of Energy ("DOE") to periodically review its existing standards to determine whether more-stringent, amended standards would be technologically feasible and economically justified, and would result in significant energy savings. In this notification of proposed determination ("NOPD"), DOE has initially determined that amended energy conservation standards for EFs, NWOFs, MHOFs, WOFs, and WGFs do not need to be amended. DOE requests comment on this proposed determination and the associated analyses and results.

Full Text

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<title>Federal Register, Volume 88 Issue 228 (Wednesday, November 29, 2023)</title>
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[Federal Register Volume 88, Number 228 (Wednesday, November 29, 2023)]
[Proposed Rules]
[Pages 83426-83463]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2023-25869]

[[Page 83425]]

Vol. 88

Wednesday,

No. 228

November 29, 2023

Part II

Department of Energy

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10 CFR Part 430

Energy Conservation Program: Energy Conservation Standards for Oil,
Electric, and Weatherized Gas Consumer Furnaces; Proposed Rule

Federal Register / Vol. 88 , No. 228 / Wednesday, November 29, 2023 /
Proposed Rules

[[Page 83426]]

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DEPARTMENT OF ENERGY

10 CFR Part 430

[EERE-2021-BT-STD-0031]
RIN 1904-AF19

Energy Conservation Program: Energy Conservation Standards for
Oil, Electric, and Weatherized Gas Consumer Furnaces

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

ACTION: Notification of proposed determination and request for comment.

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SUMMARY: The Energy Policy and Conservation Act, as amended (``EPCA''),
prescribes energy conservation standards for various consumer products
and certain commercial and industrial equipment, including non-
weatherized oil-fired furnaces (``NWOFs''), mobile home oil-fired
furnaces (``MHOFs''), weatherized gas furnaces (``WGFs''), weatherized
oil-fired furnaces (``WOFs''), and electric furnaces (``EFs''). EPCA
also requires the U.S. Department of Energy (``DOE'') to periodically
review its existing standards to determine whether more-stringent,
amended standards would be technologically feasible and economically
justified, and would result in significant energy savings. In this
notification of proposed determination (``NOPD''), DOE has initially
determined that amended energy conservation standards for EFs, NWOFs,
MHOFs, WOFs, and WGFs do not need to be amended. DOE requests comment
on this proposed determination and the associated analyses and results.

DATES:
Meeting: DOE will hold a public meeting webinar upon request.
Please request a public meeting webinar no later than December 13,
2023. See section VI, ``Public Participation,'' for webinar
registration information, participant instructions, and information
about the capabilities available to webinar participants.
Comments: Written comments and information are requested and will
be accepted on or before January 29, 2024.

ADDRESSES: Interested persons are encouraged to submit comments using
the Federal eRulemaking Portal at <a href="http://www.regulations.gov">www.regulations.gov</a> under docket
number EERE-2021-BT-STD-0031. Follow the instructions for submitting
comments.
Alternatively, interested persons may submit comments, identified
by docket number EERE-2021-BT-STD-0031 and/or RIN 1904-AF19, by any of
the following methods:
Email: <a href="/cdn-cgi/l/email-protection#c18e84968687b4b3afa0a2a4b2f3f1f3f0929585f1f1f2f081a4a4efa5aea4efa6aeb7">[email&#160;protected]</a>. Include the docket
number EERE-2021-BT-STD-0031 and/or RIN 1904-AF19 in the subject line
of the message.
Postal Mail: Appliance and Equipment Standards Program, U.S.
Department of Energy, Building Technologies Office, Mailstop EE-5B,
1000 Independence Avenue SW, Washington, DC 20585-0121. Telephone:
(202) 287-1445. If possible, please submit all items on a compact disc
(``CD''), in which case it is not necessary to include printed copies.
Hand Delivery/Courier: Appliance and Equipment Standards Program,
U.S. Department of Energy, Building Technologies Office, 950 L'Enfant
Plaza SW, 6th Floor, Washington, DC 20024. Telephone: (202) 287-1445.
If possible, please submit all items on a CD, in which case it is not
necessary to include printed copies.
No telefacsimiles (``faxes'') will be accepted. For detailed
instructions on submitting comments and additional information on this
process, see section VII of this document (Public Participation).
Docket: The docket, which includes Federal Register notices, public
meeting attendee lists and transcripts, comments, and other supporting
documents/materials, is available for review at <a href="http://www.regulations.gov">www.regulations.gov</a>.
All documents in the docket are listed in the <a href="http://www.regulations.gov">www.regulations.gov</a>
index. However, not all documents listed in the index may be publicly
available, such as information that is exempt from public disclosure.
The docket web page can be found at <a href="http://www.regulations.gov/docket/EERE-2021-BT-STD-0031">www.regulations.gov/docket/EERE-2021-BT-STD-0031</a>. The docket web page contains instructions on how
to access all documents, including public comments, in the docket. See
section VII, ``Public Participation,'' for further information on how
to submit comments through <a href="http://www.regulations.gov">www.regulations.gov</a>.

FOR FURTHER INFORMATION CONTACT:
Ms. Julia Hegarty, U.S. Department of Energy, Office of Energy
Efficiency and Renewable Energy, Building Technologies Office, EE-5B,
1000 Independence Avenue SW, Washington, DC 20585-0121. Telephone:
(240) 597-6737. Email: <a href="/cdn-cgi/l/email-protection#2e6f5e5e42474f404d4b7d5a4f404a4f5c4a5d7f5b4b5d5a4741405d6e4b4b004a414b00494158">[email&#160;protected]</a>.
Mr. Eric Stas, U.S. Department of Energy, Office of the General
Counsel, GC-33, 1000 Independence Avenue SW, Washington, DC 20585-0121.
Telephone: (202) 586-5827. Email: <a href="/cdn-cgi/l/email-protection#d693a4bfb5f885a2b7a596bea7f8b2b9b3f8b1b9a0">[email&#160;protected]</a>.
For further information on how to submit a comment or review other
public comments and the docket contact the Appliance and Equipment
Standards Program staff at (202) 287-1445 or by email:
<a href="/cdn-cgi/l/email-protection#08497878646169666b6d5b7c69666c697a6c7b597d6d7b7c6167667b486d6d266c676d266f677e">[email&#160;protected]</a>.

SUPPLEMENTARY INFORMATION:

Table of Contents

I. Synopsis of the Proposed Determination
II. Introduction
A. Authority
B. Background
1. Current Standards
2. History of Standards Rulemakings for Consumer Furnaces
C. Deviation From Appendix A
III. General Discussion and Rationale
A. General Comments
1. Comments Supporting Amended Standards
2. Comments Opposing Amended Standards
3. Standby Mode and Off Mode
B. Scope of Coverage and Product Classes
C. Test Procedure
D. Technological Feasibility
1. General
2. Maximum Technologically Feasible Levels
E. Cost-Effectiveness
F. Energy Savings
1. Determination of Savings
2. Significance of Savings
G. Additional Considerations
IV. Methodology and Discussion of Related Comments
A. Market and Technology Assessment
1. Scope of Coverage
a. Electric Furnaces
b. Weatherized Oil-Fired Furnaces
c. Fuel-Fired Heat Pumps
2. Technology Options
3. Screening Analysis
a. Screened-Out Technologies
b. Remaining Technologies
4. Product Classes
B. Engineering Analysis
1. Efficiency Analysis
a. Baseline Efficiency
b. Intermediate Efficiency Levels
c. Maximum Technology (``Max-Tech'') Efficiency Levels
d. Summary of Efficiency Levels Analyzed
2. Cost Analysis
a. Teardown Analysis
b. Cost Estimation Method
3. Cost-Efficiency Results
C. Markups Analysis
D. Energy Use Analysis
E. Life-Cycle Cost and Payback Period Analysis
1. Product Cost
2. Installation Cost
3. Annual Energy Consumption
4. Energy Prices
5. Maintenance and Repair Costs
6. Product Lifetime
7. Discount Rates

[[Page 83427]]

8. Energy Efficiency Distribution in the No-New-Standards Case
9. Payback Period Analysis
F. Shipments Analysis
G. National Impact Analysis
1. Product Efficiency Trends
2. National Energy Savings
3. Net Present Value Analysis
V. Analytical Results and Conclusions
A. Economic Impacts on Individual Consumers
B. National Impact Analysis
1. Significance of Energy Savings
2. Net Present Value of Consumer Costs and Benefits
C. Proposed Determination
1. Technological Feasibility
2. Cost-Effectiveness
3. Significant Conservation of Energy
4. Further Considerations
5. Summary
VI. Procedural Issues and Regulatory Review
A. Review Under Executive Orders 12866, 13563, and 14094
B. Review Under the Regulatory Flexibility Act
C. Review Under the Paperwork Reduction Act of 1995
D. Review Under the National Environmental Policy Act of 1969
E. Review Under Executive Order 13132
F. Review Under Executive Order 12988
G. Review Under the Unfunded Mandates Reform Act of 1995
H. Review Under the Treasury and General Government
Appropriations Act, 1999
I. Review Under Executive Order 12630
J. Review Under the Treasury and General Government
Appropriations Act, 2001
K. Review Under Executive Order 13211
L. Review Under the Information Quality Bulletin for Peer Review
VII. Public Participation
A. Participation in the Public Meeting Webinar
B. Submission of Comments
C. Issues on Which DOE Seeks Comment
VIII. Approval of the Office of the Secretary

I. Synopsis of the Proposed Determination

The Energy Policy and Conservation Act, Public Law 94-163, as
amended (``EPCA''),\1\ among other things, authorizes DOE to regulate
the energy efficiency of a number of consumer products and certain
industrial equipment. (42 U.S.C. 6291-6317, as codified) Title III,
Part B of EPCA \2\ established the Energy Conservation Program for
Consumer Products Other Than Automobiles. (42 U.S.C. 6291-6309) These
products include oil, electric, and weatherized gas consumer furnaces,
the subject of this NOPD. (42 U.S.C. 6292(a)(5))
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\1\ All references to EPCA in this document refer to the statute
as amended through the Energy Act of 2020, Public Law 116-260 (Dec.
27, 2020), which reflect the last statutory amendments that impact
Parts A and A-1 of EPCA.
\2\ For editorial reasons, upon codification in the U.S. Code,
Part B was redesignated Part A.
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Pursuant to EPCA, DOE is required to review the existing energy
conservation standards for covered consumer products, at a minimum,
every six years after issuance of any final rule establishing or
amending a standard (42 U.S.C. 6295(m)(1)). DOE is conducting this
review of the energy conservation standards for oil, electric, and
weatherized gas consumer furnaces under EPCA's six-year-lookback
authority. (Id.) Pursuant to that statutory provision, DOE must publish
either a notification of determination that standards for the product
do not need to be amended, or a notice of proposed rulemaking
(``NOPR'') including new proposed energy conservation standards
(proceeding to a final rule, as appropriate). (Id.) For the reasons
explained in the paragraphs that follow and elsewhere in this document,
DOE has tentatively determined it appropriate to issue this NOPD for
the consumer furnaces subject to this rulemaking.
For this proposed determination, DOE analyzed oil, electric, and
weatherized gas consumer furnaces subject to energy conservation
standards specified in 10 CFR 430.32(e)(1).
DOE first analyzed the technological feasibility of more energy-
efficient oil, electric, and weatherized gas furnaces and determined
that amended standards for electric furnaces are not technologically
feasible. For those oil and weatherized gas furnaces for which DOE
determined higher standards to be technologically feasible, DOE
evaluated whether higher standards would be cost-effective by
conducting life-cycle cost (``LCC'') and payback period (``PBP'')
analyses. In addition, DOE estimated energy savings that would result
from potential energy conservation standards by conducting a national
impacts analysis (``NIA''), in which it estimated the net present value
(``NPV'') of the total costs and benefits experienced by consumers.
Based on the results of the analyses, including the consideration
of impacts on manufacturers and product availability as summarized in
section V of this document, DOE has tentatively determined that current
standards for oil, electric, and weatherized gas furnaces do not need
to be amended.

II. Introduction

The following section briefly discusses the statutory authority
underlying this proposed determination, as well as some of the
historical background relevant to the establishment of energy
conservation standards for oil, electric, and weatherized gas furnaces.

A. Authority

Among other things, EPCA, Public Law 94-163 (42 U.S.C. 6291-6317,
as codified) authorizes DOE to regulate the energy efficiency of a
number of consumer products and certain industrial equipment. Title
III, Part B of EPCA established the Energy Conservation Program for
Consumer Products Other Than Automobiles. These products include
consumer furnaces, the subject of this document. (42 U.S.C. 6292(a)(5))
EPCA prescribed the initial energy conservation standards for these
products (42 U.S.C. 6295(f)(1)-(2)), and directs DOE to conduct future
rulemakings to determine whether to amend these standards. (42 U.S.C.
6295(f)(4) and 42 U.S.C. 6295(m)(1))
The energy conservation program under EPCA consists essentially of
four parts: (1) testing, (2) labeling, (3) the establishment of Federal
energy conservation standards, and (4) certification and enforcement
procedures. Relevant provisions of EPCA specifically include
definitions (42 U.S.C. 6291), test procedures (42 U.S.C. 6293),
labeling provisions (42 U.S.C. 6294), energy conservation standards (42
U.S.C. 6295), and the authority to require information and reports from
manufacturers (42 U.S.C. 6296).
Subject to certain criteria and conditions, DOE is required to
develop test procedures to measure the energy efficiency, energy use,
or estimated annual operating cost of each covered product. (42 U.S.C.
6295(o)(3)(A) and 42 U.S.C. 6295(r)) Manufacturers of covered products
must use the prescribed DOE test procedure as the basis for certifying
to DOE that their products comply with the applicable energy
conservation standards adopted under EPCA and when making
representations to the public regarding the energy use or efficiency of
those products. (42 U.S.C. 6293(c) and 42 U.S.C. 6295(s)) Similarly,
DOE must use these test procedures to determine whether the products
comply with standards adopted pursuant to EPCA. (42 U.S.C. 6295(s)) The
DOE test procedures for consumer furnaces appear at title 10 of the
Code of Federal Regulations (``CFR'') part 430, subpart B, appendix N.
Federal energy conservation requirements for covered products
established under EPCA generally supersede state laws and regulations
concerning energy conservation testing, labeling, and standards. (42
U.S.C. 6297(a)-(c)) DOE may, however, grant waivers of federal
preemption in limited

[[Page 83428]]

circumstances for particular state laws or regulations, in accordance
with the procedures and other provisions set forth under EPCA. (42
U.S.C. 6297(d))
Pursuant to the amendments to EPCA contained in the Energy
Independence and Security Act of 2007 (EISA 2007), Public Law 110-140,
any final rule for new or amended energy conservation standards
promulgated after July 1, 2010, is required to address standby mode and
off mode energy use. (42 U.S.C. 6295(gg)(3)) Specifically, when DOE
adopts a standard for a covered product after that date, it must, if
justified by the criteria for adoption of standards under EPCA (42
U.S.C. 6295(o)), incorporate standby mode and off mode energy use into
a single standard, or, if that is not feasible, adopt a separate
standard for such energy use for that product. (42 U.S.C.
6295(gg)(3)(A)-(B)) DOE's current test procedures for oil, electric,
and weatherized gas furnaces address standby mode and off mode energy
use. DOE's energy conservation standards address standby mode and off
mode energy use only for non-weatherized oil-fired furnaces (including
mobile home furnaces) and electric furnaces. 10 CFR 430.32(e)(1)(iii).
In this analysis, DOE considers such energy use in its determination of
whether energy conservation standards need to be amended.
EPCA also requires that DOE must periodically review its already
established energy conservation standards for a covered product no
later than six years from the issuance of a final rule establishing or
amending a standard for a covered product. (42 U.S.C. 6295(m)) This
six-year-lookback provision requires that DOE publish either a notice
of determination that standards do not need to be amended or a NOPR,
including new proposed standards (proceeding to a final rule, as
appropriate). (42 U.S.C. 6295(m)(1)) EPCA further provides that, not
later than 3 years after the issuance of a final determination not to
amend standards, DOE must publish either a notification of
determination that standards for the product do not need to be amended,
or a NOPR including new proposed energy conservation standards
(proceeding to a final rule, as appropriate). (42 U.S.C. 6295(m)(3)(B))
DOE must make the analysis on which a determination is based publicly
available and provide an opportunity for written comment. (42 U.S.C.
6295(m)(2))
A determination that amended standards are not needed must be based
on consideration of whether amended standards will result in
significant conservation of energy, are technologically feasible, and
are cost-effective. (42 U.S.C. 6295(m)(1)(A) and 42 U.S.C. 6295(n)(2))
Additionally, any new or amended energy conservation standard
prescribed by the Secretary for any type (or class) of covered product
shall be designed to achieve the maximum improvement in energy
efficiency which the Secretary determines is technologically feasible
and economically justified. (42 U.S.C. 6295(o)(2)(A)) Among the factors
DOE considers in evaluating whether a proposed standard level is
economically justified includes whether the proposed standard at that
level is cost-effective, as defined under 42 U.S.C.
6295(o)(2)(B)(i)(II). Under 42 U.S.C. 6295(o)(2)(B)(i)(II), an
evaluation of cost-effectiveness requires DOE to consider savings in
operating costs throughout the estimated average life of the covered
products in the type (or class) compared to any increase in the price,
initial charges, or maintenance expenses for the covered products that
are likely to result from the standard. (42 U.S.C. 6295(n)(2) and 42
U.S.C. 6295(o)(2)(B)(i)(II)) DOE is publishing this NOPD in
satisfaction of the six-year-lookback review requirement in EPCA.

B. Background

1. Current Standards
DOE most recently completed a review of its consumer furnace
standards in a direct final rule (``DFR'') published in the Federal
Register on June 27, 2011 (``June 2011 DFR''), through which DOE
amended the existing energy conservation standards for non-weatherized
gas furnaces (``NWGFs''), mobile home gas furnaces (``MHGFs''),
weatherized gas furnaces (``WGFs''), NWOF, MHOFs, and weatherized oil
furnaces (``WOFs'').\3\ 76 FR 37408. The June 2011 DFR amended the
existing energy conservation standards for NWGFs, MHGFs, and NWOFs
(which are specified in terms of annual fuel utilization efficiency
``AFUE''), and amended the compliance date (but left the existing
standards in place) for WGFs. The June 2011 DFR also established
electrical standby mode and off mode standards for NWGFs, MHGFs, NWOFs,
MHOFs, and electric furnaces. As a result of a settlement agreement
approved by the Court of Appeals for the D.C. Circuit, the standards
established by the June 2011 DFR for NWGFs and MHGFs did not go into
effect.\4\ However, the court order left in place the standards for
WGFs, NWOFs, MHOFs, WOFs, and electric furnaces, which are the subject
of this NOPD.
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\3\ This rulemaking was undertaken pursuant to the voluntary
remand in State of New York, et al. v. Department of Energy, et al.,
08-311-ag(L); 08-312-ag(con) (2d Cir. Filed Jan. 17, 2008).
\4\ DOE confirmed the standards and compliance dates promulgated
in the June 2011 DFR in a notice of effective date and compliance
dates published in the Federal Register on October 31, 2011
(``October 2011 notice''). 76 FR 67037. After publication of the
October 2011 notice, the American Public Gas Association (``APGA'')
sued DOE to invalidate the rule as it pertained to NWGFs and MHGFs.
Petition for Review, American Public Gas Association, et al. v.
Department of Energy, et al., No. 11-1485 (D.C. Cir. filed Dec. 23,
2011). On April 24, 2014, the Court granted a motion that approved a
settlement agreement that was reached between DOE, APGA, and the
various intervenors in the case, in which DOE agreed to a remand of
the non-weatherized gas furnace and mobile home gas furnace portions
of the June 2011 DFR in order to conduct further notice-and-comment
rulemaking. Accordingly, the Court's order vacated the June 2011 DFR
in part (i.e., those portions relating to non-weatherized gas
furnaces and mobile home gas furnaces) and remanded to the agency
for further rulemaking. NWGFs and MHGFs are being addressed in a
separate rulemaking proceeding (see Docket No. EERE-2014-BT-STD-
0031).
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The AFUE standards currently applicable to all consumer furnaces,
including the product classes for which DOE is conducting analyses in
this NOPD, are set forth in DOE's regulations at 10 CFR
430.32(e)(1)(ii). Table II.1 presents the currently applicable
standards for oil, electric, and weatherized gas furnaces and the date
on which compliance with each such standard was required.

[[Page 83429]]

Table II.1--Federal AFUE Standards for Oil, Electric, and Weatherized Gas Furnaces
----------------------------------------------------------------------------------------------------------------
Product class AFUE (percent) Compliance date
----------------------------------------------------------------------------------------------------------------
Non-weatherized oil-fired furnaces (not 83 May 1, 2013.
including mobile home furnaces).
Mobile home oil-fired furnaces.................. 75 September 1, 1990.
Weatherized gas furnaces........................ 81 January 1, 2015.
Weatherized oil-fired furnaces.................. 78 January 1, 1992.
Electric furnaces............................... 78 January 1, 1992.
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Table II.2--Federal Standby Mode and Off Mode Standards for Oil and Electric Furnaces
----------------------------------------------------------------------------------------------------------------
Maximum Maximum off
standby mode mode
electrical electrical
Product class power power Compliance date
consumption, consumption,
PW,SB (watts) PW,OFF (watts)

----------------------------------------------------------------------------------------------------------------
Non-weatherized oil-fired furnaces (including 11 11 May 1, 2013.
mobile home furnaces).
Electric furnaces............................ 10 10 May 1, 2013.
----------------------------------------------------------------------------------------------------------------

2. History of Standards Rulemakings for Consumer Furnaces
Amendments to EPCA in the National Appliance Energy Conservation
Act of 1987 (``NAECA''; Pub. L. 100-12) established EPCA's original
energy conservation standards for furnaces, consisting of the minimum
AFUE levels for mobile home furnaces and for all other furnaces except
``small'' gas furnaces. (42 U.S.C. 6295(f)(1)-(2)) The original
standards established a minimum AFUE of 75 percent for mobile home
furnaces and 78 percent for all other furnaces. Pursuant to authority
conferred under 42 U.S.C. 6295(f)(1)(B), DOE subsequently adopted a
mandatory minimum AFUE level for ``small'' furnaces through a final
rule published in the Federal Register on November 17, 1989 (``the
November 1989 Final Rule''). 54 FR 47916. The standards established by
NAECA and the November 1989 Final Rule for ``small'' gas furnaces are
still in effect for MHOFs, WOFs, and EFs.
Pursuant to EPCA, DOE was required to conduct two rounds of
rulemaking to consider amended energy conservation standards for all
consumer furnaces, and an additional round of rulemaking for mobile
home furnaces. (42 U.S.C. 6295(f)(4)(A), (B), and (C)) In satisfaction
of the first round of amended standards rulemaking under 42 U.S.C.
6295(f)(4)(B), on November 19, 2007, DOE published in the Federal
Register a final rule (``November 2007 Final Rule'') that revised the
standards for most furnaces but left them in place for two product
classes (i.e., MHOFs and WOFs).\5\ The standards amended in the
November 2007 Final Rule were to apply to furnaces manufactured or
imported on and after November 19, 2015. 72 FR 65136 (Nov. 19, 2007).
The energy conservation standards in the November 2007 Final Rule
consist of a minimum AFUE level for each of the six classes of
furnaces. Id. at 72 FR 65169. Based on the market analysis for the
November 2007 Final Rule and the standards established under that rule,
the November 2007 Final Rule eliminated the distinction between
furnaces based on their certified input capacity, (i.e., the standards
applicable to ``small'' furnaces were established at the same level and
as part of their appropriate class of furnace generally). Id.
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\5\ The November 2007 Final Rule adopted amended standards for
``oil-fired furnaces'' generally. However, on July 28, 2008, DOE
published a technical amendment final rule in the Federal Register
that clarified that the amended standards adopted in the November
2007 Final Rule for oil-fired furnaces did not apply to mobile home
oil-fired furnaces and weatherized oil-fired furnaces; rather they
were only applicable for non-weatherized oil-fired furnaces. 73 FR
43611, 43613 (July 28, 2008).
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Following DOE's adoption of the November 2007 Final Rule, several
parties jointly sued DOE in the United States Court of Appeals for the
Second Circuit (``Second Circuit'') to invalidate the rule. Petition
for Review, State of New York, et al. v. Department of Energy, et al.,
Nos. 08-0311-ag(L); 08-0312-ag(con) (2d Cir. filed Jan. 17, 2008). The
petitioners asserted that the standards for furnaces promulgated in the
November 2007 Final Rule did not reflect the ``maximum improvement in
energy efficiency'' that ``is technologically feasible and economically
justified'' under 42 U.S.C. 6295(o)(2)(A). On April 16, 2009, DOE filed
with the Court a motion for voluntary remand that the petitioners did
not oppose. The motion did not state that the November 2007 Final Rule
would be vacated, but it indicated that DOE would revisit its initial
conclusions outlined in the November 2007 Final Rule in a subsequent
rulemaking action. DOE also agreed that the final rule in that
subsequent rulemaking action would address both regional standards for
furnaces and the effects of alternate standards on natural gas prices.
The Second Circuit granted DOE's motion on April 21, 2009. DOE notes
that the Second Circuit's order did not vacate the energy conservation
standards set forth in the November 2007 Final Rule, and during the
remand, the standards went into effect as originally scheduled.
On June 27, 2011, DOE published a direct final rule (``DFR'') in
the Federal Register (``June 2011 DFR'') revising the energy
conservation standards for residential furnaces pursuant to the
voluntary remand in State of New York, et al. v. Department of Energy,
et al. 76 FR 37408. In the June 2011 DFR, DOE considered the amendment
of the same six product classes considered in the November 2007 Final
Rule analysis plus electric furnaces. As discussed previously, the June
2011 DFR amended the existing AFUE energy conservation standards for
NWGFs, MHGFs, and NWOFs and amended the compliance date (but left the
existing standards in place) for WGFs. The June 2011 DFR also
established electrical standby mode and off mode energy conservation
standards for NWGFs, MHGFs, NWOFs, MHOFs, and EFs. DOE confirmed the
standards and compliance dates promulgated in the June 2011 DFR in a
notice of effective date and compliance

[[Page 83430]]

dates published in the Federal Register on October 31, 2011 (``October
2011 Notice''). 76 FR 67037. The November 2007 Final Rule and the June
2011 DFR represented the first and the second rounds, respectively, of
the two rulemakings required under 42 U.S.C. 6295(f)(4)(B)-(C) to
consider amending the energy conservation standards for consumer
furnaces.
The June 2011 DFR and October 2011 Notice of effective date and
compliance dates amended, in relevant part, the AFUE energy
conservation standards and compliance dates for three product classes
of consumer furnaces (i.e., NWGFs, MHGFs, and NWOFs).\6\ The existing
AFUE standards were left in place for three classes of consumer
furnaces (i.e., WOFs, MHOFs, and EFs). For WGFs, the existing standard
was left in place, but the compliance date was amended. Electrical
standby mode and off mode energy consumption standards were established
for non-weatherized gas and oil-fired furnaces (including mobile home
furnaces) and EFs. Compliance with the energy conservation standards
promulgated in the June 2011 DFR was to be required on May 1, 2013, for
non-weatherized gas furnaces, mobile home gas furnaces, and non-
weatherized oil furnaces, and on January 1, 2015, for weatherized
furnaces. 76 FR 37408, 37547-37548 (June 27, 2011); 76 FR 67037, 67051
(Oct. 31, 2011). The amended energy conservation standards and
compliance dates in the June 2011 DFR superseded those standards and
compliance dates promulgated by the November 2007 Final Rule for NWGFs,
MHGFs, and NWOFs. Similarly, the amended compliance date for WGFs in
the June 2011 DFR superseded the compliance date in the November 2007
Final Rule.
---------------------------------------------------------------------------

\6\ For NWGFs and MHGFs, the standards were amended to a level
of 80-percent AFUE nationally with a more-stringent 90-percent AFUE
requirement in the Northern Region. For NWOF furnaces, the standard
was amended to 83-percent AFUE nationally. 76 FR 37408, 37410 (June
27, 2011).
---------------------------------------------------------------------------

Following DOE's adoption of the June 2011 DFR, the American Public
Gas Association (``APGA'') filed a petition for review with the United
States Court of Appeals for the District of Columbia Circuit (``D.C.
Circuit'') to invalidate the DOE rule as it pertained to NWGFs and
MHGFs. Petition for Review, American Public Gas Association, et al. v.
Department of Energy, et al., No. 11-1485 (D.C. Cir. filed Dec. 23,
2011). The parties to the litigation engaged in settlement
negotiations, which ultimately led to filing of an unopposed motion on
March 11, 2014, seeking to vacate DOE's rule in part and to remand to
the agency for further rulemaking.
On April 24, 2014, the Court granted the motion and ordered that
the standards established for NWGFs and MHGFs be vacated and remanded
to DOE for further rulemaking. As a result, the standards established
by the June 2011 DFR for NWGFs and MHGFs did not go into effect, and,
thus, required compliance with the standards established in the
November 2007 Final Rule for these products began on November 19, 2015.
As stated previously, the AFUE standards for WOFs, MHOFs, and EFs were
unchanged, and as such, the original standards for those product
classes remain in effect. Further, the amended standard for NWOFs was
not subject to the Court order and went into effect as specified in the
June 2011 DFR. The AFUE standards currently applicable to all
residential furnaces,\7\ including the five product classes for which
DOE is analyzing amended standards in this NOPD, are set forth in DOE's
regulations at 10 CFR 430.32(e)(1)(ii) and (iii).
---------------------------------------------------------------------------

\7\ DOE divides consumer furnaces into seven classes for the
purpose of setting energy conservation standards: (1) NWGFs, (2)
MHGFs, (3) WGFs, (4) NWOFs, (5) MHOFs, (6) WOFs, and (7) electric
furnaces. 10 CFR 430.32(e)(1)(ii). As noted previously, DOE has been
analyzing amended standards for NWGFs and MHGFs as part of a
separate, ongoing rulemaking (see Docket No. EERE-2014-BT-STD-0031).
---------------------------------------------------------------------------

On January 28, 2022, DOE published in the Federal Register a
request for information (``January 2022 RFI'') to initiate a review to
determine whether any new or amended standards would satisfy the
relevant requirements of EPCA for a new or amended energy conservation
standard for oil, electric, and weatherized gas consumer furnaces. 87
FR 4513. On November 29, 2022, DOE published in the Federal Register a
notice of availability of a preliminary technical support document
(``TSD'') (``the November 2022 Preliminary Analysis'') that presented
initial technical analyses in the following areas: (1) market and
technology; (2) screening; (3) engineering; (4) markups to determine
product price; (5) energy use; (6) life-cycle cost (``LCC'') and
payback period (``PBP''); and (7) national impacts. 87 FR 73259. DOE
held a public meeting webinar on December 19, 2022 in order to receive
public input and information related to the November 2022 Preliminary
Analysis for the subject furnaces.
DOE received comments in response to the November 2022 Preliminary
Analysis from the interested parties listed in Table II.3.

Table II.3--November 2022 Preliminary Analysis Public Comments
----------------------------------------------------------------------------------------------------------------
Comment No. in
Commenter(s) Reference in this NOPD the docket Commenter type
----------------------------------------------------------------------------------------------------------------
Air-Conditioning, Heating, & AHRI...................... 23 Manufacturer Trade
Refrigeration Institute. Association.
American Gas Association................ AGA....................... * 28 Utility Trade Association.
American Gas Association, American Joint Commenters.......... 24 Utilities and Utility
Public Gas Association, National Trade Associations.
Propane Gas Association, Spire Inc.,
Spire Missouri Inc.
Appliance Standards Awareness Project, Joint Advocates........... 22 Efficiency Advocacy
American Council for an Energy- Organizations.
Efficiency Economy, Consumer Federation
of America, Natural Resources Defense
Council.
Johnson Controls International.......... JCI....................... 25 Manufacturer.
Lennox International.................... Lennox.................... 26 Manufacturer.
New York State Energy Research and NYSERDA................... 19 State Agency.
Development Authority.
Northwest Energy Efficiency Alliance.... NEEA...................... 21 Efficiency Advocacy
Organization.
----------------------------------------------------------------------------------------------------------------
* Comment No. 28 corresponds to the transcript for the webinar held on December 19, 2022. These commenters made
oral comments during the public meeting that are summarized and discussed in this document.

[[Page 83431]]

Any oral comments provided during the webinar that are not
substantively the same as those presented in written comments are
summarized and cited separately. throughout this NOPD. A parenthetical
reference at the end of a comment quotation or paraphrase provides the
location of the item in the public record.\8\
---------------------------------------------------------------------------

\8\ The parenthetical reference provides a reference for
information located in the docket. (Docket No. EERE-2021-BT-STD-
0031, which is maintained at <a href="http://www.regulations.gov">www.regulations.gov</a>). The references
are arranged as follows: (commenter name, comment docket ID number,
page of that document).
---------------------------------------------------------------------------

C. Deviation From Appendix A

In accordance with section 3(a) of 10 CFR part 430, subpart C,
appendix A (``appendix A''), DOE notes that it is deviating from the
provision in appendix A regarding the pre-NOPR and NOPR stages for an
energy conservation standards rulemaking.
Section 6(a)(2) of the Process Rule states that if DOE determines
it is appropriate to proceed with a rulemaking, for the preliminary
stages of a rulemaking to issue or amend an energy conservation
standard, DOE will undertake a framework document and preliminary
analysis, or an advance notice of proposed rulemaking. While DOE
published a preliminary analysis for this rulemaking (see 87 FR 73529
(Nov. 29, 2022)), DOE did not publish a framework document in
conjunction with the preliminary analysis. DOE notes, however, that
chapter 2 of the preliminary technical support document that
accompanied the preliminary analysis--titled Analytical Framework,
Comments from Interested Parties, and DOE Responses--describes the
general analytical framework that DOE uses in evaluating and developing
potential amended energy conservation standards.\9\ Further, DOE
provided an overview of the analysis it would use to evaluate new or
amended energy conservation standards in the January 2022 RFI (see 87
FR 4513 (Jan. 28, 2022)). As such, publication of a separate Framework
Document would be largely redundant of previously published documents.
---------------------------------------------------------------------------

\9\ The preliminary technical support document is available at
<a href="http://www.regulations.gov/document/EERE-2021-BT-STD-0031-0011">www.regulations.gov/document/EERE-2021-BT-STD-0031-0011</a>.
---------------------------------------------------------------------------

III. General Discussion and Rationale

DOE developed this proposed determination after a review of the
market for the subject furnaces, including product listings in the DOE
Compliance Certification Database (``CCD'') database.\10\ DOE also
considered comments, data, and information from interested parties that
represent a variety of interests. This NOPD addresses issues raised by
these commenters.
---------------------------------------------------------------------------

\10\ U.S. Department of Energy Compliance Certification
Database. (Available at: <a href="http://www.regulations.doe.gov/certification-data/">www.regulations.doe.gov/certification-data/</a>
) (Last accessed Sept. 1, 2023).
---------------------------------------------------------------------------

A. General Comments

1. Comments Supporting Amended Standards
In response to the November 2022 Preliminary Analysis, several
commenters expressed their support of amended energy conservation
standards for oil, electric, and weatherized gas consumer furnaces.
The Joint Advocates stated that DOE's preliminary analysis
demonstrates that condensing-level standards for NWOFs are
technologically feasible and could result in significant consumer
savings. The Joint Advocates further commented that fuel regulations in
many northern States have helped to reduce the sulfur content in
heating oil, adding that this results in condensing NWOFs becoming
technologically feasible and commercially available. (Joint Advocates,
No. 22 at p. 1) The Joint Advocates pointed out that Adams
Manufacturing commented on the January 2022 RFI in support of a 95-
percent AFUE standard for NWOFs.\11\ (Joint Advocates, No. 22 at p. 2)
---------------------------------------------------------------------------

\11\ The comment from Adams Manufacturing, Co. in response to
the January 2022 RFI can be found at: <a href="http://www.regulations.gov/comment/EERE-2021-BT-STD-0031-0010">www.regulations.gov/comment/EERE-2021-BT-STD-0031-0010</a>.
---------------------------------------------------------------------------

NYSERDA stated support for DOE increasing the furnace standards,
particularly for oil furnaces and for standby and off modes. NYSERDA
argued that there are cost-effective and beneficial energy and
associated greenhouse gas savings available through improvements to
electric, weatherized gas, and particularly oil furnaces. (NYSERDA, No.
19 at p. 1)
As part of the rulemaking process, DOE carefully considers the
benefits and burdens of amended energy conservation standards to
determine whether such standards are the maximum standard levels that
are technologically feasible and economically justified and would
conserve a significant amount of energy, as required by EPCA (see 42
U.S.C. 6295(o)(2)-(3)). Section IV of this document outlines DOE's
approach to analyzing various potential amended energy conservation
standard levels, and section V of this document provides the results of
those analyses, as well as a detailed explanation of DOE's weighing of
the benefits and burdens. Based upon its analysis and consideration of
the relevant statutory criteria, DOE is proposing not to amend the
existing standards for oil, electric, and weatherized gas furnaces at
this time. The rationale for DOE's proposed determination is discussed
in detail in section V of this document.
2. Comments Opposing Amended Standards
In response to the November 2022 Preliminary Analysis, several
commenters expressed opposition to amended energy conservation
standards for oil, electric, and weatherized gas consumer furnaces.
The Joint Commenters stated that they are guided by the
congressional mandate that appliance efficiency standards should not
impose unjustified costs on consumers or deprive consumers of gas
products that are suitable for their needs. The Joint Commenters stated
that such standards are not authorized by statute and would be harmful
to fuel gas providers and the consumers they serve. (Joint Commenters,
No. 24 at p. 2) AHRI commented that DOE should adopt a no-new-standards
determination for mobile home oil-fired and non-weatherized oil-fired
furnaces, given the burden placed on manufacturers to meet more-
stringent standards that will provide insubstantial energy savings.
(AHRI, No. 23 at pp. 3-4)
AHRI also commented that DOE should adopt a no-new-standards
determination for weatherized gas-fired furnaces. The commenter argued
that DOE should adopt the same determination for consumer weatherized
gas furnaces as was done for commercial warm air furnaces, given that
they are technologically similar. AHRI and Lennox commented that a move
to an AFUE greater than 90 percent for weatherized gas furnaces is
unjustified, adding that EL 1 showed a 9.1-year payback period and 45.8
percent of consumers experiencing a net cost. (AHRI, No. 23 at p. 3;
Lennox, No. 26 at p. 2)
Lennox urged DOE to consider the cumulative regulatory burden of
all ongoing rulemakings on furnace manufacturers. (Lennox, No. 26 at p.
9) The commenter also stated that weatherized gas, non-weatherized oil,
and electric furnaces are niche products and total less than 10 percent
of the consumer furnace market. More specifically, Lennox stated that
weatherized gas furnaces comprise approximately 7 percent of the
market, and non-weatherized oil and electric furnaces each account for
less than 1 percent of the market. (Lennox, No. 26 at p. 1) Lennox
acknowledged that

[[Page 83432]]

technologies exist that could advance the efficiency of gas and oil
furnaces included in the preliminary TSD. However, Lennox stated that
consumer cost and utility issues render more-stringent standards
unjustified for the subject oil and gas furnaces. In particular, for
weatherized gas products, Lennox recommended that DOE find that a no-
new-standards determination is warranted for these product categories.
(Id. at p. 6)
Lennox stated that the market adoption of condensing weatherized
furnaces has been minimal. Lennox estimated that condensing weatherized
furnaces are at less than 0.12 percent of the weatherized gas market
and that there is no indication of growth in the market. Therefore,
Lennox surmised that condensing efficiency levels would not be
appropriate for DOE to consider as a basis for a national efficiency
standard for weatherized gas furnaces and that DOE should not seek to
mandate WGF condensing technology. (Lennox, No. 26 at p. 7)
Lennox stated that many consumers have been adversely impacted by
the ongoing COVID pandemic and high inflation, particularly consumers
who might already be struggling to afford new furnace equipment.
Accordingly, Lennox argued that DOE increasing furnace equipment costs
with new efficiency standards is not economically justified at this
juncture. (Lennox, No. 26 at p. 2)
In response, as discussed in section II.A of this document, DOE
must periodically review its already established energy conservation
standards for consumer furnaces no later than six years from the
issuance of a final rule establishing or amending a standard for
consumer furnaces. This six-year-lookback provision requires that DOE
publish either a determination that standards do not need to be amended
or a NOPR, including new proposed standards (proceeding to a final
rule, as appropriate). (42 U.S.C. 6295(m)(1)) As part of the rulemaking
process, DOE carefully considers the benefits and burdens of amended
standards to determine whether the amended standards are the maximum
standard levels that are technologically feasible and economically
justified and would conserve a significant amount of energy, as
required by EPCA (see 42 U.S.C. 6295(o)(2)-(3)). Section IV of this
document outlines DOE's approach to analyzing various potential amended
standard levels, and section V of this document provides the results of
those analyses. Section V also provides a detailed explanation of DOE's
weighing of the benefits and burdens and the rationale for proposing
not to amend standards for oil, electric, and weatherized gas furnaces
at this time. Regarding DOE's consideration of cumulative regulatory
burden, DOE is not proposing to amend the energy conservation standards
for oil, electric, and weatherized gas furnaces, so, therefore, the
Department does not expect this rulemaking to contribute to the
cumulative regulatory burden of manufactures.
3. Standby Mode and Off Mode
As discussed in section II.A of this document, EPCA requires any
final rule for new or amended energy conservation standards promulgated
after July 1, 2010 to address standby mode and off mode energy use. (42
U.S.C. 6295(gg)(3))
``Standby mode'' and ``off mode'' energy use are defined in the DOE
test procedure for residential furnaces and boilers (i.e., ``Uniform
Test Method for Measuring the Energy Consumption of Consumer Furnaces
Other Than Boilers,'' 10 CFR part 430, subpart B, appendix N;
``appendix N''). In that test procedure, DOE defines ``standby mode''
as any mode in which the furnace is connected to a mains power source
and offers one or more of the following space heating functions that
may persist: (a) To facilitate the activation of other modes (including
activation or deactivation of active mode) by remote switch (including
thermostat or remote control), internal or external sensors, and/or
timer; and (b) Continuous functions, including information or status
displays or sensor based functions. 10 CFR part 430, subpart B,
appendix N, section 2. ``Off mode'' for consumer furnaces is defined as
a mode in which the furnace is connected to a mains power source and is
not providing any active mode or standby mode function, and where the
mode may persist for an indefinite time. The existence of an off switch
in off position (a disconnected circuit) is included within the
classification of off mode. 10 CFR part 430, subpart B, appendix N,
section 2. An ``off switch'' is defined as the switch on the furnace
that, when activated, results in a measurable change in energy
consumption between the standby and off modes. 10 CFR part 430, subpart
B, appendix N, section 2. Currently, the standby mode and off mode
energy conservation standards for NWOFs and EFs are outlined in 10 CFR
430.32 (e)(1)(iii) and are shown in Table II.2 of this document.
Compliance with the Federal standards for standby mode and off mode
electricity consumption for NWOFs, MHOFs, and EFs, as measured by
standby power consumption in watts (``P<INF>W,SB</INF>'') and off mode
power consumption in watts (``P<INF>W,OFF</INF>''), was required on May
1, 2013.
In the November 2022 Preliminary Analysis, DOE analyzed amended
standby/off mode standards for NWOFs, MHOFs and EFs. DOE did not
consider amended standby mode and off mode standards for WGFs and WOFs,
because DOE has previously concluded in a direct final rule published
in the Federal Register on June 27, 2011 that these products are
packaged with either an air conditioner or heat pump and that the
standards for those products, specified in terms of power consumption
in watts and Seasonal Energy Efficiency Ratio (``SEER''), already
account for the standby mode and off mode energy consumption for these
classes of furnaces. 76 FR 37408, 37433. Based on market analysis
conducted for the November 2022 Preliminary Analysis, DOE tentatively
concludes that WGFs and WOFs continue to be packaged with an air
conditioner or heat pump.
In the analysis for the November 2022 Preliminary Analysis, DOE
established the baseline for NWOFs, MHOFs, and EFs as the current
Federal standby mode and off mode standards (see Table II.2). DOE also
defined and identified baseline components as those that consumed the
most electricity during standby mode and off mode operation. For
intermediate efficiency levels, DOE utilized a design-option approach
to identify design options that could be applied to the baseline design
to reduce standby mode and off mode energy consumption. Above the
baseline efficiency level, DOE implemented design options in the order
of incremental energy savings relative to baseline until all available
design options were employed (i.e., at a max-tech level). DOE
identified two design options between the baseline and max-tech design
that were used as the basis for intermediate standby mode and off mode
design options. Specifically, DOE replaced the linear transformer found
in models at the baseline with a low-loss transformer (``LL-LTX'') for
the first intermediate efficiency level and replaced the linear power
supply found in baseline models with a switching mode power supply
(``SMPS'') for the second intermediate efficiency level.
The max-tech standby mode and off mode efficiency level in the
November 2022 Preliminary Analysis was based on a combination of the
two design options that were analyzed for the intermediate efficiency
levels. To reach max-tech, DOE analyzed using an LL-LTX in combination
with an SMPS to reach the

[[Page 83433]]

minimum standby mode or off mode power consumption (without eliminating
other consumer- or performance-related electronic features). For this
design option, a transformer is only needed to step down the voltage
for the thermostat because the SMPS is able to step down the voltage
for the other components of the furnace. As such, a smaller, lower-cost
LL-LTX is used at the max-tech level, as compared to the LL-LTX used at
EL 1 (i.e., the first intermediate efficiency level).
In response to the November 2022 Preliminary Analysis, Lennox
commented that it is not aware of new or improved technology options
regarding standby mode and off mode energy use beyond those previously
identified that significantly impact the range of efficiencies for the
product covered in this rulemaking. (Lennox, No. 26 at p. 4) However,
Lennox also pointed out that consumers, utilities, third-party
aggregators, and regulators through programs such as EPA ENERGY STAR
are looking to further deploy features that enable installation
verification, ongoing monitoring, diagnostics, and prognostic features
that can save significantly more energy than de minimis standby power
limits achieve. (Id.)
AHRI and Lennox stated that the following functions and components
utilize the furnace's power supply in the on, standby, and off modes:
indoor and outdoor air conditioner (``AC'')/heat pump (``HP'') Motors
(``ECM''); AC/HP outdoor control board; heat pump defrost control;
indoor and outdoor electronic expansion valve; heat pump reversing
valve; zoning systems; UV germicidal light; humidifier; communicating
controls that aid in proper commissioning, system performance
monitoring and reporting, identification of faults, and consumer
interface; temperature sensors; air pressure sensors; refrigerant
pressure sensors; gas pressure sensors; and proprietary diagnostic-
prognostic sensors. (AHRI, No. 23, at p. 2; Lennox, No. 26 at p. 5)
Lennox further added that thermostats utilize the furnace's power
supply in the on, standby, and off modes. (Lennox, No. 26 at p. 5) AHRI
added that integrated furnace controls, gas valves, and combustion air
inducers utilize the furnace power in on, standby, and off modes.
(AHRI, No. 23, at p. 2) AHRI and Lennox commented that additional
safety-related sensors are being considered for furnaces that could
further render more-stringent standby power limits impractical,
including refrigerant leak detection mitigation sensors and CO sensors.
(Lennox, No. 26 at p. 5; AHRI, No. 23, at p. 2) Lennox also added
CO<INF>2</INF> sensors to the list of potential future diagnostic
features and stated that this list is likely to grow over time.
(Lennox, No. 26 at p. 5)
Lennox commented that increased stringency in standards for standby
power levels would inhibit other innovations that save energy and
benefit consumers. Lennox further stated that increased stringency
would also inhibit implementation of additional safety features.
(Lennox, No. 26 at p. 2) In addition, Lennox stated that the energy
savings for standby mode and off mode standards for all of the products
considered in this rulemaking do not meet the DOE criteria of
significant energy savings. (Id.) AHRI commented that DOE should
consider the standby mode and off mode requirements of higher
technology features when evaluating the standby mode and off mode
efficiency levels. (AHRI, No. 23 at p. 3) AHRI and Lennox commented
that overly stringent standby mode and off mode standards would inhibit
the integration of smart communicating controls, installation and
diagnostic features, and zoning that can enable much larger energy
savings than the minor savings achieved by the standby power limit
itself. Lennox stated that these advanced features have entered the
market for fully featured communicating products and require more
standby mode and off mode energy than the baseline products. (Lennox,
No. 26 at p. 4; AHRI, No. 23 at p. 3)
Lennox and AHRI agreed that standby mode and off mode power
consumption for WGFs that are part of a single-package air conditioner
or heat pump are captured in the P<INF>W,OFF</INF> and SEER metrics for
these products. (Lennox, No. 26 at p. 3; AHRI, No. 23 at p. 4) Lennox
stated that the current DOE metrics capture the standby energy
regardless of the mode of operation. (Lennox, No. 26 at p. 3) Lennox
commented that it is not aware of seasonal differences in standby mode
and off mode energy consumption. Further, Lennox commented that a
condensing standard for WGF may force additional factory- or field-
installed components to prevent freezing (i.e., heat tape or other) of
the condensate system, which may increase standby energy consumption in
heating mode. (Lennox, No. 26 at p. 3)
AHRI commented that an 8.5 W maximum standard for standby mode and
off mode power does not allow for the addition of the aforementioned
communication, diagnostic, and safety features. (AHRI, No. 23 at p. 2)
AHRI recommended that DOE re-evaluate the necessary power draw for
communication and safety-related features and the max-tech level based
upon the use of a 20 VA LL-LTX transformer and SMPS to meet these
utilities. (Id. at p. 3) AHRI commented that a 20 VA transformer cannot
supply the needs of all interconnected controls for all types of
systems. AHRI added that if the transformer cannot power the necessary
internal functions, then DOE must reconsider the proposed 8.5-watt
standby power limit and whether the 11-watt baseline is sufficient.
AHRI further commented that if DOE must go higher than 11 watts, DOE
may need to make allowance in future test procedures so that the
effects of safety and other control measures do not count against the
proposed 11-watt limit. (Id.)
AHRI commented that an incorrectly set minimum standard will drive
connected products such as thermostats, WIFI controls, etc. to use add-
on power supplies and cause an additional economic burden on consumers,
asserting that this would defeat the purpose of the proposed maximum
watts limit. AHRI commented that there are already auxiliary power
supplies on the market for thermostats and other devices. (Id. at p. 3)
NYSERDA commented that the technology options for standby mode that
rely on switching mode power supply with a low-loss linear transformer
have been considered by DOE for several years and are anticipated to be
transferable across furnace types, including the oil and electric
furnaces addressed in this rulemaking. NYSERDA explained that as
switch-mode power supply and low-loss linear transformers become the
standard for much of the furnace market, it becomes more feasible for
those technologies to apply to oil and electric furnaces as well.
(NYSERDA, No. 19 at p. 2)
NYSERDA recommended that DOE propose the max-tech levels for
standby mode and off mode at the NOPR stage. NYSERDA explained that, as
this rulemaking is finalized, the broader furnace manufacturing
industry is anticipated to evolve toward technology for standby mode
that relies on switching mode power supply with a low-loss linear
transformer. (NYSERDA, No. 19 at p. 2)
After considering this feedback, DOE understands that typical and
baseline levels of power consumption of consumer furnaces in standby
mode or off mode are likely to increase in the future as manufacturers
continue to build increasingly complex controls into consumer furnaces,
and that many of the likely changes are related to features such as
safety sensors or to other improvements in functionality that

[[Page 83434]]

would provide utility for the consumer. Based on these comments, DOE
has found that there is some degree of uncertainty that exists with
respect to the appropriateness of the standby mode/off mode efficiency
levels analyzed in the November 2022 Preliminary Analysis--particularly
for products that are in development but also possibly in some products
already on the market. There is also uncertainty related to the
potential impacts that standby mode and off mode power consumption
standards could have on overall system energy consumption and consumer
utility. Consequently, DOE has determined that it lacks the necessary
information to amend the standby mode and off mode standards at this
time. Particularly, since some of the functionalities at issue could
have significant safety or energy-savings benefits, DOE does not wish
to stymie such developments through well-intentioned but ultimately
counterproductive standby mode/off mode standards. Instead, DOE needs
to have a better understanding of the legitimate power consumption
needs of the subject furnaces when operating in standby mode and off
mode. Although DOE remains cognizant of the relevant requirements of 42
U.S.C. 6295(gg)(3), DOE has concluded that it does not currently have
the requisite evidence to support amended standby mode and off mode
standards under the applicable statutory criteria in EPCA. Therefore,
DOE is not proposing to amend the standby mode/off mode power standards
for NWOFs, MHOFs, and EFs this time, but instead, DOE will continue to
investigate these issues and may consider such standards in a future
rulemaking.

B. Scope of Coverage and Product Classes

This proposed determination covers certain product classes of
consumer furnaces (i.e., ones for oil, electric, and weatherized gas
furnaces). A consumer ``furnace'' is defined as a product which
utilizes only single-phase electric current, or single-phase electric
current or DC current in conjunction with natural gas, propane, or home
heating oil, and which--
(A) Is designed to be the principal heating source for the living
space of a residence;
(B) Is not contained within the same cabinet with a central air
conditioner whose rated cooling capacity is above 65,000 Btu per hour;
(C) Is an electric central furnace, electric boiler, forced-air
central furnace, gravity central furnace, or low-pressure steam or hot
water boiler; and
(D) Has a heat input rate of less than 300,000 Btu per hour for
electric boilers and low-pressure steam or hot water boilers and less
than 225,000 Btu per hour for forced-air central furnaces, gravity
central furnaces, and electric central furnaces.

10 CFR 430.2. The scope of coverage is discussed in further detail in
section IV.A.1 of this document.

When evaluating and establishing/amending energy conservation
standards, DOE divides covered products into product classes by the
type of energy used or by capacity or other performance-related
features that justify differing standards. In making a determination
whether a performance-related feature justifies a different standard,
DOE must consider such factors as the utility of the feature to the
consumer and other factors DOE determines are appropriate. (42 U.S.C.
6295(q)) The product classes for this proposed determination are
discussed in further detail in section IV.A.4 of this document.

C. Test Procedure

EPCA sets forth generally applicable criteria and procedures for
DOE's adoption and amendment of test procedures. (42 U.S.C. 6293)
Manufacturers of covered products must use these test procedures to
quantify the efficiency of their product and as the basis for
certifying to DOE that their product complies with energy conservation
standards and when making representations to the public regarding the
energy use or efficiency of the product. (42 U.S.C. 6295(s) and 42
U.S.C. 6293(c)) Similarly, DOE must use these test procedures to
determine whether the product complies with standards adopted pursuant
to EPCA. (42 U.S.C. 6295(s)) DOE's current energy conservation
standards for consumer furnaces are expressed in terms of AFUE for all
furnace product classes (i.e., active mode) and, for NWOFs, MHOFs, and
electric furnace product classes, also in terms of P<INF>W,SB</INF> and
P<INF>W,OFF</INF> (i.e., standby mode and off mode). (See 10 CFR
430.32(e)(1))
The test procedure for determining AFUE, P<INF>W,SB</INF>, and
P<INF>W,OFF</INF> is established at 10 CFR part 430, subpart B,
appendix N. AFUE is an annualized fuel efficiency metric that accounts
for fossil fuel consumption in active, standby, and off modes.
P<INF>W,SB</INF> and P<INF>W,OFF</INF> are measurements of the standby
mode and off mode electrical power consumption, respectively, in watts.
The test procedure for consumer furnaces was last amended by a final
rule published in the Federal Register on January 15, 2016 (``January
2016 TP Final Rule''). 81 FR 2628.\12\
---------------------------------------------------------------------------

\12\ On March 13, 2023, DOE published in the Federal Register a
test procedure final rule for consumer boilers, which are a type of
furnace under EPCA (see 42 U.S.C. 6291(23)) but are not included
within the scope of this rulemaking (see section IV.A.1 of this
document). 88 FR 15510. This test procedure final rule separated the
test method for consumer boilers from the test method for other
types of furnaces and moved the boilers test method to a new
appendix EE to 10 CFR part 430, subpart B. Accordingly, it amended
appendix N so as to remove provisions applicable only to boilers,
but it did not materially change the test method for the oil,
electric, and weatherized gas furnaces that are the subject of this
rulemaking.
---------------------------------------------------------------------------

The revisions to the consumer furnaces test procedure in the
January 2016 TP Final Rule included:
<bullet> Clarification of the electrical power term ``PE'';
<bullet> Adoption of a smoke stick test for determining use of
minimum default draft factors;
<bullet> Allowance for the measurement of condensate under steady-
state conditions;
<bullet> Reference to manufacturer's installation and operation
manual and clarifications for when that manual does not specify test
set-up;
<bullet> Specification of duct-work requirements for units that are
installed without a return duct;
<bullet> Specification of testing requirements for units with
multi-position configurations; and
<bullet> Revision of the requirements regarding AFUE reporting
precision.
81 FR 2628, 2629-2630 (Jan. 15, 2016).
The changes in the January 2016 TP Final Rule were mandatory for
representations of furnace efficiency made on or after July 13, 2016.
As such, the most current version of the test procedure (published in
January 2016) has now been in place for several years.

D. Technological Feasibility

1. General
In evaluating potential amendments to energy conservation
standards, DOE conducts a screening analysis based on information
gathered on all current technology options and prototype designs that
could improve the efficiency of the products or equipment that are the
subject of the determination. As the first step in such an analysis,
DOE develops a list of technology options for consideration in
consultation with manufacturers, design engineers, and other interested
parties. DOE then determines which of those means for improving
efficiency are technologically feasible. DOE considers technologies
incorporated in commercially-available products or in working
prototypes to be

[[Page 83435]]

technologically feasible. 10 CFR part 430, subpart C, appendix A,
sections 6(b)(3)(i) and 7(b)(1).
After DOE has determined that particular technology options are
technologically feasible, it further evaluates each technology option
in light of the following additional screening criteria: (1)
practicability to manufacture, install, and service; (2) adverse
impacts on product utility or availability; (3) adverse impacts on
health or safety; and (4) unique-pathway proprietary technologies. 10
CFR part 430, subpart C, appendix A, sections 6(b)(3)(ii)-(v) and
7(b)(2)-(5). Section IV.A.3 of this document discusses the results of
the screening analysis for oil, electric, and weatherized gas furnaces,
particularly the design options DOE considered, those it screened out,
and those that are the basis for the potential standards considered in
this proposed determination.
2. Maximum Technologically Feasible Levels
As when DOE proposes to adopt a new or amended standard for a type
or class of covered product, in this NOPD analysis, DOE must determine
the maximum improvement in energy efficiency or maximum reduction in
energy use that is technologically feasible for the product under
consideration. (42 U.S.C. 6295(p)(1)) Accordingly, in the engineering
analysis, DOE determined the maximum technologically feasible (``max-
tech'') improvements in energy efficiency for oil, electric, and
weatherized gas furnaces, using the design parameters for the most
efficient products available on the market or in working prototypes.
The max-tech levels that DOE determined for this analysis are described
in section IV.B.1.c of this proposed determination.

E. Cost-Effectiveness

In making a determination of whether amended energy conservation
standards are needed, EPCA requires DOE to consider the cost-
effectiveness of amended standards in the context of the savings in
operating costs throughout the estimated average life of the covered
product compared to any increase in the price of, or in the initial
charges for, or maintenance expenses of, the covered product that are
likely to result from a standard. (42 U.S.C. 6295(m)(1)(A); 42 U.S.C.
6295(n)(2)(C); 42 U.S.C. 6295(o)(2)(B)(i)(II))
In determining cost-effectiveness of potential amended standards
for oil, electric, and weatherized gas furnaces, DOE conducted LCC and
PBP analyses that estimate the costs and benefits to users from those
potential standards. To further inform DOE's consideration of the cost-
effectiveness of potential amended standards, DOE considered the NPV of
total costs and benefits estimated as part of the NIA. The inputs for
determining the NPV of the total costs and benefits experienced by
consumers are: (1) total annual installed cost, (2) total annual
operating costs (energy costs and repair and maintenance costs), and
(3) a discount factor to calculate the present value of costs and
savings. The results of this analysis are discussed in section V.C.2 of
this NOPD.

F. Energy Savings

1. Determination of Savings
For each efficiency level (``EL'') evaluated, DOE projected
anticipated energy savings from application of the EL to the oil,
electric, and weatherized gas furnace purchased in the 30-year period
that begins in the assumed year of compliance with the potential
standards (2030-2059). The savings are measured over the entire
lifetime of the oil, electric, and weatherized gas furnaces purchased
in the previous 30-year period. DOE quantified the energy savings
attributable to each EL as the difference in energy consumption between
each standards case and the no-new-standards case. The no-new-standards
case represents a projection of energy consumption that reflects how
the market for a product would likely evolve in the absence of amended
energy conservation standards. DOE used its NIA spreadsheet model to
estimate national energy savings (``NES'') from potential amended or
new standards for oil, electric, and weatherized gas furnaces. The NIA
spreadsheet model (described in section IV.G of this document)
calculates energy savings in terms of site energy, which is the energy
directly consumed by products at the locations where they are used. For
electricity, DOE reports NES in terms of primary energy savings, which
is the savings in the energy that is used to generate and transmit the
site electricity. DOE also calculates NES in terms of full-fuel-cycle
(``FFC'') energy savings. The FFC metric includes the energy consumed
in extracting, processing, and transporting primary fuels (i.e., coal,
natural gas, petroleum fuels), and, thus, presents a more complete
picture of the impacts of energy conservation standards.\13\ DOE's
approach is based on the calculation of an FFC multiplier for each of
the energy types used by covered products or equipment. For more
information on FFC energy savings, see section IV.G of this document.
---------------------------------------------------------------------------

\13\ The FFC metric is discussed in DOE's statement of policy
and notice of policy amendment. 76 FR 51281 (August 18, 2011), as
amended at 77 FR 49701 (August 17, 2012).
---------------------------------------------------------------------------

2. Significance of Savings
In determining whether amended standards are needed, DOE must
consider whether such standards will result in significant conservation
of energy. (42 U.S.C. 6295(m)(1)(A)) The significance of energy savings
offered by a new or amended energy conservation standard cannot be
determined without knowledge of the specific circumstances surrounding
a given rulemaking.\14\ For example, some covered products and
equipment have most of their energy consumption occur during periods of
peak energy demand. The impacts of these products on the energy
infrastructure can be more pronounced than products with relatively
constant demand. Accordingly, DOE evaluates the significance of energy
savings on a case-by-case basis. The significance of energy savings is
further discussed in section V.B.1 of this NOPD.
---------------------------------------------------------------------------

\14\ The numeric threshold for determining the significance of
energy savings established in a final rule published in the Federal
Register on February 14, 2020 (85 FR 8626, 8670-8672) was
subsequently rescinded through a final rule published in the Federal
Register on December 13, 2021 (86 FR 70892, 70901-70906).
---------------------------------------------------------------------------

G. Additional Considerations

Pursuant to EPCA, absent DOE publishing a notification of
determination that energy conservation standards for the subject
furnaces do not need to be amended, DOE must issue a NOPR that includes
new proposed standards. (42 U.S.C. 6295(m)(1)(B)) The new proposed
standards in any such NOPR must be based on the criteria established
under 42 U.S.C. 6295(o) and follow the procedures established under 42
U.S.C. 6295(p). (42 U.S.C. 6295(m)(1)(B)) The criteria in 42 U.S.C.
6295(o) require that standards be designed to achieve the maximum
improvement in energy efficiency, which the Secretary determines is
technologically feasible and economically justified. (42 U.S.C.
6295(o)(2)(A)) In deciding whether a proposed standard is economically
justified, DOE must determine whether the benefits of the standard
exceed its burdens. (42 U.S.C. 6295(o)(2)(B)(i)) DOE must make this
determination after receiving comments on the proposed standard, and by
considering, to the greatest extent practicable, the following seven
statutory factors:
(1) The economic impact of the standard on manufacturers and

[[Page 83436]]

consumers of the products subject to the standard;
(2) The savings in operating costs throughout the estimated average
life of the covered products in the type (or class) compared to any
increase in the price, initial charges for, or maintenance expenses of
the covered products that are likely to result from the standard;
(3) The total projected amount of energy (or as applicable, water)
savings likely to result directly from the standard;
(4) Any lessening of the utility or the performance of the covered
products likely to result from the standard;
(5) The impact of any lessening of competition, as determined in
writing by the Attorney General, that is likely to result from the
standard;
(6) The need for national energy and water conservation; and
(7) Other factors the Secretary considers relevant.
(42 U.S.C. 6295(o)(2)(B)(i)(I)-(VII))

IV. Methodology and Discussion of Related Comments

This section addresses the analyses DOE has performed for this
proposed determination with regard to oil, electric, and weatherized
gas furnaces. Separate subsections address each component of DOE's
analyses. DOE used several analytical tools to estimate the impact of
potential energy conservation standards. The first tool is a
spreadsheet that calculates the LCC savings and PBP of potential energy
conservation standards. The NIA uses a second spreadsheet set that
provides shipments projections and calculates NES and net present value
of total consumer costs and savings expected to result from potential
energy conservation standards. These spreadsheet tools are available on
the website: <a href="http://www.regulations.gov/docket/EERE-2021-BT-STD-0031">www.regulations.gov/docket/EERE-2021-BT-STD-0031</a>.
The Joint Commenters stressed the importance of implementing the
recommendations of the recent National Academies of Sciences,
Engineering, and Medicine (``NAS'') report into all appliance
rulemakings. Specifically, the Joint Commenters highlighted three
recommendations from the report that they argued should be implemented
in rulemakings impacting WGFs: (1) DOE should pay greater attention to
the justification for the standards, adding that DOE should attempt to
find significant failures of private markets or irrational behavior by
consumers in the no-new-standards case to conclude that the standards
are economically justified; (2) DOE should place greater emphasis on
providing an argument for the plausibility and magnitude of any market
failure related to the energy efficiency gap in DOE's analysis; and (3)
DOE should give greater attention to a broader set of potential market
failures on the supply side, further commenting that this would include
not just how standards might reduce the number of competing firms but
also how they might impact price discrimination, technological
diffusion, and collusion. The Joint Commenters suggested DOE should
address these recommendations before analyzing whether new efficiency
standards are warranted. (Joint Commenters, No. 24 at pp. 2-3)
In response, DOE is addressing the recommendations of the NAS
report in a separate rulemaking in parallel with other ongoing
rulemakings, including this oil, electric, and weatherized gas furnace
NOPD. As discussed in section V.C of this document, DOE is tentatively
proposing that standards do not need to be amended, and the Department
has made this tentative determination consistent with EPCA's
requirements, including evaluation of economic justification of
standards, and applicable Executive orders.

A. Market and Technology Assessment

DOE develops information in the market and technology assessment
that provides an overall picture of the market for the products
concerned, including the purpose of the products, the industry
structure, manufacturers, market characteristics, and technologies used
in the products. This activity includes both quantitative and
qualitative assessments, based primarily on publicly-available
information. The subjects addressed in the market and technology
assessment for this proposed determination include: (1) a determination
of the scope and product classes, (2) manufacturers and industry
structure, (3) existing efficiency programs, (4) shipments information,
(5) market and industry trends, and (6) technologies or design options
that could improve the energy efficiency of consumer furnaces. The key
findings of DOE's market assessment are summarized in the following
sections.
1. Scope of Coverage
In this analysis, DOE relied on the definition of a furnace in 10
CFR 430.2, which defines a consumer ``furnace'' as a product which
utilizes only single-phase electric current, or single-phase electric
current or DC current in conjunction with natural gas, propane, or home
heating oil, and which--
(A) Is designed to be the principal heating source for the living
space of a residence;
(B) Is not contained within the same cabinet with a central air
conditioner whose rated cooling capacity is above 65,000 Btu per hour;
(C) Is an electric central furnace, electric boiler, forced-air
central furnace, gravity central furnace, or low-pressure steam or hot
water boiler; and
(D) Has a heat input rate of less than 300,000 Btu per hour for
electric boilers and low-pressure steam or hot water boilers and less
than 225,000 Btu per hour for forced-air central furnaces, gravity
central furnaces, and electric central furnaces.
Any product meeting the definition of a ``furnace'' is included in
DOE's scope of coverage. In the analysis for this NOPD, DOE focused
only on oil, electric, and weatherized gas furnaces. Non-weatherized
gas furnaces and mobile home gas furnaces are considered in a separate
rulemaking.\15\
---------------------------------------------------------------------------

\15\ See Docket No. EERE-2014-BT-STD-0031 which can be accessed
at <a href="http://www.regulations.gov">www.regulations.gov</a>.
---------------------------------------------------------------------------

a. Electric Furnaces
A basic electric furnace comprises an electric resistance heating
element and blower assembly. (Additionally, there are products that
include electrically-powered heat pumps, but these are separately
covered products not addressed here.) The electric resistance heating
elements of electric furnaces are highly efficient, and the efficiency
of these units already approaches 100 percent. DOE is unaware of any
technology options that can improve the efficiency of electric
furnaces, so DOE has tentatively determined that more-stringent
standards for electric furnaces would not be technologically feasible.
Therefore, DOE anticipates that the energy savings potential from
amended standards for EFs would be minimal. Consequently, DOE did not
consider amended AFUE standards for electric furnaces in the current
analysis.
b. Weatherized Oil-Fired Furnaces
DOE is not aware of any WOFs on the market, and, therefore, DOE did
not analyze amended standards for that product class. DOE has
tentatively determined that because there are no WOFs on the market,
there would be no potential energy savings from amended standards.
c. Fuel-Fired Heat Pumps
NEEA commented that DOE should consider fuel-fired heat pumps
within the broader WGF product category by updating the definition of
``central forced-air furnace'' in the Code of Federal Regulations.
(NEEA, No. 21 at p. 1) NEEA argued that fuel-fired heat

[[Page 83437]]

pumps with a heat input rate of less than 225,000 Btu per hour meet all
the criteria in the EPCA definition for a residential ``furnace'' with
the exception that the terms, ``electric central furnace, electric
boiler, forced-air central furnace, gravity central furnace, or low-
pressure steam or hot water boiler'' do not currently cover fuel-fired
heat pumps. NEEA commented that DOE has the authority to change those
definitions and stated that redefining ``forced-air central furnace''
would allow fuel-fired heat pumps to be regulated under the energy
conservation standards for oil, electric, and weatherized gas consumer
furnaces. (Id. at p. 2) Specifically, NEEA suggested that DOE should
change the definition of ``forced air central furnace'' to a gas or oil
burning furnace designed to supply heat through a system of ducts with
air as the heating medium. The combustion of gas or oil generates heat
that is either transferred to the air within a casing by conduction
through heat exchange surfaces or utilized to run a refrigeration cycle
that transfers heat to the air and is circulated through the duct
system by means of a fan or blower. NEEA commented that this definition
covers the two main fuel-fired heat pump technologies: fuel-fired
absorption heat pumps and engine-driven heat pumps. (Id.) NEEA also
commented that weatherized fuel-fired heat pumps should be considered
as another technology option within the WGF product category. NEEA
requested that DOE consider all possible technology options for gas-
fired furnaces to be on an even playing field. (Id. at p. 3)
NEEA argued that fuel-fired heat pumps are designed to replace
existing furnaces and boilers without the need to update existing
infrastructure and to provide flexibility for decarbonized fuels.
However, NEEA stated that fuel-fired heat pumps are not direct
replacements for heat pumps, since the primary fuel sources are
different. (NEEA, No. 21 at p. 3) NEEA commented that a 2020 case study
\16\ of a pre-commercial residential fuel-fired heat pump prepared for
DOE showed that the system can achieve over 140-percent AFUE, and field
demonstrations show 36-43 percent fuel savings compared to a condensing
furnace and 46-50 percent fuel savings compared to a non-condensing
furnace. (Id.) NEEA further commented that the 2020 case study showed
that there is significant potential in the residential market for a
reasonably priced, gas-fired absorption heat pump product. (Id.)
---------------------------------------------------------------------------

\16\ The case study, titled ``Pre-Commercial Scale-Up of a Gas-
Fired Absorption Heat Pump'' is available at <a href="http://www.osti.gov/biblio/1726247">www.osti.gov/biblio/1726247</a> (Last accessed June 14, 2023).
---------------------------------------------------------------------------

NEEA encouraged DOE to consider the building energy simulation and
comparison to field-derived results for fuel-fired heat pumps,
published by Purdue University in 2021.\17\ NEEA commented that this
report demonstrates that fuel-fired heat pumps provided the lowest
operating cost and highest carbon emissions savings compared to
furnaces, boilers, electric heat pumps, and various water heating
options. NEEA commented that fuel-fired heat pumps provide the same
primary heating function as conventional fuel-to-air furnaces with the
potential for significant energy savings. (Id.)
---------------------------------------------------------------------------

\17\ The Purdue report, titled ``Pathways to Decarbonization of
Residential Heating,'' is available at <a href="http://docs.lib.purdue.edu/ihpbc/354/">docs.lib.purdue.edu/ihpbc/354/</a> (Last accessed June 14, 2023).
---------------------------------------------------------------------------

In response to the comments by NEEA, DOE notes that fuel-fired heat
pumps do not meet the current definition of ``furnace,'' as they do not
meet criteria (C) in the definition outlined in section IV.A of this
document. As such, they were not considered in the scope of this
analysis. Further, the current test procedure for consumer furnaces, as
outlined in appendix N, does not include provisions for testing fuel-
fired heat pumps. Therefore, DOE is not considering amending the
consumer ``furnace'' definition to include these products at this time.
However, DOE will continue to investigate fuel-fired heat pumps and may
evaluate test procedure provisions for related to fuel-fired heat pumps
in a future rulemaking.
2. Technology Options
DOE has identified the following components as technology options
that have the potential to improve the AFUE rating of oil and
weatherized gas furnaces:

<bullet> Condensing secondary heat exchanger
<bullet> Heat exchanger improvements
[cir] Increased heat exchanger surface area
[cir] Heat exchanger surface features
[cir] Heat exchanger baffles and turbulators
<bullet> Two-stage and modulating combustion
<bullet> Pulse combustion
<bullet> Premix burners
<bullet> Burner derating
<bullet> Insulation improvements
[cir] Increased jacket insulations
[cir] Advanced forms of insulation
<bullet> Off-cycle dampers
[cir] Electromechanical flue damper
[cir] Electromechanical burner inlet damper
<bullet> Direct venting
<bullet> Concentric venting
<bullet> Low-pressure, air-atomized oil burner
<bullet> High-static oil burner
<bullet> Delayed-action oil pump solendoid valve

These technology options are described in more detail of chapter 3
of the November 2022 Preliminary Analysis TSD.\18\ As discussed in
section IV.A.1.a of this document, DOE did not identify any technology
options that would improve the AFUE of electric furnaces.
---------------------------------------------------------------------------

\18\ For this NOPD, DOE will not publish a Technical Support
Document (TSD) because no amended standard is proposed. The
methodology for the analyses conducted for the NOPD is largely the
same as in the Preliminary Analysis, and, thus, DOE references the
Preliminary Analysis TSD throughout this document.
---------------------------------------------------------------------------

In response to the November 2022 Preliminary Analysis, AHRI,
Lennox, and JCI commented that WGF accounts for a relatively small
share of the overall furnace market (~7 percent). (AHRI, No. 23 at p.
5; Lennox, No. 26 at p. 1; JCI, No. 25 at p. 2) \19\ AHRI and JCI
stated that the maximum feasible AFUE for WGF is 81 percent. (AHRI, No.
23 at p. 5; JCI, No. 25 at p. 2)
---------------------------------------------------------------------------

\19\ JCI's comments stated that WGFs are 7 percent of the WGF
market, but DOE interprets this comment to mean that WGFs are 7
percent of the overall furnace market.
---------------------------------------------------------------------------

JCI commented that further improvements in systems efficiency of
WGFs would require the product class use of condensing technology. JCI
commented that this change in the product offering is not practical
and, based on observed market share, not justified due to system design
and application constraints. (JCI, No. 25 at p. 2) JCI argued that the
practical application of condensing WGFs creates condensation in the
heat exchangers within the unit, which is not readily drained. JCI
added that the retained condensate will freeze in the off cycle,
preventing further operation of the furnace. (Id.)
Lennox stated that applicable furnace technology has not
significantly improved to overcome barriers to deploying higher-
efficiency noncondensing and condensing technologies that would justify
more-stringent AFUE standards for WGFs. (Lennox, No. 26 at p. 4)
In response to comments regarding condensing WGFs, DOE notes that
it has identified WGFs available on the market that use condensing
technology to achieve AFUE ratings up to 95 percent. Because these
types of products are available on the market, DOE finds them to be
technologically feasible and

[[Page 83438]]

considers condensing secondary heat exchangers to be an appropriate
technology option to analyze for these products. Additionally, in
response to JCI, when evaluating the cost of implementing technologies
such as condensing heat exchangers, DOE aims to include the additional
costs of other components that may be associated with installing a unit
with such technology, such as a condensate pump and drain hoses. The
analyses of these costs are discussed in subsequent sections of this
document (e.g., the LCC and PBP analyses and the NIA (see sections IV.E
and IV.G of this document, respectively)).
During the public meeting webinar, AGA requested clarification on
how vent dampers were applied in the analysis for weatherized gas
furnaces and noted that the test procedure would not give credit for a
vent damper on an outdoor weatherized gas furnace. (AGA, Public Meeting
Transcript, No. 28 at pp. 20-22) In response, dampers were not
considered for WGFs and are not part of the design pathway for
improving AFUE for those products. (See section IV.B.1.d of this
document for the efficiency levels and associated technology options
for WGFs.) DOE notes that Tables ES.3.2, ES.3.3, ES.3.19, and 7.4.1 in
the November 2022 Preliminary Analysis TSD indicated that vent dampers
were included for NWOFs and MHOFs; however, this was a typographical
error. DOE clarifies that vent dampers also were not part of the design
pathway considered for improving AFUE of NWOFs and MHOFs for the
preliminary analysis (nor are they for this NOPD analysis).
In chapter 3 of the November 2022 Preliminary Analysis TSD, DOE
also considered three technology options that could potentially reduce
the standby mode and off mode energy consumption of NWOFs, MHOFs, and
EFs. However, for the reasons explained in section III.A.3 of this
document, DOE has tentatively determined that it cannot establish
standby mode and off mode standards that meet the criteria of EPCA at
this time, so such technologies and standards are not considered
further.
3. Screening Analysis
DOE uses the following five screening criteria to determine which
technology options are suitable for further consideration in an energy
conservation standards rulemaking:
(1) Technological feasibility. Technologies that are not
incorporated in commercial products or in commercially-viable, existing
prototypes will not be considered further.
(2) Practicability to manufacture, install, and service. If it is
determined that mass production of a technology in commercial products
and reliable installation and servicing of the technology could not be
achieved on the scale necessary to serve the relevant market at the
time of the projected compliance date of the standard, then that
technology will not be considered further.
(3) Impacts on product utility. If a technology is determined to
have a significant adverse impact on the utility of the product to
subgroups of consumers, or result in the unavailability of any covered
product type with performance characteristics (including reliability),
features, sizes, capacities, and volumes that are substantially the
same as products generally available in the United States at the time,
it will not be considered further.
(4) Safety of technologies. If it is determined that a technology
would have significant adverse impacts on health or safety, it will not
be considered further.
(5) Unique-pathway proprietary technologies. If a technology has
proprietary protection and represents a unique pathway to achieving a
given efficiency level, it will not be considered further, due to the
potential for monopolistic concerns.
10 CFR part 430, subpart C, appendix A, sections 6(b)(3) and 7(b).
In summary, if DOE determines that a technology, or a combination
of technologies, fails to meet one or more of the listed five criteria,
it will be excluded from further consideration in the engineering
analysis.
a. Screened-Out Technologies
DOE eliminated the technologies listed in Table IV.1 from further
consideration as options to improve the AFUE (as measured by the DOE
test procedure) of NWOFs, MHOFs, and WGFs. The reasons for exclusion
associated with each technology are marked with an X. Additional
details about the reasons for exclusion are discussed in this section.

Table IV.1--Screened-Out Technologies
--------------------------------------------------------------------------------------------------------------------------------------------------------
Reasons for exclusion
----------------------------------------------------------------------------------
Practicability
Excluded technology options Applicable product to Adverse impacts Adverse impacts Unique-
class(es) Technological manufacture, on product on health or pathway
feasibility install, and utility safety proprietary
service technology
--------------------------------------------------------------------------------------------------------------------------------------------------------
Pulse combustion........................ WGF........................ ............... .............. ............... X ..............
Burner derating......................... WGF, NWOF, MHOF............ ............... .............. X ............... ..............
Low-pressure, air-atomized oil burner... NWOF, MHOF................. X .............. ............... ............... ..............
--------------------------------------------------------------------------------------------------------------------------------------------------------

Pulse Combustion
Pulse combustion burners operate on self-sustaining resonating
pressure waves that alternately rarefy the combustion chamber (drawing
a fresh fuel-air mixture into the chamber) and pressurize it (causing
ignition by compression heating of the mixture to its flash point).
Pulse combustion systems are capable of direct venting without the
assistance of mechanical draft. Because the pulse combustion process is
very efficient, pulse combustion is generally used in condensing
appliances.
In contrast to natural draft and induced draft furnaces, pulse
combustion furnaces generate positive pressure in the heat exchanger.
Although these products are generally safe, this could create a
potential safety problem if the heat exchanger breeches, because
combustion products can contaminate the circulation air stream.
Pulse combustion gas furnaces were available in the United States
for more than two decades. However, they were withdrawn from the market
within the past 20 years because manufacturers found that competing
technologies, such as condensing secondary heat exchangers, cost
significantly less to

[[Page 83439]]

manufacture and operate. In light of the ability of furnace
manufacturers to cost-effectively achieve high efficiencies without the
use of pulse combustion, the technology's risks do not outweigh its
benefits for consumer furnace applications. Accordingly, DOE did not
further analyze this technology option as part of this NOPD.
Burner Derating
Decreasing the burner size to increase the ratio of heat transfer
area to fuel input, or burner derating, can increase the AFUE rating of
furnaces. However, because heat output rate is directly related to
burner size, derating also reduces the amount of heated air available
to the consumer. This reduction in heat output adversely affects the
utility to consumers. Therefore, DOE did not consider this technology
option.
Low-Pressure, Air-Atomized Oil Burner
To overcome the low input limitations of conventional oil burners,
Brookhaven National Laboratory developed a low-pressure, air-atomized
oil burner that can operate at firing rates as low as 0.25 gallons of
oil per hour (10 kW). In addition, it can operate with low levels of
excess combustion air (less than 10 percent) for lean-burning, ultra-
clean combustion. A lower level of excess air generally improves AFUE
rating. This burner design is also capable of firing fuel at a high or
low input rate, which is manually actuated by a switch, allowing the
burner to closely match the smaller heating loads of well-insulated
modern homes.
While tests performed at the Brookhaven National Laboratory seem to
have successfully demonstrated enhanced oil boiler AFUE performance per
the DOE test procedure for furnaces and boilers, the prototype was
never tested on a furnace. Therefore, the technological feasibility of
the burner prototype for incorporation into a residential oil-fired
furnace remains unknown, so DOE does not consider low-pressure, air-
atomized oil burners to be a viable technology for efficiency
improvement at this time.
b. Remaining Technologies
After reviewing each technology, DOE did not screen out the
following technology options and considers them as design options in
the engineering analysis:

<bullet> Condensing secondary heat exchanger
<bullet> Heat exchanger improvements
[cir] Increased heat exchanger surface area
[cir] Heat exchanger surface features
[cir] Heat exchanger baffles and turbulators
<bullet> Two-stage and modulating combustion
<bullet> Premix burners
<bullet> Insulation improvements
[cir] Increased jacket insulations
[cir] Advanced forms of insulation
<bullet> Off-cycle dampers
[cir] Electromechanical flue damper
[cir] Electromechanical burner inlet damper
<bullet> Direct venting
<bullet> Concentric venting
<bullet> High-static oil burner
<bullet> Delayed-action oil pump solendoid valve

DOE determined that these technology options are technologically
feasible because they are being used or have previously been used in
commercially-available products or working prototypes. DOE also finds
that all of the remaining technology options meet the other screening
criteria (i.e., practicable to manufacture/install/service, do not
result in adverse impacts on consumer utility, product availability,
health, or safety, and do not utilize unique-pathway proprietary
technologies).
In response to the November 2022 Preliminary Analysis, Lennox
commented that DOE has adequately captured most of the technology
options and screened appropriately for gas and oil products. (Lennox,
No. 26 at p. 4) However, Lennox stated that the alternatives for
insulation improvement generally have not been demonstrated in furnace
applications and may not be suitable for use in high-temperature
applications near combustion surfaces. The commenter stated that
insulation used in furnace applications must meet temperature, flame
spread, and smoke requirements per the applicable safety standards, and
that toxicity and off-gassing must also be considered. Lennox argued
that just because an insulation material has better insulating
characteristics does not mean that it is suitable for high-temperature
furnace applications. (Lennox, No. 26 at p. 6)
In response, DOE notes that insulation improvements may be achieved
with thicker layers of existing insulation materials as opposed to
necessarily requiring new insulating materials. Therefore, DOE is not
screening out insulation improvements in this NOPD. Additionally, as
outlined in section IV.B.1 of this document, insulation improvements
are not required to meet any of the efficiency levels analyzed in this
NOPD.
4. Product Classes
In general, when evaluating and establishing energy conservation
standards for a type (or class) of covered product, DOE divides the
covered product into classes by: (1) the type of energy used; (2) the
capacity of the product, or (3) any other performance-related feature
which other products within such type (or class) do not have that
affects energy efficiency and justifies different standard levels,
considering factors such as consumer utility and any other factors the
Secretary deems appropriate. (42 U.S.C. 6295(q))
In this case, DOE divides furnaces into seven product classes based
on fuel type (gas, oil, or electric), whether the furnace is
weatherized or not, and whether the furnace is designed for use only in
mobile homes or not. The current product classes for furnaces are (1)
non-weatherized gas furnaces, (2) mobile home gas furnaces, (3) non-
weatherized oil-fired furnaces, (4) mobile home oil-fired furnaces, (5)
weatherized gas furnaces, (6) weatherized oil-fired furnaces, and (7)
electric furnaces. 10 CFR 430.32(e)(1)(ii). As noted previously, non-
weatherized gas furnaces and mobile home gas furnaces are being
addressed in a separate rulemaking process.\20\ Therefore, the product
classes that DOE considered for this NOPD are NWOFs, MHOFs, WGFs, WOFs,
and EFs. However, for the reasons discussed in sections IV.A.1.a and
IV.A.1.b of this document, potential amended energy conservation
standards were not analyzed for EFs or WOFs.
---------------------------------------------------------------------------

\20\ See Docket No. EERE-2014-BT-STD-0031.
---------------------------------------------------------------------------

In summary, DOE assessed potential amended energy conservation
standards in terms of AFUE for the NWOF, MHOF, and WGF product classes
in this NOPD. Again, for the reasons discussed in section III.A.3 of
this document, DOE did not analyze new or amended standby mode/off mode
power standards for any product classes this time.

B. Engineering Analysis

The purpose of the engineering analysis is to establish the
relationship between the efficiency and cost of NWOFs, MHOFs, and WGFs.
There are two elements to consider in the engineering analysis: (1) the
selection of efficiency levels to analyze (i.e., the ``efficiency
analysis'') and (2) the determination of product cost at each
efficiency level (i.e., the ``cost analysis''). In determining the
performance of higher-efficiency products, DOE considers technologies
and design option combinations not eliminated by the screening
analysis. For each product class, DOE estimates

[[Page 83440]]

the baseline cost, as well as the incremental cost for the product at
efficiency levels above the baseline efficiency. The output of the
engineering analysis is a set of cost-efficiency ``curves'' that are
used in downstream analyses (i.e., the LCC and PBP analyses and the
NIA).
1. Efficiency Analysis
DOE typically uses one of two approaches to develop energy
efficiency levels for the engineering analysis: (1) relying on observed
efficiency levels in the market (i.e., the efficiency-level approach),
or (2) determining the incremental efficiency improvements associated
with incorporating specific design options to a baseline model (i.e.,
the design-option approach). Using the efficiency-level approach, the
efficiency levels established for the analysis are determined based on
the market distribution of existing products (in other words, based on
the range of efficiencies and efficiency level ``clusters'' that
already exist on the market). Using the design option approach, the
efficiency levels established for the analysis are determined through
detailed engineering calculations and/or computer simulations of the
efficiency improvements from implementing specific design options that
have been identified in the technology assessment. DOE may also rely on
a combination of these two approaches. For example, the efficiency-
level approach (based on actual products on the market) may be extended
using the design option approach to interpolate to define ``gap fill''
levels (i.e., to bridge large gaps between other identified efficiency
levels) and/or to extrapolate to the ``max-tech'' level (particularly
in cases where the ``max-tech'' level exceeds the maximum efficiency
level currently available on the market).
For the current analysis, DOE generally employed an efficiency-
level approach.
a. Baseline Efficiency
For each product class, DOE generally selects a baseline model as a
reference point for each class, and measures anticipated changes to the
product resulting from potential energy conservation standards against
the baseline model. The baseline model in each product class represents
the characteristics of a product typical of that class (e.g., capacity,
physical size). Generally, a baseline model is one that just meets
current energy conservation standards, or, if no standards are in
place, the baseline is typically the most common or least-efficient
unit on the market.
A basic consumer gas furnace comprises a hot surface or direct
spark ignition system, tubular in-shot burners, noncondensing heat
exchanger, blower assembly (including motor and forward-swept fan
blade), mechanical draft combustion fan assembly, and automatic
controls. A basic consumer oil-fired furnace comprises an interrupted
spark ignition system, power burner, noncondensing heat exchanger, and
blower assembly. Details and descriptions of each of these components
can be found in chapter 3 of the November 2022 Preliminary Analysis
TSD.
The identification of baseline units requires establishing the
baseline efficiency level. In cases where there is an existing
standard, DOE typically defines baseline units as units with
efficiencies equal to the current Federal energy conservation
standards. However, for MHOFs, DOE did not identify any currently
available units at the minimum standard level (75-percent AFUE), and,
therefore, DOE analyzed 80-percent AFUE as the baseline level for
MHOFs, as it was the lowest efficiency available on the market. The
baseline AFUE levels analyzed for the subject NWOFs, MHOFs, and WGFs,
as measured by AFUE, along with the typical characteristics of a
baseline unit, are shown in Table IV.2.

Table IV.2--Baseline AFUE Levels Analyzed
------------------------------------------------------------------------
Baseline AFUE
Product class level (%) Typical characteristics
------------------------------------------------------------------------
NWOF........................... 83 --Single-stage burner.
--Electronic ignition.
--Aluminized-steel heat
exchanger.
--Indoor blower fan
including PSC motor *
and forward-curved
blower impeller blade.
MHOF........................... 80 --Single-stage burner.
--Electronic ignition.
--Aluminized-steel heat
exchanger.
--Indoor blower fan
including PSC motor *
and forward-curved
blower impeller blade.
--Direct venting
system.
--Built-in evaporator
coil cabinet.
WGF............................ 81 --Draft inducer.
--Single-stage burner.
--Electronic ignition.
--Aluminized-steel
tubular heat
exchanger.
--Indoor blower fan
including BPM * motor
and forward-curved
blower impeller blade.
------------------------------------------------------------------------
* Residential furnace fans incorporated into NWOFs, MHOFs, and WGFs
manufactured on and after July 3, 2019 must meet fan energy rating
(``FER'') standards specified in 10 CFR 430.32(y). The blower fan
motor (among other factors) can affect FER. Brushless permanent magnet
(``BPM'') motors have become the predominant motor type at the
baseline AFUE levels for WGFs, and permanent split capacitor (``PSC'')
motors, which are less efficient than BPM motors, are common for NWOFs
and MHOFs.

Typically, baseline units are representative of the minimum
technology and lowest-cost product that manufacturers can produce.
Accordingly, in the teardown analysis, DOE examined a variety of
baseline units that incorporate the various baseline design options for
furnace components.
b. Intermediate Efficiency Levels
DOE also analyzed intermediate efficiency levels for NWOFs and
MHOFs. However, for WGFs, DOE has

[[Page 83441]]

not found any models on the market between the baseline (81-percent
AFUE) and max-tech level (95-percent AFUE) and has, therefore, not
analyzed any intermediate efficiency levels for this product class. The
intermediate efficiency levels analyzed for NWOFs are 85-percent and
87-percent AFUE, and the intermediate efficiency levels analyzed for
MHOFs are 83-percent and 85-percent AFUE. To improve efficiency from
the baseline to these intermediate efficiency levels, manufacturers
generally increase the surface area of the heat exchanger, which
increases the heat transfer area and, thus, allows manufacturers to
achieve higher efficiencies. The intermediate efficiency levels
analyzed are representative of common efficiency levels available on
the market. DOE reviewed its own Compliance Certification Database
(``CCD''), as well as AHRI's product certification directories,\21\
California Energy Commission's (``CEC's'') database,\22\ manufacturer
catalogs, and other publicly-available literature to inform its
selection of intermediate efficiency levels.
---------------------------------------------------------------------------

\21\ AHRI's Directory of Certified Product Performance
(Available at: <a href="http://www.ahridirectory.org/Search/SearchHome">www.ahridirectory.org/Search/SearchHome</a>) (Last
accessed Sept. 1, 2023).
\22\ California Energy Commission's MAEDbs (Available at:
<a href="http://cacertappliances.energy.ca.gov/Pages/ApplianceSearch.aspx">cacertappliances.energy.ca.gov/Pages/ApplianceSearch.aspx</a>) (Last
accessed Sept. 1, 2023).
---------------------------------------------------------------------------

In response to the November 2022 Preliminary Analysis, NYSERDA
encouraged DOE to consider an additional efficiency level (EL) between
87-percent and 96-percent AFUE for oil-fired furnaces. NYSERDA stated
it anticipates that an AFUE above 90 percent may maximize savings for
consumers. NYSERDA added that based on its review of the preliminary
TSD material, the DOE Compliance Certification Management System, and
AHRI's database, NYSERDA has seen availability of oil furnaces above
DOE's proposed EL 2. (NYSERDA, No. 19 at p. 2)
The Joint Advocates similarly encouraged DOE to evaluate an
intermediate condensing EL for NWOFs. The Joint Advocates commented
that they strongly support DOE's decision to include a max-tech EL at
96-percent AFUE and that DOE should also consider an EL between EL 2
(i.e., 87-percent AFUE) and EL 3 (i.e., 96-percent AFUE). The Joint
Advocates further commented that the CCD shows condensing models
suggesting that an intermediate EL with condensing technology is
feasible for condensing NWOFs. (Joint Advocates, No. 22 at pp. 2-3)
As discussed previously, DOE's choice of intermediate efficiency
levels was informed by publicly-available databases and manufacturer
literature, and the chosen efficiency levels were intended to be
representative of common efficiency levels available on the market. In
contrast, as discussed in section III.D.2 of this document, DOE is
statutorily obligated to analyze the efficiency level that corresponds
to the maximum improvement in energy efficiency or maximum reduction in
energy use that is technologically feasible for each product class. (42
U.S.C. 6295(p)(1)) However, because there are very few condensing-level
NWOFs on the market, efficiency levels between 87-percent and 96-
percent AFUE would not be representative of typical efficiency levels.
Therefore, DOE is not analyzing an EL between 87-percent and 96-percent
AFUE for NWOFs in this NOPD.
c. Maximum Technology (``Max-Tech'') Efficiency Levels
As part of DOE's analysis, the maximum available efficiency level
is the highest efficiency unit currently available on the market. DOE
also defines a ``max-tech'' efficiency level to represent the maximum
possible efficiency for a given product.
DOE conducted an analysis of the market and a technology assessment
and researched current product offerings to determine the max-tech
efficiency levels. The max-tech level identified in each product class
corresponds to the highest-AFUE furnace available on the market, which
DOE tentatively concludes corresponds to the maximum technologically
feasible levels at this time. For NWOFs, DOE identified a design that
achieves a max-tech efficiency level of 96-percent AFUE. For MHOFs, the
maximum efficiency level that DOE identified was 87-percent AFUE. For
WGFs, DOE identified a max-tech efficiency level design that achieves
95-percent AFUE. For WGFs and NWOFs, the max-tech efficiency level is
currently achieved by use of a condensing secondary heat exchanger. A
constant-airflow BPM indoor blower motor was also implemented as the
motor design option for the max-tech efficiency level for NWOFs because
the only NWOF model on the market available at this level includes a
constant-airflow BPM motor, and it is unclear if this level is
achievable without a constant-airflow fan. For MHOFs, the max-tech
efficiency level is currently achieved by use of a heat exchanger with
increased surface area.
Lennox stated that the DOE weatherized gas furnace standard of 81-
percent AFUE is at the maximum practical level that is economically
justified and provides reliable performance. (Lennox, No. 26 at p. 6)
Lennox stated that, as the AFUE of weatherized gas furnace products is
increased, heat exchanger and flue temperatures are reduced, which
increases the risk of condensing operation and corrosion to the heat
exchanger. (Id.) Lennox stated that while condensing weatherized gas
furnaces are feasible, they require secondary heat exchangers that
increase static pressure in the airstream and pressure drop within the
heat exchanger. Further, Lennox stated that the additional resistance
must be overcome with increased electrical power at all operating
conditions, including cooling and ventilation mode. (Id. at pp. 6-7)
Lennox stated that the measures to prevent freezing of condensate in
weatherized gas furnaces and condensate disposal add cost and consume
additional energy. (Id. at p. 7) Lennox commented that these methods
include maintaining the temperature of the condensate system above
freezing by either conditioning the condensate system using electric
heat tape or routing the condensate disposal system through conditioned
space. The commenter stated that the use of heat tape consumes
additional energy. Lennox stated that routing the condensate disposal
system through conditioned space is not technically feasible or
economically viable for a weatherized product that is contained
outdoors. (Id.) Lennox further commented that another method to prevent
freezing in weatherized gas furnaces is to install a pit or trench
condensate drainage system that extends below the frostline and also
neutralizes the acidic condensate created during combustion. Lennox
stated that the frost line in the United States varies greatly by
region from 5'' in Georgia to 80'' in Minnesota. Lennox stated that the
method of installing a pit or trench condensate drainage system that
extends below the frostline and neutralizes the acidic condensate
created during condensing combustion may work in some mild climates at
a reasonable cost but would be expensive to install and maintain in
colder climates. (Id.)
In response, the Department notes the fact that condensing
weatherized gas furnaces currently exist on the market demonstrates
that they are technologically feasible. DOE accounts for costs that may
be associated with the installation of condensing systems, including
additional costs of heat tape

[[Page 83442]]

and/or a condensate pump suitable to meet the need of an unconditioned
space, which is discussed further in section IV.E of this document. The
financial feasibility of higher efficiency levels is discussed further
in section V of this document.
JCI commented it is unaware of any condensing MHOFs commercially
available today. (JCI, No. 25 at p. 2) AHRI also commented that it is
unaware of any commercially-available condensing MHOFs. (AHRI, No. 23
at p. 5) AHRI commented that the feasibility of moving to a condensing
heat exchanger for MHOFs is low. AHRI added that there are challenges
with maintaining airflow options and footprint size to allow for an
easy replacement. (Id.)
In response, DOE agrees that there are currently no condensing
MHOFs on the market, and the Department has not considered an
efficiency level for MHOFs that requires a condensing heat exchanger as
there are no data to indicate that it would be feasible for use in
MHOFs.
d. Summary of Efficiency Levels Analyzed
DOE presents AFUE efficiency levels analyzed along with the
technologies that are expected to be used to increase energy efficiency
above the baseline efficiency level for NWOFs, MHOFs, and WGFs in Table
IV.3, Table IV.4 and Table IV.5, respectively.

Table IV.3--AFUE Efficiency Levels and Technologies Used at Each
Efficiency Level Above Baseline for NWOFs
------------------------------------------------------------------------
Description of
Efficiency level AFUE (%) technologies typically
incorporated
------------------------------------------------------------------------
0--Baseline.................... 83 See Table IV.2 for
baseline features.
1.............................. 85 Baseline EL + Increased
heat exchanger area.
2.............................. 87 EL 1 + Increased heat
exchanger area.
3--Max-tech.................... 96 EL 2 + Addition of
condensing secondary
heat exchanger (and
associated components,
sensors, etc.) +
Constant-airflow BPM
motor.
------------------------------------------------------------------------

Table IV.4--AFUE Efficiency Levels and Technologies Used at Each
Efficiency Level Above Baseline for MHOFs
------------------------------------------------------------------------
Description of
Efficiency level AFUE (%) technologies typically
incorporated
------------------------------------------------------------------------
0--Baseline.................... 80 See Table IV.2 for
baseline features.
1.............................. 83 Baseline EL + Increased
heat exchanger area.
2.............................. 85 EL 1 + Increased heat
exchanger area.
3--Max-tech.................... 87 EL 2 + Increased heat
exchanger area.
------------------------------------------------------------------------

Table IV.5--AFUE Efficiency Levels and Technologies Used at Each
Efficiency Level Above Baseline for WGFs
------------------------------------------------------------------------
Description of
EL AFUE (%) technologies typically
incorporated
------------------------------------------------------------------------
0--Baseline.................... 81 See Table IV.2 for
baseline features.
1--Max-tech.................... 95 Baseline EL + Addition
of condensing
secondary heat
exchanger (and
associated components,
sensors, etc.).
------------------------------------------------------------------------

2. Cost Analysis
The cost analysis portion of the Engineering Analysis is conducted
using one or a combination of cost approaches. The selection of cost
approach depends on a suite of factors, including the availability and
reliability of public information, characteristics of the regulated
product, and the availability and timeliness of purchasing the product
on the market. The cost approaches are summarized as follows:
[ballot] Physical teardowns: Under this approach, DOE physically
dismantles a commercially-available product, component-by-component, to
develop a detailed bill of materials for the product.
[ballot] Catalog teardowns: In lieu of physically deconstructing a
product, DOE identifies each component using parts diagrams (available
from manufacturer websites or appliance repair websites, for example)
to develop the bill of materials for the product.
[ballot] Price surveys: If neither a physical nor catalog teardown
is feasible (e.g., for tightly integrated products such as fluorescent
lamps, which are infeasible to disassemble and for which parts diagrams
are unavailable), cost-prohibitive, or otherwise impractical (e.g.,
large commercial boilers), DOE conducts price surveys using publicly-
available pricing data published on major online retailer websites and/
or by soliciting prices from distributors and other commercial
channels.
In the present case, DOE conducted the analysis using a combination
of physical and catalog teardowns. DOE estimated the manufacturer
production cost (``MPC'') associated with each efficiency level to
characterize the cost-efficiency relationship of improving consumer
furnace performance, in terms of AFUE.
The units selected for the teardown analysis spanned a range of
manufacturers and efficiencies for commercially-available products that
are the subject of this rulemaking. Products were selected that have
characteristics of typical products on the market at a representative
input capacity. WGFs selected for physical teardown generally had input
capacities of approximately 80 thousand British thermal units per hour
(``kBtu/h''), while oil units selected for physical teardown generally
had input capacities of approximately 105 kBtu/h. These capacities were
determined to be a

[[Page 83443]]

representative input capacity for WGFs and for NWOFs and MHOFs,
respectively, based on information gathered as part of the market and
technology assessment (see section IV.A of this document), as well as
discussions with manufacturers. Where needed, catalog teardowns were
also conducted to supplement the physical teardowns. DOE estimated the
manufacturing cost for each furnace selected for teardown by
disassembling the furnace and developing a bill of materials (``BOM'').
The resulting BOM provides the basis for the MPC estimates for products
at various efficiency levels spanning the full range of efficiencies
from the baseline to max-tech.
To account for manufacturers' non-production costs and profit
margin, DOE applies a non-production cost multiplier (the manufacturer
markup) to the MPC. The resulting manufacturer selling price (``MSP'')
is the price at which the manufacturer distributes a unit into
commerce. DOE developed an average manufacturer markup by examining the
annual Securities and Exchange Commission (``SEC'') 10-K reports filed
by publicly-traded manufacturers primarily engaged in heating,
ventilation, and air conditioning (``HVAC'') manufacturing whose
combined product range includes oil and weatherized gas furnaces. The
manufacturer markup estimates are consistent with the manufacturer
markups developed for a final rule for furnace fan energy conservation
standards published in the Federal Register on July 3, 2014. 79 FR
38130. Specifically, DOE estimates the industry average manufacturer
markup to be 1.35 for NWOFs, 1.29 for MHOFs, and 1.27 for WGFs.
a. Teardown Analysis
For the teardown analysis, DOE used a total of 31 teardowns of
consumer furnaces as the basis for calculating industry MPCs. The units
DOE selected for teardown are manufactured in considerable volume, are
commonly available, and have features that DOE believes are
representative of the most common characteristics (i.e., input
capacity, configuration, and heat exchanger type) of each product
class. As discussed previously, most physical teardown units had input
capacities of approximately 80 kBtu/h for WGFs or 105 kBtu/h for NWOFs
and MHOFs, which DOE considers to be representative of those furnace
product classes. To the extent possible, all major efficiency levels
and technologies were captured in the selection of models for the
teardown analysis. WGF and NWOF teardowns were considered separately.
Due to the similarity observed in NWOF and MHOF designs available
in the market, DOE tentatively concluded that the costs associated with
increasing the energy efficiency of MHOFs are equivalent to the costs
for NWOFs. A MHOF teardown was used to examine key differences between
NWOFs and MHOFs and confirmed that the MPCs of MHOFs could be estimated
based on the NWOF teardowns. Therefore, DOE based MPC estimates for
MHOFs at each efficiency level analyzed largely on teardowns of NWOFs
at that efficiency level.
Whenever possible, DOE examined multiple models from a given
manufacturer that capture different design options and used them as
direct points of comparison. The teardown selections also minimized the
incorporation of non-efficiency-related premium features, which
otherwise could inflate the incremental manufacturing cost of achieving
higher efficiency levels.
DOE examined products with a variety of indoor blower motor
technologies and combustion systems (i.e., single-stage, two-stage, or
modulating). DOE also examined products with PSC, constant-torque BPM,
and constant-airflow BPM indoor blower motors. As further discussed in
section IV.B.2.b of this document, cost adders were developed for these
technologies and applied in the downstream analyses to estimate the
manufacturing cost of going from one technology to another with higher
efficiency (e.g., using a constant-airflow BPM instead of a constant-
torque BPM, or two-stage combustion instead of single-stage
combustion).
b. Cost Estimation Method
DOE assigned costs of labor, materials, and overhead to each part,
whether purchased or produced in-house. DOE then aggregated single-part
costs into major assemblies (e.g., packaging, cabinet assembly, heat
exchanger, burner system/gas train, exhaust subassembly, fan system,
controls) and summarized these costs in a spreadsheet BOM. DOE repeated
this same process for every physical and catalog teardown in the
engineering analysis.
Analytical inputs related to manufacturer practices and cost
structure play an important role in estimating the final cost of a
product. DOE used inputs regarding the manufacturing process parameters
(e.g., equipment use, labor rates, tooling depreciation, and cost of
purchased raw materials) to determine the value for each furnace
component. DOE collected information on labor rates, tooling costs, raw
material prices, and other factors to use as inputs into the cost
estimates. DOE determined values for these parameters using internal
expertise and confidential information available to its contractors,
some of which was obtained via confidential interviews with
manufacturers. For purchased parts, DOE estimates the purchase price
based on volume-variable price quotations and detailed discussions with
manufacturers and component suppliers. DOE then summed the values of
the furnace components into assembly costs and, finally, the total MPC
for the entire furnace.
The MPC includes material, labor, and depreciation costs, as well
as the overhead costs associated with the manufacturing facility.
Material costs include both raw materials and purchased-part costs.
Labor costs include fabrication, assembly, and indirect and overhead
(burdened) labor rates. Depreciation costs include production equipment
depreciation, tooling depreciation, and building depreciation. The
overhead costs associated with the manufacturing facility include
indirect process costs, utilities, equipment and building maintenance,
and reworking defective parts/units.
DOE determined the costs of raw materials based on manufacturer
interviews, quotes from suppliers, and secondary research. Past results
are updated periodically and/or inflated to present-day prices using
indices from resources such as MEPS Intl.,\23\ PolymerUpdate,\24\ the
U.S. Geologic Survey (``USGS''),\25\ and the Bureau of Labor Statistics
(``BLS'').\26\ Metal raw material prices, such as stainless steel and
other sheet metals, are estimated on the basis of five-year averages to
smooth out spikes in demand. Other ``raw'' materials such as plastic
resins, insulation materials, etc. are estimated on a current-market
basis. For non-metal raw material prices, DOE used prices based on
current market data (as of December 2022), rather than a 5-year
average, because non-metal raw materials have not experienced the same

[[Page 83444]]

level of price volatility in recent years as metal raw materials.
---------------------------------------------------------------------------

\23\ For more information on MEPS Intl, please visit:
<a href="http://www.meps.co.uk/">www.meps.co.uk/</a> (Last accessed Sept. 5, 2023).
\24\ For more information on PolymerUpdate, please visit:
<a href="http://www.polymerupdate.com">www.polymerupdate.com</a> (Last accessed Sept. 5, 2023).
\25\ For more information on the USGS metal price statistics,
please visit <a href="http://www.usgs.gov/centers/nmic/commodity-statistics-and-information">www.usgs.gov/centers/nmic/commodity-statistics-and-information</a> (Last accessed Sept. 5, 2023).
\26\ For more information on the BLS producer price indices,
please visit: <a href="http://www.bls.gov/ppi/">www.bls.gov/ppi/</a> (Last accessed Sept. 5, 2023).
---------------------------------------------------------------------------

DOE characterized parts based on whether manufacturers fabricated
them in-house or purchased them from outside suppliers. For fabricated
parts, DOE estimated the price of intermediate materials (e.g., tube,
sheet metal) and the cost of forming them into finished parts. For
purchased parts, DOE estimated the purchase prices paid to the original
equipment manufacturers (``OEMs'') of these parts, based on discussions
with manufacturers during confidential interviews. Whenever possible,
DOE obtained price quotes directly from the component suppliers used by
furnace manufacturers whose products were examined in the engineering
analysis. DOE determined that the components in Table IV.6 are
generally purchased from outside suppliers.

Table IV.6--Purchased Furnace Components
------------------------------------------------------------------------
Assembly Purchased sub-assemblies
------------------------------------------------------------------------
Burner/Exhaust................... Gas valve.
Spark igniter.
Draft inducer assembly.
Blower........................... Indoor blower fan blade.
Indoor blower fan motor.
Controls......................... Control boards.
Capacitors, transformers, contactors,
switches, etc.
------------------------------------------------------------------------

Certain factory parameters, such as fabrication rates, labor rates,
and wages, also affect the cost of each unit produced. DOE factory
parameter assumptions were based on internal expertise and manufacturer
feedback. Table IV.7 lists the factory parameter assumptions used in
the analysis. For the engineering analysis, these factory parameters,
including production volume, are the same at every efficiency level.
The production volume used at each efficiency level corresponds with
the average production volume, per manufacturer, if 100 percent of all
units manufactured were at that efficiency level. This production
volume was estimated based on historical shipments. These assumptions
are generalized to represent typical production and are not intended to
model a specific factory.

Table IV.7--Factory Parameter Assumptions
----------------------------------------------------------------------------------------------------------------
Parameter Oil furnace estimate WGF estimate
----------------------------------------------------------------------------------------------------------------
Actual Annual Production Volume (units/ 5,000 units/year.................. 500,000 units/year.
year).
Purchased Parts Volume.................. 5,000 units/year.................. 100,000 units/year.
Workdays Per Year (days)................ 250............................... 250.
Assembly Shifts Per Day (shifts)........ 1................................. 2.
Fabrication Shifts Per Day (shifts)..... 2................................. 2.
Fabrication Labor Wages ($/h)........... 16................................ 16.
Assembly Labor Wages ($/h).............. 16................................ 16.
Length of Shift (hrs)................... 8................................. 8.
Average Equipment Installation Cost (% 10%............................... 10%.
of purchase price).
Fringe Benefits Ratio................... 50%............................... 50%.
Indirect to Direct Labor Ratio.......... 33%............................... 33%.
Average Scrap Recovery Value............ 30%............................... 30%.
Worker Downtime......................... 10%............................... 10%.
Burdened Assembly Labor Wage ($/h)...... 24................................ 24.
Burdened Fabrication Labor Wage ($/h)... 24................................ 24.
Supervisor Span (workers/supervisor).... 25/1.............................. 25/1.
Supervisor Wage Premium (over 30%............................... 30%.
fabrication and assembly wage).
----------------------------------------------------------------------------------------------------------------

Indoor Blower Motor Costs
As discussed in section IV.B.1.a of this document, the baseline
design for WGFs includes a BPM motor. DOE research suggests that the
predominant BPM indoor blower motors sold on the market today are
either a constant-torque (``CT-BPM'') or a constant-airflow (``CA-
BPM'') design. Both types of motors rely on electronic variable-speed
motor systems that are typically mounted in an external chassis to the
back of the motor. CA-BPM motors utilize feedback control to adjust
torque based on ESP in order to maintain a desired airflow. This
differentiates them from CT-BPM motors, which will maintain torque and
likely decrease airflow output in environments with high ESPs. CT-BPMs
are capable of achieving airflows similar to CA-BPMs but are generally
less expensive. Therefore, DOE considered the baseline design to
include a CT-BPM motor for the WGF product class and determined the
incremental cost of a CA-BPM motor.
DOE's review of the market showed that PSC motors are still being
used in some NWOFs and MHOFs, so the final MPC results are presented
based on a PSC motor at the baseline through 87-percent AFUE. To
account for the variety of motor technologies available on the market,
DOE determined the incremental cost associated with use of various
types of more-efficient BPM fan motors as compared to baseline PSC
motors for NWOFs and MHOFs. Additionally, for NWOFs, a constant-airflow
BPM indoor blower motor was implemented as the motor design option for
the max-tech efficiency level because the only NWOF model on the market
available at this level includes a constant-airflow BPM motor, and it
is unclear if this level is achievable without a constant-airflow fan.
For the NWOF efficiency levels below max-tech and for all MHOF
efficiency levels, DOE calculated the additional cost to switch from a
PSC blower motor to either a constant-torque or a constant-airflow BPM
motor. As discussed in Chapter 8 of the November 2022 Preliminary
Analysis TSD, these costs are applied in the LCC and PBP analyses to
determine the MPC of a furnace with each motor technology in order to
better represent typical costs to consumers for NWOFs and MHOFs.
Constant-airflow BPM blower motors are sometimes used as a utility-
enhancing feature on units below the max-tech efficiency level. The
adders are outlined in Table IV.8.

[[Page 83445]]

Table IV.8--Cost Adders for BPM Blower Motors
----------------------------------------------------------------------------------------------------------------
Incremental Incremental
Input capacity cost increase cost increase
Product class (kBtu/h) for BPM-CT for BPM-CA
(2022$) (2022$)
----------------------------------------------------------------------------------------------------------------
NWOF, MHOF...................................................... 105 $30.65 $80.48
WGF............................................................. 80 37.94 59.92
----------------------------------------------------------------------------------------------------------------

Multistage Furnaces
The market for WGFs contains a significant number of two-stage
furnaces that are rated at the same efficiency as single-stage
furnaces. DOE believes consumers sometimes choose to purchase two-stage
products for the additional thermal comfort offered by furnaces with
multiple stages of heating output. DOE determined that oil units with
multi-staging were rare and, thus, not representative of the market, so
adders were not developed for the NWOF and MHOF product classes. Where
applicable, the additional cost to change to a two-stage furnace
includes the added cost of a two-stage gas valve, a two-speed inducer
assembly, an additional pressure switch, and additional controls and
wiring. The additional cost to change to a modulating furnace includes
the added cost of a modulating gas valve, an inducer assembly, an
upgraded pressure switch, and additional controls and wiring. The
incremental costs to implement multi-staging in WGFs are outlined in
Table IV.9.

Table IV.9--Multi-Staging Incremental Cost Increase
------------------------------------------------------------------------
Incremental cost
increase for
Adder multi-staging
(2022$)
------------------------------------------------------------------------
Two-Stage............................................ $21.07
Modulating........................................... 75.36
------------------------------------------------------------------------

Low-NO<INF>X</INF> and Ultralow-NO<INF>X</INF> Furnaces
Some furnaces are marketed as ``low-NO<INF>X</INF>,'' which
indicates that their NO<INF>X</INF> emissions are less than 40
nanograms of NO<INF>X</INF> per joule of useful heat energy (``ng/J'').
Certain local jurisdictions require natural gas furnaces to comply with
NO<INF>X</INF> emissions restrictions as low as 14 ng/J,\27\ which is
referred to as ``ultralow-NO<INF>X</INF>.'' A common method of reducing
furnace NO<INF>X</INF> emissions is to slightly delay the natural gas
combustion process, which in turn produces a cooler flame and results
in suppressed formation of NO<INF>X</INF>.\28\ DOE has observed during
its teardown analysis that to achieve low-NO<INF>X</INF> operation,
manufacturers implement low-NO<INF>X</INF> baffles. For ultralow-
NO<INF>X</INF> operation, DOE used NWGF teardowns to approximate the
cost to implement this technology option in WGFs, as DOE understands
that the methodology would be the same for both product classes.
Through these teardowns of NWGFs, DOE has observed that in order to
achieve ultralow-NO<INF>X</INF> operation, the in-shot burners
typically used in residential furnaces were replaced with a mesh premix
burner. In addition, the model used a variable-speed BPM inducer fan
motor. DOE identified an ultralow-NO<INF>X</INF> WGF on the market and
compared the burner construction for the torn-down NWGF and the
ultralow-NO<INF>X</INF> WGF. DOE found that the approach used for
achieving ultralow-NO<INF>X</INF> in WGFs is similar to that used in
NWGFs. DOE also determined that oil units with ultralow-NO<INF>X</INF>
operation were rare and, thus, not representative of the market, so
adders were not developed for the NWOF and MHOF product classes.
---------------------------------------------------------------------------

\27\ Rule 1111 of the South Coast Air Quality Management
District (``SCAQMD'') of southern California currently requires that
all NWGF and MHGF not exceed a 14 ng/J restriction on NO<INF>X</INF>
emissions. For more information on Rule 1111, see <a href="http://www.aqmd.gov/docs/default-source/rule-book/reg-xi/rule-1111.pdf?sfvrsn=4">www.aqmd.gov/docs/default-source/rule-book/reg-xi/rule-1111.pdf?sfvrsn=4</a> (Last
accessed Sept. 5, 2023).
\28\ U.S. Environmental Protection Agency. Natural Gas
Combustion (Available at: <a href="http://www3.epa.gov/ttnchie1/ap42/ch01/final/c01s04.pdf">www3.epa.gov/ttnchie1/ap42/ch01/final/c01s04.pdf</a>) (Last accessed June 28, 2023).
---------------------------------------------------------------------------

Using raw material price data, teardown data from NWGFs, and
manufacturing expertise DOE estimated the manufacturing cost difference
between standard NO<INF>X</INF> burners and low-NO<INF>X</INF> and
ultralow-NO<INF>X</INF> burners. For low-NO<INF>X</INF>, MPC cost
values were developed for the implementation of low-NO<INF>X</INF>
baffles in WGFs at the representative input capacity of 80 kBtu/h. For
ultralow-NO<INF>X</INF>, MPC values were developed for the
implementation of a mesh premix burner and variable-speed BPM inducer
fan (along with other related components necessary). The resulting MPC
estimates to achieve low-NO<INF>X</INF> and ultralow-NO<INF>X</INF>
operation are shown in Table IV.10.
In the LCC and PBP analysis (see section IV.E of this document),
DOE estimated the fractions of furnaces that are installed in
jurisdictions that require low-NO<INF>X</INF> or ultralow-
NO<INF>X</INF> compliance and applied these cost adders to those
fractions of furnace installations accordingly. The application of
these adders is discussed in more detail in Chapter 8 of the November
2022 Preliminary Analysis TSD.

Table IV.10--Additional MPCs for Low-NOX and Ultralow-NOX WGFs
------------------------------------------------------------------------
Adder Value (2022$)
------------------------------------------------------------------------
Low-NOX................................................. $3.10
Ultralow-NOX............................................ 113.68
------------------------------------------------------------------------

Shipping Costs
Freight is not a manufacturing cost, but because it is a
substantial cost incurred by the manufacturer, DOE accounts for
shipping costs separately from other costs. DOE calculated shipping
costs based on a typical 53-foot straight-frame trailer with a storage
volume of 4,240 cubic feet.
DOE first calculated the cost per cubic foot of space on a trailer
based on a cost of $3,643 per shipping load and the standard dimensions
of a 53-foot trailer. This cost was determined based on a combination
of full truck load (``FTL'') freight quotations, manufacturer feedback,
and BLS producer price indices for the ``fuels and related products and
power'' grouping.\29\ Then, DOE examined the average sizes of products
in each product class at each efficiency and capacity combination
analyzed. DOE estimated the shipping costs by multiplying the product
volume by the cost per cubic foot of space on the trailer. Furnace
dimensions typically do not change as a result of increases in
efficiency, and accordingly, DOE's shipping costs show no change across
efficiency levels. In determining volumetric shipping costs, DOE also
used manufacturer feedback regarding product mix on each trailer,
packing efficiency, and methods and equipment used to load the trailers
to revise the shipping costs. Table IV.11 shows the

[[Page 83446]]

shipping costs for the products analyzed in this rulemaking.
---------------------------------------------------------------------------

\29\ U.S. Department of Labor, Bureau of Labor Statistics,
Producer Price Indices (Available at: <a href="http://data.bls.gov/timeseries/WPU057303?data_tool=XGtable">data.bls.gov/timeseries/WPU057303?data_tool=XGtable</a>) (Last accessed Feb. 17, 2022).

Table IV.11--Shipping Costs Per Unit
------------------------------------------------------------------------
Representative Per-unit
Product class capacity (kBtu/ shipping cost
h) (2022$)
------------------------------------------------------------------------
WGF................................... 80 55.69
NWOF.................................. 105 19.92
MHOF.................................. 105 19.92
------------------------------------------------------------------------

3. Cost-Efficiency Results
Using the MPCs for individual teardowns and adders described in
section IV.B.2.b of this document, DOE develops aggregated MPCs for
each product class. The final results of the AFUE engineering analysis
are the MPCs for WGFs, NWOFs, and MHOFs at each efficiency level. The
cost-efficiency results are shown in tabular form in Table IV.12
through Table IV.14 as efficiency versus MPC and MSP. These results
include the furnace fan and combustion system staging incorporated into
most furnace designs.

Table IV.12--Cost-Efficiency Data for WGFs With a Constant-Torque BPM
Indoor Blower Motor and a Single-Stage Burner
------------------------------------------------------------------------
AFUE MPC (2022$) MSP (2022$)
------------------------------------------------------------------------
81............................................ $1,412.32 $1,793.65
95............................................ 1,505.40 1,911.85
------------------------------------------------------------------------

Table IV.13--Cost-Efficiency Data for NWOFs With a PSC Indoor Blower
Motor and a Single-Stage Burner
------------------------------------------------------------------------
AFUE MPC (2022$) MSP (2022$)
------------------------------------------------------------------------
83............................................ $700.73 $945.98
85............................................ 730.94 986.77
87............................................ 761.16 1,027.57
96............................................ 1,334.85 1,802.05
------------------------------------------------------------------------

Table IV.14--Cost-Efficiency Data for MHOFs With a PSC Indoor Blower
Motor and a Single-Stage Burner
------------------------------------------------------------------------
AFUE MPC (2022$) MSP (2022$)
------------------------------------------------------------------------
80............................................ $664.47 $857.16
83............................................ 709.79 915.63
85............................................ 740.01 954.61
87............................................ 770.23 993.59
------------------------------------------------------------------------

C. Markups Analysis

The markups analysis develops appropriate markups (e.g., retailer
markups, distributor markups, contractor markups) in the distribution
chain and sales taxes to convert the MSP estimates derived in the
engineering analysis to consumer prices, which are then used in the LCC
and PBP analysis. At each step in the distribution channel, companies
mark up the price of the product to cover business costs and profit
margin. Before developing markups, DOE defines key market participants
and identifies distribution channels.
For the subject consumer furnaces, the main parties in the
distribution chains are: (1) manufacturers; (2) wholesalers or
distributors; (3) retailers; (4) mechanical contractors; (5) builders;
(6) manufactured home manufacturers, and (7) manufactured home dealers/
retailers. For this NOPD, DOE maintained the same approach as in the
preliminary analysis. DOE characterized two distribution channel market
segments to describe how NWOFs, MHOFs, and WGFs pass from the
manufacturer to residential and commercial consumers: \30\ (1)
replacements and new owners \31\ and (2) new construction.
---------------------------------------------------------------------------

\30\ DOE estimates that five percent of WGFs and three percent
of NWOFs are installed in commercial buildings.
\31\ New owners are new furnace installations in buildings that
did not previously have a NWOF, MHOF, or WGF, or existing owners
that are installing an additional consumer furnace. These primarily
consist of households that add or switch to these furnaces during a
major remodel.
---------------------------------------------------------------------------

In replacement and new owner market, the primary distribution
channel for NWOFs, MHOFs, and WGFs is characterized as follow:

Manufacturer [rarr] Wholesaler [rarr] Mechanical Contractor [rarr]
Consumer

DOE estimates that the above distribution channel applies to a
majority of the shipment of the subject consumer furnaces.\32\ However,
the retail distribution channel (including internet sales) has grown
significantly in the last five years (previously it was negligible),
and some consumers purchase the appliance directly and then have
contractors install it. Accordingly, DOE considered the following
additional distribution channels: \33\
---------------------------------------------------------------------------

\32\ In the residential sector, DOE estimates that this
distribution channel is applicable to 90 percent of the shipments
for NWOFs and MHOFs, and 80 percent for WGFs; in commercial sector,
it is applied to 75 percent of NWOF and 70 percent of WGF
distributions.
\33\ In the residential sector, DOE estimates that these two
distribution channels combined are applicable to 5 percent of the
shipments for NWOFs and MHOFs, and 15 percent for WGFs (in mobile
home applications, 10 percent of the WGFs distributed to mobile
homes is assumed to go through these channels); in the commercial
sector, they are applied to 10 percent of NWOF and 15 percent of WGF
distributions.

Manufacturer [rarr] Retailer [rarr] Consumer
Manufacturer [rarr] Retailer [rarr] Mechanical Contractor [rarr]
Consumer

For mobile home applications, there is another distribution channel
considered on top of the aforementioned, where the MHOF or WGF is
purchased via a mobile home specialty retailer or dealer: \34\
---------------------------------------------------------------------------

\34\ DOE estimates that 5 percent of MHOFs and 10 percent of
WGFs that go to mobile homes are distributed through this channel.

Manufacturer [rarr] Mobile Home Specialty Retailer/Dealer [rarr]
---------------------------------------------------------------------------
Consumer

In the new construction market, DOE identified three primary
distribution channels that involve builders, or manufactured home
builders when considering mobile home applications:

Manufacturer [rarr] Wholesaler [rarr] Mechanical Contractor [rarr]
Builder [rarr] Consumer
Manufacturer [rarr] Wholesaler [rarr] Builder [rarr] Consumer
Manufacturer [rarr] Mobile Home Manufacturer [rarr] Mobile Home Dealer
[rarr] Consumer

For both the replacements and new owners and the new construction
markets, DOE additionally considered the national accounts or direct-
from-manufacturer distribution channel, where the manufacturer through
a wholesaler sells directly to consumers.\35\
---------------------------------------------------------------------------

\35\ The national accounts channel where the buyer is the same
as the consumer is mostly applicable to NWOFs and WGFs installed in
small to mid-size commercial buildings, where on-site contractors
purchase equipment directly from wholesalers at lower prices due to
the large volume of equipment purchased, and perform the
installation themselves. DOE's analysis assumes that approximately 5
and 15 percent of NWOFs and WGFs installed in the residential and
commercial sector, respectively, use national accounts distribution
channel for replacements. For new construction, DOE assumes 10
percent of the subject furnaces installed in residential sector and
20 percent installed in commercial are distributed through national
accounts.

[[Page 83447]]

---------------------------------------------------------------------------

Manufacturer [rarr] Wholesaler (National Account) [rarr] Buyer [rarr]
Consumer

DOE developed baseline and incremental markups for each participant
in the distribution chain to ultimately determine the consumer purchase
cost. Baseline markups are applied to the price of products with
baseline efficiency, while incremental markups are applied to the
difference in price between baseline and higher-efficiency models (the
incremental cost increase). The incremental markup is typically less
than the baseline markup and is designed to maintain similar per-unit
operating profit before and after new or amended standards.\36\
---------------------------------------------------------------------------

\36\ Because the projected price of standards-compliant products
is typically higher than the price of baseline products, using the
same markup for the incremental cost and the baseline cost would
result in higher per-unit operating profit. While such an outcome is
possible, DOE maintains that in markets that are reasonably
competitive, it is unlikely that standards would lead to a
sustainable increase in profitability in the long run.
---------------------------------------------------------------------------

Lennox stated that the application of lower incremental markups for
increased consumer furnace standard levels considered in the TSD should
be reviewed. Lennox stated that a significantly discounted incremental
markup for high EL levels from baseline markup is not logical or
aligned with business practices. (Lennox, No. 26 at p. 8) Lennox added
that the assumption of reduced incremental markups for higher
efficiency standards is contrary to normal industry practice and the
expectations of its shareholders. (Lennox, No. 26 at p. 8)
In response, DOE's incremental markup approach assumes that an
increase in profitability, which is implied by keeping a fixed markup
when the product price goes up, is unlikely to be viable over time in
reasonably competitive markets. DOE recognizes that actors in the
distribution chains are likely to seek to maintain the same markup on
appliances in response to changes in manufacturer sales prices after an
amendment to energy conservation standards. However, DOE believes that
retail pricing is likely to adjust over time as those actors are forced
to readjust their markups to reach a medium-term equilibrium in which
per-unit profit is relatively unchanged before and after standards are
implemented.
DOE acknowledges that markup practices in response to amended
standards are complex and vary with business conditions. However, DOE's
analysis necessarily only considers changes in appliance offerings that
occur in response to amended standards. DOE continues to maintain that
its assumption that standards do not facilitate a sustainable increase
in profitability is reasonable. Chapter 6 of the November 2022
Preliminary Analysis TSD provides details on DOE's development of
markups for oil and weatherized gas furnaces.\37\
---------------------------------------------------------------------------

\37\ In this NOPD, DOE is referencing the November 2022
Preliminary TSD for general methodology; note that some inputs have
been updated for this NOPD.
---------------------------------------------------------------------------

D. Energy Use Analysis

The purpose of the energy use analysis is to determine the annual
energy consumption of oil and weatherized gas furnaces at different
efficiencies in representative U.S. residential buildings, commercial
buildings, and residential mobile homes, and to assess the energy
savings potential of increased oil and weatherized gas furnace
efficiency. The energy use analysis estimates the range of energy use
of oil and weatherized gas furnaces in the field (i.e., as they are
actually used by consumers). The energy use analysis provides the basis
for other analyses DOE performed, particularly assessments of the
potential energy savings and the savings in consumer operating costs
that could result from adoption of amended or new standards.
DOE estimated the annual energy consumption of oil and weatherized
gas consumer furnaces at specific energy efficiency levels across a
range of climate zones, building characteristics, and space heating
needs. The annual energy consumption includes the natural gas, liquid
petroleum gas (``LPG''), oil, and electricity, as applicable, used by
the furnace.
To determine the field energy use of the subject furnaces, DOE
developed a building sample based on the Energy Information
Administration's (``EIA'') 2015 Residential Energy Consumption Survey
(``RECS 2015'') \38\ and 2012 Commercial Building Energy Consumption
Survey (``CBECS 2012'').39 40 DOE used RECS 2015-reported or
CBECS 2012-reported heating energy consumption (based on the existing
heating system) to calculate the heating load of each household or
building. The heating load represents the amount of heating required to
keep a housing unit or building comfortable throughout an average year.
DOE assigned the energy efficiency of existing systems based on the
design of the distribution systems, a historical distribution of energy
efficiencies for NWOFs, MHOFs, and WGFs, and data about the age of the
existing furnace. The estimation of heating loads also required
calculating the electricity consumption of the blower, because heat
from the operation of the blower contributes to space heating. In
addition, DOE made adjustments based on historical weather data,
projections of building shell efficiency, and building square footage,
as well as for homes that had secondary heating equipment that used the
same fuel as the furnace. To complete the analysis, DOE calculated the
anticipated energy consumption of alternative (more energy-efficient)
products if they were to replace existing systems in each housing unit
or commercial building.
---------------------------------------------------------------------------

\38\ Energy Information Administration (EIA), 2015 Residential
Energy Consumption Survey (RECS). (Available at: <a href="http://www.eia.gov/consumption/residential/">www.eia.gov/consumption/residential/</a>) (Last accessed August 1, 2023).
\39\ Energy Information Administration (EIA), 2012 Commercial
Buildings Energy Consumption Survey (CBECS). (Available at:
<a href="http://www.eia.gov/consumption/commercial/">www.eia.gov/consumption/commercial/</a>) (Last accessed August 1, 2023).
\40\ At the time DOE performed the analyses underlying this
proposed determination, the RECS 2015 and CBECS 2012 were the latest
available full data releases.
---------------------------------------------------------------------------

DOE also included the electricity use of auxiliary equipment, such
as condensate pumps and heat tape, which are sometimes installed with
higher-efficiency products. The electricity consumption of the
auxiliary equipment (``ElecUse<INF>Aux</INF>'') is added to the total
electricity consumption.
Chapter 7 of the November 2022 Preliminary Analysis TSD provides
details on DOE's energy use analysis for oil and weatherized gas
furnaces.
AHRI commented that standard heat tape has an average energy
consumption of 9 W/ft, adding that this additional load would increase
energy use and is not accounted for in DOE's energy use analysis for
these products. AHRI stated that there are additional challenges
surrounding prevention of freezing condensate for WGF units, and
although AHRI suggested that electric strip heating could be used to
overcome this problem, such solution would add electrical losses.
(AHRI, No. 23 at p. 5)
In response, DOE accounted for heat tape use in cases when a WGF is
installed in an outdoor environment that could face freezing
conditions. DOE assumed that such installations would occur in
locations facing freezing conditions based on the outdoor heating

[[Page 83448]]

design temperature (or the 99th percentile). For the WGF sample, which
is largely in warmer parts of the country, DOE estimated that about 5
percent of those installations would require heat tape, and DOE assumed
that a larger fraction (around 50 percent) would deal with freeze
protection through other methods, such as running the condensate lines
through the ground or inside the WGF unit and into the building. For
the energy use analysis, DOE used on average 45 watts (or 9 W/ft times
5 feet) for the energy consumption of installations requiring heat
tape. For another 5 percent of installations, DOE accounted for the use
of a condensate pump with an average energy consumption of 60 watts.
DOE notes that any additional installation costs would not change DOE's
tentative decision not to amend standards for the subject products.

E. Life-Cycle Cost and Payback Period Analysis

DOE conducted LCC and PBP analyses to evaluate the economic impacts
on individual consumers of potential energy conservation standards for
oil and weatherized gas furnaces. The effect of new or amended energy
conservation standards on individual consumers usually involves a
reduction in operating cost and an increase in purchase cost. DOE used
the following two metrics to measure consumer impacts:
[ballot] Life-Cycle Cost (LCC) is the total consumer expense of an
appliance or product over the life of that product, consisting of total
installed cost (manufacturer selling price, distribution chain markups,
sales tax, and installation costs) plus operating costs (expenses for
energy use, maintenance, and repair). To compute the operating costs,
DOE discounts future operating costs to the time of purchase and sums
them over the lifetime of the product.
[ballot] Payback Period (PBP) is the estimated amount of time (in
years) it takes consumers to recover the increased purchase cost
(including installation) of a more-efficient product through lower
operating costs. DOE calculates the PBP by dividing the change in
purchase cost at higher efficiency levels by the change in annual
operating cost for the year that amended or new standards are assumed
to take effect.
For any given efficiency level, DOE measures the change in LCC
relative to the LCC in the no-new-standards case, which reflects the
estimated efficiency distribution of oil and weatherized gas furnaces
in the absence of new or amended energy conservation standards. In
contrast, the PBP for a given efficiency level is measured relative to
the baseline product.
For each considered efficiency level in each product class, DOE
calculated the LCC and PBP for a nationally representative set of
housing units and, where appropriate, commercial buildings. As stated
previously, DOE developed household and commercial building samples
from RECS 2015 and CBECS 2012. For each sample household or commercial
building, DOE determined the energy consumption for the oil and
weatherized gas furnaces and the appropriate energy price. By
developing a representative sample of households and commercial
buildings, the analysis captured the variability in energy consumption
and energy prices associated with the use of oil and weatherized gas
furnaces.
Inputs to the LCC calculation include the installed cost to the
consumer, operating expenses, the lifetime of the product, and the
discount rate that applies to projected expenses. Inputs to the
calculation of total installed cost include the cost of the product--
which includes MPCs, manufacturer markups, retailer and distributor
markups, and sales taxes (where appropriate)--and installation costs.
Inputs to the calculation of operating expenses include annual energy
consumption, energy prices and price projections, repair and
maintenance costs, product lifetimes, and discount rates. Inputs to the
payback period calculation include the installed cost to the consumer
and first year operating expenses. DOE created distributions of values
for installation cost, repair and maintenance, product lifetime, and
discount rates with probabilities attached to each value, to account
for their uncertainty and variability.
The computer model DOE uses to calculate the LCC and PBP relies on
a Monte Carlo simulation to incorporate uncertainty and variability
into the analysis. The Monte Carlo simulations randomly sample input
values from the probability distributions and oil, electric, and
weatherized gas furnace user samples. For this determination, the Monte
Carlo approach is implemented in MS Excel together with the Crystal
BallTM add-on.\41\ The model calculated the LCC and PBP for
products at each efficiency level for 10,000 furnace installations in
housing units or commercial buildings per simulation run. The
analytical results include a distribution of 10,000 data points showing
the range of LCC savings for a given efficiency level relative to the
no-new-standards case efficiency distribution. In performing an
iteration of the Monte Carlo simulation for a given consumer, product
efficiency is chosen based on its probability. If the chosen product
efficiency is greater than or equal to the efficiency of the standard
level under consideration, the LCC and PBP calculation reveals that a
consumer is not impacted by the standard level. By accounting for
consumers who are projected to purchase more-efficient furnaces than
the baseline furnace in the simulation, DOE avoids overstating the
potential benefits from increasing product efficiency.
---------------------------------------------------------------------------

\41\ Crystal BallTM is a commercially-available
software tool to facilitate the creation of these types of models by
generating probability distributions and summarizing results within
Excel (Available at: <a href="http://www.oracle.com/middleware/technologies/crystalball.html">www.oracle.com/middleware/technologies/crystalball.html</a>) (Last accessed August1, 2023).
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DOE calculated the LCC and PBP for all consumers of oil and
weatherized gas furnaces as if each were to purchase a new product in
the expected first year of required compliance with new or amended
standards. Any amended standards would apply to oil and weatherized gas
furnaces manufactured five years after the date on which any new or
amended standard is published in the Federal Register. (42 U.S.C.
6295(m)(4)(A)(ii)) For purposes of its analysis, DOE used 2030 as the
first year of compliance with any amended standards for oil and
weatherized gas furnaces.
Table IV.15 summarizes the approach and data DOE used to derive
inputs to the LCC and PBP calculations. The subsections that follow
provide further discussion. Details of the spreadsheet model, and how
all inputs to the LCC and PBP analyses are applied, are contained in
chapter 8 of the November 2022 Preliminary Analysis TSD and its
appendices.

[[Page 83449]]

Table IV.15--Summary of Inputs and Methods for the LCC and PBP Analysis
*
------------------------------------------------------------------------
Input Source/method
------------------------------------------------------------------------
Product Cost...................... Derived by multiplying MPCs by
manufacturer and distribution chain
markups and sales tax, as
appropriate. Used historical data
to derive a price-scaling index to
project product costs.
Installation Costs................ Baseline installation cost
determined with data from RSMeans
2023, manufacturer literature, and
expert consultant. DOE assumed
increased installation costs for
condensing furnaces.
Annual Energy Use................. The annual energy consumption per
unit at each efficiency level (see
section IV.D of this document).
Variability: Based on RECS 2015 and
CBECS 2012.
Energy Prices..................... Natural Gas: Based on EIA's Natural
Gas Navigator data for 2022 and
RECS 2015 and CBECS 2012 billing
data.
Propane and Fuel Oil: Based on EIA's
State Energy Data System (``SEDS'')
for 2021.
Electricity: Based on EIA's Form 861
data for 2022 and RECS 2015 and
CBECS 2012 billing data.
Variability: State energy prices
determined for residential and
commercial applications.
Marginal prices used for natural
gas, propane, and electricity
prices.
Energy Price Trends............... Residential and commercial prices
were escalated by using EIA's 2023
Annual Energy Outlook (AEO 2023)
forecasts to estimate future energy
prices. Escalation was performed at
the Census Division level.
Repair and Maintenance Costs...... Baseline installation cost
determined with data from RSMeans
2023, manufacturer literature, and
expert consultant. DOE assumed
increased repair and maintenance
costs for condensing furnaces.
Product Lifetime.................. Based on shipments data, multi-year
RECS, American Housing Survey,
American Home Comfort Survey data.
Average: 20.2-22.5 years
Discount Rates.................... For residential end users, approach
involves identifying all possible
debt or asset classes that might be
used to purchase the considered
appliances or might be affected
indirectly. Primary data source was
the Federal Reserve Board's Survey
of Consumer Finances. For
commercial end users, DOE
calculates commercial discount
rates as the weighted average cost
of capital using various financial
data.
Compliance Date................... 2030.
------------------------------------------------------------------------
* Note: References for the data sources mentioned in this table are
provided in the sections following the table or in chapter 8 of the
November 2022 Preliminary Analysis TSD.

1. Product Cost
To calculate consumer product costs, DOE multiplied the MPCs
developed in the engineering analysis by the markups described
previously (along with sales taxes). DOE used different markups for
baseline products and higher-efficiency products, because DOE applies
an incremental markup to the increase in MSP associated with higher-
efficiency products.
DOE estimated product prices in the year of compliance by using a
least-squares power-law fit on the inflation-adjusted, unified price
index (historical Producer Price Index (``PPI'') data for warm-air
furnaces from the Bureau of Labor Statistics (``BLS'') spanning the
time period 1990-2018 versus cumulative shipments.\42\
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\42\ U.S. Department of Labor, Bureau of Labor Statistics,
Produce Price Indices Series ID PCU333415333415C (Available at:
<a href="http://www.bls.gov/ppi/">www.bls.gov/ppi/</a>) (Last accessed August 1, 2023).
---------------------------------------------------------------------------

In order to improve real-world representativeness, NYSERDA
recommended that DOE consider using piecewise power-law curves for
different time intervals to estimate the learning rate parameter in the
LCC analysis. NYSERDA provided data to explain that prices decreased
until 2017 and then started to increase. NYSERDA added that one
possible explanation for this is that growing economies are consuming
more raw materials that go into manufacturing furnaces, and such an
increase in global aggregate demand for raw materials exerts upward
pressure on product prices. The commenter explained that piecewise
power-law curves are a common approach in cases where there is a
reversal in directionality of trends and cited an example journal
article. NYSERDA commented that using one power-law curve before 2017
and another after would more accurately capture the reduction in
furnace prices in the future. (NYSERDA, No. 19 at pp. 3-4)
DOE reviewed NYSERDA's suggestion for an alternative price learning
approach; however, insufficient data are available to implement the
approach for the products considered in this rulemaking. In addition,
the recommendation to segment the curve before and after 2017 is
similar to the alternative price scenarios that DOE typically explores
when proposing or finalizing amended standards, but in this case, DOE
has tentatively determined not to amend standards. For these reasons,
DOE has not changed its methodology for this NOPD.
2. Installation Cost
The installation cost is the expense to the consumer of installing
the furnace, in addition to the cost of the furnace itself.
Installation cost includes all labor, overhead, and any miscellaneous
materials and parts needed that are associated with the replacement of
an existing furnace or the installation of a furnace in a new home, as
well as delivery of the new furnace, removal of the existing furnace,
and any applicable permit fees. Higher-efficiency furnaces may require
a consumer to incur additional installation costs. DOE used data from
RSMeans,\43\ manufacturer literature, and expert consultants to
estimate the installation cost, including labor costs, for oil and
weatherized gas furnaces. DOE's analysis of installation costs
accounted for regional differences in labor costs by aggregating city-
level labor rates from RSMeans into the 50 distinct State plus
Washington DC to match RECS 2015 and CBECS 2012 data. The installation
cost methodology accounts for all potential installation cases,
including when a noncondensing furnace is replaced with a condensing
furnace, with particular attention to venting issues in replacement
applications (see descriptions which follow). The installation cost
also depends on the furnace installation location, which DOE determined
using information from RECS 2015 and CBECS 2012.
---------------------------------------------------------------------------

\43\ RSMeans Company Inc., RSMeans Cost Data. Kingston, MA
(2023) (Available at: <a href="http://www.rsmeans.com/products/books/2023-cost-data-books">www.rsmeans.com/products/books/2023-cost-data-books</a>) (Last accessed August 1, 2023).
---------------------------------------------------------------------------

For NWOF replacement installations, DOE included a number of
additional costs (``adders'') for a fraction of the sample households
that have particular features. For noncondensing furnaces, these
additional costs included updating flue vent connectors, vent resizing,
and chimney relining. For condensing furnaces, these additional costs
included adding a new flue vent

[[Page 83450]]

(PVC), adding combustion air vent for direct vent installations (PVC),
adding concealing vent pipes for indoor installations, addressing an
orphaned water heater (by updating flue vent connectors, vent resizing,
or chimney relining), and removing condensate, all based on
manufacturer installation manuals and expert consultant input. Freeze
protection (heat tape) is accounted for in the cost of condensate
removal for a fraction of NWOFs installed in unconditioned attics.
For WGF installations, DOE included additional cost adders for
condensing WGFs to dispose of the condensate created and to prevent
freezing of the condensate, as the entire product is outdoors based on
manufacturer installation manuals, field study reports, and expert
consultant input. DOE also accounted for a fraction of installations in
colder climates that could require freeze protection (heat tape), a
condensate line being buried below the frost line, or a condensate
pump.
AHRI commented that for WGFs installed in rooftop applications,
heated drain lines are needed for winter use to avoid building water
damage. AHRI added that condensate lines running within the unit are
difficult to access and could have the potential to trap condensate.
(AHRI, No. 23 at p. 5) JCI stated that while DOE considered the use of
heat tape, the practical application/maintenance of heat tape internal
to installed systems poses an undue installation and maintenance
burden. (JCI, No. 25 at p. 2)
As explained in section IV.D of this document, DOE accounted for
heat tape use in cases when a WGF is installed in an outdoor
environment that could face freezing conditions. DOE assumed that the
installation location would be facing freezing conditions based on the
outdoor heating design temperature (or the 99th percentile). For the
WGF sample, which is largely in warmer parts of the country, DOE
estimated that about five percent would require heat tape. For another
five percent of installations, DOE accounted for the use of a
condensate pump. Furthermore, DOE accounts for other condensate costs
such as adding condensate piping, running condensate lines through the
ground or inside the WGF unit and into the building, using condensate
neutralizer, adding an electrical outlet for heat tape or condensate
pump, adding a drain pan, and adding a non-corrosive drain. On average,
the installation cost adder across these scenarios is $110.
For further information on the derivation of installation costs,
see chapter 7 of the November 2022 Preliminary Analysis TSD.
3. Annual Energy Consumption
For each sampled household or commercial building, DOE determined
the energy consumption for oil and weatherized gas furnace at different
efficiency levels using the approach described previously in section
IV.D of this document.
4. Energy Prices
DOE derived 2022 annual residential and commercial electricity
prices by state from EIA Form 861M data.\44\ DOE obtained 2022 annual
residential and commercial natural gas prices by state from EIA's
Natural Gas Navigator.\45\ DOE collected 2021 average LPG and fuel oil
prices by state from EIA's 2021 State Energy Consumption, Price, and
Expenditures Estimates (``SEDS'') and scaled to 2022 prices using
AEO2023 data.\46\ To determine monthly prices for use in the analysis,
DOE developed monthly energy price factors for each fuel based on long-
term monthly price data. Monthly electricity and natural gas prices
were adjusted using seasonal marginal price factors to determine
monthly marginal electricity and natural gas prices. These marginal
energy prices were used to determine the cost to the consumer of the
change in energy consumed. Because marginal price data is only
available for residential electricity and natural gas, DOE only
developed marginal monthly prices for these fuels. For LPG and fuel
oil, DOE used average monthly prices.
---------------------------------------------------------------------------

\44\ U.S. Department of Energy-Energy Information
Administration, Form EIA-861M (formerly EIA-826) detailed data
(2022) (Available at: <a href="http://www.eia.gov/electricity/data/eia861m/">www.eia.gov/electricity/data/eia861m/</a>) (Last
accessed August 1, 2023).
\45\ U.S. Department of Energy-Energy Information
Administration, Natural Gas Navigator (2022) (Available at:
<a href="http://www.eia.gov/naturalgas/data.php">www.eia.gov/naturalgas/data.php</a>) (Last accessed August 1, 2023).
\46\ U.S. Department of Energy-Energy Information
Administration, 2021 State Energy Data System (SEDS) (2021)
(Available at: <a href="http://www.eia.gov/state/seds/">www.eia.gov/state/seds/</a>) (Last accessed August 1,
2023).
---------------------------------------------------------------------------

To estimate energy prices in future years, DOE multiplied the 2022
energy prices by the projection of annual average price changes for
each state from the Reference case in AEO2023, which has an end year of
2050.\47\ To estimate price trends after 2050, DOE used the average
annual rate of change in prices from 2046 through 2050. See chapter 8
of the November 2022 Preliminary Analysis TSD for details.
---------------------------------------------------------------------------

\47\ EIA, Annual Energy Outlook 2023 with Projections to 2050
(Available at: <a href="http://www.eia.gov/forecasts/aeo/">www.eia.gov/forecasts/aeo/</a>) (Last accessed June 1,
2023).
---------------------------------------------------------------------------

NYSERDA recommended that DOE consider applying a correction factor
to account for potential gaps between forecasted prices and actual
prices for energy, particularly in oil and natural gas. NYSERDA
provided data depicting the heating oil prices within New York over a
23-year period and noted that there is significant variation in the
time series. The commenter encouraged DOE to assemble multiple AEO
reports for historic forecasts to determine a correction factor based
on the comparison of actual prices to forecasted prices. NYSERDA added
that this correction factor could then be applied to future forecasted
prices to produce a more accurate result while still using EIA's price
forecasts. (NYSERDA, No. 19 at pp. 4-5)
In response to NYSERDA, DOE acknowledges that forecasted prices do
not always accurately predict future prices. However, DOE does not
agree that past discrepancies between the two can reliably be used to
adjust EIA's forecasts, as there is not a firm basis for assuming that
historic factors will develop in the same way in the future. For this
reason, DOE is maintaining its practice of relying on AEO's energy
price forecasts.
The Joint Commenters reiterated their comments made in response to
DOE's 2022 Request for Information pertaining to concerns with DOE's
reliance on allegedly incorrect projections of natural gas price
trends, marginal residential natural gas prices, and systematic
problems with DOE's economic analysis. The Joint Commenters added that
these earlier comments highlight flaws in DOE's process and stated that
these flaws must be addressed both in this and future rulemakings
before proposing any new minimum efficiency standards for appliances.
(Joint Commenters, No. 24 at p. 3)
In response to the Joint Commenters, DOE acknowledges that past
projections of natural gas prices have not matched actual prices in
recent years, but DOE maintains that this is due to factors that were
difficult to predict and not to any flaws in the model that is used to
develop AEO energy price projections, or to biases with regard to
assumptions.
5. Maintenance and Repair Costs
Repair costs are associated with repairing or replacing product
components that have failed in an appliance; maintenance costs are
associated with maintaining the operation of the product. The
maintenance and repair costs (including labor hours, component costs,
and frequency) at each considered efficiency level are derived based on
2023 RSMeans Facilities Maintenance and

[[Page 83451]]

Repair Data,\48\ manufacturer literature, consultant input, and
industry reports. DOE also accounted for regional differences in labor
costs based on these 2023 RSMeans data.
---------------------------------------------------------------------------

\48\ RSMeans Company Inc., RSMeans Facilities Maintenance &
Repair Cost Data (2023) (Available at: <a href="http://www.rsmeans.com/">www.rsmeans.com/</a>) (Last
accessed August 1, 2023).
---------------------------------------------------------------------------

DOE assumes that condensing furnaces have a higher maintenance cost
than noncondensing furnaces, but that this maintenance cost is the same
at all noncondensing or condensing efficiency levels within each
product class. The additional maintenance cost for condensing furnaces
includes maintenance tasks related to the condensate withdrawal system
(such as condensate pump or condensate neutralizer filter) and
additional maintenance related to the cleaning or checking of the heat
exchanger (in particular, for condensing oil-fired furnaces using high-
sulfur fuel oil).
DOE also assumes that condensing furnaces have a higher repair cost
than noncondensing furnaces, but the repair cost is the same at all
non-condensing or condensing efficiency levels within each product
class.
For more details on DOE's methodology for calculating maintenance
and repair costs, including all online resources reviewed, see appendix
8E of the November 2022 Preliminary Analysis TSD.
6. Product Lifetime
Product lifetime is the age at which an appliance is retired from
service. DOE conducted an analysis of furnace lifetimes based on the
methodology described in a recent journal paper.\49\ For this analysis,
DOE relied on RECS 1990, 1993, 2001, 2005, 2009, and 2015.\50\ DOE also
used the U.S. Census's biennial American Housing Survey (``AHS''), from
1974-2021, which surveys all housing, noting the presence of a range of
appliances.\51\ DOE used the appliance age data from these surveys, as
well as the historical furnace shipments, to generate an estimate of
the survival function. The survival function provides a lifetime range
from minimum to maximum, as well as an average lifetime. For oil and
weatherized gas furnaces, DOE developed Weibull distributions resulting
in an average lifetime of 20.2 to 22.5 years (based on region).
---------------------------------------------------------------------------

\49\ Lutz, J., A. Hopkins, V. Letschert, V. Franco, and A.
Sturges, Using national survey data to estimate lifetimes of
residential appliances, HVAC&R Research (2011) 17(5): p. 28.
(Available at: <a href="http://www.tandfonline.com/doi/abs/10.1080/10789669.2011.558166">www.tandfonline.com/doi/abs/10.1080/10789669.2011.558166</a>) (Last accessed August 1, 2023).
\50\ U.S. Department of Energy: Energy Information
Administration, Residential Energy Consumption Survey (``RECS''),
Multiple Years (1990, 1993, 1997, 2001, 2005, 2009, and 2015).
(Available at: <a href="http://www.eia.gov/consumption/residential/">www.eia.gov/consumption/residential/</a>) (Last accessed
August 1, 2023).
\51\ U.S. Census Bureau: Housing and Household Economic
Statistics Division, American Housing Survey, Multiple Years (1974,
1975, 1976, 1977, 1978, 1979, 1980, 1981, 1983, 1985, 1987, 1989,
1991, 1993, 1995, 1997, 1999, 2001, 2003, 2005, 2007, 2009, 2011,
2013, 2015, 2017, 2019, and 2021). (Available at: <a href="http://www.census.gov/programs-surveys/ahs/">www.census.gov/programs-surveys/ahs/</a>) (Last accessed August 1, 2023).
---------------------------------------------------------------------------

Appendix 8F of the November 2022 Preliminary Analysis TSD provides
further details on the methodology and sources DOE used to develop the
subject furnace lifetimes.
7. Discount Rates
The discount rate is the rate at which future expenditures and
savings are discounted to establish their present value. DOE estimates
discount rates separately for residential and commercial end users.
For residential end users, DOE applies weighted-average discount
rates calculated from consumer debt and asset data, rather than
marginal or implicit discount rates. DOE identified all relevant
household debt or asset classes in order to approximate a consumer's
opportunity cost of funds related to appliance energy cost savings. It
estimated the average percentage shares of the various types of debt
and equity by household income group using data from the Federal
Reserve Board's Survey of Consumer Finances (``SCF''). Using the SCF
and other sources, DOE developed a distribution of rates for each type
of debt and asset by income group to represent the rates that may apply
in the year in which amended standards would take effect. DOE assigned
each sample household a specific discount rate drawn from one of the
distributions.
For commercial end users, DOE estimated the weighted-average cost
of capital using data from various financial sources. The weighted-
average cost of capital is commonly used to estimate the present value
of cash flows to be derived from a typical company project or
investment. Most companies use both debt and equity capital to fund
investments, so their cost of capital is the weighted average of the
cost to the firm of equity

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